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Well, it looks like the Jews didn't save the Christmas shopping season after all. The International Council of Shopping Centers reports December retail sales rose by only 3.2 percent.
Posted by dan at 01:07 PM
The steely op-edders of the Wall Street Journal routinely rail against the evil of moral equivalency. And well they should. But perhaps a moral equivacator is simply a partisan hack who has been hijacked reality. After all, the Jack Abramoff sleaze-a-thon has pushed the page from the firm ground of moral quality straight into the mushy swamp of moral equivalency.
From today's lead editorial:
This isn't to say we agree with the media hype that the Abramoff scandal is of "historic proportions." That's true only if your "history" starts around 1994, after Jim Wright sold his "book" in bulk to the Teamsters, after Tony Coelho of "Honest Graft" fame, after Abscam, the Keating Five, Clark Clifford and BCCI, and any number of other famous episodes of Capitol Hill sleaze. Mr. Abramoff and his pals are stock Beltway characters.What's notable so far about this scandal is the wretchedness of the excess on display, as well as the fact that it involves self-styled "conservatives," who claimed to want to clean up Washington instead of cleaning up themselves. That some Republicans are just as corruptible as some Democrats won't surprise students of human nature. But it is an insult to the conservative voters who elected this class of Republicans and expected better."
See, Abramoff, who bilked Indian tribes out of tens of millions of dollars and has admitted to federal charges of wire fraud, is really just a latter-day version of the former House Speaker. Never mind that, as Jack Shafer noted, Wright made about $55,000 of a sweetheart book deal, was never indicted, and never did jail time.
In the space adjacent to the editorial, there's a lengthy historical piece by Michael Barone, who commits an even more absurd bit of moral equivalency:
And then there is Jack Abramoff. A close associate of Messrs. DeLay and Norquist and a longtime Republican activist, he seems to have been determined to make gigantic sums of money. Not content with the $1 million or so a year he could easily have made, he squeezed Indian tribes for tens of millions (Indian gambling laws have created a class of naive clients) and engaged in some very shady dealings in the gambling cruise ship business. There will always be such individuals: Abe Fortas, a lawyer of the highest intellectual caliber, was not content with a Supreme Court justice's salary and arranged for outside income from a former client, the disclosure of which led him to resign from the court. There is a fine and sometimes indistinct line between bribery, which requires a specific quid pro quo, and legal mutually beneficial conduct.
Got that? Abramoff=Abe Fortas. See, when Abe Fortas took a $20,000 retainer in 1966--a move for which he was not indicted--it was basically the same as Abramoff's present-day "shady dealings," which are known in the reality-based community as felonies.
Posted by dan at 12:52 PM
Things seem to be going well in Germany. Consumer and business confidence is up, unemployment is falling, and new chancellor Angela Merkel seems to be riding high. Naturally, that's leading many Germans to be pessimistic about the country's prospects. Bertrand Benoit reports in the Financial Times.
Angela Merkel has done more to inspire confidence among demoralised Germans than her predecessor Gerhard Schröder managed in seven years of angst-ridden government.At least that is what fans of the new German chancellor say. For many others, however, there is concern that the "Merkel factor", the psychological boost that has fuelled her personal ratings and seems to have brightened Germany's economic prospects, could get in the way of much needed economic reforms and hinder the gathering rebound.
Although the CDU has fared better than the Social Democrats in recent opinion polls, it is pro-reform MPs in Ms Merkel's party who are getting most worried about the direction taken by the unwieldy left-right coalition now ruling the country.
"I fear the reform camp within the Christian Democratic Union has been weakened," says a disaffected senior conservative MP. "This government will not address our structural weaknesses."
The government programme, agrees Thilo Sarrazin, a veteran SPD politician and finance minister in the Berlin regional government, "is more weighted towards the SPD. This has shone light on the fact that the pro-business faction is a minority in the CDU."
Norbert Röttgen, an MP and one of the main architects of Ms Merkel's radically reformist electoral platform, acknowledges the shift in the chancellor's discourse since she rose to the head of a government whose policy decisions will have to secure cross-party agreement.
"The vocabulary has become less provocative," he says. "I would also agree that those people within the CDU who want radical change to the system have less power now."
Yet although the party has scaled back its economic agenda, he says, its alliance with the SPD means those changes it still aims to implement - to the health insurance, pension and tax systems - could gain broader public acceptance. "What we have lost in ambition, we have gained in stamina."
