Recently in Business Category

I love this place

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They are farming out bids for a new high school - this great story from the Stanwood Camano News:

Bids come in under budget for the new Stanwood High School
Stanwood-Camano School District officials unsealed three bids for the new Stanwood High School — and all were under budget.

Bothell-based Cornerstone General Contractors Inc. offered the lowest bid at $89 million, about $4 million less than Redmond-based Edifice Construction and Edmonds-based Spee West Construction.

The Stanwood-Camano School Board will meet at 7:45 a.m. Monday to consider officially awarding the project, presumably to the lowest bidder. Once the board approves a pact, the long-planned project will begin in earnest.

Love it - not just Cornerstone but all three bids were under budget. Helps to have a strong economy. If this were Seattle (shudder). The money will be used wisely:

With bids under the district’s budget, there should be enough money to pay for a list of extra projects school officials wanted, Platt said. That includes new lighting at all the athletic fields, new greenhouses, softball batting cages, additional theater equipment and more.

Say it ain't so - Campbells Soup

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I grew up on the stuff and have a can of their Chicken Noodle soup when I am feeling nostalgic or do not feel like cooking. From the New York Times:

Campbell Soup’s Fate Hangs on Duel Between Company Heirs and ‘Interloper’
Daniel Loeb is happy to play the barbarian at the gate. He’s got the money, about $3.1 billion. He’s got the office, a sleek white space that is a quintessential hedge fund aerie, with art by Jean-Michel Basquiat, Jeff Koons and Andy Warhol. And in taking on the old-money family that owns more than 40 percent of Campbell Soup Company, he’s found the perfect foil for his new-money ambitions.

Third Point, Mr. Loeb’s hedge fund in Manhattan, is pushing for the sale or restructuring of Campbell, a slumping food giant that has called Camden, N.J., home for nearly 150 years.

He’s up against the descendants of John T. Dorrance, a chemist who devised the formula for condensed soup at the turn of the last century. Dozens of family members depend on the dividends they receive from the company to underwrite their comfortable lives. And for the most part they find Mr. Loeb’s proposals anathema.

“We’re interlopers who’ve come in, and they’ve decided to stick with the status quo,” Mr. Loeb said in an interview.

His hedge fund and the company have spent months exchanging barbed letters. Their battle will culminate on Nov. 29, when Campbell shareholders vote on a proposal by Third Point to take five seats on the company’s board. Mr. Loeb has even persuaded one dissident Dorrance heir and a former Campbell board member, George Strawbridge Jr., to join his campaign.

Sounds like corporate raiding to me soon to be followed by a bout of asset stripping. Not illegal but really really sucks.

Mittens was right - auto bailout

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From the Goldwater Institute:

Romney Was Right, the GM Bailout Goes Bust, and Taxpayers Pay the Price
“Let Detroit go bankrupt,” former presidential candidate Mitt Romney wrote in 2008, arguing that the federal government should not bail out the failing domestic auto industry for their poor management decisions. Vilified for turning his back on America’s autoworkers, Romney lost the argument, Barack Obama won the election, General Motors got its way, and U.S. taxpayers got stuck with an $11.2 billion bill to keep the company alive.

Today’s announcement from General Motors that it will close two plants in Metro Detroit and lay off 14,700 workers helps prove Romney right, albeit ten years later. Romney wrote that with a bailout, the American automotive industry’s demise “will be virtually guaranteed” because it would not be forced to undergo radical restructuring to be competitive in the marketplace. By subsidizing failure, the federal government would be gambling with taxpayer dollars and forestalling the inevitable.

This wasn’t the first time the government had bet heavily on General Motors at citizens’ expense. In a story much like recent efforts by state and local governments to give away billions of dollars to win a new Amazon headquarters, the cities of Detroit and neighboring Hamtramck teamed up in the early 1980s to win a new General Motors factory, chasing the promise of jobs and renewal of depressed and blighted neighborhoods. The Detroit News reports:

General Motors and Detroit Mayor Coleman Young hatched a plan: If the city would get the land, the auto company would build a state-of-the-art plant, crossing the border with Hamtramck, employing 6,000 people and providing a glittering example of what the auto companies and their suppliers could do in the city of their birth.

Residents who had lived in the targeted neighborhood would be given offers to sell their homes and move to make way for “progress,” but as the Detroit News reports, not everyone wanted to sell. In the face of protests and a legal challenge, the city moved forward with the plan, and a Michigan Supreme Court decision upheld the city’s decision to raze the site for General Motors. The factory was built, and decades later the court decision was overturned, but today, some 37 years later, that factory will be closed as General Motors fights to save costs.

One of the reasons that I love Ford so much is that they did not need to take any federal bailout money in 2008 - they are a well run company and turn out a really good truck. In hindsight, I am glad that Romney lost and that we got eight years of Obama - this set us up for President Trump and the people to follow him.

General Motors - meet President Trump

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I do not think that they fully understood the consequences of betting against our President - this will be fun to watch:

Insider trading? George Soros

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He may be a manipulative sociopath but he knows the markets - wonder if he had insider information? From Barrons:

George Soros Sold Facebook, Netflix, and Goldman Stock Just Before They Tumbled
Billionaire investor and liberal activist George Soros has been known for investing moves that have succeeded wildly —and also for ones gone horribly wrong.

Chalk up three recent moves in his win column.

