March 20, 2012

Our Glorious Ocean of Hydrocarbons

A FRIEND OF MINE recently posted on Facebook this story from Investor's Business Daily detailing the United States' oil reserves, which may in fact be much larger than originally thought. Far from only having 22 billion barrels of proven reserves, IBD's John Merline reports the United States has as much as 400 billion barrels of oil recoverable using present technology, and theoretically much more beyond that.

Now, I don't know about you, but when I hear that, it makes me think that we're sitting on top of a glorious ocean of hydrocarbons, just waiting to be exploited and put to good use. We already know, of course, that we have vast amounts of natural gas available to us -- so much gas, in fact, that the price has fallen to roughly $2 per million BTU and our producers are routinely "flaring" the stuff -- that is, burning the excess that can't be transported or otherwise used. So if we've already let the horse out of the barn when it comes to natural gas, why not do the same with oil production?

I mean, if you consider the tradeoffs inherent to this equation, you've got the environment and global warming concerns (1) on the one hand, and an amazing -- incredible -- unbelievable sum of money on the other (2). So to me, it's worth considering whether what could be done with all that money outweighs any environment problems that may result. You know, perform a cost-benefit analysis.

Now, if we use that 400 billion barrel figure mentioned above, that's roughly $42.8 trillion worth of oil at today's prices. Leaving aside the economic impact of all that oil for a moment, we could do a lot with $42.8 trillion.

Of course, part of the reason to pursue this idea is that oil prices will fall as a result. This is important, considering oil acts as a lubricant for the engine of our economy. Lower oil prices mean lower input costs. Lower input costs mean lower prices and greater profits. Lower prices and greater profits means more prosperity. It especially means more prosperity for regular working people, whom all our politicians and talking heads have forgotten about over the past decade or so. But you may rest assured they are still out there, slogging away.

You see, there are plenty of people out there for whom the New Economy isn't really working out. They may not have the skills or the education to knowledgeably design a bridge or program a computer -- and for some, going back to school to gain that education isn't a realistic prospect -- but they sure know how to do a lot in terms of the strong-back, heavy-labor tough stuff associated with oil production. In oil-rich North Dakota, where unemployment is at 3% and a truck driver for an oil producer can make upwards of $100,000 per year, regular working people are making out like bandits and presumably having a great time doing so. There's no reason why we shouldn't make these opportunities available to as many people as we can.

Additionally, it stands to reason that of those trillions of dollars, a heck of a lot of it will go to the Government in tax revenues -- from the workers themselves, who will be making money hand over fist, and from the companies producing the oil, which will be making money hand over fist. Imagine what could be done with that money. It's entirely possible we might be able to afford all the programs we currently have without having to borrow money to pay for them. For that matter, we might even be able to afford new programs that could provide great benefits to the people making use of them.

Imagine if the oil we produced let college students pursue their studies without having to shoulder immense student loan debts. Imagine if it provided health care for millions of people who couldn't otherwise afford it. Imagine if it meant we could lower tax rates for everyone. The possibilities are endless -- and it's not as if we have any good reason to wait.

The only possible reason that makes sense for not exploiting the oil, of course, is that it leaves us the last man standing when everyone else runs out. But even that's taking long-term thinking to an irrational extreme, because a) as Keynes famously said, in the long run, we are all dead; and b) as economics students know, we will never actually run out of oil, because people will quit using the stuff once better alternatives become available. (It's the old college-economics analogy about being stuck in a room stocked full of pistachio nuts; I forget who came up with it. Anyway, the idea is you're never going to crack all of the pistachios, because eventually you'll give up searching for the nuts amongst the growing, and eventually giant, number of discarded shells).

Of course, if there are better alternatives available, we should keep researching them -- they might come in handy someday, and it will keep our scientists at work. (Even oil may prove inferior to an engine powered by a thorium laser). But at the same time, we shouldn't go searching through the couch cushions for loose change when we've got a crisp $100 bill sitting on the kitchen table, either.

One final point to mention regarding the environmental aspects of oil production, which seems to be a major driver in terms of opposition to looking for more oil. Aside from the fact oil production today is necessarily much cleaner than it was 40 or 50 years ago (and do you think BP wanted to pay $20 billion to clean up its spill in the Gulf?), it's worth noting where the oil itself would be produced. Our major deposits are located in Montana, Wyoming, and western North Dakota, and it is there that much of the expected surplus would be wrung out of the ground.

Folks, I don't know about you, but I don't have any plans to visit Wyoming, Montana, or western North Dakota anytime soon. (Nor do I plan to visit Alaska's North Slope). It's one thing to be upset if an oil refinery will be built next to your house; it's another thing entirely to be upset because someone's building an oil refinery 1,500 miles away, in a state where you don't live, have no plans to visit and wouldn't even think about except for the fact some activist acquaintance posted about it on social media. If people in these locales are willing to drill for oil, we should not only let them, we should encourage them -- because we'll reap the benefits for their sacrifice.


1. I have to say that all this concern over global warming doesn't make sense to me. The last time we had a warm period, the Vikings had self-sustaining colonies in Greenland. Greenland, for God's sake. To be more precise, though, there's nothing to indicate the costs of global warming would outweigh its benefits -- and that's the key issue for me (and other people who are blasted as "climate change deniers"). The benefits include longer growing seasons, lower food prices, less hunger and less world instability. Also, shipping and resource exploitation will become easier, particularly near the poles. With those things as the result, we should welcome global warming with open arms, not waste trillions of dollars in a futile attempt to stop it.

Unfortunately, however, I don't think we'll be so lucky. I subscribe to The Twilight Zone theory of global warming, which is based on an old episode of the show ("The Midnight Sun"). This theory stipulates that everyone calling for drastic action to stop global warming will find, in something of a twist ending, that we're actually in for a severe bout of global cooling. I base that on solar cycle theory regarding global temperature patterns (i.e., it's the Sun wot does it), known past history regarding said patterns (e.g., the Maunder Minimum), and associated research, particularly out of Russia -- the last place that wants any global cooling to happen.

As one might expect, the costs associated with global cooling would be significant -- and would lead to shorter growing seasons, higher food prices, more hunger and perhaps famine in less-developed parts of the world, and greater world instability.

2. It's worth noting the $42.8 trillion figure is a low estimate for the value of the oil, as there may be as many as three trillion barrels of oil to exploit. Based on some back-of-the-envelope calculations, that would provide us with enough money to ensure every household in America had a solid gold toilet.

Posted by Benjamin Kepple at 08:46 PM | Comments (0) | TrackBack

Yeah, So I've Been Busy These Last Two Years

I HAVEN'T POSTED since December 2010? God. It's amazing what a new profession and graduate school training does to a guy. Anyway, I'm hoping to devote time again to the blog in the near future, because there's so much I would like to write about, but I haven't had the time or the energy to pursue it. But let's see if I can't change that!

Posted by Benjamin Kepple at 08:31 PM | Comments (0) | TrackBack

December 07, 2010

Thanks for Saving Us, You Rotten Bastards

THE OLD SAYING has it that no good deed goes unpunished. The chairman of the Federal Reserve, Ben Bernanke, and everyone else who works for the place ought be forgiven if that phrase has ruefully gone through their minds as of late.

After all, all the Fed did was save us from a second Great Depression. For accomplishing this feat, a success that can only be described as unparalleled in the history of monetary policy, this august institution has found itself under attack from all sides. It would be one thing if these attacks came only from the usual suspects, who have their own reasons for lambasting the Fed at every turn, but increasingly the Fed has become an easy target for attacks from people who ought know better.

The usual suspects, of course, are the old hard-money types who have a ridiculous attachment to gold – to my ear, they even say the word as if they just discovered some in the back of Sutter’s Mill -- and the idea of a gold standard. They view our current monetary arrangements as a disaster, resulting in deficits and rampant inflation, and long for the supposed security of the metal.

Your correspondent finds this a bit daft, as real estate – or any real property – does the same job without the unpleasant tax treatment and costs of storage, but that’s a story for another day. I have no doubt these folks are morally upstanding people who only want the best for their families and society as a whole, but I do think they’re wrong on this one, and have been for a long time.

But it’s not the goldbugs or their criticism of the Fed that irks me – like the poor, they shall always be with us. What does annoy me is the criticism that comes from people who really should know better – or who are blaming the Fed for failures that should be laid at their doorstep.

Exhibit A, in this instance, is U.S. Sen. Bernard Sanders, I-Vt. Sen Sanders, reportedly an actual socialist, does not like the fact that over the course of the past few years, the Federal Reserve loaned out some $3.3 trillion to various corporations and financial institutions throughout the world. Inconveniently for the Senator, this did not result in any actual loss to the Fed – in fact, it made a profit on the loans – but it still, according to Sen Sanders, resulted in a secret “backdoor bailout” on a “jaw-dropping” scale.

One wonders what alternative Sen Sanders would have wanted. After all, the Fed made these loans when the credit markets had completely seized up, and no private institution wanted to loan money to anyone. Had no money been available, it would have caused a cascading failure of private enterprise, and would have made today’s 9.8 percent unemployment rate look like a walk in the park.

Sen Sanders seems more piqued that the Fed did not, in his words, force “banks receiving assistance to step up lending to small businesses and to ease credit for consumers.”

Well, whose fault is that, one wonders? Perhaps Sen Sanders ought look at the Department of the Treasury, to say nothing of the lawmakers whose policy approaches can only be described as schizophrenic. Look how they handled TARP:

GOVERNMENT: Great news, everybody! We’ve got a $700 billion fund from Congress to help out banks and industry!

BANKER: Oh thank God.

SECOND BANKER: Praise the Lord!

THIRD BANKER: That’s great, but we don’t need it. Thanks, though.

GOVERNMENT: But you have to take the money too.


GOVERNMENT: Look, people are panicking. If they see Phil and Ted here took the money while you didn’t, there’s going to be a shitstorm and it won’t do anyone any good. So everyone has to borrow money even if they don’t need it.

THIRD BANKER: Well, if it stabilizes the system …

GOVERNMENT: Great. Just sign here.


GOVERNMENT: OK, great. Wait a minute! How much are you paying your people? AND YOU’RE DOING THAT WITH OUR MONEY?!

THIRD BANKER: What? You wanted us to take the money, and –



Then, of course, there was the whole issue of capital reserves.


BANKER: Thanks for the loan. Now we’re adequately capitalized again.


BANKER: What? You wanted us to improve our capital ratios, so we did.


BANKER: OK, so let me get this straight. You want us to improve our capital ratios but loan more money out to people, all at the same time.


BANKER: Those goals are completely contradictory. So which one of those do you want us to do?


SECOND BANKER: But we checked with accounting and they said the numbers don’t add up.



Of course, the most scorn can be dumped upon the Government’s infamous $787 billion stimulus program. That a stimulus program was necessary is not in dispute; it absolutely was, and anyone who says otherwise is playing political games. But its design was so amazingly flawed, and in many cases so incredibly stupid, that in the end it was far less effective than it could have been.

After all, that’s $787 billion. There are roughly 306 million Americans, so that works out to roughly $2,572 for every man, woman and child in America. Let’s further say $287 billion would be spent on necessary things like roads, bridges and other construction projects we’ve been meaning to get around to eventually. That leaves $500 billion dollars, or $1,634 for every man, woman and child. If that $500 billion had been directly distributed to the American people, you’d have solved a hell of a lot of the problems right there. I mean, if a typical family got a check for $6,700 from the Government, and many of those dollars got spent, the multiplier effect would be incredible. Even if much of it was used to pay debt, it would free up a hell of a lot of cash flow.

Instead, the Government somehow managed to spend hundreds of thousands of dollars on each of the largely make-work jobs they created, along with protecting their most important constituents – those on Governmental payrolls – from the ravages of the economic storm. Those in the private sector, meanwhile, got a tax cut of … oh, eight bucks a week.

So I do hope you’ll pardon my skepticism when the same people, who thought eight dollars a week would spark an economic recovery Croesus himself would envy, cast scorn upon the one institution that actually has known what it's doing during this whole mess. I also hope you’ll pardon my amazement that people who couldn’t run a hot-dog stand if their lives depended on it now demonize an institution that, just a short while ago, saved the entire financial system from careening into an abyss.

Posted by Benjamin Kepple at 08:50 PM | Comments (0) | TrackBack

December 04, 2010

Why Your Liberal Guilt Trip Doesn't Impress Corporate America

NOTED WITH AMUSEMENT: the squawks of fury and disbelief from commenters over at The New York Times -- and undoubtedly elsewhere -- over news that PayPal, along with Amazon, have severed their ties with WikiLeaks. WikiLeaks, of course, is the shadowy group slowly releasing a cache of myriad American diplomatic cables in an attempt to subject Foggy Bottom to the Chinese water torture.

I can't for the life of me figure out why people are upset with these companies. For one thing, WikiLeaks is arguably engaged in conduct that violates federal law, which isn't exactly conducive to convincing companies they ought do business with them. Besides, here's a newsflash, folks: this is what happens when you give the Government such extensive power that it only has to snap its fingers to get things like this done.

I mean, yeah, that's really a tough decision for the businesses in the middle. On one hand, they can cooperate with the Government and give it what it wants, thus making the situation go away. On the other, they can stand up to the Government, thus causing the FBI, the Department of Justice and anyone else who wants in to show up and cart off all their records, interrogate their executives and essentially bring their business to a screeching halt.

If you don't like that, then get to work on inventing a time machine. That way you can travel back to 1912 and warn the people they ought vote for Taft. More realistically, you can fire up iTunes, put on some Shoskatovich, and weep softly as the mordant strains of the strings play through your speakers. (I suggest his Chamber Symphony, Op. 110a, particularly part IV. Yes, there's a reason those first notes sound like harsh knocking on a door).

True, some people have suggested the way to show one's disapproval of these actions is to stop doing business with the companies in question. But let's be honest: 29.8 percent of the people now approving such suggestions would sooner cut off their pinky fingers than actually cut ties with the folks providing them valuable and useful services, while the remaining 70 percent don't actually do business with the firms in question, making their approval moot. (What about that last 0.2 percent? As they say in business, that's not material).

But let's play pretend for a moment and say that enough people did stop doing business with these firms to make it noticeable on a balance sheet. You know what would happen then, right? No, the companies wouldn't change their decisions. They'd lay off a bunch of low-level employees who had nothing to do with the matter at hand, then shift the laid-off folks' work onto the remaining staff. Way to stick it to The Man there, angry customers blaming the companies for making sound business decisions.

As radical as it might be these days, the only practicable solution is to somehow convince our elected geniuses that the Government's bureaucracy ought not have the power to utterly crush companies for doing business with people it does not like -- or for that matter, doing anything else. Would that lead to some distasteful scenarios down the line? Yeah, probably. But there's something to be said for having a Government that must wait for a guilty verdict before it starts knocking in heads.

Posted by Benjamin Kepple at 07:43 PM | Comments (0) | TrackBack

June 11, 2009

Report: Consultants to Blame for Venezuela-Coke Fiasco

Financial Rant

Venezuela Bans Coke Zero,
Citing Health Concerns

Calls for Invasion Grow
A "Rare Win" for Embattled
Brand Managers

CARACAS -- The Venezuelan Government yesterday banned the sale and distribution of Coke Zero, citing health concerns about the popular zero-calorie drink, in a move expected to cause "considerable distress" to the drink's bottler, Coca-Cola FEMSA SA de CV, and the Venezuelan people.

Health Minister Jesus Mantilla announced the move through the government's news agency.

It's unclear what led the Venezuelan Government to ban Coke Zero. Oddly, however, some observers in the South American nation are casting blame towards Coke brand managers Irwin Cholmondeley and Edward "Ned" Callahan. Those in the capital say Messrs Cholmondeley and Callahan appeared on President Hugo Chavez's popular television show, "Alo Presidente!" and encouraged the Venezuelan leader to take swift action against Coke Zero.

"Yes, I remember it," said Caracas bricklayer Hernan Martinez, as he was headed to work yesterday morning. "It was during the 27th hour of Chavez's marathon session last week. These two guys came on and started going on about infraccion del gusto and capitalismo imprudente. Then, when I went into the corner shop this morning, these men from the distributor were taking the Coke Zero away."

"Also, they took away the beer," Martinez said. "Something about -- how do you say it? -- 'taking back the High Life.' "

ALO PRESIDENTE! A video still from state-owned Corp. Venezolana de Televisión shows Messrs Cholmondeley (left) and Callahan elaborating on the "fundamental, capitalist evil known as Coke Zero" during President Hugo Chavez's weekly television program. President Chavez was reportedly quite alarmed to hear about how Coke Zero had created poor health among those exposed to it. Symptoms, according to Messrs Chomondeley and Callahan, included "anxiety, disturbed sleep, minor instances of paranoia, and concern over how certain people would pay their mortgages."

A clip of the show also shows Mr Callahan complaining of sore ribs and neck pain, which reportedly resulted from being tackled by a Coke Zero-crazed Troy Polamalu.

Reaction to the Government's move has been swift and strong in some quarters. Edison Paez, a Maracaibo storekeeper, complained the Government was robbing him of considerable profit.

"What the hell?" Paez said. "First they nationalize the staple good producers, and now they're forbidding honest Venezuelans from drinking Coke Zero -- a beverage, I might add, that was one of the few profitable things I could sell after the Government imposed price controls. Now what am I supposed to sell? Frescolita? The stuff tastes like bubble gum, for God's sake."

"If this keeps up, my store's going to have less stock than a Russian department store in 1985," Paez said.

However, not everyone was opposed to the move. Irina Tucupita, a hospital nurse, said she understood why the Government acted as it did.

"Those poor men. I saw them on the broadcast, and clearly this Coke Zero drove them entirely insane," Tucupita said. "So I can see why the Government decided to ban it."

WARNINGS: The Government has posted signs like these in major cities to spread word of the ban.

In the United States, observers said they thought the Venezuelan Government's move would have "minimal impact" on Coke Zero as a brand, but agreed it was "a rare win" for Messrs Cholmondeley and Callahan.

"These guys have been getting their asses kicked from Anchorage to Kuala Lumpur," said soda industry analyst Mark Piotrowski, of High Water Mark Brokerage LLC in New York. "Although this victory is a small one for them, it is a victory nonetheless, and as such it must be appealing."

When asked if rival PepsiCo Inc. could gain market share from the dispute, Piotrowski said, "I don't understand."

But opposition to the move is growing in Washington. A mid-level State Department official warned that, although Venezuela "really wasn't on our radar screen," other elements could take swift action to deal with the situation.

"We've got enough problems on our plate without worrying about how Chavez is going to further destroy his country's economy," the official said. "But it's not us he has to worry about. For one thing, taking any carbonated beverage product away from regular citizens will cause considerable societal discontent. For another, he doesn't seem to realize who he's dealing with. I mean, he's going to have to answer to the Coca-Cola Company."

Posted by Benjamin Kepple at 12:57 AM | Comments (0) | TrackBack

June 09, 2009

The Most Dangerous Game

TWENTY THREE PERCENT. That's how much the workers affiliated with the Boston Newspaper Guild will have their pay cut, now that they've rejected a proposal from The New York Times Co. to cut their wages, implement furloughs, cut their benefits and make other changes to their contract. If there's one word that sums up the reaction from my colleagues in the newspaper business, it is: "Wow" -- and for a variety of reasons!

But after looking into it, I can't say the result surprises me all that much.

For one thing, Guild members were essentially asked to pick their poison during the most recent round of negotiations. A 23 pc wage cut, although stunning on its face, may for many members be preferable to the entire package presented them, which involved an 8.3 pc cut in wages, five days of unpaid time off, and changes to health and pension benefits. Add everything together in that proposal, and it doesn't take much to see the cuts inherent in that would also be dire.

As it happens, you can run the numbers and see for yourself, thanks to the Boston Newspaper Guild's handy calculator. In my case, I used the Guild's top-scale for a reporter at the Globe, which is $1,387.15 a week, or roughly $72,133 per annum. Losing 23 pc of that works out to an annual cash loss of $16,590. But when you add in all the benefit changes the New York Times had proposed, the annual cash loss was still $15,639 for a worker with a family!

Among those changes was a proposed pension freeze -- and it's no wonder many members said no, given the math. A pension freeze is a killer, as anyone who benefits from such a plan knows. The reason, of course, has to do with the eventual payout. As the Guild's calculator showed, a freeze would over time cost each worker well into the six figures. Using my example above, a worker with ten years in the plan would have his benefit frozen at about $1,100 a month. With a maximum payout of about $3,300 if the worker made it to 30 years, that works out to leaving $2,200 a month on the table. Over 20 years, that's roughly $529,000.

Yes, that's right. $529,000.

Also, for those wags wondering how much said worker could get if he got a 100 pc cut in his wages, think about how long it might take to get to that point. If the worker survives just one more year, he increases his monthly pension benefit by about $110 a month. Over 20 years, that's $26,400. So if you figure the ship's going to sink anyway, and you're going to sink along with it (or get thrown overboard prior to hitting the iceberg), voting to accept the Globe's plan makes even less sense. If I was in the Globe's unit, I'd take the pay cut and find a way to make it work.

So after looking at it, I can't say I would blame anyone in the Boston Guild for voting one way or the other on the contract proposal. I only hope the Boston local can convince its members of that -- because the margin of the vote was so close: 277-265. (Wow).

I mean, I've been involved in similar situations, in which everyone argues passionately about how to vote on a contract proposal. But in the arguments I've been involved in, the argument has usually been a way for everyone to let off steam. Then, when the vote comes in, it's usually something like 123-3 one way or the other. This vote was so close, and the stakes were so high, that it has the potential to make for a lot of angry members. I do hope, however, that's not the case in Boston.

So, to sum up for all of you wondering why the Guild voted the way it did, think of it this way. Basically, the Guild's members had a choice. They could get their crap sandwich on a sub roll or a trendy flatbread.

Of course, the real question remains unanswered -- just what will come down the pike.

Supposedly, the Globe lost $50 million last year and was on track to lose $85 million this year prior to the cuts, according to the Times. But I'd love a bit more elaboration from the company about this. Certainly, in looking through the Times' financial reports, there's no real breakout just for the Globe itself -- most of its results are reported on a consolidated basis among all of its newspaper operations. Go look for yourself if you don't believe me.

That said, there's no denying the Times' overall financial picture has worsened -- and to my mind, is actually pretty dire. Consider the following comparison of key statistics from the Times' '08 annual report:

Goodwill: $661.2m
Stockholders' equity: $504.0m

Now consider the reasonable reaction to this news:

BUTTHEAD: "He said goodwill." Uh huh huh huh huh huh!
BEAVIS: Yeah! Heh heh hrmmm heh heh! Goodwill sucks!

This basically explains, to my mind, why the New York Times won't close the Globe anytime soon. After all, how much of that goodwill -- an accounting term to describe the premium inherent in overpaying for an asset in order to acquire it -- is wrapped up in the Boston Globe, for which the Times paid $1.1 billion back in the day? I'm guessing it's still rather a lot, despite recent impairments. Plus, if the Times suddenly had to close the Globe, how much would the Times have to writedown or expense as a result -- not just in terms of goodwill, but in PP&E, severance costs, and so on? It's not like they can just close the place and have done with it.

Also, what's interesting in the Times' reports is that stockholder equity is a key metric for evaluating the various loans extended to it. That's not an issue now because of how those metrics are calculated -- for one of its big loans, the Times had about $568m in breathing room at the end of the first quarter. But again, if the Times suddenly decided the Globe had to go, just how much breathing room would the Times have after all was said and done?

Oh, and what happens if things get worse? In 2011, the Times will have one of its revolving credit lines -- which now has $287 million outstanding in borrowings and letters of credit -- expire. Unless everybody gets well really soon, I can't believe their lenders would keep the terms as generous as they are now. Already, the Times' debt is below investment-grade. Oh, and remember that big $250 million loan from Carlos Slim Helu? It's got an effective interest rate of 17 percent -- and a whole bunch of covenants that restrict the company's capacity to take on additional debt. (They also prove Mr Slim is a financial genius, but that's neither here nor there).

So if you ask me, what the Times really could use right now is cash.

There are three ways to get cash. First, you can borrow it, but the Times probably would like to avoid that. Second, you can earn more and stop spending as much of it, which the Times is naturally trying to do. Lastly, you can sell assets to raise it. If you ask me, Door Number Three is probably becoming more palatable all the time to the suits in New York. As with all companies, they know full well their lenders will have no compunction about slamming them to the wall if the lenders think it will serve their interests.

And the Times has plenty of things it can sell. Like a roughly one-sixth stake in the Boston Red Sox, for instance. It could sell some of its papers elsewhere in the country, of which it has 15 or so. It could even sell the Globe itself -- and I'd be stunned if the Times wasn't actively considering just how to do that. Besides, think of the savings on aspirin alone. Could be in the millions.

Posted by Benjamin Kepple at 01:12 PM | Comments (0) | TrackBack

June 03, 2009

When Job Interviews Get ... Interesting

AS A JOBSEEKER, I was rather stunned at reading this great story in the Wall Street Journal about the lengths to which certain companies will go when it comes to interviewing prospective employees. The more novel tactics reportedly include:

-- requiring a prospective employee to provide 12 references
-- requiring applicants to bring their own lunch -- and three years' worth of W-2 statements
-- having prospective employees pitch other applicants as best for the job
-- performing a play with other applicants ... on the side of a highway.
-- asking inappropriate questions, such as how an applicant would react to the boss's gay son making a pass at them during an office Christmas party.

What, exactly, are these companies thinking? If you don't treat people with respect when you're in the process of hiring them, how do you expect them to treat your business? Let's say a company, XYZ Widget Corp., hired five people after subjecting them to a particularly cruel interview process, and interviewed a total of 50 applicants during that time frame. What would happen?

Well, at the very least, you can be sure the 45 people who didn't get the jobs would complain in most unflattering terms about XYZ Widget -- and to pretty much everyone with whom they came into contact. There's an old theory that says the number of people who know any given secret is the square of the number who have been told about it. So if that held in this case, you'd have 2,025 people who weren't all that fond of XYZ Widget Corp. Arguably, that could be broken down into the following subgroups:

* The 45 rejected applicants, who now hate the company and have secretly vowed revenge on its operation.
* The friends and family members who know the applicants well -- we'll call this number one-quarter of the remainder, or 495 people -- who now find the company appalling and make a point of studiously avoiding its products and services.
* The remaining three-quarters of the pool, totaling 1,485 people, who will remember the applicants' stories and make a point of discreetly avoiding doing business with XYZ Widget, much less apply for a job there.

Now, let's take the five people XYZ Widget actually did hire. It could be they end up loving their jobs, and become valued, productive employees. But it's a fair bet to say that XYZ Widget might not be the best place to work, based on its interview practices. Accordingly, two or three of the employees might jump ship once the economy improved. The fourth might end up performing at marginal capacity -- good enough to keep on, but not good enough to really sparkle or shine, which is ideally what you want from an employee. As for the fifth employee, well, he's probably a lawsuit waiting to happen.

Besides, what happens when the economy turns around? XYZ Widget's reputation -- which will stay with it -- will undoubtedly hinder its attempts to find qualified applicants when the available labor pool is small. That will accordingly mean lost opportunities in future for the company -- especially if applicants XYZ would have wanted for its team join the competition.

Now, this is not to say there aren't places for being tough during the interviewing process. Speaking personally, I don't mind a good challenge and would take a tough line of questioning as a chance to give as good as I got. But if faced with some of these questions, I would be inclined to ask some of my own. Like, "Are you well?"

Posted by Benjamin Kepple at 03:50 PM | Comments (0) | TrackBack

The Untold Story of the U.S.-China Financial Summit

Financial Rant

BEIJING -- U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan, and their respective subordinates engaged Tuesday in a financial summit between the world’s two economic superpowers, engaged in a “testy but ultimately useful discussion” during the talks, according to sources.

Despite the unusually frank nature of the back-and-forth, both sides agreed they had reached a consensus on the situation facing the two countries – namely, that the U.S. and China are completely and utterly stuck on their current course of action, whether they like it or not. A transcript of the exchange, which the Financial Rant obtained at great risk to its sources, makes this clear. The transcript follows:


SECRETARY GEITHNER: That was a fun question and answer session with the kids at Peking University, Mr Vice Premier. I can’t tell you how much I enjoyed being laughed at by a bunch of coddled Commie punks.
VICE PREMIER WANG: We are striving to achieve the openness you have in your own universities, Mr Secretary. We appreciate your patience with the students and trust they enjoyed the experience.
SEC GEITHNER: They certainly did enjoy it! That’s the problem. I’d be fine if a few of them enjoyed the experience of a re-education camp, that’s all I’m saying. I get enough of this crap back home.
VP WANG: You are right, of course, in that backbreaking agricultural labor often re-energizes the mind after strenuous months of studying. But we have many things to discuss.
ASSISTANT SECRETARY SMITH: Which reminds me -- you got any of those barbecued pork bun thingies? Those rule.

(General agreement among American delegation).

ASSISTANT VICE PREMIER YU: Yeah, we just ordered some.

(A break for char siu bau ensues).

SEC GEITHNER: Now, where were we? Oh, right. Yeah. Now, look. You know our credit’s good, right? AAA rating from Standard and Poors? The world’s largest economy and all that? A GDP of $13 trillion?
VP WANG: Uh, you owe us $768 billion.
SEC GEITHNER: Right! So a few more billion here and there won’t really make much difference.
VP WANG: Well, no, but look, this is kind of getting out of hand. Besides, it’s not like we can just foreclose on California if you decide some day that you won’t pay us.
SEC GEITHNER: Which reminds me – how would you like Guam?
SEC GEITHNER: Sure, why not? I mean, what are we doing with it? None of us here has ever been to Guam, and none of us ever will. You could use it as, I don’t know, a base for shipping lanes or something. It’d be a steal at $75 billion.
VP WANG: For that kind of money, we could buy Hawaii!
SEC GEITHNER: Oh. Well, yeah, but think of the prestige value of buying Guam. It’d be kind of like when we bought the Gadsden Purchase from Mexico.
VP WANG: No it wouldn’t! It’s Guam!
SEC GEITHNER: How about the Aleutians?
SEC GEITHNER: Well, just keep it in mind. Anyway, as I said today at the University, we’re committed to keeping a strong dollar, and –
VP WANG: (snaps at Geithner in Chinese)
SEC GEITHNER: (pauses; looks at translator)
TRANSLATOR: Uh … the vice-premier said he is certainly glad to hear of your commitment to your wise and well-considered strong dollar policy.
SEC GEITHNER: That’s not what he said.
SEC GEITHNER: Come on, what did he say?
VP WANG: “Bitch, please.” That’s what I said! You owe us $768 billion! And we all know you’re going to stealthily inflate its value away to nothing! Then where are we going to be? We’re going to have $768 billion worth of fancy covered toilet paper!
ASST. VP YU: And what the hell are we doing meeting here, anyway? I mean, here we have 768 billion of your dollars, and we can’t even go down to McDonald’s and get a hamburger. We should be meeting some place cool, like San Diego!

(General agreement among Chinese delegation).

ASST. VP YU: I mean, that would rule. Or Las Vegas. Can you imagine how cool it would be if we got to go to Las Vegas with like $100 billion? That would kick ass.
CHINESE DELEGATE: We always meet here! I wanted to visit Graceland!
SEC GEITHNER: You invited us!
VP WANG: Yes, because it was polite! But you were supposed to say you were busy and then invite us there for a rain check! Honestly, do you know nothing about how things work?
SEC GEITHNER: Oh, so now we’re supposed to read your minds. I see.
VP WANG: God, you’re worse than the French.
SEC GEITHNER: OK, so let’s talk for a bit. Let’s say we did go a bit crazy with the whole “creating money out of thin air” thing. So if we did that, wouldn’t that cause the yuan to eventually appreciate against the dollar?
VP WANG: Well, yeah, but not by much, because we’re not going to –
SEC GEITHNER: Work with me here. Now, I know that you know that I know that you’re manipulating your currency to keep it artificially cheap, and you do that by … oh, buying dollars. Isn’t that right? I mean, we’re cool with that, but doesn’t the stability of your economy depend on strong growth and job creation?
VP WANG: Well, we’re working on –
SEC GEITHNER: I mean, I forgot, how many of your citizens are living in impoverished rural areas? Oh, that’s right, 800 million or so?
VP WANG: That’s not relevant to our …
SEC GEITHNER: Aren’t most of those 800 million people really angry?
VP WANG: They’re not angry! They’re just ... well, slightly upset.
SEC GEITHNER: Well, guess how angry they would be if their friends and family members in the industrialized east all lost their jobs because Chinese goods would become super expensive to foreigners, and all the multinationals went elsewhere for their manufacturing needs? I’m not saying, I’m just saying.
VP WANG: Please. Where are the multinationals going to go? North Korea? Good luck with that. They’d get halfway through a production shift and everyone would have to go study the Wise and Glorious Revolutionary Principles of Great General Kim Jong-il, Steward of the Juche Idea.
SEC GEITHNER: They do that on their own time. There’s no overtime in North Korea!
VP WANG: Well, you’re still full of –
SEC GEITHNER: No, I’m not! You know full well what would happen if you stopped buying our Treasuries. Do you want 100 million angry people marching on the capital demanding work?


VP WANG: You know, we could use a few passenger jets.
SEC GEITHNER: How about Yellowstone?

In related news, the People’s Daily newspaper announced today that 43 students who attended Secretary Geithner’s lecture have been volunteered to pursue extended studies at Harmonious Agricultural Labor Camp No. 19 in Xinjiang province.

Posted by Benjamin Kepple at 10:40 AM | Comments (0) | TrackBack

June 01, 2009

Today's "Alex" Cartoon Nails It

TODAY'S VERSION of "Alex" -- the long-running cartoon in The Telegraph which looks at financial markets -- pretty much nails the reasons behind the sudden rash of pessimism we're seeing about the markets' future.

Posted by Benjamin Kepple at 10:33 AM | Comments (0) | TrackBack

An Editor's Pick in This Week's Carnival of Personal Finance

I ABOUT FELL off my chair this morning when I logged on to this week's Carnival of Personal Finance and found I was not only an editor's pick, but the first-listed entry in the entire carnival -- which gets more than 100 submissions each week from a variety of talented writers. That's pretty damn cool, and I offer my sincere thanks to this week's host, "Funny About Money," which gave me a nice plug for my post below -- and which the host declared "too, too good!"

Posted by Benjamin Kepple at 10:12 AM | Comments (0) | TrackBack

May 29, 2009

The Garden of Financial Delights

IN THE BEGINNING God created risk and return. And the risks were myriad and treacherous, and darkness was upon the face of the deep. And the spirit of God moved upon the face of the waters and said, “Let there be profit.” And God saw the profit, and saw that it was good; and He divided its sources into debt and equity. And the debt He called bonds, and the equity He called stocks. And the bonds and the stocks were the first instruments.

And the LORD God took the man, and did shew him the market, and put him into the market to dress and to keep it. And the LORD God commanded the man, saying, “Of every sector of the market thou mayest reap rewards. But of the Sector of Alternative Investments, thou shalt not reap from it; for in the day thou reapest thereof thou shalt surely die.”

Now the salesman was more subtle than any man which the LORD God had made. And he said to the man, “Behold, art thou earning but a pittance on thy savings accounts, and on thy muni bonds, and did not Business Week proclaim the death of equities?” And the man said, “Don’t remind me.” And the salesman said, “Thou should invest in the Sector of Alternative Investments, for thou canst reap great rewards many times that of the market, if only thou let me use the Fount of Leverage and draw from the River Forex and conjure Forces from the Pit of Shortselling.” And the man said, “Just what type of great rewards are we talking about?”

Verily the salesman looked at him and said, “Behold, I shall give thou the world and everything in it, and all for a mere two percent each year and twenty percent of the gains.” And the man said, “We’re good.” And lo, the salesman did go and produce great gains, and drew succor from all parts of the earth, and other men clamored to invest. And the salesman did create something from nothing, and all were in awe of his power; and the salesman went on to create funds of funds, which did the same thing but took even larger fees. Then men said to themselves, “Behold, the Sector of Alternative Investments is vast and powerful; and who can stand against it?” For those who controlled it had rode the bull and tamed the bear, and were portrayed in Fortune.

And the LORD God called to the man and said, “What is this thou hadst done? Didn’t I tell thou to stick with slow and steady growth?” And the man said, “Ooooooh, slow and steady growth. My fund’s alpha is through the roof and I’m partying at a mansion tonight with all these models from Eastern Europe.” And the LORD God looked at the man, and said, “Thou shalt reap what thou have sowed.” And the man looked at the LORD and wondered, but quickly dismissed the LORD’s chastisement, for the man didst score frequently with girls he met at nightclubs and partook of the Pool of Bollinger and Moet & Hennessy.

But the man had forgotten about the serpent, who stalked the fields and offered his money to those who dwelt in rental units and smallholdings, saying, “Come, thou can afford a dwelling of thine own, or I can refinance thou mortgage and bring thou vast wealth.” And the people said, “Really?” And the serpent said, “Yea, verily, for the housing market always goes up.” And the multitudes did rejoice and bought flat-screen televisions and went on cruises and traded up to sport-utility vehicles.

But the multitudes were overcome with fear when their mortgages reset, and hid in their dwellings from their creditors. And they cursed the serpent, and there was much wailing and gnashing of teeth, and they feared being cast into the outer darkness. And the storekeepers and the merchants and the industrialists all wondered at this, and said, “Oh, shit.” And the LORD opened the gate to the Pit, and a black smoke arose from it, and the man heard a voice crying, “One month LIBOR for 4.5 percent, and three month LIBOR for five percent, but oil will crash from $145 to $50 a barrel.”

Then it came to pass there was a great earthquake in the markets, and the sun turned black like sackcloth, and the moon was as if it was made of blood. The stars in the sky fell to earth, and the sky receded like a scroll, and every stock and mutual fund and hedge fund was removed from its place. Then the kings of the earth, the princes, the generals, the rich, the mighty, and every free man hid in caves and among the rocks of the mountains, and called to the Fed, “Hide us from the wrath of the Great Deleveraging, for the great day of its wrath has come, and who can stand against it?”

And the Fed did act, but it was too late for the man, who wept and beseeched the LORD for succor, saying, “LORD, forgive me, for I have sinned and didn’t really expect the whole risk thing while I was enjoying my returns.” And the LORD hid His face from the man, and cursed him, and sent him forth covered in sore boils and leprosy; and the man was ruined, and cursed his fate and the markets and the day of his birth. Thus the man left the presence of the LORD, and dwelt in the land of Nod, which is just outside Toledo, and became a vagabond, amidst the ravaged multitudes.


(Details from Hieronymous Bosch, "The Garden of Earthly Delights," c. 1504)

Posted by Benjamin Kepple at 07:19 PM | Comments (0) | TrackBack

May 21, 2009

Rubbing Salt in the Wound

AS A WRITER, I know perfectly well the importance of a good lead. Properly executed, it can draw in readers to a story they would otherwise ignore. It can soften the heart, it can inspire the imagination, and in some cases, it can cause one's blood to boil and prompt a frantic search for one's nitroglycerin.

With his incendiary introduction to an otherwise sedate essay on the economics of journalism, Robert Picard could not have succeeded any better in drawing that last reaction out of his targeted readership.

You see, in the pages of the Christian Science Monitor, Prof Picard has argued that journalists deserve low pay for their work, arguing it has little economic value. He could not have garnered more attention if he had walked into a newsroom, pulled a fire alarm, stripped off his clothing and preached his gospel whilst standing on the police reporter's desk. Prof Picard writes:

Journalists like to think of their work in moral or even sacred terms. With each new layoff or paper closing, they tell themselves that no business model could adequately compensate the holy work of enriching democratic society, speaking truth to power, and comforting the afflicted.

Actually, journalists deserve low pay.

Wages are compensation for value creation. And journalists simply aren't creating much value these days.

Until they come to grips with that issue, no amount of blogging, twittering, or micropayments is going to solve their failing business models.

Gee. Thanks for the tip, Mr Helpful.

Of course, if one was cynical -- and I am certainly not -- one might point out that Prof Picard is a professor of media economics at something called Jonkoping University in Sweden. As such, he is rather ballsy to suggest that journalists are deserving of low pay, as most academics produce little to nothing in the way of economic value. 90 pc of their research is published in obscure journals and forgotten; 90 pc of their insights are so specialized as to be meaningless to the general public or even educated laymen; 90 pc of their work does nothing to advance the human condition. True, there is value in their teaching; but even then, most of the work is fobbed off on starving graduate students, whilst the tenured professor spends his days ruminating on the modern-day relevance of Marx and Fanon.

Prof Picard tries to weasel out of this; he argues journalists do not have specialized knowledge, such as "professors" and "electricians" do. But comparing academics to electricians is an insult to electricians. Besides, there is no denying whose labor is more valuable when one's electricity fails and you have a refrigerator full of perishables.

Also, I would take issue with Prof Picard's characterization of how journalists view their work. My view may be different than most in the field, as I'm a now-underemployed business journalist, but I've never considered my work a holy calling. Certainly I don't value it enough to take a vow of poverty along with the job. When I covered business, my job was simple: present facts and useful information to my readers so they could then make informed decisions about their finances or business operations. For that matter, that's how I approached every other topic about which I wrote.

Still, I don't mean to slight Prof Picard's argument too much. When it comes to the larger points, he is right: media companies and the journalists who work for them must provide economic value to their readers. Otherwise, the readers won't buy what they're selling. As Prof Picard writes:

Well-paying employment requires that workers possess unique skills, abilities, and knowledge. It also requires that the labor must be non-commoditized. Unfortunately, journalistic labor has become commoditized. Most journalists share the same skills sets and the same approaches to stories, seek out the same sources, ask similar questions, and produce relatively similar stories. This interchangeability is one reason why salaries for average journalists are relatively low and why columnists, cartoonists, and journalists with special expertise (such as finance reporters) get higher wages.

Across the news industry, processes and procedures for news gathering are guided by standardized news values, producing standardized stories in standardized formats that are presented in standardized styles. The result is extraordinary sameness and minimal differentiation ...

... If value is to be created, journalists cannot continue to report merely in the traditional ways or merely re-report the news that has appeared elsewhere. They must add something novel that creates value. They will have to start providing information and knowledge that is not readily available elsewhere, in forms that are not available elsewhere, or in forms that are more useable by and relevant to their audiences.

One cannot expect newspaper readers to pay for page after page of stories from news agencies that were available online yesterday and are in a thousand other papers today. Providing a food section that pales by comparison to the content of food magazines or television cooking shows is not likely to create much value for readers. Neither are scores of disjointed, undigested short news stories about events in far off places.

In other words, media firms must make use of their comparative advantages if they want to succeed. A newspaper in Poughkeepsie, for instance, ought focus on Poughkeepsie -- because that's what's important to its readers: not, as Prof Picard points out, day-old wire copy repeating what they've already seen on-line or on television.

Posted by Benjamin Kepple at 08:41 AM | Comments (0) | TrackBack

May 20, 2009

Your Money and You

Oh No!
It’s Time for Yet Another Edition of …

An occasional Rant feature

IT WOULD APPEAR that my most recent installment of Your Search Engine Queries Answered! was, to use the technical term, a hit. Readership is up, it got a nice mention on something called Twitter, and people seemed generally pleased with it.

Thus, I’m going back to the well again for a special second round of Your Search Engine Queries Answered! Today, we’re going to look mostly at matters dealing with finance and economics. Why, you ask? Well, it was the most popular topic the last time. Reason enough for me. Besides, in these tough economic times, more people than ever hope to understand how our economy works. I’m happy to help. So, without further ado, let’s go to this edition of … Your Search Engine Queries Answered!

QUERY: assume that smith deposits $600 in currency into her checking account in the xyz bank. later that same day jones negotiates a loan for $1 200 at the same bank. in what direction and by what amount has the supply of money changed?

ANSWER: The supply of money will increase by $900. Here’s why.

Smith has put her money into a checking account, which means the bank will treat it as payable on demand and won’t loan any of it out. Thus the net increase there is zero. As for Jones, although he might negotiate a $1,200 loan at his branch, he’ll find out later the loan officer will get overruled by his boss, who is under orders not to actually loan money. This is because his boss’s boss is under orders from his boss not to loan money because the bank is trying to repay its TARP money, which the Treasury tricked it into taking.

However, when the bank tries to repay its TARP money, the Treasury tells it not only to pound sand, but that a senator from the bank’s state is holding a hearing on why it isn’t loaning out any money. So then the bank goes back and argues internally, and eventually decides that it can loan out Jones $900. Jones then takes his $900 and hides it under his mattress, thus technically adding it to the local money supply but really just contributing to the Paradox of Thrift that has been destroying our economy. Q.E.D.

QUERY: what is jpmorgan chase & co.’s p/e ratio hypothetically if the company issues equity in order to raise $10 million of capital?

ANSWER: The same as it was before, for all intents and purposes. What is $10 million to the House of Morgan?

QUERY: nonincentive stock option sell to cover

ANSWER: As a general rule, you should think about selling enough of your options to pay the appropriate tax due on them. Otherwise, you’ll end up like all those techies when the dot-com bubble burst, who owed oodles of tax when their options for vested at $89 each and then went to zero in little under a year. No one’s going to mind if you do this.

QUERY: what are the markets going to do next week

ANSWER: Ah, the timeless question: how will the markets do next week? I have no idea. So I turned to the I Ching, the ancient Chinese book of divination, and posed it your question. The I Ching said:

The present is embodied in Hexagram 5 - Hsu (Waiting): With sincerity, there will be brilliant success. With firmness there will be good fortune, and it will be advantageous to cross the great stream. The third line, undivided, shows its subject in the mud close by the stream. He thereby invites the approach of injury. The situation is evolving slowly, and Yin (the passive feminine force) is gaining ground.

The future is embodied in Hexagram 60 - Chieh (Limitation): There will be progress and attainment, but if the regulations prescribed be severe and difficult, they cannot be permanent.

The I Ching thus tells us that he who holds the line, and does not sell his shares in a panic, will garner great wealth and fortune in the long term. The mud by the stream represents institutional investors and hedge funds, who are targeting certain sectors -- *cough* commercial real estate *cough* – and may decide to go super-short on them, thus causing much distress and anguish to those who can’t bear to see their real-estate fund drop nine percent in a day. An increase in Yin represents selling pressure and caution among small retail investors, who would prefer not to lose any more of their money.

As for the future, this shows there will be upward momentum among financials, unless the Government steps in and crushes them under its foot. The I Ching has spoken. Behold its wisdom.

QUERY: on the pernicious speculation action and corresponding supervising countermeasures in the stocks market of china

ANSWER: As a market, China scares the hell out of me. For one thing, like any emerging market, it is prone to speculative bubbles, and if I remember right, it had a good one going until the Reds took the air out of it. This leads to the second reason why I’m scared of it – China’s Government makes Darth Vader look slow to act when it comes to changing the terms of a deal midway through. So you can keep Shanghai and Shenzhen, for all I’m concerned.

QUERY: how much money did it take to make xenia back to normal after 1974 tornado

ANSWER: Since when was Xenia normal? I mean, come on.

QUERY: hey bloated rates

ANSWER: How can this commercial STILL not be on YouTube? It was a classic. This was the one for Brown & Co. where the lady comes in and wants to trade on margin, and the front-office doofus thinks she wants to trade butter. (“No, MARGIN!” “Oh, right.”)

Oh, speaking of commercials you could see on CNBC all the time, here’s one for … well, I was hoping this would be a surprise, but NOOOOO -- YouTube's stupid preview screen ruins it. But hey! It's Smilin' Bob!

I loved these commercials, if only because they're so downright ... blatant. (Readers at work might want to turn off the sound or wear headphones, if only so your colleagues don't get any funny ideas). As for why these commercials aired constantly on the all-stocks channel ... well, I'll leave that for readers to discuss!

QUERY: operational research decision tree for an orange owner in florida faces a dilemma. the weather forecast is for cold weather and there is a 50% chance that the temperature tonight will be cold enough to freeze and destroy his entire crop, which is worth some $50 000. he can take two possible actions to try to alleviate his loss if the temperature drops. first he could set burners in the orchard; this would cost $5000 but he could still expect to incur damage of approximately $15 000 to $20 000. second he could set up sprinklers to spray the trees. if the temperature drops the water would freeze on the fruit and provide some insulation. this method is cheaper $2000 but less effective. with the sprinklers he could expect to incur as much as $25 000 to $30 000 of the loss with no protective action. compare the grower s expected values for the three alternatives he has. which alternative would you suggest the grower take? why?

ANSWER: The orange grower should take none of these steps, and instead make a claim against his insurance in the event of a catastrophic frost. Barring that, he should apply for disaster aid from the Government, allowing him to get his $50,000 back at a nominal rate of interest, which would cost him just a couple of thousand dollars per year.

QUERY: never donate to alma mater

ANSWER: Good decision! One should only donate to one’s alma mater if one can deduct it from one’s taxes and wants really good football tickets.

QUERY: what does audibilize mean?

ANSWER: “Audibilize” is an Americanism that means the quarterback is improvising and has changed the previously-agreed upon play, known as “calling an audible.” For more on this, look under “trickeration” in your General Dictionary of American English.

QUERY: can a film director rewrite a script?

ANSWER: Not only can he rewrite the script, he can screw you out of your writer’s credit if he’s clever enough. So unless you want a “based on an idea by” credit, call your lawyer.

QUERY: how much is a legitimate markup

ANSWER: As much as you can get away with, just up to the point where people start thinking you’re a real jerk.

QUERY: i did everything right then everything went wrong

ANSWER: Ah, yes. I know the feeling! The important thing to remember is that you’ll rebound from this.

QUERY: how to speculate currency

ANSWER: Currency speculation isn’t my thing. But if you’re interested about this and other matters related to market trading, you might want to visit the good people at TTS Trading Ltd. in Vancouver, B.C. TTS Trading Ltd., according to its Web site, provides "insight, intelligence, and education for the self-directed active trader" – and they gave me a shout-out on Twitter for my last Your Search Engine Queries Answered! This sent bunches of readers my way. Thanks, guys!

QUERY: you have just noticed in the financial pages of the local newspaper that you can buy a $1 000 par value bond for $800. if the coupon rate is 10 percent

ANSWER: This is a trick question, because local newspapers don’t print bond listings any longer.

QUERY: i am consuming 50000 gallons/month of water. is this good

ANSWER: No, it’s not good, you stupid prat! What are you wasting that on, a replica of the fountains in front of the Bellagio? Also, you’re going to have the inspectors from the water utility fining you for your stupid manicured lawn.

QUERY: report in how to spend ur money economicly

ANSWER: Spend less than you earn. Next!

QUERY: guy billed $62 000 for downloading wall-e

ANSWER: I’m sure he deserved it.

QUERY: canadian football league run by idiots

ANSWER: Well, I can’t disagree with you there, if only because – once again! – I can’t get any telecasts of the CFL’s games this year. Jesus Christ. The season starts in July. That’s two months of real football I could be watching but can’t, and so I’ll have to listen to the games on Internet radio again.

QUERY: indoor football games fun to watch?

ANSWER: YES. Particularly in person. Get a seat a few rows up – trust me on this, because you don’t want a linebacker flying into your seat – but not too far up, and you’ll find it exciting and thrilling.

QUERY: american idol broadcast in san miguel allende mexico

ANSWER: You’re in San Miguel and you want to watch American Idol? Are you well? I mean, come on. You’re in San Miguel. The only television shows you’re allowed to watch are sports broadcasts and CNBC.

QUERY: summary of rich dad poor dad gold miner advice

ANSWER: Who the hell ever heard of asking a gold miner for financial advice? I mean, really. Here you have Prospector Jed out in Death Valley panning for gold or something, and twenty years later he’s … still out panning for gold. I mean, let’s get realistic here.

QUERY: towels are kinda scratchy meaning

ANSWER: Congratulations, Verizon – your advertisement has now become a topic for philosophers to debate.

QUERY: is a television a durable good?

ANSWER: You mean the box itself or what’s on it?

QUERY: goodwill inadvertant unwind

ANSWER: How do you inadvertently unwind goodwill? It’s goodwill. It sits on the balance sheet and does nothing. Well, OK, it reminds a company it overpaid when it ate a smaller company, but other than that, it doesn’t have any intrinsic value. And what if it’s negative? Then what? Do you have “badwill?” Actually, that’d be kind of cool on a balance sheet.

QUERY: next week market forecast

ANSWER: Oh, not this again. All right, here we go. A moment, please.

All right, I’m ready. The I Ching said:

The present is embodied in Hexagram 14 - Ta Yu (Possession in Great Measure): There will be great progress and success. The topmost line, undivided, show its subject with help accorded to him from Heaven. There will be good fortune, advantage in every respect. The situation is evolving slowly, and Yin (the passive feminine force) is gaining ground.

The future is embodied in Hexagram 34 - Ta Chuang (The Power of the Great): It will be advantageous to be firm and correct.

Well. I suppose this means … BUY! BUY! BUY! Clearly the I Ching means that buy-and-hold investors will be rewarded for their fortitude, because Hexagram 14 indicates institutional investors and hedge funds will all start going long. Unless, of course, the I Ching means that we’re all doing pretty well now, but that the hedge funds will all go short and we’ll hemorrhage red ink out of our pores until the market eventually turns around.

That’s it for this edition of Your Search Engine Queries Answered! Tune in next time, when we examine the foibles of Terrell Owens, why it’s a bad idea to do electrical work at home, and our standard boilerplate policy on financial matters, which is this:

DISCLAIMER: This entry is not intended to act as financial advice or serve as a substitute for financial advice from a qualified certified financial planner or other knowledgeable professional. Investing can and does involve risk and carries with it a chance of losing all your money, as we’ve found out over the past several months. Buyer beware. And if it seems too good to be true, it probably is.

Posted by Benjamin Kepple at 10:54 PM | Comments (0) | TrackBack

May 07, 2009

Winner Winner Chicken Dinner (or, KFC Rolls Big Red)

ATTENTION MARKETING FOLKS -- when you promise people free food, they're going to come out of the rafters to come get it. When you promise Americans free food, they're not only going to come out of the rafters, they're going to invite all their friends, have a tailgate party and celebrate at the good fortune Providence has bestowed upon them. Add in a recession, and well, it's going to cause a bit of a ruckus.

Along those lines, when you promise Americans free food, you had best have a LOT of it on hand. Otherwise, you're going to have a lot of unhappy Americans. And when Americans get unhappy ... well, it's not a pretty scene.

Consider what the poor people at Kentucky Fried Chicken are going through. They thought they had a marketing coup by getting Oprah Winfrey to advertise a giveaway in which people could receive two (2) free pieces of a "grilled" variant of their chicken. Now, why exactly anyone would buy "grilled" chicken at a fried-chicken outlet is beyond me, but there you go. And besides, it's free chicken.

Unfortunately, KFC apparently didn't adequately prepare for the onslaught of customers they would receive as a result of their promotion. Across the nation, people reported they couldn't redeem the Internet-based coupons they were told to get from the Internet. In New York, angry customers reportedly launched a sit-in upon not receiving their free chicken. In Annapolis, the giveaway was apparently being operated by managerial fiat, with predictably poor results. And it would appear, based on media coverage of this story -- 'cause it's one now -- that KFC's logo needs a "FAIL" stamp put on it.

Not only that, but El Pollo Loco came in and told KFC -- in so many words -- to step aside and let the professionals handle it. Oh, hell yeah.

Now, as a former California resident, I am quite familiar with El Pollo Loco, which is where people in the Golden State go if they want not-fried chicken. I can also say that, as a former California resident, I would go to El Pollo Loco over KFC any day of the week. Also, New Hampshire needs an El Pollo Loco, just like it needs an In-N-Out Burger, a Jack in the Box, and a Del Taco. Maybe El Pollo Loco will save me from what by all means can be considered a fast-food desert up here.

But I digress. Anyway, El Pollo Loco noticed that KFC's free chicken giveaway wasn't good on Mother's Day. I don't know why it's not, even though I personally would sooner cut off my own head rather than take a girl to KFC on Mother's Day. I have no desire to discover the secret recipe for sleeping on the sofa for three weeks. But anyway, El Pollo Loco came out and said, "Fine. If KFC has something against mothers, we'll honor the damn coupons on Mother's Day, plus throw in two side dishes and tortillas." Oh, snap.

Also -- as CNBC reports -- El Pollo Loco caught stupid people from KFC calling into their comment line and talking up the Colonel's product while denigrating the citrusy goodness of El Pollo Loco. Then El Pollo Loco went and made an ad about it, using the taped conversations and Caller ID information. ("Highway 5? In California, it's The 5.") Oh, snap.

Besides, as at least one commenter I saw pointed out, KFC serves Pepsi products. Ew. Coke is it, people --

-- or, if you're like me, Coke Zero, 'cause it has no sugar in it. Yeah.

Posted by Benjamin Kepple at 12:51 AM | Comments (0) | TrackBack

May 05, 2009

Well, I Could Have It Worse

BY WHICH I MEAN, I don't live in Michigan, because the place is apparently turning into Mad Max Beyond Thunderdome.

Back home, according to no less a source than The Detroit News, my fellow Michiganders are engaged in a rather ghoulish kind of commerce for cash. They're selling their hair. They're selling their blood plasma. They're subjecting themselves to medical experiments. Women are even selling their eggs. At this rate, it shouldn't be much longer before Michiganders are selling their kidneys; after all, God has mercifully provided all of us with two of them, when we really only need one.

Of course, one could argue this type of commerce is not really ghoulish, since it involves willing participants on both sides and the articles being handled do not generally make up what economists call a "repugnant market." It's not, after all, as if the good people of Michigan are robbing graves to pay for their kids' college tuition. Still, even for a devotee of free markets like myself, it's kinda offputting.

Why, you ask? Well, I feel bad that anyone has to actually do those types of things for money. Also, I think these folks are getting a raw deal.

I have long thought the American system of "donating" blood and organs is a rather bad deal -- not so much for the recipients, but for the donors. A pint of blood goes for $150 or $200, so why shouldn't I, as a donor, get $30 or $40 for my rare type A-negative? After all, I'm the one doing the hard work.

Along those lines, I'm not exactly thrilled about the idea of being an organ donor, even though I am one. I've had second thoughts about this, but it'd be too much of a hassle to go down to the Department of Motor Vehicles and change it, so there you go.

Now, as you can imagine, I have no plans to die anytime soon. In fact, my own projections indicate I will live to 110 years of age, as I figure my strategic spite duct (a small organ next to the liver) has enough bile, ichor and sheer disgust stored in it to last me until 105 or 106. And even after that's exhausted, my desire to watch sports should prove a strong incentive not to kick the bucket.

But if, God forbid, I should die in an accident or something, why should my estate get nothing if I were to donate my skin, my bones, and my vital organs? I mean, some estimates place the worth of a human cadaver at no less than $200,000.

Now, I know I can't take it with me, but that's not the point. The point is that if I "donate" my dead body for medical uses, other people will profit off it while my estate gets nothing. What's up with that? I mean, it's almost as bad a deal as going to a strip club. And if there's one thing that annoys me in life, it's being on the wrong end of a bad deal. Just because I'd be dead does not mean I suddenly wouldn't have an interest in monetizing, well, me, particularly if it paid for a relative's college tuition. Or a really nice obelisk for my grave site. Or even a mausoleum. Yeah. With nice stained-glass windows, and a phone line in case I suddenly materialize and want pizza.

And if I'm not properly compensated for my monetization when I die, I'm warning you now -- I am going to come back and haunt the hell out of everyone. I'm serious.

MORGUE WORKER: That's odd.
MORGUE WORKER: Got cold here all of a sudden.
SECOND MORGUE WORKER: It's just your imagination.
ME: Why you wretched -- ah, God, it's not working! Stupid incorporeal body! All I want to do is strangle him for a minute with my cold spectral hands!
DEATH: Ah, yes. There's a bit of a latent period before you can do that. No one told you?
ME: No, no one told me! And look at these invoices! I mean, I should get thirty thousand at least.
DEATH: Well, you've got a month to figure it out. After that, I get docked on my commission for delivering you late to Purgatory.
ME: Oh, well -- wait, what? You work on commission?

Of course, I don't mean to criticize anyone who is a willing blood or organ donor, and does so out of the goodness of one's heart. That selflessness is noble and the sacrifice is certainly valued. But given the waiting lists for organs, it seems pretty clear that donations aren't enough to get the job done. Also, it seems clear to me that our culture of donation serves up a pretty raw deal for people who are willing to literally give of themselves.

This goes particularly when it comes to women donating eggs. Obviously, they're doing a great service for the recipients, and offering a gift that in many ways is priceless. But as the News reports, the compensation they are given -- capped at $5,000 -- seems far too low to adequately address the very real risks they face. It's no joke to donate anything from one's body, and I think the least we could do to be fair about it would be to offer fair market values for the things donated.

Posted by Benjamin Kepple at 12:51 PM | Comments (0) | TrackBack

April 08, 2009

Somali Pirates No Match for US Mariners

OK, HERE'S AN IMPORTANT SAFETY TIP for anyone considering a career in the growing field of maritime piracy: don't hijack an American-flagged vessel. That's not just because it will suddenly cause the world's sole superpower to take notice of your predations upon lawful commerce, but because the crew will fight back and ruin your plans well before Washington discovers something's up.

Apparently, the crew of the MV Maersk Alabama not only fought off the four armed Somali pirates that took over the ship, but managed to capture one and threw the remainder overboard. Sweet. That'll teach the Somali pirates to attack an American vessel. We've got your ransom right here, pal!

Posted by Benjamin Kepple at 12:04 PM | Comments (0) | TrackBack

April 07, 2009

Maybe the Prosecutors Should Look Into Short Sellers

REUTERS: Two dozen charged in alleged gang-led mortgage fraud.

Posted by Benjamin Kepple at 10:54 PM | Comments (0) | TrackBack

April 05, 2009

The End of the Affair

Those blues I lay low,
I'll make 'em stay low,
They'll never trail over my head;
I'll be a devil 'til I'm an angel,
but until then -- hallelujah!

-- Frank Sinatra

Like the sailor said, quote, ain't that a hole in the boat.

-- Dean Martin

ALL GOOD THINGS come to an end. In my case, the particular good thing that came to an end was my great job working as a reporter. It was interesting and engaging work, tough at times but also a lot of fun, and it was made even better by the great people with whom I worked. Plus, the pay and benefits I received were fantastic for the field, which made the work even better.

It wasn't entirely a surprise that I lost my job, of course. Since journalists love writing about themselves, the papers have been filled with stories about the troubles facing the media industry. So it's not as if I'm the only reporter to find himself studying up on rules and regulations about his unemployment benefit. Rather, I'm simply U.S. Media Sector Casualty No. 36,012 of the Global Economic Downturn. Business is business, and when you're at the bottom of the seniority list, these things can happen. So I certainly don't have any hard feelings about it, particularly since my employer kept me on as long as it could in my job.

That's not to say I don't feel any sense of loss, though. For a while yesterday -- yesterday being "the day after" -- I was feeling a bit lost, and a bit down about the whole thing. Fortunately, thanks to the Power of Technology, I can kind of show you how I felt for a few hours! Let's roll the clip:

Now, I know what you're thinking. "Kepple! You don't look anything like Joey Bishop!" Well, this is true. I just love that scene; the final contemplative walk in defeat. But I've got that out of my system and now I can move forward.

This is, of course, what one must do in a situation like this.

The way I see it, one has two options. You can feel sorry for yourself, and let the gloom drag you down into a deep funk, even though that leads to a variety of unfortunate things -- like growing a recession beard*, and watching daytime television, and lying on the sofa, and not showering regularly. Alternatively, you can pick yourself up, dust yourself off, spend a few days relaxing and then develop a plan to get back in the game. Personally, I think the second option is the better one.

This goes especially when you think about the great run I had over the last eight years. I mean, my God. When I think about what I was able to do, what I was able to see, who I was able to meet and interview -- I couldn't have asked for anything better. I hit more than one home run in my day and I'm proud of the work I did. Not only that, I went into it pretty darn green -- but when I came out, I came out with a whole set of new skills and experiences that taught me a hell of a lot.

So I'm grateful I had the opportunity to work there for eight years. I'm grateful for the chance they took on a wet-behind-the-ears kid. I'm grateful I was able to work with a lot of great people. Now that the experience is done, I'm older, wiser, tougher and richer. With the possible exception of the aging part, all those are good things. Now it's time for me to go conquer the world.

Finally, though, I would be remiss if I did not profusely thank everyone who has shown me their kindness and support over the past couple of days. That goes for my former superiors who agreed without hesitation to serve as references, my colleagues who gave me a round of applause as I left for the last time and have offered their support in so many ways, my family and friends who have offered their support and assistance, and my professional contacts who have taken time out of their own lives to offer me advice and assistance, and point me in the direction of finding work.

You see, if there's anything that got me emotional over the past couple of days, that's been it. When you realize -- really realize -- how many people care about your well-being, it's a very humbling thing. Being a bit of a stoic type, I'm not the best at expressing my emotions in person, and so to receive this outpouring of support has been a deeply moving experience for me. Thank you to everyone. And for the love of God, don't worry about me. I have plans!


* What's that? But Bennnnnnnnnn. You already have a beard! Not for much longer, I don't! Keeping routines are important when you're out of work, so I'm incorporating daily shaving into mine.

Posted by Benjamin Kepple at 05:45 PM | Comments (0) | TrackBack

March 31, 2009

Now, That's Gutsy

SINCE I LAST POSTED REGULARLY, the scandal over the immense Ponzi scheme which Bernard Madoff ran has in many ways come and gone. As we now know, Mr Madoff has been exposed as not merely a charlatan and fraud, but a twisted, ruthless sociopath whose depravity involved not just stealing from honest people but also from charities, religious endeavors, and other good institutions. As such -- if I may be permitted to borrow from Mencken -- it is The Rant's belief that Mr Madoff should be thrown off the top of the Washington Monument.

The Rant further believes that should Mr Madoff be found to have further accomplices, and said accomplices are found guilty of criminality in a court of law due to their actions in connection with the Ponzi scheme, that they should be beaten and paraded throughout the streets of New York, so that the people may revile them.

As for the rest of it -- well, I feel badly for the victims. If you read their e-mails to Judge Chin, many of them are heartbreaking; and they did not, after all, deserve to have their money stolen. But for the life of me, I can't understand why people would sink all their eggs into one basket.

For a moment, let's say Madoff truly had been a genius. Even if he had, why would any sane person put more than 10 percent or even 20 percent of their wealth under his control? It's not like other supposed sure things haven't blown up before, and we're talking sure things run by incredibly smart people. Things happen even if your investment manager isn't a crook. I know that many people hate dealing with money, particularly their own, but the old quip that "no one cares about your money as much as you" remains very valid, even in this day and age.

However, there was one e-mail in particular that made me laugh. It's on Page 36 of this helpful legal document. It gave me a chuckle for a couple of reasons. One, if it just happened to fall into the Southern District's e-mail box, it boils this case down to its nuts and bolts. Two, if a victim actually sent it in as a satire on the present situation, it is a work of genius. And three, its inclusion shows why the Government can never be relied upon to prevent such things before they happen -- because they miss things, even in situations when they shouldn't.

The letter reads, in part:

Dear Sir/Madam,

My name is Mr ---------- but my origin is from the Republic of Congo. I have an inherited fund I want to invest in a business in your country with the help of a local. I don't know about business but I found it wise to invest the funds in your country with your collaboration with me.

Ever since I move to Dubai due to the problem in my country, I have not been able to invest the funds in Dubai due to security reasons. Now I am seeking foreign assistance to transfer the funds to your country based on the news of their development. If you can assist, I am willing to give you 10% of the funds that is US$3.5 million ....

Posted by Benjamin Kepple at 01:48 AM | Comments (0) | TrackBack

March 28, 2009

The Seven Lean Years

WELL, THIS HAS BEEN an interesting six months, hasn't it? Jesus Christ.

It occurred to me today that the last time I really wrote about business and finance here on The Rant -- heck, wrote anything of substance, really -- the market was still holding up rather well. Then the tidal wave which had been cruising towards land appeared on the horizon and broke upon the shore, and suddenly, things got a lot different for pretty much everyone.

Of course, not everyone has been affected as a result of the downturn. As I understand it, there is still work to be had out in the Great Plains or in the mineral-rich states out West, and I am sure everyone knows someone, despite the turmoil heaving around them, for whom the party has not stopped. Certainly I do. But at the opposite end there are those who find themselves in much reduced circumstances as a result of the panic: people who have lost their jobs; people who have lost their homes; people who have seen their marriages dissolve; people who have watched their nest eggs fall prey to fraud and skullduggery.

Then there are folks like me, who are somewhere in the middle. Most people, I'm guessing, find themselves standing on this uneasy middle ground. They're still working, but their jobs sure as hell aren't as secure as they were six months ago. They're still drawing pay, although it doesn't seem to stretch as much as it once did. They're not as prone to spending what they once did on anything, much less luxury items or the consumer staples beloved of the mass affluent (which in this day and age, is arguably pretty much everyone).

I find this annoying on an intellectual level. Emotionally, I can get along without spending money on most of the goods and services that I once did: one must react to survive. But on a purely mental level, it aggravates me, 'cause I'm falling into the great trap known as the Paradox of Thrift, and I know I'm falling into it. On the other hand, what else is there to do? My problem, at the end of the day, is my problem, so I react accordingly.

I would be in a stronger position, perhaps, if I worked in an industry that itself was not going through systemic changes. Those Loyal Rant Readers who know me personally -- and, by the by, thanks for checking in over the past few months, despite being greeted with a blank page -- know I work in a rather cyclical industry, and know this industry faces particularly severe challenges for a variety of reasons. Since I last wrote on topics other than football -- AND HOW ABOUT THOSE PITTSBURGH STEELERS -- I have found the ground I stand on has weakened substantially. The job security I once had is gone; my future is uncertain at best, and when all is said and done, I may discover that when the music stops, I'm left without a chair in which to sit.

Of course, if that does happen, I'll be perfectly understanding about it. Business is business. That, and I'm still somewhat confident that even if the unthinkable happened, I'd manage to land on my feet. But what gnaws at me is the uncertainty of it all, because that uncertainty has led me to conclude the only rational action is inaction. It makes no sense to cast my net elsewhere because of the uncertainty in the economy as a whole; yet it makes no sense for me to put all my eggs in my current basket because I can't draw a reasonable expectation for what's coming down the pike.

So I wait. I plan for the worst and hope for the best. It is the smart course to plot.

But it is not a satisfying one. I hold back on the opportunities in my personal life that, had things been better, I might have taken. I strengthen my redoubt against a storm which could arrive, like a nor'easter in the dead of February, with the fanfare and disruption that merits TEAM STORM COVERAGE, but which could also prove an anticlimactic trifle when it finally plows into shore. The knowledge of the extremes, but the realization that the likely outcome will end up somewhere between them, makes for a deadening combination.

What's left after one balances the equation? A lot of gallows humor. A bit of anxiety. An annoying amount of aches and pains that come with getting older. But along with that, a lot of good memories and laughter and moments in which I really did hit some home runs. Combine all that and I'm still out ahead on a personal level, even if I am not as ahead financially as I was this time six months ago. In the quiet before the dawn, there's something to be said for that.

