Monday, December 24, 2007
Those of us with the more mundane worry of whether the crisis will translate into a recession will be reassured The Wall Street Journal already has the remedy: use fiscal policy not monetary policy. The paper's editors believe the dollar's virtue can not take any more ease. Read its editorial, "False Savior."
The Subprime Mortgage Credit Crisis & the Bursting of the Housing Bubble Drops Mortgage Mail Solicitations By 62%
Prominent mortgage brokers and mortgage banks have gone bust while major players have with drawn from the market.
DM News reports that the Treasury facilitated plan to selectively freeze the rates on some ARMs is causing direct marketing pros to adjust their offers.
Tuesday, December 18, 2007
Check usage by 6.4 percent a year from 2003 (the last year studied) to 2007.
The Present Value of a future cash flow discounted at X% is the amount of money you would need to invest today earning interest compounded annually at X% to accumulate that future amount. It answers the question "How much do I have to invest now to end up with that future sum if I earn the discount rate?"
A security's Current Yield is its annual income divided by its current price. For a bond it is the coupon interest divided by the price. For a share of common stock, it is the annualized dividend divided by the price.
Wednesday, December 12, 2007
Alan Greenspan dissects "The Roots of the Mortgage Crisis." He thinks that if it had not been subprime mortgages, then something else would have precipitated a crisis after risk premia had fallen so low.
Also on the Opinion Page, Alan Reynolds analyzes the dollar in his commentary, "Interest Rates and Dollar Fundamentals" and Martin Feldstein advises on "How to Avert Recession."
Meanwhile, Citicorp, parent of Citibank, has decided that Vikram Pandit and Sir Win Bischoff should stay on as CEO and Chairman, respectively. They were both acting in those jobs. You can read about it in Robin Sidel and David Enrich's article. The big question remains: "Can a universal retail/wholesale bank be created like a hothouse plant through mega mergers and acquisitions?" I have my doubts. That certainly not the way the House of Morgan was created. On October 16th, Ms Sidel and Jeffrey McCracken reported increased skepticism that Citi's universal banking strategy was working.
Saturday, December 08, 2007
Wednesday, October 24, 2007
Click on the title link to get the story and commentary by the mammon master himself. You need windows Media Player to actually watch the video.
Thursday, September 27, 2007
New home sales plunged 8.3 percent in August while the average price fell 7.5 percent. New home sales are 21.2 percent below last year. With home building down 19.1 percent from last year, this will only make a bad situation worse.
Will Housing Cause a Recession?
We can have a recession without housing starts plummeting: the recession of 2001 proved that. But can we have a large decline in housing starts without going into a recession?
The chart above is courtesy of the Federal Reserve Bank of St. Louis. Every time we have had a comparable decline in housing starts, the economy has gone into a recession. The lone apparent exception is 1966. And that exception is more apparent than real. The NBER's failure to call the cyclical episode in 1966 a "recession" was extraordinarily controversial and in my opinion a bad call. In 1966, industrial production fell sharply for five months, private domestic spending fell two consecutive quarters, the stock and bond markets took a bloodbath. Housing starts fell by a half.
In the current cyclical environment, housing starts are 41.9 percent below their cyclical peak. That puts the housing sector's current misery right up there with the typical postwar recession.
The odds against our avoiding a recession have shortened dramatically!
Monday, September 24, 2007
Molly McMillin reports in today's Wichita Eagle that "Buoyed by strong international sales and new models, the business jet industry is expected to continue to soar...
"Business jetmakers are expected to ship more than 1,300 jets next year and 14,000 new planes in the 11-year period from 2007 to 2017, according to Honeywell Aerospace's forecast. A record delivery pace is expected to continue into 2009, it said."
Wichita manufactures thirty six (36%) of the world's general aviation aircraft. The aerospace sector accounts for one in six of Wichita's jobs directly and many more indirectly.
Monday, September 17, 2007
Personally, I find John R. Hicks' explanation in A Market Theory of Money far more comprehensive and plausible for what we are now undergoing.
Monday, September 10, 2007
Members of the Federal Open Market Committee which sets U.S. monetary policy are singing from different hymnals. Their discordant tunes indicate that the future course of policy is uncertain.