Economists agree the outlook for the German economy has brightened. Most upgraded their growth forecasts for 2006 late last year to 1.5-2 per cent. Some are considering more upgrades.
A consumer confidence survey last week showed Germans were now more inclined to spend than they had been since the late 1990s. That consumption, stagnant at best for a decade, might be recovering added to signs of a broad-based cyclical rebound after months of robust exports followed by a sharp rise in corporate investment. Then, on Tuesday, it emerged that unemployment in December had registered its sharpest fall in a decade, prompting Ronald Pofalla, CDU general secretary, to declare: "The Merkel factor is working."
Michael Glos, economics minister, echoed the comment this week, saying the government would soon re-vise its 2006 growth forecast from 1.2 to 1.5-1.8 per cent. . . .
Even if growth did reach 1.8 per cent this year, a senior chancellery official points out "it would only mean another €1bn [$1.2bn, £688m] in tax revenues for the state - a drop in the ocean". For Elga Bartsch, economist at Morgan Stanley, "all this 'Merkel factor' stuff is the kind of talk that might come back to haunt her if things turn out badly in a few months".
Like the worried CDU MPs, she also fears the feel-good mood could further blunt the political leadership's modest reform plans, despite the fact that Germany's products, services, and labour markets are still in dire need of liberalisation.
Posted by dan at 09:57 AM
Foes of hybrid vehicles -- and the people who drive them -- routinely argue that it doesn't make economic sense for people to buy cars like the Prius. After all, for a typical driver, it takes a long time to recoup the higher sticker price in gas saved. This theoretical line of argument, made most prominently and fatuously by Holman Jenkins, Jr., of the Wall Street Journal, is continually undermined by actions and data coming from the real world. We've noted, for example, that hybrids save their operators money by reducing time spent at gas stations and repair shops. What's more, insurers are now slashing premiums for hybrid drivers--another cost saving.
Today, Bernard Simon reports in the Financial Times reports that one group of enterpreneurs who work in a highly competitive low-margin business are finding that hybrid cars help increase their profits.
The typical north American taxi is a clunky Ford or Chevrolet that long ago lost its allure to the family car buyer.Not so in Vancouver and Victoria, British Columbia, where taxi operators have taken the lead from their Japanese counterparts. Since late 2004, dozens of Toyota Prius hybrid petrol-electric cars have been cruising the streets of the two western Canadian cities. Tokyo was the first city to launch an "eco-taxi" fleet.
Surinder Kang, operations manager at Empress Taxi in Victoria, estimates that fuel costs for the hybrid vehicles are about one-third those of traditional cabs, such as Ford's Crown Victoria. Priuses make up more than one-third of Empress's 90-car fleet.
Citing "way better handling downtown" and lower repair bills, Mr Kang says most Empress drivers plan to replace their cars with a hybrid.
Yellow Cab, Vancouver's biggest taxi company, operates 26 Priuses out of a fleet of 208. "The public seems to like them because out here on the west coast everything is environmentally correct," says Bruce Helgason, operations manger. Several other taxi companies in the Vancouver area have added Priuses to their fleets.
According to JD Power & Associates, a market research firm, the overall US hybrid vehicle market has grown from two models and fewer than 10,000 vehicles in 2000 to 11 models and a total of 212,000 vehicles sold in 2005. However, hybrids still make up only about 1.3 per cent of total light-vehicle sales.
Hybrids are, in some ways, best suited as taxis. The electric battery gets most use in stop-start city driving, maximising fuel savings. Furthermore, the higher the vehicle's mileage, the quicker the fuel savings offset the relatively hefty purchase price. "If you're using it 100,000km a year, that's where the savings are," says Mr Kang. "At 15-20,000km, I don't think it's worth it."
Toyota sold close to 110,000 Priuses in the US and Canada last year, double 2004 sales. A hybrid version of its bigger Camry sedan is due to go on sale this year.
Lets say an urban taxi drives 60,000 miles per year. And lets say it gets 20 miles per gallon on congested streets. With gas at $2.50 per gallon, the hack spends $7,500 a year on gas. Now lets say Mr. Kang is correct, and a hybrid uses only 1/3 the fuel of a regular taxi. That's a savings of $5,000 on gas in the first year alone.
