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August 31, 2005
U.S. Companies in China: Making Money and Seeking to Expand
As it has done since 2001, the U.S.-China Business Council, of which we’re a member, surveyed its membership on business results, strategies, and opinions regarding China. Some interesting findings include:
Posted by John at 11:55 PM | Comments (0) | TrackBack--Almost three-fourths of those surveyed view China as their company’s top global priority or within the top five priorities globally.
--Over half of the companies responding report growing China revenues.
--54% say profitability of the China operations exceeds that of their profitability globally.
--94% of respondents are either optimistic or somewhat optimistic about five year prospects for their China operations.
--The top five problem issues cited by companies surveyed were inadequate intellectual property rights (IPR) enforcement, incomplete realization of distribution rights, insufficient regulatory transparency, human resource challenges, and remaining barriers to market access in service sectors.
The Great Flood of 1927 and Its Relevance for Today
I was thinking today about a book I read several years ago, Rising Tide: The Great Flood of 1927 and How It Changed America. This story of the nation’s greatest flood documents the power of the Mississippi River unleashed against the levee system, which was breached in about a dozen different places. Floodwaters covered over 26,000 square miles of land, an area larger than the entire state of West Virginia. At one point during this disaster, 13% of Arkansas’s land mass was covered in floodwaters.
Times were quite different almost 80 years ago, as this book recounts. In fact, author John Barry offers a social history as much as the history of a natural disaster.
Relevant to today, however, this book offers a glimpse not only how long it takes to get back to "normal" after a disaster like Katrina, but it also reveals how disasters can permanently change a region forever.
The Gulf Coast area, and New Orleans in particular, will be permanently changed in ways we can only guess at for now.
Posted by John at 11:35 PM | Comments (0) | TrackBackConsiderable Damage to the Gulf Coast Infrastructure
Stratfor’s latest reckoning of the damage to the transportation and industrial infrastructure in the Gulf Coast region is numbing, and indicates that the spillover economic effect to the rest of the country and even global trade will be considerable:
Posted by John at 10:55 PM | Comments (0) | TrackBackMost roads either are cut off or blocked by debris. New Orleans Mayor Ray Nagin says that Louisiana State Highway 1 -- the backbone highway that crosses the state diagonally from the extreme northwest corner to Grand Isle on the Gulf of Mexico near the extreme southeast corner of the state -- is closed in the affected area. State Highway 39 also is closed because of debris and other problems.
The executive director of the Grand Isle Port says the port essentially is wiped out and the industrial region surrounding it is in ruins.
Damage assessments at Port Fourchon are being hampered because several large ships are beached on the highway leading to the port. The port is home to three-fourths of the support services to the Gulf's deepwater oil and gas facilities and the land base for the oil off-loading facility known as the Louisiana Offshore Oil Port (LOOP). At the very least the channels that allow ship access will need to be cleared.
Oil-services facilities in the city of Venice, the closest such facility to Port Fourchon, have been completely destroyed.
The city of Cutoff also is reporting massive damage via extremely sporadic communications.
Shipping sources report that the Port of New Orleans, for all practical purposes, is gone. Damage along the Port of South Louisiana, a series of dozens of interlinked docks and trade service infrastructure, appears to be heavily damaged.
Cellular and landline communications are down throughout the region.
The situation on the Mississippi River is dire. The U.S. Coast Guard only recently began surveying the channel to look for wrecks -- and already has found many. Shipping industry sources say most barges are intact and their crews are well, but the one remaining open road to and from New Orleans will make re-supply and rotation difficult. In essence, the crews have become refugees in their barges. All electronic aids to navigation have been disrupted and are either nonfunctioning or destroyed. Although navigation is possible using GPS systems, massive quantities of debris will keep barges where they are. The river is closed to all civilian navigation to mile marker 507 in Natchez, Mississippi -- about halfway to Arkansas.
The Coast Guard has been forced to relocate its staff upstream to Alexandria, about 200 miles from New Orleans.
The U.S. Agriculture Department has begun debate on transporting grains -- especially soybeans and corn -- to Louisiana and Mississippi by rail, but no decisions have been confirmed. The rail industry already is expecting a shortage of rolling stock because the drought in the Ohio River valley is forcing some shipments to travel by rail instead of river. Because barges on the lower Mississippi are at a standstill, there are doubts agricultural producers will be able to ship grain into the region by the end of September. Soybean harvest begins in two weeks, and national soybean storage facilities already are filled to capacity.
At present, there is only one piece of good news. Initial reports indicate that the LOOP itself has passed its initial damage assessment and appears ready to resume operations as soon as power is restored. That does not, however, mean that it will. Operators must first ensure that the pipeline connecting the LOOP to Port Fourchon remains intact.
Please Give to Help Those Suffering Because of Hurricane Katrina
We and others clearly breathed a sign of relief way too early in the aftermath of Hurricane Katrina. The human loss and suffering is truly unlike anything we’ve seen in many, many years—if ever--from a natural disaster in this country.
The gradually expanding window we’re getting into the damage this disaster has done to the lives of citizens in Louisiana and Mississippi reveals profound tragedy.
Please give to help our fellow citizens. One choice is the American Red Cross, which allows you to designate up to 100% of your contribution directly for Hurricane Katrina relief. The Atlanta chapter’s website can be found here, and you can make your contribution online.
If the Red Cross is not on your preferred list, please make another choice and give. It’s what Americans have always done, for others here and around the world. Let’s all do our own part to help our neighbors along the Gulf Coast.
