Business & Economics: January 2009 Archives
Intrade has launched a World Crisis Index with a pretty neat methodology. The index is an average of several ongoing economic contracts, normalized to start at 50.0.
To measure the immediate impact of dozens of presentations and workshops by 2,500 business and 42 political leaders we have constructed the Intrade World Crisis Index.Our admittedly unsophisticated sentiment index priced at 50.0 at the official opening of the meeting is comprised of eight equally weighted markets that measure the likelihood of recessions, depressions, increased unemployment, lower stock markets, and greater international tensions.
A higher post meeting index means our markets predict a more disastrous 2009 than before. A lower post-meeting index means our markets predict global leaders have reduced the probability that 2009 will be the disaster we previously thought.
The WCI started at 50.0 two days ago, and now stands at 50.2.
Here's the inside scoop on Circuit City's liquidation sale and an explanation of why going-out-of-business sales usually aren't that great.
From cameras to TVs, every item we saw at the store was marked as 10% to 40% off. However, of all the items we looked at, only one (the 32" Sharp LCD) was cheaper at Circuit City than it was online. Even so, we've seen other Sharp TVs with similar specs for less. ...As expected, Circuit City's liquidation sale was atrocious. Even though the store had a Black Friday vibe, there were no sales to be found. But we were surprised to find that the stores beating Circuit City aren't just online-only stores like Amazon and Buy.com. Even Toys "R" Us and Sears undercut Circuit City. It bears repeating: Liquidation sales aren't synonymous with discounts, and consumers should remember that as more merchants file for bankruptcy.
As if our labor laws aren't already unfair enough to employers, the newspeaky Employee Free Choice Act is poised to tilt the table so far in the unions' favor that the whole game will become unplayable.
First, you may be surprised to learn about some of the speech restrictions that already burden employers facing union organization.
Under the National Labor Relations Act (NLRA) today, an employer can insist upon a secret ballot after 30% of workers indicate by card checks their interest in a union. The campaign that follows lets the employer air his views about the downsides of unionization before the vote takes place.To be sure, the employer's free-speech rights are limited under the NLRA. He cannot threaten to move or shut down if workers vote for the union. Nor can he promise higher wages if they don't. But he can make predictions of what will happen if his firm is unionized, and he can point to the reversal of worker fortunes in other unionized firms.
The Supreme Court (unfortunately, in my view) has held that the peculiar labor-law environment justified these abridgements of ordinary speech rights.
The name of the EFCA bill is absurd on its face: the authors' implication is that the current system of secret ballots impinges the "free choice" of the employees, but that a "card check" system would protect it. The counterargument is easy: secret ballots were good enough for our founding fathers, good enough for our state Constitutions, and good enough for all manners of private organizations. Why mess with success?
Unless you define "success" as unionizing as many workers as possible and stabilizing the power bases of the union bosses and the Democratic Party.
So right now unions can be formed/joined by secret ballot (soon to be card check?), but does anyone know how a workplace can be deunionized? It sounds like even the union bosses are realizing that the auto unions aren't good for the workers.
On Wednesday, UAW President Ron Gettlefinger predicted there would be no wage cuts as part of the union's concessions to GM and Chrysler. Gettlefinger argued Toyota's workers actually make $2-per-hour more than UAW workers, if you count bonuses. ...P.S.: So will promoters of greater unionization now boast that with unions, workers can earn $2/hour less?
I don't see how unions can win this in the long run, unless they abandon all pretense of democratic legitimacy.
It's strange to me that banks make so much money from fees instead of from loans and investments.
"It's becoming very clear that banks are increasingly reliant on fees resulting from overdrawn checking accounts for income," said Mr. Flores. "Nationally, the average household now has more than 12 overdraft transactions per year and pays $368 per year in fees. We see no reason for this trend to change. Bounced check fees and overdraft protection will have a larger and larger financial impact on households." ...* The average United States household with a banking account incurs 12.7 NSF fees per year.
* Bank and credit union data used in Bretton Woods' modeling determined 1.28 billion separate check and electronic NSF items.
* An estimated 20.2 million households with bank or credit union accounts write the majority of NSF items (1.02 billion) incurring $29.7 billion in NSF fees or approximately $1,472 in fees per active household.
Good for me I guess, since I've never paid one. My banking is subsidized by idiot taxes!
Some biologists think that hormone "imbalances" may contribute to "ultra-aggressive" traders, and therefore the financial crisis.
Successful stock traders may be physically prone to hormonal excess — a physiology that leads to success on fast-paced trading floors, but also to a global economy steered by hormonally imbalanced decision makers.In a study of 44 London traders, the most successful tended to have longer ring fingers than index fingers, a ratio linked to high prenatal exposures to androgen, a male sex hormone. This exposure in turn is believed to increase adult testosterone levels.
By favoring ultra-aggressive hotheads, the financial world may be throwing a human-sized wrench in its own gears. ...
A variety of traits — from sexual preference and athletic aptitude to assertiveness and aggression — have been correlated with ring-to-index finger ratio. Some of these studies have not been replicated, and have been criticized as a modern form of phrenology. But researchers do agree that the ratio tracks with prenatal androgen exposure. This early exposure is believed to determine testosterone levels during adulthood, carving a metabolic channel down which hormones can flow — and flow they do on trading room floors, where fortunes can be made and lost in minutes.
I'm not sure about the ring finger connection, but I can see how our financial system rewards aggressive risk-takers. One obvious example is that corporate executives can get huge bonuses in good years that they don't have to give back in bad years. Similarly, fund managers take a cut of the profits in good years but lose little in bad years.
(HT: NW.)
Here's an interesting move by Hyundai: if you lose your job within one year of buying a new car, they'll let you return it and wipe out up to $7500 of negative equity.
According to a Hyundai press release, buyers can return a vehicle for no additional charge within 12 months of purchase if any of the following occur:-- Involuntary unemployment
-- Physical disability
-- Loss of driver’s license for medical reasons
-- Job transfer overseas
-- Personal bankruptcy filing by a self-employed worker
-- Accidental death ...Here’s an example from Schwartz of how the return program works:
A customer buys a 2008 Santa Fe SUV and gets a five-year loan for the total purchase price of $22,300 (including rebates, taxes etc.). About $350 of the $430 monthly payment goes toward paying the principal on the loan. When they buyer loses his job nine months later and returns the vehicle to Hyundai, he’s paid about $3,200 in principal on the loan and still owes $19,100.
Assuming the used Santa Fe is appraised at $16,000, the buyer would be “under water” on his loan by $3,100 — easily within the $7,500 negative-equity threshold provided by Hyundai.
As a buyer, I think I'd rather have a lower interest rate or a larger rebate instead of this insurance-like program. Won't this offer attract customers who are particularly likely to lose their jobs? Or troops who might be deployed overseas?
One of my friends from church is being generous enough to help me with a water-damaged floor in my master bathroom. Since we're ripping the floor out, I figured I might as well get quotes for remodeling the shower as well. I posted a quick ad up on craigslist and within eight hours I received emails from more than 40 plumbers/carpenters/remodelers offering to do the job for as little as $15/hour. Incredible.
