They say a happy employee is a productive employee.

But this summer, with gasoline prices inching up toward $4 per gallon, cash-strapped employees don't have much to smile about.

Here's some proof. According to Wayne Hochwarter, a professor of management at Florida State University's College of Business, Americans' work attitudes have been negatively impacted by the rising price of oil and gas.

In a FSU study of 1,000 workers across the U.S., 60% of employees say that the price of gas has significantly reduced the amount of money they have to spend on other things, while 45 percent reported the need to pay off debts more slowly or not at all. Additionally, 26 percent indicated that the cost of gas has necessitated going without basics such as heat or air conditioning, or even cutting back on food purchases, over the past few months.

What's more, Hochwarter reports that those most affected by gas prices tended to experience stress both on and off the job. Such stress include: negative views of work and the company, sluggishness, antagonistic behavior, feeling overwhelmed and sadness.

"Most of these effects can be attributed directly to distraction while at work," Hochwarter said. "Those I've talked to spent a significant amount of time worrying about their financial situation."

Hochwarter also asked whether employees felt alone in their sacrifices or if their company had to tighten its belt as well.

"Certainly, only a handful of employees noted that their company changed plans or had to go without because of the price of gas — even companies that rely heavily on fuel for their operations," he said.

That could spell trouble for small businesses. The FSU study reports that those employees most affected by gas prices who did not see the company sacrificing were less committed to getting things done while at work. Compared to those who felt that their company was doing without, those who felt alone in their sacrifice:

• Were 15 percent less committed to the company.
• Had job performance levels that were 12 percent lower.
• Were 20 percent less willing to stay late or work extra if needed.
• Were 25 percent less likely to give "maximum effort."

"The price of gas has contributed to the perceptions of many that they are simply never going to get ahead," Hochwarter said.

Not a good report for small businesses. From what Hochwarter found,  when employees feel they can't get a fair shake in the consumer marketplace, their work tends to suffer. That could make your bottom line suffer, as well.

 

A tough day on Wall Street, with stocks falling 400 points on increased credit concerns over the struggling mortgage lending market. And the news isn't getting any better.

Insurance giant AIG released a report today showing that borrowers in the category just above subprime are showing increased residential mortgage delinquencies

AIG is a good position to know. The company is the world's largest insurance company and will have its hands full if lenders can't collect from borrowers. It's also one of the largest mortgage lenders in the
world. The company says that more than 10% of its subprime mortgages were 60 days overdue, while 4.6% in the category just above subprime were late during the second quarter.

In addition, total delinquencies in AIG's $25.9 billion mortgage insurance portfolio clocked in at 2.5%.

Delinquency rates for first mortgages, which represent 90% of AIG's domestic mortgage business, also jumped to 3.89% in June, up from 3.56% in April, AIG says.

Although second-lien mortgages only made up 10% of AIG's mortgage insurance portfolio, it incurred $159 million in the losses during the second quarter.

These mortgages are susceptible to defaults and are especially sensitive to falling home values, the report adds.

With banks and lenders tightening credit, and with borrowers struggling to keep up with payments, the landscape for the rest of 2007 looks rough. The rest of us will just have to ride it out.

 

A while back, I pointed out that a tight money supply could prevent companies, especially smaller ones, from getting money to grow their businesses, make new hires, do more research -- that sort of thing. I said that if companies couldn't get access to money, the economy would suffer. The Federal Reserve had to act (okay, I didn't mention the Fed specifically, but calling Batman wasn't going to help).

So what's the big deal with a tight money supply? Imagine you're a small web design firm looking to roll out a new service or product. You go to a lender to get a line of credit only to have the teller window slammed down on your fingers.

So, yes, lending decisions have a ripple effect that goes way beyond some poor guy who can't pay his mortgage.

But with lenders still smarting over the hammering they've taken in the mortgage market, banks and other lenders were reluctant to lend money to anyone.

Enter the Federal Reserve Board, which cut its key discount rate by 0.5 percentage points on Friday. In plain English, that means the rate the Fed loans money to lenders just got cheaper. That should alleviate some concerns on the part of lenders to lend money. It won't cost as much for them to do so, which is always a good thing in business.

