Where's the Cash?

by Gerri Willis

What a problem to have!

Apple, the world's biggest company, says it just has too much money!

But now it has a plan.

Apple is sitting on nearly $98 billion dollars in cash and securities.

Now it will start paying some of it out to shareholders in the form of a dividend and share buyback program - something the company hasn't done since 1995 because Steve Jobs resisted such calls.

The quarterly dividend will be $2.65 per share starting in July.

That works out to just over ten bucks annually, or just under two percent of the current stock price.

Apple said the $10 billion dollar share buyback program will begin at the end of September, and run for three years.

Investors had been expecting the move driving up Apple shares 37 percent since January.

Today, shares are hitting an all time record of $601 dollars.

Current CEO Tim Cook says when Apple began analyzing how much it could give out to shareholders, it looked at how much cash it has in the U.S.

They are just using "domestic cash" when it comes to these dividends.

Like many other big companies, which I’ll outline in a moment, Apple has much of its cash overseas.

But Apple is reluctant to bring back that $64 billion dollars because of this number: 39 percent.

That's the U.S. corporate tax rate; the highest in the world once Japan lowers its rate in April (when you combine federal and state tax rates.)

So those profits, which have already been taxed in their respective countries, would then be subject to the 39 percent corporate tax rate.

Apple's CFO Peter Oppenheimer says: "current tax laws provide a considerable economic disincentive to U.S. companies that might otherwise repatriate a substantial amount of foreign cash."

And, as I mentioned, in no way is Apple alone with this problem.

According to Moody's Investors Service, non-financial U.S. companies are sitting on one and a quarter trillion dollars in cash as of December.

But, get this: More than half of that money, or nearly $700 billion dollars is being stockpiled overseas.

The two other biggest culprits?

No surprise here... General Electric and Pfizer.

GE has more than $100 billion dollars overseas; Pfizer $63 billion.

Tech giants Google and Microsoft joined Apple with boosting their overseas profits in 2011 by more than 40 percent.

So what, if anything, is Washington doing about this problem?

As usual, not much because each side of the aisle wants something different to be changed.

According to reports, companies like Google, Cisco, Qualcomm and Oracle are waiting for Congress to repeat a 2004 tax repatriation holiday that would set a maximum rate of five and a quarter percent.

Republican Congressman Kevin Brady from Texas has sponsored such a bill.

But Obama and other democrats argue a one-time tax holiday is too much of a giveaway to big corporations.

And we all know how this administration feels about big business!

The other idea is a more permanent fix. A proposal from Republican Congressman Dave Camp of Michigan shifting the U.S. tax code to a "territorial tax system" that exempts 95 percent of foreign profits.

According to Bloomberg, this plan is very similar to the tax systems in the UK, Japan and Germany.

All four republican presidential candidates support this plan.

And that's what it's going to take for changes to the tax code to become a reality.

Someone in the White House who is not anti-corporation, not anti-profits.

Until this country fixes its onerous double taxation problem, don't expect to see these big corporations bring this money back home, and put it to use hiring people in America.

Pension Bust

by Gerri Willis

While the federal government has the ability to operate in the red, states and cities do not.

And that is no easy task.

One of the biggest problems facing these states is unfunded pension liabilities for public workers, especially teachers.

A majority of states' teacher retirement funds are underfunded, some significantly so, according to the National Council on Teacher Quality.

And with a million teachers set to retire over the next decade, the situation is stoking fights across the country.

Typically a pension plan is considered healthy if it meets an 80 percent funded benchmark.

More than 30 states have pension plans for teachers below that benchmark.

Nine are below 60 percent.

And Illinois, Rhode Island and West Virginia are funded below 50 percent!

So states are taking action.

Kansas wants to transfer new teachers and other government workers to a 401(k) style plan to help close a nearly 8.5 billion dollar gap.

California, where the pension fund is more than 50 billion dollars under-funded, is proposing employees (including teachers) contribute to at least 50 percent of their retirement costs, and all new employees would be moved into a hybrid plan that blends a pension with a 401(k).

But the most drastic move in the golden state would be to raise the retirement age to 67.

And the retirement age is a big part of the problem.

With the nation's life expectancy nearing 80 years old, the costs of paying for these pensions - with taxpayer dollars no less! - is skyrocketing.