Posted by John at 10:33 PM | Comments (0) | TrackBackQuote of the Day for Wednesday, August 31, 2005
Today's quote is from Van Morrison, born on this date in 1945: "If you live the life you love, you get the blessing from above." (Whenever God Shines His Light)
Posted by John at 12:01 AM | Comments (0) | TrackBackAugust 30, 2005
Two Genuine Class Acts in Golf's Winner's Circle
We couldn't be more delighted at the results of this weekend's professional golf tournaments on the PGA and Champions Tours, respectively. Two of the classiest gentlemen around took silver home this weekend.
In only his third time out on the Senior Tour, our friend Loren Roberts won his first major championship, The Tradition. He came from behind on Sunday--including birdies on the final two holes--to force a playoff with Dana Quigley. Loren went on to win the championship on the second playoff hole.
(Courtesy of AP)
If you like to root for good guys on the Tour, then Loren Roberts should be a focus of your attention. It's a cliché, but Loren really is the genuine article. He's a class act through and through. Congratulations, Loren, from all your friends at Heritage.
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On the PGA Tour, our pal Brad Faxon won in his New England backyard at the Buick Championship. Brad also came from behind, shooting a personal best and course record 61, and then won in a playoff with Tjaart van der Walt. Brad's been battling with a knee problem for a while now, and he had a challenging period last year. Through it all, Brad's maintained a great outlook and his naturally sunny personality. (In case you missed it, we profiled his tremendous effort at the Open Championship earlier this year.) Brad, you are truly deserving; congratulations on getting back to the winner's circle. |
Early Assessment of Katrina’s Toll
Fortunately, the human cost of Hurricane Katrina seems to be much less than it could have been, thanks in part to the efforts of residents of the area to evacuate the area. It’s way too early to tell the actual death toll, though, as search and rescue teams are still at work.
As far as the elements of the Gulf Coast economy most crucial to the nation’s economy as a whole, namely the transportation, port, and refinery infrastructure around New Orleans, the worst case scenario we feared eighteen hours ago appears to have been avoided.
Stratfor, whose commentary we highlighted Sunday, offers their assessment:
. . . Unless investigations of the Mississippi River south of New Orleans show that the course of the river has changed in some fundamental and non-navigable way, the nightmare geopolitical scenario appears to have been avoided.
We still do not know how much damage was done to the region's oil industry, or how long it will take to repair. The oil off-loading facility known as the LOOP may have been damaged, and it is possible that some of the off-shore drilling platforms were damaged as well. That will certainly have a critical effect. But our best guess is that the Mississippi remains navigable or will be after some dredging.
The bottom line is this. New Orleans has survived as a city, which means that the workers in the port and the refineries will be able to return to their jobs. The grain storage and port facilities do not appear to have been swept away. Damage to the oil refineries and other facilities does not appear to be critical. These are early estimates, and tomorrow may bring new surprises, but at the moment, the foundation of the American transportation system--the Mississippi River complex--appears to have survived.
However, as I heard one commentator on National Public Radio observe this morning, last year it took about six to eight months for areas affected by Hurricane Ivan to return to normal.
Ivan, however, "only" caused about $13 billion in damages, a figure Katrina appears likely to exceed, maybe by a significant amount. Reinsurer Munich Re already estimates that insured damage from Katrina could reach $20 billion.
Posted by John at 8:55 AM | Comments (0) | TrackBackTwins Separated at Birth?
Copier dude Stuart, shilling on Ameritrade commercials, circa 1999:
From CondoFlip.com (follow the link; I'm not making this up):
Quote of the Day for Tuesday, August 30, 2005
Today's quote is from Warren Buffett, born on this date in 1930: "In the business world, the rearview mirror is always clearer than the windshield."
Posted by John at 12:02 AM | Comments (0) | TrackBackAugust 29, 2005
Investment Wisdom on the Way to the "Little Chapel"
Heather Myles, one of the best and most authentic country singers you may have never heard of, wrote a song not long ago titled "Little Chapel." She recorded it in a duet with Dwight Yoakam, a pairing which I hope we can hear again.
Two lovers are singing this song as they are driving across the Mojave Freeway to Las Vegas to get married:
Shadow Valley, Mojave Desert (courtesy of Wikipedia) |
Sun's going down, it's still a hundred and three Driving cross the desert down Highway 15 There's no turning back now, got all that we need To a desert oasis we're traveling, my baby and me |
Even as impulsive Las Vegas marriages go, this one's already showing signs of looming problems:
Car's broken down the side of the road
How we got this far God only knows
Sold everything, don't need luxury
Been living on good loving my baby and me
The passion of "good loving" overcomes any thought of risk to such an extent, however, that this couple regards everything else as a gamble:
"Elvis" |
We're going to the little chapel on the Las Vegas strip Where the preacher looks like Elvis; we could even strike it rich Life is a gamble, but our love's a sure bet Going to the little chapel on the Las Vegas strip |
As listeners we come away from listening to these two thinking that this union has the same chances for long-term success the preponderance of most Las Vegas weddings. This pair is so consumed with their passion that they are oblivious to signs of trouble which are already appearing. Reality will descend on this union sooner or later, and we as listeners realize as much even if our two lovers don't.
We often look at our money the same way, don't we? We often ignore or minimize the obvious problems with investment we have (or are convinced we need to own). We frequently only see the glittering attraction which is the source of our original infatuation.
