http://johnmaxwellonleadership.com/2010/12/20/for-leaders-balancing-care-with-candor/
***************
"Never worry about the size of your Christmas tree. In the eyes of children, they are all 30 feet tall." (Larry Wilde, The Merry Book of Christmas)
***************
As we approach Christmas and the end of 2010, a little bit of John Maxwell is something we'd like to share.
His thoughts on "care" and "candor" as they relate to leadership:
^Care without candor creates dysfunctional relationships
^Candor without care creates distant relationships
^But care balanced with candor creates developing relationships
Maxwell goes on to be specific about how this combination should work:
+Caring values the person while candor values the person's potential
+Caring establishes the relationship while candor expands the relationship
+Caring defines the relationship while candor directs the relationship (getting the team moving together to accomplish a goal is the responsibility of the leader and that often requires candor)
+Caring should never suppress candor while candor should never displace caring
Maxwell has a "caring candor checklist" for working with people. Before having a candid conversation, can you answer "Yes" to the following questions about leading a team:
Have I invested in the relationship enough to be candid with them?
Do I truly value them as people?
Am I sure this is their issue and not mine?
Am I sure I'm not speaking up because I feel threatened?
Is the issue more important than the relationship?
Does this conversation clearly serve their interests and not just mine?
Am I willing to invest time and energy to help them change?
Am I willing to show them how to do something, not just say what's wrong?
Am I willing and able to set clear, specific expectations?
An answer of "Yes" to all of these questions means you have a good chance of communicating effectively.
***************
We'll close our postings for this year here. Merry Christmas and Happy New Year for those who celebrate that way. The happiest of holiday seasons to everyone.
In this first year of the second decade of the 21st century, it's hard to believe we've posted 110 times on all sorts of business and economic issues. As long as there's an audience, we'll continue.
Be well.
Wednesday, December 22, 2010
Home Sales
http://www.nytimes.com/2010/12/23/business/economy/23econ.html?emc=eta1
***************
"It's not enough to be busy. The question is, 'What are we busy about?'" (Henry David Thoreau)
***************
In our 12/15 "Positive" post, we pointed out that there was some good news about the economy: the current Business Roundtable CEO survey reported 45% of those CEOs plan to hire over the next 6 months (the highest percentage from that group in 8 years). And, 60% of those CEOs plan to boost capital spending which is critical to job growth. As we pointed out on 12/15, this is the same group that told Fareed Zakaria earlier this year that they were holding back on capital spending because they were unsure of the regulatory and tax environment.
Since 12/15, Mark Zandi (someone we watch and Congress listens to) has weighed in with his revised forecast on GDP growth in 2011: 3.9% (up from his original 2.8%). The Conference Board's "index of leading indicators" showed movement upward in 9 of its 10 categories for November. Only sluggish building permits pulled down the measure.
So, the "canary in the coal mine" is home sales. Today's report that sales of existing homes climbed in November but missed forecasts is mixed news. The National Association of Realtors (NAR) reports that sales of homes rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November (from about 4.43 million in October). An NAR spokesman concluded that this sector of the economy is "... underperforming, given the size of the population." The NAR position is that home sales should be over 5 million now. Their prediction is that home sales will be at 5.12 million for 2011.
This gets back to "employment." The Roundtable report on CEOs unlocking capital spending will be a boost to employment (up until now, the only capital being spent was sent to Larry Ellison so Oracle could sell productivity improvement software that slowed the need for more hiring).
The NAR's "housing affordability index" shows home prices are where they need to be: families earning a median income of $62,141 needed only to devote (in October) 13.6% of gross income (the lowest amount since calculations were started in 1970) to principal and interest on a median priced single family home.
So, home prices are low relative to incomes. We'll see what happens next.
***************
"It's not enough to be busy. The question is, 'What are we busy about?'" (Henry David Thoreau)
***************
In our 12/15 "Positive" post, we pointed out that there was some good news about the economy: the current Business Roundtable CEO survey reported 45% of those CEOs plan to hire over the next 6 months (the highest percentage from that group in 8 years). And, 60% of those CEOs plan to boost capital spending which is critical to job growth. As we pointed out on 12/15, this is the same group that told Fareed Zakaria earlier this year that they were holding back on capital spending because they were unsure of the regulatory and tax environment.
Since 12/15, Mark Zandi (someone we watch and Congress listens to) has weighed in with his revised forecast on GDP growth in 2011: 3.9% (up from his original 2.8%). The Conference Board's "index of leading indicators" showed movement upward in 9 of its 10 categories for November. Only sluggish building permits pulled down the measure.
So, the "canary in the coal mine" is home sales. Today's report that sales of existing homes climbed in November but missed forecasts is mixed news. The National Association of Realtors (NAR) reports that sales of homes rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November (from about 4.43 million in October). An NAR spokesman concluded that this sector of the economy is "... underperforming, given the size of the population." The NAR position is that home sales should be over 5 million now. Their prediction is that home sales will be at 5.12 million for 2011.
This gets back to "employment." The Roundtable report on CEOs unlocking capital spending will be a boost to employment (up until now, the only capital being spent was sent to Larry Ellison so Oracle could sell productivity improvement software that slowed the need for more hiring).
The NAR's "housing affordability index" shows home prices are where they need to be: families earning a median income of $62,141 needed only to devote (in October) 13.6% of gross income (the lowest amount since calculations were started in 1970) to principal and interest on a median priced single family home.
So, home prices are low relative to incomes. We'll see what happens next.
Tuesday, December 21, 2010
308,745,538: The American Demographic
http://www.msnbc.msn.com/id/40764172/ns/us_news-life/?GT1=43001#
***************
"Whatever the mind can conceive and believe, the mind can achieve." (Dr. Napoleon Hill)
***************
The 2010 official population of the United States was released today by the Census Bureau. The new number (see title above), based on surveys taken on April 1, 2010 (would that be "April Fools Day?"), is a 9.7% increase over the last census: 281.4 million residents in 2000.
The growth in population over the last 10 years is the lowest since the 1940 census (which covered the Great Depression's prior 10 years when growth was only 7.3%).
These are the figures that will be used to reapportion the 435 House seats among the 50 states.
The U.S. is still growing quickly relative to other developed nations. The population of France and England grew 5% over the past decade, while Japan's number has hardly changed and Germany's population is declining. China grew at 6% and Canada at 10%.
The declining growth rate since 2000 in the U.S. is due partly to the meltdown in 2008 which brought births and illegal immigration to a near standstill compared with previous years. The state that gained the most numerically in 2010 was Texas (up 4,293,741 to 25,145,561). Politically, Texas will gain four House seats due to a growing Hispanic population and a diversified economy that held up relatively well during the recession.
Given all of this, Joel Kotkin ("The Changing Demographics of America," The Smithsonian, 8/10) sees an America that grows to somewhere between 404 (United Nations estimate) and 422/458 million (U.S. Census estimate) by 2050. Kotkin, author of "The Next 100 Million - America in 2050," (Penguin Press, 2010) sees America's fertility rate (2.1 children per family in 2006 - the highest in 45 years) as the key to its growth by 2050. This is a rate helped mostly by recent immigrants who tend to have higher birth rates than residents whose families have been here for several generations. Further, the U.S. minority population, currently 30%, is expected to exceed 50% before 2050. By 2039, due largely to immigrants and their offspring, the majority of working-age Americans will be "minorities."
Again, according to Kotkin, between 2000 and 2050, the U.S. 15-to-64 age group is expected to grow 42%. This same group is expected to decline 10% in China, 25% in Europe, 30% in South Korea and more than 40% in Japan.
So, today's census figures tell us where we are. Kotkin's insightful worldwide demographic perspectives tell us where we're headed: "Only successful immigration can provide the markets, the manpower and, perhaps most important, the youthful energy to keep western societies vital and growing." (Joel Kotkin, 2010)
***************
"Whatever the mind can conceive and believe, the mind can achieve." (Dr. Napoleon Hill)
***************
The 2010 official population of the United States was released today by the Census Bureau. The new number (see title above), based on surveys taken on April 1, 2010 (would that be "April Fools Day?"), is a 9.7% increase over the last census: 281.4 million residents in 2000.
The growth in population over the last 10 years is the lowest since the 1940 census (which covered the Great Depression's prior 10 years when growth was only 7.3%).
These are the figures that will be used to reapportion the 435 House seats among the 50 states.
The U.S. is still growing quickly relative to other developed nations. The population of France and England grew 5% over the past decade, while Japan's number has hardly changed and Germany's population is declining. China grew at 6% and Canada at 10%.
The declining growth rate since 2000 in the U.S. is due partly to the meltdown in 2008 which brought births and illegal immigration to a near standstill compared with previous years. The state that gained the most numerically in 2010 was Texas (up 4,293,741 to 25,145,561). Politically, Texas will gain four House seats due to a growing Hispanic population and a diversified economy that held up relatively well during the recession.
Given all of this, Joel Kotkin ("The Changing Demographics of America," The Smithsonian, 8/10) sees an America that grows to somewhere between 404 (United Nations estimate) and 422/458 million (U.S. Census estimate) by 2050. Kotkin, author of "The Next 100 Million - America in 2050," (Penguin Press, 2010) sees America's fertility rate (2.1 children per family in 2006 - the highest in 45 years) as the key to its growth by 2050. This is a rate helped mostly by recent immigrants who tend to have higher birth rates than residents whose families have been here for several generations. Further, the U.S. minority population, currently 30%, is expected to exceed 50% before 2050. By 2039, due largely to immigrants and their offspring, the majority of working-age Americans will be "minorities."
Again, according to Kotkin, between 2000 and 2050, the U.S. 15-to-64 age group is expected to grow 42%. This same group is expected to decline 10% in China, 25% in Europe, 30% in South Korea and more than 40% in Japan.
So, today's census figures tell us where we are. Kotkin's insightful worldwide demographic perspectives tell us where we're headed: "Only successful immigration can provide the markets, the manpower and, perhaps most important, the youthful energy to keep western societies vital and growing." (Joel Kotkin, 2010)
Friday, December 17, 2010
A Teachable Moment
http://www.nytimes.com/2010/12/17/opinion/17krugman.html?_r=1&src=ISMR_HP_LO_MST_FB
Paul Krugman, who sometimes politicizes too much for me, provides us with a perspective this week that answers some questions many of us have on what's being learned about why the worldwide financial crisis happened in the first place. In his words, this should be a "teachable moment."
Nouriel Roubini's book (co-written with Stephen Mihm), "Crisis Economics" is the best book written on the subject of what happened, why it happened and what could happen in the future.
Back to Krugman: the Financial Crisis Inquiry Commission was established by law to "...examine the causes, domestic and global, of the financial ... crisis in the U.S."
However; the commission has broken down along partisan lines, unable to agree on some of the most basic points.
If we've read anything intelligent about the crisis (Roubini, or elsewhere), we know what happened and we don't want it to happen again. Krugman points out that the four Republican members of the commission "... voted to exclude the following terms from the report: deregulation, shadow banking, interconnection, and even Wall Street."
When Democratic members of the commission refused to go along with this, the Republicans issued their own report which didn't use any of the "banned" terms. The Republican story is that the crisis was the fault of "government do-gooders." This would include government-sponsored loan-guarantee agencies.
We won't dignify the extent of the Republican scenario but we find ourselves disappointed that, even on an issue as serious as this one, both sides can't agree on a single narrative about what happened and why it needs to not happen again. And, this is just Congress "defining" it! Dodd-Frank is the law created to deal with the issues.
Krugman is basically saying that the Republicans are just carrying the water for the Conservative approach that absolves the banks of any wrongdoing.
We don't like to talk about politics here but we have to occasionally bow to Krugman's judgment that there aren't any real bi-partisan approaches in today's politics. So, those of us who grew up being told that we have a pluralistic society and that that was "good" because everybody gets represented, find that things don't work the way they were supposed to and that's bad for business, regulation and the economy overall.
So, as Krugman says, the "teachable moment" from the crisis is that when an ideology backed by vast wealth and immense power confronts inconvenient facts, "the facts lose."
Paul Krugman, who sometimes politicizes too much for me, provides us with a perspective this week that answers some questions many of us have on what's being learned about why the worldwide financial crisis happened in the first place. In his words, this should be a "teachable moment."
Nouriel Roubini's book (co-written with Stephen Mihm), "Crisis Economics" is the best book written on the subject of what happened, why it happened and what could happen in the future.
Back to Krugman: the Financial Crisis Inquiry Commission was established by law to "...examine the causes, domestic and global, of the financial ... crisis in the U.S."
However; the commission has broken down along partisan lines, unable to agree on some of the most basic points.
If we've read anything intelligent about the crisis (Roubini, or elsewhere), we know what happened and we don't want it to happen again. Krugman points out that the four Republican members of the commission "... voted to exclude the following terms from the report: deregulation, shadow banking, interconnection, and even Wall Street."
When Democratic members of the commission refused to go along with this, the Republicans issued their own report which didn't use any of the "banned" terms. The Republican story is that the crisis was the fault of "government do-gooders." This would include government-sponsored loan-guarantee agencies.
We won't dignify the extent of the Republican scenario but we find ourselves disappointed that, even on an issue as serious as this one, both sides can't agree on a single narrative about what happened and why it needs to not happen again. And, this is just Congress "defining" it! Dodd-Frank is the law created to deal with the issues.
Krugman is basically saying that the Republicans are just carrying the water for the Conservative approach that absolves the banks of any wrongdoing.
We don't like to talk about politics here but we have to occasionally bow to Krugman's judgment that there aren't any real bi-partisan approaches in today's politics. So, those of us who grew up being told that we have a pluralistic society and that that was "good" because everybody gets represented, find that things don't work the way they were supposed to and that's bad for business, regulation and the economy overall.
So, as Krugman says, the "teachable moment" from the crisis is that when an ideology backed by vast wealth and immense power confronts inconvenient facts, "the facts lose."
Wednesday, December 15, 2010
Positive Economic News
http://economix.blogs.nytimes.com/2010/12/14/three-good-economic-reports/?emc=eta1
***************
"Thinking is one thing no one has ever been able to tax." (Charles Kettering)
***************
Something positive is happening out there with the economy. Whether it's the Fed, the tax break "deal," or capital spending starting to leak out into markets, the "Business Roundtable" study released yesterday implies economic improvement now.
The Business Roundtable is made up of the CEOs of the largest Top 500 companies and has, over the past 50 years been at it's most powerful when advocating that the U.S. government act on issues of import.
The Roundtable released their current CEO survey yesterday with one of its most impressive findings indicating that 45% of those CEOs plan to hire within the next six months. That's the highest percentage from that group in 8 years.
60% of those CEOs plan to bump up capital spending and 80% expect sales growth.
This is the same group that told Fareed Zakaria at the beginning of 2010 that they were "holding back" capital spending because they were unsure of the regulatory and tax environment.
In addition, yesterday brought 3 other positive reports:
(1) Retail sales rose for the fifth consecutive month in November (with the October and September figures revised up sharply);
(2) The National Federation of Independent Business's small business optimism index also rose for the fourth consecutive month (and this is where most of the hiring takes place);
(3) The producer price index also increased more than expected, lessening concerns about "deflation."
Macroeconomic Advisers yesterday raised its forecast for gross domestic product growth in the fourth quarter to an annual rate of 3%. Credit Suisse raised it's fourth quarter GDP growth forecast a full percent from 2.2% to 3.2%. JP Morgan raised its forecast a full percentage point as well from 2.5% to 3.5%. A full percentage point for the quarter that we're in is significant.
According to one Deutsche Bank economist, employers have stretched the workweek for existing workers to its limit and now must add additional employees. Assuming productivity slows to levels consistent with the last four "recoveries," the U.S. economy could create anywhere from 2.5 to 3.9 million jobs in 2011. Assuming the standard quantitative axiom that it takes 125,000 jobs per month just to account for new entrants into the workforce from population growth (or, 1.5 million total for any new year), this data is still "additive" to the economy. To put that into perspective, the economy added (roughly) 950,000 jobs in 2010.
If one takes the high end of the job creation numbers above, the unemployment rate would be pushed down to 7.3% (from the almost 10% level it sits at now).
Coming out of a recession, it doesn't get any better than this. Let's hope that this positive news continues throughout the holiday season and jump starts 2011.
***************
"Thinking is one thing no one has ever been able to tax." (Charles Kettering)
***************
Something positive is happening out there with the economy. Whether it's the Fed, the tax break "deal," or capital spending starting to leak out into markets, the "Business Roundtable" study released yesterday implies economic improvement now.
The Business Roundtable is made up of the CEOs of the largest Top 500 companies and has, over the past 50 years been at it's most powerful when advocating that the U.S. government act on issues of import.
The Roundtable released their current CEO survey yesterday with one of its most impressive findings indicating that 45% of those CEOs plan to hire within the next six months. That's the highest percentage from that group in 8 years.
60% of those CEOs plan to bump up capital spending and 80% expect sales growth.
This is the same group that told Fareed Zakaria at the beginning of 2010 that they were "holding back" capital spending because they were unsure of the regulatory and tax environment.
In addition, yesterday brought 3 other positive reports:
(1) Retail sales rose for the fifth consecutive month in November (with the October and September figures revised up sharply);
(2) The National Federation of Independent Business's small business optimism index also rose for the fourth consecutive month (and this is where most of the hiring takes place);
(3) The producer price index also increased more than expected, lessening concerns about "deflation."
Macroeconomic Advisers yesterday raised its forecast for gross domestic product growth in the fourth quarter to an annual rate of 3%. Credit Suisse raised it's fourth quarter GDP growth forecast a full percent from 2.2% to 3.2%. JP Morgan raised its forecast a full percentage point as well from 2.5% to 3.5%. A full percentage point for the quarter that we're in is significant.