Bloomberg's By Scott Lanman and Vivien Lou Chen report that: "Janet Yellen, head of the San Francisco Fed, today cited 'significant downward pressure' on growth because of housing and financial-market turmoil. Dallas Fed President Richard Fisher said he's `'generally encouraged' about the economy, while Atlanta's Dennis Lockhart backed off remarks he made four days ago that the housing slump was having a limited impact.
The scope of remarks may reflect a debate inside the central bank over whether to lower the benchmark rate on Sept. 18 by a quarter-percentage point, or a half-point as some investors expect, Fed watchers said.The R-Word?
Meanwhile, Eoin Callan in the Financial Times reports that there is more use of the word "recession" as economic observers digest last Friday's payroll employment shock. Read his "The R-word surfaces on Wall Street."
Monday, September 03, 2007
Australia's expansion is in its sixteenth year. They have been doing well ever since I first arrived in 1991 and continued after I left. (Post hoc, ergo propter hoc?)
Investment spending and exports are leading the parade. The commodity boom and particularly China's insatiable appetite for raw materials is driving growth. The U.S. is no longer the lone leader of the world economy:
Bloomberg reports "The Australian dollar climbed to 82.45 U.S. cents at 1:36 p.m. in Sydney from 82.07 cents immediately before the report."
Monday, August 27, 2007
He tells us that four years ago, "London’s business district was undergoing rapid growth, but it was at capacity in terms of traffic. Efforts to channel more cars into the city center simply led to ever lower traffic speeds, which in turn led to business losses and a decrease in quality of life. Simultaneously, carbon emissions were mounting because of the inefficiency of engine use.
In 2003, London put in place a £5 (about $9) a day congestion charge for all cars that entered the center city (the charge is now £8). This led to an immediate drop of 70,000 cars a day in the affected zone. Traffic congestion fell by almost 20 percent. Emissions of the greenhouse gas carbon dioxide were cut by more than 15 percent.
The negative side effects predicted by opponents never materialized. The retail sector in the zone has seen increases in sales that have significantly exceeded the national average. London’s theater district, which largely falls within the zone, has been enjoying record audiences. People are still flocking to London — they’re simply doing so in more efficient and less polluting ways."
The whole editorial is well worth reading.
Sunday, August 26, 2007
By Bo Nielsen
Aug. 25 (Bloomberg) -- The dollar fell the most against the euro since March on diminished concern that U.S. housing weakness will slow global growth.
The yen posted its biggest weekly decline versus the euro since 2003 as investors returned to carry trades in which they borrow in Japan to invest in higher-yielding assets elsewhere. Global stocks rose and volatility fell as traders increased bets the Federal Reserve will cut rates in September.
``Things are calming down sufficiently enough for the market to go back to the trades that dominated prior to the shake-out: buying other currencies against the yen and selling the dollar,'' said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey, with about $250 million in funds under management.
The dollar dropped 1.5 percent this week to $1.3675 per euro, for the biggest weekly decline since mid-March. The dollar rose 1.8 percent to 116.44 yen. The yen plummeted 3.4 percent to 159.26 per euro, for the biggest loss since September 2003.
Monday, August 20, 2007
The Fed reduce the rate it charges its member banks to borrow from it. Its more usual tool is open market operations: buying and selling government securities.
Sunday, August 12, 2007
Are we on the same path?
The U.S. housing bubble has ended with a large amount of mortgage backed securities backed by subprime mortgages that are turning sour. Hedge funds and other investment funds are holding large amounts of these. As they try and sell these securities, they are finding there is no market. This global run from risk is causing treasury securities to rise in price and the world's central bankers rush in shoring up the liquidity of their banking systems.
Listen to Phil Resler, Chief Economist of Nomura Securities, discusses the current liquidity scare with the Wall Street Journal's Phil Izzo and David Wessel.
The S&P 500 may seem cheap at 17 times earnings, but it spent most of my life below 15x.
Tuesday, July 24, 2007
The McClatchy family owns about 30% of the outstanding shares and has super shares to allow it control. Hedge fund Citadel Investment Group also has accumulated 3.2 million McClatchy Class A shares.
