Science has determined that people need to know 7.5 things per day, on average, about the world of business. You can't argue with science. Lucky for you, The Huffington Post has an email newsletter, delivered first thing every weekday morning, boiling down the day's biggest business news into the 7.5 things you absolutely need to know. And we're giving it away free, because we love you, and also science. Here you go:
Thing One: Econ 101: I hope you're sitting down when you read this newsletter, because I have some shocking news that may cause you to simply topple over in shock: Apparently if you take money away from people, they will spend less on goods and services.
I know it sounds like crazy talk, particularly if you live in Washington, D.C., but it's right there on the front page of the Wall Street Journal today: Higher payroll taxes have cut people's paychecks, resulting in their buying less stuff from Walmart, Burger King and more. Who could possibly have seen this coming? Aside from me, I mean, the idiot who writes a newsletter full of half-assed jokes and snark for a living. Also, most economists saw this coming, too, as I, the idiot newsletter writer, pointed out to you last month.
But nobody listens to idiot newsletter writers, or economists, which is as it should be. Perhaps they will listen to the executives of Walmart, whose sales account for about 2 percent of GDP, according to the Washington Post's Brad Plumer. Walmart yesterday warned that its fiscal first quarter, which ends in April, will be flat because of the payroll tax hike, along with higher gasoline prices and delayed income-tax refunds.
The payroll tax increase and the tax-refund delay are both legacies of the moronic "fiscal cliff" debate that gripped Washington in the latter half of last year. Another such legacy is the "sequester," $85 billion in brutal federal spending cuts set to start taking effect on March 1, dealing another blow to the economy. Companies aren't complaining about these cuts so much, mainly because they will disproportionately hit the defense industry, and mainly because one alternative to them is higher taxes on corporations. And the budget cuts will be stretched out over time, notes the WSJ. Most of Wall Street thinks the effects will be small and that some sort of deal will be reached to keep the budget cuts from becoming a permanent thing.
And the sequester is small potatoes, sure, expected to "only" cost 700,000 jobs and about a half percent of GDP, as Paul Krugman notes in his New York Times column. But you throw these budget cuts on top of higher payroll taxes and higher gasoline prices, and pretty soon you're talking about real money. Charles Dumas, chief economist of Lombard Street Research in London, warned that the full-on sequester could tip the U.S. economy into a recession. Few other people see that coming. But then, apparently few people saw this whole payroll tax-hike thing coming, either.
Thing Two: Banks To Homeowners: Drop Dead: Remember that big, splashy mortgage-foreclosure settlement last year, in which government officials extracted a cool $25 billion from banks to "punish" them for their shoddy foreclosure practices? Well, much of that money was supposed to help keep homeowners from losing their homes. How is that working out, a year later? Not so well, according to a new report from the settlement watchdog. Banks have cut the principal owed by fewer than 50,000 people, writes Ben Hallman of the Huffington Post. About 169,000 people have agreed to "short sales," which results in them losing their homes. And most of the mortgage relief has gone to second mortgages, writes Jessica Silver-Greenberg of the NYT, which looks like a loophole that lets banks rack up a lot of "relief" that doesn't really help too many people stay in their primary residence.
Thing Three: Apple Vs. Einhorn: Apple may have a lot of problems these days -- from tougher competition, flagging iPhone demand, troublesome maps and waning hedge-fund love -- but one problem it does not have is a lack of cash. In fact, it's sitting on a cash pile of $137 billion, or enough to pay for 1.6 sequesters. Funny thing, as it turns out, that cash is also turning out to be a bit of a problem: David Einhorn, the handsome, Met-fan chief of the hedge fund Greenlight Capital, is agitating for Apple to spread some of that wealth around to its shareholders, including Einhorn. He hosted a conference call yesterday in which he proposed that Apple issue something called "iPrefs," a form of preferred stock, as one way to unload that cash. One gentleman caller on the conference call compared Apple's cash hoard to a bunch of beautiful daughters he wanted to date, but were locked away from him. Leave the weird analogies to the professionals, there, Hugh Hefner (see?).
