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Sunday, June 2, 2013

Economic Stories of Relevance in Today's World -- June 2, 2013

The Student Loan Delinquency Rate In The United States Has Hit A Brand New Record High - The Economic Collapse Blog - June 2, 2013 - 37 million Americans currently have outstanding student loans, and the delinquency rate on those student loans has now reached a level never seen before.  According to a new report that was just released by the U.S. Department of Education, 11 percent of all student loans are at least 90 days delinquent.  That is a brand new record high, and it is almost double the rate of a decade ago.  Total student loan debt exceeds a trillion dollars, and it is now the second largest category of consumer debt after home mortgages.  The student loan debt bubble has been growing particularly rapidly in recent years.  According to the Federal Reserve, the total amount of student loan debt has risen by 275 percent since 2003.  That is a staggering figure.  Millions upon millions of young college graduates are entering the "real world" only to discover that they are already financially crippled for decades to come by oppressive student loan debt burdens.  Large numbers of young people are even putting off buying homes or getting married simply because of student loan debt.                       So why is this happening?  Well, a big part of the problem is that the cost of college tuition has gotten wildly out of control.  Since 1978, the cost of college tuition has risen even more rapidly then the cost of medical care has.  Tuition costs at public universities have risen by 27 percent over the past five years, and there appears to be no end in sight.                      We keep encouraging our young people to take out all of the loans that are necessary to pay for college, because a college education is supposedly the "key" to their futures.                      But is that really the case?                     Sadly, the reality of the matter is that millions of young Americans are graduating from college only to discover that the jobs that they were promised simply do not exist.                             In fact, at this point about half of all college graduates are working jobs that do not even require a college degree.                  This is leading to mass disillusionment with the system.  One survey found that 70% of all college graduates wish that they had spent more time preparing for the “real world” while they were still in college.                     And because so many of them cannot get decent jobs, more college graduates then ever are finding that they cannot pay back the huge student loans that they were encouraged to sign up for.  The following is from a recent Bloomberg article.

7 million students brace for surge in loan rates
- CNN Money - Jennifer Liberto - May 28, 2013 - On July 1, the interest rates on student loans subsidized by Uncle Sam will most likely double to 6.8%.



States That Spend the Least on Education - Wall St 24/7 - May 30, 2013 - 
7. North Carolina
> Spending per pupil: $8,312
> Total education spending: $13.7 billion (13th highest)
> Pct. with high school diploma: 84.7% (14th lowest)
> Median household income: $43,916 (12th lowest)
The North Carolina school system received just $9,951 in funding per student for the fiscal year 2011, well below the $12,411 per student nationwide. As a result of the limited funding, the school system spent just $8,312 per student in fiscal 2011, less than all but six states. Of this, $5,225 per student went to teaching costs, lower than 39 other states. The state also spent just $2,654 on support services like administration and maintenance, the third lowest of all states. North Carolina schools received just $3,366 per student from their localities, below the $5,375 per student across the country. Possibly limiting the ability of localities to raise money for their schools is North Carolina’s relatively low median household income. In 2011, it was just $43,916, well below the $50,502 median for the United States.


44% of Homeowners With a Mortgage Can't Sell: Zillow - The Street - BY Shanthi Bharatwaj - May 24, 2013 - About 44% of homeowners with mortgages cannot afford to sell their homes, according to a recent blog post from real estate company Zillow.                      Despite a recovery in prices, over a quarter of homeowners with mortgage loans still owe more than their homes are worth. "But another 18.2 percent of homeowners with mortgages, while not technically underwater, likely do not have enough equity to afford to move," according to the blog post.                      43.6% of homeowners have less than 20% equity in their homes. That makes it hard for them to move or trade-up, given the considerable costs involved in buying and selling a home, including the cost of a down payment for the next mortgage.                         This inability to sell is one of the big factors behind the acute shortage of existing homes for resale in the country. Strong investor demand for foreclosed homes is another reason.                          Previously, foreclosures provided an overwhelming supply of homes that dragged down the market. Now investors are snapping up distressed properties at a rapid pace and converting them into rentals. The share of distressed sales -- foreclosures and short sales -- is now only 33% of all sales, compared to 44% recorded a year ago, according to a survey from Campbell/Inside Mortgage Finance.                          The inventory of existing homes for sale represents 5.2 months of supply, up from 4.7 in March, but still below the 6-month mark that is considered a good balance.                      Still, the shortage of inventory is contributing to a rise in home prices, which creates an interesting feedback loop.



