Dow’s Plummet from 18,292 Means Economy is Still Shaky



Updated Sept. 18, 2015 –


So the U.S. stock market remains volatile after the Federal Reserve showed a lack of confidence in the economic recovery — ostensibly, globally and nationally.

How can we discern the Fed is not confident about the economy? The Fed declined to raise the interest rate this week.

Had the Fed been confident, the rate would have been raised.

This week’s Fed decision isn’t the only troubling sign:

— In May of this year, low interest rates propelled stock market trading to 18,292 but ended today at 16,384.79. The stock market is down 8 percent this year.

— The Conference Board reported consumer confidence plummeted to 90.9 in July from a revised 99.8 in June.

— Consumers’ outlook for the next six months drastically decreased to 79.9 this month, down from 92.8 in June.

— The percentage of consumers describing current business conditions as “good” was only 24.2.

ID-10041353 AmbroTherefore, don’t get exuberant over the Dow Jones Industrial Average’s former flirtation with 18,292. It didn’t mean the U.S. has a healthy business climate.

Because the economy remains shaky. Globally, U.S. corporate earnings are in doubt.

The U.S. also has huge economic structural issues, exacerbated by disastrous Obama Administration policies.

The Federal Reserve’s printing of money only offered false hope. All it did was keep the cost of money cheap for big investors and banks.

The unemployment rate has dropped to 5.1 percent, but it’s a dubious statistic. How can it only be 5.1 percent if about 280,00 Americans on average file for unemployment benefits each month while only about 200,000 people are hired?

Well,  the Labor Department data shows millions of Americans have been so discouraged by their prospects, they stopped looking for work.

So they aren’t counted in the data. Neither are the millions of Americans who are under-employed — toiling in part-time jobs with insufficient or no benefits.

The average American workweek has dropped to only 34.6 hours. Wages remain fairly flat.  Just as bad, the numbers aren’t forecast to improve.

So, more realistically, the jobless rate is actually double — at least 11 percent, according to economist Peter Morici, Ph.D in Q4 2014. He’s an economist and business professor at the University of Maryland, national columnist and five-time winner of the MarketWatch best forecaster award.

“The economy added 214, 000 jobs in October,” he said. “The pace has picked up over the last year, but it is still far short of the 400,000 per month needed to bring unemployment down to acceptable levels.”

(For more of Dr. Morici’s insights, click here.)

How do the disastrous Obama Administration policies compare with other comparable economic periods?

“Over the last four years, the pace has been a paltry 2.3 percent but much stronger growth is possible,” the professor points out . “During the Reagan recession of the early 1980s, unemployment peaked at a much higher level than during the recession Obama inherited, and GDP advanced at a 4.9 percent over the comparable period of recovery.”

A study reveals an alarming trend — why startups no longer lead in job creation.

True, workers with 401 (k)s are happy with the market. But my economic view is based on what I see happening at a common-sense, Main Street level.  The flirtation with 18,000 only meant investors weren’t currently worried about severe eye-opening developments: 

  1. The Euro-zone economic issues
  2. China’s stock market which has plummeted
  3. Greece’s economy

Everyone seems to forget that much of Europe is mired in a recession. 

Here in the states are economic ramifications that are costing jobs — from the president’s false promises on ObamaCare to his stonewalling on the Keystone Pipeline. 

Nordstrom is doing well and rightfully so. But the middle class is disappearing and lower-income shoppers favor retailers like Wal-Mart.

At a record rate, millions of Americans aged 62 have filed for early Social Security benefits.

Plus, even for those lucky to have a job, wages are flat. But companies are losing much of their intellectual capital as age discrimination is rampant in favor of younger workers in order to save benefit costs.

Don’t be misled about the rate of home sales in some areas. Sales increases were attributed to investors capitalizing on distressed prices as sales prices continue to drop. Not good.

Look for another round of foreclosures now that the deal has been signed between lenders and states attorney generals.

Besides, the average victim from the predatory mortgage practices only got a settlement of $2,000. 

Long term, Obama’s payroll tax extension will only hurt workers. It means retirees will get less money from Social Security when they leave work. 

What’s needed is economic vision in public policy to benefit this nation.