In my next post -- and perhaps I'll finish it up this weekend, as I'm forcing myself to take a day off for myself -- I'll look at some of the clever strategies I'm using to adapt to my new reality. Like the Class B gas ration.

Posted by Benjamin Kepple at 01:14 PM | Comments (0) | TrackBack

February 23, 2009

Microsoft Asks for "Overpaid" Severance Back

Red-Faced Executives
Ask for "Overpaid" Money Back
"Inadvertent Administrative Error"
Annoying Paper-Clip Blamed

Financial Rant

REDMOND, Wash. -- Microsoft Corp. said Monday it accidentally paid some of the 1,400 workers it laid off on Jan. 22 too much in severance pay, leading to the company writing its former employees and asking for the money back.

According to the Seattle Post-Intelligencer, the company told employees that "an inadvertent administrative error occurred that resulted in an overpayment in severance pay by Microsoft. We ask that you repay the overpayment and sincerely apologize for any inconvenience to you." The former employees have two weeks to come up with the money.

Private company sources have disclosed to the Financial Rant that "Clippy," the annoying paper-clip much reviled and which still lurks within older versions of Microsoft software, was to blame for the mishap. A transcript of how the error took place was revealed on security footage obtained from the firm's human resources department.

HR WORKER: Let's see ... open layoff letters ... here we go. Dear John ...
HR WORKER: Yes! NO! Goddammit!
PAPER CLIP: Would you like ....?
HR WORKER: NO! Go away!
PAPER CLIP: Amounts adjusted!
PAPER CLIP: Letters printing!
HR WORKER: I'm going to rip out your pancreas and deep fry it!

Company officials said privately the unnamed HR worker, who was later seen being taken to a local hospital after complaining of chest pain, had been using the older software due to mishaps with Vista's help software, which is advertised as an online chat tool but secretly involves users interfacing with a 9000 series algorithmic computer.

It is unknown whether Microsoft's former workers will actually repay the money. Although not repaying it could lead to theft charges or a civil lawsuit, some observers have pointed out the legal and public-relations costs with pursuing their former workers would outweigh any cost-recovery benefits. Also, although the exact breakdown of the workforce isn't known, some could be software workers -- which could lead to wholly different issues.

"It was a strange layoff, and for more than one reason," said former Microsoft employee Hank Garside. "I got my standard 60 days severance and added pay based on my time of service, but Jack over in programming ended up with half a million dollars. The company checked it out and said everything was all right. I wish I had been in programming."

Posted by Benjamin Kepple at 03:29 PM | Comments (0) | TrackBack

November 02, 2008


ALTHOUGH I AM NOT an automobile enthusiast, I must say that if I ever find myself in the position to purchase a luxury automobile, I'll give strong consideration to buying one of Porsche AG's fine machines. After this crazy week -- in which parent firm Porsche SE pulled off one of the most audacious, clever, astounding, fantastic maneuvers to take place in high finance in the past half-century -- it is the least I can do.

You see, Porsche SE pulled off the financial equivalent of The Play this week, and did it in such stunning fashion that it has become the talk of the business world. It was such an incredible move that it deserves to be talked about as if Porsche had amazingly outmaneuvered its rivals, ran the ball in for a touchdown despite the enemy's band being on the field, and then knocked over the trombone player. "THE BULLS!" one can imagine Joe Starkey saying. "THE BULLS! THE BULLS HAVE WON! Oh, my God! The most amazing, sensational, dramatic, heart-rending... exciting, thrilling finish in the history of finance!"

So what did Porsche do? Well, you should know that shares of Volkswagen AG, the German automaker, had been subjected to a rash of short-selling before this past week. This was because hedge funds, rightly believing the world's auto industry would suffer setbacks as a result of the global economic downturn, found Volkswagen a tempting target for their machinations.

Now, when one "shorts" a stock, one borrows shares of a company and then sells them, with the proviso he has to eventually buy the shares back. The idea is that a speculator can buy back the shares for less than what he received when he borrowed and sold them, with the difference being his profit.. The practice adds liquidity to the market -- it makes it easier for everyone to buy shares -- but at the same time people can't stand it. That's because when people short a stock, the borrowed shares are immediately sold, helping push down the price of the stock, creating losses among traditional (or "long") investors who just want their stocks to go up. As such, traditional investors view short sellers as rotten scheming bastards who should have their heads impaled on pikes.

Anyway, all these hedge funds had shorted Volkswagen shares, figuring the company was going to be in for a rough ride. However, as all the hedgies went after the company, Porsche secretly arranged to buy call options on Volkswagen shares with several German banks. Porsche, which already owned 42 pc of Volkswagen, then innocently announced it had arranged to boost its stake in Volkswagen to 75 pc. As 20 pc of VW is owned by a German state government, it effectively meant that only 5 pc of Volkswagen's shares were on the market -- and the hedgies had sold 12 pc of the firm's shares short.


The end result was that Porsche had cornered the market in Volkswagen shares, leaving the hedge funds exposed to incredible losses. The share price skyrocketed from 200 euros to 1,000 euros as the hedge funds desperately tried to close out their positions. When all was said and done, the hedge funds lost the equivalent of THIRTY EIGHT BILLION DOLLARS.

The Rant would sum up its reaction in one word: wow.

Of course, the cleverness of this scheme has led the hedge funds in London and elsewhere to cry foul, and demand the German authorities conduct an investigation. Heh. Good luck with that. In the meantime, the rest of us can indulge in heaping helpings of schadenfreude, as more than 100 hedge funds may have lost money in the whole affair. Not only will the rotten investors in such vehicles get burned, the funds' managers could get burned as well.

That's because hedge funds usually calculate their famed 20 pc shares of the profit against a "high-water mark," meaning that any future losses make it that much more difficult to book huge gains. Plus, since those profits are often invested back into the funds, they could really lose out when all is said and done. And although I am traditionally sympathetic to the idea that a rising tide lifts all boats, I'm not exactly discouraged at the idea that when the tide goes out, all the fancy yachts are getting pulled out with it.

Posted by Benjamin Kepple at 01:29 AM | Comments (0) | TrackBack

October 30, 2008

The Foreign Markets Are on Fire

GOOD MORNING. JAPAN IS UP 10 pc and Hong Kong is up 12 pc. Germany is up 4 pc, while the FTSE and the CAC are both up about 2 pc. Would it be too much to ask for the American markets to also have an up day?

I mean, my goodness. It was so absolutely frustrating to see things humming along yesterday and then -- bang! -- in the last ten minutes, see everything go to hell. This has been happening a lot lately and so I have to suspect hedge funds are behind it: they're the only ones with the risk tolerance and capital to sink a market like that.

What would be cool is if the SEC would do an investigation into this whole matter. Not to do anything about it, of course, but just to find out who's behind it. That way everyone else on Wall Street could gang up on the scoundrels and wipe them out.

On the other hand, as of this writing, the US futures are way up. Dow's up 313, S&P 500's up 29.80. Sweet. Perhaps we could pull out a nice day after all.

Posted by Benjamin Kepple at 07:01 AM | Comments (0) | TrackBack

Health Insurance Premiums Cheaper for Men

THE NEW YORK TIMES has published a fascinating article looking at the considerable difference between what men and women pay for health coverage on the individual insurance market. As it happens, women pay a lot more -- as in 30 pc to 50 pc more -- for health insurance compared to men. This has perhaps understandably alarmed women's groups, and now people in Congress are looking at it, and the Times accordingly wrings its hands about the whole matter. Indeed, as reporter Robert Pear writes in one line, the new findings "are not easily explained away."

If I wanted your opinion, Bob, I'd have asked for it. But I digress.

Anyway, the insurance companies argue that they charge more for two key reasons: one, women get pregnant and have children, which men cannot do; and two, women use more health care services than men. As one executive told Mr Pear:

“Premiums for our individual health insurance plans reflect claims experience — the use of medical services — which varies by gender and age. Females use more medical services than males, and this difference is most pronounced in young adults. ... Bearing children increases other health risks later in life, such as urinary incontinence, which may require treatment with medication or surgery."

One health insurance actuary was a bit more blunt:

"Under the age of 55, women tend to be higher utilizers of health care than men. I am more conscious of my health than my husband, who will avoid going to the doctor at all costs.”

Based on these quotes, it certainly seems as if the insurance business has its own Industrial Laundry Conundrum. That's the iron rule of economics that says men pay less at the dry cleaners because our orders largely consist of easily-washed button-down shirts, while female customers must ensure their good outfits receive special care and get dry cleaned and what not. Also, generally speaking, men are less fastidious than women and so some may seek to reduce their outlays through austerity measures (see the Looks Clean, Smells Clean Corollary).

Now, I do not have the expertise to say whether this justifies a 50 pc differential in insurance costs. But I do think most women use health care services more than men, if only because men generally hate going to the doctor. For instance, I hate going to the doctor, hate going to the hospital for pretty much any reason, and hate dealing with the paperwork and inefficiency that go along with those things. I daresay men look at the health care system somewhat like this (go about 30 seconds in):

Ren And Stimpy-In The Army | Funny Jokes at JibJab

For instance, just recently I called my GP's office to schedule a checkup -- it has been a while since I have seen the man, and it was time that I did so. So I called the office to schedule a consultation. Why, I was asked, did I want to see my GP? Well, said I, I wanted to go over my treatments for certain continuing health care issues.

This was not enough for the receptionist, who said she couldn't schedule an appointment for me unless she knew exactly why I wanted one. I responded by asking to get penciled in for 15 minutes to discuss my diabetes, among other things. After a bit more back and forth, I got set up for some lab work, after which I would then get an appointment to see my GP. Why this couldn't have been set up at all once, I don't know, but I went in for my lab work yesterday. Perhaps I will get my appointment next week.

The diagnostics lab at my GP's clinic has all the charm of waiting at an airport. Yesterday, as I sat waiting serenely to have my blood drawn, I looked around and saw six or eight people all looking rather annoyed. In the back, people wearing lab coats went about their work, which appeared to require a lot of record-handling. The minutes ticked on, and none of the people waiting were called. An elderly man walked into the lab, clutching a pamphlet about an unpleasant disease. He proceeded to read aloud from it to his companion. The waiting continued. Finally the dam gates burst and people were called in rapid succession. Things proceeded quickly from there, but what should have taken five or ten minutes took closer to thirty. Thank goodness I didn't have to work.

I suppose what bothers me the most about the health care system is that so much of it is inherently infantilizing. It is not, of course, always this way -- I really like my GP, who actually treats me like an adult, and I've had some good doctors that also actually treated me like an adult, but I'm really not into the do-this do-that or else mindset that seems to pervade the lower ranks of the medical establishment. This doesn't work on me. I'm stubborn and I'm cheap. I don't have to do jack shit.

I don't think this mindset is intentional on the staff's part; it's just the culture and that's not something that changes overnight. But it can really be aggravating. I mean, my God, I'm an independent adult and one with not too bad of a brain. Give me facts I can analyze, opinions I can weigh, decisions I can make -- don't launch into a lecture about how I'm not doing something right. Don't you think I know that already? Here's an idea: if I need to eat more vegetables or something, tell me how I can work that into a rather frenetic daily life.

I also don't like this idea that I'm supposed to surrender my life to some stupid medical condition. In my case, one of my medical conditions is that I'm a Type 2 diabetic. Oops. Anyway, as a result of this, I limit my intake of refined sugar and save dessert for special occasions. When I eat, I try to focus on protein and vegetables as opposed to carbohydrates. I take care of my feet. OK, fine.

All that does not mean that I am going to obsess over the fact my body decided it hates my pancreas and will only politely pick at its peace offerings of insulin. This also does not mean I'm going to act like I have something really bad -- like coronary disease or cancer -- and bemoan my state. It's diabetes. It is not like my typing hands got caught in a blender.

Anyway, the point to all this is that the medical establishment could perhaps do a better job at reaching out to its male patients, particularly the young, sullen, angry, passive-aggressive ones with issues. Here's an example of how they can do this:

I mean, if Taco Bell can figure it out, the medical establishment should too. Notice how this ad is extremely direct, extremely quick, proposes a reasonable and cost-effective solution, and then leaves the matter for the consumer to decide. That's what you've got to sell. Given the price of the Taco Bell box meal, you could do the same thing for a prescription of metformin. Have Adam Carolla stand up and declare, "EAT LIKE A DIABETIC!" and mention how eating right and a couple pills each day improves one's mood, improves one's sex life, gives one more energy, and a month's supply of the pills will run you $4. OK, I'm sold.

Which leads me to my last point -- I wonder if one reason women use more health-care services is because the marketers have aimed their messages in a way that is particularly receptive to women. Women are better about talking about these types of things, and more open about discussing them, and as such better at dealing with them. With men, on the other hand -- well, oftentimes we're stubborn and cheap and impatient and not good at dealing with emotions. We are also (perhaps too) confident in our own innate ability to solve health care issues; and marketers hoping to improve men's engagement in terms of their own health care might want to consider such aspects of masculinity when drawing up their campaigns. Part of me wonders if a campaign that simply said, "LOSE WEIGHT -- HAVE BETTER SEX" would do more to solve the obesity epidemic than ten billion spent on pharmaceuticals.

Posted by Benjamin Kepple at 03:33 AM | Comments (0) | TrackBack

October 23, 2008

The Free Market Has a Solution for Everything

IF THERE'S ONE THING we can take from our present economic crisis, it's that every cloud has a silver lining -- even when it's a funnel cloud. I fully admit this optimism may seem a bit misplaced in our current situation, when the equity markets are in free fall, real-estate values have plummeted, our credit markets are logjammed and it seems as if no one will be able to retire until they're 90. But panic does no one any good; instead, it is important to seek out opportunities for profit where they exist, and position oneself as best one can for the inevitable recovery.

Simply put, this situation is not all bad. Lost amidst the turmoil is the pleasing fact that oil prices have crashed over the past several months. As of this writing, crude oil is trading for "just" $67.75 per barrel, a stunning collapse from its July 11 peak of $147.27 per barrel. That's a drop of roughly 54 pc -- and in pure dollar terms, a drop of nearly $80 per barrel.

That's nearly $80 per barrel not going to the Governments of Iran and Venezuela and plenty of other Governments who are easy not to like, a situation that reminds one of Fred Schwed Jr's old quip about financial panics: would you really want all those people who had money to have it again? The situation is so bad that on Friday, the OPEC cartel will meet in an attempt to shore up the price of crude; an endeavor that will likely prove difficult for the cartel to pull off. After all, as much as the Iranians and Venezuelans might want to chisel the West, every producing country will want to sell as much oil as they can in an attempt to maximize their revenues -- particularly non-OPEC countries such as Equatorial Guinea. You think Equatorial Guinea cares about what the Iranians want to do?

As oil prices have fallen, of course, so have gasoline prices -- providing joy and relief to the oppressed American people. Here in New Hampshire, for instance, prices have fallen sharply. In my own city, Manchester, the average price for a gallon of regular unleaded is $2.81. That's down from $3.53 a month ago and down from $4.02 at its peak on July 15.

As of this writing, it seems further price declines -- at least in the near term -- are quite likely.

I think most people, given the severe price swings of the past couple years and consequent media attention on these matters, know their local filling stations do not profit when prices are high. Since the gasoline market is hyper-competitive, most gas stations make just a few pennies -- if that -- on each gallon of gasoline they sell. If they are lucky they can get a dime per gallon, which is still quite reasonable if you ask me.

This also prevents gas station owners from profiting greatly when prices suddenly decline. Even though there may be individual days where they're able to take advantage of an increase in the spread between their wholesale costs and their local market's prevailing retail price, the highly competitive nature of gasoline sales limits their upside: the guys down the street will lower their prices as soon as they can in an attempt to draw business their way. As such, there's an impetus for prices to keep falling. (Gas station owners like low prices, by the by, because their margins are better and their capital costs are lower. For instance, 10,000 gallons at $1.50 will cost a gas station $15,000; a nickel profit on each gallon works out to $500, or 3.33 pc; 10,000 gallons at $3.50 will cost a station $35,000, and the $500 profit earned from a nickel per gallon margin works out to just 1.4 pc. This is why gas stations these days have convenience stores).

If you want to know why gasoline prices move the way they do, you have to look two places -- first, at the refining and distribution level, and second, at the gasoline futures market. Generally speaking, there's usually a 60 to 75 cent differential between the next month's futures price and the cost at the pump. Let's look at some past prices to see how this worked out:

On July 7, for instance, the average retail gas price in America was $4.14 per gallon. On the same day, the price for the August New York Harbor Reformulated RBOB Regular Gasoline Future contract was about $3.48 -- a 66 cent price differential. Going back a bit, on Feb. 5, 2007, the average retail price for gasoline was $2.22 per gallon; the futures price was $1.56, a difference of ... 66 cents. Wow, and I just picked those dates at random, too. Crazy.

Anyway, as I write, the futures contract for gasoline is trading at $1.58 a gallon. If the past is any guide, this suggests gas prices will eventually fall to an average of $2.18 to $2.33 on a nationwide basis. (Your local price, of course, will vary due to environmental laws, state taxes, how close you are to refining operations and shipping terminals, local competition and other factors. There are places in New Hampshire, for instance, that are a good 30 cents cheaper than what I pay in Manchester).

According to AAA, gasoline is today retailing for $2.82 per gallon nationally. One may wonder why the spread is now $1.24 per gallon, but remember two things: it takes time for product to move through the system, and falling prices give everyone in the system a chance to make a bit of profit they couldn't make when prices were skyrocketing. So an increased spread is not prima facie evidence of unfair profiteering, but rather a chance for profit in a market that traditionally offers little room for it. If nothing major changes, prices should keep falling and we'll get closer to a more traditional spread -- the competitive nature of the market will force this to happen. And looking out over the next few months, RBOB futures prices are holding stable around that $1.50 and change mark.

Of course, the rub here is "if nothing major changes," and I do not have a crystal ball. But what if one could guard against higher prices at the pump? After all, large companies do this, many quite well -- Southwest Airlines is perhaps the best example. Its clever hedging strategy for jet fuel, which although recently backfired due to the sudden drop in oil prices, kept it profitable even as its competitors were having heart attacks when they examined their fuel bills.

Thanks to a clever site called Petrofix, consumers can do just that. Unlike traditional gasoline pre-buy programs, where customers buy hundreds of gallons of gasoline at a set price and then draw down those cheap gallons when prices go higher, Petrofix offers consumers a pure financial hedge against higher gas prices.

Generally speaking, Petrofix charges about 20 cents a gallon for its hedge. So let's say you use about 40 gallons of gasoline a month. Over a one-year period, that works out to 480 gallons. As such, a Midwesterner would pay $96 to hedge against higher fuel prices for a year. It's slightly more elsewhere. (Of course, one does not have to go whole hog -- you could hedge half your fuel consumption, or a quarter, or whatever you think works best, and pay less accordingly).

Now, if prices fall and stay lower for the entire year, you're obviously out of luck. You can take this one of two ways -- you can either get angry at guessing wrong (this can be cathartic) or you can rationalize the $96 spent as buying yourself some peace of mind (which can also be cathartic). But let's say prices go higher. Petrofix will pay you the difference on a monthly basis. Let's say you locked in a retail price of $2. If retail prices suddenly go to $3 the next day and stay there, you would save $384 over the year ($480 gross - $96 cost of hedge).

Think of the benefits that would offer. You would amaze your friends and confound your enemies. Not only could you live large on your savings, you could do so in a way that would make you seem really clever at cocktail parties. If you are a young man, you could use this to impress beautiful girls at get-togethers, and frustrate the ambitions of that guy with the conspicuous jewelry, fancy sport-utility vehicle and dog-eared guide to picking up women. It would be great on so many levels.

Of course, the trick is to buy when prices are low. If they are especially low, then hedge for as long as possible, in order to maximize your potential gain. This means you should put Petrofix in your favorites and not forget about it, and be ready to strike when you think fuel prices are at or near a low. Maybe you think conditions will change soon, and our present situation is just a breather -- then buy soon accordingly. If you think prices will keep falling, you would wait until you think they won't fall anymore, and then hedge about that point, or on the next significant uptick.

I must emphasize that I do not have a crystal ball and that oil prices, gasoline prices, futures prices, and the various other prices I've quoted here can and do change quickly, so I would caution readers of the need to do their own research and come to their own conclusions about what the oil markets may do. Additionally, past performance is no guarantee of future results, and so the historical examples I've noted may not hold in the future. In other words, don't blame me if things go to hell in three weeks. It's not my fault.

I would also caution that one must make sure to read Petrofix's terms and conditions and understand how things work before entering into any deal with them. But I would congratulate the company for making this offering available to everyday consumers, as I think it could offer people a nice weapon in their arsenal for the continued fight against high fuel prices.

Posted by Benjamin Kepple at 08:30 AM | Comments (0) | TrackBack

October 18, 2008

Fish Out of Water

PORTSMOUTH, N.H. -- SO TODAY I figured I would take a break from my usual Saturday routine, which involves work, and head over to the Seacoast to take in what was left of the fall scenery and get some good seafood. Although I usually approach ventures like this with a degree of regimentation -- I like to know what I'm doing -- I simply hit the road this time around, and after about an hour of driving found myself in downtown Portsmouth.

Downtown Portsmouth, I think, is where New Hampshire's hipsters hang out, to the extent that we have any up here. The colonial section has some impressive old architecture and draws plenty of locals and tourists alike. It also has plenty of shops, selling goods ranging from specialty foods to objets d'art. It was only natural, then, that I would spend my time in the colonial section looking for a cheap lunch.

MARKET SQUARE, Portsmouth -- Members of the upper-middle class take in the bourgeoisity on a Saturday afternoon. (Photo: Benjamin Kepple)

This quest, as I found, was not in vain. However, it certainly seemed futile at times. Initially, my plan was to get some cheap fried seafood at some seafood shack, and I figured there would be at least one in the immediate area. After all, it's Portsmouth. As such, it's a port. A port on, you know, the Atlantic Ocean. So I was sure I could find some place offering this type of lunch in the Market Square area.

Unfortunately, my assumption was faulty. When I asked a nice lady at an information booth where one could find a good seafood restaurant within a few blocks, I was told there were few such places. However, she then offered two recommendations. The first I discounted immediately because, although only a quarter-mile or so away, it was in Maine. I'm sorry, but I was in no mood to hike across a bridge only for the privilege of spending my hard-earned in Maine, a state all can agree is godforsaken and wretched. The second, which sounded promising, ended up being closed -- it was only serving dinner. So this led me to wander around for a bit looking for some place to eat.

Many of the restaurants I stumbled upon, despite being jammed into every nook and cranny down by the water, were only serving dinner. Although I must admit I don't know if I would have eaten at them if they had been open; the prices were simply out of my league. I'm sorry, but I am but a poor writer and given the economic climate, I cannot justify paying $8 for a bowl of clam chowder -- as I saw on one menu -- or $16 for an entree at some place selling fusion cuisine. $8 for a bowl of clam chowder! That reminded me of this:

What's that, you said? "But Ben? You hate Miller?" OK, so I'm not a fan. But that's not the point. The point was I felt like a fish out of water down there, among the coffee shops and art stores and people who clearly had no interest in college football. The whole experience was just strange, as I normally move well in such circles, but it had absolutely no draw for me whatsoever.

But anyway. I did finally "find" a place -- "The Rusty Hammer" -- that sold a decent and cheap lunch. I say "find" because it was the first restaurant at which I had considered eating, but on which I had taken a pass, trying to find a place devoted to cheap seafood. Oh, if only I had heeded its sign proclaiming its generous value for the dollar in the first place! They weren't kidding, either.

Anyway, annoyed at my failure to find a cheap seafood place, I sprang for a bowl of clam chowder, which was about $6. For my $6, I was astonished to find the bowl held roughly half the contents of the kitchen's soup tureen. It was an amazing amount of chowder and enough for a whole meal. I had also ordered a Caesar salad, which was all right, but it ended up being too much food. All told, the final bill came to about $15, not including tip, and it was a quite satisfying lunch. The only minor quibble I had was the programming on the bar televisions -- one was tuned to golf -- golf, for God's sake -- and the other was tuned to some professional football preview. That's fine on Sunday, but Saturday? Put on some ESPN!

Posted by Benjamin Kepple at 08:14 PM | Comments (0) | TrackBack

October 09, 2008

Next Week's Market Forecast

WELL. THAT WAS A TOUGH DAY. Now that the market is in complete freefall mode, and we're all due to be ruined shortly, I got to thinking about how to handle the future.

I must confess to a moment of wickedness here. Given these tough times, I should have consulted the Bible and its divine wisdom for inspiration. After all, does not the LORD say to us (Mt. 6:24-34):

No man can serve two masters: for either he will hate the one, and love the other; or else he will hold to the one, and despise the other. Ye cannot serve God and mammon. Therefore I say unto you: take no thought for your life, what ye shall eat, or what ye shall drink; nor yet for your body, what ye shall put on. Is not the life more than meat, and the body than raiment?

Behold the fowls of the air: for they sow not, neither do they reap, nor gather into barns; yet your heavenly Father feedeth them. Are ye not much better than they? Which of you by taking thought can add one cubit unto his stature? And why take ye thought for raiment? Consider the lilies of the field, how they grow; they toil not, neither do they spin: and yet I say unto you, that even Solomon in all his glory was not arrayed like one of these.

Wherefore, if God so clothe the grass of the field, which today is, and tomorrow is thrown into the fire, shall He not much more clothe you, O ye of little faith? Therefore take no thought, saying, 'What shall we eat?' or, 'What shall we drink?' or, 'Wherewithal shall we be clothed?' For after all these things do the Gentiles seek; your heavenly Father knoweth that ye have need of all these things.

But seek ye first the kingdom of God, and His righteousness; and all these things shall be added unto you. Take therefore no thought for the morrow: for the morrow shall take thought for the things of itself. Sufficient unto the day is the evil thereof.

Yes, He does.

Actually, that's really good advice, given the situation in which we find ourselves. The only trouble is that when I started this entry, I wasn't in the right frame of mind to take it -- and I'm still not. So for the moment, I'm going to stick with my original plan, which is trying to figure out how the market will turn out next week. To do this, I consulted the I Ching, or Book of Changes, the ancient Chinese divination text.

The Book of Changes plays a major role in Philip K. Dick's "The Man in the High Castle," perhaps the science-fiction author's best-known work. In the book -- which examines a world in which the Nazis and Japanese won World War II -- most of the major characters turn to the I Ching for guidance. All one has to do is ask it a question, and it spits out an answer after the divination takes place. The real trick comes in interpreting the book's answer -- which, like the Oracle at Delphi, can be mysterious.

Since actually using the I Ching for divination purposes is really hard and time-consuming, I cheated and used a fancy on-line automatic I Ching diviner, which does all the calculations after one asks a question. The question I asked was, "How will the market do next week?" Let's see what the I Ching has to say:

The present is embodied in Hexagram 44 (Coupling). We see a female who is bold and strong. It will not be good to marry such a female. The fourth line, undivided, shows its subject with his wallet, but no fish in it. This will give rise to evil. The situation is evolving slowly, and Yin is gaining ground.

You're damn right it will give rise to evil. I have no fish in my wallet, which means I can't buy fish at the sushi place I like, and that is clearly evil. Verily, I am wroth. Everything I've worked for over the past decade is slowly dissipating and at the rate things are going, I will be broke and begging for alms within a matter of weeks. And although I guess I should be happy with a hexagram with the title "Coupling," that has nothing to do with the question I asked, so I am entirely out of luck. (And I like bold and strong women).

Yin is gaining ground. Hmmmm. Well, according to Wikipedia -- and how could that be wrong? -- "Yin is usually characterized as slow, soft, insubstantial, cold, wet, and tranquil. It is generally associated with the feminine, and with night."

So if Yin is gaining ground, it must mean that we have entered a period of darkness and being insubstantial -- we're already there, I guess -- but it is also slow and tranquil. That must also mean conditions are now ripe for the panic to end sometime soon.

The future is embodied in Hexagram 57 (Ground). There will be some little attainment and progress. There will be advantage in movement onward in whatever direction. It will be advantageous to see the great man.

Hmmm. That sounds better! Some little attainment and progress. Well, that could mean stocks will go up slightly next week and people will start to relax. Even better is that line about there being "advantage in movement in either direction." If the market goes down, then that will put everyone in a better position to buy. If the market goes up, that will have an obvious advantage. But who is the great man?

Gee, that's troublesome. Maybe this means that Secretary Paulson or Chairman Bernanke will appear on television and say something important. Maybe Warren Buffett will do something. Maybe another great man, one I haven't yet considered, will pull our chestnuts out of the fire. Still, this would seem to signal better times ahead, and so maybe this will work!

Then again, the Asian markets are down -- by a LOT. Just in case, I'm going to do some more Bible reading.

Posted by Benjamin Kepple at 11:25 PM | Comments (1) | TrackBack

October 07, 2008

The Buy High, Sell Low Theory of Investing

I MUST SAY I was flabbergasted when I heard that Jim Cramer, the excitable host of "Mad Money" on CNBC, said on television that average investors ought take out money they'll need for the next FIVE years from the stock market. It was not so much that this advice was not sensible -- more on that in a bit -- but that Mr Cramer delivered the advice a day late and a dollar short.

Now, I fully appreciate that hindsight is 20-20. But one must ask: why did Mr Cramer not suggest this course of action when the market was going up? That way, the average investor could have actually capitalized on his gains back when the market was in full swing. What the hell good does selling now do? Oh, sure, it COULD end up saving people a lot of money if the market completely goes in the sewer and we're all left fighting for Government food rations. But since the danger of that actually happening is quite low, and it is far more likely that stocks will eventually recover, it is more likely that people will commit the cardinal sin of buying high and selling low -- and when capital disappears for good, you're out of luck.

It is important to note that Mr Cramer did advise people continue contributing to their retirement funds, and that long-term investments aren't subject to his argument. But if people really needed the money, they ought not have invested it in the stock market in the first place. There are safer places to put money that one might actually need -- bank CDs, or government bonds, or really really conservative mutual funds, or what not, rather than throwing it all into shares of

Now, I don't know about you, but being a young person, I do not have five years' worth of cash anywhere, much less five years of cash now in the stock market. But on the other hand, I don't need five years of cash. I am single, have no children, don't have any college expenses to pay, don't have any major purchases upcoming, don't have any major medical bills and don't have any desire to buy a '57 Chevy or a sailboat. That's not to say I have no cash at all -- I do have a bit stashed away in an emergency fund -- but it would not last me forever if the unthinkable were to happen. At this point in my life, that's a risk I think I should take.

And if the worst does come to pass, I'll have learned a valuable lesson. But for now, I don't see any reason to sell low when I bought high, and I don't see any reason to panic. If you're panicking at the thought of loss, then don't invest, because you'll always get whipsawed when things turn sour, only to buy in again when things are sweet.

This financial crisis has taught me a few valuable lessons, though. One, if it seems like there's real froth in the market, it's better to book a gain than hold out hope for a really spectacular gain -- unless tax consequences or other considerations make selling a bad proposition. Two, don't panic -- no matter what -- because panic will send one down the road to oblivion. And third, cash is king. We now know cash will always be king. I just wish I had a lot of capital at the ready to jump when I think the time is right. When that might be, I can't say -- my crystal ball is broken, just like everyone else's, but I've learned my lesson. The next time we have some sort of stupid financial disaster, I'll be ready to strike. This time around, though -- well, God help us all.

IMPORTANT DISCLAIMER: Mr Kepple is not a financial planner, adviser or specialist, and does not even hold a degree in finance. Not only that, his crystal ball is broken. For that matter, Mr Kepple's last big financial win happened back in 2005, when he told everyone in the office to buy gasoline before the prices went up due to Hurricane Katrina. As such, realize that investing involves risk and that you may lose money -- we ain't just whistling Dixie -- and you should talk anything over with a financial planner before you invest, as opposed to acting on the opinion of some blog.

Posted by Benjamin Kepple at 09:10 PM | Comments (0) | TrackBack

September 28, 2008

Now People Want to Ruin Sushi

SO EARLIER THIS WEEK I was feeling a bit cranky and stressed. OK, I'm usually cranky and stressed, but this week was notably worse than normal and as such I decided to splurge on an enjoyable dinner out. There is a nice restaurant (Tokyo & Taipei) in Bedford that serves both Chinese and Japanese food, and so I ventured there for a very large meal consisting mostly of raw fish.

I decided to really splurge and in the end, I managed to spend $52 including tax and tip. In no way was this a justifiable expense but I was not in my normal phlegmatic dollars-and-cents mood. For this $52, I had a nice bowl of miso soup, the sushi and sashimi deluxe combination, and for good measure I added on a few sushi rolls I especially like -- a couple of ikura (salmon roe) rolls and tobiko (flying fish roe) rolls. Oh, and also tea and Diet Coke.

For those Loyal Rant Readers who find the idea of eating fish eggs offputting, I would encourage you to give it a try -- there is nothing that better conveys the feeling and sensation and essence of the sea than roe, whether it is real caviar* or a more humble substitute, such as salmon or pike or flying fish roe. Feeling the roe roll about and pop in your mouth is just pleasant and cheering. If that proves a bridge too far, go for sashimi -- which is exquisite in its toothy rawness and elegant simplicity. If even that seems a bit much, then go for sushi -- although I would recommend going for various types of nigirizushi, which is just raw fish on rice, rather than California rolls or some such. (California rolls might actually be a good introduction for people who have never had sushi, although my personal opinion is that if I wanted avocado, I would go out for Mexican).

Anyway, it was an excellent meal as always, although dining alone has its drawbacks. For instance, I was disheartened to find that my wa was slightly disturbed thanks to the decadent barbarians in a booth some distance away, who insisted on engaging in verbal combat with their poor waiter over their dinner order. Had I been with friends, I could have ignored this and focused on my compatriots with whom I was dining.

But I digress. For I have found my harmony disturbed yet again, thanks to well-meaning people who are busy determining whether sushi is bad. This is not to say bad as in bad for one's health, but rather bad for the environment, which in this day and age is the same thing as just bad overall.

Are they entirely off-base? Of course not. For instance, the glorious bluefin tuna is being overfished to the point where it is endangered. As such, it might be wise for sushi lovers to reduce their consumption of the stuff accordingly, lest they no longer have any bluefin tuna to enjoy. Besides, although worth every penny, the stuff is hideously expensive. (I do not believe the bluefin tuna will ever go extinct, just because the prices for the stuff will shoot even higher as the bluefin tuna population declines, and people will substitute other sushi they like as a result).

Still, part of me wonders why they are so upset. After all, according to no less than the San Jose Mercury News, one Palo Alto sushi restaurant told that newspaper that the California roll, the dragon roll (crab, avocado, and eel) and the rainbow roll (fish, crab, avocado), are the most popular choices on the menu. This almost certainly means most customers need to worry about nothing, because the faux sushi rolls these represent are invariably inexpensive and made with unspectacular ingredients.

Besides, what's good and bad often depends on where the fish is from, and that is not helpful at all. No sushi customer has any idea from whence their sushi fish originates, and I have to think it would be the height of bad manners to ask. You'd be insulting the restaurant by implying they are openly engaged in bad practices. I mean, can you imagine it?

CUSTOMER: Excuse me! I was wondering -- just where does this tuna come from?
SUSHI CHEF: I'm sorry, sir?
CUSTOMER: I was just wondering where the fish came from. I'm trying to be environmentally conscious, that's all.
SUSHI CHEF: Oh! Well, sir, let me ask. A moment.
SUSHI CHEF (in Japanese): Good God. Hey! Kenjiro! Mr Important Muckymuck Foreigner here wants to know where the tuna's from!
SECOND SUSHI CHEF (in Japanese): You have to be kidding me. Tell him it's from the ocean and see if that shuts him up.
SUSHI CHEF (in Japanese): That won't work, the Westerner has a ponytail.
SECOND SUSHI CHEF (in Japanese): Hmmm. Well, make something up then. Mr Takashimi did the buying today and it's not like these fish have labels.
SUSHI CHEF (in Japanese): Good call. Thank you!
SUSHI CHEF: My apologies, sir, but our head chef did the procurement, and he has retired for the evening. Might I interest you in something more to your liking? Perhaps the ebifuraimaki rolls?
CUSTOMER: Yeah, OK! That sounds great!
SECOND SUSHI CHEF (in Japanese): Good! We can unload that box of shrimp we got from Newark.

Personally, I think a campaign focused on working hand in hand with sushi restaurants would prove much more effective than trying to work on everyday customers. For one thing, working behind the scenes would undoubtedly get better and quicker results. Also, the restaurateurs obviously know their business better than anyone. Not only would they have far more clout than their customers, they could perhaps employ different marketing schemes based on their customers: one scheme aimed at typical Westerners going out for sushi, while another aimed at serving their core base of knowledgeable customers. For instance, sushi eateries could suggest "good" fish for Western customers who are concerned about the environment, while reassuring their regulars and other knowledgeable customers that the bluefin remains in stock.

* For the record, I have never had real caviar -- by which I mean the high-grade and impossibly-expensive grades of the stuff. Those are far, far too expensive for a poor writer to enjoy -- but based on how I like the less-pricey alternatives, I am sure I would love it. If any Loyal Rant Readers want to send me a tin of sevruga or something out of the goodness of their hearts, do send me an e-mail.

Posted by Benjamin Kepple at 11:11 PM | Comments (0) | TrackBack

September 15, 2008


I fell into a burning ring of fire
I went down, down, down, and the flames went higher;
and it burns, burns, burns:
the ring of fire --
the ring of fire.

-- Johnny Cash

MY OPINION -- NOT THAT YOU CARED -- on today's rather spectacular blowup is not as gloomy as you might think. That's based on the following rationale, as I wrote to a friend of mine today:

In my estimation, this is not as bad as it seems. In terms of the market correction, it's not (yet!) as bad as 2001, and not as bad as 1987, and not as bad as 1973-74, and certainly not as bad as 1929. ...

The reason I think this is not as bad as it seems is because the financial system is purging the toxin in its system. As with any illness, you have to purge out the bad stuff before you can recuperate, and I think that's what's happening with the market right now. Now, I only wish I had a crystal ball to tell me when the fever breaks. But despite the short-term struggle that goes along with all this upheaval, every daily crisis that comes along will push us towards a position to eventually rebound.

For the record, my crystal ball is broken, so I'm not advocating any particular trading strategy. I just don't think there's any reason to panic in the streets. (That day may come. If it does, see you on the barricades!)

But there is good news: lost in all this is the fact oil prices have crashed too. As I write, the October futures are down to $93.55 per barrel. At close on Friday, the per-barrel price was $101.18. That's roughly a 7.5 pc drop and there are, at present, no signs that oil's inexorable slide is going to continue any time soon. The hot money has left the station, folks. So at least that's something for all of us.

Posted by Benjamin Kepple at 07:51 PM | Comments (0) | TrackBack

September 09, 2008

Another Day, Another Crisis

THE MESS WITH LEHMAN Brothers Holding Inc. is the latest in a series of financial crises to land upon us. Six months ago, this might have caused me a bit of worry, but now it seems as if the troubles surrounding Lehman are par for the course. The news tonight, however, leads one to wonder if they can get out of the muck.

The Associated Press reports Lehman will announce "key" initiatives to get things back on track at the investment house. Like many interested observers, I was interested in the reaction to this news. So, here at The Rant, we took a poll to find out just what Lehman Bros. shareholders want from the company. The results of this survey follow below:

What's that? Why, yes, that picture is from the cover of "Head Office." A style point for all of you who noticed!

Posted by Benjamin Kepple at 10:18 PM | Comments (0) | TrackBack

August 30, 2008

Touch and Go

LAST NIGHT, I GOT A CALL from Mr Kepple back in Ohio. It was a short call, but one with an important message: the game between Appalachian State and LSU had been pushed back to 11 a.m., due to the approach of Hurricane Gustav. Stupid hurricane, I thought to myself. It did, however, mean that football started an hour early on a day when I had Saturday off, so there was that.

Unfortunately, the game had been switched to ESPN Classic. This posed a problem. My cable provider, in a fit of Comcastic pique, decided some months ago it would switch ESPN Classic one "tier" up from my present channel lineup. However, it apparently forgot to mention this to everyone, leaving me somewhat annoyed. While ESPN Classic is not a channel I would normally want, it is starting to show more live events, and as a result it has turned from a novelty into a quasi-necessity.

As a result, after I went out and got breakfast this morning, I came back and steeled myself for the call to my cable provider, which went Comcastic. Well, actually, it went fine. The young man on the other end of the line was polite and friendly, and flipped on ESPN Classic for me. True, it did cost me $10.95 per month extra, but the annoyance associated with this faded once I realized I got Bloomberg, BBC America, and ESPNews. Oh, and I got a bunch of channels just for women.


I'm not saying, I'm just saying. Besides, I have the NFL Network.

Unfortunately, as it happened, there would not be a repeat of Aintgonnawin State's shock victory over Michigan. After 45 minutes, it was LSU 17 and ASU nil. Ugh. That didn't work, I thought. So I switched over to the Big Ten Network -- sweet -- and watched plucky Youngstown State take on the (evil) Ohio State Buckeyes. Then that game went badly. I switched that off when that hit 17-0.

I had hoped the Big Ten Network would have shown the Coastal Carolina - Penn State game, because my first cousin once removed, Brian P. Kepple, was an offensive guard for Coastal Carolina a few years ago. Then again, the game didn't really go all that well -- Penn State was ahead 45-7, last time I checked -- so I was again adrift. The other big games were also blowouts.

Except for East Carolina v. Virginia Tech. I detest Virginia Tech, so the fact East Carolina is giving them hell is wonderful. If you're reading this as of now -- it's 2:10 p.m. -- we're close to the end of the third quarter, and East Carolina is only down a field goal. Oops. Big pass play. They're about to be down two scores. But it's good to have at least one good early game to kick off college football season.

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August 22, 2008

What? My Doug Flutie Rookie Card Won't Let Me Retire?

I bought Polaroid at seven! It's probably up millions by now!

-- Miles Monroe, in "Sleeper"

IN 1987, YOUR CORRESPONDENT -- who was living in Kalamazoo, Mich., at the time -- would routinely trudge one and a half miles up to the retail complex nearest to home, and spend his pocket money at the plaza's five-and-dime store. Sadly, the store in question was consigned to the business cycle's dustbin long ago, but I can assure you the many football cards I bought from it are safely stored at home. Somewhere. I think.

Much to my chagrin, however, I have learned my complete 1987 Topps football card set -- which I spent hours upon hours collecting, storing, putting in sleeves and obsessing over -- also fell victim to the business cycle at some point in time. Apparently there was a bubble in sports cards, and it burst. Thus, I may have actually lost money on the deal when all is said and done.

This is particularly annoying because just a few years ago -- or was it longer? -- some of the cards had actually appreciated to the point where they could have paid for a decent steak. Now, they'll pay for hamburger -- and if I'm lucky, a package of rolls to go along with it.

I think 1987 -- when I was 11 -- was the first year I really got interested in football, although it wasn't for a few more years that I began to develop the hard-core loyalties that I now carry today. (When I was a very young boy, as my father loves to relate, I would root for the winning team in a football game. That's right, the winning team. If, say, Chicago was beating Detroit, I would root for Chicago unless somehow Detroit took the lead, and then I'd root for the Hawaiian blue.)

In any event, it was in this year that I really started collecting football cards, growing up as I did in a house where football was the only sport that mattered. It is amazing to think just how much time I spent on the bloody things, and I grew out of the hobby after a couple of years. After ten years or so, the cards I had collected actually had some value to them -- with a few worth over $20 each.

Unfortunately, these rarefied valuations went the way of tulip mania, the South Sea Bubble, the railroad bubble, the Florida swampland bubble, the dot-com bubble and -- well, you get the point. Consider my chagrin upon idly finding the values of the cards this very evening.

For one thing, there's the fact the Doug Flutie rookie card -- yes, that Doug Flutie -- is one of the most, if not the most, valuable cards in the 1987 Topps set. It is worth $8. Of course, that's the "book value" of the card, which means that is what you could buy it for if you went to your local hobby shop. In terms of actually selling it, it is worth somewhere between $2 and $4 -- and according to, as little as $1.25.

1987 Topps #45 - Doug Flutie RC (Rookie Card) - Courtesy of

The 1987 Doug Flutie rookie card, which is theoretically worth $8 in American dollars, but upon sale would probably not pay for passage over the Ambassador Bridge.

The Jim Kelly card is worth $10, and the Randall Cunningham rookie card is worth $6, both values that seem fair. The Dan Marino and Joe Montana cards are also allegedly worth $6. But the value of other cards have dropped precipitously. Jim Everett's rookie card from that year -- and if I recall right, the Los Angeles Rams were pretty good -- is worth just $1.25. On the lower end of the scale, Cris Collinsworth's card is worth just 25 cents -- although given his broadcasting, that might be generous.

1987 Topps #188 - Cris Collinsworth - Courtesy of

Cris Collinsworth: Lame then, lame now.

Given these values, I think we can peg the "common card" values at, oh, $0.02 each. Indeed, I daresay the whole set would probably go for about $50 on the open market, if that. Add in the extras I gathered in the pursuit, and it might go for $60 or $70.

All that for $70? Sure, I should probably be happy it might fetch $70, but ... ugh. How many hours did I spend on those walks? How many hours did I spend walking in the winter for those football cards? Why didn't I spend my youth doing something useful, like clipping bond coupons? Plus, at 45 cents per pack, which worked out to three cents per card, I probably lost one cent each on most of the cards I purchased. One 1987 U.S. cent, which is worth two cents today.

But this has taught me a valuable lesson. First off, there's a lot to be said for buy and hold -- but when things are really going well, selling might be a good idea. Second, it's important to pay attention to even the most minor assets one might have, in the event good deals are to be had for those assets. Third -- and keep this in mind, kids -- only buy collectibles if you really like them. If they happen to be a great "investment," that's all well and good, but only collect if you value the good -- like, say, football cards -- more than the cardboard they're printed on.

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August 13, 2008

This Recession Is Really Starting to Hurt, Part IV

A DETROIT HOUSE has been listed on real-estate search engines for $1, according to the Detroit News. Yes, that's right. $1.

The house does still have its roof, but fancy extras like siding, windows, doors, light fixtures, the fence, the furnace, the plumbing, and the kitchen sink will have to be replaced on the new owner's dime, because they have all been stolen from the property. Oh, and the garage, 'cause that burned down. Of course, the real question is how long the new owner can put those things back in place without squatters stealing them again.

Posted by Benjamin Kepple at 09:51 PM | Comments (2) | TrackBack

On Getting a Nicer Place

SO I WAS AT A PARTY -- no, really, I was -- on Saturday night and the conversation, as one might have expected, eventually turned to the housing market. As one might also have expected, the conversation eventually turned to the question of why I, Benjamin Kepple, continue to rent an apartment as opposed to buying a house or condominium. The benefits of owning a house -- forced savings! appreciation! climb a rung on the ladder of prosperity! -- were expounded upon, and I offered up my various defenses for not buying accordingly. (They do not, as we shall see, revolve around the state of the market itself, although I am wary about it).

This was not the first time I have found myself discussing this. Over the years, I have had people -- including people I have just met -- express opinions ranging from befuddlement to pity (!) about my decision not to buy property. It's actually somewhat unbelievable -- it's as if I'm some kind of Communist for having no interest in buying a place. But when someone I trust completely for his advice on financial matters gently broached the subject -- it appeared at the time as if a Government tax benefit might have made a purchase more worthwhile -- I gave the matter more thought.

Well, there are certainly advantages to buying one's own place, I will admit that. For one thing, you own it and you can, subject to the rules and regulations in one's municipality, do what you want with it. For another, you freeze your cost of housing. Your mortgage payment will not -- at least, in terms of principal and interest payments -- go up unless you tap your equity or otherwise treat your house like an automated teller machine.

But when one looks at it in black and white, I am not convinced the numbers work out. At least not yet.

Let's say I borrow $150,000 tomorrow, at seven percent, to buy a place. Over 30 years, this represents a total payment of $359,266.59 to my mortgage company. Of this amount, $209,266.59 is interest. In my present situation, I pay $800 per month in rent for my two-bedroom apartment. (Yes, it is a good deal). Thus, paying rent of $800 per month over that 30-year period would work out to $288,000 in total payments. (True, I realize that my rent payment will not stay at $800 forever, but we'll get to that).

Anyway, the initial gain works out to $78,733.41, that is to say, it's the equivalent of: (equity) - (total payments - rent payments). Yes, I have banked $150,000 in initial equity on the property, but have paid a goodly amount in interest to buy it, so the real equity is not as great as one might think. Now, it is true that property tends to appreciate, and if we assume the property appreciated at 3 pc per year, it would be worth about $346,089 at the end of my mortgage. Thus the appreciation would work out to $196,089, for a total gain of $274,822.41.

Tax savings from interest payments start at $1,275 in the first year and wind down to about nothing after 15 years -- after that, I would take the standard deduction, you see -- and so we'll call that $10,000 for simplicity's sake. Tax savings from property taxes start at $625 in the first year and by year 30 will hit $1,517; we'll call that $32,000 for simplicity's sake. That works out to $316,822.41.

But -- and here's the grand but -- what about the costs over time that offset this gain?

Property taxes are a big one, especially here in New Hampshire, where property tax is the Government's key revenue generator. In the first year, my property taxes would be $2,485. In year 30, they would be $6,031 -- at minimum. (That figure assumes a 3 pc increase each year). Averaged out, that's $4,258 per year, and over 30 years that works out to $127,740. Our gain is now just $189,082.41.

Next, we have condo fees, which pay for things like heat, hot water, keeping up the grounds, and so on. $200 per month is not an unreasonable estimate. This works out to $2,400 per year in year one and, let's say, $4,800 in year 30. This works out to $108,000 over 30 years. Our gain is now just $81,082.41.

My insurance costs would notably increase -- about $500 per year, I am guessing, in year one. By year 30 that would cost about $1,100, so if we average that out, that's another $24,000, bringing my gain down to $57,082.41.

Let's add in another $1,200 per year for what I call the Bad Things Happen to Good People Expense. I need a new washer; I need a new dryer; the sewer main backed up into my house; those crazy kids tore up the lawn; insert your calamity of choice here that would require some sort of surcharge. The gain now drops to $21,082.41.

And God help me if I decide to remodel the kitchen.

Now, maybe that's too pessimistic. But I am not convinced that is the case. The way I see it, I'm basically looking at a gain of about $21,000 in rapidly inflating Yankee pesos when all is said and done. Yes, I'd have that equity of $346,089 banked. But when I add in the cost of the mortgage ($200 more per month), the taxes ($200 more per month) and the condo fees ($200 more per month), I am looking at spending $600 more per month for the privilege of ownership. That's $7,200 per year that I am not directly paying for now.

If I put $7,200 per year away for 30 years, and I make 3 pc per year on it, I end up with $350,518. That's roughly $4,429 more than I'd have if I bought the house. I have more faith in my ability to invest in the markets well than I do in my ability to buy property well.*

The real financial advantage, of course, to buying a place comes after year 30 -- when the stupid mortgage is paid off. My housing costs would drop precipitously in year 31, whereas if I didn't buy, I'd still have a rent payment. Which leads to the one flaw in my argument I readily concede -- my rent payments have to stay about where they are for this to work. Once the rent goes up, the equation changes dramatically.

If my landlord decides to raise my rent sharply, suddenly the idea of buying a house becomes much more amenable, because the $288,000 rent payment number goes through the roof. For instance, if my rent jumped to $1,100 tomorrow, I'm suddenly paying $396,000 in rent over those 30 years, giving me roughly fifty thousand good reasons to buy a house.

Loyal Rant Readers may argue that my landlord, just because he needs to make a profit on his investment, will eventually raise my rent over time, thus making my argument out of balance. This may be true. But since my landlord is the best landlord in New Hampshire, I'm not seeing any immediate reason to jump on the property ladder.

There are plenty of other reasons not to jump as well. Here's my favorite: I am single and I have no children. I don't need a house. For that matter, I don't need a condo. I mean, for Pete's sake, I don't even use all the space I have now. If I did, I would not refer to the back bedroom as the Back Bedroom I Do Not Use -- well, except for storing paperwork and books -- here on The Rant.

Not having a wife and children also means that my roots here are very thin. If -- God forbid -- Something Happened, there's nothing keeping me here in New Hampshire. (I would miss the Wolves games, yes, but would undoubtedly adjust to rooting for the AFL/af2/other indoor football team in my new city). If Something Happened here, I could be fully moved back to the Midwest within 45 days, if not sooner. The long and short of it is this: if Something Happened, I could cut myself free of my New Hampshire ties quickly and easily.

I like having that flexibility, and at this point in my life that's important to me. The ability to pick up stakes and move someplace else, should the situation require it, is an advantage that those with roots someplace don't really have. This to me is worth the offset of not having a "nicer" place -- particularly since my place is nice enough already, and will undoubtedly be so ... well, for a while, anyway!


* In the last five years, house prices in my area have gone up roughly 28 pc, according to OFHEO. The S&P 500, on the other hand, has gone up 31 pc.

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August 05, 2008

Penny Wise, Pound Foolish -- Or Is It?

BACK WHEN FRED SCHWED wrote "Where Are All the Customers' Yachts?" he mentioned one silver lining to the country having gone through the Great Depression. After all, Mr Schwed wrote, are you quite sure you would want all those people who had money to have it again? Like the Depression, the state of air travel is so bad these days one has to start looking at the bright side.

After all, are we quite sure we want all those people who used to fly, back in the good old days, to start flying again? The vacationers with eight obnoxious children? The sweaty fat guys wearing track suits? The rotten scoundrels who made a point of reclining their seats the moment they sat down? I could go on, but you get the idea -- and undoubtedly you have your own bones to pick with certain members of the traveling public, like that guy who insists on loudly babbling into his mobile phone prior to takeoff, even though no one wants to hear his mundane conversation.

Fortunately, our airlines have seen the error of their money-losing ways. As a result, they are steadily making air travel more and more unpleasant for occasional and unseasoned travelers, who cost them money and whom I think all can agree are generally responsible for making air travel suck. The only down side is that the airlines are not doing the smart thing and raising fares across the board.

Instead, many are nickeling-and-dining all their passengers. Were this done reasonably, it might not be so bad; but some airlines -- fortunately not Continental, which I fly -- are charging for the privilege of checking one bag and the privilege of enjoying water whilst on the flight. (For a good list of annoying fees, see here). These fees came to the forefront yet again when JetBlue announced it would start selling passengers pillows and blankets for $7.

Now, I happen not to mind this. For one thing, I have long considered free airline pillows and blankets disease factories only marginally less dangerous than those Lord Amherst wanted to send to Pontiac's troops. For another, I have never used the stupid things, and dislike it when my seatmates do, as they bring the pestilence that much closer. Still, even if there are advantages to getting rid of free pillows and blankets, it seems a bit much to charge $7 for the things. For that matter, it also grates on the nerves when one must pay $5 for a cold sandwich, $2 for a soda, and $4 for a set of cheap headphones.

If you ask me, it would be smarter for the airlines to ... shall we say ... refine their fees. Under my plan, people would be entitled to free meals, free soda, free water, and even free headphones. These would be paid for through the imposition of fees as listed in my Reasonable Airline Fee Scheme, viz. and to wit:

1. PET IN CABIN FEE: $250 for dogs or cats; $500 for anything else, guide dogs for the blind excepted. Note: minors named Jimmy Wilson would be allowed to bring their dog on board for free, provided the dog was named Scraps.

There are few things more annoying while flying than having someone bring his precious pet on board an aircraft. Air travel is supposed to be elegant and refined. Having some selfish, emotionally crippled dingbat bring on board his or her companion ferret detracts from this experience. This goes especially if the dingbat in question does not stow the beast, which probably has rabies, in some sort of portable pet cage, but instead insists that Rory the Rabid Ferret be allowed to do whatever it is ferrets do with free rein.

Now, if you ask me, if you're so emotionally scarred that you always need a companion beast at your side, you probably shouldn't be flying. But if one were to buy everyone on board the flight lunch through paying this fee, I think it would help make things up to the other folks in economy class.

2. MOBILE PHONE FEE. $25 travel voucher to other passengers in same row, $10 travel voucher to everyone on flight.

As I understand it, our engineers believe a limited number of mobile phones could be used in flight provided modifications were made to an aircraft. However, the way air passengers behave these days, it is almost a certainty that someone who used his mobile phone during flight would abuse the privilege. This would thus result in an aggrieved passenger taking the offender's mobile phone and breaking it, or even worse, shoving it up the offender's alimentary canal.

Instead, I propose the airlines auction a limited number of mobile phone licenses -- say, three -- to passengers on board an aircraft. This would allow business travelers who really needed to make calls to make them, while compensating other travelers for the nuisance.

3. UNRULY MINOR/CHILD FEE. $50 per minor or child, levied in advance; refunded at crew's discretion; exemption for minor children under two years of age.

Air travel is supposed to be elegant and refined. This is impossible if unruly minors are rushing about the cabin screaming, crying, hollering and generally causing a mess of things. As a result, the parents of said minor children should pay a $50 surcharge for each minor to allow their children on board the craft, with the fee refunded if the children are good. If the parents are clever, they will take the fee out of their children's allowance, thus giving Junior and his siblings incentive to behave. The fee will be waived for parents traveling with infants, as they're suffering enough.

4. PROPER DRESS CREDIT/IMPROPER DRESS FEE. $10 travel voucher for every passenger wearing business or conservative travel attire. $100 fee for anyone wearing a T-shirt with a kitschy or obscene message. Note: this fee would not apply on flights to Las Vegas.

People generally behave better if they are properly dressed. This is because they do not want to ruin their good outfits. It is also because, in some fashion, the clothes make the man -- a man wearing a good suit is more likely to behave properly than a man wearing a T-shirt with a message relaying a coarse sexual innuendo. As such, people wearing business attire -- or comfortable but respectable leisure clothing -- would get a discount, while the guy wearing the "I'm With Stupid" T-shirt would be heavily fined.

5. RECLINING SEAT FEE. A quarter sounds good, don't you agree? Yeah. A quarter.

Unless the person in back of them is more than six feet tall, in which case the passenger should pay $50 to the person whose knees he is about to crush.

6. INCONSIDERATE SCHMUCK FEE. $1000 on-the-spot fee levied against passengers who force an aircraft to be delayed, to return to the terminal, make an emergency stop or take other action because they're complete asshats.

This fee would be levied against any stupid get who incessantly argues with the cabin stewardesses, smokes in the bathroom, forces other passengers to restrain him, or takes other action that completely ruins the travel plans of the other passengers on board the aircraft. This fee would be assessed in addition to any federal or international laws in force during the flight, and would be due immediately -- payable via credit card or in cash, if the person has the cash on them. The money would then be raffled off among passengers in whatever manner was deemed necessary to restore order.

These six convenient ideas are merely a starting point for a conversation on fixing air travel -- because if it isn't fixed soon, we might find the airline industry re-regulated. That would have its upsides -- I recall traveling to Puerto Rico as a boy on a massive jet that had all of FIVE passengers on it -- but I have a feeling the downside of paying $600 or more per ticket would probably outweigh those.

Probably. We'll see.

Posted by Benjamin Kepple at 10:51 PM | Comments (1) | TrackBack

July 31, 2008

Analysts: Ramirez Trade to "Pull New England Out of Recession"

Financial Rant

BOSTON -- The Boston Red Sox's decision to trade outfielder Manny Ramirez in a three-way swap that saw Ramirez head to the Los Angeles Dodgers should pull New England, and perhaps the nation, out of the current economic recession within nine months, financial analysts said.

Financial experts said trading Ramirez to the West Coast, a move that would effectively end public knowledge of the outfielder's notorious antics, would spark a productivity boost in New England that could cut unemployment in half, increase durable-goods orders by one-fifth, and boost consumer confidence. This was directly attributed to the fact that New England's baseball-mad populace -- who follow the sport with a devotion not seen elsewhere in America -- would not spend hours talking about Ramirez's latest stunts at the office.

"Now that Ramirez has been exiled to Los Angeles, where more people would pay attention to Los Angeles Galaxy goalkeeper Steve Cronin berating his defense, New England finally can get back to work," said economist Fred Carsten of the Rozelle Institute in Wakefield, Mass. "Untold man-hours of productive time will be freed up, which should spark an economic rebound that will push the Northeast towards unparalleled prosperity."

Signs this might actually happen were evident on the streets of Boston last night.

"It's like some great weight has been lifted from my shoulders," said Dorchester resident Alvin Peters, a data-entry clerk. "I think I'm going to have a good night's sleep, go into work tomorrow feeling great, and finish all those reports my boss has been wanting."

"I haven't wanted to go to work for years," said Ted Wojciechkowski, a viral marketer from Brookline. "But now, I think I can live with the soul-crushing existence of my job without Ramirez being a distraction."

Carsten warned, however, that any economic recovery could be sidelined if New England Patriots quarterback Tom Brady were to get injured this fall, although he noted such an incident would cause a burst of productivity and increased consumer confidence in Indianapolis, Pittsburgh, New York, and southern Florida.

It is unclear how the greater Los Angeles market will react to "Manny being Manny," but most analysts believe the impact will be relatively small, citing the greater popularity of football, basketball, soccer, arena football and hockey among Angelenos. Experts also believe the lack of attention publicly paid to Ramirez's antics will lead the outspoken player to become a shambling, withdrawn remnant of his former self within two years.

Posted by Benjamin Kepple at 10:46 PM | Comments (0) | TrackBack

July 28, 2008

Oil and Speculation

ROGER BOOTLE has written an important column in The Telegraph on the commodity markets. It is worth reading, particularly as it addresses the matter of speculation in said markets -- and is cleverly written, as we can see with this quote, addressing the potential of a commodities collapse:

Mind you, not everyone would be a winner. In such a scenario all of those who had bet on sharply higher commodity prices would lose out. Would some banks find themselves nursing substantial losses on commodities? Believe me, if there's a way of losing money lying out there somewhere, they will find it.

Speaking of the oil markets, it's worth noting the Chinese are going to essentially send their entire country on holiday for the duration of the Olympics. I'm just pointing this out.

Posted by Benjamin Kepple at 09:29 AM | Comments (0) | TrackBack

This Recession is Really Starting to Hurt, Part III

NEW YORK POST: Depression-era styles return to fashion. Although there would be certain advantages to reviving parts of the Thirties -- swing music! train travel! -- I would suggest this is not one of them.

Posted by Benjamin Kepple at 09:15 AM | Comments (0) | TrackBack

July 27, 2008

Fixing Albany

AFTER THE MANCHESTER WOLVES (9-7) finished off their season with an impressive and exciting 46-45 win over the Corpus Christi Sharks (8-8), I was scanning the headlines on ArenaFan and found a rather interesting story about the Albany Conquest. As in, the team's for sale. As in, the team's for sale for just a quarter of a million dollars.

Hmmmmm. Let's see ... oh, drat. I don't have the money with me. Well, let's look at my books, then -- oh, drat. I'm short. Plus, even if I did have a quarter of a million dollars, that wouldn't be enough money to rescue the Conquest. To do it right you would need at least a million bucks on top of that. Sadly, the Conquest is a money-losing franchise and so you would need a lot of capital to right the ship.

But I do think it could be done. Albany has some particular hurdles that must be overcome, but they can be overcome with the right amount of grit and hustle, by which I mean salesmanship. First, though, let's look at some numbers.

It costs about $1 milion -- now, perhaps $1.1 million or $1.2 million -- to run an af2 franchise for a year. That we know, based on a Forbes magazine story written a few years ago which featured my team, the glorious (and profitable!) Manchester Wolves. It is possible you could get away with less but since you don't want to cut corners, you should expect to pay that kind of money. So let's settle on an expense figure of $1.1 million.

This consequently means that you need revenues of at least $1.1 million to avoid nasty calls from your bankers. So how do you get $1.1 million in revenues? Well, let's look at the revenue breakdown. According to the Forbes article, 47 pc of revenue for a typical af2 team comes from ticket sales, 33 pc from corporate sponsorship, 10 pc from merchandise and concessions, 9 pc from radio and television advertising, and 1 pc from "other." Broken out for our example, that means selling $517,000 worth of tickets, getting $366,666 in corporate dollars, $110,000 from merchandise and concessions, and roughly $100,000 from radio and television.

The two big areas where a front office can do well are on the ticket and corporate sides. Everything else will follow.

Now the corporate dollars require salesmanship. Your corporate sponsors want value for money. How do you do that? Sell ads and tickets. Sell naming rights to the field. Sell ads on jerseys. Sell ads on the padding. Sell ads on the banners around the field. Do business in-kind: you feed my players one night a week, I promote you during each game and invite people to eat at Joe's with the team. Throw in some free tickets as incentives for companies -- they can be used as free morale-boosters for the troops. You provide free stuff for giveaways and we'll promote the hell out of it. Give away gasoline. Give away a car. But promote, promote, promote.

Let's break it down even further when it comes to ticket sales. There are eight home games in a season, meaning one would need $64,625 in ticket sales per game for that portion of the break-even price. An Albany Conquest season ticket holder this year paid anywhere from $33.75 to $9 per game for a ticket, depending on location, with most going for $16 each. If we assume the really good seats cancel out the endzone seats, let's say the average is $16 each. Thus, if the team could sell 4,039 season tickets, they'd break even on that component right from the get-go. The average overall attendance in Albany the past year was about 3,700, according to ArenaFan.

There are two problems I see with the Conquest's strategy as is. First, they've made many of the tickets too cheap. Second, there are no discounts for youth or seniors -- at least, none that I saw on their tickets page. Both these things are serious errors in my mind and will be difficult to correct. After all, since you've devalued the tickets (and the team isn't all that good) you have little power to increase prices. Second, in not discounting tickets for youth and seniors, you're creating a mental barrier for potential buyers.

So how does one fix this? Volume. Raise the adult prices a little bit -- there's some breathing room there. For instance, the single-game sideline seats could be sold for $20 instead of $18 without too much blowback. But youth tickets could be sold for $10 and senior tickets for $15. Be ruthless in cutting prices for kids. Kids mean adults. That's the iron-clad equation of minor-league sports. Kids mean adults.

Let's say you have a family of four wanting to buy sideline tickets for a season. This year, they would have paid $512 for season tickets. Now, I don't know about you, but to me $512 is a lot of money. Here's a better idea. Sell the adult tickets for $18 each (a $2 increase over now) and sell the kids' tickets for $5 each. That brings in $368 -- not too much less -- but your family of four is going to think, "Wow. Football games for the kids cheap." The kids will be happy, which makes the parents happy, and it's good for everyone. (The Wolves offered really cheap youth season tickets this year, and I thought it was particularly inspired).

If you were able to attract just 50 new families with this pricing scheme, it would translate to $18,400 in revenue. If you attracted 500 new families, it would translate to $184,000.

One final thought on promotion: af2 teams should work hand-in-hand with the athletic departments of their local middle and high schools. That's a natural fan base. Run football clinics, offer discounted tickets, do what you have to do, but do it. It'll be good for the players on your team and good for the kids and, one would hope, good for the bottom line.

Oh, there's also the whole football part of the equation. That's the easy part. But Albany's hapless performance on the field needs to be fixed. My guess -- and this is just a guess -- is that a good team on the field would translate into 1,000 or 1,500 tickets sold a game at the very minimum. Also, the team make sure to work with its loyal fan base and get them more involved with the team. That will excite them even more and spread the word to their friends and family.

Posted by Benjamin Kepple at 09:32 AM | Comments (0) | TrackBack

July 20, 2008

Chinese to "Cut Off" America if USA Wins at Olympics

By LORD GREEN of Weston-infra-Mare
Far Eastern Economic Rant

HONG KONG -- Chinese president Hu Jintao has informed the American Government that China will no longer buy U.S. Treasury bonds should the Americans beat its athletes in the 2008 Summer Olympics, sources close to the Chinese Politburo have confirmed.

The advisory/threat was conveyed through lower-level officials at the Chinese Embassy in Washington. A person familiar with the matter said American officials were skeptical about the request, but would "see what they could do" to ensure American Olympians finished "a distant second" in the contest's medal tables. Other Chinese officials confirmed this account.

"Secretary Paulson was initially skeptical about the matter, but eventually agreed when we pointed out the metrics of the United States' FICO score," said Wo Zhongguo, a senior collections agent with the Chinese Investment and General Trading Corp. in Harbin. "The United States simply can't afford to lose this vital source of income, while we've spent billions of yuan to ensure everything goes smoothly at the Beijing Olympics, without any unfortunate incidents from splitists, separatists, the Dalai clique, the Falun Gong cultists, reactionaries or decadent Western protestors. All in all, this is what our glorious leader Deng Xioaping would have described as a 'win-win.'"

"Besides, it's not like we said the Yankee devils couldn't beat the Russians," Wo added.

Were the Chinese to stop buying U.S. Treasury bonds, Washington's costs for borrowing money would increase sharply, as it would have to pay higher interest rates to attract capital. Economists believe that could spark any one of several economic problems, worsening the country's fortunes considerably. But not all Americans were won over by the threat.

"I guess I'd worry if I actually ate Chinese food," said Harrisburg, Pa., resident Arthur Swindle. "But everyone eats Thai food these days. So I guess I would tell the Chinese that they can keep their ... uh ... Chinese roubles, or whatever it is that they give us to keep our economy afloat."

"Yeah? Well, we'll just sue them and clawback our money," said Chicago resident Harold Z. Pringle. "Wait, what? What do you mean we can't sue them? We can't force them to buy our Treasury bonds?"

Pringle was speechless, then horrified, when informed that China's sovereignty prevented the United States from taking any effective legal action against its Government.

"Oh, God!" Pringle said, holding his head in his hands. "We're all going to have to start making crap again."

A hastily called White House press conference with ordinary citizens turned into bedlam when historian Studs Terkel crashed the event to ask questions of the gathered crowd. A partial transcript of the event read as follows:

Mr EDWARD SYPOLOWITZ, of Armrest, N.J.: We can't let those Commies tell us what to do! We've got to remind them we're number one!
Mr TERKEL: Are you number one?
PRESS OFFICER: Don't answer that!
Mr TERKEL: It's a perfectly legit ...
PRESS OFFICER: Quick! Activate Emergency Response Plan Gamma!
OFFICIALS: (chanting) U-S-A! U-S-A! U-S-A!

As of press time, it was unclear how America's actual athletes would react to the Chinese Government's demands. Sports observers believe it would be most difficult to convince athletes competing in soccer, track and field and the modern pentathlon to go along with China's plans, while the Americans' basketball squad was projected to simply blow it again. The Olympics start on Aug. 8.

Posted by Benjamin Kepple at 04:41 PM | Comments (0) | TrackBack

July 17, 2008

The Magic of Compounding

IN THE DEAD OF WINTER in 1921, The New York Times published a fascinating article that looked deep into the history of the city of Philadelphia. It did not look at monuments or administrations or public officials, but rather the links "between the present city of the quick and the old city of the dead." Specifically, it looked at the bequests which prominent Philadelphians had given to the city over the centuries, and found what had happened to them over time. The headline sums it up well:

Unforeseen Future Has Made It Impossible
to Comply With Wills of Early Philanthropists

As it happened, Benjamin Franklin had set aside a good sum of money (£1,000) to loan to young married artisans, mechanics and other craftsmen who had served as apprentices in the city, but in the early 20th century his money was idle. The practice of apprenticeship had long died out, and the interest rates set forth in Dr Franklin's will were no longer the attraction they once had been.

