Why is the US government letting them get away with it?

According to the research firm Gartner, in the next 15 years, more than 3 million US white-collar jobs, representing $136 billion in wages, will depart to places like India.  The IT industry will be the biggest loser of jobs, according to Forrester Research. American programmers are collecting unemployment, declaring bankruptcy, even contemplating suicide, because they can’t compete with people willing to work for one-sixth of their wages.

The US rich are getting richer and the US poor are getting poorer at a staggering rate. In the golden age of this country, the United States had the largest and most prosperous middle class in the history of the world.  Now, US big businesses are cutting out middle class earnings at a horrifying rate.

Globalism and the “free trade” that our politicians and big business leaders insisted would be so good for us have not been so good for the middle class. What the “global economy” really means is that middle class American workers have to directly compete for jobs with people on the other side of the world where there is no minimum wage and very few regulations (especially environmental rules.) The big global corporations have greatly benefited by exploiting third world labor pools over the last several decades, but middle class American workers have increasingly found things to be very tough, many out of work, and those lucky enough to keep jobs keep seeing their wages diminishing.

No matter how smart, how educated, how certified, or how hard working American technology worker are, they just cannot compete with people who are desperate to put in 10 to 12 hour days at less than a dollar an hour on the other side of the world.

Free trade creates jobs in other countries.

Trade implies reciprocity. It is a two-way street. There is NO reciprocity in outsourcing, only the export of domestic jobs.  Business know-how, capital and technology are more globally mobile than labor.  The advantage lies with countries with untapped pools of educated and skilled low-wage labor. The advantage increases with the absence of regulations and environmental rules.  There is no IRS, no EPA, no OSHA, or other regulatory agencies.  There is no cost to these sweat shops to pour their pollution into the world climate.

But these big piggy US business leaders may have outsmarted themselves.  The sudden increase in outsourcing high technology and professional jobs over seas may be sending something else abroad: our technology, our money and our position in the world as the lead economic power.  In the long run, everyone in America loses, even the super rich.

Unrestrained outsourcing may be especially detrimental in an information-based economy, where cooperative relationships and exchange of ideas between workers are needed for long-term success. Competition is most destructive when we are competing in creativity or sophisticated thinking and problem solving.  Why do we give away our technology to other countries, especially potential enemies, like China?

Does this person have your job?

American programmers being forced to train their Indian replacements.  They are passing along their competence, their professionalism, and they will never be repaid for providing these skills to our economic competitors.

See our previous post at:  http://www.johnbrianfastcpa.com/1795/american-information-technology-professionals-continue-to-lose-jobs/

Not only does sex sell, it collects info.

Under covers, an IBM executive gave insider “pillow talk” information that benefited hedge funds Galleon Group and New Castle Partners

Robert Moffat, 53 years old, was IBM’s senior vice president for technology and regarded as a possible future chief executive of the company until prosecutors accused him of passing along confidential information on IBM and other companies as part of an alleged insider-trading conspiracy that benefited hedge funds Galleon Group and New Castle Partners.

 Authorities say that Moffat discussed coming IBM and Sun Microsystems earnings announcements with Danielle Chiesi, who worked at New Castle and has been accused of trading on the information. 

Mr. Moffat, a veteran IBM executive who was close to CEO Samuel Palmisano, is the highest-ranking corporate official charged in the insider-trading case that federal investigators built based on wiretaps of Galleon partner Raj Rajaratnam and Ms. Chiesi.  Chiesi was a sex pot who wore revealing clothing as just one of her tools used to relentlessly gather information about the tech stocks she followed.  The SEC has charged that Ms. Chiesi traded on the information she got from Moffat and others.  The scheme reportedly netted $20 million in improper profits.

Moffat pleaded guilty in March to conspiracy and securities fraud at a hearing before U.S. Magistrate Judge Frank Maas in Manhattan. He was the 11th person to plead guilty to criminal charges in the investigation.

Danielle was relentless (in getting info, too.)

Moffat admitted to providing tips to Danielle, a former consultant for New Castle Funds LLC, involving inside information about Advanced Micro Devices Inc., IBM and Lenovo Group Ltd. between August 2008 and October 2008. Mr. Moffat said Ms. Chiesi was a “friend.”  (A friend that he had sex with.)  “I knew the information I provided would be helpful to her in her job,” Moffat has said.

