Business
03/16/08 -
Random Walk To Wealth - Its hard to say where it all began, but one of the first places it reared its ugly head was in the private equity market. It was in that market that we were introduced to "Pik-Toggle" and "convenant lite" loans as well as bridge loans that slowly transformed themselves into "pier loans." After setting all kinds of LBO records and seeing 6 of the top 10 LBO deals in history in a year-long period...
03/16/08 -
Stephen Covey - With today’s technology, multitaskers are using PDAs, cellphones, text messaging and emails to stay in connected 24 hours a day. While lighthearted nicknames like “crackberry” have been coined to describe this almost obsessive behavior, what happens when we become addicted to this connectivity? Do we exclude the other important dimensions of our life? Q: What does it mean to have work/life...
03/16/08 -
Peridot Capitalist - One of the great things about listening to Warren Buffett speak, and I suspect one reason why thousands gather each year in Omaha for his company's annual meeting, is that despite the fact that he is a brilliant man he speaks in plain, logical language that is easy to follow and usually hard to argue with. If you want the truth, without the media spin, and in as few simple words as possible, just...
03/14/08 -
Personal Financier - Motivating employees is always one of every manager’s goals. Motivated employees contribute to productivity thus directly increasing profitability for the organization. Structuring jobs and roles correctly is very important in elevating the motivation of employees. The main stream theory on motivation in general is based on Maslow’s needs hierarchy. Maslow’s constitutes a hierarchy of needs...
03/14/08 -
Debtfree Revolution - Looking back, I can see why I ended up in money troubles over the years. We learn how to handle money by watching our parents…and if they don’t teach us the proper way, we go out and learn from anyone who will. I know it’s not just me. Hubby said his father never taught him how to aggressively negotiate on vehicles when he was buying the truck (yes that one we are still paying on…that...
03/14/08 -
becker-posner - Modern national income accounts developed about 75 years. Although a sterling achievement that won Richard Stone a Nobel Prize in economics, even pioneers like Stone and Simon Kuznets recognized that these accounts had serious limitations as measures of wellbeing. Among the major oversights that remain to this day are that these accounts neglect the value of time spent in households at housework...
03/13/08 -
Gavingham - “I want to be professional”. I’d have a decent sized pot of cash if I’d received a pound for every time a salesperson has said this to me. “I want to be professional”. What do they mean by this? Is there such a thing as a professional salesperson? Does it matter anyway? And how can you become a professional salesperson?...
03/13/08 -
Lew Rockwell - It takes a lot to surprise me these days. It's hard not to be cynical when surrounded by uninformed opinions and comments based on ignorance of economics, and by a disdain for personal freedom. Thus, I was delightfully and honestly surprised when I saw this Mises.org blog entry about an editorial in the New York Times called "Charity Begins in Washington." Having found it so incredibly laughable,...
03/13/08 -
Part-Time Pundit - Since 1970, the health care industry has undergone a revolutionary change. Before that time people were overwhelmingly (about 70%) in traditional indemnity plans where patients pay a certain percentage of health care costs. With the passage of the Health Maintenance Organization Act written by Ted Kennedy (D-Mass), very quickly over 70% of Americans were covered by HMOs. ...
03/12/08 -
Mish's Global Economic Analysis - Several people have asked me recently if I have been changing my tune on a Fed bailout. The answer is no. I long ago predicted the Fed would try all sorts of things to stop a deflation threat. But I also have also said, these measures would not work and indeed they haven't. What is happening is the Zombification of Banks, that is exactly what happened to Japan as well....
03/12/08 -
Enterprise Resilience - Debates about how best to bring people out of poverty are endless. Some people, like Steven Pearlstein, believe that wealth should be redistributed through taxation [see my post Looking for a Globalization Strategy]. Others believe that dole simply establishes a pattern of dependency that traps recipients in poverty's grasp....
03/12/08 -
Vox - Many observers have argued that central banks should use monetary policy to prevent the rise of asset price bubbles. Recent research shows that monetary policy is too costly and too slow to serve such a role. The subprime crisis and falling property prices in the US and elsewhere have put central banks back in the firing line....
03/11/08 -
econweekly - Productivity is the main determinant of long-run growth. In the United States, between 1958 and 2007, the average growth of output per capita has been 2% per year, whereas the average growth of productivity —output produced in one hour of work— has been 2.1%. But productivity growth fluctuates a lot, and the latest changes are uncomfortable to look at....
03/11/08 -
irvine housing blog - Commodities are items of value and uniform quality produced in large quantities and sold in an open market. Although every residential real estate property is unique, these properties became uniformly desired by investors because all real estate prices rose during the Great Housing Bubble. The commoditization of real estate and the active, open-market trading it inspires caused houses to lose their...
03/11/08 -
Agonist - The US will go into a recession at best, a depression at worst. Expect first stagflation (high inflation and high unemployment), both because of the increased price of imports and deliberate pump priming by the Fed, then deflation, as asset prices collapse so hard they take everything else with them. The other likely scenario is stagflation followed by hyperinflation. Formal inflation numbers put...
03/10/08 -
Erick Schonfeld - The cable companies may control the set-top boxes, but they only collectively control about $5 billion of the $70 billion spent each year on TV ads. Most of those are local spots. With better ad targeting through Project Canoe the cable companies hope to triple their take to $15 billion. But that may be wishful thinking....
03/10/08 -
interfluidity - Buffet, as always, writes charmingly, and the logic here is unassailable. But there's a subtle point lost in this analysis. Sure, active investors as a class must earn less than passive investors as a class, if passive investors make the same investments in aggregate and pay lower fees. But it does not the follow that active investors, as a class, would have done better had they been passive investors....
03/10/08 -
Robert Reich - Much of the Middle East is swimming in oil money -- petro-dollars -- while China has built up its own huge stock of sino-dollars. These petro-dollars and sino-dollars aren't just sitting there in the Middle East and in China. They're being put to work - building new infrastructure in both places: skyscrapers, power plants, power grids, roads, ports. And building middle classes that, while still...
03/09/08 -
Calculated Risk - Several people have sent me this piece from interfluidity: Repurchase agreements and covert nationalization. Steve Randy Waldman does a good job of describing the situation, but I think he takes it too far. As Waldman notes, the Fed offers loans only against certain collateral, and requires that loans be overcollateralized. I've seen the lendable amount sheet, and I think the Fed is pretty well...
03/09/08 -
productivity shock - First, a solid majority of almost two-thirds opposes subsidies to large farms, defined as 500 acres or more (aside: how many Americans have any conception of how big an acre is?). And of those that support subsidies to small farms, the majority would only do so in "bad years," meaning that once again close to two-thirds of Americans oppose farm subsidies on a regular annual basis (aside: only half...
03/09/08 -
trustedadvisor - Me, I’d pick the CFO. Why? Because (s)he’s most likely trained in accounting. And I have come to believe that accountants have—overall—the clearest and most practical view of the world of all the professions. I suppose it has something to do with a closed system view of the world. Everything’s either a debit or a credit; it must have an account, and an offsetting account. And everything...
03/07/08 -
Big Picture - Ever since the Primary on Tuesday, the market's have aggressively sold off. This clearly indicates the equity market's fear of a McCain presidency. As the charts below show, ever since Tuesday -- when McCain's Intrade price soared -- stocks have been under continual pressure. Had Barrack Obama knocked out Hillary Clinton, a mano-a-mano contest would have taken place. A well rested, fully funded...
03/07/08 -
econo speak - Almost 99% of the 2.4 billion shoes purchased in the U.S. every year are imported, 86% of them from China. The problem of obtaining components is especially acute when it comes to materials uniquely designed for shoes, as opposed to generic items such as cardboard boxes that are used by a wide array of manufacturers. This is one reason why Red Wing prepares its own shoe leather, says Mr. Murphy....
03/07/08 -
chicago boyz - There’s an old story about a Soviet-era factory that made bathtubs. Plant management was measured on the total tonnage of output produced–and valves & faucets don’t add much to the weight, certainly not compared with the difficulty of manufacturing them. So the factory simply made and shipped thousands of bathtubs, without valves or faucets. The above story may be apocryphal, but the writer...
03/06/08 -
Mark Hendrickson - The iPhone still has a tiny 0.14% market share in the mobile world. But even so, Apple CEO Steve Jobs claims that 71% of web browsing on smart phones occurs on iPhones. As someone who’s used many mobile devices over the last couple of years, that’s a believable statistic. Surfing the web on an iPhone, with the high resolution screen and touch interface is a superior experience....
03/06/08 -
cafe hayek - It's funny how numbers can be used to scare and mislead. One hundred and fifty one percent seems like a big increase. But the size of that number tells you nothing. It does sound scary. But it tells you nothing. Nothing. All it tells you is that in 1989, the median family with debt had debt of 22,000. In 2004, the median family with debt had debt of 55,000. Good or bad news? You can't tell. It...
03/06/08 -
edugree - First of all, in order to ask your boss for a raise, you’ll need to know you’re worth it. Have you made improvements at work? Have you pulled some late nights? If you’re confident in your abilities and what you’ve done for the company, then you have what it takes to follow it through....
03/05/08 -
Econbrowser - Start with autos. Every sales category was down-- imports or domestic, cars or light trucks-- relative to February 2007. But the sharpest drops were seen by domestic light trucks, a category that includes the SUVs and still accounts for more than half the number of light vehicles sold. Domestic light truck sales last month were down 12.4% compared with February 2007. The graph below records the...
03/05/08 -
concurring opinions - Though I've been critical of some recent popularizations of economic thought, Dan Ariely's Predictably Irrational looks like a quality addition to the genre. As NPR relates, the book "explains how the reasoning behind [common economic] decisions is often flawed because of the invisible forces at work in people's brains: emotions, expectations and social norms." Ariely's research shows that a series...
03/05/08 -
penelope trunk - Since today’s job market is employee-driven, many candidates are fielding more than one or two offers at a time, and at this point, maybe it’s the employers who need the advice on how to attract the employees, instead of the other way around. ...
03/04/08 -
inflation usa - The firm-size dependent evolution of productivity and sales/payroll ratio potentially provides a good indication of the performance of these firms at stock market. For example, the growth in the density of the largest and smallest firms is likely related to their higher relative productivity. This process is likely industry dependent, however....
03/04/08 -
copy blogger - You’ve heard it a million times if you’ve spent any time studying copywriting, marketing or sales—stress benefits, not features. People must be expressly told what reward they can expect when buying from or even paying attention to you. This all boils down to basic psychology and an understanding of what truly motivates the person you’re trying to reach. But what’s really going on inside...
03/04/08 -
Geek Doctor - Organize the meeting in the most painless way possible Outlook invitations work well for folks who have a lot of flexibility in the calendars or who are always working in a single location. For executives who attend meetings 12 hours a day and who travel between several corporate locations, automated invitations just do not work. I cannot be in Los Angeles for breakfast and Boston for lunch. Outlook...
03/04/08 -
Vox EU - Since 1900, consumers have enjoyed a dramatic explosion in the number and quality of goods available. This column discusses a simple method for quantifying welfare gains from the introduction of new goods into the economy and their subsequent quality improvements using the personal computer as an example....
03/04/08 -
be rich - Are you in college or about to attend college? Are you in your junior or senior year? Consider sending this to your parents. This article has a lot of with ideas that may help save your parents thousands of dollars each year and may even put some extra money in your pocket....
03/04/08 -
escape from cubicle nation - Almost a year ago, I was interviewing my young, bright friend Ramit Sethi on my radio show. At the ripe age of 26, Ramit had already started a screaming hot blog with a huge following (I Will Teach You to Be Rich, a personal finance blog for college students and recent graduates), gotten 2 degrees from Stanford, started a company and struck 2 book deals. So I asked Ramit a question that I have...
03/02/08 -
Cato At Liberty - “I am sick of everyone blaming the breakdown in the credit and housing markets on subprime loans,” says D.C.-area homebuilder Michael Hill in the Washington Post. Subprime mortgages were only a symptom of the real problem, which is unaffordable housing. But what made American housing unaffordable? Hill is silent on that question, but University of Washington economist Theo Eicher knows the...
03/02/08 -
The Peridot Capitalist - Warren Buffett's annual letter is always a good read and the recently released 2007 version is no different. There are a couple points that Buffett mentions this year that I think are worth pointing out and commenting on regarding the current market environment; corporate creditworthiness and sovereign wealth funds. Buffett is often criticized for speaking out against the widespread use of...
03/02/08 -
Stumbling and Mumbling - In his speech to the Labour conference yesterday, Gordon Brown urged us to "embrace this new age of ambition" where "what counts is not how high up you start, but how high you can reach." Include me out. I'm with John Stuart Mill: I am not charmed with the ideal of life held out by those who think that the normal state of human beings is that of struggling to get on; that the trampling,...
02/29/08 -
Eliot Van Buskirk - When the RIAA sues a student for sharing files or a company for infringing its copyrights, they're fond of trotting out the artists they represent, claiming that infringement steals from them. As it turns out, artists may not be receiving their fair share of the hundreds of millions of dollars in settlements that EMI, Universal, and Warner won from Napster ($270 million), Bolt, Kazaa, and other...
02/29/08 -
life is your career - Meetings. Its a reality of a corporate environment. Same goes with team projects and all other assorted types of working in groups. The theory is that by taking many people’s different ideas and abilities you will be able to make a sum that is greater than the whole of its parts. And it works in theory…. to the same extent that communism worked in theory....
02/29/08 -
early retirement extreme - There are three versions or forms of the efficient market hypothesis. These are known as the weak, semi-strong and strong version. The weak version says that investors can not gain an advantage by knowing the past history of stock price movements. In other words, it says that technical analysis is futile. This may have some truth to it now as few technicians make a killing in the market. It was...
02/26/08 -
Econbrowser - Today we received updates on U.S. house prices from two different sources. The OFHEO national house price index recorded a 1.3% decline in the price of a typical U.S. home during the fourth quarter of 2007, while the S&P/Case-Shiller home price index registered a 5.7% decline during the last three months of 2007. Here in San Diego, the respective numbers showed a 2.6% decline according to OFHEO and...
02/26/08 -
Energy Bulletin - Elizabeth Kübler-Ross defined the five stages of coming to terms with grief and tragedy as denial, anger, bargaining, depression, and acceptance, and applied it quite successfully to various forms of catastrophic personal loss, such as death of a loved one, sudden end to one's career, and so forth. Several thinkers, notably James Howard Kunstler and, more recently John Michael Greer, have pointed...
02/26/08 -
William Polley - Students occasionally ask what economics book they should read for pleasure. If you're an econ professor, you know what I mean. Greg Mankiw tells us of a recent conversation he had... Student: Professor Mankiw, if you could recommend just one book, what book would it be? [Mankiw]: Am I allowed to recommend my favorite textbook? Student: No. Textbooks are disallowed. ...
02/26/08 -
Marginal Revolution - I haven't figured this out yet, but I'm experiencing ongoing worries. Let me try to articulate them, maybe one of you can cure me. One story I hear is that the new, carbon-friendly energy technology will be subject to decreasing costs, or alternatively increasing returns to scale. In other words, there are high start-up costs, but once it is underway it will be pretty cheap and lots of countries...
02/26/08 -
Show Me The Money - Hi. My name is Janice Ferrante. I am a time management junkie. I have bought almost every time management program that I could get my hands on. I have promised myself that I will not buy another program, only to buy “one more” because I have really wanted it “for a long time”. Yesterday is a long time to waste if you are not managing your time properly. This one will...
02/26/08 -
Brazen Careerist - Do you want to know how to tell if you have a business idea that will succeed? You know what? I don’t know how you know that. And if I did, I’d be a venture capitalist, right? But I do know how you can tell if you have a business idea that is worth reorganizing your life to try. Who knows if you have a good idea?? No one. Actually, in some cases some people can tell you for sure that your...
02/24/08 -
Alan Moore - Consumers prefer pull to push and Fragmentation drives complexity whilst Engagement remains theoretical, while reach and frequency reign. Hmm interesting the last point. As the Ex Coke Steve Heyer CEO said in 2004 – I am describing a process that is transformational. Theoretical? - Engagement is not possible whilst the old way of counting the audience remains in place - is the point. Just...
02/24/08 -
Brazen Careerist - I am a huge fan of delegating. Part of what makes me good is that I love time management advice, and I’m constantly asking myself what is most important to me. I keep my list to about five things, and everything else is fair game for delegation. Also, I am lucky to have many traits of a good delegator, including:...
02/24/08 -
consumerist - A former Sports Authority manager came forward to explain why their coupons are so damn useless. According to our tipster, "the coupons are always a sham," but apparently, gift cards worth less than $10 can be redeemed for cash. Read his other nuggets of knowledge along with zesty executive customer service contact information, after the jump....
02/23/08 -
Dani Rodrik - David Leonhardt of the New York Times surveyed economists to find out, and he says the answer is definitely yes: I received dozens of diverse responses, but there was still a runaway winner. The small group of economists who work at the Jameel Poverty Action Lab at M.I.T., led by Esther Duflo and Abhijit Banerjee, were mentioned far more often than anyone else. Ms. Duflo, Mr. Banerjee...
02/23/08 -
Caveat Emptor - You Walk Away promises to help homeowners walk away from their current mortgage with no debt, no strings, and says ballsy things like this: You will immediately know the exact amount of days you have to live in your house payment free. We stay on top of your walk away plan and keep you up to date with weekly progress emails. We also will notify you if the lender is taking longer than expected...
02/23/08 -
Consumerism Commentary - As my partner and I are active landlords and property investors, it’s no surprise that people approach us with real estate offers. Sometimes they’re great deals, too – people occasionally inherit properties they want to get rid of quickly and therefore cheaply, or learn of a house at a great price that just isn’t selling. With the current housing market downturn, it’s happening more and...
02/21/08 -
cafe hayek - One comment on this post about the state of America mentioned our rising debt, negative savings and so on. Savings is mismeasured in the US--it doesn't include investment in human capital and ignores asset appreciation. As I said in the post, yes, debt is rising. But debt isn't what matters. It's net worth. Here are the data on real net worth. It's at an all-time high. And yes, I know this is...
02/21/08 -
voxeu - Nothing lasts forever. The fall of the dollar continues to strengthen the euro, while there are signs that financial turbulence will put the euro-zone under stress for some time to come. Given this, exit from the euro is now conceivable – if not very practical, as Barry Eichengreen has argued – especially where economic pressure meets a political climate for change, as in Italy. The closest...
02/21/08 -
sales machine - If you’re not careful, your marketing group might set up sales channels that ruin your firms ability to forge long-term customer relationships. The software business is notorious for this. There are now many companies that let you have exactly one support telephone call for free. After that, they charge you $35 per service call. The reason that software vendors charge for support is that their...
02/21/08 -
Scott's Entrepreneurs Blog - Back in November, I marked my five-year anniversary at About.com with 5 Things I've Learned in 5 Years at About.com. It was one of the most comment-provoking pieces I've ever written. In particular, some people really took issue with my third point, "Sex sells." I received several emails from people criticizing me for including this in my list. The following was a typical example: Dear...
02/21/08 -
An Amazing Mind - Linux isn't very popular on the desktop. It's a far third behind OS X, which is a very far second behind Windows. Most people cite pre-installed operating systems as the reason. But as a student of psychology, I see something most people don't. There's one big factor in why Linux isn't popular on the desktop. Linux is free. I know this sounds like complete dog's bollocks, but hear me out before...
02/21/08 -
Consumerism Commentary - I’m paid bi-weekly, which is typically twice per month. Every now and then, there’s a month or two sprinkled throughout the year when I’m paid three times per month. But regardless of how often payday arrives, most of my salary is already spent before I see a dime. Why? Because, excluding taxes, there are several transactions that process automatically through payroll allotment:...
02/20/08 -
Big Picture - For quite some time in these pages, we have been lamenting the mistaken belief amongst some on Wall Street that there was a free lunch to be had. Lowering interest rates, the Panglossians argued, would stimulate the economy, whose slowdown would prevent inflation. If that argument strikes you as both circular and contradictory, welcome to the club. That obvious flaw was apparently lost on its...
02/20/08 -
Vox - A key advantage claimed for the outward-oriented development strategy is that it allows poor, labour-abundant countries to specialise in labour-intensive products and, thus make efficient use of limited capital stocks. To quote Anne O. Kruger (1985), “An export-oriented strategy permits countries to use the international market to exchange their own, relatively labour-intensive commodities for...
02/20/08 -
Visible Hand - The Standard links to an interesting LA times article on loss aversion. Now loss aversion in itself is a very interesting issue, something Rauparaha may like to write about ;). However, my focus is going to fall on the same result that The Standard was interested in namely that people would rather earn $50k when everyone else earns $25k than earn $100k when everyone else earns $250k. The article...
02/19/08 -
Econweekly - With Federal Reserve and government doing their best to stimulate demand, people have started looking at inflation. The worry is that the economy is not as sick as our policymakers think, and so the fiscal and monetary medicines are excessive. Markets disagree. Expected inflation is an important determinant of future inflation. If the public expects higher inflation, workers demand higher wages,...
02/19/08 -
econlog - As a rhetorical strategy, Benabou's probably right. Non-economists are much more anti-market than economists. If we told them that the economic way of thinking is consistent with (or better yet, justifies!) their anti-market prejudices, we'd be more popular. ...
02/19/08 -
tvhe - The Standard links to an interesting LA times article on loss aversion. Now loss aversion in itself is a very interesting issue, something Rauparaha may like to write about ;). However, my focus is going to fall on the same result that The Standard was interested in namely that people would rather earn $50k when everyone else earns $25k than earn $100k when everyone else earns $250k. The article...
02/18/08 -
Mish's Global Economic Trends - I have been writing about the Credit Default Swaps (CDS) ticking time bomb for a long time. In Who's Holding The Bag? I compared Warren Buffet's position to Greenspan's. Here is Greenspan's position: "Perhaps the clearest evidence of the perceived benefits that derivatives have provided is their continued spectacular growth." Buffett's take is quite different of course. Discussion of Credit...
02/18/08 -
constant dream - The digital platform that connects Bangalore, Boston and Beijing enables users from any of these places to “plug, play, compete, connect and collaborate,” and is changing everything, says Friedman. He lists some basics to keep in mind: Whatever can be done, will be done, “and the only question left is will it be done by you or to you.” Friedman describes a Budapest limo driver who asked him...
02/18/08 -
Macro Market - The subprime crisis is Alan Greenspan’s fault, or so we are increasingly told: he offered bankers too much monetary candy and should have put them on a monetary diet instead. Is this criticism justified? And what does it imply for the future behaviour of central banks? Few now have as much confidence in the self-restraint of the financial children as Mr Greenspan was wont to. No less certainly,...
02/15/08 -
Angry Bear - The South Sea Bubble, the Megatherium Trust, Tulip Mania, the Dot.Com Boom, the Bre-X gold mine bubble, the recent sub-prime housing bubble and Enron's … well, Enron's everything, all show this progression. Various large frauds also show this progression. Most of these properties had a real-value component (tulips, rum, slaves, electricity, international postal reply coupons) but that real...
02/15/08 -
Jeff Jarvis - The hope is that quality wins. Left purely to traffic, that may not be the case. Paris Hilton would win. But that’s where the role of the packager come in — the editor with the reliable brand who went to the trouble to find the best news from the best sources and to add value through vetting and packaging. If you go to that packager because of that value, then the sources the packager uses will...
02/15/08 -
Econbrowser - The most commonly reported statistic is the median price of homes sold during a given period. This has the advantage that we can obtain detailed and up-to-date numbers from real estate networks. The main drawback is that the numbers can be seriously contaminated by a composition effect-- you don't know whether individual homes have fallen in price or if people are simply buying more homes in areas...
02/15/08 -
Angry Bear - Trade and inventories are treated differently in the GDP accounts. All other GDP data is the average of the three months data. But trade and inventories are the change from the end of the quarter to the end of the quarter. This is because we not not directly measure output. Rather, we measure consumption and adjust that for the change in trade and inventories to indirectly estimate output. But...
02/15/08 -
Seth Godin - Everybody already knows how powerful the brain is. Take a sugar pill that’s supposed to be a powerful medicine and watch your symptoms disappear. Have a surgeon not perform bypass surgery on your heart (link.) and discover that the angina that has been crippling you vanishes. The placebo effect is not just for sick people anymore. Why do some ideas have more currency than others? Because we...
02/15/08 -
Seth Roberts - A big study of managers reached essentially the same conclusion: Good managers don’t try to make employees fit a pre-established box, the manager’s preconception about how to do the job. A good manager tries to encourage, to bring out, whatever strengths the employee already has. This wasn’t a philosophy or value judgment, it was what the data showed. The “good” managers were defined as...
02/13/08 -
Market Vise - When Microsoft announced its acquisition offer for Yahoo, some of my coworkers at VantagePoint remarked “it’s about time, this should have happened a long time ago”. Earlier today I was reading Fred Wilson’s (from A VC blog) take on the deal. Fred argues that Google will emerge as the champion of search because more oversight from a behemoth like Microsoft will not solve Yahoo’s problems....
02/13/08 -
Powerblog - In any period of economic transition there are upheavals at various levels, and winners and losers (at least in the short term). We live in just such an age today in North America, as we move from an industrial to a post-industrial information and service economy, from isolationism to increased globalization. There’s no doubt that there have been some industries and regions that have been more...
02/13/08 -
Sports Biz Blog - Is it because they got their clock cleaned at the World Cup last year by archrival Adidas? Is it because the world's best marketing opportunity dawns in a few short month's in China, that is, is it because it's an Olympic year? Or is it just because it's All Star Weekend next weekend? Whatever the reason, Nike has embarked on an unprecedented public relations campaign for the notoriously secretive...
02/13/08 -
AutoBlog - Bob Lutz understands how the automotive media operates, which is why on the same day that General Motors announced its largest loss ever, he pops up on the GM Fastlane Blog to talk about some good news: retail sales in January were up 11.2%. The interesting thing is that this record $38.7 billion loss that the automotive media's talking (too much) about is not at all attributable to GM's performance...
