October 31, 2007 4:21
Lot's of mini-recessions, but no actual recession
Business Week's Michael Mandel has this to say about the economy's apparent resilience:
[W]e now may be in a world of mini-recessions--sharp falls in one or two sectors which do not pull down the whole economy. Think about the different parts of the economy as being connected by springs (or slinkys, if you want). A sharp drop in one sector--say, housing--may pull down a couple of adjacent sectors, such as furniture. But the rest of the economy steams on, and maybe even accelerates, as resources are transferred from the weak sectors to the strong sectors.
There's clearly something to this: The recessions of the past 20 years have been much shallower than those that went before, and the boom years less spectacular. I would still worry that if the housing downturn is part of a larger retrenchment on the part of wildly overindebted American consumers, we'll get more than a "mini-recession." But maybe I should just think more like a real American and look at the bright side.
October 31, 2007 1:52
Pessimistic Europeans, optimistic Americans
Lex Hoogduin, chief economist for the big Dutch money manager Robeco (and columnist for Het Financieele Dagblad) stopped by this morning. Among the things he said was that when he makes a presentation in the U.S., he usually gets questions that seem aimed making him come out with a sunnier forecast than he really means to. In Germany, on the other hand, "after every presentation somebody comes up to me and says he's sold all his equities or wants to know if he should."
Hoogduin posits that this relative difference in optimism is a source of competitive advantage for the U.S. economy. He said he thinks continental Europe will mostly catch up with the big productivity gains that the U.S. made over the past decade as governments get smarter about employment policy and companies get smarter about using IT, but that the continent's "risk aversion" and pessimism will continue to hold it back at least a bit.
He's certainly not the first person to say this. But it's still an argument worth pondering, once we're all done celebrating that amazing 3.9% third quarter GDP growth number, the Fed's rate cut, and the all-around wonderfulness of everything.
October 30, 2007 2:55
The real estate bust in all its many colors
The headline number in the S&P/Case-Shiller Home Price Indices released this morning was that U.S. home prices dropped 4.4% in the 12 months ending in August. But it's in the metropolitan-area details that the Case-Shiller data gets really interesting. So with the help of Time.com graphics whiz Feilding Cage, I charted them:
Pretty cool, huh? What's fascinating is how the different metro areas segregate themselves into pretty clearly delineated categories.
There are the bursting-bubble metros, which on the chart start with L.A. and end with New York. Within that group there are some pretty interesting differences: L.A. and Miami peaked higher and later than the rest; Phoenix was just moseying along well outside the bubble zone until mid-2004, after which prices almost doubled in just two years; San Francisco and New York saw steadier (and possibly less bubblicious) gains than the rest.
Then you've got Seattle and Portland, which have seen substantial if not staggering price gains and are still living in their own happy, Northwestern alternative reality in which the real estate bust is just something you read about in your favorite newsweekly.
Then there are the three mini-bubble metros: Boston, Chicago and Minneapolis.
Finally, there are the metros, all in the South and Midwest, that never really participated in the post-2000 house-price boom. Most are doing okay, but Detroit and Cleveland--for reasons that have more to do with problems in the manufacturing sector than with problems in the real estate business--are not.
Update: A commenter over at Barry Ritholtz's place wonders if maybe the chart should be viewed through 3D glasses. I just tried, and it did seem to make some of the lines jump out of the page. Mainly, though, it just made my eyes hurt.
Update 2: It turns out that one Tim Iacono is the true pioneer of the multicolored Case-Shiller chart. (Actually, Excel puts it in all those pretty colors automatically, but he was the first I know of to post the result online.)
October 30, 2007 10:15
Stan finally goes. Who's next?
More than a day after the WSJ and NYT declared in no uncertain terms that he was out, Merrill Lynch CEO Stan O'Neal finally "retired" this morning. I was starting to wonder if O'Neal might be staging some sort of rearguard save-my-job action, but I guess it just took time to negotiate a cushy enough exit package.
That should return Citi's Chuck Prince to the position of most endangered CEO of a major U.S. financial company. After him, it looks like James Cayne of Bear Stearns has survived his summer troubles and will be allowed to retire gracefully in a year or two (he's already 73)--unless of course Bear gets itself into more trouble. Then there's Angelo Mozilo at mortgage giant Countrywide Financial, which reported last week that it lost $1.2 billion in the third quarter. He's the founder, which is probably the main reason he's still in charge. But if his latest promise that Countrywide is just about to turn the corner and start making money again doesn't pan out, maybe the company's board will finally lose patience. Don't count on that, though.