Blond, blue-eyed, and petite, Danielle Chiesi grew up in Binghamton, New York, where she won the regional Southern Tier beauty contest at age 15.  Early on, she found she had the looks and the personality to motivate men to give her what she wanted.

In 1988 Ms. Chiesi got a job as an analyst at a brokerage firm. Ms. Chiesi developed a strong fascination with the powerful men who ran the companies in the industries that she covered.

Some time in 2003, Chiesi and the long-time-married Moffat began sleeping together.  Moffat gave up not only information about his company, IBM, but other firms in the tech industry as well. 

When Danielle whispers, the SEC listens.

Unfortunately for the lovers, the feds were listening in.  Chiesi’s phone was tapped and some conversations concerning the insider information were recorded.

How good the sex was has not yet been reported.  I doubt Robert Moffat would say it was worth it.

NOL stands for refund!

Even a loss is worth something, especially on your taxes. 

Businesses with a need for a cash infusion may be able to obtain one quickly as a result of a tax refund from recently expanded Net Operating Loss (NOL) carryback allowances. These provisions in the law address the fact that although a net loss may appear in only one tax year, it represents weaknesses that may have arisen over years in which their effect was temporarily masked by favorable income opportunities.  Once the economy recedes and the business posts a loss, as it has done recently, it would otherwise be unable to obtain tax benefits from the amount of loss that exceeded income in that tax year.  In a sense, these provisions in the law acknowledge swings in the business cycle and help smooth them out. In addition, for many struggling small businesses in a tight credit environment, these provisions can provide much-needed cash flow.

 The Internal Revenue code allows for carryforwards and carrybacks of an NOL. The general NOL carryback period is the two years preceding the loss year. If the NOL is not fully used on the carryback, it may be carried forward for the 20 taxable years following the loss year. A taxpayer may elect to waive the two-year carryback and carry the entire NOL forward, but an immediate tax refund may be considered more beneficial. The carryback period for purposes of the alternative minimum tax is the same as the period chosen for the regular tax.

Congress has made it easier to use your net operating losses.

Under the American Recovery and Reinvestment Act of 2009, for a tax year that began or ended in the 2008 calendar year, an “eligible small business” could elect a three-, four- or five-year NOL carryback period for certain losses, instead of the usual two-year period. An “eligible small business” is one whose average annual gross receipts for the three tax years ending with the year of the NOL are $15 million or less. For tax years ending after Dec. 31, 2007, and those beginning before Jan. 1, 2010, the Worker, Homeownership and Business Assistance Act of 2009 removed the eligible small business requirement, making the extended carryback period available to businesses of any size. However, the election may be made for either 2008 or 2009 but not both.

If an NOL is carried back to the fifth preceding year, it can be used to offset only 50% of the taxable income in that carryback year. This extended carryback period will benefit many taxpayers by providing a relatively quick cash infusion of a larger amount than would be available with a two-year carryback.

How do you get your money?  An individual, estate or trust can obtain a tentative (quick) refund of taxes paid in prior years by filing a Form 1045, Application for Tentative Refund. A corporation uses a Form 1139, Corporation Application for Tentative Refund. The tentative refund form must be filed within one year after the end of the year in which the NOL arose. If this form is properly and timely filed (with all required attachments), the refund will be issued within 90 days.

If the tentative refund approach is not used, a taxpayer may file amended tax returns for the carryback years to obtain the benefits of an NOL carryback. However, the IRS usually takes longer than 90 days to process an amended return, and it can conduct an examination of the loss year and/or the carryback years before issuing a refund. Handling an examination will often involve considerable time, during which any refund will be delayed. Obviously, if the examination discloses an issue, the refund might not be issued, and a tax deficiency might arise.

Besides NOL carrybacks, another procedure allows a corporation that has paid in more estimated tax for the current year than it needed to have paid, based on currently anticipated income (or loss) to obtain a quick refund of the overpaid estimated tax without waiting to file its tax return for the year and then waiting for its refund check several months thereafter. This refund can be obtained by filing a Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax. The Form 4466 must be filed after the close of the taxable year and before the 16th day of the third month after the end of the year (March 15 for calendar-year corporations). It must be filed before the corporation files its tax return. The expected overpayment of estimated tax must exceed 10% of the corporation’s expected tax liability and be greater than $500.

