Current Events in December 2016

The U.S. Surgeon General recently warned that American teens are risking their health with their increasing use of cigarettes.

Now, researchers at Texas A&M University are echoing that concern after drilling deeper into the Surgeon General's report.

They point to the very rapid growth in e-cigarette use between 2010 and 2015. By last year, surveys showed that 40% of high school students had tried an e-cigarette at least once and 16% had used one in the past 30 days.

The only saving grace, says Amy Fairchild, associate dean of academic affairs at the Texas A&M School of Public Health, is teens appear to be smoking fewer cigarettes. The Centers for Disease Control and Prevention (CDC) reported in November 2015 that teen use of cigarettes had hit an all-time low.

“The consequences of combustible tobacco use are well known and serious, while e-cigarettes—while not risk free—represent a far lesser harm,” she said.

Where are teens getting e-cigarettes?

A concern, however, is the easy access teens appear to have to e-cigarettes. When they first hit the market a few years ago, they were completely unregulated. Now, the Food and Drug Administration (FDA) has authority to regulate them and has set age limits on their purchase.

The FDA has set the age limit at 18, while a few states, such as California, have set higher age limits on sales. But researchers say that doesn't seem to be stopping very young teens – those in middle school – from obtaining the devices.

Fairchild suggests increasing the tax on e-cigarettes – making them more expensive – as a way to deter use by young people.

“Kids are extremely price sensitive,” she said. “There is evidence to suggest that you can tax e-cigarettes and other less risky smokeless products out of their hands. At the same time, if the tax is lower than for combustible cigarettes, current smokers aren’t also stripped of a financial incentive to switch to reduced risk products.”

While e-cigarettes have fewer toxic chemicals than tobacco, but they do contain chemicals, and Fairchild says there is concern that we don't have a complete picture of the potential harm they could do.

But the effects of the nicotine these devices contain is pretty well known. Fairchild says nicotine can harm brains that are still developing, meaning anyone under age 25 should steer clear of it.

Here's something to put a little ho-ho-ho in your holiday: A new survey from outplacement consultancy Challenger, Gray & Christmas finds an improved economy and corporate profits will work their way down to the employee level.

In other words -- BONUSES.

The survey of roughly 100 human resources execs in November found 66% indicating that their companies will be awarding some type of year-end bonus/gift. That's 16% more than those who said the same last year.

And while 30% said there will be no year-end award of any type, that's down 14% from 2015.

“The economy has been steadily improving since the Great Recession ended in 2010. This last year was no exception,” said Challenger, Gray & Christmas CEO John A. Challenger. “As it continues to improve, employers will have to rely increasingly on bonuses and other perks to hold onto valuable employees.”

There are bonuses and bonuses

Challenger points out that most workers don't enjoy the type of five- and six-figure bonuses lavished upon Wall Street bankers. “For the vast majority of workers, three and sometimes four figures are likely to be the standard,” he said, adding, “Some may not even get a cash award, but instead receive a gift card, gift basket or some other type of material object. Our survey shows that the structure of the bonus or gift varies widely.”

According to the survey, 15% of employers provide a non-monetary gift to all employees, such as a gift basket or extra vacation day. Another 11% plan to give employees a small monetary award of $100 or less.

At the same time, about 40% give larger monetary awards that vary year-to-year and worker-to-worker. These can be based on the overall performance of the company, the performance of the individual, or some combination of the two.

Why the increase?

A major factor fueling year-end bonuses is the fact that after-tax corporate profits steadily increased throughout the year, after falling to a 17-quarter low to close out 2015.

The latest data from the U.S. Bureau of Economic Analysis show third-quarter profits of nearly $1.7 trillion -- were up 5.2% from the same period a year ago.

With profits on the rise, about 18% of survey respondents said their companies were upping the amount of year-end bonuses. Still, most employers (73%) plan to keep bonus levels unchanged from last year.

“Despite the lack of six-figure Wall Street-like bonuses,” Challenger said, “most employees still appreciate the year-end bonus. Mostly, they want to know that their hard work is recognized and appreciated.” 

CarMax Inc. and two other major car dealers have admitted they sold used cars with unrepaired safety recalls despite touting the supposed rigor with which they inspect cars before selling them.