02/13/08 -
Seeking Alpha - This is an article that I have wanted to write for a long time, but a number of recent events have inspired me to finally commit it to paper. Phil DeMuth and Ben Stein recently published a book, Yes, You Can Supercharge Your Portfolio (Hay House 2008), in which they are attempting to bring the value and concepts of portfolio theory to a broad audience. The core of the book explains how a good...
02/13/08 -
Political Calculations - How much does having you on the payroll really cost your employer? You can thank or blame King Banaian for the brand new tool we're featuring today, in which we seek to answer that very question! To answer the question, we're focusing on those things that represent the recurring cost of compensating you for your boss and those things that are required for all employers by law, such as all...
02/12/08 -
Housing Wire - The Wall Street Journal covers something regular HW readers already know; that some Wall Street firms are heading back to the well in terms of mortgages: … Wall Street seems to believe there still is money in failed mortgages. In fact, firms such as J.P. Morgan Chase and Bear Stearns are sidling back toward their subprime exes, looking to buy some assets on the cheap. Jamie Dimon...
02/12/08 -
Megan McArdle - Why do CEO’s make so much money? The question seems to obsess us, probably more than it should. Discussions of income inequality often turn to the topic of outsized CEO pay packages, even though massive payouts to a handful of people cannot possibly account for the trends we have seen in the nation’s income statistics—there simply aren’t enough CEOs of large companies to produce the change,...
02/12/08 -
Frontal Cortex - I'm morbidly fascinated by the massive losses recently incurred by the French Bank Societe Generale. My fascination is partly rooted in the sheer scale of the disaster, a scale that's essentially incomprehensible. (I have no idea what a $7,000,000,000 loss really means.) But I'm also interested in how, exactly, a trader could lose so much money and not get noticed. It now appears that the...
02/11/08 -
Blogging Stocks - Which is the better investment, Apple Inc. (NASDAQ: AAPL) or Bank of America Corp. (NYSE: BAC)? Most investors would take Apple's side. Even though there is some concern about the softness of iPod sales, almost no company has been more innovative over the last year in producing hot-selling new products. Unit growth prospects for the Mac and iPhone are the envy of the computer and handset...
02/11/08 -
Enterprise Resilience - It will come as no surprise to truly creative people that innovation takes hard work. Eureka moments are, to use an old adage, as rare as hens' teeth. This truism is the focus of a New York Times article by Janet Rae-Dupree ["Eureka! It Really Takes Years of Hard Work," 3 February 2008]. "We've all heard the tales of the apple falling on Newton’s head and Archimedes leaping naked from his...
02/11/08 -
Brazen Careerist - For a while, I was a visual artist. Well, sort of. I mean, I made money from it. But you know how I am about specializing, and I realized that I had a better chance of being outstanding in my field by focusing on writing instead of visual art. But I did learn some lessons from my visual art mentors, and one really cool thing someone taught me is that the color I choose is most interesting where...
02/09/08 -
Peridot Capitalist - One of the great things about listening to Warren Buffett speak, and I suspect one reason why thousands gather each year in Omaha for his company's annual meeting, is that despite the fact that he is a brilliant man he speaks in plain, logical language that is easy to follow and usually hard to argue with. If you want the truth, without the media spin, and in as few simple words as possible, just...
02/09/08 -
A Random Walk To Wealth - Here's a short history of the "Credit Crisis": Its hard to say where it all began, but one of the first places it reared its ugly head was in the private equity market. It was in that market that we were introduced to "Pik-Toggle" and "convenant lite" loans as well as bridge loans that slowly transformed themselves into "pier loans." After setting all kinds of LBO records and seeing 6 of the top...
02/09/08 -
Stephen R Covey - With today’s technology, multitaskers are using PDAs, cellphones, text messaging and emails to stay in connected 24 hours a day. While lighthearted nicknames like “crackberry” have been coined to describe this almost obsessive behavior, what happens when we become addicted to this connectivity? Do we exclude the other important dimensions of our life? Q: What does it mean to have work/life...
02/08/08 -
Concurring Opinions - Which channels for legal authority are most efficient? This enforcement-efficacy question is a tough one, understudied by traditional L&E and even BL&E. Most instrumentalist theories of law spend relatively little time thinking about the costs of distributing legal rules, and the likelihood that their recipients (citizens) will internalize them. Indeed, the basic L&E approach to criminal law (Becker's)...
02/08/08 -
Econbrowser - Michael Dueker is a senior portfolio strategist at Russell Investments and formerly was an assistant vice president in the Research Department at the Federal Reserve Bank of St. Louis. He has been doing some very interesting economic research recently in developing what he calls a Qual VAR model for predicting recessions. We are pleased that he agreed to share some of the current implications of...
02/08/08 -
Consider the Evidence - Douglas Hibbs’ “bread and peace” model has been extremely effective at predicting the outcomes of U.S. presidential elections. This chart, covering elections from 1952 to 2004, gives you the gist: On the vertical axis is the incumbent-party candidate’s share of the two-party vote. On the horizontal axis is the growth rate of per capita real disposable personal income (DPI) over the three...
02/06/08 -
A random walk to wealth - The war for the internet started long ago, but it escalated dramatically this week. Much has happened over the last few days, but I'll start with a Google update. After an earnings release that disappointed analysts Google's stock tumbled after the close yesterday. For the first time since Google went public its stock price dipped below its 200 day moving average. The introduction has gone fairly...
02/06/08 -
Mish's Global - Actually we need to stop right there for a moment because Deflationistas, at least this one, have not repeatedly called for "all-goods prices declines for the past several years, since at least 2005". While I cannot speak for others, I am not aware of any Deflationistas on Minyanville making that specific claim either. The general Minyanville Deflationistas Viewpoint (if indeed there is such a...
02/06/08 -
Seth Godin - Rudy Giuliani was the fear candidate. He tried to turn fear into love, but failed. Few products or services succeed out of love. People are too selfish for an emotion that selfless, most of the time. It's interesting to think about the way certain categories gravitate to various emotions. Doctors selling check ups, of course, are in the fear business (while oncologists certainly sell hope)....
02/05/08 -
Duncan Riley - One argument against the acquisition is that it lessens competition. While in terms of major players it does, a combined Microsoft/ Yahoo will actually increase competition in spaces where Google is dominant, and in some countries all but a monopolist provider. Scale is the key here: Google has it, and Yahoo and Microsoft need more of it. The combined Microsoft/ Yahoo would still have less than half...
02/05/08 -
Big Picture - There are lots of things that investors believe which I find perplexing. The Superbowl indicator is one, but the oddest to me is the so-called Fed Model, also known as the IBES Valuation Model. It is not that the Fed model is so terribly wrong -- it has been both right and wrong over the years. Rather, it is the way too many people conceptualize it. First, the definition of the Fed Model:...
02/05/08 -
jessica shortall - One of the most important part of the entrepreneurial process is managing and developing the role of key people. As some of my previous posts reveal, I am dead-set against some of the cult of individual 'heroes' that surrounds many social entrepreneurship initiatives, funding schemes, and communities. That said, I believe firmly that people and teams are a key component to building any successful...
02/05/08 -
Greg Mankiw - I thought it might be useful to put the debate over fiscal stimulus in a broader perspective. When designing a tax system and evaluating tax proposals, policy analysts have at least four goals in mind: 1. Efficiency: The tax system should distort incentives as little as possible (and, in the case of externalities and Pigovian taxes, correct incentives when necessary). 2. Intergenerational...
02/04/08 -
Buzz Machine - At Google’s blog today, David Drummond, the company’s chief legal officer and senior VP for development, comes out with phasers set to kill against the Microsoft bid for Yahoo. A week ago in Europe, I ended up at a small dinner and a few other events with Drummond. He’s a serious guy with a stoney glare. I’ll bet he could stare down Steve Ballmer in a contest. Implicit in Drummond’s...
02/04/08 -
Global Economic Analysis - There was an interesting post on iTulip over the weekend about the Bubble Economy Endgame. The post was written by Eric Janszen, and called Door Number Two. Here are some highlights: Today one of our best and brightest iTulip members posted an excerpt and a link to yesterday's comments by Stephanie Pomboy: Economic Fear Taking Hold. In it she says a US deflationary spiral is a mere 3% away....
02/04/08 -
Small Business Trends - Seth Godin, SethGodin.com – “Make promises and keep them. So obvious, it’s become a secret.” Jackie Huba, Church of the Customer – “Attracting is the new selling. It is the least-visible, and least-examined principle behind most companies today that are growing quickly through word of mouth.” Jonathan Fields, Awake at the Wheel – “Decide whether you want to feed your ego or...
02/03/08 -
Blogging Stocks - For those who wish to hedge a portfolio against downside risk, Nate Pile suggests a pair of ETFs that benefit from a market decline. Here is the latest from his Nate's Notes. "Although I would argue that much of the potential bad news has already been factored into stock prices, one of the mantras I have come to respect over the years is 'don't find the trend'... and the trend is currently...
02/03/08 -
Econbrowser - First, the good news. Each of the three indicators that initially turned our Little EconWatcher's face blue last month all took a favorable turn in the numbers just reported. The first of these is the Institute of Supply Management's manufacturing PMI reading. This index is based on a survey of managers, with a value below 50 indicating that more plants are reporting declines rather than increases...
02/03/08 -
Consumerism Commentary - Save 15% of your gross income. In addition to whatever short-term savings goals you might have, like a down payment on a house or preparing for children, 15% of your gross income should be saved for your long term retirement goal. Kiplinger’s calculates you’ll need $671 per month invested in the stock market if you’re starting from scratch at this age....
02/02/08 -
Alex's Adventures - Is Microsoft going down the same road as the ill-fated AOL-Time Warner merger with its hostile takeover bid of Yahoo? Microsoft has offered $44.6 billion in cash and stock to purchase Yahoo, or $31 a share, a 62 percent premium on Yahoo’s closing price on January 31. Microsoft predicts that the merger would bring about efficiencies that would save around $1 billion annually. As it estimates...
02/02/08 -
Mankiw's Blog - I thought it might be useful to put the debate over fiscal stimulus in a broader perspective. When designing a tax system and evaluating tax proposals, policy analysts have at least four goals in mind: 1. Efficiency: The tax system should distort incentives as little as possible (and, in the case of externalities and Pigovian taxes, correct incentives when necessary). 2. Intergenerational...
02/02/08 -
Marginal Revolution - It's a pleasure to be back at the Marginal Revolution. Let me start out by agreeing with Tyler and Bryan. Tim Harford is one of the leading popular social science writers and we're lucky to have him. Today, I'll focus on Chapter Two of Tim's book, "Las Vegas: The Edge of Reason." In this chapter, Harford describes game theory. In a nutshell, game theory studies any situation where (a) you...
01/31/08 -
personal financier - Inflation simplified is increase in prices for popular commodities. This price increase devalues each dollar and as a result devalues our earnings and investments. Each dollar can buy less. How do we protect our money from inflation then? The rule of thumb is to invest in real assets. These assests' value is not dependent, or is adjusted to price levels. Let's have a look at some of the steps we...
01/31/08 -
ann althouse - What's wrong with Starbucks? Certainly not that it's pushing out independent coffeeshops. They are prevailing. The big trick: Make better coffee! Meanwhile, Starbucks has been switching to push-button espresso machines. In New York City, I'm stuck patronizing Starbucks, and I was shocked when I saw that they had automated the machines. Starbucks used to seem like a luxury brand, and now it feels...
01/31/08 -
Greg Mankiw - The current debate over fiscal stimulus involves trading off these goals. The stimulus package being discussed is mainly aimed at achieving goal 4, but it does so at the cost of sacrificing goals 1 and 2 to some degree. Efficiency is sacrificed because the phase out raises effective marginal tax rates and because the higher future taxes that result from the extra government debt will likely be...
01/30/08 -
Econbrowser - Today the Federal Reserve announced a further 50-basis-point cut in its target for the fed funds interest rate, bringing it down to 3.0% for a total reduction in January of 125 basis points. How long should it take before this has an effect on the economy? In a recent research paper (quick summaries here and here) I sought to develop new measures of the time delays between when the Fed acts and...
01/30/08 -
John Quiggin - The news that over a million homes went into foreclosure in the US in 2007, affecting about 1 per cent of all households or around 3 million people, supports the view that foreclosure has taken over from bankruptcy as the primary mode of financial catastrophe. As with bankruptcy, however, the high frequency of financial distress is partly offset by the fact that US law and standard contractual...
01/30/08 -
ER Nurse - Hospitals are corporations. If you think they aren't you're fooling yourself. They are no different than McDonalds or Macy's. The product is health care and the customer is the patient. Just like a corporation they live in a competitive environment, trying to attract customers toward their product in various ways. Right now the focus in hospitals seems to be on getting different certifications. My...
01/30/08 -
Conglomerate - Last night I flipped past 60 Minutes, then noticed the segment was on the subprime mortgage crisis, and flipped back again. The part of the segment that caught my attention featured television journalist Steve Kroft questioning two California homeowners who were considering letting their house slip into foreclosure, now that the amount owed on their mortgage was more than the fair market value of...
01/30/08 -
TCS Daily - There is a large and potentially risky disconnection between the causes of the current financial crisis and the various macroeconomic stimulus packages proposed by the Fed, the president and others. We propose a precisely targeted stimulus that would seek directly to reduce the underlying uncertainty that is driving markets down....
01/30/08 -
Fortify Your Oasis - My rant on getting past presenting in an endless stream of bullet points generated a lot of response both in the comments and on email. Thank you all for your time and your ideas (which you can read here). My follow-up thoughts are below. Interesting point by Ed regarding the difficulty of presenting scientific, technical or financial information without resorting to all the worst that slideware...
01/29/08 -
Gold Stock Bull - For the next few weeks or months, analysts will likely refer to the latest rise in the gold price, which started today, as the GATA RALLY. As some of you know, this Thursday, the Wall Street Journal will carry a full-page advertisement paid for by GATA. The headline of the article will read: “Anybody Seen Our Gold?” The inference is that some of the gold that is supposed to be stored at Fort...
01/29/08 -
Seeking Alpha - f the ETF industry is going to continue to thrive, it should stick by these five rules. Rule 1: Stay Cheap and Establish an Expense Ratio Glide Path When friends and relatives ask me what ETFs are, my answer starts this way: "They are like mutual funds, but cheaper and more tax-efficient." "Cheaper" is a key part of the ETF brand, and it deserves to be protected. It worries me, therefore,...
01/29/08 -
Bad Language - Small businesses sometimes struggle with marketing. They know they want the cure - more sales usually - but they don’t want to take the medicine. In my experience marketing embraces a range of disciplines and activities: branding, PR, advertising, websites, product literature, case studies etc. etc. Copywriting touches all of these points but, on its own, it isn’t sufficient. I have worked...
01/28/08 -
Wall Street Greek - Missing, and rumored a possible scapegoat for Societe Generale to hide its mistakes, Jerome Kerviel's picture still doesn't show up on Google image searches. From nobody, to notorious "rogue" in a day's time. Unbelievable! Well, at least all the other newly unemployed traders and creative minds at the big Wall Street banks can say now, "at least I'm not THAT guy..."...
01/28/08 -
Crooked Timber - “One Economics, Many Recipes” makes a lot of useful and constructive suggestions about how to attack the central problems of economic development. However I don’t think it gives enough emphasis (fundamentally because I don’t think it’s possible to give enough emphasis) to international debt as a constraint on development. Nearly all of the success stories in the book relate to countries...
01/28/08 -
No Comment - In the current issue of Hamburg’s highly respected weekly Die Zeit, economics editor Fabian Lindner takes a look at an important study of the U.S. economic downturn done by Kenneth Rogoff, the International Monetary Fund’s former chief economist who now teaches at Harvard, and Carmen Reinhardt, a well known capital markets expert at the University of Maryland. The Rogoff-Reinhardt study says...
01/25/08 -
Brad Sester - Diplomatic sovereign wealth funds argue, more or less, that they have no desire for power – so there should be no restrictions on their ability to accumulate property. Those hoping for a cut of the SWF lucre – and those worried about creeping investment protectionism – tend to agree. Others argue that those who accumulate large amounts of property usually end up with a measure of power....
01/25/08 -
panasian biz - Doing business in China has its rewards and its challenges! An important component of your business on a full or part-time basis, unless you have mastered the language and the customs, should be a translator/interpreter. Until they’ve achieved guanxi, many firms enlist this person to smooth the road between their native business customs and the ancient complex traditions of China. Not...
01/25/08 -
equity private - Thomas reminds me of a certain long-winded CEO from a deal long since past who I used to call "The Dirigible." This owing to the way he floated around, his massive inertia rendering him unable to operate without dozens of men hanging from ropes guiding him in and out of his hangar, at the mercy of the prevailing winds, filled with hot air, or at least some lighter than air gas, the fact that he...
01/24/08 -
Inman Blog - The Bush administration appears willing to go along with an agreement by House Democrats and Republicans to boost the conforming loan limit. But while Fannie Mae and Freddie Mac will apparently be allowed to romp in what is now jumbo loan territory, it's unclear exactly what the ground rules will be, or whether FHA loan guarantee programs will be expanded as well. In announcing a breakthrough...
01/24/08 -
Seeking Alpha - This morning, DealBook linked to a Breakingviews piece on rumors of Credit Suisse (CS) possibly buying Bear Stearns (BSC). I immediately broke into a cold sweat even considering the possibility. Why? Because investment banking mergers are quite simply one of the most efficient ways of destroying the buyer's shareholder value, especially when one considers the probabilities of a deal actually being...
01/24/08 -
agonist - Bank of America announced this morning that virtually all of its quarterly profit was wiped out by write-offs of Collateralized Debt Obligations and related mortgage securities. The bank set aside reserves for further losses in its consumer mortgage and credit card portfolio, in line with large increases in defaults and delayed payments in the fourth quarter of last year. Several weeks ago the...
01/24/08 -
Blogging Stocks - Shares of e-commerce giant eBay Inc. (NASDAQ: EBAY) are trading around 7% lower in after hours trading today following its fourth quarter earnings release shortly after the market close. As we looked at in our earnings preview, the company has been struggling to keep up with the competition in its auction business. Two key components that have hurt eBay's auction business are (1) raising fees...
01/24/08 -
Crooked Timber - The decision of the US Federal Reserve to cut interest rates by 0.75 per cent is as clear a sign of panic on the part of the monetary authorities as we’ve seen since the 1987 stock market crash. It’s not entirely coincidental that it followed a dreadful week on Wall Street, and a couple of awful days on world stock markets while the US was closed for the long weekend. Still, stock markets...
01/24/08 -
All Financial Matters - Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in the corrections themselves. —Peter Lynch, Worth (September 1995) A good friend, Sherman Doll, who, like me, is a financial advisor, related the following story. He has been a two-line sport kite flier for several years. While not a pro, he has learned a few tricks by...
01/22/08 -
Econbrowser - The 10-year nominal Treasury yield fell 15 basis points, suggesting that investors see the Fed lowering even more, economic growth declining, and still no worries of resurging inflation. The latter in particular will encourage the Fed to go further-- I think the Fed will continue to cut as long as prospects for real economic activity look so bleak and there remains no sign of life at the long end...
01/22/08 -
Housing Wire - Mortgage-related charges drove a sharp drop in quarterly earnings at Charlotte, North Carolina-based Bank of America, with the bank reporting fourth quarter net income of just $268 million, compared with $5.26 billion in earnings one year earlier. BofA took a whopping $5.44 billion hit in the capital markets, with most of that charge coming on CDO writedowns, it said; it also added $1.33 billion...
01/22/08 -
economists view - There are lots of worries about sovereign wealth funds and what countries who have amassed large amounts of financial assets might do with the money. For example, if a foreign country decides to invest in and take majority control of the Wall Street Journal, CBS, or key strategic industries in the economy, are we completely comfortable with that? Is there a line that shouldn't be crossed? In the...
01/22/08 -
RGEMonitor - Hard as it is to believe on a day like today, those who expressed concerns about the sustainability of the global expansion around this time last year were mocked as worry warts. A FT headline from Davos 2007 read "Big risks to the global economy receding." Back then, more and more voices argued that global imbalances were a natural byproduct of dynamic globalization. Few warned that if the US...
01/22/08 -
Credit Slips - Eric Sevareid once remarked that a "chief cause of problems is solutions." From a libertarian perspective at least, I suspect that we will find "problems" in the "solutions" that Congress will enact to solve the sub prime mortgage mess. At this point it seems inevitable that the current Congress (and, even more so, the one that will likely sit in 2009) will be moved by heartrending stories of...
01/22/08 -
Debt Free Revolution - My son is a teenager, and thinks his life will be so good no matter what he does. This includes money. Here is the advice I give him, and fervently hope he listens to and takes to heart: * Do not finance a vehicle! Please, you are young…don’t sign your life away to impress the girls and other boys at school by trying to drive something that you can’t pay cash for. If you finance a...
01/20/08 -
VOXEU - The forward premium, the difference between the forward exchange rate and the spot exchange rate, contains economically valuable information about the future of exchange rates. Here is the evidence that it can help predict short-run rates and that investors who ignore it and use random walk models may be leaving money on the table. Exchange rates are important to innumerable economic activities....
01/20/08 -
Everything Finance - Credit unions can be a very good alternative to banks as long as you meet certain conditions. In general, credit unions can perform many of the same services that banks perform, but there can be exceptions to this. Credit unions are member organizations and this is the biggest difference between them and banks. When you join a credit union you, in essence, become a stakeholder in the institution....
01/20/08 -
The Changing NHS - Endings are important. A bunch of people have spent several hours or maybe even a day or two together, working on important stuff. It’s important that, as a minimum, they leave with a shared sense of accomplishment and clarity on what happens next or on how next steps are too be agreed. I sometimes spend too much time thinking about beginnings and not enough about endings. That's because I'm...
01/18/08 -
scrivener - First the good news: The projected increase in the budget deficit this year, to $400+ billion from $319 billion last year, doesn't matter. Also, the cost of the Bush tax cuts ... of the Iraq war ... of the all those earmarks Congress doles out for its own benefit that the pork busters are so upset about ... they don't matter. The cost of cleaning up Katrina, and fighting in Iraq, and bailing out...
01/18/08 -
Development Bank Research - The first one is that the savings rate is high because ordinary Chinese worry about the lack of safety net. This myth has been busted because evidence has shown that Chinese household savings rate is actually lower than the Indian one. The overall saving rate is high because businesses heavily save their self-generated profit for re-investment. For private business, the reason is the lack of access...
01/18/08 -
strangemaps - Although the economies of countries like China and India are growing at an incredible rate, the US remains the nation with the highest GDP in the world – and by far: US GDP is projected to be $13,22 trillion (or $13.220 billion) in 2007, according to this source. That’s almost as much as the economies of the next four (Japan, Germany, China, UK) combined. The creator of this map has had the...
01/18/08 -
personal financier - Let's have a look at an example. Say a structured product offers us twice the price increase of euro to dollar in 1 year. A nice return on investment is possible. However, if the euro-dollar exchange rate hasn't changed we've lost 1 year's worth of interest (not to mention management fees). It is quite easy to synthetically construct structured products which will ensure protection of principal...
01/18/08 -
Agonist - The financial crisis unfolding in slow-motion before our eyes was inevitable and predictable. I say this because this financial crisis was predicted by numbers of people. It was obvious: anyone with sense (which apparently includes very few people) knew a financial crisis was coming, and despite the fact that we've known for years it was going to happen, it happened anyway. The same was true...
01/18/08 -
Econbrowser - But the arranger wasn't interested in hanging on to the loan, either. In the case of many private arrangers, they in turn set up a separate legal entity (or "trust") to which they sold the loan. And where did the trust get the money to pay the arranger? That money came from investors in the trust, who could have been anybody-- pension funds, banks, or general investment funds. As a technical aside,...
01/17/08 -
Econbrowser - I thought it might be helpful to summarize some of the background on how we got into our present mortgage mess. Once upon a time, when you needed to borrow money to buy a house, you went to a bank (in the old days it was often called a "savings and loan"). The bank gave you the money you needed to purchase the house (indicated by the green arrow in the figure below), and you promised to repay...
01/17/08 -
Personal Financier - Structured products have grown increasingly common among household investors as they are conceived as a safe investment with nothing but upsides. However, as consumers, we must ask ourselves: Are these structured products better then other forms of investment just because the principal is ensured at the end of the investment period? Isn't this a cheap marketing trick?Marketing is certainly involved...
01/17/08 -
agonist - The financial crisis unfolding in slow-motion before our eyes was inevitable and predictable. I say this because this financial crisis was predicted by numbers of people. It was obvious: anyone with sense (which apparently includes very few people) knew a financial crisis was coming, and despite the fact that we've known for years it was going to happen, it happened anyway. The same was true...
01/15/08 -
the airline blog - Delta Air Lines, which has reportedly been interested in a merger for some time now, has requested permission from its board to start "formal" merger discussions with United Airlines and Northwest Airlines soon, with a plan to choose one of the airlines with which to merge. In the last few years, Delta has carried opposing views on mergers: it exited Chapter 11 bankruptcy last year after successfully...
01/15/08 -
wealth daily - The challenge then for all "value" investors is in determining if a company's misfortune is either temporary or if it reflects protracted problems with the business itself. That's what makes the home builder stocks so difficult to buy even at these levels, because as a heavily cyclical industry, the builders are ready made value traps as their revenues decline and their earnings turn negative. Their...
01/15/08 -
political calculations - The problem in modeling what the average annual pay will be in the future lies in the unpredictable timing of economic recessions, which have the effect of dramatically reducing the annual incomes of top income earners. Here, as we've previously shown, the annual incomes of the top 1% of income earners in the U.S. can be pretty volatile from year to year. In fact, this group was the most affected...