According to one Deutsche Bank economist, employers have stretched the workweek for existing workers to its limit and now must add additional employees. Assuming productivity slows to levels consistent with the last four "recoveries," the U.S. economy could create anywhere from 2.5 to 3.9 million jobs in 2011. Assuming the standard quantitative axiom that it takes 125,000 jobs per month just to account for new entrants into the workforce from population growth (or, 1.5 million total for any new year), this data is still "additive" to the economy. To put that into perspective, the economy added (roughly) 950,000 jobs in 2010.
If one takes the high end of the job creation numbers above, the unemployment rate would be pushed down to 7.3% (from the almost 10% level it sits at now).
Coming out of a recession, it doesn't get any better than this. Let's hope that this positive news continues throughout the holiday season and jump starts 2011.
Saturday, December 11, 2010
China's Inflation - Toyota's Challenges
http://www.nytimes.com/2010/12/11/business/global/11inflation.html?emc=eta1
***************
"Professional psychiatrists in China are like pandas. There are only a few thousand of us." (Zhang Yalin, Assistant Director - Mental Research Institute - Central South University - China)
***************
China's consumer price index rose 5.1% in November. That's the highest in 28 months. This is way above the government's target level of 3%.
The rise was attributed to food prices which are up 11%.
China's central bank order for all commercial banks to increase minimum reserves by 0.5% of deposits was the third such directive in the last five weeks. It comes as Beijing tries to rein in a flood of money flowing through the economy from stimulus spending and bank lending that helped China rebound quickly from the worlwide financial crisis.
The government has also instituted price controls and released food reserves in agricultural areas hoping that food prices won't spike anymore.
While China's economy is still growing at 9% (9.6% GDP growth for the 3 months ending in September, down from a post-crisis high of 11.9% in the first quarter), the measures that the government is taking to slow inflation could also "slow" the economy. That, in turn, could increase unemployment.
No matter what the situation, we see it as difficult to manage such a high rate of GDP growth in a sustained way. Mathematically, it's impossible to continue compound growth at 9% for anything. When it's an "economy," there are too many factors at play to have any level of "smoothness."
Therein lies the rub: a subtraction of 1% in GDP growth (below 9%) in China means 22 million people are unemployed.
Speaking of problems, Toyota is continuing to have problems as sales slump and inventories go up even for the Camry and the Prius. Consumers are demanding larger discounts to remain loyal. Toyota is up to 11 million recalls worldwide over the past year. Last week, Toyota recalled 650,000 Priuses to fix "cooling pumps." While industry sales rose 17% last month, Toyota's sales fell 3.3%.
In November, Toyota spent an average of $2,602 per car on incentives, 37% more than a year ago.
While Toyota's troubles can be traced to a variety of sources - recalls, market trends, etc. - many stem simply from an aging product line.
Ed Tonkin, a multi-franchise dealer in Portland, Oregon was recently quoted as saying that the Hyundai Sonata has been a real in-your-face example of how the competition is better.
Before anything can be turned around, the negative slide needs to be stopped. With Toyota, that slide appears to be longer than people originally thought.
***************
"Professional psychiatrists in China are like pandas. There are only a few thousand of us." (Zhang Yalin, Assistant Director - Mental Research Institute - Central South University - China)
***************
China's consumer price index rose 5.1% in November. That's the highest in 28 months. This is way above the government's target level of 3%.
The rise was attributed to food prices which are up 11%.
China's central bank order for all commercial banks to increase minimum reserves by 0.5% of deposits was the third such directive in the last five weeks. It comes as Beijing tries to rein in a flood of money flowing through the economy from stimulus spending and bank lending that helped China rebound quickly from the worlwide financial crisis.
The government has also instituted price controls and released food reserves in agricultural areas hoping that food prices won't spike anymore.
While China's economy is still growing at 9% (9.6% GDP growth for the 3 months ending in September, down from a post-crisis high of 11.9% in the first quarter), the measures that the government is taking to slow inflation could also "slow" the economy. That, in turn, could increase unemployment.
No matter what the situation, we see it as difficult to manage such a high rate of GDP growth in a sustained way. Mathematically, it's impossible to continue compound growth at 9% for anything. When it's an "economy," there are too many factors at play to have any level of "smoothness."
Therein lies the rub: a subtraction of 1% in GDP growth (below 9%) in China means 22 million people are unemployed.
Speaking of problems, Toyota is continuing to have problems as sales slump and inventories go up even for the Camry and the Prius. Consumers are demanding larger discounts to remain loyal. Toyota is up to 11 million recalls worldwide over the past year. Last week, Toyota recalled 650,000 Priuses to fix "cooling pumps." While industry sales rose 17% last month, Toyota's sales fell 3.3%.
In November, Toyota spent an average of $2,602 per car on incentives, 37% more than a year ago.
While Toyota's troubles can be traced to a variety of sources - recalls, market trends, etc. - many stem simply from an aging product line.
Ed Tonkin, a multi-franchise dealer in Portland, Oregon was recently quoted as saying that the Hyundai Sonata has been a real in-your-face example of how the competition is better.
Before anything can be turned around, the negative slide needs to be stopped. With Toyota, that slide appears to be longer than people originally thought.
Friday, December 10, 2010
The Nano Breakthrough
http://www.nytimes.com/2010/12/10/business/global/10tata.html?emc=eta1
***************
"Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in public or private life, have been the consequences of action without thought." (Bernard Baruch)
***************
The $2,200 (or $2,500, or $2,900) car that many thought would change everything hasn't changed anything. When the Tata Nano was introduced in early 2009, it was billed as the modern day "people's car."
The price point for the car was considered the right place for those who were looking to move up from the motorized bike or three wheeler. And, of course, as its sales grew in India, it would then take on the rest of the world.
The only problem is that it hasn't taken off in India. The Indian economy is growing at nearly 9% annually while sales of the Nano have been falling for the last four months. Tata Motors has sold (wait for it!) "509" Nanos to its dealers in November. This would be in contrast to the 9,000 Nanos that it delivered in July.
The largest selling car in India for November was the Maruti Suzuki Alto: 30,000 units sold. It's price point: $6,200.
So, is the Nano at the wrong price point?
Analysts have concluded that it may not be sufficient to make cheaper, smaller versions of existing products. Their conclusion: companies need to make sure the products are widely available and are seen as safe, useful and alluring.
There is a booming car market in India that has passed the Nano by. Total auto sales in India climbed more than 22% in November to 203,000 cars. The most popular cars are small, fuel-efficient hatchbacks that sell for $10,000 or less. Maruti Suzuki (a division of Japanese automaker Suzuki) now sells half of all cars sold in India.
Tata, which started as a locomotive and truck maker, has gradually built market share in the car business over the last 20 years on the strength of modestly priced cars and sport utility vehicles. The Nano was Tata's big bid to shake up the car market in India and then go global.
Unfortunately, the Nano was troubled from the start when it's production plans were thrown off by local protests over where they would be constructing the Nano factory. Tata had to relocate the factory to another state, Gujarat - causing it to take more than a year and a half to fill orders for the first 100,000 cars.
More recently, the Nano has been hurt by reports of "fires" in a handful of cars. This has been a problem with the Nano's image, made worse by the company's explanations for the fires which convinced no one.
Logistically, the company has gone from only taking orders for the cars to making them available for immediate purchase in more sites around the country (which they should have done in the first place).
So "safety" (which may not yet be resolved), marketing and sales strategies appear to be in need of polishing. Given that Tata Motors is the same company that bought Jaguar and Land Rover from Ford, we have thoughts that there are the financial resources there to fix these problems. But, one has to ask why the problems occurred in the first place.
We would guess that there are "quality" and vehicle "size" questions that need to be addressed as against the competition which is selling more and larger cars.
We wonder what's next for the Nano.
***************
"Whatever failures I have known, whatever errors I have committed, whatever follies I have witnessed in public or private life, have been the consequences of action without thought." (Bernard Baruch)
***************
The $2,200 (or $2,500, or $2,900) car that many thought would change everything hasn't changed anything. When the Tata Nano was introduced in early 2009, it was billed as the modern day "people's car."
The price point for the car was considered the right place for those who were looking to move up from the motorized bike or three wheeler. And, of course, as its sales grew in India, it would then take on the rest of the world.
The only problem is that it hasn't taken off in India. The Indian economy is growing at nearly 9% annually while sales of the Nano have been falling for the last four months. Tata Motors has sold (wait for it!) "509" Nanos to its dealers in November. This would be in contrast to the 9,000 Nanos that it delivered in July.
The largest selling car in India for November was the Maruti Suzuki Alto: 30,000 units sold. It's price point: $6,200.
So, is the Nano at the wrong price point?
Analysts have concluded that it may not be sufficient to make cheaper, smaller versions of existing products. Their conclusion: companies need to make sure the products are widely available and are seen as safe, useful and alluring.
There is a booming car market in India that has passed the Nano by. Total auto sales in India climbed more than 22% in November to 203,000 cars. The most popular cars are small, fuel-efficient hatchbacks that sell for $10,000 or less. Maruti Suzuki (a division of Japanese automaker Suzuki) now sells half of all cars sold in India.
Tata, which started as a locomotive and truck maker, has gradually built market share in the car business over the last 20 years on the strength of modestly priced cars and sport utility vehicles. The Nano was Tata's big bid to shake up the car market in India and then go global.
Unfortunately, the Nano was troubled from the start when it's production plans were thrown off by local protests over where they would be constructing the Nano factory. Tata had to relocate the factory to another state, Gujarat - causing it to take more than a year and a half to fill orders for the first 100,000 cars.
More recently, the Nano has been hurt by reports of "fires" in a handful of cars. This has been a problem with the Nano's image, made worse by the company's explanations for the fires which convinced no one.
Logistically, the company has gone from only taking orders for the cars to making them available for immediate purchase in more sites around the country (which they should have done in the first place).
So "safety" (which may not yet be resolved), marketing and sales strategies appear to be in need of polishing. Given that Tata Motors is the same company that bought Jaguar and Land Rover from Ford, we have thoughts that there are the financial resources there to fix these problems. But, one has to ask why the problems occurred in the first place.
We would guess that there are "quality" and vehicle "size" questions that need to be addressed as against the competition which is selling more and larger cars.
We wonder what's next for the Nano.
Tuesday, December 7, 2010
A Sputnik Moment?
http://www.nytimes.com/2010/12/07/education/07education.html?adxnnl=1&emc=eta1&adxnnlx=1291748579-pgjL9+102sdOw1uJz/evog
***************
"Those who labor with their minds govern others; those who labor with their strength are governed by others." (Meng-Tzu)
***************
Today's report in the NY Times on China's debut in international standardized testing has caused quite a stir. Pundits reported on TV early this morning that this could, in fact, be a "Sputnik Moment" in the sense that this could stir America to do something about it's weakening competitive position in education in the same way it reacted to Russia's stunning success in orbiting a satellite first!
We hope it does!
The Program for International Student Assessment (known as PISA) was given to 15 year old students in 65 countries by the OECD. The results are trusted and consistent. Secretary of Education Arne Duncan indicated that the U.S. came in 23rd or 24th in most subjects. Average math scores of American students put them below 30 other countries.
So, on the math test (500 is average), students in Shanghai scored 600, Singapore 562, Germany 513 and the U.S. 487.
Importantly, "teaching" has climbed up the ladder of preferred occupations in China and salaries have risen. That's important because you get what you pay for. One of Arne Duncan's predecessors opined this morning that getting rid of the worst 5% of U.S. teachers would raise scores on this type of test by 30%.
So, get better teachers. How do we do that? Pay them more! Part of U.S. government infrastructure investment needs to be for higher teacher salaries and better schools.
And now for some perspective: Shanghai is a giant city-state within China. It's 20 million very special people who are not the "average" population of China. The 5,100 15 year old students students who took the test would probably qualify as the "elite" of China. A U.S. comparison would be better made if 5,100 15 year olds from Palo Alto (and surrounding suburbs) took the test.
One of the things that we most enjoy about the NY Times is when they create a "Room for Debate" site as they did for this article. It's called: "What Is a College Degree Worth in China?" One of the four debaters (Yong Zhao: Distinguished Professor, Michigan State University College of Education), points out that a McKinsey study found that fewer than 10% of Chinese college graduates are considered suitable to work in multinational companies based in China.
Why? Because the educational environment is entirely too "test-oriented." It is a "gaokao" culture where everything centers around tests that determine where a student ends up studying in college. Once in college, the orientation is the same - entirely too theoretical.
What this implies is that China is growing a generation of "test-takers." That's what they do.
The facts are that college graduates in China are having difficulty finding jobs. Partly that's because the jobs aren't there (for a host of reasons) and partly that's because multinational companies don't want to hire them.
So, the test-takers of the city-state of Shanghai came in first in a worldwide test. And, the test-takers of the city-state of Singapore (who used to be first) came in second. In neither case are those "test-takers" comparable to the broad range of students that the U.S. is trying to educate. While we don't know what the U.S. sample was, we're sure it crossed all socioeconomic classes.
What the U.S. needs to do is not politicize the China success and, instead, look to people like Geoffrey Canada whose miracle in Harlem has been made into a movie ("Waiting For Superman") that we hope to see soon. Geoffrey Canada cared about what happened to every kid, block by block in Harlem and guaranteed them and their families that if they worked hard at what he told them to do, they'd go to college. It worked.
In the hardest place, Geoffrey Canada did the best job because he knew the secret was caring about each student individually. Great teachers know that it's not a "job," it's a calling.
So, how can the U.S. do the best for the most students? Get great teachers and pay them. There is no other answer. China is doing that. Why aren't we?
***************
"Those who labor with their minds govern others; those who labor with their strength are governed by others." (Meng-Tzu)
***************
Today's report in the NY Times on China's debut in international standardized testing has caused quite a stir. Pundits reported on TV early this morning that this could, in fact, be a "Sputnik Moment" in the sense that this could stir America to do something about it's weakening competitive position in education in the same way it reacted to Russia's stunning success in orbiting a satellite first!
We hope it does!
The Program for International Student Assessment (known as PISA) was given to 15 year old students in 65 countries by the OECD. The results are trusted and consistent. Secretary of Education Arne Duncan indicated that the U.S. came in 23rd or 24th in most subjects. Average math scores of American students put them below 30 other countries.
So, on the math test (500 is average), students in Shanghai scored 600, Singapore 562, Germany 513 and the U.S. 487.
Importantly, "teaching" has climbed up the ladder of preferred occupations in China and salaries have risen. That's important because you get what you pay for. One of Arne Duncan's predecessors opined this morning that getting rid of the worst 5% of U.S. teachers would raise scores on this type of test by 30%.
So, get better teachers. How do we do that? Pay them more! Part of U.S. government infrastructure investment needs to be for higher teacher salaries and better schools.
And now for some perspective: Shanghai is a giant city-state within China. It's 20 million very special people who are not the "average" population of China. The 5,100 15 year old students students who took the test would probably qualify as the "elite" of China. A U.S. comparison would be better made if 5,100 15 year olds from Palo Alto (and surrounding suburbs) took the test.
One of the things that we most enjoy about the NY Times is when they create a "Room for Debate" site as they did for this article. It's called: "What Is a College Degree Worth in China?" One of the four debaters (Yong Zhao: Distinguished Professor, Michigan State University College of Education), points out that a McKinsey study found that fewer than 10% of Chinese college graduates are considered suitable to work in multinational companies based in China.
Why? Because the educational environment is entirely too "test-oriented." It is a "gaokao" culture where everything centers around tests that determine where a student ends up studying in college. Once in college, the orientation is the same - entirely too theoretical.
What this implies is that China is growing a generation of "test-takers." That's what they do.
The facts are that college graduates in China are having difficulty finding jobs. Partly that's because the jobs aren't there (for a host of reasons) and partly that's because multinational companies don't want to hire them.
So, the test-takers of the city-state of Shanghai came in first in a worldwide test. And, the test-takers of the city-state of Singapore (who used to be first) came in second. In neither case are those "test-takers" comparable to the broad range of students that the U.S. is trying to educate. While we don't know what the U.S. sample was, we're sure it crossed all socioeconomic classes.
What the U.S. needs to do is not politicize the China success and, instead, look to people like Geoffrey Canada whose miracle in Harlem has been made into a movie ("Waiting For Superman") that we hope to see soon. Geoffrey Canada cared about what happened to every kid, block by block in Harlem and guaranteed them and their families that if they worked hard at what he told them to do, they'd go to college. It worked.
In the hardest place, Geoffrey Canada did the best job because he knew the secret was caring about each student individually. Great teachers know that it's not a "job," it's a calling.
So, how can the U.S. do the best for the most students? Get great teachers and pay them. There is no other answer. China is doing that. Why aren't we?
Monday, December 6, 2010
Unemployment: A Lagging and Leading Indicator
http://blogs.wsj.com/economics/2010/12/05/bernanke-on-cbss-60-minutes/
It's generally accepted that unemployment is a lagging indicator when recoveries come about following recessions. So, we've been waiting. And waiting.
Watching Ben Bernanke last night on "60 Minutes" it occurred to us that he's been waiting too. Clearly, Bernanke emphasized that there were two reasons for him to pull the trigger on the $600 billion bond-buying plan: unemployment and deflation. He chose not to use the word "deflation" but that's what he meant. And, unemployment was the first of his two reasons.
Here's where we had the "eureka" moment: unemployment may be a lagging indicator for "recoveries" but it may be a leading indicator for "double-dip" or extended recessions. It's going up and the U6 rate that we frequently refer to (current unemployment rate at 9.8% plus those who have given up) was referred to last night by Bernanke as currently at 17% with the potential to go as high as the levels seen during the Great Depression (he didn't name a number but that number was 25%).
Quite creatively, Bernanke came up with a reason why the U.S. might NOT have a double-dip recession: things are so bad in the housing sector that they can't get any worse! So, another decline in that area is highly unlikely. So, something is so bad that it can't contribute to things getting worse!
