THANKS & BEST WISHES FOR THE NEW YEAR

To all my readers, and to all the people who graciously shared their valuable thoughts with me over the years.

An "Indebted" Education

Today, NYT ran another great article in its series on Debt Trap- Unspoken Link Between Credit Cards and Colleges. In it the writer, Mr. Glater, describes the connections between Colleges and Finance Companies and how the Colleges have a vested interest in promoting the use of financial instruments by the students and alumni. The Colleges get a certain amount when a credit card with the school logo is used, as an example.

Every school or College talks about its "business model," and how to raise sufficient revenues and endowment funds to support its growth. The mantra in business is 'Grow or Die.' Some questions arise-

1. Is an educational institution like any other business- should the focus be on growth?
2. While revenues are needed to support operations, what constraints should be put on the means to raise revenues?
3. If growth is the focus, what kind of growth is appropriate in this business?
4. If commercial (and non-commercial firms) need good employees to grow, what monies are the shareholders going to invest in education?
   

Question 2 deals directly with the behavior of Colleges in the Fuzzy Cloud of Finance. Should colleges reject money that comes from assisting corporations in selling to students? Should every company be required to contribute a certain percent of its profits towards education, rather than exploiting colleges and students?
Our school offers two-1/4 credit courses called Financial Smarts, which are intended to teach good financial management practices to students. Only business students usually take it, so these reach only a fraction of the overall student population. While these courses are valuable, should they be the ones that protect students from exploitation by the smart companies? What is the responsibility of students in all of this?

B(anks) A(pple) D(rugs) - BAD Stuff...

According to a Bloomberg News Report, Consumer Confidence in U.S. Slumps to Record on Jobs,
"...The Conference Board’s index of consumer confidence fell to 38, the lowest level since records began in 1967, from 44.7 in November, the New York-based private research group said today. Another report showed declines in property values accelerated. Rising unemployment, mounting foreclosures and declining household wealth have dimmed the outlook for consumer spending, which accounts for 70 percent of the economy. This year’s holiday season, the most important for retailers, was probably the worst in at least four decades.."

The stories behind the stories..

GMAC - The government will invest $6 billion to prop up GMAC, the auto financing giant, the Treasury Department said last night, expanding its bailout of the troubled U.S. auto industry. The Treasury said it would use $5 billion from the $700 billion financial rescue fund it oversees to buy preferred stock from the company. It said it would also lend $1 billion to General Motors, which owns 49 percent of GMAC, to allow it to invest further in the firm. The Treasury giving free money to the people who ran us to the ground...

Apple: All sorts of rumors about Apple, and Jobs. Yes, the guy who backdated options and made off like a bandit. The new one is that Newton is resurfacing at Apple.

Drugs...A great article in the NYT..No Mug? Drug Makers Cut Out Goodies for Doctors .
Starting Jan. 1, the pharmaceutical industry has agreed to a voluntary moratorium on the kind of branded goodies — Viagra pens, Zoloft soap dispensers, Lipitor mugs — that were meant to foster good will and, some would say, encourage doctors to prescribe more of the drugs. No longer will Merck furnish doctors with purplish adhesive bandages advertising Gardasil, a vaccine against the human papillomavirus. Banished, too, are black T-shirts from Allergan adorned with rhinestones that spell out B-O-T-O-X. So are pens advertising the Sepracor sleep drug Lunesta, in whose barrel floats the brand’s mascot, a somnolent moth.Some skeptics deride the voluntary ban as a superficial measure that does nothing to curb the far larger amounts drug companies spend each year on various other efforts to influence physicians. But proponents welcome it as a step toward ending the barrage of drug brands and logos that surround, and may subliminally influence, doctors and patients. “It’s not just the pens — it’s the paper on the exam table, the tongue depressor, the stethoscope tags, medical calipers that might be used to interpret an EKG, penlights,” said Dr. RobertGoodman, a physician in internal medicine at Montefiore Medical Center in the Bronx.

Just "Verb"iage

Headline of a story in the NYT..

Writing the Web’s Future in Numerous Languages

By DANIEL SORID

The globalization of the Web means that companies have to found ways to reach out to consumers in their native languages, a costly and time-consuming endeavor.

Some interesting articles

Housing Pain Gauge: Nearly 1 in 6 Owners 'Under Water' More Defaults and Foreclosures Are Likely as Borrowers With Greater Debt Than Value in Their Homes Are Put in a Tight Spot

Economy Takes Toll on Premium Airline Passengers Carriers Say That Many Business Customers Are Traveling Less or Flying Coach

The Next Bailout: Your Adult Children?

Homage to my teachers -High School

St. Paul's High School, Hyderabad, India

Edna Aranha, who taught me English at St. Pauls. She was a wonderful teacher, who encouraged me and pushed me towards higher achievements. She pushed me to take part in the essay writing compeittion, in which won the second prize, and received a great book, Kenilworth by Sir Walter Scott. She also encouraged me to represent our school in the General Knowledge competition with Sitharam and Madhukar Reddy. That was a great experience too. Edna was the first great teacher I ever had in my life apart from my parents, and a great friend.

Sakina Mirza taught us social studies. A disciplinarian, she was rigorous in her teaching, and made social studies interesting. She also taught English to other sections.

Sajeda Begum taught us Social Studies. She introduced us to Sherlock Holmes, when she read us the story of "The Speckled band." Thanks, ma'm.


Irene taught us natural sciences. A somewhat chubby person, she was very friendly and collegial. A great teacher in the classroom, she shared time with me even outside of class.

P. Krishnamoorthy taught us Chemistry, and Mar Redddy Telugu. I could not quite relate to them. Rasool Sir taught us Math. He was quite good. but he only taught Algebra.
Pushpalata taught Telugu for a while and she was a really good teacher.

My everlasting gratitude to these wonderful people for a great education and lifelong friendship.

Dis-"Credit"Able Financial Institutions

One of my friends who just recently started her own business is having the devil of a time getting a loan to fund her operations. The banks, who did not care about credit worthiness when making those billions of dollars worth of sub-prime loans, and who bought those three letter securities, now do not want to lend money despite taking billions from the Treasury/Fed. Instead, they would rather give the money to their executives as bonuses.

The country has a long painful road ahead, just because the landscape is littered with such crooked unethical behavior.

Making Education Priority # 1, or Why students drive me to Prozac

My students did group projects the past few weeks and recently submitted their reports. I had the great (mis)fortune of grading them. Here are some extracts:

*****

Bright should be upfront with Iberia, that he is willing to negotiate up to the point where his plane is valued since he does not want to waist his time again and rather spent the time with promising clients.

If Iberia were on the market to purchase more planes, Mr. Bright should handle the situation very wearily

"When we looked up the coarse catalog in class..."

“The American empire is reaching the end of its road, and its next rulers must limit their interference to their own boarders”…

Obama On Income taxes... "Not to increase takes for people making less than $270,0 per year."

Because Austria had such a socialist economic history, it seems more rationale.

The economy lately has been a very hot topic. With global economies all declining and .......

The future President also has to deal with foreign countries, and the dependence of the good received from them.

Topics such as global warming, and oil dependency are hurting major economies throughout the world.

Importing the sugar can ethanol from Brazil would greatly benefit not only the United States by giving them a large supply of ethanol, but it would also help Brazil ...

China being the world's third largest trader is impart due to the fact that the...

Through the crash of the stock market in the U.S. it has affected Germany in the loss of capital shortage in regional banks. In regard, it shrinks Germany's capital growth to a mere zero percent.