01/14/08 -
RGE Monitor - It is almost impossible to overstate the scale of China's reserve growth. China just announced that its reserves increased by $461.9b in 2007. Its reserves "only" increased by $247.5b in 2006. Of course, some of the 2007 increase – a bit over $30b, according to my estimates – comes from the rising value of China’s existing holdings of euros. After adjusting for valuation gains, China...
01/14/08 -
A Dash of Insight - Over the last several days at "A Dash" we have been developing some important themes that will help investors in 2008. Today's events provided strong support about each of the following ideas: 1. The gap between perception and reality, on the market, the Fed, and the economy; 2. The overwhelming negativity of sentiment; and 3. The perverse effect of FAS 157 accounting rules on corporate...
01/14/08 -
Going Private - At least in contemporary finance culture (is there such a thing?) the interplay between money and fame is most glaringly apparent in the world of hedge funds. Be this as it may, some recent incidents have caused me to wonder to myself if this dynamic, like many in contemporary finance culture (if there is such a thing), isn't more complex than it first appears. Incentive fees (and management fees)...
01/14/08 -
Global Economy Analysis - The Chicago Tribune is telling a story that's happening about 60 minutes from where I live, in booming Will County Illinois where miles and miles of cornfields were turned into miles and miles of houses. It had to end and so it did. Now many are Trapped in a troubled real estate market. One of the nation's fastest-growing counties in recent years, Will County now has the highest foreclosure...
01/14/08 -
VoxEU - Until the mid-1990s, Spain was seen as the paradigm of high unemployment among developed countries. But things have changed considerably. From 1995 to 2006, the unemployment rate has fallen by 15 percentage points, from 22% to 8%, while inflation remained subdued around 3.5%. Thus, as depicted in Figure 1, there have been remarkable changes in the Spanish Phillips curve, which has shifted dramatically...
01/14/08 -
Truth On The Market - One of my favorite intellectual puzzles is figuring out what deep conceptual presuppositions cause some people to be conservatives, others to be liberals. That is, on a range of issues that would seem largely unrelated—say, abortion, affirmative action, and gun control—it turns that people’s positions are highly correlated. For instance, people who are pro-life tend also to be against affirmative...
01/11/08 -
the o - In 2008, the pool of buyers for homes is likely to become smaller, in part because of the shift away from the lax lending standards of the recent past. If prospective homeowners are required to prove adequate income to afford the homes they are purchasing, many people will qualify for a much smaller home, or none at all. As peak oil becomes more apparent, this will further reduce the number of...
01/11/08 -
Geek Doctor - Change is hard and sometimes politics in an organization are such that no internal stakeholder can champion the new idea. Bringing in consultants to publicly validate the idea can build transparency and break down barriers. It may sound strange to pay an external party to explain to an organization what it already knows, but sometimes it is necessary. Also, I've seen stakeholders in politically...
01/10/08 -
Obsidian Wings - Late last year, the FCC invited a new round of comments on net neutrality (and broadband access competition more generally). Somewhat strangely, NBC jumped into the fray, arguing that network providers should be required to monitor their networks for digital copyright violations. Somewhat less strangely, AT&T representatives at a big industry forum this week said “the time was right to start...
01/10/08 -
cultivate greatness - Generally speaking, value compounds over time. This is true of money, of knowledge, and of work. Invest $1,000 in the stock market today and you can be pretty sure it will be worth about $2,000 in about eight years (assuming the stock market grows at its historic nine percent rate). You get a similar reward with education. That’s why college graduates, on the average, earn at least a million...
01/10/08 -
business boomers - The Truth: The derivation of the word “entrepreneur” includes the concept of ‘risk-taking.’ And many people assume that entrepreneurs (small business owners) are risk-takers. Like the late Evil Knievel who cheated death many times before his recent (November 2007) death at age 69.evel kneivel stunt motorcycle rider But look carefully at this assumption. What kind of risks does a new...
01/10/08 -
Townhall - Listening to people like Lou Dobbs, John Edwards and Mike Huckabee lamenting the plight of America's middle class and poor, you'd have to conclude that things are going to hell in a handbasket. According to them, there's wage stagnation, while the rich are getting richer and the poor becoming poorer. There are a couple of updates that tell quite a different story....
01/10/08 -
Vox - In the 1930s, when Western economies were laid low by mass unemployment, Stalin could claim to have found a cure: a command economy with ambitious five-year plans to promote rapid industrialisation. Deficient demand was not a problem, but what about supply? Stalin, who was planning for great increases in productivity, faced a problem: how was he to motivate workers with low levels of skill –...
01/10/08 -
Chief Happiness Officer - Should a company let its people telecommute? Is it good or bad for productivity? Does working from home make employees more stressed because it blurs the boundary between work and private life? Or is it good for families because it cuts down on time commuting and gives people more time at home? And is it true that most of the employees who work from home do so in the nude?...
01/08/08 -
Macro Man - Financial markets are struggling to come to grips with 2008 so far, as price action across a number of markets has been erratic, to say the least. Attempts at timing the market from a quasi-fundamental perspective have been ill-fated, as anyone who traded in the aftermath of Friday's payroll figure can attest. Is the risk trade on or off? Are you making or losing money? If you don't like what you...
01/08/08 -
Agonist - Recessions, until the last 20 years, tended to huddle together for warmth. The last recession was rewritten to be shorter by the NBER, but had many of the characteristics of being a double dip recession, or one very long recession. The odds of a recession this year are approaching unity, because George W. Bush does not want to deliver fiscal stimulus to Democratic constituencies. That's really when...
01/08/08 -
Seth Godin - The music business had a spectacular run alongside the baby boomers. Starting with the Beatles and Dylan, they just kept minting money. The co-incidence of expanding purchasing power of teens along with the birth of rock, the invention of the transistor and changing social mores meant a long, long growth curve. As a result, the music business built huge systems. They created top-heavy organizations,...
01/08/08 -
Manager's Realm - The pressure from shareholders finally reached Bear Stearns (BSC) CEO James Cayne, and the 73-year-old leader is resigning from the company, said Businessweek, citing the Wall Street Journal. While not definitely confirmed, it is said he'll probably be replaced by current Bear Stearns president Alan Schwartz, who is widely respected in the industry, especially for his ability to make deals....
01/08/08 -
MarketBlog - The answer is no. But hearing former and incoming CEO Howard Schultz on the company’s conference call today, after he unexpectedly returned as CEO, it’s clear that he was worried it might become one and that the memo was a shot across the bow, of sorts. He referred to his now famous leaked memo of last February, in which he worried out loud about the “commoditization of our brand.” He also...
01/08/08 -
business pundit - There is usually information in what someone doesn't say. Long time readers may have noticed that I have never reviewed one of the most popular business books of all time - "Good to Great." Call me a heretic, but I'm not a fan of it. It's one of the best selling business books ever, but I think there is too much fluff, and I think the research team made a huge mistake when compiling it. Before I go...
01/06/08 -
Brad Sester - In retrospect, the notion that the worst tranches of residential mortgage backed securities assembled from the loans to the worst borrowers could be combined and repackaged into triple AAA securities does seem rather far fetched. Take a look at Portfolio’s cascade. That is just a simple mortgage backed security. Then imagine taking the bottom tier of the cascade – combining it with the bottom...
01/06/08 -
deadline hollywood daily - This is a huge development in the Blu-ray versus HD-DVD format war currently raging on because Warner Bros was always considered the big fish to be landed by one side or the other, Now the studio, which had been producing its high-def DVD titles in both formats, will start releasing in Blu-ray exclusively later this year. The decision was made in response to strong consumer preference for the Blu-Ray...
01/06/08 -
economists view - The problem is that there is a long chain of events that must occur for monetary policy to be effective - interests rates must fall when policy is eased (something that won't occur in a liquidity trap, for example), and once interest rates fall people have to be induced to go out and buy new houses and cars on the household side, and new factories and equipment on the business side (but in a recession...
01/04/08 -
Communications Experience - This year's List of Top Communicators highlights the best (and worst) from business, politics, entertainment and sports. Take a look to see how communications skills helped make or break these notable individuals. Gov. Mike Huckabee - What but for communicating would get a presidential candidate so far so fast?...
01/04/08 -
Robert Reich - Alan Greenspan's worldview had two sources: empiricism based his early fascination with Ludwig Wittgenstein and logical positivism, and libertarianism based on his early interest in the philosopher and social critic, Ayn Rand. Greenspan’s proudest legacy stemmed from the former. Standard economic models assumed that if the economy grew faster than 2.5 per cent a year and the rate of unemployment...
01/04/08 -
megan mcardle - The history of the various attempts to financially engineer our way to above-trend growth over the last fifty years--supply-side economics being only the most theatrical of these--seems to indicate that it doesn't matter how you finance government spending. All that matters is how much you spend, and that doesn't even matter all that much. If you spend money and finance it by tax increases, this...
01/03/08 -
.mises - By the same token, one could argue (although Kleinknecht does not) that workers tend to become complacent if given a job too easily. They would simply stop educating themselves, which is ultimately harmful for overall productivity, and produces a race to the low-wage bottom. This is how Third World manufacturing countries are born. Now why haven't Third World countries thought of this? You just...
01/03/08 -
jibber jobber - Don’t solely message people through non-e-mail methods. Send me a “direct message” through Twitter and I have to go into Twitter to reply. Send me communication only through Facebook or LI and I usually have to go through those systems to reply. Make it hard for me and it’s likely I won’t get to it, since I deal with at least two hundred e-mails a day. Don’t send me big file attachments....
01/03/08 -
cultivate greatness - Emotional Intelligence, sometimes abbreviated EI or EQ, in a takeoff of IQ, has become a hot management leadership consulting area in the last two years. Emotional skills have replaced experience and IQ or intelligence as the most important markers of personal success. EI is rooted in the belief that success is only partly explained by IQ, or one’s intellect. More important is how one behaves in...
01/03/08 -
Seeking Alpha - Meanwhile global oil production is now at an historically high level but still does not seem to be able to satisfy demand. The Saudis and the Iraqis have both managed to increase production by roughly 500,000 b/d helping to cause the 85 mb/d global production plateau that has existed for nearly two years to be eclipsed during the past few months; production now seems to be running in excess of 87...
01/02/08 -
omni - Happiness at work is a vital element of the organic growth of an organisation. If a company wants to retain talented staff in this new business environment, then employee satisfaction levels need to be high. Sure, this means paying the right salary and providing the right financial incentives, because pretty much everyone has to pay the bills. But it’s inherently more than that too. As I’ve said...
01/02/08 -
slacker manager - We are each uniquely gifted with a special mix that’s ours and ours alone, so our only real competition is ourselves. I expect some of the basic qualities to be the same for each person on the team, as I hired them each to do the same day-to-day job, but I don’t expect the same results for each person. Each person on my team started at a different day, has different collateral duties, and...
01/01/08 -
Mish's - For almost thirty years, count them, for almost thirty years people like you have predicted that our economy will collapse and the end of the consumer. Throughout all of those years, it didn't happen. No matter how many logical arguments the "gloom and doom" crowd has made, it hasn't happened. Nimesh, I have only been on the deflation bandwagon for a few years, not thirty. However, you are...
01/01/08 -
escape from cubicle nation - Changing and improving is not the problem, it is the way we go about changing that gets us in trouble and frequently makes the outcome unsuccessful. This hit me as I was planning my exercise schedule for next year. I have always loved to work out. My problem is getting started with a new exercise routine after a long hiatus. So I searched for inspiration the same way most people do: I looked...
01/01/08 -
execupundit - Artificial deadlines. It is amazing how many people treat deadlines as holy writ. Move them if they threaten the quality of the decision and be wary of anyone who tries to push you into rash action. Structure. I wish I could give an award to the person who first said that if you always have to "think outside of the box" then there's something wrong with the box. A poor analytical structure can...
12/31/07 -
Agoraphilia - Works of authorship originate in private, safely kept under common law protections. Once published, however, expressive works become data ferae naturae—wild and natural information. As such, expressive works roam and reproduce freely. They may get captured in fixed copies, caged in atoms or bits. But the public, once it has absorbed an expressive work, generally retains relatively cheap access to...
12/31/07 -
business pundit - Do you remember the first time you were promoted to a position that required you to determine the compensation of people underneath you? Or even worse, have you ever worked in a company where someone made the social faux pau of discussing their salary and it led to all sorts of comparisons, complaints, and sore egos? One of the things I learned very early in my work career is that most people think...
12/31/07 -
Securing Innovation - How do you prevent competitors from obtaining patents that could block you from using your own innovative ideas in your products and services? This critical question faces managers of innovation and intellectual property throughout the global economy, which is increasingly embroiled in a hotly contested patent race. Issued patents can be deadly. Enterprises of all stripes face burgeoning risks...
12/30/07 -
trusted advisor - Economists know this as “the tragedy of the commons,” based on the problem a few centuries ago of sheep overgrazing the town lands held in common. The problem is that people’s individual search for economic self-interest ends up, paradoxically, destroying everyone’s self-interest. The airline industry knows this dilemma well. Any given airline on any given route is incented to have a...
12/30/07 -
health blawg - The key principled objection seems to be lack of accountability, though to hear the advocates tell the tale, it's hard to see how regulators could hold anyone less accountable than they've held the large publicly traded companies (and their operating subsidiaries) that are now being bought up by private equity firms. While the public companies -- and the private equity firms -- are all subject to...
12/30/07 -
Free Money - She then goes on to detail how she and her husband (plus one child) lived in New York City (a few years ago) on less than $40,000 for more than a year. And if you can make it there on $40,000, you can make it anywhere on $40,000. We've talked a lot about the relationship between wealth and happiness and she's right -- after a certain point, more wealth doesn't lead to more happiness. But is that...
12/28/07 -
rge monitor - The best documentary of the year – filmed by my friend Charles Ferguson – is “No End in Sight” on how the US botched – from the very beginning in 2003 – the war in Iraq. If there is one film you should watch this year that is the one (and a follow-up book will be out early in 2008). “No End in Sight” should also be the title of what – in August 2006 – this author argued would...
12/28/07 -
Directory Journal - It’s a widely acknowledged fact that many of America’s best inventors weren’t born in the Untied States. But few realize exactly how many scientists and mathematicians from other corners of the globe actually affect American inventions and thus America’s position as a world leader in innovation. Slightly more than 10% of the working population in the United States is foreign born. But...
12/28/07 -
GiveWell - Transparency is the one thing about GiveWell that everyone seems to like. Our focus on measurement is much more contested. I believe that the connection is tight, though, because both are necessary consequences of humility, which is probably the last word you ever thought I’d ask to be associated with. Transparency is a really big deal to us because we believe that no matter how much we learn...
12/27/07 -
BusinessPundit - I have a problem. I'm an introvert. I'm not shy. I'm not afraid of being in public. But I am horrible at chit-chat and gossip. If I spend an evening at a social function with people I don't know or don't like, I get home and feel like I've spent all day at the ocean. It's that fighting-the-waves and drained-by-the-sun kind of tired. I would rather spend four hours with my head stapled to the carpet....
12/27/07 -
Value Stock Plus - Can market timing generate excess returns? This article argues that excess returns are possible as long as assets price our idiosyncratic behaviour such as loss aversion. A portfolio manager should follow time diversification strategies to capture such idiosyncrasies and follow strict money management rules to control risk. B. Venkatesh Asset prices are galloping at a fast pace in the Indian...
12/27/07 -
Fortune Watch - Stocks fell in Thursday after the assassination of Pakistani opposition leader Benazir Bhutto and after the Commerce Department reported a weak increase in durable goods orders. The Dow Jones industrial average fell more than 100 points. Bhutto’s assassination raised the possibility of increasing political unrest abroad, always an unsettling prospect for investors. Oil and gold prices rose...
12/26/07 -
Stock Tube - Silently, Warren Buffett could be one of the investors hoping for the much talked about recession to happen sooner rather than later to the US economy. It might sounds cruel but the fact is this legendary Oracle of Omaha has been waiting for opportunities – prices fall to rock-bottom levels. He might just have found one, though it's a public listed company, before the end of 2007. His flagship...
12/26/07 -
Sundries Shack - Well, it’s nearly the day after Christmas and gosh the MSM can’t wait to ramp up the economic gloom and doom. The Washington Post carries the dour headline, “Holiday Spending Growth at 5-Year Low” and touts as its figure a mere 3.6 growth in spending this Christmas season over last year (and since when is 3.6 percent growth in an economy a bad thing? I mean, in years when we have a President...
12/26/07 -
Trusted Advisor - The used car salesman generates such antipathy not because of tactics per se, but because of his motives. It’s a great example of a core issue in trust: there isn’t a single behavior or phrase that either guarantees the establishment of trust or its destruction. Everything is colored by intent. An interesting example of this can be found in a delightful posting called The Used Car Salesman’s...
12/26/07 -
Everyday Economist - “Why did the Squirrel fall out of the tree… it was stapled to the monkey” One doesn’t need to invent the coffee grinder, simply make the coffe grinder better to be able to receive market share and enter into the market. Now many third to market to ma...
12/26/07 -
Robert Salomon - I've had an interest in executive compensation for quite some time. I'm not interested in compensation in and of itself, but in compensation as a form of governance. My interest in compensation revolves around how it can align the interests of shareholders and managers, and how boards (as the representatives of shareholders) can become more effective in designing executive compensation packages....
12/26/07 -
Seth Godin - The #1 contributor to success in advertising, without any question whatsoever, is frequency. "Repeat yourself until everyone is annoyed but your accountant," says my friend Jay Levinson. Most of the time, creative entrepreneurs lose interest long before their marketing message loses its power. The challenge online is this: smart people are bored by frequency. The people you're trying hardest...
12/25/07 -
James D. Miller - John Edwards says "I believe in a market economy that works for everybody, so there’s fairness." No! No! No! A market economy can only work if there are winners and losers. Fear of losing profits and wages motivates many businesses and workers. If you take away this fear you have taken away much of the wealth creating power of markets. Innovation, that most important of market...
12/25/07 -
Blogging Stocks - The British Pound sank to new all-time lows against the Euro, as the market is counting on more interest rate cuts in the UK. What is interesting to note that with all the cynics out there saying how lousy the US economy is and that the Dollar is a "has-been" currency, it's not the only major currency to get hit. This news follows the Bank of Israel raising rates by 0.25%, this move was made...
12/25/07 -
Oil and Glory - The signs are that the Italian-led partners developing the suspended supergiant Kashagan oilfield are near a settlement with Kazakhstan. The four-month-old dispute at Kashagan -- the largest discovery in the world in four decades -- has become emblematic of petro-nationalism that has shifted the center of gravity in the energy world. So far, Kazakhstan has been different from belligerents such...
12/24/07 -
William Polley - I was in the St. Louis area this weekend as several inches of snow fell. A story on the local news (sorry, couldn't find a link) interviewed a young man who was going up and down the streets in a neighborhood shoveling sidewalks and driveways for cash. As I recall, the going rate he charged was $10. It looked like a middle class neighborhood. The people could certainly afford the $10. The young...
12/24/07 -
Ganas - The other day, I was talking to a very well-known and accomplished author who by her fame and prestige you imagine would be living on Easy Street. But she was exhausted and overwhelmed with her workload, and said in an exasperated tone: "I am just so tired! I have so much to do that I can't seem to run fast enough. The worst thing is that I absolutely love everything I am doing. It is so hard...
12/24/07 -
The Digerati Life - I agree with the analogy that shedding one’s debt is so much like shedding pounds: the more you have of it, the tougher it gets! Debt seems to be so much easier to take on these days, given how easy it is to get more credit. In the same way we can so easily gain weight without even noticing, it doesn’t take much for debt to creep up until such time that it becomes overwhelming and almost...
12/21/07 -
The Office Life - These days many a young professional, college graduate, X or Y generation type and generally most twenty to thirty-somethings are still trying to figure out their lives. Are you a member of this esteemed and clueless group? If so, to your chagrin, the “real world” is composed of plummeting metabolism rates, less social interactions and recouping abilities from a late night, increasing debt,...
12/21/07 -
Consumerism Commentary - Every purchase you make is an investment. Too often we think of our purchases as consumables. Some are, like food, but even those should be adding to your quality of life. Food, for instance, is an investment in your health and gives you energy for doing better stuff. We may not think of it that way, but it’s like buying stock. Not that the purchase increases in value, but that it...
12/21/07 -
The Digerati Life - At this very minute, there are lots of little startups dotting Silicon Valley and beyond, going about their frat style living except with less money, more caffeine and zero socials. Average age: 24. That is the stereotypical picture of a startup that the public has grown to know and love. However, startups do have many faces and are as diverse as the different communities that reside in...
12/21/07 -
Capital Spectator - Last week's troubling news on inflation (as detailed in the November reports for consumer and wholesale prices) should come as no shock to readers of these digital pages (assuming, of course, you've agreed with our thesis). For some time now, we've been expecting that pricing pressures were set to rise. The only question: when? We can answer that question with a confident "now," allowing us to...
12/21/07 -
Liberal Order - It's difficult to convince some people that markets tend to weed out discrimination, or at least penalize those who discriminate. For example, let's say that Ty and Amy, a male and female carpenter, respectively, can both produce four shelving units in a week. If Ty is the favored party and earns, say, $1,000 per week, while Amy, the disfavored party, earns only $800 per week, then why aren't...
12/21/07 -
Bacon Butty - I don't want to do a full scale critique of biofuels - not least because that would be to enter an already crowded field [see Biofuelwatch and Global Subsidies Initiative, for example]. But it's worth looking at how narrowly-focussed, bottom-up policy-making now means we have somehow put the most financial support into the worst ideas... Instead of asking how to reduce transport emissions...
12/20/07 -
econ weekly - With admissions at $10 and an endless series of blockbusters, what gives? At the risk of spoiling this movie, the answer lies in the distribution of power between distributors and exhibitors. Let's have a look at the revenues and costs per patron of Regal Entertainment, the largest movie exhibitor in the US. (Data from the company's financial statements.) The average price of a ticket in 2006...
12/20/07 -
Capital Spectator - If there's any one still wondering if the economy's slowing, this morning's update on weekly jobless claims may help blow some of the clouds of doubt away. For the week through December 14, initial jobless claims rose to 346,000, up 12,000 from the previous week, the Labor Department reported. That's not the high point in recent history, which was November 14's 353,000. Nonetheless, the trend...
12/20/07 -
Life Hacker - Whenever I talk to someone who knows anything about Lifehacker, whether it's a reader or a journalist, this question is inevitable: "Do you follow Getting Things Done?" My answer is always a whole-hearted "Sorta." I've read David Allen's productivity bible a few times, and The David is onto something with his methodology. But as far as I'm concerned, full-on GTD is too complicated and slippery...
12/18/07 -
Seth Godin's Blog - At the end of November, I flew out to give a speech to 350 Google folks. They had invited me to join a panel on the best way to for Google to work with partners. My riff (I only had about 8 minutes... gotta hate panels) was to point out that AOL, Microsoft, Yahoo and others before them had had the same challenges in building an environment that attracted partners and media companies. (I had...
12/18/07 -
Tech Liberation - Unfortunately, TechCrunch says that the video is being pulled from video sites because a photographer who owns a copyright to a photo featured in the video isn’t happy about it being used without permission. Michael Arrington is incensed about this, and argues that the photo is fair use. Now, Tom is right that Arrington is wrong when he says that using the photo is fair use because it’s...
12/18/07 -
Megan McArdle - This Eugene Fama interview is a must-read if you think you've got the goods on EMH. Leaving aside our recent contretemps, however, I'll zero in on his comments on CEO pay: Region: Another issue those papers touched on was compensation of CEOs, a controversial question in recent years. How do you view the suggestion that some CEOs are overcompensated? Fama: If the [compensation]...
12/18/07 -
Angry Bear - As noted in my last post, I have been playing with income data. I believe that for us to be able to properly understand just where we have been and where we are going, we need to look further back than say the 50's through Reagan's time. That is, if the data is around. I view the Great Depression as a defining point in this countries economy, kind of like BC vs AD. I'm not convinced that the...
12/18/07 -
Entrepreneur Tips and Advice - he is a business professor at the University of the Philippines. He is also a management consultant and is the Editor-In-Chief of SME Insight magazine. Pricing one’s product or service is often a stumper. Are we pricing too high? Are we pricing too low? Set a price and this will often result to pricing anxieties. Here, then, is a crash course in pricing that, hopefully, can bring about a...
12/18/07 -
Fortify Services - Woodrow Wilson was once asked how long he would spend in preparation for a 10-minute speech. “Two weeks,” he said. How long then, for an hour-long speech? “One week,” came the reply. And for a two-hour speech? “I am ready now.” Good presentation, great presentation is not easy. Even if you have mastered Noël Coward’s basics (“stand up, speak out and don't bump into the...
12/16/07 -
Marginal Revolution - I'm starting to wonder if the answer should be "no." Say you're on the left and you think that banks have screwed over borrowers and that remedying or preventing this injustice should be a top priority. The Fed is not the place to look to. Barney Frank was exaggerating when he said: "If I was going to list the top 87 entities in Washington in order of the history of their efforts on consumer...
12/16/07 -
Investor Geeks - Becky from CNBC had a talk with Warren Buffett and how Buffett is a bit pessimistic. Becky’s interpretation is an excellent example of how media changes focus and does not interpret properly. Specifically Becky keeps talking about the following comment: I made by far the best buys I’ve ever made in my lifetime in 1974. She keeps saying that even though now is doom and gloom there...
12/16/07 -
Angry Bear - As noted in my last post, I have been playing with income data. I believe that for us to be able to properly understand just where we have been and where we are going, we need to look further back than say the 50's through Reagan's time. That is, if the data is around. I view the Great Depression as a defining point in this countries economy, kind of like BC vs AD. I'm not convinced that the 90's...
12/15/07 -
rough type - Big news out of the Googleplex tonight: Google is launching what appears to be a head-on competitor to Wikipedia. The company has begun beta-testing a tool, called Knol (short for "knowledge"), that will allow people to create articles about particular subjects and post them on a set of specialized web pages hosted by Google. Each article, according to Google engineer Udi Manber, "is meant to be...