Update: Former Merrill banker Abigail Hoffman argues in the FT that Stan didn't deserve to go:
[I]n the end it was his enemies, not his errors, that brought Mr O’Neal down. He cut costs and staff rigorously following the September 2001 downturn in the industry, which won him no popularity.Mr O’Neal changed Merrill and, in my opinion, he changed it for the better. He diversified the business away from its traditional retail broking focus and oversaw significant profit growth. Net earnings rose 47 per cent last year to a record $7.5bn.
October 30, 2007 7:56
The immigration people at JFK are nice to John Gapper, as well they should be
After I wrote a couple weeks ago that New York was at a disadvantage to London as a financial center because getting through immigration as a foreigner at JFK is so much more unpleasant than at Heathrow, Financial Times columnist (and now blogger!) John Gapper has this to report:
When I arrived in London, I got through the queue for UK and European citizens very fast but there was an enormous snaking line that did not seem to be moving at all for Americans and others.In contrast, when I got back to JFK, it only took about 20 minutes to get through immigration and I got a smile and a "have a nice day" not only from the immigration official but the customs officer.
For what it is worth, these things seem to go in cycles. A couple of years ago, the line at JFK tended to be very long and the greeting from immigration officials monosyllabic and frosty. But they seem to have smartened up their act just as London is going in the opposite direction.
Either that, or the lines just happened to fall out that way the days John traveled. Does anybody actually keep stats on this kind of stuff? Or are we stuck batting anecdotes back and forth. Like this one, via Ultrabrown:
Britain's first Muslim minister said he was "deeply disappointed" after being detained at an American airport where his hand luggage was analysed for traces of explosive materials.Shahid Malik, MP for Dewsbury and International Development Minister, was returning to Heathrow after a series of meetings and talks on tackling terrorism, when he was stopped at Dulles Airport in Washington DC. ...
Then again, USA Today reports that the Transportation Security Administration folks reviewed their surveillance video and claim that Malik was only detained for eight minutes. Which is still a long time if you're late for your flight.
October 29, 2007 8:59
And now the world's richest man is ... Mukesh Ambani?
The Indian media are reporting that, only a few months after Mexico's Carlos Slim Helu passed up Bill Gates to become the richest man on earth, Slim has already lost that distinction. From The Economic Times:
Following a strong share price rally on in his three group companies, India's most valued firm Reliance Industries, Reliance Petroleum and Reliance Industrial Infrastructure Ltd, the net worth of Mukesh Ambani rose to $63.2 billion (Rs 2,49,108 crore).In comparison, the net worth of both Gates and Slim is estimated to be slightly lower at around $62.29 billion each, with Slim leading among the two by a narrow margin.
Reliance is India's biggest private company, "with businesses in the energy and materials value chain." So what does Ambani's ascent to the top tell us?
1) Some people in India must have been running these numbers every few hours for months.
2) This global economy of ours is getting to be a very interesting place.
3) It's good to be in the energy business these days.
4) It's good to inherit the (bulk of the) family company.
5) The Indian stock market might be getting a little bubbly (although I'm going with the Greenspan rule here: we won't know if there's a bubble until it pops).
Update: Gotta share this about the house, if you can call it that, that Ambani is building in Mumbai. According to the Mumbai Mirror (and if you can't trust the Mumbai Mirror, who can you trust?), it will be 173.12 meters (568 feet) tall, with 27 very high-ceilinged storeys--six of them for parking.
Update 2: The Times of India--which, while we're getting into global superlatives here, is the world's biggest-circulation English-language broadsheet--reports that, if you want to be picky about it, Ambani may be worth a mere $46 billion.
Update 3: Really, he's not that rich. From The Economic Times:
Reliance Industries moved swiftly on Tuesday to deny a report that company chief Mukesh Ambani has become the world's richest man thanks to a surge in India's stock market.The report by media putting his wealth at $63.2 billion saw newspapers hailing his rise as another triumph for the nation's booming economy.
But Reliance said Ambani was not quite so rich after all, with a net worth of somewhere in the region of $50 billion.