Soros Fund Management, which Soros founded and chairs, exited social-network giant Facebook (FB) completely in the third quarter, while also slashing positions in Netflix stock (NFLX) and Goldman Sachs Group stock (GS). Those three stocks have tumbled in the fourth quarter so far, with Facebook and Goldman setting new lows Tuesday. They are down almost 20% and 15%, respectively, so far this quarter. Highflying streaming-content giant Netflix has tumbled almost 29% since the end of September.

Soros saved a chunk of cash by selling: Barron’s estimates that, had he maintained positions in those stocks, he would have unrealized losses of about $17.7 million so far in the fourth quarter.

Everyone knew that these prices were a giant bubble but the popping sure surprised a lot of them.

An interesting chart - 20 years

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From Mark Perry at the American Enterprise Institute:

The CD ‘chart of the century’ makes the rounds at the Federal Reserve

20180910-cost.jpg

Over the last 12 years, I’ve probably created and posted more than 3,000 graphics on CD, Twitter, and Facebook including charts/graphs, tables, figures, maps and Venn diagrams. Of all of those graphics, I don’t think any single one has ever gotten more attention, links, re-Tweets, re-posts, and mentions than the one above (and previous versions), which has been referred to as “the Chart of the Century.” 

And, to make this interesting, here is the underlying reason for the spike in prices:

The greater (lower) the degree of government involvement in the provision of a good or service the greater (lower) the price increases (decreases) over time, e.g., hospital and medical costs, college tuition, childcare with both large degrees of government funding/regulation and large price increases vs. software, electronics, toys, cars and clothing with both relatively less government funding/regulation and falling prices. 

So true - the prices that are going up are highly regulated businesses while the prices that have been falling are highly deregulated and capitalism and competition is allowed to work.

Great news from Baton Rouge station WBRZ:

Louisiana bars banks from $600M deal because of gun policies
Louisiana officials have blocked two of the nation's largest banks from involvement in a $600 million road financing plan because they have policies restricting gun sales by their commercial customers.

In a narrow 7-6 vote, the State Bond Commission refused to allow Citigroup and Bank of America to participate in the interstate highway financing work.

The effort to ban the banking giants from the road deal was led by Attorney General Jeff Landry and Treasurer John Schroder and opposed by Gov. John Bel Edwards' administration.

Those pushing to exclude Bank of America and Citigroup from the financial work said by enacting firearm restriction policies for their corporate customers, the banks were violating Second Amendment rights.

Good - stand up to the bullies and they will back down. Very glad that I am not banking with either of these banks. Switched to a local credit union back in 2008 when the corporate meltdown happened and have been happy ever since.

This looks interesting - Air Help

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From their website:

Claim compensation for your flight delay or cancellation
Flight delays happen, but that doesn’t mean you have to accept them. You may be entitled to as much as $700 in compensation if your flight has been delayed, canceled or overbooked within the last three years.

They take 25% of whatever compensation you receive and you do not have to lift a finger.

President Trump is doing a very clever thing to bring down the costs of medicine and health care. He is allowing for competition. A couple of headlines with links:

By making the prices available to the insurers and the customers, he is allowing for competition. People and insurance providers can now shop around and get the best service for the best price. If a hospital wants to get more business (they are, after all, in it for the money), they will have to cut costs, trim the fat and lower their prices. Right now there is no incentive for drug companies or hospitals to cut their prices so they are gouging.

And the bubble pops (a little bit)

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Great acronym: FAANG From CNBC:

Apple and the FANG stocks could lose at least a third of value, market watcher warns
Wall Street's crown jewels, the FAANG stocks, have lost their shine lately.

Facebook, Apple, Amazon, Netflix and Google parent Alphabet are selling off again Monday after losing a combined $185 billion over the previous two sessions.

Ahead of Apple earnings scheduled for Tuesday evening, Larry McDonald, editor of the Bear Traps Report, warns to stay away from what has been one of the hottest areas of the market this year.

"These are stocks you want to run away from," McDonald told CNBC's "Trading Nation" on Friday. "I see potentially 30 percent to 40 percent downside on the FAANGs."

These things are cyclical - the stock prices were overvalued and the leaders of these companies tried to make even more money by selling consumer data. The consumers did not like this and they revolted.

I own a rural grocery store and this video is sooo spot on:

Tip of the hat to Gerard.

Did not realize that this would affect shipping so much. From Bloomberg:

Tariffs Make Life Even Tougher for World’s Biggest Shipping Company
A.P. Moeller-Maersk A/S may struggle to make a profit this year after the U.S. and China descended into a trade war that promises to hurt the world’s biggest shipping company.

Maersk, which is based in Copenhagen, has already lost almost a third of its market value this year as investors gird for more bad news. Trade protectionism means less demand, and history suggests the shipping industry will struggle to make the necessary supply cuts. What’s more, Maersk is now more exposed to shipping as the former conglomerate divests its energy business.

Per Hansen, an investment economist at Nordnet in Copenhagen, says Maersk is currently “in the eye of the hurricane” when it comes to the damage that will be inflicted by a trade war. He estimates the company’s shares could drop at least 10 percent.

Sheesh - has not seemed to affect the Baltic Dry Index though. Back in February of 2016, it cratered to below 300 - today it is over 1,600. Overall shipping seems to be up too as the Port of Long Beach California just had their busiest month ever.

