consumer reports

Two-Thirds of All Shoppers Are Tricked by the Word 'Natural' at the Supermarket - Are You One of Them?

A recent Consumer Reports study shows that nearly two-thirds of shoppers are being misled to believe the label “natural” on food packages means more than it does — including that the foods are free of GMOs, hormones, pesticides or artificial ingredients. But the truth is, these foods often contain the ingredients and chemicals consumers are trying to avoid.

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Buying America: The Many Astounding Ways You Can Express Your Values with Your Pocket Book

“Every person ought to have the awareness that purchasing is always a moral – and not simply an economic – act,” Pope Francis announced early this year. How can we spend our money as if our values matter?

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Exposed: Behind the Brain Drain at Consumer Reports

With the departure of its respected managing editor, how many professional journalists are still left at Consumer Reports? Virtually all of the major editors who produced the iconic magazine, as well as some of its best and most experienced reporters, have left CR in the past couple of years. (Disclosure: I am one of the editors who chose to leave.)

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7 Things You Might Believe About Money That Are Totally Untrue

When it comes to money, conventional wisdom may not be worth much. Don’t fall for these common myths.

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Corporate Shakedown? Automaker Tesla Demands $500 Million For its Gigafactory

Leigh McIlvaine (@Leigh M.) of Good Jobs First alerted me to this article on what Tesla Motors wants in incentives to land its $5 billion Gigafactory: $500 million. This massive 6500 worker facility will produce the next generation of batteries in order to introduce a less expensive line of cars in 2017, the Tesla Model 3. This would be a more affordable vehicle than the widely praised Model S, which starts at $69,900.

I'm not joking about the praise: Consumer Reports, my go-to source for product testing due to the fact that it does not accept ads and thus has complete independence, gave the Model S its best-ever score of 99 out of 100 when it tested the car earlier this year. It also leads the magazine's subscriber survey of customer satisfaction, with 99% of owners saying they would buy the car again. This is a vehicle, and a company, that is generating some serious excitement.

It's no surprise that the Gigafactory is generating serious excitement, too. 6500 jobs, a $5 billion investment, and cutting-edge technology is a heady mix for an economic development official. San Antonio, where Toyota makes pickup trucks, jumped into the auction quickly, offering "almost $800 million in incentives." Although Tesla has broken ground at a location near Reno, Nevada, last week CEO Elon Musk announced plans to break ground at one or two other sites as well. The company clearly considers speed to be of the essence.

It's unclear exactly what the company wants financially, and Tesla did not respond to my request for an interview to seek clarification of some important points. To be specific, does it want that $500 million in cash, in the form of property tax breaks over some number of years, land and infrastructure, or what? Most importantly, is Tesla's goal speed plus $500 million, or speed plus the highest bid? The company has sent mixed signals on this question.

As Forbes wrote, "Last week, Musk said that Tesla wanted to make sure a package was right for the winning state, as well as for Tesla." In the article's very next sentence, however, Tesla VP for communications and marketing, Simon Sproule, said, "Any publicly traded company has a fiduciary responsibility to get the best deal for its investment." Musk's comment seems to imply that $500 million is all the company wants. By contrast, fiduciary responsibility has often been used to justify a company going after the maximum incentives possible. Forbes quotes the business editor of the San Antonio Express-News that it was hard to tell if Tesla is conducting "a search (or) a shakedown."

Sproule disputed the shakedown thesis, despite invoking "fiduciary responsibility." How should we think about this project?

On the one hand, we could take Musk's comments as meaning that the company wants $500 million, no more, no less. Given that he expressed it as a percentage of the investment, my intuition is that we should assume that means $500 million in cash or cash equivalents like free land (my guess is that San Antonio's "$800 million" was mainly tax breaks, which would have a lower present value). If that's true, Sproule's contention that the incentive is not really so expensive is actually true in a comparative sense. A 10% aid intensity (subsidy/investment) would be the second-lowest for a large automotive facility in the modern history of megadeals. It would even probably be legal in the European Union under its Regional Aid Guidelines, if it were located in one of the EU's poorer regions. Moreover, the cost per job would be $76,923, substantially below the $100,000-$150,000 level common for most U.S. automobile assembly plants.

Of course, cost alone doesn't make a deal a good one. In particular, if Tesla wants its incentives up front, there is a substantial risk that the project won't ultimately produce 6500 jobs, or that changes in the market could even lead to the Gigafactory closing. New Mexico lawmakers have certainly recognized the importance of this vis-a-vis Tesla. In my email to Tesla, I asked what taxpayer protections, like clawbacks, the company is prepared to accept. Alas, no response, but I will update if I do hear back from Tesla.

On the other hand, if $500 million really is just meant as the minimum acceptable opening bid, all bets are off for saying how (comparatively) good a deal it might be.

Once again, we are confronting the issue of information asymmetry: government officials have less information about what the company really wants than the company has about the various governments, and of course its own intentions. This is a major source of bargaining power for companies shopping around for an investment location. If Musk really means that Tesla will voluntarily limit the incentives it requires, that would be a refreshing change from the typical bidding wars we have seen in so many industries. Or, it could just be business as usual, with the highest bid (adjusted for cost structure at the different locations) winning. We just don't know, but the decision is expected by the end of the year.

7 Dumb Things You Should Stop Wasting Money On

Looking for ways to keep your budget from spinning out of control? Here are a few money-wasters to avoid.

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Which Fast-Food Chain Makes the Worst Burger in the United States?

The titans of American fast food are in for a supersized reality check. KFC, Taco Bell and McDonald’s were slammed as the worst in their categories—chicken sandwich, burrito and burger, respectively—according to the latest exhaustive survey of American fast-food chains conducted by Consumer Reports.

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5 Companies That Excel at Screwing Over Customers

You would think torturing customers is so bad for business that companies would try to avoid it. Isn’t the invisible hand of the market supposed to bitchslap businesses that thumb their nose at the people who buy the stuff? Polls show 85 percent of consumers will retaliate against a company if customer service sucks, and the younger ones are likely to pour out their grievances on social media. Billions in revenue are at stake.

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7 Rip-offs You Need to Know About

Rip-offs, known by economists as “market inefficiencies,” are cases in which the price of something has little to do with its actual value. They are particularly common in industries where oligopolistic conditions dominate, which has been increasingly common since deregulation fever hit Washington. In today's marketplace, the consumer is often a sheep to be shorn. Here are seven common products where the buyer must beware.

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Beware! 5 Depressing Stories About Food in the News This Past Week

This article was produced in partnership with GlobalPossibilities.org.

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