And it doesn't help that the benefits are much more generous than in the private sector.

In all but six states, it is possible for teachers to begin collecting full retirement before age 65.

And in three states, Montana, Alabama, Kentucky, teachers can retire in their 40s.

Thankfully, Alabama is working to raise the age to 62.

If successful, that's a huge change for teachers, but it makes a huge difference.

Look at New Mexico. Right now, teachers can collect full retirement benefits at age 52.

If they’d raise the age to 65, the state could save on average $734,000 dollars per retiree!

That would go a long way in filling the $6 billion dollar gap in the pension fund.

Now, I’m not coming down on teachers. They have an incredibly important job that is in no way easy to do.

And it's not just teachers that are draining our pension funds. It's all public workers.

Teacher pensions are just a fraction of the more than $660 billion dollar shortfall in public, state and local pensions nationwide.

But the state of New York is doing something about it.

This week the state approved pension reform that will save $80 billion dollars over 30 years.

The new law creates a sixth tier of smaller benefits for future retirees, raises retirement plan contributions by up to six percent,

and the retirement age gets bumped a year to 63.

Also, only $15,00 dollars of a worker's overtime can be used to calculate benefits.

It's the worst kept secret in the public sector. If you rack up the overtime in the last year or two of working, your pension will soar.

These are huge moves for New York where pension costs are of course rising, but the empire state's pension fund is actually fully funded.

It's time states like Illinois and West Virginia take notes.

Reform can be done. Not everyone is going to like it, but sacrifices have to be made, and reality has to be faced.

The Road We Really Traveled

by Gerri Willis

An exciting event tonight: the premiere of the 17-minute documentary about President Obama’s first three years in office: 'The Road We Traveled'.

It's narrated by academy-award-winner Tom Hanks.

Here's the trailer: http://youtu.be/NXtJhLUOFXE

Stirring stuff, huh?

Three years later, and all the Administration's got to show is 17 minutes of accomplishments?

That's shorter than a sitcom without the commercials.

Makes you wonder how much footage they had to leave on the cutting room floor.

Here are the President's three major achievements you won't hear in tonight's movie.

I call it, “The Road We Really Traveled.”

When President Obama took office, unemployment was 7.8 percent. It rose to 10 before now settling at 8.3 percent.

Remember his administration said the stimulus would keep unemployment under 8 percent.

The great recession killed more than eight million jobs.

They say we're years into the recovery now, but we've only gotten two million jobs back.

That's a six million job deficit.

Thanks.

The President's next major accomplishment? Passing Obamacare.

A landmark case of government overreach, one that puts the entire U.S. health care system as we know it at risk. Your healthcare decided by Washington bureaucrats, not your doctor.

I'll have more details on how the costs are spiraling out of control later in the show.

And accomplishment number three: more than doubling the price of gas.

Yes, doubled.

You wouldn't think that would be possible to do to a vital commodity, but when you believe in hope and change, when you want to force Americans to buy unproven electric cars, when you "just say no" to American drilling, that's what you get.

Congratulations, Mr. Obama.

I'm sure your new movie will be a real blockbuster.

Now, if you could just stop busting America’s recovery, I’d be grateful.

Waste, Fraud and Gimmicks

by Gerri Willis

Whenever you're dealing with Washington, there are two things you have to watch out for: waste and gimmicks.

With waste, they're taking taxpayer money - your money - and throwing it away.

With gimmicks, they're lying to you about what they're doing with your money.

I don't know which is worse.

You don't have to decide because we got both from the Senate today.

Here's how Senator Barbara Boxer described today's legislative victory:

“After we had a very long and winding road to this point, we've been five weeks on this bill, but it was worth it. It's a bill that brought us together, and I am very humbled by that because lord knows it's hard to find those moments when we come together.”

So what was this legislative miracle?

The Senate passed a two-year transportation bill with a $109 billion dollar price tag.

And of course, they passed up the chance to save $11 billion dollars a year.

Look, even if you want highway and bridge improvements in your neighborhood, rest assured. Congress had the option of making those improvements for less money, but opted not to!

Senator Jim DeMint put forth an amendment to kill the Davis-Beacon act, a depression-era law requiring the government to pay union wages on all its projects.

