Marketplace on RADIO IQ

Weekdays at 6:30 p.m. on RADIO IQ
Kai Ryssdal

Marketplace with host Kai Ryssdal produced and distributed by American Public Media focuses on the latest business news both nationally and internationally, the global economy, and wider events linked to the financial markets.

The only national daily business news program originating from the West Coast, Marketplace is noted for its timely, relevant and accessible coverage of business, economics and personal finance. 

Marketplace, weekdays at 6:00 pm on WVTF and 6:30 pm on our RADIO IQ and RADIO IQ With BBC News networks.

Be sure to check out the  Marketplace Morning Report weekdays at 9:51 on RADIO IQ andRADIO IQ With BBC News.

Composer ID: 
5187f8c9e1c84d4a4b12564c|5187f8c5e1c84d4a4b12563e

Program Headlines

  • Friday, July 25, 2014 5:56pm

    Chicago Mayor Rahm Emanuel has announced at least 9,000 drivers will get a second chance to appeal $100 tickets issued by red light cameras. The Mayor’s decision follows a Chicago Tribune report documenting periods where some cameras generated huge, sudden and completely inexplicable spikes in tickets.

    For years, red light camera hatred grew almost as fast as the number of cities using them. Until around 2012, when the number of programs actually started to drop, according to data from the Insurance Institute for Highway Safety. The initial promise  safer streets and more city revenue  no longer seemed so promising.

    Jeff Brandes, a Republican state senator from Florida, proposed a bill that would have put some limits on red light cameras there. Among other things, he was alarmed by media reports showing that after some local governments put in red light cameras, they also shortened the time for yellow lights

    “Well, reducing yellow light timing has never been shown to be safer,” he says. “But it has been shown to generate a lot more red light camera revenue.”  

    A state report he requested did show revenue going up year-by-year. His poster child was a mom who just missed a yellow light on a rainy day. He says no cop would’ve written her a ticket.

    “You know, there’s a human factor to law enforcement,” says Brandes. “And we’re taking that out.”

    Of course drivers hate the gotcha-every-time factor, says Joseph Schofer, a professor of civil and environmental engineering professor at Northwestern University. “From the perspective of the driver, you’ve really taken away my margin,” he says.  “I can’t push it a little bit and get away with it.”

    Schofer also thinks there’s an upside, if cities want people to run fewer red lights, but he recognizes that the money creates a conflict of interest.

    “If you’re doing this to make money, set up a tollbooth,” he says. “Then it becomes more transparent.  We know what you’re doing.”

    There’s also a question about how well the cameras work. Some studies have shown that when red light cameras go in, rear-end crashes go up.

    However, researchers who favor red light cameras have an answer for that one. Anne McCartt is Senior Vice President for Research at the Insurance Institute for Highway Safety. She cites a study by the National Highway Traffic Safety Administration:

    “While rear-end crashes went up, the more serious right-angle crashes went down by a greater extent,” she says. “So there was an overall net safety benefit.”

    The Florida study that Jeff Brandes requested showed the same thing. And fewer T-bone crashes generally means fewer deaths.

  • Friday, July 25, 2014 5:49pm

    Amazon has developed a kind of parlor trick of not making a profit, despite the fact that it has gobs of revenue coming in.

    The online retailing giant announced Thursday that its revenues soared to $20 billion in the second quarter. But high costs pushed it into the red. It lost $126 million.

    "That in and of itself is quite a feat - to be able to crank up the spending machine to that degree," says Colin Gillis, senior technology analyst with BGC Financial.

    Gillis says Amazon invests aggressively in many areas: E-commerce, its own smartphone, TV shows and web services like document sharing.

    But Gillis and others wonder when Amazon, which has snubbed short-term profitability as a longer-term business strategy, is going to shift gears.

    "If they shouldn't be valued based on profitability, what should they be valued based on?" asks Sucharita Mulpuru, a retail analyst at Forrester Research.

    Mulpuru points out that other tech giants like Google and Facebook do turn in big profits even as they spend on innovation. Just yesterday, Facebook announced a second quarter profit of $800 million.

    Mulpuru says Amazon is frittering money away with steep subsidies of shipping costs for stuff customers buy from its website.

    But RJ Hottovy, an e-commerce analyst with Morningstar, says Amazon is building a lot of brand loyalty along the way.

    "Really it's important to lock in those consumers and give them less of a reason to shop elsewhere," he notes.

    Hottovy thinks Amazon's strategy will eventually pay off. But for now, the company is projecting up to $800 million in operating losses for the current quarter.

  • Friday, July 25, 2014 5:10pm

    A new study from the University of Chicago and a university in the Netherlands asked who's more likely to spend a little extra for name brands. The conclusion? Professionals don't seem to care if what they're using is generic.

    "More informed consumers are less likely to pay extra to buy national brands," the study says.

    For example, pharmacists buy generic asprin 90 percent of the time.

    The same's true with salt and sugar. It turns out chefs like to go generic too; they devote 12 percent less of their purchases to national brands than demographically similar non-chefs.

