Torn From the Kiplinger Letters


Obama Threads Needle on Russia-Ukraine Dispute

Today's forecast for management decisionmaking.



From The Kiplinger Letter, Aug. 29, 2014

Obama will stay on middle ground in dealing with Russia and Ukraine, between isolationists and those who want the U.S. to stand up to Moscow. Calls for engagement are growing. Even some members of his White House team see Russia’s stepped-up aggression as tantamount to an invasion that requires action.

He’ll stick to sanctions and allow NATO to play bad cop in the region. NATO will start next week with approval of a permanent rotating force near Russia’s western border. But the troops, seen as a deterrent, aren’t likely to fight.


Backyard Chickens May Give You Fleas

-- From The Kiplinger Agriculture Letter, Aug. 22, 2014

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Hens in the backyard? Besides fresh eggs, they can also produce fleas. Veterinarians say they’re seeing an uptick in poultry fleas among the parasites that plague household pets. And unlike more common pet fleas, the avian variety burrows into the skin of dogs and cats, which can lead to infections. Infested sites can be treated with a permethrin solution. For treating animals, consult a vet.


U.S. Farmers to Benefit from Wider Suez Canal

-- From The Kiplinger Agriculture Letter, Aug. 22, 2014

Expansion of the Suez Canal will help U.S. shippers of ag products, primarily items sent in containers. U.S. farmers who sell corn oil, seeds, almonds, walnuts, pistachios and other nuts in the Persian Gulf region and southern Asia will see speedier transits through the canal once Egypt is able to finish the project. Also benefiting: U.S. sellers of farm equipment and compressed alfalfa hay for feeding camels, goats, sheep and horses in the desert climes of the Middle East. Egypt is striving to open a second channel, at least 22 miles long, in a year or so. Western Europe, Ukraine and others that deliver bulk grain via the Suez will gain, too.


Powdered Alcohol? States Say No

-- From The Kiplinger Letter, Aug. 15, 2014

States are balking at powdered booze. Even if the federal government OKs it, some states will ban it as too alluring for kids. Many opponents say that Palcohol, when mixed with water, is essentially spiked Kool-Aid. Maker Lipsmark wants approval from Treasury’s alcohol and tobacco tax arm and hopes to get powdered vodka, rum and four specialty drinks on store shelves by fall. But the feds will tread carefully.

Fair odds New York, Minnesota, maybe Ohio will ban it, as Alaska, South Carolina and Vermont have.


Ranchers, Meat Packers May Resist New Beef Grading

-- From The Kiplinger Agriculture Letter, Aug. 22, 2014

The Department of Agriculture is poised to reexamine how it grades the quality of beef products. Ranchers, feedlot owners, meatpackers and consumer advocates will get to weigh in because the standards affect prices of cattle along with wholesale and retail beef.

The USDA says revisions in the current standards, in place for nearly half a century, are needed because cattle are different now. They’re larger than they used to be, for example, with carcasses usually 800-900 lbs…50% heavier than back in the ’60s. Also, feeding regimes (grain- vs. pasture-fattened) have altered consumer preferences. But packers and ranchers haven’t called for changes and may not accept any quickly.


Obama Labor Orders Irk Business Groups

-- From The Kiplinger Letter, Aug. 15, 2014

Business groups say a planned crackdown on U.S. contractors is too broad and will hurt some vendors and others who indirectly work with Uncle Sam. It’s the latest bid by Obama to appease unions, a big Democratic constituency. At issue: Executive orders by Obama to police firms that do federal work on everything from pay…including overtime and fair wages…to worker safety. They call for tough new rules aimed at barring repeat offenders from federal work.

Opponents say even lawful businesses will be harmed by the orders because of confusion about who is covered and the cost of complying with them. The U.S. Chamber of Commerce and National Federation of Independent Business say that minimum wage provisions in one of the orders could apply to outlets that sell fast food on military bases or to firms that lease space in federal buildings. The wage is to go to $10.10 per hour effective with new contracts beginning Jan. 1.