Update 4: Portfolio has a big profile of the guy in its latest issue (via Felix). A sample:
Everything about Ambani is over-the-top: He’s moving into the world’s most expensive house; he’s constructing the world’s largest oil-refining complex; he’s trying to remake India’s scattershot retail industry. Yet despite all of his almost absurdly big plans, Ambani is anything but a publicity-seeking social climber. In fact, he’s a semi-recluse: awkward, shy, a traditional Hindu who practices strict vegetarianism and abstains from drinking alcohol. With his mix of hubris, business savvy, and personal eccentricity, he may be a modern-day Howard Hughes.
October 29, 2007 4:08
On Nightly Business Report tonight
I'll be doing one of my regular commentaries on the Nightly Business Report on PBS tonight. It's about Microsoft, and how being unfashionable hasn't kept it from making insane amounts of money. I taped it this morning with watery eyes, a scratchy throat, and a nose red from being blown every couple of minutes for the past two days. I did splash my face with powder borrowed from Mrs. Curious Capitalist, in my first major attempt at self-application of TV makeup. So I'm curious to see how that looks. I'll post the text after the segment airs.
Update: I still haven't steeled myself enough to watch, but here's what I said (remember, it's a just a 90-second TV commentary):
It is hard to think of a technology company less fashionable today than Microsoft. Ten years ago, Bill Gates' software juggernaut was poised to rule the world. It dominated personal computing, while longtime rival Apple Computer flailed. It appeared to be on its way to taking over the Internet, and making big inroads in mobile devices. It was so dominant that the Justice Department sued it in 1998 for antitrust violations.Now, Apple rules the lucrative business of digital music players and is beginning to regain lost ground in personal computers. Far from taking over the Internet, Microsoft has been reduced to celebrating being allowed to pay $240 million for a tiny stake in Facebook. The company has made inroads in video gaming with Xbox, but that operation is only barely profitable. It also just lost an antitrust case in Europe, but that seemed more a bizaare throwback than a sign of current strength.
There's only one thing complicating this picture of a once-great company in decline. It's that last week, Microsoft reported an after-tax profit of $4.3 billion in the quarter that ended in September. That's more than ten times what it was making a decade ago, and puts Microsoft among the most profitable enterprises in the land-a territory dominated by giant oil companies and banks. Microsoft's profits, unlike theirs, are growing, and rapidly.
It's true that Microsoft's potential no longer seems boundless, and that it no longer strikes fear and awe into the hearts of competitors. But man it makes a lot of money. Clearly, there's something to be said for being unfashionable.
October 29, 2007 1:05
The NFL doesn't stand a chance of conquering the world
I've got two questions after the NFL's first-ever regular-season visit to Europe on Sunday (the Giants beat the Dolphins 13-10 in London): Does anybody think American football will ever have sustained mass appeal outside the North American continent? And if not, is it really worth the NFL's money to go to all this effort to stage the occasional overseas game?
Soccer is the one truly global team sport. Basketball probably comes in second. Volleyball is big as a participatory sport in lots of places but doesn't have the kind of mass spectator appeal that makes a sport a big business. Then you have sports that are far from global in scope, but attract mass spectator interest (and thus generate big bucks) on multiple continents: baseball, cricket, rugby, hockey (especially if you're generous and count the field and ice versions as one sport). And let's not forget team handball. (Am I missing anybody?)
American football, like hurling and Aussie rules football, is a sport very much tied to its home country. Yeah, they play it in Canada and there seems to be some grassroots interest in Northern Mexico. But football has had a century now to spread beyond North America and, the International Federation of American Football notwithstanding, it hasn't moved much beyond cult appeal. Maybe it's the "American" in the name (the unmodified "football" has been claimed by soccer in the rest of the world); more likely it's the complicated rules and the expense and hassle of fielding a properly equipped team.
Despite the pronounced lack of global interest, the NFL's huge success at home has made it the world's richest sports league. So it keeps trying to use some of those vast riches to make inroads elsewhere. The league finally gave up this summer on its 16-year effort to establish a European minor league. Now it's planning to fund an American football academy at the University of Bath. Sorry, but I don't see this going much of anywhere. Sure, the NFL can build up niche audiences overseas, but the scale of its financial success within the U.S. is so epic that they'll have only the tiniest impact on its bottom line.