When China trades directly on the U.S. financial market, China will feel the effects of the financial crash.

The main focus for Brazil is that they are not able to compete with the U.S. farmers market because ....

Brazil's economy was ranked in 2007, as the world's tenth largest economy, which out ways all the other South American countries.

***This is one good reason behind the decisions of news agencies (like AP and Reuters) to hire writers in foreign countries to cover events in the U.S.A.

Ruble Rubble, Lost Won,

Looks like Putin's Rubles may not be enough to bubble up in Sarah Putin's backyard.
Ruble's Fall Puts Russia on Defense Amid Crisis.

Won down.

A "Water"shed Year....

We have had a lot of rain this past week, on top of the few feet of snow piled up on the ground. With all the water, rivers have been flooding. I took the following pictures with my mobile phone while I was out running by the DuPage River.

Short Term Gains, Long Term Pains

The Free Market Economy mantra, repeated in every textbook, is Deregulate, Privatize, and Protect Intellectual Property. Clearly, Deregulation has contributed in a big way to the current mess, even though quite a few people had significant Short Term Gains.

MSNBC has a good story on States' looking to sell or privatize their assets to raise cash for the short term. The article is titled "Cash-strapped states look to sell roads, parks. 44 states dealing with deficits consider privatization to raise money."
Illinois has privatized some of its toll roads to raise cash. The question is what happens in the longer term- when the tolls go up significantly, or the state has to pony up more money for maintenance. Looking at the current state of the transportation infrastructure, one gets thoughtful about these efforts.

Message about Messaging

The carriers have us where they want us- on their fingertips.

Of late, I have been a bunch of spam text messages on my mobile. These messages originate both from email sources and from phone numbers.
I called my carrier and complained that I was being charged for messages that I had no control over and did not want to receive.
My choices?

1. Block all messages, inbound and outbound. This is clearly not an attractive option.
2. Block all messages from email sources. This is better than the previous option.
3. Do nothing.
   

The part that gets me is that the carrier will bill me for all messages and not refund me any money for those that are spam.
Having worked in telecommunications, I know how the game is played. Funny thing is that for the carriers, transmitting a text message has almost 0 incremental cost.

Shareholders Share the Sins

One of my students contacted me the other day- she wanted to know if she could take a one-semester leave from our private college and take courses instead at a local community college. She said that she was finding the tuition unaffordable, despite her scholarships and aid. I will be talking to her after our break, but today I read another article on lenders exploiting college students. Kathy M. Kristof, in her LA Times piece, "Personal Finance Student loans turn into crushing burden for unwary borrowers" describes the predatory practices and gross abuses of students. Here's a great extract...**For a glimpse into how lenders operate, The Times filled out online loan applications with JPMorgan Chase & Co., Sallie Mae and MyRichUncle. An 18-year-old student who began college this fall agreed to provide personal information, including her Social Security number, so that lenders would provide detailed loan terms. JPMorgan Chase, the giant New York bank, did not disclose its interest rates or fees in the online application. Sallie Mae, which is based in Reston, Va., disclosed an interest rate and fee, but an attached disclaimer in capital letters said the numbers were preliminary "and may change." The third, MyRichUncle, a New York-based student loan firm formed in 2005, disclosed a variable rate that starts at 9.6% and said there would be an unspecified origination fee. The loan companies provided a bit more information over the phone. A MyRichUncle representative said its origination fee would be 2%. A Chase agent said the variable rate would start at 7.5% with no origination fee, and Sallie Mae said its variable rate would be 8%, also with no fee. After initially resisting, agents for Sallie Mae and Chase both agreed to provide summaries of the loan costs in writing. But the one-page letters they mailed did not include the total cost of the loan over time. The Times then called all three lenders to discuss their practices. MyRichUncle co-founder Raza Khan said that the failure to state the amount of the origination fee in the online application was a mistake and that the information was now included. Sallie Mae spokeswoman Martha Holler maintained that the company's disclosures were adequate. JPMorgan Chase spokeswoman Mary Kay Bean said the loan terms would be sent after the loan had been approved, pointing out that the company was not required to do so beforehand. "We send borrowers a letter with the rate," Bean said. "We comply with the law. That's it."****
The fund managers and shareholders of these firms share the profits and the sins of the managers committing them. Doing anything for a buck seems to be the mantra of the day. I had shown a video on this same topic to my students, and one of the students commented that this was one of the things she took away from the course.

As Cat Stevens once sang,

"..hope you make a lot of nice friends out there,
but just remember there's a lot of bad and beware,

Oh baby baby it's a wild world,
it's hard to get by just upon a smile"

Memories of 2008

As the Year draws to a close, time to reflect on the year that was...

• Got my tenure. That counts for something.
• Barack ensured that the Republicans are out, at least for a while.
• Elliot Spit(zer) was spat on.
• Sorry Pa(l)in
• Bear, Lehman, Merrill - all OOS
  
• 
  

A Time-less Trance

Ahista Ahista (slowly slowly), a Hindi movie released in 1981, featured some beautiful songs. One of them, penned by Nida Fazli, is one of my favorites. A beautiful ghazal, it goes as follows:

कभी किसी को मुकम्मल जहां नहीं मिलता
कहीं ज़मीन तो कहीं आसमान नहीं मिलता

जिसे भी देखिये वो अपने आप में गुम है
जुबां मिली हैं मगर हमज़ुबां नहीं मिलता

बुझा सका हैं भला कौन वक़्त के शोले
ये ऐसी आग हैं जिस में धुंआ नहीं मिलता

तेरे जहां में ऐसा नहीं के प्यार न हो
जहाँ उम्मीद हो इसकी वहां नहीं मिलता

*******The Translation*******

My brother, the greatest poet I have known, provided the following free verse interpretation of the above song. Thanks, Vish!

The absolutes lie beyond Man's grasp
And the cosmos floats outside his clasp

And thus we live, self-enclosed, self sufficient
Parallel Interpretations of a collective cant

The dynamics of Time become static in monotony
As the embers of dead hours smoulder to eternity

And we seek on, in vain, love in hostile parts
Insensible to allies within reach of our hearts

More Beautiful, in Translation

The nineteen seventies featured some wonderful Hindi films, one of which was Gaman. Starring the intense (late) Smita Patil and Farooq Sheikh, it featured wonderful compositions by the Late Jaidev and lyrics by Shahryar. The most popular of this movie's songs, is the following:

सीने में जलन आँखों में तूफ़ान सा क्यों हैं ?
इस शहर में हार शख्स परेशान सा क्यों हैं ?

दिल हैं तो, धड़कने का बहाना कोइ ढूंढें
पत्थर की तरह बेहीसा-ओ-बेजान सा क्यों हैं ?

तनहाई की ये कौनसी, मंजिल हैं रफीकों
टा-हद्द-ये-नजर एक बयाबान सा क्यों हैं ?

क्या कोइ नयी बात नजर आती हैं हम में
आईना हमे देख के हैरान सा क्यों हैं ?

This poem's beauty and intricacy and meaning are lost when translated literally. My brother, a wonderful multi-lingual poet and a writing genius, wrote this free interpretation of the above poem last night.

Heart racing and monsoonal eyes
A city all enclosed in sighs

People alive, yet without purpose to living
Alive, and yet like pebbles, unliving

A city bustling, yet a post of isolation
Denizens, each sheathed in desolation

Today my reflection stares at me askance
Is it rebellion in my eyes – or resignation?

