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For those who just can't wait until early May, my book, Pop! Why Bubbles Are Great for the Economy,(and yes, there's a chapter on housing and housing credit) is now available for pre-order on Amazon.com. Check out the bold, Roy Lichtenstein-homage, attention-grabbing cover.
Posted by dan at 10:17 AM
My latest in Slate, on the watch business in the age of cell phones, iPods, and ubiquitous timepieces.
Posted by dan at 10:12 AM
Helicopter parents. That's the term given for overbearing yuppie parents who are psychologically unable to let their kids go. They go with them to college, try to manage their fledgling careers, and generally hover around at times when the should be regarding their jobs as completed.
Well, Alan Greenspan is showing every sign of being a helicopter ex-central banker. From the Financial Times:
Alan Greenspan risked stirring renewed controversy on Tuesday when he told the Bloomberg news agency that there was a “one-third probability” of a US recession this year.The former Federal Reserve chairman’s comments are starkly at odds with the relatively upbeat assessment made by Ben Bernanke, his successor, in testimony to Congress last week.
Mr Greenspan’s latest remarks come barely a week after he told investors in Hong Kong that he thought a US recession this year was “possible”. The earlier comments spread quickly through the investment community, spooking investors and contributing to turmoil in financial markets.
Following a global sell-off in equities and other assets, Mr Greenspan was forced to clarify his statement, declaring he had said that a recession this year was “possible” but not “probable”.
The markets appeared to take Mr Greenspan’s latest comments in their stride but the remarks show he has decided not to keep quiet in the light of the past week’s experience, highlighting a dilemma for Mr Bernanke.
Posted by dan at 10:50 AM
The Wall Street Journal's excellent coverage of the options backdating scandal continues. Today's front page article by Mark Maremont, Charles Forelle and James Bandler, notes that there was a rash of options backdating in the fall of 2001. In other words, companies that said they needed to issue options at the lows in September 2001, when the market briefly melted down, in order to keep people around, actually didn't "issue" those options until later, when the stocks had recovered somewhat. Nice. I'll only post a tiny bit here, since this is the sort of reporting that is worth paying for.
Amid the stock-market swoon that followed the Sept. 11, 2001, terrorist attacks, dozens of companies granted stock options to top executives or other employees. Now, some of those companies are saying the grants were in fact made weeks later -- and backdated.The disclosures are the latest wrinkle in a backdating scandal that involves more than 140 companies and has resulted in more than 70 firings or resignations of corporate officials. (See related article.) The new information suggests some executives profited from the market's plunge following Sept. 11 by manipulating options grant dates. . . .
At KLA-Tencor Corp., at least 11 top executives purportedly were awarded options on Oct. 2, 2001, at the very bottom of a sharp dip in the semiconductor-equipment maker's stock. But in a recent filing KLA said those options were among some that were improperly backdated, suggesting in a securities filing they weren't actually awarded until weeks later. The post-9/11 backdating increased KLA insiders' potential profit on the options by more than $12 million.
Affiliated Computer Services Inc., Take-Two Interactive Software Inc., Progress Software Corp. and Corinthian Colleges Inc. similarly have admitted they put erroneous dates on options that made it appear they were granted at post-9/11 low points.
Former officials at Monster Worldwide Inc. and Brocade Communications Systems Inc. have been accused by the Securities and Exchange Commission of backdating options to that period. The former Brocade official denies the allegations, and the ex-Monster executive has been in talks to settle the charges.
Elsewhere, in the Journal, op-ed columnist Holman Jenkins still doesn't see any problem with backdating.
Posted by dan at 10:31 AM
The Gap apparently is being priced out of many desirable retail markets due to high rents. James Covert and Nicole Urbanowicz report in the Wall Street Journal:
With rents soaring at high-profile shopping districts across the U.S., Gap Inc., appears to be feeling the pinch.The specialty-apparel chain has passed on renewing some leasles in pricey neighborhoods such as Manhattan's Upper East Side, Boston's Newbury Street and San Francisco's Haight-Ashbury section, according to brokers that specialize in retail real estate.
In the upscale suburbs north of Chicago, Gap appears to be scaling back its presence where it operates more than one store. . . .
Great! More room for Starbucks!
Posted by dan at 10:22 AM
Economists and policy types who believe that changing insurance in ways that force people to become active consumers of health care will help control costs and will "solve" the growing problem of health care insurance should read Wall Street Journal columnist Lee Gomes today. His ten-day stay in a hospital cost about $100,000--or about what a reporter at the Wall Street Journal makes in a year. Discussion questions: How would $5,000 stashed in a health savings account have helped Gomes pay for his treatment? Assuming he only had $5,000 or even $50,000 to spend on health care, which tests and treatments should he have refused or foregone? Given that he was having difficult breathing, how was Mr. Gomes supposed to negotiate for lower prices for CT scans and blood tests, as health care consumers are expected to do?