But Dr Franklin was not the first to do such a thing, as the Times relates, nor was he the only one to guess wrong. In 1739, the will of William Carter declared that an annual rent of £6 -- which would be paid for through hiring out his indentured servant, Nathan Stanbury -- would be used to buy "a dole of good bread for ye said poor people" twice a year. (By 1919 the trustees of Mr Carter's bequest had grown the money to $1,574, and apparently were still buying bread). In 1802, John Bleakly left £1,000 to help the poor who had been quarantined in hospital after contracting yellow fever; by 1921, effective treatments against the pestilence had been devised, and in 1937 a vaccine to eradicate it had been developed.

Despite the headaches and unforeseen circumstances -- which I do think could be worked around from the get-go with a bit of elasticity in the writing -- this is a really cool idea. Take some money, set it aside, use half the proceeds for relief and half to grow the bequest. Franklin's bequest, before it was distributed per his will, eventually grew into the millions; it is not inconceivable to think that future small bequests could grow into the billions given enough time.

True, there may be hiccups along the way. Recall Woody Allen's movie "Sleeper," in which Mr Allen's character wakes up in the far future and realizes, "I bought Polaroid at seven! It's probably up millions by now!" Sadly, of course, Polaroid got its ticket punched back in 2001. But if one could avoid the pitfalls of war, terror, plague, famine, inflation, stagflation and myriad other disasters, the results could be outstanding. I once heard a finance writer say that if one penny from AD 1 had been invested and compounded over time, the net proceeds would today be worth something like two trillion dollars. That is not a bad goal to have, even if one starts small.

Posted by Benjamin Kepple at 08:14 PM | Comments (0) | TrackBack

July 16, 2008

Baseball's Ad Campaign Improves

CLOSE TO SEVEN last evening, I was flipping channels waiting for the All-Star Game to begin when I stumbled across a replay of the LSU-Kentucky college football game from last year. Oooooooooooooh, I said to myself, and settled in on the sofa. I couldn't remember who won -- it was Kentucky, in triple overtime -- so it made for a great start to the night sports-wise. Then ...


By the time I woke up, it was the end of the second inning and scoreless in New York. The game, I think all can agree, was incredible. Since I have a late start at work today, I was able to stay up and watch all 15 innings. God help me. But God, what a game. The National League's defense -- well, except for Mr Three Errors -- was incredible.

Loyal Rant Readers know I am not a baseball fan, but watching Mariano Rivera emerge to close the top of the ninth was a beautiful thing. And I was rooting for the National League. This is liable to get me in trouble up here in Red Sox Nation, but I don't care. I'm rooting for the Cubs this year.

Of course, this admission of pinkhatism will undoubtedly cause a few frowns among readers, but don't worry: by the time October rolls around, I'll have forgotten all about baseball. Speaking of baseball and October, though, I do have to give credit to Major League Baseball for improving its post-season ad campaign this year. The first ad aired last night -- and unlike last year, it's not the equivalent of a double-play!

I'd rate it as a single. I liked the earnestness of the spot; it was uplifting and enthusiastic, as opposed to last year's snark-infused spots. Major League Baseball loses style points, however, for making the passionate fan a blogger sitting at his desk writing. As much as I like the idea of encouraging people to write, making the blogger the centerpiece of the spots detracts from the sport itself and seems ... well, a sop to the legions of bloggers out there who would otherwise lay into its decisions with furious anger.

All in all, I suppose my issue with the campaign is that -- yet again -- it tries to make baseball seem hip and with it to the young people, without realizing that it has no need to do this. There is no reason why baseball can't make a really, really sharp yet simple commercial focusing on the greatest baseball miracles of all time, with some powerful music and crowd noise for the sound. If you had an actor, he would play third fiddle -- or perhaps even better, you would have no actor at all. Unless, of course, it was an actor who could really carry the weight of such a spot. Because the one baseball-themed commercial I really liked last night wasn't for baseball itself -- it was for Holiday Inn. Philip Baker Hall does serious very well too, you know.

Which gives me an idea: the NFL should immediately figure out how to use Philip Baker Hall in its post-season commercials for the year. That and footage of the Freezer Bowl.

Posted by Benjamin Kepple at 12:37 PM | Comments (0) | TrackBack

July 14, 2008

Federal Regulators to Forbid Stupid Bank Names

Financial Rant

WASHINGTON -- In a move aimed at boosting confidence in the nation's banking sector, the Office of Thrift Supervision has proposed rules that will give it veto power over new banks' names, and the power to change names of banks it finds silly, officials said.

Regulators proposed the new rules after realizing a majority of bank failures, and assistance measures taken to help banks, over the past five years have involved banks with "regrettably stupid" names. Regulators believe that forcing banks to have names that convey the fact they are, you know, banks, will inspire confidence among depositors and prevent runs on institutions such as IndyMac Bank FSB.

"It sounded like a fast food restaurant," said OTS deputy director Herm Shepard. "I mean, I don't know about you, but as a depositor, I would have felt more confident if the bank was named, I don't know, the Second National Bank of Pasadena. The IndyMac name, which I think we can all agree was particularly unfortunate, offered up the impression depositors would get a free order of fries if they opened a checking account. Not exactly a confidence builder, if you ask me."

Out of the five bank failures so far this year, Shepard noted that the three with stupid names accounted for 95 percent of assets in the banks.

"With pressures related to the interest-rate environment, it's no surprise some smaller banks are having a tougher go of things, and in an economic downturn one must expect a few bank failures," Shepard said. "But that doesn't mean banks have to give depositors the impression they're run by amateurs, either."

Shepard singled out for criticism ANB Financial NA of Bentonville, Ark., and First Integrity Bank of Staples, Minn., both of which failed in May.

"ANB Financial. Yeah. Who exactly is ANB? And financial what, exactly? It sounded like a glorified check-cashing joint. As for First Integrity -- yeah, that's a winner too. I mean, if you're a bank, you shouldn't have to use the word integrity in your name. Last time I checked, integrity was supposed to go along with operating a bank," Shepard said.

"Simply put, banks must not put themselves in a position where their names and actions tell depositors, 'Go ahead! Start a run on the bank! We're insured!'" Shepard said.

If approved, the OTS's rules would require banks to do the following:

* Have the word "Bank" -- spelled correctly and not amalgamated with any other word or phrase -- as a part of an institution's name.
* Require place or origin names, relating to the location of their headquarters or originating city, in an institution's name. Alternatively, using the names of historical figures, except where otherwise already taken, would be allowed.
* When involved in mergers or acquisitions, the name of the larger merger partner or acquisition partner would be used as the name of the institution going forward. Combining names would be strictly forbidden.
* The use of initials, acronyms and similar schemes would be strictly forbidden.
* Foreign banks would be required to use their original names when buying U.S. banks, particularly if said foreign banks can print currency.

In addition, banks will be encouraged to have oil paintings of distinguished executives in their branch lobbies.

"I realize this may concern some of our trading partners, but I think they'll see this is really for their own benefit," said Shepard. "I mean, who would you rather do business with? HSBC Bank USA or The Hongkong and Shanghai Banking Corp. Ltd.? Duh."

The rules will go into effect following a 90-day public comment period. The new rules are expected to affect banks including Ted's Savings and Loan of Ionia, Mich., FDIC Insured Financial of Mayberry, N.C., and Fifth Third Bancorp of Cincinnati, Ohio.

Posted by Benjamin Kepple at 09:29 AM | Comments (0) | TrackBack

July 08, 2008

Restaurant: Man Ordered Dish That Killed Him

WELL, THE CHUTZPAH AWARD of the day goes to the Ruby Tuesday chain of restaurants, which when faced with the untimely death of a customer who was served an entree containing seafood, insisted the man ordered the dish that killed him.

The Atlanta Journal-Constitution has the full story, but here's the gist of it. Mr Rodney Hawkins, a welder and an aspiring musician with a severe shellfish allergy, went to dinner with his wife at a Ruby Tuesday's eatery in Lovejoy, Ga. Mr Hawkins, according to Mrs Hawkins, ordered the Chicken Fresco. The restaurant claims Mr Hawkins ordered the Chicken Oscar. Both dishes, according to Ruby Tuesday's menu, come served with mashed potatoes and steamed broccoli. Both chicken dishes are topped with a lemon-butter sauce. But Chicken Fresco comes with a tomato slice, while Chicken Oscar, as one might expect from the name, comes with asparagus and crab meat. Unfortunately for Mr Hawkins, he apparently did not notice the difference when the dish was served, and promptly went into shock, and died shortly thereafter.

The restaurant maintains Mr Hawkins ordered the Chicken Oscar, that the waitress verified this to Mr Hawkins, and that the order pad and kitchen ticket confirm their version of events. Mrs Hawkins disputes this version, and based on what I have read, I am inclined to agree with her story -- although I accept the restaurant may well be right.

As it happens, I have a relative who has a severe allergy to shrimp, and I can assure you that my relative makes a point of ensuring nothing she eats has any form of shrimp in it. She further makes a point of inquiring as to whether certain normally non-seafood dishes -- say an egg roll at a Chinese restaurant -- have shrimp in them; if they do, she declines. Since Ruby Tuesday's menu description of Chicken Oscar starts with the phrase "tender jumbo lump crab meat" to describe it, it seems rather unlikely Mr Hawkins would have voluntarily ordered this. It may be he made a mistake in doing so -- Chicken Fresco, Chicken Oscar, you're tired and what the hell's the difference anyway -- but if he informed the staff of his seafood allergy, they should have picked up on it.

Now, some commenters have suggested Mr Hawkins should have been more careful upon receiving his meal. To be sure, there is a duty of care on his part -- more on this in a bit. But my question is this -- both dishes are different, but how different do they really look when served up? Both are served with mashed potatoes and broccoli; both dishes are covered in lemon-butter sauce; could he have noticed? I mean, I've had the Chicken Fresco. It drowns in lemon-butter sauce.

Also, one person commenting on the AJC's Web site claims she actually saw this incident in person, and her story -- if true, mind you -- would lend credence to Mrs Hawkins' version of events.

To be sure, Mr Hawkins' severe allergy did present him with a duty of care -- if one has food allergies, one must take care not to ingest the stuff that makes one sick, even if it means avoiding going out to eat and picking around one's food to make sure none of the bad stuff is in it. One must also inform the staff of one's allergy.

That said, one does not expect to kick the bucket at Ruby Tuesday's, even if one orders the broccoli and cheese soup. So even if one argues Mr Hawkins was partially or mostly liable for his own death, it would seem at least some of the blame could still be cast upon the chain if Mr Hawkins informed the staff of his food allergy. That's important, I think: if a person simply says he does not want seafood, and the kitchen screws it up, well, it's a screw-up. If the person says I'm allergic to seafood, and it will kill me if I touch it, then the staff has to make damned sure there's no seafood.

All in all, though, I do think the chain erred in defending itself so forcefully -- there are ways to defend oneself that are consoling and appropriately saddened at the same time. Even if it is in the right, I think it could have handled this matter in a more polite way -- expressing its condolences, promising a full investigation of the matter, but most of all waiting until they're in court to make their case -- or at least making it as forcefully as they have.

Posted by Benjamin Kepple at 11:30 PM | Comments (4) | TrackBack

July 07, 2008

Well, That Wasn't a Fun Day

I KNEW IT WAS too good to last: Asia had a nice day, then Europe had a great day, and then the U.S. markets blew it again after a nice open. Shit. In a few hours, I will have the pleasant experience of seeing how much money I lost -- again -- when my financial software does its automatic update and crunches the numbers accordingly.

But since I'm in this for the long haul, I don't really mind losing my paper dollars for the moment. One of the good things about this down market -- and yes, there are good things -- is that it presents plenty of opportunities. Stocks that one wouldn't have purchased when the market was churning with froth now look more reasonably-priced, and in some cases they are downright cheap. Plus, the medium-term economics don't look all that bad, at least I don't think they do:

* Resets on adjustable sub-prime mortgages have peaked, meaning the toxicity in the system will weaken. Since sub-prime mortages have all but disappeared, the wave of resets will eventually peter out and end in 2010 or 2011.

* Oil prices will eventually fall. The volatility in the oil markets -- best evidenced by that $11 uptick in one bloody day a while back -- is prima facie evidence speculation in the market is a powerful force. The Government, being the Government, is always slow to respond to events but it seems likely it will intervene in the markets due to public outrage. This will likely mean an increase in margin requirements and a requirement contract buyers will have to take physical delivery of the oil they want, pushing many speculators out of the market.

* The Fed will likely boost interest rates as concerns over inflation mount. Normally, this would not be good for the economy but a moderate boost would have one big benefit to the average citizen: namely, a stronger dollar, which will push down oil prices.

* When oil prices start moderating, the ECB will have one less reason to keep interest rates high, meaning they may well consider lowering rates to alleviate pressures on the European economy. This will further pressure oil prices.

* Marking to market swings both ways -- it has generated huge losses for many companies, but it also has the potential to create gains.

The long and short of all this is that opportunities exist in the markets right now. You'll have to search for them, and at this point keeping an eye on opportunities might not be a bad idea as opposed to buying -- you don't want to jump into the pool until you're good and ready. But start a watch list and save your capital so you can strike when the iron is hot.

DISCLAIMER: I am not a financial analyst, a stockbroker or involved in any other profession that involves advising people what to do with their money. As such, you should always check with someone who does one of those things for a living before investing, an activity in which it is very possible to lose your shirt. Remember, the market has the power to remain irrational longer than you have the ability to remain solvent. Always do your homework and read a prospectus before investing or sending money. Caveat emptor.

Posted by Benjamin Kepple at 06:31 PM | Comments (0) | TrackBack

This Could Be Problematic

SO THE CITIZENS of Massachusetts -- well, at least some of them, anyway -- have somehow managed to get a referendum question on this fall's ballot that would ... wait for it ... abolish the state's income tax. Yes, that's right. No state income tax. In Massachusetts.

As a resident of New Hampshire, I don't know what to think about this. New Hampshire has mastered undercutting the tax regimes of our neighboring states, which not only boosts our economy but also our Government's coffers. If the Bay State gets rid of its income tax, what will that mean for us?

It's kind of like when Stimpy is set at guarding the History Eraser Button: if he hits it, nobody knows what will happen. It could be good -- if Bay Staters have more money to spend in our tax-free stores. It could be bad -- if suddenly more people decide living in Massachusetts isn't so bad after all. But nobody knows because nobody has pushed the button.


Posted by Benjamin Kepple at 06:03 PM | Comments (0) | TrackBack

July 05, 2008

And Now, A Musical Interlude

CROWDED HOUSE'S LATEST ALBUM ("Time on Earth") is downright amazing and everyone should click on iTunes and buy a copy of it. I mean, it's one of the best albums I've heard in years. For that matter, it's an album of great songs as opposed to an album with one good song, which is what most bands produce these days.

So buy it. Amaze your friends and confound your enemies with stirring proof of your excellent musical taste. Buy it. But it now.

That is all. Carry on!

Posted by Benjamin Kepple at 05:14 PM | Comments (0) | TrackBack

June 30, 2008

Uh Oh

WELL, SINCE WE'RE IN the market for bad economic news, here's some more: European inflation has hit 4 pc. This almost certainly means the European Central Bank will raise interest rates when it meets Thursday. That's bad. That's very bad.

The reason, of course, is because it will increase the interest-rate spread between the Federal Reserve and the ECB, which now stands at two percent. The cost of funds for banks in the US is now 2 pc and in Europe it is now 4 pc. This difference may not seem like a lot, but since capital flows are uncaring about human feelings, any moves will further exacerbate the already-alarming disparity between the dollar and the euro, and thus make all sorts of goods from abroad more expensive. Like, say, oil.

Just one month ago it looked as if the ECB would actually have to start reducing its benchmark rate late this year or early next. But the Europeans, who remember their bouts with high, super-high and hyperinflation from the earlier part of last century, have a pathological aversion to inflation and so will fight it at any cost -- even if it means helping wreck their economy in the process (and perhaps ours).

It is true that inflation is too high for comfort at this point, but at the same time I wonder -- is it so bad that we need higher interest rates? Certainly these folks think so, but I'm not convinced. The last thing we need is a Volcker-esque strangling of the economy like we saw in the early 1980s.

True, Volcker faced a far different situation -- with inflation running at 14 pc, he had to break the cycle of inflation no matter the cost. Today, on the other hand, inflation is running about ten points lower, which in theory would give our economic masters a little leeway in balancing the inflation-growth equation. It would be nice if they used some of it.

Posted by Benjamin Kepple at 11:00 PM | Comments (0) | TrackBack

Mistake No. 1: Don't Screw Over the Blogger

I SAW AN INTERESTING REPORT on The Consumerist, a commercial-watchdog site, which reported on the story of a man who found himself needing an oil change someplace in -- God help him -- Idaho. As such, the driver -- a San Francisco resident driving a Honda Civic -- was in dire straits, and found the only place he could have his car's oil changed was at a Wal-Mart.

Somehow, due to general incompetence, the staff at the Wal-Mart managed not to change his oil -- and then offered up the excuse that things got tricky with fancy foreign automobiles. The writer, whom I would again note lives in San Francisco, then complains about Wal-Mart most vociferously.

For the record, I don't believe one can castigate the entire Wal-Mart chain for the incompetence of its staff at one store in some backwater Idaho town, nor do I think high officials at Wal-Mart would be pleased to learn about this incompetence. The episode does, however, reinforce the importance of finding a decent place to get one's oil changed, and doing it in a locality where there are multiple service providers, thus allowing the Magic of Competition to do its work.

For my money, I've found the Valvoline Instant Oil Change chain a decent service-provider in this regard. For one thing, they let you stay in your car, which allows you to see the work being performed. They have a series of checks and balances their staff uses to make sure there are no missed steps or mistakes made, such as leaving the oil cap undone. They have never, in my experience, used high-pressure sales tactics and the one time I had a worker get too enthusiastic about trying to sell me an optional service, his manager yelled at him. (The work in question had already been done three visits beforehand). The one bad experience I had with oil changes was with the Jiffy Lube chain, after workers at a store in California somehow left some kind of tiny hose in my car's innards; I discovered this when an oil-change worker in New Hampshire shouted, "What the hell is THAT?" roughly a year later. But despite my bad experience with Jiffy Lube I would not rule out getting my oil changed there; it's just that I have found a competent and pleasant alternative. Plus, Valvoline's not bad on price.

Some commenters on The Consumerist have criticized the driver for knowing precious little about cars, but I don't see why that is all that relevant. I certainly know little about cars; I have a vague idea of how to change the oil and transmission fluid myself, but I am smart enough to have people who do that for a living take care of it. It makes little sense for me to try doing all that when I can have experts do it for the equivalent of $20. (The oil change costs more, of course, but when you factor in the cost of motor oil, $20 is about right).

And now, a plug for the domestic auto industry: one of the minor reasons behind my purchase of an American car was my experience growing up in Michigan, where the Big Three even now still command 90 pc of the auto market. Driving an American car means I don't have any worries about finding a mechanic to service it.

This is not an issue in the major cities anymore, but I do think that in certain rural markets it may be difficult to find mechanics who can service foreign automobiles, particularly high-end foreign cars. For that matter, when I was growing up, foreign cars (and by extension, the people who drove them) weren't particularly popular in certain circles -- and, if this report is any indication, they're still not. Since I travel back to Michigan once a year or so, not having to deal with dirty looks from my fellow freeway travelers isn't a positive -- but conversely, it's not a negative I have to deal with either.

Posted by Benjamin Kepple at 06:02 PM | Comments (0) | TrackBack

Angry Customer Posts "I Hate Bank of America" Sign on House

IN THE INTERESTS of full disclosure, I must note the angry man is the brother of a friend of mine. Still, I'm impressed with the guy's gumption -- I think most people, myself included, would have simply just switched banks.

Posted by Benjamin Kepple at 05:56 PM | Comments (0) | TrackBack

This Recession is Really Starting to Hurt, Part II

THE ASSOCIATED PRESS reports: amidst flaccid demand for their services, Nevada brothels are offering gas cards, price discounts, and stimulus-check specials to customers.

This can't be a good sign for the economy.

Posted by Benjamin Kepple at 05:50 PM | Comments (0) | TrackBack

June 26, 2008

Way to Manage, Hosers!

OK, THERE'S GOOD NEWS! The American schedule for Canadian Football League broadcasts is out!

Unfortunately I shall not actually get to, you know, follow any of the games. Not on television, not over the Internet, and not over the radio. This is because of the following:

The only television broadcasts in the United States are available on stations I don't receive. It is not a question of upgrading my cable package, either: I couldn't get these stations if I tried. America One doesn't have any New England affiliates, and the only other cable TV alternative is some premium option on Cablevision's system. Nor, from what I've been able to tell, would satellite television -- which I can't have anyway -- allow me to get the games.

Also, Comcast doesn't carry ESPN360 -- it's Comcastic! -- which means I can't stream the games over the Internet. TSN's pay-per-view Web casts are blacked out in the United States. Thus, the only option is SIRIUS Satellite Radio. The options there are far too expensive to justify buying it for Canadian football.

So I'm screwed.

Way to manage, hosers! Way to manage!

Posted by Benjamin Kepple at 12:44 AM | Comments (0) | TrackBack

June 25, 2008

Pot? It's Kettle on Line Three!

THE RANT notes with amusement the following summation of WALL-E, the new Disney movie for children arriving in theatres this Friday:

WALL-E is the story of the last little robot on Earth. He is a robot and his programming was to help clean up. You see, it's set way in the future. Through consumerism, rampant, unchecked consumerism, the Earth was covered with trash. And to clean up, everyone had to leave Earth and set in place millions of these little robots that went around to clean up the trash and make Earth habitable again.

Well, the cleanup program failed with the exception of this one little robot and he's left on Earth doing his duty all alone. He doesn't know he can stop working. But it's not a story about science fiction. It's a love story, because, you see, WALL·E falls in love with EVE, a robot from a probe that comes down to recover the last plant left on Earth, which curious little Wall-E has picked up. He absolutely falls in love with her.

According to Wikipedia, the speaker of these words was no less than John Lasseter, the chief creative officer of Walt Disney Animation Studios. Mr Lasseter reportedly made these remarks in a presentation to investors at Disney's 2007 Investors Conference, and a PDF transcript with his remarks in it is hosted at Disney's Web site. You're welcome, I'm sure.

My question: did any of the investors at the conference raise an eyebrow at this? I mean, for God's sake, it's The Walt Disney Co., which last time I checked made a lot of money off rampant, unchecked consumerism. (Not that I disapprove of rampant, unchecked consumerism, mind you).

So I'm torn here. In making a movie that implicitly bashes rampant consumerism, yet was undoubtedly made with an eye towards encouraging rampant consumerism through the purchase of toys, books and myriad other merchandising opportunities, has Disney achieved capitalist enlightenment or plumbed a new depth of soulless, hypocritical greed? I can't say I know the answer to that. But I bet the investors were happy, if perplexed at first -- as we can see in this dramatization:


EXECUTIVE: Thank you, John, for that exciting presentation. Now, we'll turn to the FY 07 forecast, and --

INVESTOR: Excuse me! Excuse me!

EXECUTIVE: Yes, sir.

INVESTOR: Uh, Mr Lasseter said the backstory for the movie involves an Earth littered with trash due to rampant, unchecked consumerism.

EXECUTIVE: Yes, sir.

INVESTOR: Uh, do we really want to bring that up?

EXECUTIVE: I don't understand.

INVESTOR: Don't we make billions of dollars a year encouraging rampant consumerism? I mean, Christ, everywhere I go with my kids, it's Little Mermaid this, Buzz Lightyear that, I want I want I want. Not that I mind this, of course.

EXECUTIVE: Well, "To infinity and beyond!" has always been our revenue target!


INVESTOR: Right. Which is great! I mean, I want families to spend their hard-earned money -- preferably all of it, and even money they don't have -- at our theme parks, on our merchandise, and on our videos. Especially because we've got a net profit margin of like 14 pc. But aren't we running a risk implicitly bashing the very thing we want to encourage?

EXECUTIVE: But don't you see? That's our selling point!


EXECUTIVE: People want a feel-good summer movie they can take their kids to see, right? Well, this is certainly one of them. Parents can feel like their kids are learning a valuable lesson, while at the same time tempering their own consumerism. But they'll just limit it to other things, or buy carbon credits, or do something else inherently useless. They won't limit it when it comes to buying our merchandise, which their kids will love! And demand.

INVESTOR: But the DVD boxes to all our videos could fill Yellowstone.

EXECUTIVE: You can't make an omelette without breaking a few eggs. Besides -- we're not Lucasfilm!

(Murmured agreement).

SECOND INVESTOR: You know, you can't argue with that logic.

INVESTOR: Well, yeah, but ...

EXECUTIVE: Did I mention we have a whole bunch of gelato left over from lunch? It's free!




I'm not saying. I'm just saying.

Posted by Benjamin Kepple at 10:00 PM | Comments (0) | TrackBack

Business Ethics 101

LET'S SAY YOU'RE A business student studying for the GMAT, the standardized exam students applying to graduate business schools must generally take. One day, you stumble across a site that promises to divulge information about current test questions for the sum of, say, $30. You are concerned about your potential performance on the GMAT, and are wondering whether you should spring for membership. Should you?

As we will see, the answer is a definite No.

Apparently, one such site enticed more than 1,000 prospective business-school students to sign up to get these questions, according to Business Week magazine. Due to bad planning, however, the site was apparently incautious about its operations, and the people who run the GMAT found out about it. One $2.3 million judgment later, the operator of the site has fled to his native China and the GMAT folks are in possession of the site's hard drive. As a result, Business Week reports, the students who paid to use the site are about to reap the whirlwind of Academic Justice, which as we all know is pitiless, merciless, brutal and swift. Stakes are so small and all that.

This to me is not so much an ethical question -- although there are ethical questions surrounding it -- as it is an introduction to how the business world works. In the real world, companies jealously covet their intellectual property, and are not about to have some upstart steal it and undercut a particularly lucrative business line. Nor will they stand idly by when threats to their brand's reputation exist. Nor, when presented with such threats, will they hesitate to chop off the heads of the people responsible.

Along those lines, the colleges themselves will not hesitate to chop off the heads of prospective or current students if they are judged guilty of using this site. After all, they have their own brands and reputations to protect. Thus, unless a student is particularly brilliant or naive, he will get cashiered out of the place faster than one can say Jack Robinson.

True, the students could offer defenses. Good luck with that, kids. If there's enough evidence, it will stick. The students might even sue. Again, good luck with that -- try getting a lawyer to take that on contigency.

I do realize one could argue the offense is relatively minor; but even minor things have a way of turning into major things. For instance, let's say your company acquires a contract to build a school in some foreign country, by which I do not mean China. To get the contract, you have to offer a bite or two of your apple to the local big shots. No big deal, right?

Well, contract in hand, you go about building the school. But as part of the deal you have a local partner who has also greased various palms to get his action. To keep up his profit margin, he uses substandard materials to build the school. There's almost no way anyone will notice -- until disaster hits in the form of an earthquake. Then everyone notices, because the school collapses and a lot of people inconveniently die. Now, you are in real trouble.

If you had done things above board in the first place, you might not have gotten the contract, but you wouldn't find yourself in some life-altering situation further down the line. The same principle applies here. In business, doing the right thing isn't just doing the right thing -- it's the smart thing, and a course of action that generally will save you time and trouble in the future.

Posted by Benjamin Kepple at 08:12 PM | Comments (1) | TrackBack

June 22, 2008

This Economy is Really Starting to Hurt

WSJ: "Steve & Barry's Faces Cash Crunch."

I guess that's what happens when you sell pretty much everything for under $10 -- but you'd think Steve & Barry's would thrive in less-than-optimal economic times. I mean, it's Steve & Barry's. Every male college student in America shops at Steve & Barry's. Christ, even I did back in the day.

Posted by Benjamin Kepple at 11:26 PM | Comments (0) | TrackBack

This Weekend's Football Update

OK, BAD NEWS AND GOOD NEWS. First the bad news.

Fortunately, I was out with friends last night, so I didn't have to watch the Wilkes-Barre/Scranton Pioneers (10-2, damn them) defeat my beloved Manchester Wolves (5-7), my city's minor-league arena football team. We lost 69-40. This loss can be fairly described as unfortunate. Since the Quad City Steamwheelers (6-6), based in Moline, Ill., also lost this weekend, a win would have put us in playoff position for the moment. Playoffs in the af2 are NBA style: eight teams from each conference of the 29-team league make the playoffs, with seeding along those lines. Right now, in the American Conference, we're No. 9.

Now we are one game behind the playoff contenders, with just four weeks to go before the post-season. Not the best position to be in, although it is one that may be improved upon. Now I must root for the Louisville Fire -- at home -- to lose to the Lexington Horsemen tomorrow night. That would tie up the 7th and 8th placed teams in the conference at 6-6, and improve Manchester's chances of making it into the playoffs. The good news is that our remaining four games are against relatively weaker teams, and given this, a sweep is not out of the question. So there is certainly reason for hope and every expectation we'll make it into the post-season; it's just that being 7-5 would be a heck of a lot more comforting than being 5-7.

But hey, it's exciting. It's especially exciting due to the second piece of bad news, which is that I consider it very unlikely I'm going to get a Canadian Football League broadcast feed here in New Hampshire this year. God bless it. I checked the Web site for the New England Sports Network, which carried CFL games here last year, and on kickoff Thursday they're broadcasting repeats of old Red Sox games. Not a good sign. The CFL's Web site is useless and continues to pledge that a U.S. broadcast schedule "is coming soon." Right.

CFL games are apparently being broadcast on the America One network this year, but sadly for me there are no America One affiliates in New England. The games will also apparently get broadcast on, but my cable provider doesn't carry, which is Comcastic. About the only place I was able to find information about this was the CFL fans' forum, so I am guessing I am, to use the technical term, shit out of luck.

If I find out any further information, I'll pass this on to Loyal Rant Readers, who have expressed interest in the CFL's U.S. availability. I do realize I could stream the games on-line from TSN for the bargain price of $9.99 per game, but the value-for-money equation doesn't work. I'd pay $1.99 or $2.99 per game, but not $9.99, which would be better spent on 2.25 gallons of gasoline, if you ask me.

I would say this, however. I realize the CFL's primary focus is growing the sport in Canada. That said, I can't understand why a deal wasn't reached to secure truly wide-ranging broadcasts of the CFL in the United States. I can see why ESPN or ESPN2 wouldn't work, just because they have the college football franchise. Versus, the seeming natural choice for Canadian football, also has college football.

But Gad -- you'd think the CFL would at least cobble together something to get the games broadcast everywhere. You'd think the sport would do great in July and August, when football fans are downright dying. Eventually, you'd think that would help generate interest in the sport south of the border, and revenues from the broadcasts would grow accordingly.

Feh. But now to the good news.

The good news is that the Arena Football League's playoffs are here -- and I have two teams in the hunt. True, with 12 out of the league's 17 teams in the playoffs, it would be difficult not to have two teams in the hunt, but let's not quibble about that for the moment. My teams, as Loyal Rant Readers will imagine, are the Grand Rapids Rampage (ranked No. 6 in the American Conference) and the Cleveland Gladiators (ranked No. 4 in the National Conference).

I about fell out of my chair when I saw the Wild Card schedule, for I was delighted to see that I'll be able to watch ALL of the Wild Card games, despite the peculiarities of my work schedule (I work Saturdays, for those of you who don't know). The full schedule may be found here. My predictions, for what they're worth:

* No. 3 Dallas easily defeats No. 6 New York.
* No. 4 Cleveland defeats No. 5 Orlando.

* No. 4 Utah will probably defeat No. 5 Colorado, although it will be a tough go.
* No. 6 Grand Rapids defeats No. 3 Arizona.

Here's to a great couple days of football next weekend!

Posted by Benjamin Kepple at 10:15 PM | Comments (0) | TrackBack

Important Safety Tip: Speak -- and Write -- Clearly

THE LOCAL GOVERNMENT ASSOCIATION, a British lobby that promotes the interests of local Governments there, has done the world a service this past week. The group wrote a letter to its members warning them they must use plain English if they want the people they serve to have any hope of understanding them. As such, it drew up a list of 100 words and phrases they ought avoid, ranging from "empowerment" and "sustainable communities" to "core value" and "facilitate." Better to use phrases like people power, environmentally friendly, belief and help, the agency said.

As an American, I can sum up my reaction in two words: many thanks. After all, as an American, I am subjected to an incredible and debilitating amount of jargon on a daily basis -- not only from the Government, but from business and sports leaders. I hope the worldwide coverage of the LGA's letter will cause people everywhere to recognize the value of clear yet precise language. This is not merely a selfish consideration, either. My greatest fear is that some American businessman will inadvertently stumble across a lethal combination of jargon from the commercial, sports and Government arenas, resulting in an economic and political panic that will make tulipmania look like a cocktail party:

IMPORTANT EXECUTIVE: Thanks to a bit of trickeration, we were able to audibilize on the ground and commit to a synergy-enhancing deal proving accretive in the third quarter, all while balancing stakeholders' interests with our revenue guidance, which will be in line with our previous estimates, and --
ANALYST (on mute): Dear God! He's mad!

What's that? No, I'm not overreacting. Crises in confidence often start out with small things, don't they?

Anyway, since we're on a crusade to clean up the English language, here is my list of words and phrases that should be taken out in the back and shot. In no particular order, they are:

AUDIBILIZE: This alleged transitive verb is drawn from the world of American football, where a quarterback changing the play at the line of scrimmage "calls an audible." Use a form of change or quick change instead.

UTILIZE: You mean use, so use that instead.

TRICKERATION: Just because ESPN sportscasters use the phrase does not mean you should. Use trickery or deception.

IT IS WHAT IT IS: Athletes and their coaches can gain style points with the public through using more refined language. Try It can't be helped or, even better, The die has been cast. Julius Caesar said that, you know!

INCENTIVIZE: Instead of incentivizing the sales team, you gave them bonus targets.

ENHANCE: You mean improve.

ALLEGEDLY: Avoid this word through writing better. Do not write: John Smith allegedly robbed the Sixth Fourth Bank on Main Street. Rather, write: Police have charged John Smith with robbing the Sixth Fourth Bank on Main Street.

AT THIS JUNCTURE: Unless you're Dana Carvey doing an impression, forget it.

STAKEHOLDER: Group or party.

E- or WEB ANYTHING: Online.

WORKING FAMILIES: The working poor, or the lower-middle class, whichever is applicable.




WEALTHY: Filthy rich.

HOMESITE: House lot.

USER FEE: Use tax.

PARADIGM: Mindset.

PARTNER: In business, partner should be reserved for a colleague who has equity in your business. Do not use it when you are describing a company with which you do business or have a relationship. Especially do not use it in reference to the consultancy you've hired.

NEXT GENERATION: The (goddamned) kids.

METRICS: Standards.

ENTERPRISE: Corporation; a large company.

AT THE END OF THE DAY: At the end of the day, this is superfluous. Just strike it and say what you actually mean to say.

Well, now that I've thrown that out on the stoop -- oops! -- I hope it will, in some small measure, help people realize that if you say what you mean it can help you achieve your goals faster. Either that, or it will help spawn a resurgent interest in using Latin phrases, which could only be a good thing. For now, vale.

Posted by Benjamin Kepple at 07:30 AM | Comments (0) | TrackBack

June 18, 2008

The Accountants Didn't Plan for This

THE NEW YORK TIMES reports today that the J.M. Smucker Co., the Ohio-based food conglomerate, plans to move production of the iconic White Lily brand of flour to two factories in the Midwest. The expected result of this is that the company's flour mill in Knoxville, Tenn., will close, as J.M. Smucker bought White Lily from Texas-based C.H. Guenther & Son Inc. in 2006. The unexpected result is that the fans of the baking flour are furious.

Apparently, the flour made in Knoxville and the flour made in the Midwest don't come out the same, and no one knows why. The company insists customers won't notice the difference between the two, but in a blind taste test the Times had carried out, two bakers noticed it clear as day. Now, Southern bakers are anxious and worried that their favorite flour will effectively go the way of the dodo.

Boy, I bet the accountants didn't plan for this.

Although, in a way, it makes sense. After all, the peculiarities of New York's water system are supposedly why it is impossible to replicate New York-style pizza outside of the Tri-State Area. We all know you can't get a decent cheesesteak outside Philadelphia, that you shouldn't order clam chowder outside New England, and that if you want really good Mexican food, you go to the Southwest. Perhaps something similar is at work here. Even if the stuff is made exactly the same way, perhaps there's something different in the inputs, or shipping the flour has an effect; it could be one of a thousand variables that's different.

If I was working for Smucker's, I would embark on an ambitious plan to head this potential marketing disaster off at the pass. First, I'd keep making the flour in Knoxville, but would make sure distribution from the Knoxville plant was solely performed around the South. If the costs of the firm's inputs went up, raise the price accordingly -- or even better, shrink the package. Market the hell out of it as a necessary good for proper bakers.

But I'd also keep making the flour in the Midwest. After all, the company undoubtedly spent a great deal of money getting those plants ready to handle White Lily production, so divert that product to northern markets. Northerners won't know the difference; they have not been exposed to the Southern product and the brand will undoubtedly prove superior to the flours already on the market for baking. If there are differences -- and at least a few folks will notice those -- blame them on the Northern water or the Northern eggs or whatever other input might cause them. If worse comes to worst, just rebrand it.

What? It's not an entirely disingenuous plan, and it will prevent a marketing disaster that could end up as disasterous as New Coke. Plus, it means jobs for the Midwest -- relatively well-paying jobs for hardworking, God-fearing Midwesterners. I don't care what Smucker's does to the flour if it provides jobs for the Midwest. Jobs, jobs, jobs, dammit.

Posted by Benjamin Kepple at 10:58 PM | Comments (0) | TrackBack

Well, Look Who Doesn't Understand the Internet

THE ASSOCIATED PRESS has found itself in a bit of hot water this week. Apparently, the news cooperative was upset a blogger had posted several items relying on AP content, with excerpts of between 39 and 79 words in each of the offending entries. This prompted the AP to send a letter to the blogger in question telling him to remove the items; the blogger then went and told the entire Internet, and everyone got angry about it.

Now the AP has backtracked, realizing it didn't handle the matter well. Still, they're not entirely backing down, as The New York Times -- and not the AP -- reports:

The Associated Press, one of the nation’s largest news organizations, said that it will, for the first time, attempt to define clear standards as to how much of its articles and broadcasts bloggers and Web sites can excerpt without infringing on The A.P.’s copyright.

The A.P.’s effort to impose some guidelines on the free-wheeling blogosphere, where extensive quoting and even copying of entire news articles is common, may offer a prominent definition of the important but vague doctrine of “fair use,” which holds that copyright owners cannot ban others from using small bits of their works under some circumstances. For example, a book reviewer is allowed to quote passages from the work without permission from the publisher. Fair use has become an essential concept to many bloggers, who often quote portions of articles before discussing them.

I would be sympathetic to the AP's claims if a blogger in question had copied the entirety of its story, did so without providing a link back to the original piece, and then offered no original commentary of his own. That would be outright theft, and in a situation like that, the AP would have every right to say, "Hey. Wait a minute."

However, it is difficult to be sympathetic when the AP is going after a blogger for excerpting as little as 39 words from a story. That's downright ridiculous. It is even more ridiculous when clever bloggers, such as Patrick Nielsen Hayden, reveal the Associated Press sells rights to private parties to quote from its stories, starting at $12.50 for excerpts between five and 25 words in length. "In this spirit," Mr Nielsen Hayden wrote, "I will shortly be putting up my own Web form through which people can PayPal me money in exchange for my promise to not blow up the moon."

Now, it is one thing to sell reprint rights for a story; that is standard practice for any newspaper. But charging for a quote or two is not only silly -- there's that whole pesky fair use doctrine -- but cheap.

As for these standards to be developed -- well, good luck with that.

You see, here's the trouble. The AP is a cooperative and a wire agency. This means two things. First, nearly all of its copy comes from its member newspapers. Second, when the AP does write about important happenings, the important happenings are usually important enough so that one can also read coverage from major newspapers, or from competing wire services, or from foreign news outlets, or from high-profile bloggers.

As a result, nobody actually needs the AP to do what they're doing; AP copy just happens to be awfully convenient. But it wouldn't be all that inconvenient to go elsewhere. Why, it could take as long as fifteen or thirty seconds for a competent blogger to do some searching and find a story -- usually more in-depth, I might add -- from a local AP member paper; a local AP member paper, I might add, that isn't going to complain when bloggers send traffic its way. Most bloggers just quote a little from stories; say two or three paragraphs. If their visitors are really interested in a story, they'll click through the provided link and read more. This, in business terms, is known as a "win-win." This, in business terms, is known as "free advertising."

Yet the AP apparently doesn't see it this way. They're entitled to their position -- but if you ask me, they're setting themselves up for something like this:

"Xai Jian, best customer!" Indeed!

Posted by Benjamin Kepple at 12:49 AM | Comments (0) | TrackBack

June 16, 2008

Fire Burn and Cauldron Bubble

LOOKING AT THE MARKET today, I am reminded of the very old and very true short-seller's saying that the market can stay irrational longer than one can stay solvent. We have more than 1.2 trillion barrels of oil in the ground, and supply still outstrips even heightened demand, yet oil nearly hit $140 per barrel this morning. Double double toil and trouble, fire burn and cauldron bubble, said the witches in Macbeth, and look at all the trouble they caused with their advice.

It is a bubble, and it will burst -- the only question is when. Already, we are seeing what the experts pleasantly call "demand destruction" as the result of higher prices -- no surprise there. That will only continue as Governments around the world, who subsidize gasoline for their people, reduce or eliminate those subsidies because they have become unaffordable. If you ask me, only China, which has a trillion of our dollars in its coffers, will be able to keep those subsidies going over the long term -- and even then, if they are smart, they will reduce those subsidies over time.

Unfortunately, I haven't a crystal ball that can tell me the exact moment oil will start to correct, and sadly, the oil market is not like the Dutch tulip market, which famously crashed in 1638 when traders held an auction, got no bids for their bulbs, and then collectively said, "Oh, shit." It may be a while before the oil market has a similar realization, and I make no predictions as to when that might happen. I do, however, think investors might want to consider investing in sectors that are currently out of favor, as that's generally how profits are made: buy when no one else is interested and sell when everyone is interested. That's what David Herro, the chief investment officer of Harris International, has recommended. It might not be a bad strategy.

Although I'm pretty damned certain oil is in a bubble, I am less certain when it comes to the run-up we've seen for agricultural commodities. Right now, I think there's definitely a lot of froth in the marketplace, and it's likely we are seeing some form of bubble at present. However, the economics behind the run-up in agricultural commodities are somewhat different than with oil. About the agricultural markets, we know the following:

1. Everybody needs to eat.
2. People continue to be fruitful and multiply, particularly in developing nations.
3. The developing nations are getting richer.
4. The first thing people, particularly in poorer nations, do when they get more money is improve their diets.
5. More people + more money = higher prices for food, particularly quality food.
6. Food security is crucial to the stability of developing nations.
7. Prices for food are inherently based on agricultural yields. As yields improve with time, prices fall.

History shows us our present situation is nothing new, which may or may not be comforting, depending on one's viewpoint. When the Black Death swept through Europe in the late 1340s and early 1350s, and killed off a third of its population (in some places, half), it created a fundamental change in the continent's economy. It was one of the few times in history that labor got the upper hand over capital. With so few workers, their wages improved markedly in real terms, even as demand for goods and services (mostly goods) fell due to what one might call demand destruction.

(As an aside, this created a huge mess for Europe's feudal-based "Governments" at the time. Remember, no one knew anything about economics back then. Plus, it threw a wrench into the whole social order, as merchants and other upstarts started wearing fine clothing and eating well and worst of all, started putting on airs. For more on this, Google "sumptuary laws.")

Anyway, the plague survivors discovered that because their competition had conveniently died, they were able to reap great economic benefits from their lords and masters. But as in all things, this did not last, as the economic historian Fernand Braudel pointed out (see Civilization and Capitalism, Vol. I). In Swabia in 1550, as Braudel notes, a man named Heinrich Muller wrote that things had changed:

In the past they ate differently at the peasant's house. Then there was meat and food in profusion every day; tables at village fairs and feasts sank under their load. Today, everything has truly changed. Indeed, for some years now, what a calamitous time, what high prices! And the food of the most comfortably-off peasants is almost worse than that of day-labourers and valets in the old days."

In 1550, the start of the Iron Century (so named because life pretty much sucked), there was an extra factor that entered into the equation: the galleons carrying immense quantities of gold and silver from New Spain. Sadly, the Spanish crown was feckless and had a thing for starting wars, and spent the gold extravagantly. Since the currency of the age was based on precious metals, and people didn't understand how inflation worked -- that wouldn't come until a few decades later -- it ruined Spain's economy and made life difficult for everyone else.

The long and short, however, was that food prices skyrocketed -- and stayed high up until the 18th century, when developments in agriculture kicked off improvements in yields that have continued up to this day.

But getting back to the modern age, let's look at the situation. The world population continues to rise, and more people than ever have money to spend. Even the poorest trader will splurge on chicken or beef -- especially beef -- once he gets a bit of extra pocket money. India and China's middle classes are expanding rapidly, and with that comes a demand for better food. We know demand has been so high in certain places that nations are cutting exports for staples such as rice, thus creating higher prices on the world markets for remaining stocks. This does not mean there are shortages -- but it is certainly indicative of greater demand.

The question, thus, is this -- will yields improve going forward, and by how much?

I do not pretend to know the answer to this question. Nor do I know whether the present run-up is a "bubble" or simply a matter of fundamentals. But it is something to keep in mind going forward if one is considering the agricultural markets and the companies operating in them. For if yields improve markedly, long-term prices will fall. If they do not, prices will almost certainly rise.

IMPORTANT NOTICE: I am not an investment advisor and do not work professionally as a money manager. As a result, you should consult with someone who does that for a living before making investment decisions. You should always read a prospectus or similar document detailing the potential risks and rewards of an investment before sending money. You could lose a lot of money investing. You'll almost certainly lose it if you invest in commodities, which is a fool's game. Also, there's a hell of a lot of risk investing when prices are high with the hope they're going to go higher. You don't want to buy high and sell low, so keep that in mind. All rights reserved, yada yada yada.

Posted by Benjamin Kepple at 12:52 PM | Comments (0) | TrackBack

June 12, 2008

The Conundrum of Chain Restaurants

SO I WAS BORED last night and was watching the Red Sox beat Baltimore when, much to my amazement, I saw a commercial for the Applebee's chain of restaurants that didn't make me turn white as a sheet and sweat in dreadful anticipation of the horror to come. This event so stunned me that I wondered if it might not be a turning point for the modern middle-class atrocity known as the chain restaurant.

Like most arrogant and over-educated young sophisticates, I have long regarded Applebee's with contempt and disdain. This chain, among all chains, has been the most egregious offender in the $70 billion industry's campaign to trick Hard Working, God-Fearing Americans from Working Families into believing the overpriced, processed industrial slop set before them is indicative of quality, upper-middle class dining. But much to my surprise, the commercial did not go down this route. Instead, it focused on the fact that it had a lot of cheap specials that tasted good, and for good measure slapped its rivals over at Ruby Tuesday's and T.G.I. Friday's in the closing.

What? No pseudo-celebrity chef? No supposed culinary masterpieces? No lame-o attempts at conveying the chain is hip and with it? And I can get a meal for like $10 plus tax and tip? Truth in advertising? What an idea! True, it will take me a long time before I'm ready to actually return to an Applebee's, but I'm not going to say this didn't open the door just a crack to the idea. Plus, I have to admit I kind of liked seeing them stand up for themselves. You tell those bastards over at Friday's who's boss!

Now, I should note that despite my remarks above, I am not opposed to chain restaurants. Why, I even ate at one this evening. I ate at this particular restaurant, part of a regional chain, because they have this calamari dish I like, their advertisements don't insult my intelligence, there is no nonsense about premium-this and featuring-that, and the staff are sharp. When I was done eating, my waitress brought me my check quickly, I left a nice tip, and the mission was accomplished. That's all I wanted, and it was done. Why other chain restaurants have problems with this boggles my mind.

For instance, take the Olive Garden. I am not fundamentally opposed to a casual Italian restaurant chain. They make a good basic salad. The food's not bad. I will never dine there again if I can help it, and I am proud to say it has been five years since I have. This is not simply because every time I think of the Olive Garden, I think of Joe Queenan placing a shroud over the "zuppa toscana," but because the place is a mockery of all the values that make Italian restuarants wonderful. (Also because it reminds of a relationship which I completely screwed up, but that is neither here nor there).

Consider: has anyone ever visited an Olive Garden where you haven't had to wait an unseemly long time for a table? I certainly haven't. Every time I have visited, there has always been an annoyingly long wait, even if the restaurant was half-empty. I once had to wait even though I turned up at like four o'clock. Such waits would be understandable if I was at, I don't know, Gino's East in Chicago, or Chez Jay in Santa Monica, or The Baricelli Inn in Cleveland. It is not acceptable at the fucking Olive Garden, which I would note is most certainly not Le Bec Fin. And what the hell are they doing anyway, making me wait? It's uneconomic! Get me in and out as quickly as possible and give the table to the next revenue source, I mean, customer.

Also, there's the whole rigamarole involving the Peddling of the Crappy House Wine, which Prof Doug Shaw has so eloquently denounced on his Web site. I mean, for Christ's sake -- the Olive Garden, at least one of them here in New Hampshire, has Riunite on its wine list. Riunite!

God! I thought I was a heartless capitalist, but I couldn't sleep at night if I served up Riunite or Sutter Home and passed it off as something worthy of drinking while enjoying a fine meal. I'm just not that cold-hearted.

Don't get me started on TGI Friday's either. Although I've eaten there recently, primarily because it had the good idea of selling reasonably-sized portions of food at reasonable prices, this latest ad campaign of theirs with that spiky-haired supposed chef makes me recoil with horror. For one thing, no grown man should have a haircut like that. For another, the guy comes off -- as the kids say these days -- as a complete douchebag. As such I have transferred my extreme dislike of him to the chain as a whole.

Still, there is hope. It may be that people will respond to Applebee's latest venture, prompting the company to realize it has a winning idea, and chain restaurants everywhere will dump the fraudulent bozoism that for years on end has oozed like a pustulent wound from their operations. Alternatively, T.R. Brennan's here in Manchester -- my old neighborhood watering hole that burned down in a fire on Christmas Day -- will rebuild and I'll finally have a good place to get breakfast again.

I can only hope.

Posted by Benjamin Kepple at 11:11 PM | Comments (1) | TrackBack

June 11, 2008

Hold the Line!

THE OLDER I GET, the more convinced I am that saving and investing is equivalent to war. Specifically, World War I and its horrific trench warfare.

Certainly the past few months have felt like trench warfare. One day, we take a trench and make money. The next day, we lose it and our gains from the day before. The day after that, we lose several more trenches, and soon after regain them again. In the end it will prove a winning battle -- for the market has always gone up -- but in the short term the only winners are the rats. In this case the rats take 20 pc of the profits and annual management fees around two percent, growing big as dogs in the process.

But this present nastiness will someday end, even if it takes longer than we might hope. True, it is not guaranteed -- if the Black Death returns or hydrogen bombs vaporize the developed world, then we're sunk all around and we'll all have more pressing concerns than our investments. But barring a major disaster, it will turn -- there is nothing in history that suggests that will not be the case. Population growth creates wealth. Technological advances create wealth. Industrial production creates wealth. The development of new goods and services creates wealth. Wealth itself begets wealth.* It has always been and it will always be so.

The trouble is, no one knows when this will happen. It may take one year, or three, or five, or ten. It may have great pitfalls along the way. But it will happen eventually. As a result, my strategy -- as painful as it is right now -- is to hold the line on my investments and continue plowing money into my dollar-cost averaged accounts. If it pays off -- and I make no guarantee that it will -- then I should eventually have a handsome profit from these activities. It is a comforting thought, even as I log into my retirement accounts each day to see just how bad the damage has been. True, I could retreat from my positions, but my fear is that doing so would cause my retreat to turn into a rout. Instead, I've decided to hold the line.

* Wealth begets wealth, but one must be judicious in how one approaches that, as an Old Story -- I think it was one of Andrew Lang's -- illustrates.

Long ago there was a well-off merchant who happened across a wise man, and the wise man promised the merchant he could greatly increase the man's wealth. The merchant was naturally intrigued, and entrusted the wise man with his money accordingly.

Some time later, the merchant paid a call upon the wise man. "Behold," said the wise man, "look upon thy gold coins, for they have married coins of silver." The merchant was duly impressed with the increase in his wealth, and he bade the wise man continue with his plan. A year later, the merchant returned to find his wealth had increased even further. "Behold," said the wise man, "thy gold and silver coins, joined in matrimony, have beget children of copper." The merchant was overjoyed.

Five years later, the merchant returned to the wise man, downright giddy with the thoughts of how much money he would have after five years had transpired. But when he arrived at the wise man's abode, the wise man looked at him, puzzled. There was no money for him. The merchant was horrified and demanded to know what had happened. "Alas, my lord," said the wise man, "I am sorry, but your coins have all passed away."

Posted by Benjamin Kepple at 10:21 PM | Comments (0) | TrackBack

June 09, 2008

Being a Minor League Sports Fan is Tough

OK, THIS SUCKS. Here I am, all ready to watch the pivotal matchup between the Los Angeles Avengers and the Utah Blaze of the Arena Football League, and what do we have on ESPN2? A college baseball game between Fresno and Arizona State. A horribly long and wretched college baseball game, which 24 minutes into the AFL game is only in the top of the 8th inning. A game in which Fresno is leading 11-5.

You have got to be frickin' kidding me. We've got a game with major playoff implications going on, and we're forced to watch a blowout of a college baseball game?

Fortunately, I somehow managed to get a radio feed from Utah to listen to the game, which is turning out to be a shootout. But -- this is ridiculous. Even worse, I think the college kids are deliberately stretching out their game so they can take advantage of every second of their 15 minutes of fame. I've already missed the entire first quarter and at this rate, will miss the entire first half.

I hate spring. I hate it, I hate it, I hate it. Well, if I'm lucky, the future Class A kids will wrap up before midnight, so I can see the fourth quarter.

Posted by Benjamin Kepple at 10:36 PM | Comments (0) | TrackBack

June 05, 2008

One BILLION Dollars

IT MAY BE TIME for the Reserve Bank of Zimbabwe to give up and start over. When it takes one billion Zimbabwe dollars -- which have already been revalued once -- to buy one American dollar, you may as well start hoarding canned goods and ammunition. Which is perhaps what Zimbabwe's leaders have been doing all these months as the country's economy goes through its death throes.

What's that? You think I'm kidding? Fair enough. The article linked above was, after all, published this morning. The exchange rate now stands at close to two billion Zimbabwe dollars for every US$1, according to this handy money-transfer site. Fortunately, the RBZ has starting printing special agricultural bearer checks in amounts up to Z$50 billion, which means they could actually hold value for as long as -- oh, let's give it a week or two. If the farmers are clever they will put their money into the Zimbabwe stock exchange, which has shot up to 900 billion points. (No, that's not a typo).

At this point, the RBZ has two options. It could create a new dollar and revalue, and take the big step of not printing any more money, or it could say the hell with it and go for the record. Back in 1947, the Hungarian pengo hit the downright silly exchange rate of roughly 47 octillion to the dollar. Yes, octillion. Or, if you prefer, 47 thousand trillion trillion. However, as I am sure the RBZ's directors would prefer not to go down in history as the worst economic managers of all time, maybe the first option would work.

Posted by Benjamin Kepple at 10:10 PM | Comments (0) | TrackBack

But Guess Who's Going to Pay For It

THE WALL STREET JOURNAL'S "Real Time Economics" blog has published a rather alarming post about how the Baby Boomers have once again failed to change the world for the better. Not only that, they've failed to even provide for themselves.

The Journal tells us the Baby Boomers -- collectively, of course -- have thrown out the life-cycle theory of consumption, which holds that people save a lot when they are in middle age. Instead of saving 30 pc of their money like their forebears, today's middle-aged folks are saving just 20 pc of their income at best and as little as 10 pc at worst. This, the newspaper writes, has left them woefully unprepared for retirement -- and only one-third of the Baby Boomers are adequately prepared for their old age.

This is alarming because I think we all know who will have to pay for all this -- and it ain't the kids who spent their youth playing the tambourine and singing along with the Cowsills.

Posted by Benjamin Kepple at 07:48 PM | Comments (0) | TrackBack

Reuters Discovers Paradox of Thrift

WELL, HERE'S TODAY'S "Sun Rises in the East" headline: "Newfound savings penchant could retard growth." Gee. You don't say.

Of course, before everyone starts bemoaning the complete inability of Americans to save, let's note the "savings rate" is a bit of a misnomer. The rate doesn't include capital gains in housing or investments, and those are important savings vehicles for many people. That also explains why they don't save as much: if you have a million dollar stock portfolio and $250,000 equity in your house, you're not exactly worried about not being able to pay the electric bill. Still, as a matter of course, I suppose we should be happy that people are starting to shore up their finances to the point where the savings rate is no longer negative.

Posted by Benjamin Kepple at 07:35 PM | Comments (0) | TrackBack

June 03, 2008

Uh Oh! Mr Sluggo Says You're Overdrawn!

TODAY'S ALARMING NEWS: Mr Bill is now a pitchman for MasterCard-branded debit cards.

First thought: Oh nooooooooooooooooo!

Second thought: Let's see how long that goes before Mr Sluggo tells Mr Hands that Mr Bill is overdrawn, and must now pay three $39 overdraft fees for the $2 coffee, $4 crueller and $1 newspaper he bought on the way to catch his train in the morning. Oh noooooooooooooooooo!

Posted by Benjamin Kepple at 10:10 PM | Comments (0) | TrackBack

In the Event of Rapture, I'm Stealing Your Car

SOME TIME BACK, I briefly noted -- thanks to the work of Mr David Malki ! -- that it would be nice if if I could get rich without hustling suckers and idiots. However, there are times I think there's something to be said for hustling people who are easily parted from their money, particularly when I see a good idea that someone else developed.

The latest good idea which I should have considered sooner may be seen at "You've Been Left Behind!" This site, the creation of Massachusetts-based You've Been Left Behind LLC, exists to provide evangelical Christians a way to alert their unsaved friends and family about Christ's saving grace in the event of the Rapture. Yes, that Rapture, where the LORD our God calls home all the God-fearing, right-thinking Christians of the world, while the rest of us (the Pointedly Non-Elect) are condemned to suffer through the Tribulation prior to the Last Day.

The Tribulation shall be terrible indeed: there shall be shortages and hyperinflation, and every mountain and island shall be removed from its place, and the Horsemen shall alight upon the withered globe, spreading pestilence and death and agony. Also the Oakland Raiders will win the Super Bowl year after year. However, the good people at You've Been Left Behind offer us hope. For just $40 per annum -- I mean, each year -- You've Been Left Behind LLC will save important documents and e-mail them out to family and friends when the Rapture comes. This is because anyone who would spend $40 each year on such a service is so gullible -- I mean, so pure in heart -- that the LORD will sweep them up to His presence without so much as a by-your-leave.

So the service is part estate-planning and part spiritual tool -- as we can see in the "Why?" section of You've Been Left Behind's Web site, which says:

We all have family and friends who have failed to receive the Good News of the Gospel. The unsaved will be 'left behind' on earth to go through the "tribulation period" after the "Rapture" ... Imagine how taken back they will be by the millions of missing Christians and devastation at the rapture. They will know it was true and that they have blown it. There will be a small window of time where they might be reached for the Kingdom of God. We have made it possible for you to send them a letter of love and a plea to receive Christ one last time.

You will also be able to give them some help in living out their remaining time. In the encrypted portion of your account you can give them access to your banking, brokerage, hidden valuables, and powers of attorneys' (you won't be needing them any more, and the gift will drive home the message of love). There won't be any bodies, so probate court will take 7 years to clear your assets to your next of Kin. 7 years of course is all the time that will be left. So, basically the Government of the AntiChrist gets your stuff, unless you make it available in another way. You can also send information based on scripture as to what will happen next. Each fulfilled prophecy will cause your letter and plea to be remembered and a decision to be made.

"WHY" is one last chance to bring them to Christ and snatch them from the flames!

I don't mean to rain on anyone's parade, but I live in the United States of America. The Government already gets my stuff and there is nothing I can do about it. So it's not exactly going to make a lot of difference if Randall Flagg suddenly shows up three weeks after the Big Surprise and starts forcing us all into work camps. Besides, let's face it -- if the Tribulation was really a Tribulation, one doubts that brokerage statements or other valuables would prove, well, valuable to anyone dealing with the End Times. You don't need to save money -- and you certainly won't invest it -- if in a scant few years Christ Himself is dividing us up into sheep and goats. That would take all the fun out of it.

Along those lines, while I am sure the nation's probate courts will be pleased to realize the End Timers have such faith in their workings, it seems unlikely one would need anything more than a codicil to his will to have his wishes carried out. If millions of people suddenly go poof, it is not much of a stretch to think a proper probate court would agree to let their survivors get the vanished folks' Ford F-150s.

For that matter, what's all this bit about flames? Who the hell says Hell is hot? Here at The Rant, which operates under Roman Catholic principles, we believe Hell is very much in line with Dante's vision of it. Thus, it could well be cold. Really cold. Or even temperate. It all depends.

Of course, as a Roman Catholic, I do not believe in the Rapture, which is an invention of the 1830s. However, for my evangelical brethren who do believe in it, I would suggest that one could keep the $40 per year and instead engage in some smart estate planning. After all, no man knoweth the day nor the hour.

Posted by Benjamin Kepple at 08:30 PM | Comments (0) | TrackBack

May 21, 2008

Sadly, the Burro Could Not Take Care of the Fine Right There

POLICE IN CHIAPAS jailed a donkey for biting and kicking two men, only releasing it after the beast's owner paid a $36 fine and the $115 hospital bill for the injured. In all, the burro spent three days in a local jail's equivalent of the drunk tank.

The key quote from the two stories linked above? "Around here, if someone commits a crime they are jailed no matter who they are," said local policeman Sinar Gomez. Well. I guess so.

I applaud this tough law-and-order talk from the police in Chiapas, and I for one am confident the burro learned its lesson. After all, in Mexico -- particularly in the south -- biting people is a strictly-regulated affair, and something which can only be conducted with the knowledge and approval of the proper authorities.

Posted by Benjamin Kepple at 10:09 PM | Comments (0) | TrackBack

May 17, 2008

Karmic Justice

LOYAL RANT READERS may dimly recall an old incident involving Latrell Sprewell, in which the basketball player famously turned down a $21 million contract extension from the Minnesota Timberwolves, saying he had "a family to feed."

Perhaps Mr Sprewell might have gotten more sympathy if he had said he had bankers to pay, because it turns out he owes a few banks a bit of money. According to the Milwaukee Journal Sentinel, RBS Citizens Bank has foreclosed upon a house belonging to Mr Sprewell, on which the player owed $320,284 -- and that number will rise once the Scots add up all the fees and charges related to the foreclosure. Other outstanding debts include a $72,698 judgment for an unspecified debt and a $72,102 judgment for unpaid taxes to the state of Wisconsin. Also, Mr Sprewell's $1.5 million yacht was sold at auction to satisfy the yacht's note-holders, according to the paper.

Oops. Then again, maybe Mr Sprewell could turn this to his advantage -- he could show up at the foreclosure auction and choke the auctioneer, and parlay the resulting firestorm into an NBA contract with, I don't know, the Dallas Mavericks or something.

Posted by Benjamin Kepple at 10:24 PM | Comments (0) | TrackBack

May 13, 2008

The Art of the Pitch

HELL HATH NO FURY like a blogger scorned. That's the lesson I've taken from the latest uproar on the Internet, in which angry bloggers are openly humilitating public relations firms who are bombarding them with unwanted pitches, annoying press releases, and other things in which the bloggers have absolutely no interest.

Much to my surprise, however, the furore has garnered the attention of some public relations types themselves. To their credit, these PR folks are taking a step back and looking at how to improve their relationships with bloggers and journalists. Meg Roberts, a new entrant into the PR field, has posted a pretty good summary of the problem, along with a few good questions that deserve answers: "What do we need to know? How do bloggers and journalists want to be pitched? Better yet, professionals, what are your media relations training programs like in this PR 2.0 world?"

Well, since I'm not a PR man, I can't answer the third question -- although as a writer I do want to know how much money the person who came up with the "PR 2.0" idea got for it. But as a blogger and an actual professional journalist, I suppose my answers to Questions One and Two might have some validity.

I should start by saying my work as a blogger and my work as a journalist are two entirely separate facets of my life. The work I do on my blog is all for fun; the work I do as a journalist is work. As a result, when it comes to my blog, I don't mind getting PR pitches. I really don't. Obviously, I daresay I've deleted nearly all of them in my time, but I'm still flattered to get them for what is essentially a hobby. The best thing a PR person can do in writing to minor players in the blogosphere is make the pitch personal and make sure your pitch covers something the blogger writes about. As one can see on my blog, I write about high and personal finance, all levels of professional football, and people or events who or which can be charitably described as crazy. I also like humor writing. As a result, pitches should focus on these things, and not something I can't stand, like Major League Baseball.

As a journalist, though, it's a whole different story. This is because a lot of PR folks don't seem to understand just what it is we do, why we insist on things being done a certain way, why we don't respond to the pitch you think is incredibly important, and why we really don't like it when you call us out of the blue on deadline. In that vein, I've created a handy jim-dandy tip sheet for PR folks who deal with journalists -- and, dare I say it, high-profile or important bloggers, who in this day and age are as important as journalists. First, we'll cover what PR folks should do, and then what they should not do.


This is simply a matter of efficiency. Simply put, make sure you're approaching the right person, and approaching the right person the way he wants to be approached. Thus, if you have a client in Topeka, Kan., who makes aircraft parts, you have a pretty limited universe of folks who would be interested in related news. Stick to those folks. Trying to artificially expand that universe -- e.g., pitching stuff about that client to journalists in St. Louis, Mo., or Tulsa, Okla., -- won't work well. Along with that, know your clients' preferences for receiving such news. If they want it via e-mail, e-mail it.

Realize that if you're cold-calling a journalist (or cold-emailing), the journalist will not know you from Adam (or Eve). So take it slow and make a good first impression. Make the pitch personal; know what the journalist has written about before and put things in context. This is also a good way to find out how the journalist wants to receive pitches, when he can reasonably receive them, and when you shouldn't call him unless it's a Grade One Emergency. This can go a long way in establishing the groundwork for a beautiful friendship.

A lot of PR work involves journalists calling PR folks for quotes or information. Be as helpful and responsive as you can. If you don't know the answer to a question, do your best to find out and call back -- and do call back. Ask what the journalist's deadline is, send him background information, and have as much data as you can at your fingertips. If you're talking about your Topeka client with a journalist in Topeka, have information ready about basic facts: the work the firm does in Topeka (and Kansas), how many folks it employs, and so on.

It is always frustrating for a journalist when he is trying to write about XYZ Corp., but can't for the life of him get anyone from XYZ to return his calls. Make sure your contact information is out there, particularly for after-hours stuff. If you're not available -- let's say you took a personal day -- make sure anyone who calls knows about an alternate contact whom he can call instead.

You've had an interview with a journalist about your client's new widget! Great! But the journalist has to go back and write the story and then have it mercilessly edited. This process will undoubtedly lead to new questions. Be ready for these, and let the journalist know how he can get in touch with you.

Your client may think the announcement of his new product upgrade is the most important thing since canned beer. The journalist receiving it may think differently. Recognize this dichotomy and become one with it. Along with that, as with the above tips, tailor your message accordingly to each journalist and his coverage area.

As an aside, remember the audience for which your journalist is writing. If he is writing for a sophisticated financial audience, it may be perfectly acceptable to have the money quote from your client's CEO use words like "accretive" and "subordinated debenture," even if the phrases "will boost revenues" and "junior debt" would work better. If he is writing for a general audience, the money quote should focus on basic concepts -- and use words readers will understand. Otherwise, your money quote will get boiled down to one sentence, starting, "CEO Smith said."

A good way to make sure your pitches get noticed is to make sure you don't flood your contacts' e-mail boxes with pitches about every single little thing that has happened with a client. That way, when you do send out things, your e-mail will actually get read -- and not given a cursory five-second glance before it gets deleted.

If you come across breaking news, or hear of something that's up, it wouldn't hurt to drop a line to your friendly neighborhood reporter. If done right, this will go a long way in establishing working relationships with journalists, who will consequently make time for you even when they're really busy.

Journalists are swamped with a lot of work and a lot of deadlines. If we're really interested in something, we'll get back to you -- you can bet on it. Just realize that it may take time. For instance, if you know your journalist has a deadline of Wednesday for his weekly publication, realize your pitch sent Tuesday probably won't get a real read until Thursday, particularly if it's not breaking news.

Just as readers have to trust the journalists they read, so too do journalists have to trust their sources. Recognize this and conduct yourself in an exemplary fashion. Tell the truth, don't shy away from bad news, say what you mean and do what you say you'll do. All these things will go a long way in building trust, which is crucial when dealing with reporters.


Trust me on this. Do not lie. If the lie becomes apparent before the story is written, it could prove highly embarrassing. If the line becomes apparent afterwards, the journalist will remember you lied, which won't make dealing with him in the future all that easy. Even worse, he might recount this story to all his fellow journalists, which would make them cautious dealing with you.

The cover-up is always worse than the issue itself. Do not let a situation that would blow itself out in a day -- and most of them do -- turn into a major fiasco.

Do NOT ignore mistakes. Do NOT consider keeping quiet about them as "a cost of doing business." Reporters and their editors want the story right as much as you do, and will gladly correct errors to the record accordingly, even if it really bruises the ego.

That said, remember reporters are human beings. They make mistakes sometimes. A good reporter will, upon being notified of a mistake, do his best to rectify the situation, even if it means he will get a severe dressing-down from his boss. Keep in mind that if you do approach a reporter about a mistake, he will be apologetic at the least and will do what he can to make things right. (I myself deal with mistakes in a manner not dissimilar to Monty Python's dirty fork sketch).

From what I understand, some PR folks have actually advised their colleagues to ask reporters if they can see a story prior to publication. Don't do this, as most publications have strict rules forbidding this practice. At the very least, it will annoy the reporter, although he may be understanding about it. However, some reporters would be highly offended at such a suggestion, due to the implication of incompetence. The way to go about handling this issue is to encourage the reporter to call if he has any additional questions or needs any additional information -- and he will.

