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Lawrence Lindsey writes an op-ed in today's Wall Street Journal, reprinted on AEI's website, in which he frets that the Democratic Congress is about to hand a big victory to unions by supporting the Employee Free Choice Act , which would make it easier for unions to organize. And that corporate executives--the type of people who read the Wall Street Journal editorial page--should take heed.
To which I respond: what unions? Check out the recent study from BLS on union representation. BLS found that in 2006, only 7.4 percent of private industry workers -- only 7.4 percent -- were members of unions. Corporate executives--the type of people who read the Wall Street Journal editorial page -- have done a pretty darn good job beating the unions down all by themselves.
Posted by dan at 05:32 PM
Wal-Mart CEO Lee Scott is making the right kind of noises on reducing energy use and promoting alternative energy--as a way of increasing profits and sales that has the collateral effect of boosting the firm's image and making the company a useful citizen. Now he's making noises about using Wal-Mart's legendary ability to gets its suppliers and vendors to alter theri habits to enlist in the same cause.
Kris Hudson reports in the Wall Street Journal:
Wal-Mart Stores Inc. Chief Executive Lee Scott called on the retailing giant's suppliers and employees to aid its green campaign, including a request that suppliers eventually eliminate nonrenewable energy from their processes and products.For the past year the company has been expanding its environmental push even as its sales growth has waned and it has faced persistent criticism over its wages and health benefits. But Mr. Scott's remarks yesterday in London marked Wal-Mart's first formal call for suppliers to decrease their use of nonrenewable energy such as that generated by burning coal or gas. Wal-Mart pledges to eventually power its operations entirely with renewable energy sources such as wind and solar energy.
Mr. Scott issued the call while introducing a campaign he christened "Sustainability 360." In another aspect of the campaign, Wal-Mart will ask its 1.35 million U.S. employees this year to make commitments of their own, such as biking to work or encouraging friends to buy energy-efficient light bulbs.
Among the initiatives Mr. Scott outlined, prodding suppliers off nonrenewable energy could have the largest commercial ramifications. Wal-Mart, with an estimated $350 billion in sales last year, buys goods from more than 60,000 suppliers globally.
"Just think about this: What if we worked with our suppliers to take nonrenewable energy off our shelves and out of the lives of our customers?" Mr. Scott said, according to a transcript of the speech, at an executive seminar hosted by the University of Cambridge and Prince Charles.
Posted by dan at 12:09 PM
Bush to the Democratic Congress: you have to cut Medicare in the coming years because I and the Republican Congress decided to expand it with the prescription drug benefit a few years ago--oh, and because we need to preserve the tax cuts. This is going to be a recurring theme: legislators are being asked to choose between extending tax cuts (which chiefly benefit those with means) and providing health care to old people (which benefits everyone) and providing health care to poor people (which benefits poor people).
Robert Pear reports in the New York Times:
President Bush will ask Congress in his budget next week to squeeze more than $70 billion of savings from Medicare and Medicaid over the next five years, administration officials and health care lobbyists said Thursday.The proposals, part of a White House plan to balance the budget by 2012, set the stage for a battle with Congress over entitlement spending. Even some administration officials say they cannot imagine approval of such large cutbacks in a Congress now controlled by Democrats.
Mr. Bush is also expected to propose changes in the Children’s Health Insurance Program to sharpen its focus on low-income families. The changes could reduce federal payments to states that cover children with family incomes exceeding twice the poverty level. Under federal guidelines, a family of four is considered poor if its annual income is less than $20,650. . .
One measure of the political difficulty facing the president’s plan for Medicare and Medicaid is that he sought $20 billion less in savings from the two programs last year, when Republicans controlled Congress, and few of those proposals were adopted. . . .
“If you want to balance the budget eventually and you do not want tax increases,” said Joseph R. Antos, an economist at the American Enterprise Institute, “you have no choice but to propose substantial reductions in Medicare.” . . .
Most of the proposed savings, however, would come from health care providers. Mr. Bush is expected to propose freezing Medicare payments to home health agencies and reducing the inflation allowance paid to hospitals, nursing homes and other providers. . .
The president’s budget also assumes that Medicare payments to doctors will be cut at least 8 percent next year, as provided under a formula in existing law.
Yikes, eight percent cuts for physicians! Pretty soon we'll have Hematologists for Hillary, Osteopaths for Obama, and Endocronologists for Edwards.
Posted by dan at 11:51 AM
Did you know that Wall Street was run by Mayans? I didn't either, until I came across this great nugget in the FT's front-page article on the cashiering of Dell CEO Kevin Rollins and his replacement by Dell:
Mr. Dell probably shared as much responsibility as Mr. Rollins for the company's failings of the past two years, said Roger Kay, an analyst at Endpoint Associates."The rules of Wall Street demand that their be human sacrifice," he said.