Posted by dan at 09:42 AM
Someone in Washington has been reading Malcolm Gladwell. A month ago, as we noted, Treasury Secretary John Snow argued that it's just maybe possible that there's a potential for workers finally to start to see wages increase. Maybe.
"We're about at a tipping-point here where we're going to see much improvement in wage rates and compensation," Snow said during an interview on CNBC television
In a speech yesterday, Snow reiterated his belief that prosperity for workers is just around the corner.
"We are, right now, likely witnessing the tipping point on wages – when incomes rise for workers and business combined, but workers once again increase their incomes faster than businesses. As employers, you are familiar with the scenario: once businesses have been doing well for a while, they ultimately compete those increases in income away by competing harder for labor. The result is higher wages and higher standards of living for workers."
And what do the data say? Well, today the Bureau of Labor Statistics released the December jobs report. And what does it say about wages? Well, average hourly earnings for the private sector for both October and November were actually revised downward from the previous month's report. Average hourly wages for October were revised from $16.29, as reported in December, to $16.28. Average hourly wages for November were revised downward to $16.29, from $16.32, as reported in December.
The current report says hourly wages rose to $16.34 in December. That's moving in the right direction, I suppose. But the wages are still rising at a far slower rate than overall inflation.
Posted by dan at 08:59 AM
My latest in Slate, on Wal-Mart's tentative foray into the health insurance business.
Posted by dan at 08:31 AM
A big cramdown from Big Blue. IBM tells employees that their pensions are being frozen.
IBM assures employees they won't feel much pain, since at the same time, the company is "Redesigning its 401(k) savings plan to make it one of the richest in U.S. business by giving current pension plan participants an annual company-funded contribution of as much as 10 percent of their pay."
OK. But IBM wouldn't be doing all this stuff if it wasn't going to save money in the end, by putting less cash aside for employees' retirements. And it lets us know just how much less it will be putting aside:
IBM expects the U.S. plan changes announced today, along with 2006 retirement plan changes under consideration in several other countries, will result in worldwide retirement-related expense savings of $450 to $500 million for 2006, and $2.5 to $3 billion for the period 2006 through 2010, based on year-end 2005 pension assumptions.
Posted by dan at 05:44 PM
Wal-Mart announces sales for the most recent five-week period and says earnings will come in at the low end of expectations. Company-wide, same-store sales were up 2.2%, which isn't so hot. But drill down a bit. Same-store sales at Sam's Club warehouses, which are more likely to be patronized by businesses, were up a decent 3.6 percent. Same-store sales at Wal-Mart stores, which are more likely to be patronized by individuals, were up a measly 1.9 percent.
And why did it ratchet down earnings expectations? As Marketwatch reports:
However, it was food sales that fed most of December's sales, dominating receipts in three of the crucial month's weeks. As compared to general merchandise sales, food sales deliver thinner profit margins
In other words, Wal-Mart's shoppers in December were spending on stuff they absolutely needed -- i.e. food -- but not buying stuff they wanted.
Posted by dan at 01:09 PM
Holman Jenkins, Jr., the Wall Street Journal op-edist has been arguing that hybrid cars like the Prius are economically inefficient and irrational purchases. After all, it may take several years for buyers to recoup the extra money they pay for the cars through lower outlays for gas.
As I've pointed out, this line of reasoning -- and I use the term advisedly -- ignores the many other economic and psychological reasons that spur people to buy hybrids. There are big tax credits associated with it, and you save time (which has a dollar value) by making fewer trips to gas stations, and by getting access to special driving lanes and parking spaces. Hybrids have also proved to be more reliable, saving owners further cash and time spent on repairs. And many people get a valuable psychic reward for knowing that they're emitting fewer noxious fumes into the air their neighbors breathe, and derive some satisfaction from the virtuous feeling they get when tooling silently around town.
Now comes more evidence that (1) hybrids lower operating costs for owners, and (2) profit-seeking entitites are rewarding hybrid owners for their virtue. Every car owner must pay insurance every year, and the bill can frequently be quite hefty. As Jennifer Saranow reports in the Wall Street Journal, hybrid drivers are going to get discounts on car insurance.
Insurance companies are the latest to reward owners of hybrid vehicles.In recent months, drivers of the vehicles that combine an electric motor with a gasoline engine have gained such things as tax breaks, access to car-pool lanes and free parking. Now, an increasing number of insurers are giving discounts of as much as 10% to customers with the typically more fuel-efficient vehicles.
