September 22, 2019

This Week in Business: No More E-Cigarettes at Walmart, and an Attack on the World’s Oil Supply

Surprise, surprise: The Federal Reserve decreased interest rates by a smidge (a quarter percentage point), making it cheaper for Americans to borrow money. The decision was widely expected, and was meant to juice the slowing economy. But Fed officials are still sharply divided on how much the rate cut was needed, considering that the economy is still pretty robust — unemployment is low, people are spending and wages are on the rise. On the flip side, more hawkish economists (and Mr. Trump) want the Fed to cut rates more drastically to head off a potential recession. But no one can agree how much of a threat that really is.

CreditTill Lauer

Saudi Arabia could take months to fully restore oil output after its biggest oil-processing plant was attacked last Saturday by … well, it’s still not entirely clear. The Trump administration blames Iran, whose government denies it. Meanwhile, the Houthi rebels in Yemen, who are backed by Iran, are claiming responsibility, but no one believes that they had the resources to pull it off. Either way, the attack has squeezed the world’s oil supply, and Saudi Arabia has tapped into reserves to keep it flowing. Here in the United States, Mr. Trump is threatening retaliation against Iran, although it’s unclear what that means. His top priority? Keeping oil prices down and the economy steady, which would be hard to do if tensions between Iran and Saudi Arabia escalate further.

As the number of vaping-related lung illnesses keeps climbing, Walmart said on Friday that it would no longer sell e-cigarettes of any kind in its stores in the United States. (That is, after its current supply has sold out.) The action follows a federal initiative to ban dessert-flavored e-cigarette products, which are particularly popular among teenagers. For Walmart, it’s another example of taking corporate responsibility on a larger public issue. Earlier this month, the retailer announced that it would limit its ammunition and gun sales after a fatal shooting at one of its stores in El Paso, Tex. Also on Walmart’s docket: avoiding a potential discrimination lawsuit. Almost 200 female employees have claimed that they were paid less than their male counterparts from 1999 to 2011, and the company is working on a settlement offer.

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Americans Trust Police More Than Congress, Study Finds

The responses differed among racial and ethnic groups, however. Whereas more than 70 percent of white Americans said police officers treated racial and ethnic groups equally at least some of the time, just half of Hispanic Americans and only a third of black Americans said the same.

The trust divide between Congress and local elected officials was stark among Republicans and Democrats alike. Two-thirds of Americans said local elected officials cared about their constituents at least some of the time, compared with just half who said the same about members of Congress. Local elected officials were less trusted by black Americans to do their job well than white Americans, however.

In terms of providing fair and accurate information and handling resources responsibly, members of Congress were the least trusted of all powerful or influential groups. On this metric, local officials hovered in the middle between journalists and religious leaders.

Jonathan Baron, a professor of psychology at the University of Pennsylvania who studies the role of citizens in democracies, said that he was not at all surprised by the finding that trust was greater in local political leaders than in Congress. He attributed this to what he calls a “negative halo effect,” meaning an impression in one area negatively affects an impression in another.

“Congress really is dysfunctional, so the negative halo extends to its members,” Dr. Baron, who was not involved with the Pew study, said. Corruption and nepotism exist in local government, but more tends to get accomplished, he added.

“Nobody really notices the effects of these problems until the building built by a councilman’s unqualified brother-in-law falls down,” he said.

Trust in journalists varied depending on the question and the respondent’s political affiliation. Roughly half of Americans said journalists care about people like them, whereas nearly as many — 46 percent — said journalists rarely care. Republicans’ belief that journalists would fairly cover all sides of an issue (31 percent) was dramatically lower than Democrats’ (74 percent). Two-thirds of Americans think that journalists behave unethically some or most of the time.

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Graduate Students, After Gains in Union Efforts, Face a Federal Setback

A Harvard spokesman said the university was concerned that a new arbitration system would violate federal law by creating a process for union members only, separate from the provisions of Title IX of the Education Amendments of 1972.

“It is unfortunate that a work disruption is being considered,” said the spokesman, Jonathan L. Swain. “There remains an ongoing commitment on the part of the university to these negotiations.”

It’s not clear how the N.L.R.B.’s proposed rule will affect universities where bargaining is underway. Mr. Swain said Harvard was reviewing the proposed rule to “assess what implications it may have.” Columbia said it had no immediate comment.

But the regulation could give universities the upper hand in negotiations.

“This could be an additional reason that they could articulate or rely upon to discontinue bargaining, or limit bargaining on certain issues,” said Mr. Gould, the former N.L.R.B. chairman. “The only option for the union then would be to go to the very N.L.R.B. that had established a contrary position.”