Something Big is Eating Your Old Favorite Restaurant Chains - Daily Finance - Rick Aristotle Munarriz - May 30th 2013 - If we're in an economic recovery, good luck trying to convince the country's largest casual dining chains -- they're sputtering.
  • Darden Restaurants (DRI) suffered a combined same-restaurant sales decline of 4.6 percent for Olive Garden, Red Lobster, and LongHorn Steakhouse in its latest quarter, and analysts predict a sharp drop in earnings for its fiscal year that ends this week.
  • DineEquity (DIN) also posted negative comps at Applebee's and IHOP in its latest quarter. DineEquity is in the process of unloading company-owned Applebee's to franchisees, so it's not a surprise to see revenue falling sharply. But profitability is also sliding.
  • Ruby Tuesday (RT) checked in with a 2.8 percent drop in same-restaurant sales at its company-owned namesake eateries. Investors have been feeling the pain. The stock has been meandering about in the single digits for nearly two years.
And it's not as if hungry customers are flocking to cheaper fast food.                     After nearly a decade of positive comps, McDonald's (MCD) saw its domestic same-restaurant sales decline last October. It wasn't a fluke. Comps have gone on to slip in three different months after that.                If casual dining establishments and fast food joints are smarting for traffic, where are people getting fed?
Kicking Burritos and Taking Names - Fast casual -- a hot niche where quality food is served quickly without a dedicated wait staff -- is what's eating into both the fast food and casual dining markets.                     Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) have become the new darlings of the dining scene. They're the poster children for fast casual, where diners can get a meal that may be slightly more expensive than fast food alternatives, but the food quality and perceived ambiance is also better.


Where's the beef? Maybe not on your grill this summer - USA Today - Elizabeth Weise - May 30, 2013 -


Employers Eye Bare-Bones Health Plans Under New Law - The Wall Street Journal - Christopher Weaver and Anna Wilde Mathews – May 19, 2013 -  Employers are increasingly recognizing they may be able to avoid certain penalties under the federal health law by offering very limited plans that can lack key benefits such as hospital coverage.                     Benefits advisers and insurance brokers—bucking a commonly held expectation that the law would broadly enrich benefits—are pitching these low-benefit plans around the country. They cover minimal requirements such as preventive services, but often little more. Some of the plans wouldn't cover surgery, X-rays or prenatal care at all. Others will be paired with limited packages to cover additional services, for instance, $100 a day for a hospital visit.                 Federal officials say this type of plan, in concept, would appear to qualify as acceptable minimum coverage under the law, and let most employers avoid an across-the-workforce $2,000-per-worker penalty for firms that offer nothing. Employers could still face other penalties they anticipate would be far less costly.                       It is unclear how many employers will adopt the strategy, but a handful of companies have signed on and an industry is sprouting around the tactic. More than a dozen brokers and benefit-administrators in 10 states said they were discussing the strategy with their clients...


Large Retailers Sue Visa, MasterCard Over Card Fees - Reuters - May 23, 2013 - A group of retailers, including Macy's and Target, sued Visa and MasterCard on Thursday, breaking off from a proposed $7.2 billion settlement reached last year over fees to process credit card transactions.
The lawsuit, filed in U.S. District Court in Manhattan, came ahead of a May 28 deadline for the millions of merchants affected by the settlement to decide whether to forgo receiving damages under the pact and pursue their own legal action.                     That settlement, pending in federal court in Brooklyn, would end litigation on behalf of merchants that accused Visa and MasterCard of inflating so-called interchange, or swipe, fees.                Many retailers criticized the proposed settlement after it was announced in July 2012. They said the pact offers inadequate compensation and forces them to sign broad litigation releases that could shield Visa and MasterCard from future lawsuits over antitrust violations.                  By "opting out" of the settlement, the retailers can pursue separate litigation seeking damages over allegations of past antitrust violations. But even so, merchants would still be bound by other injunctive relief if the settlement goes forward, including changes to Visa and MasterCard's swipe-fee rules.