Some NFL owners appear to agree, and have chosen a different means of going global: Buying into the one global sport, soccer. The Glazers of the Tampa Bay Bucs now own Manchester United. Stan Kroenke of the St. Louis Rams has a big stake in London's Arsenal. The Krafts of the New England Patriots own the local soccer team, the New England Revolution, and have shown interest in the past in Liverpool. American Football League founder Lamar Hunt was also one of the founding fathers of Major League Soccer. Maybe these guys know something that NFL Commissioner Roger Goodell doesn't.
Update: I forgot about Randy Lerner, who owns the Cleveland Browns and Aston Villa. Plus there's Tom Hicks, the new co-owner of Liverpool. He's not an NFL owner, but is from Texas.
October 28, 2007 8:13
Madison photo album
I came back from Madison Thursday night (somewhat shockingly, my trip via O'Hare encountered no delays) but have been laid low by a Wisconsin cold ever since. So now I'm finally getting around to posting the leftover photos from my visit to the city whose mayor hopes to make it the most progressive city in America. (I would have thought it was already there, but whatever.)
To begin with, here's the campus from high up in the House That Vitamin D Built, also known as the Wisconsin Alumni Research Foundation building:
And here's more of a ground-level campus view, on Bascom Hill:
Here's the extremely useful clock in the lobby of the main business school building:
This was my extremely useful rental bike:
I went out to visit some relatives in Fitchburg, south of Madison. These are geese preparing to land on one of their just-harvested corn fields:
And here's the moon over some not-yet-harvested corn:
As for commenter Kert, who wants to know how I "rank" Madison, all I can say is, highly.
October 28, 2007 7:43
Econoblogger at work: Menzie Chinn
While I was in Madison, Wisconsin, last week, I paid a visit to one of my favorite econobloggers: UW professor of public affairs and economics Menzie Chinn. I took this photo, which I hope will be the first in an acclaimed and award-winning series on econobloggers at work. Although if you look closely, you'll see that Chinn is not actually working on his blog, but pretending to read it.
The blog is Econbrowser. UC San Diego's James Hamilton started it; Chinn commented occasionally and Hamilton eventually asked him to start posting. They both offer a mostly no-nonsense take on the big macroeconomic issues of the day. I'm particularly partial to Chinn's writings on exchange rates--one of the most confusing subjects of our time, as well as one of the most important. He offers no definitive answers, but does a great job of clearly describing the extent of current economic knowledge on the subject, as well as the limits.
October 26, 2007 2:30
New column: Telling the knuckleheads from the geniuses in the banking business
My new column is online and the issue of Time with a California fire fighter on the cover. It begins:
When times are good, it's awfully hard to tell the knuckleheads from the geniuses in the financial-services business. That's because bad loans and bad investments tend to look just as profitable as good ones--and sometimes even more so--until trouble hits.Lots of trouble has been hitting lately, with private-equity loans turning sour, AAA-rated subprime mortgage securities turning into junk, and all manner of other bets going bad. This ought to make it easier to figure out just who in the money business knows what he's doing. Which explains why the just-completed earnings-reporting season for banks and other financial firms was the most informative in years. Not to mention entertaining, especially during the usually soporific conference calls with analysts in which executives discuss their results.
There was Bank of America chief Ken Lewis, who, after reporting setbacks in his attempts to turn the bank into a major force on Wall Street, declared, "I've had all the fun I can stand in investment banking at the moment." And after Citigroup announced a nearly 60% drop in earnings, Deutsche Bank analyst Mike Mayo more or less asked CEO Chuck Prince why he hadn't been fired. Prince's response: "If you look at the strategic plan that we are executing on, I think any fair-minded person would say that strategic plan is working." Read more.
The column was mostly written at the Fair Trade Coffee House in Madison on Monday afternoon, and sent to the printer Tuesday night, so I couldn't include any of the juicy details on Merrill's horrible Wednesday earnings report or the fact that Stan O'Neal has replaced Prince as the most on-the-spot financial industry CEO. Which already makes the column seem slightly dated. Dontcha just hate dead-tree journalism?
However, the piece does end with the timeless wisdom of Dick Kovacevich, the chairman of Wells Fargo. If I get my act together I may post some more of my Q&A with Kovacevich here next week.