The Trump Tariffs - steel

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From the Chicago Tribune:

The Illinois town where Trump's tariffs have provided jobs, and a sigh of relief
Grab a cup of coffee with a resident of Granite City and you’ll likely hear it said that the southern Illinois city was built around the local U.S. Steel plant, not the other way around.

It’s the locals’ way of conveying how heavily Granite City, just outside St. Louis, depends on the steel mill, both for the jobs and the sense of identity it provides.

For more than 100 years, Granite City has defined itself as a hardworking mill town, a place where young people eager to cement a solid financial future without a college degree have to look no further than the dirt and iron and fire of the local steel plant, which stretches over 2 square miles. The opportunity afforded by the plant came to a halt at the end of 2015, when the plant idled production, laying off 2,000 people.

But the first blast furnace now has been restarted and U.S. Steel is filling 800 jobs at the mill, a result of the steep tariffs that President Donald Trump announced on imported steel and aluminum earlier this year. The Trump administration has in recent months imposed tariffs on goods from Canada, Mexico and China and on Friday imposed tariffs on $34 billion worth of Chinese imports. That country responded by levying tariffs of its own on American-made goods.

Not a big fan of tariffs - they should be used as a last resort but still, they are having a positive effect. My problem is that U.S. Steel is now going to raise their prices to a fraction of what the imported steel plus those tariffs will cost because they can. Makes for a tax on consumers. Good that workers are getting rehired though...

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An interesting change - PowerPoint

I hate PowerPoint with a passion. It allows users to creat a nice looking presentation with zero content. It seems that Jeff Bezos at Amazon feels the same way. From Barfblog (they usually food safety related issues):

Storytelling is more effective than PowerPoint
Food safety training and effective communication involves a myriad of techniques and behavior-based solutions in order to be compelling. The power of narration or story-telling is underrated and should be used more often as a way to inform the public on food safety than simply using PowerPoint. The CEO of Amazon has eliminated the use of PowerPoint in their executive meetings as a means to be more productive.

In his 2018 annual letter, Amazon founder and CEO Jeff Bezos repeated his rule that PowerPoint is banned in executive meetings. What Bezos replaced it with provides even more valuable insight for entrepreneurs and leaders.

In his letter, and in a recent discussion at the Forum on Leadership at the Bush Center, Bezos revealed that “narrative structure” is more effective than PowerPoint. According to Bezos, new executives are in for a culture shock in their first Amazon meetings. Instead of reading bullet points on a PowerPoint slide, everyone sits silently for about 30 minutes to read a “six-page memo that’s narratively structured with real sentences, topic sentences, verbs, and nouns.”

After everyone’s done reading, they discuss the topic. “It’s so much better than the typical PowerPoint presentation for so many reasons,” Bezos added.

The author (Robert Mancini) then goes on to give three reasons why narrative is much better than bullet points. Excellent analysis and great call by Amazon leadership.

End of an era - Ronco

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From the Austin, Texas Business Journal:

Ronco, the infomercial powerhouse behind Veg-O-Matic, files for Chapter 11 bankruptcy
Ronco Holdings Inc., which popularized the infomercial tagline "But wait, there’s more" and sold household gadgets such as the Pocket Fisherman and Veg-O-Matic, has filed for Chapter 11 bankruptcy protection.

Rondo Brands, which was incorporated February 2017 in Austin to become the holding company of Ronco Holdings, announced plans more than a year ago to raise $30 million through a "mini-IPO" of 5 million shares at $6 per share.

That funding effort failed, according to the New York Post, which first reported on the late April bankruptcy filing last week.

Product inventor Ron Popeil founded Ronco in 1964. Over the decades, it rolled out devices such as the Chiptastic Microwave Potato Chip Maker and Turbo Food Dehydrator.

End of an era - if you watched television 30 years ago, their advertising was in constant rotation.

President Trump's economy

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There's hope yet...

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Interesting report on the age of entrepreneurs - from the National Bureau of Economic Research:

Age and High-Growth Entrepreneurship
Many observers, and many investors, believe that young people are especially likely to produce the most successful new firms. We use administrative data at the U.S. Census Bureau to study the ages of founders of growth-oriented start-ups in the past decade. Our primary finding is that successful entrepreneurs are middle-aged, not young. The mean founder age for the 1 in 1,000 fastest growing new ventures is 45.0. The findings are broadly similar when considering high-technology sectors, entrepreneurial hubs, and successful firm exits. Prior experience in the specific industry predicts much greater rates of entrepreneurial success. These findings strongly reject common hypotheses that emphasize youth as a key trait of successful entrepreneurs.

Good news for us old farts...

An interesting shift - Ford

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Curious if true - from Tech Crunch:

Ford to stop selling every car in North America but the Mustang and Focus Active
Ford today announced it will phase out most cars it sells in North America. According to its latest financial release, the auto giant “will transition to two vehicles” — the Mustang and an unannounced vehicle, the Focus Active, being the only traditional cars it sells in the region. Ford sees 90 percent of its North America portfolio in trucks, utilities and commercial vehicles. Citing a reduction in consumer demand and product profitability, Ford is in turn not investing in the next generation of sedans. The Taurus is no more.

The press release also talks about a new type of vehicle, though it sounds like a crossover. This so-called white space vehicle will “combine the best attributes of cars and utilities, such as higher ride height, space and versatility.”