Today, St. Paul Travelers Cos.' Travelers personal-lines unit plans to announce a 10% auto-insurance discount for hybrid-vehicle owners. Travelers plans to roll out the offer nationally starting late next month. Farmers Insurance Group of Cos., a unit of Zurich Financial Services AG, in October began offering a 5% discount for auto customers in California who own a hybrid or alternative-fuel vehicle.
Insurance premiums are calculated based on a number of factors including type of vehicle, vehicle price and driver characteristics. The new discounts, however, are applied after regular insurance premiums are calculated, meaning they are on top of other reductions, such as rates for being a safe driver or a company's claim experience with hybrids.
Travelers says it is offering its new discount in an effort to further reward hybrid owners, who the company's research shows tend to be safe and lower-risk drivers, having fewer claims than drivers of nonhybrid vehicles.
"The hybrid customers tend to have preferred insurance characteristics," says Greg Toczydlowski, senior vice president of product management for Travelers.
Meanwhile, the latest sales figures are out. Toyota in December sold 9,207 Priuses, 2,198 Highlander hybrid SUVs, and 2,172 Lexus hybrid SUVs, for a total of 13,577, or 6.7 percent of total sales. Honda sold 2,528 Civic hybrids, and 720 Accord hybrids, for a total of 3,248, or about 2.5 percent of all sales.
Posted by dan at 09:01 AM
That was a very expensive lap dance. Randall Smith reports on the Wall Street Journal that several highly-paid Morgan Stanley staffers were cashiered for taking clients to a strip joint.
NEW YORK -- Morgan Stanley has fired a stock-research analyst and three sales staffers in the Wall Street firm's institutional-stock division after they accompanied one or more clients on a visit to an adult-entertainment club, according to people familiar with the matter.The firing of the staffers, all men, sent a message that exclusionary, male-only activities won't be tolerated at the firm, according to people familiar with the matter. In mid-2004, Morgan Stanley agreed to pay $54 million to settle a gender-discrimination case. As part of the settlement, Morgan Stanley denied wrongdoing but agreed to take additional steps to promote diversity and conduct antidiscrimination training.
One of the complaints in the gender-discrimination case brought by the Equal Employment Opportunity Commission was that women in the same institutional-stock division had been improperly excluded from certain client-related activities such as male-only golf outings and strip-club visits. . . .
In the recent episode, the four fired employees were all technology-industry specialists who made the strip-club visit during free time while they were attending a three-day Morgan Stanley conference for tech investors in early November at the Arizona Biltmore Resort & Spa in Phoenix.
The firm has a policy against participation in an exclusionary event while on company business, people familiar with the firm said. One rule specifically bars attending adult-entertainment establishments in connection with company business. One or more clients were present at the Arizona establishment, one person familiar with the matter said.
Moreover, the same people said, such actions couldn't be tolerated under a new chief executive, John Mack, who is known as a champion of both diversity and regulatory compliance.
Posted by dan at 08:56 AM
Adam Davidson of National Public Radio looks into some obscure economic indicators.
Posted by dan at 08:43 AM
Remember Aether Sytems? In the summer of 2004, I wrote a piece in Slate that marveled at the absurdity of the once high-flying wireless networking company selling off its businesses and deciding it would use its remaining cash to build a leveraged portfolio of mortgage-backed securities. Never mind that none of the executives had any experience trading fixed-income securities, or that the yield curve was already in the process of flattening.
So how did it work out? Well, it didn't. The company's stock has lost about five percent of its value in the past two years. Aether's shareholders would have done far better if managemnet had simply bought the S&P500 Index and called it a day, or put the money in a CD. (Here's a chart showing the path of Aether vs. the S&P 500 since June 2004.)
And in its most recent 10-Q, filed in November 2005, Aether indicated that it's probably not cut out for the whole trading thing.
In light of the continued reduction in spreads between long-term and short-term interest rates, which has had a negative impact on the value and performance of our MBS portfolio, we have increasingly devoted attention to exploring other potential business opportunities that we believe would help us achieve our overall business objectives. While we have not identified a particular business or strategy that we believe should be pursued at this time, we intend to continue exploring alternatives and do not expect to make additional investments in our MBS portfolio in the near term.