The rule proposed Friday is the latest swing on an issue that has divided the board along partisan lines for two decades. In 2000, the N.L.R.B. overturned a longstanding precedent and gave students at New York University the right to unionize. But that ruling was reversed in 2004, in a decision involving Brown University, before the board switched back to the pro-union standard in 2016.

In the proposed rule, the N.L.R.B. states that students at private universities who “perform services” related to their studies are “primarily students with a primarily educational, not economic, relationship with their university.” After a 60-day period for public comment, the board will revisit the proposal.

“This rule-making is intended to obtain maximum input on this issue from the public, and then to bring stability to this important area of federal labor law,” John F. Ring, the chairman of the N.L.R.B., said in a statement.

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Walmart stops selling e-cigarettes in US as reports of vaping-related deaths soar

According to an internal company memo sent out to Walmart employees on Friday and seen by Reuters, the retailer is concerned with the growing teenage interest in vape-smoking, as well as the alarming number of reports on cases of vaping-related lung disease and deaths.

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It noted that the current uncertainty over regulations regarding vape-smoking at federal, state and local levels also makes it difficult to continue selling vaping-related products.

The data from the US Centers for Disease Control and Prevention (CDC) published earlier this week, shows the number of vaping-related lung disease has risen to 530 probable cases, up from 380 last week. Eight people have so far died from the mysterious ailments attributed to the habit.

The US Food and Drug Administration on Thursday launched a criminal probe into the recent spike in vaping-related illnesses. It has collected more than 150 vaping product samples in order to test them for traces of nicotine, cannabinoids, opioids, pesticides, poisons, toxins and other potentially dangerous substances. 

Walmart’s action on Friday follows bans on sales of flavored vaping products, which are especially attractive to youngsters, in the states of New York and Michigan. Also, President Donald Trump’s administration recently announced plans to remove all flavored e-cigarettes from stores as half of the cases of vaping-related illnesses are people younger than 25, with 16% aged under 18. A congressional subcommittee is scheduled to hold a hearing on the outbreak next Tuesday.

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According to Politico, the government is drafting a bipartisan bill which is to ban vaping flavors other than tobacco, as well as to apply existing tobacco taxes to vaping products and launch a campaign describing the health risks posed by e-cigarettes.

A recent study by the New York State Department of Health suggested that Vitamin E acetate, a thickening agent in THC oil which is inhaled during vape-smoking, is to blame for the lung illnesses. However, leading makers of nicotine e-cigarettes, including Juul Labs Inc, British American Tobacco Plc and Imperial Brands Plc all claim their products do not contain Vitamin E compounds.

For more stories on economy finance visit RT’s business section

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US grants Apple tariff exemptions despite Trump’s earlier no-go

According to the notices published by the Office of the US Trade Representative in the Federal Register on Friday, Apple has been given approval for 10 of its 15 requests for tariff exemptions.

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Although the company builds its new Mac Pro computers on US soil, some structural parts for the devices – like, for instance, circuit boards– are manufactured in China and therefore are subject to Trump’s 25% levies. These circuit boards have been granted a tariff exemption, as have Mac Pro stainless-steel exterior enclosure, finished Magic Mice and Magic Trackpads. Several requests are still under a substantive review by the trade regulator.

Apple had filed formal requests for the exemptions with President Donald Trump’s administration back in July. The company’s reasoning for the desired exemptions in its initial filing was that “there are no other sources for th[ese] proprietary, Apple-designed component[s].” Apple argued that tariffs on its products could reduce its contribution to the US economy and “weigh on Apple’s global competitiveness” as Chinese tech manufacturers are the main competitors of the products Apple makes.

Also on Dog leashes, plastic straws Christmas lights: Trump exempts 400+ Chinese goods from tariff list

However, following Apple’s request for special tariff consideration, President Trump initially tweeted that the company would not be given any waivers and told it to make its Mac Pro in the United States.

Apple will not be given Tariff wavers (sic), or relief, for Mac Pro parts that are made in China. Make them in USA, no Tariffs!” Trump’s tweet stated. Following that tweet, the company even saw a slight drop in its shares.

Apart from Apple components, Friday’s tariff exemption list includes some 400 types of Chinese products. The move to exempt these goods stems from some 1,100 exclusion requests made by a vast number of companies in the United States over the past several months. The list includes a range of computer components used not only by Apple, but by nearly all computer manufacturers, including chips from Intel Corp, Nvidia Corp and Advanced Micro Devices Inc, considered some of the most expensive parts in the machines. All exemptions, however, are temporary, set to expire by this time next year.