From the Coach’s Corner, consider the vision of Dr. Ben Carson who is known as a uniquely soft-spoken retired neurosurgeon. His voluminous accomplishments include his pioneering in the separation of conjoined twins at the head.

But, of course, there’s more. A lot more. With his gentle, low-key demeanor, he’s also known for his powerful insights on the issues facing the U.S. and the world.  See: Q&A with Dr. Ben Carson – The Full Meal Deal with Solutions.

A blind person asked St. Anthony: “Can there be anything worse than losing eye sight?”

He replied: “Yes, losing your vision!”

 


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.  




Photo courtesy of Ambro at www.freedigitalphotos.net

Legal War on Wall Street Chicanery Isn’t Finished



Updated Sept. 9, 2014 –

Wall Street continues to prove again and again that it needs a moral compass.

True, JP Morgan Chase was fined $20 billion in fines in 2013 and Bank of America was fined more than $16 billion for their companies’ behavior in Wall Street’s collapse in the Great Recession.

But company executives haven’t contrite, they haven’t gone to jail and transparency is questionable.

So, the Obama Administration’s record in prosecuting Wall Street’s behavior has been weak. That also means there are many unanswered questions. Instead, the Federal Reserve and the New York Attorney General are in the forefront to force change.

ID-10074458 chanpipatBreak up the big banks

Meantime, the time has come to break up the big banks. There are 5,000+ banks in the U.S. However, just a dozen of them dominate with 69 percent of the assets in the banking sector.

The eight biggest banks, which are interconnected in many ways, are  JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs, Wells Fargo, Morgan Stanley, Bank of New York Mellon and State Street Bank.

When their predatory behavior causes their demise and they beg for dollars in massive bailouts, the nation’s economy is practically swallowed up, as we experienced in the events causing the Great Recession.

It prompted me to write the article, Major Banks Are Too Big to Fail, But Not to Break Them Up.

Downsizing banks?

While the administration has failed to prosecute the people responsible, the Federal Reserve appears to be pressuring the big U.S. Banks to merely downsize so they become less risky for the nation’s economy.

Fed Gov. Daniel Tarullo testified before Senate hearing that the Fed is working on several ideas to cut risks and shrink the big banks.

One idea is to impose  more capital requirements for the eight biggest banks to have sufficient assets to cover losses instead of relying on taxpayers. It’s a silly solution in that it doesn’t go far enough, and some of the banks already meet the proposed capital requirements.

There are 5,000+ banks in the U.S. However, just a dozen of them dominate with 69 percent of the assets in the banking sector.

Another idea is to force banks to reduce their dependence of using short-term borrowing from other banks. Why? In a crisis like the Great Recession, all banks are affected so such short-term borrowing is unproductive.

True, JP Morgan Chase was fined $20 billion in fines in 2013 and Bank of America was fined more than $16 billion for their companies’ behavior in Wall Street’s collapse in the Great Recession. But company executives haven’t gone to jail.

But the Fed hasn’t adequately addressed the corruption.

New York Attorney General

In another legal arena, BlackRock, the world’s-largest asset manager has agreed to terms in an investigation that it has been giving some investors early insider information — an unfair advantage to make money.

After being pursued by New York Attorney General Eric Schneiderman, BlackRock will stop giving data and analyst sentiment to Wall Street elitists.

Mr. Schneiderman calls the illegitimate practice, “insider trading 2.0.”

But six years after Congress promised answers in the big banks’ roles in the financial scandal, mostly questions remain.

Fortunately, Mr. Schneiderman has also been investigating Wall Street’s role in the mortgage quagmire.

Return to massive profits

Meantime, elite investors seem giddy over the big banks’ 2013 profits, which would be at an all-time high, if weren’t for their legal costs.

The profits are up an aggregate 21 percent — $74.1 billion for Bank of America, Citigroup, Goldman Sachs, JP Morgan Chase, Morgan Stanley and Wells Fargo.

Six banks paid nearly $19 billion over their chicanery — violating the Bank Secrecy Act, lying about the quality of mortgage-backed securities, trading manipulations and for selling contaminated mortgages to government-owned financiers.

But the legal war on Wall Street Chicanery shouldn’t finished.