In fact, we're sometimes so duped ourselves in how right we are in, that like this couple, we regard everything else as risky. What we possess is a sure bet.
As an old Wall Street saying goes, "stocks don't know you own them." (That goes for real estate, too, by the way.) A corollary to that thought might be: the risk of an investment is not lessened simply because you own it.
"Little Chapel" might be just the background music we should have playing as we review our portfolios.
Posted by John at 9:00 AM | Comments (0) | TrackBackQuote of the Day for Monday, August 29, 2005
Today's quote is from Charles Kettering, born on this date in 1876: "If you have always done it that way, it's probably wrong."
Posted by John at 12:00 AM | Comments (0) | TrackBackAugust 28, 2005
Katrina’s Economic Impact Could Be Substantial and Global
The port of New Orleans is the nation’s largest in terms of tonnage, and the fifth largest in the world. Fifteen percent of all U.S. exports by value travel through this port; a significant portion of Midwestern crops desinated for export around the world are routed through New Orleans.
Stratfor, a private global intelligence and consulting firm, offered some commentary Sunday afternoon on what a direct and devastating hit to the port of New Orleans would have on the global economy:
Posted by John at 10:48 PM | Comments (0) | TrackBackThe Port of Southern Louisiana is a river port. It depends on the navigability of the Mississippi River. The Mississippi is notorious for changing its course, and in southern Louisiana -- indeed along much of its length -- levees both protect the land from its water and maintain its course and navigability. Dredging and other maintenance are constant and necessary to maintain its navigability. It is fragile.
If New Orleans is hit, the Port of Southern Louisiana, by definition, also will be hit. No one can predict the precise course of the storm or its consequences. However, if we speculate on worse-case scenarios the following consequences jump out:
The port might become in whole or part unusable if levees burst. If the damage to the river and port facilities could not be repaired within 30 days when the U.S. harvests are at their peak, the effect on global agricultural prices could be substantial. There is a large refinery at Belle Chasse. It is the only refinery that is seriously threatened by the storm, but if it were to be inundated, 250,000 barrels per day would go off line. Moreover, the threat of environmental danger would be substantial. About 2 percent of world crude production and roughly 25 percent of U.S.-produced crude comes from the Gulf of Mexico and already is affected by Katrina. Platforms in the path of Katrina have been evacuated but others continue pumping. If this follows normal patterns, most production will be back on line within hours or days. However, if a Category 5 hurricane (of which there have only been three others in history) has a different effect, the damage could be longer lasting. Depending on the effect on the Port of Southern Louisiana, the ability to ship could be affected. A narrow, two-lane highway that handles approximately 10,000 vehicles a day, is used for transport of cargo and petroleum products and provides port access for thousands of employees is threatened with closure. A closure of as long as two weeks could rapidly push gasoline prices higher.
At a time when oil prices are in the mid-60-dollar range and starting to hurt, the hurricane has an obvious effect. However, it must be borne in mind that the Mississippi remains a key American shipping route, particularly for the export and import of a variety of primary commodities from grain to oil, as well as steel and rubber. . . .
Katrina's Impact Likely to Be Severe
The news from the coastal areas of Louisiana and Mississippi, and even well inland, will not be very good at all the next few days and even weeks, as this message from the National Weather Service indicates:
Posted by John at 10:33 PM | Comments (0) | TrackBackMOST OF THE AREA WILL BE UNINHABITABLE FOR WEEKS...PERHAPS LONGER. AT LEAST ONE HALF OF WELL CONSTRUCTED HOMES WILL HAVE ROOF AND WALL FAILURE. ALL GABLED ROOFS WILL FAIL...LEAVING THOSE HOMES SEVERELY DAMAGED OR DESTROYED.
THE MAJORITY OF INDUSTRIAL BUILDINGS WILL BECOME NON FUNCTIONAL. PARTIAL TO COMPLETE WALL AND ROOF FAILURE IS EXPECTED. ALL WOOD FRAMED LOW RISING APARTMENT BUILDINGS WILL BE DESTROYED. CONCRETE BLOCK LOW RISE APARTMENTS WILL SUSTAIN MAJOR DAMAGE...INCLUDING SOME WALL AND ROOF FAILURE.
HIGH RISE OFFICE AND APARTMENT BUILDINGS WILL SWAY DANGEROUSLY...A
FEW TO THE POINT OF TOTAL COLLAPSE. ALL WINDOWS WILL BLOW OUT.AIRBORNE DEBRIS WILL BE WIDESPREAD...AND MAY INCLUDE HEAVY ITEMS SUCH AS HOUSEHOLD APPLIANCES AND EVEN LIGHT VEHICLES. SPORT UTILITY VEHICLES AND LIGHT TRUCKS WILL BE MOVED. THE BLOWN DEBRIS WILL CREATE ADDITIONAL DESTRUCTION. PERSONS...PETS...AND LIVESTOCK EXPOSED TO THE WINDS WILL FACE CERTAIN DEATH IF STRUCK.
POWER OUTAGES WILL LAST FOR WEEKS...AS MOST POWER POLES WILL BE DOWN AND TRANSFORMERS DESTROYED. WATER SHORTAGES WILL MAKE HUMAN SUFFERING INCREDIBLE BY MODERN STANDARDS.
THE VAST MAJORITY OF NATIVE TREES WILL BE SNAPPED OR UPROOTED. ONLY THE HEARTIEST WILL REMAIN STANDING...BUT BE TOTALLY DEFOLIATED. FEW CROPS WILL REMAIN. LIVESTOCK LEFT EXPOSED TO THE WINDS WILL BE KILLED.