The dealers have settled Federal Trade Commission (FTC) charges by agreeing to a consent order saying they won't do it again, but Congresswoman Jan Schakowsky (D-Ill.) says she's disappointed with the decision. 

“Cars shouldn’t be sold with open recalls – and they definitely shouldn’t be advertised as safe,” said Schakowsky. “I am very disappointed by the FTC’s decision. Instead of stopping deceptive advertising outright, today’s consent orders still allows used car dealers to use a confusing disclaimer that the vehicle may or may not be under recall while continue to advertise it as ‘certified, pre-owned’ or passing a ‘rigorous safety inspection.’

Schakowsky is sponsoring a bill that would ban the practice.

“I have introduced the Vehicle Safety Improvement Act to end the sale of used cars with open recalls, and I will keep fighting to stop car sellers from putting dangerous vehicles on the road. I urge anyone buying a used car to go to www.safercar.gov and check if there’s a safety recall that the seller isn’t telling you about.”

Dealers' defense

Besides Virginia-based CarMax, the case involved Asbury Automotive Group of Georgia and West-Herr Automotive, the largest auto dealer in New York. The commission also approved final consent orders in similar cases against General Motors Company, Jim Koons Management, and Lithia Motors Inc. that were settled earlier this year.

In their defense, car dealers say it can take months to get the parts needed to perform a recall and they can't afford to let cars sit on their lots that long. 

Just last week, AutoNation backed down on its pledge to fix all outstanding recalls before selling cars to customers, apparently based on an assumption that President-elect Trump will not pursue the matter.

AutoNation started selling used vehicles with open recalls on Monday, Nov. 28, after CEO Mike Jackson concluded that Trump's victory would mean the end of legislative efforts to require used car dealers to stop selling recalled used cars that have not been repaired.

125+ Inspection

The FTC’s complaint against Virginia-based CarMax cites its claims about rigorous used car inspections, including its “125+ Point Inspection” and that its cars undergo, on average, “12 hours of renewing – sandwiched between two meticulous inspections.”  

The complaint also notes a TV commercial touting a team inspection and reconditioning, which included a message that appears for three seconds in tiny type at the bottom of the screen stating, “Some CarMax vehicles are subject to open safety recalls.”

Despite highlighting their inspections, the FTC alleges that CarMax failed to adequately disclose that some of the cars had open recalls. These recalls included defects that could cause serious injury, including the GM key ignition switch defect and the Takata airbag defect.

The other dealers made similar unfounded claims, the FTC said.

Under the proposed consent orders, CarMax, Asbury, and West-Herr are prohibited from claiming that their used vehicles are safe, have been repaired for safety issues, or have been subject to an inspection for safety-related issues, unless they are free of open recalls, or the companies clearly and conspicuously disclose that their vehicles may be subject to unrepaired recalls for safety issues and explain how consumers can determine whether a vehicle is subject to a recall for a safety issue that has not been repaired, and the claims are not otherwise misleading.

The proposed orders also would prohibit the companies from misrepresenting whether there is or is not an open recall for safety issues for any used motor vehicle.

The commission said the consent orders “will help empower consumers to make more informed and safer purchasing decisions in a market that, absent a change in federal law, continues to include cars subject to open recalls.” 

Since the day after election day, Wall Street has been on a tear, with the major stock averages moving into record territory day after day.

Analysts say much of the advance has been due to a change in economic outlook. A Trump administration is expected to spend more on infrastructure and lower the corporate tax rate. That, in turn, is expected to spur economic growth.

Treasury Secretary-designate Steve Mnuchin is on record predicting sustained economic growth of 3% or more.

But the euphoria may be a bit premature, some analysts caution. The stock market, specifically, has already priced in the economic growth that has yet to be achieved. And the economic advancement might not be as easy as it sounds.

Contrarian view

John Connaughton, an economist at the University of North Carolina (UNC) Charlotte takes a somewhat contrarian view. He expects the same slow pace of economic growth to continue for a while.

“During the first half of 2016, the North Carolina economy seemed to experience slower growth than during the previous 18 months,” he said. “What has been happening in North Carolina during the first half of 2016 is not dissimilar to what has happened in the U.S. It seems that after seven years of economic expansion, the economy has begun to slow.”

