Unemployment Numbers Good or Bad?

The new unemployment numbers came out today, and who you listen to may decide how you see them. The Labor Department reported the economy added 120,000 jobs last month. The unemployment rate also dropped to 8.2 percen, which is the lowest level since January 2009. These are great numbers right?

President Obama was quoted as saying "we welcome today's news that our business created another 121,000 jobs last month and the unemployment rate ticked down." However, GOP candidate Mitt Romney views these statistics as more proof that there needs to be someone else in the White House.

Romney stated that "this is a weak and very troubling jobs report that shows the unemployment market remains stagnant." He says this for good reason too. This is the first time since November that the new jobs figures fall below gains of 200,000. Romney also stated, according to FoxNews, that "more and more people are growing so discouraged that they are dropping out of the labor force alltogether."

Romney has a point that this is troublesome news, and that it appears that the slow economic recovery may be stalling even more. However, it is important for those reading these news stories and listening to the politicians do some research on their own.

For example, I am not sure where Romney sees that last claim. Although the Bureau of Labor Statistics makes the point that the number of discouraged workers is about the same as last year (not seasonally adjusted), the numbers released show that there are approximately 865,000 discouraged workers. This is down from over a million from last month.

In other words, people who will be voting in November should look up some of this information on their own to make up their own minds on the progess of their country.

Follow this link to see the report for yourself and make up your mind:
http://www.bls.gov/news.release/pdf/empsit.pdf

Luis Alexander

Community Outreach in Lexington

Today I had the pleasure of speaking with Ms. Raven Williams, the head of Sales and Development at Sweet Frog. She was kind enough to answer a few questions I had regarding their company structure and growth.

If you are unaware of what Sweet Frog is, you should go visit the frozen yogurt hangout located next to the Subway on Hunter Hill. Williams explained they currently have 50-60 establishments, but they plan to expand to nearly 180 stores in 15 states by the end of the summer. This impressive growth is nothing when you consider the other expansionary ideas Derek Cha, the founder of Sweet Frog, has for his company. Children’s books, mascots, television shows, and video games are just some of the projects Cha is working on.

Some may find this to be a bit too ambitious; however, Cha has faith and relies on God to guide his company. In fact, the “frog” in Sweet Frog stands for “fully rely on God.” Williams described this Christian background as the backbone of their company, and “corporately our main goal is to do outreach in the community.”

Their goal to reach out to the community happens to also be one of their big methods to differentiate from other established frozen yogurt chains. For example, Sweet Frog mascots visit the children’s hospital in Richmond.

I have to say it was refreshing to hear someone talk about the importance of reaching out and performing acts of charity in the communities this company becomes involved in. I know this is already a common practice, but I wonder what kind of outreach would be best for Lexington.

Lexington is different from other towns Sweet Frog does business in because college students play such an important role in this establishment’s business. It would seem to me that the best option for Sweet Frog to get involved with charities that the fraternities and sororities are supporting. Donating frozen yogurt and money to the events that the fraternities and sororities host for charities, like Muscular Dystrophy Association and Relay for Life, would be a good start.

I wish Sweet Frog good luck and plan on eating there on many occasions this Spring Term.

Luis Alexander

Companies Rethink the Value of Business Majors... uh oh

Today the Wall Street Journal published an article about corporate recruiters questioning the value of business degrees despite the fact that one in every five American students are business majors.

Seriously, how many more hoops does my generation need to jump through to get a job in this world?

Our frantic race to a jobless economy started in the 10th grade when we began wasting away our high school youth by getting tutored for SATs that became completely irrelevant to our lives the second we got into a school. I fondly remember being told that me and my friends needed to be kids, needed to get outside and get off our computers. This advice echoed through my head as I longingly stared at the blue sky and green grass from the window of my SAT tutor classroom. (Editor's note: this actually never happened because the classroom was in a basement). Upon entrance at our college, we flocked like blind sheep to majors that we thought were popular and would get us a job based upon the advice of others (hey, we were 18 at the time, we literally were blind sheep). Now, as we enter the work force, we find an economy without jobs because it got screwed up by an irresponsible older generation. Apparently, even if there were jobs, companies wouldn't hire us because they have decided that they don't value the skill sets we have acquired.

If we ever do get jobs though, we can look forward to giving all our money away to an unsustainable social security system to take care of the people that have secured this wonderful future for us.

Businesses today are looking for innovative, flexible thinkers with a well-rounded base of knowledge. Essentially, businesses want people with a liberal arts education, and thankfully, W&L lives up to its motto: "Not Unmindful of the Future" in the development of its curriculum.