"One day in mid-January I had a cold; a few days later, something like the flu; and a few days after that, I was needing three breaths just to finish a sentence. An X-ray later showed my left lung as flooded as New Orleans was. . . . .As for the cost of all this, well, take a deep breath. This is where the conundrum of medical technology becomes apparent. The bill for my 10-day stay was $125,000 -- and that doesn't include any charges from my doctors. Those CT scans were $3,000 each, 10 times the cost of an X-ray. Each white blood-cell tally was a relative bargain at $250.
While this is not the amount my insurance company will end up paying -- medical accounting rivals Hollywood's in its opacity -- it is still a staggering sum.
Obviously, high-tech gadgets weren't the only reason for the price tag: My room, for instance, was $4,000 a day, though a good chunk of that was to pay for a system that used Wi-Fi technology to beam my vital signs to the nursing station. . . .
Of course, I doubt that I would have declined any of the high-tech wonders I was offered. Who would? And that attitude is a main cause of our soaring health care costs. The decisions that are in our best interest as individual patients, in the aggregate, help push things into crisis. We can't afford the remarkable system we've been smart enough to build.
Posted by dan at 10:14 AM
A reader pinged me for providing anecdotes, not data, for my argument in Slate last week that the housing market had yet to touch bottom. OK, here's some data.
The National Association of Realtors reported Tuesday that pending home sales in January 2007 were down 4.1 percent from December 2006, and down 8.9 percent from January 2006.
The Wall Street Journal reports today that inventories in several large markets rose in February.
The supply of homes listed for sale in 18 major metropolitan areas at the end of February was up 3.9% from a month earlier, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm based in Emeryville, Calif. . .Inventories remain high in much of the country. In February, they were up 36% from a year earlier in the 15 metro areas for which comparable data were available, ZipRealty reported. . . .
The biggest increases in February from a month earlier were in the Los Angeles metro area, up 8.1%; Minneapolis, 6.6%; Las Vegas, 6.2%, and Miami, 5.8%, according to ZipRealty. (Compare inventory rates with an interactive chart.)
Thomas Lawler, a housing economist in Vienna, Va., says that the inventory trends are worrisome in already glutted markets, such as southern Florida, and that recent tightening of credit standards by subprime lenders will hurt sales this spring.
Posted by dan at 10:09 AM
My latest in Slate: an academic study suggests that something isn't quite right with the I/B/E/S stock recommendations database.
Posted by dan at 10:01 AM
This private equity stuff is getting out of control. Regulators and Congress should act quickly, or else the Blackstone Group will soon have a monopoly on. . . . . cheesy European entertainment.
In 2005, Blackstone bought the company that controls Dungeons. What is Dungeons? Why, as Julia Werdiger informs us in the New York Times, it's a "a string of attractions in Britain, Amsterdam, and Hamburg that use wax figures to bring to life some of history’s goriest events."
Not content with this empire, Blackstone proceeded to buy Legoland in 2005. Last year, it bought Gardaland, an amusement park in Northern Italy.
Now comes news that Blackstone will pay nearly $2 billion for Tussauds Group, which, in addition to owning the wax museums, owns the London Eye.
Either some Europe-based partner has some long-term vision about the future for such companies, or he is a very indulgent parent of small children.
Posted by dan at 09:12 AM
A great article in yesterday's New York Times by Robert Pear about the challenges individuals face in buying health care. There are a host of reasons why the notion that forcing individuals to become more intelligent consumers of health insurance and health services, currently being pushed by an array of well-known economists, is a cruel joke. Pear provides a great example, introducing us to Vicki Readling.
Increasingly, the problem affects middle-class people like Ms. Readling, who said she made about $60,000 last year. As an independent contractor, like many real estate agents, Ms. Readling does not receive health benefits from an employer. She tried to buy a policy in the individual insurance market, but — having had cancer — could not obtain coverage, except at a price exceeding $27,000 a year, which was more than she could pay. . . .As an independent contractor with a Century 21 real estate brokerage, Ms. Readling had bought insurance on her own, a temporary extension of coverage from a prior job. But she was unable to renew it after she had surgery for breast cancer in 2005. Most insurers would not offer her coverage, she said, and one carrier quoted a price of $2,300 a month for coverage with a deductible of $5,000 a year.
Keep in mind that as a self-employed person, Ms. Readling can already deduct the cost of health insurance premiums from her taxable income. The Bush administration, and its allies in think tanks and universities, all of whom enjoy nice health care benefits for which the government or their employers picks up the bill, would have us think that the solution to the problem of health insurance is to extend such tax breaks to people who have payroll jobs.
Please.
Here was a woman who bought insurance on her own in the private market. Then the insurer refused to continue selling her insurance after it turned out she actually needed insurance. And now, as she enters the private market, armed with a big tax break, she still can't find anyone to sell her insurance for less than about half her pre-tax income. Consumer-driven health care, indeed.
Wouldn't it be simpler, and more economically efficient, if Ms. Readling was placed in a risk pool with, oh, 280 million other Americans?