Newspapers have always been great cash generators. John Rodgers, Citadel, Rupert Murdoch, and Sam Zell all seem to think they are worth investing in. Everyone else is avoiding them like the plague. At least in Murdoch’s case we know that his strategic insight is that he who controls the content commands the audiences.
Ft.com has an interview with Zell that provides a view of the business that he back up with a very large bet.
Friday, July 20, 2007
"Last fall, newspaper executives and analysts were caught by surprise by the severity of a slump that took hold last summer. Since the beginning of this year, the rate of decline in advertising revenue has accelerated. Total print and online ad revenue was down 4.8% to $10.6 billion in the first quarter from a year earlier, according to the Newspaper Association of America, compared with its full-year decline in 2006 of 0.3%." You can see the acceleration in the chart from the Journal on the right.
Newspapers continue to increase their internet revenues: their 2006 online ad revenue was up 31.5 per cent. However, at only 5 percent of the total, the internet revenues are no where ner enough to offset the losses.
Direct mail spending continue to grow, but faces a strategic problem. While newspapers are rich in content, they are increasingly poor in ad revenues. Direct mail revenues grow, but the medium is increasingly poor in content.
Tuesday, July 10, 2007
Robert J. Coen of Universal McCann is the world's leading authority on advertizing expenditures.
Wednesday, June 13, 2007
Tuesday, May 15, 2007
Construction: Housing Starts 19% Below Last Year
The Wall Street Journal reported, "Home construction unexpectedly rose during April, making a surprise increase despite bloated inventories and tighter credit for subprime borrowers, but building permits took their sharpest fall in 17 years." Bloomberg's consensus forecast for housing starts were 1.475 million new units. The actual (a 1.528 million annual rate) was better, but that level is 19 percent below the year before.
Manufacturing, especially Aerospace, Is Up
The Federal Reserve Board published its April Index of Industrial Production. America' mines and factories produced 1.9% more than a year ago and their capacity usage (80.2% ) was 2.3% higher. Motor vehicles were a little stronger, a good sign.
Aerospace production was up 9.7 percent over last year.
Friday, May 04, 2007
Wall Street expected a weak employment report for April and it got it. According to Bloomberg, the consensus estimate was for a growth of 100,000 jobs. According to the Wall Street Journal, the expectation was for 110,000. The Bureau of Labor Statistics announced April's job growth was 88,000.
April's payroll's were 1.4% higher than a year ago. The economy has produced slower year over year job growth in first four months of 2007 than we saw last year. Yet 1.4 percent growth is fast enough to keep up with labor force growth and slowly pull down the unemployment rate. These comparisons need to be weighed against the very rapid growth experienced the same time last year.
The unemployment rate increased from 4.4 percent to 4.5 percent. This reflects the month to month sampling fluctuation more than it does a fundamental reversal of trend.
Aircraft manufacturing booming
The Bureau did not report separate jobs data for aircraft manufacturing. However it did report that total jobs in the transportation equipment sector fell by 200,000 and that motor vehicles and parts fell by 4.8 million. This implies the rest of the sector grew by 4.6 million jobs which would be principally in the aerospace industry.
Wednesday, May 02, 2007
Employment grew a rapid 4.1 percent in the Wichita labor market since March of last year according to the federal Bureau of Labor Statistics. Not only was Wichita's job growth strong, but it is accelerating compared to the 3.9 percent year over year growth recorded in February. By way of comparison payrolls nationwide grew only 1.4 percent. Wichita’s economy produced twelve thousand new jobs over the last twelve months.
The unemployment rate is down and well below the national rate.
The Wichita unemployment rate was 4.1 percent well below the national average of 4.5 percent. Things have changed dramatically over the last twelve months. A year ago, both the national and the local unemployment rates stood at 4.8 percent. One major reason is the booming aircraft industry. Commercial aircraft order backlogs are up 40 percent over a year ago. The financial recovery of the domestic airline industry, its aging fleet of planes, and a huge demand abroad are all contributing to this sanquine cycle in a very boom and bust business. The Eagle reports that passangers on Air Tran grew 12.9 percent in April.
