The Starbucks Boycott

Starbucks cupStarbucks has recently come under controversy after CEO Howard Schultz sent out a company-wide letter detailing plans to hire 10,000 refugees in countries where the coffee giant operates.  This move, in direct response to Trump’s decision to ban the citizens of seven majority-Muslim countries from entering the US.  It’s met with a strong reaction with social media, with some declaring their support of Starbucks while others have called for a boycott.

The executive order signed on Friday temporarily bans citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen from entering the US.  Schultz declared that this was an “unprecedented time”, when “the promise of the American Dream [is] being called into question”.  He outlined some of the actions his company is taking, including plans to hire 10,000 refugees.  The UN recognizes some 65 million people around the world as “refugees”, and Starbucks is developing plans to hire at least 10,000 of them in the many countries where they do business.  Starbucks isn’t the only company who have been critical of the Muslim ban; Google, Facebook, General Electric and others have been knocking it since it was first signed.

Not long after the announcement, the company faced backlash from Trump’s supporters, and the #boycottstarbucks hashtag began trending on Twitter.  Some of them have attacked the company for hiring refugees instead of veterans, yet Starbucks already has a program dedicated to hiring veterans.  The hashtag transcended political views, and has been used by those who want to support the company.

Schultz’s letter also makes reference to Mexico, partially because social media users in Mexico have called for boycotts of American companies (including Starbucks).  He pointed out that Starbucks has strong ties to the country, sourcing coffee from Mexican growers and employing thousands of Mexicans.  So while Schultz’s letter has called for a boycott from some Americans, this move could also endear the company to customers south of the border and beyond.

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Delta Pilot’s Demands

Brett Fingerhut pilotsIn what might sound excessive to some, pilots from Delta Air Lines are demanding a 40% pay hike over the next three years, which the union says would bring the pilots’ salaries back to 2004 levels.  Since that high water mark for wages, Delta filed for bankruptcy alongside Northwest Airlines, with whom Delta merged.

To try and keep carriers out of bankruptcy, and again during the bankruptcy process, the pilots took huge pay cuts, and even their pension benefits were reduced.  The union, representing some 13,000 pilots, argues that Delta can afford to raise the wages since it posted record profits last year.  Even if oil more than doubles in price, union leader John Malone insists that Delta executives are in a position to remain profitable.

Starting first officers at Delta earn an average of about $68,000 in base pay, while the most senior captains earn around $261,000.  This is less than comparable pilots at United and American, as well as those at major cargo carriers such as FedEx and UPS.  However, Delta has the best profits-sharing program in the industry, adding nearly $40,000 to every pilot’s pay last year.  Tomorrow marks the next stage in the ongoing talks, when the union will be asking federal mediators to join in the negotiations.

Last spring the union and management had already reached an agreement on a new contract, which rank and file pilots overwhelmingly shut down.  The problem, they said, was that a base pay raise was offset by a 22% cut in profit sharing, and it called for a change in work rules that were deemed “unfriendly” to pilots.  Although management won’t directly comment on union’s wage proposal, they said that they’re prepared to reach an industry-leading agreement, although this would have to be “sustainable and market-based”.  Delta pilots currently have an average base pay of $185,000, less than the average of $190,000 at Southwest, $205,000 at American and $209,000 at United.

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What’s To Become Of Trump?

Brett Fingerhut TrumpRegardless of your opinion of him, Donald Trump has certainly been able to earn plenty of publicity.  Yet to many people’s’ surprise, he’s just a stone’s throw away from securing the GOP nomination.  For every outlandish thing he does or says, Trump seems to keep earning supporters.  His most recent scandal comes in the form of his campaign manager, Corey Lewandowski, who was charged with simple battery.  If convicted of forcefully grabbing a female reporter at a campaign event earlier this month, the manager faces up to a year in prison and a $1,000 fine.  Yet despite the hot water he’s putting himself in, Trump has chosen to defend his campaign manager.

Even before this decision, Trump had a tough week ahead of him as he races to gather support to win Wisconsin on April 5.  He has less than four months to turn his campaign into one that can unify the GOP for the July convention, despite the fact that the established Republican Party has been fighting him tooth and nail.  On Twitter, Trump said that Lewandowski did nothing wrong.  While this is only the most recent of Trump’s many polarizing antics, these all add up, giving his Democratic opposition plenty of ammunition if Trump were to win the GOP nomination.  The Republican establishment has therefore been backing Cruz.

