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Tuesday, March 31, 2009

When a promise is just words....

President Obama is talking tough on the auto industry issues. According to the NYT report,
"President Obama delivered an ultimatum to General Motors and Chrysler on Monday, telling them to adopt radical changes in short order or face bankruptcy — a move that came after a series of somber discussions in which he concluded that a controlled bankruptcy might be the best way to reorganize the two ailing auto giants. In the end, the president decided to throw the companies a short lifeline. He gave G.M. 60 days and Chrysler one month to avert bankruptcy and restructure on their own. But during that period, Mr. Obama warned on Monday, the automakers will have to drastically reshape their businesses in a way that experts say will severely shrink them. For G.M., the president’s decision means not only the loss of its chief executive, Rick Wagoner, who was forced out as part of the deal, but also some tough negotiations with the United Automobile Workers and bondholders, who have thus far balked at the company’s demands. Now the union will be asked to make even bigger concessions on a new wage and benefits contract and health benefits for retirees. The bondholders will most likely be forced to accept a deep discount on the price of their debt as well as agree to take G.M. stock in lieu of debt repayments."

One can understand bond holders taking a bath. After all, bond holders risk their principal for a return. Suppliers also take a risk when selling and receiving IOUs. But the retirees who worked at GM were promised pensions and/or health insurance. While Rick Wagoner and other management personnel shovel away millions (Rick is getting $23 million in payments after getting fired) the retirees are asked to take on a burden when they are no longer working. Obama is in fact encouraging this breach of promise, saying that the automakers have to be lean. He has not said that management needs to be hacked and paid a lot less, but has said that, in effect, the workers have to agree to lower wages.
The moral fabric of the country is being ripped apart. More frustration, and violent reactions, are to be anticipated.

Monday, March 30, 2009

Some stuff doesn't change

Obama is making a big deal out of the announcement that Rick Wagoner of GM is stepping own. Mr. Wagoner will not receive a severance payment but instead will get a pension and other benefits worth about $23 million, to be paid in installments over the rest of his life, according to Equilar, a compensation consulting firm. (NYT).
The government is going to assume the warranty expenditures...
And people keep claiming that the government is broken!.

Turkish Delight - Optimism

Reflecting on my trip to Turkey, I was struck by the optimism in the country. The businesspeople feel that there were not too many excesses, so they expect the downturn to be mild. Further, the older generation seems to be very positive on the younger generation, and the efforts being put into education. Education, of the kind that produces thinkers, scientists and engineers, will certainly help the country progress and prosper. I did not come across anyone who wanted to major in finance.

A great trip to a great city and great country. I am looking forward to another trip to Istanbul.

Friday, March 27, 2009

It's called Gambling in Las Vegas, Investing on Wall Street

Betting, Investing or Gambling?

The words used to describe different activities (often with the same underlying principles) to make some appear more scientific or valid or legitimate than others is fascinating.
One example is to classify the financial activities as "Investing" and bets in Las Vegas as gambling.
As people have seen their retirement accounts shrink dramatically the question being is asked is about investing, and the advisors are recommending "long-term" investing. At its core, investing and gambling are not different, they are the same. One plays the game for entertainment. It should not be assumed that investing, short or long-term, guarantees principal, let alone return on principal.

Stocks: Is It Time to Start Betting on a Recovery?


Companies of all sizes, under financial pressure, are "retrenching on the 401(k) front," says Alicia Munnell, director of the Center for Retirement Research at Boston College. GroupGeneral Motors, (GM) Eastman Kodak, (EK) FedEx (FDX) and Sears Holdings (SHLD) are among the companies that have suspended their 401(k) contributions, according to the center.A survey released Wednesday by research and consulting company Spectrem Group says 29% of employers intend to reduce or eliminate contributions to "defined-contribution retirement plans" in the next 12 months.While the survey has a large +/- 8 percentage point margin of error, other surveys back up the dire forecast.A mid-February study by employment consulting company Watson Wyatt Worldwide found that 12% of 245 large companies have already cut their 401(k)/403(b) matches — and another 12% plan to do so in the next 12 months.Most workers are unprepared to fund retirement.Using data from the Federal Reserve's 2007 Survey of Consumer Finances, which was published before the financial crisis, Munnell pegged the median 401(k) balance for those approaching retirement at $60,000.Given the stock market turmoil, those retirement funds are likely only worth about $40,000 now, she says.


Thursday, March 26, 2009

What an amazing experience..

Today we arrived in Konya and visited an all girls school.Guventas. The warmth and the energy of the students was infectious! This was the highlight of our trip!

Wednesday, March 25, 2009

Really FED up..

Looks like the Fed is moving faster on its buying binge.

From Bloomberg:

The Federal Reserve bought $7.5 billion of Treasuries in the first outright purchase of U.S. government debt by the central bank to keep consumer borrowing costs low since the 1960s.Thirteen of the 19 securities maturing from February 2016 to February 2019 listed for possible acquisition were bought, the Federal Reserve Bank of New York said in a statement today. It is the first step in a six-month program to buy up to $300 billion in Treasuries.The Fed joins central banks in the U.K. and Japan in extraordinary purchases of government debt, broadening efforts to unfreeze credit and end the recessionafter cutting the benchmark interest rate close to zero. Policy makers announced the decision to buy the debt last week along with a plan to more than double purchases of housing debt to $1.45 trillion, hoping to reduce rateson home loans.“This is the beginning of a program that should start to help to keep five- to 10-year Treasury yields lower than otherwise and at least partially pass through into private borrowing rates,” said Brian Sack, vice president at Macroeconomic Advisers LLC in Washington and a former Fed economist. “The question is whether the purchases will be enough to outweigh the large amounts of supply in the pipeline.”


China’s call for the creation of a new international reserve currency
may signal its concern at the dollar’s weakness and ambitions for a leadership role at next week’s Group of 20 summit, economists said.Central bank Governor Zhou Xiaochuanthis week urged the International Monetary Fund to expand the use of so-called Special Drawing Rights and move toward a “super-sovereign reserve currency.” The dollar weakened after the Federal Reserve said that it would buy Treasuries and the U.S. government outlined plans to buy illiquid bank assets.
****
Czech Leader: U.S. Recovery Plan Is 'Way To Hell'
: In the tell-us-what-you-really-think department, Czech Republic Prime Minister Mirek Topolanek called the U.S. recovery plan "a way to hell," CNN is reporting.Topolanek may have reason to be bitter: his government collapsed yesterday after an embarrassing vote of no-confidence. The Czech Republic currently holds the rotating office of the presidency of theEuropean Union, but Topolanek's comments significantly break ranks with the rest of Europe.Topolanek said the Obama administration is following the same mistakes made by FDR that lengthened and worsened the Great Depression -- a view held by some U.S. free-marketers and political conservatives.The Czech p.m. said he is "quite alarmed" at Treasury Secretary Tim Geithner's toxic asset plan."He talks about a large stimulus campaign by Americans," Topolanek said. "All of these steps, their combination and their permanency, is a way to hell."

Tuesday, March 24, 2009

The Baklava of EU

Today we had an interesting meeting with the journalists of Zaman Daily in Istanbul. The Director explained how the country felt that it has been jerked around by the EU and whether the latter would ever accept Turkey. It would be interesting to see if the "perception" of Turkey's people that the EU is a 'Christian club that does not want a Muslim country' is made realistic.

In response to my question about changes internally in Turkey, the Director of the paper said that education is the big change. Many more students are getting educated, and more good schools, colleges and Universities have opened for students. This bodes well for the country.