Tuesday, May 01, 2007
The rule of media empires is he who owns the content rules. Whether content pays is another matter! Wall Street seems convinced that top shelf journalism and having a business model in the black are two diferent things after all. (And I do not mean Conrad Black!)
Rupert Murdoch's News Corp has bid $ 5 billion for Dow Jones, publisher of the Wall Street Journal, Barrons, and the Dow Jones Newwires among other media properties.
Is Murdoch paying too much? he does not think so: "[W]e feel it's worth this. This is the greatest newspaper in America, one of the greatest in the world. It has great journalists which deserve, I think, a much wider audience. We feel that with coming both online and offline, there's a great deal to be done here. It's got great journalists, it's got great management, but it's got a rather confined capital. It's got to be part of a bigger organization to be taken further."
The Bancrofts say "No."
Although the bid is a 67% premium over the stock price that does not mean it is a deal.
Like many traded newspaper companies, Dow Jones has more than one class of shares. In this instance, the Bancroft family, which has a minority of the shares has a voting majority. The Financial Times quotes Michael Elefante, a Dow Jones director and lawyer representing the Bancroft family, as saying “Members of the family and the trustees of trust for their benefit have advised him that they will vote shares constituting slightly more than 50 per cent of the outstanding voting power of Dow Jones against the proposal.”
Stay tuned, the fun has just begun.
Monday, April 30, 2007
This will be their third trial.
Tuesday, April 24, 2007
New orders for durable goods were up 3.4 percent compared with a 2.2 percent consensus estimate according to Bloomberg and 2.7 percent polled by the Wall Street Journal. Particularly relevant to Wichita, new orders for commercial aircraft were up by 37.6 percent more than offsetting a 48.8 percent decline in military arircraft orders. In a significant reverse of form, motor vehicles and parts were up 3.3 percent. Boeing announced 27 percent higher profits based on its revenues which are being driven by its strong order book.
Will the delating housing bubble pull us down?
The national housing market remains a worry for the economic outlook. Yesterday we learned existing home sales were down by 8.4 percent in March, the largest drop in eighteen years. Weather has caused these numbers to bounce like a yo-yo. Indeed they spiked in February setting up a snap back. Thomas Lawler, the Vienna, Virginia housing economist, predicted a 7 percent drop in house prices this year (fourth quarter, 2007 over fourth quarter, 2006.) Lawler's prediction was quoted in today's Wall Street Journal. More encouraging was a 1.6 percent drop in the inventory of unsold homes and higher than expected new home sales in March of 1.213 million.
Thursday, April 05, 2007
Not surprisingly, the Teamsters see things differently. If you click on the title link for this posting, you will find their press release proclaiming a victory of sorts in their skirmishing with FedEx.
A key element in FedEx's business model for their package delivery operation and in particular for FedEx Home Delivery is its use of nonunion contractors.
This might develop into an interesting story to follow.
Wednesday, April 04, 2007
The Bureau of Labor Statistics reported this morning that Wichita's job market was stronger than the national job market. Our unemployment rate dropped to 4.4 percent in February compared to 4.6 percent in January and 4.9 percent in the America as a whole.
Strong job growth
Employment, as measured by the Bureau's survey of Wichita's payrolls, grew 3.9 percent over February last year an increase of thirty nine hundred jobs. Strong orders in the aerospace industry have fueled this growth. Recent new orders data confirm that this sector is booming even while other key parts of manufacturing weaken. The news in the automotive industry, for example, continues to be weak.
Aerospace leads the way
Aerospace seems to be on the boom part of traditional boom and bust cycle. Although the domestic economic growth appears to be cooling off, foreign demand continues strong and a strong replacement demand exists in the U.S. as it battered airlines nurture their balance sheets back into health. Moreover, a new IMF study argues that the rest of the world is less vulnerable to a U.S. economic slowdown.
The Department of Commerce reported that the unfilled order backlog for the aerospace indutry was up 31.3 percent in February. The growth was almost entirely in the non defense book was up almost 40 percent.
Wednesday, March 21, 2007
Mr. Laperriere, a managing director in the Washington office of ISI Group, comments in today's Wall Street Journal.
