Home Finance Page 2

Finance

Axed: J.C. Penney CEO Shown the Door

Axed: J.C. Penney CEO Shown the Door

 

 
The Ron Johnson tenure at J.C. Penney is official over. 
 
The troubled department store announced late yesterday that Johnson is stepping down as CEO and leaving the company after just 18 months at the helm. Johnson is being replaced by his predecessor, Mike Ullman, who led the corporation for seven years prior to Johnson’s hiring. 
 
J.C. Penney announced that Johnson’s departure is not the result of a conflict or disagreement with the Board of Directors or the company itself on any matter relating to operation, practices or policies. 
 
J.C. Penney char Thomas Engibous said via a statement that the company is fortunate to have new CEO Mike Ullman take the reins at the distressed retailer. 
 
Ullman said in a statement that J.C. Penney has traversed through choppy waters, but that the store remains a leader in American retailing and is an asset the can be leveraged and built upon. 
 
J.C. Penney shares surged following the news of Johnson’s departure, but dropped off after it was announced that Ullman would replace him. Ultimately the stock dipped 7 percent by Monday night. 
 
“The selection of Mike Ullman, puzzled a lot of people,” said William Frohnhoefer, an analyst with BTIG, noting that Johnson’s hiring two years ago was viewed as an attempt to change course following Ullman’s tenure. 
 
J.C. Penney shares have dropped more than 50 percent over the past year as Johnson, a former Apple executive struggled to drive a turnaround effort. 
 
Johnson offered a series of new initiatives, including redesigned store layouts, overhauled prices, and even free haircuts for children, in an effort to revitalize the company. Johnson ditched older brands and announced plans to terminate checkout counters in favor of self-checkout lanes and mobile devices. 
 
“Johnson tried to do too much too soon,” Frohnhoefer claimed. “Johnson had a slew of radical and bold ideas, and he attempted to execute them all at once.”
 
Johnson received a compensation package worth nearly $54 million for 2011, $53 million of which came as a special stock award. Johnson earned roughly $2 million in 2012, receiving only 44 percent of his target cash compensation in light of the company’s poor performance. 
 
New CEO Mike Ullman is scheduled to receive an annual base salary of $1 million, J.C. Penney announced on Monday. 
 

Ben Bernake Warns against Raising Interest Rates too soon

Ben Bernake Warns against Raising Interest Rates too soon

 

 
Federal Reserve Chairman Ben Bernanke warned the American public of the risks associated with raising interest rates too soon. Mr. Bernanke also urged the U.S. Congress to do more to help the economy. 
 
The United States’ economy is doing far better than it was a year ago, but Bernanke wants to be cautious not to squash the recovery now. 
 
“A premature tightening of our monetary policy could cause interest rates to rise temporarily, but it would also carry a significant risk of slowing or ending our economy recovery and causing inflation to drop further,” Bernanke told the U.S. Congressional Joint Economic Committee on Wednesday. 
 
The Federal Reserve has maintained its fundamental short-term interest rate close to zero since December of 2008, and expects rates to stay at this level there for a “considerable amount of time” as the recovery continues to strengthen, Bernanke said. 
The Fed is also engaged in a controversial stimulus practice known as quantitative easing, where the central bank purchases $85 billion a month in Treasury bonds and mortgage-backed securities. This policy is meant to reduce long-term interest rates to stimulate the economy through a variety of avenues. 
 
Low mortgage rates, for example, have played a vital role in the housing recovery, enabling some homeowners to refinance or provide an incentive to prospective buyers to purchase a home. 
 
The housing recovery has provided a significant boost to the construction and real estate employment markets; since 2011, these industries have added roughly 420,000 jobs, according to the Federal Bureau of Labor Statistics. 
 
That said, it is unclear how effective the policy has been in boosting the overall labor market. The economy lost roughly 8.7 million jobs following the financial crisis, and has since gained only about 6.2 million jobs back. 
 
As of last month, the unemployment rate was 7.5 percent, which is an improvement from the peak of 10% during the crisis, but still well below the pre-recession level. 
Bernanke cited his concerns about not just the labor market, but also underemployment—roughly 8 million Americans are working part-time even though they are willing to engage in full-time work. 
 
Meanwhile, the policy is widely credited for boosting stocks to record highs. 
The Federal Reserve is aiming to keep short-term interest rates close to zero until the unemployment rate dips back to 6.5 percent or inflation exceeds 2.5 percent per year. By the central bank’s own forecasts, this scenario is not likely to happen until at least 2015. 
 