Currently, Ford sells six sedans and coupes in North America: the Fiesta, Focus, Fusion, C-Max, Mustang and Taurus. This lineup hits multiple segments, from the compact Fiesta to the mid-size Focus, C-Max and Fusion to the full-size Taurus. The Mustang stands alone as the lone coupe.

Makes sense in a way - Ford trucks are their top seller. I love mine. I have been looking at downsizing and there is not a Ford passanger vehicle that I find attractive. Leaning more toward a Toyota Highlander or RAV-4 or 4Runner. Go with what you know.

Our "trade" war with China

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A good explanation of what is really happening from Gordon Chang writing at The Daily Beast:

Trump’s Right to Say He’s Not Launching a Trade War With China. He’s Doing Something Bigger.
Hours ago, President Trump, acting under the authority of Section 301 of the Trade Act of 1974, instructed U.S. Trade Representative Robert Lighthizer to consider the imposition of tariffs on $100 billion of Chinese goods. These tariffs are on top of those Lighthizer proposed Tuesday on $50 billion of China’s products. All these duties are intended to remedy China’s theft of American intellectual property.

“We are not in a trade war with China,” President Trump tweeted Wednesday morning.

The president is correct. What looks like a trade war is really a struggle for the control of the technologies that will dominate coming decades.

China has been doing two things. First, have been buying American companies and second, any US company who wants to manufacture and sell their products in China has to give the Chinese the technology used in that product. This Intellectual Property drain needs to be stopped.

Yet the current relationship between China and the U.S. needs to be disrupted. Chinese theft of intellectual property is sapping American innovation and therefore America’s economy. The IP Commission, in a 2017 update (PDF) to its landmark 2013 report, estimates the U.S. each year loses somewhere between $225 billion to $600 billion in intellectual property through predatory means. It almost goes without saying that most of that loss is, directly or indirectly, to China.

So true - this is a war for the future, not just a few dollars of trade. President Trump is doing the right thing.

A bit of a dystopian article at FOX News - not at all surprised though:

Retail Apocalypse: 24 big retailers closing stores
Some of the United States’ most prominent retailers are shuttering stores in recent months amid sagging sales in the troubled sector.

The rise of ecommerce outlets like Amazon (NASDAQ:AMZN) has made it harder for traditional retailers to attract customers to their stores and forced companies to change their sales strategies. Many companies have turned to sales promotions and increased digital efforts to lure shoppers while shutting down brick-and-mortar locations.

And their list (just a few excerpted from the list of 24):

  • Abercrombie & Fitch
  • American Apparel
  • Bon-Ton Stores Inc.
  • CVS
  • J. Crew
  • J.C. Penney

No surprises there except for CVS. A&F has been sliding downhill ever since they tossed out the basic ideas implemented 125 years ago by David T. Abercrombie and Ezra Fitch when the store filed for bankruptcy in 1976. The new incarnation has been selling crappy overpriced clothing to peolpe who do not know any better and they are paying the price for it.

Too many business are trying to suceed by following market trends. Funny thing - if you offer a high quality product at a fair price, the world will beat its way to your doorstep. Witness stores like Zappos, Amazon, Costco, Nordstrom, etc...

Quote of the month - Naval Ravikant

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“Don’t debate people in the media when you can debate them in the marketplace.”

A lot more here: Navalism — Quotes & Perceptions by Naval Ravikant

An interesting slant - from Yahoo/Agence France Presse:

Free news gets scarcer as paywalls tighten
For those looking for free news online, the search is becoming harder.

Tougher restrictions on online content have boosted digital paid subscriptions at many news organizations, amid a growing trend keeping content behind a "paywall."

Free news has by no means disappeared, but recent moves by media groups and Facebook and Google supporting paid subscriptions is forcing free-riders to scramble.

For some analysts, the trend reflects a normalization of a situation that has existed since the early internet days that enabled consumers to get accustomed to the notion of free online content.

"I think there is a definite trend for people to start paying for at least one news source," said Rebecca Lieb, an analyst who follows digital media for Kaleido Insights.

Or, people are just fed up with the quality of the reporting and whenever they find a paywall at a place that used to be free, they simply click NEXT and move on. Personally, I find that the Google Chrome Incognito window works great on most stuff that I read. There are also Chrome plug-ins that work to defeat the curtains in front of the news page.

If the publishers made content that we wanted to read, then maybe the subscription model would work and not be viewed as an obstruction. The free version of Ccleaner works great on sites that let you have X number of page-views per month/week/etc... Run it to reset the cookies. Make sure when installing to uncheck the box to install the anti-virus software.

It's the internet dummy!

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Talk about being unclear on the subject - from The Atlantic:

Where Did All the Advertising Jobs Go?
They are everywhere. Singing jingles in living rooms. Lining phone screens. Inhabiting the voices of podcast hosts. Looming like Dr. T.J. Eckleburg from highway billboards. They are ads.

But while the work of stealing attention might seem infinitely employable, something strange is happening behind the scenes of America’s most inescapable industry. For the first time on record, the number of advertising-specific jobs in the U.S. is declining in the middle of an economic expansion, according to government data.

Vendors no longer have to steal people's attention. The people have the internet and they use it to search for what they want to consume. End of story.