Unanswered questions

Even as a free-market advocate, I remain unconvinced there are at least six unanswered questions:

— The banks’ roles in the role that led to the housing bubble?

— What about guaranteed transparency including securitization details?

— What about jail time for perpetrators?

— What will be sufficient to prevent the future devastation of investors?

— What will be done to stop all the illegalities, including the robo-signing in the foreclosures of homeowners?

— What about a cultural change — a moral compass to halt the practice of giving multi-million dollars in bonuses to employees at the big banks bailed out by taxpayers?

Ineffective Feds

“These days the Justice Dept. and the Securities and Exchange Commission are investigating Wall Street with tactics, such as wire taps, usually reserved for professional criminals and terrorists,” blogged Peter Morici, Ph.D., in May 2011. He’s a business professor at the University of Maryland and former chief economist at the U.S. International Trade Commission.

“Apparently, those agencies recognize what Treasury and the Federal Reserve simply won’t admit – insider trading, robo foreclosures and peddling dodgy securities to unsuspecting investors are good old fashioned fraud,” he wrote. “Like the corruption tolerated by Third World autocrats, those practices handicap American capitalism in global competition and undermine prosperity.”

He cited the subpoenas for executives at Goldman Sachs and SAC Capital advisors.

“Punitive settlements and convictions-resulting from investigations into insider trading at Galleon and SAC, shoddy mortgage foreclosure practices at Bank of America, and shady marketing of mortgage backed securities at Goldman Sachs — ultimately, would curb cynical behavior and ever bigger paydays on Wall Street, and improve returns for stock investors,” he asserted. “As importantly, it would redirect American capital and talent toward more productive, jobs-creating purposes.”

Stocks as investment

Dr. Morici indicated stocks aren’t an optimized investment.

“In February 1998, the S&P 500 first closed above 1000 — since corporate profits are up about 210 percent but equities less than 35 percent,” he recalled. “Corporate profits rose 6 percent annually but investing in stocks paid a disappointing 2.3 percent a year.”

Why else?

“Buying stocks doesn’t seem to pay, because too much of the profits created by innovators with ordinary investors capital is captured by hedge funds, Wall Street trading desks, private equity houses, aggressive M&A shops, and then paid to Wall Street executives and traders,” he wrote.

Dr. Morici suggested an eye-opening thesis.

“In the drive for ever bigger compensation packages, Wall Street’s best and brightest violate boundaries of ethical behavior and the law,” he explained. “Not all of our problems can be laid on Wall Street’s steps, but its culture of entitlement and sharp practices impose enormous burdens.

“The carnival culture on Wall Street is attracting too many young people to business schools to study economics and finance, instead of pursuing physics and engineering,” he added. “That’s why the best business schools are overwhelmed with applicants from Connecticut and California, while engineering colleges depend on students from China and Asia, who will then return home to compete with American businesses.

Wall Street paychecks

He believes that the obscene Wall Street paychecks hurt individual shareholders and pension funds, alike.

“The absence of significant appreciation in equities for more than a decade means that many retirees dependent on IRAs and other defined contributions vehicles can no longer live comfortably, and many baby boomers who have been pushed into such pension vehicles can’t retire,” he wrote. “Their money may be working hard, but only for Wall Street titans and not for them.”

He maintains the financial chicanery costs jobs.

“These days, too much money and talent are directed to financial engineering-efforts to design the next complex derivative-and not enough is going into physics and real engineering-designing electric cars, new materials, and products and services that will define U.S. global competitive success and prosperity for the next 25 years,” he maintained.

“Increasingly, venture capital and stock investors look abroad for the best returns, and this deprives small and moderate sized U.S. companies of capital needed to expand and invest in new ideas and create jobs,” he added.

Conclusion

So, what can Mr. Schneiderman, the Justice Department, and the Securities and Exchange Commission accomplish – while the Treasury Dept. and Federal Reserve appear incoherent?

“Prosecuting Wall Street will do a lot to curb abusive practices and excessive compensation, make stocks and IRAs sensible investments, redirect capital and talent into productive purposes, and get the American growth machine back on track for our children and grandchildren,” concluded Dr. Morici.