He also used one of our favorite numbers: 2.5%. It takes 2.5% GDP growth just to keep unemployment stable. And, that's "about" what we're getting. Any small drop and ...
Reading the excerpts from the interview would be a good idea and we recommend that. Even better, watch the interview wherever it's available. We've attached the "link" to the WSJ "excerpts" but, while we are subscribers, we've had problems before with linking to WSJ wisdom.
It's generally accepted that unemployment is a lagging indicator when recoveries come about following recessions. So, we've been waiting. And waiting.
Watching Ben Bernanke last night on "60 Minutes" it occurred to us that he's been waiting too. Clearly, Bernanke emphasized that there were two reasons for him to pull the trigger on the $600 billion bond-buying plan: unemployment and deflation. He chose not to use the word "deflation" but that's what he meant. And, unemployment was the first of his two reasons.
Here's where we had the "eureka" moment: unemployment may be a lagging indicator for "recoveries" but it may be a leading indicator for "double-dip" or extended recessions. It's going up and the U6 rate that we frequently refer to (current unemployment rate at 9.8% plus those who have given up) was referred to last night by Bernanke as currently at 17% with the potential to go as high as the levels seen during the Great Depression (he didn't name a number but that number was 25%).
Quite creatively, Bernanke came up with a reason why the U.S. might NOT have a double-dip recession: things are so bad in the housing sector that they can't get any worse! So, another decline in that area is highly unlikely. So, something is so bad that it can't contribute to things getting worse!
He also used one of our favorite numbers: 2.5%. It takes 2.5% GDP growth just to keep unemployment stable. And, that's "about" what we're getting. Any small drop and ...
Reading the excerpts from the interview would be a good idea and we recommend that. Even better, watch the interview wherever it's available. We've attached the "link" to the WSJ "excerpts" but, while we are subscribers, we've had problems before with linking to WSJ wisdom.
Saturday, December 4, 2010
Crude Oil
http://www.advfn.com/p.php?pid=commodities&adw=74&gclid=CKbFubH30qUCFYXu7QodA2e-lA
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"When a person doesn't have gratitude, something is missing in his or her humanity. A person can almost be defined by his or her attitude toward gratitude." (Elie Wiesel)
***************
It's interesting to us that with all the "room" that the NY Times has for "business news" and general news that there doesn't seem to be any mention today of at least yesterday's oil price close (near-term futures, per barrel): $89.19. We're guessing that nobody there is paying attention to what they're paying for gasoline at the "pump." Perhaps one of their editors will read a blog post and realize that the $90 per barrel mark has been reached.
We know oil reached $147 per barrel in February, 2008 before it came back down again to, roughly, $38. The $90 mark looks to us like a half way point for a march back up to the $150 range.
This probably wouldn't be inconsistent with what's going on with gold but, in both cases, we're dealing with speculation, not supply/demand. So, while CALPERS (the largest public employee retirement plan in the U.S. - California Public Employee Retirement System) is busy telling (or threatening to sell their stock) big companies how they should be managed, they're out speculating with their investments by betting on oil prices (etc.). And so, their "retirees," who are already paying too much at the "pump" (especially in California), will now be paying more. And so, CALPERS is preaching responsible management while practicing, what, responsible speculation?
We had to know the price of oil would continue up for two reasons:
(1) "The Ben Bernanke" (we'll see him on "60 Minutes" tomorrow night) printed up $600 billion to try to get money into the economy in an effort to do something to battle unemployment (inflation may be a long term consequence of this action, but desperate times call for desperate measures). We agree with what he did but, as one of my colleagues has said, giving that money to Goldman Sachs is probably not the way to create jobs. He could have had a more direct impact on jobs by actually designating that money for specific regional small banks who are the primary lenders to "small" business which is where most jobs get created or restored. And, "oil" gets traded in "dollars" so the minute "The Ben Bernanke" throws more dollars into the world markets (or, Goldman Sachs), prices for commodities go up, and
(2) The volume of trading in "barrels" of oil has gotten to levels that we're not sure were ever anticipated. One barrel of oil now trades (and there are various numbers and sources for this data so we're just picking one) 36 times before it "lands" for actual use in refining, etc. Now, while we need markets for any commodity, there must be some point at which over trading or speculation reaches a limit. Of course, asking our regulators (and we use that term loosely) to figure that out would be asking too much and we realize that.
OPEC is on record as looking to keep the price of oil at $60 to $70 per barrel which is a price that keeps their member countries at very high profit margins while discouraging efforts to produce alternative fuels or fuel sources. It may be too late. Canadian oil sands alone now represent as much potential oil supply as Saudi Arabia. In the U.S., four western states have enough oil shale to potentially eclipse all of OPEC's output. The only thing that stands in the way of either the U.S. or Canada's expansion of these sources is a sophisticated approach to environmental analysis.
We've attached a current real time source for oil prices per barrel and it basically indicates that the $90 price has been achieved at least twice so far today. We don't think it's going to stop there but not because of the supply/demand balance in the world. Oil is going to continue to rise in price because of speculation. Let's see where it ends. There are some pretty successful investment bankers who think it will end at $500.
Then what?
***************
"When a person doesn't have gratitude, something is missing in his or her humanity. A person can almost be defined by his or her attitude toward gratitude." (Elie Wiesel)
***************
It's interesting to us that with all the "room" that the NY Times has for "business news" and general news that there doesn't seem to be any mention today of at least yesterday's oil price close (near-term futures, per barrel): $89.19. We're guessing that nobody there is paying attention to what they're paying for gasoline at the "pump." Perhaps one of their editors will read a blog post and realize that the $90 per barrel mark has been reached.
We know oil reached $147 per barrel in February, 2008 before it came back down again to, roughly, $38. The $90 mark looks to us like a half way point for a march back up to the $150 range.
This probably wouldn't be inconsistent with what's going on with gold but, in both cases, we're dealing with speculation, not supply/demand. So, while CALPERS (the largest public employee retirement plan in the U.S. - California Public Employee Retirement System) is busy telling (or threatening to sell their stock) big companies how they should be managed, they're out speculating with their investments by betting on oil prices (etc.). And so, their "retirees," who are already paying too much at the "pump" (especially in California), will now be paying more. And so, CALPERS is preaching responsible management while practicing, what, responsible speculation?
We had to know the price of oil would continue up for two reasons:
(1) "The Ben Bernanke" (we'll see him on "60 Minutes" tomorrow night) printed up $600 billion to try to get money into the economy in an effort to do something to battle unemployment (inflation may be a long term consequence of this action, but desperate times call for desperate measures). We agree with what he did but, as one of my colleagues has said, giving that money to Goldman Sachs is probably not the way to create jobs. He could have had a more direct impact on jobs by actually designating that money for specific regional small banks who are the primary lenders to "small" business which is where most jobs get created or restored. And, "oil" gets traded in "dollars" so the minute "The Ben Bernanke" throws more dollars into the world markets (or, Goldman Sachs), prices for commodities go up, and
(2) The volume of trading in "barrels" of oil has gotten to levels that we're not sure were ever anticipated. One barrel of oil now trades (and there are various numbers and sources for this data so we're just picking one) 36 times before it "lands" for actual use in refining, etc. Now, while we need markets for any commodity, there must be some point at which over trading or speculation reaches a limit. Of course, asking our regulators (and we use that term loosely) to figure that out would be asking too much and we realize that.
OPEC is on record as looking to keep the price of oil at $60 to $70 per barrel which is a price that keeps their member countries at very high profit margins while discouraging efforts to produce alternative fuels or fuel sources. It may be too late. Canadian oil sands alone now represent as much potential oil supply as Saudi Arabia. In the U.S., four western states have enough oil shale to potentially eclipse all of OPEC's output. The only thing that stands in the way of either the U.S. or Canada's expansion of these sources is a sophisticated approach to environmental analysis.
We've attached a current real time source for oil prices per barrel and it basically indicates that the $90 price has been achieved at least twice so far today. We don't think it's going to stop there but not because of the supply/demand balance in the world. Oil is going to continue to rise in price because of speculation. Let's see where it ends. There are some pretty successful investment bankers who think it will end at $500.
Then what?
Friday, December 3, 2010
Freezing Out Hope
http://www.nytimes.com/2010/12/03/opinion/03krugman.html?src=ISMR_HP_LO_MST_FB
http://www.nytimes.com/2010/12/04/business/economy/04jobs.html?emc=eta1
http://www.youtube.com/watch?v=PTUY16CkS-k
***************
"He who gives should never remember; he who receives should never forget." (The Talmud)
***************
This morning's jobs report was disappointing. Overall employment growth fell to 39,000 from 172,000. Private-sector hiring fell to 50,000 - which isn't nearly enough to keep up with population growth (125,000 per month) - from more than 100,000 in each of the previous four months.
Today's report is another argument in favor of the Federal Reserve's attempts to reduce long-term interest rates thru "quantitative easing (QE)." For a special perspective on QE, check the totally hilarious "bears" on YouTube!
A quick check of the historic recession to recovery trend lines attached to the Times article we've supplied here shows a perfectly dreadful comparison to previous periods that needs no further review here.
We've attached Krugman as well and borrowed his article title because we think it's apropos. Krugman does a nice job of explaining the politics (something we try to stay away from here) as he addresses what Nero is doing while Rome burns. Just in time for the abysmal jobs report today, President Obama has announced a Federal Pay Freeze. This, of course, is the answer to all of our problems because federal employee pay is at the very heart of the Great Recession! So, while "The Ben Bernanke" (see the YouTube video) is trying to force feed money into the economy (or, at least, to Goldman Sachs), the Administration is trying to cut back on spending at just the time when the economy needs more stimulus (of any kind!).
As we pointed out in our last post, corporate profits are at an all time record level. Fareed Zakaria has continued to tell his followers that Top 500 CEOs are refusing to spend their rapidly accumulating capital (because the U.S. regulatory and tax situation is so murky). So, in the midst of all of this, freezing the pay of federal workers has become top priority. As Krugman points out, how incredibly cynical! In spite of some recent studies that claim federal employees make more for the same job content, Krugman accurately points out that federal workers actually make a little less. But, that's not the point! Federal pay is a small fraction of federal expenses.
Krugman interprets this pay cut action as a gesture of appeasement to the GOP prior to a bi-partisan summit (to discuss what, we don't know). We side with Krugman on the question of why offer something like the pay cut up when the Administration has gotten no cooperation on anything from the GOP. But, this is "politics" and we want to stay away from that.
So, we'll just say: "Really?" Freezing federal pay reminds us of the installation of "Wage and Price Controls" in the early 70s when the "Administration" at that time was trying to stop runaway inflation. So, real people like us sat at places like Citibank and made determinations about what constituted a "bona fide" promotion (those could go thru) versus just a "merit increase" (those could not go thru). The person who solved that problem way back then is named Volcker and he is still with us (as a matter of fact, he's an adviser to the President on the economy!). He solved the problem then as Fed Chairman by boosting interest rates higher than the rate of inflation. He probably has some ideas now about what to do but we digress.
We're guessing that employment is the problem right now and nobody appears to be leading the charge to solve that issue. Somebody needs to look at the recession to recovery trend line. It's a disaster that cutting the federal budget is not going to solve.
http://www.nytimes.com/2010/12/04/business/economy/04jobs.html?emc=eta1
http://www.youtube.com/watch?v=PTUY16CkS-k
***************
"He who gives should never remember; he who receives should never forget." (The Talmud)
***************
This morning's jobs report was disappointing. Overall employment growth fell to 39,000 from 172,000. Private-sector hiring fell to 50,000 - which isn't nearly enough to keep up with population growth (125,000 per month) - from more than 100,000 in each of the previous four months.
Today's report is another argument in favor of the Federal Reserve's attempts to reduce long-term interest rates thru "quantitative easing (QE)." For a special perspective on QE, check the totally hilarious "bears" on YouTube!
A quick check of the historic recession to recovery trend lines attached to the Times article we've supplied here shows a perfectly dreadful comparison to previous periods that needs no further review here.
We've attached Krugman as well and borrowed his article title because we think it's apropos. Krugman does a nice job of explaining the politics (something we try to stay away from here) as he addresses what Nero is doing while Rome burns. Just in time for the abysmal jobs report today, President Obama has announced a Federal Pay Freeze. This, of course, is the answer to all of our problems because federal employee pay is at the very heart of the Great Recession! So, while "The Ben Bernanke" (see the YouTube video) is trying to force feed money into the economy (or, at least, to Goldman Sachs), the Administration is trying to cut back on spending at just the time when the economy needs more stimulus (of any kind!).
As we pointed out in our last post, corporate profits are at an all time record level. Fareed Zakaria has continued to tell his followers that Top 500 CEOs are refusing to spend their rapidly accumulating capital (because the U.S. regulatory and tax situation is so murky). So, in the midst of all of this, freezing the pay of federal workers has become top priority. As Krugman points out, how incredibly cynical! In spite of some recent studies that claim federal employees make more for the same job content, Krugman accurately points out that federal workers actually make a little less. But, that's not the point! Federal pay is a small fraction of federal expenses.
Krugman interprets this pay cut action as a gesture of appeasement to the GOP prior to a bi-partisan summit (to discuss what, we don't know). We side with Krugman on the question of why offer something like the pay cut up when the Administration has gotten no cooperation on anything from the GOP. But, this is "politics" and we want to stay away from that.
So, we'll just say: "Really?" Freezing federal pay reminds us of the installation of "Wage and Price Controls" in the early 70s when the "Administration" at that time was trying to stop runaway inflation. So, real people like us sat at places like Citibank and made determinations about what constituted a "bona fide" promotion (those could go thru) versus just a "merit increase" (those could not go thru). The person who solved that problem way back then is named Volcker and he is still with us (as a matter of fact, he's an adviser to the President on the economy!). He solved the problem then as Fed Chairman by boosting interest rates higher than the rate of inflation. He probably has some ideas now about what to do but we digress.
We're guessing that employment is the problem right now and nobody appears to be leading the charge to solve that issue. Somebody needs to look at the recession to recovery trend line. It's a disaster that cutting the federal budget is not going to solve.
Wednesday, November 24, 2010
Corporate Profits
http://www.nytimes.com/2010/11/24/business/economy/24econ.html?emc=eta1
Yesterday's report from the Commerce Department showed that "corporate profits" were the highest on record at $1.659 trillion for the third quarter. This is the highest figure since the government began keeping track over 60 years ago (plug in here various inflation caveats).
Profits have grown for seven consecutive quarters at some of the fastest rates in history. Obviously, these numbers can at least partially be attributed to strong productivity growth where companies are testing the outer limits of producing more with less.
More importantly, that same report showed the nation's output grew at a slightly more rapid pace than original estimates for the third quarter: 2.5% (vs. the 2% originally estimated). This is as against 1.7% for the second quarter of 2010. 2.5% GDP growth is the number at which the U.S. economy needs to be in order to keep unemployment from "rising." This is also a number more in line with those economists who feel that that U.S. GDP growth could achieve a number between 3% to 4% by year end 2011. We saw numbers from Yale over the weekend that project GDP growth at 3.69% for the first three quarters of 2012.
As we have observed on more than one occasion, capital has no conscience, and we're pretty sure that Fareed Zakaria's numbers from earlier this year still apply: somewhere between $2 and $3 trillion of Top 500 capital still on the sidelines because those CEOs don't have a clear picture of the regulatory and tax environment in the U.S. Add to this now the growing all time record business profits mentioned above and we have a "spending situation."
We like that term - we don't think we've heard it before so we'll use it here as our idea. The "situation" is this: only so much "capital" can be held back in larger companies. It's almost a law of nature - it gets spent. So, that may start soon - almost like a dam overflowing, it has a life of it's own (we exaggerate, but not by much). And, where are all these profits going? To cash on the books - not likely, because that's just an invitation to acquisition. Then maybe to buy back stock? That's last year's idea. We feel that the cash and the capital will conspire to be spent hopefully in the U.S. or, at least more in the U.S. than elsewhere. If so, then those more optimistic GDP growth numbers mentioned above will happen.
Not everybody can invest in China and we're not sure we'd want to right now.
Yesterday's report from the Commerce Department showed that "corporate profits" were the highest on record at $1.659 trillion for the third quarter. This is the highest figure since the government began keeping track over 60 years ago (plug in here various inflation caveats).
Profits have grown for seven consecutive quarters at some of the fastest rates in history. Obviously, these numbers can at least partially be attributed to strong productivity growth where companies are testing the outer limits of producing more with less.
More importantly, that same report showed the nation's output grew at a slightly more rapid pace than original estimates for the third quarter: 2.5% (vs. the 2% originally estimated). This is as against 1.7% for the second quarter of 2010. 2.5% GDP growth is the number at which the U.S. economy needs to be in order to keep unemployment from "rising." This is also a number more in line with those economists who feel that that U.S. GDP growth could achieve a number between 3% to 4% by year end 2011. We saw numbers from Yale over the weekend that project GDP growth at 3.69% for the first three quarters of 2012.
As we have observed on more than one occasion, capital has no conscience, and we're pretty sure that Fareed Zakaria's numbers from earlier this year still apply: somewhere between $2 and $3 trillion of Top 500 capital still on the sidelines because those CEOs don't have a clear picture of the regulatory and tax environment in the U.S. Add to this now the growing all time record business profits mentioned above and we have a "spending situation."
We like that term - we don't think we've heard it before so we'll use it here as our idea. The "situation" is this: only so much "capital" can be held back in larger companies. It's almost a law of nature - it gets spent. So, that may start soon - almost like a dam overflowing, it has a life of it's own (we exaggerate, but not by much). And, where are all these profits going? To cash on the books - not likely, because that's just an invitation to acquisition. Then maybe to buy back stock? That's last year's idea. We feel that the cash and the capital will conspire to be spent hopefully in the U.S. or, at least more in the U.S. than elsewhere. If so, then those more optimistic GDP growth numbers mentioned above will happen.