He goes on to say, "Stock markets world-wide have sold off the past few weeks over concerns the collapse of the subprime mortgage industry could prolong and deepen the housing slump and threaten the health of the U.S. economy. Federal Reserve officials and most economists believe the problems in the subprime mortgage market will remain relatively contained, but there is compelling evidence that the failure of subprime loans may be the start of a painful unwinding of a housing bubble that was fueled by easy money and loose lending practices."
The "wealth effect" has been a the tail wind boosting consumption growth and GDP. If house prices do fall 10 percent this year, it will feel like a Kansas gale in our faces. How far will it push us back?
Tuesday, March 20, 2007
China announced it will set up a state-owned company to build large commercial jet aircraft. The state council, roughly the cabinet, had made what it called an “important strategic decision” to begin research and development to enter the market dominated by Boeing and Airbus.
China is one of the biggest markets with an estimated demand for almost $350 billion in planes over the next two decades. Serving a big domestic market is a key success factor in industries with large scale production.
China's entry into this market over the next fifteen years could have significant impact on Boeing and its suppliers like Spirit Aerospace.
Monday, March 19, 2007
Ann Keeton in the Wall Street Journal reports "Boeing Co.'s new 787 aircraft is 'targeting' a first flight in late August, followed by the first delivery, as previously scheduled, in May 2008..."During the first update this year, Mike Bair, head of the 787 program, said Boeing likely will increase production of the aircraft to meet strong customer demand, which now stands at close to 500 aircraft."
Spirit Areospace makes the composite fuselages.
Sunday, March 18, 2007
By their fruits ye shall know them
Breeders judge a horse by the races, particularly the stakes, won by the stud's or mare's offspring. Secretariat was the greatest horse that ever circled the oval, but his offspring have had nothing like their father's success.
Darren Everson in this weekend's Wall Street Journal looks at the big name college basketball coaches and asks whose assistants became successful head coaches. He develops a scorecard similar to that kept by horse breeders. He looks at the suces rates of assistants of big name coaches. Why do some coaches like Rick Pitino produce subordinates who go on to be great head coachs, while others do not? This is an issue not only for baketball fans, but for students of management everywhere.
Whom do companies reward?
Corporations invest heavily in training and succession planning. How often do they identify, encourage, and reward managers who are successful mentors? The managers who produce great managers are a powerful and underappreciated asset.
One last note in Secretariat's defense: he may not have been horse racing's greatest sire, but he is arguably the greatest broodmare sire God ever created!
Thursday, March 15, 2007
The Journal got its overall internet ad spending data from the Interactive Advertising Bureau.
Read more in Ad Age.
Tuesday, March 13, 2007
Damian Paletta reports in the Wall Street Journal today that "[d]elinquency rates for subprime adjustable rate mortgages reached 14.44% in the fourth quarter of last year, jumping 122 basis points in three months...."
This is based on data from the Mortgage Bankers Association's National Delinquency Survey. "[D]elinquencies on one-to-four family homes jumped 28-basis points in the fourth quarter to 4.95%." These data are reported quarterly.
The Stock Market fell 242 points. The mortgage market's woes help pull equity prices down.
The role of fraud and brokers
Mortgage brokers had a money machine when interest rates were low, house prices rising, and mortgage refinancing was a boom business. When that boom faded, apparently some less scrupulous brokers wrote mortgages that have turned sour. How much of the problems in the subprime market result from fraud and how much from changing economics is not clear. Imprudent lending and borrowing are certainly a big part of the problem.
What is the effect on the economy and mail volumes?
Securitizing the pain
The last time that we had wide spread mortgage credit delinquencies and foreclosures was in the run up to the 1990-91 recession. At that time a much larger proportion of mortgages were on bank balance sheets. As banks wrote off assets reducing their capital, they cut back on business loans contributing to that recession. The conventional wisdom is that securitiztion reduces the economy's vulnerability to a wave of mortgage defaults. I am less sanguine.
The real estate sector has been an important source of mail volumes in recent years. We should expect a cutback in solicitations from mortgage brokers. When the problems in mortgage markets overflow into credit card issuers, expect a cutback in credit card solicitations to the subprime market.
Friday, March 09, 2007
The Readers' Digest Goes Private
March 2nd, 2007, Readers' Digest Association went private. Ripplwood Holdings, LLC led a group of private equity investors who acquied the Association.