Dealing with Fake News

President Trump has come up with a novel idea for dealing with all the Fake News swirling around - tax it. From New York's The Sun:

Newspapers Opposing Trump Begging for Relief on Duties On Newsprint From Canada
If you think President Trump has an antagonistic relationship with the press now, just wait until his administration slaps a new 30% tax on newsprint.

Seriously. That’s the threat America’s newspaper publishers are warning about, with the Commerce Department’s International Trade Administration set to issue a preliminary determination by March 7, 2018 on whether Canada’s export into the United States of “certain uncoated groundwood paper” meets the legal tests to qualify for countervailing duties under the Tariff Act of 1930.

The publisher of Maine’s largest newspaper, the Portland Press Herald, raised an alarm about the issue in her year-end letter to readers. “We are facing a new challenge that threatens our newspapers,” the publisher, Lisa DeSisto, wrote. “The Trump administration is looking to impose a tariff on newsprint from Canada, which would have a disastrous effect on the entire newspaper industry. We purchase all our newsprint from Canada, as Maine mills no longer produce it. It would be near impossible for us to absorb a 30 percent increase in newsprint costs.”

Come on now - the corporate tax rate is way down. And how many newspapers are starting their reporters, typesetters and press operators $15/hour? How many of them are handing out bonuses this year? Methinks we are seeing a bit of crocodile tears - newspapers are generally privately held corporations so we do not really get an insiders look at their finances. Considering what they charge for advertising, I am betting that selling ink is still quite profitable.

A curious development in the business world

If you hire someone to work for your business on a temporary basis, you give them an IRS Form 1099 at the end of their service with you. This is a record of how much they worked and what they were paid. It is then the responsibility of the temporary worker to pay their own withholding, L&I and taxes. This makes it very cheap for the employer as they do not have to deal with workers compensation, payroll taxes, FICA, FUTA, the whole alphabet salad but this is not intended for full-time workers - the rules are very explicit on this.

There is an interesting lawsuit going on now - a lot of the "gig" businesses like Uber and Lyft are treating all of their employees like independent contractors and giving them 1099's at the end of the year. From Yahoo:

What you missed at the GrubHub trial about 1099 independent contractors
In a windowless, 15th-floor courtroom in downtown San Francisco last week, GrubHub was defending its 1099 independent contractor employment model for its delivery drivers.

There's no verdict yet, and there probably won't be for at least another week. This trial, Lawson vs. GrubHub, is looking to determine whether or not plaintiff Raef Lawson, an ex-GrubHub driver, was misclassified as an independent contractor while delivering food for GrubHub.

Those who work as 1099 contractors can be their own bosses, meaning they can set their own schedules, and decide when, where and how much they want to work. Being a 1099 contractor can also be a solid, lucrative side-hustle because you could theoretically work for several companies at once. As noted in this trial, Lawson also delivered food for other gig economy startups, including Postmates. For employers, bringing on 1099 contractors means they can avoid paying taxes, overtime pay, benefits and workers' compensation.

Although Lawson only seeks a small, estimated sum of $586.56, the result of the trial could potentially affect the employment models of companies like Uber, Lyft, Postmates, Caviar, DoorDash and many others. On day one, I noticed a member of Uber's employment counsel team watching closely, taking notes about the trial. That makes sense, given Uber has found itself as the defendant in similar lawsuits that have ultimately been settled before needing to go to trial.

Lawson's lawyer, Shannon Liss-Riordan, has spent a good chunk of time in this trial focusing on the amount of control she perceived GrubHub to have over Lawson during the time he delivered food for them. She's trying to prove that Lawson's employment met the conditions of the Borello test, which looks at circumstances like whether the work performed is part of the company’s regular business, the skill required, payment method and whether the work is done under supervision of a manager. The purpose of the test is to determine whether a worker is a 1099 contractor or a W-2 employee.

That is going to change a lot of these businesses - rides will not be as cheap as they are now. The Borello test is an interesting one - involved cucumber pickers but applicable to any business hiring temporary workers

Larceny in their hearts

An interesting idea for software - from the United States Department of Justice:

Everett Software Salesman Sentenced to Prison for Selling ‘Tax Zapper’ Software to Enable Cheating on State and Federal Taxes
Promoted and Sold Software to Restaurants Resulting in More Than $3.4 Million Tax Loss
An Everett, Washington man who worked for a Canadian company that sells point of sale computer software, was sentenced today in U.S. District Court in Seattle to 18 months in prison and three years of supervised release for his role in a scheme to sell ‘Tax Zapper’ software, announced U.S. Attorney Annette L. Hayes. JOHN YIN, 66, pleaded guilty in December 2016, to wire fraud and conspiracy to defraud the government admitting that he promoted and sold a revenue suppression software that allowed restaurants to underreport their sales and illegally lower their tax bills. The software – sometimes called a “Zapper” program - resulted in a loss amount of more than $3.4 million. At the sentencing hearing U.S. District Judge Richard A. Jones said YIN served as a facilitator for illegal operations. “This was illegal, this was criminal and you had to know you have to pay taxes… but you continued – motivated by greed.”

And they caught one of his customers - from The Seattle Times:

Bellevue restaurant owner pleads guilty to tax theft using software that hid cash
The owner of a Bellevue restaurant pleaded guilty Wednesday to using software that deleted transactions and allowed her to steal an estimated $395,000 in sales taxes.