Agreed. At one time, my free-market philosophy would have differed on this scandal. But not now. The economic liberty of countless people is at stake.

From the Coach’s Corner, Dr. Morici’s analyses are regularly published in this portal’s Economic Analysis Op Ed section.

Here are links on the background of the financial scandal:

“There is two things that can disrupt business in this country. One is war and the other is a meeting of the Federal Reserve.”

-Will Rogers

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Photo courtesy of chanpipat at www.frwww.freedigitalphotos.neteedigitalphotos.net


Will Goldman’s Scandal Prompt Cultural Changes on Wall Street?



There were reasons for financial reforms.

On the same day  that Congress passed sweeping financial-reform legislation in 2010, Goldman Sachs & Co. agreed to pay $550 million to settle fraud charges. The charges accused Goldman of fraud in mortgage investments. That includes $300 million in fines assessed by the Security and Exchange Commission – the largest in SEC history.

The remaining balance of $250 million went to the victims.

profits-618373_1280You might recall that Goldman’s mortgage-related investments were designed with participation by a Goldman client, Paulson & Co. Paulson bet those investments would not succeed, and they didn’t.

Goldman was forced to assess its procedures in such financial mortgage deals. The catalyst was the investments that cost investors nearly $1 billion, but the deal netted Paulson huge sums of money. It was also part of the mega mortgage meltdown that helped to exacerbate the nation’s economic downturn.

“This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing,” said Robert Khuzami, the SEC’s enforcement director.

The case against Goldman gathered steam when a published report added impetus to fraud allegations against Goldman. The Sacramento Bee alleged Goldman secretly worked to dump “billions of dollars in risky mortgage securities and buy exotic insurance” in anticipation of the housing bubble. But the report said Goldman hid its actions from the Securities and Exchange Commission for nine months in 2007 (“Goldman didn’t disclose its subprime mortgage hedges”).

Goldman’s gambling

At issue: Opponents eventually proved that Goldman’s gambling was so relevant – investors would not have bought Goldman’s offerings.

The furor over that controversial 2007 mortgage derivatives deal still underscores the fear of many Americans that the market is rigged against them because Wall Street is a haven for questionable behavior.

The Security and Exchange Commission’s triumph over Goldman’s handling of the collateralized debt obligation (CDO) in subprime mortgages showed the Wall Street sheriff is back and is flexing some muscles.

Furthermore, Goldman’s failure to disclose that a hedge fund manager, John Paulson, helped select the underlying securities and then bet against them to make more than $1 billion is bad enough.

Goldman hid investigation

It’s looked even worse after Bloomberg reported Goldman knew it was under investigation for nine months but failed to disclose the investigation in their financial reports to investors.

Such omissions triggered the shareholder legal action.

The resulting headlines are reminiscent of the financial-greed scandals involving the 1980’s shadowy behavior of convicts Mike Milken and Ivan Boesky, as well as the principals at Enron and Worldcom.

Several questions have arisen:

  1. Is the SEC action really the tip of the iceberg of upcoming legal challenges?
  2. Will it lead to a stock market correction?
  3. Will it end the entitlement attitudes seemingly held by many investment bankers?
  4. Will it improve the culture in the financial sector?

This case was an ideal situation for New York’s litigious community.

It led to a decline of Goldman shares – 13 percent – as well as the shares of other financial companies trading in CDOs, including Deutsche Bank AG, Morgan Stanley, Bank of America (the parent of Merrill Lynch) and Citigroup.

Widespread conflicts of interest

In addition, a Chicago online publication, ProPublica, reported on questionable bets by Magnetar and allegations of conflicts of interest by the latter three financial firms. Magnetar denied culpability and none of the three banks denied or commented on the allegations.

Indeed, the same day that the SEC acted against Goldman, a Dutch bank leveled similar charges against Merrill Lynch. Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank, cited Merrill Lynch in a $1.5 billion CDO.

Sadly, regarding Wall Street’s entitlement attitudes and culture, the consequences might not be severe enough to prompt an attitude adjustment.

Not to be cynical, here’s the bottom-line question: Are there enough moral compasses on Wall Street to put a stop to the chicanery? Probably not.