Creative Efforts to Stem Golf's Decline

-- From The Kiplinger Letter, Aug. 15, 2014

No quick recovery in sight for golf’s popularity...bad news for course owners, equipment makers and other businesses that cater to golfers. Amateur play is declining as fewer golfers hit the links or do so less frequently. Also ebbing: Fan enthusiasm for the pro game. TV viewership of the 2014 Masters tournament… the most watched golf event of the year…netted its smallest audience in two decades.

Many golf course owners will have to get creative to avoid closing up shop. Expect a heavy emphasis on youth programs and lessons to draw in future customers. And don’t be surprised if your local course starts sponsoring “footgolf,” a hybrid sport played with a soccer ball on golf courses. More than 140 courses already offer it to boost revenue from underused facilities…and hopefully spark new interest in golf.


Education Gives Women Edge at Finding Jobs

-- From The Kiplinger Letter, Aug. 15, 2014

Women are winning the race on regaining jobs lost in the Great Recession... more women employed now than at their previous peak in Nov. 2007. Men are still 643,000 shy of their earlier jobs peak. Why the gender disparity? One reason: Many new jobs are in business and professional services, education and health... fields that put a premium on educational attainment, where women have an edge.


Growth in Canada, Mexico Accelerating

-- From The Kiplinger Letter, Aug. 15, 2014

In Canada, healthy consumer spending and rising exports spell better growth this year…about 2.2%...with a 2.5% gain likely next year. In 2013, GDP grew just 2%.

South of the border, an energy boom is propelling the Mexican economy… about a 2.3% jump this year, with a robust 3.5% expansion in the cards for 2015. The recent move by the Mexican government to let foreign and domestic companies explore for and refine oil will spur Pemex, the country’s state-owned oil enterprise, to become more competitive, boosting growth. (The oil industry accounts for about 6% of Mexico’s GDP.) Plus, home building is perking up, and manufacturing is getting a lift from the rebound in U.S. and Canadian consumer demand after a dismal winter.

That’s good news for U.S. businesses. The North American neighbors are the U.S.’ top two foreign customers, accounting for $500-billion-plus in exports.


New Rules Will Clear Up Phone Bills

-- From The Kiplinger Letter, Aug. 15, 2014

Easier-to-read wireless phone bills are in the cards. A federal crackdown on mobile cramming…the practice of charging hidden or unauthorized fees on bills… is leading carriers to adopt new, voluntary measures to make bills more transparent. Such fees include charges for ringtones, horoscopes, weather forecasts, etc., from third-party marketers that give carriers a cut of the profits. In recent years, wireless carriers have reaped hundreds of millions of dollars from such services.

The threat of stricter billing regs from the FCC lurks in the wings, spurring both carriers and marketers to clean up their acts to avoid paying fines and even the possibility, though remote, of an outright ban on third-party charges.


Well-Funded ISIS Rebels Will Be Hard to Defeat

-- From The Kiplinger Letter, Aug. 15, 2014

The ISIS rebels in Iraq can be contained, but it will take months or years because of the hit-and-hide nature of their attacks and the U.S.’ reluctance to send ground troops back to the troubled territory. Instead, airstrikes will continue, and Britain will join the U.S. and France in arming the Kurds in northeastern Iraq.

The rebel forces aren’t vast, and much of their military gear is ancient. But they have billions of dollars on hand to buy weapons and train recruits. And the porous border between Iraq and Syria allows them to come and go freely.


Tablets Toughen Up for Challenging Workplaces

-- From The Kiplinger Letter, Aug. 8, 2014

More companies will turn to rugged tablets to battle tough work conditions. The mobile devices are designed to tolerate falls, water and extreme temperatures. The bulked-up versions have Microsoft Windows, Intel chips and simple touch screens, making it easy for IT departments to integrate them with companies’ other hardware.

Look for sales to grow by 16% a year through 2017. Eager to buy: Firms in construction, oil & gas, public safety and the military. Commercial drone users, too.


Obama's Immigration Moves May Hurt Democrats

-- From The Kiplinger Letter, Aug. 8, 2014

The big shock in President Obama’s next move on illegal immigrants? Not that he’ll block some deportations by executive order, but the timing. He’s likely to take the contentious step before this fall’s congressional elections, when Democrats face a stout challenge to maintain a majority in the Senate.

That’ll frustrate those Democrats who want him to stall any action until after the midterm elections, when control of Congress will again be at stake. Millions of illegals who have been in the U.S. for a while will be allowed to stay.