So what trend will Aether glom on to next? Krispy Kreme franchises? Solar energy? Buying and selling condos in Miami? Stay tuned.
Posted by dan at 10:22 AM
A lot of New York City real estate brokers may be seeking to diversify their income streams. Michael Corkery reports in the Wall Street Journal:
Sale prices of condominiums and co-ops in Manhattan continued to rise last year, but there was a sizable decrease in the number of sales, according to reports by two of the city's largest real-estate brokers.Corcoran Group reported the number of sales of Manhattan condos and co-ops dropped by about one-third from 2004 to 2005. Similarly, Prudential Douglas Elliman said sales slipped 27.2% in the fourth quarter compared with a year earlier. . .
"What you are seeing is a pause, a holdback," says Jonathan Miller, president and chief executive officer of Miller Samuel, a real-estate appraisal firm based in New York that prepared the Prudential Douglas Elliman report. The decrease in the number of sales came as inventory returned to normal levels after being unusually low in recent years, Mr. Miller says. . . .
While prices continue to move up, in some cases condos and co-ops are staying on the market longer. According to Prudential Douglas Elliman, it took an average of 137 days to sell an apartment in the fourth quarter of 2005, compared with an average of 96 days a year earlier.
Posted by dan at 10:12 AM
John Larkin reports in the Wall Street Journal that the Tom Friedman's India-techies-taking-over-the-world scenario may have to wait a few years--at least until students begin to wear shoes to business meetings:
MUMBAI -- India, despite its reputation as a bottomless well of back-office talent ready to scoop up American jobs, is having an increasingly difficult time finding qualified workers to fuel its booming services sector.The cross-sector crunch is especially worrisome in the technology industry, where wages are rising 15% a year as call centers and software firms throw money at the increasingly shallow pool of youngsters who can hit the ground running. Consulting firm McKinsey & Co. says India's information-technology industry could face a deficit of 500,000 workers as soon as 2010, undermining its attractiveness as an investment destination.
Even if companies continue to find the talent they need in the near term, the rising wage bill is a troublesome long-term trend for India's competitive prospects -- and for foreign companies pumping money into the global outsourcing market. The emerging talent deficit is giving rivals such as Russia space to compete with India for high-end outsourced work such as software design and solutions, and allows aspirants such as the Philippines -- where English is widely spoken -- to better compete for call-center business.
"There are huge numbers of fresh [university] graduates who are just not hirable," says Anand Saraf, managing director of Iqura Technologies, a software firm in Bangalore, India. Mr. Saraf says he has lost contract work to other countries including the Philippines and Poland due to rising local wages. India, he adds, is becoming "an expensive place to do business."
At the heart of India's dilemma lies the subcontinent's antiquated higher-education system. It produces around three million graduates a year, but they are of such uneven quality that many aren't employable. This wasn't a problem when significant numbers of talented recruits were available to fill the first waves of jobs in the modernizing economy. But as the cream of each year's class becomes absorbed more quickly, companies are having trouble finding good, affordable talent -- from the lowliest phone jockeys to top executives -- as revenue and operations expand along with India's booming economy. . . .
India produces a huge number of engineers, says L&T's chairman A.M. Naik, but most are graduates of mediocre private engineering colleges. "I spend more time on human resources than actually doing work," he complains. "The talent issue is going to decide who will win and who will lose" the race for profitability. . . .
Politics is also shortchanging students, says Shiv Visvanathan, a professor at the Dhirubhai Ambani Institute of Information and Communication Technology at Ahmedabad. Many state colleges, he says, are controlled by local politicians who arrange for the necessary licenses and get a cut of revenue. As a result, the emphasis is on making money rather than on academics. Some colleges can't afford library books and don't have enough classrooms. . . .
In the meantime, an army of unemployed recent graduates, estimated at more than five million, is expected to grow. Mr. Saraf, whose firm Iqura also has an executive-search business, says most IT firms now won't touch anyone with less than two years of experience. He says he regularly receives graduate applicants who have learned outdated computer languages.
"I've even had to tell [new hires] they can't wear slippers to business meetings," he says.
Posted by dan at 09:54 AM
The economy may be growing nicely, but people who rely on wages for their income aren't doing particularly well. That's why Wal-Mart's same-store sales are growing far more slowly than the economy at large. Meanwhile, the Federal Reserve in December said the inflation data was benign and the climate was good for corporate profits, in part because "subdued gains in compensation and strong growth in productivity were holding down business costs."