From the Coach’s Corner, a few more Wall Street-related articles:

Major Banks Are Too Big to Fail, But Not to Break Them Up — The time has come to break up the big banks. There are 5,000+ banks in the U.S. However, just a dozen of them dominate with 69 percent of the assets in the banking sector.

Federal Reserve Typifies What’s Wrong with Economy — There’s still a troubling schism in U.S. politics, monetary policy and management of the economy. The Federal Reserve keeps printing money, which risks inflation and only encourages more bad monetary policy. For another example, consider Bloomberg ‘s shocking expose: “Wall Street Aristocracy Got $1.2 Trillion in Loans from Fed.” Yes, $1.2 trillion in secrecy.

How Twitter Levels the Playing Field for Small Cap Companies — Good news for venture capitalists and entrepreneurs who are known to kvetch that that their companies fall below the radar screen of Wall Street analysts and the media. It’s widely known that mainstream media coverage seems to favor large companies over small ones. It’s a valid concern.

“The saddest thing I can imagine is to get used to luxury”

-Charlie Chaplin

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Sen. Cantwell Is Right to Question Risky Derivative Dangers, Geithner

 

Updated July 15, 2010 – 3 p.m.

An influential U.S. senator, Sen. Maria Cantwell (D-WA), worked to regulate the perilous use of derivatives by Wall Street bankers, and criticized the Obama Administration in the process. But her derivative strategy worked. The sweeping financial reform legislation will regulate the risky, intangible instruments.

This means derivative trading now faces regulation, and financial institutions will have to set up a fire wall by moving their derivative departments elsewhere.

“This isn’t about poking the White House, it’s about getting capital flowing to small businesses,” Sen. Cantwell said in an interview with Les Blumenthal, a reporter for McClatchy’s Washington state newspapers.

She helped lead the fight against investment bankers, who were bailed out by taxpayers only to shell out big bonuses and who are at it again. Instead of extending credit to business, Wall Street is back to the old tricks of playing risky derivative games that helped lead to Wall Street’s meltdown and the global-financial disaster.

She’s also had a testy exchange with Treasury Secretary Timothy Geithner over the failed efforts to bail out community banks and the associated credit issues faced by her Washington state constituents and other American businesses and consumers.

“We are trying to keep the focus on what needs to be done to get credit flowing and avoid another bubble,” Sen. Cantwell also said. “Do I wish the White House team was more attuned to these issues? Yes.”

 Yes is right. It’s commendable that she’s become outspoken about regulating Wall Street’s behavior.

If she’s successful, we’ll see job creation – the only way out of this mess. I’ve been harping about this and asking for answers to questions for an extended period of time starting with this column, “Is it Time to Police Pay at Wall Street Banks?

And she was right about voting against the reappointment of Fed Chair Ben Bernanke. Few in Congress seem to understand Main Street issues and his tardy, tepid handling of the Great Recession at the Fed.

Firewall partnership

Sen. Cantwell partnered with Sen. John McCain (R-AZ), the former GOP presidential candidate, to bring back the commercial/investment banking firewall. This will prevent risk-taking by commercial banks that exacerbated two downturns in the 1930s and the most-recent  financial chaos. The two worked together on the Senate Commerce Committee.

Cash flow and credit are critical for operating a business. With too-few funds available in loans, businesses have been failing or, at least, suffering from bad credit as a result of not having access to capital.

Efforts by the Obama Administration and Small Business Administration to provide more loans are to be commended. However, they are way too-little and too late. Most afflicted small businesses now have poor credit because of the cash cutoffs and they won’t qualify for any the funding.

Credit card regulations were too late, too.

Nothing has been done to help repair the credit of the millions of small businesspeople and consumers who were victimized by the credit card companies – domiciled in a handful of states that permit predatory behavior – their rapacious interest rate hikes for bogus reasons and slashed credit lines.

Sen. Cantwell also indicated her disappointment that the Obama Administration twice reneged on promises for action on the proposed firewall between commercial and investment banks.

“Their economic team is not living up to what they said they would,” she explained to Mr. Blumenthal.

Hmm. Broken promises? That’s not what America needs, but we can appreciate Sen. Cantwell’s candor and successful efforts.

