Amidst taxes, the 2010 Census, the health care bill development, China’s yuan appreciation, and the market, it’s been an eventful springtime. Last month brought us much to discuss for the Year of Karma theme. April is no different. Here to join their automotive brethren in deception, manipulation, and dipped sales are two huge conglomerates: Goldman Sachs and General Electric. Welcome to Karma, guys!

Goldman Accused of Subprime Fraud

The SEC has finally caught up with Goldman Sachs. They were one of the few firms that profited tremendously from the housing market turmoil. It doesn’t take a scientist to realize that Goldman Sachs had its hand in the cookie jar during the subprime market manipulation. Why it has taken the SEC three years to discover this is news to us.

According to the Wall Street Journal, Goldman Sachs was charged with “deceiving clients by selling them mortgage securities secretly designed by a hedge-fund firm run by John Paulson, who made a killing betting on the housing market’s collapse.” This sounds like the secret mission statement that Goldman Sachs lives and breathes by: deception, manipulated profits, and questionably legal partnerships with politicians and other financial firms. Neither John Paulson nor his hedge-fund firm have been charged in this matter.

Goldman Sachs partnered with Paulson & Co to create a new financial product called collateralized debt obligation aka CDOs. They were comprised of subprime mortgage equities, which Paulson & Co firm betted against. At the same time, GS was selling these packages to its investors that faltered when the market fell. The SEC hasn’t quite determined how many high officials were aware of this matter, but they have astoundingly found quite a few.

Goldman Sachs is fervently denying the charges, and they’re ready to pay people under the table contest the allegations. However, the market has paid attention and is responding to the news. GS stock dropped 13%, which is the biggest drop the stock has ever experienced since it went public.

We certainly hope that this is the beginning of the house of cards falling for Goldman Sachs. However, we’re wary. Unless they’re going to ask for every last billion GS pocketed from the subprime market back, then they’ll just take the slap on the wrist and keep on wreaking havoc. However, Obama is using this as momentum to get a bill passed that will place restrictions on derivatives. Overall, we’re excited that GS has a bad spotlight cast on them. There’s many other big banks and politicians that should be thrown into the hot seat. Let the games begin!

GE Profit Drops 31% on Discontinued Operations

GE doesn’t seem to be doing to well this year. Their first quarter has experienced a 31 percent drop in revenue from a year ago. As sad as that is for the monolithic industrial company, they also are being investigated by the SEC for telling fibs. Two and a half years ago, GE convinced investors that their commercial paper programs were flourishing. Evidence shows that the exact opposite may have been true. As the SEC is still investigating, GE is denying the allegations.

Since the recession hit, GE hasn’t been the dominant, money hording company that it once was. Profits have almost been cut in half. Instead of innovating its way out of the mess, the Wall Street Journal reports that CEO Jeffrey Immelt seems to have his eye on the US Government stimulus program. If the best that they can do is look for federal handouts, we hope GE continues to spiral downward.

*Images courtesy of WSJ and ABC News.

It’s a recession and all, but there are some things that are to occur as sure as the sunrise every morning. One of those things would be the Starbucks Effect. It’s when retailers raise their prices during a downturn in the economy. Normally, the laws of supply and demand regulate the prices of items. Unfortunately, things just don’t work that easily when board members, shareholders, executive egos, and dwindling sales enter the picture.

Starbucks is a great example because its price hikes are always a big deal. It has a loyal customer base that purchases products frequently on a weekly basis. So, when a price increases on their popular items, it makes a significant difference in the long run. Recently, CNN Money reported that the coffee retail giant has raised the prices of its popular drinks by as much as twenty cents in its urban areas. Imagine the surprise for many customers who view the move as illogical. However, this is a simple cop-out that many businesses use in order to boost revenues.

Not only is demand lower for Starbucks, but the cost of supplies has been stable for quite some time. Milk and coffee prices are stable. Labor wages are stagnant, and there’s already been a flurry of staff layoffs. So, why the price hike?

Running from the Starbucks Affect

Starbucks like many other retailers was built off of the funds by their loyal customers. Once they relocate into their plush corporate offices and answer to Wall Street, the beat of their drum changes dramatically. If you find a company arbitrarily raising prices and hurting you in the wallet, it’s time to make some changes. It’s up to the customers to remind corporations of who has the power. We suggest the following three suggestions:

• DIY (do-it-yourself): Can you make the product in need or service yourself? If so, begin substituting your regular purchase with your own concoction. You’d be surprised at how many DIY videos exist to teach you just about anything imaginable.
• Small Business: We like small businesses that practice sound business tactics. Sound business practices are the key words here. In fact, there aren’t many big businesses that we go to for anything these days. We’ve found comparable or superior quality in smaller stores for better prices.
• Psychological Outlook: For some people, the idea of ending their patronage with a particular store signals the end of their lives, or so they think. There are countless people around the world who live without electricity, designer clothes, and iPods. Trust that there’s nothing that you can’t overcome. Discover the reasons that your dependency runs so deep. Make a list of all of the good things that will arise should you stop patronizing a particular store. We’ll start you off: increased wealth income.