But the Senate said no, let's pay more for labor! They rejected the measure.

If that's not enough, wet your whistle with another tidbit from the Senate's transportation bill: TIFIA - now a billion dollar slush fund for unvetted road projects.

Yes, the "Transportation Infrastructure Finance and Innovation Act" is a loan program meant to spur private investment in road projects, but they got rid of the rules that dole out the money based on merit.

As one Senator said, it's become "a first come, first serve feeding trough" for pork projects.

And the Senate bill fails to deal with one of the biggest problems with the federal funding system for highways:

States collect the federal gas tax – 18.4 cents a gallon - and send it to Washington, who re-distributes it as they see fit.

Most states pay more into it than they get back.

Think of it as class warfare between the states.

Every day Washington takes in $110 million dollars from the gas tax thanks to the states which don't get to decide what happens to the money they raised!

And don't even get me started on the short-term budget gimmicks baked in to this scheme:

The Senate wants to raise $10 billion dollars from taxes and program cuts over 10 years, but spend it all in two years (and yes, they used the same gimmick with payroll tax cuts - only worse - 10 years of savings for one year of spending...)

But this brings me to something that'll really make your blood boil. What better embodiment of waste and gimmicks than the stimulus.

More like stimu-mess.

According to the head of the Tax Foundation Grover Norquist, the states hit hardest by the recession got the least amount of money.

I know it doesn't make sense. If your state had a lot of foreclosures, a high jobless rate and high bankruptcy rates, then you were less likely to get the big stimulus dollars.

Sound unfair?

Sure it does.

But what Norquist found is economic pain wasn't a great predictor of stimulus dollars, Democratic legislators were.

In other words, the Dems were more successful at steering these dollars to their districts.

That very fact was even more important than whether state voters went for Obama in the 2008 election.

Outrageous.

Waste, gimmicks, pork.

And people wonder why Congress has such low ratings.

Frankly, they get what they deserve.

What's Really Behind Rising Gas Prices

by Gerri Willis

I was talking to my mother last night about what else? Gas prices.

She pays $3.77 a gallon in her small mountain town in the North Carolina’s Blue Ridge Mountains, and thinks she's being price gouged. Well this weekend, I paid $4.19 a gallon in a suburb of New York.

Both of us feel like we should be paying less. Both of us frustrated.

But what would it be like if you lived in California where the average is $4.36 cents a gallon, or Indiana where they pay $3.94?

Illinois is over four bucks a gallon.

And why are the people in Wyoming getting away with paying just $3.33 cents a gallon?

Doesn't seem fair.

The national average of $3.81 sure doesn't tell the whole story, and I started thinking who sets gas prices anyway, and why don't gas prices come down when oil prices come down?

Basically, if you look at the big picture nationwide, the cost of crude oil is the biggest factor. 10 years ago 50% of the cost was the cost of crude. Today it's between 70% and 80%, and as you can see there are a lot of other costs that get passed down to consumers.

The next thing is taxes, and they are different all over the country.

The national average is 47 cents on the gallon including the 18 cents imposed by the federal government.

But people in California are paying 64.5 cents per gallon just in taxes, and New York is not far behind.

Wyoming, New Jersey and Georgia only pay about 32 cents.

Then there's the cost of refining, and this is one of the reasons my cost of gas is so high. In the northeast, at least two refiners are out of commission punching prices higher.

Distribution and marketing costs are also a part of the picture although my local station took down its sign with the prices. Guess they were embarrassed that prices kept going up and up.

Other smaller issues play a role too like the fact the ethanol tax credit expired.

The government mandates each gallon of gas contain 10% ethanol, and they used to support that with tax credits, but now? Well, instead of supporting it with your taxes, you pay for it at the pump.

There's one more thing some say is responsible for higher prices: speculators, traders, business operators, farmers and investors who either hedge their risk of changing oil prices in the futures market or simply take a view on future prices.

If you look at the chart below, you can see the number of folks buying futures contracts has gone through the roof while demand has stayed the same.

Here's the thing though. You may be one of these speculators because increasingly 401(k)s and pensions invest in commodities.

Back to my original question: who sets gas prices?

Well, oil is a global market so the price of crude gets set by investors world over, but then state legislators have a say in what kind of tax you will pay and, of course, the oil companies themselves have a piece of the action as well.