12/15/07 -
one man bandwidth - Culture Fish came about after I trued to place a few ads for an Israeli firm with Baidu’s local office. After two months of diligent communication, in-house training from Baidu for me and a group of digital interns, and several face to face visits with the ad manager. Tracking statistics were off, communication in English was impossible, IT changes could not be effected by the regional office and...
12/15/07 -
tax girl - FedEx has a little more to deal with this season than holiday deliveries: it has been deflecting claims in multiple jurisdictions over its classification of drivers as independent contractors rather than employees. The tax implications are pretty easy to figure out: back taxes (FICA and with holding), penalties and interest. But what about those misclassified employees? What happens to them?...
12/14/07 -
A VC - If you automatically enroll a user in an email marketing program and then require them to "opt-out", you build a huge list very quickly and eventually everyone views you as a spammer because very few users actually take the time to figure out how to opt-out. Here's the traffic to Facebook's opt-out page before and after Beacon was launched which shows that pretty clearly. Thanks to Dave McClure...
12/14/07 -
Megan Mcardle - There is, of course, a bit of a puzzle in finance. To wit: how can markets be so efficient that even very smart people with PhDs in finance cannot (on average) outperform a diversified index, when so many of the people buying and selling the stocks are so stupid that they think they can beat the market? For the same reason that you can't beat the football spreads. Even if people are stupid,...
12/14/07 -
Angry Bear - We know who’s smart and who’s not. It isn’t Secretary Paulson, who’s been speaking platitudes about a “strong dollar policy” for his entire term. Now China, main beneficiary of its basket-peg to the Dollar, makes pious noises that echo Paulson. Two birds are singing the same song, and neither is very sincere. Strong Dollar Policy ``China supports a strong dollar,'' said...
12/12/07 -
Union Square Ventures - It has been three weeks since we hosted a group of technologists and philanthropists to talk about the impact of technology on philanthropy. I have now had a chance to go back through the transcript and to reflect on some of the themes that emerged from the conversation. I plan to post thoughts on a few of these themes over the next few weeks. One theme that dominated a great deal of the...
12/12/07 -
Seth Godin - There's been a lot of noise about privacy over the last decade, but what most pundits miss is that most people don't care about privacy, not at all. If they did, they wouldn't have credit cards. Your credit card company knows an insane amount about you. What people care about is being surprised. If your credit card company called you up and said, "we've been looking over your records...
12/12/07 -
Red State - the Federal Reserve Open Market Committee, meeting in Washington yesterday, announced a cut in short-term interest rates. The "fed funds rate" will now be targeted at 4.25%, down 25 basis points from the 4.50% rate that was announced in October. The Fed also cut the "discount rate" (at which banks may borrow money directly from the Fed) by 25 basis points. The moves had been carefully...
12/11/07 -
How To Change The World - I used to take an adult hockey class. Each session started with all of us facing the boards and skating backwards on the instructor’s whistle. We were all supposed to stop on a second whistle; then the instructor grouped students by how far they had skated in the limited time. (This is a picture of Bret Hedican of the Carolina Hurricanes. Arguably, one of the best skaters in the NHL,...
12/11/07 -
Note To Cmo - You spend weeks of hard work developing a PPC campaign to drive more traffic to your site, but the landing page only gets a full fifteen minutes of thought. Clicks are way up, but conversion is flat. Visit to store is fine; store to close? All you hear is crickets. It takes twelve months to design your new product that is technically superior in every possible way to your competitor's version,...
12/11/07 -
Bizsolutionsplus - English Pravda shouts Offshore wind farms to power every home in Britain by 2020; a Stanford research team eyes offshore wind farms for California; Madison Gas & Electric gives us the facts about their wind farm; and Cape Cod continues to battle about a proposed wind farm off its shores. For utility and energy businesses and for Americans and environmental groups, the primary questions are: ...
12/10/07 -
Becker Posner Blog - The growth of large government managed funds during the past few years has been spectacular. These funds are estimated to manage between $2-3 trillion, and their assets are increasing rapidly. Sovereign funds have grown mainly because of the run-up in fossil fuel and other commodity prices, although China is creating a large fund with the capital earned from its trade surplus in goods. If...
12/10/07 -
Buzz Machine - I’m trying to catalogue some of the lessons I learned in my entrepreneurial journalism course at CUNY. There’ll be more, especially after the students and I share our postmortem in the final class, Wednesday. But here’s a start. The students presented a dozen businesses to a dozen jurors who had it in their power to award up to $50,000 in seed money (thanks to a grant from the McCormick...
12/10/07 -
Blogging Stocks - Stock index futures pointed to a higher opening Monday as investors expect a quarter-point interest rate cut from the Federal Reserve when it meets tomorrow. Anticipation of a rate cut offset news from UBS (NYSE: UBS) that it will write down around $10 billion in subprime holdings, and that it expects a loss when it reports fourth quarter results in February. Muting the write-downs, UBS announced...
12/10/07 -
Marketing Technology - One of the most common questions is about adding a blog to your corporate brochure site. First let me state that I would never recommend replacing your brochure site with a blog - I do believe in the power of a brand, marketing, and naturally organized web presence. Companies will always benefit from the addition of corporate blogs, though, if the resources (time and talent) permit and the company...
12/09/07 -
Duct Tape Marketing - Consider subscribing to my blog's RSS feed. It's sticky Look, I don’t really think that the mySpaces and Facebooks of the world are that important for the typical small business as they stand today. There may be very practical business reasons for some to actually use these and other social networks, like LinkedIn, for business gain, but most people that have jumped on the social network...
12/09/07 -
Fast Company - The New York Times' article about McDonald's in Seminole County, Fla., rewarding local students with Happy Meals for academic achievement has certainly provoked much commentary. I wasn't sure if I would post on the topic, but after seeing that one of our own expert bloggers, Tom Stern, has already tackled the subject, I figured I might as well offer another point of view. My first question:...
12/08/07 -
Washington Bureau - One recurring subject among Westerners living in Beijing, at least in my circle of friends, is whether we’re harming our kids by choosing to live in a polluted environment. Beijing is severely polluted. Call me ethnocentric but my experience is that most Chinese have no idea how severe the pollution is. They’ve rarely or never been outside of China, and they’ve grown accustomed to the haze...
12/08/07 -
Housing Bubble Blog - It’s Friday desk clearing time for this blogger. “A private lender representing a consortium of banks has taken ownership instead of foreclosing on the 33 unsold condominiums at Pond View Village and, after slashing prices by about a third, has successfully resumed selling in a slumping market. Two units have sold in recent days, according to Ruth Pino, sales agent for the Massachusetts Housing...
12/08/07 -
Macro Man - Ah, the festive season! Christmas trees are springing up, nativity plays are being performed, carols are pouring out of the radio, and all across the City copious amount of rich food and expensive claret are being consumed at lunch and dinner time. It's enough to bring a tear to the eye, especially amongst those whose bonus checks will be signed by Ebenezer Scrooge this year. Macro Man has yet...
12/08/07 -
Dealscape - While private equity has won a reprieve in its battle over the taxation of carried interest, that may be cold comfort for Henry Kravis, who's not only facing protests at his Upper East Side home, but is the feature of a new, short documentary called "The War on Greed," which is available on YouTube below. House Ways and Means Committee Chairman, Charles Rangel, D-N.Y., dropped Thursday a proposed...
12/06/07 -
dailykos - President Bush certainly appeared to be a populist this week. "The homeowners deserve our help," President Bush said at a press conference this morning. "The steps I've outlined today are a sensible response to a serious challenge." Officials said 1.2 million borrowers nationwide would be eligible for assistance. Bush's plan calls for a freezing of mortgage rate resets for subprime...
12/06/07 -
Open Market - “Wall Street Falls on Mortgage Unease” read the headline of an Associated Press story posted on Yahoo Finance just after the markets closed on Monday of this week. The headline was fairly typical of financial stories of the last few months, as the stock market has see-sawed due to mortgage woes and fears of a broader impact on the economy. The article noted that “the stock market’s decline...
12/06/07 -
Cubicle Nation - As the saying goes, if I had a nickel for every time someone asked me "When is the right time to leave my day job?", I would be rich. Just the other day, I received the following email: "Can you recommend a good strategy for leaving the "cube nation" when there are limited job opportunities should you fail at your own business? Is there a formula to determine if you should stay at your...
12/06/07 -
Greg Mankiw - As Panagariya points out, the potential for productivity changes to reduce the gains from trade has long been understood (Panagariya has Harry Johnson teaching this at the University of Chicago in the 1950’s). The harm in Samuelson’s setup comes from having less trade, not more. This is light-years removed from the usual concerns of people about globalization giving rise to too much economic...
12/06/07 -
Wealth Daily - To the millions of retail investors who lost their shirts in the Internet Bubble, former New York Attorney General (AG) Eliot Spitzer is something of a folk hero. That's because when it came to Wall Street chicanery, Spitzer was something of a one man wrecking crew, working in ways that bodies like the SEC would not. Analyst fraud, illegal trading, and an ocean of conflicts of interests, Spitzer...
12/06/07 -
Chronicle Review - My guess is that average literate Americans know of three 20th-century economists: John Maynard Keynes, Milton Friedman, and Alan Greenspan. Perhaps they also know of Paul Samuelson (but as textbook author, not economic theorist), of Friedrich Hayek (but think that he is the father of an actress), and of John Kenneth Galbraith (as William F. Buckley Jr.'s friend who appeared on TV). The rest of us...
12/05/07 -
Angry Bear - So what is the most useful way to look at the size of debt? Well, on the one hand, you don’t want to count money owed from one branch of the Federal government to another, so debt held by the public makes more sense than gross debt. Furthermore, if the average person borrowed $1 million, they’d have some trouble paying it back, whereas Bill Gates would have no such issues. Therefore, debt as...
12/05/07 -
Marginal Revolution - Most of all, my relative economic optimism stems from a very naive look at current conditions, which do not (yet?) indicate collapse. Because of Austrian influences and again Fischer Black, I am suspicious of long chains of reasoning, or for that matter medium-long chains of reasoning, which imply that an apparently OK state of affairs must end in ruin. Current market prices are indeed very noisy,...
12/05/07 -
dealbreaker - Earlier today we noted how his Sunday column rested on the nonsensical position that there was something unethical about shorting mortgage indexes while selling collateralized mortgage products. But the thing that seems to be getting the most attention around town is Stein’s sleazy smear against one of Goldman Sachs' leading economic analysts, Jan Hatzius. We want to talk about this but we can't...
12/04/07 -
InmanBlog - Unions representing hotel and textile workers have created a Web site advocating a boycott of Countrywide Financial Corp.'s banks and financial institutions. Countrywide's not doing enough to help out troubled borrowers, the unions claim, so consumers shouldn't let the lender use their savings to make more loans. Contributing to Countrywide's deposit base, the unions say, "will potentially help...
12/04/07 -
Get Rich Slowly - A few weeks ago, J.D. and I were chatting when he asked me what it felt like to be debt-free. Free Money FinanceHe’d read on my blog that I had no debt and was curious if I’d write about it for Get Rich Slowly. In particular, he asked me to communicate both how I managed to pay off my mortgage (the biggest debt most people have) as well as how it felt when we did so. I was happy to accept his...
12/04/07 -
InstigatorBlog - Failure sucks. Let’s not sugarcoat it. No one goes into business, pours their heart (and money) into a startup, and hopes it will fail. But failure is common enough. The statistics on it are immaterial (and I’m too lazy to look them up right now) — suffice it to say, lots of startups fail. And even more of them don’t live up to expectations (even if they survive to fight another day.) It’s...
12/03/07 -
A Dash of Insight - Every trading system has a time frame. What works for short-term trading may be completely wrong for longer-term methods. In the extreme volatility of the last two weeks, we are sure there are some traders who are buying every dip and selling every rally. This works fine in a volatile but range-bound environment. It will quit working when the trader unsuccessfully sells short at what...
12/03/07 -
Pharmalot - That’s the charge contained in a lawsuit filed against the health care giant. Johnson & Johnson allegedly misled docs and the FDA for years by altering and withholding medical data about the patch, according to a motion filed in federal court in Toledo, Ohio, Bloomberg News reports. J&J faces lawsuits by 2,400 women who claim the patch releases high levels of estrogen that cause strokes,...
12/03/07 -
Accumulating Money - Tulip Mania and the Stock Market Investing Add comments Tulip Mania and the Stock MarketIs a tulip bulb worth $76,000? It is if people are willing to pay that much for it and that’s exactly what happened in Holland in the 1630’s. If it sounds unbelievable, you may have never heard of Tulip Mania. The story began in 1559 when Conrad Guestner brought the first tulip bulbs from Constantinople...
11/30/07 -
Escape From Cubicle Nation - Mistake At the risk of belaboring a small point (and repeating a bit of the story from my last post), I couldn't help but write this month's ezine article on learning from your mistakes since my word bumbling was so fresh in my mind. Here is the article: --- This week I was flying high from the opportunity to write a guest post for the New York Times. As someone raised by a family who loves...
11/30/07 -
Geek Doctor - I was recently asked to give a lecture about how I say "no" to new project requests. Of course I have governance committees which help prioritize all IT projects based on Return on Investment Quality/Compliance Impact factor - number of doctors, nurses, staff and patients who will benefit Alignment with the strategic needs of the business Beyond my governance processes, which I will...
11/30/07 -
Consumerism Commentary - The holiday season is approaching, so I know I’ll be spending more money. I have even begun planning a vacation for early 2008, and I want to make sure I can afford it. Additionally, I am projecting that my side business will make less money in the future and not allow for the career transition from full-time cube dweller/half-time blogger to full-time blogger that I have been considering...
11/30/07 -
Free Money Finance - We looked at seven houses (supposed to be eight) this past Saturday and I thought I'd share my thoughts on the day with you. Here goes: * Most sellers are still not fully reflecting market conditions in their pricing. I've seen about 40 homes since this past summer and I'm pretty familiar with what homes should sell for -- and many are still way over-priced. It's almost as if they know buyers...
11/29/07 -
Accumulating Money - A real estate investment trust (REIT) is a real estate company that offers common shares to the public. In this way, a REIT stock is similar to any other stock that represents ownership in an operating business. But a REIT has two unique features: its primary business is managing groups of income-producing properties and it must distribute most of its profits as dividends. Congress created...
11/29/07 -
Everyday Economist - Last night it occured to me how much starting up a new product is like a joke. I remember being on a playground as a child, and having a friend come up and tell me a new joke they learned. “Why did the monkey fall out of the tree… It was dead” I’d laugh, and they’d enjoy it. But then, another friend would come up and tell me the joke again. “Why did the monkey...
11/28/07 -
Marginal Revolution - Should we regulate banks more? In the wake of subprime losses we are hearing claims that the United States should have regulated its banks more. It is worth pointing out that the U.S. has some of the most heavily regulated banks in the world: 1. The Bank Holding Company Act of 1940, still in force, prevents bank from owning non-financial corporations. 2. The previous Glass-Steagall Act...
11/28/07 -
Dani Rodrik - The New York Times has discovered to its horror that Manhattan's manhole covers are made in India under working conditions that would be considered appalling by most of its readers. Seemingly impervious to the heat from the metal, the workers at one of West Bengal’s many foundries relied on strength and bare hands rather than machinery. Safety precautions were barely in evidence; just...
11/28/07 -
Finadom - People can’t get out of debt because they don’t know or care about how serious their debts are. It is usually too late the time they realize this. Before this, I talked about the reasons why people are in debts. After that I talked about how we can motivate ourselves to get out of debt by finding the reasons. Both articles are talking about the mindset preparation for getting out of...
11/28/07 -
The Peridot Capitalist - Just days after I wrote about the focus at Sears (SHLD) being store redesigns, not non-core asset sales, we get a timely SEC filing from the company announcing its interest in bidding for home furnishings retailer Restoration Hardware (RSTO). The comments from Sears are very interesting. Chairman Eddie Lampert has been eyeing the company since June, and this month alone has increased his stake by...
11/28/07 -
Random Walk To Wealth - With sovereign funds becoming more and more active players in global financial markets we could see a variety of interesting "side effects": 1. Rising Protectionist Sentiment (especially for strategic assets). 2. A "sovereign wealth" premium: companies viewed as "strategic assets" will increasingly become targets of foreign governments, increasing their market value....
11/28/07 -
greg mankiw - The whole theory of optimal taxation and redistribution, best exemplified by the literature that follows Mirrlees, assumes that the social planner cares about inequality in itself. Government policy in the model is driven by a utilitarian calculus, which in turn is based on the axiom of diminishing marginal utility. The planner would, if he could achieve the goal without blunting incentives and...
11/26/07 -
Clive Crook - The rules of US monetary policy have changed: the Fed has revised its reporting procedures in a potentially significant way. The first set of the more detailed minutes of FOMC meetings that Ben Bernanke promised last week was published on Tuesday, covering the meeting that took place on October 30-31. I'm still unsure whether it is correct to regard the new regime as de facto inflation-targeting,...
11/26/07 -
Agoraphilia - The term of copyright has steadily expanded under U.S. law. The first federal copyright legislation, the 1790 Copyright Act, set the maximum term at fourteen years plus a renewal term (subject to certain conditions) of fourteen years. The 1831 Copyright Act doubled the initial term and retained the conditional renewal term, allowing a total of up to forty-two years of protection. Lawmakers...
11/26/07 -
Dani Rodrik's weblog - The language of "growth diagnostics" and of "removing binding constraints" is becoming so commonplace in multilateral agencies and donor organizations these days that I sometimes wonder whether we have not unleashed something out to the real world before its time. The trouble is that what I see being implemented in practice is often the rhetoric and not the substance. That is because the...
11/26/07 -
EconoMonitor - Robert Reich weighs in on the subject of subprime loans, and gets the big picture right: foreclosures are rising, and, as a result, "millions of families who thought they had found the American dream are ending up in a nightmare". But he also gets a couple of things wrong: Even if they can just barely afford the added payments of a fixed-rate loan, many of these families won't qualify for...
11/26/07 -
Overcoming Bias - On a purely instinctive level, any human planner behaves as if they distinguish between means and ends. Want chocolate? There's chocolate at the Publix supermarket. You can get to the supermarket if you drive one mile south on Washington Ave. You can drive if you get into the car. You can get into the car if you open the door. You can open the door if you have your car keys. So you put your...
11/26/07 -
The Consumerist - Okay, so Jack Hough's column in SmartMoney this week is really just an extended ad for his new book. But in this case, the content of the book is something valuable that we think a lot of Consumerist readers will want to know about: how to identify reliable stock picking strategies. For instance, he dissects the way mutual funds are created, culled to isolate the best-performing ones, and then...
11/22/07 -
becker-posner - It seems unlikely that the surge itself would increase the risk of default, though it might, by enabling both the Sunnis and the Shiites to rest and augment their forces for the eventual showdown, taking advantage of a kind of truce imposed by the additional American troops. More likely, the bond traders see the surge as a desperate last gamble by the United States; as a preclude to U.S. withdrawal...
11/22/07 -
deal breaker - So is this why Larry Fink, the chief executive of BlackRock, either passed up or was passed over for John Thain? Everyone absolutely knew Fink was the number one pick to run Merrill Lynch after Stan O'Neal's ouster but some how the job went to New York Stock Exchange boss Thain. And know we know are entertaining ourselves with the thought that this might have happened because Fink had a task far...
11/22/07 -
james kunstler - Venturing into the rural outlands of the upstate New York counties these days, you see new houses everywhere in what was, until about the 1970s, mostly farm country. Almost all of them are stand-alone houses; there are very few multiple-unit subdivisions up here, a la the vast beige housing monocultures found in the sunbelt. But they seem no less tragic to me. These new houses all follow...
11/21/07 -
Seeking Alpha - Stocks lost more ground Monday as investors ran to safer assets. The Dow Jones Industrial Average lost 211.1 points (-1.6%), Standard & Poor's 500 index fell 22.9 points (-1.6%), and the Nasdaq decreased 34.66 points (-1.33%). Volume on the NYSE was light before the holiday at 1.35 billion shares, and decliners controlled advancers by a ratio of 2:1. The US 10-year Treasury was up 23/32 in price,...
11/21/07 -
overcoming bias - Over the last month I've sketched how decision markets might inform choices in marriage, college, college admissions, and medical treatment. Today I consider development, i.e., advising governments and non-profits trying to improve "developing" nations and societies. Rick Davies, Michael Strong (here and here), and Robert Hahn and Paul Tetlock have written already about this to varying degrees,...
11/21/07 -
fat boy slimmed - So what is the deal — I sound like Seinfeld — with stores now opening at 4:00AM on Black Friday??? Do they think they are doing you a favor? That is ridiculous. How “silly” as a consumer are you to get up - or not go to bed - to go shopping at 4am?? Is this just something to do to say you did it? Absolutely ridiculous. And, I feel sorry for the employees that have to work those ridiculous...
11/21/07 -
The Austrian Economists - A question was recently raised about policies of redistribution within the Austrian approach to political economy. This is a fundamental question and should be addressed. I think it is important to stress that there is nothing within Austrian economics per se that would entail a rejection of a normative focus on income inequaity and the standard of living of the poorest of the poor. In fact,...
11/21/07 -
Robert Reich - All signs point to a recession: Home prices dropping, the dollar falling, more mortgages foreclosed, more credit cards delinquent or in default, consumer confidence down, retail sales the worst in a dozen years. We may pull out of it, yet. Bernanke and company may make bigger cuts in interest rates. Congress may enact a payroll tax holiday on the first fifteen thousand of income, as I’ve urged....
11/21/07 -
Aleph Blog - Good investors are typically skeptical. They don’t buy every idea that comes their way, but they test and probe to find ideas with compelling value that are misunderstood by others. That said, the best investors are prudent risk-takers. They continue to search for good investments even in environments that seem to have a negative investing climate. Skepticism can degenerate to permanent pessimism,...
11/20/07 -
All Facebook - Fred Wilson has been updating the world about his venture in Facebook advertising over the past week. Today, Fred posted and updated screenshot of his ad campaign’s performance and it doesn’t appear to be too stellar. For one of his campaigns, out of 10,080 impressions there were only 8 clicks. The average cost-per-click for Fred was $0.08 and the average CPM was $0.06. This is a less than...
11/20/07 -
Dealscape - In a Deal newsweekly article Nov. 19, The Deal's Matt Miller checks in with what The Donald has been up to lately, including a new take on the smelliest of projects.While the housing slump does offer a slight reprove from the continued build out of outlying suburbs as housing closer to cities has become somewhat affordable, some developers still see fresh opportunity. He writes: "Developers...
11/20/07 -
Becker Posner Blog - The wealth of some individuals is so staggering that it is hard for the rest of us to fathom. All of the world's 100 richest individuals are worth much more than $1billion. Even persons with a few billion dollars would not make this exclusive list since Donald and Samuel Newhouse are tied for the bottom spot with $7billion (the rankings are for March of 2007, and were compiled by Forbes...
11/19/07 -
Dani Rodrik - The workhorse model of international trade (the 2x2 Heckscher-Ohlin model) has very stark implications for the effect of trade with poor, labor-abundant countries. Low-skilled workers in rich countries (read the U.S.) must end up as losers--not in relative terms, but in absolute terms. Moreover, the larger the overall gains from trade, the bigger must this adverse distributional effect be. In...
11/19/07 -
The American Scene - A year or so ago I was talking with my multi-talented friend Wen Stephenson, who now produces the esteemed radio news program On Point but then was the editor of the Boston Globe’s Ideas section. I was complimenting some recent stories he had run, and he happened to ask me how and in what format I read the stories. I replied that I subscribed to the Ideas RSS feed and read everything in my...
11/19/07 -
The Liberal Order - It's difficult to convince some people that markets tend to weed out discrimination, or at least penalize those who discriminate. For example, let's say that Ty and Amy, a male and female carpenter, respectively, can both produce four shelving units in a week. If Ty is the favored party and earns, say, $1,000 per week, while Amy, the disfavored party, earns only $800 per week, then why aren't...
11/16/07 -
Capital Spectator - Mr. Market isn't always right, but quite often he imparts valuable information. No, he won't whisper the secret to easy money in your ear. But he's always willing to provide some perspective, which comes in handy every now and again if only to remind investors that capital flows are forever evolving. With that in mind, we crunched the numbers on the 10 major sectors that comprise the S&P 500...
11/16/07 -
RGE Monitor - Two related stories in today’s Financial Times point out one of the most worrying economic risks facing the world today. The first is a report by China’s National Bureau of Statistics that fixed asset investment (FAI) in urban areas was up 26.9% (to RMB 8.9 trillion) during the first 10 months of the year compared with the same period last year. This is the highest it has been in over a...
11/16/07 -
Geek Doctor - This is the second in my series about email. I receive over 600 email messages each day (with virtually no Spam, so they are all legitimate) and respond to most via Blackberry. How do I triage 600 messages? I use these 10 rules to mentally score each email: 1. E-mail marked with a “high importance” exclamation point must pass the “cry wolf” test. Is the sender a habitual “high...
11/16/07 -
Seeking Alpha - Looking past the detail and the noise, we wager that a world-wide bubble is in its last stages. To this point, a massive credit inflation has infected virtually every investment class … to the farthest corners on earth. This, unsurprisingly, is not readily identified by most analysts. Once inflationary forces have percolated for a long period of time, it is no longer possible to separate...
11/16/07 -
Mortgage Rates Report - The Writers Guild of America elected to strike last Monday rather than accept the offer from studios. The sticky subject of residual income becomes more complicated in this "new media age". The WGA wanted studios to pay residual income regardless if they recouped their production and development costs; the studios capitulated to that claim. The issue today is the residual income off of...