So that small web design firm now has a better chance of getting that line of credit, allowing them to grow their business and contribute to the overall health of the economy.

It's also an emotional lift for investors, who drove the Dow Jones Industrial Average up 240 points after the Fed announcement. Says Jim Cramer, the CNBC investing guru; `They obviously heard us, they acted,'' he said on his show Mad Money. "This is the beginning of the run to 14,500.''

"It's a brilliant move by the Fed,'' Cramer added. "Two weeks ago they were doing the exact opposite.''

We'll see about that. Short term, no doubt the Fed rate cut stopped the bleeding on Wall Street. But long term, the Federal Reserve only has so many options.

Besides, why is the Fed bailing out rich bankers, anyway? Last time I looked, licking the boots of Wall Street lenders wasn't in the Fed's charter. Richard Yamarone, chief economist for Argus Research in New York sums it up well.

"My mother always told me those who play with fire get burned,'' he said. "Here, that apparently doesn't hold true. Someone is making my mother out to be a liar, and that's not a good thing.''

But you have to walk in Fed Chief Ben Bernanke's shoes for a while. People were losing faith in the U.S. credit system. Not good. Investors were pulling money out of the stock market in droves. Understandable, but once again, not good.

A confidence boost was needed and that's just what the economy got when the Fed cut its discount rate.

The questions now is . . . how long can that confidence last?

 

Friday was a weird day on Wall Street.

First, the head of troubled Countrywide Financial predicted that the ongoing credit slump would lead to a recession. He also said that things would be better if the Federal Reserve lowered interest rates (isn't that how we got into this situation in the first place?)

My guess is that the Fed will probably cut interest rates, not by the .50 percent rate that many economists are predicting, but by a quarter-point. The Fed is historically loath to cut rates because Wall Street tells it  to. It's also reluctant to cut rates too much because of inflationary fears (they don't want money to become too cheap). The Federal Reserve Board next meets on September 18.

But wait. Later on Friday the U.S. Commerce Department reports that sales of new U.S. homes unexpectedly rose 2.8 percent to an 870,000 annual sales pace in July, reversing two months of declines. Analysts were expecting new home sales to dip to an 820,000 sales pace. New home sales in June were revised to an annual rate of 846,000 from the previously reported 834,000 rate.

It's early, but that's potentially great news for the economy. The housing and lending sectors are bleeding badly right now, and any sign showing a turnaround could be a real shot in the arm for both industries, which right now are struggling with big financial losses, heavy layoffs, and a general crisis of confidence.

Let's see what happens, but for now, there could be a glimmer of hope on the horizon.

 

The Federal Trade Commission routinely warns consumers and businesses about online fraud. They're doing so again -- but this time the scam artists are using the FTC's good name in an email spyware gambit.

According to a statement from the FTC, consumers, including corporate and banking executives, appear to be targets of a bogus e-mail supposedly sent by the Federal Trade Commission but actually sent by third parties hoping to install spyware on computers. The bogus e-mail poses as an acknowledgment of a complaint filed by the recipient, and includes an attachment. Consumers who open the attachment to this e-mail unleash malicious spyware onto their computer. The agency warns consumers who get this e-mail that 
purports to be from the FTC:

-- Don’t open the attachment.
-- Delete the e-mail.
-- Empty the deleted items folder.

According to the FTC, the hoax e-mail is personalized, and contains the name of the recipient and their business. The bogus message explains how the complaint will be used, who will have access to it and states, “Attached you will find a copy of your complaint. Please print a hard copy of the complaint for your records in the upcoming investigation.” Opening the attachment downloads the malicious spyware.

Emails touting spyware offers  is one of the most common forms of online fraud out there. What makes this particular campaign perilous is the fact that the perpetrators are using an official U.S. government agency, it's logo and letterhead, and email address. I don't have any actual studies on this, but my get tells me that consumers respond more aggressively to directives bearing Uncle Sam's imprint.

So the watch word here is "caution". Don't go for the FTC gambit and don't open any email offering spyware offers with the FTC's name on it.