No Paid Vacation? You Must Be an American - CNBC - Allison Linn - May 28, 2013 -  The United States is the only highly developed nation that doesn't require employers to offer paid vacation time, according to a new report from the Center for Economic and Policy Research, a left-leaning think tank.                  The report examined vacation policies in 21 developed countries, including the United States. The researchers found that every country except the U.S. had laws making employers offer between 10 and 30 paid vacation days a year.




Smithfield Foods close to a sale: WSJ - Saumya Vaishampayan -Market Watch - May 29, 2013 - Smithfield Foods Inc. ( SFD +0.61%) could be acquired by the Shuanghui Group, a meat producer based in China, for as much as $5 billion, according to The Wall Street Journal. The sale announcement could be made on Wednesday morning, according to the report. Smithfield, a pork processor, has come under pressure from from its biggest shareholder, Continental Grain Company, to split itself up into three companies, according to Barron's. Smithfield shares closed at $25.97 on Tuesday.


Senior health care crisis looms; report ranks states - USA Today - Michelle Healy - May 28, 2013 - An aging nation that's living longer but with growing rates of obesity, diabetes and other chronic diseases points to an emerging health care crisis, says a report out Tuesday that analyzes seniors' health status state-by-state.                      Just two years ago, the first Baby Boomers turned 65, setting into motion a "tremendous demographic shift in the U.S. population," said physician Rhonda Randall, a senior adviser to the not-for-profit United Health Foundation, which released America's Health Rankings Senior Report Tuesday.                 The report focuses on 34 measures of senior health, including physical inactivity, obesity, self-reported health status, poverty, drug coverage, hospital re-admission rates and flu vaccinations. The data analyzed is from more than a dozen government agencies and private research groups.                 As generations move into retirement, they become greater consumers of health care, Randall said. But those turning 65 today "are more likely to live longer than their parents and grandparents, and much more likely to live sicker for a longer period of time," she said.


Like your health care policy? You may be losing it - AP through WRAL - By RICARDO ALONSO-ZALDIVAR - May 29, 2013 - Many people who buy their own health insurance could get surprises in the mail this fall: cancellation notices because their current policies aren't up to the basic standards of President Barack Obama's health care law.            They, and some small businesses, will have to find replacement plans — and that has some state insurance officials worried about consumer confusion.              Rollout of the Affordable Care Act is going full speed ahead, despite repeal efforts by congressional Republicans. New insurance markets called exchanges are to open in every state this fall. Middle-class consumers who don't get coverage on the job will be able to pick private health plans, while low-income people will be steered to an expanded version of Medicaid in states that accept it.                   The goal is to cover most of the nation's nearly 50 million uninsured, but even Obama says there will be bumps in the road. And discontinued insurance plans could be another bump.                    Also, it doesn't seem to square with one of the president's best known promises about his health care overhaul: "If you like your health care plan, you'll be able to keep your health care plan."                   But supporters of the overhaul are betting that consumers won't object once they realize the coverage they will get under the new law is superior to current bare-bones insurance. For example, insurers will no longer be able to turn people down because of medical problems.                Other bumps on the road to the new health care law include potentially unaffordable premiums for smokers unless states act to waive them, a new $63-per-head fee that will hit companies already providing coverage to employees and dependents, and a long-term care insurance program that had to be canceled because of the risk it could go belly up.            The Obama administration did not respond directly to questions about the potential fallout from cancellation notices. Instead, Health and Human Services spokeswoman Joanne Peters released a prepared statement saying: "Beginning in October, individuals and small businesses will be able to shop for insurance in the marketplace, where we are already seeing that increased competition and transparency are leading to a range of options for quality, affordable plans."


Record DOW Is All Smoke And Mirrors - Why The Crash Is Coming In 2013 ~ Harry Dent

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