FirstFed's shares soar as 'short' bets backfire on bears

All Things Considered, August 14, 2008 · Almost everyone has a cell phone these days. But if you're among the people who make personal calls on a company mobile phone, the Internal Revenue Service may want to talk with you.

The IRS puts cell phones in the listed property category — right along with company-issued motor vehicles and use of the corporate plane. And they consider little perks like cell phone calls from your work BlackBerry to be taxable as an extension of your compensation package. So either you or your employer is supposed to pay up.

The law for taxing cell phones was written 20 years ago, when the wireless industry was in its infancy and mobile phones were about the size and weight of a brick. Back in the day, if you wanted one of those big Motorolas with the 2-foot antenna (visualize Michael Douglas on the beach in the 1987 movie Wall Street), you — or more likely, your company — would have shelled out about $4,000. So of course, they were reserved for top-level executives.

Fast-forward 20 years, and now everybody has cell phones. They're smaller, lighter and faster. Instead of just calling on them, you can watch the news, listen to music and scan your e-mail. The CEO, the IT guy and the facilities manager each have one. Doctors and reporters would be lost without them. And how else would that real estate agent know whether you've blown her off or you're stuck — again — on the freeway en route to meeting her?

"The number of people in this country who depend on cell phones goes well into the millions," says John Walls, vice president for public affairs at CTIA, the wireless telecommunications industry association.

Long-standing Laws

Walls points out that once a tax law is created, it can take a good long while to amend it to reflect current reality: "I think a great example of this is the federal excise tax that was created to help pay for the Spanish-American War. That was only rescinded a few short years ago."

The government doesn't have a problem with people using the company phone to make personal calls, provided the individual or the company pays the appropriate taxes on such calls.

And that's the problem. To do that, says Michael O'Neill, manager for tax and payroll services for the University of California system, each cell user would have to submit documentation for every single call and indicate which ones were personal, so a tax determination could be made.

"The rules are really unworkable, unreasonable and burdensome," O'Neill says. "The IRS realized that most employers aren't following those rules."

Found Money For The IRS

In an economic downturn, where every government agency is looking to find new sources of income, collecting taxes for mixed use of the company cell is essentially free money. In 2007, during a routine payroll audit of UCLA, the IRS slapped the university with a bill for almost $240,000 in back taxes because it couldn't show how each phone had been used.

O'Neill says the university is now considering issuing voucher payments to all employees who need a cell phone, so that they can purchase one. This would become a taxable benefit that the employee must declare. "And that way, the tax burden shifts to the employee, and the university has no exposure, because we're giving the employee additional wages to go out and buy their own phone," says O'Neill.

Antiquated Tax Codes

That's still an accounting nightmare. "Back in the day, cell phones were considered exotic," says Ed McClellan, a partner at PricewaterhouseCoopers, one of the country's largest accounting firms. "And it was pretty easy to track them because only a few people had them. Things have changed, and the tax code needs to catch up with it."

That might happen very soon. A bill has already passed in the House amending the tax code to reflect how cell phones are used today. And it's being shepherded through the Senate by Massachusetts Democrat John Kerry — with 41 co-sponsors on both sides of the aisle.

"We think this is one of those nonpartisan issues where everybody benefits," says CTIA's Walls.

Whether you're from a red state or a blue one, whether you're a Republican or a Democrat, a reasonable tax code that acknowledges cells have moved from an executive perk to a way of life seems to be something everyone can agree on.

Morning Edition, August 26, 2008 · Two years ago, retail giant Wal-Mart created a stir when it announced it was moving into the organic foods market.

Today, the nation's top grocery seller is highlighting its purchases of "locally grown" produce. While the company is touting the community benefits, buying local produce is also a way to cut the company's growing fuel costs.

Wal-Mart says partnerships with local farmers have grown 50 percent over the past two years — not just in California, but in Wal-Mart stores across the country. This year, it plans to buy about $400 million worth of locally grown produce.

Tiffany Moffatt, a Wal-Mart spokeswoman, says the primary benefit to the company is millions of dollars of savings on fuel costs each year. Local partnerships have become the company's latest public relations mantra.

"It's estimated that in the United States, produce travels an average of 1,500 miles — from farms to [the] homes of consumers. So it just provides us an opportunity to make products closer to home and buy local," Moffatt says.

But the retailer's definition of what constitutes locally grown doesn't match the one promoted by many in the so-called local food movement.

Defining Local Food

On a Saturday morning at a weekly farmers market in Sacramento, Calif., farmer Patrick Hoover is ladling blueberries into small plastic boxes and offering samples. He drove less than 50 miles, from his 40 acres up in the foothills, to sell them. And that's what most locavores — the fans of locally grown food — describe as "real local food." Hoover says selling to Wal-Mart doesn't really appeal to him.

Wal-Mart says anything grown in the same state is local food.

"The quality, I have. I don't do any markets like that, just because my stuff is picked ripe, and the only shelf I want it on is between here and the customer at home," Hoover says. "And sitting in any retail store is just not good for my produce."