----Thank you to the great lyricists--

A sunny story

Saw a news clip yesterday on Jim Lehrer's News Hour....It was an amazing story.
You can watch it here.

Stimulating Bits and Bites

Read a rumor that Microsoft will announce layoffs soon.
Google is handing out G1 phones to most of its employees in lieu of cash, as an end of the year gift.
More firms are eliminating the 401-k matching contribution, including FedEx and Motorola.

More and more industries and their associations want a piece of the "trillion dollar"stimulus plan....After the banks and the autos, commercial real estate lenders want to be "rescued." State governments want to be rescued. Now, according to the WSJ, retailers want Obama to declare "tax-free" shopping days to stimulate consumer spending.

"The National Retail Federation called for three periods of sales tax-free shopping that would last 10 days each in March, July and October 2009. The trade group estimates that it would save consumers about $20 billion, or $175 per family.

Under the industry group's proposal, which would exclude alcohol and tobacco sales, the federal government would reimburse states for the lost tax revenue. State sales tax rates range from 2.9% to 7.25%, the group said. The five states without a sales tax -- Alaska, Delaware, Montana, New Hampshire and Oregon -- would also receive monies." (WSJ).

Looks like everyone except the taxpaying citizen wants to be bailed out...

Dollar Undermines Manufacturing Base

Today, the Newshour with Jim Lehrer on PBS featured some economists discussing, well, the economy. One of them stated that one good thing to come out of the current crisis was that manufacturing jobs will return to the U.S., and consumers here will purchase locally manufactured goods.
This optimistic view is based on rather flimsy foundations...The forecast should be based on the following:

1. One of the somewhat illogical collateral damages of the current crises is the strength of the U.S. dollar, relative to many currencies including the Euro, the Renminbi and the Indian Rupee. Of course it reflects supply and demand, but the apparent repatriation of dollars by multinationals and the flight to quality are cited as possible reasons. The unwinding of the Yen carry trade has strengthened the Yen against the dollar and the Euro, but this has been the exception. The strengthening of the U.S. dollar makes the U.S. labor force more expensive relative to that of China or India. The weakening of the U.S. dollar by some 50% relative to the RMB might have a significant impact on the labor wage differential, but the dollar strengthening against the RMB does not bode well for U.S. manufacturing.
2. The dramatic, steep plunge in oil prices. A barrel of crude is going at $37, down more than 70% from its peak just a few months ago. High oil prices increase the transportation costs for global supply chains. Oil prices at $120/barrel had some companies looking into North American manufacturing to reduce transportation costs. Current oil prices mean that transportation from Asia-Pacific to U.S. and Europe is less expensive than what it was a few months ago. Clearly this does NOT make manufacturing in Asia Pacific less attractive, and does not drive manufacturing to return to the U.S.

Another important point to note is that the U.S. consumer might have structurally changed his/her lifestyle habits, and "buy, baby, buy" might not be the mantra going forward.
Manufacturing might not return to the U.S., but then again, the mantra is very simple- Innovate or Perish... the meaning of IP....

Being More Productive...Can be Really Destructive!

An article by Reuters, "Consumers fall deeper into debt: Equifax" got me thinking about productivity. The article talks about consumer credit card debt. Some extracts...[[[ "Dann Adams, president of U.S. Information Systems for Equifax Inc, said the already high rate of personal bankruptcies could increase. "We've seen a continued ramp up of delinquencies across the board," he said. That would pile more bad debt on banks already struggling to cope with heavy mortgage-related losses.
Consumers are missing payments on mortgages, credit cards, and auto loans, Adams said, adding that Americans may be growing more reluctant to take on new debt and more willing to save. Economists have long warned that U.S. households were taking on unsustainable levels of debt, pushing the savings rate near zero. But although increasing savings and reducing debt can contribute to consumers' financial health, if Americans further tighten their purse strings now it could worsen the recession.

VICIOUS CIRCLE-What happens in this type of economy is that consumers and businesses get caught up in a vicious circle, where they fall behind on payments, banks clamp down on credit, and the economy deteriorates further.]]]

The economists quoted here are missing the fundamental point about demand, productivity and quality.
Let us take demand in a given year t for some capital equipment, like TVs.
In general, the demand D(t) = N(t) + RD(t)+ RU(t) where N is the New demand from people who currently do not own the product, RD is the demand related to Replacement of existing product because it failed or is defective, and RU is the demand related to upgrade of an existing working product.
Therefore the change in demand is
D(t+1)-D(t)= N(t+1) - N(t) + RD(t+1) - RD(t)+ RU(t+1) - RU(t)
N(t+1) - N(t), over the long term, is related to growth of population or households. In the U.S. based on Census projections, the overall growth is less than 1%
RD(t+1) - RD(t) is a key term. As QUALITY INCREASES, the percent of units that fail within a specified time period from manufactured date should decrease. For example, if 10% of TVs made in 2003 died within 5 years, the percent dying within a 5 year period for TVs made in 2008 should be less than 10%, due to increases in various quality measures.
RU(t+1) - RU(t), the UPGRADE factor, is dependent on many variables. Does a newer version offers significantly more benefits than the current one owned? It is established that major jumps in innovation do not occur with a specific periodicity. Do changes in the environment make the current unit unusable- which is the current situation with analog TVs as the broadcasters switch to Digital signals? This factor causes a limited, one time jump in upgrades. Other factors include "looking cool" and so on. However, based on my data collection, more of the young people are taking their environmental responsibilities seriously. They are extending the life of current gadgets, and doing reuse as much as possible. This big push towards being green means that people will extend the life of currently owned products, will reuse/recycle, and will reduce. Taking all these into consideration, the increase in RU should decline over time, and RU (t) itself may even decline.
All these factors indicate that demand itself should be flat or grow slowly over the long term, in general.
Now, the PRODUCTIVITY factor.
Assume that Demand D(t) is 1 Million. If one person can make 2000 per year, working 50 weeks at 40 hrs/week, this needs 500 people. If PRODUCTIVITY INCREASES by 5%, for example, while Demand increases by 1%, only 481 people are needed. In order to keep all 500 people employed, everyone has to work about 12 days less in a year, in this example. Therefore large productivity gains are a negative for employment, especially in a slow demand growth environment.
So, the message for young folks- go forth and "surf away your time!"

Inspiring...

From FT.com

"ICICI Bank, India's largest private financial institution, on Friday named Chanda Kochhar as its new chief executive, one of a growing number of women who are joining the top ranks of the sector.Ms Kochhar is a member of an elite group of women bankers in India who are running institutions including HSBC, ABN Amro, JPMorgan, UBS and ICICI's insurance arm.

The 47-year-old sari-wearing banker, who started with ICICI as a management trainee, replaces one of the country's most respected senior bankers, KV Kamath, who will become non-executive chairman....."

Ms. Kochhar is quite an amazing, impressive person. She has made many lists, including the 50 most powerful women in the world list.

Newsweek had a great article in 2007 titled "What I Learned - Whether they're running universities, political campaigns or major corporations, these 10 remarkable women have found their own ways of overcoming obstacles." Ms. Kochhar was one of the ten people. In the article, she writes ".....I have not stopped learning lessons. First, don't have fixed notions. Bankers are always typed as corporate or investment, but I have grown with the bank and helped set up every new business: infrastructure financing, commercial banking, retail credit. When I was offered retail credit, it was a totally unknown area in India. I knew as long as I was willing to learn I would be able to do it. Accept challenges; don't run away from them.