From the Coach’s Corner, on another somber note regarding credit: Customers of the hospitality industry are ostensibly the No. 1 target of hackers, here’s the article.

Green Is Good, but Government Nearly Caused a Nightmare



A green environment is good, but in retrospect the U.S. government hurt the cause and very nearly created other problems.

In concert with the Obama Administration, Congressional legislation in 2009 that would have capped greenhouse gas emissions and allow trading for emission rights would have further damaged the nation’s economic climate. The bill also raised the specter of massive climate fraud.

In fact, some lawmakers suggested that sealed documents in a multi-million dollar California climate-fraud case hold secrets showing vulnerabilities in potential cap-and-trade scams. More on the potential for Bernie Madoff-type fraud later.

Cap and trade stemmed from bogus reasons.

“There is no scientific proof that human emissions of carbon dioxide are the dominant cause of the minor warming of the earth’s atmosphere over the past 100 years,” Dr. Patrick Moore, co-founder of Greenpeace, later said in testimony before a U.S. Senate Subcommittee.


Adding up the costs

On its surface, the cap and trade bill to reduce greenhouse-causing carbon dioxide emissions looked like a promising idea. It has passed the House and failed in the Senate.

Admittedly, America consumed about 21 billion barrels of oil daily – more than half was purchased from abroad – many of the nations are not considered loyal allies. Therefore, the environment would benefit from our using renewable, cleaner energy, which means it is a desirable idea.

However, it’s clear that a cap-and-trade system would have increased prices to American businesses and the end user – consumers who were already suffering to the brink from the Great Recession. The cost to business would have been astronomical.

Power companies would have been forced to generate and market electricity from renewable sources. Businesses would have been commanded to trim down their carbon dioxide emissions or buy credits – pollution permits – if they needed to surpass the limits set by Congress. A business could sell or trade unused allowances to other companies.

Progress – energy efficiency

Undoubtedly, the debate warranted examining America’s progress in energy efficiency.

In October 2009, the American Council for an Energy-Efficient Economy (ACEEE) released a study of what it calls a scorecard of how the states were faring in energy policies, practices and programs. That included utility-sector and public benefits programs and policies; transportation policies; building energy codes; combined heat and power; state government initiatives; and appliance-efficiency standards.

In saluting frontrunners in energy efficiency, the ACEEE study named 10 states:

  1. California
  2. Massachusetts
  3. Connecticut
  4. Oregon
  5. New York
  6. Vermont
  7. Washington
  8. Minnesota
  9. Rhode Island
  10. Maine

ACEEE gave five states and the District of Columbia high marks for showing the most improvement; they included:

  1. Maine
  2. Colorado
  3. Delaware
  4. District of Columbia
  5. South Dakota
  6. Tennessee

ACEEE also lauded manufacturers, energy efficiency groups and California’s Pacific Gas & Electric Company for agreeing to new efficiency standards for outdoor lights. ACEE hoped Congress would pass a law that will lower energy use by lights up to 42 billion kilowatt hours a year. ACEEE estimated it would affect at least 3.6 million households.

OK, so progress is being made in energy efficiency.

But businesspeople and consumers had a right to be concerned about such legislation. It would have imposed more government regulation and heavy mandated costs. Not to mention some of the world’s major players are not in the game.

In July 2009, Environmental Protection Agency Administrator Lisa Jackson admitted to Congress that America’s efforts to reduce greenhouse gas emissions would not have made a difference unless China, India and third-world countries implement such green policies.

China had vowed to cut “carbon intensity” by 40 to 45 percent in 10 years, but critics said the promise was inadequate.

Three coalitions – comprised of 23 states with 50 percent of the U.S. population and responsible for more than a third of gas emissions – were working in the cap-and-trade arena. Each state would be autonomous but only one coalition showed any progress, at all.

The coalitions were formed after former President George Bush opposed such controls.

A group in the Northeast, the Northeast Regional Greenhouse Gas Coalition, commenced its efforts affecting electric utilities, but was not able to benchmark success.

A second group, the Midwest Greenhouse Gas Accord, reportedly couldn’t even design its program.

The third group, the Western Climate Initiative, comprised of seven Western states and four Canadian provinces has worked since 2007. But was in a quandary over whether to proceed ahead of the federal government.