Republicans trying to stop Trump have been spending weeks painting him as a demagogue whose refusal to speak out against the violence that characterizes his rallies would make him an unsuitable President.  While he remains the front-runner for the GOP nomination, recent polling has suggested that this might be changing; a Bloomberg Politics national poll from earlier this month has showed that 68 percent of Americans view him unfavorably, up 25 points from a year ago.  The vast majority of Republicans think Cru has a better temperament for being President, and nearly two thirds think he better embodies their moral values.

The only primary contest for the next three weeks is in Wisconsin, where his anti-Muslim, anti-Mexican and anti-Megyn Kelly rhetoric hasn’t struck as much of a chord as it once did.  On Monday, influential conservative radio host Charlie Sykes called him out for not being civil or decent.  Polls have shown Cruz and Trump neck-and-neck in the state.  Trump has so far won 736 delegates to Cruz’s 463, but the eventual nominee needs to capture 1,237.  With 943 delegates still up for grabs, it doesn’t look at good for Cruz, but Trump certainly isn’t out of the woods yet.

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The Chinese Economic Slowdown in 2015

Chinese dragon cartoon

This year, the Chinese economy has lost some of its luster and aura of perceived invincibility.  The commodities boom went bust, affecting everything from oil fields in Texas to coal mines in Indonesia.  While China had been on everybody’s mind for a while now, it’s taken five years for people to finally become worried about China’s slow-motion economic deceleration.  This freak-out finally hit global markets this August.  Between August 10 and 25, the Dow Jones industrial average plunged 11 percent, based on fears that everybody had underestimated China’s troubles and their impact on the rest of the world.

China’s deceleration is part of an official plan to shift from unsustainable growth from exports and wasteful investment to slower-but-steadier expansion based on consumer spending.  However, its leaders have tarnished their reputation for economic stewardship through clumsily intervening to prop up plunging stock prices.  Such a move confused the markets and devalued the Chinese currency.

Economists have begun to conclude that China’s official story of its economy growing at around 7 percent a year is too rosy, and that growth might be closer to 5 or 6 percent and most likely will weaken further.  The economic slowdown of China, as well as a global oil glut, crushed commodities and energy prices.  The Standard & Poor’s GSCI commodities index has plunged 34 percent this year to the lowest level since 1999, down 80 percent from its peak.  A main reason of this was the Chinese economic slowdown; when they’re booming, Chinese factories took up about half of the aluminium, steel, copper and nickel in the world.  Oil prices also tumbled from $98 a barrel two years ago to under $35.  This was mainly due to unrestrained production across the world, which led to a major supply glut.  How this will resolve itself remains to be seen, but it should be interesting.  If you’d like to learn more, you can click here!

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Zuma Faces Criticism

 

Nhlanhla Nene

Nhlanhla Nene

Since South African President Jacob Zuma fired his finance minister Nhalnhla Nene, he’s received criticism in South Africa and beyond.  The currency in South Africa fell close to a record low against the dollar yesterday morning as the markets processed the news.  This firing comes as the South African economy is having trouble growing.  Zuma said that Nene was being moved to “another strategic position”, although he didn’t elaborate on the reasons behind this, and Nene has been replaced by the relative unknown David van Rooyen.

Yesterday morning, the rand fell to below 15 to the dollar, and stock prices fell in Johannesburg with the start of trading.  South Africa’s opposition leader, Mmusi Maimane, has criticised the sacking on Twitter, saying that Zuma has proven himself “incapable of making the right decisions”.  Another opposition party, the Economic Freedom Fighters, said that Zuma appointed Van Rooyen so that he won’t stand up to him.  A cartoon called “Zuma’s wrecking ball” has been featured widely on social media, featuring a stone cast of the president’s head butting everything in sight.  There is a general feeling among South Africans that Zuma dismissed a competent minister.

Although Nene was finance minister for just over 18 months, he had already been able to stand his ground on wasteful government expenditure.  In his short tenure, Nene openly criticised wage increases for public servants, questioned the management of public utilities, opposed a national airline bailout and refused to approve the proposal to buy a new private jet for the president.  Some have suggested that his removal was due to a lack of “political clout”.  Last week, two credit ratings agencies downgraded their assessments of South Africa, while unemployment in the country is above 25%.

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The Decline of Oil

oilEarlier today, oil fell another 6% to $37.50 a barrel, the lowest level since February of 2009.  Since June 2014, a massive supply glut has wiped out two-thirds of oil’s value.  This latest plunge has taken its toll on the stock market.

In recent years, OPEC has been held in a big divide between two different factions, one led by Saudi Arabia and its Gulf allies who can deal with cheap oil and other countries such as Nigeria and Venezuela that need higher prices to stimulate their economies.  Yet with Saudi Arabia firmly in control of decision making, near-term oil recovery doesn’t seem too likely.  The oil crash began last year after the American shale oil boom flooded the market with excess supply.  OPEC has been aggressively pumping oil to steal back market share, instead of cutting supply to boost prices.