There is no substitute for hard work. You can't think that things will work out of some brilliant, fantastic analysis or some lucky break. My work required long hours: so be it. It has required that I travel so much: so be it. It has meant less sleep: so be it. You can't say "I want to be successful" yet "I will work only five days a week because the other two days I will have to be with my family." For women especially, if they really want to prosper, they have to prosper on a level playing field, not by asking for special treatment. At this level I don't think I am working for ICICI. I am ICICI, and ICICI is me. It is an immense sense of responsibility that I bring to my work.

I have learned that if things go right, as a leader you should share credit with others. If something has gone wrong, then as a leader I must own up to it. Instead of brooding, start a course correction and provide a broad shoulder to your team. That reduces the damage to morale and energy, and brings you back into action. I believe the shoulder of a leader should become broader and stronger when there is a challenge. I also make it a point when traveling abroad to wear only saris, because I don't feel the need to change my personality if I am entering someone else's boardroom. Also, if you wear a sari you stand out and get noticed. So I am not only comfortable in a sari in the World Economic Forum meeting in snowy Davos, I am proud of it as a dignified Indian outfit."

Thank you for making that last statement, Ms. Kochhar.

A Teacher In Pursuit of an Education....

A good teacher is like a candle - it consumes itself to light the way for others...Source Unknown...

I am creating a new course for the upcoming spring semester, titled 'Global Business Process Management.' My vision is to educate juniors and seniors about business processes, and using technology and other tools to achieve operational and strategic excellence. I created a rough draft of the syllabus and sent to some former students who are currently working in large successful firms to get some feedback. One replied "It looks like you will be summarizing in this course much of what I learned during my internship/1st year of employment. This introduction to business process management/improvement will not only help students interview better but lower their learning curve once on the job. Much of what you have planned to discuss I learned on the job by translating classroom discussions into business applications. (This looks like a course I would have enjoyed!)..." Another former student said " Thank you for the opportunity to review your syllabus. From an overview read, it looks like you've included most arms of a manufacturers' organizational chart. New hires who could talk/relate in these terms would certainly have a competitive advantage. Jack Welsh, GE, 6 sigma, ...these are things I learned in grad school! Week X, balanced scorecards/dashboards, is something I deliver monthly
to our VPs of grocery sales. My firm introduced a score carding standard in 2008 and I am the source of distributing it out to the sales teams. I would be happy to guest lecture on this topic..."

In a department where innovation in the curriculum is minimal, I have been pushing the envelope in creating material that will help students navigate these treacherous times. But I have to be in touch with 'reality' as defined by the 'outside' world....A tough task.

Holy Tundra- Even Toyota's Cold...While (Shop)Lifting is Hot!

Two interesting stories...

Even Toyota Will Lose Money as Car Sales Slow


As Economy Dips, Arrests for Shoplifting Soar

Hinsdale on lookout for package thieves

It is sad to see people resort to desperate measures when they are sick and cannot afford medication...social cruelty...

Family and Friends Plan-Work less, Make Less, Care Less

Back on December 11, in my post Lousy Economy deserves a French Riviera Vacation I had written that "With companies continuing to cut labor, it is just a matter of time before alternatives like shorter workweeks and work without benefits become attractive options when faced with the option of no work. Perhaps people will work less, earn less, and be happier..... The one complication is the standard of living, or the ability to afford certain lifestyles."

Today, the NYT carried an article titled "More Companies Are Cutting Labor Costs Without Layoffs" which states that "A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor. And in some cases, workers are even buying in. Witness the unusual suggestion made in early December by the chairman of the faculty senate at Brandeis University, who proposed that the school’s 300 professors and instructors give up 1 percent of their pay. “What we are doing is a symbolic gesture that has real consequences — it can save a few jobs,” said William Flesch, the senate chairman and an English professor.......The rolls of companies nipping at labor costs with measures less drastic than wholesale layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (plans to save $1 million with a week of unpaid furlough for 500 workers). There are also many midsize and small companies trying such tactics....In San Francisco, a Web design firm called Hot Studio laid off a handful of workers when the dot-com bubble burst in 2000. But the company’s owner, Maria Guidice, said the tactic was painful, and she did not want to repeat it. This time, her first step is to take away bonuses — for the first time in the company’s 12-year history — and instead give people paid time off over the holidays. “In 2000, it was like ‘cut the heads,’ ” she said of the ethos of the era. This time, she says, it feels different. “Our No. 1 priority is to keep people employed and to do that we’re going to bank the money and keep it for when we need it,” she said, adding, “I know some people are super bummed, but they understand we’re trying to keep the work force intact.” Several employees at Hot Studio said they did not mind the policy, particularly as they have heard of layoffs elsewhere in the economy. “People feel they’d much rather have a job in six months than get a bonus right now,” said Jon Littell, a Web designer......"

While I have seen this coming, being right does not make it less painful!

Planes, Trains, and Automobiles

To further buttress the point that Hank Paulson and George Bush have one set of rules for their Wall Street buddies and another set of rules for the union workers of Detroit Automakers-

MSNBC has an AP report titled "Wall Street still not downgrading to first class. Companies — some taking bailout money — still fly corporate jets." It states, in part, that "Six financial firms that received billions in bailout dollars still own and operate fleets of jets to carry executives to company events and sometimes personal trips, according to an Associated Press review.... Wall Street's reliance of the rarified mode of travel has largely escaped the scorn poured on the Big Three automakers.Insurance giant American International Group Inc., which has received about $150 billion in bailout money, has one of the largest fleets among bailout recipients, with seven planes, according to a review of Federal Aviation Administration records. "...Five other financial companies that got a combined $120 billion in government cash injections — Citigroup Inc., Wells Fargo & Co., Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley — all own aircraft for executive travel, according to regulatory filings earlier this year and interviews."

There is one thing in common between the executives of the financial and auto firms- they LOVE to take private jets, rather than take the trains and the automobiles.

MSNBC has another interesting AP report titled "$1.6 billion went to bailed-out bank execs Records show bonuses, chauffeurs, health club benefits, financial planning." Some extracts..."Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages. Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found. The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.... The 116 banks have so far received $188 billion in taxpayer help. Among the findings:The average paid to each of the banks' top executives was $2.6 million in salary, bonuses and benefits. Lloyd Blankfein, president and chief executive officer of Goldman Sachs, took home nearly $54 million in compensation last year. The company's top five executives received a total of $242 million..... Even where banks cut back on pay, some executives were left with seven- or eight-figure compensation that most people can only dream about. Richard D. Fairbank, the chairman of Capital One Financial Corp., took a $1 million hit in compensation after his company had a disappointing year, but still got $17 million in stock options. The McLean, Va.-based company received $3.56 billion in bailout money on Nov. 14. John A. Thain, chief executive officer of Merrill Lynch, topped all corporate bank bosses with $83 million in earnings last year. Thain, a former chief operating officer for Goldman Sachs, took the reins of the company in December 2007, avoiding the blame for a year in which Merrill lost $7.8 billion. Since he began work late in the year, he earned $57,692 in salary, a $15 million signing bonus and an additional $68 million in stock options. Like Goldman, Merrill got $10 billion from taxpayers on Oct. 28.The AP review comes amid sharp questions about the banks' commitment to the goals of the Troubled Assets Relief Program (TARP), a law designed to buy bad mortgages and other troubled assets..... Wells Fargo of San Francisco, which took $25 billion in taxpayer bailout money, gave its top executives up to $20,000 each to pay personal financial planners.At Bank of New York Mellon Corp., chief executive Robert P. Kelly's stipend for financial planning services came to $66,748, on top of his $975,000 salary and $7.5 million bonus. His car and driver cost $178,879. Kelly also received $846,000 in relocation expenses, including help selling his home in Pittsburgh and purchasing one in Manhattan, the company said. Goldman Sachs' tab for leased cars and drivers ran as high as $233,000 per executive. The firm told its shareholders this year that financial counseling and chauffeurs are important in giving executives more time to focus on their jobs. JPMorgan Chase chairman James Dimon ran up a $211,182 private jet travel tab last year when his family lived in Chicago and he was commuting to New York. The company got $25 billion in bailout funds..."

