Article 43


Tuesday, July 31, 2007

USA Today Wants You to Believe That the Baby Boomers Will Break Disability

In Monday’s paper, USA Today reports on a growing backlog of disability cases being processed by the Social Security administration. The article tells us that the aging of the baby boomers is a main cuplrit and the problem will get worse as the boomers continue to age.

By Dean Baker
American Prospect - Beat The Press
July 30, 2007

Actually, the problem won’t get worse, or at least the problem won’t get worse because the boomers are aging. Disabled people of working age get disability benefits. When workers hit age 62, they qualify for retirement benefits, whether or not a disability keeps them from working. Over the last decade, most of the baby boomers entered the ages of high disability rates from 50 to 62. Beginning next year, the oldest baby boomers will have reached age 62, the earliest possible age to receive SS retirement benefits. This means the full impact of the wave of aging baby boomers on the disability program should be felt this year. In future years, the burden on the disability program is likely to increase less rapidly.

That is exactly what the Social Security trustees project. From 2002 through 2007, they project that the cost of the disability program will have increased at an average annual rate of 8.6 percent (@ 6.1 percent in real dollars). From 2007 through 2016 they project that the cost will increase at an average annual rate of 5.8 percent (@3.3 percent in real dollars). In other words, the worst effects of aging baby boomers on the disability program have already been felt.


Posted by Elvis on 07/31/07 •
Section General Reading
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Musings And Earnings Of A Telco Equipment Maker


I WOULDN’T BLAME Alcatel-Lucent customers if they decided to switch their equipment vendor relationships to rivals.

Would you buy a million dollar telco switch from the former BELL LABS whose STEADILY laying off it’s BEST and BRIGHTEST workers in DROVES, cutting costs EVERYWHERE, while moving DEVELOPMENT away from the Unites States to third world countries? 

Lucent used to own the North American telecom market.

Not even OIL COMPANIES invest in America these days.

How frightening.


Alcatel-Lucent Swings to Loss
July 31, 2007

Alcatel-Lucent sank 8% in Europe after the struggling telecom equipment maker swung to an unexpected second-quarter loss.

The Paris-based company lost 336 million euros ($460 million), or 15 euro cents (20 cents U.S.) a share, reversing the year-ago profit of 302 million euros, or 13 euro cents a share. Sales fell to 4.33 billion euros ($5.93 billion) from 4.49 billion a year earlier.

Analysts surveyed by Thomson Financial were looking for a 3-cent profit on sales of $5.8 billion.

The struggle is only the latest for the company, which has posted disappointment after disappointment on the earnings front since last year’s merger joined France’s Alcatel with New Jersey’s Lucent. The company has been struggling to compete with rivals like NORTEL.

“This quarter, our revenues sequentially grew by a solid 13% at a constant Euro/USD exchange rate, with the strongest performance in the wireline and services businesses,” said CEO Pat Russo. “From a regional perspective, we saw strong growth in Asia Pacific. We are seeing the benefits of the merger with momentum building in our order flow for the second consecutive quarter. As a result, our order backlog at the end of the second quarter 2007 continues to improve compared to first quarter 2007.”

Russo added that “gross margin was lower than we would have liked and was negatively impacted by continued significant investments in key markets, an unfavorable product and geographic mix as well as some impact from product related transition costs as customers migrate their networks. We believe the gross margin level this quarter is not indicative of the business going forward.”

Alcatel-Lucent said it expects to post sequential revenue growth as the year progresses, “which implies a strong ramp-up in the second half 2007. Looking forward to the full year 2007, we continue to expect revenues to increase on a percentage basis at the carrier market growth rate of mid single digits at a constant Euro/USD exchange rate.”



Alcatel-Lucent Doing Worse Than Before Merger

Alcatel-Lucent Tuesday swung to a second-quarter net loss, as the company continued to integrate its businesses and an unfavorable product and geographic mix. The telecommunications equipment maker posted a net loss of 336 million ($460.3 million), compared with a profit of 302 million a year earlier. Revenue fell 3.6% to 4.33 billion from 4.49 billion.

The company, formed late last year by the combination of French Alcatel and American Lucent (successor to Western Electric—the manufacturing arm of AT&T), reported an operating loss of 19 million, compared with a 252 million profit on a pro forma basis. Analysts had expected a 85 million operating profit, according to a forecast from seven analysts polled by Dow Jones Newswires.

Gross profit decreased to 1.45 billion from 1.71 billion a year earlier. “The gross margin was lower than we would have liked,” Chief Executive Patricia Russo said, adding that the margin was negatively impacted by “significant investments in key markets, an unfavorable product and geographic mix as well as some impact from product related transition costs.”