Consumers can learn more about protecting themselves from malicious spyware and bogus e-mails at OnGuardOnline.gov, a Web site created by the FTC in partnership with other federal agencies and the technology industry to help consumers stay safe online. The site features modules on spyware and phishing, at http://onguardonline.gov/ spyware.html and http://onguardonline.gov/phishing.html

 

With Apple in the headlines from its iPhone pricing debacle, I’ve kept a close eye on the company’s stock price.

One rule of thumb on Wall Street is that if your company find itself in the news for negative reasons, take control of the issue and engineer some new headlines, preferably the kind that will minimize any damage to the company’s stock price.

That’s what Apple tried to do when it’s new iPhone price-cutting strategy blew up in its face. Price-cutting is a real departure for Apple. The company is famous for eschewing big sales and dramatic cuts in product prices. It sells quality – and if that quality includes price tags that induce stocker shock, so be it.

So a lot of eyebrows were raised on Wall Street when Apple went against the grain and cut its price or its new iPhone from $599 to $399. Even at $399, the iPhone is vastly more expensive than any other cell phone out on the market, so a good argument can be made that Apple isn’t really leaving all that much money on the table. The lower price should attract a lot more buyers than it would at $599. American consumers, after all, are famous for letting the early adopters pay the full freight, shake out any product bugs, then waltz in a few months later and buy in at a lower price tag.

But Apple didn’t count on how those early adopter would react when it slashed prices only two months into the iPhone’s release. Apple adopters had counted on the fact that the company would not cut prices for the iPhone. As I said, it has a long history of not doing so with its computer products.

Even Steve Jobs wasn’t giving off any vibes that Apple would lower the iPhone price. In a classic exchange with a reporter from USA Today, Jobs had the following to say:

“Soon after Apple (AAPL) announced an unexpected $200 drop in the price of the iPhone on Sept. 5, Chief Executive Steve Jobs betrayed little sympathy for the chumps who had bought the device at the higher price. "Well, that's what happens in technology," he said.”

A rugby scrum ensued after the about face, with Jobs taking the brunt of it. Customers, media mavens, bloggers and Wall Street analysts all 
piled on Apple and its CEO.

"A drop of $200 after just 66 days means that the iPhone decreased roughly $3.03 a day in retail value between launch and yesterday's announcement," said Terrence Russell on Wired's blog, Epicenter. "It's no secret that electronics drop in price over time, but such a deep and hasty discount makes trying to quantify the realistic retail value of the hardware confusing."

"To us, this move suggests the phone is not selling as well as Apple had hoped," wrote Dan Frommer on Silicon Valley Insider. Meanwhile Apple 2.0's Philip Elmer-Dewitt predicted that the company may be "clearing out inventory to make way for a 3G iPhone ASAP," referring to future product that might utilize a higher-capacity phone network.

Customers were particularly ticked off. In comment threads on The Unofficial Apple Weblog, posts from disgruntled iPhone owners numbered in the hundreds. "A $200 penalty for buying into their vision and trusting them?" asks a commenter going by the name Billy K. "Never again."

Now yesterday comes news from Apple that it will appease early iPhone adopters by offering them a $100 gift voucher, good at any Apple store or on Apple.com. Will that appease customers? Probably. Most Apple customers are loyal to a fault.

Will it stem the sharp decline in Apple stock from the past week? That’s not so clear. Apple stock fell from $145 per share to $130 in about 48 hours after the pricing announcement. It’s creeping up somewhat through early Friday trading but the damage has been done.

After all, what is more deliciously ironic than using your $599 iPhone to email your broker to sell your Apple stock?

 

A tough day on Wall Street, with stocks falling 400 points on increased credit concerns over the struggling mortgage lending market. And the news isn't getting any better.

Insurance giant AIG released a report today showing that borrowers in the category just above sub prime are showing increased residential mortgage delinquencies

AIG is a good position to know. The company is the world's largest insurance company and will have its hands full if lenders can't collect from borrowers. It's also one of the largest mortgage lenders in the world. The company says that more than 10% of its sub prime mortgages were 60 days overdue, while 4.6% in the category just above sub prime were late during the second quarter.