Talking about trains, there is an interesting article in the NYT titled "Subway Window Ads Alarm Some Riders" where the author Jennifer 8. Lee discusses the new experiment of the The Metropolitan Transportation Authority of NY- covering subway windows with ads. For starters, she reports that "As Gothamist pointed out last week, red Coca-Cola ads are now covering a number of subway windows, as part of a 30-day pilot program. They are being used on a single eight-car A train where four of the cars have ads covering their large windows (though not their door panes). None of the windows on the other four cars are covered..... Despite the M.T.A. budget shortfall, transit officials say that advertising revenue is not the main motivation for the program. Instead, the sprawling ads have a practical purpose. The first is to reduce what officials call “scratchiti,” or scratched graffiti on the windows."

Bush - using the classic FUD

FUD = Fear, Uncertainty, and Doubt.

George Bush has some clever people working for him while he himself does not display much intelligence.
Earlier this week, he and Hank Paulson kept repeating that they were considering an "orderly" bankruptcy for the auto industry. The idea being that Chapter 7 would essentially dismantle the companies, while an orderly process would keep these firms as going concerns. However, one effect of bankruptcy would be that the unions would lose their contracts and benefits, and possibly their shirts. After spreading this fear, Bush announced that he would give $13 billion right away to GM & Chrysler, with the promise of more if they come back with a "plan" and also reduce costs to that of the foreign automakers. Just a signal that the auto unions are going to be attacked, bankruptcy or not.

Bush, Obama, and others do not see the obvious issue- autos are capital assets, and the volume of automobiles that are going to be purchased in the future, per year, do not appear to support many auto manufacturers. Further, the U.S. makers do not have the product mix to support what customers want.
Everyone wants to play the Casino with someone else's money,

Not Music to My Students' Ears...

This fall, some of my students mentioned the name 'LimeWire' when discussing copyrights and music downloads. I had certainly heard of BitTorrent, but not LimeWire....

Today, the WSJ, in an article titled "Music Industry to Abandon Mass Suits," reports that "after years of suing thousands of people for allegedly stealing music via the Internet, the recording industry is set to drop its legal assault as it searches for more effective ways to combat online music piracy. The decision represents an abrupt shift of strategy for the industry, which has opened legal proceedings against about 35,000 people since 2003. Critics say the legal offensive ultimately did little to stem the tide of illegally downloaded music. And it created a public-relations disaster for the industry, whose lawsuits targeted, among others, several single mothers, a dead person and a 13-year-old girl.
Instead, the Recording Industry Association of America said it plans to try an approach that relies on the cooperation of Internet-service providers. The trade group said it has hashed out preliminary agreements with major ISPs under which it will send an email to the provider when it finds a provider's customers making music available online for others to take. Depending on the agreement, the ISP will either forward the note to customers, or alert customers that they appear to be uploading music illegally, and ask them to stop. If the customers continue the file-sharing, they will get one or two more emails, perhaps accompanied by slower service from the provider. Finally, the ISP may cut off their access altogether."
Wow! Losing Internet access as the punishment for illegal downloads! With only a handful of ISPs in a metro area (AT&T, Comcast, WideOpenWest, and perhaps Verizon in my area) one can be blacklisted across service providers. I personally respect and obey copyright laws, but the music industry has to realize that it has to look at a different business model. People are willing pay, as iTunes proves.

While talking about music, I wanted to take a trip back in time and look at the "English Rock/Pop" music of my youth...

Pre-1978 (the year when I entered the Indian Instittute of Technology, Madras)
Catch me if you can (on Mohammed Ali)
Osibisa
Jim Reeves
Billy Vaughn- Come September and Berlin Melody

1978-1983 (the year I graduated from IIT and joined Northwestern)
Pink Floyd- Dark Side of the Moon
Simon and Garfunkel- Greatest Hits
Best of Bread
Lobo
AC/DC - Back in Black
Deep Purple/Machine Head- Smoke on the Water
La Bionda
Saturday Night Fever
Bee Gees
Moody Blues

1983-1990 (year I lost my father)
10,000 Maniacs -In my Tribe (one of the greatest albums ever)
Cat Stevens
Jackson Browne - Lives in the Balance (one of the most powerful albums ever)
Los Lobos - By the Light of the Moon (a fabulous album)
Bruce - Born to Run, Born in the USA
U2 - The Joshua Tree - one of the best
Moody Blues - In your wildest dreams
Tom Petty - Free Falling and I won't back down
Dire Straits - Brothers in Arms
George Harrison - Got my mind set on you
Madonna - Like a Virgin
Bonnie Tyler - Total Eclipse of the Heart, Betty Davis' Eyes
Cindy Lauper - Girls Just Want to have Fun
Men At Work
Simply Red
Eurythmics
Traveling Wilburys I - a fabulous album

1990-2000 (the last decade of the previous century)

Cranberries - No Need to Argue - a wonderful album
Sarah McLachlan - Fumbling Towards Ecstasy
U2
10,000 Maniacs - Our Time in Eden, with the song - These are days
Natalie Merchant - Tigerlilly

Stumped!

Today, one of the local news channels reported that police forces around the country are dealing with an increasing number of incidents involving stolen Christmas trees. CNN's Fortune website also has the story.

President-Elect Obama's picks for his cabinet are proving to be quite discouraging to those who hoped that he would usher in a significantly different era. The nominations of Senator Ken Salazar of Colorado, Mr. Arne Duncan, and Gov. Bill Richardson to head the Departments of Interior, Education, and Commerce, and the nomination of former Dallas Mayor Ron Kirk, a longtime free trader, as U.S. trade representative, all raise questions regarding Obama's pledges during the campaign and his intent to fulfill them. Perhaps the selection of Mr. Salazar is the most disturbing, as it suggests that Obama is not serious about taking an aggressive approach to tackling global warming and protecting our natural environment.

It is hoped that these cabinet members act in accordance with the commitments laid out during the campaign.

Where's the Beef? In the Dead Zone in Gulf of Mexico...

A few years ago, one of the students in my Global Business course was discussing global warming and said that cutting down on beef would directly contribute to a significant reduction in carbon emissions. In her view that was the simplest change a person could make in his/her lifestyle and contribute positively towards the environment.

Today, Michael Reilly, in his Discovery News article, America's Meat Habit Feeds Gulf Dead Zone, reports that "America's taste for meat is a well-known enemy of the environment; growing feed for livestock guzzles far more oil and water, and pumps out far more nitrogen-laced runoff, than if we were all vegetarians. Now new research shows how the leftover fertilizer is contributing to an oxygen-starved dead zone where the Mississippi River drains into the Gulf of Mexico. Last summer, the zone was nearly the size of Massachusetts." Gidon Eshel of Bard College at Simon's Rock in Massachusetts and Pamela Martin of the University of Chicago calculate that if Americans kicked their meat habit, it would prevent seven million tons of nitrogen from spilling into the gulf -- a reduction of nearly 90 percent. "When we did the calculations, it was astonishing," Eshel said. "The main reason is we're feeding so much corn to livestock. It takes 4.5 times more cropland to do that than if you feed people a plant diet, and corn is so nitrogen-intensive."