Posted by dan at 09:46 AM
Former Senator Alfonse D'Amato thinks William Weld, the ex-Massachusetts turned dilettante private equity investor who is now running for Governor of New York, has ethics problems.
Patrick Healy reports in the New York Times:
Alfonse M. D'Amato, the former senator, sharply criticized a leading Republican candidate for governor, William F. Weld, saying last night that Mr. Weld was under the "cloud" of a federal investigation for once running a "sham college."Mr. D'Amato, a Republican, also chastised Mr. Weld for resigning as governor of Massachusetts in 1997, before his second term was over, and then seeking to lead New York "without any real experience here."
Speaking on NY1, where he is a paid commentator, Mr. D'Amato acknowledged that he did not feel "kindly" toward Mr. Weld, given that Mr. Weld had led the Justice Department's criminal division around the time that officials there began investigating Mr. D'Amato's brother, Armand, a lobbyist.
"You want to come and be the governor of New York without any real experience here, but you've got experience down in Tennessee running this institution that's being investigated up and down," Mr. D'Amato said. "It doesn't sound to me that this is the time and place, not with this cloud."
Mr. D'Amato also said that Attorney General Eliot Spitzer, who is seeking the Democratic nomination for governor, had done an "excellent" job in office.
Mr. D'Amato said Mr. Weld would have trouble explaining the "multimillion dollar looting" of Decker College in Kentucky, which collapsed in bankruptcy last fall after federal officials cut off student loan aid because of mismanagement concerns.
Mr. Weld was Decker's chief executive from last January to October. Mr. Weld has said that federal prosecutors have told his lawyer that he was not being investigated.
Posted by dan at 09:42 AM
Husband and wife executive team Peter Kann and Karen Elliott House are giving up the reins of Dow Jones. The stock pops 8 percent on the move.
Posted by dan at 12:15 PM
N. Gregory Mankiw, back in Cambridge, seems to have discovered his capacity to speak truth to power--which he must have buried somewhere in Harvard Yard before moving to Washington to serve as Chairman of the Council of Economic Advisers.
Today, on the Wall Street Journal editorial page, he offers seven New Year's Resolutions to economic policy makers--of which he was one. They include:
• #1: This year I will be straight about the budget mess. I know that the federal budget is on an unsustainable path. I know that when the baby-boom generation retires and becomes eligible for Social Security and Medicare, all hell is going to break loose. I know that the choices aren't pretty -- either large cuts in promised benefits or taxes vastly higher than anything ever experienced in U.S. history. I am going to admit these facts to the American people, and I am going to say which choice I favor.
• #3: This year I will ask farmers to accept the free market. While I believe the government should provide a safety net for the truly needy, taxpayers shouldn't have to finance handouts to farmers, many of whom are wealthy. Farmers should meet the market test as much as anyone else. I will vote to repeal all federal subsidies to growers of corn, wheat, cotton, soybeans and rice. I will vote to allow unrestricted import of sugar. (See resolution no. 2.) I will tell Americans that eliminating our farm subsidies should not be a "concession" made in trade negotiations but a policy change that we affirmatively embrace.
• #4: This year I will admit that there are some good taxes. Everyone hates taxes, but the government needs to fund its operations, and some taxes can actually do some good in the process. I will tell the American people that a higher tax on gasoline is better at encouraging conservation than are heavy-handed CAFE regulations. It would not only encourage people to buy more fuel-efficient cars, but it would encourage them to drive less, such as by living closer to where they work. I will tell people that tolls are a good way to reduce traffic congestion -- and with new technologies they are getting easier to collect. I will advocate a carbon tax as the best way to control global warming. Because we may well need to raise more revenue (see resolution no. 1), I'll always be on the lookout for these good taxes.
It would have been nice if Mankiw had the fortitude to speak these obvious, eternal truths when he was actually in a position to influence policy. But did he shout from the rooftops that the fiscal course established by the president and the Republican Congress would lead either to massive benefits or massive tax increases? And he did say which choice he favored? Did he -- publicly or privately -- urge that all federal subsidies for farmers of corn, wheat, cotton, soybeans and rice, who are concentrated in Republican-dominated states, be repealed? Did he -- publicly or privately -- call for an increase in higher gasoline taxes and a carbon tax to combat global warning? Um, lets see, so far as I can tell, no, no, no, and no.