As a Mass Communications major here, I am required to take 90 credits outside of the Journalism school. This has allowed me to take classes in a variety of subjects, and has left me with an education that is thorough and well-rounded. Unfortunately, students who do not go to a school such as ours may not be so fortunate.

I will conclude my gripes and belly aches with The Talking Heads' song "Road to Nowhere" because I think David Byrne says it best.
http://www.youtube.com/watch?v=JtdBtZOG17E

- Bryan Stuke 

The IPO model

I recently read an article in Wired Magazine saying that Mark Zuckerberg must be furious about Facebook getting ready for its IPO. This first stunned me because how could someone be mad that they are about to be a multi billionaire? However, as I continued to read I began to understand why a tech company going public may not be as celebratory as one would expect.

            The article titled Why Going Public Sucks discussed how venture capitalists have a way of forcing companies to grow too fast, which in turn causes their demise. The author, Jesse Lenz, said that Facebook is somewhat of a different case because Zuckerberg will still have 56.9 percent of all votes on company business, so in theory it is still his personal private company.

            Lenz says that for some companies going public causes a “death spiral of unsustainable growth.” The article says that when a company goes public, it becomes too caught up in stock prices and only focuses on short-term moves that will boost stock and make the investors happy, instead of focusing on more long term goals to make the company more stable. Companies like Google and Facebook don’t have this problem because they were so big by the time they made an IPO, but this hasn’t worked out so well for others.

            The article sits Groupon as an example of a company that skyrocketed after its initial IPO then started to lose revenue. In the first quarter of 2011, Groupon’s revenue was $645 million or a 1,357 percent increase in one year. However, recently Groupon reported a loss of $146 million in one quarter. Groupon wasted a large amount of money on advertising rather than looking at its expansion for the long term.

            After bashing the IPO model, the article does look at the multiple positive benefits that it brings as well. By going public, the company can now offer stock options to new employees rather than giving them a bigger paycheck, thus saving money in the process.

            The main point of the article is looking at how Facebook was basically forced into going public by the SEC. Lenz believes this is an unfair pressure to put on new tech companies, which can result in the loss of a lot of money.

Billy Crosby 

The Dangers of Easter Eggs?

By Laura Simmons
This afternoon I spent some time reading articles about Easter and was very surprised when I read that a favorite Easter surprise, the Kinder egg, is actually illegal to import into the U.S. Spending so much time on globalization this semester, I thought this story was particularly interesting and relevant to our class discussions about global markets.
If you don't know, a Kinder egg is a special chocolate egg that comes with a small toy inside. While these are sold globally in many countries, they are not sold in the U.S because they are deemed "too dangerous" by the President, Homeland Security and the U.S Customs and Border Patrol......really?
I have trouble believing that these seasonal chocolate eggs are "dangerous". While the Consumer Product and Safety Commission and the FDA have said that this product is too dangerous because children can choke on the toy, I have to disagree. A kid could choke on a Skittle...Skittles aren't illegal. Similarly, a kid could choke on a Polly Pocket....Polly Pockets aren't illegal. According to the Border protectant agency, however, over 60,000 Kinder eggs were confiscated in 2011.
My first encounter with a Kinder egg occurred over this summer while I taught tennis to a 5 year old girl whose family was from Czech. She would bring one almost everyday with her lunch. It never occurred to me that this 5 year old was smuggling an illegal product....
In terms of globalization, I think this is a really great example of market barriers. For a product to sell on a global level, they want relatively easy or no barriers to entry. The Kinder Egg company may be sold in other countries, but they can not sell their product in the U.S due to market barriers, which can be caused by political, social or other reasons.
In my opinion, I think that the U.S Border patrol should be focusing on more serious and harmful products being smuggled into our country other than little chocolate eggs.

Unfortunate Confluence

The Labor Department usually publishes the employment report on the first Friday of every month and the timing of Good Friday depends on the cycles of the moon. This year the two events will occur on the same day. Since 1885, except in 1898, 1906, and 1907, the New York Stock Exchange has closed for the holiday.

As of today, the markets have continued to slide and it appears that nothing is going to shake the ill feelings on Wall Street this week. The Dow is currently down 3.67 points or less than a tenth of a percent at 13,071.08.  The S&P 500 fell 1.4 percent in the past two days.

This may be a result of the Tuesday release of the Federal Reserve’s minutes from its last meeting and an uneasy Spanish bond auction. The rise in Spanish bond yields renewed concerns about the Euro Zone’s financial health. Traders are reluctant to make any significant moves ahead of the Fed’s release of the unemployment rate tomorrow.