Along the lines mentioned in Point Two, there's no better way to attract attention to an unwanted issue than argue with the reporter or editor about its newsworthiness. Arguing with a reporter is futile, because he's been told to write about the story, so he's going to write about it. I have known seasoned reporters who believe the proper response to this line of questioning is: "Do you want in the story or not?" As for editors, they're even tougher than the reporters. The best way to handle this is like you would any other story.

As I noted above, reporters are busy. It may take time for them to get to your news release, especially if the release contains information that is not time-sensitive. If you are unsure whether they got it, a follow-up e-mail -- after a reasonable amount of time -- will suffice. Do NOT call them and ask whether they got the e-mail you sent three hours before, unless it involves breaking news of the highest urgency. You can rest assured they did in fact get it, but are busy working on a story about something completely different; and if you call, you could be bothering them when they're awaiting a crucial call for a story. That's unbelievably frustrating. Also, that "return receipt" feature on Outlook is really annoying. Don't use it unless it involves news of the highest urgency.

Reporters get a lot of e-mail. A lot of e-mail. Do not send innumerable e-mails of no interest. For instance, if your contact covers business in Kansas, do not send e-mails about events in Nebraska or Oklahoma just because they're in the same time zone. Your reporter wants Kansas stuff. Send Kansas stuff.

Many years ago, when I was a young reporter, a friend of mine and I would for fun send corporate press releases through a fun little site known as the "Jargonmeter," and then we would laugh hysterically at the result. I can't emphasize how important the use of Plain English is. Not only will it make your release easier to understand, it will better the chances that what you want to get across gets across.

In sum: don't use words like utilize (you mean use), incentivize (you mean encourage), enhance (improve), wordsmith (edit) or extrapediately (whatever the hell that means). This goes double for silly pormanteau words like Webinar, customercentric, futureproof and cyber-anything.

Forgive the double negative: but it's awfully annoying when PR folks tell reporters they call, then don't; pledge to get information but don't deliver; so on and so forth. Remember again that when you work with a reporter, you are actually working with his entire organization. Efficient PR folks are praised and regarded as good guys; inefficent PR folks can develop poor reputations.

If there is ONE message I would pass on to interested PR people, it is: do NOT make a pitch when a reporter is on deadline. Consider: you have called at the absolute worst possible time; you are making your pitch to a distracted, harried and busy reporter, who spends most of the inevitably short call trying to get you off the telephone so he can a) get back to work and b) keep the line open for the important call for which he's been waiting all day. These are not conducive conditions for success.

Generally speaking, the best time to make pitches is in the morning, when the reporter has several hours ahead of him and can spend a few minutes shooting the breeze; he will not have that luxury in the late afternoon or early evening.

Well -- thus endeth today's lesson. Hopefully it was somewhat enlightening; I would like to think that was the case, and hopefully it will, in some small measure, contribute to peace and good will among the nation's hack and flack communities. Or, at the very least, make things easier for both of us. Perhaps it might even engender a response -- I am sure there are plenty of things PR folks would like journalists to understand about their profession.

Posted by Benjamin Kepple at 01:12 AM | Comments (1) | TrackBack

May 12, 2008

Boy, the Airlines Are Getting Serious About Cost-Cutting

A NEW YORK MAN has sued JetBlue Airways Corp., charging that an aircraft pilot ordered him to sit in the plane's lavatory so a flight attendant could avoid sitting on an uncomfortable jump seat, according to WCBS-TV in New York. The station reports:

A New York City man is suing JetBlue Airways Corp. for more than $2 million because he says a pilot made him give up his seat to a flight attendant and sit on the toilet for more than three hours on a flight from California.

Gokhan Mutlu, of Manhattan's Inwood section, says in court papers the pilot told him to "go 'hang out' in the bathroom" about 90 minutes into the San Diego to New York flight because the flight attendant complained that the "jump seat" she was assigned was uncomfortable, the lawsuit said.

Mutlu was traveling on a a "buddy pass," a standby travel voucher that JetBlue employees give to friends, from New York to San Diego on Feb. 16, and returned to New York on Feb. 23, the lawsuit said.

Initially, Mutlu was told a flight attendant had taken the last seat on the plane, but then he was advised she would sit in the employee "jump seat," meaning he could have the last seat, the lawsuit said.

The pilot told him 1 1/2 hours into the five-hour flight that he would have to relinquish the seat to the flight attendant, court papers say. But the pilot said that Mutlu could not sit in the jump seat because only JetBlue employees were permitted to sit there, the lawsuit said.

When Mutlu expressed reluctance to go sit in the bathroom, the pilot, who was not named in the lawsuit, told him that "he was the pilot, that this was his plane, under his command that (Mutlu) should be grateful for being on board," the lawsuit said.

When the aircraft hit turbulence and passengers were directed to return to their seats, but "the plaintiff had no seat to return to, sitting on a toilet stool with no seat belts," court papers say.

Sometime later, a male flight attendant knocked on the restroom door and told Mutlu he could return to his original seat, court papers say.

Well, that puts paying $5 for a snack box all in perspective, doesn't it?

Posted by Benjamin Kepple at 06:50 PM | Comments (0) | TrackBack

No State -- Well, Except Hawaii -- Is an Island

TIMES ARE TOUGH in California. The economy is in rough shape, statewide unemployment now averages 6.2 pc and has hit double digits in several locales, and the Government is facing a budget shortfall that could hit $20 billion. As a result, this has prompted the Government to take strong action to turn around the state's fortunes.

Of course, this being California, the strong action in question involves frantically looking for new ways to extract tax money from the wretched populace. Among the proposals so far are: a 25 cent tax on plastic bags; extending the 8 pc sales tax to on-line music downloads, a 30 cent tax on beer bottles (raising the price of a case by $7.20), and turning poor senior citizens into serfs in exchange for a property tax break. But perhaps the most stunningly ill-conceived idea threatening to escape the Assembly is a 25 percent gross receipts tax on all facets of the adult-entertainment industry: strip clubs, movie studios, risque stores, pay-per-view movies in hotels, you name it, it would be taxed. (A hearing on the matter is being held today).

Faced with the prospect of being shaken down by the Assembly -- the biggest pimps of all -- those in the industry are understandably panicked. Their lobbyists are warning the proposed levy is so onerous it will prompt the industry's mass exodus from the state. The Whittier Daily News, in Whittier, Calif., spoke with one of those lobbyists, who was not at all happy with the proposal:

"If you see this tax pass, I think you would see an exodus to Nevada or Oregon or some other state," said Matt Gray, a lobbyist for the Association of Club Executives, a group representing the adult entertainment industry. ...

Gray called (Assembly Bill 2914) the "most dishonest" piece of legislation he has ever seen in his life, suggesting it smears the reputation of the industry. The text of the bill suggests that adult entertainers are a blight on local communities, saying they "impact the character of neighborhoods, or curtail and prevent the development of properties in their general vicinity."

Gray estimates the industry employs about 50,000 people in the state and generates about $4 billion a year.

When Mr Gray spoke, the proposed tax was a mere eight percent of gross receipts. One can only imagine what he thinks of it now. As for me, I have to wonder what the Assembly was thinking in even allowing this miserable idea to see the light of day.

After all, let's review the facts here. Fifty thousand jobs and $4 billion in revenues. That's not exactly a drop in the bucket -- especially when one considers how much of that money comes into the state from customers who live outside California. Were the state to enact such an onerous gross receipts tax on the industry, it's fair to say most of the industry would find a more hospitable place to do business. As amazing as it might seem to Sacramento, California isn't an island unto itself -- people can and do leave as a result of decisions made there.

The obvious candidate for the industry's relocation would be Nevada, which has no corporate income tax (California's is 8 pc or so) and has built much of its economy around allowing people to do things they can't do in California. Plus, if one considers how much of that $4 billion gets spent, it conceivably would mean California enjoys an economic benefit of at least $15-$16 billion from that activity. If you take out that economic activity and the people, it will have a ripple effect that will only exacerbate California's economic problems. It won't help the housing market in the San Fernando Valley either.

Now, some may argue that I'm treating the idea far too dispassionately: after all, many people don't care much for the industry given what it does. However, the moral questions related to it -- on which I am a neutralist -- are an entirely different matter. I am interested solely in the economics of it all. Really. Honest.

As it happens, though, the economics of the industry explain why I haven't been to a strip club in seven years and have no plans to return. You see, the adult-entertainment industry is the sole business on Earth where zero-sum economics applies, and the customers are those on the losing end of its transactions. On an intellectual level, it annoys me to be on the losing end of zero-sum transactions.

Also, although I consider myself quite savvy when it comes to commercial negotiations, I also know when I'm hopelessly outclassed. This was made clear to me on my last visit to a strip club, seven years ago in Nevada. I was with a friend, who shall remain nameless, and we had gone to a club on what appeared to be a rather slow night. My friend and I each got a lap dance and being gentlemen we tipped well.

I can assure Loyal Rant Readers that not ten minutes after this, it seemed as if practically every girl in the club approached us and inquired if we would like another lap dance. I mean, it was an all-out assault on our wallets -- and it nearly worked, too. But after fending off the sixth or seventh inquiry, my friend and I looked at each other and his reaction -- "Let's get the hell out of here!" -- summed up my thoughts exactly. We got the hell out and went back to our hotel to regroup.

Perhaps ironically, this is a big reason why I think the industry will be able to escape Sacramento's clutches, at least for now -- the people in the business are so skilled at sales and marketing that they'll run circles around the legislators trying to tax them out of existence. One can only hope that in the process, they'll get some very important economic lessons across to the gang of idiots in Sacramento, because the lessons are applicable to all businesses and all sectors of the economy. Sadly, the other sectors of the economy don't have pretty girls to speak on their behalf.

Posted by Benjamin Kepple at 06:42 PM | Comments (0) | TrackBack

The Bombers Heading Towards Vorkuta

JUST AS THINGS SEEM to have been going well for the financial markets, and world-destroying disaster averted, Ambrose Evans-Pritchard has made the most impolite suggestion that we may be in for that most awful of Dr. Strangelove-type situations -- the bear rally. Mr Evans-Pritchard is a natural bear, so gloom does not exactly come as a shock, but when even he says the data frightens him, I take notice. It would appear that despite our recent harrowing of the credit crunch, there are still a few financial bombers heading towards Vorkuta.

One of these, of course, is the price of oil. I must admit surprise, with crude prices at $126 per barrel, that the Government has not taken concrete steps to address this, either overt or in secret. After all, we have 702.7 million barrels -- 280.5 million of which are "sweet" -- of crude oil in our Strategic Petroleum Reserve, worth some $88 billion. We continue to add a couple million barrels to the SPR each month. Why the Government has not used this stockpile as a billy club amazes me.

I do realize we need the SPR just in case we wake up one morning and discover the People's Liberation Army has landed on Oahu. Still, if we released oil from the SPR during the supply shock from Hurricane Katrina, you would think we could do the same now and fry the speculators who have driven up the price of oil, ostensibly on supply concerns.

Of course, we know from past history that flooding the market with scarce goods doesn't work, if the injection of additional supply is limited and temporary. It could be the Government has already considered this, and accordingly held back from taking action. But although oil supplies may have been seen as tight, they are still perfectly adequate at this point. Thus, although it might not work and oil prices could remain high as ever, I'm not exactly seeing the downside of giving it a try.

The only objective here would be to convince the speculators the run in oil is over. If you could do that, and the speculators quailed as visions of the profits were replaced with nightmares of their losses, you would see a trickle, then a stream, then a flood out of oil.

It wouldn't even need to be a big deal. In fact, not making it a big deal -- at least to start -- might be the way to go. After all, if everyone knows about it, then the collective market could conceivably write it off. So it would be better for the Government to go after the speculators at their own game. You'd want to bury the news as best you could; conveniently leak advance news of it to certain players but refuse to confirm it; start the rumor mill going the opposite way for once. Then, once there was sufficient turmoil, bang! Blow open the flood gates!

But wait, you say. Wouldn't this go against those notions of fair play and caveat vendor that presently rule American capitalism? Yes, it would -- but sometimes you have to fight fire with fire, and the blaze we're fighting is not only out of control but heading towards population. Besides, the Government's so-called Plunge Protection Team reportedly has vast powers to intervene in the financial markets, an image the PPT has itself undoubtedly quietly encouraged. So I'm not exactly seeing a moral conundrum here, particularly since the very nature of financial speculation is cut-throat and ruthless. With each passing day, though, I am seeing the virtue of giving it the old college try.

Posted by Benjamin Kepple at 11:50 AM | Comments (0) | TrackBack

May 11, 2008

A Very, Very, Very Bad Option

BEFORE I WENT TO SLEEP last night, I was reading the financial news on the wires and stumbled across a rather alarming article from the Associated Press. This article, which Associated Press business writer Joe Bel Bruno wrote, reports that many brokerages, seeing options trading gain in popularity among investors, are encouraging their customers to accordingly start getting involved in options.

My reaction to this news can be summed up in one word -- and that word, said very loudly and in slow motion, is: Noooooooooooooo! This is not because I think options are an inherently bad thing -- they do have their uses -- but because I don't think they're a good fit for most investors, particularly small investors or those investing with a focus on the long-term. But let's look at Mr Bel Bruno's article to get a lay of the land:

For Kim Snider, it only takes one word to send participants in her monthly investment workshops into a near panic. The Dallas-based financial adviser gets the same reaction, without fail, every time she suggests using options as a way to protect stock portfolios and make money.

"Peoples' eyes roll to the back of their heads; they are absolutely horrified," she said. "There is still a pervasive myth that options are complicated and risky."

That might be quickly changing. The options market once baffled investors who felt using puts and calls to bet on stock moves was tantamount to a Wall Street craps game. These days, online brokerages and financial advisers are pitching more investor-friendly ways to use options -- and that's led to a significant growth in their popularity. ...

One reason for the options boom is that more individual investors are managing their investments online; options are more readily available on the Internet than when they were sold through brokers in the past. Options also feed on Wall Street volatility, which has gone up significantly in the past year.

"There's been a tremendous adoption wave among self-directed retail investors of options trading," said Don Montanaro, chairman and chief executive of Boca Raton, Fla.-based brokerage TradeKing. "The savvy and wisest investors realize they'd gone through a whole market cycle where they adopted taking care of their own investments online, but did so with a limited amount of plays. People only knew how to buy and sell stock."

For the most part, Montanaro said education has been the biggest priority in persuading his customers to use options as a tool. It's little wonder, because options contracts -- which turned 35 this past week -- were once exclusively traded by big institutions inside of Chicago's boisterous futures pits.

TradeKing customers last year were mailed a step-by-step "Options Playbook" that helps instruct them on how and when to employ the investments.

Now, let's look at how Mr Bel Bruno describes options trading:

The basic premise of stock options contracts is that investors bet on a stock's direction and price within a specific time frame. For instance, investors who predict Google Inc. shares will vault $100 to $600 can lock in such that wager and hope it rises.

At the end of the contract, that would give them the right to pay only $500 when everyone else is forced to buy at a higher price -- giving them an instant profit. However, stocks could easily move the other way and leave investors forced to cover the difference. Options are also used on other investments, such as commodities.

I know some of my readers will have immediately noticed the mistake in Mr Bel Bruno's example of how options work, and I would submit it as Exhibit A as proof for why only sophisticated investors should consider using options as part of their investment strategies. I mean, if the reporter writing the story can't adequately describe them -- or, more likely, the copy desk made an error in boiling things down -- that should be a warning sign as to the complexity of these things. (A discussion of their complexity follows -- if you're not interested, scroll down past it).

OPTIONS: The Craps Table of the Investing World,
Without the Spectacle of That Guy Shouting for a Hard Eight

That said, Mr Bel Bruno got it right in the first sentence of his description: "the basic premise of stock options contracts is that investors bet on a stock's direction and price within a specific time frame." This is true. But Mr Bel Bruno's description of a "call option" -- the most basic of options transactions -- wasn't spot on.

A "call option" gives one the right to buy stock at a given price within a certain time frame. For instance, Google is now trading at $573 per share. You think the price is going to go up. However, you don't have the capital to buy Google shares, because they're trading at $573. So, what you can do is buy a call option (or options) to place your bet accordingly.

Let's say you think that, by September, Google will rise to $650, and as a result you buy two call options. These options are now trading at $26.70 per share, which is how options contracts are priced. An option contract covers 100 shares. Thus, your two call options will cost you $5,340 ($26.70 x 100 x 2), plus commission -- at my brokerage, these are nominal: it would cost about $10 to buy this, which isn't bad at all.

Now, let's say in June, Google announces its latest secret project will revolutionize, I don't know, the way people buy coffee. The price of Google now jumps to $670, and the price of your options jumps accordingly -- let's say to $70 or so. $20 of that price would reflect the value of the option -- since the option is $20 above its "strike price" of $650 -- and $50 would represent investor sentiment that Google would go even higher, thus making the option even more valuable. On the underlying value of the option, you would be up $4,000 -- and if you sold right away, you would make $13,990 ($14,000 - $10 commission).

But -- and this is a very big but -- let's say you hold on and the price of Google drops to $610 in August based on, I don't know, trouble with the coffee-buying project. Your option is now inherently worthless, because people can buy the stock for $610 and not turn to you to buy it for $650. Since there's only a month left before the option expires, and market sentiment has turned against Google, the price of your option falls to $15. You're now down $2,340. ($15 x 100 x 2). And if you hold on until the option expires -- and it's still not in the money, you're out your entire investment of $5,340, with no chance to get it back. It's done, gone, an ex-parrot. Stick a fork in it.

Given this, it might have made more sense to have taken your $5,340 and purchase eight shares of GOOG, which although not as exciting still would have given you a profit of $296. (8 x ($610-$573)). Plus, of course, you'd still have the shares, which you could hold as long as you wanted.

This is a very optimistic scenario I've set out, as you can imagine. After all, if you bought the options at $26.70, and Google tanked for the next month, not only would you be out of the money, the speculative value of your options could plummet as well. You'd then have to rely on the stock recovering to make any money. If the option expired worthless, you would not have to cover the difference -- Mr Bel Bruno's mistake -- but you would be out a lot of money. (There are cases in which you would have to cover the difference -- a highly risky strategy known as writing (selling) "naked calls," in which you didn't have the shares to write the option but did so anyway, requiring you to pony up for them when the option expires. But most people writing options have the shares to cover them -- although one could also argue this is dumb).

Being that Joyless, Rotten Bastard at the End of the Table
Who Bets the Don't Pass and Profits From the Misfortune
of Everyone Else Playing

Now, the call option is the most basic option to understand. You can also buy a put option, which is the opposite of a call option: you're essentially betting the stock price will go down. (It's similar to short selling a stock).

Getting more advanced, you can sell ("write") a call option, either with (a "covered call") or without (a "naked call") holding the underlying shares. This is extremely risky. If you hold the shares, and the option goes "in the money" for the holder of the option, you'll have to sell your shares at the strike price. Using our above example, if you sold (wrote) a call option on GOOG at $650, you would have to sell your 100 GOOG shares at $650 if the shares went above that, meaning you'd be out whatever profit you could have realized from the higher price. If you didn't have the shares, you'd have to buy them at whatever price they were at, which would leave you in a world of hurt. You can also sell puts (again, covered or naked).

The basic idea behind this strategy is that you would gain income from the options -- using our above example, you would make $5,340 through writing two GOOG call options -- but only if the options were out of the money when they expired. If the price of GOOG shot up to $700 per share, you would lose out on $50 per share when the option was exercised, because you'd have agreed to sell your shares at $650. That would leave you with lost profit of $10,000; after subtracting your option income, you'd have lost $4,660 on the deal. If you wrote a "naked call," you'd have to come up with $140,000 to cover the 200 shares of Google you'd agreed to make available to the option holder. I don't know about you, but for me this would really suck.

There's one other strategy I'll discuss before moving on -- that's known as a "married put." Let's say you own 100 shares of GOOG at $573, and you buy a put option at $550. The value of your shares is worth $57,300. The cost of the put option, which expires in September, is $3,920. If GOOG shares fall to $500 in August, you'll make at least $5,000 on the put -- and probably a lot more -- which offsets your equity loss of $7,300 in the stock itself. The idea is to hedge against loss in the value of your underlying equity position; however, the flip side is that if GOOG goes up, you'll have wasted $3,920 on your put, which will be worthless.

IN SUMMARY: Why Options Are
Not the Right Option for Most People

At the start of Mr Bel Bruno's article, there was a quote from a financial adviser who said it was a "myth" that options are complicated and risky. Well, it ain't no myth: they are complicated and they are risky. Nearly everyone should stick with investing -- not wildly speculating on future events that may or may not happen. There are plenty of ways to wildly speculate on things without putting your hard-earned investment capital at risk. Remember, it took a lot of hard work to earn that capital in the first place -- risking it on options doesn't make all that much sense.

But Bennnnnnnnnnnnn, some of my readers are saying. What if I just use them as a hedge against my shares falling? Well, what about it? If you're investing for the long term, then swings in market prices shouldn't concern you all that much. More importantly, though, you're eating into your returns by wasting money on options. If the worst doesn't happen, and the stock you buy goes up, you'll make money -- but not as much as you could have, because you had wasted money on buying your hedge, which would now be worthless as a result of the stock price going up.

As for the brokerages -- well, of course they want their customers to buy options, because that boosts their bottom lines. After all, with commissions for most vanilla stock trades practically nothing, allowing customers to trade in options means more business for them. Companies such as TradeKing don't send out "educational packages" out of the goodness of their hearts -- they do so because they think it will mean more revenue.

Finally, readers undoubtedly noticed in Mr Bel Bruno's article the historic comparison of options to a craps game. Folks, the comparison was made because it's true.

Speaking of history, craps itself is a simplified version of an old medieval dice game which had the very appropriate name of hazard. Hazard. Keep in that in mind the next time someone at a cocktail party starts babbling on about how much money they made with options. That someone may have avoided the traps for now. But over time, I would suggest most people speculating on options will find out the hard way that the house always wins.

ADDENDUM: Futures Options, or:
How to Lose Less Money on Commodities

Oops -- almost forgot! One place where using options makes sense is when one speculates on the commodities markets, but only because it's slightly less crazy than screwing around with commodities in the first place. If options are the craps games of the investing world, then the commodities markets are the pai gow tables. You know, those tables where the Chinese play dominoes based on an incredibly complex series of rules and traditions that no one unfamiliar with the game could ever figure out unless they spent months at it.

Anyway, futures options -- also known as "futops" -- are a way one can limit one's losses speculating in commodities, because you'll only lose the underlying value of the option when you inevitably end up down-limit on pork bellies or something. Of course, in screwing around with commodities, you're violating Rule No. 4 of Basic Investing Principles, which is: "Don't Screw Around with the Commodities Markets, Because They Can Make Your Life a Living Hell." So just as you would smartly avoid speculating in commodities, you should smartly avoid speculating in futures options based on those commodities. Still, if you must lose all your money in commodities, you could lose it slower through using futops as opposed to actual positions in the commodities themselves.

Posted by Benjamin Kepple at 11:45 AM | Comments (0) | TrackBack

May 07, 2008

Travel on the Cheap

SOMETIMES, IN MY MORE charitable moments, I feel a twinge of pity for the poor scoundrels who have volunteered themselves to produce articles on personal finance matters for Yahoo! Finance.

For those of you unfamiliar with the site, it serves as a news aggregator about happenings in the financial markets, and it does a good job at this. However, it does less good of a job at producing original content. Much of the content, at least from what I can tell, comes in the form of commentary, opinion and light news articles from a stable of experts, who write these articles with varying degrees of competence. A few of the writers -- Harold Maass and Ben Stein -- are actually quite good at what they do. Most of the contributors, however, write such absolute drivel that I think Steve Ballmer held them up as Exhibit A for why he wasn't paying $37 a share.

I don't necessarily blame the writers for this, as I don't know what exactly they are told to produce. However, there is clearly a mismatch between what the site's managers think they should produce and what the site's readers expect them to produce. This is most often seen in the user comments left in response to the articles, in which readers will regularly blast contributors for writing things any functioning adult should figure out on their own. (This may be true, but one can't necessarily fault the writer if he is told to write for a general audience).

Readers' responses to a recent column from Mr David Bach exemplify this reality. Mr Bach, a former executive with Morgan Stanley, writes about personal-finance matters in a column known as "The Automatic Millionaire." This week, Mr Bach wrote a column on travel that ... well, let's just say it left a lot to be desired, because there were such amazing howlers in it that it gave the impression Mr Bach has himself not traveled past the Triborough Bridge. These included the typographical error that identified Hungary as a city and the assertion it would take four to five days to drive from Los Angeles to Seattle. (This would only be the case if one drove a Model T, and even then, one might make it sooner).

Typical responses to the article were as follows: "I feel stupider after reading this article," "More useless drivel from this putz," and "Pretty good article, but he forgot to mention one of THE BEST money saving tips when traveling: PICKPOCKETING!" But perhaps the best was:

I'm planning to save a bundle on my family vacation this year with David's tips. We'll go to a third world country called the United States. Instead of pampering ourselves, we'll walk to all our destinations, cook our own meals and go somewhere that is cheap and close (say western Kansas) even though it is completely unappealing. We'll sleep in our car at rest areas and hire a couple hobos to take us on a tour of a downtown. Boy won't my wife just be so happy that we saved all that money. I might even be able to afford the ensuing divorce.

Now, with such forceful blowback, one may wonder just what Mr Bach wrote to garner such condemnation. In Mr Bach's defense, some of his tips were actually somewhat useful -- try alternative travel Web sites, or consider alternative lodgings that might prove cheaper. However, others were of limited utility: for instance, train travel, although I much approve of it, is slower and often not cheaper than air travel. Some of Mr Bach's ideas were just downright odd: for instance, the one about paying locals to offer tours of their areas. I don't know about you, but if you ask me, you can just go exploring for fun and not pay anyone anything. Also, they won't be insulted at your cheapo offer.

The idea of paying for a hotel kitchen on longer-term trips also didn't make much sense, at least to me; there are ways around the restaurant problem that are cheaper. And the bit about staying close to home also didn't seem to really fit in with the idea of a vacation. As Mr Bach wrote:

When the cost of gas, the rigor of air travel, and the hassle of packing up the kids is just too daunting, consider staying home and discovering nearby attractions you may never have seen.

Tape a map of your metro area to a dartboard. Once a month, throw a dart at the map. Wherever the dart lands, that's where you go that weekend to explore, even if you've been there before (the obvious exception is areas that might be dangerous). You can still make some amazing discoveries in your own backyard, spend quality time with family, and recharge your batteries -- not to mention save a bundle of cash.

Don't do this. When I was living in Los Angeles, a colleague of mine who was heading out of town on a long weekend had his car break down, and he got stranded in Fontana, Calif. Let's just say the weekend in Fontana was not the optimal way for the guy to spend his vacation. Besides, the kids probably wouldn't be enthused if you suddenly announced the family was going to vacation in ... New Rochelle, N.Y. Or Pacoima, Calif. Or Jeannette, Pa. You get my drift.

However, as a travel enthusiast myself, here are my clever ideas for saving money while vacationing. I have divided them into two categories: Travel for the Single Guy and Travel for the Single Guy Who is Traveling With His Girlfriend. These separate categories are warranted because -- well, let's face it, a single man traveling alone can cut certain corners he wouldn't dare dream of doing if traveling with a woman. Conversely, while traveling with a lady, a man may want to entertain spending notions he wouldn't even consider if he was traveling alone. So let's get into them, shall we?


1. Stay with friends for some or all of the journey. Hotels are expensive. Staying with friends is free, even if etiquette dictates you buy your friends at least one meal for the hospitality. Another option, instead of buying your friends dinner, is to help with the dishes.

2. Your hotel is a place to sleep. There is no sense spending oodles of money on a room when you're going to spend eight hours at most in it per day. Instead, go as cheap as you can on the hotel, while making sure it still has certain fancy options, such as working door locks and hot running water.

3. Eat cheap. Although travelers should always endeavor to eat at sit-down restaurants for their daily bread, this does not mean one has to be extravagant. If you're clever, you should be able to get a really good breakfast for like $5 or perhaps $7. This will allow you to take a light lunch (again, for about $5 or $7), and then get a decent dinner for less than $15.

4. On a road trip? Stop by Meijer or something. There is no point in stopping repeatedly for soft drinks and snacks while on your road trip. Stop once at a Meijer and pick up a cheap twelve-pack of soda (I like Diet Squirt myself) and a bunch of snacks. This will run you like $20 and provide plenty of sustenance for the trip. If you're clever, you can get breakfast stuff on the go or a cheap dinner as well, saving yourself bunches of money that you can spend instead on football souveniers.

5. Renting a car isn't such a bad idea. Car rental prices are so cheap that you can hire a car for as little as $20 or $30 per day. If you're putting bunches of miles on it, you'll still come out ahead on the deal compared to using your own vehicle once you factor in depreciation. For instance, on my recent trip back to Michigan, I drove about 800 miles. If you figure depreciation for a typical auto is 15 cents per mile, that works out to $120. My car rental cost was $144, meaning I essentially got the car -- a nice, new car with satellite radio -- for free.

6. Use loyalty programs. This goes hand-in-hand with Item No. 1 below, but when you're traveling alone, loyalty programs are a great way to build up credit for when you're traveling with your girlfriend and want to splurge without spending additional money.


1. Now is the time when you use your frequent flyer miles. There are two acceptable routes here. It is a good idea, for instance, to use your frequent flyer miles to buy the tickets outright. However, it is a better idea to use your frequent flyer miles to secure upgrades to first class. It can be difficult to actually buy tickets that you want with miles, so the upgrade option may well prove a better use of them. Plus, you're flying first class and your consumer acumen will impress your girlfriend accordingly.

2. Travel off-peak. For most young men (and younger women), the value in traveling comes in the traveling. It is not until you are older that the actual time of the travel becomes noteworthy amongst your peers. Simply put, going to Europe or the Caribbean is cool enough. The timing is less important. So save a bunch of money by going during the off-season -- if not the height of the low season, at least off enough so that you'll be able to snag some serious discounts.

3. Plan artsy/romantic things to do. These often do not cost a lot of money, but often your girlfriend will like them, which consequently means she will go along with your clever ideas, such as spending the whole day on Sunday watching football. Also, as I said, they don't often cost much. So plan ahead -- take in a museum or find some romantic movie or go for a walk on the Santa Monica Pier. The list of ideas is endless and dare I say it, you'll enjoy it as well.

4. Plan some of your eating out ahead of time. Plans change, of course, and you might have to scuttle some of the ideas you come up with under this one, but there's no better way to control expenses and wow your girlfriend through getting reservations at an excellent restaurant you've scouted out beforehand. Consider using a service like to plan accordingly.

5. Stagger your hotel reservations. Hotels are expensive, but there is no reason to pay more for a hotel than you must. It may make sense to spend most of your trip at a mid-priced hotel and then spend the last day or two in some place really fancy, like a suite with an ocean view. This goes especially if you can finagle some great deals on your hotel stays -- do some searching around.

6. Black lingerie is proof from God that He loves us and wants us to be happy. I'm just saying.

Anyway, there are my Travel Tips for the Single Man. Hopefully, you have found them helpful and not just regurgitation of things any idiot could have figured out on their own, because it certainly would be embarrassing if that was the case. Also, I would like to apologize to Benjamin Franklin for borrowing a quote of his for the last item, although knowing Franklin's reputation, I doubt he would disagree with that statement.

Posted by Benjamin Kepple at 10:26 PM | Comments (0) | TrackBack

May 06, 2008

Let's Not Get Carried Away Here, Shall We?

WELL, HERE'S THE MARKET REPORT of the Day, from none other than the Fox Business channel, which breathlessly reports: "Wall Street Defiant in the Face of $122 Oil."

Yes, that's right -- defiant. You know, because a rising market is as American as motherhood, apple pie and National League baseball.

The report goes on to express wonderment at the market's rise on a day when oil prices were at $122 a barrel and -- wait for it -- Goldman Sachs forecasted a potential price spike to $200 a barrel in the not-too distant future. You know, because Wall Street investment houses are always spot on with their forecasts about the commodities markets. Also, the markets solely respond to oil prices when they decide to go up or down.

I much prefer the reporting job the Associated Press did about oil prices. It's actually a decent report. Instead of babbling on about oil prices so high the American people will resort to wearing barrels instead of buying them, the AP looks at facts of minor import, such as: a) this isn't exactly a new prediction from Goldman Sachs, b) Citigroup, in so many words, came out and said Goldman's analysis was crap. The Rant, accordingly, gives a tip of the hat to the AP for digging beneath the surface of the matter.

Posted by Benjamin Kepple at 11:58 PM | Comments (0) | TrackBack

May 02, 2008

Men, Women, and Bringing Home the Bacon

EARLIER THIS EVENING, I was thinking about how to pay for college for the kids I don't have with the wife I haven't yet met. This may seem strange, but I find it useful to engage in theoretical planning exercises once in a while, because it helps keep me focused on certain realities of life. After about ten minutes of running various scenarios in my head, I came up with a solution -- start saving when the test strip comes back blue. Problem solved.

Soon after I ran through this exercise, I stumbled upon an essay which a Texas physician wrote regarding the modern American man and how he views his obligations towards work, family, finances, and so on. Dr Melissa Clouthier argues that men in general need to act more like, well, men. In her words, "men need to butch up."

As Loyal Rant Readers may well expect, I am in general agreement with this argument, although my outlook may be a bit different than Dr Clouthier's. But to do full justice to her argument, I think I should address it point by point. Dr Clouthier starts out by writing:

Men. What the world needs more of is manly men. I've blogged about this before, but it's worth repeating. A girlfriend of mine told me that her three best girlfriends all have husbands that stay home while their wives work and the men sit around complaining about their wives. That just seems wrong somehow.

Seems wrong? Oh, come on, now. Unless the men are taking care of the children full time and keeping house along with it, it's entirely wrong and pathetic. There's absolutely no excuse for a man to be idle while his wife is out earning the couple's living expenses.

Dr Clouthier continues on by writing:

This post is going to be so politically incorrect that a good chunk of even my most traditional readers might not like it, but I'm kinda thinking out loud here for a minute. Do you guys think that by women entering the workforce, that women have had the same effect on the man's role as say welfare has?

I mean, a generation ago, a man wouldn't look down on his woman for not working outside the home. Taking care of the house; cooking, cleaning, caring for the children and basically being the center of the home was what a woman did. It was enough. No one would consider her to be slacking. In this generation, women suffer a vague, and sometimes, explicit, unease about doing that job. She is viewed as not pulling her weight because she's just a housewife.

And it's not just women judging women. Men, too, want their women to work to take the pressure off. A man is simply not interested in carrying all the financial weight and why should he have to? Women are equal now. Equal means doing the same thing--working and living like a man. Feminism means, and it's men that I've seen to be the biggest feminists, being a good man and bring home the bacon, frying it up in a pan and doing it again and again.

But it seems like an unintended consequence has been resentment. Women have excelled in the workplace. They can take care of themselves. They do leave their babies to work. Meanwhile, some men (not all, of course) have gone the other way. They no longer work as hard because they just don't have to. On the one hand, they don't have the financial pressure of their father's generation, but they also don't have the self-respect, work-ethic and noble purpose of their father's generation either.

Now perhaps I'm just old-fashioned, but I can't imagine looking down on my wife -- whom I haven't yet met -- if she wanted to stay home and raise our family. She would be, after all, raising the family and keeping house, which is no small feat. Meanwhile, I would have the luxury of getting to go out and work -- which involves fun things like eating out and talking with other adult human beings. If anything, I would do everything I could to make that a reality if that was a choice she wanted to make.

I can also say I would feel horribly guilty if my wife felt she had to work in order to meet our expenses. That's not the same situation, I would note, as the idea of my wife working because she wanted to do so. That's entirely different, and if she wanted to work, well, we'd just handle things accordingly -- just as we would if she stayed home and I had to do the providing bit.

As for men wanting their wives to "take the pressure off" -- perhaps it's just me, but I don't think I know of any man who personally looks to his wife as the financial savior of their relationship. Perhaps I just look at things differently, but to me, the first answer to Not Having Enough Money is reducing expenses, and only then looking at ways to earn extra income. A man provides for his wife and children first and then indulges his whims afterwards; that's how things are supposed to be done. If that means I have to work longer hours or moonlight to provide for the family, well, that's what I do.

This is not to say the circumstances Dr Clouthier mentions do not exist -- they do. Why this is, I don't really know. We know the family has become weaker over the decades and I suspect that has played a big part in it. I know in my own case, though, that my family has had a very strong influence on me. When your father and all your uncles work like the devil at their jobs -- especially Uncle Bob, who famously returned to work the day after his appendectomy -- those ideas about your responsibilities are passed down accordingly. (I haven't had a 14-hour day in a while, but when I do, I refer to it as a "Dad day.")

Along those lines, I wonder about the resentment angle Dr Clouthier mentions. In terms of the workplace environment, I certainly don't see it. When I was growing up, I was taught that it didn't matter who my competition was or what advantages they might have -- my job was to succeed regardless. At home, though, maybe it's a different matter. Men certainly have that provider instinct internalized in them, and I certainly think some men would be resentful if their wives demeaned their contributions (or lack thereof).

But it seems to me there are two solutions to this problem. If one's wife's reaction is unreasonable, then marriage counseling is the answer. If one's wife's reaction is reasonable, then the answer is for the man to contribute more. If a man is not working and his wife is doing so, and his wife also keeps house, then the man should go out and get a job -- even if it really sucks. Also, along with getting a job, he should help out with the vacuuming or something.

Dr Clouthier continues:

It seems to me that a man needs to be needed and when that feedback loop is cut either by the government, or even by a working woman, he can (not always) lose his drive and desire to work and succeed.

Societally, it seems like men don't value or seem to be valued for manliness. A strong, hard-working, driven guy has been replaced with a soft, unmotivated, aimless man who can't make a declarative sentence or find the will to do what needs to be done. Basically, too many men have become pansies.

Yes, a man needs to be needed. But the fact his wife is working shouldn't cause him to lose his drive or desire to work or succeed. That's a rather poor excuse, if you ask me. And as for society -- who gives a damn about what society thinks? My loyalties are first to my family and then to my friends and then to the church and only then -- a distant fourth! -- this concept of "society."

When all is said and done, the pursuit of manliness starts with the man himself wanting to pursue it. Oddly enough, I saw this principle best exemplified in a children's cartoon some years back. The idea can be summed up as follows: "Help wanted? Inquire within."

Posted by Benjamin Kepple at 12:21 AM | Comments (0) | TrackBack

April 30, 2008

In Times Like These, My Faith in Capitalism is Tested

WHAT'S THAT? Oh, no no no. This hasn't anything to do with the state of the economy, the speculative bubble in commodities, interest rates or anything like that. No, my faith in capitalism is tested because of an alarming story I read in the New York Daily News.

Apparently, one apparel company (the "Juicy Couture" division of Liz Claiborne Inc.) has sued another apparel company (the Victoria's Secret segment of Limited Brands Inc.), and news reports say the former has charged the latter with stealing particular facets of its clothing design and marketing schemes: most notably, the former's practice of stamping logos on the asses of its pants.

No, I am not kidding.

I don't know why this should test my faith in capitalism. It sure seems like a win-win on the face of it. After all, here you have a company selling -- dear God! -- velour tracksuits and other mindless frippery that must have insane gross margins. Not only that, they're selling to an impressionable and uncritical market, where buyers spend great amounts of money on the stuff in desperate attempts to look "hip" and "with it," and apparently do so without recognizing the finance guys are playing them like an accordion. Why, it's almost enough of an investment opportunity to warm even my cold, grasping heart -- except I vowed long ago never to invest again in fashion.*

Yet it tests my faith, nonetheless. I guess I just can't see why anyone would voluntarily sell (or voluntarily buy) clothing that demeaned the wearer so. I mean, the logo's on the ass. That's just fundamentally wrong on so many levels. Then again, perhaps it bothers me, because we clearly have a money-making business here and I don't get it. Perhaps I'm just getting old.

In fact, maybe that's just it. I'm getting old. My all-time favorite reaction to the foibles of modern youth came from a teacher of Chinese, who when asked about the social habits of Chinese youth, said with a somewhat perplexed look on her face: "Ah, the young people. They go crazy." God knows that with each passing day, I'm more inclined to think she was right.

* The story of why I will never invest in fashion again will have to wait, but I took the loss about as well as Emperor Augustus took losing the Battle of the Teutoberg Forest. ("St. John Knits! Give me back my $1,300!")

Posted by Benjamin Kepple at 10:20 PM | Comments (0) | TrackBack

April 28, 2008

Old-Time Football in the Modern Age

FORT WAYNE, Ind., Apr. 26 -- When I told people I was going to Fort Wayne, Ind., to watch a minor-league indoor football game, most people I know reacted with surprise and disbelief. Some folks expressed amazement that I was driving hours out of my way to go watch a minor-league football game. Others, perhaps believing Fort Wayne to be a bit rougher than it actually is -- it's certainly not in the same level as Flint, Mich., or Youngstown, Ohio, or even Kalamazoo, Mich. -- reacted as if I had casually mentioned going to watch a football game in Gaza.

Well, I am proud to say I can deliver a positive report about The City That Saved Itself -- and about the Continental Indoor Football League, the small indoor-football minor league that put on the game between the Fort Wayne Freedom and the Marion (Ohio) Mayhem. The game was held in the Allen County War Memorial Coliseum: a very nice venue indeed, and one of which Fort Wayne can be proud. Getting to the stadium was remarkably easy and parking was a breeze and very affordable ($4). Inside, the stadium was well-appointed and staff were friendly -- all nice things. Now, about the Continental Indoor Football League.

Here at The Rant, we classify football leagues into a ladder-like structure. At the top, of course, is the NFL. Then comes the Canadian Football League, and after that, the Arena Football League. After that comes the af2, which serves as a developmental league for the AFL. But as amazing as it might seem, below this -- "below," at least in my mind -- are several minor leagues that aren't part of the arena-league system.

For instance, residents in the Great Plains can watch teams in the American Professional Football League, which has teams in Kansas, Nebraska, Missouri and Texas. Great Plains residents can also watch teams in the United Indoor Football league, which also has teams in Kansas, Nebraska, but also South Dakota, Montana and nearby states. (The UIF is also home to the silliest-named football team ever, that being the Omaha Beef. No, really. The Omaha Beef). There's also the American Indoor Football Association, which has 16 teams, most of which are around Ohio, Pennsylvania and the South, but are located around the nation. Then, there's the Intense Football League, with teams around Texas, Louisiana and -- oddly -- two in Alaska. Don't ask me how that works, but it apparently does.

Now, the cool thing about these leagues, if you ask me, is that they allow minor-league football to reach places that don't have AFL teams -- located in the big cities -- or af2 teams, located in smaller but still big markets like Manchester and Peoria and Lexington and Tulsa and Boise. These other teams compete in the smallest markets, many of which arguably couldn't support an af2 franchise, although I think a few could. There's certainly a market for many of these teams, and attendance in the several thousands for a game isn't uncommon. The Omaha Beef, for instance, got 7,634 at one of their home games earlier this year.

As for the CIFL, I think it has some real potential. The biggest difference between the minor minor leagues and the arena-league system is the absence of rebound nets, which the AFL cleverly patented. Instead, there's a "floating" goalpost hung from the rafters. Also, kickoffs -- at least in the CIFL -- have to land in the field of play, or else you get dinged with a big penalty. One big difference between the CIFL and the other leagues is that play in the CIFL is 7-on-7, as opposed to 8-on-8.

Before I went to the game, I dismissed this as a gimmick. But it works. Really. The seven-on-seven works. For one thing, it opens the game up to a lot more running -- particularly by the quarterback, if he can escape pressure from the linemen. Since the linemen are eligible receivers, it heightens the importance of man-on-man coverage. There's also more open space on the field, meaning well-executed running plays have a chance to go the distance, instead of having the back run three yards and fall down.

Anyway -- as for the game itself -- it was a blast. Much to my surprise, my third-row seat at midfield was actually a first-row seat behind the visiting team's bench, which was great fun. For one thing, I was so close to the field I could hear a lineman say, "Oh, shit!" as he jumped offsides. For another, it allowed me to join in the boisterous teasing of the opposing squad. Consider this conversation between me and former Ohio State quarterback Stanley Jackson, who was remarking on the raucous crowd:

Mr JACKSON: These guys aren't used to winning around here.
Mr KEPPLE: Neither are you!
Mr JACKSON: We're 4-2, in case you haven't noticed!
Mr KEPPLE, making a surprisingly quick comeback: I haven't noticed! I'm not from around here!

Admittedly, if I had known at the time Mr Jackson had played in Canada for several years, and had formerly been a quarterback for the Toronto Argonauts, I would not have been so snarky. But I was. Besides, the man played for Ohio State, and that was enough reason to try and egg the guy on. As it turned out, Mr Jackson was part of the amazing 1996 Ohio State squad that went 10-0 until they faced Michigan in the final game of their season, and lost, so I really didn't feel bad about it. Hey, my football loyalties run pretty deep.

However, most of the taunting between the fans and Marion was directed at defensive lineman Thomas McKenzie, who played for Riverside Community College in California. I liked McKenzie, as he gave as good as he got, and he was very much a leader on the squad. When Fort Wayne got out to a 14-0 lead, McKenzie was furious at his team's lackadaisal attitude towards the matter and rallied them accordingly: "14-0 to these dudes? 14-0 to these dudes? Nobody mad?!" McKenzie said. Well, they apparently got mad, because at halftime it was 24-20, and in the third quarter it was tied up at 27-27. McKenzie played quite well, too -- on one play he just flattened his opposing lineman. Someone should consider the man for a promotion, if you ask me.

Still, although Marion was able to tie the game up, they were not able to gain a lead, as Fort Wayne powered back to take an insurmountable lead, and they eventually won the game, 55-40. Although only 2,300 people or so attended the game, I was impressed with Fort Wayne's fans -- they had one section that was very much a cheering section, lauding every first down and every big play. Near the end of the game, some joker in the crowd started chanting, "Warm up the bus!" and soon everyone was taking part. Heh. "Warm up the bus!" I like that. I may use it here in Manchester. If I can, that is -- while I was away, the Wolves were on the road, and lost, putting them at 1-3. Supposedly big changes are in the works in terms of the Wolves' line up, but we'll see.

Anyway, I have to give Fort Wayne a lot of credit for putting on some really good football, and people around Fort Wayne should definitely give the Fort Wayne Freedom a try. The tickets are cheap and the games are a lot of fun, and the game I went to definitely made the trip to northeastern Indiana worthwhile.

Posted by Benjamin Kepple at 11:19 PM | Comments (0) | TrackBack

Old-Time Football in the Modern Age

FORT WAYNE, Ind., Apr. 26 -- When I told people I was going to Fort Wayne, Ind., to watch a minor-league indoor football game, most people I know reacted with surprise and disbelief. Some folks expressed amazement that I was driving hours out of my way to go watch a minor-league football game. Others, perhaps believing Fort Wayne to be a bit rougher than it actually is -- it's certainly not in the same level as Flint, Mich., or Youngstown, Ohio, or even Kalamazoo, Mich. -- reacted as if I had casually mentioned going to watch a football game in Gaza.

Well, I am proud to say I can deliver a positive report about The City That Saved Itself -- and about the Continental Indoor Football League, the small indoor-football minor league that put on the game between the Fort Wayne Freedom and the Marion (Ohio) Mayhem. The game was held in the Allen County War Memorial Coliseum: a very nice venue indeed, and one of which Fort Wayne can be proud. Getting to the stadium was remarkably easy and parking was a breeze and very affordable ($4). Inside, the stadium was well-appointed and staff were friendly -- all nice things. Now, about the Continental Indoor Football League.

Here at The Rant, we classify football leagues into a ladder-like structure. At the top, of course, is the NFL. Then comes the Canadian Football League, and after that, the Arena Football League. After that comes the af2, which serves as a developmental league for the AFL. But as amazing as it might seem, below this -- "below," at least in my mind -- are several minor leagues that aren't part of the arena-league system.

For instance, residents in the Great Plains can watch teams in the American Professional Football League, which has teams in Kansas, Nebraska, Missouri and Texas. Great Plains residents can also watch teams in the United Indoor Football league, which also has teams in Kansas, Nebraska, but also South Dakota, Montana and nearby states. (The UIF is also home to the silliest-named football team ever, that being the Omaha Beef. No, really. The Omaha Beef). There's also the American Indoor Football Association, which has 16 teams, most of which are around Ohio, Pennsylvania and the South, but are located around the nation. Then, there's the Intense Football League, with teams around Texas, Louisiana and -- oddly -- two in Alaska. Don't ask me how that works, but it apparently does.

Now, the cool thing about these leagues, if you ask me, is that they allow minor-league football to reach places that don't have AFL teams -- located in the big cities -- or af2 teams, located in smaller but still big markets like Manchester and Peoria and Lexington and Tulsa and Boise. These other teams compete in the smallest markets, many of which arguably couldn't support an af2 franchise, although I think a few could. There's certainly a market for many of these teams, and attendance in the several thousands for a game isn't uncommon. The Omaha Beef, for instance, got 7,634 at one of their home games earlier this year.

As for the CIFL, I think it has some real potential. The biggest difference between the minor minor leagues and the arena-league system is the absence of rebound nets, which the AFL cleverly patented. Instead, there's a "floating" goalpost hung from the rafters. Also, kickoffs -- at least in the CIFL -- have to land in the field of play, or else you get dinged with a big penalty. One big difference between the CIFL and the other leagues is that play in the CIFL is 7-on-7, as opposed to 8-on-8.

Before I went to the game, I dismissed this as a gimmick. But it works. Really. The seven-on-seven works. For one thing, it opens the game up to a lot more running -- particularly by the quarterback, if he can escape pressure from the linemen. Since the linemen are eligible receivers, it heightens the importance of man-on-man coverage. There's also more open space on the field, meaning well-executed running plays have a chance to go the distance, instead of having the back run three yards and fall down.

Anyway -- as for the game itself -- it was a blast. Much to my surprise, my third-row seat at midfield was actually a first-row seat behind the visiting team's bench, which was great fun. For one thing, I was so close to the field I could hear a lineman say, "Oh, shit!" as he jumped offsides. For another, it allowed me to join in the boisterous teasing of the opposing squad. Consider this conversation between me and former Ohio State quarterback Stanley Jackson, who was remarking on the raucous crowd:

Mr JACKSON: These guys aren't used to winning around here.
Mr KEPPLE: Neither are you!
Mr JACKSON: We're 4-2, in case you haven't noticed!
Mr KEPPLE, making a surprisingly quick comeback: I haven't noticed! I'm not from around here!

Admittedly, if I had known at the time Mr Jackson had played in Canada for several years, and had formerly been a quarterback for the Toronto Argonauts, I would not have been so snarky. But I was. Besides, the man played for Ohio State, and that was enough reason to try and egg the guy on. As it turned out, Mr Jackson was part of the amazing 1996 Ohio State squad that went 10-0 until they faced Michigan in the final game of their season, and lost, so I really didn't feel bad about it. Hey, my football loyalties run pretty deep.

However, most of the taunting between the fans and Marion was directed at defensive lineman Thomas McKenzie, who played for Riverside Community College in California. I liked McKenzie, as he gave as good as he got, and he was very much a leader on the squad. When Fort Wayne got out to a 14-0 lead, McKenzie was furious at his team's lackadaisal attitude towards the matter and rallied them accordingly: "14-0 to these dudes? 14-0 to these dudes? Nobody mad?!" McKenzie said. Well, they apparently got mad, because at halftime it was 24-20, and in the third quarter it was tied up at 27-27. McKenzie played quite well, too -- on one play he just flattened his opposing lineman. Someone should consider the man for a promotion, if you ask me.

Still, although Marion was able to tie the game up, they were not able to gain a lead, as Fort Wayne powered back to take an insurmountable lead, and they eventually won the game, 55-40. Although only 2,300 people or so attended the game, I was impressed with Fort Wayne's fans -- they had one section that was very much a cheering section, lauding every first down and every big play. Near the end of the game, some joker in the crowd started chanting, "Warm up the bus!" and soon everyone was taking part. Heh. "Warm up the bus!" I like that. I may use it here in Manchester. If I can, that is -- while I was away, the Wolves were on the road, and lost, putting them at 1-3. Supposedly big changes are in the works in terms of the Wolves' line up, but we'll see.

Anyway, I have to give Fort Wayne a lot of credit for putting on some really good football, and people around Fort Wayne should definitely give the Fort Wayne Freedom a try. The tickets are cheap and the games are a lot of fun, and the game I went to definitely made the trip to northeastern Indiana worthwhile.

Posted by Benjamin Kepple at 11:19 PM | Comments (0) | TrackBack

April 23, 2008

Proxy Statements

I LIKE VOTING on proxy statements. A proxy statement, for those unfamiliar with the term, is a form on which a company that needs its shareholders to vote on various proposals tells its shareholders about the proposals in question, and how it thinks they should vote. The latter option is traditionally a recommendation to vote Yes on the matters at hand, and I must say I delight in voting No.

True, it doesn't really matter. Generally speaking, shareholders get one vote per share they own in the company. Since my holdings are tiny, my No votes are far less than a rounding error when everything is added up. Meanwhile, some lame-o mutual fund that owns roughly eighty million more shares than I do gets to vote Yes on all of them, thus making my vote even more worthless than those of Fritz Mondale's electors back in '84. Still, it is fun. I only wish the voting options would be changed. I would prefer three: Yes, No, and No, No, No You Rotten Bastards.

Posted by Benjamin Kepple at 09:16 PM | Comments (0) | TrackBack

Perspective Required

FOR THE RECORD, The Rant is not impressed with the stories appearing in the press about the sudden "rationing" of rice at many U.S. supermarkets. This is for the following reasons:

1. The Government has not announced rice rationing, meaning the issue is not a fundamental supply issue but ultimately logistical in nature.

2. The Government has never rationed cereals, even during World War II, when we were fighting the Nazis.

3. When we were fighting the Nazis, the Government rationed meats, fats, sugar, vegetables and gasoline. Not only that, the Government set the national speed limit at 35 mph as part of a rubber-rationing scheme. 35 miles per hour. No wonder everyone signed up to fight the Jerries.

4. The rice products being "rationed" at these stores are not American rice, but rather fancy imported rice, as the American Digest blog notes. True, the imported rice (such as Thai basmati rice) is higher-quality, but it's not like you can't procure rice to save your life.

5. The price for American rice is higher than it used to be -- it now stands at about $850 per ton. This works out to $42.50 per cwt or $0.425 per pound. Four pounds of rice is enough to feed a family of four for an entire day. Thus, even if a family of four ate nothing but rice for a day, this rice would cost $1.64 at wholesale.

6. The purchase limit at the chains "rationing" rice varies from between 100 lbs. to 200 lbs. PER PURCHASE, as American Digest again noted.

In short, anyone who wants rice can have it, because American rice farmers are producing bushels and bushels of the stuff. Even the fancy stuff is available to anyone who wants it, even if stores may occasionally run out of the fancier grades due to localized speculative buying. So it seems hard to describe this practice as "rationing." I mean, I don't know about you, but it seems difficult to argue the nation is in fundamental peril because some stores are limiting people to buying a scant two or three months' supply of rice at a time.

Of course, I do realize that export bans abroad may eventually limit the supply of top-quality rice, but I doubt things will get that far. Even if it did, it would be no different than the present situation we have involving caviar, where beluga caviar cannot be found for any price. (Not that one could afford it even if it was available, but it's not like one can't enjoy caviar otherwise just because beluga is not on the shelf). Other kinds of rice would still be there. They will always still be there. Whipping up panic does not help matters.

Posted by Benjamin Kepple at 08:52 PM | Comments (1) | TrackBack

April 20, 2008

A Modest Proposal

ONE OF THE KNOCKS AGAINST the Department of Homeland Security's color-coded terrorism threat level chart is that the warning guide is neither specific nor all that helpful -- it has stayed in the "yellow," or elevated band, for roughly the last seven years. Occasionally, it will move up to "orange," or the high band; it has never, to the best of my knowledge, actually fallen into the "guarded," or relatively low band.

I am not an expert in security matters so I will leave the issue of tweaking the charts to the experts. But I do have an interest in financial matters -- to the point where people will sometimes ask me about what I think regarding various market happenings. Along these lines, I thought perhaps a chart detailing the probability of an utter financial disaster might prove helpful. People could use this chart to make easy determinations about where things might be headed, and issue pronouncements to folks accordingly. My own thoughts are that we're in the Gold band, for moderate risk, or the Orangeish band, for moderate to high risk; although I would caution readers that I am not a financial advisor, and you should always consult with a financial advisor before making investing decisions, investments can and do lose money, so on and so forth.

Anyway, without further ado, here is Benjamin Kepple's Daily Rant Financial Disaster Warning Scheme:

Posted by Benjamin Kepple at 10:00 PM | Comments (0) | TrackBack

April 19, 2008

Oops With a Capital O

IN RETROSPECT, it may not have been a good idea for Decca Records to turn down The Beatles, for Western Union to dismiss the telephone as a toy, for the Schlitz Brewing Co. to mess with its formula, and for something called the W.T. Grant Co. to use such negative incentives for a credit-promotion scheme that managers gave credit to anyone with a pulse.

These and other incredibly stupid decisions are recounted in Neatorama's compilation of The Stupidest Business Decisions in History, which makes for some fun reading. Amazingly, there are no entries related to the whole subprime lending mess ("Lending standards? Hah!") but I suppose that isn't technically history yet, but rather current affairs. On the other hand, I suppose this compendium can make the rest of us feel better -- no matter how bad things may be, at least we didn't screw things up like these guys did.

Posted by Benjamin Kepple at 08:52 PM | Comments (0) | TrackBack

April 15, 2008

The (Horrible, Dystopian) Future is Now

OH, GREAT. According to no less a source than The New York Times, the first-ever international conference on the artificial manufacture of meat is taking place in Norway. The symposium will look at the idea of growing various forms of meat -- basically, all the good ones we all enjoy -- in vats. Yes, vats. Apparently, this process is now being tested on the laboratory scale, and so it may not be much longer before we're harvesting hamburger meat out of tanks.

The Times man who wrote the story -- it was actually a blog post -- worries whether the Earth of 2050 can sustain an increasingly-wealthy population of some nine billion people while still enjoying succulent, wonderful meat. This has attracted bunches of comments, which can be generalized as follows, viz.

1. There are too many people. Having too many people is bad.
2. People shouldn't eat meat because it is wasteful and inefficient.
3. But why don't meat eaters turn vegetarian and enjoy life-sustaining meat substitutes?

Generally speaking, these complaints are pretty easy to answer.

Regarding the first point, those who believe the Earth is dangerously overpopulated can themselves easily take concrete and immediate steps to help reduce the population. True, the particular long-term solution of which I speak is contrary to God's law, but it is the most effective step in reducing one's impact on the planet. However, should that prove unpalatable, one could always get a vasectomy.

Regarding the second point, arguing that meat production is wasteful and inefficient is a non sequitur. It is only wasteful and inefficient if one lives in a giant fantasy land where everyone does one's bidding -- you know, kind of like the Soviet Union, but with no famine. Here on planet Earth, however, one could argue that beef is actually a better value for the consumer because he is paying less of a markup compared to say, corn. No, really. Hear me out on this.

Right now, wholesale beef is running about $143 per cwt (that is, 100 lbs). That works out to a wholesale price of about $1.43 per pound. When shipped, delivered and ground up, the end consumer may pay between $3 or $4 for his pound of ground hamburger. Although corn is cheaper -- it costs $6.06 per bushel or so, which works out to 11 cents per pound -- the markup is greater: a 4.4 lb. bag of corn meal will run you $2.34, or 53 cents per pound. Thus, your end markup for beef is about 200 pc or so, whereas the end markup for corn meal is about twice that. Plus, if you buy beef, you get tasty, succulent beef, and not corn, which is good for tortillas and chips but not much else. One thing the eco-economists forget is that Foodstuff A does not automatically equal Foodstuff B.

Regarding the third point, a major reason meat-eaters like myself do not switch to meat substitutes is that the meat substitutes aren't, well, meat. They don't taste like it, they don't feel like it, and they sure as heck don't fill one up like it. I know this because I was occasionally subjected to meatless cafeteria nights in college, and this exercise taught me that animal protein is important for my well-being. True, I could survive on meat substitutes -- at least one of which is actually grown in a tank -- but I'd prefer not to do so.

As for the fourth point ... well, we haven't much reason to worry about Soylent Green anytime soon. Nor, for that matter, do we have to worry about meat production. Although hardly anyone on the Times' message boards figured it out, the solution to all these matters is based in economics -- just as it has been in the past.

You see, we already know what happens when growing populations face limited food resources -- the rich get the choice stuff and the poor do not. The economic historian Fernand Braudel demonstrated this very well when he looked at the grim Iron Century (1550-1650) and compared this to Europe a couple of centuries earlier -- when the population was severely reduced thanks to the Great Pestilence. After the Plague, there was plenty of food for everyone, especially meat and dairy products; by the Iron Century, yon peasants were subsisting on bread and a few turnips.

Thus, we do not need to worry about meat production because we will eventually reach a productivity peak with it, and supply-and-demand will take care of the rest. Already meat production is growing at just 1.7 pc per year (4.7 million metric tons, according to the Times, on production of 270 million tonnes). Although one could expect more meat production to start up as the price rises, eventually it will come to a head as the costs of inputs for growing it rise accordingly. The price will then rise, and people will seek alternate substitutes -- like ground salmon, or chicken, or even meat grown in a frickin' vat -- as a result.

Incidentally, I've found my diet has changed over the past year or so -- I am eating far less meat and a good deal more chicken and fish. In part, this is because my desire for glorious meat has abated, and I'm definitely finding the economic value in fish. Why, I picked up a one-pound bag of farmed-raised smoked salmon trim for like $6 at the store, and when you figure that works out to like $1.50 per meal, there's little reason to go buy ground beef, which is clearly inferior to smoked salmon. Et voila, you can see the invisible hand working already.

Posted by Benjamin Kepple at 09:06 PM | Comments (0) | TrackBack

April 13, 2008

"Leatherheads" Actually an Enjoyable, Decent Movie

OK, I HAVE TO ADMIT IT: I went to see "Leatherheads" tonight not simply because I was bored, but because I thought it would make a good "Bad Cinema With Ben" post, and I haven't done one of those in a while. However, that Bad Cinema With Ben post is going to have to wait, because "Leatherheads" turned out -- wait for it -- to be an enjoyable movie. Silly in some ways, but a heck of a lot of fun.

That I enjoyed the movie quite a bit undoubtedly helps explain why financially, the film is facing a fourth-and-long and will probably turn the ball over on downs. This is a shame, because the movie really was fun. Not only was it fun, it was actually decent -- a movie that relies on wit and humor to score points, and clean humor at that. My God, what a concept. In short, it's a movie that you could take an eight-year-old to see and you wouldn't have to deal with any embarrassing questions afterwards. Also, if you ask me, there's something to be said for movies -- especially romantic comedies, which this was -- that actually have smart dialogue.

True, the marketing of the movie might not have been the best. I never got the sense it was marketed to couples or families, and it might not have been the best move to launch a football movie right when baseball season is opening up and basketball and hockey are headed to their playoffs. The multiplex where I watched the movie was deserted -- no doubt because a) everything else playing was shit and b) the Red Sox were playing the Yankees. In my own theatre, there were all of four people watching "Leatherheads," and I was the youngest one of them. Not good signs, if you ask me.

But that didn't take away from the goodness and beauty of the film, which really was quite well done, and managed to capture the feel of the Roaring Twenties. I always like movies about the Roaring Twenties. For one thing, I like seeing everyone having a good time, because God knows the Thirties and Forties weren't a picnic. For another, the mid-Twenties seemed like a pretty good time -- one full of optimism and full of hope. Of course, as we know, it's easy to be full of hope and optimism when the stock market is booming thanks to a margin-fueled bubble, but hey. Good times were had, and it's nice to see that on film these days; it's a nice escape.

Anyway, the plot takes some explaining, so here goes. Of course, before I do that, I should deliver a quick primer on the history of professional football in America.

As I think we all know, American football was the brainchild of none other than George Washington, and the first football game was played at Valley Forge in 1778. The first epic battle, between Col. Henry Purvis' Fighting Wolverines and Maj. Enoch Tarleton's Redcoat-Buckeyes, resulted in the Wolverines defeating the Buckeyes by the amazing score of 42-3. But in the years to come, football went dormant, as the victorious Americans became soft and decadent and started playing baseball.

However, in the late 19th century, thanks to the efforts of various American heroes, football started to develop into the great sport we know today. By the early 20th century, college football was wildly popular -- extremely dangerous, but still wildly popular. Eventually, massive crowds would turn out to watch college football games -- but professional football, which was formally established in 1920 with the creation of what is now the National Football League, struggled in its infancy. However, it started to pick up speed when the league started hiring football stars out of college -- such as Jim Thorpe, who was paid $250 a game when the Canton Bulldogs signed him in 1915. (When you consider a bricklayer at the time made $33 a week for 44 hours on the job, that made Mr Thorpe kind of a big deal).

Anyway, this is the period in which "Leatherheads" is set -- as professional football is first starting to make its way from an also-ran of a sport to an actual professional phenomenon. (There are some parts in the film where the historical aspects of football's development are completely laughable, but by that point you're having too much fun to really mind). George Clooney's character, Dodge Connolly, is the team captain of the woeful Duluth Bulldogs, who play to pitiful crowds and are lucky if they can get to the next town for their next game. Teams in their league are folding left and right, and Duluth itself finds itself in big trouble. Enter clean-cut Princeton College football star and war hero Carter Rutherford (John Krasinski), whom Clooney convinces to play for Duluth and provides the spark to relight football's pilot light. Enter Lexie Littleton (Renee Zellweger), who is investigating whether Rutherford's tales of heroism are all they're cracked up to be. With two guys and one girl, you can see where this is going.

All in all, though, "Leatherheads" was a fun movie and thoroughly enjoyable to watch -- and Mr Clooney got the classic "big football game" at the end just right. (Football fans who watch it will understand why). As I said, it's a shame the movie hasn't done well at the box office, but I'll probably pick it up on DVD when it comes out. Good movies about football -- that also happen to be good movies in and of themselves -- are precious hard to find.

Posted by Benjamin Kepple at 11:37 PM | Comments (0) | TrackBack

April 12, 2008

When Less is More

WITH THE WEAK ECONOMY, it makes sense for people to re-examine their spending on various goods and services. It's not only a question of trying to strengthen one's own balance sheet, but also taking advantage of economic conditions to score a better deal on the goods and services one regularly buys. Given this, I've been thinking about my own spending on communications, which represents a good portion of my monthly "fixed" expenses -- about 15 pc of them, to be exact. Here's how things break down:

Cost: $68 (incl. taxes and fees)
Status: Inviolate

Until Congress or the FCC decides that they'll allow cable customers to buy channels on an a la carte basis, I'm pretty much stuck with this bill, which provides me with access to a) CNBC, b) a whole bunch of sports channels and c) everything else. I never watch the channels in Category C, as many of the shows on these channels are so bad they would constitute violations of the Geneva Convention if they were shown to war prisoners. On half of them, one expects the idiot hosts -- whose peppiness is only exacerbated by the idiot producers who would pass off dryer lint as fascinating -- to erupt in exclamations of "EXTREME!" whenever something of moderate interest actually happens on their shows. And yet, I can't get the Big Ten Network nor a decent Canadian television feed (for the CFL games, of course) to save my life. Christ.

But wait, you say. What about satellite television? Not going to happen. I live in an apartment complex and I have a sweet deal going with my landlord, so I'm not about to screw things up by badgering him to let me have a DirecTV dish, even if that would solve all my problems in terms of access to football broadcasts.

Cost: $48 (incl. taxes and fees)
Status: Inviolate

At this point, I've come to like my high-speed broadband connection so much that losing it would be akin to cutting off my right arm. Could I survive without it? Well, of course -- but until I stop writing and relying on it for most of my communications needs, it stays.

Cost: $41
Status: Annoying but needed accessory

I am a late adapter to the mobile phone, which has been in wide use in America since the Eighties but a device I did not acquire until 2005. I use it as infrequently as possible, and although I have found it useful for certain things (like checking my stocks when I'm on the road, and meeting up with people when I'm on the road) I have found other uses of it (such as text messaging) patently uncompelling. Part of me would ditch it tomorrow if I could; the other part of me finds it useful enough to keep.

Cost: $70
Status: Hmmmmmmm.

Yes, I still have an actual copper-based "landline." Among my peers, this is a quaint anomaly: although there have been no jokes about whether I actually still use a horse-and-buggy as well, I imagine many of my friends have wondered about it -- particularly since it costs, you know, $70 per month, which is ridiculous. That does include unlimited long distance in the U.S. and Canada, and cheap calls to Mexico, for which I occasionally find use.

Still, I have considered switching to digital voice service, if only because it also offers the same package, but for just $40 per month. However, I am loathe to make the switch.

True, I have gotten beyond the "what if the power goes out" problem, as I would still have my mobile phone. Also, I think if I was in a situation where the mobile and cable networks both went down, the whole "being utterly screwed" aspect probably wouldn't change much if I still had my landline. But I am leery of turning over my phone line to the same people who provide me with cable television. And I'm also not convinced I should rely solely on my cell phone, even if I make all my calls on nights and weekends. Old habits die hard, I guess. That said, if anyone out there wants to convince me otherwise, hey -- go for it. I'm all ears.

Posted by Benjamin Kepple at 10:23 PM | Comments (2) | TrackBack

April 10, 2008

Ticketmaster Is The Servant of the Devil

OK, SO PERHAPS that's a bit harsh. But at the time I drew this conclusion, it seemed an eminently reasonable proposition. After all, for the privilege of buying a ticket to a sporting event, I had paid a markup that amounted to a 26 pc premium over the actual face value of the ticket itself. As such, I was a bit annoyed, and it slightly dampened the joy I had at getting the best seat in the house for the sporting event I plan to attend.

This may seem surprising to Loyal Rant Readers, given that I am traditionally accepting of the idea that businesses are in business to make money. Indeed, I would be the first to agree with the idea that the folks at Ticketmaster, most of whom I am sure are good and decent people, ought to be compensated for the services they provide, and at the terms they reach with the venues they represent. After all, I'm not a Communist. Still, it is one thing to pay a legitimate markup for a product and another to have that legitimate markup broken down into a series of duplicitous, wretched, egregious and downright insulting charges and fees, said charges and fees described in such a manner that I feel like I'm being treated like an idiot.

To be blunt about it, I would be fine if Ticketmaster just listed the $8 I paid to buy the ticket through them as a "customer surcharge" or some such. However, I am not at all fine with the said $8 being broken down into a $4 "convenience charge," a $1.75 "delivery" charge, and a $2.25 "order processing fee." Like I'm not going to fucking notice that I'm paying $8 -- which, as I mentioned, was a 26 pc markup -- for the privilege of buying the ticket through Ticketmaster. Or Ticketshafter, which is punny. Yeah.