The International Energy Agency said that oil inventories have swelled to nearly 3 billion barrels, a record-breaking number.  The excess has gotten so bad that there’s been a “traffic jam” in the US Gulf Coast of oil supertankers waiting to be offloaded.  Oil prices haven’t been helped by the less-than-stellar economic environment around the world; the US economy has been enjoying only a modest recovery from the Great Recession, and many other parts of the world, such as China, have been slowing down.

China’s economic slowdown has been a big problem for raw materials, including oil.  Explosive growth in China helped to fuel a strong demand for oil and even led to predictions that crude would continue to soar to $200 a barrel or more.  Yet to everybody’s surprise, the opposite happened, with crude breaking below $38 a barrel in late August.  This is of course good news for American drivers, with gas prices potentially falling below $2 a gallon for the first time since 2009.  Yet this is bad news for energy companies, which have all suffered steep declines in share prices and profits.

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Will Twitter Get a New CEO?

Today marks Twitter’s board meeting, where the board will most likelyThe twitter logo discuss its options for the company’s next CEO.  Although there’s yet to be any guarantee that a decision will be made, there is a sense of urgency in the air as shares continue to fall.  Since Dick Costolo stepped down as CEO this past July, Twitter’s stock has sunk 22%.  While Twitter began its search for a new leader, co-founder and former CEO Jack Dorsey took over as interim CEO.  Dorsey’s name has come up as a potential candidate for CEO, although he’s also acting CEO of mobile payments company Square, so many feel it would spread Twitter’s leadership too thin.  Another potential candidate is Adam Bain, Twitter’s president of global revenue.

Twitter’s board of directors enlisted the help of an outside executive search company to look at external talent.  Cisco CTO Padmasree Warrior is said to be the leading external candidate.  In the nine years it’s been in existence, Twitter has experienced management shake-ups before.  Back in 2010, Costolo took over as CEO after Twitter co-founder Evan Williams, who had taken the reins from Dorsey in 2008, left the position.  Since Costolo stepped down five years ago, many top-level managers have fled the company.

Twitter has denied that its latest shake-up had anything to do with its struggles since going public.  However, in the two years since its IPO, Twitter has been slow to add any new members.  Back in August, its stock fell below $26 a share, which is where the IPO had been priced.  Since then it has rebounded slightly.  As of June 2015, Twitter had 316 million active monthly users, who post some 500 million tweets every day.  Meanwhile, Facebook has nearly 1.5 billion active users.

In an effort to attract new people, Twitter has been adding new features.  Earlier this year, it acquired Periscope, an app that allows people to show live video streams.  And last month, it removed the 140-character limit from its direct messages, quite possibly in an attempt to compete with other popular messaging services, such as WhatsApp or Facebook’s own Messages app.

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The September Stock Market

Stocks jumped in afternoon trading today as Wall Street has attempted to rebound from yesterday’s sharp sell-off that saw the Dow drop 470 points and fall back into “correction territory”.  Investors were encouraged by positive economic reports that hinted to decent private sector job gains and an upward revision in worker productivity in the second quarter.

The Dow Jones Industrial Average was up 195 points (1.2%) at 1:05 PM ET, recouping a portion of Tuesday’s 2.8% drop.  The Standard & Poor’s 500 index gained 20 points, (1.1%), after dropping 58 points the previous session.  The Nasdaq composite index gained some 60 points (1.3%).  Yesterday’s nosedive came in the aftermath of a difficult August on Wall Street, that saw the S&P 500’s worst monthly performance in three years.  This recent downturn has been blamed on market volatility in China and a pending rate hike from the Fed that’s expected to occur as soon as this month.

Several economic reports released earlier today have provided evidence that the US economy has kept on trucking in spite of fears of economic stagnation in China.  According to payroll processor ADP, businesses have added some 190,000 jobs in August.  Economists surveyed by Bloomberg have expected gains of some 218,000 jobs.  Worker productivity growth was revised sharply higher for the second quarter, thanks to falling labor costs.  Productivity rose at a 3.3% annual rate, higher than the initial estimate of 1.3% and a sharp rebound from the first quarter’s 1.1% drop.

stock market photoAs the Federal Reserve considers raising interest rates, the jobs picture is revealing itself as an important data point.  Economists are divided on whether they’ll raise rates at their next meeting later on in the month.  Outside of manufacturing, the domestic activity data is very strong.  However, Fed officials seem to be worried about things in China slowing down.  Overseas, the Shanghai Composite lost .2% today on the last day of trading before a two-day holiday commemorating victory in World War II.  This was a relatively small slide, especially when compared to the index’s recent drops, which have often been upwards of 2%.  Analysts believe that the Chinese government has been directing state-owned agencies to buy up stocks in order to prop up prices and stop the slide.