Last month, the U.S. economy added 227,000 jobs and the unemployment rate was 8.3 percent. Even though the economy is expected to add at least 200,000 jobs for the fourth month in a row, the unemployment rate is expected to remain at 8.3 percent. Because of Good Friday holiday tomorrow, any market reaction to the employment report will be seen on Monday.

“The stock markets can’t tell the government when to release the data, and the government can’t mandate that stock markets be open,” says Michael James, managing director of equity trading at Wedbush. “It’s an unfortunate confluence of dates.”

The last time the monthly employment report coincided with Good Friday was 2010. U.S. stock-index futures, yields on 10-year Treasuries and the dollar rose on April 2, 2010, after the report showed employers added the most jobs in three years. The S&P 500 future rose 0.3 percent, while Treasuries fell, driving the yield on 10-year notes up to 3.94 percent. The jobs report and Good Friday also coincided in 2007, 1999, and 1996, according to data compiled by Bloomberg.

All of the big nations, except Russia’s equity market, will be shut down tomorrow. While bourses in China and Japan will be open tomorrow, they will have closed by the time the report is published.

It is important to remember that even though every piece of news might move the markets up and down for one day, it does not mean much for long-term investors who are looking for long-term value creation. 

- Harlyn Croland

Globalization and Buena Vista, VA

With a population around 6,650, it may come as a surprise that within the small town of Buena Vista there is a company turning out millions of tactical accessories and gear to the United States military that is shipped around the world.

In 1987, Scott and Mary Sayre started Sayre Enterprises in their garage with one product–an ankle blousing strap. This strap provides a more comfortable fit for military officers who had to “blouse” their pants. As a result, the Sayres sold over one million blousing strap within the first year of business.

Today, total annual sales top ten million dollars and the company employes around 115 individuals. When examining the total annual sales, 65 to 70 percent of sales are military, 25 percent of sales are promotional and commercial sales claim the remaining percent of sales.  Since creating the blousing straps, Sayre Enterprises has branched out to promotional products, collegiate items–such as creating the T-shirts for Washington and Lee University Mock Convention, and additional uniform accessories. Sayre is the number one provider of reflective gear to the military.

Of interest to many Washington and Lee students, Sayre Enterprises is responsible for the embroidery and monogramming of Jcrew’s products. But how does Sayre have a global impact or deal with globalization?

When discussing foreign competition, Mary Sayre, CEO, says it is difficult to compete with labor costs in China because of minimum wage and benefit requirements in the United States. Therefore, Sayre is extremely reliant on its number one client–The United States Military.

However, the US military has many requirements and standard codes that Sayre must meet in order to be certified to work with the military. One of the requirements is that all materials used in military gear must be made in the United States. This creates a small problem for Sayre since they do have China products such as vinyl used in reflective gear.

In order to solve this problem, the company does not keep the China products in its 30,000 square foot Buena Vista manufacturing plant. Instead, they keep the China products in an offsite location and will only bring in the products as needed. This allows Sayre Enterprises to remain consistent with the wishes and codes of the US military.

I find it extremely interesting and surprising that within such a small community like Buena Vista, there is a company with global ties that must deal with the benefits and the obstacles of an increasingly interconnected world.

- Harlyn Croland 

Dwindling Peanut Industry

By Laura Simmons
April 3, 2011

For my enterprise paper I chose to write about the VA peanut industry and it's impact on the global peanut market. When I began my research I didn't know where to start. After contacting almost every peanut company in existence in Virginia, I started to see some results. My questions about the industry were met with overwhelming responses from peanut growers, shellers and sellers. I learned that the "Virginia" peanut is a gourmet peanut type that is mostly sold in the U.S, but is also sold on a global level. I also learned that while the U.S. had a global presence in the market historically, recently the industry has fallen behind China and Argentina. When speaking to the head of a "shelling" company (a business that buys peanuts from farmers and shells and cleans them before selling them to companies like Planters and Jif), he admitted that farmers in the U.S are pulling away from the peanut company because it is not as lucrative as other crops like cotton and soy. In addition, food safety is a huge issue with the peanut industry especially after serious salmonella scares that happened a few years ago in a peanut company located in Lynchburg, VA. Farmers are discouraged to grow peanuts because it requires such expensive food sanitation processes. But, there is still a lot of new research being done on peanut breeding and quality, which will hopefully re-vamp the U.S industry.

State Legislatures Play the Lotto

Last Friday, March 30, the jackpot for the Mega Millions lottery grew to a record-breaking $656 million.  With the jackpot at a record high, it caught the eye of not only millions of lotto hopefuls, but also state legislatures. 