A far more interesting piece would have been a first-person account of: (1) how Mankiw tried to bring up these eternal, obvious truths and was repeatedly shot down or ignored; or (2) why he didn't bother to try to bring up these eternal, obvious truths.
Here it is, three days into the new year, and he's already got me violating one of my own resolutions: to stop screaming and pulling my hair out when I read the Wall Street Journal editorial page.
Posted by dan at 11:22 AM
A big theme for 2006 is likely to be a continuation of one of the big themes for the last several years: labor is weak, and capital is strong. People who depend on wages for income are likely to struggle, and so are the companies who cater to them. Like Wal-Mart. In December, it's same-store sales rose a measly 2.2 percent.
Posted by dan at 10:17 AM
The Wall Street Journal online edition has a new law blog, written by Peter Lattman. Well worth checking out.
Posted by dan at 10:16 AM
In New York, five-year-old, would-be trendy, money-losing retail stores run by young people with no track record of business sucess are easily ignored. But when the proprietor is the progeny of Ralph Lauren, style icon and bigtime advertiser, it's worthy of a giant front-page article in the New York Times Style section.
All around Ms. Lauren and Mr. Buck were designs in development: plates, umbrellas, bags. These, along with the rainbows of M&M's, gummy bears and jawbreakers - plus the chocolate bubble bath, Swarovski crystal Pez dispensers, striped scarves, candy panties and "I {sheart} Goobers" T-shirts already for sale - are the signs of what Ms. Lauren hopes will grow into a diversified candyland in which candy girls, and perhaps a few candy boys, will turn to Dylan's not just for sweets but also for candy-theme housewares, apparel, spa products and parties.In this aim she is not unlike her father, the fashion-to-lifestyle crossover king Ralph Lauren, whose empire is now valued at more than $5.5 billion. But Dylan's, which opened in 2001, is not yet profitable. Whether Ms. Lauren's business will do for candy couture what her father has done for cashmere, or become a costly, somewhat girlish art project, remains to be seen.
In the meantime Ms. Lauren is focused on fun.
"We like to have fun, right?" she said, smiling at Mr. Buck. In her world, fun - the kind found on waterslides and at amusement parks, a pink bubble gum kind of fun - is a gift worth giving.
"We do," Mr. Buck said.
"It's about the humor," Ms. Lauren said.
Yuk, yuk, went Mr. Buck. "Edgy humor," he said. "Adult."
"Right," Ms. Lauren said. "Adult spins on candy." Fun is a cherished principle at Dylan's Candy Bar, for its colors, packaging and people may be just the things that will make middling chocolate and gumballs worth real money.
Dylan's Candy Bar flagship store - 10,000 square feet of Willy Wonkaesque splendor on Third Avenue and 60th Street - has become a destination for A-list moms and their children. The appeal has extended to tweens and girls about town in need of a little something sweet. Paris Hilton was spotted at the new Dylan's boutique at Henri Bendel's; Anna Wintour stopped by to check out a display of candy dresses. (She left a note: "Fabulous! See you soon.")
Apparently Ms. Lauren understood something her father - who says he does not like candy - did not: "Dylan knew that girls go and love candies," Mr. Lauren said.
Not just any girls. Girls like her: trim, cool girls with good skin, perfect teeth and stunning clothes. "These Park Avenue sophisticates," Ms. Lauren said, "who go to the Polo store and spend trillions of dollars on cashmere sweaters are going to buy gummy bears in my store. Just because they buy certain clothes and wear mink coats and whatever, they still have an inner child. They will buy lollipops."
Ms. Lauren considers herself the model for the sparkling creature around which her business is coalescing: the Candy Girl, who appears every now and again in conversation. As in: "The Candy Girl can be sexy and young and thin. Candy's not about fat people."
And she is betting that one day Candy Girls - not just in New York but across the nation - will buy things like lollipop plates and have lollipop bachelorette parties too. As Ms. Lauren expands her product lines, she is also building a distribution network. In 2003 she added four locations nationwide, and in November she opened a seasonal boutique in Bendel's. She plans to open a store in Los Angeles next year and is scouting sites in London, Tokyo, San Francisco, Las Vegas, Aspen, the Hamptons and Palm Beach.