Sunday, March 22, 2009

Watering down the basic rights...eruptions occur

Air to breathe, Water to drink....these are basic needs. The conference on Water in Istanbul yielded interesting comments
****
A week-long international conference ended Sunday in Istanbul with a statement that recognizes access to safe drinking water as a "basic human need," but not a "human right," as some delegates had proposed. The statement, coinciding with the United Nations' World Water Day, was issued at the end of a three-day ministerial meeting at the 5th annual World Water Forum in the Turkish city. "We acknowledge the discussions with the UN system regarding human rights and access to safe drinking water and sanitation. We recognize that access to safe drinking water and sanitation is a basic human need," the statement said. Dissenting countries challenge declaration The lack of binding protocols at the forum, held every three years to safeguard the world's freshwater supplies, prompted about 20 dissenting member countries to issue their own declaration, defining safe drinking water as a human right. Countries that tried to beef up the wording of the official statement were blocked by Brazil, Egypt and the United States, Agence France Presse reported.
***

Scientists sailed Thursday to inspect an undersea volcano that has been erupting for days near Tonga -- shooting smoke, steam and ash thousands of feet into the sky above the South Pacific ocean. Spectacular Pictures

Amazing City

Today was a fascinating day for us, in Istanbul. The tour guide Ikud was very educational. Saw the Blue Mosque, the Cistern, the Topkapi Palace, and the Hagia Sophia church.

The recession does not seem to be hurting Turkey too much.;

Saturday, March 21, 2009

This is no Turkey

Had an interesting day. From the departure at ORD to the arrival at Istanbul...met Minita who is a student from Ohio state. Made the Turkish airline apologize to her for a gaffe. Met plenty of jerks on the flight. Came to Istanbul and had a long evening trying to get everything sorted out.

Looking forward to tomorrow.

Friday, March 20, 2009

White House to Green House

Green being the premier word of choice these days, the White House is also becoming a Green House. Michelle Obama is working on a vegetable garden on the White House grounds.

This is a good start. Hopefully the Obama family will embrace more eco-friendly choices in their White House stay.

I am thinking about our course on Sustainability and the modifications we need to make for Fall.

So much to do, and so much to learn!

Thursday, March 19, 2009

FedExpress stuck in a slow lane..Cisco flips for Flip

FedEx Corp. said Thursday it plans to cut more jobs and trim wages again, as the company reported its fiscal third-quarter profit tumbled 75 percent on severe weakness in the global economy.

FedEx is a broad barometer of the global economy.

Cisco Systems, whose router sales growth is slowing significantly, paid nearly $590 million for Pure Digital, maker of Flip digital video-cameras. Incidentally, I was mentioning Flip in my marketing class yesterday and explaining why these devices command a significant market share- video-cameras for dummies.

Wednesday, March 18, 2009

Protection....Does it work?


China rejected a $2.4 billion bid by Coca-Cola Co.
for one of the country's largest juice makers -- dealing a blow to Chief Executive Muhtar Kent's campaign to accelerate his company's push beyond soda in a critical market. The Commerce Ministry's finding, that the purchase could crowd out smaller companies and raise consumer prices, also risks having a chilling effect on foreigners looking to make other deals in China, lawyers and investment bankers said. Coke's attempt to buy China Huiyuan Juice Group Ltd. was part of Mr. Kent's broader strategy to push more aggressively into the fruit-juice business globally. Coke had been trying to parlay its high-profile sponsorship of the Beijing Olympics last summer into greater commercial success as U.S. sales slow. China is Coke's fourth-largest market by volume, after the U.S., Mexico, and Brazil. Mr. Kent, who became CEO in July, had a lot riding on the deal and now must find another way to grab a larger share of the fast-growing Chinese juice business. Juice sales in China rose 89% by volume from 2004 through last year, while soda sales rose 42%, according to research firm Euromonitor International.

****
From WSJ - Mexico Issues Tariff List in U.S. Trucking Dispute : Mexico detailed its new tariffs on U.S.-made goods, roughly 90 products ranging from food staples such as potatoes and apricots to an eclectic mix including deodorant and Christmas trees.

Some of the U.S. Products to Face Import Tariffs Into Mexico

Christmas trees20%
Onions10%
Peeled onions20%
Pears20%
Cherries20%
Potatoes20%
Soy sauce20%
Soup, broth and stew mixes, and prepared stew, broth and soups10%
Mineral water20%
Sunflower seeds15%
Products for manicures and pedicures15%
Shampoo15%
Toothpaste15%
Deodorants and anti-perspirants15%
Statuettes and other decorative articles20%
Notebooks10%
Curtain rods20%
Coffee makers20%
Waste from batteries, rechargeable batteries, chargers20%
Sunglasses15%

The specific goods, a combined $2.4 billion in exports to Mexico in 2007, mostly face import duties of 10% to 20% of their value. Fresh grapes will face a 45% tariff, by far the highest. Mexico said Monday it will levy the tariffs in retaliation for the recent shutdown by Congress of a pilot program that allowed some Mexican truckers to operate on U.S. highways. Mexico might increase the number of products it has slapped tariffs on if this first retaliatory round doesn't produce results, Beatriz Leycegui, deputy minister for foreign commerce, said Wednesday.

The biggest Ponzi scheme of all- Fed on a Treasury Hunt!

Bernie Madoff is sentenced to jail for running a Ponzi scheme with other people's money.

Today the Fed's Bernanke announced one of his own. The Fed is going to buy long-term U.S. Treasuries. So the government exchanges one type of paper (Treasuries) with the Fed for another type of paper, dollars, and this is supposed to increase the economic fundamentals? If the fed did not buy the Treasuries, the long-term rates would be higher, as they should be when a government goes on a spending binge like a drunken sailor.

Fed to Buy $1 Trillion in Securities to Aid Economy

...."But to the surprise of investors and analysts, the committee said it had decided to purchase an additional $750 billion worth of government-guaranteed mortgage-backed securities on top of the $500 billion that the Fed is already in the process of buying. In addition, the Fed said it would buy up to $300 billion worth of longer-term Treasury securities over the next six months. That would tend to push down longer-term interest rates on all types of loans.All these measures would come in addition to what has already been an unprecedented expansion of lending by the Fed. The central bank also said it would probably expand the scope of a new program to finance consumer and business lending, which gets under way this week. In effect, the central bank has been lending money to a wider and wider array of borrowers, and it has financed that lending by using its authority to create new money at will. Since last September, the Fed’s lending programs have roughly doubled the size of its balance sheet, to about $1.8 trillion, from $900 billion. The actions announced on Wednesday are likely to expand that to well over $3 trillion over the next year."

Tuesday, March 17, 2009

How much should one person gain from another person's suffering?

This is the question I always ask in class when discussing pricing, especially of pharmaceutical drugs.
Today, I read in the NYT that "Citigroup gave Vikram S. Pandit, its chief executive, a compensation package valued at more than $38.2 million for 2008, even as the bank posted five consecutive quarters of multibillion-dollar losses and turned to the government three times for help.

Mr. Pandit’s compensation, disclosed Monday in Citigroup’s proxy statement, stems largely from stock and option awards that were part of his starting package last year and comes on top of the nearly $80 million he earned from selling his hedge fund to Citigroup in 2007.

The value of his stock and option awards has since fallen sharply with the price of Citigroup’s shares and, adjusted for Friday’s closing price of $1.78, it would be worth about $2.9 million, according to Equilar, an executive compensation firm.

Mr. Pandit, who declined a 2008 bonus, has said he would accept a base salary of $1 until the company returns to profitability.