Not everybody can invest in China and we're not sure we'd want to right now.
Saturday, November 20, 2010
Debasement Inflation
http://dealbook.nytimes.com/2010/11/18/from-russia-expert-a-gloomy-outlook/?emc=eta1
William F. Browder was on the front lines of investing in Russia from 1996 to 2005. He was one of that country's most prominent and vocal investors with a fund that rose from $25 million to $4.5 billion by the end of 2005. Browder focused on under-researched Russian companies that were trading at sharp discounts to their more widely followed peers.
In 2005, he was expelled from Russia after the Kremlin turned against him. Many believe the "expulsion" was because of his criticism of some of Russia's prized companies like Gazprom. The story of what actually happened there reads like a crime novel. Fareed Zakaria's interview with him on "Fareed Zakaria: GPS" (CNN) is both gripping and sad.
Fortunately, he escaped Russia with most of the money from his very well known fund "Hermitage Capital." He then started a new fund in London called "Hermitage Global."
Browder's new fund invests globally so it's making bets on what the worldwide economy is doing and specifically avoids Russia where, he says, "I think it is a place to avoid both for financial and moral reasons."
Interviewed after speaking at Columbia Business School a few weeks ago, Browder made several points which are hard to disagree with:
(1) Rising prices and no growth are a given in developed countries,
(2) Central banks in the developed world are printing money so we want to own "hard things" that can't be printed,
(3) His fund owns gold,
(4) Emerging markets went thru this a decade ago in the Asian financial crisis: their currencies aren't going to go thru "debasement" (Browder sees the emergence in developed countries of "DEBASEMENT INFLATION" - rising prices with no growth) again,
(5) Hard assets in emerging markets are a BETTER STORE OF VALUE FOR INVESTORS - over there, it's right to own gold mining stocks and real estate developers,
(6) He sees the world in the SECOND STAGE of the worldwide financial crisis: governments won't be able to borrow much more - ergo, they will be forced to print money,
(7) People are going to lose big in long term bonds,
(8) The next stage of the world economy: a "collapse of currencies" or a crisis of confidence in developed market currencies and you can't bail out currencies once they start collapsing,
(9) If Browder were finishing business school right now: he'd become an expert in the U.S. residential real estate market - it's 50% off its peak and will become an inflation hedge in the U.S. as others start printing money.
We see Browder's perspective as a highly informed one. How many people grow a fund from $25 million to $4.5 billion in Russia and get out of their with that fund substantially intact when Putin turns against them? And, today, Browder's new fund is investing in the "world." We like his odds and we respect his perspective.
William F. Browder was on the front lines of investing in Russia from 1996 to 2005. He was one of that country's most prominent and vocal investors with a fund that rose from $25 million to $4.5 billion by the end of 2005. Browder focused on under-researched Russian companies that were trading at sharp discounts to their more widely followed peers.
In 2005, he was expelled from Russia after the Kremlin turned against him. Many believe the "expulsion" was because of his criticism of some of Russia's prized companies like Gazprom. The story of what actually happened there reads like a crime novel. Fareed Zakaria's interview with him on "Fareed Zakaria: GPS" (CNN) is both gripping and sad.
Fortunately, he escaped Russia with most of the money from his very well known fund "Hermitage Capital." He then started a new fund in London called "Hermitage Global."
Browder's new fund invests globally so it's making bets on what the worldwide economy is doing and specifically avoids Russia where, he says, "I think it is a place to avoid both for financial and moral reasons."
Interviewed after speaking at Columbia Business School a few weeks ago, Browder made several points which are hard to disagree with:
(1) Rising prices and no growth are a given in developed countries,
(2) Central banks in the developed world are printing money so we want to own "hard things" that can't be printed,
(3) His fund owns gold,
(4) Emerging markets went thru this a decade ago in the Asian financial crisis: their currencies aren't going to go thru "debasement" (Browder sees the emergence in developed countries of "DEBASEMENT INFLATION" - rising prices with no growth) again,
(5) Hard assets in emerging markets are a BETTER STORE OF VALUE FOR INVESTORS - over there, it's right to own gold mining stocks and real estate developers,
(6) He sees the world in the SECOND STAGE of the worldwide financial crisis: governments won't be able to borrow much more - ergo, they will be forced to print money,
(7) People are going to lose big in long term bonds,
(8) The next stage of the world economy: a "collapse of currencies" or a crisis of confidence in developed market currencies and you can't bail out currencies once they start collapsing,
(9) If Browder were finishing business school right now: he'd become an expert in the U.S. residential real estate market - it's 50% off its peak and will become an inflation hedge in the U.S. as others start printing money.
We see Browder's perspective as a highly informed one. How many people grow a fund from $25 million to $4.5 billion in Russia and get out of their with that fund substantially intact when Putin turns against them? And, today, Browder's new fund is investing in the "world." We like his odds and we respect his perspective.
Friday, November 19, 2010
Cultivating Growth
http://www.nytimes.com/2010/11/17/business/economy/17leonhardt.html?emc=eta1
Here's a concept: everybody wants to "trim the deficit" by cutting spending - very timely: it puts us back to 1937 when doing that just made the Great Depression worse and the only thing that got our economy out of that was WW II.
Here's a concept: foster policies that encourage "more rapid GDP growth." We're guessing here that most members of Congress and the administration have some form of advanced education. If so, an aspect of that education would include some basic economics and some recent economic history.
In the late 1990s the U.S. government was running a budget "surplus." So, we went into the 21st century with a "surplus," not a deficit. What was going well then? The ECONOMY. It actually grew more rapidly than expected in the late 90s. The faster growth pushed up incomes and caused more tax revenues (from tax rates that had been raised) to flow into the Treasury.
As David Leonhardt points out (article attached), today's deficits are too large to be closed exclusively with growth. The baby boom generation is too big, and the rise in Medicare costs continues to be too steep. But, "growth" could make a big difference.
As several of you have pointed out to me, there is a NY Times "Deficit Puzzle" which was created as an interactive device to allow anyone to juggle the variables of the deficit and see what works to tame it and what doesn't. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by 2030. If growth were a half point faster than expected, the needed "savings" would instead drop to less than $700 billion.
So arguably the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth.
So, in the short term, we should actually spend more. This is the point Warren Buffet and Paul Krugman made back when the U.S. stimulus plan was first enacted (they said at that time that it wasn't enough). As Alice Rivlin puts it: "We can do both. We can put money in people's pockets in the short run and trim government spending in the long run."
Here's a concept: one aspect of the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. Now that would be a tax that directs moneys toward infrastructure where our crumbling highways and "bridges" are in much need of repair AND creates (or preserves) jobs where they're needed. We believe it was Mark Zandi who pointed out to both houses of Congress that there is a "spending multiplier" into the economy for this type of investment.
Stimulating growth: what a concept!
Here's a concept: everybody wants to "trim the deficit" by cutting spending - very timely: it puts us back to 1937 when doing that just made the Great Depression worse and the only thing that got our economy out of that was WW II.
Here's a concept: foster policies that encourage "more rapid GDP growth." We're guessing here that most members of Congress and the administration have some form of advanced education. If so, an aspect of that education would include some basic economics and some recent economic history.
In the late 1990s the U.S. government was running a budget "surplus." So, we went into the 21st century with a "surplus," not a deficit. What was going well then? The ECONOMY. It actually grew more rapidly than expected in the late 90s. The faster growth pushed up incomes and caused more tax revenues (from tax rates that had been raised) to flow into the Treasury.
As David Leonhardt points out (article attached), today's deficits are too large to be closed exclusively with growth. The baby boom generation is too big, and the rise in Medicare costs continues to be too steep. But, "growth" could make a big difference.
As several of you have pointed out to me, there is a NY Times "Deficit Puzzle" which was created as an interactive device to allow anyone to juggle the variables of the deficit and see what works to tame it and what doesn't. It asks you to find almost $1.4 trillion in annual spending cuts and tax increases by 2030. If growth were a half point faster than expected, the needed "savings" would instead drop to less than $700 billion.
So arguably the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth.
So, in the short term, we should actually spend more. This is the point Warren Buffet and Paul Krugman made back when the U.S. stimulus plan was first enacted (they said at that time that it wasn't enough). As Alice Rivlin puts it: "We can do both. We can put money in people's pockets in the short run and trim government spending in the long run."
Here's a concept: one aspect of the Bowles-Simpson plan calls for a gradual 15-cents-a-gallon increase in the federal gasoline tax to pay for highways, mass transit and other projects. Now that would be a tax that directs moneys toward infrastructure where our crumbling highways and "bridges" are in much need of repair AND creates (or preserves) jobs where they're needed. We believe it was Mark Zandi who pointed out to both houses of Congress that there is a "spending multiplier" into the economy for this type of investment.
Stimulating growth: what a concept!
Wednesday, November 17, 2010
Warren Buffet
http://www.nytimes.com/2010/11/17/opinion/17buffett.html?hp
Warren Buffett's letter to Uncle Sam will probably stand the test of time. It was published this morning in the NY Times.
He named some of the key people responsible for saving us from a Depression: Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair.
Buffett goes on to point out that: these people "... grasped the gravity of the situation and acted with courage and dispatch."
Nobody ever talks about the fact that Bernanke, to cite one case, sent $350 billion to the EU central bank before the U.S. government even created a bailout fund because the EU was about to tank. Bernanke did that because he knew what he was doing. He's in the right place - his PhD was on the Great Depression.
Bernanke is now being criticized for putting $600 billion more into the U.S. system this week because that "purchase" will devalue the dollar and cause inflation (etc.). So, a barrel of oil will cost more. So what. Do we really think he doesn't know what he's doing? If some of that money gets to smaller banks that lend money to smaller businesses, then jobs (and growth) get created.
We'd like to thank Warren Buffett for giving some perspective to the situation.
Warren Buffett's letter to Uncle Sam will probably stand the test of time. It was published this morning in the NY Times.
He named some of the key people responsible for saving us from a Depression: Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair.
Buffett goes on to point out that: these people "... grasped the gravity of the situation and acted with courage and dispatch."
Nobody ever talks about the fact that Bernanke, to cite one case, sent $350 billion to the EU central bank before the U.S. government even created a bailout fund because the EU was about to tank. Bernanke did that because he knew what he was doing. He's in the right place - his PhD was on the Great Depression.
Bernanke is now being criticized for putting $600 billion more into the U.S. system this week because that "purchase" will devalue the dollar and cause inflation (etc.). So, a barrel of oil will cost more. So what. Do we really think he doesn't know what he's doing? If some of that money gets to smaller banks that lend money to smaller businesses, then jobs (and growth) get created.
We'd like to thank Warren Buffett for giving some perspective to the situation.
Saturday, November 13, 2010
The South Korea Trade Deal
http://www.washingtonpost.com/wp-dyn/content/article/2010/11/11/AR2010111103288.html?referrer=emailarticle
So, our President went to India with an entourage of U.S. business leaders and proposed "freer" trade. He did the same in Indonesia. But, when he got to South Korea, the country hosting this week's G-20 meetings, he couldn't close the most important deal: a deal that would increase U.S. exports by $10 billion annually and support 70,000 jobs in the U.S. Although the list of outstanding issues was short, and the U.S. Chamber of Commerce lobbied heavily for the agreement, key labor and auto interests and their allies in Congress demanded a fuller opening of South Korea's market.
South Korea is a hot economy. As Nouriel Roubini pointed out in his 2010 book, "Crisis Economics," what used to be called "BRIC" (depicting the major moving economies of the world: Brazil, Russia, India and China) might be better be depicted as "BRICK" to include South Korea. Roubini: "South Korea is a sophisticated high-tech economic power: innovative, dynamic and home to a skilled labor force. Its only major problem is the danger that North Korea will collapse and inundate it with hungry refugees."
But we can't make a trade deal with them. Really. Forgive my patriotic zeal, but they exist because of us. My wife's father was a decorated Marine wounded twice at Iwo Jima during WW II who went back to fight in the Korean War. We lost 40,000 men in Korea so these people could have a country of their own. But, forgetting that, how incompetent are we that we can't get our act together and make a deal that was set to happen BEFORE President Obama got there. We look like fools.
Is this what "mid-term losses" cost a President? Or, is this just an incompetent Presidential administration?
How many Hyundais can an unemployed U.S. worker buy?
Make the deal.
This is a President that has pushed to elevate the G-20 as the main forum for coordinating world economic policy (and it should be: it's the 19 largest economies plus the EU). But, it does not appear that the G-20 is giving back much cooperation - there's an undertone of: the worldwide economic crisis was the fault of the U.S. Nobody in the G-20 is going to pressure China over its undervalued currency when the Fed has just pumped another $600 billion into the U.S. economy, basically "undervaluing the dollar" as we watch "oil" go up to $86 per barrel.
But the EU has made a free-trade pact with South Korea which means that European cars and other products will soon face lower duties as they enter South Korea. What does the EU know that we don't?
Here's an idea: how about we remove some troops from Korean demilitarized zone unless we get the free trade deal we want? Let's take off the gloves - everybody else has.
So, our President went to India with an entourage of U.S. business leaders and proposed "freer" trade. He did the same in Indonesia. But, when he got to South Korea, the country hosting this week's G-20 meetings, he couldn't close the most important deal: a deal that would increase U.S. exports by $10 billion annually and support 70,000 jobs in the U.S. Although the list of outstanding issues was short, and the U.S. Chamber of Commerce lobbied heavily for the agreement, key labor and auto interests and their allies in Congress demanded a fuller opening of South Korea's market.
South Korea is a hot economy. As Nouriel Roubini pointed out in his 2010 book, "Crisis Economics," what used to be called "BRIC" (depicting the major moving economies of the world: Brazil, Russia, India and China) might be better be depicted as "BRICK" to include South Korea. Roubini: "South Korea is a sophisticated high-tech economic power: innovative, dynamic and home to a skilled labor force. Its only major problem is the danger that North Korea will collapse and inundate it with hungry refugees."
But we can't make a trade deal with them. Really. Forgive my patriotic zeal, but they exist because of us. My wife's father was a decorated Marine wounded twice at Iwo Jima during WW II who went back to fight in the Korean War. We lost 40,000 men in Korea so these people could have a country of their own. But, forgetting that, how incompetent are we that we can't get our act together and make a deal that was set to happen BEFORE President Obama got there. We look like fools.
Is this what "mid-term losses" cost a President? Or, is this just an incompetent Presidential administration?
How many Hyundais can an unemployed U.S. worker buy?
Make the deal.
This is a President that has pushed to elevate the G-20 as the main forum for coordinating world economic policy (and it should be: it's the 19 largest economies plus the EU). But, it does not appear that the G-20 is giving back much cooperation - there's an undertone of: the worldwide economic crisis was the fault of the U.S. Nobody in the G-20 is going to pressure China over its undervalued currency when the Fed has just pumped another $600 billion into the U.S. economy, basically "undervaluing the dollar" as we watch "oil" go up to $86 per barrel.
But the EU has made a free-trade pact with South Korea which means that European cars and other products will soon face lower duties as they enter South Korea. What does the EU know that we don't?
Here's an idea: how about we remove some troops from Korean demilitarized zone unless we get the free trade deal we want? Let's take off the gloves - everybody else has.
Corporate Profits
http://economix.blogs.nytimes.com/2010/11/12/a-high-water-mark-for-profits/?emc=eta1
According to a new analysis from Deutsche Bank's economics research team, corporate profits appear to be heading toward a record high. Those economists estimate that in the third quarter of 2010, corporate profits rose to $1.68 trillion at an annualized rate, higher than their previous peak in the third quarter of 2006 at $1.66 trillion. The numbers are not "normalized" for inflation but so what?
Since their cyclical low in the fourth quarter of 2008, profits have grown six consecutive quarters at an annualized rate of 38%. This is the fastest rate of increase in history.
According to Joseph A. LaVorgna, chief U.S. economist at Deutsche Bank: "That means that companies have more money than they know what to do with." This is a very scientific observation!
But, however humorous we find it, there's a real implication for the economy's number one lagging indicator: unemployment. While profits and productivity have been climbing, the unemployment rate is stuck at 9.6%. Deutsche Bank is watching to see if the numbers they're watching will correlate with an increase in hiring because those numbers usually do.
This is something to be optimistic about so we hope that the Deutsche Bank team is right.
According to a new analysis from Deutsche Bank's economics research team, corporate profits appear to be heading toward a record high. Those economists estimate that in the third quarter of 2010, corporate profits rose to $1.68 trillion at an annualized rate, higher than their previous peak in the third quarter of 2006 at $1.66 trillion. The numbers are not "normalized" for inflation but so what?
Since their cyclical low in the fourth quarter of 2008, profits have grown six consecutive quarters at an annualized rate of 38%. This is the fastest rate of increase in history.
According to Joseph A. LaVorgna, chief U.S. economist at Deutsche Bank: "That means that companies have more money than they know what to do with." This is a very scientific observation!
But, however humorous we find it, there's a real implication for the economy's number one lagging indicator: unemployment. While profits and productivity have been climbing, the unemployment rate is stuck at 9.6%. Deutsche Bank is watching to see if the numbers they're watching will correlate with an increase in hiring because those numbers usually do.
This is something to be optimistic about so we hope that the Deutsche Bank team is right.
Facebook Protection
http://www.nytimes.com/2010/11/09/business/09facebook.html?_r=1&emc=eta1
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"The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first class mind is only happy when it is thinking." (A.A. Milne)
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In what labor relations officials and lawyers view as a ground-breaking case involving workers and social media, the National Labor Relations Board has accused a company of illegally firing an employee after she criticized her supervisor on her Facebook page.
This is the first case in which the labor board has stepped in to argue that workers' criticisms of their bosses or companies on a social networking site are generally a "protected activity" and that employers would be violating the law by punishing workers for such statements.