For more stories on economy finance visit RT’s business section

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Are oil traders already looking beyond the Saudi oil crisis?

The attack led to Brent crude futures spiking by 20 percent in early Monday morning trading. Despite the severity of the supply outage (some 5.7 million bpd), Saudi Arabian and OPEC sources quickly reaffirmed the markets that crude flows wouldn’t be upended.

As a result, prices fell 6 percent on Tuesday morning, and continued to fall on bearish inventory that same day.

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Riyadh was quick to confirm to some of its Asian trading partners that it would be able to supply all contracted volumes. Thus far, there have been no reports of failed loading/delivery, even though rumors emerged on Thursday morning that the Saudis had requested to buy additional crude oil volumes from Iraq. True or not, Saudi Aramco sources were quick to deny that this wasn’t the case.

The US, China trade war and concerns about the global economy have, for months, fueled bearish sentiment in markets, but this week, albeit briefly, traders’ attention returned to the supply side of the equation. 

The central questions this week are: how quickly can Saudi Arabia restore its production capacity and how severe is this supply outage in reality?

Although they can’t tell the entire story, Brent spreads can shed a light on what the most informed oil buyers currently think. 

At the start of the curve, the 1-month Brent spread is trading at 107-cents backwardated, suggesting that the outage will last at least a few weeks. The 2month/3month spread is trading at 94-cents backwardated, the 3month/4month spread is trading at 67 cents backwardated and the 4month/5month Brent spread is trading at 49 cents backwardated. We have to go all the way out to the 7month/8month spread to find a diff that is trading at less than 40-cents of backwardation. The strong backwardation in the futures price curve here suggests that major oil buyers don’t fully believe the Saudi argument that it will restore full production by the end of September.

Bearish sentiment in August nearly led to a contango situation in the market, and while many analysts still believe that the second half of 2019 will see relative tightness in crude markets, sentiment matters. 

While bullish sentiment lifted the futures price curve on Monday, the tides changed on Wednesday with the price difference between one-month and 7-month Brent contracts narrowing rapidly, suggesting a more bearish outlook.

Also on We stop, you stop! Houthis offer Saudi Arabia mutual halt to strikes in wake of devastating oil-plant attacks

While uncertainty remains about how Washington and Riyadh will respond to what they have identified as attacks that came from Iranian soil, with Iranian equipment, there seems to be some kind of consensus that market remains adequately supplied.

For now, the geopolitical risk premium in oil remains intact, and oil continues to trade slightly higher, but unless the Persian Gulf is shocked by another attack like the one on Abqaiq and the Khurais field, prices aren’t likely to skyrocket again in the short-term.

This article was originally published on

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From Underwear to Cars, India’s Economy Is Fraying

Until last year, India, with a population of 1.3 billion people, was the world’s fastest-growing large economy, routinely clocking growth of 8 percent or more. Now the government pegs the country’s growth at 5 percent. And the layoff notices are piling up, with unemployment at 8.4 percent and rising, according to the Center for Monitoring Indian Economy.

India’s reversal of fortunes, partly driven by domestic problems like neglected farmers, is ominous for other developing countries in Asia, Africa and Latin America that are trying to navigate both the weakening global economy and Mr. Trump’s fusillade of trade conflicts.

“India is potentially a bellwether,” said Per Hammarlund, the chief emerging markets strategist at SEB, a Swedish bank. “It’s a sign of the global economic trend right now: Growth has slowed further this year than last year.”

As skittish global investors have flocked to the safety of the dollar, India’s rupee and other emerging-market currencies have plunged in value. That has made vital imports of energy, electronics and factory equipment more expensive. Last weekend’s attack on two Saudi Arabia’s oil facilities, which sent the global price of oil soaring, underscored just how vulnerable India and other developing countries are to external factors beyond their control.

Like China and Indonesia, India is grappling with the fallout from years of excessive lending encouraged by the state. In India’s case, the overhang of bad bank loans, coupled with recent defaults by nonbank financial firms, has curbed lending to consumers and businesses.

Policy decisions by India’s central and state governments have worsened the country’s downturn, according to economists and business leaders.

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Inside Airbnb, Employees Eager for Big Payouts Pushed It to Go Public

Airbnb’s situation illustrates a paradox of the start-up dream. Many tech workers join fast-growing privately held companies with the hope of gaining stock in the firms and converting those shares to riches when the start-ups go public. But employees are dependent on the company’s founders and board before that can become a reality.