Posted by dan at 09:39 AM
That sound you hear is economists' heads exploding. Why? When Angela Merkel decided to raise the value-added tax, they said it would spell doom. Instead, Germany's economy is rampant, by German standards, that is. Bertrand Benoit reports in the Financial Times:
The German government yesterday claimed it had defied doomsayers who had predicted that the economy would suffer from last month's value added tax rise."The sceptics and doom merchants who predicted the economy would not survive the VAT increase have gone a lot quieter," a jubilant Michael Glos, German economics minister, said as he presented the annual economic report, which raised the 2007 gross domestic product growth forecast from 1.4 per cent to 1.7 per cent.
The report's publication yesterday coincided with yet another raft of surprisingly positive labour market data.
Most economists agree that Germany's robust recovery may have gathered sufficient momentum to weather this month's 3-point rise in VAT to 19 per cent with little more than a temporary slow-down.
This would be a victory for Angela Merkel, chancellor, who took a gamble in the face of criticism from economists when she agreed to the heftiest tax rise in Germany's postwar history after her election in November 2005.
The government now expects the number of jobseekers in Europe's largest economy to fall below 4m this year as the strong recovery continues, bringing the total fall since January 2006 to more than 1m.
"We expect unemployment to stand at 4.008m on average this year," said a senior official. "If you look at the figure now, that implies a fall below 4m in the course of the -second half." . . .
Posted by dan at 09:35 AM
The Financial Times serves many excellent functions. Among them: it's a great aggregator of anecdotes on the many ways in which excess liquidity and cheap credit affect markets. Today, the FT takes us to some less-explored corners of the world: Romania and distressed debt.
First, Christopher Condon reports that Romania is seen by investors as equivalent in risk to General Motors:
Foreign investor interest is expected to be keen when Romania auctions 1bn lei ($382m) worth of three-year government bonds today in Bucharest.It marks Romania's first local-currency treasury bond issue in 16 months, and the first since the central bank opened the local market to foreign buyers on January 1, the day Romania joined the European Union. . . .
Today's three-year paper carries a 6 per cent coupon. Some expect yields as low as 5.5 per cent in the auction process, though others are more sceptical. Mr Ionescu predicted an average yield of around 6.25 per cent.
Lets say the yield comes out in the middle of the predictions, at about 6 percent. That means, based on yesterday's Treasury data, Romania pays only 120 basis points more on three-year money than the U.S. government does.
Item #2. Chris Hughes reports on distressed debt.
An imbalance between supply and demand is nudging up prices of distressed and "stressed" debt to inflated levels, bankers have warned. . . . .Gareth Noonan, managing director of European high-yield capital markets at Merrill Lynch, said stressed bank and mezzanine debt were trading at levels which might not reflect credit quality since a relatively big number of investors was chasing a limited number of distressed opportunities.
"There are more than 20 dedicated distressed investors and fewer than 10 distressed opportunities," he said. "As a result, most stressed or distressed debt, especially senior debt, is trading at inflated levels."
Dennis Buckley, managing director of Bright Asset, the London-based debt advisory boutique, said: "We think the pricing of distressed credits is inflated due to the. . . liquidity in the market."
Posted by dan at 09:27 AM
Jeff Opdyke reports in the Wall Street Journal on the continuing decline of pensions.
"Newly hired workers may find it tougher to gian access to a company pension plan, while some already in a plan may no longer see their benefits grow, according to a new survey of corporate retirement plans.In its Hot Topics in Retirement survey of 146 large U.S. companies due to be released today, human-resources consulting firm Hewitt Associates found that 6% of those with pension plans say they are 'very likely to close participation to new employees' in 2007. Meanwhile, 4% expect to freeze accruals, meaning current workers who now participate in a pension plan will see the size of their retirement benefits stop growing."
Posted by dan at 09:22 AM
My latest in Slate, on the rising culture of nice executives -- in the NFL and in the corporate world.
Posted by dan at 08:33 AM
The European Union accuses the U.S. of protectionism. Tobias Buck reports in the Financial Times:
The European Union's top financial regulator has accused the US of using a crackdown on online gambling to protect its domestic gaming industry and warned it could trigger legal action before the World Trade OrganisationCharlie McCreevy, the internal market commissioner, yesterday said US legislation that made it illegal for banks and credit card companies to process online bets placed by American citizens with foreign gambling sites was "protectionist".
In my view it is probably a restrictive practice and we might take it up in another forum," Mr McCreevy said. He added that the case could go to the WTO and suggested he would pursue the matter with his American counterparts on a visit to the US in March.
Posted by dan at 08:52 AM
Condoflip.com, which features briefly in my forthcoming book about bubbles (due out in early May), is having to, um, change it's strategy a bit. The Wall Street Journal reports:
Mark Zilbert, founder of the online swap meet for preconstruction condo contracts is "rebranding" his Web site, which was a symbol of the condo boom times. "It just didn't make sense in a marketplace where all you have are sellers," says Mr. Zilbert, a downtown Miami residential real-estate broker.His new Web site name: Condosupercenter.com. "Super Center" is, of course, a term often associated with discount retail stores. "We clearly have a lot of sellers and very few buyers," but there is still demand for buildings as they convert from being holes in the ground to being actually built, he says.