11/16/07 -
Instigator Blog - Who doesn’t enjoy the thought of tossing and turning all night in fits of restlessness brought on by nightmares? Woohoo! The secret is this: Work right until the moment you go to bed. It’s really as simple as that. Work, work, and work some more. When you’re exhausted, go straight to bed (don’t pass GO!) and try to sleep. I can guarantee a night filled with nightmares. The nightmares...
11/15/07 -
VOX - The global financial system shows signs of stress, but why should policy-makers care? After all, this is financial turmoil, not a systemic financial crisis. There has been no failure of a large complex financial institution, nor a widespread decline of asset prices. True, many investors lost money and the problems are not over. Risk is being repriced, funding vehicles unwound, and liquidity...
11/15/07 -
Angry Bear - An interesting article concerning swarms appeared in the NYT last Tuesday. Dr. Ian Couzin, a mathematical biologist, offered intriguing explanations of how various swarms actually occur. What all swarms have in common is that their behavior is nothing more than the summation of every individual’s behavior. Furthermore, the principle guiding the behavior of each individual is the same guiding...
11/15/07 -
Frugal Zeitgeist - A couple of months ago, I took a look at Prosper.com to see what that was all about, and I wrote a post about what I found. I spent a little more time looking at Prosper again over the past couple of days. This time, instead of looking at it holistically, I only looked at the loan requests in which the borrowers were categorized as HR, or High Risk. The reason I was specifically interested in HR...
11/14/07 -
The Oil Drum - In an interview with the Financial Times, the Saudi oil minister, Ali Naimi, admits he is powerless in today's market: We have nothing to do [with] where the price is today. (...) We work very hard and consciously to be sure that whatever actions we take that we are responsible do not dampen economic growth. (...) We are today not producing all our capacity because it is not needed. The demand...
11/14/07 -
The Consumerist - We've been covering One Laptop Per Child's "Buy One Get One" deal because it's a cheap way to get a very unique, kid-friendly laptop, and because at the end of the year a lot of people are looking for places to burn off some extra tax-deductible donations. But now that OLPC is rolling in one year of free T-Mobile access, the deal just turned into a true bargain—if you meet a couple of conditions. ...
11/14/07 -
ForeExTradingHQ - The Australian Dollar strengthened for a second day in forex trading as a rally in U.S. stocks prompted investors to take part in carry trading by borrowing funds from Japan and investing it into higher yielding assets. The Australian Dollar rose to its highest level in three weeks against the Japanese Yen after the Standard and Poor's 500 index had its largest gain in two months. ''The Australian...
11/12/07 -
Red State - Like many people, I'd let myself hope that last August's global financial crisis was just that: a phenomenon arising from and largely contained within the narrow world of finance and capital markets. Much like the 1998 Long-Term Capital Management crisis, or the 1987 stock-market crash. How wrong I was. The last two weeks have seen growing evidence that disorders in financial markets are...
11/12/07 -
robert reich - Time Warner has just revealed that, as part of his new employment contract, Chief Executive-elect Jeff Bewkes will receive a minimum salary and target bonus of $10.25 million next year. A pay package this size is now so typical for CEOs that the annoucement barely raised an eyebrow. In "Supercapitalism" I explain why CEO pay has reached such absurd levels. The Wall Street Journal recently...
11/12/07 -
Angry Bear - We have a long history. Why not see what this nation was truly use to before we decide whether the opportunity (chance?) to be employed is good, bad or indifferent? I went to the department of labor site and used their graphing for the following charts. First 1948 to 2007 E/P Ratio. What we see is 3 distinct groupings. 1948 to 1960 vacillation within a range of 1 point (55 to 56). Then the...
11/11/07 -
The Oil Drum - After the CEO of Total (the French oil major) last week, two more CEOs of an oil major came out this Thursday to give stark warnings that mean that peak oil is happening right now. In addition, the chief economist of the International Energy Agency (the IEA), one of the main cheerleaders of the "there's more than enough oil" camp until now, is giving an extraordinarily pessimistic interview...
11/11/07 -
Health Beat Blog - Last month a slew of media outlets caught wind of Jay Parkinson, a 31 year old Brooklyn-based M.D. who provides care for his patients through the Internet. Here’s how it works: you get an initial in-person consultation at your home or office. After that, you can ask Parkinson questions online through instant message or video chat; e-mail him digital images of minor wounds, rashes, etc., that...
11/11/07 -
Inmanwiki - Okay, with all of this bad news on the California real estate market, you would think that most sellers got the memo that things have changed. Apparently, there are still some sellers who think it is still 2005, and that none of these things effect them. Because I am “the giver”, I want to do my part to help some of these sellers realize that things have changed. So here are some examples...
11/10/07 -
Good Goth - The euro surged to a record high against the U.S. dollar yesterday, touching $1.4731, a 65 per cent gain since the end of 2001. Analysts say the euro has become the main threat to the U.S. dollar's dominance; while political leaders worry its rising value is hurting European exports. The euro made its debut as an accounting currency in 1999 and was put into wide circulation as physical money...
11/10/07 -
Calculated Risk - Via PJ at Housing Wire, I see that WaMu put a PR out yesterday on the matter of Mr. Cuomo's investigation into its appraisal practices. As PJ notes, this is the part that matters: The contract with the vendor named by the NY AG requires that the vendor represent and warrant that appraisals are prepared in compliance with Uniform Standards of Professional Appraisal Practice and all guidelines...
11/10/07 -
EconomicObjectorvism - With a weakening US dollar and more competitive union contracts, exporting vehicles to Europe from the US is looking more and more plausible with each passing day. … Automobilwoche in Europe is reporting that Opel worker’s council head Klaus Franz called a US-built Zafira a “distinct possibility” Many things are a distinct possibility. A strong holiday sales period over...
11/08/07 -
Red State - The US dollar is in a full-fledged rout. It's trading at historic lows against every major currency except the Japanese yen, and against a raft of minor currencies as well. Dollar-prices for commodities like oil and gold are at record highs. Dollar weakness is an expected consequence of the Federal Reserve's two recent cuts in its benchmark short-term interest rate. But dollar sentiment around...
11/08/07 -
Roger L. Simon - Entertainment journos like Nikki Finke - who is doing a great job covering the Writers’ Strike, by the way - love to call Los Angeles a “company town” for show biz the way Washington is for politics. It’s not, really. Vastly bigger than the DC metro area, LA, city and county, is a sprawling megalopolis of nearly ten million (not counting illegals) with more Koreans than any city but Seoul...
11/08/07 -
Mark Cuban - The beauty of Facebook, as opposed to Myspace and other social networks is that the people on there are for the most part who they say they are, and Facebook does their best to dismiss those who aren't. This simple differentiation makes the membership base of Facebook far more valuable than any other social network. When you go to my Facebook profile, you get the real me. Thats not to say I answer...
11/07/07 -
Econbrowser - There's an idea floating around that asserts that the high price of oil is -- at least in part -- due to the weak dollar. Does this make sense? Oil nears $100 mark as crude reaches yet another record By Steve Hawkes Oil prices moved a step closer to the $100 a barrel mark yesterday as supply disruptions in Mexico, the weak dollar and the threat of attacks on oil facilities...
11/07/07 -
Brad Setser - It’s always a pleasure to be asked to guest-blog for such a much-admired and widely-read blog. In about an hour I will be meeting up with Brad here in lovely smog-free Beijing (sick joke). As usual I have to warn Brad’s regular readers that I am so enthralled by China that sometimes it is hard for me to notice what is going on in the rest of the world unless there is some China angle...
11/07/07 -
Bacon Butty - Imagine your job is taking huge gambles with other people's savings and pensions. Imagine also that the bets are arranged so that you are paid a fortune when things turn out well, but you don't lose anything much when they go wrong. How would you behave...? I think you might rapidly develop a hog's appetite for wild risk taking. And that is, in essence, what is wrong about the financial...
11/07/07 -
Tech Law Forum - Today Yahoo Chief Executive Jerry Yang and General Counsel Michael Callahan were shamed in the House Committee on Foreign Relations. Yahoo was raked over the coals for turning over information to the Chinese government in 2004 which led to the incarceration of Chinese dissident Shi Tao. Callahan specifically was hammered for evading questions in a 2006 hearing about Yahoo’s knowledge of what...
11/06/07 -
The Capital Spectator - The strategies that increase the odds of achieving investment success too often get a bum rap. Drowned out by the advice du jour, financial prudence is forever getting trampled in the latest news cycle as more enticing notions grab the crowd's attention. Buy this, sell that. Oh, look, XYZ Corp. posted an unexpected rise in earnings last quarter. But, wait, look over there: same store sales are down...
11/06/07 -
CARPE DIEM - For workers with some college (but no degree), the unemployment rate in October 2007 was 3.5%, almost the same as October 2006 (3.4%), and about the same as the average rate of 3.6% over the last three years (see chart above, click to For college graduates, the October unemployment rate was 2.1%, exactly matching the average unemployment rate for that group of workers during the last three years...
11/05/07 -
Core Economics - Labor released part of its housing policy yesterday. The idea is to provide superannuation style accounts to first home buyers complete with superannuation style tax breaks. The general thrust of this looks good although some details could use some post-election tweaking. The general idea of encouraging saving but also redressing the fact that retirement saving is rewarded more than housing...
11/05/07 -
The Oil Drum - Year-on-year change in centered moving average of Russian oil production according to three data sources: EIA Table 1.1c, IEA Table 3, and JODI. Black line is an extrapolation of the current trend and is a scenario, not a forecast This piece concerns the near term prognosis for Russian oil production. For background on Russia at TOD, I would recommend the excellent summary by Dave Cohen last...
11/05/07 -
Piao Hao Report - According to a Bloomberg article today, the RMB was up 0.56% last week, reaching 7.456 to the dollar. This may not sound like a lot if you trade dollar/euro, but it is easily the biggest one-week jump in the US dollar value of the currency since it was suddenly revalued by 2.1% in July, 2005. According to a Bloomberg article, RMB forward contracts imply a price of 7.38 by the end of this...
11/04/07 -
26econ - In a previous post I talked about one reason why a social networking site like Facebook is valuable: the information that it collects about people, their preferences, and who their friends are in principle allows more efficient targeting of ads to viewers. In economics this is known as a ‘matching’ problem. You have two groups (viewers and advertisers) and you can create some value if you...
11/04/07 -
Pharmalot - whoknows.jpgEarlier this week, the drugmaker claimed a much-hoped-for victory when the FDA finally approved its cancer med, which can be used as a treatment for chronic myeloid leukemia in patients who can no longer take Gleevec. The agency delayed approval last July after deciding to review study data. That same week, a former global director of biostatistics filed a wrongful termination...
11/04/07 -
A Dash of Insight - In developing our trading methods, we pay careful attention to various measures of risk and volatility --beta, the Sharpe ratio, the Ulcer Index (Vince's favorite), and others. These measures must all be compared to another important approach, the trader's "feel" for the position. How Does One Develop "Feel" Developing a feel for one's position is difficult to explain to those who have...
11/02/07 -
RBC - The familiar jab at economists, that they know the price of everything and the value of nothing, can only be repeated by someone who knows nothing of economics (or economists). But a related charge, that the discipline is so seductive and illuminating that you can easily forget about all the things that aren't traded in markets and whose value is thus invisible if you don't pay attention, has some...
11/02/07 -
24/7 Wall St - The truth is that unless an analyst makes a stark hidden discovery, analyst calls are not truly news. Of course the calls impact the prices because of the influence in buys and sells. This price move today has just confirmed a technical crisis for Citigroup stock. Since shares had traded under a pretty hard support level of support at $43.00, this was on many chart watcher lists. Now shares are...
11/02/07 -
artworld salon - Do we need some of these rules? Has the Art market now reached the stage that it NEEDS regulating to protect individual buyers and sellers? Or should we continue to rely on members of the community outing their peers before things go bad? Are there less cumbersome alternatives that could be put in place? I once suggested a public register for all transactions of works by major artists. The register...
11/01/07 -
Freedom to Tinker - In 1980 AT&T was a powerful institution with a lucrative monopoly on transporting long-distance voice communications, but forbidden by law from permitting the government to eavesdrop without a warrant. Then in 1981 Judge Greene took its voice monopoly away, and in the 1980s and 90s the Internet ate the rest of its lunch. By 1996, Nicholas Negroponte wrote what many others also foresaw: “Shipping...
11/01/07 -
Econweekly - I’ve gotten used to hearing things like this: “Country X (insert the name of your favorite developing country here) doesn’t care about the labor rights of its workers, so US products can’t compete with Country X's.” Ditto about environmental or product safety standards. American manufacturers are being wiped out by hordes of third-world factories that exploit children and slave-workers;...
11/01/07 -
Alex M. Thomas - This post is the first in the series- On Neoclassical Economics. This series attempts to look at the basic concepts of Neoclassicalism or Marginalism. The concepts that this series will cover are that of man being rational, measurement of utility, equilibrium from demand and supply, Micro and Macro economics and notion of perfect competition. Remind yourself that what we (mostly) see in...
10/31/07 -
The Oil Drum - Of course, these two explanations are satisfying our natural impulse to find scapegoats rather than facing the depressing facts of fossil fuel depletion. Robert Rapier already debunked the first allegation, the second one is much more nebulous and has always troubled me since I got interested in peak oil. Stuart Staniford looked also at this problem (Is Oil in a Price Bubble?) by noting that price...
10/31/07 -
sybil star - If you're like me, you've been wondering: Okay, if credit markets have seized up, where are these new mortgages and refinancing deals getting the money? Why isn't Countrywide going bankrupt? I know they've received a $2 billion infusion from Bank of America, but that can't be enough. The answer is, it's coming indirectly from you and me. Our tax dollars have just become collateral behind newly...
10/31/07 -
rge monitor - Summers hints that China may hesitate to allow the RMB to move too much now out of fear that the next US administration will want it to do even more. Better to hold off and do a deal later. He may well be right. But if the dollar's current decline against the world's freely floating currencies continues (Right now, it takes about 1.44 dollars to buy a euro), it may not be in China's own...
10/31/07 -
political calculations - Every six weeks, the members of the Federal Open Market Committee of the Federal Reserve, the most powerful central bank in the world, gather together in a dark corner of a discreet office building in Washington D.C. with a dark purpose: to sacrifice a goat so that they might read its entrails to divine where they might next set the level of the Federal Funds Rate. You'll have to excuse our prose...
10/31/07 -
becker-posner - Little evidence supports the role of population growth as an important factor behind the recent spurt in food prices since the growth in world population has slowed in each subsequent decade during the past 30 years. A more significant force behind the rise in food prices is the rapid growth in the per capita incomes of developing countries, especially China and India, which has raised world demand...
10/31/07 -
cunning realist - The consequences for trying to repeal the natural economic cycle are almost comically obvious now. On Friday the dollar closed at a new low, gold a new high, and oil a new high as well. Take a look at this one-year chart of the latter. Remember: as the price of oil continues to rise, it puts enormous pressure on policymakers. Statists hate pressure, especially when they also hate the minutiae and...
10/29/07 -
Liberal Order - Price ceilings lead to shortages, whether the price control is mandated by government or voluntarily implemented. In San Diego, many hotels reduced rates, rather than increase them, in light of the hordes of evacuees seeking shelter. A compassionate gesture? Maybe, but have they created adverse consequences? Kirk Shaw, office manager at the city's Days Inn Harbor View said the facility has...
10/29/07 -
Not Sneaky - The recurrent topic of which economy's dad can beat up which economy's dad - the US' or the EU's - recently popped up again here and there. Roughly speaking, the US has lots of inequality but higher per capita income, whereas the EU (here, as often, basically meaning France, Italy and Germany) has lower per capita income but a lot less inequality. In fact if you take the OECD countries, minus the...
10/29/07 -
Agoraphilia - This post will seem frivolous at first. It’s not. Wait for the punchline. Suppose John Doe cares about two things in a woman: looks and personality. Moreover, he says these characteristics are equally important to him (that is, he places 50% weight on looks, 50% weight on personality). The World Mating Association (WMA) would like to create a ranking of women according to John’s...
10/28/07 -
Next Billion - Boston Consulting Group has been conducting extensive primary research into the spending habits and lifestyle of a segment of the population it identifies as the "next billion." The "next billion" are economically better off than the poorest of the poor, but earn just less than the current customer base of the formal economy. BCG discusses business strategies to tap the next billion market segment...
10/28/07 -
The Big Picture - Depending upon who you believe, the impact of this is either: 1) temporary consumer weakness blamed on energy costs; 2) signs of an ongoing sentiment decay in the US, partially blamed on the Iraq War; 3) the long awaited impact of the housing slowdown on US consumption; 4) warnings of a greater economic slowdown or even recession; 5) some combination of all of the above. As the prices of the...
10/28/07 -
Seth Godin - A survey can teach your customers or it can help you learn from them. And it might be a real survey, or it could be a census. The traditional understanding of a survey is that the goal is to LEARN from your population and that you will ask a scientific sampling, not everyone. You can TEACH people with a survey, though, simply by asking them questions that help them notice things they never...
10/26/07 -
Dealscape - To say that Merrill Lynch & Co. had a rough week is an understatement. The New York investment bank announced one of the worst quarterly earnings performances ever, due to its exposure to subprime debt. The results triggered possible mutiny over its CEO E. Stanley O'Neal. Meanwhile, O'Neal was incidentally talking with Wachovia Corp. over a possible merger. But despite all this, Merrill was able to...
10/26/07 -
The Oil Drum - After an extended period of bewildering, painful and rewarding transition, the people of the USA finally feel that they have found their feet underneath them, with a clear and hopeful path to the future. Oil consumption is down to 6.6 million barrels/day, 30% of our 2007 peak oil use, and CO2 emissions are 26% of their 2011 peak, a matter of pride for most Americans. Rapid reductions in world...
10/26/07 -
Hodak Value - Franklin Allen, Elena Carletti, Robert Marquez raise the age-old question, "Shareholders or stakeholders?" in this study. When finance and economic professors resurrect this popular dichotomy, they invariably blur a much more useful distinction: short-term vs. long-term. From their study: A surprising finding is that "some companies may choose to become stakeholder-oriented because it increases...
10/25/07 -
knzn - I’ll begin with a hypothetical question: If half the prices went down by 10%, and the other half went up by 10%, would that be price stability? If you have faith in the General Price Level, you may answer yes, but since the General Price Level has never revealed itself to me, nor did my parents teach me to believe in it, I must ask, “How can it be price stability if none of the prices are...
10/25/07 -
Becker Posner Blog - I agree with Posner that third party liability is desirable in some cases, but that class is narrow. One appropriate case is where a firm makes a device whose only purpose is to steal satellite signals. The firm should be held liable when one of its devices is purchased and used for that illegal, and only, purpose. In addition to the obvious advantages of discouraging the production of goods...
10/25/07 -
Freedom to Tinker - I’m currently in the process of purchasing a new house. I called up a well-known national bank and said I wanted a mortgage. In the space of 30 minutes, I was pre-approved, had my rates locked in, and so forth. Pretty much the only identifying information I had to provide was the employer, salary, and social security number for myself and my wife, as well as some basic stats on our investment...
10/24/07 -
RGE Monitor - That is basically what the US has to sell to China to finance its current account deficit right now. China Reserve Watch Not 6% of Bear ($1 billion) every business day. 6% of Bear every single day of the year. Financing the deficit requires selling more like 10% of Bear ($1.5 to $2b) every business day. We don’t really have good data on the true scale of China’s foreign...
10/24/07 -
stirling_newberry - A German energy group predicts that 2006 will have been the peak of oil production, and states that output will slide rapidly from here on in. This is a very downside prediction, far worse than most. However, it is only worse than most. It also underscores that we have seen the peak of conventional light oil, and are going to see our next swing upwards in production only when unconventional...
10/24/07 -
Chip Conely - We live in a promiscuous era, don’t we? America is experiencing a divorce epidemic and the future of the American family is at stake. Is this statement a myth or reality? Turns out it’s a myth. The divorce rate in America has dropped for more than a quarter century and is now one-third lower than it was in 1981. OK, if that’s the case, then maybe all these stories we hear about employees,...
10/23/07 -
- For the last several years the euro has been appreciating steadily against the U.S. dollar. Given the Chinese renminbi and other East Asian currencies are pegged to the dollar that means the euro has been appreciating steadily against all. This spells trouble for Euroland, and it suggests European policymakers should join with the U.S. to address the global problem of under-valued currencies. The...
10/23/07 -
Contrary Investor - We all know far too well by now that late last year and early this year, many a Fed and Treasury official were proclaiming from on high that sub-prime mortgage credit problems were contained. The party line was that problems in that particular credit sector neck of the woods were not about to spread or cause further problems in any other part of the domestic, let alone, global credit markets. ...
10/23/07 -
the digerai life - Seems like a lot of bad stuff happens in October, making it a notorious month for investing. It also looks like this has been the case all the way back in time. When I first started investing in 1990, Black Monday was still a fresh episode in the minds of people. Take note of these examples of wild October stock market behavior: In late October of 1929, the stock market crashed for the first...
10/22/07 -
fabrice grinda - A country can either control its interest rates or its currency. It cannot control both at the same time. When you increase interest rates, you make investing in your country more appealing to foreigners and your currency rises. China has a mostly fixed exchange rate with the U.S. This means that Chinese monetary policy is essentially decided by the Federal Reserve. The problem is that given its...
10/22/07 -
recovering journalist - The sheer, delirious, lip-smacking glee that is being exuded by various commentators over the demise of The New York Time's TimesSelect is proof that a lot of people still don't really understand this. They're still living the dream that journalism somehow happens by magic, and that attaching revenue and other business principles to it (ooh, profit!) is somehow dirty. Alternatively, some of these...
10/22/07 -
god of the machine - This new pro-reason philosophy, of course, would be Objectivism. Now I think we can agree that in the twenty-five years since this passage was written two things have not happened. Objectivism has not swept the country, and American-style Nazis have not taken over the government. (Anyone who thinks the Bush gang counts needs to acquaint himself with the real Nazis.) We have had approximately...
10/21/07 -
Equity Private - Liquidity Feedback Loop reflections on reflections An early intuitive model supporting the time distortion effects of near light speed travel imagined a beam of light bouncing between two perfectly reflective and perfectly parallel surfaces hurling through space at great speed. Today, the image and the recursive metaphor conjures up more thoughts about liquidity, its dark side and the after...
10/21/07 -
Ficke - Whenever the subject of air travel comes up, particularly its rather high cost, I often joke that one could just ship oneself in a crate for a lot less money. I was about to make such a comment in regard to a certain upcoming event, when I realized that I had never actually checked out whether it was true. Is it really cheaper to FedEx yourself cross-country than to buy a plane ticket? Time...
10/21/07 -
Aleph Blog - Back after a hiatus of sorts. I should have a piece on my portfolio reshaping coming on Monday or so. Tentatively, what I find fascinating, is that I have so many shoe and retail names near the top of my list. Oh, and a few mortgage REITs, if they make sense… :( But on with this morning’s topic, which deals with global macroeconomic pressures. A few of the articles are a month dated,...
10/19/07 -
investor geeks - For the poker illiterate, VPIP stands for “variably put money into pot”, which is a statistic that tracks what percentage of hands you play. Good players are in the 15-30% range. The cheaters are in the 70-90%. BB/100 stands for “big blinds per 100 hands”, which measures how profitable you are. So if you were playing $100/$200 poker with a 1BB win-rate, you would win on average $200 every...
10/19/07 -
becker-posner - A report to be issued this coming week by the IMF (the technical analysis was released early) shows that greater globalization during the past two decades contributed significantly to rising inequality during this period in most developing as well as developed countries. The media greeted this conclusion about the connection between inequality and globalization with claims that the new report is...
10/19/07 -
Captain Capitalism - Noticed that back in the Great Depression, based on dividend yield stocks were a steal, at one point dividends providing a near 10% of the firm's stock price. But with the nearly 20 year bull market stocks increased at a rate faster than dividends, driving the dividend yield to its historic low of just 1.1%. So roughly, based on the amount of dividends the firm was paying, you'd have to wait almost...
10/18/07 -
rge - Obviously, there is a big difference between that kind of outflow for a month and that kind of outflow over the course of the year. The rolling 12 month sum of high quality inflows – foreign purchases of long-term securities (see line 19) – is still $785b. That though is below the totals for 2005 and 200. And if the repayment of principal on various Agency guaranteed MBS and other ABS are...
10/18/07 -
Seth Godin - Word of mouth is a decaying function. A marketer does something and a consumer tells five or ten friends. And that's it. It amplifies the marketing action and then fades, usually quickly. A lousy flight on United Airlines is word of mouth. A great meal at Momofuku is word of mouth. Viral marketing is a compounding function. A marketer does something and then a consumer tells five or ten people....
10/18/07 -
Roseman Eruptions - If I lose money in the markets, can I count on U.S. Treasury Secretary, Hank Paulson, to bail me out? Investors have grown accustomed to similar government bail-outs, most recently the “Greenspan put” whereby the Federal Reserve would step in and alleviate market stress by cutting interest rates to address market crises and systemic threats to the financial system. The “Bernanke put” has...
10/17/07 -
Liberal Order - Joel Waldfogel argues that markets, too, lead to a tyranny of the minority, much like libertarians and other small government types accuse democracy of producing. But Waldfogel premises his argument on bad economics. This is not to say that Waldfogel is a bad economist - to the contrary, he's an exceptional economist using bad standard economic analysis of market comptition. Waldfogel uses...
10/17/07 -
Athena Alliance - Creating a new industry or capturing an old one is the Holy Grail of local economic development. In today's economy, that usually means going after the next hot thing -- "ABC"-tech. But there is a high-profile existing industry that local leaders swoon over: the film industry. Everyone gets excited when the movies come to town to make a picture. My own recent example was spending half a day...
10/17/07 -
Orgtheory - The most recent issue of Organization Studies has a special forum on critical theories of management, with a special focus on the paleo-Marxist view. What, you ask, is paleo-Marxism? No, it is not the study of the alienated ancient Greek labor class. “Paleo” is Paul Adler’s way of describing a more fundamental view of Marxism that returns to the original Marxist texts to uncover core themes....
