Posts by Rick Newman

  • 4 ways Trump’s economic plan is already morphing

    Rick Newman at Yahoo Finance 18 hrs ago

    Campaign promises are a special kind of lie. Voters know they can’t be kept, yet still love grandiose ideas that sound too good to be true.

    Donald Trump made a lot of unkeepable promises during the presidential campaign, and voters rewarded him with a startling victory on Election Day. Now that he’s filling out his cabinet and fleshing out his ideas, the hype from the campaign is morphing into more pragmatic plans that can actually be implemented. Here are four important ways Trump’s economic plan has been changing:

    Fewer tax breaks for the wealthy. Trump’s tax plan during the campaign included a huge tax cut for the wealthy, on the supply-side principle that they’d spend more and help create more jobs. In October, the nonpartisan Tax Policy Center estimated that Trump’s plan would save the top 1% of earners an average of $215,000 per year, while middle earners would only save $1,000 or so.

     

  • How a smartphone saved 1,000 jobs

    Rick Newman at Yahoo Finance 20 hrs ago

    A picture is worth a thousand workers.

    It’s a moving picture, but still—a picture.

    On Feb. 10 of this year, supervisors called workers together at a Carrier factory in Indianapolis. The news was bad: Carrier would be shutting down the plant, starting in 2017, and moving 1,400 jobs to Mexico.

    The announcement was big news in Indiana, which had fought hard to keep Carrier by offering tax breaks and other incentives. Beyond the state’s borders, however, hardly anybody noticed. US employers announced more than 60,000 layoffs that month, and 1,400 job losses at one plant was hardly national news.

    But two days later, a Carrier employee named LaKeisha Austin posted a three-and-a-half minute video to her Facebook account showing Carrier workers revolting as a man in a suit recites a corporate statement about the move. Workers shout and swear at him, and sneer when he says, “this is strictly a business decision.”

     

  • What just happened with Carrier is crazy

    Rick Newman at Yahoo Finance 1 day ago

    From 2011 to 2013, the city of Indianapolis and the state of Indiana gave Carrier and an affiliated company $1.7 million in grants and tax incentives, as an inducement to keep two manufacturing plants in the state and bring additional work in. It turned out not to be enough.

    Earlier this year, Carrier said it would move those factories to Mexico, eliminating 2,000 jobs and saving $65 million. Indiana and its governor, Mike Pence, demanded most of the tax break money back, and got it.

    Perverse incentives

    Tax incentives that offset the cost of labor also give companies a stronger incentive to substitute automation and other types of technology for labor, as long as they’re not committed to a minimum number of jobs. That way, employers can benefit from tax breaks while still lowering labor costs by replacing people with machines.

     

  • Surprise! Trump is listening to critics

    Rick Newman at Yahoo Finance 2 days ago

    Okay, it’s only a few tweets, and the details may not measure up to the promise. But incoming president Donald Trump is responding fairly quickly to concerns that his far-flung real estate operations could be a funnel for favors from countries and other entities he deals with as a businessman.

    The New York Times recently published a long analysis of the myriad ways Trump’s business interests around the world could collide with his duties as the nation’s commander-in-chief and foreign policy architect. Other groups have begun to track potential conflicts of interest involving Trump, his business and his family. The Sunlight Foundation has identified nearly 30 so far.

    After the election, Trump said he’d turn over the running of his business to his kids, Ivanka, Eric and Donald, Jr., who already have senior positions in the Trump Organization. But that didn’t appease good-government experts, who felt that wouldn’t go far enough.

     

     

  • Steve Mnuchin, Trump’s Treasury nominee, has a nagging foreclosure problem

    Rick Newman at Yahoo Finance 2 days ago

    He’ll probably get confirmed. But first, Steve Mnuchin, Donald Trump’s nominee for Treasury Secretary, will have some explaining to do.

    Mnuchin is a Goldman Sachs alumnus and lifelong financier who mostly has a strong track record of earning millions of dollars for clients and himself. But he became a lightning rod after assembling a group of investors to buy the insolvent bank IndyMac in 2009. Mnuchin et al. renamed the bank OneWest and successfully turned it around, but in the process foreclosed on thousands of irate homeowners while also drawing criticism for exploiting corporate welfare. Those foreclosures represent ready ammunition for Trump critics eager to paint his Cabinet choices as heartless Wall Streeters.

    Rick Newman is the author of four books, including  Rebounders: How Winners Pivot from Setback to Success . Follow him on Twitter:  @rickjnewman .

     

  • Trump’s Commerce nominee, Wilbur Ross: “There aren’t going to be trade wars”

    Rick Newman at Yahoo Finance 2 days ago

    Corporate America’s biggest worry about incoming President Donald Trump is that he’ll ignite trade wars with China, Mexico and other big exporters. His pick for Commerce Secretary, private-equity billionaire Wilbur Ross, says that’s not going to happen.