OK, first things first -- what the hell is a "convenience charge?" I mean, I'm sorry, but it isn't exactly all that convenient to have to pay an additional $4 for the privilege of buying a ticket. For the love of Christ, call it something reasonable -- an on-line ordering fee or something. Hell, call it a "mandatory and arbitrary customer charge" for all I care -- just approximate exactly what it is that I'm paying for.

While I'm thinking of it, could someone at Ticketmaster explain to me why I was charged $1.75 for the privilege of printing out my own ticket using my home computer, while I could have received the ticket through the mail for no additional charge? I mean, clearly I missed something here, because I was under the impression that buying the ticket on-line would result in an additional net cost to Ticketmaster of roughly, oh, $0.00, while their cost of actually stuffing the ticket into an envelope and mailing it would probably cost $1. Yet for some reason, I'm being charged $1.75 for delivery when no actual physical delivery took place. Couldn't this be rolled into the "convenience charge?" That actually was convenient.

Finally, what's with the $2.25 "order processing fee?" I mean, are you kidding me? What processing? It's not like anyone has to do anything extra. I mean, it's one thing if you want to recoup the cost of the merchant transaction fee you'll have to pay to the credit-card issuer. I couldn't blame you for that. Yet the description of this $2.25 "order processing fee" makes me feel like a schnook.

You know, here's an idea -- why not just charge me $8 in one line item for your costs associated with acting as the ticket agent? I mean, I understand you have to keep the lights on and pay your employees and ship up God knows how much cash each quarter to corporate. I'm cool with that. Also, I just realized I indirectly own a tiny percentage of your operation through some investments I hold, so why not just be honest about it? I'm a shareholder! You can be honest with me! Hell, given that I'm a shareholder, boost it up a couple bucks if you want!

Of course, I do want the good people at Ticketmaster to realize that I do sympathize with them. It's not like you haven't heard any of this before. In fact, I imagine the company is kinda like North Korea -- it's got of plenty of good people, it's just that the ones at the top are evil and sadistic. As a result, I am guessing that this whole scheme about "convenience charges" and "order processing fees" was dreamed up in your marketing department, and that there is absolutely nothing you, the good rank-and-file employees of Ticketmaster, can do about it.

However, maybe you can find out just who came up with the idea of adding useless and pathetic fees, and exorcise their office. Because whoever did is clearly not human, but was rather shit out of Satan's festering bowels for the sole purpose of acting as a wicked scourge upon mankind. You'll need a Bible -- you've heard of it, it's this old book -- and some votive candles. Let me know how it goes, and I'll be glad to provide an update to my vast audience of influential readers. Well, OK, my decent-sized audience of influential readers. Dammit, I'm ranked in the 300,000s on Technorati, that's got to count for something. Anyway, thanks for listening.

Posted by Benjamin Kepple at 10:00 PM | Comments (4) | TrackBack

April 07, 2008

But At Least There's a Mint on the Pillow

IT IS RARE that the lead in a newspaper story provides the money quote, but The Wall Street Journal's story on the troubles facing the "condo-hotel" market manages to do it. Says the Journal: "For many investors, the condo hotel may go down as the of the real-estate bubble." Ouch!

The Journal goes on to describe the myriad woes facing investors who bought into condo-hotel projects, which let buyers purchase a room they could use whenever they liked, plus receive a share of the revenues whenever the room was rented to hotel guests. The trouble, however, is that the expected revenues for these hotel rooms didn't apparently materialize -- leaving the people who bought the condo-hotel rooms with less revenue than they expected and deteriorating values for the asset. The Journal interviewed one such unfortunate buyer, who says he got burned on his purchase of a room at a Las Vegas casino:

"It's been a very bad investment," said Moji Adekunbi, a 47-year-old engineer, who bought a $550,000 condo-hotel unit in the Signature at the MGM Grand in 2005 in Las Vegas, where one of every four hotel rooms being developed is a condo-hotel unit. Mr. Adekunbi counted on the cash flow from renting out his unit more than covering his $3,000-a-month mortgage payment, leaving him with a tidy profit.

He said the developer's sales staff led him to believe that the hotel would have 94% occupancy and $350-a-night rates, Turns out, he said he is netting only between $400 and $1,800 a month before his mortgage payment.

"I am in so much debt. I don't know how long I can sustain this," Mr. Adekunbi said. Making matters worse, many markets for these rooms are weak, meaning owners might lose much of their investment if they sell.

Representatives for the developer and the hotel operator said hotel-rental projections weren't discussed with customers before they bought their units, and some buyers made their own assumptions about rental income. "Some people's assumptions didn't pay off, and they are trying to find someone to blame," said MGM spokesman Alan Feldman.

Now, I must admit I have always been enamored of the idea of a condo-hotel room, if only because I would end up spending a good amount of time in it and aggravating the hotel staff:


ROOM SERVICE: Room service! May I help --
ME: Yes! This is Room 1412, and --
ME: -- I'm calling regarding my aviator's salad. Again.
ROOM SERVICE: Well, now what is it?
ME: Well, I'm sure you're aware that an aviator's salad is supposed to contain anchovies. Yet here I am, once again faced with a cheap imitation Caesar salad, that much to my annoyance does not have any anchovies on it, despite my repeated requests for them. So I suppose my question is, how exactly can I get some anchovies up here? I mean, if I have to go out and buy a tin, that's fine, but do let me know.
ROOM SERVICE: (grumbling) We'll send some up right away, sir.
ME: Thank you. I appreciate it.


ME: Idiot!

Also, if it brought in some revenue to offset the mortgage, well that would be great. But a condo-hotel certainly isn't the type of investment I would sink my life savings into, either. The word "hotel" is perhaps the operative one in the description and hotels can be a bit streaky as an investment. There are off-seasons and bad weather and all sorts of things that can crop up and gum up the cash flow.

As for the buyers -- well, it is difficult to feel a lot of sympathy for them. They're deserving of some, I guess -- it's no fun when your investments tank, and so perhaps some pity is deserved. Still, even in this day and age, there's something to be said for caveat emptor, and the assumptions these buyers seem to have made are a bit strange.

For instance, take our engineer quoted above. He figured he could make a profit based on the cash flow alone from the room rentals; but if that was the case, why would the price not have been higher? After all, if the rental income outstripped the cost of the mortgage income, that would have meant the developer was selling the room at a discount. Another buyer, who sprang for several condo-hotel units in Florida, says the sales staff for his units were preaching the virtues of the hot market and the necessity to buy quickly -- but is that was anything other than what they would do? They're salesmen.

Interestingly enough, though, some developers' enthusiasm for their projects may let the buyers off the hook, the Journal said. If sales staff made detailed statements about income, cash flow and other matters, then one could argue the condo-hotel rooms should have been marketed as securities and not just real-estate. Since securities sales have to be registered, the buyers could then unwind the deals because their transactions weren't registered with the proper authorities. You've gotta love the technicalities.

Posted by Benjamin Kepple at 12:48 AM | Comments (0) | TrackBack

April 06, 2008

The Silent Killer: Death by Blogging

THE NEW YORK TIMES has published an article that suggests all is not well in the blogging world. According to the Paper of Record, some professional bloggers are working under sweatshop style conditions, being forced to toil for the modern equivalent of piece work, and suffering accordingly. Even worse, a couple bloggers have actually died -- a result, the paper suggests, of their blog-centered lives.

I would be more sympathetic to the Times story if I did not happen to know professional conditions for young journalists just starting out are not particularly lucrative. For instance, I was talking with a relative some time ago when she told me a young man she knew had just started out working on a weekly newspaper, located back in the Midwest. She told me all about his job and what he was supposed to do, and etc., and my reaction to this was: "Eighteen thousand?" Although the young man made more than that per year, it was not much more than that, and he was certainly expected to work hard for that money. (My relative, however, was appalled at how close I was to guessing the kid's pay).

Of course, once you get into the higher echelons of the field, you can and do make more -- in many cases, considerably more. For instance, at the New York Times, reporters' top minimum salaries are about $87,000 per annum. But starting out at the very bottom rung -- challenging in many fields -- is particularly challenging in journalism. It's simply a supply and demand function. A lot of people want to write, and there aren't that many jobs, so the pay is lower. This dynamic continues as you go higher in the field, but since the skills and experience required for those higher-level jobs are more demanding, it reduces the supply of available workers, who can thus demand higher wages for their services. Somehow, I'm guessing things are the same in the professional blogging world.

So for the Times to suggest that bloggers are working in some sweatshop-style environment is a bit much, because neither bloggers nor journalists do so. When you're a professional, you work hard, and when you're just starting out, you work hard for not that much money. It is the way of things.

Also, to be perfectly blunt about it, a journalist's life (or a professional blogger's life) is not equivalent to that of, you know, a hod carrier, or a breakfast waitress, or those of myriad other people who work very hard in physically demanding jobs for not all that much money. A journalist gets to talk with people and write about it. A professional blogger does much the same, and due to the nature of blogging gets to have more fun with his work. It's not like they're putting up drywall for a living. This helps explain why lots of people want to write for a living -- it is fun work and they enjoy it. It's not as if the professional bloggers -- or the professional journalists, for that matter -- are slaving away cooking bricks in an oven.

I would argue that for the vast majority of bloggers, blogging is -- dare I say it -- fun. For me, at any rate, blogging is a great stress reliever -- I get to write about things in which I'm interested, crack a few jokes here and there, and talk with other people about them. I don't make any money at it, and in fact, lose $71.40 per year to engage in my hobby. For me, it also carries the benefit of being able to improve my skill set -- the faster I can write and the better I can write, the better it is for me.

Could I make money at this? Well, perhaps. Certainly one of the reasons I blog is to have something I could monetize in the very unlikely event I find myself made redundant. But since at this point blogging for cash would require me to turn over about 40 percent of my profits to the Government, and could also open up a can of worms I don't want to open, I've elected to keep the non-profit model. I'm perfectly fine with that.

But I would imagine that nearly all the bloggers who are paid for their work don't rely on it for their full-time income -- and most of the top bloggers out there still keep their day jobs. Rather, they find themselves in the enviable position of being able to make money through a hobby -- and so I doubt the circumstances described in the Times' story would apply to them.

Posted by Benjamin Kepple at 01:34 PM | Comments (0) | TrackBack

April 01, 2008

Huge Market Rally "Massive April Fool's Day Joke," Traders Say


Hedge Funds, Institutional Traders
Behind Huge "Joke" Buying Spree

Mr. Livermore Goes Long

Financial Rant

NEW YORK -- Today's huge, across-the-board stock market rally that sent every major U.S. index up more than three percent and resulted in big European gains was the result of a "massive" April Fool's Day joke, traders have admitted.

The joke, which began only half-amusingly early this morning at a Connecticut-based hedge fund, quickly caught momentum in the close-knit hedge-fund community. Not long after, institutional traders began to get in on the joke, whilst European traders delivered the coup de grace in a spree of buying. The end result proved "extremely funny" to all those who took part, as nearly all admitted they would "switch gears on Wednesday."

Among those taken in by the joke were retail investors in Muncie, Ind.; small speculators in Oneida, N.Y.; commodities traders in Chicago; and the entire adult populations of Hong Kong and Shanghai.

"Whooo!" shouted Piers Brosnihan, a junior hedge-fund trader at Stamford-based Dewey, Shortem & Howe LLC. "Oh, man! I can't believe they all fell for it! Boy, are all those (small investors) in for a surprise tomorrow when they check their portfolios about 3 p.m."

It was at Dewey Shortem where the April Fool's Day joke was launched. Dewey Shortem managing director Fred Argyle, the superior of Brosnihan's superior, had spent the wee hours scheming to find a way to get back at rival hedge-fund director Lloyd Frontiero, of Cos Cob-based Rainy Day Now LLC. Frontiero, Argyle believed, had purposely avoided him at the previous night's Help America's Struggling Children charity fundraiser. Not only that, but Frontiero had outbid Argyle in an auction for a weekend skiing in Whistler, British Columbia.

"After getting a tip from Lloyd's secretary's college roommate, I was pretty sure Lloyd was short on a whole bunch of financial stocks," said Argyle, who was embittered over Frontiero bragging about a considerable winning put he had made against the Bear Stearns Cos. "So I figured I'd get the bastard right between the eyes with a concerted and devious long press on financials. Then, I started thinking about it. The market's been so choppy that a big one-day rally, only to disappear the next day, would be a great joke. So I talked it over with the guys and we threw the whole goddamn portfolio long."

"It really was a brilliant idea," agreed Frank Johansson, managing director of Dolphin Cove-based Leverage This LLC. "Once I heard about it from Fred, I was like, 'Hell, yeah, let's go for it.'" The next thing I know, we're up like $80 million and we'd successfully closed out all our short equity positions before anyone in New York managed to notice. By 2 p.m. I was on the phone ordering six cases of 1985 (Louis Roederer) Cristal (Champagne)."

"I'm going to party like it's 1999," Johansson added.

Among the big winners yesterday was stock speculator Jesse Livermore, known for his sharp prowess in figuring out market trends before they happen. Livermore said he expected such a scheme to take place, and cleverly unloaded his short positions over the past week. By Mar. 31, expecting a spate of mutual funds to engage in window dressing, Livermore had made considerable long bets on blue-chip and financial stocks. On Apr. 1, when stocks unexpectedly rose, the scheme netted him millions on paper. However, Livermore -- like many others interviewed for this story -- said they immediately planned to switch gears.

"I'm going to ride it all the way to the bottom," Livermore said gleefully.

Despite the admission from big Wall Street players that the market's huge jump was a one-day thing, many investors refused to believe the increase was actually a huge joke.

"A joke? Oh, that's complete crap," said Morton Henries, an investor from Pierre, S.D., as he touted his success with one particular equity. "I told everyone this stock would go up, and it did. See? Look there, on the chart. There's a cup-and-handle pattern! At least, I think it's a cup-and-handle pattern. Anyway, the point is, it's going up, and it wasn't the result of any stupid hedge fund."

"A joke? Oh, that's complete crap," said Ma Jin-tao, an investor from Shenzhen, Guangdong, as he touted his success with one particular equity. "I told everyone this stock would go up, and it did. See? Look there -- on the registry index -- there are three eights in the registration number! Only clever and connected people could have managed that. Anyway, the point is, it's going up, and it wasn't the result of any stupid hedge fund."

"Dew neh loh moh on all filthy gweilo hedge funds and the stinking foreign devils who run them!" Ma added.

The particular equities Henries and Ma were discussing will fall 8.9 pc and 13.8 pc, respectively, on Apr. 2, sources in the hedge-fund world said.

As for the market itself, analysts said Wednesday's anticipated losses would likely run between 4 pc and 6 pc, and worse on the broader indicies, with the "true whirlwind" to hit about 3 p.m. Eastern time. The drop will likely begin in pre-market trading as hedge funds and institutional trading floors cash out their long positions and switch back to shorting the markets, with said shorting positions increasing as the day goes on. Most traders interviewed said they plan to end the day aggressively shorting stocks, and then spend between 4 p.m. and 6 p.m. trying to get a table at Masa.

Posted by Benjamin Kepple at 08:51 PM | Comments (0) | TrackBack

March 30, 2008

(Stop) Loss

IN FINANCE, the phrase "stop-loss" refers to a particular stock-trading manuever, in which one directs one's broker to sell a given position should it fall below a certain price. It can be used to lock in profits or pare losses. For instance, if you bought Stock A at $50, and it rises to $80, you can have the position automatically sold should it fall below $70. If you bought Stock B at $40, and you wanted to make sure you didn't lose too much money on it, you could put in a stop-loss order once Stock B fell below $35. It does not always work -- if your stock gets cut like a harvest-ready stalk of wheat on some horribly bad news, you'll have to take what you get. But it generally does the job.

As it happens, the Government also uses the phrase "stop loss." In its case, it refers to the military's practice of keeping servicemen on active duty beyond the time specified in their enlistment contracts. The practice is enshrined in federal law and the contracts themselves.

This past week, the twain have met. Apparently, a movie about the military's practice -- unsurprisingly called "Stop Loss" -- opened on Friday and did rather poorly, despite good reviews. The film pulled in just $4.6 million over the weekend. Subtract half of that for the theatre operators, etc., and that leaves $2.3 million in revenues on a film which -- although its budget isn't known for sure -- supposedly cost at least $30 million to produce -- if not $40 million. As for the semi-official spin about the opening weekend, Nikki Finke at Deadline Hollywood Daily has the key quote. She writes:

"It's not looking good," a studio source told me before the weekend. "No one wants to see Iraq war movies. No matter what we put out there in terms of great cast or trailers, people were completely turned off. It's a function of the marketplace not being ready to address this conflict in a dramatic way because the war itself is something that's unresolved yet. It's a shame because it's a good movie that's just ahead of its time."

I suppose my question for the moviemakers, then, is this. If nobody wants to see Iraq war movies, why the hell did you release it now? It's not like you didn't have any indication these types of movies weren't popular -- there have been some pretty spectacular blowups before now. So why not wait for a while? Why not put it in the can for a year and see if it would hold up?

Of course, one could argue it might have been a good idea to wait on making the thing in the first place, but perhaps that relies too much on 20-20 hindsight. But the combination of a) the war and b) the film being a bit of a downer wasn't exactly a recipe for box office success. I mean, I just don't understand how the producers could so badly misread the moviegoing public.

I mean, come on. First, we're in a war, a war that many people don't think is going all that well. Second, the economy is weak and getting weaker even as I type. Third, people are facing myriad personal and financial challenges as a result of the first two matters. They're facing skyrocketing costs for fuel and food, turmoil in the housing market and worries about the stability of their jobs. Given all that, I don't see how any reasonable person could conclude that people would flock to the movies and fork over fistfuls of dollars to be reminded of all this. Getting hit in the head with a crowbar would take a lot less time and cost a lot less money.

When things are going badly in people's lives, they want an escape. Why Hollywood hasn't been churning out smart comedies and romantic comedies and fast-paced thrillers is beyond me. Of course, some of these have been produced and they've done all right, but God -- I mean, ramp up the throttle here. When the subprime mess hit early last year and the credit crunch hit last summer, Hollywood's executives should have green-lit any comedy that came their way, to get it into production and fast.

It is not too late, of course, for Hollywood to turn things around. But they'll have to move quickly -- or hope beyond hope this recession won't be a short one.

Posted by Benjamin Kepple at 09:34 PM | Comments (0) | TrackBack

(Stop) Loss

IN FINANCE, the phrase "stop-loss" refers to a particular stock-trading manuever, in which one directs one's broker to sell a given position should it fall below a certain price. It can be used to lock in profits or pare losses. For instance, if you bought Stock A at $50, and it rises to $80, you can have the position automatically sold should it fall below $70. If you bought Stock B at $40, and you wanted to make sure you didn't lose too much money on it, you could put in a stop-loss order once Stock B fell below $35. It does not always work -- if your stock gets cut like a harvest-ready stalk of wheat on some horribly bad news, you'll have to take what you get. But it generally does the job.

As it happens, the Government also uses the phrase "stop loss." In its case, it refers to the military's practice of keeping servicemen on active duty beyond the time specified in their enlistment contracts. The practice is enshrined in federal law and the contracts themselves.

This past week, the twain have met. Apparently, a movie about the military's practice -- unsurprisingly called "Stop Loss" -- opened on Friday and did rather poorly, despite good reviews. The film pulled in just $4.6 million over the weekend. Subtract half of that for the theatre operators, etc., and that leaves $2.3 million in revenues on a film which -- although its budget isn't known for sure -- supposedly cost at least $30 million to produce -- if not $40 million. As for the semi-official spin about the opening weekend, Nikki Finke at Deadline Hollywood Daily has the key quote. She writes:

"It's not looking good," a studio source told me before the weekend. "No one wants to see Iraq war movies. No matter what we put out there in terms of great cast or trailers, people were completely turned off. It's a function of the marketplace not being ready to address this conflict in a dramatic way because the war itself is something that's unresolved yet. It's a shame because it's a good movie that's just ahead of its time."

I suppose my question for the moviemakers, then, is this. If nobody wants to see Iraq war movies, why the hell did you release it now? It's not like you didn't have any indication these types of movies weren't popular -- there have been some pretty spectacular blowups before now. So why not wait for a while? Why not put it in the can for a year and see if it would hold up?

Of course, one could argue it might have been a good idea to wait on making the thing in the first place, but perhaps that relies too much on 20-20 hindsight. But the combination of a) the war and b) the film being a bit of a downer wasn't exactly a recipe for box office success. I mean, I just don't understand how the producers could so badly misread the moviegoing public.

I mean, come on. First, we're in a war, a war that many people don't think is going all that well. Second, the economy is weak and getting weaker even as I type. Third, people are facing myriad personal and financial challenges as a result of the first two matters. They're facing skyrocketing costs for fuel and food, turmoil in the housing market and worries about the stability of their jobs. Given all that, I don't see how any reasonable person could conclude that people would flock to the movies and fork over fistfuls of dollars to be reminded of all this. Getting hit in the head with a crowbar would take a lot less time and cost a lot less money.

When things are going badly in people's lives, they want an escape. Why Hollywood hasn't been churning out smart comedies and romantic comedies and fast-paced thrillers is beyond me. Of course, some of these have been produced and they've done all right, but God -- I mean, ramp up the throttle here. When the subprime mess hit early last year and the credit crunch hit last summer, Hollywood's executives should have green-lit any comedy that came their way, to get it into production and fast.

It is not too late, of course, for Hollywood to turn things around. But they'll have to move quickly -- or hope beyond hope this recession won't be a short one.

Posted by Benjamin Kepple at 09:34 PM | Comments (0) | TrackBack

March 26, 2008

Ye Olde Fable of the Shoeshine Boy, Revisited

SO I WAS DRIVING into work this morning when the disc jockey on the radio -- I will not use the term "radio personality" -- started complaining about the alarming fall in his company's stock.

Now our disc jockey in question works for a station belonging to Clear Channel Communications Inc. (NYSE: CCU). Today, much to the horror of the firm's investors, the much-discussed buyout deal that would have paid shareholders $39.20 per share for the company officially blew up. It blew up because the banks funding the deal got snakebit.

Apparently, loans for leveraged-buyouts aren't worth what they once were, and so the $22 billion the banks were going to put up would have resulted in huge losses on their books. Now, why would a big loan, generating immense amounts of interest, somehow result in huge losses? The idea on its face makes no sense and at first glance is, to use the technical Wall Street term, "completely insane."

However, there's a good reason. It's because the banks would have to value the giant loan on a mark-to-market basis. Since the credit crunch has thrown the whole business of loan pricing into turmoil, what was once a sought-after deal has become the financial equivalent of Dutch Elm disease. So the banks essentially told the private-equity buyers and CCU shareholders they were out of luck. This has infuriated the buyers and shareholders, who argue that a deal is a deal, so loan us the money you told us you would loan us. The matter will almost certainly head to court, and the deal could still well happen -- although the outcome is now very much in doubt.

But back to our disc jockey. This morning, CCU shares suffered a project beating: they fell to $27 per share, which is not Bear Stearns bad but still a drop of 17 pc. In after-hours trading, they recovered a bit, but still -- they got hammered. So it was understandable that our disc jockey, on the air and broadcasting to the Greater Boston area, would wail and gnash his teeth about his losses. Exactly what his holdings were weren't clear. They could have included both stock and options, as the word "underwater" was used, although one draws inferences from a disc jockey at one's own peril. Still, that the man had suffered losses was clear, and he was morose.

It was at this point that one of the man's cohosts made the salient, although untimely, point that everyone on the show still had each other and that all they needed was love. Although I cannot argue with the sentiment, I daresay this was not exactly comforting at the time. When I have a bad day on the market, it takes me six or seven minutes to get to a "love and sunshine" moment. In the interim, I think about disemboweling the wretched, short-selling hedge fund trader who has conspired against my positions, and pray that he contracts syphilis and the gout. Still, the disc jockey showed admirable restraint, and ended the show with some shared gallows humor.

On the remaining minutes of my drive, I pondered the following alarming thoughts:

* When the hell did radio people start worrying about their investments? It's radio, for God's sake. Hardly anyone makes anything in radio.
* The disc jockey on the Top 40 station, one of approximately six stations I receive clearly up here, is talking about his investments. On a typical day, this station breathlessly talks about celebrity shenanigans and chides the people who call into it. It's not like it's Les Nessman being alarmed that his shares in Polaroid went kaputski.
* If a disc jockey is talking about his declining investments, it means we're clearly in a recession.
* Why the hell didn't the disc jockey talk about his investments when CCU was doing somewhat well? I mean, it was around $46 just a few years ago and was rangebound in the $30s for a long time.
* If the disc jockey had talked about his investments when they were going well, I could have applied the Joseph Kennedy Principle and switched all my holdings to cash, thus spectacularly timing the market and saving myself a bundle of money. (So the story goes, the elder Joe Kennedy sold his stocks in 1929 when he got a hot tip from a shoeshine boy).

But oh well. Such are the breaks of investing -- and one learns quickly that hindsight is 20-20. Also, it did highlight one benefit to recessions: as Fred Schwed once put it, "Are you quite sure you would care to see all those people who had big money then have it again?" That is not a bad point. Besides, as it turns out, hedge funds are among those suffering losses as a result of this whole mess. And how could one turn down an extra helping of schadenfreude?

Posted by Benjamin Kepple at 11:02 PM | Comments (0) | TrackBack

Let No One Say the Sport of Kings is Crooked

OOPS: Owner fails to back own horse in 33-1 win.

Key quote: "Two people asked me earlier should they back him and I told them no way."

This story is even funnier when one considers the owner in question is none other than Michael O'Leary, boss of the European budget airline Ryanair.

Posted by Benjamin Kepple at 10:00 PM | Comments (0) | TrackBack

Could Iceland Spread Financial Contagion?

IT COULD INDEED, argues Ambrose Evans-Pritchard. It seems the country has had to raise interest rates to an alarming 15 pc to stem the plummet in its currency -- and similarly-placed countries could find themselves in similar pickles.

Posted by Benjamin Kepple at 09:59 PM | Comments (0) | TrackBack

March 23, 2008

Credit Crunch Making Iceland Affordable Again

AS MANY TRAVELERS know all too well, the annoying weakness in the U.S. dollar is good for our exporters but not so good for our tourists, who travel overseas to find their dollars are increasingly becoming less and less valuable. As one wit famously put it, having dollars in London -- where the dollar now buys just 50p, compared to 72p or so back in 2001 -- is like having Mexican pesos to spend in New York.

But of course, the pain is not just limited to Yankees buying sterling. The dollar once bought 1.20 euros -- now, it buys just 65 euro cents; when it once bought about 135 Japanese yen, now, it buys just 100. The dollar once bought 8.3 Chinese yuan -- now it buys just seven. The once-mighty dollar once bought 1.80 Swiss francs -- now, it takes a penny more than a dollar to buy a Swiss franc.

One could go on -- and why not? Even once-toxic currencies like the Russian rouble and the Argentine peso and the Lebanese pound have been appreciating against the dollar. I mean, my God. Nearly everywhere you look, it's an utter rout.

But the key word is "nearly." There are some bargains out there, if you look closely. Jamaica, for instance. It is not someplace I would want to go, but the Jamaican dollar has weakened steadily over the past several years. Mexico, a place I do like visiting, is so closely tied to America's economy that its peso has been stable. Then, there's Venezuela's bolivar -- that's gone to hell since Chavez took power and started wrecking the place. So there's a little unrest -- it's cheap! Take two weeks!

And then, there's Iceland. Yes, that Iceland. You've seen pictures! You know the drill -- 300,000 people, all of whom look like models; midnight sun; hot springs; lots of seafood; kickass ring road that takes you around the whole damn place. Oh, you can also eat whale meat. OK, so that's not a selling point for most people, but I'd give it a go.

Anyway, as it turns out, the international credit crunch is playing havoc with Iceland's economy. The country's banking sector is in a world of pain, and prices on credit-default swaps have risen dramatically. For a look at the troubles facing the Icelandic economy, here's a good overview. The upshot for us, however, is that Iceland's krona is now depreciating against the dollar, and Iceland's loss is our gain. In just this past week, the ISK has fallen from about 71 to the buck to 79 -- at one point hitting 82. This is good news for Yankee tourists, because only a short time ago it took just 60 ISK or so to buy a dollar. The way things are going, perhaps things will get worse, and the Icelandic people will be even more welcoming to foreign tourists with strong, valuable American dollars.

At least, I hope so, because I'd like to think I could afford a nice exotic vacation someplace cool. And the way things have been going with the dollar, even Canada has suddenly become expensive. Gah!

Posted by Benjamin Kepple at 10:53 AM | Comments (0) | TrackBack

March 22, 2008

You Know, I Think This Story Beats the Guinea Worm

LOYAL RANT READERS may recall a post I wrote two years ago -- Gad -- about the primal horror known as the Guinea worm. At the time, I was convinced there was no worse pestilence on earth than this hideous parasite, which burrows through the still-living flesh of its victims. However, yet again, this world continues to amaze me, 'cause I just read a story I think is worse:


Yes, that's right. Horrible, plague-bearing, pestilential vermin actually climbing up through the plumbing and attacking God-fearing people in their apartments. This is clearly screwed up beyond all recognition, as a story from The Daily Telegraph of Australia shows, citing a dispatch from London:

A DISABLED woman has told of her horror at being attacked and bitten by a group of rats which came up through her toilet while she was sitting on it.

Maxine Killingback, who lives on her own, jumped up in shock when she felt the rat bite the top of her leg and fell over onto the floor, hurting her back.

After drowning the rat herself using a plunger and barricading the toilet to stop other rats which were trying to get out, she phoned Greenwich Council in London only to be told she would have to wait three weeks for them to come and sort out the problem. ...

Ms Killingback, who has rheumatism in her legs and back, said the rat was still trying to get out of the toilet after she fell on the floor.

She tried flushing the toilet chain twice but the creature came back each time. ...

Ms Killingback, who says she has a nervous disposition, then jammed a bleach bottle next to the plunger and kept it there until the rat had drowned.

She said: "Then there were more coming up, I could see their noses poking through the gap.

"I just put two big boxes of washing powder and other things on top of the toilet to block it and shut the bathroom door. I've never known anything like it. My next door neighbour came in to verify what had happened because I thought I was going mad."

A council spokesman said it was not possible to make an immediate appointment for its free rat control service due to high demand.

He said Ms Killingback had declined to be put on a standby list and an offer of advice on how to contact a private pest control contractor but would be visited by a pest control officer on April 7.

The spokesman said: "There are no records in the past 12 months of other complaints about rats in that block, and no immediate evidence of runs or holes."

I have to admit I am stunned to hear about such a thing, particularly in London, which last time I checked was one of the Western world's chief cities and a beacon to all civilization. But then again, perhaps I should not be. Apparently, our unfortunate Ms Killingback -- now there's a name -- lives in what is known as "council housing" in England, which is the British equivalent of our public housing here in the United States. However, despite the similarities in name, there are key difference between the programs.

In America, roughly 3 pc of our people (about 8.5 million) rely on public housing, although far fewer (about 0.8 pc, or 2.4 million) actually live in municipal housing projects. The rest rely on various other Government programs to assist them with their housing needs, most notably the Housing Choice Voucher Program. Essentially, the tenants pay their landlords low rents, while the Government pays the landlords a nice subsidy to make up for the rents they could have charged. The tenants get reasonable rents, the landlords get guaranteed income, and the Government -- well, it's the Government, that's what they do. That's the carrot angle.

The Government also has sticks: if the tenant screws up or trashes the place, he can get cast into Byzantine Government Housing Purgatory, in which he is struck off from getting Government housing aid in future. The landlord has to make sure the housing is clean and safe, lest he end up losing the Government's rent payments. The only trouble is the program's popularity: it is so popular, in fact, that most people who apply for it end up in Byzantine Government Housing Limbo, in which they are placed on a waiting list about as long as that for season tickets to the Green Bay Packers.*

Things are apparently different in Britain: about 15 pc of the people there live in "council housing." I don't know enough about Britain to say why so many more people live in Government housing there than do here. It is, of course, a much smaller country; it is also more in sync with the concept of socialism. The trouble for Britain, however, is two-pronged. First, since the Government owns many of the council estates, no one actually has a stake in them, so they become neglected and wretched. Second, because of the peculiar caste system in Britain and Europe held over from the old days, there are lingering class resentments bubbling below the surface -- the middle-class fear and mistrust the working class, and the working class hate and despise the middle class, while the upper class would prefer to not talk about any of this whilst enjoying cucumber sandwiches.

I would suggest a combination of these two factors might be why the civil servants of Greenwich Council have been so particularly unhelpful to Ms Killingback. Then again -- and this is the more likely reason -- they could just be complete and utter bastards. So dreadfully sorry, Ms Killingback, we shan't be able to immediately investigate. We can fit you in in about three weeks. Our apologies. No, there's nothing we can do. Good morning, Ms Killingback, good morning.

I do find it interesting, though, the dual reports about Ms Killingback's situation. There have been no instances of vermin trouble in her block in the last twelve months, despite Ms Killingback's report that rats have physically attacked her in her water closet. At the same time, however, Ms Killingback cannot receive free rat control services right away because the demand for them is so high. One wonders why it is the pestilential rats, known for their cunning and guile, have conveniently managed to stay away from her block for so long. They, unlike men, have no inclinations towards prevarication.

* There are roughly 74,000 names on the Packers' wait list right now. With an average attrition of 70 tickets per year, a person joining the list now could expect to get season tickets in oh ... AD 3,065 or so. This analysis puts it at AD 3074, although I've seen calculations as high as AD 4,360. It all depends on how one runs the numbers.

Posted by Benjamin Kepple at 10:23 PM | Comments (0) | TrackBack

March 18, 2008

Not the Brightest of Ideas, Perhaps

AS I UNDERSTAND IT, on Mar. 29 various well-meaning people around the globe (as of now, about 142,000, or .002 pc of the world's population) will shut off their lights for an hour to take part in a consciousness-raising exercise about global warming. Along with these 142,000 folks, some 24 cities around the world -- including Chicago, San Francisco, and Atlanta -- will also take part, thus potentially cajoling millions of others to join along.

I have to admit, being the contrarian I am, that news of this initially made me wish my electricity use was time-priced, so I could take advantage of the lowered demand on Mar. 29. Sadly, my power supply is not so rationed, and as such I can derive no benefit from any well-meaning person taking part where I live. Still, although I certainly can't complain about well-meaning people wanting to show they're well-meaning, I have to wonder whether this is the most effective way of promoting an agenda that at its heart is focused on less consumerism. Consider how some Australians are celebrating the mass-switching-off, according to The Sydney Morning Herald:

When the international campaign to raise awareness of climate change was launched last year, several restaurants in Sydney and Melbourne turned their lights off. The Carricks (Shaun and Margarita) were also keen to participate but their first Earth Hour dinner started as a fairly informal affair when some of their B&B guests asked if they could join them for their evening meal.

"We said, 'You're welcome to have it with us but we're doing the Earth Hour, turning all the lights off,"' Margarita recalls.

This year looks set to be more lavish, with about 15 guests joining them for three courses of organic patés, wines, meats, fruits and vegetables grown on their Pine End Organic Farm or sourced from local organic suppliers.

The evening will open with a petanque tournament and a selection of homemade cheeses, before the sun goes down and lights go out at 8pm. Ten per cent of the evening's proceeds will be donated to the WWF, one of the organisers of Earth Hour.

Petanque is a fancy term for lawn bowling, or so I am told. I have never lawn bowled but I understand that socially it is on par with croquet, another fancy lawn sport at which I was never very proficient. As you can see, the Carricks and their friends are of the proper sort and so it would be bad form to suggest having 15 people over for a grand dinner party might use more energy than that which would be saved during the hour of diminished lights. Even if some are already staying at their bed and breakfast. Also, shouldn't the cheese course follow the dessert?

But I quibble.* As I said, if people wish to switch off their lights for an hour because it makes them feel good, by all means they should go for it. Still, after that -- why not get some solar panels, or switch to wood-fired heat, or plan to buy a more fuel-efficient car, or buy a bicycle and actually use it, or take other very real and very concrete steps towards reducing one's consumption? Since increasing standards of living across the globe will subsequently mean higher prices for things we in the Western world already enjoy -- too much money chasing not enough goods -- why not act accordingly? It might even help more than one's pocketbook.

* It might also be bad form to note that out of the 142,000 or so people committed to take part, 113,265 are from the G-7 nations and Australia, while only 3,221 are from the BRIC nations -- Brazil, Russia, India and China.

(via Tim Blair, whose reaction leads one to believe that during Earth Hour, he might crank up his diesel generator).

Posted by Benjamin Kepple at 10:41 PM | Comments (0) | TrackBack

March 17, 2008

Après Ce, Le Déluge

STUNNED BEAR STEARNS employees report to work. Key quote: "I've been at Bear for 11 years and I want to vomit." Also, apparently some joker taped a $2 bill to the front entranceway, in reference to the firm's share price, which leads to the second key quote: "Where is the $2 bill? I might need that tomorrow!"

Among the highlights of the linked story: a clever real-estate agent who handed out his card at the door. Also, the local coffee/bagel vendor is understandably concerned.

STUNNED INVESTORS: It's time to lawyer up. Key quote: "I can't divulge privileged conversations, but shareholders don't contact me when they are happy with the way things are going with their investments."

STUNNED NEW YORKERS: Uh, this can't be good for the local economy.

STUNNED RETIREMENT PLANS: The Toronto Globe & Mail reports: "Bear Stearns employees wiped out." Former top boss Cayne's stake reportedly falls from $900m to $13m in value. That has got to suck.

STUNNED EXECS LEARN BEAR DID ONE THING RIGHT: No golden parachutes! Oddly, the Reuters story describes this as "insult to injury," although it seems more like getting "hit in the head with a crowbar."

PRESENTED WITHOUT COMMENT: Here's a report on Cramer's take on Bear Stearns.

Posted by Benjamin Kepple at 04:17 PM | Comments (2) | TrackBack

Well, At Least Not Everyone's Doing Badly

IF ANYONE HAS any extra money lying around -- yes, I'm talking to you, the guy who had the Bear Stearns puts -- you might be interested in this fancy deal: the chance to buy twelve personalized bottles of Champagne from Perrier-Jouet. The Champagne will be largely based on the house's 2000 Belle Epoque Champagne, but each twelve-bottle set will be customized with Champagne liqueur from varying years.

What's that? The cost? Oh, mon Dieu ... Monsieur, if one must ask ... each unique and personalized half-case, which will be one out of just 100 specialized half-cases, and which comes with a tete-a-tete with M Deschamps, the house's cellar master, along with storage in the house's cellar, will be offered for the most reasonable price of €50,000 (US$1.8 million).

Posted by Benjamin Kepple at 03:46 PM | Comments (0) | TrackBack

The IRS Has Pleasantly Surprised Me

WHEN I HEARD ABOUT the IRS's plans for issuing the Government's stimulus payments, I experienced a feeling that can best be summed up in a line from a James Taylor song: "after the laughter, a wave of dread." Since the IRS tends to send the payments based on the last digits of Social Security numbers, I tend to get screwed. I figured that long after most people had gotten their checks, blown them, recovered from the hangovers associated with blowing them, then spent more money just for the hell of it, I would get my stimulus payment sometime in August or September.

True, there would have been advantages to this. For one thing, the way the economy is going, the money would have arrived just as I needed to stock up on canned goods and other necessities. After all, if we extrapolate things out, it's certainly possible -- although admittedly not probable -- that by summer, civil authority will have broken down and armed gangs of men will rove the streets of my fair city, looking to waylay any traveler who has more than half a tank of gasoline in his car. However, as I understand it, these types of disturbances are now confined to a few small pockets of the Rust Belt, so I have nothing to fear as of yet.

But much to my surprise, the IRS did NOT stretch out the payments schedule and so I will get my payment in May like pretty much everyone else. Here's when the payments will be issued. (note: .doc file) So I am pleased, and based on the schedule, so should we all. Of course, until we get thrown into another Depression and ... well, apres ce, le deluge.

Posted by Benjamin Kepple at 03:30 PM | Comments (0) | TrackBack

March 16, 2008

Two Bear Shares Now Equal One Cup of Coffee

J.P. MORGAN & CHASE CO. has agreed to buy the ailing Bear Stearns investment house for the stock equivalent of $2 a share, according to the Wall Street Journal and plenty of other news outlets. No, that's not a typo. $2 a share. Two. As in, $2 will buy you two-thirds of a gallon of gas, or $2 will buy you half of one of those fancy coffee drinks at Starbucks. That $2.

My reaction can be summed up as follows: Holy Mary Mother of God.

Oddly, the headline on the WSJ's piece says, "J.P. Morgan Rescues Bear Stearns." I don't know about you, but if anyone in future ever tries to rescue me in the same way -- please, let me drown and kick me in the teeth as I go over the waterfall. $2 per share is not a rescue. $2 per share is a calculated, cunning, brutal and utterly ruthless offer. It's the Wall Street equivalent of some Soviet commissar in World War II going into a failed general's office, and offering him a gun with one bullet in it. It is absolutely and totally merciless. It is also completely and totally brilliant.

This, by the way, would make me very happy if I was a shareholder of the J.P. Morgan & Chase Co., because Bear Stearns did have a book value of $80 per share. (Their building alone is worth more than $1 billion). After all, it seems unlikely J.P. Morgan would buy into the thing if it was too toxic, and they're getting Bear Stearns for practically nothing. Sadly, I am not.

I would be absolutely furious, however, if I was a Bear Stearns shareholder. I mean, can you imagine how people are reacting right now, learning they're getting two bucks a share? Thank God, though, I am not one. The destruction of wealth that's occurred here is incredible. I mean, my God -- can you imagine it? A week ago, shares in this company were worth $70. $70! It reminds me of some old verse from France back in the 18th century, after the Mississippi Company scandal broke:

My shares, which on Monday I bought
Were worth millions on Tuesday, I thought
So on Wednesday I chose my abode
In my carriage on Thursday I rode
To the ballroom on Friday I went
To the workhouse next day I was sent.

Of course, we are enlightened these days, and we do not have workhouses any more. This may or may not be comforting to the poor bastards who now find themselves in a world of complete and utter pain.

The deal values Bear at roughly $236.2 million. At $2 per share, that works out to 118.1 million shares. These shares were once worth $169 each, back in the good old days of January 2007. At that rarefied price, Bear was worth just under $20 billion. What an amazing collapse; what an incredible destruction of wealth. Although the effects won't nearly be as bad as it would have been if Bear collapsed, the cascading effect of the per-share drop from $70 to $2 in a week could still be considerable for the larger economy. When you wipe out $8 billion in wealth in a flash, it can't be anything other than painful. According to Bloomberg, some of Bear's larger shareholders have lost unimaginable sums of money. One guy supposedly lost more than $1 billion. Yes, with a B.

As for the little guys -- well, God help them. The WSJ says:

Many well-known investors, from billionaire Joe Lewis to Bruce Sherman, the head of Legg Mason Inc.'s Private Capital Management Inc. money-management firm, have seen the value of their stakes in Bear Stearns plummet. The pain could be most acute for Bear Stearns's employees, who are steeped in a culture of personal ownership -- and hold about a third of the firm's shares outstanding.

Wow. A third.

I feel really bad for the back-office and middle-office guys at Bear. God knows I have no inside knowledge of anything going on there, but in big collapses like this, it always seems like the little guys and the middle guys are the ones who get squeezed like an overripe grapefruit. Plus, they're the ones who tend to get thrown overboard first should any job losses -- which the WSJ seems to think pretty likely -- come down the pike. Of course, the senior guys are almost certainly feeling a lot of pain too -- how much of their money, one wonders, was tied up in Bear stock and its options? But you'd think they would have an easier time landing on their feet elsewhere. Wouldn't they?

Of course, as for the rest of us -- hopefully Bear's troubles won't cascade too much, and the sale will right the overall Wall Street ship. Then again, Japan and Singapore are both off three percent right now in morning trading. Australia and New Zealand are down too.

You know, this could be a tough week.

Posted by Benjamin Kepple at 09:53 PM | Comments (0) | TrackBack

March 14, 2008

The Stupidest Thing I've Read in Years

AFTER DOING SOME SEARCHING in my archives, I know I've been prone to using the above phrase in the past. For instance, I used it back in 2005 when a Colorado woman sued her teenaged neighbors for leaving cookies on her doorstep. I used it later in that year when Forbes ran a stupid story about how to deal with criticism from bloggers. I also used it in October, when George Monbiot wrote something I thought was particularly dumb.

Still, I don't use the phrase lightly, and I'm about to use it again.

You see, I wasted precious minutes of my life reading Rachel Beck's hagiography of Eliot Spitzer's crusading reforms against Wall Street, and couldn't believe some of the things written in it. Not about Spitzer, mind you -- I don't really care about that -- but about business and about Wall Street. I mean, can someone explain to me how the Associated Press's national business columnist can write something like the following, yet somehow not be mortified at doing so? (emphasis added)

Whatever he might have done in his personal life, though, doesn't tarnish that he made the investment environment more open and friendly for individual shareholders. Before Spitzer got involved when he was New York's attorney general, no one knew of the conflicts that existed in stock research or that mutual funds were giving trading perks to wealthy investors and hedge funds.

"No one knew of the conflicts that existed in stock research?" Are you kidding me?

Now, I'll admit that novice investors -- perhaps even investors with some knowledge of the markets -- might have taken the advice they received at face value back in the day. But certainly not everyone did, and I would submit that even back in the good old Nineties, there was a pretty strong correlation between "experience in investing" and "distrusting stock market analysts." And by the good old Nineties, I mean the 1890s, because anyone who knows Wall Street's history knows trust is a precious and scarce commodity there.

But even in the 1990s, most investors had to know (or should have known) something was up, even if they didn't operate on the sound principle of trusting no one. All one had to do was analyze the companies being touted. If the financials were shaky and the fundamentals weren't sound and the business plan wasn't sound, then the stock was crap and you didn't buy it, never mind what some analyst said about it. And if one did operate on the trust no one principle, one just assumed the analyst was lying (or worse) and paid no attention to what he said. Looking at analysts' recommendations in the aggregate also paid dividends, because even if the stock was a dog hardly anyone actually said to sell it. Thus, the "buy means hold and hold means sell" principle.

In the days before disclosure -- which rightfully became popular after the tech crash -- I was taught to view stock recommendations with deep suspicion. I remember when I made my first investment, which I decided upon after reading about it in a financial newspaper. I had to justify it; I couldn't rely on the simple fact it was listed as a good pick. It didn't matter what the writer said, even if he was as morally pure as an angel, because you had to operate on the assumption he had already bought the stock, and so had his friends. That was a lesson I remembered very clearly. (This is one reason why, on the rare occasion I talk about my investments, I tell you what I own).

Yet Ms Beck goes on. She writes:

After the dot-com bubble had burst and companies long heralded as corporate America's finest were collapsing under the weight of scandal, Spitzer went into attack mode. His first targets were the big investment firms that had made so much money during the stock market's surge in the late 1990s. Little did we know that much of it was at our expense.

We would soon learn that their game was fixed: Research analysts were recommending stocks so that their investment-banking colleagues could win more lucrative business from those same companies. Spitzer subpoenaed e-mails from Wall Street firms and used those messages to build a solid case of how they misled investors.

The findings were shocking, especially for anyone who bought a high- flying Internet stock during the market boom.

One e-mail showed star Merrill Lynch & Co. analyst Henry Blodget describing InfoSpace Inc., one of the firm's highest-rated stocks, as "a piece of junk." Another exchange had Salomon Smith Barney telecommunications analyst Jack Grubman telling a friend that his recommendation of AT&T stock helped secure spots in an exclusive Manhattan nursery school for his twin daughters.

Ten Wall Street firms eventually agreed to a $1.4 billion settlement, and new rules were put in place that separated banking and research. Independent research was also made more available to investors, and the firms were required to disclose potential conflicts of interest.

I would contrast Ms Beck's words with those of Mr Fred Schwed Jr, who wrote (in "Where Are the Customers' Yachts?") the following about the validity of financial predictions:

On the theoretic side our chief preoccupation will be an inquiry which is quite simple, but which is more awful in its implications than any Senate investigation. It has to do with what has become the major part of the business of Wall Street -- the foretelling of price moves. Concerning these predictions, we are about to ask:

1. Are they pretty good?
2. Are they slightly good?
3. Are they any damn good at all?
4. How do they compare with tomorrow's weather prediction you read in the paper?
5. How do they compare with the tipster horse-race services?

Mr Schwed -- who wrote those words in 1940, for Pete's sake -- was a bit more charitable in his assessment of these predictions, essentially chalking them up to foolishness and human failure than downright avarice. But his opinion of them is pretty clear:

It is hard to find a Wall Street man, from the oldest partner to the youngest "runner," who is willing to be just a croupier. This causes a great deal of anguish in the long run, and the reasons for it are both human and economic.

For one thing, customers have an unfortunate habit of asking about the financial future. Now if you do someone the signal honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers -- "I don't know."

The average male likes to sit at breakfast and tell his wife and children what Adolf Hitler will do month after next. This is a harmless vanity. But from this it is an easy step for him to go downtown and start telling people what United States Steel will do month after next. That is liable to lose someone's life savings for him.

Of course, if you want avarice, there are plenty of books detailing that. In 1923, Edwin Lefevre wrote "Reminiscences of a Stock Operator." In the 1980s, Michael Lewis wrote grand books about Wall Street's excesses. Still, considering that skullduggery involving stocks has existed since the Mississippi Company debacle in 1719-20 -- hell, since the Amsterdam Stock Exchange was founded in 1602 -- it's kind of tough to be "shocked" at anything Wall Street does. I mean, Daniel Drew would be shocked people actually got in trouble for the stuff Spitzer crusaded against, which he would have considered child's play. (This was because Mr Drew was ruthless).

Dismayed at Wall Street's actions, on the other hand -- well, God help us if the $415 trillion in derivatives contracts come unglued. You-know-who has the story. Again.

Posted by Benjamin Kepple at 11:01 PM | Comments (0) | TrackBack

March 11, 2008

The Other Shoe

SO ABOUT 1 p.m. today I finally had a chance to take a break at the office and look -- with trepidation -- at how the market was doing. I was surprised to find green arrows where there were normally red, and even more surprised when I checked later and found the arrows were still green. After all, it's been a bad past few days. But I figured, hell -- the market still had an hour and a half to go and I was sure the other shoe would drop, and the hedge funds and computerized trading models would kick in and do their thing and we'd be screwed again.

Much to my surprise, though ... the market kept going up and had its best day in more than five years. It's still going up even now -- Japan and Singapore are up about 3 pc in morning trading there.

Normally, I would be ecstatic at this ... but you know, I'm waiting for the other shoe to drop right about now. I really am. Maybe that's just because this whole "market turmoil" thing has left me a bit jaded. But it could be worse. I could have owned Wellpoint Inc., which on this banner day lost 28 pc of its value. IN ONE DAY.

The fates, they are cruel and cunning.

Posted by Benjamin Kepple at 09:27 PM | Comments (0) | TrackBack

It's Not Just an Adventure ...

... IT'S A WAY TO GET BACK the ladies from the corrupt local bigshot -- the corrupt local bigshot with his fancy foreign car, conspicuous gold jewelry and fashion sense derived from a bad American music video! Yes, the Ukrainian Army -- join up today!

(The best part, if you ask me: when the local bigshot says the Ukranian equivalent of a slow-motion "NOOOOOOOOO!")

Posted by Benjamin Kepple at 07:47 PM | Comments (0) | TrackBack

... Then Again, Maybe It Is

THE RUSSIAN ARMY, on the other hand, focuses a lot on "blowing stuff up" and "meeting old friends who haven't been ground into the dust by the Army's sadistic officer corps."

If that doesn't get the kids to sign up, well, maybe the bad Russian Army rap will get them interested.

Posted by Benjamin Kepple at 07:46 PM | Comments (0) | TrackBack

March 06, 2008


THIS IS WHAT HAPPENS when "catching a falling knife" turns into "we caught the knife, but it sliced our wrists in the process." Ambrose Evans-Pritchard has the full story:

Property investment trusts shares have crashed on panic selling in New York after an affiliate of the private equity giant Carlyle Group fell into default on mortgage losses.

Carlyle Capital Corp (CCC) said it had missed margin calls to seven creditors and lacked collateral to cover its trading exposure to mortgage securities.

The news sent shockwaves through the financial markets. Carlyle Capital has leveraged itself to the hilt, taking out debt at a ratio of 32:1 to invest in the US mortgage assets. It held securities worth a $21.7bn (£10.8bn) last month, raising the spectre of distress sales on a scale large enough to trigger a cascade of liquidations by other funds.

Fears of forced sales ravaged real estate investment trusts, which also own big holdings of Fannie Mae and Freddie Mac debt. Anworth Mortgage shares plunged 24pc and Capstead Mortgage was off 25pc.

Thornburg Mortgage crashed 60pc after revealing an SEC-filing in New York that it had missed a $28m margin call to JP Morgan Chase. It has suffered from the collapse in investor demand for so-called jumbo mortgages.

An analyst report that UBS was engaged in a "fire-sale" of mortgage securities worth $24bn accelerated the flight from risk. Most of the assets are alleged to be Alt A securities, the next notch up from sub-prime. The Dow Jones index fell 164 points in early trading to 12,090.

Leverage. It works both ways.

Posted by Benjamin Kepple at 10:32 PM | Comments (0) | TrackBack

Important Milestone Achieved

THERE'S NOTHING like a productive day at the home office. Today, I hit an important milestone with my finances -- I figured out how to configure my home-finance computer program so that when it starts, it plays the sound of the New York Stock Exchange's opening bell rather than an annoying musical tone. Sweet.

I am hopeful this move, which replaces the musical tone with the repetitive, obnoxious, ball peen hammer-like sound of the opening bell, will help soothe my nerves when I see how much money I've lost each trading day.

UPDATE: 10:36 p.m. No it does NOT soothe my nerves. Christ Almighty!

Posted by Benjamin Kepple at 10:26 PM | Comments (0) | TrackBack

Please, Lads, DO Hold the Line!

THE NEW YORK TIMES has an interesting piece up today on the machinations of the European Central Bank, which due to concerns over inflation has held its interest rates steady. That's in stark contrast to how the Federal Reserve here has acted, as the Fed has basically figured a little inflation is better than having growth disappear.

Of course, the trouble with the ECB's scheme is that interest rates in Europe -- now at 4 pc -- are greater than those here in the US, where the Fed Funds rate is 3 pc, and will probably fall. This interest-rate imbalance has understandably led to the euro shooting up against the dollar: it now stands at -- God in Heaven -- about $1.538 to the greenback! That's roughly 32 pc higher than when the euro was introduced back in the day and nearly 88 pc higher than the euro's all-time low, which was something like 82 U.S. cents.

As a result, I have to think European firms -- particularly those that do a lot of exporting -- are just screaming at the currency-borne pain they're going through. But since it doesn't seem like the ECB will change its tune anytime soon, my question is: will the ECB's paranoia about inflation throw the Eurozone into a recession? It's possible to have inflation without growth, of course, but if there's one thing that causes inflation, it is growth. Take growth away from the equation ...

Of course, as an American, this is exactly how I want the ECB to manage its economy. A super-strong euro only helps American exporters and weakens European importers -- and since I have no plans to travel to Europe or buy European goods anytime soon, this is only to my benefit. True, it will require some sacrifice: the lox portion of my weekly bagels-and-lox will have to be Alaskan rather than Scottish. But in these tough economic times, we all have to do our part.

Posted by Benjamin Kepple at 10:12 PM | Comments (0) | TrackBack

February 27, 2008

Report: Kepple to Spend Economic Stimulus Aid in Michigan

"Rant" Chief Kepple to
Spend Stimulus Cash in Michigan

Aid to Benefit Struggling Sport of
Professional Football

New Hampshire "Cool With That"

Financial Rant

ROMULUS, Mich. -- Officials in southeastern Michigan were "cautiously optimistic" about reports Benjamin Kepple, the chief of an Internet content provider based in New Hampshire, planned to spend all of his economic stimulus money from the Government in the Great Lakes State this spring.

Kepple, who admitted he would "blow the whole stupid check" while on a long weekend in the depressed Rust Belt state, told reporters from New Hampshire he had made plans to spend the money on football tickets, hotel rooms, rental car charges and other sundry items. All told, Kepple said, his planned expenditures in Michigan so far worked out to $458.60, a sum which would "very likely" top $600 when all is said and done.

"That doesn't count the cost of the plane ticket, but that's because the airline isn't headquartered in Michigan," Kepple said. "True, that money might theoretically support some airline support staff at Detroit Metro, but I don't think including that would square with GAAP. But I'm pretty pleased with the result, nonetheless."

"I'm going home!" Kepple added cheerfully.

The news prompted shock and amazement among several economists, who have questioned just how many people plan to spend their stimulus payments.

"Mr. Kepple's admission he is spending the cash on a vacation is downright incredible," said Tod Forsythe, an economist with the University of Michigan. "As of our latest count, he is one of just 27 Americans to admit spending the money on non-essentials. Normal people are saving the money or spending it slowly on basic necessities, not blowing it on some weird off-season bender of a vacation. Indeed, his shockingly flagrant admission of expenditures is the most noteworthy we've seen since Mrs. Bertha Schwenke of Fond du Lac, Wisc., announced she would buy a dinette set from Floyd's Fast-Delivery Furniture."

Kepple readily agreed with Forsythe's statement his trip was "completely irresponsible," but said the timing and availability of football made it a "clearly worthwhile, even if completely irresponsible, trip."

Kepple said roughly one-sixth of the money would be spent on tickets to professional football games, including the All-American Football League's Team Michigan and the Arena Football League's Grand Rapids Rampage. This might have been more, Kepple said, although he "missed out" on the chance for 50-yard-line tickets with the AAFL, and "really close-up" AFL tickets are in his judgment overpriced.

"I don't know about you, but I've never been enamored with the idea of a wide receiver flying into my seat," Kepple said. "I like to be close to the action, of course, but not TOO close. I was once in the third row of an arena-football game when two players flew over the boards and landed on the poor folks in the first row; that's close enough. If I can get seats a few rows back for less, that's worth it."

"In any event, though, I can't wait to go see the Grand Rapids Rampage again and I'm especially excited to see the AAFL's Michigan team. I'm in line for a fantastic seat there and can't wait for the game. Hail to Michigan!"



Michigan officials hailed the news.

"This is great! An out-of-stater is coming to Michigan and spending money! Based on our estimates, this could generate as much as $2,000 or even $3,000 in economic activity around the state," said Marcus Henry, the state's Secretary of Business and Economic Development.

"I'm not an out-of-stater! I grew up in -- " Kepple cut in.

"I mean, how wonderful it is to see a returning native son come home to Michigan," Henry said, correcting himself. "We hope he has a wonderful time. Also, we hope his example will serve as a shining beacon to others -- especially out-of-staters -- to visit the great state of Michigan, which has unparalleled natural beauty, excellent cultural attractions and amazing activities for the entire family. Did I mention our Web site? It's here."

"If you seek a pleasant peninsula, look around you," Henry added.

However, others were not so enthused about the news.

"That's all well and good, but how the hell does that help me?" asked Arnold van der Kringer, an unemployed machinist in Holland, a western Michigan city located near Lake Michigan. "He's not coming to Holland. He's not even getting close to Holland. I mean, explain to me how a native son won't visit Holland during the Tulip Time Festival, will you?"

"Tulips. God, that's fitting, given the economy and the subprime mortgages, isn't it?" van der Kringer said. "Speculative bubbles, everywhere you look! Rotten thieving scoundrels!"

As for Kepple's present home of New Hampshire, officials there were reportedly "cool" with Kepple's decision to spend his stimulus money back in Michigan.

"Look, let's be honest about this," said an unnamed official in the Department of Revenue Administration. "In December, we had a 3.6 pc unemployment rate. In Michigan, it was 7.6 pc. The place lost nearly 80,000 jobs in the past year. Eighty thousand! So, you know, we're not really going to complain that much if Mr Kapple, or whatever his name is, decides to spend some money in his home state. Because his home state ... well, it's Michigan. God help them!"

Posted by Benjamin Kepple at 10:37 PM | Comments (0) | TrackBack

February 25, 2008

LGT Dragnet Reportedly Widens

THERE COULD BE big trouble ahead for more of Europe's wealthiest citizens. According to the Times of London, a now-infamous bank informant has apparently sold data about clients of Lichtenstein's LGT Group to the British tax authorities for some £100,000. This follows a scandal which erupted in Germany, when the same informant sold client data to the German tax authorities for the equivalent of £3.2 million. Armed with the data, the German tax authorities have gone after their targets with the Teutonic sadism one would expect, and one would expect the Inland Revenue to also conduct a thorough investigation. In all, the LGT data reportedly covers some 1,400 rich people from around the world, about half of whom were German.

This is a fascinating story on bunches of levels, but unless you've been following it closely, it requires a bit of background.

Lichtenstein is a tiny little country in middle Europe: a holdover from the myriad tiny states that made up the Holy Roman Empire. It has all of 35,000 people. Its monarch, His Serene Highness Prince Hans-Adam II, actually has a bit of power. It is a very pretty country and has great skiing.

After World War II, it was broke.

Realizing that being poor sucked -- and perhaps realizing their country was tiny and would have trouble quelling a beer hall fight, much less stave off foreign invasion -- the Litchtensteiners cleverly figured out a way to make themselves indispensable to Europe. Simply put, they turned the country into a tax haven. Now Liechtenstein is rich and prosperous. It also has many private banks, which secretly safeguard untold billions of dollars of wealth. Reportedly, some of this wealth may not have been adequately taxed by the depositors' home countries, but Liechtenstein took the rational view this was none of their business. You can do this when you're your own country.

Thus, when data about foreign nationals' bank deposits got out onto the market, there was a grand hue and cry. For one thing, this is all hugely embarrassing for the LGT Group, the financial firm whose data was compromised, because an important part of being a secret tax haven is, well, secrecy. This is also embarrasing for the Government of Liechtenstein, since the House of Liechtenstein owns the LGT Group. (You can do this when you're your own country). Now, with reports that records from a second bank are in the hands of the German tax authorities, it's become hugely embarrassing for the whole country. As if that wasn't enough, now the Germans are up in arms that hundreds of their wealthiest citizens duped them for so long, and want Liechtenstein to stop what the Germans consider aiding and abetting tax evasion. It may be the Liechtensteiners tell the Germans to go pound sand, but we'll see how it all turns out. Germany may have ways of making them cooperate.

The informant who originally sold the data also, according to The Times, offered to sell data to the tax authorities in France, Canada, Australia and the United States. Heh. Now that could prove interesting. Since America taxes its citizens on a global basis -- you pay no matter where you earn the income -- it seems almost certain at least some Americans will get caught up in the dragnet. It would be even worse, of course, if it turned out those Americans had funded their accounts/trusts/investments with untaxed dollars.

On the other hand, though, I don't know how many Yanks will get caught up in this dragnet. For one thing, there are plenty of offshore havens closer to America than Liechtenstein -- the Bahamas and the Caymans, for instance. For another, the United States' tax regime isn't all that bad -- and clever rich people can structure things so their tax rates are actually quite reasonable. When you have long-term capital gains taxes at 15 pc, it's not exactly confiscatory -- even when you add in the AMT along with it.

This is, one must note, in sharp contrast to Europe's stupidly punitive tax rates. In France, for instance, the top income tax rate is 48 pc; in Italy, it is 43 pc; Germany stands at 42 pc and the UK rings in at 40 pc. Those European rates don't include things like value-added taxes, wealth taxes or other such levies that make the tax burden even more crushing. Plus, the European systems aren't as generous as ours when it comes to credits, deductions and the like. So there's a lot less incentive for Americans to try screwing around with the Government's tax authorities, which The Rant would note is Really Not a Good Idea.

That said, I can't argue that holding money abroad is prima facie evidence of skullduggery, either. If anything, holding a small amount of one's money in reserve someplace else might be useful, especially if things go to hell in the United States and we're all fighting each other for canned goods. However, if that's a route you follow, you are expected to report your holdings accordingly to the Internal Revenue Service -- and this incident involving Liechtenstein shows that reporting those holdings would be a good idea. In situations like this, it's a hell of a lot easier to ask for permission than forgiveness.

Posted by Benjamin Kepple at 11:41 PM | Comments (0) | TrackBack

February 24, 2008

Sharper Image Collapse: A Harbinger of Trouble Ahead?

UPON HEARING THE NEWS of the Sharper Image Corp.’s Chapter 11 bankruptcy filing, one may be tempted to simply write off the disaster as the isolated struggle of a badly-performing retail company. However, one wonders if that’s all there is to it.

After all, this is the Sharper Image Corp. For decades, it has produced goods that no American – much less the company’s customers – have actually needed. When times were good, it made millions of dollars per year doing so. When times weren’t so good, it still made millions of dollars, because many people have far more money than sense. Thus, its spectacular collapse – SHRP lost nearly $60 million on revenues of $525 million this past year – may be symptomatic of a far more serious problem: that many American consumers are finally tapped out and have stopped buying crap they really don’t need.

To best explain just what Sharper Image sold, it is perhaps useful to rely on an old episode of "Garfield and Friends." In this episode, Jon becomes angry with Garfield upon discovering Garfield has bought goods including an indoor birdbath, a lifesize statue of Leonardo DaVinci sculpted from macaroni, and – I quote – "a battery-operated battery charger that’s only good for charging its own batteries." This is not, I would submit, all that different a product selection than what one would find in Sharper Image’s catalog. Indeed, consider the goods on offer at the chain’s Web site:

* A $500 air purifier that magically cleans the air of bacteria, mold sports, viruses and other nasty pathogens. A perfect product for people who a) find the idea of opening their windows to the elements appalling; 2) never vacuum their apartments and c) want to pointedly show off to friends their air purifier from the Sharper Image Corp.

* A $3,995 “Human Touch Zero-Gravity Massage Chair” that improves circulation and expands lung capacity, along with providing massage therapy. Of course, for $3,995, some might want such a chair to do a bit more, like cure the gout and toast bagels, along with – well, you figure it out. Alarmingly, although the Human Touch Zero-Gravity Massage Chair retails for $3,995, the people at Sharper Image also sell three-year and five-year service guarantees for an additional $299.95 and $399.95, respectively. I don’t know about you, but if I paid four grand for a goddamned massage chair, I’d want the company to stand behind it until California falls into the ocean.

* A $50 electric wet-dry shaver for men that – wait for it – can be used to “trim and shave everywhere -- chest and abs, underarms, groin area, legs, back and shoulders.” You know, because this couldn’t be done with an $8 safety razor.

* A $70 set of knives – now selling for $27 – used solely for slicing and preparing cheese. Oddly, although this comes with a cutting board, the set doesn’t come with anything useful, like a cheese grater. Interestingly, one of the selling points for the knives is that they’re “ergonomically designed for comfort and safety.” This may explain why the knives were price-reduced, because they’re fucking cheese knives. They’re supposed to be sharp, and thus, inherently unsafe.

* A $50 set of high-end Tupperware, although supposedly better than Tupperware. Oddly, the high-end not-Tupperware also comes with a service guarantee available. I mean, it's (practically) Tupperware, for Christ's sake. It will last until the end of time.

* A $500 GPS device that tracks one’s dog when one’s dog escapes the grasp of his owner and bounds off someplace. Speaking as someone who had to go retrieve the family golden retriever when she would bound off into the wilderness, part of me thinks it should be incumbent upon the dogs to return home to their masters. After all, dogs are smart animals. As such, they should know they have a sweet deal going: their masters provide them with food, water, shelter, dog treats, table scraps, and attention, in return for following five or six simple commands a day.

Indeed, why anyone would buy any of these products is a complete mystery. Even people normally prone to making stupid decisions – marketing executives, disc jockeys, the Detroit Lions’ front office – would be hard-pressed to come up with reasons to buy this stuff. So in that regard, one can argue that the crap Sharper Image sold was so craptacular that eventually, even idiots balked at buying the stuff.

Still, there’s no denying that for a long time, Sharper Image sold lots of stuff, and did so at a profit. So one might argue that Sharper Image’s operation wasn’t prepared for a time when many people are tightening their belts and looking towards the future with a wary eye. If it was the latter situation that led to the company’s bankruptcy and not the former, then perhaps we shouldn’t laugh too loudly about Sharper Image’s troubles.

Posted by Benjamin Kepple at 02:09 PM | Comments (0) | TrackBack

February 20, 2008

Tick, Tick, Tick, Tick ...

MARTIN WOLF, A COLUMNIST for the Financial Times, recently devoted space in his column to a rather interesting list. The developer of this list is Prof Nouriel Roubini, of the Stern School of Business at New York University, and its topic is nothing less than what one might call a financial doomsday scenario.

There are many very good reasons why one must take Prof Roubini seriously, but here are two of them. First, he called our present state of affairs way back in 2006. Back then, the people laughed, but they are not laughing now. Second, his list is cold, calculated, and the events described therein are eminently possible. Prof Roubini's list, according to Mr Wolf, is as follows:

Step one is the worst housing recession in US history. House prices will, he says, fall by 20 to 30 per cent from their peak, which would wipe out between $4,000bn and $6,000bn in household wealth. Ten million households will end up with negative equity and so with a huge incentive to put the house keys in the post and depart for greener fields. Many more home-builders will be bankrupted.

Step two would be further losses, beyond the $250bn-$300bn now estimated, for subprime mortgages. About 60 per cent of all mortgage origination between 2005 and 2007 had "reckless or toxic features", argues Prof Roubini. Goldman Sachs estimates mortgage losses at $400bn. But if home prices fell by more than 20 per cent, losses would be bigger. That would further impair the banks' ability to offer credit.

Step three would be big losses on unsecured consumer debt: credit cards, auto loans, student loans and so forth. The "credit crunch" would then spread from mortgages to a wide range of consumer credit.

Step four would be the downgrading of the monoline insurers, which do not deserve the AAA rating on which their business depends. A further $150bn writedown of asset-backed securities would then ensue.

Step five would be the meltdown of the commercial property market, while step six would be bankruptcy of a large regional or national bank.

Step seven would be big losses on reckless leveraged buy-outs. Hundreds of billions of dollars of such loans are now stuck on the balance sheets of financial institutions.

Step eight would be a wave of corporate defaults. On average, US companies are in decent shape, but a "fat tail" of companies has low profitability and heavy debt. Such defaults would spread losses in "credit default swaps", which insure such debt. The losses could be $250bn. Some insurers might go bankrupt.

Step nine would be a meltdown in the "shadow financial system". Dealing with the distress of hedge funds, special investment vehicles and so forth will be made more difficult by the fact that they have no direct access to lending from central banks.

Step 10 would be a further collapse in stock prices. Failures of hedge funds, margin calls and shorting could lead to cascading falls in prices.

Step 11 would be a drying-up of liquidity in a range of financial markets, including interbank and money markets. Behind this would be a jump in concerns about solvency.

Step 12 would be "a vicious circle of losses, capital reduction, credit contraction, forced liquidation and fire sales of assets at below fundamental prices".

These, then, are 12 steps to meltdown. In all, argues Prof Roubini: "Total losses in the financial system will add up to more than $1,000bn and the economic recession will become deeper more protracted and severe." This, he suggests, is the "nightmare scenario" keeping Ben Bernanke and colleagues at the US Federal Reserve awake. It explains why, having failed to appreciate the dangers for so long, the Fed has lowered rates by 200 basis points this year. This is insurance against a financial meltdown.