Also, according to the proxy, James A. Forese, a co-head of Citigroup’s markets division, received $20.9 million in stock and cash bonus awards. Stephen R. Volk, a Citigroup vice chairman, was paid more than $13 million. Ajay Banga, who oversees Citigroup’s Asian operations, was awarded $10.9 million. Gary L. Crittenden, the chief financial officer who also declined a 2008 bonus, was paid about $10.6 million, largely from guaranteed stock awards to make up the difference of what he left behind at American Express."

The fact that the stock price declined since the bonus was awarded makes no difference- when the bonuses were granted they were valued as reported. Citi is one of the blighters on the landscape that made away with a lot of taxpayer money.

Wow! Faking an Outrage....

Everyone from Obama to the writers in NYT and WSJ are expressing outrage at

  1. The $165 million bonus payments made by AIG to its employees...Seventy-three employees were paid more than $1 million in the latest bonuses at the insurance giant American International Group, according to the New York attorney general, Andrew M. Cuomo. Of course, the names of these people were not released. Apparently these million dollar babies had no qualms stealing money from the public.
  2. The parties that got big chunks of the $180 billion bailout money that was given to AIG.
    Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion). Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion). A.I.G. also named the 20 largest states, starting with California, that stood to lose billions last fall because A.I.G. was holding money they had raised with bond sales. In total, A.I.G. named nearly 80 companies and municipalities that benefited most from the Fed rescue, though many more that received smaller payments were left out. WOW! A BIG SURPRISE! Hanky Panky Paulson using public taxpayer money to benefit his own stake and bail out his buddies at Goldman and other banks. Corruption at its finest! Bangladesh does not even come close.

DSP at work- Darwinism, Socialism, Protectionism,

Interesting news pieces.

Joining a wave of public anger, President Barack Obama blistered insurance giant AIG for "recklessness and greed" Monday and pledged to try to block it from handing its executives $165 million in bonuses after taking billions in federal bailout money. "How do they justify this outrage to the taxpayers who are keeping the company afloat?" Obama asked. "This isn't just a matter of dollars and cents. It's about our fundamental values."Obama aggressively joined other officials in criticizing American International Group, the company that is fast becoming the poster boy for Americans' bailout blues.The bonuses could contribute to a backlash against Washington that would make it tougher for Obama to ask Congress for more bailout help — and jeopardize other parts of the recovery agenda that is dominating the start of his presidency. Thus, the president and his top aides were working hard to distance themselves from the insurer's conduct, to contain possible political damage and to try to bolster public confidence in his administration's handling of the broader economic rescue effort.


United Airlines is preparing to outsource some international flying, a move likely to spark an uproar as the carrier opens contract talks with its pilots April 9. Other U.S. carriers and their unions are closely watching a venture being created by Chicago-based United and Aer Lingus that will use non-union crews on new flights from Washington-Dulles International Airport to Madrid, set to begin in March 2010. The carriers plan to add service to two other cities in 2011. United will provide marketing muscle to the partnership as well as passengers from Dulles, its second-largest hub. The Irish carrier will contribute three new Airbus A330 jets to the Europe-based venture and recruit pilots who aren't employees of either airline to fly them.

Brazil's president calls on businessmen to help convince US to lift tariffs on ethanol fuel
NEW YORK (AP) -- Brazil's President Luiz Inacio Lula da Silva on Monday implored American businessmen to help convince the United States to lift the 53-cent-per-gallon import tariff it places on his country's ethanol fuel.Speaking at a Wall Street Journal-sponsored investor forum Monday, Silva defended the gasoline alternative as a cheap and easy way to end dependence on foreign oil and help reduce global poverty."I've spoken (about the tariffs) so many times with President Bush and certainly I will speak about it many times with President Obama," Silva said. "That's why I'm asking for your help."Brazil is a world leader in biofuels and the world's largest exporter of ethanol.But Silva, who met with President Barack Obama on Saturday, has made little progress persuading the U.S. to reduce the tariffs, which are in place to protect American farmers who make ethanol from corn. Brazil makes ethanol from sugar, in a process that is much more efficient and costs less."One thing that leaves me perplexed, is in the same world where we invest in environmental policy capable of avoiding global warming ... many countries still don't place any tariff on polluting fuels while they place absurd tariffs on ethanol," Silva said, pointing out the ethanol burns relatively cleanly compared to gasoline.During the presidential elections, Obama supported subsidies for the Midwest-based ethanol industry.That support is widely considered a factor in his victory at the Iowa cauceses which boosted his early prospects during the primary. It also contributed to his victory in the general elections against John McCain, who opposed the subsidies.In Brazil, all gasoline is blended with 25 percent ethanol and so-called "flex-fuel" cars can run on either the gasoline-alcohol mix or pure ethanol available at about 35,000 filling stations across Brazil.About 23 percent of Brazil's automotive fleet is now "flex-fuel.

Sunday, March 15, 2009

Getting Dirty....Garden Dirty.

We have been growing vegetables and fruits in our yard for ten years now.
Today this article by AP was featured on Yahoo..

Dollars from dirt: Economy spurs home garden boom
In the green: Gardening industry sees boom as families grow own veggies to save on groceries
LONG BEACH, Calif. (AP) -- With the recession in full swing, many Americans are returning to their roots -- literally -- cultivating vegetables in their backyards to squeeze every penny out of their food budget.Industry surveys show double-digit growth in the number of home gardeners this year and mail-order companies report such a tremendous demand that some have run out of seeds for basic vegetables such as onions, tomatoes and peppers."People's home grocery budget got absolutely shredded and now we've seen just this dramatic increase in the demand for our vegetable seeds. We're selling out," said George Ball, CEO of Burpee Seeds, the largest mail-order seed company in the U.S. "I've never seen anything like it."


The best job in the Universe..

Sunday March 15, 2009 7:30-9:00 PM

This evening I went to a senior voice recital by one of my graduating students, JB. He put together a highly challenging program including compositions of Handel, Mozart, Gilbert & Sullivan, Gershwin, and Verdi, and delivered a magnificent performance. It was a very enjoyable evening. I was delighted to meet JB's parents who were very gracious and thanked me for playing the role of a mentor and a friend for their son. These moments really make my job worthwhile, and enable me to put up with all the political garbage that goes on in any organization.

**
A note from a former student:

Dear Dr. Gopal: Did anyone tell you that you see people's values very clearly? That is a rare and good asset.

Saturday, March 14, 2009

Two sides: Obesity and Malnutrition...

India, always a country of contradictions! A country with many dollar or rupee billionaires...but very few 'character' millionaires.

As Indian Growth Soars, Child Hunger Persists By SOMINI SENGUPTA NEW DELHI — Small, sick, listless children have long been India’s scourge — “a national shame,” in the words of its prime minister, Manmohan Singh. But even after a decade of galloping economic growth, child malnutrition rates are worse here than in many sub-Saharan African countries, and they stand out as a paradox in a proud democracy. China, that other Asian economic powerhouse, sharply reduced child malnutrition, and now just 7 percent of its children under 5 are underweight, a critical gauge of malnutrition. In India, by contrast, despite robust growth and good government intentions, the comparable number is 42.5 percent. Malnutrition makes children more prone to illness and stunts physical and intellectual growth for a lifetime. There are no simple explanations. Economists and public health experts say stubborn malnutrition rates point to a central failing in this democracy of the poor. Amartya Sen, the Nobel prize-winning economist, lamented that hunger was not enough of a political priority here. India’s public expenditure on health remains low, and in some places, financing for child nutrition programs remains unspent. Yet several democracies have all but eradicated hunger. And ignoring the needs of the poor altogether does spell political peril in India, helping to topple parties in the last elections. Others point to the efficiency of an authoritarian state like China. India’s sluggish and sometimes corrupt bureaucracy has only haltingly put in place relatively simple solutions — iodizing salt, for instance, or making sure all children are immunized against preventable diseases — to say nothing of its progress on the harder tasks, like changing what and how parents feed their children. But as China itself has grown more prosperous, it has had its own struggles with health care, as the government safety net has shredded with its adoption of a more market-driven economy. While India runs the largest child feeding program in the world, experts agree it is inadequately designed, and has made barely a dent in the ranks of sick children in the past 10 years. The $1.3 billion Integrated Child Development Services program, India’s primary effort to combat malnutrition, finances a network of soup kitchens in urban slums and villages. But most experts agree that providing adequate nutrition to pregnant women and children under 2 years old is crucial — and the Indian program has not homed in on them adequately. Nor has it succeeded in sufficiently changing child feeding and hygiene practices. Many women here remain in ill health and are ill fed; they are prone to giving birth to low-weight babies and tend not to be aware of how best to feed them.