Currency conversion can be costly.

If your business does business with international companies you must deal with sometimes-complex currency conversions.

Even small businesses now routinely operate in global markets, and the relationship between the dollar and many major currencies has reached new levels of volatility.

In the past two years, one of the most watched international rates — the euro versus the U.S. dollar — has swung wildly, from as high as $1.60 to the euro to as low as $1.25. As recently as 2002, the euro was worth 85 cents.  The Canadian dollar has strenthened significantly in recent years.

Despite burgeoning deficits and an economy that could grow slowly for the next few years, the United States has, somewhat surprisingly, reclaimed its long-standing role as the world’s safest currency.

With such volatility in key exchange rates, how can small business owners protect their companies from the risks of currency conversions?  Here are some options:

Share the Risk:  Perhaps the most straightforward way to eliminate or reduce currency risk is to structure the business so that revenues are earned and expenses are incurred in the same currency. Then, if a company sees declining revenue due to currency shifts, it can offset some of the impact with correspondingly lower costs.

Contract Design:  Addressing possible currency fluctuations through contract design is another relatively simple and efficient strategy.  Your customer can agree to a minimum amount of committed business for a specific period of a contract.  Your business can then hedge that risk using financial instruments for the life of the agreement.  If the customer wants to terminate the contract early, it agrees to cover the cost of unwinding the hedge.  Most customers are understanding, in part because they realize that they will still make money, even after accounting for potential currency-related adjustments.

Hedging:  Consider currency risk from the very beginning of every contract.  Develop a financial hedging strategy for the life of the program.  Factor in the expense of executing the

Hedge your currency bets.

necessary hedging contracts with your bank or financial institution before quoting a price.  Train your finance and accounting staff to make sure that everyone understands the accounting and reporting requirements for hedging activities.  Small companies are starting to explore the possibility of hedging through derivatives, according to Sanela Hodzic, director of strategy and business development at Calypso, a developer.  The decision to engage in financial hedging depends not only on a company’s own risk profile but also on its competitors’ positions. If everybody has got hedging programs except you, you need to think seriously about putting a program in place, because it’s really going to impact your competitive situation in a volatile currency environment potential future upside should the euro strengthen significantly. Finally, a CFO could lock in the company’s foreign-exchange rate by putting a forward contract on its cash flows at a certain rate; if the rate later goes up, the firm does not gain.

Conclusion:  Regardless of whether a CFO feels he or she can dive into the complex world of financially hedging a company’s foreign-exchange exposure, it is clear that the time is right to review currency liabilities and develop contingency plans, because the uncertainty in the dollar and its relationship with other currencies is not going away any time soon.  Future currency trends are very difficult to predict.

Just look at what has happened in the federal government. 

When social media began making inroads in the federal government in the past few years, most federal officials saw it as either irrelevant to agency operations or, at best, a peripheral function of public affairs. Many agencies, including the military services, debated the idea of blocking access to commercial social media sites.  For example, the Small Business Administration blocks access to all social media and web sites except for its own sites.

But a few agency officials think otherwise. They share concerns about the security and privacy of commercial sites, but they also realize that social media can play a valuable role in their daily operations, making it possible for employees to collaborate in new and unimagined ways.

MySpace never got a Spacebook page.

NASA developed a system called Spacebook, which enables agency employees to network in a secure environment. The Defense Department is following suit with Milbook and the State Department with Statebook.  The IRS should start TaxBook.  Later this summer, the General Services Administration plans to launch a secure social networking system for agencies that do not wish to build their own.

For federal officials who had hoped that social networking was a fad that would fade away or, at most, just another collaboration tool, the news keeps getting worse.  By making it so easy for information to flow across an organization, social media is changing how decisions get made.

Using social media leads to distributed decision making in that it pushes decisions away from the hgih-center, where decisions used to be made, to more relevant centers, closer to the customer or client. Once decisions are made closer to the edge, a bigger buy-in from all stake holders is achieved.  Decision-making inside of distributed models may look confusing and chaotic, but it is just the opposite.  There is a tremendous amount of discipline and planning needed to get everyone working in the same direction.  Social media provides the tools for that type of discipline and planning.  They don’t call it “social” media for nothin’.