Acting before November could hurt Democrats trying to win key Senate seats. The move will inflame conservatives in such states as Ark., Ga., La. and N.C. If their anger translates into more of them voting, Republicans will stand to gain. Many Hispanics will be energized, too, but the eight or so states with key races don’t have Hispanic populations large enough to alter Election Day results.

Obama isn’t likely to order a boost in the number of high-tech visas, despite widespread support in the business community. A shortage of workers with math and science backgrounds and a long wait for visas hamper firms.


Small Firms Will Keep Expanding Payrolls

-- From The Kiplinger Letter, Aug. 8, 2014

Look for the gradual pickup in hiring by small business to last into 2015. Businesses with 50 or fewer employees are sounding increasingly confident that climbing revenues will justify expanded payrolls. And it’s no longer just in areas of the country buoyed by the energy boom. Smalls in Seattle, Detroit and San Diego, for example, are also beefing up their workforces. Moreover, service industries… from accounting firms to restaurants…are posting some of the biggest hiring gains.

About 13% of small firms say they plan to add workers…the 10th month in a row that more smalls aimed to hire than to cut back. And, since small firms make up the majority of employers, that’s good news for communities across the U.S.


Ebola Vaccine Coming, But Drug Firms Uninterested

-- From The Kiplinger Letter, Aug. 8, 2014

An Ebola vaccine is in the works, but it won’t be ready till mid- to late 2015. Animal testing and upcoming human tests are being funded by Uncle Sam. Drug firms aren’t interested...there’s little chance of a big return on investment because outbreaks are sporadic and relatively few people come down with the illness.

But here’s good news on the health front: All signs point to a mild flu season. Getting the shot can reduce the chance of needing a doctor visit by 60%... great news for employers that offer shots in the office or pay for workers to get them. Among workers aged 50 to 64, the flu is responsible for nearly half of lost workdays and days of low production. The price tag for all that lost productivity: $6.2 billion.


Safety of a Dam Will Drive U.S. Iraq Policy

-- From The Kiplinger Letter, Aug. 8, 2014

U.S. airstrikes against ISIS rebels in Iraq will continue on and off for months. Obama insists he won’t send ground troops, but he might not have a choice. If the rebels destroy a massive dam they now control, Baghdad will be flooded, presenting the president with one of the biggest challenges of his White House tenure. Ground forces would likely be needed to protect U.S. citizens and American facilities.


Smart Watches' Time Has Come

-- From The Kiplinger Letter, Aug. 1, 2014

The hot new electronic gadgets this holiday season as well as next year? Smart watches from Apple, Samsung, LG Electronics, Pebble and others. Google also licenses a smart watch operating system used by Motorola, Samsung and other watchmakers. Prices of new watches will likely range from around $150 to as much as $1,000 for ones with lots of computer power, memory and sensors. Partnerships with top-end watchmakers such as Rolex will lead to even higher prices. Worldwide shipments of smart watches are expected to hit a whopping $3.6 billion in 2015, a more than 20-fold increase from the shipments of such gadgets last year.


Casino Market Increasingly Saturated

-- From The Kiplinger Letter, Aug. 1, 2014

Additional casinos won’t bring states more gambling bucks. The market is saturated, especially in the Northeast, and expansion in one state simply cannibalizes business in another. Atlantic City, N.J., revenues, for example, have dropped 45% since 2006 as N.Y. and Pa. gained business, while newer casinos in Pa. take dollars from N.J. and Del. With casinos legal now in all but 10 states, 853,000 slot machines nationwide and more splashy Vegas-style resorts opening in N.Y., Mass., Md. and Ohio, the $37-billion pie will be split into smaller slices.

Meanwhile, online betting is proving a disappointment for Nev., N.J. and Del., the only states where it’s legal. N.J. has raked in just $9 million so far this year; it was banking on a $180-million haul from online betting. The market as a whole is likely to nab just $3.5 billion from 2013-2016, down from an expected $5 billion.

Brighter prospects further down the road, though, as new gambling apps are rolled out and more folks turn to using their smartphones to take their chances.