India Prosperity Creates Paradox; Many Children Are Fat, Even More Are Famished By SOMINI SENGUPTA Presenting a confounding portrait of child health in India, new research commissioned by the government finds that despite the economic advances of recent years India's share of malnourished children remains among the worst in the world. Paradox being pervasive in this country, the new data on child malnutrition comes even as public health officials confront what they call alarming levels of childhood obesity. In short, while new money and new foods transform the eating habits of some of India's youngest citizens, gnawing destitution continues to plague millions of others. Taken together, it is a picture of plenty and want, each producing its own set of afflictions. Consider the statistics from Delhi, one of the country's most prosperous states and the seat of the capital. A recent study conducted by the Delhi Diabetes Research Center among schoolchildren ages 10 to 16 found nearly one in five to be either overweight or clinically obese. At the same time, preliminary figures from the latest National Family Health Survey showed one in three children under the age of 3 to be clinically underweight, the most reliable measure of malnutrition. Most vexing, especially for the government, is that the preliminary findings of the national survey, conducted in 2005-6, suggest that India's share of malnourished children seems to have declined only modestly since the last national survey seven years ago.

Innovation...An Advisor wises up!

It is that time of the year, when my advising season starts. In our College students have to meet with their advisors before registering for the upcoming semester. I carry a big burden- I have nearly sixty advisees. When you are good, everyone wants you. Each student takes about 1/2 hr, which means that this advising takes up nearly 30 hours over the next three weeks.
Every semester I put a sign-up sheet on my door. Students come and select the time slot to see me for advising. Every faculty member does it similarly. This term, finally, I am using an online scheduling system. I had been planning to use one for more than two years, but the start-up effort was a big barrier. I bit the bullet this time.
We will see how it works, but so far the comments have been positive...

***

I think signing up for advising online is a great idea! It's so convenient and "green." I am also going to get a reminder e-mail 24 hours before my time slot which will be very helpful. MS.

I just finished using it and it was really easy. I think it's a great idea because for some people it might be hard to find time to go sign up at your door when the building is open. It was really fast and easy to use- it took me less than 2 minutes, which is less time than it would have taken me to walk over to your office...CM.
I really liked it! I would definitely implement it into setting up scheduling times. It was easy to use and is nice to be able to do from our computers. KC.

I scheduled an appointment and it seemed to work. I'll see you then...TS

Friday, March 13, 2009

Chinese Premier is Worried...He should be glad he is not in the U.S.

China, the U.S. government’s largest creditor, is “worried” about its holdings of Treasuries and wants assurances that the investment is safe, Premier Wen Jiabao said. “We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

As the recession deepens, doctors and hospitals are reporting that hard-pressed patients are deferring elective surgery, like knee replacements and nose jobs, even as others are speeding up non-urgent procedures out of fear that they may soon lose their jobs and health insurance.

Interesting note from the Irish:
The government has told seven state-insured banks that its top executives must be paid euro500,000 ($645,000) or less from now on as part of the deal, the Finance Department announced Friday.

Thursday, March 12, 2009

Everybody's aTwitter with short bites, but where will we get the depth?

These days one cannot read any paper or magazine without coming across a piece on Twitter, the "micro /messaging/blogging/socializing" service. Based on my experience and my readings, Twitter can

  • boost one's ego by creating a following
  • get a user answers or suggestions in response to a query
  • let one post pictures of action or events quickly
  • let one post inane stuff
Many news reporters, news analysts, anchors, etc. are now Twittering. Obama appeared cool because he was using online social networking while campaigning.

While Facebook and Twitter are growing fast and adding lots of users, news"papers" are a dying breed. Chicago Tribune is in bankruptcy. The NYT, McClatchy Co ( publisher of 30 daily newspapers, including The Miami Herald, Sacramento Bee and Anchorage Daily News), USA Today publisher Gannett Co Inc., and many others have been slashing jobs and dividends in order to survive. How should we look at this situation?

The myth of giving or getting 'something for free' on a societal scale has to be broken. Facebook, Twitter, and other online sites that provides services without charging consumers expect to make money through advertising. Three are possible:
  1. Total Ad spending remains constant but the mix/ad medium shifts from paper ads / Google ads to Facebook/Twitter ads. If this happens, consumers might not pay higher prices for goods and services, but they are supporting the "shift" of resources. Part of these resources today support the journalists who gather information, report and write interesting stories, and provide analysis.The resource shift will do away with these workers- instead we will have everyone twittering- a lot of noise through which one has to find the tune.
  2. Ad spending will grow, and more money will be spend on the social networking sites in addition to ads on paper and TV. This scenario appears unlikely. If it happens, one can assess the value these social networking sites provide, because consumers will have to fork out more ad dollars when they purchase goods and services. If the price of cereal is raised by a few cents (which go to pay for ads on Twitter) will consumers balk?
  3. Total Ad spending declines and the mix shifts. This is an interesting scenario, because it could argue that the dollars that are not spent in advertising can be directed somewhere else.
The basic point is that it is better for society if people paid for services used, rather than getting them for free, but paying for them in a different way. Newspapers should not be giving away their content for free, and Facebook/Twitter should be charging for their services. It is ironic that when the airlines are going completely a la carte, charging extra for seats, food, luggage, and air, these online sites are giving more away for free.
Land of the Free, but certainly home of the Unfree...

Wednesday, March 11, 2009

Reduce, Reduce, Reduce...before Recycle

Two articles I read today made me cry...

Ocean Conservancy Report: Volunteers Remove Seven Million Pounds of Trash from the Ocean, Lakes, Rivers and Waterways in World’s Only Country-by-Country, State-by-State Analysis of Marine Debris. Report provides a roadmap for eliminating marine debris altogether by reducing it at the source, changing behaviors that cause it, and supporting debris prevention policies.

From the release:

The 2008 International Coastal Cleanup, by the numbers:
This year, 104 countries and locations participated in the Cleanup, a more than 30 percent jump in the number over 2007 -- a powerful demonstration that awareness of the marine debris problem is surging around the globe.
About half of the 390,881 volunteers were from the U.S.; the Philippines, Canada and Japan had the greatest volunteer turnout internationally.
443 animals were found entangled or trapped by marine debris, of those, 268 were found alive and released.
Volunteers removed 6.8 million pounds of debris the weight of 18 blue whales.
Volunteers collected 11.4 million items in all, from cigarette butts to grocery bags to food wrappers.
Volunteers tracked 43 items during the Cleanup; the top three most frequently found items were cigarette butts, plastic bags, and food wrappers/containers. The Top 10 items have remained the same over the past five years.
Volunteers collected 1,362,741 cigarette butts in the United States; 19,504 fishing nets in the United Kingdom; and 11,077 diapers in the Philippines information that can help planners at the local, regional, national, and international levels tackle specific marine debris problems.
Our report shows the same percentage and types of items found along the ocean were found in inland waterway cleanups. According to the Environmental Protection Agency, more than 50 percent of marine debris starts out on land, reinforcing the land-sea connections we all share.