10/16/07 -
buzz machine - Paul Steiger, outgoing editor of the Wall Street Journal, announced today that he is heading Pro Publica, a foundation-backed, nonprofit organization that will perform investigative journalism and place it in established media organizations. Is this how investigative journalism will be supported in the future, with journalistic organizations shrinking inexorably? I have been dubious about...
10/16/07 -
Rodrik - A progressive trade agenda would embrace globalization, not reject it, be defensive about it, or be isolationist. Rather than rejecting globalization, a progressive would talk about a broader conception of globalization: globalization plus, rather than globalization minus. This is as much for rhetorical purposes as for substantive ones: progressives are not today’s Luddites, and cannot afford to...
10/16/07 -
Lean Left - Mr. Nacchio said last year that he had refused an N.S.A. request for customers’ call records in late 2001, after the Sept. 11 attacks, as the agency initiated domestic surveillance and data mining programs to monitor Al Qaeda communications. But the documents unsealed Wednesday in federal court in Denver, first reported in The Rocky Mountain News on Thursday, claim for the first time that...
10/15/07 -
Mark Perry - Cotton subsidies primarily benefits large corporate farms and their wealthy owners. Of the $19.1 billion that was paid out from 1995-2005, the top 10% of cotton-subsidy recipients got more than 80%, or almost $15.5 billion. The bottom 80% of recipients had to make do with $1.4 billion. Cotton subsidies are a brazen wealth transfer from the tax-paying middle class to fat cats, i.e. it's a form...
10/15/07 -
ryan avent - First off, it’s important to recognize that there can be more than one force behind inequality operating at a time. If you’re trying to explain the massive growth in earnings among the top 1 percent, you’re going to have a difficult time finding a role for education. At the same time, explaining wage stagnation for parts of the middle and bottom of the income spectrum probably needs to take...
10/15/07 -
talking fed - Let's take a look at the data. The graph below (click to enlarge) shows several key interest rates, all deflated by the year-over-year change in core PCE. The top two lines are real mortgage rates for conforming and jumbo mortgages. Those rates are significantly higher than they were at the start of the year, adding to downward pressure on real-estate prices. The lower two lines are overnight LIBOR...
10/14/07 -
greg mankiw - Maybe you think it's Al Gore, and if so, you are correct. But I also have in mind the supply-side economists of the 1980s. The more I think about it, the more similar Al Gore and the supply-siders appear. They both noticed something that many serious scholars had been working on (human carbon emissions are causing the planet to overheat, high tax rates are causing the economy to underperform.) They...
10/14/07 -
Biz-Ranking - Franchising is known to be among the available options that businessmen and entrepreneurs can use as business opportunities without having to go through the usual motions of having to brainstorm and hypothesize on studies that most business tycoons would initially make. Franchising can be seen today in local food chain stores like McDonald’s, Burger King and Subway. They are practically seen in...
10/14/07 -
graeme thickins - Ever wonder how a tech startup gets from a standing start to an IPO in just five years? Well, it doesn't often happen that quickly -- or easily(!). But we actually have quite a strong history here in Minnesota of tech firms that start as just an idea and go on to become big industry players in a relatively short period of time. Going back a ways, my former employers Control Data and Medtronic...
10/12/07 -
Cato at liberty - A group of House Republicans has introduced a plan that could eventually break the logjam on moving tax reform legislation through Congress. House members Paul Ryan, Jeb Hensarling, and John Campbell proposed a “Simplified Tax” system as an alternative to the current complex and inefficient individual income tax. The Simplified Tax has two rates, 10 and 25 percent, a huge standard deduction...
10/12/07 -
stealth mode - So my ETrade account has been compromised, and they have put it on restricted status. I noticed about a month ago that I couldn't see my balances, and I began calling and emailing. I finally was able to talk to someone about it today, after trying for a month and being told that the "right person" to talk to would call me back. After an extensive interview in which I had to prove my identity,...
10/12/07 -
money crashers - I’ve been watching a lot of the house flipping shows on TLC and HGTV lately. I’ve also been doing some reading about house flipping and how to do it the right way. It seems like everyone has their own opinion about house flipping, but I am still intrigued by it. I am intrigued, because you really can be just an average joe and make some decent cash from it, no matter what the housing market is...
10/11/07 -
Epicure and Dealmaker - Confidence Game Is it just me, or is the sound of whistling getting louder in here? Helen Thomas from FT Alphaville told us earlier this week that the market mavens at UBS have declared the imminent health of the mergers and acquisitions market. Apparently, these Pollyannas took a gander at previous disruptions to the global financial markets—like the US savings and loan crisis and the...
10/11/07 -
AltHouse - Pajamas Media vs. BlogAds -- the blogger's perspective. Let's assume you're a reasonably successful blogger who would like to make money from the writing you put into your blog. You currently have BlogAds, which advertisers buy by the week, month, or quarter. So you must continually attract new advertisers, but you are also always free to adjust your prices. Thus, if you're getting a lot of...
10/11/07 -
Blogging Stocks - Economists expect growth to continue slowing. Still, they expect the U.S. economy to avoid falling into a recession even with the housing mess that Goldman Sachs Group economist Seamus Smyth calls an "ongoing train wreck." I think economists may be a bit optimistic even with that sobering news. Here's the numbers Bloomberg reported today from its survey of economists: ...
10/11/07 -
Robert salomon - I've had an interest in executive compensation for quite some time. I'm not interested in compensation in and of itself, but in compensation as a form of governance. My interest in compensation revolves around how it can align the interests of shareholders and managers, and how boards (as the representatives of shareholders) can become more effective in designing executive compensation packages....
10/11/07 -
Doctor housing bubble - I’ve been getting multiple e-mail requests about doing an analysis about renting versus buying especially in high priced areas. Since in my mind’s eye, the answer is rather clear for the moment since any equation will tell you outright that buying does not make sense with current prices and trends. There was no point in using mortgage calculators or figuring out tax breaks since the numbers...
10/11/07 -
A random walk to wealth - As announced yesterday, I have put together an aggressive growth portfolio that I am calling a "hare" portfolio. Because most of the stocks in this portfolio are high beta, momentum based selections I have also constructed a fully hedged "Hedged Hare" portfolio that shorts the ETF's of three broad market indices that this portfolio tracks. Specifically it is short 40% FXI, 40% VWO and 20% SPY. The...
10/10/07 -
Economics - There has been much discussion over the past few weeks about the iPhone locking and unlocking issue. It began when Apple chose AT&T as its partner for the next two years. In the US, this meant that the iPhone would be locked and only accept SIM cards from AT&T. Then a few months after the launch of the iPhone hackers managed to unlock it allowing it accept any SIM cards; most notably ones from...
10/10/07 -
Econblog - The Dollar and the Drug Trade The value of the U.S. dollar (USD) is falling against a number of foreign currencies, including the Canadian dollar (CAD), also known as the loonie. As the dollar weakens against the loonie, imports from Canada, including illegal drugs like marijuana, become more expensive. As American dope-smokers get priced out of the market for high-quality Canadian marijuana,...
10/10/07 -
Andrew Norton - In The Sunday Age yesterday, there was another article about private school students struggling at university. It was based on the numerous studies (I mention a couple here) which have found that, for a given ENTER score, kids from private schools, and also selective government schools where they have been examined, average slightly lower first-year university marks than kids who have been to...
10/08/07 -
EconoSpeak - ProGrowth Liberal just posted interesting information about Martin Feldstein on Social Security. Here is an extract from my new book, The Confiscation of American Prosperity, regarding Feldstein's obsession with the subject. Feldstein first came to national attention in 1974, the same year that Arthur Laffer produced his famous napkin. Feldstein published a model that "proved" that Social Security...
10/08/07 -
BuzzMachine - I want you to invent the ideal cable company. That may sound oxymoronic or just moronic, but I want you to try. Here’s why: Bob Garfield continues his jihad against his cable company (and, by extension, all of them) at Comcast Must Die. He is inviting fellow cable-sufferers to come in and tell their tales of the foe. Garfield charges his congregation: “Congratulations. You are no longer just...
10/08/07 -
Dealscape - Are activist hedge funds bad guys or good guys? It depends on who you ask. But the overwhelming consensus from a panel Friday at the Mergers & Acquisitions Institute in Dallas was that activism is here to stay and companies have to deal with it. Sure, hedge funds are "nastier" than your garden variety shareholder, according to Chris Watson, an investment banker at Lehman Brothers Inc. who faced...
10/08/07 -
Dealscape - On Sept. 29, China became the latest country to launch a sovereign wealth fund — in this case a staggering $200 billion investment vehicle, China Investment Corp., Asia's largest and one that seeks to capitalize on $1.41 trillion worth of currency reserves. The Deal contributor Sean Daly points out Asia’s reserve total $3.5 trillion — accounting for two-thirds of the world’s — and are...
10/08/07 -
Canadian Econoview - The Toronto Globe and Mail ran a story ($$$ subscription required) a little while back about cancer patients treating themselves with DCA, the drug which, according to reports out of the University of Alberta shows promise as a cancer treatment, based on its effectiveness in lab rats. Orac, who blogs at Respectful Insolence, ran a post here cautioning against getting your hopes up too high, based...
10/08/07 -
Dealscape - There's been an elephant in the room at the Mergers & Acquisitions Institute in Dallas, and that, of course, is the fact that big private equity deals have virtually vanished after the credit crunch brought on by the subprime mortgage implosion. Panelists referred to it in their remarks on Thursday — the famed return of the corporate buyer now that private equity firms can't borrow cheaply,...
10/06/07 -
Blogging Stocks - September's U.S. job report released Friday reinforced two economics adages. Namely: 1) it's best to not put too much confidence in the U.S. Labor Department's initial monthly job statistic, as it will undoubtedly be revised; and 2) regarding job creation/reduction, it's best to use a 3-month or 6-month average, as it gives a more-complete and more-accurate picture of hiring conditions. For...
10/06/07 -
Deal Breaker - Brazen Careerist and smartest woman in the world Penelope Trunk has a new piece of advice for you: screw business school. Now, we know you’re thinking, “Because Ms. Trunk is the same woman who once instructed the ladies to “dress like hookers, solicit co-workers, expect harassment, and stay cool” and people in general to switch rapidly from job to job, make it clear to prospective employers...
10/06/07 -
Mish's Global Economic Trend Analysis - In response to Is the Fed Deflating? I received several reader question similar to this one from Mike: Thank you for your analysis. Could you please tell me, and others, what we should do to protect ourselves per your warning below? "Those who ignore the warnings are likely to drown." Sincerely, Mike Thanks for the question Mike. It's a good question and not often...
10/04/07 -
Sema - Blame it on Boeing. In the last two years, the Seattle aviation giant—along with its European rival Airbus and partners at the Pentagon—has consumed most of the world’s carbon-fiber supply. The severe shortage has caused wholesale prices to triple in some cases, putting the squeeze on specialty-equipment companies that trade in the wonder composite. Carbon fiber is considered as strong and...
10/04/07 -
becker-posner - The recent two-day strike by the United Automobile Workers (UAW) against General Motors (GM) illustrates clearly the steep decline of the importance of unions in the United States economy. Once perhaps the most powerful union in America, UAW membership among the big three auto companies has fallen by 40 per cent since the last national contract in 2003, and by much more since the 1980's. This...
10/04/07 -
Alpha Sources - Between the rumbling in financial markets, a EUR/USD touching an all time high, a French president smelling blood, and what seems to be subtle yet clear signs of a turning point in the economic fundamentals it has been difficult indeed to catch a breath as a Eurozone watcher. Now of course, we are nearing the proverbial end of the line and with tomorrow's ECB meeting we should expect to get some...
10/03/07 -
Greg Mankiw - Here is the basic problem. You are an expert working at an American university. A dictator calls you up, says his nation is facing a problem, and wants your help solving it. Many people, not just the dictator, are suffering because of this problem. What do you do? Does it matter whether the problem is an economic problem or a medical problem? If so, why? (If you want my opinion, here it is: I have...
10/03/07 -
megan mcardle - 02 Oct 2007 02:21 pm The economics bloggers are, understandably, excited about Radiohead's decision to literally charge what the market will bear, allowing its new album to be downloaded for any sum you like, as low as a (British) penny. Tipping is, as Greg Mankiw points out, one of the most mysterious phenomena economists study. No one understands why the social norm is so strongly self-enforcing...
10/03/07 -
rge monitor - Analysts and investors ask why is the stock market is going up in spite of continued flow of lousy macro news. In my view the answer is clear: the market is expecting that the Fed will rescue the economy from a recession: the worse the macro news the stronger the revisions for further Fed rate cut that would - in the wishful thinking of the investors - rescue the economy from a recession. But the...
10/02/07 -
Captain Capitalism - What brought down GM and the US auto industry was not so much superior foreign competition, but the dead weight of legacy pensions due to the legions of former union workers that GM had promised pensions to until death do them part. Unfortunately, GM's actuaries did a poor job in projecting life expectancy and thus (depending on whose figures you want to use) it costs GM $1,200 per car more than...
10/02/07 -
robert reich - The dollar is now at a record low against the Euro, down more than 20 percent from its peak in 2002, down so low it’s about equal to a Canadian dollar. What difference does all this make? Roman holidays may be more costly, but how many of us are going to Rome? Canada is pricier but ... so what? The biggest burden isn’t on American tourists. It’s on American consumers. Put simply: When...
10/02/07 -
The Deal Blogs - So asked Felix Salmon, blogging for Conde Nast’s Portfolio.com. At first glance it appears an interesting question. General Motors Corp. as part of its new contract with the United Auto Workers has committed to paying $30 billion into a union-managed trust that will fund retiree healthcare benefits, with plans to add $5 billion or more to the trust in the years to come. It will be up to the...
10/01/07 -
claus vistesen - On the back of a miserable Q2 GDP reading and general uncertainty in markets Japan's economy has not exactly been the harbinger of pleasant data reading as of late unless of course you have been short on the Yen. As I said in a recent small post on Japan Economy Watch this week would bring some pretty interesting data releases from Japan in terms of figures for prices, consumption expenditures,...
10/01/07 -
knzn - Suddenly I have so much to say about the core CPI, in response to the latest attacks by Barry Ritholtz and Daniel Gross. I've already said most of it in comments to a post by Brad DeLong (also note kharris' insightful comments) and one to the original Barry Ritholtz post. I may reproduce some of them in future posts here, but my last (thus far) comment (from the DeLong post) is probably what needs...
10/01/07 -
healthcare-economist - Local governments provide a variety of services which are highly valued by their residents. From police protection to waste disposal, from snow plowing to utility meter reading, the local government is charged with providing the infrastructure necessary for a smooth functioning economy and a high level quality of life. But should local governments outsource these tasks to the private sector or...
09/30/07 -
Aplia Econ Blog - One of the biggest economic stories of the past decade has been the practice of outsourcing jobs from the U.S. to India. From the start, it was an enormously profitable idea: American companies could create a “back office” halfway around the world that would work while the folks in the American “front office” slept. Rather than getting 8 or 10 hours per day of productive work, companies...
09/30/07 -
International Political Economy - And now here's an old-school, straight-up IPE topic: the fate of the IMF. As you know, the IMF was originally intended to be a lender of last resort when countries ran into balance of payments crises. When a country no longer had the ability to pay for its exports since its foreign exchange holdings were depleted, it had to call on the IMF. The most visible, relatively recent calls for help were...
09/30/07 -
Economics and... - The dollar is now at a record low against the Euro, down more than 20 percent from its peak in 2002, down so low it’s about equal to a Canadian dollar. So begins Robert Reich's blog post to which I referred on Friday. By my arithmetic the situation is even more extreme, with the dollar having lost about 40% of its value in Euros since the 2002 peak. But should the drop in the dollar between...
09/28/07 -
everyday economist - Often times when talking about free trade, protectionists argue that trade does not necessarily make people better off. They often point to those who lose their jobs to more efficient and less costly foreigners as a detrimental result of free trade. However, this view misunderstands what economists mean by “gains from trade.” Suppose I am in the market for a new laptop computer. If I am...
09/28/07 -
antares vending - There are some certain factors in vending, which when put together can make your Planet Antares vending business very profitable. Some of these factors can be considered as the three “Q”s of vending, which are listed below: Purchase a Quality vending machine……. At a Quality price……. And place it in a Quality location With a Planet Antares vending business you can easily achieve...
09/28/07 -
bouphonia - Walter E. Williams is upset because John Dingell wants to end mortgage-tax deductions for houses over 3,000 square feet, which use considerably more energy (and raw materials) than the average house. The problem with Dingell's proposal, apparently, is that its focus on larger-than-average houses is so arbitrary: The average U.S. home is around 2,300 square feet, compared with Europe's...
09/28/07 -
IPE Zone - One of the things I find most irksome are these endless apologists for American profligacy who purvey a brand of "free lunch" economics: Americans can spend all they like without any future consequences. As MAD Magazine's Alfred E. Neumann would put it, "What, me worry?" Here is the gist of their argument: While the recorded savings of US households are nearly zero, these figures reported by the...
09/28/07 -
Indian Economy - Tajikistan, under the Russian influence, has repudiated the Indian proposal for an air base in the strategically important Central Asian republic. The Russians have pressed the Tajikis for this eviction to pressurise the Indians into favouring the Russians while signing the lucrative multi-billion dollar defence deals. The Russian insistence comes as no surprise as over three-quarters of Russian...
09/28/07 -
not sneaky - In the comments to the last post Jane points out that whether higher unemployment benefits increase or decrease labor force participation and hence unemployment rate depends on whether the getting of benefits is tied to job search or not. In US at least, in order to qualify for the benefits a person must essentially list themselves as "unemployed" rather than "not in labor force" which WOULD actually...
09/26/07 -
Maverecon - Liquidity is a key property of assets. It refers to the ability to sell the asset at short notice and at low transaction cost at a price close to its fundamental or fair value (fundamental or fair value is what you would pay for the asset if it could be bought and sold instantaneously and at zero transaction cost, that is, if ownership could be transferred costlessly and instantaneously). Liquidity...
09/26/07 -
guy kawasaki - “Our firm is really excited about what you’re doing, so we’d like to invest in your company too.” Also part of the standard sales pitch. Most firms invest in most of their startup clients—it’s simply the law of big numbers: Invest in enough dumb ideas, and one will turn out to be a Google. “We can work on the billing so that you pay us when you get financed.” The final flattery...
09/26/07 -
accrued interest - I've written several times about the CDO market. Let me begin by saying that I think that the CDO market is a net positive for the economy. Used properly, CDOs can be an effective means of spreading risk around in the economy. However, the CDO market has played a central role in creating the sub-prime housing quagmire we are currently muddling through. Indeed, I believe the CDO market has a lot...
09/25/07 -
capital spectator - Commodities have enjoyed a renaissance in recent years as a strategic tool in portfolio design. The allure boils down to the low correlation between the prices of raw materials and stocks and bonds. Adding commodities to a conventional investment portfolio enhances the overall expected risk-adjusted returns. But what looks good in an optimizer can get messy in the real world. Yes, there are a number...
09/25/07 -
Healthcare Economist - A new study by Tai-Seale, McGuire, and Zhang (HSR 2007) analyzes how primary care physicians allocate their time in a typical office visit. The authors use data from 392 videotaped office visits conducted in three settings: 1) a salaried group practice in an academic medical center (AMC), 2) a managed care group (MCG), and a fee-for-service inner city solo (ICS) practitioners with an Independent...
09/25/07 -
tax foundation blog - In short, he or she is a pretty typical 20- or 30-something Marylander. He or she might be a government worker who commutes into Washington or a young doctor, nurse or researcher at Johns Hopkins in Baltimore. It could just as easily, though, represent a widower or an older, busy professional who doesn't have the time to deal with owning and maintaining a home. O'Malley's tax proposal either...
09/24/07 -
Demography Matters - In so many words we are quite simply taking about the impact of demographics on financial markets and more specifically the way demographics are affecting (and will affect in the future) cross-country capital flows and global liquidity conditions. This is of course a topic which, contrary to many other issues dealing with demographics, has been widely debated in the literature and amongst financial...
09/24/07 -
Harry Clark - The Age today is bemoaning the fact that monopoly control of large tracts of land on the borders of our big cities is driving up land and therefore house prices. The claim is that developers are ‘sitting on’ enough land to house 100,000 people. A Professor Steven Keen is complaining that ‘land banking’ is driving up prices. Academics from RMIT and the ANU have backed these stupid claims and...
09/24/07 -
Econ Log - Taking as given the way that publishing, hiring and tenure decisions are made, I do not think that there is much leeway to alter the curriculum. If the basic unit of measurement is the journal article, and what the journals value is mathematical models and econometrics, then it makes sense to focus teaching on mathematical models and econometrics. Before you change the curriculum, you have to...
09/23/07 -
Economics And - I’m referring to targeting a forecast of labor costs (using a “price rule” that would correct for the failures of earlier forecasts), not trying to react to every wiggle in the reported series, which is reported with a lag, quite volatile and subject sometimes to fairly dramatic revisions. The idea is for the Fed to have a long-run stable growth rate of unit labor costs as its ultimate objective,...
09/23/07 -
mjperry - In 2000, the Fed Funds target rate was 6.5% and the money supply (M1) was $1.1 trillion (see top chart above, click to enlarge). In response to the recession of 2001 and the subsequent "jobless recovery" in 2002 and 2003, the Fed lowered its target Fed Funds rate to 1% by mid-2003 using expansionary monetary policy that increased the money supply by 27%, to $1.375 trillion by 2004 (see top chart...
09/23/07 -
M1EK's Bake-Sale - Wanted to point readers to a discussion between Austin Contrarian and myself about fixed versus variable costs of driving, and how best to account the fixed costs. One thing many commute calculators get just absolutely and stupidly wrong is the idea that depreciation is a factor of miles driven (it's actually far more a factor of age - miles a distant second). For instance, this is a comparison I...
09/21/07 -
Core Economics - It is an interesting time for competition policy. The European Commission confirms its decision against Microsoft taking a hard stance on competition policy. Then, in an extraordinary move, the Treasurer, Peter Costello, proposes amendments to the Australian law to toughen up rules on predatory pricing. Pressures to strengthen predatory pricing rules have been around since the High Court rejected...
09/21/07 -
buzz machine - We’re teaching the class for a few reasons. First, it’s more likely than ever that journalism students today will need to work independently — and not just as freelancers banging down the door of major media but also possibly as the proprietors of new enterprises of their own; we’re seeing more and more of that. Second, journalism needs more such sustainable enterprises; this is how it will...
09/21/07 -
IPE Zone - It is estimated that between 40 to 60% of the trading volume at the New York Stock Exchange is now done via program trading. That is, trading strategies based on algorithms account for nearly a majority or a majority of trading volume. It makes you wonder about the folly of those who closely follow computer-generated stock market gyrations via Bubblevision (CNBC) and the like. Although these media...
09/20/07 -
Maverecon - Until the UK’s Standing lending facility extends its list of eligible collateral and lends at longer maturities than it does now, I would encourage every UK bank to set up a subsidiary in the US and in the Euro Area, to be able to take advantage of the more generous definition of eligible collateral at the discount windows there, and the longer maturities. Indeed, at the Fed’s Primary discount...
09/20/07 -
The Oil Drum - The notion of our standard work week here in America has remained largely the same since 1938. That was the year the Fair Labor Standards Act was passed, standardizing the eight hour work day and the 40 hour work week. Each Monday, Tuesday, Wednesday, Thursday and Friday workers all over the country wake up, get dressed, eat breakfast and go to work. But the notion that the majority of the workforce...
09/20/07 -
emprical skeptic - With about 5% of the city’s workforce propped up by two large, national banks, Charlotte is all the rage for single-family housing speculators and metropolitan transplants. Data from MacroMarkets’ Case/Schiller Index series shows that the trend in home prices in Charlotte has opted for a steadier sloping linear growth path versus the steeper S-curve of the national index (see chart) and other...
09/20/07 -
Megan McArdle - My problem is a little different, though: the effect was probably not that big. And the reason it wasn't that big, is not that marginal tax rates don't matter, but that almost no one paid those marginal tax rates. In 1951, the year that rate was enacted, the 91% tax rate kicked in at $400,000 for a married couple filing jointly (Moreover, due to statutory adjustments, its effective limit was...
09/20/07 -
Gladwell - The study is described in Ian Ayres’ Pervasive Prejudice?: Non-Traditional Evidence of Race and Gender Discrimination , which is a book that had a great deal of influence on my thinking when I was writing “Blink.” Ayres’ project in the book is in exploring non-traditional sources of discrimination—that is, the discrimination that persists because of some flaw or condition of the...
09/20/07 -
Economonitor - The Indian rupee rose over 9% in the period Jan-Jul 2007. Q1 2007 witnessed massive FX intervention by the Reserve Bank of India (RBI) to keep the rupee down. FX particularly swelled in Feb 2007 but sterilization was kept up via Market Stabilization Scheme (MSS) and increase in cash-reserve ratio to contain liquidity and inflation with some success. However, capital inflows continued to surge in...
09/18/07 -
refinance - Economic growth was moderate during the first half of the year. But it’s harder for consumers and corporations to get credit now, and possibly intensifying the slowdown in home sales and the slide in housing costs. Cutting rates is intended to keep the credit crunch from spilling over into the broader economy and to stimulate the overall economy. Inflation has grown tamer this year. But there’s...
09/18/07 -
Roseman Eruptions - In prior economic booms and busts, technology stocks responded with a high degree of correlation to broad-based economic trends. The last boom-bust cycle in the late 1990s notwithstanding, tech booms in the 1980s and 1970s all led to major price declines for sector stalwarts as recession fears mounted, eventually resulting in periods of economic contraction. But this time, recession fears, though...