October 25, 2007 6:32
The case for giving up on Buffalo
Harvard economist Edward Glaeser has a provocative article in City Journal (the Manhattan Institute's publication; that's two MI references in two blog posts. Crazy!) making the case that state and federal politicians should stop spending money trying to resurrect Buffalo (via his Harvard colleague Greg Mankiw):
Scores of close to worthless urban projects have received government funding not because any cost-benefit analysis has justified them but because of hazy claims that they would make some once-great area thrive again. It’s almost impossible to imagine that the billions already spent on Buffalo’s urban-renewal projects would satisfy any reasonable cost-benefit analysis for helping to reverse the city’s decline. The desire of people and firms to move is just too strong.
Glaeser is almost certainly right. But still I wonder, do his cost-benefit calculations factor in the economic impact of Rick James? I mean, if there were no Buffalo, it seems unlikely that there would be a Super Freak.
October 25, 2007 5:13
Madisonians aren't afraid to name their schools after people, or alphabets
The conservative Manhattan Institute got lots of press a couple of months ago for its study of school naming practices, which discovered that ever fewer schools are being named after people. This trend, the Manhattanites wrote, "raises questions about the civic mission of public education and the role that school names may play in that civic mission."
Well, in its perennial effort to become the "most progressive city in America," Madison, Wisc., which I've been visiting this week, veritably oozes with civic mission--albeit possibly not the same mission that the guys at the Manhattan Institute are on. This is from an article in yesterday's Capital Times:
Eighty-seven possible names for Madison's newest elementary school were submitted to the district by Monday's end-of-day deadline. ... The new school was originally named Vang Pao Elementary last spring but the School Board withdrew that name after the Hmong military and civilian leader was charged in California in June with conspiring to topple the Communist government [of Laos, I presume].
The full list can be read in the Capital Times article, but here are some of my favorites:
Clarence H. Beebe
Amy Elizabeth Biehl
Bong-Sijan Medal of Honor
Brain Dead School Board
Rachel Carson
James Doty
Frederick Douglass
Tony Farina
Frank J. Gambino
Mahatma Gandhi
Glacier's Edge
Elroy Hirsch "Crazylegs"
Hmong-American Unity
Hmong Freedom
Honeylands
Honor Striving
Steve Irwin
Coretta Scott King
Martin Luther King Jr.
Lady Liberty
MMSD #1
Thurgood Marshall
Christa McAuliffe
Nash (Philleo & Edith)
Peace & Prosperity
Promise (School of)
Senator William Proxmire
RPA (Romanized Popular Alphabets)
Ronald Wilson Reagan
Fred Rogers
Thornton Wilder
Reggie White
Frank Lloyd Wright
October 25, 2007 3:10
Are the Southern California fires a real estate story, a global warming story, or a golf story?
I turned on the TV when I got back to my hotel Tuesday night and somehow ended up on the Golf Channel. They were offering news coverage of the Southern California fires, but purely in terms of which golf courses were affected. Of particular interest was Torrey Pines Golf Course in San Diego, which will be hosting not only the Buick Invitational in January but also the U.S. Open in June. You'll be glad to know that it appears to be okay.
However surreal this was to watch, you can't really blame the Golf Channel for focusing on golf (they also reported that Phil Mickelson's family had to evacuate). But it was a nice reminder of how narrow the perspectives are through which we often view events like this.
There's the people-we-sorta know perspective: Three of my Google Reader regulars--James Hamilton of Econbrowser, Herb Greenberg of Marketwatch, and Paul Kedrosky of Infectious Greed--are San Diegans. Hamilton and Greenberg had to evacuate, although both are now back home.
There's the raging-flames-look-cool-on-TV perspective, which determined most of the coverage choices on CNN, Fox News, MSBNC, etc.
There's the real estate perspective: A colleague suggested I blog about the impact on the fires on the Southern California housing market. That seemed kinda tasteless, but I noticed that it hadn't stopped others. I just have no idea how the fires might impact the Southern California housing market. They've certainly reduced supply in the short-term, but if this starts happening every couple years then demand ought to drop, too.
There's the LA-and-San-Diego-are-Sodom-and-Gomorrha perspective.
There's the people-shouldn't-be-building-houses-in-tinder-dry-canyons perspective. Even if you're not willing to argue that Southern California is unfit for large-scale human settlement, you can at least make a case for the destruction of Malibu.