Among the report’s other findings:
Every year, thousands of marine mammals, sea turtles, seabirds, and other animals are sickened, injured, or killed by trash in our ocean. Leaky paint cans, empty yogurt cups, and abandoned fishing gear can lead to entanglement and suffocation of wildlife. Ingested trash can also cause choking, blockage of the digestive system, or toxic poisoning.
Keeping our ocean free of trash is one of the easiest ways we can help improve the ocean’s resilience as it tries to adapt to the harmful effects of climate change such as melting ice, rising sea levels, and changing ocean chemistry. From wildlife like endangered sea turtles and the Hawaiian monk seal to biologically rich ecosystems like coral reefs, life in the ocean will be healthier, more resilient and better able to adapt to climate change in the absence of debris-related impacts.

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"China’s Big Recycling Market Is Sagging" By DAN LEVIN

“Even trash has become worthless,” Mr. Tian said recently as he made his way to a collection center, his sacks nearly bursting.

Sorting through discarded calligraphed sheets of Chairman Mao’s poems, she added, “China now has more garbage than it can digest. Do we really need America’s junk, too?”

Giving Due Credit to President Lula

Over the last eight years, there is perhaps no head of state who has done a better job than President Luiz Inácio Lula da Silva of Brazil. He should be given the Nobel Prize for governing.

On the eve of his visit to the U.S., the Financial Times printed an Op-Ed from President da Silva.
It is worth reading. He concludes by writing, "But, above all, I hope for a world free of the economic dogmas that invaded the thinking of many and were presented as absolute truths. Anti-cyclical policies must not be adopted only when a crisis is under way. Applied in advance – as they have been in Brazil – they can be the guarantors of a more just and democratic society.As I said at the outset, I do not give much importance to abstract concepts. I am not worried about the name to be given to the economic and social order that will come after the crisis, so long as its central concern is with human beings."

The WSJ also has an article about the Brazilian President, titled "Brazil's da Silva Warns Against Protectionism." The article says that "Mr. da Silva's unlikely rise to power -- he was a school dropout and industrial worker who lost a finger in a factory accident -- gives him enormous reservoir of good will in a region with a deep divide between rich and poor. Relations between the U.S. and Brazil, though good, are relatively underdeveloped. The cornerstone is an agreement to develop biofuel technology, a Brazilian area of expertise. Mr. da Silva's impoverished background has raised expectations that he will be able to forge an especially productive relationship with Mr. Obama, whose own background didn't presage power." The Brazilian was effusive in his praise for the U.S. president. "I pray for Obama more than I pray for myself," Mr. da Silva said. "Bush's policies toward Brazil were dignified. But I think they can be infinitely better with Obama."

Mr. da Silva's disdain for investment banks is rooted in the aftermath of his 2002 election, when U.S. and European investment houses led a rout on Brazilian bonds, predicting Mr. da Silva would wreck the economy. Brazil's economy has remained on solid footing, and its financial system is intact. Indeed, Mr. da Silva said the crisis offered an opportunity to create an economy where Wall Street financiers play a smaller role. "The world will be less false," Mr. da Silva said. "The economy that will count is the one that produces corn, rice, a screw, a car, a suit, a watch."


Tuesday, March 10, 2009

Finding peace, piece by piece.....

In this time of crisis, the folksy folks are trying to use the war metaphor, again.

George Bush did it with his 'war on terror' approach. He spent more than a trillion dollars fighting this 'phantom' enemy, and ended his reign with not much to show for it.

Warren Buffett, talking about the current economic crisis, said he believes patriotic Republicans and Democrats will realize the nation is engaged in an economic war.“What is required is a commander in chief that’s looked at like a commander in chief in a time of war,” Buffett said. We need to come up with a moniker for this one...
War on Peace
Economy War
McWar on Mconomy

Monday, March 09, 2009

Conspicuous Consumption...Conspicuously Absent everywhere Except at the Government

Today the NYT ran an interesting piece titled "Conspicuous Consumption, a Casualty of Recession." The word "casualty" implies a negative aspect, a victim, but the article includes pieces like this...“I think this economy was a good way to cure my compulsive shopping habit,” Maxine Frankel, 59, a high school teacher from Skokie, Ill., said as she longingly stroked a diaphanous black shawl at a shop in the nearby Chicago suburb of Glenview. “It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well being of my family. I’m just not seeking happiness from material things anymore.”

From Bloomberg:

Americans are fearful, confused and changing their buying habits, which is showing up at Berkshire’s operating units, Buffett said during an appearance on the CNBC television network today. U.S. stocks fell after Buffett’s comments, following the worst weekly slump in the Standard & Poor’s 500 Index since November. “We are doing things now that are potentially very inflationary,” Buffett said. He called on Congress to unite behind President Barack Obama, comparing the economic crisis to a military conflict that needs a commander-in-chief. “Patriotic Americans will realize this is a war,” he said.

Also from Bloomberg:
Investor Jim Rogers said the Federal Reserve will probably start buying Treasuries to keep borrowing costs down, postponing a rout in U.S. government debt. Fed Chairman Ben S. Bernanke said March 7 the central bank will use “all the tools” available to revive economic growth, indicating the central bank is closer to buying, Rogers said. Record government borrowings will lead to losses later, said the chairman of Singapore-based Rogers Holdings and author of the books “Hot Commodities” and “Adventure Capitalist.” “He’s setting things up for a gigantic fall down the line, but that does not mean he can’t drive long-term interest rates to zero,” Rogers said. “Governments are printing money everywhere, borrowing stupendous amounts. Throughout history that has led to problems in the bond markets, and it will this time too.”

Sunday, March 08, 2009

Statistics tell a story....Psychology flummoxes it.

Some recent data:

  1. One out of five U.S. mortgage holders is now underwater, according to First American CoreLogic's latest review of 45 million mortgages in its database
  2. A Merrill Lynch currency trader has been suspended after racking up more than $400m in undisclosed losses in recent months, raising further questions about the financial health of the investment bank bought by Bank of America last September.
  3. Adding Up the Government’s Total Bailout Tab Beyond the $700 billion bailout known as TARP, which has been used to prop up banks and car companies, the government has created an array of other programs to provide support to the struggling financial system. Through March 2, the government has made commitments of nearly $9 trillion and spent $2.1 trillion. Here is an overview, organized by the role the government has assumed in each case.
  4. City short-circuited...Circuit City, that is.
  5. General Electric Co., to its quarterly payment 68 percent, to 10 cents a share, from 31 cents. Wells Fargo to reduce dividend by 85%, to 5 cents from 34 cents.
  6. Freedom Bank of Georgia was seized by regulators, the 17th bank closed this year, as the recession persists and a jump in unemployment pushed more borrowers behind on home loan payments.
  7. U.S. Bancorp's dividend will be cut to 5 cents per common share from 42.5 cents per common share.
  8. More hotels are facing foreclosure, bankruptcy.
Now to the Flummoxing of the Intelligentsia...
  1. College music programs booming despite economic bust
  2. Did Obama Cause the Stock Slide?
  3. Dolce & Gabbana The Makeup marks P&G's first foray into upscale cosmetics, a huge jump from its drugstore CoverGirl and Max Factor brands. The move is an extension of a partnership forged three years ago to produce fragrances. But it comes at a time when luxury stores are suffering some of the biggest sales declines in all of retailing.
  4. Procter & Gamble Co. is planning to extend its cleaning services from car washes to dry cleaners, this time relying on the strength of its brand Tide. The Cincinnati-based consumer products maker, which has operations in Greensboro, plans to open three stores in the Kansas City area, according to the Associated Press, which interviewed Gary Coombe, vice president for new business development at P&G. They will be called Tide Dry Cleaners.