  • Friday, July 25, 2014 5:07pm

    This week the U.S. Department of Health and Human Services announced that nearly 7 million consumers would receive $330 million in refunds from health insurers.  

    Under the Affordable Care Act, the carriers must spend 80 cents of every dollar in premiums towards medical care or steps to improve healthcare quality.

    That leaves 20 cents for things like salaries, bonuses and other administrative costs.

    This provision of the ACA is often called the 80/20 rule.

    Q. What’s the reason for the 80/20 rule?

    Kaiser Family Foundation Senior Vice President Larry Levitt was pretty succinct when he said “this is really a protection against insurers trying to gouge people.”

    When Obamacare architects were designing the law, they wanted to make sure most of the money consumers spent on premiums would actually be dedicated to medical care.

    While Levitt says 80/20 was a late addition to the legislation, he believes it’s actually changing the nature of the insurance industry.

    “It’s in effect putting a cap on overhead and profits and that’s a pretty dramatic step that I don’t think people fully appreciate,” says Levitt.

    Q. I’ve paid my premiums and haven’t visited the doctor once this year. Will I see some money in my mailbox soon?

    It depends.

    The only way someone qualifies for a rebate is if the particular insurance plan you’ve enrolled in falls short of the 80/20 ratio.

    If you’re enrolled in an insurance policy that meets the target, you won’t be getting a check any time soon.

    If you get coverage at work, your company gets the refund, or a credit towards next year’s coverage.

    Q. How is this rule impacting insurance companies?

    When the 80/20 rule began in 2011, insurers paid out more than $1 billion in rebates. This year it’s a third that much.

    Matthew Eyles with Avalere Health says the industry has clearly figured out how to calculate their expenses and how money they’ll spend providing medical coverage.

    “This is almost pixie dust really if you think about the amount of premiums that insurers collect in hundreds of billions,” he says.

    Under this new system there is little incentive for insurers to inflate premium prices, particularly on the health exchanges.

    If prices are too high, not only are consumers less likely to buy those plans, insures know they’ll have to return profits at the end of the year.

    In that regard, Kaiser’s Larry Levitt says insurers are becoming more like public utilities.

    “Insurers still have some flexibility in how they design these products. But an insurance policy is a much more standardized product. And the pricing is much more regimented as well,” he says.

    Q. If insurers can’t make as much off of premiums, are they finding new ways to make profits?

    HealthLeaders-InterStudy analyst Paula Wade says insurers can make up any lost revenue by increasing deductibles, co-pays and other out-of-pocket expenses consumers face.

    “If you look at the how the major insurers are doing, they are doing very well,” she says.

    “I wouldn’t lose any sleep worrying about their profits.”

  • Friday, July 25, 2014 4:29pm

    Markets have been setting records pretty much every other week for months, investors are making record money... and Wall Street?

    Well, it’s looking a little lean.

    "I think it’s really tough, even for people who are really good at it, to be honest," says Jesse Marrus, president of StreetID, a financial careers service. He says jobs on Wall Street have been drying up. "It’s definitely an ‘eat what you kill’ business, so there are people losing their positions in that space."

    Why is there less of a killing to be made for Wall Street workers? 

    "Trading volumes are way lower than they were," explains Max Wolff, chief economist at Citizen VCTrading volumes - a.k.a. how many trades are done per day - is where Wall Street makes its money. Fewer trades mean a lot fewer commissions. Trading volume has been really low since the financial crisis. Last year, the number of trades was a third lower than it was in 2009.

    A big reason for the low trading volume is the low level of investor enthusiasm. "It's no secret that this is one of the world’s most hated rallies," says Wolff. "It’s been pretty clear that the markets got well ahead of the macroeconomic health of the U.S. and they've stayed there. And everyone kept waiting for this correction that didn’t come and slowly, begrudgingly people jumped on board, because they couldn’t afford just to watch other people make money forever. But they didn’t believe in it and they definitely don’t want to catch the elevator ride down that everyone’s afraid may come."

    So investors are putting their money in the markets and leaving it there: They’re not buying a hot new stock or selling it off based on a hot tip. Instead, they’re buying and holding. "For there to be trades, there have to be differences of opinion," says Lawrence White, a professor of Economics at the NYU Stern School of Business. "Somebody has to think, 'It’s a good time to buy!' and somebody else has to think, 'It’s a good time to sell!' When trading volumes are lower, it just means there’s less diversity of opinion, more consensus."

    All of that consensus has had a very chilling impact on Wall Street. "It’s really alarming for the people who are in the broker/dealer seats that really rely on the trading volumes," says Marrus. "Despite the record highs, it’s still really hard for them to make the commissions that they were making and make the livings that they were making because the volume’s low and the volatilities are so low."

    But even if volatility and volume come back, Wall Street workers probably won't be back to the good old days. Electronic trading has replaced brokers and traders to a large extent and the future Wall Street broker will probably look a lot more like Hal than a power player in a pin-striped suit.

Playlist

June 26, 2014

6:55 PM
Hot Cakes
Artist : El Ten Eleven
Album : Every Direction Is North
Composer :
Label : El Ten Eleven