The Air Force has affairs???

As a sign of the times, the Air Force Public Affairs Agency is published its first guidebook to using social media for airmen.  Soar like eagles, gentlepersons. 

Is your small business ready?

Here are just some of the events that can interfere with the normal operations of your business. 

Air Conditioning Failure  (You would feel that this week in Dallas.)

Acid Leak

Asbestos

Bomb Threat

Bomb Blast

Brown Out  (Certainly possible in the North East.)

Burst Pipe

Cable Cut

Chemical Spill

CO Fire

Condensation

Construction

Coolant Leak

Cooling Tower Leak

Corrupted Data

Diesel Generator

Earthquakes destroy buildings and infrastructure.

Earthquake

Electrical Short

Epidemic

Evacuation

Explosion

Fire

Floods can destroy back up files and tapes.

Flood

Fraud

Frozen Pipes

Hacker

Hail Storm

Halon Discharge

Human Error

Humidity

Hurricane

HVAC Failure

Hardware Error

Hurricanes can cause the most wide spread damage.

Hurricanes

Ice Storm  (Please, this week in Dallas.)

Insects

Lightning

Logic Bomb

Lost Data

Low Voltage

Microwave Fade

Network Failure

PCB Contamination

Plane Crash

Power Outage

Power Spike

Power Surge

Programmer Error

Raw Sewage

Relocation Delay

Rodents

Roof Cave In

Sabotage

Shotgun Blast

Shredded Data

Sick building

Fire and smoke are the most insured against perils.

Smoke Damage

Snow Storm

Faulty Sprinkler

Static Electricity

Strike Action

Software Error

Software Ransom

Terrorism

Theft

Toilet Overflow

Tornado

Train Derailment

Transformer Fire

UPS Failure

Vandalism

Vehicle Crash

Virus

Water Damage

Wind Storm

Volcano 

Against these risks, here are 10 things you can do: 

1.  Assess your risk, both internally and externally.

What could happen as a result of your facility’s location? What types of emergencies could result from the design or construction of your facility? What could result from a process or system failure?  Are you in a flood plain?  Have you been a prior victim of a hacking attack? 

2.      Assess your critical business functions.  What could you not do without?

Safety systems

Telecommunications

Computer system

Power

Heating/Cooling system

Emergency notification system 

3. Prepare your supply chain. Talk to your key vendors and suppliers about their recovery plans.  Ask yourself, “Has it been tested?”  The very important answer is, “Yes!”  Develop relationships with alternate vendors.  Eliminate single points of failure.  Educate your clients about the importance of preparedness.

Insure what can’t be protected. 

4.       Create an emergency management plan. Minimizes the impact, protects and re-assures stakeholders, and prepares for recovery.  Facilitates transition between normal business operations and a catastrophe response.  Includes the notification and management of employees, clients, vendors, suppliers and the media. 

5.      Back-up your data.  We have had two separate posts on this operation.  There are companies who will do this expertly for you at a very reasonable price.  Take advantage of these companies.  We have one on our “Friends” page that we recommend. 

6. Create a crisis communication plan. Develop a process to make sure all stakeholders (internal and external) are aware of decisions and expectations.

24-hour phone tree

Password protected web page

E-mail alert

Call-in recording system

Manage client and key vendor communications.

Prepare a media communications plan. 

7. Assemble an emergency kit. It should include:

Recovery plan

Important records

Insurance policies

Fixed asset inventory

Contracts

Operating system install disks

Licensing keys

Letterhead

Office Supplies

Stamps

Writing Utensils

Stapler/Staples

Tape

Printer Paper

Calculators

Cash

8. Review your insurance coverage. You insurance agent will be happy to do this with you.  Assure you are insured for all potential risks.  Consider business interruption insurance and added expense insurance.  Keep photos of your building, equipment lists and policy information stored in a safe and secure offsite location. 

9. Plan for an alternate locations.  Plan to have critical items delivered to a specific location.  Have a hot site recovery location set up in advance. 

10. Test your plan.  Having a great plan is no good unless you test it.  Many times I have found that clients think they are backing up their data, only to find that what they have saved cannot be restored.

There are many risks, but there are many solutions.  Having a plan and testing it is what is important for your small business.