We’re just at the beginning of the year, and we’ve already heard news of big corporations being dealt big blows in terms of revenue. It’s about time that these mega corporations start feeling the burn that has already affected the majority of its consumers. It goes to show what goes around, truly comes around.

Chrysler’s Low Sales

Automakers have been running a tight ship for some time now. They’ve had to resort to closing down factories, laying off workers, and outsourcing tasks. These kinds of dire conditions would force any executive in their right mind to fly to DC in their corporate jets and ask for money, right? Well, it seemed to work, and they were granted their saving grace moolah. However, they have a daunting task ahead of them with proving that they provide value to their customers and can save the company.

For Chrysler at the moment, things aren’t looking so hot. They’ve experienced a big drop in sales for the year. Car Advice reports on the situation:

Posting its worst sales figures in 47 years, the iconic US brand has seen sales of less than one million units (931,000) in 2009, a number last seen in 1962. The figure represents a 36 per cent year-on-year fall.

A year later, with all of their bailout money, the ball continues to drop. Yes, we understand that change takes time, but unless Chrysler delivers cutting edge vehicles at competitive prices, it’ll be game-over for them. We just don’t like to see companies use their employees up and dispose of them when money sales dip while retained executives rake in big compensation packages and fly around the world in gas guzzling private jets.

Monsanto’s Big Loss

Monsanto has experienced a 36% dip in herbicide sales for the year. This is sweet music to our ears. The Wall Street Journal reports the good news:

Monsanto’s $19 million for the quarter ended Nov. 30 amounted to three cents a share. It compares with a profit of $556 million, or $1 a share, a year earlier. The company last month forecast a loss of as much as five cents a share.

Revenue fell 36% to $1.7 billion. Analysts polled by Thomson Reuters had forecast $1.98 billion.

This biochemical company represents the apex of corporate evil, greed, and a monopoly, as they dominate 90% of the seed industry in the US. They’ve been linked to monopolistic practices, deregulating the agricultural industry, getting their employees in office in Congress, robbing the livelihood of farmers around the world, and even responsible for the massive suicides of an estimated 1200+ in India.

So please believe it when we say we hope this trend continues for this company.

Conclusion:

Consumers are waking up. They’re opting to pay themselves first and only purchase things that add value to their lives. They’re beginning to see beyond the shiny packaging and false promises these companies are making. May 2010 be the Year of Awakening for consumers and the Year of Karma for Big corporations and Banking Institutions. Attention big banks, we hope you’re next.

It seems only natural for the government to step in and control the banking greed that is spiraling out of control. The banking industry in Britain has received over £850-billion in taxpayer bailout funds in a twelve-month period. Meanwhile, unemployment is still high. And just as the banks were gearing up to pay employees over £7 billion in bonuses, the government imposed a “super tax” that would cripple big gains offered by bonuses.

The super tax imposed only affects banks who have received bailout funds and are planning on issuing out bonuses. Bonuses would be taxed by 50% whilst the remaining would be subject to an additional income tax in the highest applicable tax bracket. For banks that attempt to delay bonuses will be subject to an even bigger fine. It’s sure to have most banks re-evaluating whether to give bonuses at all.

The super tax may be loved by the public, but it has bankers so enraged that they’re planning to delay bonuses. The Globe and Mail reports that senior bankers may hold off on bonuses until a conservative group takes over in government which could happen by next year. Otherwise, some banks may consider leaving London’s jurisdiction to escape the super tax.

Possible Repercussions

This situation does create a predicament for London. For a city facing high debts, they may not reap much from this tax if banks refuse to participate. High level corporate crooks have their way of defying regulation over their spending practices. There’s one thing the wealthy elite and high-grossing corporations won’t lie down and take and that is high taxation. Some speculate that if banks do indeed pack up and leave the city, their largest earning financial sector will take a hit.

Despite the controversy over the super tax, it does deliver a warning to banks that they aren’t invisible to scrutiny. With that in mind, more countries need to follow suit to keep banks from simply relocating. In the meantime, banking employees can’t count on getting their big fat million pound bonuses for the holidays.

*Image courtesy of the Guardian.