Here's a statement from Lafe Solomon, the board's acting general counsel: "This is a fairly straightforward case under the National Labor Relations Act - whether it takes place on Facebook or at the water cooler, it was employees talking jointly about working conditions, in this case about their supervisor, and they have a right to do that."
Really.
Here we have a group of lawyers working for the government (our tax dollars at work) interpreting a law that was passed prior to the existence of such an entity as "Facebook"
and insisting that an individual's rights were violated because a company fired that person for ridiculing an immediate supervisor on (or in) a public forum? Do we have that right? In this case, the board filed a complaint against an ambulance service, American Medical Response (AMR) of Connecticut, that fired an emergency medical technician for violating a "policy" against depicting that company in any way on a social media site. But wait, it gets better. The board also faulted another company policy, one prohibiting employees from making "disparaging" or "discriminatory" remarks "when discussing the company or the employee's superiors and co-workers."
So, let's look at AMR's response: "The employee in question was discharged based on multiple, serious complaints about her behavior. The employee was held accountable for negative personal attacks against a co-worker posted publicly on Facebook."
How does this become a violation of employees' rights to discuss wages, working conditions and unionization (what the NLRB protects)? This looks more like the government stepping in to protect an employee's right to "slam" anybody they want at the "workplace."
And, just a "sidebar" your honor: Morgan, Lewis and Bockius, a law firm with a large labor and employment practice "representing hundreds of companies" sent out a "lawflash" advisory: "Employers should review their Internet and social media policies to determine whether they are susceptible to an allegation..." AMR had a "policy" and it didn't do them any good.
When it looks like a duck, and quacks like a duck ... we're pretty convinced that this is an example of a government agency trying to prove its worth in the 21st century and, instead, proving that it is an artifact of the 20th century.
***************
"The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first class mind is only happy when it is thinking." (A.A. Milne)
***************
In what labor relations officials and lawyers view as a ground-breaking case involving workers and social media, the National Labor Relations Board has accused a company of illegally firing an employee after she criticized her supervisor on her Facebook page.
This is the first case in which the labor board has stepped in to argue that workers' criticisms of their bosses or companies on a social networking site are generally a "protected activity" and that employers would be violating the law by punishing workers for such statements.
Here's a statement from Lafe Solomon, the board's acting general counsel: "This is a fairly straightforward case under the National Labor Relations Act - whether it takes place on Facebook or at the water cooler, it was employees talking jointly about working conditions, in this case about their supervisor, and they have a right to do that."
Really.
Here we have a group of lawyers working for the government (our tax dollars at work) interpreting a law that was passed prior to the existence of such an entity as "Facebook"
and insisting that an individual's rights were violated because a company fired that person for ridiculing an immediate supervisor on (or in) a public forum? Do we have that right? In this case, the board filed a complaint against an ambulance service, American Medical Response (AMR) of Connecticut, that fired an emergency medical technician for violating a "policy" against depicting that company in any way on a social media site. But wait, it gets better. The board also faulted another company policy, one prohibiting employees from making "disparaging" or "discriminatory" remarks "when discussing the company or the employee's superiors and co-workers."
So, let's look at AMR's response: "The employee in question was discharged based on multiple, serious complaints about her behavior. The employee was held accountable for negative personal attacks against a co-worker posted publicly on Facebook."
How does this become a violation of employees' rights to discuss wages, working conditions and unionization (what the NLRB protects)? This looks more like the government stepping in to protect an employee's right to "slam" anybody they want at the "workplace."
And, just a "sidebar" your honor: Morgan, Lewis and Bockius, a law firm with a large labor and employment practice "representing hundreds of companies" sent out a "lawflash" advisory: "Employers should review their Internet and social media policies to determine whether they are susceptible to an allegation..." AMR had a "policy" and it didn't do them any good.
When it looks like a duck, and quacks like a duck ... we're pretty convinced that this is an example of a government agency trying to prove its worth in the 21st century and, instead, proving that it is an artifact of the 20th century.
Monday, November 8, 2010
The Anti-Roubini
http://www.nytimes.com/2010/11/07/business/07gret.html?emc=eta1
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"The real problem is not whether machines think but whether men do." (B. F. Skinner)
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Gretchen Morgenson does an excellent job as a feature writer/editor for the NY Times on business and economic issues. We were happy to see over the weekend that she sought out an economist with the opposite position to Roubini's (always) depressing outlook (see our 11/6 post): Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Shepherdson warned his clients in the fall of 2005 that real estate would crash and a recession would ensue. We think that there only two kinds of economists now: those who saw the train wreck coming and those who didn't. So, we listen to Shepherdson.
Shepherdson sees the beginnings of a turn in the economy that could translate to a rise in gross domestic product growth and an improving employment picture in the second half of 2011.
The basis for his view is a shift in commercial and industrial bank lending. The trend is real and as it gains steam, small businesses should receive more credit "... for which they have been starved." And, since these "small" businesses employ half the nation's workforce, this credit expansion will translate into real employment gains.
Shepherdson: "The depression in small businesses explains pretty much everything in the weakness of this cycle ... I reckon in the last cycle they accounted for two-thirds of all new job creation ... they are better job-creation engines than big companies, which are more inclined to do their hiring offshore."
If Shepherdson is correct in his assumptions, we could achieve annualized GDP growth of 3% to 4% in the second half of 2011. In the meantime, the U.S. will bump along at 2% GDP growth with no "double-dip recession." As commercial and industrial credit eases up, it will unleash a pent-up demand among smaller companies for capital equipment, software, vehicles and other goods.
We noted with interest over the weekend that Fareed Zakaria had Paul Krugman on his "GPS" television program. Krugman remarked that, with the Republicans back in power in the House, we will be entering a period of "Herbert Hoover Economics." Nothing will get done to stimulate the economy - if anything, "deficits" will be reduced (we've even read that the Republicans have publicly stated that their goal will be to "starve" the financing for the new health care bill, which would effectively kill it.).
Meanwhile, Ben Bernanke has the Fed doing "QE 2" (most people of a certain ilk think of that term as meaning the newer version of a very famous cruise ship). Bernanke's PhD was on the subject of "The Great Depression" and his track record through "The Great Recession" has been historically right. The second "quantitative easing" (announced last week) is adding $6 billion to the economy and just in time for small business. So, while Congress "fiddles," Bernanke delivers.
Overall, we hope Shepherdson is right about when the economy gets better. We know Krugman and Bernanke are right.
***************
"The real problem is not whether machines think but whether men do." (B. F. Skinner)
***************
Gretchen Morgenson does an excellent job as a feature writer/editor for the NY Times on business and economic issues. We were happy to see over the weekend that she sought out an economist with the opposite position to Roubini's (always) depressing outlook (see our 11/6 post): Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Shepherdson warned his clients in the fall of 2005 that real estate would crash and a recession would ensue. We think that there only two kinds of economists now: those who saw the train wreck coming and those who didn't. So, we listen to Shepherdson.
Shepherdson sees the beginnings of a turn in the economy that could translate to a rise in gross domestic product growth and an improving employment picture in the second half of 2011.
The basis for his view is a shift in commercial and industrial bank lending. The trend is real and as it gains steam, small businesses should receive more credit "... for which they have been starved." And, since these "small" businesses employ half the nation's workforce, this credit expansion will translate into real employment gains.
Shepherdson: "The depression in small businesses explains pretty much everything in the weakness of this cycle ... I reckon in the last cycle they accounted for two-thirds of all new job creation ... they are better job-creation engines than big companies, which are more inclined to do their hiring offshore."
If Shepherdson is correct in his assumptions, we could achieve annualized GDP growth of 3% to 4% in the second half of 2011. In the meantime, the U.S. will bump along at 2% GDP growth with no "double-dip recession." As commercial and industrial credit eases up, it will unleash a pent-up demand among smaller companies for capital equipment, software, vehicles and other goods.
We noted with interest over the weekend that Fareed Zakaria had Paul Krugman on his "GPS" television program. Krugman remarked that, with the Republicans back in power in the House, we will be entering a period of "Herbert Hoover Economics." Nothing will get done to stimulate the economy - if anything, "deficits" will be reduced (we've even read that the Republicans have publicly stated that their goal will be to "starve" the financing for the new health care bill, which would effectively kill it.).
Meanwhile, Ben Bernanke has the Fed doing "QE 2" (most people of a certain ilk think of that term as meaning the newer version of a very famous cruise ship). Bernanke's PhD was on the subject of "The Great Depression" and his track record through "The Great Recession" has been historically right. The second "quantitative easing" (announced last week) is adding $6 billion to the economy and just in time for small business. So, while Congress "fiddles," Bernanke delivers.
Overall, we hope Shepherdson is right about when the economy gets better. We know Krugman and Bernanke are right.
Saturday, November 6, 2010
Hiring & Unemployment
http://www.nytimes.com/2010/11/06/opinion/06obama.html?emc=eta1
http://www.nytimes.com/2010/11/06/business/economy/06jobs.html?nl=todaysheadlines&emc=tha1#tab=1
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"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
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The good news is that the economy added 151,000 jobs in October (159,000 private sector) on a surge in the service sector. That's good because our economy is now 70% "service." There are really 2 magic numbers here. By general consensus, 125,000 jobs is the key number to be ABOVE: there are that many new entrants (roughly) into the workforce each month. The other is 5%: our GDP growth would have to average that much for a year to drop the unemployment rate by 1 percentage point. As it is, we have to average 2.5% GDP growth just to keep unemployment from rising. Both numbers are approximate, but then so is "economics."
The interactive graphic in the Times article attached does a nice job of showing the public and private numbers on increased hiring. This may be an early indicator that GDP may be growing at a more rapid rate than the 2% many economists project. According to BLS data, the average hourly workweek and average hourly wages also rose in October.
The Fed followed thru with their plan to spend $600 billion on the economy this week. We see that as good. Others worry about inflation down the road. Our response is that, without spending like this, there will be no "road." It's that simple. The real (BLS U-6) unemployment rate dropped from 17.1% to 17.0%: this is the more realistic rate that includes people who have given up looking, etc. This number has to go down short term and long term or we will creep closer to the 25% rate we saw in the Great Depression. We already have higher numbers for the "long term unemployed" than at any time since the Depression.
In one of the most disingenuous acts we've seen in a long time, Rush Limbaugh and other talking heads of his "ilk" have criticized President Obama for his current trip to India and other Asian countries because it will cost $200 million a day. We're going to dignify the "source" of that data by saying that an Indian stringer spouted those figures without any facts to back it up and people like Limbaugh ran with it.
Those aren't the numbers, but, even if they were, are we going to criticize the President for what he does or what it costs? We've attached his explanation of what he's doing and we think it's reasonable. He'd like to improve our export situation: as he says, for every $1 billion we export, that's 5,000 jobs in the U.S. Asia is where three of the five largest economies in the world are (with a rapidly expanding middle class). In India, the President will be negotiating about reducing barriers to U.S. exports and increased access to Indian markets. In South Korea, the host of the G-20 economic forum, he will be participating in signing a trade pact that could be worth billions in increased exports. We used to be the top exporter to South Korea; now we're in fourth place. Who let that situation slip?
Hours worked and temporary hiring are key indicators but exports have a role in the process and we haven't paid attention to that situation in a long time.
We read Nouriel Roubini and he defines "worst case" for us. We're hopeful that 2018 (per Roubini) is not how long we'll have to wait for a "comeback."
http://www.nytimes.com/2010/11/06/business/economy/06jobs.html?nl=todaysheadlines&emc=tha1#tab=1
***************
"Where success is concerned, people are not measured in inches, or pounds, or college degrees, or family background; they are measured by the size of their thinking." (David Schwartz)
***************
The good news is that the economy added 151,000 jobs in October (159,000 private sector) on a surge in the service sector. That's good because our economy is now 70% "service." There are really 2 magic numbers here. By general consensus, 125,000 jobs is the key number to be ABOVE: there are that many new entrants (roughly) into the workforce each month. The other is 5%: our GDP growth would have to average that much for a year to drop the unemployment rate by 1 percentage point. As it is, we have to average 2.5% GDP growth just to keep unemployment from rising. Both numbers are approximate, but then so is "economics."
The interactive graphic in the Times article attached does a nice job of showing the public and private numbers on increased hiring. This may be an early indicator that GDP may be growing at a more rapid rate than the 2% many economists project. According to BLS data, the average hourly workweek and average hourly wages also rose in October.
The Fed followed thru with their plan to spend $600 billion on the economy this week. We see that as good. Others worry about inflation down the road. Our response is that, without spending like this, there will be no "road." It's that simple. The real (BLS U-6) unemployment rate dropped from 17.1% to 17.0%: this is the more realistic rate that includes people who have given up looking, etc. This number has to go down short term and long term or we will creep closer to the 25% rate we saw in the Great Depression. We already have higher numbers for the "long term unemployed" than at any time since the Depression.
In one of the most disingenuous acts we've seen in a long time, Rush Limbaugh and other talking heads of his "ilk" have criticized President Obama for his current trip to India and other Asian countries because it will cost $200 million a day. We're going to dignify the "source" of that data by saying that an Indian stringer spouted those figures without any facts to back it up and people like Limbaugh ran with it.
Those aren't the numbers, but, even if they were, are we going to criticize the President for what he does or what it costs? We've attached his explanation of what he's doing and we think it's reasonable. He'd like to improve our export situation: as he says, for every $1 billion we export, that's 5,000 jobs in the U.S. Asia is where three of the five largest economies in the world are (with a rapidly expanding middle class). In India, the President will be negotiating about reducing barriers to U.S. exports and increased access to Indian markets. In South Korea, the host of the G-20 economic forum, he will be participating in signing a trade pact that could be worth billions in increased exports. We used to be the top exporter to South Korea; now we're in fourth place. Who let that situation slip?
Hours worked and temporary hiring are key indicators but exports have a role in the process and we haven't paid attention to that situation in a long time.
We read Nouriel Roubini and he defines "worst case" for us. We're hopeful that 2018 (per Roubini) is not how long we'll have to wait for a "comeback."
Tuesday, November 2, 2010
Fiscal Austerity & GDP Growth
http://www.economist.com/node/17147618?story_id=17147618&fsrc=rss
***************
"The value of life lies not in the length of days, but in the use we make of them; a man may live long yet live very little." (Michel Eyquem de Montaigne - French Essayist)
***************
Again a solute to one of my former students who sends a most interesting article on settling the arguement amongst macroeconomists and politicians on the issue of reducing government spending as a path to long term growth.
Terms like "Cyclically Adjusted Primary Fiscal Balance" (CAPB) are, for us, real sleep inducers but the studies that determine whether it is appropriate to claim GDP growth can result from government cost reductions are important. The "Economist" article attached outlines the debate on that issue and concludes that cutting back does not do what some in government think it does.
We're guessing there is "debate" on this issue because economists can't agree on what time it is, let alone the effects of fiscal austerity. We're also guessing that one of the lessons of the Great Depression is being ignored in this modern debate: the U.S. government decided to be fiscally "austere" in 1937 and simply made things worse. What is that old saying about those who ignore the lessons of history ...?
Fortunately, Ben Bernanke (whose PhD work was done on the Great Depression) has not ignored that lesson and will be continuing to "spend" (if the current Fed discussions are acted upon). But, of course, there is much debate about QE (Quantitaive Easing: just a fancy two word classification for the Fed spending money) and how much of an effect it can have on the economy.
In any case, the IMF study on belt tightening carefully defined "intent" and "action" in defining what quantitative results to study and compare.
The IMF concluded that, on average, a rich country attempted a fiscal contraction of more than 1.5% of GDP about once a decade. It concluded that the typical such episode is clearly contractionary: a fiscal consolidation of 1% of GDP leads on average to a 0.5% decline in GDP after two years, and an increase of 0.3 percentage points in the unemployment rate. The charts supporting this conclusion showing trend lines for net exports, unemployment, GDP and domestic demand are excellent.
Interestingly, simulations carried out by the fund show that slashing spending in an environment where interest rates have no more room to fall DOUBLES the contractionary effect of such cuts compared with a situation where the central bank still has scope to cut rates.
In English, it is stupid to go for fiscal austerity programs in the middle of a severe recessionary environment. We believe it was Paul Krugman (along with Warren Buffet) who said the U.S. economic stimulus package was not large enough, and went on to say that spending "big" now will save the economy now, and that fiscal austerity can be achieved when we get back to full employment.
Then, of course, there is the history that we are doomed to repeat.
***************
"The value of life lies not in the length of days, but in the use we make of them; a man may live long yet live very little." (Michel Eyquem de Montaigne - French Essayist)
***************
Again a solute to one of my former students who sends a most interesting article on settling the arguement amongst macroeconomists and politicians on the issue of reducing government spending as a path to long term growth.
Terms like "Cyclically Adjusted Primary Fiscal Balance" (CAPB) are, for us, real sleep inducers but the studies that determine whether it is appropriate to claim GDP growth can result from government cost reductions are important. The "Economist" article attached outlines the debate on that issue and concludes that cutting back does not do what some in government think it does.
We're guessing there is "debate" on this issue because economists can't agree on what time it is, let alone the effects of fiscal austerity. We're also guessing that one of the lessons of the Great Depression is being ignored in this modern debate: the U.S. government decided to be fiscally "austere" in 1937 and simply made things worse. What is that old saying about those who ignore the lessons of history ...?
Fortunately, Ben Bernanke (whose PhD work was done on the Great Depression) has not ignored that lesson and will be continuing to "spend" (if the current Fed discussions are acted upon). But, of course, there is much debate about QE (Quantitaive Easing: just a fancy two word classification for the Fed spending money) and how much of an effect it can have on the economy.
In any case, the IMF study on belt tightening carefully defined "intent" and "action" in defining what quantitative results to study and compare.