This surprises many experts.  (These may be the same people that told you Congress would continue the Bush tax cuts.)

In the United States, the estate rate in recent years was 45 percent, with an exemption for the first $2 million. In 2009, however, the exemption jumped to $3.5 million, which meant that the heirs of a rich, dying parent had about 1.5 million additional reasons to console themselves if said parent died on the first day of 2009 rather than the last day of 2008. With this incentive, it’s not hard to imagine such heirs giving their parent the best medical care money could buy, at least through the end of the year. Indeed, two Australian scholars found that when their nation abolished its inheritance tax in 1979, a disproportionately high number of people died in the week after the elimination of the tax as compared with the week before.

George's heirs say, "Thumbs up to no estate taxes."

If the tax is suspended for a year, a parent worth $100 million who died in 2010 could have passed along all $100 million to his or her heirs.  But, with a scheduled resumption of the tax in 2011, such heirs would have surrendered more than $40 million if their parent had the back luck to die even one day too late.  It is reported that George Steinbrenner’s heirs will save $600 million in taxes if no estate tax law is passed for 2010.  Perhaps the bickering politicians may decide to smooth out the tax law if they realize how many assisted suicides they may be responsible for during the waning weeks of 2010.

If Congress doesn’t change the law soon, and many think that in this highly partisan election year it will not, the estate tax will come roaring back in 2011. Not only will the top rate jump to 55%, but the exemption will shrink from $3.5 million per individual in 2009 to just $1 million in 2011, potentially affecting eight times as many taxpayers.  Consider these examples: On a $5 million estate, the tax consequence of dying a minute after midnight on Jan. 1, 2011 rather than two minutes earlier could be more than $2 million; on a $15 million estate, the difference could be about $8 million.

Are estate taxes dead in 2010?

Advisers say the estate-tax dilemma is especially awkward for heirs.  Heirs may be tempted to pull plugs on December 31. Economists might call the taking of a life to reap a tax advantage a “perverse incentive.” District attorneys might call it homicide.

The future is NOW!

What does it mean to you?

The first impression to us is that the law provides general guidelines but few specifics.  The bill leaves multiple regulators with wide discretion across a range of critical issues. The arguments over precisely what the new rules will be are barely getting started.  Some of the most important questions, such as the amount of capital financial firms will have to set aside, are scarcely even addressed. Again and again, the bill calls for studies to be undertaken. The whole law is an unfinished work with many details to be filled in. 

Will voters see this as another victory for Obama?

New:  The Financial Stability Oversight Council and the new early resolution authority. There will be a single entity charged with financial oversight, even if the entity is a panel of representatives from many different agencies.  A new oversight body is still a big change.  The new council will identify systematically significant companies and monitor markets for bubbles.  Companies branded as systemically significant would face stricter capital, leverage and liquidity standards and be obliged to draw up a “living will” to describe how they would be broken up in the event of failure.

Early resolution authority is the bill’s main defense against “Too Big to Fail”. The idea is to have the FDIC apply a pre-emptive liquidation procedure, like the one it currently uses for banks, to any systemically important financial firm that looks headed for collapse. For the foreseeable future, the authorities will not let a big bank fail.  Government can seize and wind up a large institution if it faces impending failure and poses a risk to the broader financial system. Payments to creditors would be paid by the government but recouped later from levies on the industry.

Senator Dodd has the last laugh.

The new Dodd-Frank law lays out a broad mandate for the new Consumer Financial Protection Bureau, and confers broad powers. A new agency will be set up inside the Federal Reserve, but with complete independence from the central bank.  It would tackle “abusive” mis-selling of mortgages, credit cards and other loan products.The law is silent on how the consumer protection agency should balance the directly competing goals of greater safety and wider access to finance.  If the agency significantly shrinks the availability of credit for low-income borrowers, it will not stay popular with the politicians who have championed it for very long. Hopefully, it will not significantly shrink the availability of credit.

The bill makes progress on derivatives.  The goal is to standardize these exotic instruments and have them traded on exchanges where they will be more transparent.  Derivatives that trade in “over-the-counter” bilateral deals would be forced through central clearing houses to curb the risk from one counterparty going bankrupt and on to electronic exchanges.  Banks would be forced to spin off some of their derivatives dealing operations.

In memory of "Do no evil."