Saturday, March 07, 2009

World's a Twitter....M3D leads the way

M3D= Massive Move to Mobile Devices

It is interesting to take a look back at recent history. During the late 1990s, massive investment in telecommunications laid the groundwork for the networks of today. The prices of phone calls have dropped to pennies, and the world has become a lot smaller. While I was at an equipment maker at the time and benefited from the investment, I also saw the devastation this left behind- scores of companies went away, and hundreds of thousands of people were left jobless.

News organizations have been giving away their intellectual property for free- something they are paying employees to procure. Now newspapers are closing down or are shrinking rapidly. Our only news source may be people typing blurbs or firing tinyurls on Twitter.

Which brings us to social networking. I attend conferences every year to present my academic work and also to network and meet old friends. Over the past year I have seen a number of conferences get canceled. However, LinkedIn boasts 35 million or so members, Twitter 6 million, Facebook 175 million and so on. Increasingly, the posts on these sites are originating from mobile devices. As the M3D tsunami ploughs through, will these replace the physical social networks? As they add to social networking, what will they subtract? WIll the tiny tweets replace good old "finding the dots" and connecting them to get a story? Stay tweened...

What I said in July 2005.....

Assessing the Demand for Residential Real Estate
(originally published on PrudentBear.com in July 2005)

Recently the CEOs of some residential construction companies have been on television’s “financial news” networks taking about their companies and emphasizing the following two points.
1. This time, the housing market is not as sensitive to increases in interest rates as in the past, especially since the rates are at historically low levels. The point being emphasized is that the rates can go higher (another 200 basis points?) before having a significant impact on home sales.
2. The housing market is all about SUPPLY and DEMAND.

Point 1 is related, in part, to the “Greenspan’s Conundrum” that writers on this site and elsewhere have explained using a “supply and demand” scenario for dollar denominated debt, with contribution from foreign buying of the intermediate-to-long end of the yield curve. This article examines the second point made above, especially the demand side of the housing market. Demand For Residential Housing can be classified into two categories. The first covers houses (or condos) purchased for buyer-occupancy as primary residence (PFR). All other purchases can be categorized as Purchases for Investment (PFI). Vacation homes which are not the primary residence of the owner will be included in the PFI bucket. The next two sections examine the demand in these two groups. Only net demand is considered here- someone selling a house to buy another does not create net incremental demand.

House Purchase for primary residence
Buying a house has traditionally been a big part of the American dream. As students graduate and enter the workforce some of their primary goals are to find a job or be an entrepreneur, find a spouse, and buy a house, not necessarily in that order. From the data reported by Census Bureau homeownership rates for the United States went from 65.5% in 1980 to 69.1% in 1Q 2005 . As the number of household units reported is approximately 106 million, this leaves nearly 33 million householders (renters) who are potential “owners.”

The desire to own a home is not new or unique to the 21st century, but what is new is the suppliers’ emphasis on “satisfying the customer’s needs.” Freddie Mac states that its mission is to “Make Home Possible.” Fannie Mae states that it is “in the American Dream business.” How are the customer’s housing needs being met? It is illustrative at this point to look at the historical growth in the ownership of TVs (or VCRs) to more than 98% of households today from about 9% in 1950. This growth was driven primarily by technical and process innovations, especially in electronics and in electrical engineering. These innovations along with economies of scale allowed the vendors to reduce the unit price to customers (as a percent of their after-tax incomes), thus satisfying customer demand. The current growth in homeownership is also driven by innovations, primarily in the lending industry. Lenders are creating customized innovative products like no down-payment loans, interest-only loans, and the like that let customers own the home of their dreams. This, along with a supply constrained situation, has led to yearly housing price increases running in double digits in many areas. It is anticipated that those among the nearly 33 million “renters” who desire to own their home can work with the lending community for a mortgage product that satisfies their unique needs.

Then there are roughly 16 million students enrolled in post-secondary education in the United States . Those who are living in dorms can, with the right kind of financial product, move out of the dorms and “own” their quarters. They also have the potential to extract equity gains when they graduate and pay off their student loans.

Another source of demand comes from immigration, both legal and illegal. A recent Business Week article cites estimates of nearly 11 million illegal aliens and also provides examples of how service firms are innovating to meet the needs of this class. Those illegal aliens who are not covered in the Census data and who currently do not own a home can also contribute to incremental demand. Even if 20% of this group is looking to buy homes, that is an additional demand of more than two million. In addition, legal and illegal immigration together is expected to contribute more than a million new potential arrivals per year. Immigrants might be expected to rent initially and then move towards home ownership, thus providing some level of support to rental units. However, greater controls on immigration in the aftermath of the London bombings could reduce this demand.

It should be noted that higher divorce rates can also create more households and drive incremental demand. But recent research indicates that directionally, divorce rates are inching down.

Assuming that the supply of new homes and condos is between two to three million units per year, it will take a few years to provide the physical product to meet the above demand for primary residence. The question is whether financial innovation at lending institutions will continue to meet customer needs, as the customer profile changes.

House Purchases for Investment

Recent reports indicate that in certain areas more than twenty percent of house purchases are being made purely for investment, with the buyer not residing in the house. Part of this is being attributed to foreign buying of American housing. While the demand in this category is hard to assess, it can be inferred that a further weakness in the dollar vis-à-vis other major currencies will be positive for incremental demand. If the Yuan strengthens by nearly 40% relative to the dollar, as many China-critics want, this will enable greater purchases of American real estate by the Chinese. One point to note about real-estate investment is that unlike paper investments such as equities or bonds, there is a “real” outflow of money during the time of ownership of real-estate. This includes taxes and maintenance costs. A house purchased as an investment can be rented out for income, but there may be downward pressure on rents if the rate of homeownership among the “renters” goes up relative to the rate of conversion of apartment units into condos or other units meant for sale.


In summary, the magnitude of the unfulfilled demand for housing combined with financial “new product development” can keep the current housing boom going for a few more years. However these new financial products have yet to stand the test of the vagaries of the environment- an economic downturn or an interest rate spike or other events that may cause lenders to pull in the reins. To understand the magnitude of the impact of a constrained lending environment it is useful to look at the sharp decline in prices of telecommunications stocks in 2001-2002 when investors became more risk-averse. Some companies went bankrupt and those left holding the bag (like the author) did not receive any bailout from the government. Others like Lucent and Nortel are currently trading at less than 5% of their peak values. The expectation with the housing market now is quite different. Despite the new bankruptcy law that makes filing Chapter 7 more difficult, house buyers are purchasing financial products with greater risk on the downside. Investors are pouring more money into the homebuilders and the lenders. Part of the bet is that with the scale of liabilities of the mortgage industry, especially the GSEs, the Fed and the government will bail out the financial sector from any disasters, shifting the burden to the public. As alluded to by others, ‘character’ is being tested- that of buyers, lenders, builders, investors, and the public at large.