One of ACEEE’s highly ranked energy-efficient states, Washington, considered a cap-and-trade proposal supported by then-Gov. Chris Gregoire but it died under heavy criticism in the 2009 legislative session. There were concerns over the burdens on energy-intensive companies that complained they would suffer from high costs. They also warned that prices for pollution permits would not be transparent and could be manipulated.

Only California and the Canadian provinces have passed legislation in the Western coalition.

So many consumers and businesses saw a cap-and-trade system as terrible for the economic climate. They have been too stressed over poor cash flow, layoffs, credit issues and foreclosures.

Climate fraud case

Meantime, two members of Congress demanded that sealed documents in a California multi-million dollar climate fraud case be opened. They said the documents were evidence that would affect the cap-and-trade legislation because a new trillion-dollar commodities market would have evolved as a result of the carbon dioxide emissions credits.

The lawmakers suggested the climate-change legislation might create an environment for more Wall Street deception – this time, in trading cap-and-trade pollution rights.

Rep. Joe Barton (R-TX), ranking member of the Energy and Commerce Committee, and Rep. Greg Walden (R-OR), ranking member of an oversight and investigations panel, were represented by the House Office of General Counsel in asking a California federal district court to release sealed records in the fraud conviction of Anne Masters Sholtz, a former economist at California Institute of Technology.

The 2005-Sholtz case entailed a climate trading system called Reclaim. She participated in the design of Reclaim and was convicted of fraud in selling phony emission allowances to the tune of $12 million. It is believed the sealed documents would show how climate fraud could remain under the radar screen and lead to another multi-billion dollar Bernie Madoff-type scandal.

Such schemes make it difficult to connect the dots in massive financial losses.

You might recall the Wall Street firms that received bailouts, in part, after the commodity and housing markets collapsed in the current financial disaster. Well, some reportedly have been already involved in the Northeastern coalition’s cap-and-trade system. They include Barclays, Goldman Sachs, JP Morgan, Merrill Lynch (now a subsidiary of Bank of America) and Morgan Stanley.

In conclusion, there were two questions: Did the dubious cap-and-trade benefits outweigh the financial risk to businesses and consumers? Was the likely pain from more Wall Street chicanery worth the risk?

The answer to both questions is a resounding no. When will we learn our lessons? With great difficulty we recovered from Enronitis, and it is not clear we will ever really succeed over the Wall Street chicanery that exacerbated the Great Recession.

From the Coach’s Corner, editor’s pick:

Checklist for Branding, Selling Your Biz as Green — Consumers love environmentally sensitive businesses. You might think it’s a slam dunk for businesses to market themselves as green. Well, yes and no. There are precautions to take. They include educating your audience on your eco practices.

“Much of the debate over global warming is predicated on fear, rather than science.”

-James Inhofe


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.




Why Women Receive Less Angel Funding Than Men



You’re a woman with a great business idea, but you’re short on funds. You’ve also heard that it’s tough for female entrepreneurs to get financing from an angel investor – someone who funds early-stage companies.

Ironically, female entrepreneurs receive less angel funding than men, even though they launch more businesses, according to a study co-authored by a finance professor, Dr. John Becker-Blease, at Washington State University, Vancouver.

The study is entitled: “Do women-owned businesses have equal access to angel capital?”

ID-10044310 ambroDr. Becker-Blease conducted the study with Dr. Jeffrey E. Sohl, who directs The Center for Venture Research at the University of New Hampshire, in 2007.

Dr. Becker-Blease formerly worked at the center prior to joining WSU where he researches entrepreneurship, corporate governance and women in business.

What is their study’s first insight on why women receive less angel capital? Fewer women than men actually apply for angel funds.

For those who do apply, Dr. Becker-Blease reminds us that investors aren’t interested in backing small retail-type micro-businesses.

“We found that women entrepreneurs submitted an average of nine percent of proposals received by our angel groups during the sample,” he said. “Indeed, of the proposals received, both women and men had an equal chance of receiving funding (about a 14 percent chance).”

Here is an excerpt of the interview with Dr. Becker-Blease:

Q: At what rates do women start business vs. men?