 
Source: whitehouse.gov

Another One Bites the Dust: IRS Official Lois Lerner Placed on Administrative Leave

Another One Bites the Dust: IRS Official Lois Lerner Placed on Administrative Leave

 

 
The official of the Internal Revenue Service responsible for overseeing the unit that targeted conservative groups for a number of years starting in the spring of 2010 has been placed on administrative leave, according to a statement released by both the Republican and Democratic parties. 
 
Mrs. Lerner was the director of exempt organizations when the Internal Revenue Service filtered applications for tax exempt status for words such as “tea party” and “patriot.”
 
Mrs. Lerner publicly revealed the targeting two weeks ago when she gave an answer to a planted question at a bar association event in Washington shortly prior to the issuing of an inspector general report that made the issue a public matter. 
 
The Internal Revenue Service’s new acting director announced late today that he would be appointing Ken Corbin to oversee the exempt organizations unit. Mr. Corbin was previously a part of the agency as a deputy director of a department that processes payments and tax returns. 
 
Lerner appeared before the House Oversight Committee earlier this week and stated she had not broken any of the agency’s regulations or laws of the United States. Mrs. Lerner then invoked her Fifth Amendment right against self-incrimination and refused to answer any questions. 
 
Members of the Republican Party questioned whether Lerner had waived that right by issuing her opening statement. Committee Chairmen Darrel Issa will call Mrs. Lerner back to testify before the committee, his spokesman said in a statement released earlier today. 
 
Lerner was made aware of the scandal in June of 2011, according to a report by the agency’s inspector general. Lerner ordered agents of the IRS to scrap the criteria, but later they expanded to include groups that promoted the Bill of Rights and the Constitution. 
 
The singling out finally halted this month, when top agency officials claimed they found out and ordered agents to adopt legitimate criteria for determining whether tax-exempt groups were overly political. 
 
 
Source: IRS.gov

Not as bad as we thought: Obamacare Premiums in California Lower than Expected

Not as bad as we thought: Obamacare Premiums in California Lower than Expected

 

 
 Health insurance providers in the state of California will charge an average of $304 a month for the silver-level coverage (the least expensive plan) in state-based exchanges starting next year. That said, many residents will pay far less than this figure for coverage. 
 
Rates for Obamacare plans will vary by region, level of coverage, and age; the majority of low-income California residents will qualify for federal subsidies that will further lower premiums. The plans will be provided in four tiers, ranging from bronze to platinum. The bronze plan will charge lower premiums, but will carry increased out-of-pocket benefits, and the platinum plan will have the highest premiums but the cheapest out-of-pocket costs. 
 
Federal subsidies will be based on the cost of silver plans and will be provided to those earning up to 400 percent of the poverty line, which comes out to approximately $45,000 for an individual and $92,000 for a family of four. 
 
State-based exchanges will open for enrollment in October of this year, while coverage under Obamacare will start in January. 
 
Multiple plans from insurance providers including Blue Cross Blue Shield will be available based on region. However, other large providers, including UnitedHealth declined to participate in the program. 
 
The least costly silver plan for a young person will cost around $215 a month, but those regarded as low income (earning 150 percent of the poverty line) may only be required to pay $44 after procuring federal subsidies. The same plan for middle-aged individuals will cost roughly $275 a month and approximately $40 after the subsidies kick in. 
 
States are beginning to unveil details of their plans; however, California has provided the most detail in describing its plans. 
 
“Several Americans will see rates similar to what they are paying now, and in many cases, far lower and with better benefits,” said the Washington Insurance Department in a blog posting. “We are definitely not seeing the significant rate increases that some insurance providers had predicted.”
 
 
Source: whitehouse.gov

SEC Charges Dallas-Based Trader with Front Running

See You Later: Lululemon Executive Axed After See-Thru Yoga Pant Fiasco

See You Later: Lululemon Executive Axed After See-Thru Yoga Pant Fiasco

 

 
 Lululemon, the maker of yoga clothing, announced that its chief product executive was let go after last month’s see-through yoga pants debacle.
 
The Vancouver-based clothing company announced on Wednesday that Sheree Waterson, Lululemon’s chief product officer will step down on the 15th of this month after five successful years with the company. 
 
Waterson’s removal comes quickly on the heels of the company’s considerable recall of Lululemon’s popular black yoga pants in March of this year. Waterson’s removal is directly related to the botched production of the pants; as a result of the blunder, the company was required to recall the entire line of black, stretchy yoga pants that had an unacceptable level of sheerness. The pants hit the market with a sales price between $72 and $98.
 
The popular yoga pants were recalled because they were unintentionally see-through. The defective pants represented nearly 18 percent of all women’s yoga pants sold in the company’s store and prompted a severe shortage of the product.
 