Mary Berner takes over as CEO. She has a big job ahead of her. Since the Cold War ended, the flagship magazine, an American cultural icon, drifted away from its original editorial embodiment of solid American values in a desperate search for new demographics. Circulation fell. The magazine, which was the vine that gave substance to the direct marketing branches, withered.
Mary Berner is highly qualified for the job. She left Conte Nash in January, 2006. Apparently she lost out in the bureaucratic politics, and did not want to play second fiddle. She brought an appealing management style to Fairfax publications and achieved great success.
Stockholders, who had gotten little to cheer (see the stock price chart courtesey of Stocktrak.com) about during the long years of public ownership, gladly voted for the acquisition offer in February.
Thursday, March 08, 2007
Koch is the architypical active investor who grew a family business into the largest privately owned business in America. He has strong ideas on management (embodied in his Market-Based Management philosophy.) In contrast to the conflicts too evident in many publicly traded companies, Koch explains that "[a]t Koch, we use incentives to attempt to align the interests of each employee with the interests of both the company and society. This means we strive to pay employees a portion of the value they create for the company. We believe this approach tends to attract and retain the right people, and motivates them to be principled entrepreneurs."
For a fuller exposition of his ideas, read his interview with the Eagle last Sunday or just read the book.
Wednesday, February 28, 2007
Chinese stocks fell almost 9% in Shanghai overnight Tuesday. The Dow responded by dropping over 500 points as part of a world wide rout in share prices.
Among the economic news, there was plenty to make investors revise their expectations.
Alan Greenspan suggested there might be a recession in our future. (See below.)
The estimated growth of the U.S. economy was revised downward. The Commerce Department said GDP grew only 2.2 percent (that is a seasonally adjusted annual rate) far short of the 3.5 percent initially reported. That is one of the largest downward revisions in a long time. The main culprit was the estimate of inventory investment, although downward revisions of fixed business investment spending and consumer spending on durable goods and nondurable goods all contributed.
The fourth quarter saw a big inventory sell off. Although this pulled down estimated GDP growth by 1.35 percentage points (final sales grew 3.6 percent), a drop in inventories can be a good omen for future production. We must take a careful look at its composition.
New home sales dropped 16.6 percent in January.
The housing sector is continuing to worry investors. They are right to worry. The lenders who financed the run-up in house prices are now finding their capital strained. See Justin Lahart: "After Subprime: Lax Lending Lurks Elsewhere" and Robin Sidel And David Reilly, "No Worries: Banks Keeping Less Money in Reserve."
Viewed from the vantage point of Thursday afternoon, investors seem to have taken Professor Greenspan’s advice. They are now a bit more risk adverse. Consequently stocks are a bit cheaper, government bonds a bit dearer, and high yield bonds’ yields are higher. And analysts are now a bit gun shy about saying the economy has nowhere to go but up.
Monday, February 26, 2007
He found "disturbing" how low risk premia have fallen. Professor Greenspan was teaching us that when we discount risk too much we set ourselves up for a fall. When shocks occur, investors and institutions become more risk averse in reaction. This sets up the pull back in lending, investing, and spending that drives the economy down.
Friday, February 02, 2007
The Labor Department's January employment report came out today. Economists' reactions were all over the map. And well they should be.
When the Bureau of Labor (BLS) asked firms how many people were on their payrolls, the results indicated that jobs grew by a fairly modest 111,000 in January. When its surveyors phoned households, they found that 4.6 percent of the workforce said they were unemployed, up from December's 4.5 percent.
Conclusion: based on those bare facts, the economy is growing but somewhat weakly. Hence the Wall Street Journal's headline: "Heading for a Soft Landing."
But you need to read the fine print to get the real shock! The statisticians on Massachusetts Avenue rebenchmarked their samples to an actual count of firms who are registered with the state employment offices.
There were 981,000 more jobs in December than BLS had estimated in its previous report. The monthly data were revised back almost two years. (The revision is "only" 933,000 on a seasonally adjusted basis.)