But rest assured. Our country could have an impact on global oil prices by increasing production. In fact, it's already happened.

The states in this country with the lowest gas prices are also the ones producing energy, like Oklahoma, Colorado, Texas and Wyoming.

Economics 101… you produce more of a good, the price falls. Simple.

Time to Give Up on Green!

by Gerri Willis

$3.80.

That is the national average cost for a gallon of gas.

In Hawaii, California, Alaska and Illinois, gas is over four dollars!

Seven more states are nearing the four dollar mark.

So, you would think the rising gas prices, a record for this time of year, would inspire Americans to go electric.

After all, why pay four dollars for gas when you can get a plug-in car?

But that's the shocker here. Drivers are not going green.

In fact, according to USA Today and The Detroit Free Press, "these are the dark days for electric cars, darker than even a few months ago."

How dark? Well, as we reported, General Motors will be stopping production of the taxpayer-backed Chevy Volt starting next week for at least a month!

Why? Because no one is buying them!

But it's not just GM struggling to sell plug-in vehicles.

This year, Toyota has sold more than ten times as many hybrids than electric cars.

Despite tax credits in the thousands, last year sales of these cars amounted to just one-tenth of one percent of vehicle sales.

Is that worth investing tax payer dollars in?!?

Don't expect it to get better. LMC Automotive predicts sales of electric vehicles will stay near that level for at least the next, not one, not two, but five years.

One of the reasons? Cost!

Many gas-powered cars are working to improve fuel standards, and you can get a car that gets 40 miles on the gallon for ten thousand dollars less than a Volt or a Nissan Leaf.

More troubling signs for these cars…

Fisker has a high-profile electric sports car called the Karma with a price tag nearly $108 thousand!

But its performance isn’t so hot.

Last week, Consumer Reports, which conducts its own car testing, had this to say about the Fisker:

"We buy 80 cars a year and this is the first time in memory that we have had a car that was undriveable before it finished the check in process."

The folks at Consumer Reports had to bring in a flatbed tow truck to haul the thing away!

You know what they say about karma!!

And Bright Automotive, a vehicle manufacturer, was started as an alternative to the Detroit big three; a way forward in greener cars.

Well, it just announced it's closing its doors.

But it's not just car companies feeling the pinch from these failed products.

The dark days are extending across the spectrum of this industry.

Fisker's problems with their over-priced, under-performing electric cars are forcing the company to cut back on orders that has led to major losses for A123 Systems which makes the batteries.

That company has lost nearly $258 million in 2011 alone.

Ener1, another battery maker, declared bankruptcy earlier this year.f

What is it going to take to get through to this President?

He predicted there would be a million electric cars on the road within three years?!?!

Auto dealers can't even sell the ones they have!

Mister President, you tried. No one wants these cars. It's time to give up and come up with a new pet project. One Americans might actually get behind.

If you're looking for suggestions, I hear they're looking to build a pipeline in this country!

The Green Ruse

by Gerri Willis

There's getting things wrong. And then there's getting things really wrong.

Check out what the President had to say in North Carolina:

"Now, because of these new standards for cars and trucks, they're going to - all going to be able to go further and use less fuel every year. And that means pretty soon you'll be able to fill up your car every two weeks instead of every week - and, over time, that saves you, a typical family, about $8,000 a year.”

Hmmm. Given that the average family spends less than $3,000 a year on gas, it seems pretty unlikely that they could save $8,000 because of new fuel emission standards.

But the media picked up the Presidents' claims without fact checking them (except for the Washington Post that is).

And voila! The President's screw-up becomes well established fact.

In fact, the President himself has made different claims about the impact of the fuel standards before. He usually says that the $8,000 in savings comes "over time." What that means is that it comes over the lifetime of your car, and that my friend is an eternity.

The average car lasts 26 years in this country, according to the National Highway Transportation Authority, or 162,000 miles.

So, let's see now. The President's claim of saving $8,000 is really just 307.69 cents a year or 25.64 cents a month or 5.92 cents a week. Or 84 cents a day. Impressive? Not so much.

But you know how this works when it comes to green initiatives, particularly ones coming from this administration, well, a little sugar helps the medicine go down.