The IMF concluded that, on average, a rich country attempted a fiscal contraction of more than 1.5% of GDP about once a decade. It concluded that the typical such episode is clearly contractionary: a fiscal consolidation of 1% of GDP leads on average to a 0.5% decline in GDP after two years, and an increase of 0.3 percentage points in the unemployment rate. The charts supporting this conclusion showing trend lines for net exports, unemployment, GDP and domestic demand are excellent.
Interestingly, simulations carried out by the fund show that slashing spending in an environment where interest rates have no more room to fall DOUBLES the contractionary effect of such cuts compared with a situation where the central bank still has scope to cut rates.
In English, it is stupid to go for fiscal austerity programs in the middle of a severe recessionary environment. We believe it was Paul Krugman (along with Warren Buffet) who said the U.S. economic stimulus package was not large enough, and went on to say that spending "big" now will save the economy now, and that fiscal austerity can be achieved when we get back to full employment.
Then, of course, there is the history that we are doomed to repeat.
Saturday, October 30, 2010
Roubini "The Predictor"
http://www.huffingtonpost.com/2010/10/29/nouriel-roubini-fiscal-train-wreck_n_775870.html
http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html
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"Thought is action in rehearsal." (Sigmund Freud)
***************
As we reach the end of October, we'd like to thank two of our former students who have forwarded data that is germane to what's happening right now in the economy. They both know that my position on "economics" (which is not that different than most current and former Top 500 executives) is that it leaves something to be desired from the point of view of professional consensus on anything.
From 2/14/09, we have Greg Mankiw's post ("News Flash: Economists Agree") which is enlightening as it applies to what economists CAN agree on (based on various polls of the profession). We'll list the first few:
1 A ceiling on rents reduces the quantity and quality of housing available. (93%)
2 Tariffs and import quotas usually reduce general economic welfare. (93%)
3 Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
4 Fiscal policy (e.g. tax cut and/or government expenditure increases) has a significant stimulative impact on a less than fully employed economy. (90%)
5 The United States should not restrict employers from outsourcing work to foreign countries. (90%).
There are 14 consensus items that Mankiw has put together and they're good: read his post attached.
Moving on to Nouriel Roubini, he was quoted yesterday in the Financial Times as indicating that the U.S. economy is a "train wreck" waiting to happen. He went on to say that the current U.S. situation "... risks ushering in a period of stagnation featuring minimal growth, high unemployment and deflationary pressure."
For many reasons, we tend to listen to what "Dr. Doom" has to say. He was, after all, one of the first economists (and the most well known) to predict the worldwide financial crisis. In addition, his 2010 book, "Crisis Economics (A Crash Course in the Future of Finance)" not only describes what has happened up to now in world economics but predicts what needs to be done in the future (or else). (Paranthetically, we get no income from recommending his book.) No book comes close to Roubini's for that subject matter.
Back to Roubini in the Financial Times. He credits fiscal and monetary stimulus for preventing another depression. But he said that further quantitative easing will have little effect on U.S. growth in 2011, "... so fiscal policy should be doing some of the lifting to prevent a double dip recession." The problem here is that, while we would like to remove "politics" from the equation, the elections coming up Tuesday could have an effect on the ability of the U.S. government to boost fiscal stimulus: if the polls are correct, enough Republicans who are against fiscal stimulus could be elected, in which case those considerations end.
Roubini even goes on to predict what could snap the economy back into another recession: the trigger could be a debt rollover crisis in a major U.S. state government.
Quoting Roubini again: "The worst of the coming fiscal train wreck will be prevented by the Fed's easing. But the risk is (Obama) ... will then preside over ... a Japanese style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger."
While we would like to disagree with Roubini, we don't have any facts to refute his position. And, neither does anybody else.
Roubini's prediction of a 40% chance of a double dip recession seems real to us. Paul Volcker's prediction of prolonged unemployment also seems real to us.
This would correlate with a new Associated Press poll (of 43 leading private, corporate and academic economists) released yesterday that found economists thinking that unemployment won't drop to a historically normal 5.5% to 6% until at least 2018. This latest quarterly AP survey shows economists are pushing back their estimates (significantly) of when key barometers like hiring, spending and economic growth will signal strength.
We will continue to hope for the best but things do not look promising.
http://gregmankiw.blogspot.com/2009/02/news-flash-economists-agree.html
***************
"Thought is action in rehearsal." (Sigmund Freud)
***************
As we reach the end of October, we'd like to thank two of our former students who have forwarded data that is germane to what's happening right now in the economy. They both know that my position on "economics" (which is not that different than most current and former Top 500 executives) is that it leaves something to be desired from the point of view of professional consensus on anything.
From 2/14/09, we have Greg Mankiw's post ("News Flash: Economists Agree") which is enlightening as it applies to what economists CAN agree on (based on various polls of the profession). We'll list the first few:
1 A ceiling on rents reduces the quantity and quality of housing available. (93%)
2 Tariffs and import quotas usually reduce general economic welfare. (93%)
3 Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
4 Fiscal policy (e.g. tax cut and/or government expenditure increases) has a significant stimulative impact on a less than fully employed economy. (90%)
5 The United States should not restrict employers from outsourcing work to foreign countries. (90%).
There are 14 consensus items that Mankiw has put together and they're good: read his post attached.
Moving on to Nouriel Roubini, he was quoted yesterday in the Financial Times as indicating that the U.S. economy is a "train wreck" waiting to happen. He went on to say that the current U.S. situation "... risks ushering in a period of stagnation featuring minimal growth, high unemployment and deflationary pressure."
For many reasons, we tend to listen to what "Dr. Doom" has to say. He was, after all, one of the first economists (and the most well known) to predict the worldwide financial crisis. In addition, his 2010 book, "Crisis Economics (A Crash Course in the Future of Finance)" not only describes what has happened up to now in world economics but predicts what needs to be done in the future (or else). (Paranthetically, we get no income from recommending his book.) No book comes close to Roubini's for that subject matter.
Back to Roubini in the Financial Times. He credits fiscal and monetary stimulus for preventing another depression. But he said that further quantitative easing will have little effect on U.S. growth in 2011, "... so fiscal policy should be doing some of the lifting to prevent a double dip recession." The problem here is that, while we would like to remove "politics" from the equation, the elections coming up Tuesday could have an effect on the ability of the U.S. government to boost fiscal stimulus: if the polls are correct, enough Republicans who are against fiscal stimulus could be elected, in which case those considerations end.
Roubini even goes on to predict what could snap the economy back into another recession: the trigger could be a debt rollover crisis in a major U.S. state government.
Quoting Roubini again: "The worst of the coming fiscal train wreck will be prevented by the Fed's easing. But the risk is (Obama) ... will then preside over ... a Japanese style stagnation, where growth is barely positive, and deflationary pressures and high unemployment linger."
While we would like to disagree with Roubini, we don't have any facts to refute his position. And, neither does anybody else.
Roubini's prediction of a 40% chance of a double dip recession seems real to us. Paul Volcker's prediction of prolonged unemployment also seems real to us.
This would correlate with a new Associated Press poll (of 43 leading private, corporate and academic economists) released yesterday that found economists thinking that unemployment won't drop to a historically normal 5.5% to 6% until at least 2018. This latest quarterly AP survey shows economists are pushing back their estimates (significantly) of when key barometers like hiring, spending and economic growth will signal strength.
We will continue to hope for the best but things do not look promising.
Wednesday, October 27, 2010
Following Larry Summers
http://chronicle.com/article/Larry-Summersthe/124790/
***************
"I never think of the future. It comes soon enough." (Albert Einstein)
***************
One of my colleagues sent me an article from "The Chronicle of Higher Education" that does an outstanding job of summarizing the "deficits" (actually, that's a very good word) implicit today in that combination of universities, government and banking that economists sometimes travel thru in their careers.
Lawrence (don't call me "Larry") Summers has moved thru the chairs of government and universities while presiding over and consulting with banks. His journey reminds me of the childrens' game: Finding Waldo (if I'm not correct with the name of that game, I'm close). Except, in this case, we're "Following Waldo" (Larry) thru the many public service (or non-profit) chairs of his career.
Recall that "Larry" has been one of our "favorites" in the past for his breathtakingly ignorant position as president of Harvard where he lost his job after suggesting that women might be innately inferior to men at scientific work. How could anybody so smart be so stupid? Which causes us to ask: is he really very smart?
Perhaps we should adjust our perception of Larry to a character more like "Pig Pen" from the "Peanuts" comic strip. The dirt seems to just circulate around him as he walks thru his various roles in life. Or, perhaps, that person that drives at 20 mph causing traffic accidents in his or her wake all the time oblivious to the wreckage.
So, the Obama Administration has announced that Larry is resigning as director of the National Economic Council (oh, and Larry, how's the economy going?) and will return to Harvard early next year. Charles Ferguson's article attached considers the damaging influence that some senior academic economists have on the effective functioning of the overall economy - Ferguson calls it "conflicts of interest." We call it inept.
As a rising economist at Harvard and the World Bank, Summers argued for privatization and deregulation in several areas, including finance. Later, as deputy secretary of the treasury and treasury secretary in the Clinton Administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation of the financial sector.
There is a general consensus amongst economists (right there, I worry) that Raghuram Rajan's 2005 paper presented at the annual Jackson Hole conference of central bankers was the first warning of the worldwide financial crisis to come. He argued, among other things, that the bonus structure for executives at financial institutions reinforced taking huge risks with other people's money. When he finished his talk there, Summers rose up in the audience and shouted him down with various accusations. Ridiculous and disrespectful.
We could go on here but we won't. Ferguson points out some interesting facts about the pay levels that some economists enjoy for being on various boards of directors. That perspective is certainly of interest. And, while Ferguson is obviously promoting his new documentary "Inside Job," nothing that he has summarized about the "economist triangle" (our new term for the dreaded economists movements between universities, government and banking) is incorrect. It's actually a great summary and all it involved was following "Larry."
***************
"I never think of the future. It comes soon enough." (Albert Einstein)
***************
One of my colleagues sent me an article from "The Chronicle of Higher Education" that does an outstanding job of summarizing the "deficits" (actually, that's a very good word) implicit today in that combination of universities, government and banking that economists sometimes travel thru in their careers.
Lawrence (don't call me "Larry") Summers has moved thru the chairs of government and universities while presiding over and consulting with banks. His journey reminds me of the childrens' game: Finding Waldo (if I'm not correct with the name of that game, I'm close). Except, in this case, we're "Following Waldo" (Larry) thru the many public service (or non-profit) chairs of his career.
Recall that "Larry" has been one of our "favorites" in the past for his breathtakingly ignorant position as president of Harvard where he lost his job after suggesting that women might be innately inferior to men at scientific work. How could anybody so smart be so stupid? Which causes us to ask: is he really very smart?
Perhaps we should adjust our perception of Larry to a character more like "Pig Pen" from the "Peanuts" comic strip. The dirt seems to just circulate around him as he walks thru his various roles in life. Or, perhaps, that person that drives at 20 mph causing traffic accidents in his or her wake all the time oblivious to the wreckage.
So, the Obama Administration has announced that Larry is resigning as director of the National Economic Council (oh, and Larry, how's the economy going?) and will return to Harvard early next year. Charles Ferguson's article attached considers the damaging influence that some senior academic economists have on the effective functioning of the overall economy - Ferguson calls it "conflicts of interest." We call it inept.
As a rising economist at Harvard and the World Bank, Summers argued for privatization and deregulation in several areas, including finance. Later, as deputy secretary of the treasury and treasury secretary in the Clinton Administration, he implemented those policies. Summers oversaw passage of the Gramm-Leach-Bliley Act, which repealed Glass-Steagall, permitted the previously illegal merger that created Citigroup, and allowed further consolidation of the financial sector.
There is a general consensus amongst economists (right there, I worry) that Raghuram Rajan's 2005 paper presented at the annual Jackson Hole conference of central bankers was the first warning of the worldwide financial crisis to come. He argued, among other things, that the bonus structure for executives at financial institutions reinforced taking huge risks with other people's money. When he finished his talk there, Summers rose up in the audience and shouted him down with various accusations. Ridiculous and disrespectful.
We could go on here but we won't. Ferguson points out some interesting facts about the pay levels that some economists enjoy for being on various boards of directors. That perspective is certainly of interest. And, while Ferguson is obviously promoting his new documentary "Inside Job," nothing that he has summarized about the "economist triangle" (our new term for the dreaded economists movements between universities, government and banking) is incorrect. It's actually a great summary and all it involved was following "Larry."
Thursday, October 21, 2010
Gordon Gekko Jr.
http://www.slate.com/id/2271265/
The ultimate disrespect for the American university system comes in the form of paying students NOT to go to school. Jacob Weisberg (chairman and editor-in-chief of the Slate Group) chronicles in his 10/16 article (attached) what Peter Thiel has decided to do with some of his fortune: the Thiel Fellowship will pay would-be entrepreneurs UNDER 20 $100,000 in cash to DROP OUT of school.
What a concept!
In announcing the "program," Thiel made clear his contempt for American universities which, like governments (according to him), cost more than they're worth and hinder what really matters in life: starting tech companies. His scholarships are meant as an escape hatch from those "... insufficiently capitalistic institutions of higher learning."
Thiel has a profile: he was the first outside investor in Facebook, putting up $500,000 to finance the site's original expansion in 2004. And, that deal buys him a brief on screen character appearance in the plot of "The Social Network."
According to Weisberg, Thiel has a "big vision" and has been spending the millions he has made from PayPal, Facebook and a hedge fund called Clarium trying to advance it. Weisberg goes on: "Thiel's philosophy demands attention not because it is original or interesting in any way ... but because it epitomizes an ugly side of Silicon Valley's politics."
Thiel's belief system is based on unapologetic selfishness and economic Darwinism. His most famous quote (borrowed from Vince Lombardi) is: "Show me a good loser and I'll show you a loser." His "personal statement" produced last year for the Cato Institute was: "I no longer believe that freedom and democracy are compatible."
Our thought here is that Thiel should, indeed, go someplace else if he feels that freedom and democracy aren't compatible. And, if he doesn't see that the same $100,000 grants from his foundation would be better used giving a young adult a "chance" to go to college (when that person would otherwise not have that chance), then he's missing his own best possibility of making a contribution to mankind.
Compare Thiel's philosophy to what Gates and Buffet are doing with their foundations. The money they're investing in Africa is saving lives.
GG, Jr. comes up short. We're guessing Vince Lombardi would have thought so too.
The ultimate disrespect for the American university system comes in the form of paying students NOT to go to school. Jacob Weisberg (chairman and editor-in-chief of the Slate Group) chronicles in his 10/16 article (attached) what Peter Thiel has decided to do with some of his fortune: the Thiel Fellowship will pay would-be entrepreneurs UNDER 20 $100,000 in cash to DROP OUT of school.
What a concept!
In announcing the "program," Thiel made clear his contempt for American universities which, like governments (according to him), cost more than they're worth and hinder what really matters in life: starting tech companies. His scholarships are meant as an escape hatch from those "... insufficiently capitalistic institutions of higher learning."
Thiel has a profile: he was the first outside investor in Facebook, putting up $500,000 to finance the site's original expansion in 2004. And, that deal buys him a brief on screen character appearance in the plot of "The Social Network."
According to Weisberg, Thiel has a "big vision" and has been spending the millions he has made from PayPal, Facebook and a hedge fund called Clarium trying to advance it. Weisberg goes on: "Thiel's philosophy demands attention not because it is original or interesting in any way ... but because it epitomizes an ugly side of Silicon Valley's politics."
Thiel's belief system is based on unapologetic selfishness and economic Darwinism. His most famous quote (borrowed from Vince Lombardi) is: "Show me a good loser and I'll show you a loser." His "personal statement" produced last year for the Cato Institute was: "I no longer believe that freedom and democracy are compatible."
Our thought here is that Thiel should, indeed, go someplace else if he feels that freedom and democracy aren't compatible. And, if he doesn't see that the same $100,000 grants from his foundation would be better used giving a young adult a "chance" to go to college (when that person would otherwise not have that chance), then he's missing his own best possibility of making a contribution to mankind.
Compare Thiel's philosophy to what Gates and Buffet are doing with their foundations. The money they're investing in Africa is saving lives.
GG, Jr. comes up short. We're guessing Vince Lombardi would have thought so too.
Tuesday, October 12, 2010
Purple Squirrels
http://www.msnbc.msn.com/id/39604781/ns/business-careers/
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"Advice is seldom welcome, and those who need it most like it the least." (Samuel Johnson)
***************
HR professionals have a name for the highly sought but elusive job candidate whose skills and experiences precisely match an employer's needs: the "purple squirrel."
What's happened with the aftermath of the Great Recession is that the process of hiring back staff in the "average" organization has been delayed by both software/computer upgrades that allow companies (especially manufacturers) to do more with less people, and, the predisposition by employers to fill "open" positions with upgraded personnel (those that may have broader skills and/or certifications).
All this makes "productivity" (as measured by output per hour worked) go up: 3.5% last year. This is certainly laudible but it is brought about by a slowness to rehire that, in many cases, puts a strain on those left behind after layoffs. Only 49% of people laid off from 2007 to 2009 were re-employed by January 2010.
Companies are complaining that they can't find qualified people. Well, if those employers have now combined business analyst and systems analyst positions into one job, for example, the pool of people who can qualify for that "opening" substantially reduces. So, those "openings" are now there but info tech companies now want "dual threat" people.
So, the statistic for the number of unemployed Americans, on average, competing for each opening is still high at 4.6 to 1. Prior to the recession, it was 1.8 to 1.
In a new survey released yesterday, 46 economists forecast that the economy will grow this year and next at a slower pace than previously thought (National Association of Business Economists). The new forecast predicted economic growth to be 2.6% for 2010 and 2011. That's down from it's May forecast of 3.2%. During that period, these same economists don't see the official unemployment rate going much below 9.2% and they don't see home prices rising much.