But farmers who sell at local markets acknowledge their products are usually more expensive than what's stocked in the stores. The price difference is partly due to the additional labor involved. Many of Wal-Mart's local producers are large-scale farmers that can supply in bulk, which generally means cheaper prices.

The Wal-Mart Effect On 'Locally Grown'

Professor Dan Sumner teaches agriculture economics at the University of California at Davis. He says if the company's strategy catches on nationwide, it could spell problems for a major growing state like California, where much is shipped elsewhere.

"If people decide they're going to consume locally. That means they're probably not consuming our walnuts and apricots and almonds and everything else we grow around here," Sumner says.

Still, locally grown might not be that big of a selling point for Wal-Mart customers. The produce area in the West Sacramento Wal-Mart is covered with bright green and white signs, highlighting products that are "California Grown."

But those signs aren't having much of an impact on shopper Thomas Teeney. He says he's most concerned with his household's bottom line.

"We're kind of on a tight budget right now," Teeney says. "It's not really [of] that great importance to us. We just buy what's cheap."

Morning Edition, August 25, 2008 · The housing market may be in a downward spiral, but it's a buyer's market for many deal seekers in California. Yet for first-time buyers, the path to home ownership can still be rocky.

Steve Milne is a reporter for member station KXJZ in Sacramento.

Your Money

Housing Limbo: How Low Will Prices Go?

by Joshua Brockman

 

Enlarge

Steven Senne

As the housing market has dropped, so have home prices — at considerable losses to the sellers. The housing market could hit bottom in the middle of next year or early 2010, according to Dean Baker, co-director of the Center for Economic and Policy Research. AP

 

 

NPR.org, August 21, 2008 · These days, many homeowners — and those looking to buy — are nervous. Home sales are also well below what they were during the peak of the housing market. With transportation, food costs and unemployment on the rise, making a decision about one of the largest purchases of your life — a house — is far from simple.

Unfortunately, there's no crystal ball to consult. But there are housing market experts. Here, some weigh in with factors to consider if you're thinking of buying.

How do I judge whether a house is overvalued?

You need to compare the market price to a theoretical price based on current economic and demographic trends, says Celia Chen, director of housing economics for Moody's Economy.com. "Nationally, prices are probably pretty overvalued — by about 10 percent," she says. At the peak of the housing market, when prices were rising rapidly, houses were 20 percent to 25 percent overvalued, she adds.

It's helpful to remember that housing prices don't behave like stocks — they're not going to change overnight, says Dean Baker, co-director of the Center for Economic and Policy Research. In other words, it's going to take time for overvalued houses to reach their true price.

Is the current economic slowdown making the housing market worse?

Yes. But it's important to note that nationwide housing prices started to decline after peaking in the summer of 2006 — before the rest of the U.S. economy began sputtering. Indeed, the bursting of the housing bubble was a major factor in the country's economic slowdown.

Now that the slowdown is in full swing, it's likely to further weigh down the housing market. Baker says that larger-than-average job losses in any region will "further weaken the housing market and prolong the downturn there."

Mike Shedlock, an investment adviser for SitkaPacific Capital Management and the blogger behind Mish's Global Economic Trend Analysis, says he, too, is concerned about negative job reports: "More people out of work is going to put more pressure on people being able to pay their mortgages. So, that's going to lead to more foreclosures [and] more people walking away from their houses."

How do I know when the market has hit bottom?

"Nationally, we're very, very far from any bottom," says Baker, who believes the lowest point may arrive between the middle of 2009 and the start of 2010. He notes the nationwide glut of housing inventory, with the number of new and existing homes on the market at near-record levels and vacancy rates for ownership units at record highs.

Shedlock sees the bottom further out: 2012. He says foreclosures and inventory have to stop rising — and sales figures have to start increasing — before the market can reach its bottom. Even then, consumers shouldn't expect prices to shoot back up. Instead, he says, they'll remain "stagnant or stable," rising slowly in the decade after the bottom. "There's no rush for anyone to buy in now, or even when we see the signs of a housing bottom," he adds.

Moody's Celia Chen adds that housing remains "a better value now than it was a year ago." She predicts home prices will hit "absolute bottom" in the spring of 2009. Chen and other housing experts remain concerned that problems in the credit market as a whole will disrupt funding for home mortgages.

When will prices stop falling?

Inventory has to decline in order for prices to stop falling, says Chen. And right now, "there's too much supply versus demand" around the country, she says.

Some areas of the U.S. with "drastic" price declines include Las Vegas, Miami and San Diego, says Baker. Washington, D.C., has had larger price declines than Boston and New York City, two cities that Baker says have had "moderate" ones. Meanwhile, Baker says the latest housing data suggest that Cleveland and Detroit have "bottomed already."

Chen says certain metro areas in Florida remain "the most overvalued" in the nation, as are certain cities in Arizona and California. All three states have an oversupply of residential real estate. The South and Midwest, however, are regions where houses have remained affordable. And home prices in Columbus, Cincinnati and Indianapolis remain in line with where they should be, because these cities did not experience a "price bubble," she says.