Last month, Lululemon announced that the recall would significantly disrupt the company’s operations and ultimately damage its financial results. As a result of the defective production of the popular pants, the company expects first-quarter same-store sales to rise 5 to 8 percent in the first quarter, which is a significant drop from its earlier forecasts of an 11 percent gain. In total, the production mistake is expected to cost the company around $65 to $75 million. 
 
The company offered full refunds to individuals who purchased the pants. As a result of the botched production effort, shares of Lululemon plummeted, and the brand has not announced when the pants will be placed on shelves again. 
 
Source: CNN
 

Wave of the Future: Bitcoin ATMs Coming to a City near You

Wave of the Future: Bitcoin ATMs Coming to a City near You

 

 
Media mogul Jeff Berwick is hoping to bring Bitcoin ATMs to major metropolitan areas throughout the world within the next couple of weeks to months. 
 
Berwick expects to put the first two Bitcoin ATMs in Cyprus and Los Angeles in the next couple of weeks and is choosing between handfuls of different retail locations in both cities. Berwick added that orders for Bitcoin ATMs are coming in by the hundreds from a variety of countries all over the world. 
 
Bitcoin is a virtual currency that was created four years ago. Since its inception, the currency has generated a considerable amount of attention over the past few weeks. The value of the digital currency has surged in the wake of the fumbled bailout and bank-run in Cyprus and worries regarding the health of government-backed paper currencies like the dollar and euro.
 
A Bitcoin ATM will work like a traditional automated teller machine; however, instead of connecting to your bank account, the software Berwick and his team developed will convert cash to Bitcoins stored in your Bitcoin wallet or provide cash based on what is stored in your personal Bitcoin account. 
 
Berwick plans to charge approximately $10,000 to ATM operators to maintain the machines; fees then will be split with said operators. Berwick expects fees to hover around 3 percent, which is slightly higher than what most Americans pay to get cash from ATM’s outside of their banking network. 
 
Thus far, Berwick has used his personal savings to develop the machines and build out the first prototype. Berwick is currently hoping to raise between $2 and $4 million in outside investments to get more ATMs in the hands of operators. 
 
Berwick claims that getting a Bitcoin machine up and running should not be much more difficult than setting up a traditional ATM. In most cases, ATM operators are required to purchase the machine, pour cash into it and maintain network connections to accounts and Bitcoin wallets.  
 
The virtual currency market is rapidly expanding and ever evolving. At this time, Bitcoin users or investors can trade in their coins for cash through a number of websites such as BitInstant and Coinbase that work directly with banks to facilitate transactions. Moreover, some vendors are now accepting the coins as real currency, including the online community Reddit and the blog hosting site WordPress.
 
That said, the financial turmoil in Cyprus was the principal catalyst for the recent Bitcoin surge; and with seemingly no end in sight to Europe’s debt crisis, further financial problems in the Eurozone are expected. “If Cyprus happens in Spain, Italy or Ireland, more people will look to Bitcoin,” claims Berwick.  
 
 
Source: AP

Fired IRS Official Denies Intentional Targeting and Lying to Congress

Fired IRS Official Denies Intentional Targeting and Lying to Congress

 

Ousted IRS Official Denies Intentional Targeting and Lying to Congress
 
A significant increase in workload, as oppose to deliberate targeting, led to foolish mistakes and acts of political discrimination in the IRS as cited by an inspector general’s report, the agency’s outgoing commissioner claimed today. 
 
The testimony by Steven Miller, who was forced to resign as commissioner of the Internal Revenue Service earlier this week, was presented at the first congressional hearing on the controversy that has required President Obama’s administration on the defensive. 
 
Rep. Dave Camp, the chairman of the Republican-led panel, and other GOP members sought to paint the controversy as indicative of a government gone wild, with the IRS abusing conservative organizations and other political adversaries of the administration. 
 
Democrats on the committee also expressed disdain at the political targeting of conservative groups’ tax-exempt status; however, they noted that the top IRS official responsible for conducting affairs was appointed by Republican President George W. Bush.
 
The Democrats on the committee also noted that the inspector general’s report expressed that there was no evidence of any political influence from outside the Internal Revenue Service. 
 
Miller apologized for what he described as “horrible customer service,” he also rejected any accusation that it amounted to bringing politics into the Internal Revenue Service’s work and responsibilities. 
 
According to reports, the Internal Revenue Service developed and followed a defective policy to determine whether the applicants for tax-exempt status were engaged in legitimate political activities. If so, the organizations being reviewed would be disqualified from receiving tax-exempt status. 
 