Friday, March 06, 2009

A Fair Definition of Fair Trade, and application to the issue of GMF

Last week we discussed Economic Agreements, including Free Trade Agreements like CAFTA, in our Global Business class. I had students discuss the notion of 'Fair Trade' as comapred to 'Free Trade' and write a brief paper. Many students had interesting view points.
Ms. CB wrote a thoughtful piece that reminded me of my thinking when I was at that age. It is reproduced below. As usual, a few typos/errors crept in, but have to be ignored to appreciate the overarching point.
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I would define fair trade as justice. Fair trade should be the only accepted form of trade, unfortunately; however, this is not the case. My understanding of fair trade is that all parties involved in trade will benefit. Clearly, benefit is a key component in trade; otherwise trade wouldn’t exist if something didn’t stand to be gained. So allow me to refine a bit more. I believe that in a fair trade situation no one party should gain anything at the expense of the other.
It may be obvious, or not, but it is a way of life that something can’t be gained unless something somewhere else is lost. Take for example free trade. In a model of free trade economically wealthier parties are concerned with losing their rather high standard of living based on the perceived standardizations that globalization would bring. On the other hand, the economically poorer parties welcome the perceived effect that would increase their standard of living. So I consider, set aside the complexities of free trade and globalization and look at the reality; people are concerned with losing wealth at the expense of someone else. To apply this thought, in an extreme context, is to say that I don’t want to give up my daily luxuries so that someone else can have a meal to eat.
I realize that perhaps this is a bold and extreme context, but I state it with assurance that it is not too far from the truth. A model of fair trade would assure that the inequalities that exist today would be minimized and eliminated to the extent that they can be. I take a step back and consider all of the wonderful extra/ luxury things that I have in my life, also realizing that many people in the world don’t even have access to what should be considered the basics of life. What greed? What injustice? And to know that there is resolution to many cases of poverty with justice. There is resolution to poverty and the plethora of accompanying issues: the answer is fair trade. I return to the theory that no one should gain anything else at the expense of another.
Think of it this way, what satisfaction is there in taking first place in a race if you are the only competitor? Apply this model to trade and financial well being. What satisfaction is there in a cup of coffee or an inexpensive item knowing that somewhere in production, somebody that harvested those coffee beans or someone that made that item can’t afford to get an education, access health care, or for that matter have a meal to eat. Personally I would prefer pay more for an item if I could be assured that everybody along the line had access to the basics of life.
In life we all make decisions, and each decision has consequences. This is something that we learn early on in life. A lesser considered fact is that the decisions that we make affect more than just us. This simple truth has cost many when the self-concerned and ego-centric make their decisions without a care or regard for the rest of humanity. It can be seen in unjust trade practices as well as many other instances.
An instance that I would like to contemplate relates to governments and the health and well being of humanity. Genetically Modified Foods (GMF) is an issue far more complex than I can completely process. My opinion of GMF is as follows, I have a hard time taking a position on the various debates regarding altering nature. My thought is that no, genetically modified is not natural, we are too smart for our own good, therefore it shouldn’t take place. Well, the truth is that it is too late. GMF products already exist. I further have trouble with trying to understand what to do with them now. Preferably, I would like to banish all GMF products and go au natural, but the reality is quite possibly it is too late for that too! Nature takes its course, and the potential for cross contamination between GMF and organic goods has taken root. It may be near impossible to know for sure what is natural and organic versus what has been genetically modified.
Here is the perfect example of the decision of a few impacting the lives of many. The U.S government, as an example, has been pressured by the U.S agricultural industry to compete in the global market. To have an advantage, a superior product was needed, and therefore created, with political and government support. As I understand it, the U.S now has the superior product, genetically modified, and has an advantage in production as well as in the market. Wrong from the beginning, but increasingly more negative as now the GMF products are pressuring their ways into other countries that don’t want them.
I find it extremely difficult to deal with decisions that are made for me either as an individual or as a member of society. And in such instances feel the need to resist passive compliance. As a result I find myself questioning and pressuring to an extent that shows as rebellion. Related to fair trade and GMF products I seek and expect honesty and accountability from leaders of society, which in some cases is a tall order.
Why is it that GMF products are also known as “generally recognized as safe” by the FDA? I find myself skeptical of anything that is generally recognized as safe. Why is it that foods with color agents and preservatives need to be ‘inspected’ by the Food and Drug Administration, but foods that are genetically modified don’t need to be inspected? In cases such as these I see a system that has a procedure of checks and balances that would pass 2 plus 2 as generally 4. The truth is that it either is or isn’t and no matter how it is masked doesn’t make it right.

Jobs...Missing, and Amiss...

Apple Tells Investors That Steve Jobs Plans to Return- For the last nine months, Apple has refused to get into specifics about the well-being of its chief executive, Steven P. Jobs, even as he said last month that he was taking a six-month leave of absence to deal with health problems. On Wednesday, the company’s shareholders had their chance to press for more information — but they did not get far. At its annual shareholder meeting here on Apple’s corporate campus, run by the chief operating officer, Timothy D. Cook, the company responded to inquiries about Mr. Jobs by saying that he still planned to return to the company in June. “He is deeply involved in all strategic matters and has delegated day-to-day authority to Tim Cook and his team,” said Arthur D. Levinson, a co-lead director of Apple and the chief executive of Genentech. “That’s where it stands.”
***

Today's unemployment report just confirmed the dismal jobs situation. The dubious statistic, which the media report as 'factual' but is heavily massaged, would indicate that the real unemployment is closer to 15%. All the productivity increases are making more workers unnecessary.
***

Today NYT had a good article on the main catalyst for the sub-prime mortgage boom- HSBC's purchase of Household International. Interesting read. The Deal That Fueled Subprime.

Thursday, March 05, 2009

Layoffs, Women and Men....Food Safety..

The layoffs during the current economic tsunami are stinging more than women, according to a NYT report.

Today BBC reports.....The economic crisis could increase the number of unemployed women by up to 22 million this year, the International Labour Organization (ILO) says. In a report assessing employment trends for women, the ILO warns that they will not escape the downturn. The global crisis began in the financial sectors of the world's richest countries, in jobs traditionally dominated by men. But unemployment is now spreading well beyond these sectors, the ILO says. Jeff Johnson, author of the report, says: "The sectors that were initially impacted the hardest, which were finance, insurance and real estate, construction and manufacturing were often dominated by male workers. "But as this crisis has played out, it's hit other sectors of the economy, service orientated sectors wholesale retail trade which in many industrialised economies are dominated by females." Jobs disappear As consumer confidence wanes, more traditionally female jobs such as waitresses, shop assistants, are all disappearing too. The ILO is especially worried about women in the developing world, working in agriculture, or as domestic servants, on a piece meal basis. They have no social protection and are especially vulnerable during an economic downturn.
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NYT has a stomach-churning story titled "Food Safety Problems Slip Past Private Inspectors."

.....An examination of the largest food poisoning outbreaks in recent years — in products as varied as spinach, pet food, and a children’s snack, Veggie Booty — show that auditors failed to detect problems at plants whose contaminated products later sickened consumers.In one case involving hamburgers fed to schoolchildren, the Westland/Hallmark Meat Company in California passed 17 separate audits in 2007, records show. Then an undercover video made that year showed the plant’s workers using forklifts to force sickly cows into the slaughterhouse, which prompted a recall of 143 million pounds of beef in February 2008. “The contributions of third-party audits to food safety is the same as the contribution of mail-order diploma mills to education,” said Mansour Samadpour, a Seattle consultant who has worked with companies nationwide to improve food safety.