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Trump Leading Polls

When Donald Trump first announced his presidential candidacyBrett Fingerhut Donald Trump earlier this year, a lot of people didn’t take it too seriously, and even now many people find it hard to imagine him as the President of the United States.  However, according to a new national poll from Bloomberg, Trump is lapping the Republican field.  He was backed by 21 percent of registered Republican voters, followed by Jeb Bush at 10 percent and Scott Walker at 8.  It seems possible that Trump’s star will continue to rise, as many Republicans view him as an alternative to “career politicians”.

Fox News, who will be hosting a Republican debate in Cleveland this Thursday, plans on allowing the 10 candidates on stage who fare the best in an average of the five most recent national polls.  As of yet, the network hasn’t said which polls it will consider, other than that they need to be conducted by “major, nationally recognized organizations that use standard methodological techniques”.  If the Bloomberg survey were the sole decider, then the debate stage candidates would be Trump, Bush, Scott Walker, Mike Huckabee (7 percent), Marco Rubio (6), Rand Paul (5), Ben Carson (5), Chris Christie (4), Ted Cruz (4) and John Kasich (4). Other potential candidates that didn’t make the top 10 included Rick Perry, Rick Santorum, Lindsey Graham, Bobby Jindal, Carly Fiorina, George Pataki and Jim Gilmore.

In recent days, Kasich, Perry and Christie have especially been stepping up their efforts to boost their poll numbers ahead of the cutoff.  With the exception of moderate Republicans, Trump has the edge among all subgroups measured in the Bloomberg poll, and even there he’s only edged by one point by Jeb Bush.  Apart from objections from candidates who are at the bottom of the polls, the Fox cutoff has also been criticized by some pollsters because it implies a greater level of precision than surveys can offer.  Nonetheless, a strong majority in the Bloomberg poll (71 percent) approve of the Fox rules.

Trump’s surge in popularity this summer has come at the expense of other Republicans, who have seen their poll numbers drop since he entered the race seven weeks ago.

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Will Oil Prices Decline More?

A couple of years ago, gas prices were at what seemed like an all-time high; a full tank oBrett Fingerhut Crude Oil

f gas typically cost around $60.  But in the past year or so, prices have plummeted as the demand for oil has decreased.  And now, it looks like gas prices could be going even lower; the US currently has so much crude oil that it’s running out of places to put it, potentially driving oil and gasoline prices even lower in the upcoming months.  For the past seven weeks, the US has been producing and importing on average 1 million more barrels of oil every day than it’s consuming.  This extra crude ends up in storage tanks, which in turn pushes US supplies to their highest point in at least 80 years.

If this keeps up, by mid-April, storage tanks could be approaching their operational limits, known as “tank tops” in the oil industry.  This would cause the price of crude, as well as gasoline, to plummet.  In a recent symposium at the Council on Foreign Relations in New York, Ed Morse, suggested that oil could fall down to $20 a barrel, compared to the current $50 a barrel.  At this price, oil companies, already faced with mounting losses, would have to stop pumping oil until this eased.  Gas prices would fall along with crude, although lower refinery production due to seasonal factors and unexpected outages could prevent a sharp decline.

Currently, the national average price for gasoline is $2.44 a gallon, over than a dollar cheaper than last year at this time.  Some analysts agree that crude is poised to fall sharply, although not as low as $20, since it continues to flood into storage for various reasons, such as the continued rise in US oil production, the fact that the new oil being produced can’t be processed at many US refineries, foreign oil’s continued flow into the US and that this is the slowest time of the year for gas demand.  The delivery point for most oil traded in the US is Cushing, a small town in Oklahoma that intersects several pipelines.  In theory, the tanks that dot this town can hold 85 million barrels of oil.  It’s estimated that Cushing is currently two-thirds full, and could be completely full by mid-April.

However, full tanks aren’t a sure thing.  There’s currently additional storage being constructed at Cushing, and there are currently large storage terminals in other parts of the country that will probably start to take in more oil as prices continue to fall.  Drillers have also been cutting back as prices continue to plummet.  Although the Energy Department reported another enormous rise in crude stocks last week, it also reported that diesel and gasoline supplies fell more than expected, leading some to conclude that demand for crude will soon pick up again and ease the surplus.  However, many analysts believe that the price of oil will continue to fall in the spring before summer drivers start to relieve the surplus.

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