Yu-Ling Wong, the owner of Taiwanese restaurant Facing East, has agreed to pay $300,000 in restitution to the Department of Revenue. The Everett man who sold Wong the software pleaded guilty in December. and was sentenced to 18 months in prison in April.

This was the first prosecution in the United States for the use of sales suppression software, according to a news release from the office of Washington Attorney General Bob Ferguson, which prosecuted the case.

What tipped them off?

Facing East’s missing taxes were brought to light when auditors looking over the restaurant’s 2010 to 2013 tax returns found that only 7 percent of the restaurant’s sales were in cash — far below normal — that cash tips on some days exceeded the restaurant’s total cash sales, and that bills seemed to be paid minutes after orders were put in the system.

Statistical and probability analysis will point out all sorts of things about a businesses operation that some people would rather leave undiscovered.

Be ready for higher gasoline prices

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From USA Today:

The nation's largest oil refinery shuts down as Hurricane Harvey floods Texas
Flood waters closed oil refineries Wednesday along the Texas Gulf Coast, including the nation's largest, as Hurricane Harvey showed its power to ravage the energy infrastructure and drive up gasoline prices.

Some 15 refineries were going off line from Corpus Christi, Texas, to Port Arthur, Texas, the Energy Department reported. The list included the largest refinery in the U.S., the Saudi-owned Motiva plant in Port Arthur, which began what it called "a controlled shutdown."

Taken together, the closures represent about 25% of U.S. refining capacity, GasBuddy.com petroleum analyst Patrick DeHaan said.

"It's a chilling effect on the refining industry, which is in a dire state right now," DeHaan said.

Just ahead of the Labor Day holiday weekend, one of the top travel weekends of the year, DeHaan estimated Wednesday that gas prices would increase 15 cents to 25 cents per gallon nationwide as a result of Harvey. Earlier, he had predicted a boost of 5 to 15 cents.

We have two refineries up here so it will be interesting to see what happens to the local prices. They will probably jack them because they can.

Some fun in San Francisco

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Someone just got a bunch of elite panties in a twist - from the San Francisco Chronicle:

Rich SF residents get a shock: Someone bought their street
Thanks to a little-noticed auction sale, a South Bay couple are the proud owners of one of the most exclusive streets in San Francisco — and they’re looking for ways to make their purchase pay.

Tina Lam and Michael Cheng snatched up Presidio Terrace — the block-long, private oval street lined by 35 megamillion-dollar mansions — for $90,000 and change in a city-run auction stemming from an unpaid tax bill. They outlasted several other bidders.

Now they’re looking to cash in — maybe by charging the residents of those mansions to park on their own private street.

Those residents value their privacy — and their exclusivity. Past homeowners have included Sen. Dianne Feinstein and her financier husband, Richard Blum; House Democratic leader Nancy Pelosi; and the late Mayor Joseph Alioto. A guard is stationed round the clock at the stone-gate entrance to the street to keep the curious away.

A bit more about how this happened:

The couple’s purchase appears to be the culmination of a comedy of errors involving a $14-a-year property tax bill that the homeowners association failed to pay for three decades. It’s something that the owners of all 181 private streets in San Francisco are obliged to do.

In a letter to the city last month, Scott Emblidge, the attorney for the Presidio Homeowners Association, said the group had failed to pay up because its tax bill was being mailed to the Kearny Street address used by an accountant who hadn’t worked for the homeowners since the 1980s.

Two years ago, the city’s tax office put the property up for sale in an online auction, seeking to recover $994 in unpaid back taxes, penalties and interest. Cheng and Lam, trawling for real estate opportunities in the city, pounced on the offer — snatching up the parcel with a $90,100 bid, sight unseen.

Since the purchase in April 2015, the couple have been quietly sitting on the property, talking to a number of land-use attorneys to explore their options.

“We were looking to get title insurance so it could be marketable,” Cheng said.

He and his wife see plenty of financial opportunity — especially from the 120 parking spaces on the street that they now control.

Kudos to them - the HOA should have had their ducks in a row on this and they failed spectacularly.

I'll try their products - Brandless

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Sounds like a great idea - from their About page:

Everyone deserves better.
We've created a thoughtful, irresistible selection of the food and household products you reach for every day. Searching far and wide for high-quality materials and healthy ingredients, everything that's Brandless is also bad-stuff-less and goodness‑ful.

Who says better needs to cost more?
BrandTax™ is the hidden costs you pay for a national brand. We've been trained to believe these costs increase quality, but they rarely do. We estimate the average person pays at least 40% more for products of comparable quality as ours. And sometimes up to 370% more for beauty products like face cream. We're here to eliminate BrandTax™ once and for all.

Just What Matters™
At Brandless, we put people first. That means you. We know your values are important and you look for better-for-you products in every aspect of your life. So do we! Around here we focus on “just what matters.” That starts with offering products that match your values, preferences, and at times requirements—where it matters our products are non-GMO, sometimes organic, fair trade, kosher, gluten free, no added sugar and more. It’s different for everyone.

Basically, their products are packaged in plain white boxes with zero branding - makes perfect sense for bulk staples like sugar, corn flakes, soap, etc... Forbes has a nice profile of the founders. I wish them well - like I said, a great idea and I will buy their products.

You have different levels of competency at different stores so this story may be an isolated instance but still...
From Quora:

How do Lowe's and Home Depot differ?
I have a fresh and steamy story to tell you about which is better.