Is this kind of scenario at least plausible? It is.

YES, IT IS PLAUSIBLE. At this point, though, I do not think it all that probable -- although that could certainly change if the economic situation turns for the worse. The trouble with economic cycles, of course, is that they have a cascading effect. That's great on the upside, not so great on the downside. Right now, we're pretty clearly on the downside.

After all, just because the numbers look good on paper does not mean we can avoid getting into a pickle. Unemployment now stands at 4.9 pc, real inflation stands over 7 pc, and nationally, home prices are now back to where they were in 2005. (They may be worse in your neighborhood). All in all, that's not too bad, considering where we have been, and those who argue a recession is not in the cards would say there's little to worry about. After all, they say, what's five percent unemployment and seven percent inflation? Do you not remember the late Seventies and early Eighties? How about the early Nineties?

Fair enough. However, such an analysis leaves out one minor point, which is that the late Seventies, early Eighties, and early Nineties sucked like New Coke sucked. You can't compare today's numbers to the bad old days without noting the good old days were better. As I see it, the trouble is that things may -- could -- perhaps -- get worse. Where will we be then, if unemployment jumps to seven or eight percent, and that causes real inflation to spike, and home prices slowly swirl down the drain?

Were that to happen, I think we'd find ourselves somewhere about Step Four on the list. As for the points after it, I'm not entirely sure they're in the proper order, but that's just how I see things. For instance, I see Steps Five and Six as being too early on the list, while Steps Seven, Eight and Nine are a bit too late.

If you look closely into these things, you can already see instances where private-equity investments are failing: they may be isolated at this point, and indicative of poor management rather than an economic disaster, but they are happening. If we work from Prof Roubini's argument that at least some LBOs are on the brink now, it stands to reason that a worsening in economic conditions would cause that to happen sooner, not later. The same goes for Step Eight -- the corporate defaults. And as for Step Nine -- well, it only takes a few bad bets for hedge funds to implode. Already 49 hedge funds have either gone bust or suffered badly, according to no less a source than the Hedge Fund Implode-O-Meter. When you consider that many hedge funds are heavily, heavily leveraged -- it may not take much more to push them over the edge. Nor, as Prof Roubini notes, can these funds turn to the central bankers -- instead, their competitors will carve them up and eat them. One of the reasons why Long-Term Capital Management failed back in the day was because their competition figured out what was happening to LTCM, and turned on the wounded fund like a pack of jackals.

Conversely, though, I don't see Steps Five and Six happening until we see a bit of Steps Seven, Eight and Nine. The commercial real-estate market has already gotten its ass kicked and so I would argue that it would take real trouble, with a Capital T, to make things get markedly worse there. (As I, to my sorrow, know). As for Step Six, I find it hard to believe any large regional or national bank would seriously go under and wipe out their shareholders. Politically, it could not happen; the Government would step in and act.

If we get to Step Ten, though, I'm moving to California. I have some friends there, and they have a lemon tree in their backyard. I could sell the lemons on commission and survive that way.

But let's step back a bit. I don't think we'll get to Step Ten. Nor do I think we'll get to my Step Nine -- the massive bank failure. For that matter, I don't think we'll get too far down the list before the world's major Governments take action. They can, you know. And they will -- if only to save their own necks from angry voters.

Already we have heard rumblings about the so-called "Plunge Protection Team" -- the shadowy Government panel with extraordinary powers to intervene in the markets -- from Ambrose Evans-Pritchard at The Telegraph, and most recently John Crudele at the New York Post. No one knows what this panel can do and how they would do it, but they're definitely out there. Given the press coverage, it seems clear they want it known they're out there, even if at this point, they only want to be remembered in the dim reaches of the back of one's mind. If they do take action, well -- we might not all be reduced to selling apples just yet.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

February 19, 2008

A Friendly Notice to Spammers

HELLO, SPAMMERS! I trust you are having a good day, and a profitable one as well. We've got to talk, though, about the comment spamming here at Benjamin Kepple's Daily Rant.

Now, you should know that, unlike most bloggers, I do not consider you evil and do not pray daily for Satan himself to disembowel your ragged, naked corpses in his hideous, razor-sharp maws. No, really. I understand that you are simply trying to make a living. Furthermore, I understand that you are almost certainly not the ones really benefiting from your spamming activities.

Rather, you are some underpaid engineering student making 20 rupees / 7 yuan / 15 roubles / 1.2 million Zimbabwean dollars per hour. For this wage, you must scour the Internet for your cruel paymasters, hoping and praying desperately that somewhere, some blogger will have his guard down and you can infest their sites with links to counterfeit pharmaceuticals, weird and curiously sad pornography, money-transfer schemes and other ungrammatical attempts at fraud, and supposed concotions that would improve a man's virility to the point where Priapus would feel inadequate. Success at this endeavor, I know, is a heady feeling -- why, your bosses might even pay you the wages they owe you!

Yet sadly, you visit The Rant quite frequently and spend precious minutes entering comments, only to discover they've gone into the Internet's equivalent of the Ghostbusters' containment unit. This is not good.

Not so much for me, of course. With the blogging program I use, it takes about ten seconds for me to clear the cache and drive a stake through all your efforts. Click, dump, click, dump. For you, however, this is disaster. I mean, you do not spend fourteen hours a day in a windowless back room someplace just so I can delete your comment spam. Besides, Mr Singh / Mr Wei / Mr Smirnov / Mr Zanupf has made it very clear that failure is not an option, and if you do not make quota you will regret it.

So, I would like to politely inform you that your spamming attempts here are a waste of time. Instead, you should take up a profession that will not only help you feed your families, but make you feel good about yourselves. Like smuggling small arms, for instance! Or illicit trading in conflict gems! Heck, if you're really feeling adventurous, consider a career in the lucrative fields of small-time banditry or transport extortion! Just think: you'd be able to set your own hours and meet interesting people! Maybe you could even rob your own boss at the spam factory -- that would be, as the saying goes here, some kind of bonus.

Posted by Benjamin Kepple at 10:10 PM | Comments (0) | TrackBack

February 18, 2008

Hedge Fund Man Seeks "Live-In Model and Maid"

ATTENTION, YOUNG TWENTY-SOMETHING GIRLS! Are you looking to move to New York? Are you looking for free room and board? Are you looking to live in a semi-glamorous apartment in a semi-glamorous part of town? All these things COULD be yours ... provided you're willing to do dishes and vacuum the place a bit. Some caveats: you have to be young, and white, and pretty. Oh, and sleeping with the "gentleman" of the house is encouraged.

As appalling and horrible as this offer sounds -- to say nothing of its cheapness -- I can assure you the above was an Actual Offer Made on Craiglist by a "young hedge fund analyst" who also does "runway modeling on the side." It was first reported in no less than Gawker's helpful and appropriately named "Live With a Douche" feature, and the poster in question is being gleefully mocked and harassed as we speak. Strangely, there's no mention of his violation of the nation's housing laws, but I'm sure there will be soon enough. Also, since everyone else is having fun beating up on the sap, I think I'll join in the fun.

First off, it's worth nothing that our man describes himself as a "hedge fund analyst." Focus on the last word in that sentence, because it means that he is Not Making Hedge-Fund Money. He's not even a trader, for God's sake -- he's an analyst. This means he makes ... oh, let's say $90,000 per annum. Now this would be a great salary anywhere else, but he a) lives in New York and 2) lives in Manhattan. Thus, all his money is being eaten up by taxes and the cost of living. What's that? Well, yes, he probably does get a bonus, but let's face it: the man probably blows it all on expensive vodka. In strip clubs.

Besides, the man openly admits having to work a second job, supposedly as a runway model. Well, this alone is proof that he is not doing well enough at his first job. Which reminds me: the guy describes himself as 6'3", athletic and very good-looking. Since most people in finance look like Woody Allen, it shouldn't be too hard for the insular hedge-fund community to figure out just which analyst this is. Once they do, this advertisement will undoubtedly spark serious conversations at his firm whether to fire the idiot, because he's clearly spending his off-work time prancing around on some runway or hanging out at clubs, when he should be at home watching Bloomberg waiting for the Asian markets to open. I mean, come on -- get back to work!

Plus, when you think about it, this isn't exactly the most intelligent offer in the world. If you want maid service in New York, it's going to run you about $89 every two weeks. This is not a lot of money, considering the maids are going to actually clean the place professionally and not just mail in a performance like the man's "new roommate" eventually would. This expense works out to about $192 per month. Since the man's ad lists the princely sum of $500 (assumedly, per month) in compensation, this would leave $308 for lap-dances or something. That's a hell of a lot cheaper than a "roommate," when you factor in the costs of room (half the apartment's rent), board (say $300/mo.), the $500 stipend, and the inevitable blackmail (priceless) that would come along with anyone taking the man up on this offer.

This should also spark serious questions at the man's firm about whether they can trust their precious analyst, because the man clearly has no discretion, has questionable business judgment and certainly seems cavalier with his meagre pay. Plus, he's a schmuck. OK, so that last point might actually be a good thing in the hedge-fund world; I don't know. However, even if he was an ass working for a firm full of asses, the first three sins are unforgivable. As was the posting of this advertisement. If the guy's lucky, it will soon be forgotten and he can live out his douchey life without too much trouble and he can go on to be a moderately-successful junior senior deputy analyst. But we'll see.

Posted by Benjamin Kepple at 11:29 PM | Comments (0) | TrackBack

Rogue Conference-Caller Frustrates World of Finance

THE MARKETS MAY be closed due to the Presidents' Day holiday -- somehow, that seems fitting -- but that doesn't mean there aren't financial-related happenings to blog about. For instance, consider this story in The Wall Street Journal, which details how a rogue conference caller -- one Mr "Joe Herrick" of "Gutterman Research" -- is causing havoc with executives and analysts alike. Apparently, Mr Herrick has been worming his way into these calls, and then asking executives silly questions laden with jargon. To their credit -- I guess -- the executives actually try to answer the questions, although I think it'd be pretty cool if they said something to the effect of, "What kind of idiot question is that?"

I learned about this story from my friend Matt, who found it hilarious and sent me a nice note asking if I was in fact Mr Joe Herrick of Gutterman Research. I can assure Loyal Rant Readers that I am not. Even though I am very interested in business and finance, and have listened to conference calls in the past, I don't have the mental fortitude Mr Joe Herrick does. This is because after listening to 45 minutes of presentations from a company, my brain hurts and the only response I can muster up is a shout of "Nice doggie! Froyn-LAVEN!"

However, I do think Mr Herrick could improve his performance on these calls -- and cause even more trouble -- if he did the following:

* Instead of talking about Six Sigma or capital savings, ask a question using the Four Unspeakable Words of Business. That will surely get the executives' feathers ruffled. What are the Four Unspeakable Words of Business, you ask? "Long Term Compensation Expense."

* Focus on suspect new product launches and other endeavors with the simple query, "What the hell were you guys thinking?" This would work especially well with food and beverage companies, and particularly with Cadbury Schweppes PLC, which recently introduced "Diet Dr Pepper Cherry Chocolate." What's up with that? Cadbury Schweppes PLC does NOT need to screw around with Diet Dr Pepper, which tastes like regular Dr Pepper.

* Formulate questions based on the reductio ad quantum principle, in which any development is contrasted negatively with the company's falling stock price, and answers demanded as a result.

* Openly declare suspect guidance or numbers as such. Bonus points for using the phrase "I call bullshit."

* Complain about the company's paltry dividend or entire lack thereof.

* Demand to know what football teams to which the executives proclaim allegiance. You can tell a lot from that. For instance, if they're Raiders fans, that's a clear sign to sell. If they're Bengals fans, you can expect continued underperformance for years to come. If they're Patriots fans, though, that might be a sign to buy shares, because clearly they're ruthless and cunning and will stop at nothing to achieve their goals.

* After receiving a long and complex answer from a well-meaning executive, shout "Bingo!"

Anyway, Mr Herrick, you're welcome, I'm sure. For my corporate readers -- if I have any -- grinding their teeth, I would encourage you not to take offense, but rather consider this an important preparation document. After all, someone will ask you about these things eventually, so you may as well be ready.

Posted by Benjamin Kepple at 10:24 AM | Comments (0) | TrackBack

February 11, 2008

Somebody Needs to Take a Refresher Course

IT SOMETIMES AMAZES me how personal-finance writers can get economic matters amazingly wrong, even if the personal finance advice they dispense is generally correct. Consider this gem of an observation about the economy from Suze Orman, the personal-finance columnist:

That's because if you're planning to use your Washington mini-windfall at the mall or a car dealership, you're playing into the government's theory that your spending will stimulate the economy and all will be well. Or at least all will be better.

I don't agree with that approach on any level. The economy isn't floundering because we aren't spending enough; it's floundering because we're spending too much, largely on credit. So do the opposite of what the government is hoping for -- it's far more important for people to boost their savings, not their spending.

(slap hand to forehead)

Uh, did Ms Orman skip economics in college or something? I mean, I'm sorry, but if consumer spending represents some 70 pc of the economy, and consumer spending falls for whatever reason, it will have a negative impact on the economy. If consumer spending rises, it will have a positive impact on the economy. Thus, giving money to consumers in the form of a temporary tax cut will boost the economy -- if that money is spent.

Along those lines, if people facing tough times (or the possibility of them) decide to cut back and start saving more, it will also have a negative impact on the economy. That's just Keynes' Paradox of Thrift.

Still, even if the economic analysis is half-baked, Ms Orman is right about the savings part. For most people, saving money through reducing their debts will help improve their financial situation.

Besides, one can argue that since the Government is borrowing this money for us, if everyone saved the cash it would have no negative impact on the economy, and perhaps a small positive effect. It's not as if people are saving on their own, thus crowding out money they would have spent. Instead the Government is giving them the means to save. In that regard, the Government is trying to head off the paradox of thrift -- and if spending continues because people feel more confident about their own affairs, then it might take some of the edge off of our current economic problems.

As for me, I plan a combination of spending and saving for my rebate check. I'm going to use $500 to make six' weeks worth of extra payments on my car. When it's paid off sometime this year, not having to make those payments will boost my income accordingly. As for the rest, I will go out for a nice steak dinner.

Posted by Benjamin Kepple at 05:05 PM | Comments (0) | TrackBack

Adolf Hitler, HD DVD Fan

FOR THOSE OF YOU interested in technology matters -- whom one suspects is an entirely different group than those interested in professional football -- here's another Adolf Hitler/Downfall parody video:

(via Matt)

Posted by Benjamin Kepple at 12:40 PM | Comments (0) | TrackBack

January 30, 2008

Someone Needs a Backbone Sub, With Extra Backbone

AS IF IT WASN'T BAD ENOUGH that Subway's sole form of advertising involves subjecting the American people to the not-funny and not-innovative maunderings of Mr Jared Fogle, the ubiquitous sub chain is now taking issue with other companies' advertisements just because they're funny.

OK, OK, maybe that's a bit much. Still, the people behind Subway have sued rival sandwich chain Quizno's over an ad campaign that portrays Quizno's sub sandwiches as superior to Subway's. Subway's attorneys, according to The New York Times, claim Quizno's advertisements -- some of which were dreamed up by actual normal people, and not advertising executives -- were defamatory. Why, these advertisements contained "literally false statements" and depicted Subway in a "disparaging manner," according to the chain's lawsuit.

Well, boo-fucking-hoo. What the hell is wrong with these people? Jesus -- get out there and kick some ass! If your competitor decides he's going to openly attack you, you don't go whining to your lawyers and send nastygrams -- you go out and fight back. Not only that, you beat him so frickin' bad that the mere thought of your campaign will send him into spasms of whimpering. I'm serious. If this means sending Jared into a Quizno's franchisee meeting with a baseball bat and videotaping the ensuing spectacle, then do it.

I mean, it's not like we haven't been through this before. Remember the Cola Wars, and how the evil people behind Pepsi tried to overthrow the Coca-Cola Co. in their sick quest to rid America of everything good and decent?

God, those bastards -- tricking our young people into thinking Pepsi was cool and with it? Lies -- all lies! But Coca-Cola didn't just sit there, now did they? Hell, no. They fought back. That's exactly what Subway should be doing here. Instead of going to their lawyers and crying, they need to go tell their advertising people to ... well, have a little fun with the situation. Then they can sit back and let the ad people go to work, and the next thing you'll know, the Quizno's people will be begging for mercy, because it's not fair the Subway people compared their giant footlong subs to those tiny little mini-sandwiches, or whatever it is Quizno's rolled out recently. So get to work, Subway! You aren't going to let those rotten scoundrels get away with this with their egos intact, are you?

Posted by Benjamin Kepple at 12:25 AM | Comments (0) | TrackBack

January 29, 2008

When Denial Ain't Just a River in Egypt

LADIES AND GENTLEMEN, MEET Nathan Drake. He is 30 years old. He both lives and works in Whittier, Calif. He is a Canadian expat. After taxes, he brings home some $3,000 per month. He is now $54,000 in debt.

Mr Drake has come to the world's attention through a profile in the Los Angeles Times. Amazingly, Mr Drake volunteered to have his profligate lifestyle featured in the pages of that newspaper, courtesy of its Sunday Business section, which publishes what are known as "money makeover" stories. I can assure you that profligate -- that is, wildly extravagant, or completely given up to dissipation and licentiousness -- is not an unkind word to describe Mr Drake's finances. He spends some $2,000 more than his take-home pay each month, and was forced to use his overdraft protection twice in the past month. Only now has he realized his lifestyle is unsustainable.

Well, actually, no, he hasn't. Consider: Mr Drake has a partial share in a boat, worth some $1,500 or so. Yet he will not sell it. Why? Well, he uses the boat to go on vacation. How exactly he pays for these vacations when he owes $29,000 on his six credit cards and some $16,000 to his bank (presumably for the loan on a very expensive truck); well, that seems to be a secondary consideration.

Of course, the situation is not entirely lost. The Times reports that Mr Drake may be able to boost his income some $12,000 per annum if things go well at work. Oh, and -- the coup de grace -- his wife is apparently going to indenture herself to help pay off his debts:

And when Jodi changes her immigration status and becomes a permanent U.S. resident, she'll start working too. Drake, a permanent resident, is awaiting his U.S. citizenship. It could take as long as a year for him to become a citizen and six months more for his wife to get her residency, said Louis Piscopo, an immigration attorney in Anaheim.

For now, though, Jodi must return to Canada while seeking residency. There, she plans to work for her sister's clothing company and to send most of her monthly paycheck to Drake.


This guy's not a husband, he's a pimp.

I would be much more sympathetic (and consequently not so harsh) if Mr Drake had not involved his wife in his sordid profligacy. People make mistakes in life and everybody, of course, is deserving of a second chance, and it seems Mr Drake could receive one if he negotiates with his creditors. But it is one thing if you are screwing up your own life, and another entirely if you're screwing up someone else's along with it. Thus, it is entirely unjust to Mrs Drake for Mr Drake to not take every single possible action to right his financial ship. That doesn't just mean selling the boat or getting a cheaper car, either -- for her sake, he should resign himself to living a monk's existence for the next few years until he can get his house in order.

Now, if I were Mr and Mrs Drake, I would set out this plan. Mrs Drake should work while she is in Canada, but instead of giving her hard-earned to her husband, she should save it for an emergency fund -- it seems clear the couple doesn't have two nickels to rub together otherwise. In the meantime, Mr Drake should negotiate with his creditors, force himself to live below his means, and dispose of every single luxury that he can to help boost his finances. That means the boat and the truck and his pet rock and anything else he's got.

It will take a hell of a lot of work, of course, for Mr Drake to get himself out of the hole he is in. But he can do it. Once he takes the first few steps down that very long road, he'll find that each passing step will get easier; eventually he will start walking at a nice clip, and then sprinting along. But I fear the trouble here is that Mr Drake will not summon up the will to do the things that need done. That's a true shame, because hitting bottom is no fun at all; but from the story, it sounds as if hitting bottom will be the only thing that wakes Mr Drake up from his stupor.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

January 28, 2008

The Markets Give No Quarter

A WHILE BACK I had written a few posts extolling my own cleverness at having bought shares in E*Trade Financial Corp., the on-line brokerage.

On Nov. 14, for instance, I cheerfully recounted how smart I was to buy in at roughly $4.21 per share, and how this had made me 25 pc on paper in just one trading session. On Nov. 30, I wrote about E*Trade's deal with Citadel, and how the trading on that particular day proved that many -- although not all -- day traders are dumb. Then, on Dec. 4, I wrote about how some idiot analyst at Bank of America downgraded the stock, a move which turned my paper profits into paper losses. The analyst, whom we know is an idiot because he spoke out against one of my positions, claimed the stock would drop to $2.

Of course, the stock DID drop to just over $2 roughly five weeks later. At this point, I have to admit I was kind of hoping Loyal Rant Readers would conveniently forget that I had been so gleeful earlier. But I still had confidence in the thing, and it would appear that my confidence has paid off. At least for the moment. For ETFC closed out the day today at $3.90 per share, which means I'm about where I was on Dec. 4 -- down $20. Behold my intestinal fortitude. Behold my triumph. I rule!

There's even better news too: the latest short-selling data came out, and it shows that between Dec. 31 and Jan. 15, the short interest in ETFC -- i.e., the people betting ETFC will fall in value -- rose 12.2 pc over that time frame. That's something on the order of 9 million shares. Now, at the end of the day on Dec. 31, ETFC was trading at $3.55 per share; at the end of the day on Jan. 15, ETFC was trading at $2.92 per share. Now that it is at $3.90 per share, one can deduce the short-sellers behind that increase have in the aggregate lost money. Not all, of course -- one can imagine a lot of smart folks got out when the stock hit $2 or around there. But it seems pretty clear there are plenty of folks who have entered a world of pain as a result.

This is good for buy-and-hold types like me, who are "long" on E*Trade. This is because short-sellers make money through borrowing shares and selling them. For instance, if Trader A shorts 5000 shares of Stock X at $10, and Stock X falls to $7, he has made $15,000. But to close out his position, he must actually buy the shares that he borrowed and sold and give them back to the original owner -- thus pushing the price of the shares upwards.

I have no idea, of course, whether the recent rise in ETFC's shares is primarily due to short-sellers covering their positions. But that sure would be great. You see, like most "long" investors, I view short-sellers -- at least those with the audacity to short my holdings -- with scorn and contempt. If they had decided to short something else, well, business is business. But if they short my stuff, their actions inherently depress the value of my investments. As such, there's part of me that quietly hopes they get cholera, because they are clearly all secret Communists and obviously hate truth, justice and the American Way.

What's that? OK, so that might be a little much. Thus, I guess I'd settle for "them losing money" and "me making it." Also, should any of them find themselves hanging from the brink due to a margin call, I want to stomp on their fingers and laugh maniacally. Hey, the markets give no quarter, and neither do I.

DISCLAIMER: This is in no way intended as financial advice. Even a cursory glance at ETFC's charges will show investing in ETFC is an incredibly risky proposition. Thus, you should only invest in anything after reading an actual prospectus and talking it over with an actual financial advisor, you know, someone who knows what he's doing and stuff. Investments can lose value, just like collectibles from the Franklin Mint can lose value. Caveat emptor. Caveat vendor. Oh, and remember Daniel Drew's old saying:

"He who sells what isn't his'n
must buy it back or go to pris'n."

Posted by Benjamin Kepple at 07:48 PM | Comments (0) | TrackBack

January 27, 2008

Report: Meat is Economic Murder

IN TODAY'S EDITIONS of The New York Times, food writer Mark Bittman -- who is a genius at cookery -- takes a look at the economics of meat. It may seem an odd subject to tackle, but Mr Bittman argues that Americans could soon change their views on the idea of eating meat for myriad reasons:

A sea change in the consumption of a resource that Americans take for granted may be in store — something cheap, plentiful, widely enjoyed and a part of daily life. And it isn’t oil.

It’s meat.

The two commodities share a great deal: Like oil, meat is subsidized by the federal government. Like oil, meat is subject to accelerating demand as nations become wealthier, and this, in turn, sends prices higher. Finally — like oil — meat is something people are encouraged to consume less of, as the toll exacted by industrial production increases, and becomes increasingly visible.

I can't do justice to Mr Bittman's article through excerpts, so I would encourage you all to read it in full. That said, the summary points of Mr Bittman's essay are as follows -- the world's annual meat supply now stands at 284 million tons, and world meat consumption is expected to double again through 2050. However, raising animals for meet is energy inefficient, particularly when it comes to grain-fed cattle. More meat production will mean a higher demand for corn and soya feed, thus potentially impacting production of food crops:

Grain, meat and even energy are roped together in a way that could have dire results. More meat means a corresponding increase in demand for feed, especially corn and soy, which some experts say will contribute to higher prices.

This will be inconvenient for citizens of wealthier nations, but it could have tragic consequences for those of poorer ones, especially if higher prices for feed divert production away from food crops. The demand for ethanol is already pushing up prices, and explains, in part, the 40 percent rise last year in the food price index calculated by the United Nations’ Food and Agricultural Organization.

But these problems could be avoided, Mr Bittman writes, if people were to realize the supposed horrible effects of industrial farming. As he put it, "If price spikes don’t change eating habits, perhaps the combination of deforestation, pollution, climate change, starvation, heart disease and animal cruelty will gradually encourage the simple daily act of eating more plants and fewer animals."

That, of course, would rely on people seeing meat production as a problem. One doubts that most Americans will ever see that as the case. As prima facie evidence of this, I point to the impassioned lament of Mr Randy Taylor, a resident of the southern United States. Mr Taylor, as readers may recall, was quite aggrieved at news the makers of his favorite breakfast sausage had reduced their product sizes; so much so, that he called the company and left a profanity-filled complaint.

Given that, I don't even want to think how regular Americans would react if the nation's beef supply suddenly contracted and sent prices spiraling, and God help us if anything happened to the nation's critical supply of bacon. One can imagine folks would be pretty upset. But that doesn't mean they would change their habits. This is because most Americans see meat as a vital part of their diet, and the availability of it is more important than ancillary factors such as how the meat was raised, or whether growth hormones were used, and so on. Along those lines, if prices went up, people would still buy meat -- maybe of lower quality, maybe not as much -- but they'd still buy a lot of it.

For concerns about supposed animal cruelty and similar issues are chiefly the province of the upper and upper-middle classes, who can afford to feel guilty about their consumption. As such, they will pay extra to avoid feeling guilty about eating Wilbur the pig, who was cruelly slaughtered after a nasty, brutal and short life in some wretched, godforsaken industrial hog farm in South Carolina. But most Americans would not spare a second thought for the poor beast; they would rather dig in to the succulent, life-sustaining barbecue created from it.

Now let's look at the developing world, which Mr Bittman argues will be most at risk from increasing meat production, due to increases in the prices of corn and soybeans, which are used in feed.

I have my doubts that poorer countries would experience the "tragic results" Mr Bittman implies could result from ever-greater meat production. Yes, food prices are going up. Yes, many folks in the developing world are upset about this. That doesn't translate to famine and mass starvation.

It could, of course, if there was a price shock for all food staples. But what will most likely happen is that people will lower their consumption of certain high-priced foods (i.e., corn) accordingly and/or switch to lower-cost staples. We've already seen this in Mexico, where the poor are having a rough go of it due to high corn prices. For many poor Mexicans, the corn-based tortilla is their staple food, and corn now stands at $5 per bushel. I don't know what tortillas go for now in Mexico, but they had been going for between $1.36 and $1.81 per kilo last year. That was very expensive compared to historical standards, and that was when corn prices were not as high as they are now.

But is meat production behind this price rise? I haven't seen any indication it has had anything to do with the price shock in corn -- rather, ethanol production seems to be the real culprit. On the consumer end, the high price of oil also undoubtedly has helped push prices higher -- it takes oil to ship the stuff.

Quite frankly, when you take the combined effects of these two factors, would more meat production really have much of an impact in comparison? Not enough to make me think twice about ordering a steak.

Posted by Benjamin Kepple at 10:11 AM | Comments (0) | TrackBack

January 26, 2008

I Know I'm Not Helping, But --

SO I WAS ON Yahoo! Finance checking stock prices tonight when I clicked on one of their annoying personal-finance articles with the oddly ungrammatical headline: "Surviving 2008 for the Middle Aged." I don't know why just "Surviving 2008" wouldn't have cut it, but hey. Anyway, I skimmed the thing, which had Bold Predictions in it, such as a likely rise in the price of basic staple goods. (You don't say). But it was the last line that got me chuckling: "The bottom line: 2008 is a good time to reduce debt and sit tight while building your job skills."

Uh, I know I'm not helping here, but isn't it always a good time to reduce debt and build your job skills? I mean, really. It's not like calamity never befalls people when times are great and everyone's in a good mood because the stock markets have performed well -- it does. Speaking of calamity, I understand it's a good time to buy gold. It's always a good time to buy gold, as James Lileks has cleverly noted, based on hearing radio ads for the last two decades on that subject.

For that matter, it's always a good time to lose 15 pounds, start eating right, take long walks after dinner, spend quality time with your spouse, play catch with your son and clean out the garage. Oh, and it's always a good idea to not play around with electrical sockets, to not stick your hand in the garbage disposal, and to not antagonize angry caged zoo animals. Tune in next week when we discuss how it's always a good time to regularly change the oil in your car, eat five servings of vegetables per day and shower on a daily basis.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

January 25, 2008

Were Bonus Motivations Behind the $7.2bn Fraud?

IN WHAT COULD PERHAPS be described as a really big "oops," French financial giant Société Générale has admitted a rogue trader managed to rack up some $7.2 billion -- yes, with a b -- in losses through bad bets on the futures markets. Somehow, the trader managed to conceal from his superiors the positions leading to the losses, despite reported employment of some 2,000 people in the firm's compliance office. The losses are so staggering that it wiped out much of the bank's yearly profit.

The man now accused of pulling this off is 31-year-old -- hey, he's my age! -- Jerome Kerviel, who bet wrong on "plain vanilla" futures positions reportedly worth some $60 billion. As for why he did it, no one knows. However, his trade union has speculated that perhaps Kerviel -- who earned less than $150,000 per annum -- may have been trying to boost his bonus package. The Daily Telegraph of Australia reports:

The trader had worked for the bank since 2000 and earned a salary and bonus of less than AUD 168,000. The bank said he netted no personal financial gains from his operations.

(Michel) Marchet of the CGT said his union was concerned that Kerviel may have been trying to get spectacular results as a way to boost his bonus, and added the system of bonuses for traders was "something we want to talk about with management."

"It's possible that he took positions with exaggerated risks, and when he had losses he tried to hide them - but with the stock market crisis, and an error that he seems to have committed, he was found out," Marchet said.

I mean, I don't know about you, but less than $150,000 seems awfully low even for a run-of-the-mill trader, especially when one considers M Kerviel was at the mercy of the French State each time he opened his pay packet.

M Kerviel was reportedly single and pulled down about 100,000 euros a year (about US$146,000). In income taxes alone -- at least, based on my calculations, based on this site -- he paid 38,583 euros on that salary and bonus. He paid 8,000 euros in social insurance taxes. We're now down to 53,417 euros. If we assume M Kerviel paid an overall rate of 16 pc for his VAT-based purchases (the rate varies from 5.5 pc to 19.6 pc) he's now down to 44,870 euros per year. And I haven't even gotten to the renter's tax, the television tax, or any of the other taxes the French Government has dreamed up, which are apparently legion. I mention all this not to indict the French tax system but to emphasize how little, at the end of the day, M Kerviel was drawing in pay.

All that said, consider -- this from no less a source than The Economist -- that a decent, furnished, one-bedroom apartment in Paris -- where the bank is based -- costs roughly 2,000 euros a month.

I mean, I'm better off than this guy -- and he's a trader! (I pay less than half that for my decent two-bedroom apartment in Manchester, N.H. Plus, given my line of work, I have no need to buy expensive suits, spend fancy evenings out on the town for work, spend an insane amount of money on coffee and croissants, etc.)

I do not, of course, condone M Kerviel's actions -- not in the slightest. It is one thing to screw up your own finances but when you screw up other people's finances, you have committed a grievous and unpardonable sin and must pay for it dearly, at least in my book. I'm just shocked that he got paid so little. When I say "little," I am not talking in absolute terms, of course, but in terms of the industry in which he works and the compensation which those in that industry draw.

One wonders if he was just spectacularly incompetent, or held in amazing contempt at his workplace, or what. But certainly it lends credence to the theory the man was perhaps facing financial problems and saw a large bonus as a way to fix those. Why else would he have done it, aside from insanity? A man does not slave away for eight years at a financial house because he wants to be the next Herostratus.

Strangely, M Kerviel has conveniently disappeared after word of this affair came to light. For reasons not entirely understood, his bosses did not separate M Kerviel's head from his neck, but instead allowed him to depart -- and before calling in the police. As The Telegraph of London reports:

Mr Kerviel is said to have admitted the alleged fraud after being confronted by his boss on Saturday, but the bank admitted last night that it now had no idea where he was.

Because the bank delayed calling in the police, Mr Kerviel still has his passport and may already have left the country.

If M Kerviel has indeed fled, that was probably a good idea, considering the legions of angry ex-coworkers who now would like nothing more than to dismember him. After all, he's probably now thrown their bonuses in jeopardy and as such would be as popular as bubonic plague. But there's no need to worry -- as the bank's chief executive put it, "He's not received a bonus this year, and probably won't be asking for one."

Well. Thank God for that. Although I would advise the Department of Homeland Security to keep a sharp eye out for M Kerviel. After all, in America, pesky issues such as "performance" and "return on investment" have no bearing on "compensation" in certain fields. He might have figured this out. He could be heading our way -- and quite frankly, we've got enough problems.

Posted by Benjamin Kepple at 12:28 AM | Comments (0) | TrackBack

January 24, 2008

But I'd Become One with the Horrible Grinding Losses

THIS IS TYPICAL -- ROUGHLY 23 seconds after I finally got comfortable with the idea of a prolonged downturn in the market, the market shoots up and all my positions shoot up with it.

Of course, I am not complaining about this. Not one bit. Like almost everyone else, I had a wonderful day on Wednesday, to the point where I nearly broke out in song at the office. (One of these days, I shall -- I daresay I'm close to having Monty Python's "The Money Programme" skit memorized, so that will be fun and exciting and draw weird looks from my coworkers, who are not as enthused as I am about business matters). I'm just saying I have an impeccable sense of emotional timing, that's all.

Now, the way I saw it (and see it), there was nothing inherently wrong with the downturn, even though I looked forward to its arrival the same way I look forward to having termites invade my apartment. After all, if we must have a downturn, let's get it over with -- let's flush out the wound, clean out the pus, cauterize it, and move on. Since I dollar cost average most of my investments, a downturn actually works to my advantage*, provided there's an eventual upside. Of course, there's always an upside -- we just don't know when it will come. So it thus made sense to keep doing what I was doing and then lie in wait for the inevitable switch in direction, allowing me to clean up on the back side. It is simple, and not all that risky, and it works.

Of course, it took me a while to get to this point. This is because downturns, in and of themselves, are not fun for long-term buy-and-hold investors like me. Sure, I could become a speculator and try to make money on the market falling, but given my capital and portfolio that is far too dangerous. Being young, I can tolerate risk, but at the same time that doesn't mean I should risk it on ventures in which I could suffer huge, capital-eating losses. So over the past few weeks, I found myself in the position of watching my positions slowly fall lower. Thus I entered the five stages of grief. And right at the moment I hit "acceptance," the Fed dropped rates 75 basis points.

No, really. At 8:04 a.m. on Tuesday, I sent out an e-mail saying something to the effect of "it's going to be a wild ride," based on the crazy futures reports we were seeing at the time. My exact words, in fact, were: "Getcha popcorn ready." Immediately after I sent this, the Fed dropped rates. Immediately.

Which I'm cool with, I would note. Like I said, I'm not complaining. That's especially because this could just be a hiccup on a long ride down into the cellar. If that's the case, I'd better start looking for bright sides again pretty quickly.


* This is because I'm able to buy more shares with the stable value of my periodic investments than if prices were high; when an upturn comes, those shares will consequently be worth more.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

January 23, 2008

Coinstar Machines: Fair Dealing or Decadent, Usurious Tools?

I WAS SCANNING The Rant's search logs this evening, looking for material for another Your Search Engine Queries Answered! survey, when my eyes stopped upon a fascinating query someone had entered: coinstar haram. From these two words, one can reasonably deduce what the questioner was asking: is the use of a Coinstar coin-changing machine, which charges users 8.9 cents per dollar of change converted, forbidden under the principles of Islamic finance, which prohibit the charging of interest?

The short answer is: I have no idea. I am, after all, a Roman Catholic. As a result, I am in no way qualified to judge whether use of a Coinstar machine is permissible under the Fiqh al-Muamalat. Thus, I would say to my questioner that he ought consult his local religious authorities for their view of the matter, have them make a determination accordingly, and follow their guidance.

After all, there are two sides to the coin here -- do pardon the pun.

On one hand, the Coinstar people are performing a service for the customer: they take possession of the customer's coins, store them at the site, transport them elsewhere, and deposit them for safekeeping. One could argue that in providing the customer with a voucher he can then convert to paper money, the Coinstar folks are providing a necessary service, and are earning just profit through doing so. Particularly since -- let's face it -- if you're using the Coinstar machine, you probably need money pretty quickly, and at some weird hour of the night.

On the other hand, the Coinstar people are charging 8.9 cents per dollar to take your coins and change them into cash vouchers. In the quarter ending Sept. 30, 2007, Coinstar processed some $767 million in its coin machines, according to its 10-Q form on file with the SEC. Yes, that's right. $767 million. We can thus deduce that through doing so, Coinstar had revenues of about $68 million just from those charges it levied (provided, of course, its charges are uniform). Thus, one could perhaps argue these revenues are the product of interest, as Coinstar is charging its customers 8.9 cents per dollar because of the convenience, i.e., the time value of money, it offers to customers. (You can have your money now, and the company gains; or you can wait until the morning and change it somewhere else). This may be fine for decadent Westerners but not, perhaps, for observant Moslems.

As I said, however, I take no position on the religious implications of using a Coinstar machine. Such questions are clearly best left to others. I would note, however, that these questions may be avoided entirely through going to one's local bank and using their coin-changing machine, as many banks offer coin-changing services free of charge. Not only does that leave you free of any spiritual guilt, it leaves you 8.9 cents per dollar richer. And that adds up.

(CLEAR-AS-MUD FOLLOW-UP: If there is a charge at your bank, it may be so low as to actually qualify as a pure service -- if the charge is so low as to simply represent the cost of the machine and its operation. For instance, my local credit union charges just three cents on the dollar to change coins, and I figure that probably pays for having the coin-counting machine in the lobby and someone to empty it each night. I am pretty confident my credit union is not making money on the thing, which looks expensive. However, I am not sure that is the case. Further, as this whole digression is opening up another can of worms, I would caution my questioner and my Moslem readers that the answers to these questions are best served through obtaining spiritual counsel).

Posted by Benjamin Kepple at 10:55 PM | Comments (0) | TrackBack

Ars Longa, Commercium Brevis

WHILST SURFING THE INTERNET, I stumbled across the Web site of a rather inventive musician, who has come up with a novel way to raise funds for her next album: she’s soliciting donations from her fan base. Jill Sobule, our musician, hopes to raise some $75,000 for the effort, and is more than one-third of the way towards her goal. In return, her fans get a variety of benefits, ranging from advance copies of the disc in question (for $25) to free admission to her shows ($200) to having her show up and perform in concert at a fan’s house ($5,000).

My right brain thought this was rather clever and pretty neat, but it didn’t take long before my left brain jeered at my right brain’s soft, weak, bleeding-heart all-about-the-music way of thinking:


RIGHT BRAIN: Wow, what a cool idea. Fans can support one of their favorite artists and they’ll get to be part of the experience, and –
LEFT BRAIN: Fuck that, I want equity.
RIGHT BRAIN: Wretched cur! How could you so harshly taint an artist’s love with crass thoughts of commercial profit?
LEFT BRAIN: Idiot! Go buy the world a Coke! I’m trying to calculate here.
RIGHT BRAIN: But don’t you see you would help create a work that would last the test of time? A work that would launch important ideas into the eternal soul of mankind?
LEFT BRAIN: What good is it if the work doesn’t help me reach my goal of not working? Ooooh, a liner note! I’m sure I’ll remember it when I’m working as a Wal-Mart greeter at 90!
RIGHT BRAIN: Dammit, just once I want you to recognize the importance of art!
LEFT BRAIN: Art is important because it means the rest of society is working and actually making useful goods and offering useful services, thus allowing people to buy it!
RIGHT BRAIN: Filthy capitalist running dog!
LEFT BRAIN: Goddamn pinko hippie!
RIGHT BRAIN: Running dog!


Soon, however, the two halves of my brain came to a compromise, and so I thought: this would be a great way for an artist to both raise money and connect with his fan base, but why should the artist get all the upside yet none of the downside? After all, if the album is a huge success, why should the artist reap all the dough while I get a liner note?

As it turns out, however, our artist DID look into that question, but concluded there were issues about risk-and-reward sharing, viz. and to wit: “We looked into that possibility, but concluded that it could get very complicated very fast. The recordkeeping overhead, the legal and contractual requirements, the potential SEC implications -- it's just more than we could reasonably handle. We want to make a record, not start General Motors.”

This, to me, is a problem, because she’s right – especially regarding the SEC. After all, in this day and age, to make an honest-to-God investment-funding scenario from a fan base work out, you’d have to sell stock. You’d also have to register it with the SEC and your state securities regulators -- unless you restricted the buyers all to one state, and then you’d have to still deal with your state securities regulators.

Of course, it’s worth noting why these regulatory requirements exist, because many people aren’t as financially savvy as one might hope. Vast sums of money are wasted each year on dodgy oil-and-gas investments; pyramid schemes and nonexistent companies dreamed up in boiler rooms and chop houses; outlandish insurance products; get-rich quick scams; odd personal-enrichment and money management seminars; and my personal favorite, those infomercials on television showing you how to become wealthy using a variety of strange tactics that seemingly require the expenditure of money. Oh, and season tickets to see the St. Louis Rams. Yeah, can’t forget that one.

Still, it is frustrating to think people are kept away from a potentially promising venture just because other people get duped. After all, why shouldn’t people who aren’t accredited investors (that is to say, rich, under the SEC’s definition) be allowed to invest in such ventures? It’s not like people without bunches of money are stupid.

Of course, I say this realizing that the potential for profit in a musical venture is very small, just by its nature. The business of producing a record is understandably fraught with peril just on its own: a recording company must spend money producing and manufacturing an album, and then must spend more money on promotion and various other expenses, and then must spend even more money to handle all the administrative work associated with it. Since the music market is so unpredictable, it stands to reason that many of these efforts are unprofitable, and that unprofitable albums receive an effective subsidy from profitable albums as a result. After all, you don’t think the recording companies screw over their profitable artists just for fun, do you? Well, maybe they do, but the whole “keeping the lights on” business is also a likely incentive.

Still, it seems investors can be easily advised about these affairs: for instance, through the prospectus, which can tell prospective investors of the SIGNIFICANT AND ALMOST CERTAIN RISK THEY’LL LOSE THEIR SHIRTS ON THIS BARMY, COMPLETELY MAD IDEA. Hell, put it in bright red ink if you must. But that should be enough protection for people who are going into the deal without the seasoned investor’s knowledge that any such venture will almost certainly fail. Because it will: that is the way of the world.

But one does not fund these things solely for commercial gain. For instance, a very good friend of mine is in a very good band – one that definitely has “breakout potential” and has a better chance than most to actually make it. Why the hell shouldn’t they be able to raise money in this way? For that matter, why shouldn’t I be able to chip in a bit to their efforts if I want to do so? I like them, and they make good music. It’s not like I’d expect to get any money back, much less an actual return on investment. But it sure would be cool if I did.

So my idea is this: we legislatively create a new type of corporation, out of whole cloth, for creative types, and allow these people to raise money for artistic endeavors. For artistic endeavors at their core are business endeavors, whether anyone wants to admit it or not: they are simply part of the quaternary sector of the economy. The firms would have extremely limited capital-raising abilities -- $100,000 seems a good maximum – and could sell shares to the general public. The amounts purchased by non-accredited investors could be limited, perhaps to say $500 or $1,000 per non-accredited investor, in order to prevent anyone from really losing a bunch of dough. The issuer of said shares would have to provide a prospectus detailing the work or product in which investors would hold shares, and how returns would be calculated and distributed. They would have to provide relatively reasonable financial statements (nothing fancy) and could incorporate in a single state, but draw investors from all states. We could call it a Limited Liability Creative Corporation.

Thus, Band X which sought to raise $20,000 to produce and distribute an album could perhaps sell shares entitling shareholders to 75 percent of the take on said album. If you figure a CD goes for about $10 these days, it would take perhaps 2,700 copies for the investors to realize a profit. But an LLCC wouldn’t have to be music-related: it could be book-related or art-related or what not. Even better, the combination of helping out a creative type you like AND the possibility of an actual return could result in greater gains and more artistic output than simply getting a thank you in very, very small print.

Posted by Benjamin Kepple at 08:54 PM | Comments (0) | TrackBack

January 15, 2008

Thoughts on the Magic Number

I'M NOT GREEDY. All I want is $1.3 million.

In saying that, I do realize the reactions which will accompany such a seemingly outlandish statement. After all, Loyal Rant Readers will shake their heads and say, "Ben, what do you want with $1.3 million?" For $1.3 million is, even in this day and age, a whole heck of a lot of money. For that matter, I'd be perfectly happy if smaller amounts were to suddenly fall into my lap, such as $130,000. Or $13,000. Or $1,300. Hell, $130's enough for three good steak dinners, and believe you me, I would be psyched as all get out to discover an extra $130 in my wallet or my sofa cushions or my sweet NFL change bank or what have you. And $13 would buy me four gallons of gasoline and who could complain about that?

But I still want $1.3 million.

Why, you ask? Because that, my friends, is My Magic Number: the amount of money that, given my lifestyle, would make me Fully Independent and Accountable to No Man. As a result, I could do everything I've ever really wanted to do: travel, live someplace warm, write the great American novel and lounge on the beach all day. Not only that, I could do so on my own time and my own schedule, instead of having to arrange these things around inconvenient realities such as "work" and, well, "work." Were I ever to reach my Magic Number, I could do all these things and still have my $1.3 million last into perpetuity, which would give me a hell of a spring in my step, without having to rely on the Government or my Corporate Paymasters or what not.

The trouble is: how do I get $1.3 million salted away? What if I don't manage to do it -- will I be working until I'm 90? And do I really need $1.3 million to achieve a lifestyle worthy of having $1.3 million in the bank?

Well, the answer to the first question seems pretty clear: save, and save as much as I can. I like to think I'm doing this already, although I could probably do more. But let's say, for the sake of argument, that I'm not able to get to the magic number through savings alone. What I need is the equivalent of $1.3 million, at least in terms of the $1.3 million's income power.

If you ask me, this is the great slip-up when it comes to thinking about retirement and magic numbers and all that. It might be nice to have all that money in the bank, but people really don't necessarily need it, particularly if they've got pensions or 401(k) company matches or what have you. Plus, unless our Government officials want to end up like Rostenkowski, they'll pay out Social Security benefits even to us young folks who now view the program as a giant sinkhole. (Which it is, but in fairness, it could have been a hell of a lot worse).

I recently ran the numbers for my own personal retirement and found, much to my shock, that the age-62 payouts for retirement under my pension scheme and Social Security would account for nearly two-thirds of my target income in retirement. I was so stunned that I double-checked the numbers, but they worked out. Suddenly, My Magic Number has been downshifted a bit -- from $1.3 million to $292,154. That's the price of an immediate annuity payable for life at age 62 with a premium guarantee (thus eliminating the downside risk in the event I get run over by a cement mixer six days after signing the contract).

Suddenly, this whole "retirement" thing seems a hell of a lot more doable -- especially because getting that $292,154 should be pretty easy.

But wait, you say. What about that most pernicious of evils, the doom of men, the grim spectre, the rider upon a pale horse? Yes, of course -- inflation! Surely that must be worked into your calculations, right? Well, I hadn't gotten to that point, but let's review it.

If we assume that inflation will be at a manageable level over the next 30 years or so -- essentially a continuation of American monetary policy since 1984 -- then we can deduce it will take 2.4 times the amount of money to buy thirty years from now what we can buy today. Thus, my $292,154 works out to $701,169 -- which is considerably more than I had hoped. But it's still not $1.3 million. The good news, though, is that I can still hit that inflation-adjusted number if I keep saving throughout my thirties and get a decent rate of return on my investment in future.

The lesson from all this? You might not actually need as much as you thought you needed for retirement, especially if you factor in things like long-lost pensions and Government aid and -- one factor I specifically left out -- your prime nest egg, which for most Americans is their house. This works both ways: either you pay off your mortgage, thus reducing your outlays in retirement, or you draw from its equity during your retirement, which if you ask me isn't exactly a bad tradeoff. Ideally, you could do both with a reverse mortgage, provided housing valuations are high. Of course, I don't own a home yet and have based my assumptions on the fact I'm a renter, but that's something to consider as well.

Admittedly, I've also based my assumptions on the fact my life stays exactly as it is now, which is a bit fraught with peril. I could get married and have children, which would throw those assumptions out the window entirely, and the end result could be markedly different than what I've laid out here. But it's a start, anyway -- and even if I don't get my $1.3 million, we all need something to shoot for in life.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

January 13, 2008

Well, I Guess We'll Give 'Em Points for Trying

DURING THE SHORT REIGN of Emperor Julian the Apostate (360-363), the Emperor found himself facing one of the innumerable financial crises that plagued the Late Roman Empire, and decided to take strong action to stop it. Like all emperors during the waning days of the Western Empire, Julian was faced with a weak, inflation-hobbled economy; a situation that resulted from the debasement of Rome's currency.

Now in those days there was panic in the markets at Antioch. Due to inflationary pressures, the price of grain had skyrocketed and the multitudes of that city suffered grievously. Julian, according to researcher Bruce Bartlett, thought the problem was not based in the Government's actions, but rather the unseemly and selfish actions of Antioch's merchant class. With the price of grain extremely dear, Julian figured he would shock the market and released all of his grain into it, in the hopes it would lower the price of the commodity. It did not work: the town merchants bought all the grain, the producers saved their stocks for a rainy day, and afterwards it was as if the Emperor had done nothing.

Julian was not pleased at this, and ruefully blamed all concerned for acting in their own self-interest. But then, one could not blame them for doing so: after all, they clearly recognized Julian's grain infusion was a short-term, one-off affair that would not be repeated. That said, although Julian was a bit of a bastard, one could not blame him for at least trying to alleviate the people's suffering.

Also, Julian had an excuse: he was living in the fourth century, and it was not for many centuries afterwards that people started to get a handle on economics as a science. For instance, people didn't start figuring out inflation until the 16th century, and it was not until last century that people started figuring out demand-side and supply-side economics. However, human nature does not change, and so it should be no surprise to learn The Powers That Be are channeling Julian in their latest attempts to solve our current economic troubles.

As Loyal Rant Readers may have heard, our current economic troubles have prompted the Government to float the idea of an Economic Stimulus Package. Since it is an election year, one can assume both parties in Government will work feverishly to advance their ideas accordingly. Furthermore, given the political pressures resulting from the upcoming election and the perils facing the American economy, it stands to reason any "stimulus" will contain measures agreeable to everyone. Thus, it seems likely a stimulus will contain: a) a temporary tax rebate, i.e., checks in the mail to the American people; and b) additional Government spending.

Of course, one can quibble over both these options. The temporary nature of a tax rebate means many who receive it will act like the farmers around Antioch -- they'll just save the money they get as a protection against future calamity. Additional Government spending -- if it is "traditional" spending on works projects and what not -- will largely go to the well-connected, just as Antioch's merchants bought all the grain; and although that might boost the fortunes of a few, it probably won't have a really big impact because the overall problem is so large. And if the Government spends its money on programs helping the less fortunate, it will have the same impact as a tax rebate -- the people who get more food stamps, for instance, will undoubtedly save more cash as a result, if they can do so.

So while one must give the Government points for trying to alleviate the problems facing the American economy, one cannot expect much success no matter what comes down the legislative pike. As Ambrose Evans-Pritchard has noted, the collapse of America's housing bubble has destroyed $2.5 trillion in wealth -- a sum nearly equivalent to the Government's entire budget. Thus, even a generous stimulus package will do little to make up for that. The only people who can save us now are the central bankers.

The good news, though, is that the central bankers have been working on this -- in concert with other top officials in the Government. Apparently, there's some secret working group that can take drastic actions to yank the markets up by their suspenders. As Ambrose Evans-Pritchard writes:

It appears to have powers to support the markets in a crisis with a host of instruments, mostly by through buying futures contracts on the stock indexes (DOW, S&P 500, NASDAQ and Russell) and key credit levers. And it has the means to fry "short" traders in the hottest of oils.


Posted by Benjamin Kepple at 01:33 PM | Comments (0) | TrackBack

January 07, 2008

Behold, Life is Good, For I Have New Kitchen Appliances

BOY, 2008 IS TURNING OUT to be a great year so far! Let's review all the good things that have happened:

* Michigan beat Florida in the Capital One Bowl.
* The Pittsburgh Steelers were in the NFL playoffs.
* The New Hampshire presidential primary means more work, which means more money, for me.
* I just got new kitchen appliances for my apartment today.

Boy, these appliances are sweet, too. One of the advantages of living a pretty modest lifestyle is that it's easy to get used to it, thus making unexpected upgrades to that lifestyle a welcome surprise. My old refrigerator, a Westinghouse model I think was built sometime during the Carter administration, was swapped out for a slick new 15.7 cubic foot frost-free fridge with bunches of clever features, such as an interior door shelf that holds 12 cans of soda. Maximum sweetness.

Oh, there's the other major benefit too -- this fridge is far more energy-efficient than my old one, meaning it will cost me about $5 per month to power. This should thus knock off anywhere from $5 to $12 monthly from my power bill -- and perhaps more, if my old fridge really did date from Carter. (Although I don't think that was the case. My apartment building was built in 1982 -- anyone who has visited me knows it has that vague late-Seventies feel to it -- and so I think that's when the appliances were bought.)

Anyway, I also got a new electric range -- sweet -- which has a self-cleaning oven and generally kicks ass. My old range was a bit underpowered and could be a bit slow at boiling water and baking things; this new one is clearly more efficient and has clever design features, such as a top that lifts up for easy cleaning. This will work.

I found out I was getting new appliances on Saturday, although I never really learned why. I figured it was a combination Tenant Retention/Tax Purposes move, though. After all, buying appliances means my landlord can depreciate the cost of them over the next several years, and given the age of the older models it was probably a good idea to turn them over before the old ones finally gave up the ghost. Plus, now that I have new appliances AND a new conditioner -- Loyal Rant Readers may remember my joy at that -- my landlord has taken strong action to ensure I'll be here all the way through the housing crisis, which I figure will wrap up in 2010 or so. Since I'm quiet and I pay my rent on time, this is good for all concerned.

Oh, and did I mention my new fridge has a door shelf for soda? Sweet. Sweet. Sweet.

Posted by Benjamin Kepple at 06:24 PM | Comments (2) | TrackBack

January 05, 2008

The Herostratus of Our Age

THE QUEST FOR FAME has its roots in antiquity. Witness the rash act of Herostratus, who on July 21, 356 BC, burned down the Temple of Artemis at Ephesus for the sole purpose of having his name remembered in history. Although the people in charge of Ephesus were nearly successful in thwarting Herostratus' scheme -- not only did they execute him, they pledged to execute anyone who so much as mentioned his name. Unfortunately some ancient historian recounted the entire affair and so we know of Herostratus' plot today.

Well, some 2,363 years and change later, we have a new Herostratus -- Mr Richard Arens of oil trading concern ABS. According to media reports, Mr Arens purposely bid $100 for an oil futures contract so as to be the first one to bid $100 per barrel for oil, viz:

"The magic figure was hit apparently on the back of a single trade, rumoured to be a local intent on fame," Sucden analysts wrote in a commentary Thursday on the record breaking deal.

Arens offered 100,000 dollars on the New York market on Wednesday for 1,000 barrels of oil, producing the much talked of 100 dollars per barrel which sparked anguish across the financial markets.

He later sold on the contract for slightly below 100 dollars, taking a 600 dollar loss.

"It was just for the form; he wanted to be the first in the world to buy oil at 100 dollars," said Antoine Heff, an analyst at NewEdge.

The new price record came as a shock to the markets although many had been saying 100 dollars was inevitable at some point given strong demand and supply constraints.

Oil slipped back slightly but hit 100 dollars again on Thursday.

On Friday, profit-taking pushed the price back again, with quotes in late Asian trade of 99.23 dollars for New York's main contract, light sweet crude for delivery in February.

Thanks, Richard Arens! THANKS A LOT! After all, now that oil has finally broken through the psychological/ technical barrier of $100 per barrel, there's no reason why it won't continue to keep rising as speculators continue to squeeze the futures contracts for every penny they can get. (OK, so that's what they do. I don't care. It's affecting my positions negatively, so I hope they rot in hell).

Meanwhile, we're all stuck paying more than $3 per gallon for gasoline because the gasoline futures are moving in line with the oil futures, and it sucks. Even worse, the high price of oil will undoubtedly continue to eat away at the equity markets, thus driving down returns and making average investors skittish, and before we know it the economy could be mired in a recession. What's that, you say? Surely the markets wouldn't react that way to a stunt trade? Ha! If a hot dog vendor outside the New York Stock Exchange ran out of soda at lunch, somebody would short PepsiCo within five minutes, and just because they could.

Yes, I do realize oil futures would have almost certainly hit $100 anyway, but that's not the point. The point is that Captain Nefarious here purposely kicked it off, and it was a real jerk move. I hope the guy ends up down-limit on some huge contract he went all-out on margin for, and he gets a margin call, and his creditors send forth swarms of officers to harass him and eat out his substance.

Oh! That reminds me. Short cotton*, because the commodities exchanges are going computerized, which means a whole bunch of the floor traders will eventually have to find other work, and there won't be near the demand for those funny-colored sport jackets they wear. You heard it here first!

* Don't even think about doing it, even if you want to. Just don't. Put your money in an ETF or something. Crikey.

Posted by Benjamin Kepple at 12:12 AM | Comments (0) | TrackBack

January 02, 2008

If You Get a Smaller Slice of a Bigger Pie, Are You Still Getting Hosed?

AS ONE OF ABOUT THREE Americans who find economic data really interesting, I have to point Loyal Rant Readers to some spectacular work which blogger Afferent Input has done regarding U.S. income inequality. Our anonymous blogger has created some really clever charts which show income inequality trends from 1979 to the present.

Those readers who keep an eye on these things -- and who have read my various posts over the years on these issues -- won't be surprised to find out income inequality has risen over the past three decades. America's Gini coefficient is up somewhere around 0.46 or so, up from 0.40 in 1980, and that alone gives you the gist of how things are going. Still, the charts Afferent Input has produced show pretty clearly the top one pc of American households are holding an ever greater share of the nation's wealth.

Along those lines, the top 10 pc overall have increased their shares of the pie, while everyone else holds correspondingly less. The poor and working class have seen their share fall some 30 pc over that time, while the lower-middle class and middle-class have seen their respective shares fall about 20 pc. Interestingly enough, this phenomenon even reaches into the upper-middle class, with those in the 80th to 90th percentiles also losing out.

Now this is, of course, the type of data that causes much wailing and gnashing of teeth when it is released and examined. After all, the idea of rich people becoming richer doesn't tend to sit well with people who aren't rich, particularly when the non-rich are facing all manner of economic calamities. When the upper-middle class are facing higher tax bills and school costs, and the middle-class are getting their benefits squeezed, and the lower-middle class are getting laid off, and the poor are stuck making eight bucks an hour, they're not exactly going to pull for the rich guy hoping this will be the year he hits the $30 million mark on the odometer. These reactions are all perfectly understandable.

However, I would caution this is the type of data you have to peel back like an onion if you want to get at the underlying truth. Plus, you can't look at it in a vacuum if you want to get an objective reading on the economic situation.

If you go take a look at the charts, you may well notice the spikes and dips in the top one pc's share of the national wealth mirror the performance of the financial markets. That makes perfect sense: it is easy to reap a lot of wealth when you have a lot to sow. When the markets do well, the rich benefit accordingly; when they do poorly, their share of the pie falls in commensurate measure to how the markets react.

Charts like these also don't factor in social mobility. Since their underlying data is a collection of snapshots in time, they don't account for the fact that the student who in 1979 was eating ramen noodles and driving an old Rambler American is now the prosperous division head of some million-dollar corporation, or the fact that today's twenty-something retail worker wasn't even a gleam in his father's eye back when the data series started. True, there are undoubtedly some workers who have remained stationary in their careers since the series started, but certainly those are in the minority of American workers.

Income charts are also tricky because they don't factor in other things, most notably personal wealth. But they also don't factor in real income -- by which I mean disposable personal income, the net income of Americans after they pay the Government their taxes. Since we have a progressive income tax system, and a system that levies tax at the federal, state and local levels, a rich American in a high-tax state may effectively pay 50 percent or more of his income in tax, while a poor American may effectively pay a rate ranging from a few percent down to well less than zero. (For instance, if you have a family on the dole, their income -- however meagre -- comes from the Government's largesse, and only a portion of that is recaptured via sales, excise and other taxes).

Speaking of disposable personal income, though, that brings up another question. If an American is getting a smaller share of the overall pie, but the size of the pie has increased to the point where he's still getting more pie than he did before, is he still getting screwed?

Now, I bring this up because America has gotten considerably richer than it was back in 1979. After all, think about 1979 for a moment. It was 1979. It sucked. In fact, July 12 of that year was the nadir of post-war American history, as I have conclusively proven here. Pleather. Gas lines. STAGFLATION! Carly Simon. I mean, my parents had plastic furniture in our living room. It was a bad year.

In July of 1979, the disposable personal income of the American people was roughly $1.8 trillion. That works out to roughly $8,000 for each of America's 225 million residents at the time. At the end of 2006, the disposable personal income of the American people was roughly $9.9 trillion. That works out to about $33,000 for each of America's 300 million residents at the time. Now, when you crunch those numbers through the GDP deflator, you find that a dollar back then is worth about 42 cents today. Still, the end result is that real per-capita disposable personal income has risen from $19,000 back in the day to $33,000 today. Thus, America is 73 percent richer than it was back when people wore wide ties.

That's just on a dollar-per-dollar basis too. After all, think of how life has improved since 1979 -- another thing income graphs don't tell you. In 1979, nobody had a personal computer, nobody had e-mail, nobody knew anything about the Internet, nobody could buy a decent car for love or money and nobody -- and I mean nobody -- could find a decent interior decorator. Instead you had shag carpets and plastic furniture and disco music and the death of equities and STAGFLATION! Oh, and Carly Simon. Who you listened to on something called a "record" -- or perhaps something called an "eight-track." And don't get me started about the regulated airlines or the 55 mph speed limit, 'cause we'll be here all night.

So now that we've established that Americans are collectively enjoying not just a bigger pie, but a much tastier pie at that, can we say people are getting hosed? For instance, the lowest quintile saw a roughly 30 pc drop in their share of the pie between 1979 and today. But they're still enjoying 21 pc more pie than they were before -- and much tastier pie. The middle class are enjoying 38 pc more pie. The upper-middle class perhaps have 50 pc more pie. One would generally think they are accordingly better off, because it's really good pie: kind of like the pie you get at a really good diner, compared to the three-day-old industrially-made pie you would get back in 1979.

True, the idea of seeing the rich guy get 280 pc more pie might stick in folks' craw a bit. But since people still have the individual opportunity to find ways to get more pie, with time they may soon reap the rewards of their labor with a giant slice of the stuff. After all, this is America.

Posted by Benjamin Kepple at 12:37 AM | Comments (0) | TrackBack

December 31, 2007

Well, We're All Going to Hell (And Happy New Year!)

I TAKE IT MOST of my readers will end up reading this sometime on Jan. 1, so allow me to wish all of you my best and my hopes you'll have a happy and prosperous New Year. Unfortunately, it would appear that for many Americans, 2008 isn't going to be all that prosperous -- and accordingly, not all that happy.*

There are a couple of pieces of Bad News out there for Americans, particularly middle- and lower middle-class folks, who are most at risk of facing the negative consequences that go along with reduced valuations on real property. The first piece of Bad News comes from The Times of London, which reports that America's housing market could see price declines commesurate with the Japanese flu of the Nineties. It took years for Japan to get over that bug, which it caught when real-estate prices collapsed and sent the country into a wretched deflationary spiral. The trouble with this report is that it's not from some wacky gold bug, but rather Prof Robert Shiller of Yale University. Prof Shiller is the guy who coined the "irrational exuberence" phrase, so we can guess the man knows what he's talking about. Also, he is an expert on the residential real-estate market. His prognosis isn't good:

Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

He said that US futures markets had priced in further declines in house prices in the short term, with contracts on the S&P Shiller index pointing to decreases of up to 14 per cent.

“Over the next five years, the futures contracts are pointing to losses of around 35 per cent in some areas, such as Florida, California and Las Vegas. There is a good chance that this housing recession will go on for years,” he said.

Professor Shiller, author of Irrational Exuberance, a phrase later used by Alan Greenspan, the former Federal Reserve chairman, said: “This is a classic bubble scenario. A few years ago house prices got very high, pushed up because of investor expectations. Americans have fuelled the myth that prices would never fall, that values could only go up. People believed the story. Now there is a very real chance of a big recession.”

I have to admit I would normally approve of falling house prices, as they would mean I would, you know, "actually be able to buy a place." But I don't want those to come along with a deep and prolonged recession, because that could mean me losing my job, and having a job would be rather important were I actually to jump on the property ladder. I also don't want a deep and prolonged recession because that could well hit me where I do have money -- in the equity markets. Is it too much to ask for a nice Goldilocks economy (not too hot, not too cold) where salaries can slowly rise to the point where housing values are actually sustainable? I guess it is.

But if that wasn't bad enough news, the Los Angeles Times recently had a rather alarming story on Americans who have been taking out increasingly hefty loans on their vehicles -- and doing so through rolling over their loans on their former vehicles. Since vehicles depreciate in value, this is something akin to financial suicide on the part of the borrowers -- and it may also hit the people loaning them the money.

Now, when you read the story, you'll be downright stunned at what one might charitably call the innumeracy of the people taking out these loans. You may also, like me, have an initial reaction that the buyers made their beds and now they can lie in them. But that's not exactly helpful, now is it? Besides, it's one thing if it's only the borrowers getting fleeced, because they should have known what they were getting into -- but it's another thing entirely if the situation helps spur an economic slowdown which ends up biting investors in the collective ass.

The LAT reports:

Americans haven't just been taking out risky mortgages for homes in the last few years; they've also been signing larger automobile loans for significantly longer terms than they used to.

As a result, people are slipping into a perpetual cycle of automobile debt that experts think could lead to a new credit crunch extending from dealerships to driveways and all the way to Wall Street.

Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years. Even some staid lenders owned by the carmakers, such as Toyota Financial Services and Ford Credit, are offering seven-year financing. And a few credit unions, particularly in the West, are tinkering with the eight-year note.

At the same time, the amount of money drivers owe on their cars is soaring. In October, the average amount financed hit $30,738, up $3,500 in just a year and nearly 40% in the last decade, according to the Fed. More troubling, today's average car owner owes $4,221 more than the vehicle is worth at the time it's sold -- up from $3,529 in 2002, according to industry analyst Edmunds.

Quite frankly, this boggles my mind. I fully admit I'm not like most people when it comes to cars -- all I want in my car is a V6 engine -- but still, this is crazy.

I can't tell you how much I absolutely detest having a car note, and I have made it one of my financial goals to pay off the goddamned thing as soon as I can. Readers may recall I bought the Family Truckster back in February, and at the time I arranged for a payment plan that would have the car paid off in 32 months. I now own 62 pc of the car and will have it paid off at the end of the year, God willing, for a total loan term of 23 months. At the latest I will have it paid off in March 2009, for a loan term of 25 months. When I do pay it off, I will jump for joy and sing hosannas and look forward to having several hundred dollars per month added back onto my bottom line. Not only that, the car itself should last for a good six or seven years beyond that.

One of the reasons I don't like having a car note is because it requires me to make loan payments, and that's annoying. Another reason is that although the car is depreciating in value, it is still an asset and useful -- after all, if worse came to worst, I could sleep in the stupid thing and drive around looking for places to get a shower. There's something to be said for having that freedom. Another advantage of paying my car loan off quickly is that I'll have equity in the car -- and that could come in handy down the line. After all, if someone runs into the car next summer and it is totaled, I'll get a rather nice check that will let me buy another car without hassles and without a lot of associated debt.

I mean, my God. Borrowing thirty thousand for a car! Can you imagine it? (Please say no).

As I said, it's not really the borrowers' situations that bothers me -- it's everyone else who indirectly relies on those folks to keep earning and keep spending. After all, people in tough spots financially will do whatever they can to keep their cars, which give them the freedom to live in this day and age. If that means keeping up with the extra high payments on their car notes, they'll spend less on other stuff, which will hurt all of us.

Anyway, to recap: housing prices falling, people up to necks in hock, gloomy forecast again. I know I should secretly wish this state of affairs continues so I can cleverly take advantage of it down the line, but I suppose I'm having a minor crisis of confidence. This is so not cool and with it.

* Money doesn't buy happiness. However, not having money isn't exactly a ticket to paradise either.

Posted by Benjamin Kepple at 08:17 PM | Comments (0) | TrackBack

December 15, 2007

Christmas Carols for Today's Age

ONE OF THE OLD JOYS of the Christmas season used to be that everyone dusted off their Christmas music compilations and played them for an evening or two, allowing everyone to get in the Christmas spirit. Now, of course, the soulless marketers and cheap radio stations start playing Christmas music somewhere around Veterans' Day, and everyone gets sick of Christmas music before Advent. So their message gets a bit lost in the grand rush of consumerism. And although I like consumerism -- don't get me wrong -- even I find it a bit ridiculous.

I could put up with the rash of Christmas music if it started playing around a decent time -- like, the Friday before Christmas. But since that's never going to happen again in my lifetime, I've come up with some alternative lyrics to traditional favorites that better reflect our modern capitalist age. That's because the real reason for the season isn't going to register on people's radar screens until Dec. 23 or Dec. 24. So, with that, here you go: Christmas Carols for Today's Age!

(NOTICE: If you ARE in a Christmasy mood, please be forewarned these "Christmas carols" get increasingly cynical, curmudgeonly and Scrooge-like as you progress. So you might want to skip these. Unless, like me, you have a morbid and wicked sense of humor).