'FED" Royalty is Alive and Well... in the good old USA

When George Bush was the President, he used every means available to stamp everything 'Secret.' Now the blasted Federal Reserve Board seems to think that it does not have to answer to anyone, even while spending public money and piling on crippling debt on the taxpayers.
Bloomberg reports that "The Federal Reserve Board of Governors receives daily reports on bailout loans to financial institutions and won’t make the information public, the central bank said in a reply to a Bloomberg News lawsuit. The Fed refused yesterday to disclose the names of the borrowers and the loans, alleging that it would cast “a stigma” on recipients of more than $1.9 trillion of emergency credit from U.S. taxpayers and the assets the central bank is accepting as collateral."
Bloomberg sued Nov. 7 under the U.S. Freedom of Information Act, requesting details about the terms of 11 Fed lending programs. The Bloomberg lawsuit said the collateral lists “are central to understanding and assessing the government’s response to the most cataclysmic financial crisis in America since the Great Depression.”

Wednesday, March 04, 2009

Dirty AIG, Crazy Benny

NYT reported the grilling of Ben Chopper Bernanke by legislators. Excerpts..

The Federal Reserve Chairman, Ben S. Bernanke, told lawmakers on Tuesday that the country faces “a prolonged episode of economic stagnation” if they do not address the economic crisis forcefully, but he quickly encountered deep anger, particularly over the dealings of the ailing American International Group. Mr. Bernanke told the Senate Budget Committee that the worst outlook, should action on the crisis prove inadequate, would be “further deterioration in the fiscal situation” and probably “lower output, employment and incomes for an extended period.”....
Mr. Bernanke replied that nothing had made him more angry during the months of the sprawling financial crisis than the episode involving the insurance giant that has reported astronomical losses and has been given financial lifelines worth billions of dollars. “A.I.G. exploited a huge gap in the regulatory system,” Mr. Bernanke said. “There was no oversight of the financial products division. This was a hedge fund, basically, that was attached to a large and stable insurance company.” And this quasi-hedge fund, Mr. Bernanke went on, to nobody’s surprise, made irresponsible bets and took huge losses. “We had no choice but to try to stabilize the system because of the implications that the failure would have had for the broad economic system,” he said.

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So, it is the fault of the legislators because they created the system with the loopholes? Ben absolves himself and the fed of all blame. Ben, every one knew what was going on.

Ben also went on to support Obama's massive spending plan. Usually the bankers want the government to be fiscally sound and balanced, and not run deficits because deficit spending has consequences. However, Big Ben is playing a new tune.

The chairman of the Federal Reserve on Tuesday tacitly endorsed President Obama’s call for huge increases in spending and trillion-dollar deficits over the next couple of years, saying the economic crisis required aggressive action. Though the chairman, Ben S. Bernanke, did not endorse any of Mr. Obama’s specific proposals, he echoed the president’s call for bold government action to address the economy’s immediate travails and pointedly refused to criticize his longer-term plans. “All else equal, this is a development that all of us would have preferred to avoid,” Mr. Bernanke told the Senate Budget Committee, referring to record-breaking deficits expected this year and in the next two years. “But our economy and financial markets face extraordinary challenges, and a failure by policy makers to address these challenges in a timely way would likely be more costly in the end.”

QoQ or Quality over Quantity

These days one cannot read a newspaper or magazine without coming across some 'social networking" stuff like Facebook or Twitter or LinkedIn. I have friends who are on to Twitter, and of course Facebook has a large membership. For some people, interestingly, their power is measured through the number of their connections- I have a contact on LinkedIn who is connected to more than 5000 people. I received a request from a person to be her friend on Facebook, and she never got along with me for the few days we knew each other. Personally, I prefer the quality of my relationships over the quantity.

Tuesday, March 03, 2009

Rogers and Obama- Good Music with Bad..

Today, CNBC website has an interesting article titled "Jim Rogers: Let AIG Go Bankrupt, Not America." It is a good read. "Suppose AIG goes bankrupt, it is better that AIG goes bankrupt and we have a horrible two or three years than that the whole US goes bankrupt," Rogers said. "AIG has trillions of dollars of obligations, let them fail, let the courts sort it out and start over. Otherwise we'll never start over." He goes on to pour gasoline on the borrow-spend cycle and says that "The idea that you have too much debt, too much borrowing and too much consumption and you're going to solve that problem with more debt, more consumption and more borrowing? These people are nuts."
He is the director of two funds which are buying greenfield land in Brazil and existing farms in Canada and starting to farm it. The funds are clearing the land, fertilizing it, irrigating it and hiring farmers and, Rogers said, some day will probably sell the land but that is a remote prospect. I happen to agree with Jim Rogers.

AP reported that "Trying to pump up the nation's confidence, President Barack Obama said Tuesday that Wall Street has been hammered so hard that "buying stocks is a potentially good deal," and he dispatched top aides to Capitol Hill to defend his plans for pulling the economy out of its deep recession.".....Sounding ever more like an analyst, he said that "profit and earning ratios are starting to get to the point where buying stocks is a potentially good deal if you've got a long-term perspective on it."

Instead of focusing on the basics and talking about jobs and competing, BOB is out pushing the stock market. It is the market that has been one of the causes of the problem. BOB should not try to make things rosy by pushing exchange of paper. Let Wall Street manage itself. The politicians should be grounded in reality, and on earth.

Monday, March 02, 2009

DOW(N), DOW(N), AND DOW(N)

Dow record High: Oct 2007 : 14164.53
Dow at close on 3/2/2009: 6763

% loss from high = 52%

Dow at close on 4/28/1997: 6783

Took the DJ Index 10 YEARS and 5 MONTHS to reach the peak, and took only ONE YEAR AND FOUR MONTHS TO GIVE BACK THE GAINS...IN ONLY 12.8% OF THE TIME.

AIG- THIS BEAST SIMPLY CANNOT BE FED..ALREADY ATE $150 BILLION, NOW GOING AFTER ANOTHER $30 BILLION.

This is a weird world. The government says it cannot allow AIG to fail...but it is allowing millions of individuals to fail every day...by not providing for food or education...

Sunday, March 01, 2009

Transparency- Necessary but not Sufficient...

I came across a sharp Op-Ed piece by Kris Gopalakrishnan, CEO of the Indian tech giant Infosys titled "Financial Transparency a Must- Only by embracing the principles of transparency can confidence be returned to the financial system." He outlines, in a succinct way, the progression of U.S. capitalistic enterprise system, and the greed that fueled the major catastrophes over the past hundred years. His key point is that "One common theme throughout the evolution of corporate governance is increased transparency. But there is only so much regulators can do, and trying to regulate for every possibility surely will stifle growth. Corporate leaders must seize this opportunity to prioritize openness in their organizations. Promoting transparency not only covers greater disclosure to regulators or the investing public; it also means that risk should be in plain sight to the institution's own management. If exposure to "hidden" risk must exist there should be good, quantitative estimates of that risk and an acknowledgement of what is unknowable. "

Mr. Gopalakrishnan is correct in stating that transparency is essential for affirming trust and confidence without which society cannot function. However, transparency by itself is not enough. Enron was an 'opaque' problem. But everyone knew what AIG, Merrill Lynch, Citi, and others were up to. Not many protested because most people 'thought they benefited' from the financial engineering, and self-serving greed blinded one to even 'transparent' shenanigans. The issue here is not one of transparency of the object, it is the observer/participator being blind. Being a citizen means having a sense of ethical values, societal values, and a sense of responsibility to the world at large. It should not be acceptable to "take and take" without concern for the world. This applies to the leaders of firms, the suppliers, the customers, shareholders, and everyone else- in short, it is a societal issue. Mr. Gopalakrishnan and Infosys would have been more trustworthy and transparent had they actually down business from these shady firms and stated the reasons for doing so.