The controversy started in early 2010 and continued for more than 18 months. The report ultimately declared that the IRS used inappropriate criteria to identify the Tea Party and other conservative groups as non-exempt. The report stated that the agency found these organizations as speculative bodies for receiving tax-emptions based upon their names or political positions as oppose to indications of potential political intervention. 
 
According to the report, IRS officials failed to consult anyone beyond the agency regarding the development of additional screening criteria. President Barack Obama called the findings “outrageous” and forced Miller’s resignation, which is set to take place in early June. 
 
 
Source: whitehouse.gov

Pump the Brakes: Hiring Slows Severely in March

Pump the Brakes: Hiring Slows Severely in March

 

 

 
Hiring in the United States slowed drastically in the month of March as the economy added only 88,000 jobs, the lowest monthly gain since June of last year. 
Economists were expecting an increase of approximately 190,000 jobs when the United States Labor Department issued their jobs report today. 
 
Experts expected the jobless rate to hover around the 7.7 percent level, but the drop in unemployment is not good news. Although the unemployment rate dropped to 7.6 percent, the amount of Americans leaving the labor market is on a steady rise; nearly 500,000 Americans dropped out of the labor market. 
 
That said, the report left many economists feeling somewhat optimistic; although the news is poor and surprising, many industry professionals expect hiring to continue at a steady pace for the remainder of the year. 
 
“Payrolls and hiring decisions are very volatile from month to month,” claimed Jim O’Sullivan, chief economist at High Frequency Economics, who believes monthly job figures will average approximately 175,000 for the rest of 2013. “I am not going to panic over one 88,000 report,” added O’Sullivan. 
 
Looking at the first quarter of 2013, companies expanded payrolls by an average of 168,000 a month, which is roughly in line with past two years. This statistic reflects one of the few bright spots in Friday’s report: hiring figures in January and February were revised upward by roughly 60,000 jobs. 
 
Economists and industry professionals earlier in the week forecasted employers to add 2.24 million jobs throughout 2013, and that 2.4 million jobs will be added in 2014. The same individuals expect the unemployment rate to dip to 7.4 percent by the end of 2013 and to improve to 6.7 percent by the end of 2014. These estimates are close to the 6.5 percent level that the Federal Reserve has announced it wishes to see before raising interest rates. 
 
In March, hiring was concentrated in only a few industries; growth was slowed by the retail sector, which lost nearly 25,000 jobs, and at the United States Postal Service, which cut 12,000 positions. The decline in retail was particularly alarming, because the sector had average an increase in roughly 32,000 jobs per month over the past 6 months. 
 
The construction industry was one of the bright spots on the report; the construction sector added over 18,000 jobs last month. 
 
Overall, the private sector struggled as it added only 95,000 jobs, while the public sector slashed over 7,000 positions. The poor jobs data ended a week of disappointing labor news; a report released Thursday revealed that initial unemployment claims rose 28,000 for the last week in March. Stocks declined sharply on Friday in response to the jobs report. 
 
Source: AP

SEC Charges Father and Son Conducted Cherry-Picking Scheme at Investment Company

SEC Charges  Father and Son Conducted Cherry-Picking Scheme at Investment Company

 

The Securities and Exchange Commission charged a father and son and their Chicago-based investment advisory business with defrauding clients via a cherry-picking scheme that reaped them approximately $2 million in illegal profits, which they used to purchase vehicles, vacations, and luxury homes. 
 
The United States Securities and Exchange Commission alleges that Charles Dushek and his son Charles Dushek Jr. placed several million dollars in securities trades without identifying in advance whether they were executing trades for themselves or their clients. The father and son delayed allocating trades to cherry pick winning trades for their personal accounts and drop losing trades on the accounts of clients at Capital Management Associates. 
 
According to the complaint filed in Chicago, the scheme took place from 2008 to 2012. During this period, the Dusheks finalized in excess of 13,500 trades totaling more than $350 million. The Dusheks often waited to distribute the trades for at least one day, which was ample time to evaluate the success of the transaction. The father and son kept most of the winning trades and placed the losses on their clients. During the time of trading, the Dusheks did not keep written documentation of whether they were trading personal funds or client funds. 
 
The incredible success the father and son procured reflects the breadth of their illegal activities. For 17 consecutive quarters, the two reaped positive returns while their clients suffered negative returns–one of their personal accounts increased by a ludicrous 25,000 percent from 2008 to 2011 while the majority of his clients’ accounts decreased sharply in value. 
 
The illegal profits garnered from their personal accounts were the only source of consistent income for the pair. 
 
The complaint charges the father and son with fraud and seeks judgments that would require the pair to return all illegal gains with interest and penalties. 
 
 
Source: SEV.gov