Do You Hear What I Hear?
(with apologies to Noel Regney and Gloria Shayne)

Said the trader to the specialist,
do you see what I see?
Way up in the sky, specialist,
do you see what I see?
It's down, it's down --
the market's uptight
with a ticker tape full of fright
with a ticker tape full of fright

Said the specialist to the trading chief,
do you hear what I hear?
Whispers on the sly, trading chief
do you hear what I hear?
A cut, a cut --
what we want to see
with a report due out by three
with a report due out by three

Said the trading chief to the big M.D.
do you know what I know?
in your grand office, big M.D.,
do you know what I know?
The Fed, the Fed,
plans to be quite bold,
let us buy up euros and gold!
let us buy up euros and gold!

Said the boss to the people everywhere,
Listen to what I say:
fifty points, people everywhere
Listen to what I say:
Rate cuts, rate cuts
there's reason to hope!
They will bring us rallies and growth!
They will bring us rallies and growth!

Rate cuts, rate cuts,
There's reason to hope!
They will bring us rallies and growth!


It's the Most Wonderful Time of the Year
(with apologies to Andy Williams)

It's the most wonderful time of the year --
with the markets all selling
and everyone telling you
no bonus here--
it's the most wonderful time of the year!

It's the hap-happiest season of all!
With those insincere greetings
and those wretched meetings
when margins gets called --
it's the hap-happiest season of all!

There'll be parties for boasting
bad headaches for dosing;
and making out after the show;
there'll be weird lawsuit stories
and tales of the glories
of Christmases long long ago!

It's the most wonderful time of the year!
There'll be lots of loud groaning
and bitching and moaning
when swag don't appear --
It's the most wonderful time of the year!

There'll be parties for boasting
bad headaches for dosing;
and making out after the show;
there'll be weird lawsuit stories
and tales of the glories
of Christmases long long ago!

It's the most wonderful time --
the most wonderful time --
the most wonderful time --
of the year!


Let it Go! Let it Go! Let it Go!
(based on "Let it Snow!")
(with apologies to Sammy Cahn)

Oh, our new mortgage rate is frightful
and the lenders are being spiteful
since we've no fixed-rate loan,
let it go! let it go! let it go!

It doesn't show signs of stoppin'
the adjustments are eye-poppin'
our hopes are at all-new lows;
let it go! let it go! let it go!

When we finally walk away,
how we'll hate our new credit report,
but these lenders are so damned tight,
their big losses will make us warm!

The American dream is dying,
and our blood pressure's still rising
but as long as they hold that note,
let it go!
let it go!
let it go! let it go! let it go!


It's the Holiday Season!
(with apologies to Andy Williams)

Happy holiday!
Happy holiday!
While the registers keep ringing,
Happy holiday to you!

It's the holiday season,
-- the prices are going way down
the credit card interest makes you frown
and under your debts you seem to drown
-- you'll be goin' down the toilet, down!
(You'll be goin' down the toilet, down!)

It's the holiday season,
and Santa Claus has made a toy
wanted by good girls and good little boys;
get one now, or there won't be joy --
you'll be goin' down the toilet, down!
(You'll be goin' down the toilet, down!)

You'll have a big ice pack upon your back,
and lots of aches from all the shopping --
so eat the peppermint stick for ol' St. Nick,
'cause that's about all that's free!

It's the holiday season!
So buy presents and watch the clock
(you may need to sell some stock)
or just exactly at twelve o'clock --
you'll be going down the toilet, down!
(You'll be goin' down the toilet, down!)

You'll have a big ice pack upon your back,
and lots of aches from all the shopping --
so eat the peppermint stick for ol' St. Nick,
'cause that's about all that's free!

It's the holiday season!
So buy presents and watch the clock
(you may need to sell some stock)
or just exactly at twelve o'clockl
you'll be going down the toilet, down!
(You'll be goin' down the toilet, down!)

Happy holiday! Happy holiday!
While the registers keep ringing --
happy holiday to you!


Merry Christmas, everybody! (No, really. I mean it this time. Merry Christmas to everyone, and I do hope that you and your families have a wonderful holiday and a prosperous New Year).

Posted by Benjamin Kepple at 09:51 PM | Comments (0) | TrackBack

Stag-FLATION! (Part II)

RELATED: The story from the Financial Times.

Posted by Benjamin Kepple at 06:13 AM | Comments (0) | TrackBack

December 13, 2007

Today's Tip: Don't Mess With A Texan's Breakfast

SELF-PROCLAIMED TEXAN Randy Taylor is a serious man: a man set in his ways and fine with them. We know this because Mr Taylor called the customer complaint line established by the makers of Jimmy Dean sausage, and left a two-minute complaint for the firm over its supposed decision to reduce the size of its sausage tubes. Mr Taylor argues he cannot feed his family of five on a mere 12 ounce tube of sausage, and demands that Jimmy Dean return to its 16 ounce package forthwith. Downsizing to a 12 oz. package, Mr Taylor argues, represents unfair profiteering on the part of the sausage-maker at the expense of a hardworking American family. (Or, as Mr Taylor put it, "Save money, save money, save money -- fuck, I wanna eat, goddammit.")

The full audio of Mr Taylor's complaint can be heard here. The first 75 seconds are free of profanity, although he does get worked up after that. Especially at the end, when he is apparently talking to one of his children but has not yet ended the call.

As Mr Taylor noted at the beginning of his call, he did not know where "you people" at Jimmy Dean were based, so I did some looking for him. Apparently, the Sara Lee Corp., based in the Chicago suburb of Downers Grove, Ill., produces the stuff. Sara Lee (NYSE: SLE) has a market capitalization of some $12 billion and made $504 million on revenues of about $12.3 billion in fiscal year 2007. Thus, at first blush, Mr Taylor's comment may seem to be the cri de coeur of a solid workingman against a giant food distribution concern.

However, after doing some basic research, I do wonder if Mr Taylor may have made a mistake. Perusing Jimmy Dean's Web site, one finds that although the "light" version of its sausage comes in a 12 oz. container, one can purchase a full pound of the regular sausage. Or two pounds. Hell, Mr Taylor could go out and buy a three pound tube of Jimmy Dean sausage if he so wished, if the company's Web site is correct.

Much has been made of the family breakfast which Mr Taylor describes as regular eating for his household, but I daresay people may be reading too much into that. At least I hope. As Mr Taylor sounds like a man who works for a living, and his family sounds like people who work for a living, it is arguable that an entire pound worth of sausage for a family of five -- plus a whole buncha fried eggs -- is a reasonable breakfast, if they are engaged in heavy, physical labor. Then again, it might be a completely ridiculous breakfast. I don't know.

I would quibble with one facet of Mr Taylor's argument. On the recording, Mr Taylor says, "As far as your 16 oz. maple and sage (sausage), I don't eat that. I'm not from the North." Hey, pal, we don't eat it either! As one person commenting about this recording has already said, we eat scrapple in the North. Yeah. Scrapple. Although, there are various reasons why we don't eat it all that much.

(Thanks to Jesse).

Posted by Benjamin Kepple at 09:17 PM | Comments (0) | TrackBack

December 09, 2007

Cutting Off One's Nose to Spite One's Face

AS SOMEONE WHO WRITES for a living, albeit in a different field, I have made no secret here I am fully and completely in support of the Writers Guild of America in their strike against their paymasters, represented by the Alliance of Motion Picture and Television Producers. Simply put, as a writer myself, I think it's important that writers get paid for their work, and receive a fair share of the revenues that result from their efforts. This is a notoriously difficult thing in the entertainment industry, where normal business procedures revolve around screwing writers whilst an army of producers and to a lesser extent actors get all the money.

Fittingly enough given the issues on the table, the best place to get information about the month-old strike is on an Internet site known as Deadline Hollywood Daily, which veteran journalist Nikki Finke writes. At present, we learn from Ms Finke, the AMPTP are playing hardball and have walked away from negotiations, while the WGA is understandably refusing to give into the producers' demands.

For the moment, anyway, the networks are doing fine. Their revenues aren't great but their costs are way down and that means profit and profit is good. But that situation can't last forever, of course. So my question is this: at what point, from the producers' view, does allowing the writers' strike to continue mean they are cutting off their noses to spite their faces?

I mean, as a member of the Key 18-34 Demographic, about all I watch on television are professional sports and, to a lesser extent, news programs. This is because the shows the Hollywood producers vomit out onto the airwaves are shit. Should the strike continue, the airwaves will be increasingly filled with reality television programs and game shows and other entertainment that will prove particularly foul shit. As such, they're not going to gain much of an audience among people like me, who have some measure of disposable income and are prone to cleverly-produced advertisements for imported beer, electronic gadgetry and major durable goods, viz:

How I wish I could justify buying one of those. Oh, well. Anyway, my point is this. We already know the ratings are down because of the strike, which means people have already stopped watching network television as a result. That trend should continue because, as amazing as it may seem to the brain trust in Los Angeles, the American people have a limit as to how much crap they can stomach. No, really. I'm not kidding.

Sure, there's a demographic out there that will lap up everything thrown at it, but it's fair to say in our winner-take-all society they won't have the resources to buy the goods advertisers want to sell them. In the meantime, though, most viewers will seek out other forms of entertainment in an increasingly fractionalized marketplace. Will they return once the strike is over? At least some won't -- and if nothing good is on, well, then it's really up in the air.

One wonders how much that will have an effect on the networks' bottom lines. They may be doing all right for the moment, but in the end they may come to realize their hardball tactics have meant they've cut off their noses to spite their faces.

Posted by Benjamin Kepple at 09:44 AM | Comments (0) | TrackBack

December 08, 2007


SO TONIGHT, I WAS thinking about what every normal person thinks about on a Saturday night: inflation figures.

Earlier this week, I was surfing around the Internet when I came to a fascinating site called Shadow Government Statistics, which a researcher in Oakland, Calif., compiles. It's a subscription site but I found the main graph on it particularly interesting. Apparently, the Government has changed the way it calculates inflation, and Dr John Williams has been tracking not only the Government's official inflation rate but also the old inflation rate, the way it used to be calculated. Sadly, the inflation rate -- when calculated like it used to be -- is significantly higher than the official rate. By, like, four percentage points.

This means, as one can deduce from the helpful main graph on Dr Williams' site, that official inflation is now around 3 pc, while the arguably real rate of inflation is about 7 pc. One could thus argue we've gone from a situation where inflation is under control to one where inflation is now somewhat worrisome. Even worse, one could argue that if this real inflation gets any higher, we'll find ourselves dealing with stagflation. This is doubleplusungood.

But then -- how does one measure the thing?

On one hand, we know the prices of basic staples and goods are increasing. We know food prices have gone up, that energy prices have gone up, and that medical costs have gone up. In all three cases, one can point to double-digit annual cost increases. The price of housing has gone up remarkably over the past several years, this present downturn notwithstanding. The price of raw materials has increased markedly, as one can see from looking at the commodities markets.

On the other hand, though, we know that technological innovation, competition among businesses, and unbalanced trade equations have helped push the price of many goods down. For instance, computers and other electronic gadgets have become cheaper as technology improves. One could argue the cost of clothing and other essential goods has gone down due to cheap imports from abroad. Technological innovation has also arguably pushed down the cost of major durable goods. For instance, my new used car is more technologically advanced than my old car, even though it cost half what my old car cost back in 1998.

This puts us in a quandary. For we also know that in some cases, official statistics are often subject to extensive revision. For instance, the Government's jobs figures are reported every month on a preliminary basis. Later, we learn revisions were made and suddenly, the picture is far brighter (or dimmer) than it had been. Yet everyone jumps on the initial report and no one notices the revised numbers.

This leads me to two conclusions. The first is that one can solve the initial quandary through splitting the difference, putting inflation at about five percent or so. This may not be an elegant solution but it would at least counter the Government's seemingly low inflation figures with data that reflects real-world experience. The second is to argue that there are really two different inflation rates: one for the elite and one for the masses. A significant uptick in food and energy prices will necessarily hit the poor harder than it would the middle or upper-middle class, while a drop in electronics prices will necesssarily benefit the better-off portion of society more than the poor.

See, this is why you read The Rant -- because you know that you'll necessarily get something different, because I'm one of four people interested in these types of things!

Posted by Benjamin Kepple at 11:38 PM | Comments (0) | TrackBack

December 06, 2007

Inadvertently Funny Line of the Month

"The really amazing part of this whole process is the fact that there is substantial documentation to prove all of the allegations of our lawsuit."

-- Daniel Duffy
Chief Executive
Sebastian River Holdings Inc. (SBRV.PK)

(as seen on PR Newswire)

Posted by Benjamin Kepple at 09:21 PM | Comments (0) | TrackBack

December 05, 2007

Mad Englishwoman Calls for Reintroduction of Rationing

I'VE READ SOME STRANGE THINGS in my time, but this essay from Guardian columnist Madeleine Bunting must really take the cake. Ms Bunting, noting that no less a pillar of competency than the United Nations has said the developed world must cut its carbon emissions 80 percent by 2050 to stave off climate change, believes that only a low-consumption economy will allow this happenstance to come about. As such, she believes that state-ordered rationing -- with the little passbooks and everything -- is the best way to make this come about.

And, as Ms Bunting notes, it's been done before! She writes:

Hearteningly, we know it can be done - our parents and grandparents managed it in the second world war. This useful analogy, explored by Andrew Simms in his book Ecological Debt, demonstrates the critical role of government. In the early 1940s, a dramatic drop in household consumption was achieved - not by relying on the good intentions of individuals (and their ability to act on that coffee-stained pamphlet), but by the government orchestrating a massive propaganda exercise combined with a rationing system and a luxury tax. This will be the stuff of 21st-century politics - something that, right now, all the main political parties are much too scared to admit.

I don't mean to be a spoilsport here, but isn't it worth noting the reason Britain had the rationing was because, you know, they were fighting the Nazis? I mean, I don't know about you, but to me, "fighting the Nazis" makes it a heck of a lot easier to ration stuff compared to "preventing climate change." Especially when you consider the potential tradeoffs. An Englishman who gave up beef in the early Forties at least knew his sacrifice would help Our Boys kill the ravaging Hitlerite hordes stomping over Europe. An Englishman who gave up beef today would have to be content with saving mosquitoes and polar bears and fruit bats and a wide variety of God's creatures who really could care less about his existence, and who would tear him to pieces if given the opportunity. They're animals; that's what they do. They don't wax on eloquently about the beauty of the Government's latest white paper on ecological engineering.

Besides, a big reason rationing was in existence -- and why it worked -- was because Britain, during the war, was in many ways a closed economy. After all, it wasn't exactly easy to conduct trade when the U-Boats were sinking everything in sight. Rationing only works in a time of scarceness, not of plenty. On a related note, it's worth noting what happened during and after the war when outside influences were able to arrive in Britain. Myriad legions of American troops -- who, if I recall correctly, were oversexed, overpaid and over here -- descended upon Britain and got all the girls. Sixty thousand marriages resulted from our occupation of the British Isles and God knows how much other stuff went on. If Britain re-introduced rationing, it would mean that all sorts of foreigners -- and especially Americans -- would swoop in and get all the girls. So I would ask the English and Ms Bunting: do you really want this to happen again?

Hey, wait a minute.

You know, on second thought, I've changed my mind. Therefore, I call on all Britons to immediately implement Ms Bunting's rationing plan. Come on, do it! It's for the planet, you selfish scoundrels! Start patiently queueing up for passbooks and ration cards and dig out your copies of those old recipe booklets from the Ministry of Food. They should be at your local libraries.

Once you've done that, it shouldn't take much longer for you to start queueing up for your weekly allotments of cooking fat and tinned vegetables. Oh, and let me know when you've got things underway, because I've called dibs on asking out Geri Halliwell. Foxy!

(via Samizdata)

Posted by Benjamin Kepple at 08:42 PM | Comments (0) | TrackBack

December 04, 2007

This Was Funny At the Time

REMEMBER THIS COMMERCIAL? Heh. I loved this when it came out. The kicker, of course, is the possibility E*Trade Financial Corp. may go the same way as, and the sock puppet. Heh. It's the Blade Runner curse for the 21st century!

Anyway, much to my annoyance, I am now losing money on ETFC, which is now down to $3.91 per share. What's that? OK, so I'm only losing $20. No, not $20,000 -- $20. I told you I didn't invest much in the stupid thing, and I wasn't kidding. I mean, I'm not that crazy. But I digress.

Over the past couple of days, ETFC has had its ass kicked because yet another idiot analyst downgraded it -- this time because of the Citadel deal. The analyst set a target price of $2 and said the company wouldn't make any money in 2008.

How do I know the analyst is an idiot? Because I own the stock. Duh. If he upgraded it, he'd be a genius.

In all seriousness, though, this is what happens when you buy an extremely volatile stock in an extremely volatile market and approximately 90 percent of the volume involves day traders, hedge funds and other speculators trying to squeeze out pennies on their trades. I have no doubt the analyst is an extremely smart and reasonable person, and it's entirely possible his report will prove correct, just like it's entirely possible that Citigroup analyst's report -- which started this whole rigamarole -- will prove correct. However, I am guessing that Mr Ken Griffin, Citadel's chief, is smarter than the analysts.

After all, if Mr Griffin's investment goes south, Citadel is out upwards of $2 billion, because the fund's $1.75 billion loan will go bye-bye and its $400m in E*Trade stock will be worth less than a roll of toilet paper. (Those certificates aren't Charmin soft). As a result, I figure Mr Griffin is not going to let E*Trade collapse. I also figure he just plans to wait until the market turns eventually, and then cackle maniacally as he reaps in untold profits as a result of the deal. In the meantime, he can do fun things like castigate E*Trade's management at company board meetings.

As a result, I figure I can keep my E*Trade stock for a while, because I bought it at an near-low (even if it is now lower) and it will hopefully rebound sometime in the near future. Like next Tuesday. But even if it takes until 2010 or 2011, that's not really a concern for me, because I'm looking at a pretty nifty risk-reward equation. If it bombs, I'm out a few hundred bucks. If it scores, I could theoretically do pretty well. Now comes the waiting game. Winning it will require a bit of intestinal fortitude.

OBLIGATORY DISCLAIMER: The beta on ETFC is 3.16. You'd have to be downright certifiable to think this would be a safe, prudent and reasonable investment. As such, it would make sense to buy an industrial-sized bottle of Pepto-Bismol if you were actually crazy enough to buy into it. Speaking of Pepto-Bismol, look at PG -- it's near a 52-week-high! I wonder if there's any connection. Nah.

Posted by Benjamin Kepple at 11:54 PM | Comments (2) | TrackBack

Here Comes Another Bubble ...


The last time this happened, didn't we all agree we weren't going to let the goddamned tech-savvy teenagers put us over a barrel again? Didn't we? I'm just pointing it out. I seem to remember distinctly we all agreed we wouldn't let anyone who couldn't be bothered to wear a suit to an investor presentation get any venture capital money. Oh, and we weren't going to invest with anyone who regularly used the word "dude" in conversation.

Anyway. My favorite stanza? I mean, aside from the blogging comments?

make yourself a million bucks
partly skill, mostly luck
now you can afford a down payment
on a small house

Heard that, brother. Anyway, this video is a beautiful thing. With the exception of Google, I think it's probably true.

Posted by Benjamin Kepple at 10:54 PM | Comments (0) | TrackBack

November 30, 2007

ETFC Saved!

AH, SUCCESS. How I love it. As Loyal Rant Readers know, a few weeks back I bought a tiny number of shares in E*TRADE Financial Corp. (NASD:ETFC) at roughly $4.21 per share. Immediately after I did so, the stock skyrocketed and I have been completely insufferable ever since. For it was a completely speculative play but one that -- so far, anyway -- has actually paid off. Thursday, we got good news about ETFC -- at least for investors like me. Day traders, not so much. But we'll get back to that in a bit.

First, the good news. Citadel Investment Group agreed to inject some $2.5 billion in capital into E*Trade, which had been flailing about like a clothesline in a gale. The Wall Street Journal has a great story on how the deal came together -- it's really wonderful reporting. Anyway, the gist of the deal is this:


* Citadel bought E*Trade's crappy $3 billion portfolio of asset-backed securities for roughly $800 million, which works out to 27 cents on the dollar. The bad news is that E*Trade will take a $2.2 billion loss on the portfolio. The good news is that E*Trade doesn't have the damn thing hanging over its head any more, and now someone else can worry about the portfolio and its tranches (crap, super-crap, and uber-crap). And hey -- 27 cents on the dollar beats zero cents on the dollar.

* Citadel is pumping $1.75 billion into E*Trade. In return for this, Citadel will end up with roughly 20 pc of the company and get paid 12.5 pc per annum on ten-year notes. It's getting roughly 84 million shares of ETFC, which have a market value today of about $420 million. That's like the cherry on top the sundae of $1.75 billion in ten-year notes. Those notes should be very profitable in the meantime for Citadel, and could especially be so depending on how the notes are structured.

The good news is that E*Trade gets a bunch of cash it needs. The bad news is that E*Trade's managers have diluted the stock in agreeing to the deal, meaning less earnings in future for tiny shareholders like me. Also, the debt payments will reduce those earnings even further. But I don't have $1.75 billion, so I'm not complaining until my position goes under water.

* Citadel gets a seat on the board. This is good because it means the hedge fund will continually go after management to boost the company's valuation, which is good for speculators like me.


Now, the announcement of this deal also brought other things to light: perhaps most notably, it brought to light more proof that day traders are generally stupid. Particularly day traders who post messages on Internet bulletin boards. Consider: when the deal was announced, the stock shot up -- it opened at more than $6 per share. At the end of the day, the stock price actually went down and closed at $4.82 per share. Then, in after hours trading, it went back up to $5.06!

Quite frankly, I could care less because I bought in at $4.21. Furthermore, since my entire position is predicated on the assumption the whole thing could blow up tomorrow and I'll be out the whole thing, I can live with fluctuations -- and I'm happy as long as it stays above $4.22. (Well, above $5 would be nice). But my God! the caterwauling from the day traders who are getting blown out after having bought in the high $5 range!

Here are some of my favorite discussion threads on Google:


"What's moving this down ... shorts being covered?" *

(BJK: "And Ivan Ackerman -- always the wrong answer. Always.")

"Why is it falling?" **

(BJK: Key quote from discussion: "I bought this at 6.03 at opening. What do you suggest guys?Should I retain for next day trade or sell out?" Uh oh.)

"I am worried." ***

(BJK: The writer of this bought at $5.47 per share and lost $600 by COB. Now he's got a case of nerves?)


Aside from that, though, as details of the deal emerged, it became pretty clear that Citadel hit a home run in offering a deal that E*Trade felt it couldn't refuse. So I have to congratulate them on their cleverness, because it seems almost certain they'll make a boatload of profit off these transactions. Still, even with Citadel sinking its claws into E*Trade, I'm not yet convinced they have sunk deep enough to cause any lasting damage. Instead, they have probably rescued a company that was dangling from a cliff -- and now E*Trade can move forward, hopefully without too many nasty surprises in store.



* Sorry, I couldn't resist being snotty there, but it boggles the mind that an investor -- much less a speculator -- would have such a wrong impression about short-selling. I mean, there's a lot of money on the line here.

For those readers not investing-minded, a "short" seller is someone who essentially bets the price of a stock is going to go down. He borrows the shares from someone else to get the transaction started, and when he divests himself of the position he buys the shares back. Thus, if a speculator shorts 100 shares of a stock at $6 and the price drops to $4, he reaps $200 on the deal. But in buying the stock back, he contributes to its price going up, not down.

** Indeed, why does a stock fall? Truly there are as many reasons as there are grains of sand upon the beach, or as there are stars in the sky. And yet, sometimes, there is no reason at all. It just is. Become one with the ebb and flow of the market, and you will achieve enlightenment. Or you could just stop checking the price constantly, which also helps in that regard.

*** Scared money does not a good investment make. Particularly when it's, you know, an investment in the most volatile frickin' stock we've seen in years.


OBLIGATORY DISCLAIMER: I can't emphasize how great the risks are associated with speculating in ETFC right now, so don't buy anything just because I put in a tiny amount of cash into this. I mean, my God. It's probably one of the most volatile stocks on the market today, it's bouncing back and forth like a ping-pong ball at a table tennis tournament, and it's still conceivable the whole thing will blow up. In short, the risk of losing money is very high and you should discuss this with an actual financial professional before you make an investment decision. Better yet, take the money and buy some nice Christmas presents for the kids.

Posted by Benjamin Kepple at 12:42 AM | Comments (0) | TrackBack

November 29, 2007

A Stranger in the House of Ayer

THERE'S A PITHY ACRONYM in the blogosphere known as RTWT -- for Read the Whole Thing. Like many pithy acronyms, it is often watered down due to overuse, and so I make a point of hardly ever using it. But there are times when articles come along that are so well-written and so thought-provoking and so bloody interesting that even I feel compelled to say -- Read the Whole Thing.

Boston Magazine has published such an article -- "A Stranger in the House of Ayer." Consider it a cautionary tale. It's a story about an old and wealthy family worth some $600 million, the outside manager who had worked for them for decades, and the alleged siphoning of nearly $60 million from that fortune. The lesson I drew from this story? If you let somebody else drive your car, make sure you keep an eye on how they handle the wheel.

Posted by Benjamin Kepple at 10:29 PM | Comments (0) | TrackBack

November 28, 2007

Civility, How We Miss Thee

OVER AT DEAN'S WORLD, Celia Farber wrote a nice post on the utter lack of civility which she encountered in two particular instances -- one recent, at a New York bookshop, the other at a restaurant. The first instance involved Mrs Farber bringing in books to sell at the store, in which she felt she was treated rudely by both the first employee she met and then the book-buyer; the second involved an experience with a rude waiter, who was so over-the-top in his incivility that she and her husband departed from the restaurant without settling the check.

Almost comically, this post has received a wealth of relatively snarky and rude comments.

While I do believe she and her husband ought not have walked out on the eatery -- she dropped payment off later -- I think it would certainly be appropriate in such a situation not to tip the waiter. I have only not tipped a waiter twice in my life and in both cases it was due to the overbearing wretchedness of the men in question. Normally, even with atrocious service, I'll leave 10 percent, because that's message enough; I typically leave 20 percent, and one time in a fit of generosity I even left a C-note. But if the service is truly rude and obnoxious I see nothing wrong with stiffing a waiter at a restaurant to which I'll never return.

As for the situation with the bookstore, I think Mrs Farber was right to complain about her initial reception, although I think she read too much into the book-buyer's attitude. That's just commerce, and the proper response would have been to haggle over the offer made. Still, I would have been furious had I received such an initial response upon entering the store and particularly contemptuous in return. Given that, I thought she handled the situation rather well.

Posted by Benjamin Kepple at 10:26 PM | Comments (0) | TrackBack

November 26, 2007

The First Credit Crunch

AS THE CREDIT CRUNCH continues to keep Wall Street mired in a financial morass, it's worth noting that credit crunches -- and the economic contractions that have gone with them -- have been with us for millenia. In the Middle Ages, the Fugger bank was one of just several major banking operations that was thrown for a loss when its risky loans to warmongering princes -- the original subprime loans -- went bad. Before that, the economy of the late Roman Empire was ruined due to runaway inflation. Long before that, the famed archon Solon of Athens threw a giant monkey wrench into the city-state's works when, through governmental fiat, he abolished all debts in the early 6th century BC.

However, interestingly enough, Yale finance professor William Goetzmann has noted perhaps the first recorded instance of a credit crunch in 1788 BC, in no less a place than the ancient city-state of Ur.

In a particularly interesting work (see link), Prof Goetzmann relates the case of the ancient businessman Dumuzi-gamil, who became wealthy through building large bakeries and lending silver at high rates of interest. While the Government at the time had lending caps in place -- interest on loans could not top 20 pc -- enterprising types like Dumuzi-gamil got around this through arranging short-term loans, generally between one and three months in length. But in 1788, Prof Goetzmann notes, it all went down the drain when local warlord Rim-Sin decided to abolish all debts, throwing the once-thriving financial markets of Ur into chaos and pretty much destroying the economic engine of the city.

But wait, you say. Who the devil was this Rim-Sin, king of Larsa? Well, there's a reason no one has ever heard of him: it's because the great Hammurabi, the guy who handed down all the laws (with death being the typical punishment), came along and kicked his ass a couple of decades later. Of course, had Rim-Sin not ruined his local economy, he might have been able to raise the capital to raise an army capable of defeating Hammurabi. But there is little in the historical record that suggests the economy came back to life anytime soon: about all that exists in the record after 1788, as Prof Goetzmann notes, are lawsuits.

It is perhaps a bit harsh to condemn the ancients for their lack of knowledge about economics and finance, as the knowledge we have today of those subjects far outpaces that which they had. For instance, the quantity theory of money -- the basis for understanding inflation -- wasn't first guessed at until the 16th century, when people finally drew the connection between rising prices and all the precious metals coming over from New Spain. The math of probability wasn't really known until the 17th century, which was also when the joint-stock company was formally developed. Price controls have never worked, as Diocletian famously found out back in the third century, yet up until the 1970s the Western world at times seemed to think they were a good idea.

Still, this sad saga from long ago holds many lessons for people today. For instance, the easy way out is not always the best way out. Hopefully, folks will keep that in mind when considering how to address Wall Street's present dilemma.

Posted by Benjamin Kepple at 12:44 AM | Comments (0) | TrackBack

November 18, 2007

And Now, Some Good News on the Currency Front

PERHAPS THE MOST FASCINATING thing about the continuing fall of the U.S. dollar's value, at least to me, is how it has moved from a strictly financial matter to one recognized in popular culture. Consider that the dollar's weakness compared to the Canadian dollar has just been lampooned in The Onion, America's premier humor magazine; and the clever rapper Shawn "Jay-Z" Carter has just produced a music video in which the currency of admiration is not $100 bills, but €500 notes. And Mr Carter is not alone among celebrities in singing the praises of the continent's currency.

As with any financial development that suddenly receives public notice, there is plenty of associated wailing and rending of garments and gnashing of teeth. That makes it especially important to take the long view of this situation and avoid the emotional highs and lows that go along with it.

For many Americans -- including me -- there is a knee-jerk emotional reaction that goes with having a weak dollar. It is bad enough we must always listen to the Europeans gripe and moan about how the backward Yankee imperialist hypercapitalist running dogs are screwing everything up, but even more annoying is that their foofy currency -- once worth a pleasing U.S. 86 cents about five years ago -- is now worth roughly $1.47. The dollar once bought 32 Russian roubles and now only buys 25, it once bought 120 Japanese yen and now buys 110; and when it once bought nearly $1.60 Canadian, it now buys a mere 97 Canadian cents. This last item is particularly galling for me; as a college student I remember going to Canada with my strong dollars and spending loonies like they were pesos. No more. No more.

I mean, it's getting to the point where Americans have to hold their tongues when the Europeans and others start in with their myriad complaints, and that's frustrating as all get out. It's kind of like that episode of "The Simpsons" where the family, to raise money, turns their home into a boarding house for snotty German tourists. They may act up, but we can't do anything about it because we need their euros. And pounds and loonies and rand and francs.

However, taking the long-term view of this situation tends to blunt these emotional and irrational fears. After all, in most cases the immutable laws of economics are driving the situation, so there is no use getting upset over things that are far beyond the ability of anyone to change. Also, while the fall in the dollar's value does make goods from abroad more expensive, when was the last time you bought something other than wine, food or high-end clothing products from Europe? Most people would have trouble recalling such a situation, since Americans generally buy imports (clothes, electronics, vehicles) produced in Asia or Latin America.

For most Americans, the only true downside to the fall in the dollar thus far is that it makes it more expensive to vacation in Europe. But again: how many Americans have actually been to Europe? 10 pc? Five? Plus, one can argue that so far, only America's upper and upper-middle classes are the ones really feeling the bite of this, since they're the only ones buying Bordeaux and Roquefort and expensive frippery.

Of course, there are risks if the dollar keeps falling (STAG-FLATION!) and it is possible, although certainly not yet probable, we could find ourselves in some horrible Seventies-era economic malaise as a result. But the risks to the rest of the world are far more pressing. Already our exports are becoming more competitive and our manufacturing sector is starting to rebound. If their currencies keep rising, it will inevitably wreck their economies and leave us in the driver's seat once again. That's enough to make a $1.60 or $1.70 euro tolerable, if you ask me.

In the meantime, it's worth noting there are plenty of countries out there whose currencies aren't rising against the dollar. True, many of these nations are complete basket cases, which means they're not exactly good tourist destinations. But some of these nations are relatively prosperous, enjoyable to visit, have ancient and rich cultures, wonderful food and delightful people.

Mexico is clearly at the top of this latter list, and I would encourage Americans to consider taking their vacations there; not so much in Cancun but rather places like San Miguel de Allende and Tlaxcala and Zihuatanejo. I must admit surprise the Mexican tourism authorities haven't gone full-press in promoting the relative inexpense of traveling in Mexico. But I've an idea in this regard:

Hey, you never know -- it might just work!

Posted by Benjamin Kepple at 11:55 AM | Comments (0) | TrackBack

November 14, 2007

Atlanta Man Pilloried as Jerk for Water Use

AS THE SOUTHEAST suffers through an extreme drought, an Atlanta man has been pilloried as a selfish jerk for using some 440,000 gallons of water in October at his palatial home. This amount of water, we learn from no less a source than ABC News, is roughly equal to the water use of 60 average homes in the area. As one might expect, this story has infuriated pretty much everyone in greater Atlanta.

The man in question, Mr Chris G. Carlos, had attempted to hide from the inquiring press, but things apparently got so bad that he issued a statement basically saying: I had no idea I was using so much water, and I'm going to reduce my use accordingly. Apparently, he has already cut back to roughly 121,000 gallons per month, which is about as much as 10 typical homes use. So that's a start, I guess. He does have a very nice home with very nice landscaping and a pool, so I'm not going to criticize the guy too much, even if he probably should have thought about this sooner. I mean, when the governor is organizing prayer services to ask for relief, that's kind of a tip off that all isn't well.

Speaking of thinking about things sooner, I daresay Mr Carlos would have noticed how much water he had been using if prices had been adjusted accordingly to discourage excess consumption. Why the local water authority has not taken such a strong stance is beyond me. According to the Cobb County Water System, there are five tiers of use for residential customers -- ranging from $2.29 per thousand gallons for up to 8,000 gallons to $5 per thousand gallons for customers using more than 50,000 gallons per month. (The top two tiers had their prices recently adjusted upwards, from $2.98 per thousand gallons, but that's clearly no salt off one's back for a customer using that much water).

Now, I am no expert in water use, but it seems to me the proper way to discourage consumption is to enact a heavy price for excess use. So dig my idea:

* First, the System should establish a per-household usage ceiling (call it a caput, for tradition's sake) for how much water each household should -- on general principle grounds -- use in a month. This can vary accordingly due to drought conditions: in severe drought conditions as we have now, the caput could be set at 10,000 gallons per month, or roughly the typical home's use. These customers would be charged a very low fee for their water use, say $2 per thousand gallons (I am a fan of round numbers).

* Second, the System should increase prices ever more sharply as usage increases and as drought conditions worsen. For instance, use from 10,000 gallons to 20,000 gallons could be charged at $4 per thousand gallons. Use from 20,000 to 30,000 gallons could be charged at $10 per thousand gallons. Use from 30,000 to 40,000 gallons could be charged at $20 per thousand, while use from 40,000 to 50,000 could be charged at $40 per thousand. Use above 50,000 could be charged at $50 per thousand, and so on. Extreme users could face even larger charges; for instance, $100 per thousand when one hits 100,000 gallons per month.

True, this would result in heavy expenditures for some users. For instance, under the current regime, Mr Carlos' reduced 121,000 gallon use will cost him roughly $494 per month for the water as a commodity. Under my idea, Mr Carlos' use would result in a total commodity charge of $5,360 per month. I would submit that if annual water charges of $5,928 are not getting Mr Carlos' attention, then an annual water charge of $64,320 definitely would.

* Third, to get folks used to the new price regime, the System should offer conservation credits based on a user's water consumption the prior year. These would be based on percentage targets and be inversely correlated with water use. For instance, let's say the conservation goal is 10 pc, as it is this year. Anyone who gets below that benchmark would get a credit for doing so on their water bill. For homes using under 10,000 gallons of water a month, that could be a $2-per-thousand credit. For homes using between 10,000 and 20,000 gallons, it could be a $1-per-thousand credit, and so on, up to say a nickel for users above 50,000 gallons.

Thus, a home that used 10,000 gallons a month and got it down to 8,000 gallons would receive a $4 credit, or a 20 percent bonus. A home that used 20,000 gallons and got it down to 16,000 would receive a $4 credit as well, or a 6.67 percent bonus. If Mr Carlos got his 121,000 gallons down to 60,000 gallons, he would receive a credit of $3.05. That's not much at all compared to the $1,060 per month he would pay under my swell plan for water use, but it's something and it's important to provide everyone incentives for this to work. Obviously, the goal is to get the small users -- of whom there are a LOT more -- to conserve; for Mr Carlos, the real savings comes in not paying the higher charges.

Ideally, this is a plan that would only be used in severe drought conditions. If water is widely available, it wouldn't be just to charge even heavy users an arm and a leg for the stuff. However, in situations when water is scarce and everyone is on alert to not waste it, it would make sense to make sure supplies of this public good are carefully guarded. A well-designed water pricing scheme would go a long way in doing that.

Posted by Benjamin Kepple at 11:00 PM | Comments (0) | TrackBack

Every Man a Speculator (Including Me)

Your science cannot take account of her;
She controls, takes decisions, executes them
In her kingdom, as other gods do in theirs

Her permutations go on without truce;
Necessity ensures that she is rapid;
So you no sooner have a thing than you lose it.

-- Inferno VII: 85-90

DANTE’S WORDS about the demiurge of Fortune resonate still today, although I daresay I now find myself at the mercy of another VIXen. You see, in a moment of weakness -- well, more precisely a moment of hubris, vanity and overconfidence – on Tuesday I became what I have most abhorred. Yes, I have become a … speculator.

You see, on Tuesday morning I was at home relaxing and reading the financial press, and I came across a story about the great tumult surrounding shares of the E*Trade Financial Corp. (NASD: ETFC), the on-line brokerage and banking institution. For those of you unfamiliar with this grand saga, you should know that on Friday night, an analyst for Citigroup proclaimed that E*Trade was in most dire straits due to an asset portfolio it holds.

This portfolio contains some $3 billion worth of asset-backed securities, including some $450 million in dreaded collateralized debt obligations, as well as some bullshit securities based on second mortgages. These nasty little instruments are what’s responsible for the turmoil in the credit markets, because these formerly swell investments have turned to crap. They’ve turned to crap because people have realized that bunches of the mortgagees basically engaged in fraud to get the loans. Also, the loans are cruel and designed to squeeze every penny out of the borrowers. This would be fine except the borrowers don’t have the money to make their rapidly-rising payments, leaving the lenders stuck.

Anyway, the Citigroup analyst basically said the company was screwed because of this, forecasting a 15 pc chance of the firm going under. This prompted the company’s shares to crash on Monday and by Monday night they were off 59 pc and trading somewhere about $3.55 a share. Thus, I had a “What’s up with that?” moment.

The way I saw it, this was a complete overreaction.* So the company’s going to have to write off some of its CDOs. So is everyone else. Besides, at $4 or so, that gave ETFC a P/E Ratio of … three. Yes, three. Its expected forward P/E Ratio was 12. The company also said it could write off $1 billion of that portfolio and still be on solid ground. I mean, it was so out of whack that the company’s cash accounts were worth more than its market capitalization, meaning that if someone came and bought the whole stupid company right then and there, the buyer would essentially get paid to do so.

As a result, I bought ETFC after about ten minutes of quick investigation.

After doing it, I thought I needed a shower. I mean, I could FEEL the disapproval from my father, who has spent the last 31 years informing me about the importance of avoiding speculative traps, why one ought buy and hold, why one ought not act before prudently evaluating a situation. About the only saving grace was that I had bought a trifling** amount of the stock, with a bit of the capital scraped up from the odd dividend here and there and the leftover bits of cash from other investments.

Thus, the way I saw it was that if the company did tank, I’d be out a trifling amount of cash. You never want to lose money, of course, but if I did, it wasn’t like I would have put my retirement at risk. The upside was that the stock could well rebound and have a bright future. Arguably, there was an 85 percent chance of that happening, based on the gloomy analyst’s report. Besides, E*Trade has a strong brokerage business, so what the hell. I bought in at about $4.21.

A while later I checked back and the bloody thing had skyrocketed to like $4.70 and by the time I got in to work it was up to $5.42. It closed at $5 but rebounded in after-hours to $5.24. That’s twenty-five percent in a day. And despite the small actual gain – it was truly marginal – I had a spring in my step the whole bloody day as a result. I mean, I was really and truly happy. On one hand it was completely ridiculous but on the other hand I felt like I really got in, if not on the bottom floor, on the second.

True, the trading was absolutely insane. I spent some time watching it in awe, as giant blocks of $100,000 and $200,000 worth of shares were bought and sold and the ask price slowly rose up. At the end of the day, some 250 million shares had been traded, which is like HALF the company’s shares. So clearly day traders and speculators everywhere were in on this, and that was undoubtedly fueled due to speculation about a merger or takeover and the fact Jim Cramer said reassuring things about the company***. Conveniently, all these things happened after I bought the shares.

Of course, I am acutely aware this could all go to hell and the company could vanish and I’ll be left with two cents on the dollar and E*Trade will go the way of**** Plus, God knows what the speculators will do to the thing on Wednesday. But I do plan to keep the shares for a long time coming. On Tuesday, I got in at the bottom, and I’ve either scored a huge coup or caught a falling knife. We shall see how it turns out.


* Efficient market my ass.

** In investing terms, a “trifling” amount is in the three figures. This is below a “small” investment in the four figures and a “rounding error” in the two figures.

*** BOO-YAH!

**** If that actually happened, that would make for an excellent commercial some day, wouldn’t it?

OBLIGATORY DISCLAIMER: OK, so I bought a few shares of ETFC. This does NOT mean you should as well, if only because the price has gone up and you’ve missed your opportunity to get in at the ground floor. Investments can and do lose money, and God knows I’m taking the risk of that happening here, especially if Cramer spills soda on his shirt and hits the wrong sound-effects button and suddenly everyone watching him sells the thing short. You should always talk over any investment decision with an actual professional and carefully review all paperwork explaining potential risks before investing. And for the love of God, don’t buy those overpriced proof sets of commemorative coins.

Posted by Benjamin Kepple at 12:06 AM | Comments (0) | TrackBack

November 08, 2007

It's A Small, Small, Small, Small World

SOME YEARS AGO, as part of my day job, I had the opportunity to interview Dr Niyi Osundare, an acclaimed Nigerian poet and professor of English at the University of New Orleans. Unfortunately, it was not under the best of circumstances, for Dr Osundare was temporarily staying in New England following the devastation wrought by Hurricane Katrina. After I had written about Dr Osundare's ordeal, he got in touch with me and thanked me for the article -- and mentioned that a friend of his in Ethiopia had seen the story on-line!

This, as one might expect, caused me to about fall out of my chair. It's one thing for people you know to mention they've seen your work, but the idea of people halfway around the world reading it is an entirely different kettle of fish. It's an amazing feeling, and when I heard the story from Dr Osundare, it was very much proof to me that globalization is here, and here to stay.

I had another experience like this just tonight.

As Loyal Rant Readers may recall, I have been a supporter of a fantastic Web site called Kiva, which allows donors in the developed world to loan capital to worthy businesspeople in the developing world. I am proud to report tonight that one of the two loans I made to small operations in Mexico has just been paid back in full. The borrower, a widow who operates a shoe store in Monterrey, Nuevo Leon, was able to use my cash and that of many other donors to purchase inventory for her small shop, which she was in the process of expanding. (My other loan, made to a widow who operates a small grocery in Cd. Acuña, Coahuila, is in the process of being paid back and is on-schedule).

Anyway, with the loan repaid, it meant my $25 share of it was also repaid. That left me searching for a new business for which I could act as a Tiny International Financier. My original hope had been to invest again in Mexico, as I am a strong believer that trade between our two nations will lift everyone's boat. However, I couldn't find a business in Mexico to invest in -- a function, perhaps, of the site's recent popularity. (There were only two loans available, for construction projects, and while these are certainly worthy endeavors I prefer to focus on small business).

So on a lark I expanded my search preference from "North America" to "All" and stumbled across a couple in Azerbaijan who operate a cattle-breeding business. They had asked for the sum of $900 to buy a cow. This sure seemed like a winner to me, as one cow -- aside from producing milk or eventually being used as beef -- can also produce calves, and they can go forth and multiply, and thus wealth is created. But what really sealed the deal was where the borrowers were from: the small city of Beyleqan near the Iranian border.

You see, several months ago I interviewed Mr Ayaz Guliyev, the chief executive of the Ashikhli Credit Union, located in -- guess where -- Beyleqan. Fortunately, I was able to meet Mr Guliyev and several of his Azeri counterparts in happier circumstances -- they were touring New England to see how credit unions operated in the United States. It was a great interview and it was pretty cool to learn from Mr Guliyev and his counterparts about the state of business in Azerbaijan. So having that "connection," if you will -- well, it made the decision to invest that $25 pretty easy for me. It would be pretty cool if some of my loan money, through the normal course of commerce and business, were to eventually end up in Mr Guliyev's operation.

The long and short of it, though, was that this again reinforced my feeling that globalization is here, and here to stay. We'll see how this latest venture turns out but I am confident in its success -- and confident my small investment will help the couple in question build a better life. For more information about Kiva, visit here.

Posted by Benjamin Kepple at 09:44 PM | Comments (0) | TrackBack

November 07, 2007

It's Hard to Find Good Help These Days

A FEW DAYS AGO, The Wall Street Journal's "The Wealth Report" blog had an interesting post on a Troubling and Serious Issue facing America's salespeople. Apparently, the salespeople are now annoyed because -- quelle horreur! -- they can't tell whether the customers are wealthy anymore. This situation means they now have to be nice to everyone.

My initial reaction to this story was to feel good about living in a country that prizes capitalism. After all, there's something to be said for a nation when so many people have money they can do their own thing without giving two cents about what others think of them. Then I got to thinking about it, and I thought: why the devil are the salespeople being smarmy to potential customers?

You would think that salespeople, particularly those selling luxury goods, would realize the master-servant dynamic of such a commercial relationship and exploit it to their benefit. Being nice, last time I checked, has never killed anyone, and neither has providing good service. When you provide good service to a customer, or a potential customer, you are usually rewarded in the end -- either through a commission or a tip or what have you.

This goes especially when your customers actually are wealthy, because they usually have a soft spot for people who do good work for them. Even upper-middle class and middle class consumers would tend to be receptive in such a situation, because they value both the service and the fact the salesman at the fancy boutique did not look down on them. Salesmen, for that matter, have no business looking down on anyone. That's not part of the job description. The job entails selling product and as long as a customer has cash or credit, that should be enough.

Posted by Benjamin Kepple at 10:56 PM | Comments (0) | TrackBack

November 06, 2007

BBC: Cleveland "Sub-Prime Capital of the United States"

THE BBC HAS PUBLISHED a fascinating account of how the sub-prime lending crisis is plowing through the greater Cleveland area like a really nasty case of necrotizing fasciitis. According to the corporation, one out of ten homes in Cleveland is now vacant and entire neighborhoods are falling apart as the houses in them are foreclosed upon, boarded up and summarily vandalized.

Perhaps most astounding are the graphics the BBC has compiled, showing the horrific economic carnage. In huge swaths of the city and its inner suburbs, at least 57 percent of the mortgages are sub-prime, and entire sections of greater Cleveland appear to have been foreclosed upon. I was talking about this at work with a friend of mine, and he remarked on a chilling change in economic conditions that has occurred as a result. The old saw has it that lenders don't mind offering mortgages because even if the loan goes bad, they still have the house as collateral. But what happens if you can't sell the house? It sounds as if that's happening in Cleveland right now.

Here's another map from Case Western Reserve University showing the percentage of bank-owned homes in the greater Cleveland area. In some communities this is close to ten percent.

Take a look at the maps and graphics. They show a city that is flat on its back.

Posted by Benjamin Kepple at 08:51 PM | Comments (0) | TrackBack

November 01, 2007

Strike! (Based on an Idea by ...)

SINCE IT APPEARS QUITE LIKELY the Writers Guild of America will go on strike within a few hours, The Rant would like to offer its open support to the WGA and its member scribes in their fight against the entertainment-industrial complex, also known as the "Alliance of Motion Picture and Television Producers."

As a former Los Angeles resident, who made the acquaintance of some folks within the entertainment industry during my time there, I am somewhat aware of the unpleasantness writers out there face. As a rule, writers are constantly getting screwed over. Their credits get stolen; their payments get "held up;" incompetent producers ruin their work. As it seems clear the proposals from the industry side are designed to screw over the writers even more, I think everyone should support the writers should they decide to walk out.

Admittedly, this is not an issue that affects me, other than the fact I myself write for a living (in another trade) and I generally have a policy that it is good for writers to be paid, and paid well. I have, however, been surprised at the vitriol that has been spewed in the writers' direction, particularly the attacks against their work. Some wags have quipped that one would hardly be able to tell if the writers walked off the job, while others have been more direct and said the writers' work is shit.

I don't think this is an entirely fair argument. After all, it's not like the writers determine what ends up on screen. That's the work of people, often overpaid and undertalented, above them in the food chain. If the final product turns out to be shit -- and there's an increasing amount of shit out there, it seems -- it is not generally the fault of the writers, but the producers and other executive-types who decide something needs sexed-up or more bathroom humor or what not.

I mean, come on. Think of the poor bastards who got stuck writing "Big Momma's House 2," or "Deuce Bigalow: European Gigolo," or "Alone in the Dark," or "From Justin to Kelly." You think they wanted to write those? You think a writer gets up in the afternoon and says to himself, "Boy, I can't wait to get to work on this crappy sequel!" Hell, no. A writer gets up and says to himself, "I can't believe what they're charging me for this earthquake insurance," and then starts churning out something like "My Little Pony: the Movie." And then they STILL get screwed over.

So I would encourage Loyal Rant Readers to support the WGA in their strike. Doing so would hopefully lead to better-quality entertainment in the future. Of course, in the short term it will be a slog, because the God-fearing American public will be forced to watch reality television programs and game shows and various other shows featuring the cream of America's bumper moron crop. But that in itself could have good effects, such as having people watch more football.

Anyway, I wish my fellow writers good luck and all the best in their struggle. You've got at least one guy out in flyover country* rooting for you.

* Well, actually, not really. I do live in New Hampshire now. But I am a Michigander at heart, so take that for what it's worth.

Posted by Benjamin Kepple at 07:51 PM | Comments (0) | TrackBack

October 27, 2007

What the Hell Happened

THE RANT WOULD like to give a tip of the hat to Mr Allan Sloan, a senior editor-at-large of Fortune magazine, for writing one of the best pieces yet on the collapse of the subprime mortgage market.

Simply put, if you want to understand why everything went to hell in the market, causing untold pain and woe to hedge-fund investors and foreigners and other folks who snapped up these miserable loans like hotcakes on Sunday morning, then you should read this article. Hell, read it anyway -- it's some of the best business reporting I've seen in a good long while. Besides, you'll learn what a "mezzanine tranche" is, and will sound smart at parties.

Anyway, Mr Sloan looks at the origination, sale and disposition of a loan bundle known as GSAMP Trust 2006-S3, a collection of $494 million worth of subprime mortage loans that Goldman Sachs packaged up together, and then sliced up for sale. He then looks at what happened to them, and it ain't pretty.

Mr Sloan writes:


In the spring of 2006, Goldman assembled 8,274 second-mortgage loans originated by Fremont Investment & Loan, Long Beach Mortgage Co., and assorted other players. More than a third of the loans were in California, then a hot market. It was a run-of-the-mill deal, one of the 916 residential mortgage-backed issues totaling $592 billion that were sold last year.

The average equity that the second-mortgage borrowers had in their homes was 0.71%. (No, that's not a misprint - the average loan-to-value of the issue's borrowers was 99.29%.)

It gets even hinkier. Some 58% of the loans were no-documentation or low-documentation. This means that although 98% of the borrowers said they were occupying the homes they were borrowing on - "owner-occupied" loans are considered less risky than loans to speculators - no one knows if that was true. And no one knows whether borrowers' incomes or assets bore any serious relationship to what they told the mortgage lenders.

You can see why borrowers lined up for the loans, even though they carried high interest rates. If you took out one of these second mortgages and a typical 80% first mortgage, you got to buy a house with essentially none of your own money at risk. If house prices rose, you'd have a profit. If house prices fell and you couldn't make your mortgage payments, you'd get to walk away with nothing (or almost nothing) out of pocket. It was go-go finance, very 21st century.

Goldman acquired these second-mortgage loans and put them together as GSAMP Trust 2006-S3. To transform them into securities it could sell to investors, it divided them into tranches - which is French for "slices," in case you're interested.

There are trillions of dollars of mortgage-backed securities in the world for the same reason that Tyson Foods offers you chicken pieces rather than insisting you buy an entire bird. Tyson can slice a chicken into breasts, legs, thighs, giblets - and Lord knows what else - and get more for the pieces than it gets for a whole chicken. Customers are happy, because they get only the pieces they want.

Similarly, Wall Street carves mortgages into tranches because it can get more for the pieces than it would get for whole mortgages. Mortgages have maturities that are unpredictable, and they require all that messy maintenance like collecting the monthly payments, making sure real estate taxes are paid, chasing slow-pay and no-pay borrowers, and sending out annual statements of interest and taxes paid. Securities are simpler to deal with and can be customized.

Someone wants a safe, relatively low-interest, short-term security? Fine, we'll give him a nice AAA-rated slice that gets repaid quickly and is very unlikely to default. Someone wants a risky piece with a potentially very rich yield, an indefinite maturity, and no credit rating at all? One unrated X tranche coming right up. Interested in legs, thighs, giblets, the heart? The butcher - excuse us, the investment banker - gives customers what they want.


READER: Hinkier? What the hell kind of word is hinkier?

"Hinkier" is a cognate of the word "Jinkies!" -- a made-up exclamation of surprise used in the old Scooby-Doo cartoons. This and other strange sayings -- such as "ZOINKS!" -- evolved because the writers couldn't use normal exclamations such as "Holy shit!' and "CHRIST JESUS!" back in the late Sixties.

Anyway, as we know, this all ended very badly and the investors who bought these loans were left uttering exclamations -- on par with "ZOINKS!" -- when they opened their hedge-fund statements, or tried to redeem their investments from the funds. It really went badly for the folks who held the riskier tranches of the debt. Basically, as Mr Sloan explains, they were the first ones to get wiped out. Mr Sloan's analysis, although boiled down, may still seem a bit dense, so let's boil things away.

Everyone, of course, got interest payments, no matter what tranche they bought into. The tranches dealt with the loans' principal as well. Basically, when the loans got divided up, people who bought into the safest pool were due to get their principal repaid first, while investors in the riskiest pools got repaid last. The safer tranches (A1, A2 and so on) had the lowest interest rates, which got higher as risk increased, up to an X (or unrated for credit purposes) tranche.

In theory, if all the loans had been paid off, the X tranche would have paid off like gangbusters, and it would have paid for years and years and years. The A1 tranche, in contrast, would have paid well, but for a shorter time -- until the share of the total principal associated with it was paid back. When the A1 tranche was paid off, the A2 tranche would start to get paid off, and so on down the line. They would have gotten away with it too if it hadn't been for those meddling homeowners.

But where does one begin in looking at all this? I mean, the greed and stupidity is just mind-boggling here.

When I talked with Mr Kepple tonight about this, he expressed amazement at the credit rating agencies' actions. Why the devil would bunches of second mortgages, written to people who had no equity in their homes and no proof they could actually pay back the money, earn a AAA-grade rating? I mean, come on. I don't have any sympathy for the investors who bought the debt, for there is such a thing as caveat emptor, but for the credit agencies to screw the pooch like this is unbelievable.

Of course, I also don't know what the buyers of the debt were thinking either. I don't understand why these very smart people, who can do things with money I can't even imagine, suddenly took leave of their senses and approached things so amateurishly. But there are lessons to be drawn from this, of course:

A) It pays to do your homework;
2) If something seems too good to be true, it probably is, and:
C) Sometimes, Wall Street exists to take your money.

Oh, yeah. You see, as Mr Sloan revealed, this past quarter Goldman Sachs cleverly shorted an index of mortgage-backed securities, so it made a whole bunch of money in the meltdown even as its customers were getting their heads handed to them. If you read Mr Sloan's article, it's actually not nearly as cold-blooded as it sounds. Besides, the times change and Wall Street changes with them.

Still, it does bring to mind that old quip about customers' yachts.

Posted by Benjamin Kepple at 10:24 PM | Comments (0) | TrackBack

October 20, 2007

A Busy Past Few Days

AH, OCTOBER. The leaves are falling from the trees, the college football is fast and furious, and it's time again for the Seasonal Stock-Up here at Casa Ben. Even more amazing, I managed to get a weekend's worth of errands done by 9:30 a.m. today, and that's really nice.

As Loyal Rant Readers know, I am a big fan of buying things in bulk. That's not only because of the cost savings associated with buying in volume, but also the Lack of Aggravation down the pike. Now that I have a nine-month supply of kitchen trash bags and toilet paper, a six month supply of paper towels and a month's worth of soda stored in the Back Bedroom I Never Use, I've pretty much made certain that I'll limit my trips through the cold and muck this winter carrying large and unsteady bundles of stuff.

Also, I got new tires for the car today. They're slick -- Michelin Hydroedge tires, and they should last for years. Buying tires can always prove a bit tricky but with a relatively newer car, the expensive tires should prove cost-effective in the long run. Apparently, these have a 90,000 mile tread warranty, which is pretty bloody impressive.

Posted by Benjamin Kepple at 10:33 AM | Comments (0) | TrackBack

October 16, 2007

Wake Me When It's 2010, Please

A COUPLE of new reports on the state of the housing industry piqued my interest today. The first article looked at homebuilders' expectations about market conditions for the next six months, as well as data about new home sales. The second article is a more positive look -- for builders, anyway -- at the dynamic between those building new homes and potential buyers.

The first article, from the Associated Press, reports homebuilders' confidence is at an all-time low, at least since the index tracking it started up in 1985. The National Association of Home Builders said its confidence index, on which 50 is a neutral indicator, fell to 18 in October, which I suppose is somewhere between "despondent malaise" and "Biblical lamentations." Along with that news comes word that home sales in Southern California have dropped to their lowest level in two decades, which only adds to the gloom.

With all this grim news, a corresponding article from Forbes seems a bit oddly upbeat. Here's the gist of the story:

“Builders in the field are reporting that, while their sales incentives are attracting interest among consumers, many potential buyers are either holding out for even better deals or hesitating due to concerns about negative and confusing media reports on home values,” said NAHB President Brian Catalde.

Consumers are still trying to get the best deals they can, said NAHB Chief Economist David Seiders, and many may have unrealistic expectations as to prices for new homes as well as what they can get for their existing homes.

The good news Seiders said is that builders expect sales conditions to remain stable in the next six months instead of decline further. NAHB’s housing forecast indicates the second half of the year will show significant improvement.

Now that's an interesting assessment. Mr Seiders seems to suggest that buyers are overly optimistic about what they can get for their own homes, while overly optimistic about how much cash they can squeeze out of the homebuilders looking to dispose of inventory. Well, if that ain't human nature, I don't know what is.

Of course, I realize much may change over the next several months -- few people want to buy homes in winter, after all -- and spring may dawn with a renewed confidence in the markets and the economy, and God may smile upon the land, and the people may march forward into the future with renewed optimism and hope. That would certainly boost the housing market.

Still, I'll believe it when I see it. One reason I have not actively pursued buying a home is because I don't want to catch a falling knife, and buy an asset that keeps dropping in value. If I must buy property, I would much rather buy on the upside. (Of course, there's also that no wife-no kids thing, which is the overriding thing at this point).

But another big reason is my own uncertainty about the future. Will I meet a girl and get married? Will my job still exist in the same fashion five years from now? Will the dynamics of the market change? Will my own circumstances change? Will I find myself here in Manchester in five years' time, or in Memphis or Ann Arbor or Rochester or Tucson? Those are a lot of things to keep in mind. They change that home-buying dynamic from a matter of watching a teakettle slowly move to a boil to a matter of watching several pots on a range, and hoping one of them doesn't spill over its top. If a lot of other people feel the same way I do, then one can expect continued turbulence in the market ahead.

That's a big if, I suppose, and only a fool would rule out completely the idea of the housing market suddenly roaring again in six months' time. As the proverb goes, brag about next year and the devil laughs. Still, at this point, I think I'm better off staying put until 2008 or 2009 or even 2010 -- or about the time I buy a ring, whichever comes first.

Posted by Benjamin Kepple at 11:15 PM | Comments (0) | TrackBack

October 12, 2007

The Joys of Ticket Scalping

WE LEARN TODAY from CNN that a grave crisis is sweeping America. It hasn't anything to do with the war, or national security, or what not. Rather, scandalous and evil ticket brokers have snapped up the great majority of the tickets to teen starlet Miley Cyrus' concert tour, and accordingly have caused the price of the tickets to skyrocket accordingly.

CNN's report makes it pretty clear -- at least from their point of view -- these clever souls are Ruining Things for America's Children. As such, there is much wailing and gnashing of teeth from parents and children and attorneys general, proclaiming the practice is odious and wretched. While even I would admit the situation is not an ideal one, I don't see why people -- even professionals -- should be forbidden from buying tickets and then re-selling them.

I feel this way because, as a semi-clever college student, I routinely sold my tickets to Michigan football games to shady scalpers who hung out around the student union building. I say semi-clever because, although I profited from these sales, I could have made a lot more money if I had just invested more time into the selling process. Instead, I ended up selling my tickets to some overcoat-wearing hustler who put up ready cash in the hopes he could sell the tickets prior to game time. With some games, such as the annual Ohio State matchup, he was certain of making a killing. With other games, such as the annual Minnesota matchup, he was taking more of a risk. However, in retrospect, I have a feeling those scalpers did all right for themselves even on days when we played the Eastern Michigans of this world.

However, this was ten years ago. It was an era without eBay and StubHub and craigslist and all the other faboo sites that promote on-line commerce. If you wanted to sell your tickets, you had two choices. You could go to the scalpers, or you could put up a flyer and hope to sell them that way. The proceeds, of course, were used for things like pizza and beer and various other carbohydrate-heavy foods that made watching the game at home far more fun. I loved going to Michigan's games, but having to stand for three hours straight in the student section would soon cause anyone to consider selling their tickets.

But I digress. It's difficult to argue the principles of voluntary exchange involved in ticket scalping are somehow contrary to natural law: the buyer gets what he wants and the seller gets what he wants, and the market decides the price accordingly. It seems to me the real problem has to do with the way tickets are sold. I don't see why concert promoters couldn't devise a way to sell the tickets via on-line auction, or set aside a certain number that could only be purchased in person, or carry out one of a dozen other tactics to frustrate the ticket brokers and get the tickets in the hands of "real" fans -- if that is indeed their aim.

In the meantime, I have to say I feel really old -- for two reasons. First, I'm alarmed to think that Billy Ray Cyrus -- he of "Achy Breaky Heart" fame -- has a teenaged daughter, because I remember when he was popular. Second, I was out at breakfast this morning when I was listening to a bad televised performance of a song that sounded familiar, but that I couldn't immediately place. Suddenly, I realized what it was, and announced loudly that Lionel Richie's "All Night Long" should not have been remade, particularly not this badly. The cute waitress -- the one I unsuccessfully asked out a while back -- agreed the performance was awful, but was unaware the song was a remake. Ouch. I mean, I remember that song from the Eighties. It wasn't THAT long ago, was it?

Posted by Benjamin Kepple at 10:46 PM | Comments (0) | TrackBack

October 10, 2007

One of the Dumbest Things I've Read in Years

I DARESAY George Monbiot, the loathesome and wretched columnist for The Guardian, stands as prima facie evidence of Britain and Europe's continuing slide into irrelevance. Here is a man, given a grand stage on which to deliver his wisdom, and he consistently spouts theories and ideas that make less sense than the utterings of a mad street preacher. His latest gem is a pitiful screed in which he argues -- wait for it -- that Governments ought work to halt economic growth because it could promote climate change and cause an ecological collapse.

This is, of course, a breathtakingly stupid argument. Apparently the ecological destruction wrought under certain economically unfree regimes over the past half-century has slipped Mr Monbiot's mind. Apparently, Mr Monbiot has also not realized economic growth is a catalyst for environmental improvements, as one can see here in the United States and in most places in the developed world. Lastly, Mr Monbiot has apparently forgotten that economic stagnation -- or sharp economic declines -- can lead to unpleasant struggles over land, resources and other property. Struggles, one might add, that often involve trampling underfoot the ecology he so adores.

But let's look at Mr Monbiot's argument in depth, because only that can expose the man's intellectual ineptitude. Mr Monbiot writes:

If you are of a sensitive disposition, I advise you to turn the page now. I am about to break the last of the universal taboos. I hope that the recession now being forecast by some economists materialises.

Actually, I can think of many universal taboos that still remain alive and well, including ---


NOTICE: The following three paragraphs have been censored in accordance with site policy for their highly offensive, gross and degenerate nature. Why exactly Mr Kepple thought to write them is beyond us, as he is well aware of the rules and regulations laid out in Style Memorandum No. 56, "On Sensitive and Inflammatory Topics." We apologize for any distress caused as a result.


Standards Department
Benjamin Kepple's Daily Rant Inc.
"Your Hometown Nostalgia Source"


-- and especially when you use whipped cream. But I digress. It is generally poor form to root for a downtown in the economy, even if you've got your portfolio entirely short. Most people, who maintain at least some sense of class and decorum, know to keep such thoughts private. Mr Monbiot has never shown much of either.

Mr Monbiot continues:

I recognise that recession causes hardship. Like everyone I am aware that it would cause some people to lose their jobs and homes. I do not dismiss these impacts or the harm they inflict, though I would argue that they are the avoidable results of an economy designed to maximise growth rather than welfare. What I would like you to recognise is something much less discussed: that, beyond a certain point, hardship is also caused by economic growth.

Mr Monbiot, of course, does dismiss these. He does so through not volunteering to be the first one made redundant at The Guardian when the economic downturn he so desires actually comes through. Of course, at the rate things are going in Britain and Europe, he may well get his wish yet. As the American dollar continues to fall and the Asian nations continue to artificially keep their currencies undervalued, a downturn on the other side of the Atlantic can't be ruled out.

Still, the idea that economic growth causes hardship just doesn't make any sense. Economic growth unequivocally improves lives, raises standards of living and creates a better world. After all, the world of today is far better than it was back in 1900, 1950 or even 1980. As such, it stands to reason that with continued growth, the world of 2020, 2050 or 2100 will be better still.

This conclusion, however, has escaped Mr Monbiot completely. He has forgotten that a lot of growth does not result from building factories or polluting rivers, but through entire economic sectors that are based on intellectual and technological advancements. The pursuit of growth has already led to the development of hybrid automobiles; who is to say that super-clean hydrogen cars won't be far behind? What is to say the drive for cheaper energy won't lead to the development of cleaner power plants?

Mr Monbiot continues by decrying what he sees as runaway consumption, not only among the hoi polloi but among the upper classes, who spend an alarming amount of money on expensive frippery and useless knick-knacks and related goods. Why he didn't devote his column to the reasonable argument that reducing consumption is not only clever, but a social good, is beyond me. That itself, aside from being sound, would provide many of the benefits he supposedly hopes to derive through less economic growth.

Yet as Mr Monbiot is rooted in the peculiar world view of Europe -- and its idea that Government, in all its forms, can and must solve every problem under the sun -- it is unsurprising he would look to the State to solve the supposed ills he identifies. It is fortunate, as Mr Monbiot ruefully notes, that the Governments he would like to act will take no action on his ideas. That may be because, unlike Monbiot, these Governments are back on planet Earth.

Posted by Benjamin Kepple at 11:19 PM | Comments (2) | TrackBack

October 09, 2007

Decision to Open Taco Bells "Last Straw," Says Aggrieved Mexico

El Diario Rant

SAN MIGUEL de ALLENDE, Mexico -- RELATIONS BETWEEN the United States and Mexico have fallen to a new low after Yum Brands Inc., the Kentucky-based owner of the Taco Bell fast-food chain, said it was expanding into the country after a 15-year hiatus in operations.

Already at loggerheads over issues ranging from immigration to trade, the company's move has infuritated partisans on both sides of the border. But its effects have been most strongly decried in Mexico, where culinary tradition is paramount and citizens often resent what they see as American interference in their lives. Still, the company -- in announcing its move -- did not flinch from criticism.

"We believe the people of Mexico deserve access to the spicy, grilled, melty, crunchy taste of Taco Bell, whether they like it or not," said Chad Finnster, a Yum brands spokesman. "We're sure they'll come to find value in our product offerings -- particularly at 2 a.m., when other restaurants are closed and the people, suffering from a lack of grilled and melty offerings, find they have the munchies. We're confident our strategy, based around ecumenical concepts such as "Fourthmeal" and the quasi-creative use of industrially-produced foodstuffs, will prove as successful in Mexico as it has in America."

Despite the company's optimism, though, the move was met with derision not only in Mexico, but also from marketing experts.

"Oh, sure, Taco Bells in Mexico. That's a real winner right there," said New York-based marketer Floyd Pantaleon. "I mean, I can see it possibly working if the value meals were, you know, values in a country where the minimum wage is roughly $4.25 a day. But based on reports I've seen, Taco Bell's tacos are selling for $1 and burritos are selling for as much as $5.70. Those prices are high enough in America, much less Mexico."

"I mean, why would you pay 11 pesos or so for a Taco Bell taco when you could pay 11 pesos for two or three yummy carnitas tacos, lovingly prepared, from some roadside vendor who has been making tacos, and making tacos well, for thirty years?" Pantaleon said. "Besides, when you're buying from a roadside vendor, you know what you're getting into. With Taco Bell, not so much. I mean, my God. I don't know about you, but last time I checked, overloading a burrito with an alarming amount of American cheese wasn't a hallmark of Mexican cuisine."

"And don't get me started on those faux taquito thingies either," Pantaleon added. "Holy Mary."

"I thought this was some kind of sick joke until I walked down Calle Insurgentes and saw teenagers hanging outside one of those hideous outlets," said Hector Armando Calderon, a political scientist in Mexico City. "Yet it was not a sick joke. Once again a hideous nightmare from El Norte has descended upon the Mexican people. For the love of God, haven't we suffered enough?"

"And this 'fourthmeal' you speak of," Armando said. "What's up with that? One-sixth of our country is living in extreme poverty and the pinche gringos speak of a fourth meal? Scandalous!"

Surprisingly, the establishment of Taco Bells in Mexico has not been met with much resistance from local politicians, many of whom are welcoming the eateries.

"What's that? Taco Bell? Oh, yes. I went down there for a bite and was very pleased. I'm confident they will provide their customers with regular, uninterrupted service and have no problems whatsoever," said local health inspector and sacadolar Nestor Wojciechkowski Cabron. "By the way, what is this "melty taste" they talk about? I don't understand."