Prayers and Thoughts for Those Friends in Katrina’s Path
We all have good friends in the path of Hurricane Katrina. Our prayers are with all of you and you are constantly in our thoughts during these tense hours.
Posted by John at 10:31 PM | Comments (0) | TrackBackPetroleum's Bite of Consumers' Pocketbooks Still Manageable
James K. Glassman reports, in just a couple of sentences in his recent commentary for Tech Central Station, why significantly elevated gas prices haven’t slowed down U.S. consumers:
The Bureau of Economic Analysis reports that in 1984, U.S. consumers spent about $95 billion on petroleum products; last year, we spent $203 billion. But in 1984, consumer income was $2.3 trillion; in 2004, it was $6.7 trillion. So, very simply, we're spending twice as much on oil, but our incomes are three times greater.
Even if you assume that U.S. consumers will spent twice as much on petroleum products in 2005 as in 2004, about $400 billion, a little less than 6% of aggregate consumer income will be consumed by petroleum That’s a dramatic jump from the 3% bite of 2004, but not, in aggregate, an unmanageable situation. So far.
Posted by John at 9:48 PM | Comments (0) | TrackBackQuote of the Day for Sunday, August 28, 2005
Today's quote is from Johann Wolfgang von Goethe, born on this date in 1749: "Until one is committed, there is hesitancy, the chance to draw back, always ineffectiveness. Concerning all acts of initiative and creation, there is one elementary truth the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves too. All sorts of things occur to help one that would never otherwise have occurred. A whole stream of events issues from the decision, raising in one's favor all manner of unforeseen incidents, meetings and material assistance which no man could have dreamed would have come his way. Whatever you can do or dream you can, begin it. Boldness has genius, power and magic in it. Begin it now."
Posted by John at 12:07 AM | Comments (0) | TrackBackAugust 27, 2005
Quote of the Day for Saturday, August 27, 2005
Today's quote is from Lyndon Baines Johnson, born on this date in 1908: "Yesterday is not ours to recover, but tomorrow is ours to win or lose."
Posted by John at 12:07 AM | Comments (0) | TrackBackAugust 26, 2005
Youthful Hispanic Demographic Portends Further Outperformance of Hispanic Media
This summer’s ratings for the major broadcast networks have been dismal, with one notable exception. Among adults 18-49, Univision’s viewership was up 23% over last summer. The major broadcast networks as a whole were down 10% in this key age segment.
The relative youthfulness of the Hispanic population, which we noted previously, virtually guarantees significant outperformance for Hispanic-oriented media in the 18-49 demographic for the foreseeable future.
You can read more from the Los Angeles Times here.
Posted by John at 8:19 AM | Comments (0) | TrackBackQuote of the Day for Friday, August 26, 2005
Today's quote is from John Buchan, born on this date in 1875: "We can pay our debts to the past by putting the future in debt to ourselves."
Posted by John at 12:05 AM | Comments (0) | TrackBackAugust 25, 2005
Keith Richards and The Rolling Stones: Longevity Through Constant Improvement
In this morning’s Wall Street Journal Jim Fusilli reviews ($) the opening of the Rolling Stones’ latest tour, which occurred earlier this week at Boston’s Fenway Park. As Mr. Fusilli observes in his review, the Stones have survived and thrived for better than four decades because of a relentless quest to innovate within the bounds of their chosen blues-drenched rock and roll discipline:
Much like a jazz group, they toyed with tempo and meter while tossing in unexpected filigrees and embellishments that kept their old music fresh and new songs as intriguing as the band’s standards.
The band’s driver is 62 year old guitarist Keith Richards, who is still striving to get better:
Mr. Richards says he’ll continue to look for new ways to make the music better every night during the bank’s 57-gig tour.
"That’s my modus operandi," he says. "It’s instinctive by now. What happens depends on what happens when I drop down and listen."
The Rolling Stones are one of the music industry’s more profitable enterprises. While the human tendency might be to relax and coast, particularly if you're 62 and universally acclaimed, that’s not what Richards and the Stones have done. They are constantly trying to improve, testing the possibilities of their music. Their tendency to not be content keeps them fresh, vital, relevant.
It’s an example for all of us.
Posted by John at 11:57 PM | Comments (0) | TrackBackQuote of the Day for Thursday, August 25, 2005
Today's quote is from Bret Harte, born on this date in 1836: "Never a tear bedims the eye, That time and patience will not dry."
Posted by John at 12:03 AM | Comments (0) | TrackBackAugust 24, 2005
A Lesson over Tea From My Four Year Old
Last night my four year old and I were working on a school project on family. His assignment was to do his own family coat of arms, in which he drew or pasted pictures which represented fact or qualities about his family which were important to him.
To get started, I asked him what he thought about when he thought about his family. He immediately answered "love." (That made Mommy and Daddy feel pretty proud—and a little misty, too.) To represent love, he drew a heart and I helped him spell "love."
I asked him what else he thought of when he thought about family. "Tea," he said.
"Tea?," I asked.
"Yes, Daddy, the tea we share," he chirped.
What my little man was referring to is the peach-flavored tea that both of us are hooked on that I’m constantly mixing. We’ve gotten to the point that both of us often share a Mason jar full. He drew a big jar full of tea and I helped him write "tea."
I didn’t realize that such a small thing, to me, anyway, was important enough to him that that’s what he thought of when he thought about "family."