From the pages of Time, there's the Schwarzenegger-is-a-pretty-competent-guy perspective.
And finally, from lots of different sources, there's the global-warming-is-behind-this perspective.
Any important ones I'm missing?
October 25, 2007 12:49
The McRib is back, bringing conflict prevention in its wake
When I saw this sign at a McDonald's here in Madison I had to take a picture. Why? Because of its potential international-relations consequences. Back in 1996, Tom Friedman proposed his famous Golden Arches Theory of Conflict Prevention in the New York Times:
[W]hen a country reaches a certain level of economic development, when it has a middle class big enough to support a McDonald's, it becomes a McDonald's country, and people in McDonald's countries don't like to fight wars; they like to wait in line for burgers.
And sure enough, in 1996 it was true that, as Friedman claimed, "No two countries that both have a McDonald's have ever fought a war against each other."
Then, in 1999, the U.S. bombed Belgrade, a city where you could get a Big Mac. The Golden Arches Theory appeared to be in big trouble. Friedman offered this defense:
Once NATO turned out the lights in Belgrade, and shut down the power grids and the economy, Belgrade's citizens demanded an end to the war. It's that simple. Not only did NATO soldiers not want to die for Kosovo -- neither did the Serbs of Belgrade. They wanted to be part of the world, more than they wanted Kosovo to be part of them. They wanted McDonald's re-opened, much more than they wanted Kosovo re-occupied. So, yes, there is now one exception to the Golden Arches Theory -- an exception that, in the end, only proves how powerful is the rule.
But I much preferred the alternative proposed by James Poniewozik in Salon (yes, before he became Time's pop culture guru he was an important foreign affairs pundit):
Perhaps the theory simply needs refinement. I suspect, for instance, that no two countries with access to the limited-markets-only McRib sandwich have ever fought a war. Or maybe the answer lies in a different area of pop culture. For instance, no two countries that have served as the setting of a Whit Stillman film have ever gone to war with one another. Well, not since 1898 -- OK, the 1930s, if you count the Abraham Lincoln Brigade -- but the general principle stands that a nation that can support an urban comedy of manners exploring the social mores of prep school graduates is a peaceful nation, and we should be signing up Chris Eigemann and Chloe Sevigny for "The Last Days of Kim Il Sung" pronto.
Whit Stillman hasn't made a movie since 1998, although according to his website he has an unfinished project called Red Azalea that's set in China. (Think of all the money the Pentagon is spending on coming up ways to counter the hypothetical future military threat from China, and think how much less it would cost just to help Stillman finish his danged movie. It's a no brainer!) And now the McRib is back, although apparently only on a farewell tour. Make that comeback permanent, and get Whit Stillman directing again, and we could have peace in our time. Or am I putting too much stock in silly pop-culture explanations of how the world works?
October 25, 2007 10:28
Mortgage lenders not learning very quickly
Back when it became clear early this year that subprime mortgage lending had become a big mess, I sort of figured that the practices that had led to the mess would disappear pretty quickly. That's the way financial markets work: They can go wildly overboard in one direction or another, but when it comes time to correct they at least do it quickly. But I guess what we're learning is that the market for mortgage securities isn't quite what we think of as a financial market--it's riddled with opacity and ineptitude and assorted other inefficiencies.
There was evidence of this a couple of weeks when it came out that loans made in early 2007 were going bad at an even faster rate than those of previous years. And now there's this, from an unscientific but very interesting poll (via e-mail from Andrew Schiff) of people planning to attend ABS East, a securitized lending conference:
56% described 2007 attempts to address unsound lending practices as “too little, too late,” while 16% thought that the industry had “done nothing” in 2007 to improve loan quality. Surprisingly 9% believed that lenders “dropped” standards in 2007. Only 19% described industry moves to address questionable loan criteria as “reasonable” or “bold.”
October 24, 2007 3:34
What the journalists of the future look like
I took a photo of the first class I spoke to here in Madison, so when I arrived in Bob Drechsel's intermediate reporting class this afternoon the students asked if I was going to take their picture. So as an illustration of, I dunno, the self-indulgence inherent in blogging (or at least my blogging), I've decided to take their picture and post it during class. Here goes:
October 24, 2007 10:20
It's morning in Madison
And it's really cold. At least it is if you're riding a bike along Lake Mendota before 9 a.m. with no hat and no gloves.