Stop(s) Making Sense

Stop Making Sense...a great movie and great songs by Talking Heads.

One would expect that oil prices are negatively correlated with auto sales. Oil prices at the pump have gone from $4.30 a few months ago (in Chicago suburbs) to $1.57, down 63%. Such a massive drop within the space of nine months should result in massive increases in auto sales.......

But, this is the new reality, or the new paradigm per Alan G. and Ben B.

Chrysler will close all 30 of its manufacturing plants for a month, starting Friday, to conserve cash and match production to slowing demand, the Detroit automaker announced on Wednesday.
Ford announced it will shut down 10 of its North American assembly plants for an extra week in January due to the slumping U.S. auto market. Spokeswoman Angie Kozleski said the normal two-week holiday shutdown will be extended to Jan. 12 at all operating assembly plants except those in Claycomo, Mo., near Kansas City and the Dearborn, Mich., truck plant.

Honda Motor Co. now expects 185 billion yen ($2.06 billion) in group net profit for the fiscal year ending March 31, 2009 -- less than a third of the 600 billion yen it earned last fiscal year. Honda's worldwide vehicle sales in 2008 are expected to reach 3.77 million units, almost unchanged from 2007. Sales are plunging in the U.S. and other regions, with even previously healthy emerging markets getting battered in recent months, according to Honda. Underlining the tough times ahead, Honda President Fukui refused to set a vehicles sales target for 2009 -- an unusual move for Honda. To take responsibility for the faltering results, Honda directors will take a 10 percent pay cut and further bonus reductions are likely, he said. Earlier this month, Honda said it was pulling out of the glamorous but expensive Formula One racing to save costs and focus on its core car business. Fukui said Honda will focus on green technology, especially hybrid vehicles and small cars, to prepare for recovery in the long run. The company also trimmed annual investment spending by 60 billion yen ($674 million) to about 650 billion yen ($7.3 billion) to cut costs during hard times, including scrapping plans to introduce the Acura luxury line in Japan by 2010. Plans to develop a successor to the NSX sportscar were also canceled.Honda had already said it was cutting 760 temporary workers in Japan, or nearly 18 percent of its Japan temporary work force of 4,300. On Wednesday, Honda said another 450 temporary workers in Japan will be reduced through February.The plunging dollar, meanwhile, spells more trouble for Japan's automakers. For every yen the dollar declines, Honda loses about 18 billion yen ($200 million) in operating profit. In trading Wednesday, the dollar fell as low as 88.15 yen.To cope with sluggish sales worldwide, Fukui said Honda will halt expansion in Japan as well as abroad, including Turkey and India. With its plans to cut 78,000 vehicles, Nissan Motor Co. has now production by 225,000 vehicles over the last year, 16 percent of its initial production forecast for 1.398 million vehicles for the fiscal year.Toyota is also reducing production. In a key setback, Toyota said earlier this week that it's delaying indefinitely the start of production at its plant in Blue Springs, Mississippi. The plant had been scheduled to begin in 2010, marking the first time the gas-electric Prius hybrid would be built outside of Japan and China.
(All reports culled from AP releases)

FIVE BEN-EFICIAL IDEAS FOR BEN (BERNANKE)

Ben has been leading an all-out attack on his invisible enemies in this "financial World War III" (according to Erin Burnett of CNBC) but the situation appears to be worsening daily. Putting interest rates at 0%, and buying up all types of "worthless" mortgages and other financial assets has just made the situation worse, eroding confidence.
As long as Ben is running the printing press 24/7, here are some ideas, which, if implemented, will make our economy sky-rocket with a turbo-charged booster.

1. The Fed provides anyone who is laid-off the same annual salary as Ben.
   
2. The Fed pays everyone's health insurance premiums, and all co-pays. This includes people who are currently without any health insurance.
   
3. The Fed contributes the "match" (instead of the employer) to everyone's retirement plans- 401K, etc.
4. The Fed pays a new mother's salary for six months while she cares for the new-born baby.
5. The Fed pays the tuition of every College student.

Money spent on these initiatives will probably provide greater return than throwing it at crooked banks or at other lemons.

Hanging up on benefits...As the Economy Spirals

Companies of all ilk are hacking away at employees and benefits.

Motorola announced today that "Effective March 1, the company said, it will freeze its U.S. pension plans, which are the older-style plans that pay employees a fixed amount monthly for life after they retire. Such plans, which once were the dominant retirement package for major American corporations, have been shut down at many companies in favor of less-costly plans in which corporate workers receive annual contributions into a personal retirement fund, but don't receive lifetime benefits. Motorola emphasized that employees who have vested pension plans will receive them upon retirement; the company is simply no longer accruing future contributions to those plans.
Motorola also said that as of Jan. 1, it will stop making matching contributions to its workers' 401(k) plans. Until now, workers have made tax-protected contributions into their retirement plan and the company has provided a matching contribution, effectively doubling the workers' annual retirement set-aside. Now, however, the company is ending that match in order to save cash. "The sustained downturn in the global economy requires that we take these difficult but necessary steps," the company said."

According to the WSJ article, Jobs, Benefits: Grim Outlook By Dana Mattioli -"Employers eliminated nearly two million jobs this year, and no relief is in sight. Even for employees who keep their jobs, companies say they will take other steps to cut costs. Motorola Inc. announced Wednesday that it will suspend its 401(k) matching program and pension plan. General Motors Corp., Ford Motor Co. and Cushman & Wakefield already have suspended 401(k) matching programs. According to a survey to be released Thursday by consulting firm Watson Wyatt Worldwide Inc., 7% of 117 respondents plan to reduce matching employee 401(k) and 403(b) contributions, and 3% already have done so. In addition, 17% of respondents plan to raise employee contributions to health-care premiums, and 20% already have raised them. "When benefits are cut back or contributions are decreased, people look at it as if you cut their pay," says Jeanne Hand, senior account executive of United Benefit Consulting Inc., a benefit consulting firm that is a division of HUB International. What's more, layoff projections are looking grim. A survey conducted by the Society for Human Resource Management of 633 employers found that 25% are very likely to lay off employees in the next 12 months and 35% are somewhat likely to lay off workers. The survey, conducted at the end of October, could take into account layoffs that occurred in November and December. Similarly, the Watson Wyatt report found that 23% of surveyed companies -- representing 1.6 million workers -- plan layoffs over the next 12 months, with 39% already reducing their work force or having layoff plans in place. According to the SHRM survey, 53% of respondents plan to dismiss employees from various levels. The other respondents indicated that executives are safest from being let go, with only 1% of planned layoffs coming at the executive level. Sales positions will account for 3% of layoffs, middle management for 6%, and the majority of layoffs will hit technical and professional positions or unskilled labor positions, each accounting for 13%. Administrative positions account for another 11%. These new 2009 layoffs will overwhelm an already crowded jobs-wanted marketplace. In October, there were 3.3 unemployed people for every job opening, according to the Economic Policy Institute, a nonprofit that analyzes labor statistics. Heidi Shierholz, an economist with the institute, says this ratio could "easily increase to over six unemployed workers for every available job" if job-opening trends continue and unemployment hits 9%, as is projected by many economists. According to Challenger, Gray & Christmas, the average job search in the third quarter took nearly 4.4 months. John Challenger, chief executive of Challenger, expects this trend to worsen. In some sectors, search time is already longer. "Many people I've spoken to are celebrating their one-year anniversary of unemployment," says Robert Olman, president of Alpha Search Advisory Partners, a search firm in Roslyn, N.Y., that focuses on hedge funds and investment banks. While the auto, banking and housing industries will remain prone to job cuts, Mr. Challenger says the retail, technology and manufacturing sectors will be ripe for dismissals next year. A recent report from consulting firm Mercer LLC found that 48% of survey respondents from manufacturing and technology firms will likely reduce their work forces by significant levels; 28% of respondents from retail and wholesale firms reported layoff plans. Jo Prabhu, chief executive officer of International Services Group, a placement and consulting firm in Long Beach, Calif., is getting about 300 résumés a day, up from 100 at this time last year. "Normally a lot of people who file for unemployment are people who expect to be recalled to their jobs. That's not what's going on right now," says Lawrence Katz, an economic professor at Harvard University and a former chief economist for the Labor Department."