Company managers: your employees and shareholders may listen when you talk about the visions and strategies, but what they really pay attention to are actions that to you seem insignificant or routine. We often forget the particulars when there are worlds to conquer, but it's those particulars that often mean the most to those around us who support us, work with us, or invest in us.
As my son might say if he were a little older, love’s a great concept, but sharing the tea, Dad, that’s the best!
Posted by John at 2:11 PM | Comments (4) | TrackBackStill Feeling Hot, Hot, Hot Over Miami Condos
The Miami Herald reports that condominium and apartment units under construction or being planned have topped 70,000, an all-time high. That’s a 15% jump from only three months earlier.
We’ve commented here about the danger which we see for buyers in this market.
Quote of the Day for Wednesday, August 24, 2005
Today's quote is from Fernand Braudel, born on this date in 1902: "History may be divided into three movements: what moves rapidly, what moves slowly and what appears not to move at all."
Posted by John at 12:01 AM | Comments (0) | TrackBackAugust 23, 2005
Quote of the Day for Tuesday, August 23, 2005
Today's quote is from Mark Russell, born on this date in 1932: "If you call your opponent a politician, it's grounds for libel."
Posted by John at 12:04 AM | Comments (0) | TrackBackAugust 22, 2005
The Cost of Anti-Dumping Tariffs: Indefensibly High
Greg Mankiw and Phillip Swagel, writing in the most recent addition of Foreign Affairs, offer one of the most cogent explanations of the ridiculously high costs and narrow benefits of anti-dumping tariffs I’ve read in a while:
Antidumping is the "third rail" of U.S. trade politics, with few politicians of either party willing to point out its broadly negative impact. Antidumping statutes are extremely complex, and few voters understand how they work and what effect they have. Advocates of antidumping measures claim that they guarantee that international trade is competitive and fair. And who, they ask, could be against fairness? But such rhetoric bears little relation to economic reality. Rather than promote fairness and competition, the American producers who petition for antidumping tariffs--a powerful and often unrecognized lobby--use them to thwart foreign competition. In essence, "antidumping" means little more than "antibargain." If a foreign firm sells its product in the U.S. market at too attractive a price, domestic firms can threaten it with an antidumping suit that will lead to hefty tariffs and higher prices.
What is especially perverse is that the impact of antidumping tariffs falls most harshly on two groups whose interests members of Congress should be working to protect: the least well-off of their constituents and the vast majority of American producers. All Americans pay higher prices for food and housing as a result of antidumping tariffs, but the burden is likely greatest on the poor, because these necessities make up a larger share of their spending. U.S. producers are affected because most items hit with antidumping tariffs are not finished goods but components that are used to make other items. Since 1989, for example, imported ball bearings have been subject to tariffs ranging above 50 percent. U.S. manufacturers of ball bearings surely benefit, but there are many more buyers of ball bearings in the United States than there are producers--and all of them end up paying significantly more than they should and than their foreign competitors do. Antidumping practice has also become a growing obstacle for U.S. exporters.
Firms that benefit from antidumping and their allies in Congress hotly contest any change that weakens antidumping law. Yet for all their claims that antidumping policy ensures that trade is fair, it is little more than an opaque way of protecting favored industries that have powerful lobbies--doing, in the process, significant damage to everyone else.
Last year, in the email-only version of "Tidbits," we noted that anti-dumping penalties on cement continued, in spite of the need Floridians had to get their hands on the product to rebuild after the damage of four different hurricanes. It was so, in spite of the fact that much of the cement capacity of the United States is actually owned by foreign companies in France and Mexico.
Quite simply, anti-dumping penalties are anti-competitive, which makes them anti-consumer.
If you’re not a subscriber to Foreign Affairs but would like to read the complete article by Mankiw and Swagel, follow this link.
Posted by John at 9:03 PM | Comments (0) | TrackBackThe Solution for $60 Oil Prices
In a fine editorial for the Baltimore Sun, Jay Hancock reminds us that prices are signals which ignite behavior among market participants. As he notes, $60 a barrel oil prices are sending certain signals and eliciting reactive behaviors that will ultimately work against $60 a barrel prices:
As rising oil prices make alternatives look attractive, we're also getting the strongest incentives in two decades to reduce our petro addiction and take the next step.
Public transit use seems to be rising. Ridership on the MARC commuter rail system is up 13 percent since 2003 despite ridiculous breakdowns and delays, The Sun reported last week. Public transit ridership also seems to be up mildly in places from Washington to St. Louis to Los Angeles, according to various newspaper reports.
Sales are soaring for "hybrid" vehicles that run on gas and electricity. Toyota doubled production of its Prius hybrid this year. Ford has a hybrid SUV. GM has a hybrid truck and says it could produce a fuel-cell car that runs on hydrogen by 2020.
Florida-based FPL Group is building up to 750 megawatts' worth of wind-powered electricity generation this year - nearly half the capacity of Constellation Energy's Calvert Cliffs nuclear facility. Frederick-based BP Solar, a division of BP PLC, is expanding again after downsizing in 2003, the Frederick News-Post reported a few months ago.
Weirder and wilder stuff is on the way. Venture capitalists, the people who brought you Silicon Valley and the computer revolution, have gotten interested in energy. One of the partners at Baltimore's New Enterprise Associates is a Nobel Prize winner searching the globe for alternative-energy investments.