Russo confirmed the company’s full-year guidance of revenue growth in the “mid-single-digits” at constant currency rates, which implies a “strong ramp-up” in second-half sales. She also reaffirmed Alcatel-Lucent’s forecast of 600 million in pretax cost savings in 2007, in line with its target of 1.7 billion within three years. She said the company shed 1,900 jobs in the quarter and, to date, has cut 30% of the targeted 12,500 jobs over three years.

Alcatel bought Lucent last year in an 8.4 billion deal aimed at taking market share from competitors such as Ericsson. Ericsson, which last week reported a 6.4% increase in second-quarter revenue, has said it is taking market share in emerging markets. (info from The Wall Street Journal)


Posted by Elvis on 07/31/07 •
Section General Reading
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Midsummer Market Meltdown

Is the End Near?

By Dean Baker
July 30, 2007

LAST WEEK’S stock market tailspin has many of the big-time money folks worried. They have suddenly discovered risk. It turns out leveraged buyouts are not always successful, and mortgages and other debts sometimes don’t get paid off. Who could have known?

While some of the big rollers who helped propel the housing and debt bubbles of the last five years will lose substantial sums, the fact is most will still end up much richer as a result of their efforts. This is because most of the risk they take is with other people’s money. The biggest risk these folks face is a smaller paycheck.

This is most obviously the case with the standard contract used to pay hedge fund managers. Typically, these contracts give managers a fee equal to 2 percent of the value of the funds being managed, plus 20 percent of earnings in excess of some benchmark. Under such a contract, if a hedge fund controls $4 billion, and manages to get a return that exceeds its benchmark by 5 percentage points, the manager walks away with $120 million. Of this sum, $80 million comes from the 2 percent flat fee and the other $40 million comes from the commission on the excess return.

Now suppose the genius fund manager managed to lose half the value of the fund’s assets by speculating on bonds backed by subprime mortgages. The manager still gets the $80 million in fees, even though he lost the fund $2 billion. Perhaps the fund manager will get fired, but with $80 million in the bank (which gets the special low fund manager tax rate), he will be able to take his time looking for a new job. Many of the people most directly responsible for the subprime meltdown will also be in a similar boat. Some of the big issuers of subprime mortgages have already gone belly-up after they were unable to meet obligations on bad mortgages. While the people who hold the mortgages are out of luck, many of the top executives of these mortgage-lending companies will walk away with millions of dollars in profit.

When you see people making vast fortunes in this economy, it is usually a good start to ask what the government did to allow for their success. In the case of the fund managers, a substantial chunk of their business comes from pension funds. Some of these pensions involve government money in the form of public employee pension funds. Others carry a government guarantee; so, if the fund managers blow the wad, the government picks up the tab. In both cases, it would be a good first step if regulators let the pension fund trustees, who hand billions of dollars to fund managers, know that they will lose their jobs if these investments don’t pay off as promised. Ripping-off the public to make the richest people in the country even richer is not funny, and pension fund trustees must understand this.

As far as the mortgage industry, this is a complete mess. The current regulatory system provides enormous opportunities for sharp operators to pilfer millions, while leaving investors out of luck and homebuyers out on the street. This will be a topic for future columns. But, it is long past time we hold the people who control the investment of public funds or publicly guaranteed funds more accountable. If they want to give the fund managers huge paychecks, then they should do it from their own pockets.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of THE CONSERVATIVE NANNY STATE: How the Wealthy Use the Government to Stay Rich and Get Richer. He also has a blog, “Beat the Press,” where he discusses the media’s coverage of economic issues. You can find it at the American Prospect’s web site.


Posted by Elvis on 07/31/07 •
Section Dying America
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Verizon Gets Bigger

Verizon - who CLAIMS TO OWN THE INTERNET - keeps getting bigger, while our choices in cellular providers, keeps getting smaller.


Verizon Wireless to acquire Rural Cellular for $757 million

The Associated Press
July 30, 2007

Verizon Wireless, the nation’s second-largest wireless provider behind AT&T, said Monday it will purchase Rural Cellular Corp. for $757 million in cash in a move to expand its wireless service coverage in rural markets.

Rural Cellular’s Unicel network served 716,000 customers as of March 31 spread across 15 states including Maine, New Hampshire and Vermont.

“The addition of Rural Cellular’s markets will enable us to expand our services into areas where previously we had little or no presence,” said Lowell McAdam, president and CEO of Verizon Wireless.

The deal has been approved by the boards of both companies and is expected to close in the first half of 2008, subject to governmental and regulatory clearance and approval of Rural Cellular’s shareholders.