A: The rate of increase in the number of businesses in which women were at least 50 percent owners is quite a bit higher than the increase in men-owned-businesses. The National Foundation of Women Business Owners reports a 17 percent increase in the number of women-owned firms between 1997 and 2004, compared to an overall increase of only nine percent in the total number of firms.

Fewer women than men actually apply for angel funds.

Q: Why do fewer women seek capital than men?

A: Three possible answers. 1. Women entrepreneurs are not interested because the kinds of businesses they tend to start such as retail and service businesses are not the type that most angel investors care to fund. 2. Women entrepreneurs do not know who to ask or how to go about seeking capital. This is a by-product of their network composition. Most angel investors tend to be men (roughly 90 percent) and since women entrepreneurs are not typically part of their network, women do not know how to contact these angels. 3. There is discrimination, or perceived discrimination, in the angel capital market against women and therefore only those women with the best networks or those with the most promising business ventures will find it worth their time and effort to seek angel funding. I should note that we do not find evidence of discrimination.

Q: Why are women likely to seek funds from women angels?

A: It is not simple for the average entrepreneur to find an individual or group of individuals who are willing and able to provide two or three hundred thousand dollars worth of equity capital. Instead, angel investing appears to occur primarily within fairly closed networks.

Homophily is the tendency of individuals to interact with others who are similar to themselves, and sex-based homophily can be particularly strong. We do find strong evidence of homophily in the seeking of angel capital; men appear to seek funds from angel groups comprised disproportionately of men and women appear to seek funds from angel groups comprised disproportionately of women.

Q: How do women entrepreneurs fare compared to men in receiving funds?

A: The data suggest about the same. We have some evidence that angel groups that invest in a relatively high proportion of women-owned-businesses tend to invest more funds than other angel groups. This may be due to the kinds of businesses these groups fund, the stage of the investment, or just a quirk in the data.

Q: Why is so little known about women receiving private equity investors?

A: From the supply-side, since angel investors are not organized around a formal market, researchers have difficulty identifying them and even when we do, many angel investors are reluctant or have such heavy demands on their time that they cannot participate in academic studies. From the demand-side, identifying serious aspiring entrepreneurs, especially those in the kinds of industries that angel capitalists tend to invest in (that is, high growth) is perhaps even more challenging.

“… angel groups comprised disproportionately of men accept a higher proportion of women-sponsored proposals than do angel groups comprised disproportionately of women.”

Q: What other data did you uncover?

A: As an interesting aside, in a current project that Jeff and I are working on together, we find evidence that angel groups comprised disproportionately of men accept a higher proportion of women-sponsored proposals than do angel groups comprised disproportionately of women.

Q: What questions did your research leave unanswered?

A: We need to examine much more carefully the demand-side of the market. Why are there so few women entrepreneurs who seek funding? For a given level of quality of proposal, are men and women equally likely to receive funding?

Q: What advice would you offer women entrepreneurs seeking funds?

A: There is a growing awareness that women entrepreneurs may face added challenges in acquiring early-stage equity financing. This has led to the creation of women-focused angel groups such as The Women’s Investment Network in Portland, Oregon, which is part of the Oregon Entrepreneurs Network, www.oen.org, or the Seraph Capital Forum in Seattle, www.seraphcapital.com. Make use of their resources and any forums offered.

Well put.

From the Coach’s Corner, here’s more angel-funding advice from an expert who warns that many novice women entrepreneurs underestimate the marketplace:

“Tell women entrepreneurs they’ll encounter major competition,” said Neil Delisanti, who retired as a counselor with the Small Business Development Center in Tacoma, WA, and as a business professor at University of Puget Sound. “Advise them to assess their strengths and weaknesses to determine their competitive advantages, and to develop operating strategies.”

Mr. Delisanti said he’s observed some women are too empathetic to customers, but are more organized than men in financial and other administrative matters.

For information on raising capital in turbulent times, visit: What No One Tells You about Raising Investment Capital

“Being a CEO still means sitting across the table from big institutional investors and showing your leadership and having them believe in you.” 

-Christie Hefner


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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.





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Seattle business consultant Terry Corbell provides high-performance management services and strategies.