Gee, that doesn't sound so bad, actually. Maybe higher prices are part of an invisible hand creating economic order, as described by Adam Smith. Maybe $60 oil is beaming signals across the economy that will boost supply, cut demand and eventually lower prices, as described by Friedrich Hayek. Maybe we didn't need the energy bill Congress just passed.
Maybe, in a free market, the solution to $60 oil is - $60 oil.
Hardly a glimmer of what Hancock describes was happening when oil prices were one-third of where they are today.
Posted by John at 8:48 PM | Comments (0) | TrackBackQuote of the Day for Monday, August 22, 2005
Today's quote is from Deng Xiaoping, born on this date in 1904: "Reform is China's second revolution."
Posted by John at 12:02 AM | Comments (0) | TrackBackAugust 21, 2005
Savannah's Rapidly Growing Port Reveals Georgia's Stake in International Trade
I recently highlighted the importance of Savannah’s port to Georgia’s economy, and by implication, the economic stake Georgia has in fostering trade with China.
Monday’s Wall Street Journal has a front page article ($) on the story of the rapid growth in Savannah’s port, along with its economic impact:
. . . The Savannah port handled 1.7 million cargo containers in 2004, up from 550,000 in 1994. Located on the Savannah River, 23 miles upstream from the Atlantic Ocean, it now ranks second among East Coast ports in attracting cargo from Asia, lagging behind only the Port of New York and New Jersey. Among North American container ports, Savannah is the 10th-busiest overall.
Today, Savannah's port generates about 120,000 jobs, with pay ranging from $12 an hour for warehouse workers to $120,000 a year for some dockworkers, according to the University of Georgia. Cargo handled in Savannah produces an estimated $1.4 billion a year in state and local tax revenue. . . .
The port of Charleston can tell a similar story about its growth and the impact the trade it facilitates has on its own state of South Carolina.
Posted by John at 11:44 PM | Comments (0) | TrackBackTaking a Partner: The Penalties for Bad Choices Are High
Susan Schreter, who writes about startups for the Seattle Post-Intelligencer, recently answered a sole proprietor’s query about the advisability of taking on a partner. Ms. Schreter’s sage advice included the following:
Don't be afraid to set a high standard for partner acceptance. Early partners should improve the company's financial position in a meaningful way or provide critical intellectual capital to develop higher-profit-margin products. Anything less is probably not worth the risks associated with shared ownership.
Please, entrepreneurs, read this advice and take it to heart. It may literally save your business if you do.
Set your standards high. The price of getting rid of an incompetent or dishonest partner is distastefully high.
That price by the way, comes not just in the money it takes to get a bad partner to go away, but the opportunity cost such an individual exacts on the business. The penalty is literally incalculable.
Posted by John at 10:48 PM | Comments (0) | TrackBack“It’s Stupid to Be Afraid”: Singapore’s Lee Kuan Yew on China and other subjects
A few weeks ago we pointed to an interesting commentary from Singapore’s first Prime Minister, Lee Kuan Yew. He recently gave an interview to Germany’s Der Speigel; it’s also worth your close attention. A short excerpt follows; this link will take you to the complete interview:
. . . They [the Chinese] are learning. They have learnt takeovers and mergers from the Americans. They know that if they try to sell their computers with a Chinese brand it will take them decades in America, but if they buy IBM, they can inject their technology and low cost into IBM's brand name, and they will gain access to the market much faster.
SPIEGEL: But how afraid should the West be?
Mr. Lee: It's stupid to be afraid. It's going to happen. I console myself this way. Suppose, China had never gone communist in 1949, suppose the Nationalist government had worked with the Americans -- China would be the great power in Asia -- not Japan, not Korea, not Hong Kong, not Singapore. Because China isolated itself, development took place on the periphery of Asia first.
SPIEGEL: Such a consolation won't be enough for the future.
Mr. Lee: Right. In 50 years I see China, Korea and Japan at the high-tech end of the value chain. Look at the numbers and quality of the engineers and scientists they produce and you know that this is where the R&D will be done. The Chinese have a space programme, they're going to put a man on the Moon and nobody sold them that technology. We have to face that. But you should not be afraid of that. You are leading in many fields which they cannot catch up with for many years, many decades. In pharmaceuticals, I don't see them catching up with the Germans for a long time. . . .
SPIEGEL: When you look to Western Europe, do you see a possible collapse of the society because of the overwhelming forces of globalization?
Mr. Lee: No. I see ten bitter years. In the end, the workers, whether they like it or not, will realize, that the cosy European world which they created after the war has come to an end.
SPIEGEL: How so?
Mr. Lee: The social contract that led to workers sitting on the boards of companies and everybody being happy rested on this condition: I work hard, I restore Germany's prosperity, and you, the state, you have to look after me. I'm entitled to go to Baden Baden for spa recuperation one month every year. This old system was gone in the blink of an eye when two to three billion people joined the race -- one billion in China, one billion in India and over half-a-billion in Eastern Europe and the former Soviet Union. . . .
SPIEGEL: The question is: How do you answer that challenge?
Mr. Lee: Chancellor Kohl tried to do it. He did it halfway then he had to pause. Schroeder tried to do it, now he's in a jam and has called an election. Merkel will go in and push, then she will get hammered before she can finish the job, but each time, they will push the restructuring a bit forward.
SPIEGEL: You think it's too slow?
Mr. Lee: It is painful because it is so slow. If your workers were rational they would say, yes, this is going to happen anyway, let's do the necessary things in one go. Instead of one month at the spa, take one week at the spa, work harder and longer for the same pay, compete with the East Europeans, invent in new technology, put more money into your R&D, keep ahead of the Chinese and the Indians.