The winner of the lotto has to pay a hefty tax back to their state.  In most states the tax on winnings ranges from 5 to 9 percent.  For states such as Rhode Island and New Hampshire, this meant the possibility of an over $20 million payout which would have gone a long way in their small state budgets.

In the end it was the Illinois, Maryland and Kansas state legislatures left with smiles on their faces as three residents from these three states split the record jackpot. Illinois and Kansas both have 5 percent taxes on winnings, meaning this jackpot alone will bring in an estimated $7.9 million for each state.  Maryland has an 8.5 percent tax rate on winnings and will take in an estimated $13.4 million from the winner. 

The Mega Millions jackpot is especially welcomed revenue for state legislatures because it comes largely from other states’ pockets.  Most lotteries are confined to one state but the Mega Millions is played in 42 states plus the District of Columbia and U.S. Virgin Islands. 

Many state legislatures rely on lottery revenue as part of the budget each year.  According to the website ThinkProgress.org, lotteries were first perceived as fiscal saviors, but they do not annually bring in the anticipated revenue.  Even with this knowledge, many states still earmark lottery revenue for specific parts of the budget, most often education. 

Studies have shown that this practice is not a good long-term solution to budget imbalances at the state and local level.  The Nelson A. Rockefeller Institute of Government found that “new gambling operations that are intended to pay for normal increases in general state spending may actually add to, rather than ease, state budget imbalances.”

Taking New Hampshire as an example, 27 percent of every dollar spent on a lottery ticket is earmarked for education.  What many people don’t realize is that because state governments expect to make a certain amount of money each year from the lottery, they actually decrease the allotted amount of stable funds for education. This means that the money from the lottery is not a bonus for education, but money that education actually relies on each year. 

This means states are betting on a steady revenue stream each year from lotteries.  Unfortunately for a state like New Hampshire that has seen the revenue on a steady decline for the past five years, this means less money for schools. 

So why earmark the lottery money for such a vital part of the budget such as education?

States often earmark lottery revenues toward education as a marketing ploy.  It sounds a lot better to a consumer when close to 30 percent of each dollar is going toward education rather than going to corrupt politicians’ salaries or an unnecessary regulatory board.

Lotteries aren’t just gambling away your money, they may be gambling away your child’s education too.  

-Tyler J. Tokarczyk

Sweden's Mexico: Conflicts Between The Needs of the Virginian Worker and His Ideology

For my enterprise story, I am writing about the Ikea plant that has opened in Danville, VA and the accusations surrounding the plant of mistreating and intimidating their workers.  

Ikea is a Swedish furniture factory, where in its native country, factory workers are paid about $19 an hour, and given five weeks of paid vacation thanks to government mandates. Danville workers, however, are paid at $8 an hour with merely 12 vacation days, eight of which are dates determined by the company.

One could portray Ikea as an evil corporation that is exploiting American workers. However, the company is for the most part working within the laws and regulations of the United States. Ikea has been criticized for not providing the same benefits to American workers that it does for their European counterparts. Why should Ikea be held responsible to operate by Swedish law in the United States?

My stance on the issue is not to defend Ikea in this situation, but to criticize the policies and voters of Virginia. I find the disconnect between the needs of the blue-collar Virginian, and his anti-government, anti-union, anti-interference values fascinating. Countries such as Sweden have found a way to formulate a mutually beneficial social contract between the government and its people. Why not us? Do Americans not want a higher quality of life? Do we prefer lower wages and less vacation days?

Perhaps some of our conservative values harken to a sense of patriotism, and the perception that government stepping in to protect workers from being abused is anti-American. Maybe it is an idealistic belief in the American Dream. To these types of thinkers, I offer this clip from The Daily Show with John Stewart, which deals with the reality that, in this instance at least, America has become "Sweden's Mexico".


http://www.thedailyshow.com/watch/wed-june-29-2011/swede-dreams---made-in-america

- Bryan Stuke

Fed Slows Down Efforts

            Today, the Fed showed signs that it would slow down its action to stimulate the economy. Apparently the Fed has decided to slow down its bond buying programs because the economy has showed signs of improvement.

            However, apparently Wall Street wasn’t as agreeable with this deal. According to an AP piece, traders started selling stocks and bonds after the minutes were released.

            This caused the yield on a 10-year treasury note to rise from 2.16 percent to 2.3 percent. This is pretty significant because the yield has an inverse relation with its price. As the yield rises, the price drops.

            The Dow closed today at 13,199 falling about 133 points throughout the day, 65 points lower from yesterday.

This seemed to be exactly what the Fed was trying not to do. They were so sure of the economy, so it stopped its policy of trying to stimulate the economy, only to have the Dow drop at the end of the day.