Gas Prices Will Continue to Fall This Year

-- From The Kiplinger Letter, Aug. 1, 2014

Expect friendlier gasoline prices for the remainder of 2014. Ample supplies and restrained demand have already caused the average price of regular gas to decline from the peak of about $3.70 per gallon reached in June to $3.50 today. Pump prices will slip a few cents more in coming weeks and decline even further after the Labor Day holiday weekend. Figure on an average of $3.30 per gallon by Dec. For the full year, prices will average a dime or so per gallon less than 2013’s $3.51.

Ditto for diesel, which will ease from $3.84 per gallon now to $3.80 by winter.

Rising crude oil output and busy refineries will keep markets well supplied. U.S. refinery output is setting records, thanks to more low-cost domestic crude and more refining capacity. Current U.S. oil production of 8.4 million barrels per day will keep expanding, to 9 million barrels per day by year-end…the most since 1986.


Eager Back to School Shoppers Will Find Few Discounts

-- From The Kiplinger Letter, Aug. 1, 2014

Retailers can expect healthy sales this back-to-school season. Total sales figure to come in at $590 billion, topping 2013’s figures by 4%. Families with children in grade school will spend $670 on average, mostly at department and discount stores. But bookstores and electronics retailers will also get in on the action…laptops, tablets and other digital devices are increasingly seen as school necessities, not luxuries.

Shoppers seeking hot deals will be out of luck. Retailers won’t drop prices to nab sales...profit margins are too slim. So many buyers will turn to store brands to find savings over brand-name counterparts. And a quarter of families will hold off until late August or early September to shop, hoping for late-season sales as classes begin.


China Seeks More Moderate Growth

-- From The Kiplinger Letter, Aug. 1, 2014

Look for China’s economic growth to slow more markedly in the years ahead. Gains will drop to around 6% by 2016, from 7% next year and about 7.3% this year…a far cry from double-digit average annual growth of the previous decade.

The fact is, bad loans are on the rise, curtailing the supply of credit, particularly from nontraditional lenders such as trust companies. Moreover, falling real estate prices are taking a toll on construction activity and sales, further weakening the business investment that has helped stimulate past growth.

But the slowdown is OK with Beijing. Officials figure that more-sustainable, albeit moderate, growth is preferable to additional, riskier credit-fueled expansion. Plus the government wants home prices to slide, making homes more affordable for average families. Ditto for rents to fill new, but unoccupied, apartment buildings.

Still, officials will watch employment levels closely. A sharp acceleration in joblessness would see them step in quickly to prevent widespread social unrest.


Custom Web Sites for Even the Smallest of Firms

-- From The Kiplinger Letter, July 25, 2014

Website-building services are targeting a new client list: Entrepreneurs. Start-ups are eager to quickly and cheaply create a sharp-looking Internet presence. They can get basics from plug-in programs, but those provide cookie-cutter websites that don’t stand out. The custom creators allow them to have a first-rate Web service without devoting time or resources to writing lines of cumbersome code on their own. Once used primarily by bloggers, the services are gaining acceptance from retailers.

Small businesses stand to benefit the most. A majority of those operations aren’t on the Web. Even fewer of them have mobile sites designed for smartphones. Fees, including online stores: About $25 a month for Weebly, Wix and Squarespace. The sites track order history, keep tabs on inventory and sell digital downloads.


Millennials Itchy to Move into Their Own Place

-- From The Kiplinger Letter, July 25, 2014

Lots of pent-up demand for apartments from millions of 18- to 34-year-olds looking for a way out of their parents’ basements. About 22.4 million of them still live at home…3.3 million more than the long-term average for that age group. The vast majority of this population group rents a first home rather than buying. So...

That will soak up the surge of new units this year: Up to 240,000 of them, vs. only 160,000 in 2013. With vacancy rates as low as 2.6% in New York City, 3.2% in San Diego and 4.4% for the nation overall, landlords will be able to jack up rents. Figure on hikes averaging 3% per year over the next several years, just off 2013’s rate.

Expect building to level off or retreat slightly in 2015 as investors pause to assess whether the pickup in the economy is strong enough to fill even more units.