SPIEGEL: You have seen yourself how hard it is to implement such strategies.
Mr. Lee: I faced this problem myself. Every year, our unions and the Labour Department subsidize trips to China and India. We tell the participants: Don't just look at the Great Wall but go to the factories and ask, "What are you paid?" What hours do you work?" And they come back shell-shocked. The Chinese had perestroika first, then glasnost. That's where the Russians made their mistake. . . .
Lee goes on to comment on China’s intentions for its military, Japan, North Korea, and the U.S.-China relationship. Read and gain from Mr. Lee’s perspective.
Posted by John at 10:05 PM | Comments (0) | TrackBackQuote of the Day for Sunday, August 21, 2005
Today's quote is from St. Francis de Sales, born on this date in 1567: "Have patience with all things, but chiefly have patience with yourself. Do not loose courage in considering your own imperfections but instantly set about remedying them--every day begin the task anew."
Posted by John at 12:00 AM | Comments (0) | TrackBackAugust 20, 2005
Se Habla Espanol, Just Not Online
Many companies are offering Spanish language options in their automated help lines and live call centers. Most of the same companies, however, do not offer an online presence in Spanish, according to Forrester Magazine, via the New York Times:
That decision--or oversight--is costing merchants tens of billions of dollars in sales a year, according to the current issue of Forrester Magazine, published by the research company of the same name.
"Hispanics have $575 billion in purchasing power," Eric Hellweg, senior editor at the magazine, writes. "The Hispanic online population grew 43 percent from 2003 to 2004, according to Nielsen/NetRatings." That, according to the article, makes Hispanics "the fastest-growing online group."
And a number of those people would rather not conduct business in English; Mr. Hellweg writes that "42 percent of Hispanics prefer to speak Spanish." In addition, 31 percent of Hispanics say they speak as much Spanish as they do English.
As part of their research, Forrester also found that 81% of Fortune 500 companies do not have Spanish content online.
The mainstream business community, for the most part, clearly doesn’t understand how quickly Hispanics are becoming wired. The reasons for this are varied, but probably include stereotyping and a lack of Hispanics in senior management.
As we reported several months ago, half of all U.S. Hispanics 18 or older own a computer, and about one-fifth of all Hispanics have made Internet purchases of over $100.
The market is there.
Posted by John at 9:10 PM | Comments (0) | TrackBackStereotypes and Action Movies from Hollywood and China
Brian Micklethwait, writing for the blog of the Globalization Insitute, has some interesting thoughts about the worldwide spread of Hollywood action movies, and the notions about the U.S., often negative, these movies plant in viewers’ minds around the world:
". . . these action movies have surely also reinforced the stereotype of Americans as adolescents, who use fisticuffs, magical super-technology and explosions as a substitute for thinking things through. And they have also, surely, helped to fuel that characteristic American phenomenon, American anti-Americanism."
Micklethwait also notes in his fine analysis that the recent success of the Chinese in the action movie genre may result in "similarly ambiguous results for China."
It is extremely difficult to overcome the power of stereotypes reinforced by the mass-media; this principal applies equally to the United States and to China.
Posted by John at 9:22 AM | Comments (0) | TrackBackQuote of the Day for Saturday, August 20, 2005
Today's quote is from Paul Tillich, born on this date in 1886: "Decision is a risk rooted in the courage of being free."
Posted by John at 12:07 AM | Comments (0) | TrackBackAugust 19, 2005
Quote of the Day for Friday, August 19, 2005
Today's quote is from Coco Chanel, born on this date in 1883: "Success is often achieved by those who don't know that failure is inevitable."
Posted by John at 12:00 AM | Comments (0) | TrackBackAugust 18, 2005
Spanish Language Newspapers Growing By Being Local and Authentic
Although the circulation of mainstream newspapers is falling, Spanish language and bilingual newspapers are growing, reports Hispanic Business.
The reason, quite simply, is that these newspapers address the wants of an underserved community through, among other features, "providing relevant stories by going out into the communities and getting authentic voices."
Posted by John at 5:05 AM | Comments (0) | TrackBackQuote of the Day for Thursday, August 18, 2005
Today's quote is from Marshall Field, born on this date in 1834: "Goodwill is the one and only asset that competition cannot undersell or destroy."
Posted by John at 12:00 AM | Comments (0) | TrackBackAugust 17, 2005
CAFTA’s Effect: More Foreign Direct Investment
The Economist reports on the possible impact of CAFTA for Central American countries. The biggest change in the short run is more likely in foreign direct investment in CAFTA countries, the magazine reports, instead of in trade itself. This investment is likely to come not only from Americans, but investors in Europe and Asia as well, who view the treaty as a further sign of stability.
Posted by John at 5:16 AM | Comments (0) | TrackBackSingle Family Housing "Extremely Overvalued" in One-Third of U.S.
USA Today reports on a study by National City Corp. economist Richard DeKaser which finds that single family housing is "extremely overvalued" in 53 U.S. cities. These cities represent nearly one-third of the overall U.S. housing market.
DeKaser’s definition of overvaluation is if prices are 30% above his estimates of where they should be based on historic price data, area income, mortgage rates, and population density, which he uses as a proxy for land scarcity.
The highest risk markets, not surprisingly, are largely clustered in California, southern Florida, and in Northeastern markets like Boston and parts of New York and New Jersey.