October 23, 2007 6:55
Bloggers who love Ray Hudson move the media world closer to perfection
I've blogged before about the loopy brilliance of Ray Hudson's soccer commentaries on GolTV, and linked to the Hudson Wikipedia entry in which some of his gems are collected.
But now I've learned (via DuNord, who says Grant Wahl told him about) that there's now a whole friggin' blog dedicated to "Hudsonia--the Wisdom of Ray Hudson." Two recent samples (there are also audio links on the site):
The Russians wiped the floor with the most overrated international team, based on the most overrated individual footballers, based out of the most overrated domestic league in world international football - England, the premiership, and the rest of that sorry shower called England. Pathetic. ...Like a Jedi knight. No, better than that, a Templar knight. This is a flash of pure inspiration and let me tip my hat to the genesis of this goal, Ibarra. It's Ibarra who plays it down the side, it gets pulled back for Lionel. Lionel only absolutely lights it up here. He lifts off it, flamethrowers it past poor Renny Vega, who does everything. It's just as well Renny didn't get a hand to that, because it would have taken it off his wrist ...
I've been talking to lots of folks here at the University of Wisconsin about the future of the media and blogs and all that kinda claptrap, and I imagine such discussions will intensify as I move from the business school--where I spoke to classes Monday and Tuesday--to the journalism school. This Hudsonia thing strikes me as strong evidence that we are getting progressively closer to some sort of new media nirvana, in which every possible informational and amusement need is filled. Of course, I do worry that nobody gets paid in nirvana.
October 23, 2007 10:22
Larry Lessig says corporations are like pet tigers (personally, I prefer guinea pigs)
From a Larry Lessig review of Robert Reich's new book, Supercapitalism (via Ezra Klein):
[W]e need to understand the nature of the corporation -- to make money -- and come to love it, and yet, to keep it in its proper place, just as you can love a tiger, but know that it's not the sort of thing that should play with your kid. Corporations are not more efficient governments. They are instead increasingly efficient money making machines. And while there's nothing at all wrong with money making machines -- indeed, wealth and growth depends upon them -- there is something fundamentally wrong with trusting these machines to restrain the drive for profits in the name of doing the right thing. The cushion that enabled that in the past (relatively limited competition) is gone. The job of GM is even more now to make money for GM.Recognizing this point forces you to recognize how important it is that we make government work. It is government's job to set the appropriate limits on corporations (and individuals) so that when corporations and individuals pursue their self-interest, they will not harm a public interest. If government were doing that sensibly, it would force carbon producers to internalize the negative externality of carbon (something our current government doesn't do), just as it would force those who benefit from creative work to internalize the positive externality of creativity (something our current government is obsessed with doing).
And this leads to the link with the work on corruption: for notice (surprise!, surprise!), government is pretty good at forcing internalization when it benefits strong special interests (again, copyright), and not when it harms strong special interests (again, carbon).
What's striking to me about this is the echo of Milton Friedman famous 1970 New York Times Magazine essay, "The Social Responsibility of Business Is to Increase its Profits," in which he wrote:
In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has a direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.
So Lessig basically endorses Friedman's main point, demonstrating yet again how it has gone from very controversial in 1970 to commonplace today. He just sees that "the basic rules of society" that corporations are supposed to follow aren't set in some kind of corporation-free vacuum. So how do you fix that? Lessig apparently gave a lecture on the topic last month, which appears to be available only in video form. I think he says the Internet will save us. I'm dubious, but I'll reserve judgment until I take the time to watch it.
October 23, 2007 12:02
What stands in the way of a nation of Macs?
The guy sitting at the table next to mine at the Fair Trade Coffee House here in Madison had a Dell laptop. He asked me for help. It was his son's computer, he said, and he couldn't figure out how to make the wifi work. I looked at the screen for a minute and finally said, "I dunno, I'm a Mac guy."
"Me too," he said. We both looked around, to see if anybody else on the place was on a Windows machine. No luck. Only Macs in sight.
Now I realize that a coffeehouse in Madison isn't America. But still, with Apple's latest blowout earnings report due in large part to big Mac market-share gains, you've got to wonder: Is Mac on every table/desk really where we're headed?