In addition, total delinquencies in AIG's $25.9 billion mortgage insurance portfolio clocked in at 2.5%.

Delinquency rates for first mortgages, which represent 90% of AIG's domestic mortgage business, also jumped to 3.89% in June, up from 3.56% in April, AIG says.

Although second-lien mortgages only made up 10% of AIG's mortgage insurance portfolio, it incurred $159 million in the losses during the second quarter.

These mortgages are susceptible to defaults and are especially sensitive to falling home values, the report adds.

With banks and lenders tightening credit, and with borrowers struggling to keep up with payments, the landscape for the rest of 2007 looks rough. The rest of us will just have to ride it out.
 

Anyone who's been following these blogs knows that I'm a stickler for saving money. You can't plan for the future if you're blowing your kid's college fund on hot tubs or vacations to Disney World (don't  laugh -- I actually know people who have done this).

Now comes word from yet another study that U.S. retirees are up the creek without a portfolio, let alone a paddle. According to a new study from Boston College's Center for Retirement Research, almost half of U.S. households will be unable to maintain their current  living standards—even if they work to age 65. There is no shortage of reasons for this predicament that retirees could find themselves in, but the study does say that declining Social Security replacement rates and employers’ shift from defined benefit plans to 401(k) plans have led to 32% of people aged 51 to 61 being at risk.

Things weren't this bad 15 years ago. The BC survey notes that, in 1992, just one-fifth of those households were at risk of coming up short in retirement.

Factors contributing to lower Social Security replacement rates include the increase in the average retirement age from 65 to 67. In 1992, the average retirement age for people between ages 51 and 61 was 65.2 years, but by 2004 it went up to 66.

The BC study adds that currently, 35% of early baby boomers born between 1946 to 1954 are at risk, as are 44% of late boomers born between 1955 and 1964. In addition, nearly half of Gen Xers face the possibility of a paltry retirement thanks to smaller Social Security benefits and increasing age longevity.

I take no issue with the study, save one thing: nowhere do the study researchers place the blame on overspending consumerism - - the bane of any long term saving plan, in my book. The plain fact is, we're not saving enough, and the decline in Social Security benefits and  employee retirement funding programs aren't helping matters.

 

They say a happy employee is a productive employee.

But this summer, with gasoline prices inching up toward $4 per gallon, cash-strapped employees don't have much to smile about.

Here's some proof. According to Wayne Hochwarter, a professor of management at Florida State University's College of Business, Americans' work attitudes have been negatively impacted by the rising price of oil and gas.

In a FSU study of 1,000 workers across the U.S., 60% of employees say that the price of gas has significantly reduced the amount of money they have to spend on other things, while 45 percent reported the need to pay off debts more slowly or not at all. Additionally, 26 percent indicated that the cost of gas has necessitated going without basics such as heat or air conditioning, or even cutting back on food purchases, over the past few months.

What's more, Hochwarter reports that those most affected by gas prices tended to experience stress both on and off the job. Such stress include: negative views of work and the company, sluggishness, antagonistic behavior, feeling overwhelmed and sadness.

"Most of these effects can be attributed directly to distraction while at work," Hochwarter said. "Those I've talked to spent a significant amount of time worrying about their financial situation."

Hochwarter also asked whether employees felt alone in their sacrifices or if their company had to tighten its belt as well.

"Certainly, only a handful of employees noted that their company changed plans or had to go without because of the price of gas — even companies that rely heavily on fuel for their operations," he said.

That could spell trouble for small businesses. The FSU study reports that those employees most affected by gas prices who did not see the company sacrificing were less committed to getting things done while at work. Compared to those who felt that their company was doing without, those who felt alone in their sacrifice:

• Were 15 percent less committed to the company.
• Had job performance levels that were 12 percent lower.
• Were 20 percent less willing to stay late or work extra if needed.
• Were 25 percent less likely to give "maximum effort.

"The price of gas has contributed to the perceptions of many that they are simply never going to get ahead," Hochwarter said.

Not a good report for small businesses. From what Hochwarter found, when employees feel they can't get a fair shake in the consumer marketplace, their work tends to suffer. That could make your bottom line suffer, as well.