While this forecast is not considered "optimistic," it does not seem to reflect the most recent official GDP growth number (actually, they say it does - we say it doesn't): 1.7% for the U.S. second quarter.
The survey expectation for "hiring" is that the economy will add 150,000 jobs per month until the middle of 2011 after which the numbers will increase to 175,000. Since the economy needs to add 125,000 net new jobs each month just to keep up with population growth, these numbers are positive. But, there is a generally accepted number for GDP growth that correlates with the 125,000 jobs number and that's 2.5%. That's the GDP growth number that most economists feel is needed to keep unemployment from rising. As we indicated above, the NABE economists' 2.6% GDP growth number doesn't look supportable to us, given the most recent quarter at 1.7%.
Last, foreign trade was not seen as weighing on economic growth. The NABE economists said trade deficits would remain constant as a share of GDP. In addition, those surveyed forecast a one-third chance of a "bubble" in China's economy which, to them, means not a high level of concern.
So, between purple squirrels and slower than expected economic growth, things are not as good as they could be.
***************
"Advice is seldom welcome, and those who need it most like it the least." (Samuel Johnson)
***************
HR professionals have a name for the highly sought but elusive job candidate whose skills and experiences precisely match an employer's needs: the "purple squirrel."
What's happened with the aftermath of the Great Recession is that the process of hiring back staff in the "average" organization has been delayed by both software/computer upgrades that allow companies (especially manufacturers) to do more with less people, and, the predisposition by employers to fill "open" positions with upgraded personnel (those that may have broader skills and/or certifications).
All this makes "productivity" (as measured by output per hour worked) go up: 3.5% last year. This is certainly laudible but it is brought about by a slowness to rehire that, in many cases, puts a strain on those left behind after layoffs. Only 49% of people laid off from 2007 to 2009 were re-employed by January 2010.
Companies are complaining that they can't find qualified people. Well, if those employers have now combined business analyst and systems analyst positions into one job, for example, the pool of people who can qualify for that "opening" substantially reduces. So, those "openings" are now there but info tech companies now want "dual threat" people.
So, the statistic for the number of unemployed Americans, on average, competing for each opening is still high at 4.6 to 1. Prior to the recession, it was 1.8 to 1.
In a new survey released yesterday, 46 economists forecast that the economy will grow this year and next at a slower pace than previously thought (National Association of Business Economists). The new forecast predicted economic growth to be 2.6% for 2010 and 2011. That's down from it's May forecast of 3.2%. During that period, these same economists don't see the official unemployment rate going much below 9.2% and they don't see home prices rising much.
While this forecast is not considered "optimistic," it does not seem to reflect the most recent official GDP growth number (actually, they say it does - we say it doesn't): 1.7% for the U.S. second quarter.
The survey expectation for "hiring" is that the economy will add 150,000 jobs per month until the middle of 2011 after which the numbers will increase to 175,000. Since the economy needs to add 125,000 net new jobs each month just to keep up with population growth, these numbers are positive. But, there is a generally accepted number for GDP growth that correlates with the 125,000 jobs number and that's 2.5%. That's the GDP growth number that most economists feel is needed to keep unemployment from rising. As we indicated above, the NABE economists' 2.6% GDP growth number doesn't look supportable to us, given the most recent quarter at 1.7%.
Last, foreign trade was not seen as weighing on economic growth. The NABE economists said trade deficits would remain constant as a share of GDP. In addition, those surveyed forecast a one-third chance of a "bubble" in China's economy which, to them, means not a high level of concern.
So, between purple squirrels and slower than expected economic growth, things are not as good as they could be.
Saturday, October 9, 2010
Flying Fewer Planes
http://www.nytimes.com/2010/10/09/business/09air.html?th&emc=th
***************
"As time goes by, the way people live outweighs the words they use." (John C. Maxwell)
***************
For the first time since deregulation (1978), airlines in the U.S. have managed not to increase the number of planes they fly.
Empty seats are increasingly difficult to find and fares have jumped. A record number of planes are stored at the edge of the Mojave Desert, the home for decommissioned passenger jets.
We'll be anxious to see, after the Southwest and United mergers shake out, whether the industry can climb back up to consecutive years of profitability. The overall economics of the industry show zero total net profit over the entire 32 years since deregulation.
Airlines trimmed their capacity in recent years by grounding planes, reducing the number of flights they offered between cities and flying smaller planes. Last year's cuts in capacity, at 7 percent, were the deepest since 1942. Demand has risen 6.1% this year yet airlines have added just 1.5% more seats. The key number is 80%. The airlines now fill up more than 80% of their seats where the traditional level has been 70%.
All of this is key to getting "price" but we want to see what happens when (we hope) the economy comes back and demand for "seats" goes up.
We hope to be pleasantly surprised.
***************
"As time goes by, the way people live outweighs the words they use." (John C. Maxwell)
***************
For the first time since deregulation (1978), airlines in the U.S. have managed not to increase the number of planes they fly.
Empty seats are increasingly difficult to find and fares have jumped. A record number of planes are stored at the edge of the Mojave Desert, the home for decommissioned passenger jets.
We'll be anxious to see, after the Southwest and United mergers shake out, whether the industry can climb back up to consecutive years of profitability. The overall economics of the industry show zero total net profit over the entire 32 years since deregulation.
Airlines trimmed their capacity in recent years by grounding planes, reducing the number of flights they offered between cities and flying smaller planes. Last year's cuts in capacity, at 7 percent, were the deepest since 1942. Demand has risen 6.1% this year yet airlines have added just 1.5% more seats. The key number is 80%. The airlines now fill up more than 80% of their seats where the traditional level has been 70%.
All of this is key to getting "price" but we want to see what happens when (we hope) the economy comes back and demand for "seats" goes up.
We hope to be pleasantly surprised.
Friday, October 8, 2010
Fixing Wall Street
http://opinionator.blogs.nytimes.com/2010/10/07/make-wall-street-risk-it-all/?emc=eta1
***************
"Over the last 35 years ... payroll employment in San Francisco has dropped by 50%, but self-employment has shot up 150%, including a large number working in software, consulting, video games, and other high wage professions." (Joel Kotkin)
***************
William Cohan's post in "The Opinionator" yesterday reflects my position on almost everything that's happened since 2007 on Wall Street.
To quote Cohan: "The 2,200 page Dodd-Frank Act, which President Obama signed this summer, creates an Orwellian alphabet soup of new agencies, oversight boards and offices intended to protect us from ourselves.
The problem is that since the incentives on Wall Street have not been changed one iota by the new laws - nor are they likely to be changed by any of the soon-to-be-written regulations of federal agencies - we're no better protected from bankers' potentially reckless behavior than we were before the latest round of reforms."
The key word is "INCENTIVES." People will do what they get paid off for. The really well done behavioral studies endorse that position. Getting huge bonuses for recirculating subprime mortgage CDOs (aka toxic trash) creates no actual product nor pays for any actual result of value. By contrast, huge bonuses for saving a company (and the "jobs" implied by that) are "worth it."
For the more sophisticated financial types, the new Basel III capital rules which will require banks to hold more "capital" (common equity up from roughly 3% to 7%), don't change the incentive plans of the folks who manage the banks.
It is interesting to note that on Wall Street 50% of every dollar of revenue generated is paid out to employees in the form of compensation. Really. Why? The Dodd-Frank "say on pay" is a shareholder right that is "non-binding" on any company. So there is no improvement in shareholder rights to amend outrageous pay practices.
Cohan's suggestion that the Top 100 executives at Wall Street's "systemically important" firms be personally liable for the risks they take gets at the issue of accountability. His quote on the fact that the days of privatizing the profits of Wall Street and socializing the risks must end suites the situation perfectly.
Fix the incentives - fix Wall Street.
***************
"Over the last 35 years ... payroll employment in San Francisco has dropped by 50%, but self-employment has shot up 150%, including a large number working in software, consulting, video games, and other high wage professions." (Joel Kotkin)
***************
William Cohan's post in "The Opinionator" yesterday reflects my position on almost everything that's happened since 2007 on Wall Street.
To quote Cohan: "The 2,200 page Dodd-Frank Act, which President Obama signed this summer, creates an Orwellian alphabet soup of new agencies, oversight boards and offices intended to protect us from ourselves.
The problem is that since the incentives on Wall Street have not been changed one iota by the new laws - nor are they likely to be changed by any of the soon-to-be-written regulations of federal agencies - we're no better protected from bankers' potentially reckless behavior than we were before the latest round of reforms."
The key word is "INCENTIVES." People will do what they get paid off for. The really well done behavioral studies endorse that position. Getting huge bonuses for recirculating subprime mortgage CDOs (aka toxic trash) creates no actual product nor pays for any actual result of value. By contrast, huge bonuses for saving a company (and the "jobs" implied by that) are "worth it."
For the more sophisticated financial types, the new Basel III capital rules which will require banks to hold more "capital" (common equity up from roughly 3% to 7%), don't change the incentive plans of the folks who manage the banks.
It is interesting to note that on Wall Street 50% of every dollar of revenue generated is paid out to employees in the form of compensation. Really. Why? The Dodd-Frank "say on pay" is a shareholder right that is "non-binding" on any company. So there is no improvement in shareholder rights to amend outrageous pay practices.
Cohan's suggestion that the Top 100 executives at Wall Street's "systemically important" firms be personally liable for the risks they take gets at the issue of accountability. His quote on the fact that the days of privatizing the profits of Wall Street and socializing the risks must end suites the situation perfectly.
Fix the incentives - fix Wall Street.
Saturday, October 2, 2010
Auto Sales: Paris and Ford
http://www.nytimes.com/2010/10/02/business/02auto.html?ref=business
http://www.nytimes.com/2010/10/03/automobiles/BMW-PARIS.html
***************
"Nobody wants to be sold, but everyone wants to be helped." (John C. Maxwell)
***************
The place to be this week has been Paris. This has been more than the annual "Paris Auto Show." It's been more like what cars are going to sell and where will they be selling?
Ford has continued its incredible comeback with a 46% increase over prior year for September. And, Ford had had a good month in September of 2009 so those numbers are real. Ford paced the overall U.S. auto market which gained 28.5% from a year ago.
Ford's market share has improved for the 23rd month in the last 24.
Alan Mulally (Ford's CEO) was quoted in Paris as indicating that Ford's net debt will be zero by the end of 2011. Since Ford borrowed over $23 billion at the end of 2006 (mortgaging everything they had, including the "Ford" logo) after years of net losses, the industry has watched Mulally turn around Ford without declaring bankruptcy or taking money from the taxpayers.
Mulally expects the U.S. car market to grow at a pace of 3 to 5% in the future while he sees the global market expanding by 5 to 10%. Ford has regained its number 2 position in U.S. market share at 16.7% (GM is #1 at 18%, Toyota is #3 at 15.3%).
The U.S. auto industry's seasonally adjusted annualized selling rate for September was 11.76 million cars (the highest level this year). That rate was 9.38 million a year ago. But relatively slow sales in the first half of the year mean total sales for the industry in 2010 are expected to be around 11.5 million. That compares with 10.4 million in 2009 and more than 17 million in 2005.
Our question: will the U.S. auto market ever get back to 17 million cars sold?
Back to Paris. China's auto market (where reports had total sales there last year well beyond 17 million autos) appears to be headed for a leap beyond diesel. Europe is used to diesel and is receptive to the new refined versions of those engines. According to BMW's head of sales, China may skip diesel cars all together and move directly to gasoline-electric hybrid vehicles. Because Beijing limits sales of diesel fuel to trucks, Chinese consumers, unlike Europeans, have never gotten used to the idea that diesel is more economical than gasoline.
BMW's goal for China is to be the top luxury carmaker. Last year, they sold 90,000 cars there and their forecast for 2010 is to sell as many as 120,000. Their brands there include the "Mini" and, of course, Rolls Royce.
BMW is not ignoring the U.S. market. They've invested $750 million in their Spartanburg, South Carolina facility to produce the new X3 luxury crossover, which was rolled out in Paris.
The BMW sales perspective is key: despite the weakness of volume automakers in mature markets, the global luxury sector is holding up well. This is not just true for cars, "... it's true for handbags and hotels too."
Paris is a great place to hear positive news about the U.S. car market and especially Ford, where the comeback has been amazing and free of government bailouts.
http://www.nytimes.com/2010/10/03/automobiles/BMW-PARIS.html
***************
"Nobody wants to be sold, but everyone wants to be helped." (John C. Maxwell)
***************
The place to be this week has been Paris. This has been more than the annual "Paris Auto Show." It's been more like what cars are going to sell and where will they be selling?
Ford has continued its incredible comeback with a 46% increase over prior year for September. And, Ford had had a good month in September of 2009 so those numbers are real. Ford paced the overall U.S. auto market which gained 28.5% from a year ago.
Ford's market share has improved for the 23rd month in the last 24.
Alan Mulally (Ford's CEO) was quoted in Paris as indicating that Ford's net debt will be zero by the end of 2011. Since Ford borrowed over $23 billion at the end of 2006 (mortgaging everything they had, including the "Ford" logo) after years of net losses, the industry has watched Mulally turn around Ford without declaring bankruptcy or taking money from the taxpayers.
Mulally expects the U.S. car market to grow at a pace of 3 to 5% in the future while he sees the global market expanding by 5 to 10%. Ford has regained its number 2 position in U.S. market share at 16.7% (GM is #1 at 18%, Toyota is #3 at 15.3%).
The U.S. auto industry's seasonally adjusted annualized selling rate for September was 11.76 million cars (the highest level this year). That rate was 9.38 million a year ago. But relatively slow sales in the first half of the year mean total sales for the industry in 2010 are expected to be around 11.5 million. That compares with 10.4 million in 2009 and more than 17 million in 2005.
Our question: will the U.S. auto market ever get back to 17 million cars sold?
Back to Paris. China's auto market (where reports had total sales there last year well beyond 17 million autos) appears to be headed for a leap beyond diesel. Europe is used to diesel and is receptive to the new refined versions of those engines. According to BMW's head of sales, China may skip diesel cars all together and move directly to gasoline-electric hybrid vehicles. Because Beijing limits sales of diesel fuel to trucks, Chinese consumers, unlike Europeans, have never gotten used to the idea that diesel is more economical than gasoline.
BMW's goal for China is to be the top luxury carmaker. Last year, they sold 90,000 cars there and their forecast for 2010 is to sell as many as 120,000. Their brands there include the "Mini" and, of course, Rolls Royce.
BMW is not ignoring the U.S. market. They've invested $750 million in their Spartanburg, South Carolina facility to produce the new X3 luxury crossover, which was rolled out in Paris.
The BMW sales perspective is key: despite the weakness of volume automakers in mature markets, the global luxury sector is holding up well. This is not just true for cars, "... it's true for handbags and hotels too."
Paris is a great place to hear positive news about the U.S. car market and especially Ford, where the comeback has been amazing and free of government bailouts.
Monday, September 27, 2010
Future Generations Condemning Us
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/24/AR2010092404113.html?referrer=emailarticle
***************
"Of all the virtues, gratitude is probably the most neglected and least expressed."
(John C. Maxwell)
***************
Sunday's Washington Post had an interesting input from Kwame Anthony Appiah asking what future generations will condemn us for. His article was made that much more interesting by the added option of giving readers a "choice" to vote for four alternatives. In the 24 hours since my vote went in, 2,000 more people have voted. Cast your vote!
Overall, Appiah suggests that there are three signs that a particular practice is destined for future condemnation. First, people have already heard the arguments against the practice ("The case against slavery didn't emerge in a blinding moment of moral clarity, for instance; it had been around for centuries."). Second, defenders of the custom tend not to offer moral counterarguments but instead invoke tradition, human nature or necessity (As in, "We've always had slaves, and how could we grow cotton without them?"). And third, supporters engage in what one might call strategic ignorance, avoiding truths that might force them to face the evils in which they are complicit ("Those who ate the sugar or wore the cotton that the slaves grew simply didn't think about what made those goods possible.").
No matter how much we think we know about the various issues going on in the world, we can't know about all of them. Appiah calls our attention to the Russian Republic of Kalmykia where satellite photos show a "... vast expanse of parched wasteland that decades earlier was a lush and verdant landscape ... recognized in the 1990s as Europe's first man-made desert." Desertification, which is primarily the result of destructive land-management practices, threatens a third of the earth's surface.
It's good to have a philosophy professor like Appiah remind us occasionally that part of our worldwide decision-making process should be based on what we are leaving for future generations to deal with, cope with or stand for.
***************
"Of all the virtues, gratitude is probably the most neglected and least expressed."
(John C. Maxwell)
***************
Sunday's Washington Post had an interesting input from Kwame Anthony Appiah asking what future generations will condemn us for. His article was made that much more interesting by the added option of giving readers a "choice" to vote for four alternatives. In the 24 hours since my vote went in, 2,000 more people have voted. Cast your vote!
Overall, Appiah suggests that there are three signs that a particular practice is destined for future condemnation. First, people have already heard the arguments against the practice ("The case against slavery didn't emerge in a blinding moment of moral clarity, for instance; it had been around for centuries."). Second, defenders of the custom tend not to offer moral counterarguments but instead invoke tradition, human nature or necessity (As in, "We've always had slaves, and how could we grow cotton without them?"). And third, supporters engage in what one might call strategic ignorance, avoiding truths that might force them to face the evils in which they are complicit ("Those who ate the sugar or wore the cotton that the slaves grew simply didn't think about what made those goods possible.").
No matter how much we think we know about the various issues going on in the world, we can't know about all of them. Appiah calls our attention to the Russian Republic of Kalmykia where satellite photos show a "... vast expanse of parched wasteland that decades earlier was a lush and verdant landscape ... recognized in the 1990s as Europe's first man-made desert." Desertification, which is primarily the result of destructive land-management practices, threatens a third of the earth's surface.