Naah, I don't believe it either. But what's gonna stop it?
Update: I'm back at the Fair Trade on Tuesday afternoon, and the current count is eight Macs (mine included) to six Windows laptops.
Update 2: Commenter Dave is right to point out that what stands in the way of a nation of Macs is that Macs now cost much more than Windows machines. (I actually knew that but I thought what's the point of a blog post that answers its own question.) But of course the high-end segment is much more profitable. And Apple's dominance there is truly amazing. Philip Elmer-DeWitt reported a couple of weeks ago that Bernstein Research analyst Toni Sacconaghi Jr. estimates that Apple has a 29.4% market share among laptops in the top price quintile, and a 45.8% (!) market share in that quintile among consumer and education buyers (that is, the people who don't have to go through humbug corporate IT managers).
Update 3: The Wednesday morning count at the Fair Trade appears to be five Macs to eight Windows laptops. The trend is against them!
October 22, 2007 2:42
Greetings from Madison
I guess I should mention at some point that I'm writing this week from America's most insanely livable city, Madison, Wisconsin. Above is the view from my table at the Fair Trade Coffee House on State Street, where I'm typing these very words. Here's a view down State Street toward the Capitol:
I'm in Madison because I'm the "Business Writer in Residence" at the University of Wisconsin's journalism and business schools. Which mainly means I go to classes and jabber. This was my first, Scott Troyan's 9:30 communication class at the business school:
Anyway, I've got a column to write this afternoon. But I'm sure I'll have more thrilling news to report from Madison in the coming days.
October 22, 2007 9:01
No, it's not 1987. But neither is it 1998
Stock markets around the world are having another crummy day. It's always worth reiterating that the plus or minus 2% daily drops we've been seeing are nothing compared with the more than 20% decline on Oct. 19, 1987.
But this decline is not the product of some weird hiccup in the workings of financial markets, as was the case in 1998--and even, to a certain extent, in 1987. It would seem instead to be a belated realization that after years of taking on more and more debt, a large segment of the American population is completely tapped out, and nobody's willing to lend it any more money.
This isn't the end of the world. It doesn't even necessarily mean we're headed for a recession. It does mean that a significant source of corporate profits, especially the profits of the financial industry, may have disappeared for at least a couple of years. Which seems to be a pretty good reason for stock prices to go down, and possibly keep going down.
October 22, 2007 8:51
What regulators are good for: Cleaning up
Hedge fund manager and poker ace David Einhorn was the speaker at the 17th annual Graham & Dodd breakfast Friday morning. I arrived too late to get a seat, and left early because I was starving, but I did write down this quote:
Regulators are good at cleaning up fraud after the money is gone. Government doesn't really know what to do when it catches fraud in progress.
Einhorn was talking mainly about his long-running battle with investment firm Allied Capital over its accounting practices. He's got a book about the saga coming out next year, and if the excerpt he read at the breakfast--about a grilling he underwent at the hands of two SEC lawyers--was any indication, it should be pretty entertaining.
But the lesson is a broader one: It is incredibly hard for government officials to step in and try to stop behavior that they think is illegal or unwise at companies that seem to be making lots of money off this behavior. It's even harder if it's an entire industry, such as, say, the subprime mortgage lenders of a couple years ago. Try to crack down while the party is still going and you're likely to get hauled in front of Congressional committees, lambasted in the media and attacked by aggressive company lawyers. Wait until it all falls apart and, while you'll still get lambasted a bit, most of the discussions in the media and Congress will be about how to give you more resources and power in the future.
October 19, 2007 7:44
How the 1987 crash brought us back to the 1800s
Today's the big day! The 20th anniversary of the Crash of 1987! We've already been deluged with reminiscences and will-it-happen-agains. If you want more, my friend and fellow Acalanes High School graduate Matthew Rees's recounting in The American is the most thoughtful and exhaustive I've seen.
But, uh, will it happen again? Depends what it is. If it's a 20+% one-day drop in the stock market, maybe not. If it's a financial system freakout, where suddenly everybody stops trusting each other and lending each other money, well, that happened a couple of months ago. It happened in 1998, too.
In 1987, matters were at their worst the morning after the stock market crash. That's when the global banking system threatened to freeze up and lots of people involved with Wall Street started worr