Mr. Chesky, who co-founded Airbnb in 2008, has been vocal about not rushing to take it public. In January 2018, he published a letter saying the company will have an “infinite time horizon.” He is now exploring a nontraditional initial public offering by potentially listing the shares directly, or on the Long-Term Stock Exchange, which is backed by venture capital but not yet operational, three people with knowledge of the situation said.

Doug Leone, a venture capitalist at Sequoia Capital, one of Airbnb’s backers, said that while start-ups had “an implied social contract” to go public at some point, there was no rush for them to do so. “The I.P.O. is just a moment in time,” he said.

Yet Mr. Chesky’s go-slow stance has become problematic as other high-profile start-ups of the same generation as Airbnb have started listing their shares on the stock market. This year, the ride-hailing companies Uber and Lyft, the online pinboard company Pinterest and the business software maker Slack are among those that have gone public. That has allowed their employees to cash in their shares.

Employee tension is unusual for Airbnb, known for its cheery mission of “belong anywhere” and for fostering a kumbaya culture among its staff. The company has grown rapidly, with more than seven million listings in 100,000 cities. In the second quarter, its revenue exceeded $1 billion. Many employees work out of an airy building in San Francisco, which features rooms that replicate its famous listings. Several former employees said they were grateful for the windfall they would eventually receive from their shares.

But any reward from owning Airbnb stock has been held back. Starting in 2011, when the young company topped a $1 billion valuation, Airbnb prohibited workers from selling shares, while allowing its three founders — Mr. Chesky, Nathan Blecharczyk and Joe Gebbia — to cash out a total of $21 million.

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Facebook’s Suspension of ‘Tens of Thousands’ of Apps Reveals Wider Privacy Issues

“We are far from finished,” Mr. Archibong wrote. “As each month goes by, we have incorporated what we learned and re-examined the ways that developers can build using our platforms. We’ve also improved the ways we investigate and enforce against potential policy violations that we find.”

The Silicon Valley company has been dueling with the Massachusetts Attorney General’s Office to keep documents related to its app investigation out of the public eye. The state prosecutor began examining Facebook’s data sharing practices in early 2018 after the Cambridge Analytica revelations broke and issued several civil subpoenas to the company for information. Last month, Facebook had petitioned a judge in Boston to seal the records. The seal was lifted on Friday.

“For nearly a year, Facebook has fought to shield information about improper data-sharing with app developers,” Maura Healey, the Massachusetts attorney general, said in a statement. “If only Facebook cared this much about privacy when it was giving away the personal data of everyone you know online.”

According to the court documents, Facebook told the attorney general’s office that it had identified approximately two million apps that required a close examination to determine whether they had misused people’s personal data. The investigation narrowed to focus on a group of 10,000 apps, one document said.

Of the 10,000 apps, 6,000 were flagged because a large number of people installed them, which could expose them to data misuse. Facebook conducted a “detailed background check” of developers behind 2,000 apps to determine whether they had connections to “entities of interest” or revealed any signs of fraud, according to the court documents. Another group of 2,000 apps received a technical review from Facebook, which looked at internal records to determine whether the apps had made broad data requests that could indicate misuse, the documents said.

The Massachusetts prosecutor said in a court filing that it sent Facebook a demand to reveal the names of the apps involved in the investigation. The company declined to identify them.

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Suzanne Whang, Former Host of ‘House Hunters,’ Dies at 56

Ms. Whang moved to Los Angeles in 1998 to pursue a career in show business. The daughter of a Navy engineer who moved the family frequently, she was determined to keep friendships throughout adulthood.

“Suzanne is the kind of human being who will spoon-feed you when you are a mess,” the actress Vanessa Marcil, who worked with Ms. Whang on “Las Vegas,” told The New York Times in 2013, when Ms. Whang married her second husband, Jay Nickerson. (The pair filed for divorce in 2015, according to court records.)

On set and beyond, Ms. Whang developed a reputation as an exceptionally positive person. In the fall of 2006, when she learned that she had breast cancer, she said she told the doctor, “This will be great material for my act.”

Though at first she was private about the diagnosis, she eventually did precisely that, incorporating her health problems in her stand-up routine. She credited her paternal grandfather, a prominent Presbyterian leader in Washington, with teaching her how to incorporate comedy into unlikely topics. People would tell him that church was not funny, she told the The New York Times in 2013, and he would remind her that without humor, people would fall asleep.

Five years after her diagnosis, doctors told her she was free of cancer. But it returned last October, according to Mr. Culbertson, who represented her for nearly 25 years.

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