For example, last year the Federal Government decided to award a $10 million prize to the manufacturer who could create a "green" and affordable light bulb.

Energy Secretary Stephen Chu said the prize would spur industry to create LED's at prices that families could afford. Chu is the same fella who said he doesn't have a car, and he feels like it’s not his job to bring down gas prices.

And drum roll please…

Philips won the competition, and the low low price on its bulb? Fifty bucks! Philips has said the bulb was so expensive - more than existing LCDs - because the Energy Department required that it be brighter and more efficient.

That's the government's idea of cheap. Fifty bucks for a light bulb. Reminds me of when we paid 100 bucks for a toilet seat!

Does no one in Washington understand the value of a dollar? I guess it’s cheap for government work!

Tale of 10 States

by Gerri Willis

The economy…That's the drum Republican candidates have been beating as they compete for the presidential nomination. And in fact, its been a critical concern of voters since 2007 when the recession started.

But the national economic story - the slow-as-molasses recovery, herky jerky expansion - isn't necessarily the story of the 10 states holding primaries and caucuses in today's Super Tuesday contests.

In fact, there are big differences between these states when it comes to economic performance, and presumably the mood of the voters as well.

Take North Dakota. The state boasts the strongest economy in the nation, growing at a rate of five percent last year, while the national economy couldn't break two percent. That's five times the national average.

Employment markets are robust with a jobless rate of 3.3 percent. North Dakota has the lowest unemployment rate in the country.

The reason for the success is the rapid fire development of the Bakken oil shale deposits in the Western part of the state. Oil exploration is rapid fire. In fact, the number of active rigs operating in the state has jumped from 40 in 2007 to 200 last year.

If the economy isn't a motivating factor for North Dakota voters, perhaps the failure of the President to allow the Keystone pipeline to be built is. We'll see tonight.

Compare North Dakota with Georgia. People in Georgia would love to have such expansion, but they are on the opposite end of the spectrum. That state is an economic basket case.

The jobs rate is 9.4% - above the national average of 8.3%. Georgia's economy will expand at an anemic 1.5% pace - again worse than the nation.

At the heart of the economic trouble, a housing market in crisis.

One in 328 homes is in foreclosure - the worst of the 10 states with contests tonight.

The proportion of homeowners with negative equity, meaning they owe more than the house is worse, is 33%!

That's worse than even California, where housing has truly been an Achilles’ Heel.

And, the reason is Georgia requires foreclosure proceedings occur outside of the courthouse. It means the housing fallout is happening more quickly there.

Probably the most critical state tonight, the swing state Ohio, has its own story to tell. The state, once referred to as part of the nation's rust belt of state's populated by aging and empty factories, is enjoying good times.

At the heart of Ohio's renaissance - manufacturing. And it's not just the cities in the northeastern part of the state you've heard about before -- Cleveland, Akron and Canton.

Today's big winner is tiny Maryville outside of Columbus, the state capitol. That's where Honda has built a massive plant employing more than 13,000 people.

Buckeyes can look forward to a 2012 in which growth will nearly hit four percent.

Voters’ attitudes will be shaped by their personal experiences, and their local economies.

And what is clear is those experiences are all very different.

Tonight we'll find out what it means for the GOP hopefuls.

Get Your Shovel Ready

by Gerri Willis

Get out your shovel because here comes the latest jobs pitch from Congress and the President.

Congress is currently squabbling over transportation bills that would cost hundreds of billions of dollars and the promise of millions of jobs.

 

Harry Reid just the other day pushing the merits of one such bill before the Senate:

"We're trying to pass a bill that would save about 1.8 million jobs and produce about 700,000 more jobs. That's what this is about."

 

A similar bill backed by Speaker John Boehner costing $260 billion fell apart earlier this year. House Republicans wouldn't vote for it.

They're working on another one.

 

The President is pitching his own plan. This one costs nearly half a trillion dollars over six years, but it's unlikely that will get through Congress.

But one thing is consistent in all these plans and proposals.

The authors argue this kind of spending on roads and bridges and other so-called shovel ready projects is the best way to “create or save jobs,” but recent history has shown that argument to be tenuous at best.

Even the President admitted as much:

"Shovel-ready was not as …uh…shovel-ready as we expected."