Posted by dan at 08:39 AM
Andrew Ward reports in the Financial Times on the trevails of a U.S. company that makes those "Support Our Troops" magnets:
For three years after the invasion of Iraq it was impossible to drive far in middle America without seeing a car displaying a magnetic yellow ribbon.The magnets, bearingthe slogan "Support Our Troops", became a symbol of patriotism for millions.
But as support for the war fades, demand for the ribbons has collapsed.
Magnet America, the largest manufacturer, has seen sales fall from 1.2m in August 2004 to about 4,000 a month and has an unsold stockpile of about 1m. . . .
At its peak the North Carolina-based company had a staff of 180 people. Today it employs 11.
Mr Pattisall said declining support for the war was not the only reason for the slump. A flood of cheap imports from China also hurt the company, which has refused to shift production overseas even though it costs three times as much to manufacture in the US.
About half a dozen companies are still supplying the magnets compared with 200 at the height of the fad, according to Mr Pattisall. . .
When the company was founded in April 2003, during the initial invasion of Iraq, nearly all its revenues came from yellow ribbons. Today, patriotic products account for only 6 per cent of sales.
The ribbon has been overtaken as the company's best-selling product by a wristband promoting chastity before marriage with the slogan "True Love Waits".
Posted by dan at 08:21 AM
An excellent article in yesterday's Wall Street Journal by John Lyons about Wal-Mart's success in Mexico. There are two unappreciated ironies here. First, Wal-Mart, and other retail brands that are seen as low-end in the U.S. (Burger King, say), are, to a degree, aspirational brands in emerging markets like Mexico. Communities and shoppers see their arrival as a sign of progress, as a vast improvement on the retail experience and choice on offer. Second, companies that pay low wages in the U.S. can be significant forces in helping to create a viable middle class in emerging markets. Unlike many employers in Mexico, Wal-Mart puts people on the payroll, thus allowing people who used to work off the books to join the tax rolls, to become eligible for government services, and paying predictable wages that, given the lower cost of living in Mexico, provide a solid basis of support.
Wal-Mart de México SAB, a publicly traded subsidiary, is not only the biggest private employer in Mexico -- it's the biggest single retailer in Latin America. Sales at Wal-Mex, as the Mexican unit is called, are forecast to rise 16% to $21 billion this year, representing a quarter of Wal-Mart's foreign revenue. International revenue soared 30% to $77.1 billion, accounting for 22% of Wal-Mart's sales, in the fiscal year ended Jan. 31. Wal-Mex profits are forecast to grow 20% to $1.3 billion this year. . . .Wal-Mart's jobs pay well by Mexican standards and serve as a gateway to the state health and pension systems. Full-time jobs with regular salaries are scarce. About half Mexico's labor force -- 20 million people -- work in a so-called informal economy of day laborers, unregistered taxi drivers and street vendors. Their salaries are in cash and they pay no taxes. Because they aren't in the tax system, they are also not eligible for the state-run health-care system and government mortgage subsidies, and they have no pensions. . . .
In a country where family connections often matter more than skill, Wal-Mart trains floor workers to rise to management. Plus, Wal-Mart lowered prices on thousands of staples from tomatoes to diapers, helping stretch low wages here for millions of middle-class and poor consumers. . . .
Gisela López, the 31-year-old head of billing at the Juchitán store, benefited from the retailer's system of promoting from within. Raised by her uneducated, Zapotec-speaking grandparents, Ms. López earned a computer degree at Juchitán's small technical college and then left for the booming northern city of Monterrey in search of opportunity.
Lacking connections, she couldn't find the office job she dreamed about, and took a job at one of Wal-Mart's stores. After three months, Ms. López made cashier supervisor, and later moved over to the billing department. When Wal-Mart opened a store in Juchitán, Ms. López jumped at the chance to move home -- and was promoted to billing chief in the process.
"It's a very different place to work, because you can succeed by your own effort," says Ms. López, whose $12,000-a-year salary now puts her in Mexico's middle class.
Posted by dan at 08:15 AM
Who knew Shaquille O'Neal was so haimische? From the Financial Times on Saturday.
The elder O’Neal is clearly a big influence, who raised his son “Karate Kid-style”. By that, he means that - like the Ralph Macchio character in the 1980s Hollywood film - he was forced to perform basic chores and endure experiences that were frustrating at the time, but which later proved valuable. “Like we moved to Germany. There are no black people in Germany - only on the base - which was good for me.” Moving around a lot meant O’Neal “learned to relate to different people”. “Now I can go up to someone and say: Shalom, shana tova. Hello, how are you doing?” O’Neal reaches out and shakes my hand as he recites the Hebrew New Year greeting.
Posted by dan at 08:12 AM
Your humble scribe appears in three (count 'em, three) of the world's great newspapers this morning.
1. My "Economic View" column in the New York Times, which asks the question: if a recession was on the horizon, would professional foreocasters be able to see it?
2. A review of P.J. O'Rourke's book on The Wealth of Nations in the Washington Post.
3. An article in the Los Angeles Times opinion section on Maoisit self-criticism at Starbucks.
Posted by dan at 07:29 AM