Employers to Boost Bonuses in 2015

-- From The Kiplinger Letter, July 25, 2014

Bonuses for workers will be popular in 2015 as employers of all sizes try to retain talent as the economy improves and competition for workers grows. Employers are offering more and bigger signing bonuses as well as awarding bonuses on the spot to recognize excellence during the year. Rewards, too, for employees who refer successful candidates, achieve longevity or reach other milestones.

Also growing in popularity: Nonfinancial rewards…extra opportunities for career development, education, time off, more-flexible work hours and the like. Many workers consider such things to be more valuable than some extra cash.


Record Year for Natural Gas Production Ahead

-- From The Kiplinger Letter, July 25, 2014

More gains ahead for natural gas reserves and output as drillers tap deposits associated with oil locked in shale rock and produce gas as a by-product. Though the number of rigs drilling for gas is declining, output is up 5% over last year.

Another record-setting year of production is all but certain. For the full year, figure on about 31.5 trillion cubic feet of gas…up from 2013’s 30.2 trillion cubic feet. That should help rebuild gas stocks vastly depleted by last winter’s frigid weather.


Obamacare Subsidies Appear Immune to Court Challenges

-- From The Kiplinger Letter, July 25, 2014

About reports that court rulings will wound Obamacare, maybe fatally: They’re premature at the least. And probably are vastly overstated. Only one ruling has gone against the legality of subsidies for insurance bought through the federal exchange instead of state-run exchanges. And that ruling, by a three-judge appellate panel in Washington, D.C., seems ripe for reversal when the Obama administration asks the full 11-judge court to rehear the case. Rulings by other federal courts have upheld the health insurance subsidies.

If the full court allows the subsidies and other courts don’t take differing views, the Supreme Court isn’t likely to weigh in. The justices usually pick cases in which the law needs to be clarified or a constitutional issue needs to be settled.

But in the end, even a negative ruling from the Court wouldn’t be fatal. Governors and state lawmakers in the 36 states that rely on the federal exchange would face immense pressure from voters and insurers to open state exchanges. Not all 36 oppose state programs. They just took the easier path under the law.


Tighter Security for Mobile Devices

-- From The Kiplinger Letter, July 17, 2014

Coming soon: Better protection against hacking that targets mobile devices. Banks and technology developers won’t wait for serious breaches to occur. Instead, within two years, they’ll roll out more advanced techniques to verify account users.

First in line: Fingerprint recognition, making it pointless to steal passwords and usernames. Voice recognition may also help beef up authentication efforts. Education will be a priority, too, starting next year. Mobile users will be warned about the dangers of “jailbreaking” their phones…altering hardware and software to allow uses outside those set up by the manufacturer. The practice is common and adds flexibility. But it voids warranties and can compromise data protection by circumventing built-in security provisions that keep hackers and malware away.


States Push Hard to Sell to China

-- From The Kiplinger Letter, July 17, 2014

New efforts by states to drum up business with China: Half a dozen governors will meet with Chinese officials in Nov. in California And a steady stream of them will continue to head across the Pacific in coming months with trade delegations hawking products from Virginia paper and Michigan salsa to medical equipment from Wisconsin.

Personal connections help: Montana hopes to cash in on ties to Max Baucus, former U.S. senator and now ambassador to China. Iowa has an ace in the hole with Gov. Terry Branstad, who became acquainted with President Xi Jinping in 1985, when as a party leader, Xi toured Iowa. 25% of Iowa soybeans are exported to China.


Credit Easing, But Not Dangerously So

-- From The Kiplinger Letter, July 17, 2014

Looser credit for business, car and personal loans is in the cards, with banks encouraged to lend more freely by near-record lows in delinquency rates. For auto loans and leases, rates are hitting bottom. For credit cards, delinquencies are the sparsest since 2006. For commercial and industrial loans…lowest in 30 years.

Competition among banks spells longer loan lengths and lower credit scores required from borrowers. Plus it’s keeping downward pressure on interest rates. There’s little or no easing in student and home lending standards, though.

Expect federal regulators to keep their eyes peeled, ready to curb lending that becomes overly aggressive. Already, the Federal Reserve is sounding a quiet alarm about excessively low interest rates on junk bonds.

In terms of consumer lending, no great worries, for now, though car loans are headed into risky territory. Lenders are offering financing for 100% of car prices plus taxes and stretching lengths of loans up to 84 months. An economic downturn would cause defaults to spike.