This means that the year over year employment growth in December was 1.66 percent. A month ago, we thought employment had grown only 1.37 percent. Apparently the economy was stronger than the 2006 data initially led us to believe. On Wednesday we got a surprise. The Commerce Department reported the Gross Domestic Product grew a strong 3.5 percent at a seasonally adjusted annual rate in the last quarter. In light of these revisions, it should not have been such a surprise.
Fed watchers should note that the economists who work for Dr. Bernake also read footnotes!
What is a Forecaster to Do?
This episode gives you a little insight into the real difficulties of business forecasting.
Consider the Postal Service which not only has one of the most sophisticated business forecasting systems in the world, but also shares it with the public through its rate filings. When you read the testimony of Thomas E. Thress one of the Postal Service's experts with RCF Consulting, you will find that a similar measure of employment in the forecasting equation for First-Class single piece mail. One of the attractions of this variable in forecasting and econometric work is its robustness against revision and statistical reporting quirks by the reporting agency (BLS.)
Unfortunately, the gnomes in the bowels of BLS are not cooperating.
Sunday, January 28, 2007
To quote the Wall Street Journal, "A surge in aircraft orders accounted for a large part of the gain, but orders for "core" capital goods excluding defense and aircraft were also up at a good clip."
Friday, January 26, 2007
He was arrested 6:00 A.M. yesterday.
I wonder what he was thinking? "They won't notice $800,000: it's rounding error."
Of course, maybe he is innocent. Perhaps in the wacky world of the media, he was simply facilitating the extravagence of his superiors.
The unsung hero of the piece is the internal auditor who caught him. Internal auditing has been booming after the wakiness of the internet boom went out of fashion. What was ordinary business practice was seen to be just plain silly when that bubble burst. Sarbanes Oxley has super charged the boom. The most recent figures I saw had internal auditors' salaries growing in double digits. The demand outstrips the applicants off into the future.
Most interesting in this news story is NBC Universal's reaction:
Consider its public statement: "NBC Universal is committed to and vigilant about the enforcement of its compliance policies. When we discovered the potential integrity breach, we promptly brought it to the appropriate authorities and are cooperating fully with the investigation. We will continue to monitor the situation to its resolution."
That is a far cry from "That blankety blank stole the shareholders' money and we want every red cent back!" Perhaps the flack under the NBC peacock is singing a song for his grey flannel superiors at GE where the corporate culture is probably a lot less flamboyant.
In general, the return to corporate sanity after the internet bubble burst is salutary. But I also wonder whether in the post Sarbanes-Oxley world, companies are worrying more about following the rules, than growing the value of their businesses?
Thursday, January 18, 2007
What does he mean? By "diverse business model," does he mean that J.P. Morgan has multiple business models? Or does he mean that the bank's business model is based on a diversity of business (each with its own business model)?
I have a personal preference for the more straightforward verb "lever" over the rethreaded noun, "leverage." Whatever my preference, I know I am spitting into the wind on this one. That said, how does one lever a diverse business model to a bottom line? That is not a matter of levering or amplifying.
So what does he mean? My hunch is that J.P. Morgan has made progress integrating banks it has bought and achieving some economies of scope between such diverse businesses as securities trading, investment banking, retail banking, and credit cards. And perhaps he is right.
If I were an investor in J.P. Morgan, my worry would be this: The bank is gaining an earnings boost from over levered consumers who are falling back on their credit cards lines. Will that interest income disappear in the future when some of those balances evaporate into loan loss reserves?
Friday, January 05, 2007
Although the transportation sector (which includes the aircraft industry) lost five thousand jobs nationwide, the losses were overwhelmingly were among firms producing motor vehicles and parts. The American automotive industry is suffering from both a declining vehicle market and stiff foreign competition. Employment in motor vehicles and parts has declined 4.9 percent over the last twelve months while jobs in the rest of the transportation equipment sector increased by two percent.
Overall, employment is doing well. Jobs were 1.4 percent higher in December, 2006 than in December, 2005. This steady growth seems to be holding up despite the economy's slower second half growth (see the chart.)
The job growth reflects the continuing strength of the local economy, particularly the aircraft industry. That industry's unfilled orders have grown. The job growth is the more impressive given that Raytheon Aircraft has been operating under a job freeze while its pending sale was being resolved.