Many consumers who are struggling to keep up may be surprised to learn that the U.S. economy has been expanding for 89 months. It's just been at a very slow pace.

But Connaughton says the current economic expansion is the fourth-longest on record, going back to 1854. And despite the post-election rise in business and consumer confidence, he doesn't expect much to change, in the way of economic growth, in the coming year. Economic headwinds, he says, include falling productivity and the retirement of the Baby Boomer generation.

Economists largely skeptical

An early December poll by Reuters found the Trump bump that has boosted the stock market hasn't really changed economists' outlook, who note that recessions are regular occurrences, even if the expansion has been less than robust.

The economists in the poll correctly predicted the Federal Reserve's decision this week to hike short term interest rates. Fed Chair Janet Yellen held out the prospect of three additional hikes in 2017, suggesting a more optimistic outlook for economic growth.

But at the same time, Yellen left herself some wiggle room, suggesting the Fed could always hold off on normalizing rates if economic growth doesn't measure up to rosy expectations.

Trek Bicycle Corporation of Waterloo, Wis., is recalling about 600 bicycle lights.

The bicycle light can operate intermittently when paired with a remote transmitter, reducing the visibility of and for the rider, posing an injury hazard.

The firm has received seven reports of the lights functioning intermittently when paired with a remote transmitter. No injuries have been reported.

This recall involves Trek Bontrager Flare RT and Ion 700 RT bicycle lights. Both models of lights come in black. “Bontrager” and “Transmtr” are printed on the front of the Bontrager Flare RT lights and the date code is printed on the back.

“Ion 700 RT,” “700 Lumen” and “Transmtr” are printed on the side of the Ion 700 RT lights and the date code is printed on the bottom under the charging port cover.

The recalled lights have the following date code:

The lights, manufactured in Taiwan, were sold at bicycle stores nationwide and online at www.trekbikes.com from July 2016, through October 2016, for between $60 and $240.

What to do

Consumers should immediately stop using the recalled lights with a remote transmitter and return the lights to the store where purchased or contact Trek to receive a free replacement bicycle light.

Consumers may contact Trek at 800-373-4594 from 8 a.m. to 6 p.m. (CT) Monday through Friday or online at www.trekbikes.com and click on “Safety & Recalls” at the bottom of the page for more information.

Bingo Deals is recalling about 2,700 egg-laying chicken toys.

The toys contain small eggs, and the chicken can break into small plastic pieces, both posing a choking hazard to children.

No incidents or injuries are reported.

This recall involves the Bump 'N Go Walking Egg Laying Chicken with light, sound and music. The battery-powered plastic toy is a yellow chicken with an orange head and orange wings. The chicken toy includes three white plastic eggs that are placed into the back of the chicken and then released from the bottom.

The chicken measures 7 inches wide by 6 inches tall by 7 inches deep. The eggs measure one inch wide by one inch tall by one inch deep. “QQ Chicken” is printed on the wing. A small yellow chicken sits on the chicken’s back.

The toys, manufactured in China, were sold online at Amazon.com and Bingo Deal’s website www.prextex.com from July 2015, through June 2016, for about $20.

What to do

Consumers should immediately take the chicken toy and eggs away from children and contact Bingo Deals for a full refund. Bingo Deals is contacting consumers who bought the toy directly.

Consumers may contact Bingo Deals toll-free at 888-429-1679 from 10 a.m. to 5 p.m. (ET) Monday through Thursday and from 10 a.m. to 12 p.m. (ET) on Friday, by email Recall@prextex.com or at Bingo Deal’s website www.prextex.com and click on Recall Safety at the top of the page.

Drug prices remain a red hot consumer issue as 20 states have filed a federal lawsuit against six generic drug makers, including Mylan Pharmaceuticals, charging conspiracies to restrain trade and artificially inflate prices for two drugs.

Besides Mylan, maker of the EpiPen, the suit filed in a U.S. District Court in Connecticut names Heritage Pharmaceuticals, Inc., Auribindo Pharma USA, Inc., Citron Pharma, LLC, Mayne Pharma (USA), Inc., and Teva Pharmaceuticals USA, Inc., as defendants.

The drug companies are accused specifically of trying to squash competition and boost prices for doxycycline hyclate delayed release, an antibiotic, and glyburide, an oral diabetes medication.