Thing Four: Libor Fraud Settlements Are So 2012: The European Commission, like every other half-sentient regulatory body in the Western Hemisphere, is investigating charges that more than a dozen banks in Europe and the U.S. constantly manipulate key short-term interest rates for fun and profit. Many of those half-sentient regulatory bodies are trying to extract massive fines and even a couple of criminal charges from those banks. Not the European Commission! That's just not how it rolls. According to Reuters, the EC is sort of bored with this whole Libor thing and wants to wrap it up quickly, so it has been offering banks deals that let them off scot-free, in exchange for writing 100 times on the chalkboard, "I Will Not Manipulate Interest Rates."
Thing Five: SEC Stat-Padding: Nobody will ever mistake the Securities and Exchange Commission for a fear-inducing instrument of swift Wall Street justice. But the SEC at least has some impressive stats it can throw around when people claim it is useless, including more than 1400 regulatory enforcement actions brought in the past two years. But Bloomberg reports that roughly a third of those stats were just "follow-on" proceedings in cases that have already been brought, sometimes years earlier. If you strip those away, the SEC actually brought fewer enforcement actions last year than it did in 2009, according to Bloomberg.
Thing Six: Charges For Peanut Pushers: Four former executives at the Peanut Corporation of America, the company behind a massive salmonella outbreak in 2009, have been criminally indicted by a federal grand jury in Georgia. The four are accused of knowingly shipping tainted peanut products to food manufacturers and trying to cover up their actions. The outbreak killed nine people and made hundreds more sick.
Thing Seven: DIY Cancer Diagnosis: This pretty much sounds like a horrible idea to me, but a company called Mode Diagnostics is hoping very soon to sell an in-home test for colon cancer, Bloomberg writes. So now you can take your paranoid Googling of your medical symptoms to even new extremes.
Thing Seven And One Half: Miracle On Ice: On this day in 1980, in Lake Placid, N.Y., the upstart U.S. Olympic hockey team defeated the Soviet Union, 4-3, a stunning upset and a blow to Soviet pride at the height of the Cold War. The Russians had won the past four Olympic gold medals and five of the past six, and their team was full of Olympic veterans. The Americans were mostly college students -- their average age was 22 -- most of whom were in their first Olympics. Seeded seventh heading into the Olympics, the Americans went on to win the gold medal by beating Finland in their final game.
Now Arriving By Email: If you'd like this newsletter delivered daily to your email inbox, then please just feed your email address to the thin box over on the right side of this page, wedged narrowly between the ad and all the social-media buttons. OR, if you are logged into a HuffPost account, you could simply click on this link and tick the box labeled "7.5 Things" (and any other kind of news alert you'd like to get). Nothing bad will happen to you if you do, unless you consider getting this newsletter delivered daily to your email inbox a bad thing.
Calendar Du Jour:
Heard On The Tweets:
You tweet something smart by mistake? RT @realdonaldtrump: My Twitter has been seriously hacked—- and we are looking for the perpetrators.
— daveweigel (@daveweigel) February 21, 2013
A likely hacked tweet. RT @realdonaldtrump: Wow, Macy’s numbers just in-Trump is doing better than ever - thanks for your great support!
— caroline moss (@socarolinesays) February 21, 2013
Look, they didn't necessarily find horse *meat* in that beef. It was horse *DNA*. Relax.
— Shane! (@batsly) February 21, 2013
If you thought people that wear Bluetooth headsets are annoying, you haven't seen anything yet!- Google Glass
— Rock (@TheMichaelRock) February 21, 2013
Just started training for my first 401k.How far is that in miles?
— Kirk Fox (@kirkfox) February 21, 2013
-- Calendar and Tweets rounded up by Alexis Kleinman