But perhaps the loudest opposition to Taco Bell's expansion has come from American expatriates now living in Mexico, who complain "they did not move to Mexico" just so "the corporate Yankee culture" could follow them and "pollute all (they) held dear."

"This is an outrage!" said Marvin Welker, a transplant from New Jersey now living in San Miguel de Allende, Guanajuato. "I mean, Taco Bell? In Mexico? I may throw up."

"How dare this American company march in with its adulterated faux-Mexican food and pitch itself as a value-oriented establishment?" asked Welker, who despite the region's poverty has spent the last three years agitating against the construction of a large supermarket on the outskirts of town. "This is as bad as that time a gas station wanted to set up shop three blocks from my house. Soon, people will want all the conveniences of life right at their fingertips, and God knows where that could lead."

"There's clearly only one thing to do," Welker said, as he turned on his computer. "I must write immediately to the editor of San Miguel's tiny newspaper for expatriates. That'll put a stop to this."

Posted by Benjamin Kepple at 07:45 PM | Comments (0) | TrackBack

October 04, 2007

An Open Letter to the Big Ten Network

TO: The Big Ten Network

FR: Benjamin Kepple

RE: Football

Dear Blockheads,

I note with displeasure reports that suggest key Big Ten football matchups, such as the upcoming game between Michigan and Michigan State, may be broadcast on the Big Ten Network (BTN) while millions of Big Ten alumni in the Midwest and elsewhere cannot get the channel through major cable systems. I would have thought by now you would have seen reason and figured out a way to correct this market inefficiency. Amazingly, however, you have not yet done so.

I trust you will correct this state of affairs in short order through coming to an equitable agreement with the major cable carriers. Of course, I realize that actually doing so would require a modicum of competence in the business arena, something I have not yet seen from you. In fact, your decisions thus far make me wonder whether you folks are simply staggeringly incompetent at what you do for a living, or whether you are the embodiment of some ancient evil whose capacity to inflict mayhem and suffering nears that of Lucifer himself. I mean, come on. You're dealing with Comcast and Time Warner, for Pete's sake. How in the name of God could you manage to end up being the bad guy here? Yet through your wretched stubbornness, you have. Jesus.

Now look. There's nothing wrong with your idea the BTN should be on expanded cable. However, you are deluding yourselves if you think the cable systems will pay $1.10 per Midwestern subscriber per month on a basic tier. I haven't heard whether you've expressed willingness to budge on this, but why you even thought you could get away with this suggests you were higher than a Michigan freshman on the first Saturday in April when you came up with that.

I also note you want the BTN carried outside the Midwest and want to charge $0.10 per subscriber for it. I admit I don't know if this is extravagant or not. However, with so many channels available I think people wouldn't mind paying a dollar or so for all the proposed collegiate networks combined, so maybe that would work. Besides, if it's an issue, I am sure you could convince the cable networks to drop some annoying networks, or put THEM on a special tier. (As Ryan Masse of the Badger Herald put it, "I would love to jettison Lifetime, Oxygen, etc. to a special women’s tier and not have to pay for them anymore. You could do the same with a men’s tier of Spike TV, Vs., etc.") And if the BTN just absolutely has to go on a special tier outside the Midwest, given in to the cable networks' demands and go for it. I'm willing to pay extra for it. And at this point, you're probably bleeding red ink because you're running a network nobody can see.

So, fix this, please -- and soon, because you're not operating from a position of strength. The games everyone wants to see, after all, are going to pass quickly -- and after that you'll be left with basketball and ice hockey, which aren't as popular as college football. If you go into summer with the situation as it is now, you're really going to be in trouble. So make a deal while you still can, or the BTN will end up dead on arrival. Although I have to admit, at this point, I don't think I'd be shedding any tears were that to happen.

Posted by Benjamin Kepple at 09:00 PM | Comments (0) | TrackBack

October 03, 2007

Report: Typical Wedding Results in Over-Time Loss of $1m

AS A FAN of small weddings, I must admit I am sympathetic to a recent argument which writer Jeffrey Strain put forward, in which he asserted the typical wedding -- which now reportedly costs some $35,000 -- not only ends up putting a strain on couples' finances, but also represents a potential long-term forbearance of at least $1 million. Mr Strain notes that three-quarters of all couples either don't set a wedding budget or fail to stick to the plan they had originally set out.

This, I am sure, is not welcome news to the romantics among us, who like to believe that love conquers all and is the most powerful force in the universe. While I myself do have a romantic streak -- it now resides, supressed, in the deeper recesses of my cold heart -- I also know that love is not the most powerful force in the universe. Oh, no. The most powerful force in the universe is compound interest. And Einstein said that, not me, so clearly this sentiment is correct and true.

That said, I must say I know few couples -- actually, no couples -- who have actually had a truly ostentatious wedding. In fact, all my married friends have had relatively simple weddings, with relatively small to medium-sized guest lists, perfectly acceptable but not over-the-top banquets and receptions afterwards, and clever money-saving ideas folded into the mix. For instance, one couple I know had their post-wedding reception at the home of the bride's mother; another couple had a pleasant lunch reception following the grand affair; and a third arranged cut-price hotel rooms for their guests. As amazing as it might seem, all these weddings worked out perfectly and the marriages have been strong as granite. So the idea a couple must spend oodles of money to have a great wedding seems a bit much to this observer.

Of course, as a man, I realize my opinions count for little in this arena. After all, weddings are not about men, whose idea of a good wedding typically involves plenty of liquor, a love-den for the honeymoon night and a ceremony that does not conflict with major sporting events. This helps explain why if one picks up a magazine or book devoted to weddings, one will be hard-pressed to find any pictoral evidence that a groom is even necessary for a good wedding. This also helps explain why men, no matter how modern and beta-male they may be, will find themselves pushed to the limits of their sanity and well-being should they "help out" with the wedding plans. These things, in an ideal world, would be left to the bride, the bride's family, and the bride's female friends, for whom weddings are of the utmost importance.

That said, I do think it important for a man and woman to be cognizant of the financial implications of their wedding. For instance, a man should -- wait for it -- save for the engagement ring, allowing him to ask for his lady's hand without putting himself in hock for the next several years. A man should also make a point of saving for other wedding-related expenses, like a honeymoon. Starting and regularly funding a separate account for these expenses, I think, could prove to be a real life-saver down the line. Even if the contributions started out small, it would grow over time, and if the man found he didn't get married, he could then invest the money for his retirement. Or, he could blow it all on several truly amazing descents into debauchery of classical proportions; either way, it's a win-win.

Things are a bit murkier for women, I suppose, and I realize much depends on whether a bride's family can cover most or all of the expense of a wedding. Of course, even if the family's resources are limited, I don't see why that should take away from the ceremony itself. There's nothing wrong with a simple ceremony. Conversely, a lavish ceremony is great for a day but can clearly have deleterious effects down the line -- I recall one couple whose lavish wedding was profiled on television a while back, but despite spending an alarming amount of money, they had nothing left over for a honeymoon! Truly this was an unfortunate circumstance, and one which even the most devoted wedding planner would have to admit would not be a desirable thing.

Posted by Benjamin Kepple at 11:37 PM | Comments (0) | TrackBack

October 01, 2007

Commerce, American Style. You Know I Love It.

SO REMEMBER THAT impassioned post I wrote a while back about how my glorious alma mater, The University of Michigan, called me and asked me for an absurd amount of money, and I said No! because I was angry about the football program? Well, that and the fact I'm a notorious cheapskate? Well, dig this: the University of Michigan sent me an athletic-themed fundraising package this past week.

Not only did this pleasant missive include a keepsake photo of Michigan Stadium -- although, for reasons I don't entirely understand, a photo in which the Big House is empty -- it also included plenty of information about how joining the University's alumni association would save me Big Money on athletic tickets and all sorts of other athletic-themed stuff. I can join the alumni group for just $59 per year -- and a single life membership can be mine for just $950! I'm still not sending them any money, of course, but you have to give them credit for their tenacity, the scoundrels.

Actually, I have to admit that for a moment, I was tempted to go for it, but a few seconds later my reason kicked back in and I realized that encouraging alumni to reminisce about big football games and other athletic joys was simply a trick the school uses to suck in unwary donors. I just wonder how my fellow alumni -- particularly those facing a crushing burden of student debt -- take these fundraising calls and letters.

I mean, I'm serious -- my school is shameless. For instance, a while back they sent along a nice notepad -- I use it for writing down notes here at the computer -- that is personalized with my information. Naturally, I used the thing -- and discovered that halfway through, they had slipped in a solicitation form asking for donations! Truly nothing is off-limits for these folks.


SO LAST WEEK I got a call at work from a nice lady who, after some pleasant opening chit-chat, asked if I had remembered speaking with her about a year or so ago. Thinking it was a professional contact, I admitted I had not; this is not unusual, though, given the hundreds of people with which I speak. But then the conversation took a different and admittedly somewhat alarming tone. How, she asked, was my mortgage working out? Oh, well -- eh? What did you just say?

"What mortgage?"

Well, Ben, the 2/28 mortgage you signed up for last year.

"I don't have a mortgage."

Oh! So you paid off the property?

"What property?"

The property you -- wait, is this Ben so-and-so?

"No, this is Ben Kepple."

As you've deduced, our caller had somehow been directed to me, Benjamin Kepple, and not another guy in the building named Ben. I guess she was a mortgage broker and trying to find folks with adjustable mortgages wishing to refinance their loans. After clearing up all the confusion, and me agreeing to transfer her to the correct Ben, she asked ME if I wanted a mortgage! I mumbled something to the effect of a) No and b) the market's crazy. I swear, I sometimes wonder if this whole housing mess is still going to get worse before it gets any better.


SPEAKING OF ODD SOLICITATIONS, I got a very nice e-mail this week from the Grand Rapids Rampage, the Arena Football League squad based in Michigan's second city. I had attended a game there on my vacation and enjoyed it very much. Oddly, though, this somehow got me on the "Maybe You'd Like Season Tickets!" e-mail list. My question is this: since the Rampage folks probably had my physical address as well as my e-mail address -- if I recall right, I had to submit both when buying the ticket on-line -- why wouldn't they notice that I lived, oh, roughly 884 miles away from the arena?

That said, I have to say Grand Rapids' e-mail was great -- very polite, informative, and interesting. Also, I would have definitely sprung for a season ticket if only I lived within one hour, and not 13 1/2 hours, of the venue. Michigan residents who DO live within an hour or so's drive of Van Andel Arena -- that would be YOU, residents of Kalamazoo, Holland, Muskegon, Big Rapids, and places in between -- should buy season tickets. Trust me: it is good football and fun to watch. Plus, the prices are insanely cheap. $202 gets you a lower-bowl season ticket to all eight home games AND a first-round playoff ticket.

Of course, that's assuming the Rampage make the playoffs, something they haven't done since 2003. But they do have a new coach, and they did win the whole enchilada back in 2001, so there's hope. I know things are tough in our home state right now, and that lots of folks don't have an extra $202 (or more) for season tickets. But upper bowl tickets are just $135 for the whole season. Speaking as a Midwesterner, we all know how important football is, and so I would encourage you to support this worthy local franchise. At least give it a try and go for one game. You'll have fun! (Also, parking is super easy, the arena is very nice and Grand Rapids has REALLY turned itself around).


RANT READERS may have noticed the NFL's big push this month to market the glorious sport to Hispanics. The league has run commercials proclaiming Hispanic Heritage Month and some funny spots showing a marriage-counseling session in which a wife breaks down in tears upon learning her husband likes American football. On one Sunday Night Football broadcast, NBC went so far as to refer to the Vaqueros de Dallas v. Osos de Chicago matchup, and mentioned the Spanish feed viewers could pick up.

This is all well and good, but if the NFL really wants to generate popularity for the sport, put a team in Mexico City. I mean, come on, wasn't the one game held there last year a smashing success? Didn't it sell out Estadio Azteca? Didn't the stadium hold like 90,000 people for the game? I mean, come on -- let's do this and get a team in Mexico City, where one belongs. Put the team in the NFC South (because that will spur some great rivalries) and go for it. Having a 33rd team in the league shouldn't cause too many scheduling issues, television deals could easily be worked out with Televisa, and the league would tap into a huge new market. Let's strike while the iron is hot. And if you need to balance things out, give Los Angeles a team -- they've been a football desert for years.


Anyway, speaking of football, the Cincinnati-New England game's about to start, so I must dash. But to recap: football is good, especially in spring and in Mexico City, but isn't enough of a motivator for me to give money to my old school. And go ... Patriots ... Bengals ... Patriots ... Bengals ... oh, at least put up a fight tonight, Cinci. Gawd.

Posted by Benjamin Kepple at 08:31 PM | Comments (0) | TrackBack

September 26, 2007

The Joys of Economy

SO I RECENTLY GOT a nice surprise from my hosting provider -- the good people at Verve Hosting, based in my home state of Michigan. Apparently, they went ahead and changed my hosting package -- giving me 20 GB worth of bandwidth per month, compared to my old 15 GB, and more storage space on their servers. Nice, eh? Did I mention they also cut the monthly price by 33 pc? Advances in technology rule -- particularly when you're a late adopter like me, and have no need for pricey electronic gadgetry.

Along those lines, I have to admit I was a bit stunned when I walked through the aisles of my local electronics store recently and saw how cheap everything had become in just a couple of years. For instance, when I bought my 26" color television some three years ago, it cost me about $300. It is nothing fancy but it is nice and it does the job. At the time, a similarly-sized flat-panel television would have cost well over $1,000, and perhaps $2,000. But I found that such televisions could be bought for as little as $500 or so for an off-brand and about $700 or so from a quality brand.

Similarly, I was surprised to find how inexpensive many modern appliances were. A decent refrigerator -- again, nothing fancy -- could be had for about $400 or so, although there were some models that cost significantly more than that. But even the cheapo models were frost-free designs and had features that made my own refrigerator (or, more correctly, my landlord's) seem obsolete. Also, the washers and dryers seemed cheap too, with basic models starting at just $300 or so.

I must admit that as a bachelor and a renter, I don't really know how these prices compare to how things were in the past, although simple economics dictates that as supply of a product increases the price falls accordingly.

I recall my father talking about when his family bought their first television back in the 1950s -- it was described to him as a "radio with pictures," something he found understandably amazing at the time. Now, a $300 black-and-white television back in 1952 cost the equivalent of about $2,200 today, while the amazing invention of color television cost the equivalent of about $10,000 today. As it happens, an "automatic washing machine" also cost about $300 in 1952, and was undoubtedly about as basic as one could get. So we can see that with time, prices generally fall sharply* -- and this process is seemingly accelerating. Why, the iPhone was only on the market for two months before its price was chopped considerably.

So again, we have a good object lesson in the virtue of patience when it comes to buying expensive goods, particularly electronics. And sometimes, the price gets chopped for you!


* But not always, as we can see from this example using 1953 price data:

This helpful salve
cost $0.35
inflation's kept
the price alive


(Thirty-five cents back in the day was worth the equivalent of $2.64 today -- and a good-quality jar of shaving cream will run about $2.79. Sadly, it won't be Burma-Shave shaving cream, as it was discontinued in 1966.)

Posted by Benjamin Kepple at 11:07 PM | Comments (0) | TrackBack

September 25, 2007

Let's Play Unemployment Bingo!

SO I WAS AT THE PHARMACY today when the pharmacist, who was buying some goods up front, mentioned to the cashier he had just ordered a car from General Motors Corp. Unfortunately, said the pharmacist, he had ordered the car just as General Motors went on strike, meaning it would be a long time before he received his vehicle. My reaction to this can be summed up as follows: Uhhhhhhhhhhhh ...

What the hell? I thought negotiations were going -- well, they were negotiations, which are never fun, but nobody said anything about a strike. Maybe this is just what happens when I take a weekend off to watch football. So my question is this: how bad will things get now in my home state of Michigan?

Clearly the UAW's leaders felt a strike was their last and best hope to force the company to make concessions regarding job security, which was supposedly the rationale for the walkout. That's the idea behind a strike -- a union tries to make it more painful for the company to settle their differences than to have the union continue with the job action. Plus, striking GM is a shot against the bow to Ford and Chrysler. Still, a strike is so disruptive things must have been going pretty badly for the UAW to order their people off the job.

The trouble for the union is that I don't think General Motors is going to make any major concessions. General Motors may be at a point where they've privately said the hell with it -- let's take our chances with this thing. The UAW has 73,000 workers out on the line, each getting $200 a week in strike pay and medical coverage. According to the New York Times, the union's $900 million in the strike bank is good enough for a two-month walkout. However, GM has $23 billion in the bank and more than two months' worth of inventory. If GM decides that it can last four or even five months with the workers on strike, it may decide to go for it if its leaders think they'll emerge stronger afterwards. By that time, of course, General Motors may decide to bring in replacement workers -- if it can do so under the terms of the contract -- and then things will really get ugly.

Things may not get to that point, however. Let's face it: although these are workers with good jobs, how many of them are prepared to live on strike pay for several weeks? Not many, I'm guessing. Here's how one GM worker described her situation:

"Oh my God, here they come," said Anita Ahrens, 39. "This is unreal."

Ahrens has seven years at the plant, where she works nights installing speakers in sport utility vehicles. She waited Monday for her husband, Ron Ahrens, who has worked there for 21 years.

The couple has three children, including a college freshman, and Ahrens worried about how they would pay their bills.

"This is horrible, but we're die-hard union, so we have to," Ahrens said. "We got a mortgage, two car payments and tons of freaking bills."

Now, based on that, do you think Mr and Mrs Ahrens can take three or four months out on the line? I don't believe they can, and there are undoubtedly lots of workers in the same boat. I remember reading an old saw that said a typical American family would be out of cash a week after losing a job -- and sure, there are credit cards and friends and family and other sources of money -- but after a while, things would get really unpleasant. Sure, there's a lot of bravado from the workers right now, but the workers admit no one wins when there's a strike.

But as a Michigander, and thus someone who will always have a soft spot for his home state, I am more worried right now about the chain-reaction effects. Things were bad enough already back home. I mean, when I was there in spring, people I didn't know from Adam asked me about jobs in New Hampshire after two minutes of talk. That's how bad it is. Also, the state government is bleeding red ink, property values are falling, the roads are shot, and Lloyd Carr is still Michigan's football coach. Thus, you can see the state is going to hell in a handbasket. This will only make things worse.

Excluding its corporate headquarters staff, General Motors has 57,495 employees in the Great Lakes State, according to its Web site, and all of them are probably reaching for the antacid right about now. As it happens, that's 1.1 pc of Michigan's entire labor force.

Unemployment in Michigan is already 7.4 pc and 8 pc in the state's southeastern industrial heart. Based on some back-of-the-envelope calculations, this strike will have the effective impact of pushing statewide unemployment in Michigan to about 9 pc, and perhaps 9.5 pc in the southeast. I'm basing those numbers on two factors: the hourly workers are probably screwed and the salaried workers are probably scared, and I'm assuming all will accordingly cut back on their spending, whether they have to do so or just want to do so. Those numbers are also highly optimistic -- because when GM stops, all of its suppliers will eventually stop, and have to lay off their own people. I don't even know how many workers those folks employ.

But what's going to happen to all the other businesses? After all, when people stop spending, that means money stops flowing into local businesses. God help the poor souls who own restaurants and gift shops and all those other outlets for the workingman's discretionary income, and God help the people who work there, because they could find themselves out of work if this strike lasts a long time. Plus, economic disruption is kind of like waves crashing in on the beach -- small ones won't damage a sand castle, but a few of the big ones in succession will wipe the castle out in short order. Even if one is clever and builds a moat to divert the oncoming tide.

I guess about all the workers can do, aside from praying the strike will end soon, is make up some cards for unemployment bingo. Your local autoworkers are your free square. And for all my people back home, I hope you don't find your numbers called anytime soon.

Posted by Benjamin Kepple at 12:48 AM | Comments (0) | TrackBack

September 17, 2007

Why I'm Still Renting (or, Happy Monday, Campers!)

SOME TIME AGO, I was talking about housing prices out at this-or-that event and after a discussion of the market, the older person I was speaking with expressed pity -- yes, pity -- at the fact I rent an apartment. Essentially, she said, it was a shame I and other young people had missed the run-up in home prices and generally wouldn't be able to afford homes.

I found this a bit much, but since I am rarely pitied I figured I would take it. I didn't mention the three key reasons why I haven't bought a home: the prices in my local market were higher than I was willing to pay; the state of the market made it economical to rent, and my real housing cost has decreased over time; and I've been able to put money in the stock market, which has seen some nice returns. It's been more than a year since I had that conversation, but these three factors haven't changed any. Until they do, I'm out of the housing game. (There's also that whole "not married, no kids" thing, but hey).

Hedge fund manager Barry Ritholtz, at Seeking Alpha, writes today that prices may well continue falling. Mr Ritholtz cites the continued rise in inventory of homes for sale -- now at 6.6 pc of the total housing market -- and says this real-estate cycle could be worse than the 1988-1996 bear/flat market in homes. Mr Ritholtz writes:

Prices have failed to come down enough to jump start more activity. Sellers have been stubbornly sticking to their imagined top tick prices of 2005.

Thus, supply remains high, and if we believe the NAR or OFHEO, prices have slipped only slightly. Econ 101 informs us that until prices fall appreciably, the inventory situation will not improve.

There is a psychological component to all this: it very much reminds me of the investors who when having missed selling Amazon (AMZN) at $400 and Yahoo (YHOO) at $200 and EMC (EMC) at $80 and Cisco (CSCO) at $60, refused to take 10% less. So they ended up riding the stocks all the way to multi year lows.

So they held onto stocks, hoping to sell again at higher prices, all the while prices fell.

One can imagine home sellers doing something similar. In their minds, their selling prices are "anchored" at the prices they imagined getting at the top.

Do read that article -- the graph along with it, comparing inventory numbers in the bear market of 1988-1992 and the present situation, will give you pause.

I do agree with Mr Ritholtz that there is a psychological factor to this. A friend of mine told me about his attempts to buy a home -- a home, mind you, which was not all that and a bag of chips -- but who was constantly frustrated due to the idiocy of the seller, who would not budge on the price. As one might expect, my friend did not proceed with the deal and the home remained on the market.

There are good reasons for why we're seeing a spike in inventory. Foreclosures are up, credit standards have been tightened, and there's continued economic uncertainty. The first two obviously have an impact on prices; adding supply while cutting demand. But it's that third one that's really the killer. It's a hell of a lot easier to take the plunge when there's a boom and everyone is getting rich than it is when things look shaky.

Besides, if the economy does fall into recession, it could push things over the edge. The striking thing about this housing downturn is that it's happening even as the economy remains fundamentally strong. Inflation is mild, we're doing well in terms of growth and there's low unemployment. If the wheels start coming off the bus, it could conceivably contribute to a widespread housing-market correction.

Of course, that's already happening in some places, like south Florida and Arizona and what not. Furthermore, since all housing markets are local, it's conceivable that some markets might actually improve as others collapse. That said, I do wonder if continued economic pressures will eventually push us into recession at some point. Sometimes it takes just a spark to set off a massive economic forest fire, and while I think it would take a lot to push us over the edge, perhaps we're heading towards the threshold.

Speaking of sparks that could set off a massive economic forest fire -- it would appear Northern Rock is finished, if this article in The Telegraph is correct. Customers have now taken out £2 billion from the bank (or 8 pc of its deposits), its share price has crashed and depositors, even today, are doing what anyone would do in this type of situation: they're crowding the bank and demanding their money. The authorities have tried to stem the panic, and have said the bank will not fail; but understandably that means nothing to the poor bastards queueing at the branches. After all, what else would they say?

The real question now is whether OTHER banks in the UK (or elsewhere) are facing the same type of mortgage-related troubles Northern Rock has, or are otherwise in a world of pain. Certainly the market is skittish about that; bank stocks on the LSE are getting hit in the head with a crowbar. And if the answer is yes, this could all possibly get worse rather quickly.

Happy Monday!

Posted by Benjamin Kepple at 06:07 AM | Comments (0) | TrackBack

September 15, 2007

A Run on the Bank!

WELL, I NEVER THOUGHT I'd see the day when crazed depositors would crowd bank branches demanding to take their money out, but that's apparently what's happened in the case of Britain's Northern Rock bank, which on Friday saw bunches of depositors crowd its branches around the country. Wow. Unfortunately, The Telegraph -- which I think has had the best coverage -- is having Web issues right now, but all the British papers are covering it.

THE TIMES: Run on the bank
THE TIMES: Tempers start to fray as panic-stricken pensioners demand their money back
THE GUARDIAN: Between Rock and a hard place: savers besiege bank
THE GUARDIAN: "They've got a problem if a director is here."
THE GUARDIAN: Banking shares suffer amid fears of another Northern Rock
THE INDEPENDENT: "Takeover may be Rock's only hope"

So how much did the panicked depositors take out? Oh, try about £1 BILLION. (That was according to The Telegraph, which isn't loading up). That's roughly 4 pc of the bank's £24 billion in total deposits.

It seems extremely unlikely Northern Rock will actually fail, however. The Bank of England has agreed to step in and lend it money to make sure Northern Rock meets all its obligations. However, I can still see why people are crowding the branches in desperation to try and get their money out. Since the British equivalent of the FDIC only insures the first £2,000 in an account pound-per-pound, anything above that is subject to at least some kind of loss. The regulators will cover 90 pc of the next £35,000, but beyond that, you're on your own.

This serves as yet another reminder why it pays to Not Put All of One's Eggs in One Basket. Here in the U.S., bank and credit union deposits are fully insured up to $100,000; while brokerage deposits are insured through the SIPC (cash up to $100,000; cash and securities up to $500,000). Still, it makes sense to start spreading the wealth around even before one gets to that point. I mean, I don't know about you, but the last thing I want is to go through what must be the Not Fun Process of trying to get my money back from a failed institution, and I'd REALLY hate to go through it if ALL my money was in the place.

In Northern Rock's case, there were many reports of people withdrawing hundreds of thousands of pounds on deposit with the bank, and in one case, as much as £1 million. The couple who had the million pounds on deposit barricaded a bank manager in her office when they were told they couldn't take all the money out without notice.

Still, it seems about all Northern Rock's troubles will amount to is a lot of heartburn. With the Bank of England's offer to lend the institution money, it should remain sound even as it figures out how to refinance nearly three billion pounds worth of short-term commercial paper over the next six months. This, you see, was the Rock's Achilles heel. It borrowed billions on the credit markets to lend out to homeowners. Unfortunately, with the subprime crisis and subsequent credit crunch, it can't get that money any more -- which is why it's borrowing from the Bank of England, and at a Not Fun Interest Rate.

But what if it turns out the heartburn is indicative of something really bad? The worst thing, of course, would be if OTHER banks started saying, "Gee, we can't get any money from the credit markets either, and we need help." That could make Northern Rock's issues look tame in comparison. And then, of course, there's the larger issues with Britain's economy.

Apparently, Northern Rock was a pretty aggressive mortgage-lender. Although it didn't have a lot of sub-prime exposure, it made some pretty "out there" loans -- including some that offered homeowners mortgages up to 125 pc of the value of their homes. (Uh, OK). And Britain's mortgage market is weird -- apparently, most people have ARMs as opposed to fixed mortgages. And housing prices have actually fallen a bit over the past year, following years of appreciation.

Gee. This sounds familiar.

The danger -- although one that's still far out on the horizon at this point -- is that Britain will spiral down into recession as its housing market stumbles, consumer spending stalls or falls and investors start looking for other places to put their capital. And if Britain catches cold, it could spread.

It doesn't seem to make sense to actively worry about this -- if it happens, no one will be able to stop it -- but I do think it's yet another sign people should consider whether to be a wee bit more cautious about their own affairs. In other words, save more, spend less, and put off big purchases until you get in a stronger financial position.

Of course, I realize some readers might suggest this advice, if everyone followed it, would actually send the economy into recession. But I'm not too worried. Most people don't tend to tighten their belts until it's too late.

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

September 13, 2007


WOOLWORTHS GROUP PLC, the British discount retailer, has shocked the world of wine in announcing it will sell a £5 bottle of Champagne -- actual Champagne, not sparkling wine. That, according to The Telegraph, has "alarmed wine experts" (it would, wouldn't it?) and led to questions about how the company can actually manage to sell the stuff for just £5 per bottle. However, it has also received something approaching acclaim from the newspaper's wine critic, who writes: "It isn't dry enough for me, but I've had a hell of a lot worse at many times the price."

I guess we'll see how well it sells. I myself am not much of a Champagne drinker, but I do know that when I do drink it, I'm doing so on a special occasion -- and somehow, cheap Champagne wouldn't seem to fit the bill. Still, I certainly approve of the idea, particularly if it lets more people enjoy the stuff. Plus, if people want Champagne just because they want Champagne, it would *definitely* seem to fit the bill.

I myself have two minds -- well, actually three -- about the proper way to approach drinking and the drinks one buys. My general rule for wine is that one ought drink the cheap stuff on an everyday basis while saving the good bottles for special occasions. That's not to say bad wine, but rather inexpensive wine, which can be had for a few dollars per bottle if you know where to get it. Besides, not minding the regular stuff makes the good stuff so much better when you actually do drink it.

When it comes to hard liquor, though, I take a different tack. My general rule for hard liquor is to drink top-shelf stuff, but only do so sparingly. I figure it's far better to abstain than drink cheap liquor, which is usually awful. The end result is that it makes the times I do drink the hard stuff far more enjoyable. Plus, it takes a lot less to get me drunk, which means my nights out are relatively cheap.

However, while I might be willing to swill cheap wine in the privacy of my own home, I would never serve it to a guest and certainly never send it to someone I know. If you have guests over to your house, you should get out the good stuff and enjoy your company. The same goes for hard liquor: I have a bottle of Patron Añejo and a bottle of Bombay Sapphire ready to go here at Rant Headquarters the next time I have guests over. (I even had a small bottle of Johnnie Walker Blue, but I drank that with Simon From Jersey the last time he was up in the Granite State).

As for beer -- well, what can one say? There are few things in life worse than bad beer, so again, I think it's better to abstain from drinking than partake of some watered-down American pilsner. Even if the watered-down pilsner in question has a hell of an advertising campaign. The good news here, however, is that excellent beer isn't expensive at all, so it's not like one actually has to abstain from drinking. For perhaps a dollar more per bottle -- if that -- you can get an excellent and pleasing brew that is filling, substantial, and tasty. Plus, when one considers that one good beer can have the same results one would get from two or three mediocre beers, it actually works out to be cost-effective.

Posted by Benjamin Kepple at 10:14 PM | Comments (0) | TrackBack

Time Equals (Glorious, Tax-Free) Money

THE BOSTON GLOBE has published (reg. required) a neat little article on the concept of "time banks," which essentially act as a favor-bank for people within a community. For instance, if Mr Smith spends an hour shuttling Mr Jones to the grocery, he receives credit for one hour's worth of services he can "cash" from Mr Thompson for another service, such as fixing his broken freezer.

This is a particularly clever idea and I'm pleased to see it has taken hold throughout much of the United States. It reminds me of an old Eric Frank Russell story -- written in 1951 -- in which an entire society bases its economy around such a system. The society in question necessarily had very strong community ties because everyone depended on everyone else for assistance. And I do hope the idea spreads: in an age when commercial ties have largely supplanted age-old networks of family and community, these time banks could prove valuable for citizens.

After all, let's say Mr Smith spends three hours per week performing time-bank services. After a month, he could earn enough time for three evenings of free babysitting -- which could save him perhaps $100 or so. Or, he could engage someone to rake his yard, perhaps saving $100 or $200 that he would have spent on a landscaping service. True, one could certainly argue that had he been employed in steady work for those twelve hours, he could earn more than he would save, thus making the transaction uneconomical. But the intangible value -- the goodwill, one might say -- of the work would have its benefits. After all, if you need a ride to the airport, the convenience factor alone of getting a free ride might outweigh the cost and intangible hassles of having to otherwise arrange for transport, thus making the transaction economical. Plus, since the transactions are necessarily tax-free, Mr Smith's return is actually greater than one might otherwise expect.

Of course, one does wonder about taxes in this situation, but I do think the time banks are on solid ground.

According to the IRS's Tax Topic 420 (Bartering Income), services arranged through bartering are taxable. Thus, if I as a writer agreed to look over my plumber's manuscript in return for the plumber fixing my broken toilet, both of us would have to declare the market value of those services as income. This is because the Government is clever and does not want people to use bartering as a means to sneakily reduce their taxable income.

But under the Government's definition of barter income, "the term does not include arrangements that provide solely for the informal exchange of similar services on a noncommercial basis." That would appear to be the case here. After all, if an attorney agrees to ferry an elderly resident to the grocery, and in return receives a ride to the airport later from a handyman, one can't really say there was a commercial point to the transaction, as neither the lawyer or handyman are regularly engaged in offering rides.

Obviously, the concept of a "time bank" is far more amenable to people who are not highly compensated, as their labors are not as monetarily valuable and as such they have the most to gain (or least to lose) from such a system. An accountant who charges $250 per hour for his services would undoubtedly be better off just working more and buying the services he needs. But for a waitress making $10 an hour, it could have real benefits, particularly if the outlay she would normally expend on services offered through a "time bank" exceeds any wages she could make through traditional work.

(via Boston Gal's Open Wallet)

Posted by Benjamin Kepple at 12:01 AM | Comments (0) | TrackBack

September 11, 2007

Reason No. 42,218 Why the Los Angeles Times Sucks

WHEN TIME MAGAZINE recently published a list of history's worst-ever automobiles, there were plenty of obvious choices that made the list. The Ford Edsel, the AMC Gremlin, the Sachsenring Trabant, the Zastava Yugo -- one could go on. But amazingly, TIME also included on the list -- wait for it -- the Model T!

But wait, you say. Wasn't the Model T an unqualified success? Wasn't it a triumph of manufacturing? Wasn't it so popular that it had a twenty year production run and sold millions upon millions of units? And wasn't it so cheap that everyone, even a hod carrier making $2,000 per year, could afford it if he scrimped and saved? (I mean, by the Twenties the Model T's price was down to less than $300, arguably putting it within reach of even common laborers.) Well, according to TIME, that's the problem:

Let's stipulate that the Model T did everything that the history books say: It put America on wheels, supercharged the nation's economy and transformed the landscape in ways unimagined when the first Tin Lizzy rolled out of the factory. Well, that's just the problem, isn't it? The Model T — whose mass production technique was the work of engineer William C. Klann, who had visited a slaughterhouse's "disassembly line" — conferred to Americans the notion of automobility as something akin to natural law, a right endowed by our Creator. A century later, the consequences of putting every living soul on gas-powered wheels are piling up, from the air over our cities to the sand under our soldiers' boots. And by the way, with its blacksmithed body panels and crude instruments, the Model T was a piece of junk, the Yugo of its day.

What the hell is wrong with these people? I mean, they're either stupid or evil, and I don't know which. How could anyone be against economic progress and growth, particularly when that economic progress and growth enabled the working classes to enjoy at least some of the fruits of America's industrialization? Particularly when one considers how the automobile was a key factor in contributing to the growth of the West and the Sun Belt?

As it turns out the lead writer on this TIME special was none other than Dan Neil, the auto columnist for the Los Angeles Times. Why exactly Mr Neil assented to this idiocy, I don't know -- maybe he had one too many bad commutes and while sitting in traffic on The 10 one day, decided that he'd had enough of this shit and suddenly became a convert to the supposed glories of mass transit.

But one cannot blame the automobile for outdated urban planning. I downright love driving -- it is one of my few hobbies -- and I relish each chance I get to go for a drive. That said, one of the things I loved about living in Washington was the capital's fantastic public transit system, which quickly and effortlessly moved people around the city. If only the Metro would operate 24 hours, and if only the Silver and Purple lines would get built!

Here in Manchester, N.H., we don't have near enough people for a subway and our bus system is hub-and-spoke, making it inconvenient for short trips. For instance, if I want to go to the grocery some two miles away, I have to take the No. 7 bus downtown and transfer to the No. 2 bus. It's roughly 12 minutes downtown, but I'd miss the No. 7 bus heading outbound and so would have to wait 35 minutes for the next one, upon which it would take an additional 10 minutes to get to the grocery. Thus, the total travel time would be about an hour each way, or roughly twice the time it would take me to walk to the store and back.

So it's a good thing I have my trusty Ford Taurus handy. Mr Neil and TIME might wish in their hearts the autoways were open and clear for the elites, but for my money, I'd rather have the traffic and congestion if it means all can share in our nation's economic prosperity.

(via Tim Blair)

Posted by Benjamin Kepple at 10:02 AM | Comments (0) | TrackBack

September 04, 2007

One for the Bookmark Files

CONVENIENTLY ENOUGH, The Telegraph of London has put all their reporting on the subprime crisis onto one Web page, which can be accessed here. It's got all the latest news updates about the crisis -- the LIBOR is through the roof apparently -- the Ambrose Evans-Pritchard commentaries, and more.

It is a good site for anyone hoping to learn about the "high finance" aspects of our present crisis and, just as important, keep up with the latest news on the matter. The English papers have really done a good job at covering this, probably because the crisis has affected the City and Europe more than it has affected us.

Posted by Benjamin Kepple at 10:14 PM | Comments (0) | TrackBack

Proof I Watch Too Much CNBC

SO EARLIER TODAY I was doing some business with a large corporation that shall go unnamed, when the topic of conversation turned to how I had heard of the corporation in question. Well, I said, it was the television advertisements on CNBC. Unfortunately, this immediately led me to think of some other advertisements that had appeared with alarming frequency on the business channel, and I got the theme song for those other advertisements stuck in my head.

It's still stuck in my head. More than twelve hours later. Thus, I'm writing this entry in the hopes I can get the theme out of my head. But that's not the worst part. You see, it'd be one thing if the theme was Rhapsody in Blue, the theme for United Airlines, or another nice classical piece. But this is grating and annoying. And the worst part of all is what the advertisements were for.

Yes, those commercials. My God.

Now, I realize that many readers may be shaking their heads thinking, "Uh, I don't get it." Others, however, are shrieking with laughter, and would be sympathetic if only they could stop laughing so hard their sides hurt and they were straining to keep from wetting themselves. I don't have any issues in that regard, either, which makes it doubly embarrassing to admit I got this song stuck in my head.

About the only good thing about this is that I've learned the wretched, awful people behind these commercials are facing a federal indictment for myriad alleged sins, a summary of which may be found here. All I have to say is there's an awful lot of money in exploiting the fears of insecure men. Also, make the whistling stop. Please, make it stop.

Posted by Benjamin Kepple at 10:13 PM | Comments (0) | TrackBack

I Am to Blame for Everyone Now Hating Bottled Water

SO I WAS OVER AT The Mad Pigeon's site when I noticed he had posted a couple of links about the environmental impacts of people drinking bottled water. Apparently, drinking bottled water used to be good, until too many people started doing so and then it became bad. As I myself started buying bottled water just recently, I can only conclude my decision to start buying the stuff in bulk is behind this shift in attitudes.

This should be no surprise to anyone, as my purchasing habits are perhaps single-handedly the best indicator for America's marketers to determine when particular goods or services are no longer cool. After all, what happened after I bought my swell new television set a few years ago? Everyone started buying flat-screen TVs. What happened when I bought my DVD player a short while before that? It wasn't much longer before talk of a "format war" between the Blu-ray and HD DVD formats started popping up. So now that word got out that I started buying bottled water -- in those plastic-wrapped cases, no less -- it is only natural that bottled water would be scorned, shunned, mocked and reviled by the fashionable elites.

I could, of course, care less about this. That's because I do not buy plain bottled water, but rather the flavored bottled water that tastes like something other than water, yet has water-like properties. It's value-added water! This, then, somewhat justifies the price I pay for it, which works out to something on the order of 42 cents a bottle, 84 cents a liter, or $3.16 per gallon. This is, I realize, wasteful and decadent -- at least when viewed alone. However, when viewed in proper context -- as an alternative beverage purchase -- it is not all that expensive. It is slightly less expensive than the diet, flavored iced tea I buy (50 cents a bottle, $1 a liter, or $3.80 per gallon) and slightly more expensive than the diet cola I buy (this week, 24 cents a can, or 69 cents a liter, or $2.61 per gallon). And since variety is the spice of life, I can somewhat justify the purchase.

Yes, it would be far cheaper to have a glass of tap water with dinner, but the tap water here tastes ... well, it tastes off, like everywhere else in the country. And although that could be rectified with a good water pitcher, which retails for about $25 or so, I like the metallic raspberry tang taste that goes with my value-added flavored water beverage product.

In any event, I am confident the market will work all this out in the end. It stands to reason that if people start to value the environmental risks as untenable compared to the reward they'll get from an icy cold bottle of purified water, fewer people will buy bottled water. This should cause the demand (and eventually the supply) of bottled water to fall accordingly. Hopefully this will lead to some kind of bottled water glut, in which the stuff goes on sale and I can get a whole bunch of it cheap. Thus, market forces should make everyone happy -- at least until the latest new craze came along for people to get in a sniff about.

Posted by Benjamin Kepple at 05:46 PM | Comments (0) | TrackBack

August 29, 2007

These People Are Completely Insane (Part II)

LOYAL RANT READERS know I am not much of an outdoors person. This is because the wild contains all sorts of things I would rather avoid, such as angry woodland creatures, mosquitoes, non-potable water, mosquitoes, rather nasty diseases and mosquitoes. Still, even I about choked on my Diet Cherry Coke when I read this wretched story about upscale "camping" trips from the Los Angeles Times:

GREENOUGH, Mont. -- When 6-year-old Ethan Bondick told his mom and dad he wanted to go fly-fishing in Montana, his well-heeled parents were stumped.

"We looked at each other and said, 'Oh, God, now what?' " said Gigi Bondick, 37, of Massachusetts.

"We're just not the camping kind of people. We don't pitch tents. We don't cook outdoors. We don't share a bathroom. It's just not going to happen," she said. "This is a kid who has never flown anything but first class or stayed anywhere other than a Four Seasons."

After typing "luxury" into a Google search along with "camping" and "Montana," the couple settled on The Resort at Paws Up, a 37,000-acre getaway in the heart of Big Sky country. It's a place for affluent travelers who want to enjoy the outdoors but can't fathom using a smelly outhouse.

The Bondicks, who live in a sprawling home outside Boston and hire a personal chef at home, shelled out $595 a night, plus an additional $110 per person per day for food.

It's a hefty price to sleep in a tent, but the perks include a camp butler to build their fire, a maid to crank up the heated down comforter at nightfall and a cook to whip up bison rib-eye for dinner and French toast topped with huckleberries for breakfast.

The number of visits to U.S. national parks is declining, but "glamping," or glamorous camping, is on the rise in North America after gaining popularity among wealthy travelers in Africa and England, where luxury tents come with Persian rugs and electricity to power blow dryers.

I suppose my thoughts on this can be summed up as follows: these people are completely insane.

I mean, I don't know about you, but when I was growing up, my brother and I Most Certainly Did Not get to decide where the Kepple family went on vacation. We went where Mr and Mrs Kepple decided we were going, and that was that. True, the vacations were all extremely enjoyable, and we went to some pretty cool places, but that does not take away from the point that the kids were not in charge. Furthermore, the idea the kids would be in charge would have sent my parents into hysterics. (In fact, I think it still does*).

So the fact the Bondicks -- who would be from Massachusetts -- actually spent precious vacation time on a faux-camping trip at their son's direction leaves me -- I don't know, a bit stunned. It shouldn't, I know, because these people clearly have more money than sense. I mean, the fact the mother is actually named Gigi -- oh dear -- is telling enough in that regard, but the fact they went camping even though they're not camping people is just weird.

Besides, if you're actually going to go camping, you may as well rough it and teach the boy a bit about the joys of material sacrifice, self-discipline and wanton suffering. For a boy, these are good things to learn, because they will help him adapt to the uncaring, cruel and unpleasant world that awaits him. As amazing as it may seem to many people these days, the real world requires that one develop these types of survival skills or one will be ground into the dust. So they may as well start teaching the kid now. Then, they could move on to more advanced lessons in survival, such as flying coach. It would suck at first, but before too long the kid would get excited at the little joys in life, such as when they serve the red snack box. (Yay red snack box!)

Of course, I should note that I don't begrudge the parents any of their expenditures. They're adults, after all, and it's their money. If they want a cook (that's the old name for a "personal chef") and weekly maid service and all that fun stuff, then that's their business. If they want to spend $900 a night on a camping trip that's not really a camping trip, that's their business. In fact, generally speaking, I like it when the rich spend a great deal of money on overpriced things. That spending boosts the economy, which boosts the stock market, which boosts my bottom line. I approve of things that boost my bottom line. So I encourage the rich to spend. Come on, spend. I'm not getting any younger here and I've only got 29 years, five months and change before I retire. Chop chop!

However, while I approve of adults spending on a profligate basis, I don't see why they extend that to their young children. At the rate the Bondicks are going, before they know it their boy will announce that he's skipping college and heading off to Europe backpacking. (Quelle horreur!) It doesn't help the kid become self-sufficient and it doesn't help him learn that he's going to have to work to earn his keep. Once that lesson gets lost in the shuffle, the specter of downward mobility can't be far behind.

(via The Bitch Girls)
* As evidenced by the fact my father still refuses to let me buy he and Mom dinner.

Posted by Benjamin Kepple at 08:41 PM | Comments (0) | TrackBack

August 28, 2007

Real Men of Genius

BUD LIGHT'S "REAL MEN OF GENIUS" advertising campaign is perhaps one of the funniest commercial campaigns I've heard in ages. Proof of this can be seen in the fact the commercials have been running for seven years now -- and they're still really funny. Scroll down on this page for one of my favorites: "Mr Hot Stock Tip Giver Outer."

Posted by Benjamin Kepple at 08:23 PM | Comments (0) | TrackBack

August 27, 2007

Your Stuff Isn't Worth What You Think It Is

SO I WAS SURFING around the Internet tonight and I stumbled across the story of a Kansas City couple who have admitted to the world they are in dire need of a financial makeover. They get one courtesy of The Kansas City Star. Interestingly enough, though, the reporter on the story lets go unchallenged one particular datum from their financial health-chart. See if you can guess which one it is:


Cash and cash equivalents, $4,615;
retirement savings, $16,220;
cars, $10,000;
home, $142,040;
personal property, $50,000.
TOTAL: $222,875

Credit cards, $62,410;
student loans (currently in deference), $45,000;
mortgage, $132,015.
TOTAL: $239,425

NET WORTH: ($16,550)


I'm sure you've guessed it, because it's so blooming obvious -- that ridiculous $50,000 number for personal property. Nor am I the only one to question this: over at Boston Gal's Open Wallet, where I found the story, Boston Gal herself also raises an eyebrow:

Just like the last Kansas Star Money Makeover couple, this one seems to have a large dollar figure for "personal property" which may not be very realistic. Either that or giving myself just $5,000 for everything I own is vastly under valuing my personal property...

I for one doubt that Boston Gal is undervaluing her own personal property, just because personal property has a way of depreciating far more quickly than one might otherwise hope.

I myself only value my own personal property at $1,000. In part, this is because I don't have a lot of stuff, but it's also because the stuff I do have has depreciated to the point of no return. For instance, the computer desk on which I'm writing has a broken drawer and a whole bunch of scratches from moving. I bought it new at $200; if I ever get rid of it, it's free for the taking to anyone who will just pick the damn thing up.

I also have a nice leather recliner in my apartment bought new at $500 or so. I'd be lucky to get $75 for it at this point. The davenport/futon, which I bought for $300 new, is probably worth about $20. (It's been used). My swell new television, which I bought a while back, also for $300, is also probably worth about $50. My books and CD collection are great but their resale value is practically nil. You see where I'm going with this -- if I was lucky, I could get $1,000 for the contents of my apartment.

So to be perfectly blunt, if this family has $50,000 in personal property, I'm the Queen of England. And about the only way they could get $50,000 for their personal property is if Gene Wilder and Richard Pryor suddenly stumbled upon the scene with a zany, madcap plan to evade the federal authorities and get out of Kansas City. Something like this:


GROVER: That's a bad sofa! Give you $700 for it!
MAN: It's yours!
GROVER: Pay the man.
GROVER: Pay the man!
GROVER: Give you $300 for the coffee table!
MAN: Sold!
GROVER: Pay the man!
GEORGE: These plans of yours are getting awfully expensive!
MAN: I've got a television here if you want it.
GEORGE: No, we're fine!
MAN: You want this Cuisinart?
MAN: Can't blame a man for trying!


So, knowing nothing other than the numbers presented above, it seems to me it would make sense to adjust the family's personal property number significantly downward. $10,000 would seem generous, and $5,000 is probably more on target. That also makes their financial picture far more dire -- they're now $56,000 or $61,000 in the hole, as opposed to $16,000 -- but it is also far more accurate.

And how these folks managed to ring up $62,000 in credit card debt is beyond belief. Lots of families have credit card debt these days but you would think after hitting a certain number the alarm bells would have gone off and they'd have adjusted their spending accordingly. Hopefully they will be able to adjust now -- because those student loans will come due eventually, and you can NEVER get rid of those except through paying them off.

That aside, though, the whole "personal property" number is a vague and imprecise one. So if you do include it in your financial calculations, the number should be an extremely low one, unless you've got a whole bunch of antique furniture around the place. After all, in the event you DO have to hock everything, you might as well get a nice surprise on the upside.

Posted by Benjamin Kepple at 09:52 PM | Comments (0) | TrackBack

Getting Our Dollars Back, One Way or the Other

LATE LAST WEEK I was talking with a colleague at work about the mess in the lending markets. We had just received word the Bank of China Ltd. was stuck with billions of dollars of debt backed by sub-prime mortgages, and I said something to the effect of, "We're getting our dollars back, one way or the other!"

Well, as it turns out, that's exactly what's happening -- and it's happening all over the world. Ambrose-Evans Pritchard -- yes, who else would it be -- blogged about it over at The Telegraph. Mr Evans-Pritchard writes:

In a warped sense, one has to admire the cool way that Americans – who save nothing, in aggregate – tapped into the vast savings pool of thrifty Germans to finance their speculative excesses, and then left the creditors holding a chunk of the subprime losses.

Was it sharp practice, in the same way that foreigners were recruited by Lloyds of London in 1986 and 1987 – before the impending asbestos losses were known – and placed like cannon fodder on “spiral syndicates” to absorb crippling losses? (Lloyds denies this occurred).

I am endebted to Randall W. Forsyth from Barron’s for this delicious quote from a hedge-fund operator, recounting with disgust what happened this time in a letter to clients:

" 'Real money' (U.S. insurance companies, pension funds, etc.) accounts had stopped purchasing mezzanine tranches of U.S. subprime debt in late 2003 and [Wall Street] needed a mechanism that could enable them to 'mark up' these loans, package them opaquely, and EXPORT THE NEWLY PACKAGED RISK TO UNWITTING BUYERS IN ASIA AND CENTRAL EUROPE!!!!

"These CDOs were the only way to get rid of the riskiest tranches of subprime debt. Interestingly enough, these buyers (mainland Chinese banks, the Chinese Government, Taiwanese banks, Korean banks, German banks, French banks, U.K. banks) possess the 'excess' pools of liquidity around the globe. These pools are basically derived from two sources: 1) massive trade surpluses with the U.S. in U.S. dollars, 2) petrodollar recyclers. These two pools of excess capital are U.S. dollar-denominated and have had a virtually insatiable demand for U.S. dollar-denominated debt . . . until now."

Mr Evans-Pritchard sums up his feelings in one word: "Shameless." And it was.

But then, what else would you expect from Wall Street, which has been doing that type of thing for years? It's like the bond-selling scenes from Liar's Poker on a grand scale. Plus, there's something to be said for caveat emptor here. While I'm sorry these folks are losing their shirts in this whole mess, I have to say I feel a bit like the counter-point guy in "Airplane!" -- "They bought the paper. They knew what they were getting into. I say, let 'em crash!"

Now, a benign view of all this might note these types of things seem to happen on a cyclical basis. Back in the Eighties, when everyone was in an uproar over the seeming Japanese domination of our economy, many Japanese came over with their dollars and bought trophy properties in the United States. They also managed to lose a bundle on these but at least they got to enjoy a bit of golf in the meantime. This time around, it's China's turn -- and they don't even get to golf. (Maximum suckage).

Mr Evans-Pritchard, however, does not find this benign. Apparently the Germans have been hit especially hard due to the subprime mess, with at least one German bank being sold in a fire sale as a result of its sub-prime issues. Another one had to be bailed out. Plus, the jump in interest rates has apparently put a real squeeze on corporate borrowing, and it seems there's a very real likelihood this whole mess will spill over into the larger economy. And that, Mr Evans-Pritchard writes, could mean recession.

I sure don't know what the future holds, but I do know this. The idea of a recession around the corner doesn't mean one should panic. It does, however, mean one should position oneself for the possibility, and be ready to strike when the iron is hot. To my way of thinking, that means building up cash reserves in the meantime, paying down or paying off debts, and being ready to invest when the time seems right. A recession, if it comes, would end eventually, and it seems to me one could do very well if one bought the right investments when things seem at their bleakest.

Posted by Benjamin Kepple at 07:35 PM | Comments (0) | TrackBack

August 26, 2007

For God's Sake, People, Go West!

WE LEARN FROM the Associated Press that Montana, of all places, is experiencing an economic boom so fierce employers are finding it pretty much impossible to fill jobs. The boom, as one might expect from the West, is due to heavy investment in resource extraction. With unemployment at just 2 pc, that's left other employers looking around and wondering where the hell all the job applicants went:

HELENA, Mont. -- The owner of a fast food joint in Montana's booming oil patch found himself outsourcing the drive-thru window to a Texas telemarketing firm, not because it's cheaper but because he can't find workers.

Record low unemployment across parts of the West has created tough working conditions for business owners, who in places are being forced to boost wages or be creative to fill their jobs.

John Francis, who owns the McDonald's in Sidney, Mont., said he tried advertising in the local newspaper and even offered up to $10 an hour to compete with higher-paying oil field jobs. Yet the only calls were from other business owners upset they would have to raise wages, too. Of course, Francis' current employees also wanted a pay hike.

"I don't know what the answer is," Francis said. "There's just nobody around that wants to work."

Well, the problem here is pretty obvious, and so is the answer. The problem is a fundamental imbalance in the local labor pool's supply and demand. The demand from employers is high, while the supply is low. Thus, employers who want to attract workers must raise their wages to equilibrium, or they're not going to have any workers. Mr Francis' complaint is thus disingenuous -- there's just nobody around who wants to work at the wage he wants to pay them.

Of course, one way for Mr Francis and his business-owner colleagues to fix this problem is to find more workers, of which there are plenty. Perhaps they should advertise. Heck, my home state of Michigan, where unemployment is higher than seven percent and even higher in the major cities, has oodles of idle workers who would like nothing more than to get back into the labor force. Oh, and it would appear there are some folks in Iowa who will soon be looking for work. The New York Times has the story:

NEWTON, Iowa -- THE LAST of the Maytag factories that lifted so many people into the middle class here will close on Oct. 26. Guy Winchell and his wife, Lisa, will lose their jobs that day. Their combined income of $43 an hour will disappear and, soon after, so will their health insurance. Most of the pensions they would have received will also be gone.

The Winchells are still in their 40s. They can retrain or start a business, choices promoted by city leaders in a campaign to “reinvent” Newton without its biggest employer. But as they ponder their futures, the Winchells are uncertain about how to deal with a lower standard of living. “I’m not wanting to go waitress,” said Mrs. Winchell, who, at 41, drives a forklift and earns $19 an hour, “but I can do what I have to to make money.”

Mr. Winchell, 46, having earned $24 an hour as a skilled electrician, seems paralyzed by the disappearance of his employer. He imagines that there is work for electricians in central Iowa but he hasn’t looked. “Lisa is always on me because I’m so angry,” he said. “She says, ‘What would your mom have said?’ My mom would have said, ‘Worrying is not going to help.’”

Newton’s last day as a manufacturing mecca comes a century after Fred L. Maytag built his first mechanical washing machine here. Over time he also located his headquarters, research center and most production in Newton, changing it from a rural county seat into a prosperous city of 16,000. Absent Maytag’s high pay, overall hourly earnings last year for other workers in the county would have been $3 an hour less, according to Iowa Workforce Development, a state agency.

I am not entirely unsympathetic to Mr Winchell's frustration. When one has invested one's whole life in a particular job or company, that really becomes part of one's identity and to have that taken away can really throw one for a loss. But it's one thing to be angry about losing one's job, and another thing entirely to let that keep a man from picking himself up, dusting himself up, and getting back in the race.

Of course, getting back in the race can mean a lot of life changes. Mr Winchell has spoken of looking for jobs in central Iowa, but I don't see why he would limit himself to just central Iowa. As a tradesman, he can pretty much go wherever he wants and find work -- and relocating for work can do a lot in terms of one's getting ahead in life.

I know this through my own experience, as I moved from Los Angeles to New Hampshire solely for the work, a move which took place three years after I moved to Los Angeles solely for the work. When my work here ends, I'll depart New Hampshire for better (and, God willing, warmer) climes. That could be when I retire from my present job (the Granite State is not the best place to retire tax-wise) or it could be when circumstances change and I find I've been made redundant. Sure, I could have stayed in my hometown of Kalamazoo, Mich. all these years, but the opportunities for which I was looking weren't there.

I fully admit it may be easier for me to say this, as when Mr Kepple was working, my own family moved solely for the work. So I'm used to the idea -- and used to the idea of not growing up near one's extended family, or the social networks that one has in a place where one's family has lived for a long time. But you keep up with your family as best you can and build new relationships and do what you have to do. That is the way of things in this day and age.

Personally, if I was in Mr Winchell's shoes -- or any of those about-to-be-unemployed Maytag workers, I'd get the hell out of Iowa while the getting was good and go where the grass was greener. Like, say, Montana. (It's pretty country up there and not unlike Iowa culturally, I'll bet). And although I feel secure in my own position here in New Hampshire, I definitely have my running shoes at the ready. It's easy but dangerous to take things in life for granted and so I've made plans should the unthinkable happen. These plans include the following:

1. Go out for a good steak dinner.
2. Take a good long vacation. A very good, very long vacation. Like, a drive around the country vacation in which I visit all my friends and family and go places where I've never been. Hey, when the hell am I going to get this type of free time again?
3. Four or six weeks later, come back and file for unemployment.
4. Start looking for work the next Monday.

Perhaps that's a bit idealistic on my part -- after all, there's something to be said for hitting the ground the very next morning -- but it sounds like a plan and I'm going to stick with it. Besides, if worse came to worst, I could always head out to Montana.

Posted by Benjamin Kepple at 06:27 PM | Comments (0) | TrackBack

August 24, 2007

Prosperity Gospel, Part II

If someone expresses interest in investing in Guanajuato, we don't let them get away.

--Vicente Fox

GIVEN ALL THE business and finance writing I have been doing over the past few months, I daresay Loyal Rant Readers could be forgiven if they thought I had become -- well, a bit calculating in my outlook on life. Indeed, were one to say my writing on these topics has been a bit cold, unforgiving and ruthless, I don't think I would disagree.

However, when dealing with financial matters, I don't think these traits are all that bad to possess. Since these transactions necessarily involve working with strangers, one ought not reward incompetence, forgive stupidity or allow oneself to be taken advantage of just because one wants to be nice or avoid confrontation.

After all, no one cares more than you about your own money, and unless you operate along those lines you are inviting trouble. So if that means questioning the fees paid to the managers of your retirement funds, or criticizing the rationale of an investment strategy, or witholding your proxy vote for a clueless company director, or not buying the tru-coat at the used car lot, then those are the things you have to do. It's far better to be conscientious of these things than to be taken for a chump.

But the wonderful thing about capitalism is that, even as one must deal with the back-and-forth of the markets and the minefields of business, there are so many opportunities to help one's fellow man. Our system lends itself to coming up with new and creative ways to help those less fortunate, whether it's through one's own investing decisions or through one's charitable endeavors. Increasingly, it's possible to combine those two seemingly unrelated objectives and offer a dignified helping hand to those who need it.

Perhaps one of the most inventive combinations out there is Kiva, a Web site that allows people to offer no-interest loans to small businesspeople in the developing world. Since people are offering loans and not grants, it is not really charity, but at the same time, providing these small firms with working capital is very much doing good. Back in May, I wrote about the small investment I had made in the site and why I was happy to do so -- because the approach treats borrowers with dignity and as equals, not as charity cases.

At the time, I invested a total of $50 into my loan pool and made two $25 loans to two small businesses in Mexico, whose owners are widows working to raise their families. This investment worked out to 2.7 pc of a $925 loan made to a shoeseller in Monterrey, and 2.5 pc of a $1,000 loan to a small grocery in Cd. Acuña.

Four months later, I am pleased to report my borrowers have repaid me a total of $18.37 and are well on their way to repaying the loans in full. While God knows things happen in business, it sure looks like my borrowers are going to repay me on time. This is, if I may say so, pretty bloody cool. The opportunity cost to me was practically nothing* and I've helped them accomplish their goals. And when the loans are eventually repaid, I could cash out and get my money back -- but you know, I don't really want to do that. I'd rather plow the money back into new loans and keep the virtuous cycle going.

But I am certainly not the only one getting repaid. According to Kiva, the two microfinance groups that handle the loans in Mexico have turned in downright stellar performances. In total, they have loaned out more than $1 million over the past year or so. NOT ONE loan has gone into default. NOT ONE loan has even been delinquent. This is downright amazing when you consider more than 1,700 loans have been made. With that amount of activity, it would be reasonable to expect a default rate of 1 to 2 pc and a delinquency rate a bit higher, but EVERYONE has been paying back and paying back on time. Even if I wanted to find fault, I couldn't do it.

But what I really like about Kiva's approach is that it creates wealth without any of the distorting economic effects one often sees with well-intentioned relief efforts. Plus, I would like to think that eventually, that wealth creation -- through increasing trade and other economic activity -- will help folks here in the United States. If that grocery in Acuña does well enough, its owner may well be shopping over in Del Rio before we know it.

And that's enough to warm even my cold, calculating heart.

* Arguably, the opportunity cost of making the loans is the measly amount of interest I would have earned had I put the $50 into a stingy U.S.-based savings account. That works out to like 17 cents. These days, you can't even buy penny candy with 17 cents.

Posted by Benjamin Kepple at 12:45 AM | Comments (0) | TrackBack

August 23, 2007

Commodity Fetishism

SO I WAS TOOLING AROUND on Yahoo! Finance and much to my amazement I saw a column from one of their financial "experts" proclaiming --- wait for it -- silver as the next great investment. Yes, you read that right. Silver. Silver, which is down 16 pc over the last 15 months. Silver, which has historically traded around $4 to $5 per troy ounce. Silver, which since its recent historical lows in the Eighties and Nineties has seen a big run up to $13 per troy ounce or so, meaning you should have bought it back when it was cheap.

The author of this essay, one Robert Kiyosaki, is the author of the "Rich Dad, Poor Dad" series of books. He has sold about 26 million of these, proving at the very least he is an excellent salesman. As I have not read his books, I can't offer any real criticism of these works, although Wikipedia sure does. Still, I must say I admire the man's guts, because I have a feeling his words are going to come back to bite him like a pack of pit bulls. Mr Kiyosaki writes:

But as much as I love real estate, I believe the biggest opportunity today is in silver. I think this precious metal is about to become the most spectacular investment in recent history -- bigger than oil, even bigger than Google.

The Rant believes this statement is the stupidest thing we've read in years. Nearly as mindless is Mr Kiyosaki's statement about the potential upside appreciation one might find in the precious metal. He writes:

As I write, silver is approximately $13 an ounce. If industrial consumption continues and monetary panic sets in, who knows how high the price will go? Between 1979 and 1980, silver went to $48 an ounce. In today's dollars, that would be the same as $80 an ounce.

And recently, exchange traded funds in silver have been added as a way for investors to hold silver. The reason I find the silver ETF so intriguing is because an ETF represents real money -- not fake money like the U.S. dollar.

I don't mean to be rude, but it might be slightly important to mention the reason silver hit $48 an ounce back in the day -- actually, $49.45 per troy ounce at its peak -- was because the Hunts were scheming to corner the silver market. Of course, the economy was teetering on the brink of ruin at that point (Death of Equities!) and precious metals were a popular investment; but the idea that silver would have hit such a lofty height without the Hunts' machinations seems a bit much. Besides, once things got better, silver went on to crash spectacularly, losing two-thirds of its value over the next two decades. The S&P 500, meanwhile, went on to achieve more than a seven-fold return.

I have to say I just don't understand the commodity fetishism mindset that exists among economic doomsayers. If you look at the long-term trends and believe that all is lost -- an argument of which I am highly skeptical -- there are far better and more stable places to put your money. Real estate is probably the best of them, because they ain't making any more land and people always need places to live and work. Real estate is a good hard asset with tangible value. It also can't be stolen and melted down.

Plus, because God has blessed America with a stable system of laws and regulations governing the ownership and transfer of real-estate, the only way you'll truly lose out with real-estate is in the event of a nuclear holocaust (in which case we're all screwed) or some neo-Bolshevik movement seizes power (in which case we're all screwed). It should be worth noting that in the cases in which we are all screwed, NO investment -- except a plane ticket to Switzerland or Bermuda or the Caymans -- will save you. Those bars of silver and gold will only come in handy for getting one or two good swings at your local commissar before his socialist minions drag you off to be shot.

Of course, I realize some readers may look at this and complain that inflation is eating their dollars and the Government cannot be trusted and They -- whomever They are today -- Are Going to Sell Us Down the River. But here's the thing.

Let's say that all the above items are true. Let's say inflation is a bit higher than normal; let's say the Government is weak and ineffectual; and let's say the Trilateral Commission has somehow managed to spread its tentacles throughout the world of international finance, and its directors are spending their meetings looking at the stock tickers and laughing maniacally. As long as the returns on one's investments outpace inflation, there's no reason to switch to metals, because you're still making money in real terms and that is what counts at the end of the day. Real-estate and Treasuries and other investments would be far safer -- and arguably more liquid -- in such a situation. That's because if things improved -- as they almost certainly would -- they would still keep appreciating, whereas gold and silver would fall accordingly.

Besides, what if the doom one expects never arrives? Then you're really out of luck. Think of all those gold and silver bugs who held on to their metals portfolios throughout the Eighties and Nineties, expecting the crash that never came? The value of their holdings slowly diminished even as those who invested in more mainstream investments made a killing.

Now, I do not mean to completely dismiss metals enthusiasts here. Clearly, many are very smart and there's no denying there are some long-term trends extant that are cause for concern. But I have to wonder if a lot of these folks aren't perhaps being too clever for their own good, and thus extrapolating scenarios from their analyses that are possible, but certainly not very probable.

After all, the banking panics of the 19th and early 20th centuries are no more. There is no more wide demand, as the hotel operator in "The Good, the Bad and the Ugly" put it, for "gold, not paper dollars!" The gold standard has been sundered, even in Switzerland. Fiat money rules the world and there seems little chance that will change any time soon. Plus, the U.S. dollar still remains a great store of value -- after all, that's why so many foreigners hold dollars as a hedge against their own, far weaker, currencies.

So for the life of me, I can't see any reason to think silver is suddenly going to be the next big thing. Perhaps if things got really bad and there was a huge flight to quality, gold and silver would do well. But even then, those gains would only be temporary. Markets turn; that is their nature, and those who are accustomed to seeing the glass as half empty should always be prepared to accept the glass is actually half full.

Posted by Benjamin Kepple at 01:01 AM | Comments (0) | TrackBack

August 22, 2007


THE ONION: "Neither Person In Conversation Knows What Hedge Fund Is."

Posted by Benjamin Kepple at 01:35 AM | Comments (0) | TrackBack

Joyous Fun With Tax Statistics

SO HOW WAS YOUR TUESDAY EVENING? I spent mine boxing up more books. Then I took a break and started reading The New York Times. Unfortunately for my continued book-distribution project, I read an article in the NYT about national income statistics that first puzzled me, then annoyed me, and then got my Scotch-Irish up. So I spent the next couple of hours doing some on-line research to see whether I could gather up enough information to analyze the analysis, and in fact, I did.

First, though, let's look at what NYT scribe David Cay Johnston wrote for the Paper of Record:

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.

The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.

Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.

The White House said the fact that average incomes were smaller five years after the Internet bubble burst “should not surprise anyone.”

The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.

These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.

People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.

The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law.

The nearly 90 percent of Americans who make less than $100,000 a year saved on average $318 each on their investments. They collected 5.3 percent of the total savings from reduced tax rates on investment income.

The I.R.S. data showed that the number of Americans making less than $25,000 a year shrank, down by 3.2 million, or 5.5 percent.

Nearly half of Americans reported incomes of less than $30,000, and two-thirds make less than $50,000.

The number of taxpayers making more than $100,000 grew by nearly 3.4 million and accounted for more than two-thirds of the growth in the number of returns filed in 2005 compared with those in 2000.

The fact that average incomes remained lower in 2005 than five years earlier helps explain why so many Americans report feeling economic stress despite overall growth in the economy. Many Americans are also paying a larger share of their health care costs and have had their retirement benefits reduced, adding to their out-of-pocket costs.

OK, so that's pretty much the entire article, but I'm analyzing it, so I had to post that much. I left out the bits at the end, which include the White House's response to the statistics and some policy analyst saying the data shows supply-side economics doesn't work. Discuss amongst yourselves.

Naturally, the Times' article has been on the receiving end of some pretty heavy firepower. Tom Blumer fired back a response saying the newspaper was twisting the facts to make things look bad. Randall Hoven also fired back, pointing to other Government data that apparently contradicted Mr Johnston's analysis. This prompted Mr Johnston to issue a response, which can be seen at Mr Blumer's site.

Anyway, based on my reading of the data, Mr Johnston oversimplifies and exaggerates the situation. He does not help matters by not explicitly mentioning where the data came from and how it was collected, leaving analysts no choice but to run around looking for it. After a while, though, I found it.

The data Mr Johnston cites comes from the Internal Revenue Service's Statistics of Income -- Individual Income Tax Returns report. (Publication 1304). The report, if you really want to download it, can be found here. It contains a bunch of PDF and XLS files which you'll then have to slog through. However, I did this for you out of the goodness of my heart. You're welcome, I'm sure.

Anyway, it would have been nice if Mr Johnston had mentioned this, as well as the fact the SOI report's figures "are all estimates based on samples." It also would have been nice if Mr Johnston had made clear that his average income statistics were based on the number of income tax returns filed. Thus, given the various filing options people have, they can only be quoted as being on an income-tax return basis. This isn't clear in the story and Mr Johnston should have taken care in pointing this out, even if it meant cutting out a quote from the policy wonk.

Furthermore, Mr Johnston's article could have certainly used a good bit of perspective. Yes, incomes have been down over the past five years. However, they're only down $476 on average, as his own data show. That works out to a whopping $1.90 per day, if we assume 250 working days in a year. My God -- people might have to give up their morning crueller to compensate. However will America's middle class survive this body blow to its way of life?

The drop also isn't all that much when one considers 2000 was something of a banner year, and over the next few years we had the Sept. 11 attacks, myriad c