'Widespread participation in illegal conspiracies'

“While the principal architect of the conspiracies addressed in this lawsuit was Heritage Pharmaceuticals, we have evidence of widespread participation in illegal conspiracies across the generic drug industry,” said Connecticut Attorney General George Jepsen. “Ultimately, it was consumers – and, indeed, our healthcare system as a whole – who paid for these actions through artificially high prices for generic drugs.”

New York Attorney General Eric Schneiderman says the multi-state investigation found evidence of a widespread, well-coordinated, and long running series of conspiracies to artificially set prices and stake out markets for certain generic pharmaceuticals in the United States.

“Generic drugs play a critical role in moderating healthcare costs for all New Yorkers,” Schneiderman said. “Companies that collude and fix prices for generic drugs in order to pad their profits must be held accountable for the very real harm they inflict on New Yorkers’ ability to pay for life-saving medications.”

Met at trade shows

Florida Attorney General Pam Bondi said investigators determined that the six drug companies coordinated price-fixing efforts when they had face to face contact at trade shows and customer conferences. She says there is also evidence the drug companies avoided written communication once they became aware their activities were under investigation, and in some cases deleted existing communication.

“Generic medicine is an important option for consumers in need of medical care and any effort to distort the price of these drugs harms consumers,” Bondi said. “Today’s multi-state action seeks to hold these drug companies accountable and protect the market place.”

The suit claims the drug companies' conduct violated the Sherman Antitrust Act, in addition to state antitrust laws. It seeks “substantial” financial compensation.

Before buying a toy for a child, you might check the age recommendation and make sure that no small parts present a choking hazard. Making sure the toy is safe for its intended recipient is, of course, paramount.

Some toys on the market today are just as loud as the sound of a motorcycle 50 feet away, says Dr. Rob Danoff, an osteopathic family physician and program director of The Family Practice Residency. He urges parents to protect kids’ ears from the future effect of today’s loud toys.

Test the toy first

While experts don’t yet have statistics on toy related hearing loss, they are concerned that loud toys could lead to future hearing problems for kids. That’s because hearing loss is often the result of cumulative exposure to loud noises over time, explains Danoff.

• If a toy is too loud in a noisy store, it will sound too loud in your quiet home.
• If the sound of the toy hurts when you place it next to your ears, it will sound even louder to your young child as their narrow ear canals will focus those sound waves into pounding thumps of noise.
• If the toy is too loud and has a battery compartment, remove the batteries. If they can’t be removed, avoid the toy.
• If the toy has a speaker section without a volume control, put masking tape over the speaker to dampen the noise. If it's still too loud, avoid the toy.

The U.S. housing market has recovered. The median home price is now about where it was at the time of the housing market crash.

But like politics, all real estate is local. Not every housing market has recovered at the same pace and there's still plenty of pain left over from the popping of the housing bubble.

Real estate marketplace Zillow reports about 5.3 million homeowners were under water – meaning they owed more on mortgages than the homes are worth – in the third quarter of the year. That amounts to about 11% of homeowners with mortgages.

While that is discouraging for those homeowners who have not been able to sell or refinance for the last decade, it's a marked improvement from the height of the housing crash. In 2012, an estimated 15.7 million homeowners were under water.

Rising home prices helped some get their heads back above the surface, but not all. Many are no longer under water because they eventually lost their homes to foreclosure.

Chicago and Las Vegas the most under water

Today, Zillow says the thriving West Coast housing markets have the fewest under water homeowners. But Chicago and Las Vegas have the highest levels of negative equity. Seventeen percent of Chicago home owners are trapped in a negative equity situation while 16.8% of Las Vegas homeowners are in that boat.

"In addition to the individual homeowners who are underwater, negative equity affects the housing market as a whole, so this is good news not only for these owners, who are now able to either sell their home or at least regain some financial stability, but also for buyers who may find more options now,” said Zillow Chief Economist Dr. Svenja Gudell. “I expect homes will gain value steadily, for solid economic reasons, and that negative equity rates will continue to fall."

While some homeowners have regained positive equity, it might not yet be enough to allow them to sell. Zillow says having less than 20% equity in a property probably isn't enough to cover Realtors' fees, other closing costs, and a downpayment if they are purchasing another home.