Rural Cellular shareholders will receive $45 per share in cash, representing a 16 percent premium to the stock’s average closing price over the last 10 trading days and a 41 percent premium to its closing price Friday of $31.88.

Verizon Wireless is a joint venture of Verizon Communications and Vodafone. Including assumed debt, the company values the deal at about $2.67 billion.

The deal comes one month after AT&T Inc. agreed to buy larger rural wireless service provider Dobson Communications Corp. for $2.8 billion.

Wayne Jortner, general counsel of the Maine public advocate’s office, said he had concerns about the deal because it would mean fewer wireless carriers and less competition in a state that currently has only five major wireless competitors.

“Going from five to four is a very bad thing in my opinion,” he said from Augusta, Maine.

Also, Jortner he felt that Unicel was doing a good job of expanding its service in rural Maine thanks to federal grants and that having Verizon as an owner won’t necessarily mean additional improvements for Mainers.

Finally, the different wireless technology used by Unicel and Verizon isn’t compatible, and that could cause problems for customers in Maine, he added.

Alexandria, Minn.-based Rural Cellular uses both CDMA and GSM technology separately across its five regional markets. Verizon Wireless plans to deploy CDMA service in Rural Cellular’s existing GSM markets and convert the GSM customers to CDMA service.

Verizon Wireless, however, said it expects to maintain Rural Cellular’s existing GSM networks to continue serving roaming needs of other GSM carriers’ customers.

Rural Cellular reported a loss of $116 million in 2006, on sales of $564.5 million. In premarket trading, shares jumped $5.56, or 17.5 percent, to $37.37.


Posted by Elvis on 07/31/07 •
Section News
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AT&T iPhone Price Gouging


I have a caveat emptor to top them all. I purchased an iPhone on OPENING DAY to use in lieu of a cumbersome laptop while traveling in Ireland and England for two weeks in early July. AT&T promises “easy, affordable, and convenient plans” in their advertising… turns out I got two out of three.

On the way to the airport, I activated the per-use international roaming data plan - the only one offered to me. The rep quoted me $.005 per KB but did not disclose what that would translate to in layman’s language (i.e., X amount per e-mail, X amount per web page, etc.). I’m a web developer as part of my career and I couldn’t even tell you how many KB the average web page is, no less a text message to my son, an e-mail with a photo to my mother, or a quick check of Google Maps. That’s part one of the trap. However, I now pay $40 per month for unlimited data usage on the iPhone, so really—how much could it be? $100 at the most, right?

Keep reading.

As we know, the iPhone can’t be unlocked to use a European provider’s SIM card for more reasonable rates while traveling. There’s part two of the trap.

To be safe, I went online to My Account at AT&T a couple days into the trip and again a week later and was told ”usage data is currently unavailable”… and that’s part three. I had no way of knowing specific usage data until I received my bill over the last weekend.

A bill for $3000.

Two weeks of travel with sporadic AT&T EDGE network usage off and on mixed with wifi when available… $3000.

Doing some research, I learned this morning that AT&T offers unlimited international data usage at $70 per month to its Blackberry customers.

Here’s my bottom line: I want this same usage plan to be made available to iPhone customers and to be applied retroactively to my account.

Billing phone reps offered me a $400 “courtesy credit” on the $3000 charge if I would agree to sign up for a $300 per year international data plan with a max of 20MB per month. (I’m not planning any international travel for a while anyway, but 20MB would be burned in a day or two of average use - they must be kidding.) I have until August 14th to resolve this or all my family’s phones (including my wife’s business line) get disconnected. Obviously, there’s no way I can pay $3000 for something so egregiously wrong.

I’m writing you in the hope that the exposure of my story might force AT&T’s hand in admitting they have an inadequate solution in place for international iPhone users, that they’ve discriminated against the iPhone in favor of the Blackberry, that they failed to adequately disclose the exorbitant nature of their rate plan, that they kept me in the dark about my usage specifics until it was too late to modify them, and that by disallowing unlocking to use a European provider’s SIM with more reasonable rates, I was trapped without knowing it until that $3000 “gotcha” came knocking at my door.



Fully Unlocked iPhone Available In Hong Kong
New Launches
August 16, 2007

The iPhone is finally free from AT&T’s shackles and completely unlocked. Stores across Hong Kong are selling it and it is just a matter of time before it makes way to other countries. Unlocking is done using the Turbo SIM method and for 2000 HK dollars or 200 USD the shopkeeper loads up the Chinese or Japanese interface and special fonts so the names of Chinese songs appear correctly. Once unlocked all the features can be accessed from the music player to web browser and to making and receiving calls of course.


Posted by Elvis on 07/31/07 •
Section General Reading
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