I have a week off of work and I've been bored around the house so I decided to build a fence partitioning my backyard, with one half being a giant garden. This project was going to cost me around $1,500-$2,000 and I was going to get my supplies at the local Home Depot in Puyallup, Wa.

Jacob proceeds to tell his story - it does not end well:

Manager: “I don't care who loaded them for you or who said it was okay. I'm the manager and I say that you can't buy these.”

Me: “Look. I've loaded about $2,000 of stuff onto these pallets and I'm willing to pay the $15 for them. It was a hassle putting all of this stuff on them. What do you expect me to do?”

Manager: “Unload your items and return the pallets to Recieving.”

Me: (after about 10 seconds of staring into this kid’s soul) “You can kiss my fucking ass.”

And I walked out, vowing never to shop at Home Depot ever again.

Right behind Home Depot is a Lowes, which I've never shopped at.

The first thing I see INSTANTLY makes me a lifelong customer there:

20170704-lowes.jpg

And the shopping experience?

So, I park in this amazing spot and ask to see the manager before anything else so I can see if the pallets will be a hassle. She laughs and tells me that she'd be dumb not to GIVE me 3 pallets for all of that stuff and I continue to have an amazing shopping experience. That and what would have cost me $2,000 at Home Depot cost me $1,154.73 at Lowes.

So again, Home Depot can kiss my fucking ass.

Save money, more fun shopping and Lowe's takes care of our Veterans - talk about win/win.

We have both stores in Bellingham - Home Depot has a better selection of tools and hardware but Lowe's has a better selection of everything else and I like the people there.

A breath of fresh air - Oregon

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From gCaptain:

Oregon County Overwhelmingly Rejects Measure to Block LNG Export Terminal
A coastal Oregon county overwhelmingly rejected a ballot measure aimed at blocking a proposed natural gas terminal dealing a blow to what was the latest in a series of efforts to thwart energy projects across the Pacific Northwest.

The measure, had it passed, would have banned transport of fossil fuels not intended for local use through Coos County, located about 200 miles (322 kms) south of Portland.

Around 76 percent of votes were cast against the measure, with 24 percent in favor, according to unofficial results posted on the Coos County government website late Tuesday.

Unfortunately, there is still a lot of Gang Green activity in these parts:

Last year, the Lummi Nation Native American tribe and environmental groups blocked an export terminal in Northwest Washington state that would have moved Montana and Wyoming coal to markets in Asia.

In January, Washington State denied a permit for a coal export terminal in the city of Longview, citing concerns about the financial viability of the project.

In February, bowing to pressure from activists, Seattle’s city council voted to divest approximately $3 billion from Wells Fargo, citing concerns over the bank’s support of the North Dakota Access Pipeline, among other factors.

All of these bad for business, bad for local employment and the environmental "concerns" are ludicrous. This is not anything new - Cherry Point is currently the home of an aluminum plant and a refinery. They were proposing to develop a sea terminal for shipping coal to China and Australia and this was shut down by the environmentalists. The only problem is that back in 1999, the environmentalists received huge concessions from the developers with the understanding that Cherry Point would be permitted to become a multi-use heavy industry site. The PDF document can be found here. The signatories are Pacific International Terminals (the developers), Whatcom County, the State of Washington Departments of Ecology, Department of Fish and Wildlife, the North Cascade Audubon Society, People for Puget Sound, the League of Women Voters, Ocean Advocates, and Washington Environmental Council. All these people signed off on the agreement and now they want to re-write history and take it back.

Further development would have been a goldmine for our County and our State - with just the aluminum plant and the refinery, Cherry Point either directly or indirectly hires 11% of the Whatcom county labor force and they contribute over $200 Million dollars in tax revenues. Let us hope that this can be revisited at a later date - my gut reaction is that the Lummi Indians were not in the original agreement and they weren't offered enough money with this new one. It is all about the Benjamins - want to understand some strange political transaction? Follow the money.

Only in San Francisco

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From Business Insider:

San Francisco is considering a once unthinkable measure to offset the threat of job-killing robots
The tech industry collectively face-palmed when Trump's treasury secretary said earlier this year that the threat of robots taking human jobs was "not even on our radar screen."

There is a growing evidence that robots and artificial intelligence could displace huge swaths of the American workforce in the next couple of decades, much sooner than the "50 to 100 more years away" timeline that Treasury Secretary Steven Mnuchin said he expects.

In San Francisco, where robots already run food deliveries for Yelp's Eat24 and make lattés at a mall coffee kiosk, one politician is working to ensure the city stays ahead of the curve.

Supervisor Jane Kim is exploring a tax on robots as one solution to offset the economic devastation a robot-powered workforce might bring. Companies that use robots to perform tasks previously done by humans would pay the city. Those public funds might be used to help retrain workers who lose their jobs to robots or to finance a basic income initiative.

Geez - talk about nanny-state protectionism. This benefits nobody. How about energizing your business and getting out there and competing in the marketplace. Don't drag everyone down to your moribund level, get out there and win!

Why ESPN is tanking

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A couple of days ago, I noted that sports network ESPN was laying off about 100 of their on-air personalities. Today, Sean Davis at The Federalist lays out the reasons why:

The Real Story Behind ESPN’s Wednesday Massacre
ESPN, the self-proclaimed worldwide leader in sports, became the worldwide leader in sports layoffs on Wednesday morning after news leaked that the cable network was in the process of laying off 100 staffers, most of whom are reported to be on-air talent.