    “There aren’t going to be trade wars,” Ross told Yahoo Finance the day after the election. “There are plenty of things that could be done that would not be the end of the Earth but would help our trade balance.”

    On the campaign trail, Trump talked tough about slapping quotas on cheap imports and punishing China if its currency appeared to be undervalued. If those things were to happen, it would make imports more expensive for American consumers, invite similar quotas on American exports and possibly cause a recession. Hence the worry in US boardrooms.

    The goal, he says, wouldn’t be to punish US companies that produce goods in Mexico, but to reduce America’s $60 billion trade deficit with Mexico. That can be done two ways: by Mexico exporting less to the United States or buying more from it. Either could be accomplished, he says, without dismantling the North American Free Trade Agreement.

     

     

  • Steve Mnuchin, Trump’s Treasury pick, has a checkered history in Hollywood

    Rick Newman at Yahoo Finance 3 days ago

    On July 17, 2015, less than two weeks before the film company Relativity Media declared bankruptcy, one of its lenders, OneWest Bank, swept $17.9 million out of a Relativity account meant to pay fees to producers, writers, performers and other staffers who worked on the company’s movies. During the next two months, OneWest swept another $32 million out of Relativity accounts, leaving the company desperate for cash to pay hundreds of other creditors.

    “This liquidity crisis caused the debtors to largely have to stop paying many vendor bills, to postpone production of certain film projects, and to postpone the release of certain completed films,” a restructuring expert hired by Relativity wrote in a Chapter 11 filing when the company declared bankruptcy.

    Contact the writer: rnewman@yahoo-inc.com.

    Rick Newman is the author of four books, including  Rebounders: How Winners Pivot from Setback to Success . Follow him on Twitter:  @rickjnewman .

  • President Obama's gift to Trump

    Rick Newman at Yahoo Finance 3 days ago

    The US economy grew 3.2% in the third quarter, according to newly revised government figures. That’s just three-tenths of a percentage point short of Donald Trump’s goal for growth, which is 3.5%.

    Employers have created nearly 2.4 million jobs during the last 12 months. Donald Trump’s goal: 2.5 million new jobs per year. Again, we’re almost there.

    Trump, the incoming president, campaigned on a litany of complaints about the economy’s performance under President Obama during the last 8 years. He repeatedly called the Obama economy “disastrous” and a “total failure.” Yet Trump now stands to inherit an economy that’s gathering steam and could make his first year or two in office a new standard for prosperity.

    Trump supporters argue that recent economic news—almost all of it upbeat—is due largely to the fact that Trump won the presidential election and is now generating new hope about an economic revival. But it’s easy to break down the latest developments to determine which predate the election and which come after. The following updates were all published recently but refer to periods before the election, when most polls predicted Hillary Clinton would be the likely winner:

  • A new record for home prices—but fewer owners to benefit

    Rick Newman at Yahoo Finance 3 days ago

    The housing bust is officially over, 10 years after it started. But like much else in the economy, the real-estate recovery has benefitted the wealthy more than others, with many ordinary folks still falling behind.

    A prominent gauge of home prices, the S&P Corelogic Case-Shiller index, set a new record high in September, surpassing the previous high, from July 2006. Home prices on average have risen 5.5% during the last 12 months. “This indicates a completed recovery of US home prices since the Great Recession,” S&P Global said in a release. Here’s the home price index since 1988, with the solid line representing the national average:

    Great news, right? Well, sure, if you’re a homeowner enjoying an ongoing boost in wealth. But the portion of Americans owning a home has been dropping since 2005, with the homeownership rate now at levels of the mid-1960s. In late 2004, the homeownership rate peaked at 69.2% of all households. Today, it’s just 63.5%.

  • Trump's tactics for saving jobs could kill them instead

    Rick Newman at Yahoo Finance 4 days ago

    Donald Trump has pulled off a public relations coup by persuading Carrier, the air conditioning company, to reverse plans to offshore hundreds of jobs from an Indiana factory to Mexico. That fulfills a campaign promise before the incoming president even takes office. But the kind of corporate arm-twisting Trump is engaging in could easily backfire and end up destroying more jobs than if Trump were to do nothing.

    Trump has reportedly struck a deal with Carrier to keep half of the 1,400 jobs it planned to outsource in Indiana, with details to be revealed later. Beyond jawboning the company, Trump supposedly promised relief from regulations and lower taxes, which in theory ought to offset some of the additional costs of paying higher wages to American workers. It’s a highly unusual arrangement, since elected officials rarely, if ever, make such deals with individual companies. If anything, it allows Trump to claim a win while Carrier gets off the hook.