It turns out that “Do no evil” means “Do just enough evil to get by.”

The name “Google” originated from a misspelling of “googol,” which refers to the number represented by a 1 followed by one-hundred zeros.  In a binary googol world, 1 is the distinct minority. 

In a world dominated by one-party states and huge global-national corporations, it is important to protect the minorities.  In “Our Philosophy” Google lists as one of its ten points, “Democracy on the web works.”  And I think that one of the Google founders, Sergey Brin, meant this in just more than an AdSales sense, but that also more information should mean more democracy.

That is why we applauded Google’s announcement that the company would pull out of China after discovering attacks seeking e-mails from human rights activists and the company’s source code.  It seemed Google was putting principle over profits.

However, Google anouunced July 8, through a Google blog post, that China had renewed its internet content provider licence, suggesting that its previous confrontation confrontation with Red Chaina has been followed by compromise.

People close to Google denied the company had offered fresh concessions other than its announcement last week that it would now send Chinese users to a limited website that gives them the option of being redirected to Hong Kong, ending the direct link.  However, through its internet filtering systems, known as the “Great Firewall”, the Chinese authorities will be able to limit access to information, or even disrupt Google’s service entirely.

Google caves in to the Red Menace.

The renewed licence from Red China suggests that both sides have found a face-saving way to step back from the brink and that Google has given in to the Red Menace.

For Google, such a compromise would suggests that the company took a second look and decided it wanted to have some sort of presence in China, whatever the distaste of its founder Sergey Brin about the country’s censorship regime.  Champagne revenues will wash a lot of bad tastes our of your mouth.

China has the largest number of internet users, 400,000,000, and the number of new users is growing exponentially.  Perhaps more importatatn, Google wants to push its new initiatives such as the Android operating system for mobile phones.  With 800,000,000 subscribers, China is also the world’s largest mobile phone market.

No matter what face it puts on it, Google gave in.

Google reveals its true character.

In “Our Philosophy” Google says, “We continue to push the limits of existing technology to provide a fast, accurate and easy-to-use service that anyone seeking information can access, whether they’re at a desk in Boston or on a phone in Bangkok.”  Just not Beijing.

iTunes security holes?

iTunes has some serious control issues.

 After one successful hacking attack occurred earlier this month, Apple has tried to minimize the threat.  “The iTunes servers were not compromised”, Apple said on Tuesday, July 6.  “An extremely small percentage of users, about 400 of the 150 million iTunes users, that is less than 0.0003 per cent of iTunes users were impacted.”  So says Apple.

Experts feel, however, that many more iTunes accounts have been hacked than the 400 Apple depicted as an isolated case of fraud by a rogue iPhone application developer.

If all your App Store titles are in Vietnamese, you should worry.

The California-based maker of the iPhone and iPad said this week that it had banned an independent developer using the name Thuat Nguyen from the iTunes App Store, after complaints from US consumers who discovered that their accounts had purchased his Vietnamese-language electronic books.

Charts from AppExplorer show that one of Mr Nguyen’s $4.99 applications, LP Bat Bai P6, leapt to about number 50 on the US book charts by mid-June and eventually reached number 21 about three weeks later. On a recent weekday, a developer said it took 50 downloads to get to No. 38 on that chart, so more than 1,000 purchases would have been needed during that rise.

Mr Nguyen, who failed to respond or comment, had more than 40 such applications in the top 50, suggesting that many thousands of accounts could have been compromised in what security experts said was probably an automated attack.

It is ridiculous to think that Mr Nguyen was the only one who might be pulling such a scam, which has called into question Apple’s security practices such as its use of e-mail addresses as usernames.  Other developers are likely to be flying below the radar by using many hacked accounts for small in-app purchases that do not send the programs onto the very visible bestseller lists.

iTunes users should change passwords frequently.

The Apple web sites have cautioned its customers to be vigilant for suspicious transactions.  “If your credit card or iTunes password is stolen and used on iTunes we recommend that you contact your financial institution and inquire about cancelling the card and issuing a chargeback for any unauthorized transactions,” Apple stated.  “We also recommend that you change your iTunes account password immediately,” Apple added.

Apple has tweaked its ordering process in response to the alleged fraud case, requiring customers to re-enter the numeric security codes on their credit cards more often.