The new Web site is meant to help those early speculators -- 80% of the market, Mr. Zilbert estimates -- to sell their condos to folks actually interested in living in them. "We clearly don't have one buyer for every apartment being built." Still, he's optimistic enough that he's opening a sales center in downtown Miami.
Posted by dan at 08:37 AM
And that's a pretty good grade. S&P yesterday awarded India investment grade status. The Wall Street Journal reports:
Ratings agency Standard & Poor's raised its sovereign credit ratings on India to investment grade, citing a strong economic outlook, rising foreign reserves and well-functioning capital markets.The upgrade brings S&P in line with Moody's Investors Service and Fitch Ratings, which already have investment-grade ratings for India. Analysts said the rating improvement should cut the cost of borrowing for some Indian companies and reduce the cost of credit default swaps for government issues. It also should lift the country's global profile as an investment destination.
S&P raised its long-term rating to triple-B-minus from double-B-plus and its short-term rating to single-A-3 from single-B. It said the outlook on the ratings is stable.
"India's economic prospects remain strong and are rising gradually, with GDP-trend growth likely to average more than 7.5% in the medium term," S&P's credit analyst, Ping Chew, said in a statement.
Posted by dan at 08:32 AM
An interesting piece by Pui-Wing Tam in the Wall Street Journal about the challenges facing venture capitalists. Funds formed in the last six years have reported negative median turns, and as investors get wise to their practices, VCs are having a difficult time quickly cashing out of early-stage companies through IPOs.
For the past few years, it has been difficult for venture capitalists to cash in on their investments in start-up companies. Historically, they drew out their profits in the start-up businesses they financed by doing public stock offerings, or outright sales of the companies.It isn't so easy anymore. Despite a recent burst of activity, the pace of new stock offerings remains muted, compared with the late 1990s and 2000. And acquisitions of start-up companies, while steady, haven't skyrocketed. That has left venture capitalists with many companies they funded sitting in their portfolios, generating no returns.
Posted by dan at 08:28 AM
It's common to hear skepticism about the impact of greater ethanol production on the food supply and the environment. Elisabeth Rosenthal reports in the New York Times on skepticism about the impact of vastly increased production of another alternative fuel: palm oil.
Posted by dan at 08:26 AM
Is the freight business slowing? Maybe, says UPS, which reported earnings yesterday.
The good news: shipping volume in the U.S. for the fourth quarter of 2006 was up 3.6 percent from the 2005 fourth quarter. That sounds pretty good. Of course, in the fourth quarter of 2005, volume rose 6.3 percent from the 2004 fourth quarter.
Given the continuing rise in trade, outsourcing, and e-commerce, one would expect UPS's volume to be growing at a rate significantly faster than the economy as a whole. Clearly, the economy, like UPS's trucks, are continuing to move ahead--just in a lower gear.
Posted by dan at 08:19 AM
The Census Bureau yesterday reported on the level of vacant houses. The salient data point: 2.7 percent of homes (not apartments, homes) were vacant in the fourth quarter of 2006, up from 2.0 percent in 2005. That may not sound like much, but when you consider that there are 75.763 million homes owned by homeowners, that's a big number. As Table 3 shows, the number of vacant homes for sale rose from 1.566 million in the fourth quarter to 2.1 million homes in the fourth quarter of 2006, an increase of 444,000. According to the National Association of Realtors, current inventory of existing homes for sale is about 3.5 million.
Posted by dan at 09:49 AM
The war between capital and labor continues apace. Guess who is winning? The Bureau of Labor Statistics reports on union membership:
In 2006, 12.0 percent of employed wage and salary workers were union members, down from 12.5 percent a year earlier, the U.S. Department of Labor's Bureau of Labor Statistics reported today. The number of persons belonging to a union fell by 326,000 in 2006 to 15.4 million. The union membership rate has steadily declined from 20.1 percent in 1983, the first year for which comparable union data are available.
Meanwhile, private sector unions appear to be well on their way to extinction.
The union membership rate for government workers (36.2 percent) was substantially higher than for private industry workers (7.4 percent).
That's right, only 7.4 percent of private industry workers are members of unions.
It is a mere coincidence that wages have stagnated and that the proportion of private sector workers covered by health insurance has been declining in recent years at a time when private-sector unions have continually lost strength? I think not.
Posted by dan at 03:46 PM
My latest in the Times, on America's declining market share.
Posted by dan at 08:24 AM
My latest in Slate, on a hypothetical management-led buyout for the New York Times.
Posted by dan at 08:23 AM