Interestingly, Atlanta is only 4% overvalued, according to DeKaser’s study. Undervalued markets include vibrant areas such as Charlotte (undervalued by 2%), Nashville (3%), Austin (5%), Houston (8%), and Dallas (11%).
You can find the entire list here.
This study helps illustrate why there is such a fierce debate over the state of housing and whether a price bubble exists. One’s point of view on housing can be extremely colored, positively or negatively, depending on one’s location.
Posted by John at 5:02 AM | Comments (0) | TrackBackChicagoland's Population Growth Driven by Hispanics
Eighty percent of the Chicago metropolitan area’s gain in population since 2000 has been due to the increase in the Hispanic population, reports Hispanic Business. The article reports these gains are coming not just in Cook County, but are widely spread among suburban Chicago counties as well.
Posted by John at 4:57 AM | Comments (0) | TrackBackThank Goodness We Have the Analysts
A headline from this morning's Atlanta Journal-Constitution: Analysts: Delta faces cash crunch.
Posted by John at 4:39 AM | Comments (0) | TrackBackQuote of the Day for Wednesday, August 17, 2005
The source of today's quote is unknown, but it's too good not to pass along: "Today's mighty oak is yesterday's nut that held its ground."
Posted by John at 12:00 AM | Comments (0) | TrackBackAugust 16, 2005
Diminishing Gap between Hispanic and Mainstream Media Ad Rates
Hispanic Business reports that the ad-price gap between English and Spanish language advertising is closing rapidly, measured by cost per thousand (CPM). Factors cited include better audience measurement, a higher profile for Hispanic media companies, and the rapid increase in Hispanic purchasing power over the last decade.
Only six years ago, an FCC study found that the revenues of minority broadcasters were almost two-thirds lower than those for their non-minority peers.
Probably the most basic reason for the closing gap in CPMs, however, is contained in a quote by advertising executive Héctor Orcí of La Agenica de Orcí & Asociados in Los Angeles: ". . . it has never been a numbers game; it has always been a question of people's willingness to believe the numbers . . . They believe when the bottom line is affected. At one time ignoring Hispanics was OK business behavior. It's not anymore."
Posted by John at 11:28 AM | Comments (0) | TrackBackWho's Going to Fix Your Air Conditioning?: More Worker Shortages
We recently pointed to IndustryWeek’s prediction of an increasing dearth of manufacturing workers; expect shortages in repair technicians as well, says IW:
Posted by John at 3:58 AM | Comments (0) | TrackBackThere's a growing shortage of automotive, heating and air conditioning, equipment maintenance, recreational vehicle and appliance repair technicians, notes Joyce Gioia, president of the Herman Group, a Greensboro, N.C., consulting firm. "With a growing demand and a no-growth labor pool, each of us will feel the effects personally," she says. Shortages already are resulting in longer waiting times for service and affecting the quality of work, Gioia claims.
Quote of the Day for Tuesday, August 16, 2005
Today's quote is from Jean de la Bruyere, born on this date in 1645: "Those who make the worst use of their time are the first to complain of its shortness."
Posted by John at 12:03 AM | Comments (0) | TrackBackAugust 15, 2005
Quote of the Day for Monday, August 15, 2005
Today's quote is from Edna Ferber, born on this date in 1885: "I am not belittling the brave pioneer men but the sunbonnet as well as the sombrero has helped to settle this glorious land of ours."
Posted by John at 12:02 AM | Comments (0) | TrackBackAugust 14, 2005
The Most Important Economic Statistic: Productivity
Economist Arnold Kling, formerly a staff economist for the Fed’s Board of Governors, says productivity statistics should get the most weighting in the President’s economic briefings.
Another well-spoken economist, James Hamilton, explains in his blog Econobrowser, why productivity is so important. I urge you to absorb his post in its entirety; an excerpt follows to whet your appetite:
Between 1947 and 1973, U.S. output per worker chugged along impressively at an annual growth rate of 2.7% per year. Beginning in 1973, however, that trend abruptly deteriorated, with productivity growing at only a 1.4% annual rate for the next two decades. . . .
. . . U.S. productivity began to grow quickly again in the late 1990's, and there now are enough data to suggest that this change is for real. Between 1995 and 2004, U.S. output per worker grew at a 2.9% annual rate, even faster than the impressive pre-1973 pace. It's hard to attribute this to a change in any of those factors thought to have contributed to the slowdown in the seventies. Instead, the good news seems to be the result of a new set of favorable developments, chief among which is the way that computers and information technology have changed so much about the American workplace. . . .
Please read Hamilton’s important comments in full.
Confirming What We’ve Long Suspected: Congress is Bad for Stocks
This country has come to feel the same when Congress is in session as when the baby gets hold of a hammer. (Will Rogers)
That hammer is aimed at the stock market—at a minimum—based on a research study recently highlighted by CFO magazine.
Not only are stock returns lower when Congress is in session, but volatility is higher.
The study found that over the entire existence of the Dow Jones Industrial Average, over a century, 90% of the returns of the index have come when Congress is not in session.
To verify the results, researchers Michael Ferguson and Hugh Douglas Witte tested three other broad market indices, including the S&P 500, and came to the same conclusion.
Posted by John at 10:51 PM | Comments (0) | TrackBackQuote of the Day for Sunday, August 14, 2005
Today's quote is from John Galsworthy, born on this date in 1867: "A man is the sum of his actions, of what he has done, of what he can do. Nothing else."