However, the Fed’s decision seems to be justified. They decided to do this with the recent drop in the unemployment rate. It is now at 8.3 percent, but, according to the article, Ben Bernanke says he doesn’t expect the unemployment rate to continue dropping at its current rate.

Billy Crosby

Oil Boom Towns Struggle to Adapt

            In 1995, the US Geological Survey published a report estimating that there were 150 million barrels of oil “technically recoverable” from the Bakken Shale formation, a rock unit covering around 200,000 square miles of land in Montana, North Dakota, and parts of Canada.  Because of rapid technological advances in surveying and extraction procedures, the estimate as of March 2012 now hovers around 24 billion barrels.  News of so much extractable oil has sent major US Energy companies racing to small towns near the formation to set up camp and get a piece of the profits, bringing with them a whole new set of challenges for local economies.

     

           Williston, North Dakota recorded a population of about 10,000 people from the 1960’s until 2000.   Like countless other towns in the region, Williston’s economy was based primarily around agriculture, that is until the mid 2000’s when major oil companies started eyeing North Dakota and the Bakken Formation for development.  Today, official estimates put the population level at 20 or even 30 thousand, comprised of workers from around the country coming for jobs where starting pay can surpass $100,000.

            

            The large number of workers have made Williston one of the top oil-producing sites in the United States in terms of output, close to surpassing Alaska’s Prudhoe Bay, the historical top-dog in domestic output.  This has brought big money, as well as unprecedented amounts of stress, to the once sleepy farm town. 

In just the past two years the Williston school district has dealt with 480 new students, a 22 percent overall increase.  This may not seem extraordinary, but the superintendent Viola Lafontaine notes that the increase is equivalent to adding “a whole elementary school.”  Even more, Lafontaine expects 1,200 more new students in the coming year. 

Because of a lack in available housing, oil workers used to sleep in their cars in the local Wal-Mart parking lot, which eventually evolved into a neighborhood of trailers and RV’s until management kicked everyone out.  There is finally some new housing going up, but demand is so high that workers can expect to pay $2000 a month for a small one bedroom apartment, that is if the they can find a lease.  Most new apartment complexes are entirely leased months before planned completion.

Williston’s economy might appear strong from the outside (it boasts a 0.8% unemployment rate), however many are concerned that the percentage of oil-revenues major companies are required to give to local economies is not keeping up with the explosion in economic demand.  Williston is a town built for 10,000 local residents, not 20,000 newcomers who now require new streets, sewer facilities, water-treatment plants, schools, housing etc.  Many locals, like Lafontaine, are fighting for more state aid for North Dakota’s booming oil-producing region, but they’ll need significantly more funds than they’re currently allocated to keep up with the soaring population levels and production rates found in towns around the Bakken Formation.

-Harper Coulson

RIM's New Woes

            Research in Motion, once the leading player in the Smartphone market, recently posted a quarterly loss of $125 million, or $0.24 per share, amid fierce competition from Apple and Android.  Adjusted net income fell from earnings of $934 million this time a year ago to just $418 million, confirming analyst’s weak revenue expectations. Former co-chief executive and board member Jim Balsillie and chief technology officer David Yacht resigned shortly after the posted loss, adding to the company’s woes. 

            Thorsten Heins, recently brought in as CEO, made a statement claiming RIM would start focusing on the business market, a segment it dominated in the early 2000’s when it was one of the only companies to offer email on a mobile phone.  “We plan to refocus on the enterprise business and capitalize on our leading position in this segment,” he said.

            RIM has long been losing relevancy across the board as key competitors continue to innovate and crowd out market share.  RIM seemed to have been so blinded by their successful stranglehold on the market in its early years that it forgot to continue pushing the envelope, staying true to the basic applications like email, calendars and SMS messaging while Apple introduced us to a world of cutting-edge Smartphone technology.

            Many analysts are starting to draw comparison between RIM and Blockbuster, one of the most prominent business flops of the past decade.  Blockbuster one dominated its space for years, but failed to keep up with innovative competitors like Netflix who offered a more convenient and cost-effective business model focused on DVD rental by mail.

            Is RIM destined to go the way of other obsolete technology companies that fell from market dominance? Top executives think there is still time to make a push to regain market share by refocusing on the foundation of its core business.  Investors apparently share this confidence-- RIM stock traded close to $15 with high volume the day after the earnings report was released. 

            On the short term RIM stock looks to be a risky investment as it undergoes complex corporate refocusing.  However, investors seem to be willing to ride the wave for a payout in the long-term as RIM seeks to become the business-enterprise focused company it once was.

-Harper Coulson