The layoff reports came as no surprise to those who have followed ESPN and its on- and off-air struggles to profitably provide the kind of content that most sports fans want to watch. Shortly after the mass layoff reports were confirmed, the Internet hot takes began. ESPN is failing because of cord-cutting, because it has too much politics, because it has too little politics, because sports fans are racists, you name it.

And the four reasons:

1) ESPN Overpaid for Broadcast Rights
2) Cable Cord-Cutting
3) Declining ESPN Ratings - and, you guessed it:
4) Politics
With all this in mind, it’s not at all surprising that ESPN decided to retreat into the fever swamp of leftist politics to save itself. An obsession with politics didn’t doom ESPN, but it’s going to make it extremely difficult for ESPN to dig itself out.

The industry insider I spoke to said the focus on politics was a symptom, rather than a root cause, of all these current issues. According to this insider, ESPN executives saw the writing on the wall — higher costs, subscriber losses, lower ratings — and decided that it needed a bigger content pie to attract more content consumers. Sports is too small, so why not try for a real mass audience by broadening the network’s focus to include news and politics? If X number of people like sports, and Y number of people like politics, then surely combining sports and politics will lead to a much bigger audience, thereby solving the company’s financial dilemma.

This view, of course, ignores how people consume political news. The diehards who love political news don’t turn on the TV or open the laptop and navigate to sites with zero bias that just play it straight. Why? Because those kinds of political news and commentary providers don’t exist. Because that’s not what political junkies want. Liberals want news from liberals, and conservatives want news from conservatives. The Balkanization of political news and commentary didn’t happen by accident. People in this business know you have to pick a side. That works in political news. It doesn’t work if you have a bipartisan mass media audience.

Instead of expanding its pie by combining two types of mass media content, ESPN ended up communicating to half its audience that it didn’t respect them. How? By committing itself entirely not to political news, but to unceasing left-wing political commentary.

Yup. They did not think this through and alienated half of their audience

More on the Laffer Curve

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I had posted earlier today about President Trump's wonderful tax cuts and gave a side reference to the Laffer Curve. The New York Times has a nice article:

Arthur Laffer’s Theory on Tax Cuts Comes to Life Once More
A white cloth napkin, now displayed in the National Museum of American History, helped change the course of modern economics. On it, the economist Arthur Laffer in 1974 sketched a curve meant to illustrate his theory that cutting taxes would spur enough economic growth to generate new tax revenue.

More than 40 years after those scribblings, President Trump is reviving the so-called Laffer curve as he announces the broad outlines of a tax overhaul on Wednesday. What the first President George Bush once called “voodoo economics” is back, as Mr. Trump’s advisers argue that deep cuts in corporate taxes will ultimately pay for themselves with an explosion of new business and job creation.

The exact contours of the plan remained murky and Mr. Trump will not produce a fully realized proposal on Wednesday. But what the president has called a tax reform plan is looking more like a tax cut plan, showering taxpayers with rate reductions without offsetting the full cost by closing loopholes or raising taxes elsewhere. In the short run, such a plan would add many billions of dollars to the national deficit. Mr. Trump contends that it will be worth it in the long run.

“The tax plan will pay for itself with economic growth,” Steven Mnuchin, the Treasury secretary and main architect of the plan, told reporters this week.

Good - make the cuts deep enough and the economy will boom. Cut regulation, cut taxes and stand back.

From The New York Times:

White House Proposes Slashing Tax Rates for Individuals and Businesses
President Trump on Wednesday proposed sharp reductions in both individual and corporate income tax rates, reducing the number of individual income tax brackets to three — 10 percent, 25 percent and 35 percent — and easing the tax burden on most Americans, including the rich.

The Trump administration would double the standard deduction, essentially eliminating taxes on the first $24,000 of a couple’s earnings. It also called for the elimination of most itemized tax deductions but would leave in place the popular deductions for mortgage interest and charitable contributions. The estate tax and the alternative minimum tax, which Mr. Trump has railed against for years, would be repealed under his plan.

Arthur Laffer - paging Mr. Laffer to the white courtesy phone please...

Keep on the corporate side of life

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A memo from the Puddles Pity Party

The future of Coal

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From Reuters:

United Air removes couple traveling to wedding from plane
An engaged couple were removed from a United Airlines flight to Costa Rica on Saturday, as the airline remained under scrutiny following outrage caused by a video last week of a passenger being forcibly removed from a flight.

A matter of someone sleeping and leaning across their seats - they moved up a few rows to a vacant row of seats. This was in a higher class and they tried to pay for the upgrade but United would not let them. This is no way to run an airline...

United Airlines

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Things just keep getting better and better for them - from Global News Canada:

Emergency crews called to airport after man reportedly stung by scorpion on flight to Calgary
A beautiful two-week vacation in Mexico came to an unexpected — and creepy — end for a Calgary couple.

Richard and Linda Bell were on United Airlines flight 1418 going home from Houston when a feisty, eight-legged creature showed up.

The scorpion fell in Richard’s hair from an overhead bin. Linda said it reminded her of something else entirely.

And:

Richard dropped it on his plate, then picked it up again. That’s when it stung him.

It “felt like a wasp sting,” he said.

Pure chance but still - United is not getting any good publicity these days.

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