Car Dealers Opening Storefronts in Shopping Malls

-- From The Kiplinger Letter, July 17, 2014

Coming to a mall near you soon: Car shopping. The idea is to infect consumers who casually stop by between errands with new-car fever, rather than to clinch sales then and there. Dealerships and third-party companies that represent multiple brands will showcase models from several different makers and focus on showing consumers features, options, color choices, etc. For test drives, some cars will be stored in mall parking lots. In most cases, once the consumer has the bug, he or she will be ushered to a dealership to actually make the buy.

For malls plagued with empty space, the idea is a welcome innovation.


Russia Won't Suffer from Malaysian Flight's Downing

-- From The Kiplinger Letter, July 17, 2014

Russia faces outrage and talk of sanctions after the civilian jet shootdown. But don’t be shocked if the calls for an economic crackdown come to naught in the long run. There’ll be plenty of talk, but little actual action in the months ahead.

Europe will be reluctant to comply because it needs Russia’s gas this winter.

But uncertainty will slow Russia’s recovery from an apparent recession. GDP there shrank by 0.5% in Jan.-March and likely waned further in April-June. For the year, growth will be flat, at best, with downside risks rising as tensions mount.

At the heart of Moscow’s woes: Massive capital flight...nearly $51 billion in the first three months of the year, with investors pulling out more every week.

Don’t expect Russia to soften its aggressive stance regarding Ukraine. Six months from now, the standoff is likely to look about the same.


Feds to Focus on Cutting Our Salt Intake

-- From The Kiplinger Letter, July 10, 2014

Uncle Sam wants Americans to eat less salt. New guidelines due from the Food and Drug Administration will recommend that food makers gradually cut back on the salt content of packaged foods to give consumers’ taste buds time to adjust. The guidance will be voluntary but is likely to spur the push already under way among retailers, restaurants and food processors to use less salt for health reasons.

The average consumer now eats twice as much salt as the feds recommend, about 3,300 milligrams per day vs. a suggested limit of 1,500 milligrams. Excess salt has been linked to high blood pressure, which can lead to heart disease and stroke. In response, chains such as Walmart and Subway are carrying lower-salt products, while Morton Salt has opened a new lab to help develop recipes that use less salt.


Higher Flying Fees Don't Translate to More Security

-- From The Kiplinger Letter, July 10, 2014

Budget for higher fees if you’ll be flying later this summer. The security levy charged by Uncle Sam to fund airport safety measures is set to rise July 21 from $2.50 for each leg of a flight to $5.60 per one-way trip…costly for direct flights. What’s more, most of the revenue will be used to avoid cutting other federal programs, rather than on bulking up airport security…adding insult to injury for air travelers.

Airlines are charging more, too. More carriers will follow the lead of Spirit and Frontier, which now charge for carry-on bags. And if your bag exceeds the limit the airline defines for carry-on luggage, expect to pay up to $50 to check it at the gate.


Improved Storm, Flood Warnings this Year

-- From The Kiplinger Letter, July 10, 2014

Coastal residents can look forward to better hurricane forecasts this year. The National Hurricane Center is rolling out an experimental mapping tool that can pinpoint areas along the Atlantic and Gulf coasts that can expect flooding when a hurricane is imminent. Coastal flooding is one of the most damaging threats posed by tropical systems, but folks often don’t realize when they’re in harm’s way.

Flood warnings will appear whenever a hurricane watch or warning is posted, with updates on at-risk coastal areas offered four times daily until the storm passes.

Also on tap: Enhanced storm path predictions from more-powerful computers that will help meteorologists sharpen the accuracy of predicting where storms will hit.


Your Next Movie Is Likely a Sequel

-- From The Kiplinger Letter, July 10, 2014

Hollywood’s plan for hiking box office revenues this year and next: Sequels. Lots of them. The potential blockbusters will help offset a dip in ticket prices. On tap: Hunger Games: Mockingjay-Part 1; The Hobbit: The Battle of the Five Armies; Paul Blart: Mall Cop 2; Star Wars: Episode VII; and Mission: Impossible 5.

A growing market for U.S. movies abroad: China. It’s building new theaters like crazy and typically allows only American movies that are big hits to be shown.




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