Why it's an empire built on pluck and gummy bears! Except, as the article notes, the flagship Dylan's store is not yet profitable, and all the capital has come from daddy. And it's really not a business in the traditional sense of the word. For example, profits are secondary:
She says she has turned down rich business deals from, for example, Target, that other company owners would probably kill for. "It's not about the money to me," she said. "I believe I'm here to do something, to create something that makes people happy and expresses myself."
And the investors aren't exactly clamoring for dividends or interest payments.
She's got another month," Mr. Lauren growled. He laughed. "I don't consider it a loan. She does. If she wants to pay me back, it's very good of her, and I'll take it. If she can't pay me back, I know whatever she did she's done because she believes in it and was honest about it and works hard. I'm glad she had a chance to use her creativity and express herself."
Posted by dan at 07:55 AM
Notice anything strange about Alan Finder's front page story from the New York Times yesterday?
It's a nice story about how small liberal arts colleges are competing with other private universities by offering merit-based scholarships, and hence discounting tuition. The headline blares: "Aid Lets Smaller Colleges Ask, Why Pay for Ivy League Retail?"
The problem? The article has nothing to do with Ivy League colleges whatsoever. The lead anecdote describes a student who chose Allegheny College in Pennsylvania over Boston University because B.U. offered no financial aid and Allegheny offered a merit-based scholarship that cut tuition by 50 percent. but there's no evidence presented elsewhere in the article that students are practicing tuition arbitrage between Ivy League colleges and discounters. In fact, none of the students, families, or administrators quoted in the article have anything to do with an Ivy League college. So what gives?
The real headline should have been: small liberal arts colleges in the midwest have to discount tuition massively in order to attract students.
Posted by dan at 07:45 AM
Peter Gosselin of the Los Angeles Times continues with his fine work on income, benefit, and job insecurity. An excellent piece of micro- work on one of the macro-economic trends that is the most powerful in the economy--and the most overlooked by the financial elites.
The headline -- How Bedrock Promises Of Security Have Fractured Across America -- neatly sums it up.A few choice quotes:
By contrast, 401(k)s involve no similar promise of income, as Seibert painfully discovered. Instead, what these accounts offer is a tax break in return for saving out of pay. Employers may contribute, which is why 401(k)s are called "defined contribution" plans. But that's the limit of their obligation. The risks and responsibilities are all on the employee.
Risk or not, however, 401(k)s and similar accounts are sweeping the field. Since 1980, the fraction of the full-time private sector workforce covered by pensions has fallen from 35% to under 20%, according to the Employee Benefit Research Institute, which is sponsored by big business.
One in every six to 10 companies that still offer pensions have frozen their plans by limiting or eliminating employees' right to accrue additional benefits or no longer covering new hires, according to studies by the Pension Benefit Guaranty Corp. and Chicago-based Aon Consulting. Among those that will freeze at the beginning of 2006 is Tribune Corp., which owns the Los Angeles Times.
The trends for 401(k)s and similar accounts are the mirror opposite. In a nutshell, America is quickly converting from a defined benefit society to a defined contribution one. . . .
The switch from traditional pensions to 401(k)s is the most clear-cut example of the risk shift underway in America from business and government to working families. But it hardly is the only one.
Across the country, safety nets that working people once depended on to shield them from economic dislocation — for example, unemployment compensation, disability insurance, job training and healthcare coverage — have been scaled back or eliminated. At Delphi, the battle lines have formed not just over retirement, but also wages, benefits, job security, indeed the company's very survival.
Well worth reading--and a theme we'll be hearing a great deal of in the coming year. There's mounting evidence that we are, in fact, in a New Economy--high productivity, high growth, low inflation, highly flexible, resistant to recessions, really intense competition, and capital gets treated nicely and rewarded. That's all to the good. What generally gets overlooked is that, while not quite a zero sum game, the New Economy is only made possible because labor is treated shabbilty, because companies and governments routinely abandon commitments they make, and because volatility and instability in jobs, incomes and benefits are now, too, a seemingly permanent feature of our economic life.
Posted by dan at 07:31 AM
I haven't had a chance to dig into Benjamin Friedman's Moral Consequences of Economic Growth. But Jeffrey Madrick's nice review essay ($ required) in the New York Review of Books moves it to the top of the pile.
Posted by dan at 07:25 AM
A lagniappe for the New Year, on the prospects of an alternative energy bubble, in the New York Times Week in Review.
Posted by dan at 08:16 AM