 

The Federal Highway Administration says for every one billion spent on highways it leads to 35,000 jobs.

But economists say it's almost impossible to put a precise figure on the number of jobs created by transportation spending.

One thing is clear: big government programs are not the way to create jobs.

Getting out of the way of the private sector is.

 

Take Apple for example.

No government bailouts there, and no taxpayer handouts either.

And, for the first time ever, Apple has attempted to quantify how many jobs in this country can be credited to its line of iPhones and iPads.

Apple says it created or supported 514,000 American jobs.

The precise number can be debated, and to be sure, Apple has created more job outside this country.

But it shows you just how ineffective the government is in creating jobs compared to the private sector, and leads to the inevitable conclusion that the best way for Washington to help manufacturers here in the United States is to get out of the way.

And it wouldn't hurt to cut the corporate tax rate in the U.S., which is about to become the highest in the world.

These numbers make it clear. It's the private sector that creates jobs; not the public sector.

Red Tape Tsunami

by Gerri Willis

Bank of America is planning to introduce a monthly fee for even the most basic checking accounts unless customers agree to bank online, buy more products or maintain certain balances.

This all comes after the huge consumer backlash last year when it tried to implement a five dollar per month debit card fee.

We led the outrage that forced Bank of America to reverse that decision.

So, does the nation's second largest bank just hate their customers or is there a reason for the rising costs?

Well Bank of America and others blame Dodd-Frank.

This was the bank regulation law written in the aftermath of the financial crisis.

The one that was supposed to save us from another financial crash, and keep our money safe.

But as is normally the case with red tape, it's more of a mess than a solution.

Check this out...

The original law that set up America's banking system following the Civil war was 29 pages long.

The law that created the Federal Reserve in 1913 was a whopping 32 pages.

And Glass-Steagall - the regulatory law that went into effect after the big stock market crash in 1929 - that was 37 pages.

Dodd-frank? 848 pages long!

I don't think I’m going out on a limb here when I say who in Congress read all that?!? By the way, the math was done by the magazine, The Economist.

The other problem: an official at Yale Law School Jonathan Macey says: "Laws classically provide people with rules. Dodd-Frank is not directed at people. It is an outline directed at bureaucrats and it instructs them to make still more regulations and to create more bureaucracies."

In other words, Dodd-Frank is like the mother of all regulations because it will create huge numbers of regulations.

Dodd-Frank's authors said all of these regulations and bureaucracies would be in place within 18 months. We're 18 months in; we're not done - far from it. Now, experts are saying Dodd-Frank rule writing say it could take a decade! Don't you feel safer about your money?

For starters, of the 400 rules the law calls for, only 93 have been written. That's less than a quarter.

Dodd-Frank also called for 87 studies to be conducted within these 18 months, and only 50 have been completed.

In an effort to strengthen regulation, it has put a host of regulators in charge of the same thing.

The result of this bewildering set of rules is this: Nobody knows who does what when.

That's just the over-arching problems with this law.

But Dodd-Frank isn't just governing from the margins. Its rules are so specific and expensive, everyone from hedge funds to manufacturers are forced to pay up.

The Economist points out a three-page rule written in October that has turned into a 92-page form costing hedge funds upwards of $150k for just the first year it's implemented, and another $40k every year after.

I normally don't have a lot of sympathy for hedge funds, but this is a little ridiculous, don't you think?!?

And Dodd-Frank doesn't stop at the door of financial institutions. Manufacturers will have to report to information about stuff they buy overseas to the SEC, which could cost them billions of dollars. Can you say government overreach?

And then, of course, there are the banks. The big bad villains that have single handedly ruined our economy, crushed our spirit and sucked the life out of the small business world… Oh no… sorry that's the government.

Because these banks will now have to fork over hundreds of millions of dollars annually, and they're already making you and I pay for this with all these new fees, and I’m not just talking about Bank of America.

Even supporters of this law originally are now saying we need to start over and come up with a simple plan.

I say, if simple is just too hard for anyone in Washington, let's try a law that works.

One that doesn't have loopholes big enough to drive a tractor trailer through.

Or one that doesn't make you and me - the taxpayers, the consumers - responsible for paying for it.

ADVERTISEMENT

On Twitter

ADVERTISEMENT