The pressures increase..

Making a "FED"eral Case for Free Money...

Today, the Ben's Den let out the big roar and applied the big bite....the question is whether they have bitten off more than they could chew.

From the FOMC minutes:

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent. Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further......The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time. The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.....In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent."

This is basically the Japanese style of flooding the market with money to reflate the market. The lesson learnt is that even with such low interest rates for many years, it has done very little to grow the economy, and had the really bad effect of spawning the "Yen-XYZ" carry trade- borrowing in Yen and lending in higher yielding currencies. Now the Japanese, who lent the money to American banks who then lent to U.S. residents, are losing "interest." It is also hurting their exports, as the unwinding of the carry trade means demand for local currency.

Ben is assuming and deploying immense powers- of printing paper and throwing it around, but he cannot create fundamental demand. Nor can he change the cultural shift happening in the country. Adults and children are becoming more "conservation" conscious, and more thoughtful. This game will be played out for many years to come...

Duncan...No Slam Dunk as Head Ed Guy

In perhaps the most important cabinet selection so far, PEO has chosen Arne Duncan as his Secretary of Education. I get seriously concerned when Duncan gets a ringing endorsement from the current U.S. Education Secretary Margaret Spellings, who said she believed the Chicago Public Schools chief had the necessary skills to take her place(Tribune).

In an exam I gave last week, only 1 out of 16 students could do a simple math problem that involved computing x% of y, for a set of (x,y) values. Even that one student could not complete the next question, that involved understanding these percentages.

Putting an Education "CEO" to run Education in the country, in light of the scandals and bailouts in the corporate world, is not the proper signal to send. Obama would have been wiser to choose a person like Andy Grove, the former top dog of Intel, or a person who is an Educator first and an administrator last.

Students need to be culture-shifted to focus more on acquiring solid fundamental skills and less on other stuff, like sports or even working part-time to make minimum wage money. Otherwise they will be toast....or toasted by people in other countries.

Does Capitalism Bring Out the "Crookedness" in Every One?

The spectacular actions of the Fed, the Treasury, and their equivalents around the world, clearly drive home the point that Free Market Capitalism, broadly, has failed the public. Many, including managers, are calling for more regulations and oversight.
Mr. Bernard Madoff has provided another stellar example of capitalism driven crookedness. As BBC reports, "Some of the world's biggest banks have revealed they are victims of an alleged fraud which has lost $50bn (£33bn). Bernard Madoff, who was arrested on Thursday, has been charged with fraud in what is being described as one of the biggest-ever such cases. Among the banks that have been hit are Britain's HSBC and RBS, Spain's Santander and France's BNP Paribas. Other victims include film director Stephen Spielberg's Wunderkinder Foundation charity. One of the City's best-known fund managers has criticised US regulators for not detecting the alleged fraud. Nicola Horlick, boss of Bramdean investments, told the BBC: "I think now it is very difficult for people to invest in things that are meant to be regulated in America, because they have fallen down on the job." "This is the biggest financial scandal, probably in the history of the markets - $50bn is a huge amount of money," she said. Counting the cost Banks and financial institutions across the world had investments with Bernard Madoff, but not all have yet confirmed what their potential losses might be. Among the potential losers is Spain's largest bank, Santander, which owns the UK High Street banks Abbey, Alliance & Leicester and Bradford & Bingley. The bank had a direct exposure of 17m euros ($23m; £15m), but clients of its Optimal fund management unit have another 2.3bn euros invested in the firm run by Bernard Madoff Britain's HSBC said it had investments of about $1bn, which could be affected. Royal Bank of Scotland said it could potentially lose about £400m ($601m) if all its investments had to be written off. The French bank, Natixis, a subsidiary of Caisse d'Epargne and Banque Populaire, said it could potentially lose up to 450m euros (£402m; $605m). One of the world's biggest investment groups, Man, said it had invested about $360m through its RMF institutional fund of funds business, representing 0.5% of its total funds. Banking shares fell around the world, with Royal Bank of Scotland dropping 3.7%, HSBC losing 1.2% and banks making up the top four losers on New York's Dow Jones Industrial Average. 'Systemic failure' Meanwhile, some of the biggest private losers seem to have been members of the Palm Beach country club, where many of Mr Madoff's wealthy clients were recruited. According to some reports, the list of prominent victims include a New Jersey Senator, the owners of the New York Mets and the charities run by film director Stephen Spielberg and Nobel Prize winning writer Elie Wiesel."

Bush gets a Pair of Free Shoes

From BBC...

A surprise visit by US President George Bush to Iraq has been overshadowed by an incident in which two shoes were thrown at him during a news conference.

An Iraqi journalist was wrestled to the floor by security guards after he called Mr Bush "a dog" and threw his footwear, just missing the president.

Showing the soles of shoes to someone is a sign of contempt in Arab culture.

A photo..

The way the economy is going, Bush would be well-advised to keep the pair and sell it on e-bay, if the shoes don't fit...

Culture Shock...An "Academic' Experience

After completing my doctoral thesis, I worked in industry for nearly 15 years before returning to Academia. I taught as a lecturer while I was doing graduate work, but this entailed teaching and grading courses, with none of the "overhead."
In 2003 I returned to academia full-time, and obtained my tenure earlier this year. Over the past five years I have worked with my colleagues, tenured and non-tenured faculty and staff. One of my colleagues is fond of saying that Academia could provide many case studies of how not to do things. I have been amazed at the sheer waste, of time and talent, in the holy grounds. Some of my observations follow. While the specifics are related to my particular institution, the general concepts, based on my conversations with colleagues in other schools, are fairly widespread.

• Folks having meetings without an agenda or a purpose. This is perhaps the most criminal act, resulting in a waste of time, that scarce resource.
• People attending meetings when they don't add any value, or have nothing of substance to add. This behavior is also prevalent in companies, where some managers try to appear busy by getting involved in many meetings.
• One too many committees. We actually have a Committee on Committees to staff the Committees. What a C(R)OC!
• Faculty they are legends, but in reality, they are legends in their own minds.
• Faculty are so used to "lecturing" that they can't turn it off, and ramble on and on in meetings, again wasting everyone's time.
• Faculty expect students to be "open" but do not want to share any data themselves.
• Faculty do not communicate well- some don't return phone calls or emails, and some are never around.
  
  

More to be added to this list "As Time Goes By"....Thanks, Geoffrey Palmer and Judith Dench, and others, for a wonderful series!