09/18/07 -
the money box - The $6 by Six Million program goes like this. Basically, you pay $6 for your a website that is custom made, ready to go immediately and 100% hosted for you. It looks exactly like the website you just learned about the program from and used to purchase it. You then get a massive list of links to sites that can expose this site to millions of internet surfers. When these surfers visit your site they...
09/17/07 -
The Fly On The Wall - General Motors (GM) and the United Auto Workers union are still undergoing contentious talks and hope to hammer out a deal before 11:59 p.m. tonight. The main issue is the union-run retiree health fund. If there’s no deal, the UAW will walk, and strike. The crux of the disagreement is how to fund the retiree health fund. Compared to the other major auto companies, Ford (F) and Chrysler, GM has...
09/17/07 -
moneyning - For us, those articles are not relevant because we do not have a lot cash to pour into the market that we don’t need to take out. It is important to remember that having a long term outlook means that the money that is put into your account needs to stay there while the stocks / mutual fund / ETF go down during a recession. It could be months or even years before the money you put in recovers. It...
09/17/07 -
Media Circus - Okay, so I was trying to be provocative with the title of this post. I certainly don’t believe Google has conquered the Mobile content market, but I do agree with Russell Beattie’s notion that Google is playing catch-up, while companies like AdMob have the lead in the mobile content space. Why the sudden need to expand mobile reach? It seems Google has placed a great deal of emphasis on...
09/16/07 -
mises - These and similar measures have been discussed by the Fed for several years. They were studied during the bogus 2002 deflation scare and disclosed in a series of papers and speeches that I have discussed elsewhere. It was my view at the time that the only for the Fed to avoid a total meltdown of the credit bubble is to monetize assets at prices sufficient to maintain the solvency of the banks and...
09/16/07 -
the daily green - When the OPEC cartel begins its meeting Sept. 11, some analysts expect Saudi Arabia’s dirty little secret will come out: It, and the world with it, has hit peak oil. Oil, these analysts think, is running short — leaving a yawning gap between supply and demand that will eventually send the world economy into a tailspin and could even lead to war. Saudi Arabia, the line of reasoning goes,...
09/16/07 -
digital signage blog - A crisis, eh? Those aren't my words, but those of Information Resources, Inc (IRI), who report that, "consumer packaged good (CPG) companies are facing a merchandising crisis as retailers have cut back significantly on point-of-sale display space at a time when manufacturers need it most, given the declining effectiveness of traditional advertising vehicles." It's certainly surprising to hear that...
09/14/07 -
Housing Bubble Blog - Some housing bubble news from Wall Street and beyond. Forbes, “The moment that the British banking sector has been dreading came on Friday. Northern Rock, the country’s fifth-largest mortgage lender, confirmed late on Thursday that it had requested and received a line of emergency funding from the Bank of England.” “‘It has now become clear that the global credit and liquidity markets...
09/14/07 -
becker-posner - It is a problem of externalities. The costs of Chinese air pollution to Koreans, Japanese, and Americans are not costs to China, and the benefits of abating this external pollution would not be benefits to China. But this description of the problem ignores the Coase theorem, one version of which is that if transaction costs are low, the market itself will internalize externalities and thus solve...
09/14/07 -
Paper Money - Today, the Commerce Department released their monthly Retail Sales Report for August which continued to show an interesting correlation between declining consumer spending, particularly on discretionary items, and the decline in home values. As in past months, I have isolated the primary discretionary retail sales categories into a single “discretionary” retail sales series, and then charted...
09/13/07 -
erik sherman - As interest rates drop in the US, you get less bang for your literal buck, and you want to hold currency that has greater strength, because there's greater demand. But forget about interest rates going forward, for a moment, and consider what happens to existing debt. As the value of the dollar falls, people and institutions in other countries find that the notes they hold keep dropping in...
09/13/07 -
dmi blog - Our workers need, at a minimum, two-to-four years of college, technological literacy and lifelong updating of skills to meet current needs. Our education must emphasize research, modernized technology, infrastructure, math and science. More than 150 years ago as we entered the age of industrialization and embraced technology, it was clear that we needed to assure a minimum level of skills in our...
09/13/07 -
creative think - Think about it: our error rate in any activity is a function of our familiarity with that activity. If we are doing things that are routine for us, then we will probably make very few errors. But if we are doing things that have no precedence in our experience or are trying different approaches, then we will be making our share of mistakes. Innovators may not bat a thousand — far from it — but...
09/12/07 -
Daily FX - The biggest debate in the currency markets at the moment surrounds what the Federal Reserve will do on September 18th. We expect the upcoming interest rate decision to create a great volatility in the financial markets because with less than a week to go, economists and traders have yet to reach a consensus on how much the Federal Reserve will lower interest rates, if at all. According to the 117...
09/12/07 -
Mish's Blog - Actually, there is every reason for the U.S. savings rate to have fallen: The Fed continuously held interest rates too low thereby creating a negative incentive for anyone to save. Eventually a near unanimous belief set in that asset prices were a one way street headed North and the purchasing power of the dollar a one way street headed South. So why save? And after the Greenspan Fed foolishly...
09/12/07 -
House and family united - It is hardly surprising that a car billed as the “ultimate driving machine” would spawn imitators. But for BMW, the Shuanghuan CEO is less a respectful homage than a brazen knockoff. BMW is going after Shuanghuan Automobile, a Chinese carmaker that hopes to break into Europe, on charges that its sport utility vehicle, the CEO, is a copy of BMW's popular SUV, the X5. The German carmaker has...
09/11/07 -
daily reckoning - And more to the point, does it make any difference? If oil prices have been rising the whole time OPEC output has been rising, is demand outstripping supply even as supply grows? That's the real story that's getting lost amid the speculation of what's going on behind closed doors in Vienna....
09/11/07 -
revolution radio - hirty per cent? By Christmas? Food prices have already risen 6% from this time last year, outpacing the official Consumer Price Index by a factor of two. And yet, even with runaway inflation set to kick in this autumn, Leyland sees the threat as just somebody else’s problem. “If I were [the UK finance minister] Alistair Darling or a pensioner, I’d be very worried,” he tells the British...
09/11/07 -
rge monitor - While globalization has been cited as one of the reasons for benign global growth in recent years, there are growing concerns that it is leading to increasing inequality in the U.S. Data from the Census and the IRS have been showing an increase in concentration of income at the top income level. While returns to capital have risen as predicted by the trade theory, rising inequality has made some...
09/10/07 -
mobile opportunity - The Apple-Nokia war finally got underway on August 29, when Nokia announced an array of new music-capable phones and an online music store. The two companies had been eyeing one-another like wrestlers outside the ring for more than a year. Apple entered the mobile phone market, but only in the US, where Nokia is a non-factor. Nokia openly declared that it's a computing company (link), but its...
09/10/07 -
Bonddad - Remember that financial shares represent about 20% of the S%P 500. That means their performance could have a very strong impact on the index's overall performance. Here's a chart of the XLF -- the ETF that tracks the financial sector. Notice it is performing very poorly. While the ETF has found support around the $48/area, it hasn't been able to move above $50. Also note the 20 and 50 simple moving...
09/10/07 -
bakpo - Leadership is not rocket science but a simple act of bringing positive change for the betterment of others. It sounds so simple, yet so many leaders we know are only able to dream, talk, and lull their followers into the same dream ......and soothingly reminding us not to wake up, for if we wake up the dream will be over. Leadership - is a role and a choice! And once you have chosen to be a leader,...
09/10/07 -
Loan Blog - Countrywide Financial Corporation is slashing about 20% of its work force, or about 12,000 jobs. The report on Yahoo! News says that Countrywide is concerned about soaring foreclosures and defaults, and needs to slash costs. Countrywide feels that new mortgages will fall about 25% in 2008 from where it is today. Countrywide Chief Executive Angelo Mozilo stated in a letter to employees that the...
09/10/07 -
rge monitor - The probability of a US economic hard landing (either a likely outright recession and/or an almost certain “growth recession”) was already significant even before the severe turmoil and volatility in financial markets during this summer. But the recent financial turmoil - that has manifested itself as a severe liquidity and credit crunch - now makes the likelihood of such a hard landing even...
09/10/07 -
business pundit - Time management in this day and age is much harder than it used to be. Our brains are primed to pay attention to people, to communications, to whatever is going on in the lives of others. Spending a quiet hour focused on a single topic is rare. I believed that if I could spend some quiet hours working, I would get more done. But removing myself from the constant connectedness was hard. Maybe I just...
09/08/07 -
All Spin Zone - Today’s gloomy jobs report…and the associated downward revision of the prior months figures…reminded me of my time as an economics major many years ago. I’ve always found economics fascinating. While in college, it was my major for three years before I elected to reconsider…eventually majoring in psychology. I decided to drop economics for one particular reason…one that may no longer...
09/08/07 -
Econbrowser - Macroeconomic Advisers says the probability of recession is less than 50%. "While it suggests the probability of a recession has gone up in the last month it is still well below 50 percent," Prakken told Reuters. "It's a slightly higher higher risk than it was a month ago but it's still not a dominant risk." Based on August data, e-forecasting cites in their newsletter (no link) a 34%...
09/08/07 -
Short Woman - Not a lot of people paid attention to the fact that GDP growth has had little impact on wages during the Bush Administration. In fact, CNN glossed over the fact that most families saw income and earnings decline. Admittedly, everyone is fixated on housing and mortgages, mortgages and housing: How are Joe and Jane Average going to fare? What can be done for them? Do we need a rate cut? I mean...
09/06/07 -
Environmental Economics - As the cost of extracting a depletable energy resource, like oil, increases, the market price of that resource will also increase. The higher prices accomplish three things: 1) Consumers have the incentive to conserve, 2) Producers have the incentive to explore for new sources of the depletable resource, and 3) Money-mongers have the incentive to discover new energy sources or invent new technologies...
09/06/07 -
Tutor 2 U - How brittle is the health of the world’s largest economy, the United States as we head into the autumn months? This week the OECD, an organisation made up of thirty one of the leading advanced rich nations, released a new forecast which suggested that the USA will experience a further slowdown in the rate of economic growth. The International Monetary Fund (IMF) has reinforced this sense of...
09/06/07 -
The Money Blogs - The U.S. Federal Reserve (The Fed) has been injecting billions of dollars into the financial markets to maintain liquidity amid rising interest rates. But how could interest rates be rising? Doesn't the Fed set interest rates? The answer is "Yes," but it doesn't set all of the interest rates. Let me explain. The Fed sets the Discount Rate and banks set the Federal Funds Rate. I know it seems...
09/06/07 -
von Miss Institute - The tongue is a discerning instrument; in the hands of a traveled soda aficionado, it is capable of leading to insightful truths about agricultural geopolitics. To the drinker who has imbibed foreign sodas, this truth stems from the peculiar, yet incontrovertible fact that American soda is not delicious. Though some blame this phenomenon on the use of aluminum cans over glass bottles, even the...
09/06/07 -
Fractals of Change - We the people like to own stuff and not pay rent to use it (BTW, rent includes taxes but that’s another story). They the oligarchs like to own the stuff and charge us rent to use it. The rise of a middle class has historically meant the rise of a property-owning class. The underclass pays exorbitant rents. The telecommunications world – or at least the US part of it – is a battle of rent...
09/06/07 -
Businomics Blog - Michigan has the highest unemployment rate in the country. That would typically indicate a surplus of labor. But on a recent visit to Mackinac Island, the resort community in the straits between Michigan's upper and lower peninsulas, I met some of the 500 Jamaicans working there. Yes, 500 Jamaicans working in one small community of the state with the highest unemployment rate. These are not...
09/05/07 -
Dividend Guy Blog - There is a recent article posted at Bloomberg that provides investors with some advice on things to do to keep a portfolio chugging along, even if we see a prolonged period of weak markets in North America. Among their suggestions are being weary of REITs and looking outside of the U.S. market by way of global mutual funds or index funds. Although they suggested some big name mutual funds, which as...
09/05/07 -
The Street - Over the past 11 trading days, there has been a collective sigh of relief from investors that the Federal Reserve and the Bush administration will successfully confront and reverse the domestic (nonexport) economy's weakness. But the economic reality will bite. A continued rise in equities? Not from my perch. Here's why. 1. Housing collapse: The housing depression will continue despite...
09/05/07 -
Professor Bainbridge - I first encountered the work of Texas Tech law professor Christopher Bruner when researching my recent article on good faith in corporate law. He had written a couple of very fine articles on that subject, from which I learned a lot. In a more recent article, The Enduring Ambivalence of Corporate Law, he ambitiously challenges just about everybody in corporate law. Bruner argues that "we have three...
09/03/07 -
WSWS.ORG - The US economy could experience a deep recession as a result of the housing crisis, according to National Bureau of Economic Research president Martin Feldstein. Feldstein told the annual symposium of central bankers and economists at Jackson Hole Wyoming over the weekend that the housing sector was at the root of three distinct but related problems confronting the US economy. The decline in...
09/03/07 -
Bob Bly - I’m a fan of David Ogilvy. Rosser Reeves. James Webb Young. But Jerry Della Femina? Not so much. Della Femina was interviewed by the NY Post (8/27/07, pp. 38-39) for an article on the differences in the ad agency business of the 1960s vs. today. Laments Della Femina: “It went from being a business of fun to being a business of money, and that changes everything.” Pity Della Femina’s...
09/03/07 -
New Economist - Considerable attention has been devoted to the annual Federal Reserve gathering at Jackson Hole this Labor Day weekend. For a good summary see Brad de Long's post I Am Not at the Jackson Lake Lodge This Labor Day Weekend, James Hamilton on The Taylor Rule and the housing boom, and Greg Ip's report Two Heavyweights Weigh in on Greenspan’s Legacy But another recent central bank gathering is worth...
08/31/07 -
The LockeSmith Blog - For free markets to work, they need to be left, well, free. We had a series of mortgage companies make bad loans to people who should not have taken them in the first place. No money down, interest only, variable notes known as subprime mortgages. This created a huge speculative bubble in real estate. People bought houses way beyond their means, while others snapped up condos hoping to quickly flip...
08/31/07 -
Pissed on Politics - The Corporate Barons are constantly pushing for a state of free and unfettered capitalism tethered to a system of open and free global markets. The argument they unanimously use is that regulations cut into precious profits while market restrictions reduce the flow of goods and services thereby punishing the corporate bottom line. To dumb down the complex economics for us dullards, the Corporatists...
08/31/07 -
WCUK Express - There exists a near-universal belief by folks on Wall Street that the stock market trends higher over time. The spread of capitalism, global growth, secular trends, these things form the foundation of the “buy and hold” strategy that undermines much of investment strategy. History has been the de facto guide to growing capital. Hold stocks for 10 years and they will appreciate in value. I...
08/31/07 -
Blogging Stocks - But this Fed chairman has a dramatically different view of his job than did his predecessor, Alan Greenspan, who regularly used interest rate cuts during financial crises, as The Wall Street Journal (subscription required) points out. Plus, Bernanke seems to hold the view that the job of the Federal Reserve ISN'T to rescue people who took stupid risks, such as the ones that lead to the subprime...
08/31/07 -
Economist's View - Okay. Let's start with some diagrams you must have seen if you've taken principles of economics at any level. The diagram on the left-hand side shows an individual firm and the right-hand side graph is the entire market. The market is competitive. The graphs show the response to an increase in demand. I assume the diagram is familiar, so I won't spend much time explaining it. (Demand increases do...
08/31/07 -
Aleph Blog - The Efficient Markets Hypothesis in its semi-strong form says that the current market price of an asset incorporates all available information about the security in question. Coming from a family where my Mom was a successful investor, I had an impossible time swallowing the EMH, except perhaps as a limiting concept — i.e., the markets tend to be that way, but never get there fully. I’m a...
08/29/07 -
Optionetics - Trading remained volatile Wednesday, but this time with prices moving sharply higher and erasing nearly all of Tuesday’s losses. The Dow Jones Industrial Average ($INDU), which had given up 280 points during the previous trading session, finished the day 247 points higher. All thirty of the components of the Dow finished the day with gains. General Motors (GM) did the best. Shares rallied 5%...
08/29/07 -
This Is China - Americans prefer a command-and-control business structure: internationally, and in-house. I bark the orders; you follow. Admittedly, American company cultures tend to be less hierarchical than, for instance, German companies, where you still may have to call someone by an accepted apellation (Herr Doktor Doktor) and their surname. I’ve worked in a British environment, and it was more relaxed than...
08/29/07 -
Blogging Away Debt - Payday loans are notorious for charging huge amounts of interest in the neighborhood of 500%+. Way back when, I almost worked at a payday loan place and while I didn’t know too much back then about finance, I knew that the rates they charged were very high. Needless to say, I got a call back but I told them I wasn’t interested. Now that I know more about finance, I’m glad I did that. Non-profit...
08/29/07 -
Economist's View - Imagine living a world with no insurance, there's no health insurance, fire insurance, auto insurance, unemployment insurance, Social Security, nothing of this sort at all. As we know from countries such as China, when insurance is not widely available households tend to increase their savings, i.e. to increase their precautionary saving balances. But in a world with insurance, consumers are able...
08/29/07 -
Know More Media - The US economy is a complicated matter. I was reminded of that today as several reports indicated that the US economy and Consumer Confidence was suffering. What, me worry? I am afraid so. The financial markets, credit markets, labor markets and housingalfred%20e%20newman.jpg market have all reported negative news recently. All that ugly news was wrapped-up with a bow and presented alongside a...
08/28/07 -
Blackfriars - I wrote back in 2005 that Chinese companies have done a remarkable job of recognizing undervalued brands from US companies. Well, this morning's headlines brought another proof point to that claim with the news that Taiwan's Acer is going to buy Gateway Computer. Gateway has fallen on hard times in recent years, but was still relatively well-known here in the US. And since it had the right of...
08/28/07 -
Andrew Norton - Twice in recent months I have become involved in blogosphere debates about claimed conflicts of interest. First I disputed James Farrell’s argument that ABC TV news needed to disclose the fact that finance presenter Alan Kohler also operates a financial advice newsletter, which in turn is partly financed by a firm that had links with companies that Kohler reported on for the ABC. Then this week...
08/28/07 -
Dani Rodrik - I teach in a public policy school, so hear constantly about leadership. But economists don't even have the language to talk about how or why leadership matters in economics--even though I guess that deep down most of them think it is very important. Recently there has been some interesting work that may signal a change. In an empirical paper, Ben Jones and Ben Olken link shifts in growth...
08/27/07 -
Northman's Fury - Housing is a commodity like any other and therefore follows the same rules. Once enough people forget that and buy into the hype that this market will somehow be different, its bubble time, and the bursting will be bad. So much in one little paragraph. The declines won't erase the gains of the last decade unless the downturn is much worse than economists are expecting? Are these the same economists...
08/27/07 -
Stockerblog - It is the ninth largest country in the world by area. It ranks 62nd in the world in terms of population. The GDP growth has been in excess of 9% for each of the last five years. It was the first former Soviet republic to repay all of its debt to the International Monetary Fund, seven years before it was due. In 2002, the first country in the Commonwealth of Independent States to receive an...
08/27/07 -
Progressive Economics - Much commentary has focussed on the awkwardness of this situation for Oxoby and the absence of an apology from Levitt. What interests me is that Levitt and a bunch of other economists failed to recognize the paper as satire. I am fairly certain that almost anyone from outside the economics profession would have taken it as a joke. Levitt and others did not because Oxoby’s paper - complete with...
08/24/07 -
Beck-Posner Blog - If a person's assets grow in value, he can borrow more against them, or expect a lower interest rate if he does not increase his borrowing (for then the lenders have more security). This is true of houses as of other assets. In a growing economy, with the amount of land available for housing more or less fixed, the value of residential property can be expected to increase--over the long run. But in...
08/24/07 -
Groundhogtech - Stocks rose moderately Friday following several upbeat economic readings that seemed to counter some of the bleak sentiment on Wall Street in recent weeks. Stocks went from flat to higher after a stronger-than-expected reading on new homes sales for July. That followed a better-than-expected durable goods report. The Commerce Department said Friday that new-home sales rose 2.8 percent in July,...
08/24/07 -
Small Business Hub - I am amazed at the blog-reluctance of many small businesses. I hear things like “I don’t have time to blog”, “blogging doesn’t make sense in my industry”, and sometimes even the dreaded “what the heck is a blog?” The reality is if your company provides unique products or services, you should be blogging. (And if your company doesn’t, you should probably consider a career...
08/24/07 -
Blog Business World - Disaster can strike a business at any time. Crises can range all the way from failed shipments and lost accounts to natural events like hurricanes, floods, and earthquakes. At any time, a severe problem can wreak havoc with your company. In many cases, the nightmare scenario can force a business into bankruptcy. A prudent company is prepared to handle any emergency. In the day to day operations...
08/24/07 -
Purple Motes - From 1985 to 2004, video rentals from U.S. public libraries grew 340%. Over the same period, video rentals from U.S. commercial rental businesses grew 140%. Public libraries' video rental activity did grow from a smaller base: 70 million videos loaned in 1985 (6% of the number of videos commercial outfits turned in that year), to 300 million videos loaned in 2004 (12% of the number of videos rented...
08/24/07 -
Undergraduate Economist - Four persons A, B, C and D have to share Rs 4 among themselves in units of one rupee. First A proposes a distribution and all of them, including A vote on it. If at least 50% of those voting agree with A, the proposal is accepted. If not, A loses her voting rights and B gets to propose a distribution and all except A vote on it. Once again B’s proposal is accepted if at least 50% of those eligible...
08/22/07 -
Big Picture - Every now and again, a potentially significant story manages to slip through the cracks, barely noticed by anyone. A recent Dow Jones article by Jilian Mincer -- "Mtge Lawsuits Could Bail Out Some Borrowers" -- is just such an article. The only reason I even knew about it was because I spoke with the reporter and was quoted in it. It is a fascinating tale that I suspect won't be ignored for long....
08/22/07 -
EPI - One of the most frequently heard phrases in certain Washington policy circles is "the tax cuts are working." As President Bush put it just last week, "Since the tax cuts took full effect in 2003, our economy has added more than 8.3 million new jobs." The logic behind this claim falls under the rubric of "supply-side economics." The basic idea is that taxes constrain investment and employment...
08/22/07 -
Market Watch Blog - How obvious does it have to be? No matter what anybody says, the nations biggest banks appear to have gotten the call (wink, wink) from Paulson, Bernanke & Co. to use that darn discount window now that the rates have been lowered, even if they don't need to. And based on their comments, that this is meant as a way to take a "leadership role" in all of this, this is little more than window dressing...
08/21/07 -
DMW Daily - Big news this morning – At a press conference that just finished in New York it was announced that Real Networks is hooking up with MTVN, Verizon and Vodafone to take on Apple’s iTunes in the legal digital music market. Finally, after Microsoft, so far, has failed to gain traction for its Zune music player and marketplace, we see some other competitors making a big joint move (Pictured left to...
08/21/07 -
IPE Zone - Bond insurers, the so-called "monolines," have fallen under hard times. Obviously, what they do is insure bonds. In so doing, they function like credit rating agencies who have skin in the game. If these insured bonds default, then they become liable for both principal and interest to bondholders. Credit agencies have been accused of being unreliable, first during the Asian financial crisis when...
08/21/07 -
The Random Economist - The China-bashing season is back in fashion in Washington and Brussels. The U.S. Congress is demanding that China re-value its currency to correct what is perceived as a trade imbalance. The financial press has called this, delightfully, a product of “The collective brain deficit trust, otherwise known as the US Congress.” Europe is also growing increasingly impatient with the Chinese propensity...
08/20/07 -
The Oil Drum - “The world is consuming more oil than it is producing.” --The Economist, July 14-20 print edition. Wow, that’s a shockingly foolish statement. Each day approximately 84 million barrels of oil are extracted from the earth, and approximately the same amount is consumed. It can be no other way: inventory space is limited, and could not be extended significantly by “excess production”...
08/20/07 -
Blogging Stocks - In markets where 3G connections are widely available to allow user to have high-speed connections to the internet, video ads on cell phones are becoming a big business. The New York Times writes that Japanese think-tank Dentsu Communication Institute Inc. sees revenue for this form of advertising tripling in that country to $1 billion by 2011. If the market for TV-type ads on phones is indeed...
08/20/07 -
Blogging Stocks - Unknown to most people, economist Hyman Minsky spent the latter part of his life feuding with dyed-in-the-wool efficient market theorists as he argued that markets were open to periods of speculation that could end in crises. An interesting article appeared in Saturday's Wall Street Journal that explains how many traders and analysts are beginning to think Minsky wasn't so crazy after all. In...
08/17/07 -
Mises.org - Amazing as it sounds, when the government tries to violate your rights, you don't have to sit back and take it. Whole Foods stood up to the Federal Trade Commission's bullying and prevailed today when a federal judge rejected the antitrust regulator's demands to stop Whole Foods acquisition of Wild Oats Markets. The judge's opinion remains under seal until at least Monday, but there's no question...
08/17/07 -
Blogging Stocks - Oil prices have been moving higher, as the market reacted to this mornings discount rate cut by the Federal Reserve. Crude prices have pulled back a little from earlier day highs, but still prices are trading up $0.57 to $71.57. Earlier in the session prices had managed to go as high as $72.54. ...
08/17/07 -
Real Russia Project - There is a lot of material on the Internet about Russia’s gold mining industry and different ways to invest in it. Here at Russia Blog, I would like to present one example of a Russian company that is mulling an IPO later this year on the London Stock Exchange (LON:LSE) Alternative Investment Market or Canada’s Toronto Stock Exchange (TSE:X). This mining operation is not large, but it shows the...
08/17/07 -
Seeking Alpha - On its face, the CPI news comes just in time to counter Tuesday's whiff of trouble embedded in the report on producer prices. As we wrote on Tuesday, there was reason to worry that core PPI was starting to look robust once more. But with no corroborating evidence in today's CPI, one can breathe a sigh of relief. Taken together, PPI and CPI offer a mostly encouraging review about general price...