Why is it important to compare the sales price of a house to rental prices before buying?

Comparing the sales price of a house to annual rent for a comparable property gives consumers a good yardstick to know whether it's a financially sound decision to become a homeowner.

One simple way to measure this is by calculating an own-to-rent ratio: Take the sale price of a house and divide it by the annual rent for a similar property or apartment. For example, take a house selling for $180,000, and a comparable house that rents for $1,000 a month ($12,000 annually). The own-versus-rent ratio is 15:1. This number indicates that you have a "balance" between ownership costs and rental costs, says Baker. (One can also do more complicated calculations that factor in additional home ownership costs, including property taxes.)

The ratio is not a magic number, but consumers may want to think twice before purchasing a house once that ratio creeps toward 18:1 or higher. During the peak of the housing bubble, there were ratios greater than 25:1, particularly in parts of California, Baker says. The 15-year average ratio in the U.S. is 11.4, according to Moody's Economy.com.

Nationwide, the ratio of housing prices to rents is "still above the historic average, which means that houses are expensive relative to apartments," says Chen.

How have consumer attitudes toward housing changed?

This market is forcing consumers to embrace the idea that a house is first and foremost a place to live, not a sure-thing investment. Not long ago, investing frenzy fueled the real estate market in "hot" cities like Miami, where investors snapped up condos as if they were going out of style.

"We've had boomers accumulating multiple housing or rental houses on the expectation that housing was a one-way ticket up. And that belief has been shattered," says Shedlock.

"If you're buying to live in a house, it's probably OK to purchase a house now," says Chen. "It's probably better if you wait a little longer."

Baker cautions in a research note that the "failure to recognize declining home prices can cause homeowners to be overly optimistic about their financial situation." As a result, we have an oversupply of houses on the market — and sellers who are "unwilling to drop their price to the market level," he says. The economy would improve, he says, if home sellers recognized their house just isn't worth what it used to be.

Each weekend night, the dueling pianists engage each other in a lively musical competition complete with cheering crowds, forceful piano chops, and crazy antics. The crowds and the piano players, together, compete for the title as the wildest side of the cantina. Headlining pianists include Douglas Pipes, Patty Lund, Aruna, and Steve Haas.

Meanwhile, jazz reigns supreme at Steamers Cafe, 138 W Commonwealth, where owner Terrance Love notes "Jazz fans know that great music feeds the mind and soul, and that the perfect accompaniment to an evening's listening is, of course, great food and drink."

Terrance proudly refers to Steamers Cafe as "Orange County's Premiere Jazz Club" because of its national reputation for featuring famous jazz performers from around the world. Terrance is also proud to offer a diverse menu designed to "feed the body" while enhancing the jazz experience. Soon he will be adding an outdoor patio and a full range of liquors to better satisfy his swelling following of customers.

Steamers offers jazz, including solo pianist John Paris, every day from 11:30 a.m. to 12:30 p.m., a 17-piece big band jazz every Monday evening, and a mix of jazz performers every night the rest of the week. There is a $5 cover charge on Friday and Saturday nights, and all ages are always welcome.

Chomp, 181 E Commonwealth, is a relatively new arrival to the downtown and features a 36-seat sushi bar complete with a live shark tank and "loud and crazy" sushi and Tepan chefs to entertain you while you dine. The restaurant features a live band on Thursday nights, and transforms into a "high energy" night club every Friday and Saturday night with a wild DJ and daring customers who take turns at their favorite songs in the Karaoke bar.

Back Alley Bar and Grill, 116 ?W Wilshire, also has something going on almost every night of the week, starting with free pool on Mondays and Tuesdays, and live disco music featuring local band "Jungle Boogie" on Tuesdays. Local DJ Jay-me and guest DJs liven things up Wednesday nights, while Thursday nights feature Reggae music by "Jativa" or "Dominion Status." Every Friday and Saturday night, Back Alley sets our historic downtown to rumbling with various local bands playing rock, jazz, jamb, and Reggae. .

The Continental Room, 115 W Santa Fe, offers live entertainment six days a week, including traditional jazz and lounge acts and free live jazz from 5:30-8:30 p.m. Fridays.

McClain's Coffee House, 817 N. Harbor, features live acoustic folk and blues music Thursdays through Saturdays. Tyrone Wells plays every Thursday night to large crowds, and the owners promise that every weekend there is always "something new." In addition, local artists are invited to display their work every month

Joe Florentine, owner of Florentines Downtown Grill, 102 N. Harbor, offers live piano music Friday and Saturday nights. Plans are in the works to expand the existing restaurant to the corner of Harbor and Commonwealth, and will include an outdoor patio, dance floor, upscale bar, and a "grandiose" entrance at the corner. Lunch will be served Monday-Saturday and there will be jazz brunches on Sundays when the new facility opens late summer.