Detroit Automakers and Bush Legacy - A Bad Mix

According to the WSJ, "Throwing a lifeline to Detroit's ailing automakers, the White House reversed course Friday and said it would consider using the $700 billion financial-rescue plan to avert a bankruptcy of the Big Three that could deepen the U.S. recession. The announcement came hours after negotiations collapsed in Congress over a compromise bailout plan fiercely opposed by Senate Republicans. That package would have set up $14 billion in loans to the companies and a government-run restructuring process. The loans to be offered could be more limited than the $14 billion that Congress was contemplating -- perhaps closer to $8 billion, one person familiar with the situation said. General Motors Corp. would be a recipient, this person said. GM is hoping President George W. Bush will come through with about $10 billion to keep the company going. It warned Congress it needed at least $4 billion by the end of the month. It wasn't clear whether loans would be made available to Chrysler LLC, which is controlled by private equity firm Cerberus Capital Management. Cerberus came in for heavy criticism during the recent debate for not bailing out its own company. Ford Motor Co. has said all along it doesn't need a short-term lifeline, but could need help if one of its peers keeled over. The White House's intervention showed how heavily the question of the president's legacy is weighing over his last few weeks in office. White House officials worried that the collapse of one or more domestic auto company, perhaps the last crisis Mr. Bush will confront as president, could cause a surge in job losses, worsening the current recession."

The guy is now worried about his legacy?

Over a couple of decades, the U.S. automakers have funneled money to managers and shareholders and short-changed investment into new products. Lack of a desirable product mix is Detroit's main problem.

Currently, Toyota, Honda, VW, and other automakers are all reporting double digit declines (year over year) in auto sales. Once demand levels off, the fundamental questions are- what is the level, and the mix? Detroit has shown that it cannot produce innovative, low price, low cost, high quality autos. Customers are going to migrate towards these types of vehicles, and are also going to keep their vehicles longer. The bailout money really does not address these fundamental issues. Certainly executives of GM and other firms will make away with their loot, some employees will get paid, but these firms will most likely restructure and either go away or reappear in a very different form. Product mix is the problem- something short term money will not solve.

Bush Legacy? The worst President of all time, and he graduated from Yale and got an MBA from Harvard!

A Textbook "Open" and Shut Case

As a professor, I am keenly aware of the high cost of textbooks that I require of students. Over the years I have stopped using textbooks for some upper level courses, but they are still a necessity for many courses.
Yesterday I received an email from the Student PIRGs and the Make Textbooks Affordable campaign about Open Textbooks. I had been thinking about starting something along the same lines, so I was glad to see someone take the lead. The idea is to promote Open Textbooks, which can be used free of cost in a digital form, or at a low cost in printed form.
It is time I started writing my own textbook....

Make Textbooks Affordable

A Rewarding Education- updated

This fall term has been a challenging one, on many fronts. Disappointments in my personal life, difficult students, and uninspiring colleagues in my department, to name a few. While I will get my formal course evaluations in a couple of months, some students have given me feedback, and more...
These are some comments I have received from students in my Global Business, International Marketing and FYS Local Choices Global Effects (Sustainability) courses. The students truly educate me- that is the greatest reward I can get.

• Once again, your class this semester has proven to be extremely interesting and enjoyable! Thanks for all the movies clips!!
• Because of this course, I have realized that there is morecompetition than I ever realized in the international business world. Because globalization has really boomed around the world, not only do I have to compete with other college students from Illinois or the United States, but also with students from various places around the world such as India or Japan. Seeing as there are now more people competing for the same amount of jobs, there is more of an importance for me to make sure that I do well in school.
• It was very beneficial for me that current news and events were used when we were learning about different aspects of global business. Having a real-world application gives the lesson more purpose and meaning, and makes it much easier to understand. I really appreciated the interactive teaching methods used in this course, since this is how I learn best.
• The impact this course can have on an individual is very essential and must be respected. Certain aspects of this course teach building blocks that will not only be useful in other classes, but also in the business world. I have become a much more globally conscious person and a much more ready person to go out in the business world because of it. I would not just recommend taking this course as a Gen. Ed. I would suggest requiring it as it is very mind opening and enables people to think more outside the box concerning business.
• Thank you for challenging me in this class. I still have a lot to learn, but this class was a good way to start.
• Globalization of capital helped me understand the current financial crisis and the housing bubble that popped. When I would watch the news before, I could not comprehend whose fault it was. On top of that, I did not even know how it had started. The drawings on the board made perfect sense of it though. This further sparked my interest in the economic and social problems of the 2008 election. By breaking down what the candidates were saying issue-by-issue I was able to vote confidently this year.
• This class has broadened my knowledge of the business world. I don’t feel uncomfortable speaking of such dynamic topics, such as our current events. I have a new perspective and see things from the business approach now. I was ignorant when it came to business, so thank you for sharing all the information you could.
• Overall, I feel that I now have a much better understanding of sustainability and what it takes to create a sustainable community. Even if we are not successful in implementing all of our proposed changes to Elmhurst College, I have learned a lot in this class that will help me to have a more sustainable lifestyle myself.
• My favorite parts of the class however were the video clips we watched sparingly throughout the duration of the semester, our role playing assignments we did, and the guest speakers we had the pleasure of listening to. They provided me with an insight into the real business world and proved to be a lot more effective than reading it out of a textbook. They involved real stories and included real people telling us how to be successful in an increasingly competitive world. The role playing assignments my favorite of which was the one we did on the presidential candidates really gave me an insight to the way both the Republican and Democratic parties viewed our country. It was the source of my knowledge of both the Presidential candidates and really increased my level of interest in the race. Lastly, the guest speakers who either represented a successful company or was an entrepreneur who started their own real business. Their insight and lessons they taught us from real life experience are truly valuable and are still in my head. I can not thank them enough nor did I know how valuable their lessons were going to be before I heard them. You cannot replace real life experience so that fact that our own professor was a very successful business man did not hurt either. All in all everything we did as a class and everything our professor provided us really did increase my understanding of an increasingly global business world and really has better prepared me to work in it.
• In this last couple of chapters, I have seen the importance in the differences between cultures and how one should respond to those. Some might find this as a nuisance having to cater to each culture but I find this as an opportunity for a more diverse business not only in just culture but also in ideas and in thought. Also, I am now prepared to make better arguments for free trade not only in the business that I am in but also for arguments that America should be involved in free trade. I feel that this class has been more beneficial to me in my daily life then any other class I have taken thus far. I will be sure to recommend it to everyone even if it is not part of the essential classes. Usually people just hear of the negative impacts of free trade from the media but after this class, one can see the necessity of free trade in the market.
• Overall, this semester has been much more than just a class. It has helped each and every one of us realize our place in the world and how it is our responsibility to take care of it.
• This semester has greatly increased my knowledge of the global business world and prepared me to work in it. You really care a lot for your students and it shows by how much effort you have put into teaching us as much as possible. I have probably learned more information I will actually use in my career in my two semesters with you than all my other classes combined. Thanks for the great year Professor Gopal.
• By taking Business 271 with Dr. Gopal, I feel like I truly have a better understanding of the world, how it operates, and its culture.
• I think the biggest thing that I will be able to use from this class is the concept of keeping an open mind. It doesn’t matter if you are doing business domestically or globally, it is very important to always have an open mind about differences.

One that really made me happy..
***I PASSED accounting!! I didn't like the grade that I got, but I still passed! Thought I would share the great news with you!***