It's good to have a philosophy professor like Appiah remind us occasionally that part of our worldwide decision-making process should be based on what we are leaving for future generations to deal with, cope with or stand for.
Saturday, September 25, 2010
Attitude
http://johnmaxwellonleadership.com/2010/09/24/attitude-is-contagious-%e2%80%93-what-are-people-catching-from-you/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+JohnMaxwellOnLeadership+%28John+Maxwell+on+Leadership%29
***************
"People won't go along with you if they can't get along with you." (John C. Maxwell)
***************
Al Casey, whom many consider one of the Top 10 CEOs of the 20th century (as CEO of American Airlines in the 70s and 80s, he led the industry through deregulation), prized Dr. Charles Swindoll's definition of "Attitude." We'll quote a portion of it here: "The longer I live, the more I realize the impact of attitude on life ... I am convinced that life is 10 percent what happens to me and 90 percent of how I react to it."
John C. Maxwell carries the torch with his 9/24 post (attached). He reminds us that several things on a team are NOT contagious: talent, experience, willingness to practice. BUT, attitude is catching: "People have a tendency to adopt the attitude of those they spend time with - to pick up on their mindset, beliefs and approaches to challenges."
Maxwell goes on to quote an idea from Fred Smith about there being two kinds of people in any organization: polluters and purifiers.
"POLLUTERS are like smokestacks, belching out dirty smoke all the time. They hate clear skies, and no matter how clear the air is, they can find a way to poison it with gloom. When the people around them "breathe" their toxins, they feel sicker and sicker."
"PURIFIERS, on the other hand, make everything around them better. It doesn't matter what kind of rotten atmosphere they encounter. They take in the toxic words of polluters in the organization just as everyone else does, but they filter the words before they pass them on. What goes in may be gloomy and negative, but when it comes back out, it's fresh and clear."
Leading doesn't necessarily mean you have people working for you - leading is the example you set from wherever you are. Do you do what you say you are going to do when you say you are going to do it? Do you help others when you can?
Al Casey would have agreed. :)
***************
"People won't go along with you if they can't get along with you." (John C. Maxwell)
***************
Al Casey, whom many consider one of the Top 10 CEOs of the 20th century (as CEO of American Airlines in the 70s and 80s, he led the industry through deregulation), prized Dr. Charles Swindoll's definition of "Attitude." We'll quote a portion of it here: "The longer I live, the more I realize the impact of attitude on life ... I am convinced that life is 10 percent what happens to me and 90 percent of how I react to it."
John C. Maxwell carries the torch with his 9/24 post (attached). He reminds us that several things on a team are NOT contagious: talent, experience, willingness to practice. BUT, attitude is catching: "People have a tendency to adopt the attitude of those they spend time with - to pick up on their mindset, beliefs and approaches to challenges."
Maxwell goes on to quote an idea from Fred Smith about there being two kinds of people in any organization: polluters and purifiers.
"POLLUTERS are like smokestacks, belching out dirty smoke all the time. They hate clear skies, and no matter how clear the air is, they can find a way to poison it with gloom. When the people around them "breathe" their toxins, they feel sicker and sicker."
"PURIFIERS, on the other hand, make everything around them better. It doesn't matter what kind of rotten atmosphere they encounter. They take in the toxic words of polluters in the organization just as everyone else does, but they filter the words before they pass them on. What goes in may be gloomy and negative, but when it comes back out, it's fresh and clear."
Leading doesn't necessarily mean you have people working for you - leading is the example you set from wherever you are. Do you do what you say you are going to do when you say you are going to do it? Do you help others when you can?
Al Casey would have agreed. :)
Friday, September 24, 2010
The Short List
http://dealbook.blogs.nytimes.com/2010/09/22/after-summers-new-economics-chief-could-be-a-c-e-o/?scp=8&sq=Lawrence%20Summers&st=cse
***************
"The way I measure greatness is ... How many people can you make want to be better?"
(Will Smith)
***************
So, Lawrence (don't call me "Larry") Summers will be leaving at the end of the year. He is being given credit for being the "chief architect" of the Obama economic policy. Would that be the same as being chief naval architect of the "Titanic?"
We've attached the short list of potential replacements and we note with interest (and "hope") that Anne Mulcahy (the recently retired CEO of Xerox) is a contender. Not only would she bring some common sense to the position, but she would be the first business CEO to be added to the Obama team. In addition, if common sense wasn't enough, she would also bring a sensitivity to diversity which her predecessor clearly lacked (Summers only lasted two years as president of Harvard before he was ousted by a faculty vote of "no confidence" after he argued that differences between the sexes explained why fewer women pursued math and science careers. Actually, that was the immediate proximate cause - he had always been "tone deaf." How he ever became president of Harvard in the first place is beyond me - actually, it had something to do with having been Secretary of the Treasury. But, please...).
President Obama's appointment of Summers in the first place reflected a certain lack of sophistication about Summers' personality as well as the task at hand. Mulcahy suffers no such disadvantages.
Now three members of the original Obama economic team are gone. Treasury Secretary Geithner is referred to as "remaining" as the last of the team but that's only because Summers ignored Paul Volcker, the esteemed former Fed Chairman who is more qualified than the rest of the group put together and is still there. At least Volcker contributed the "Volcker Rule" to the financial reform legislation and is listened to by those who know what they are talking about. Volcker's position has consistently been that the legislation and the original "stimulus" were not enough. Summers failed at everything. Volcker has yet to fail. Mulcahy turned around Xerox when that was thought to be impossible.
Maybe President Obama won't be as tone deaf as his appointment of Lawrence Summers implied. Maybe he'll make a good choice now.
***************
"The way I measure greatness is ... How many people can you make want to be better?"
(Will Smith)
***************
So, Lawrence (don't call me "Larry") Summers will be leaving at the end of the year. He is being given credit for being the "chief architect" of the Obama economic policy. Would that be the same as being chief naval architect of the "Titanic?"
We've attached the short list of potential replacements and we note with interest (and "hope") that Anne Mulcahy (the recently retired CEO of Xerox) is a contender. Not only would she bring some common sense to the position, but she would be the first business CEO to be added to the Obama team. In addition, if common sense wasn't enough, she would also bring a sensitivity to diversity which her predecessor clearly lacked (Summers only lasted two years as president of Harvard before he was ousted by a faculty vote of "no confidence" after he argued that differences between the sexes explained why fewer women pursued math and science careers. Actually, that was the immediate proximate cause - he had always been "tone deaf." How he ever became president of Harvard in the first place is beyond me - actually, it had something to do with having been Secretary of the Treasury. But, please...).
President Obama's appointment of Summers in the first place reflected a certain lack of sophistication about Summers' personality as well as the task at hand. Mulcahy suffers no such disadvantages.
Now three members of the original Obama economic team are gone. Treasury Secretary Geithner is referred to as "remaining" as the last of the team but that's only because Summers ignored Paul Volcker, the esteemed former Fed Chairman who is more qualified than the rest of the group put together and is still there. At least Volcker contributed the "Volcker Rule" to the financial reform legislation and is listened to by those who know what they are talking about. Volcker's position has consistently been that the legislation and the original "stimulus" were not enough. Summers failed at everything. Volcker has yet to fail. Mulcahy turned around Xerox when that was thought to be impossible.
Maybe President Obama won't be as tone deaf as his appointment of Lawrence Summers implied. Maybe he'll make a good choice now.
Tuesday, September 21, 2010
Change Your Thinking
http://johnmaxwellonleadership.com/2010/09/20/change-your-thinking-change-your-life/?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+JohnMaxwellOnLeadership+%28John+Maxwell+on+Leadership%29
***************
"The biggest lesson I have ever learned is the stupendous importance of what we think. If I knew what you think, I would know what you are, for your thoughts make you what you are; by changing our thoughts, we can change our lives." (Dale Carnegie)
***************
John C. Maxwell has studied successful people for forty years and, as he says, though the diversity you find among them is "astounding," he believes they are all alike in one way: how they think! That is the one thing that separates the successful from the unsuccessful.
The good news is that it's possible to think like a successful person. Good thinking requires several specific thinking skills. Maxwell has put together 11 of them. Read what they are within the context of what he's written (attached).
For those of you who have experienced my interpretation of Maxwell's 360 Leader, think about what he's saying within that context.
***************
"The biggest lesson I have ever learned is the stupendous importance of what we think. If I knew what you think, I would know what you are, for your thoughts make you what you are; by changing our thoughts, we can change our lives." (Dale Carnegie)
***************
John C. Maxwell has studied successful people for forty years and, as he says, though the diversity you find among them is "astounding," he believes they are all alike in one way: how they think! That is the one thing that separates the successful from the unsuccessful.
The good news is that it's possible to think like a successful person. Good thinking requires several specific thinking skills. Maxwell has put together 11 of them. Read what they are within the context of what he's written (attached).
For those of you who have experienced my interpretation of Maxwell's 360 Leader, think about what he's saying within that context.
Saturday, September 18, 2010
Rising Poverty
http://www.nytimes.com/roomfordebate/2010/09/16/rising-poverty-and-the-social-safety-net?emc=eta1
http://www.nytimes.com/2010/09/17/us/17poverty.html?_r=1&emc=eta1
***************
"It's difficult to find common ground with others when the only person you're focused on is YOURSELF." (John C. Maxwell)
***************
So, the money not being spent on the U.S. economy in the form of capital expenditures from U.S. companies continues to be a drag on job growth. The report on this subject by Fareed Zakaria recently was backed up by Federal Reserve data released this week. The Fed's quarterly Flow of Funds report indicates that corporate liquid assets made up 6.12% of total business assets in the second quarter. That's just barely down from the 6.21% level in the first quarter when companies had the highest share of assets in cash since the early 1960s. And, any corporate CEO will tell you why: the regulatory and tax environment is still not settled.
The slight increase in capital expenditures in the second quarter (reducing the 6.21% number above to 6.12%) reflects spending on software and equipment, not people. Some would look at the prior sentence and say, "... software and equipment instead of people" since many CEOs and top finance staff view such expenditures as synomimous with more output "because" they're not spending on people. Consequently, they improve their "productivity."
All of this makes it possible for companies like Oracle (the world's biggest maker of database software) to report a 20% increase in net profit in the latest quarter. Oracle's results, reported Thursday, come as the company finds itself in the spotlight in the latest Silicon Valley soap opera: this one involving Mark Hurd, the ousted chief of Hewlett-Packard. Oracle has hired Hurd to sharpen its attack on HP in the area of computer servers, an area Oracle picked up with its $7.3 billion purchase earlier this year of Sun Microsystems.
The theatrics over Hurd's appointment as Oracle co-president (is that like co-CEO, only a level lower?) - a move HP has sued to stop (unfortunately, the HP Board was so anxious to get rid of Hurd that they didn't put a clause in his ($35 million?) severance agreement about working for the competition) - have overshadowed the fact that Oracle's core business is thriving because businesses have pumped up their investments in the programs that run their back offices. Oracle is a key company because its software is ubiquitous but largely hidden from the public view. It's used to keep bank transactions humming, airplanes landing on time and retailers shelves stocked with the right amount of merchandise.
While that's nice for Oracle, the providers of "services" in this service economy have a mixed bag of performance that is more reflective of what's really going on. FedEx Corp. indicated Thursday that the global economic recovery remains "uneven." While strength in international shipments is boosting their net income, FedEx is cutting 1,700 jobs in its U.S. freight business to offset losses there. Where do those people go?
Back to rising poverty. The percentage of Americans struggling below the poverty line in 2009 was the highest it has been in 15 years according to the Census Bureau report on Thursday. Four million additional Americans found themselves in poverty in 2009. That total is now 44 million or 1 in 7 residents. The share of residents in poverty climbed to 14.3% in 2009.
For a single adult in 2009, the poverty line was $10,830 in pretax cash income; for a family of four, $22,050. We've attached a second article (in addition to our first which includes an excellent graphic depiction of the combination of real median income in thousands, poverty rate and percentage without health insurance) which addresses what to do about the situation from various points of view. David R. Jones (President and CEO of The Community Service Society of New York) has the realistic view that we need to upgrade the skills of young people trying to enter the labor market - funding should be increased for vocational education that leads to real jobs after school. Essentially, we should concentrate our efforts on young people who are not going on to college. Otherwise, we have the makings of a permanent underclass. We would add to Jones' perspective that colleges need to get serious about working with students on getting them to options in courses that will lead to "employable skills" in profit or non-profit sectors that are growing (health care, for example).
Last, we noted with interest on Friday that Dell will open a second major operations center in China in the western city of Chengdu. This is a natural outgrowth of rising costs in the more developed coastal areas. We're sure China's perspective is supportive since the government is looking for economic growth away from its coasts. Dell, like other foreign PC makers in China, has struggled to increase its market share against Lenovo. Dell expects its new operations center to open in 2011 with manufacturing, sales and service centers which could eventually employ up to 3,000 people.
Dell estimates that it will spend more than $100 billion in the next decade in China on facilities, employment, research and development and purchases from Chinese suppliers. Here, we are tempted to ask why Dell can't spend some of that money in the U.S. - but we won't. Currently Dell accounts for 9% of the 16.6 million PCs shipped in China annually, putting them in second place behind Lenovo which has a 28.7% share (HP has an 8.2% share).
Unemployment, poverty and capital money being spent overseas by U.S. companies. There seems to be a recurring theme here. Getting capital money to be spent here would be a good way to jump start the economy and jobs.
So we are back to the issue of unemployment and poverty in the U.S.
http://www.nytimes.com/2010/09/17/us/17poverty.html?_r=1&emc=eta1
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"It's difficult to find common ground with others when the only person you're focused on is YOURSELF." (John C. Maxwell)
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So, the money not being spent on the U.S. economy in the form of capital expenditures from U.S. companies continues to be a drag on job growth. The report on this subject by Fareed Zakaria recently was backed up by Federal Reserve data released this week. The Fed's quarterly Flow of Funds report indicates that corporate liquid assets made up 6.12% of total business assets in the second quarter. That's just barely down from the 6.21% level in the first quarter when companies had the highest share of assets in cash since the early 1960s. And, any corporate CEO will tell you why: the regulatory and tax environment is still not settled.
The slight increase in capital expenditures in the second quarter (reducing the 6.21% number above to 6.12%) reflects spending on software and equipment, not people. Some would look at the prior sentence and say, "... software and equipment instead of people" since many CEOs and top finance staff view such expenditures as synomimous with more output "because" they're not spending on people. Consequently, they improve their "productivity."
All of this makes it possible for companies like Oracle (the world's biggest maker of database software) to report a 20% increase in net profit in the latest quarter. Oracle's results, reported Thursday, come as the company finds itself in the spotlight in the latest Silicon Valley soap opera: this one involving Mark Hurd, the ousted chief of Hewlett-Packard. Oracle has hired Hurd to sharpen its attack on HP in the area of computer servers, an area Oracle picked up with its $7.3 billion purchase earlier this year of Sun Microsystems.
The theatrics over Hurd's appointment as Oracle co-president (is that like co-CEO, only a level lower?) - a move HP has sued to stop (unfortunately, the HP Board was so anxious to get rid of Hurd that they didn't put a clause in his ($35 million?) severance agreement about working for the competition) - have overshadowed the fact that Oracle's core business is thriving because businesses have pumped up their investments in the programs that run their back offices. Oracle is a key company because its software is ubiquitous but largely hidden from the public view. It's used to keep bank transactions humming, airplanes landing on time and retailers shelves stocked with the right amount of merchandise.
While that's nice for Oracle, the providers of "services" in this service economy have a mixed bag of performance that is more reflective of what's really going on. FedEx Corp. indicated Thursday that the global economic recovery remains "uneven." While strength in international shipments is boosting their net income, FedEx is cutting 1,700 jobs in its U.S. freight business to offset losses there. Where do those people go?
Back to rising poverty. The percentage of Americans struggling below the poverty line in 2009 was the highest it has been in 15 years according to the Census Bureau report on Thursday. Four million additional Americans found themselves in poverty in 2009. That total is now 44 million or 1 in 7 residents. The share of residents in poverty climbed to 14.3% in 2009.
For a single adult in 2009, the poverty line was $10,830 in pretax cash income; for a family of four, $22,050. We've attached a second article (in addition to our first which includes an excellent graphic depiction of the combination of real median income in thousands, poverty rate and percentage without health insurance) which addresses what to do about the situation from various points of view. David R. Jones (President and CEO of The Community Service Society of New York) has the realistic view that we need to upgrade the skills of young people trying to enter the labor market - funding should be increased for vocational education that leads to real jobs after school. Essentially, we should concentrate our efforts on young people who are not going on to college. Otherwise, we have the makings of a permanent underclass. We would add to Jones' perspective that colleges need to get serious about working with students on getting them to options in courses that will lead to "employable skills" in profit or non-profit sectors that are growing (health care, for example).
Last, we noted with interest on Friday that Dell will open a second major operations center in China in the western city of Chengdu. This is a natural outgrowth of rising costs in the more developed coastal areas. We're sure China's perspective is supportive since the government is looking for economic growth away from its coasts. Dell, like other foreign PC makers in China, has struggled to increase its market share against Lenovo. Dell expects its new operations center to open in 2011 with manufacturing, sales and service centers which could eventually employ up to 3,000 people.
Dell estimates that it will spend more than $100 billion in the next decade in China on facilities, employment, research and development and purchases from Chinese suppliers. Here, we are tempted to ask why Dell can't spend some of that money in the U.S. - but we won't. Currently Dell accounts for 9% of the 16.6 million PCs shipped in China annually, putting them in second place behind Lenovo which has a 28.7% share (HP has an 8.2% share).
Unemployment, poverty and capital money being spent overseas by U.S. companies. There seems to be a recurring theme here. Getting capital money to be spent here would be a good way to jump start the economy and jobs.
So we are back to the issue of unemployment and poverty in the U.S.
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