08/17/07 -
Smith’s Neighborhood - Imus was terminated without notice by CBS Radio in April following disparaging remarks made by Imus and sidekick Bernard McGuirk in the early morning hours of the nationally syndicated show and its simulcast on MSNBC. It was since uncovered that Imus’ termination was carefully orchestrated by staffer Ryan Chiachiere of Media Matters for America, a front for the Hillary Clinton campaign operating...
08/17/07 -
Brand Curve - As a follow-up to my post last week, 7 Ways Research Shows Color Affects Your Brand, I thought it would be appropriate to share some of the psychology of colors. Since it’s been proven that color can affect your brand, it’s important that you take great care in color selection when you’re developing and promoting your brand. I found a great post by John Williams on Entrepreneur.com that...
08/15/07 -
Mises Blog - With the collapse in the price of sub-prime mortgage backed securities and credit derivatives, the credit boom has moved into the crisis phase. This is the place in the cycle where it becomes clear to the market the investments made possible by unfunded credit were mal-investments and they are re-priced. The initial response of the Fed and mainstream media was that the sub-prime crisis was small...
08/15/07 -
Oil Drum - Central bankers have many tools at their disposal which they can use to tweak the economy – they can raise or lower interest rates, can control reserve requirements for fractional reserve banking and can inject liquidity into the banking system, among other things – and we have become used to thinking that they can prevent the kind of 'economic accidents' that previous episodes of excess have...
08/15/07 -
Green Business - Every so often, here at Green Business, we will write about companies that are doing their part to help keep our world clean. Two companies are thriving in Vancouver, BC, Canada, by creating businesses that promote sustainability- Happy Planet and SPUD are the future of business. Using only organic fruits, Happy Planet makes some of the best juice around. Founded by Randal Ius and Gregor Robertson,...
08/13/07 -
The Strata-Sphere - It seems the Newsweek story regarding who is in denial about global warming was so bad even a Newsweek editor had to come out and publically tear it down. The story was all about how those of us who do not buy into Al Gore’s unscientific emotional tirades (probably because we have backgrounds in science and engineering and KNOW the data does not portray anything the earth has not experienced before...
08/13/07 -
The Agonist - I’m going to geek it up today and talk about a couple ways that economies grow - import replacement and new work. Both are very applicable to the current US and world economy, but we’re going to start examining them by looking at a new and simple economy. Let’s take a new village created around a gold mine. It earns its money by digging up ore and shipping it out. Everything in the economy is...
08/13/07 -
Housing Wire - As the difficulties in the mortgage markets have spilled over to create broader problems for various hedge funds, Goldman Sachs formally disclosed this morning that it has seen three of its hedge funds run into difficulty. In response, the investment bank said that it and a cadre of investors would put up $3 billion to help one of the ailing funds known as the Global Equity Opportunities Fund:...
08/12/07 -
The Fly On The Wall - To say it's a little early to issue pronouncements about, learn lessons from, or gauge the impact of the subprime mortgage default issue would be an understatement. With the above in mind, this news analysis article focuses on what is known to-date, including the Fed's and the ECB's actions to-date. What is known: We know that a portion of subprime mortgages are in non-performing status. That is to...
08/12/07 -
Econbrowser - It was an exciting week in financial markets, including some dramatic central bank interventions in short-term money markets. First, a little background on what we're talking about here, focusing on the U.S. system with which I am most familiar. Banks that are members of the U.S. Federal Reserve System hold accounts known as Federal Reserve deposits. These deposits play a fundamental role in...
08/12/07 -
Seeking Alpha - At Wal-Mart stores grocery sales were once again stronger than general merchandise sales. Perishables led the increase in grocery, with solid performance in dairy and bakery, as well as pharmacy. Electronics continued to show solid sales gains over last year, with strength in TVs, computers, digital cameras and video games. At Sam's Club, sales have been driven by continued momentum with small...
08/10/07 -
Rock the Truth - Despite China’s support of the Treasury bond market, China’s large holdings of dollar-denominated financial instruments have been depreciating for some time as the dollar declines against other traded currencies, because people and central banks in other countries are either reducing their dollar holdings or ceasing to add to them. China’s dollar holdings reflect the creditor status China...
08/10/07 -
Hamzei - The chart is the NYSE going back for three years with its McClellan Oscillator and Summation index. When McClellan Summation index reaches below -500 it implies the NYSE is very oversold and near an intermediate term low. We have marked on the Summation index with a red arrow when the Summation index reached the bullish -500 range. Once the Summation index turns up from below -500, it implies the...
08/10/07 -
Blue Matter - People fixate with house prices and completely overlook rents. This is strange, because rental yield is an important component of the total returns from investment in housing. (Note that whether you are an owner-occupier or buy-to-let property landlord is irrelevant. An owner-occupier still 'pays rent' the exact same way a tenant does; excluding the tax implications, the fact that he is 'taking...
08/08/07 -
How To Change The World - Lately I've been thinking how hard, not how easy, it is to build a new company. Hard has gone out of fashion. Like college students bragging about how they barely studied, start-ups today take care to project a sense of ease. Wherever I’ve worked, we’ve secretly felt just the opposite. We’re assailed by doubts, mortified by our own shortcomings, surrounded by freaks, testy over silly details....
08/08/07 -
The Periodot Capitalist - We find ourselves in a market that doesn't trust what companies are saying. Other than mortgage lenders and home builders, company conference calls this quarter have emphasized that things are not as bad as the markets are indicating. However, investors are scared and are selling indiscriminately, regardless of what companies are actually saying their exposure is. People just don't believe them....
08/08/07 -
WSJ Deals - Uncertainty in the debt markets continues to wreak havoc on several pending buyout deals, developments that have become top page news, as evidenced in this article from today’s Wall Street Journal. Deal Journal has spent the past several weeks meeting with various deal makers to determine just how these problems could jostle current and future deals. In that time, we have logged a fair bit of time...
08/07/07 -
Vox - Germans are having a hard time getting their minds around the fact that their economy is doing better. I know this because of a seminar in which I participated in Munich this week to mark the publication of Hans-Werner Sinn’s Can Germany be Saved? – and my own book, The European Economy Since 1945.1 Professor Sinn’s book has actually gone through eleven editions, which in and of itself...
08/07/07 -
Apple 2.0 - Analysts anticipating today's Apple (AAPL) product announcements have gone beyond speculating what Steve Jobs' has up his sleeve -- the conventional wisdom has settled on new iMacs and some kind of upgrade of Apple's .Mac service -- to calculating what effect the event will have on investors and the company's bottom line. Piper Jaffray's Gene Munster is getting a lot of play for his analysis that...
08/07/07 -
Abnormal Returns - What has been the upshot of investor desire for alpha and the alternative investment vehicles that try to produce alpha? In light of recent capital market stress the question is entirely relevant. An article by Greg Ip and Jon E. Hilsenrath at WSJ.com in part argues that the desire of institutional investors to “look like Yale” has been a contributing factor to how it is we got where we are...
08/06/07 -
Contrary Investor - You probably saw that the 2Q GDP report came in relatively strong, as was absolutely no surprise at all. Inventories were rebuilt relative to the contraction in 1Q, which is academically additive to the GDP calculation. Government spending was also quite strong, especially defense spending. No surprise at all. Non-residential real estate construction also added to the strength in the headline...
08/06/07 -
Angry Bear - This post is on spending on civilian physical infrastructure and how its changed by Presidential administration since the early 1950s. Kind of a follow-up to PGL's post from earlier today, but using data from the White House Office of Management and Budget Table 9.3: Given the recent bridge collapse, and the disaster that was New Orleans in the wake of Katrina, I think it makes sense to focus on...
08/06/07 -
NextBillion - I had a very interesting talk last week with Marsha Wulff, the founder and president of Wulff Capital. She has a very interesting idea of opening African markets to business by a Product Commercialization Platform (PCP) model that would enable indigenous development in Africa. Wulff has always had an interest in Africa. When she finally visited, she fell in love with the continent and its people....
08/05/07 -
Dani Rodrik - Non-economists are often baffled by the disagreements among professional economists on the issues of the day--from international trade to the minimum wage, from economic development to health policy. I think the best way to understand the source of these disagreements is to recognize that there are two genres of economists. I call them "first-best economists" and "second-best economists." Here...
08/05/07 -
The Big Picture - Yesterday, we looked at the week that was. Today, we preview the coming week. We have a very light calendar of economic releases. All eyes will be on the FOMC, which meets on Tuesday. Few are expecting any change in their stance (Goldman Sachs is forecasting a change in "bias" from inflation-fighting to a neutral stance). I am looking for some acknowledgment in either the statement or the minutes...
08/05/07 -
feministing - Well, kinda. Women in their 20s are out-earning men their age in several major U.S. cities, including New York, Dallas, Chicago, Boston, and Minneapolis. To summarize the various reasons for this offered in the Times article, it's likely because these are women who flock to cities after they graduate college, and because they have yet to get married or have kids. In other words, they're very much...
08/03/07 -
TMTGM - The labor department reported slowing job growth in July, down to a seasonally adjusted rate of 92,000 as employment gains in various service industries were offset by losses in manufacturing, construction, and government. Contrary to the pattern established over the last year, data for the two prior months were revised downward, falling from 190,000 to 188,000 in May and from 132,000 to 126,000 in...
08/03/07 -
Blogging Stocks - American Home Mortgage (NYSE: AHM) fired almost all 7,000 of its employees late yesterday. According to CNN Money, the company will go into bankruptcy immediately. AHM made $59 billion in loans last year, many of them with adjustable-rates. Many of the company's loans were to the middle part of the housing market and were no sub-prime mortgages. Another lender, Accredited Home Lenders (NASDAQ:...
08/03/07 -
A.E. Feldman - Public pension systems are straying from the tried and true strategy of “little risk, guaranteed return” and opening up to the “high risk, high return” world of hedge funds. The reason behind the trend: no one expects the public equity market to return what it was going forward and pension funds must continue to generate the annual returns necessary to meet their obligation to retirees. ...
08/02/07 -
BNET - Mattel's Fisher Price division announced yesterday that it will recall 967,000 plastic toys, including Big Bird, Elmo, and Dora the Explorer, after learning its Chinese vendor used paint that contains more than .06 percent lead (the amount determined by the Consumer Product Safety Commission to be acceptable.) Luckily, two-thirds of the products were quarantined before hitting shelves, but the rest...
08/02/07 -
Roseman Eruptions - Just when things couldn’t get worse for Japanese equity investors this year, the ruling LDP in Japan lost its majority in the Upper House last week following elections – the worst defeat for the Liberal Democratic Party in 52 years. Prime Minister Shinzo Abe, elected just ten months ago, is now challenged by opposition members in government following another resignation this week from...
08/02/07 -
Housing Bubble Blog - Las Vegas Now reports from Nevada. “The recent troubles in mortgage lending mean foreclosed homes are flooding the market. They’re also making it tougher for other sellers who were hoping to make a profit selling their home. You can usually buy foreclosed homes for less than a regular house for sale. That’s good news for the buyer, but bad news for sellers trying to compete with...
08/02/07 -
Grasping Reality - It's a somewhat odd column. The Democratic economists--Summers, Blinder, Krugman, and that other guy who doesn't belong in such company--are right to say that things are complicated: globalization has not delivered the growth-accelerating flow of capital to the developing world that it was supposed to, and the Clinton focus on restoring fiscal stability to America was then immediately undone by Bush...
08/02/07 -
Jeff Matthews - "The mark of an original thinker may be that you never know how they're going to answer a question you've never heard them get asked. "That's how NotMakingThisUp started a recap of the private equity discussion at this year’s Berkshire-Hathaway annual meeting, which came about when a shareholder asked Warren Buffett—The Oracle of Omaha—this simple question about the private equity mania then...
08/02/07 -
Stubborn Facts - On the heels of the House vote on the Ledbetter bill, Mary Katharine Ham reports on a very timely study looking deeper at the reason there's a gender wage gap. It turns out, women don't ask for as much as men do. On the whole, men are far more likely to take the initiative and ask for a raise, a promotion, and other more advantageous working conditions. Women, on the other hand, tend to accept the...
07/31/07 -
China Economics - H/T Time China for a post that makes reference to 4 obstacles to the greening of China. Time reiterate that the following list amounts to nothing more than saying that the entire problem is related to "corruption". I disagree with this statement. China has already come on a remarkable journey in the last 20 years. The speed of development is bound to lead to teething problems and China is on a very...
07/31/07 -
Better School Food Blog - If you think that our government is leading the way in protecting our kids from poor quality foods, think again! This summer I took a ride down to DC with BSF president Maryann Petrilena to hear what the FTC and food industry had to say about their efforts to combat childhood obesity. Children see over 20,000 commercials over the course of a year, most of it consists of four "food groups": fast...
07/31/07 -
Marginal Revolution - Alan Blinder had a good column yesterday, summarized and discussed by Mark Thoma. The current movement, supported by Greg Mankiw I might add, is trying to raise the rate of taxation on private equity income so that Warren Buffet is not paying a lower tax rate than someone poorer than me. More generally, it seems to many people that the rate of taxation on capital gains should be the same as the...
07/30/07 -
The Big Picture - I think that's fairly apparent to readers from the weekend linkfests. And, despite the fact that I have warned in the past that reading the news is hazardous to your investment returns (see Lose the News), I do occasionally like to Use the News -- but for other reasons. I find it quite interesting to see how different financial publications respond to market turmoil. Sometimes, it can be incidentally...
07/30/07 -
Nouriel Roubini - It is always risky to call an equity market peak and the beginning of a bear market in equities; so I will not try to do that. But leaving aside equity valuations, it increasingly looks like we are at the peak of a credit/debt cycle, in the US and globally. Specifically, the crucial macro question that we should ask ourselves today is whether we are at the peak of a Minsky Credit Cycle. Or as the...
07/30/07 -
AdBusters - As global warming deepens, and a somber, new reality sinks in, people are starting to ask some uncomfortable questions: Why am I being told to buy a new car a dozen times every day? Why am I constantly being urged to splurge on myself ‘because I’m worth it’? Why, in this ecological age of ours, do we need a $500-billion industry telling us thousands of times each day to consume more? In the...
07/29/07 -
Delightful advancement - It seems like we’ve been fighting over the yield curve for close to two years. Sure it’s one of the most powerful graphs in economics. But its magical power to predict a recession is what everyone has been talking about since at least January 2006 when the dreaded inverted yield curve began rearing its ugly, gnarly head. This is not exactly your friendly every day Punksatony Phil type of...
07/29/07 -
Robert Blumen - As the mortgage-backed securities market meltdown accelerates, Bloomberg reports U.S. Urges China to Buy Mortgage-Backed Securities. According to the article, China buys some but not a lot of these instruments. The unfolding crisis in this sector is driven by a higher-than-expected default rates forcing a mark-to-market of securities whose value had previously been determined solely by mathematical...
07/29/07 -
CARPE DIEM - First came BPO (business process outsourcing) for back office (billing, payroll, purchasing, records) and front office (customer service, tech support) services, and then came KPO (knowledge process outsourcing) for higher-value-added forms of BPO services: market research, legal services, patent and copyright services, software design, engineering, and R&D. Now comes PPO (person-to-person...
07/27/07 -
ASBlog - Smith's price theory has nothing to do with the medieval idea of the 'just price'. Smith’s (and others') idea of the ‘Natural’ price was based on the price that happened to reward the factors land, labour and capital, or 'neither more nor less' what it costs to bring the product to market (Wealth Of Nations, pp 72-4). But the sellers do not determine the price of anything unilaterally;...
07/27/07 -
NKE - In North Korea, despite the additional reform measures on the table after the implementation of the 2002 July 1 Economic Management Reform Measure (July 1 Economic Measure), it appears that a mass-scale trade deficit has resulted. Choi Soo Young, a Senior Researcher of Korea Institute for National Unification, said through a recently published report called “Five years after the July 1 economic...
07/27/07 -
KnowledgeProblem - As noted here yesterday, FERC is taking action against Amaranth and its erstwhile energy trading star Brian Hunter for allegedly manipulating energy markets. FERC issued a show cause order, detailing the evidence collected and inviting Amaranth entities to explain why they should not be found in violation of Part 1c of the Commission's regulations, which prohibits energy market manipulation. Unlike...
07/26/07 -
Law & Econ Prof Blog - It's well known that crime declined significantly in the 1990s and early 2000s. And thanks to Steve Levitt, we have a pretty good idea of why. (See his "Understanding Why Crime Fell in the 1990s: Four Factors That Explain the Decline and Six That Do Not," 18 J. Econ. Persp. 163 (2004).) The Economist magazine of June 9, 2007, has a lead article in its United States section on current crime trends....
07/26/07 -
Aplia Econ Blog - I was deep in conversation with my 14-year-old son regarding the relative costs and benefits of wearing a helmet while skateboarding. Guess which side I was on? We were driving from the Bay Area to Davis, California, for Memorial Day weekend. Deep into the task of convincing my son that the various monetary, emotional, and intellectual costs of brain surgery far outweighed the relatively minuscule...
07/26/07 -
Paul Kedrosky - I was recently talking to a CEO friend of mine who is having trouble with his board. He thinks there is a very good chance that he will soon be fired. What's the problem?, I asked. "Fucking board full of VCs," he said. "They undervalue me. I'm knocking myself out getting this company on analysts' radar, getting our systems in place, hiring good people, and even closed this recent round. And...
07/25/07 -
WSJ Law Blog - As Barry Bonds closes in on Hank Aaron’s home-run record, a fun tax-law question looms: If you’re the lucky fan who catches the record-breaking home run ball, what are the tax consequences? “Everyone’s sure they know the right answer, but there’s very little agreement” on what it is, tax lawyer Phillip Mann of Miller & Chevalier tells the WSJ’s Tom Herman in this article. Here are...
07/25/07 -
Instigator Blog - When raising money from venture capitalists or angels, you’ll want to meet as many as possible. They won’t all invest, but each time you pitch, you get better. Each time you pitch, you get asked different questions, get different opinions and ideas. It’s worth it to pitch as many people as you can, as often as you can. Wil Schroter says it perfectly, pitch everyone, all the time. Some...
07/25/07 -
The Angry Economist - Indians seem afraid of improvements in productivity. They very much seem to have the idea that there is a fixed amount of work. Improvements in productivity would destroy some of that work, and make the country poorer. Or perhaps more accurately, it would destroy the employment of enough voters that they resist change. Some Indians see this perfectly. The Times of India is running an India Poised...
07/24/07 -
Peak Oil News - As public awareness about peak oil continues to grow, and even the big oil companies like Exxon Mobil Corp. are now starting to admit that the future supply of oil looks troublesome (see this Boston Globe article), there's an increasing focus on renewable energy solutions. But most members of the public still don't understand energy very well, and they generally have no idea whether alternative...
07/24/07 -
Black Dog - If you’ve ever been involved in a business of any kind, you’ve probably had occasion to wonder if some customers are more trouble than they’re worth. Whether too high-maintenance, too low-value, or a bit of both, there have probably been times where you thought you’d probably be better off without them. In my case, there have been a couple occasions where I did some informal cost-benefit...
07/24/07 -
Becker-Posner - Estimates suggest that intangible capital, which is mainly skilled employees, constitutes 70 per cent of the total capital of large American companies. Attracting and retaining skilled workers is the number one priority of these companies. The fundamental cause of the great emphasis being placed on talent is that production in modern economies is much more knowledge-intensive than production was in...
07/23/07 -
Scholars and Rogues - The Federal Communications Commission recently announced plans to auction off portions of the wireless spectrum in order to raise money for the government. Although supporters of net neutrality and broadband access wanted the spectrum to remain open in order to build a national wireless broadband network, it was generally expected that incumbent telecoms like AT&T and Verizon would use their mountains...
07/23/07 -
Political Calculations - In 2006, the rate at which the cost of tuition at U.S. colleges and universities increased at a rate of 6.71%. By comparison, the rate at which inflation increased in the general U.S. economy was just 3.23%, less that half the rate at which the average U.S. university jacked up the price of tuition at their institutions. These numbers are provided by FinAid, one of the most comprehensive sources of...
07/23/07 -
Econbrowser - If this is what we get in a good year, what will happen when we have a bad crop? American consumers are starting to see some of the consequences of our ill -fated ethanol policy in the prices of everything from meat to ice cream. While well-fed Americans may gripe, the implications for those in sub-Saharan Africa are quite alarming. All of these concerns arise from the higher average price of corn...
07/20/07 -
WSJ Blog - The Wall Street Journal’s Scott Patterson takes a look at Google’s results from the analysts’ perspective: We hate to say we told you so, but, when it comes to Google’s earnings miss: We told you so (OK, we were a quarter early). In retrospect, the miss wasn’t such a shock. Google’s growth is slowing — which makes sense, given its rapid expansion over the past few years. The trouble...
07/20/07 -
Property Crossroads - Selling your home is not just about finding an agent to sell it for you. More than anyone else, you’re the one who has the most vested interest in selling your home. Thus, you should do your share in making sure that your home is in tip top shape during inspections and open houses. Hiring a professional home stager can make things easier for you. However, if it’s not within your budget,...
07/20/07 -
Brand Curve - There is more to creating and promoting a brand than making a pretty logo and tagline. In fact, a logo and tagline are just representations of your brand. Following are several rules to follow to help you create, promote and maintain your brand. 5 Rules for Effective Branding Be specific: Know what your brand stands for, and know what your brand promises. Your brand promises should be precise...
07/19/07 -
SeekingAlpha - China's statistics bureau reported Q2 GDP grew 11.9%, topping every estimate in a Bloomberg poll. Inflation rose 4.4%, the most since Sept. 2004, and exceeded the central bank's 3% target for the fourth straight month. Despite renewed concerns of rate hikes, stocks were mixed and held up much better than in the past. The Shanghai Composite ended lower by 0.44% to 3,912.94. A-shares gained 0.25% in...
07/19/07 -
RGE Monitor - As reported by Bloomberg today U.S. Homebuilder Confidence Drops to 16-Year Low as Housing Slump Persists. This is all consistent with all the other indicators coming from the housing market showing that the housing recession is getting worse: falling home sales, falling starts and permits, rising cancellation rates, increased supply of unsold new and existing homes, falling home prices, rising...
07/19/07 -
Fortify Your Oasis - Carmine Gallo had an interesting piece in Business Week earlier this month in which he deconstructed some of the elements of Steve Jobs' iPhone launch presentation from January this year and illustrated some simple takeaways. His five elements: 1. Build Tension 2. Stick to One Theme Per Slide 3. Add Pizzazz to Your Delivery 4. Practise 5. Be Honest and Show Enthusiasm I like Carmine a lot...
07/19/07 -
Brad Setser - China announced that it added $130.6b to its reserves in the second quarter, only a bit smaller than the $135.7b it added in the first quarter. Most of the increase was real: if China had 5% of its portfolio in yen and 20-25% in euros and pounds, valuation gains only explain $2b of the increase; if China had fewer yen and more euros and pounds, valuation changes could account for maybe $5b of the...
07/19/07 -
Econbrowser - Are OPEC's recent decisions responsible for the current price of oil? I'm not persuaded that they are, and here's why. Econbrowser reader GT points us (in comments #6 and #13 here) to a graph at an anonymous website called Saudi oil production which relates crude production from the Kingdom to the production quotas set by OPEC. I was able to reproduce this graph (as shown below), using for...
07/19/07 -
SeekingAlpha - Accounting for iPhone's revenues should result in steadily increasing revenue growth for Apple (AAPL) and potentially extend earnings momentum even after iPhone sales have peaked. Apple stated in its most recent 10-Q filing that, since it will provide additional unspecified software products and features free of charge to customers over the product life, iPhone revenues will be recognized under...
07/18/07 -
Manthan - WSJ talks about the rising salaries in India and how companies are re-evaluating their strategy vis-a-vis outsourcing. Savings and efficiency in India can only be achieved now with scale. Smaller companies will find it difficult to attract and retain good talent. The culture of working for "stocks" at startups is not very popular in India. Besides highly motivated professional try to seek on-site...
07/18/07 -
WRI - Changemakers is an Ashoka initiative that focuses on social innovation. In the spirit of market incentives, Changemakers holds idea competitions - with monetary prizes - to solicit the best ideas and models in emerging areas of social innovation. They're trying to build a new market for compelling topics in the field; the latest is entitled Disruptive Innovations in Health and Healthcare: Solutions...
07/18/07 -
The Peridot Capitalist - The move from Dow 12,000 to Dow 14,000 has been pretty stunning. How relevant is that index though? We can argue that it is heavily weighted towards mega cap stocks, and that is true, but so is the S&P 500 since it is market cap weighted. Some of you may not be aware of this, but the Dow Jones Industrial Average is not market cap weighted. Instead, it is share price weighted. This serves to make...
07/11/07 -
Through The Fly's Eyes - Short-selling is as you all may know is making a "bet" that share prices will decline. Sellers have to "borrow" the stock first at a price, and then return the stock, they hope, at a lower price. The difference is a profit. If the stock rises above the price borrowed, you have a loss instead. In the U.S. there have been constraints on short-selling since the post-crash years beginning 1934. Today,...
07/11/07 -
Greg Mankiw's Blog - A reader asks: I found this article by Hal Varian, and a sentence at the end caught my attention. It says that although the Chinese only add 1% of the iPod's value, each unit exported to the US contributes about $150 to the bilateral deficit. This left me wondering: could bilateral trade numbers, namely the US deficit with China, be a fiction? No, the bilateral trade deficit is not a fiction, but...
07/11/07 -
seth godin's BLOG - Marketing works. Advertising and promotion and lobbying cost money. And organizations pay for it because, by and large, it works. Not all the time, and rarely as big as people hope, but sure, you can influence the public by spending money. Which leads to the key question: are you responsible for what you market? Some people will tell you that the market decides. They’ll remind you that most...
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