Not Your Typical CEO

The Wall Street Journal's Kaveri Niththyananthan talks with Virgin Atlantic's President Richard Branson about the future for Virgin, strikes at BA and price fixing allegations.  Branson is for competition in ways many CEOs are not.

Virgin's Jilie Southern Talks strategy and the Airline Outlook

The Wall Street Journal's Kaveri Niththyananthan interviews Virgin Airline's Chief Commercial and Financial Officer, Jilie Southern, about the outlook, the impact from volcanic ash and her opinion on new government policy:

Apple Worth More Than Microsoft?

The WSJ's Simon Cosnable and Dennis Berman joins the News Hub to discuss how last Wednesday (5/26/2010), Apple's market capitalization past Microsoft's:

When Earnings Go Up, Stocks Go Down?

Corporate profits are still posting positive surprises, but Alex Eule reports the market has seemingly lost interest. From Barrons.com's:

When the Euro Sneezes, Does the Aussie Dollar Catch Something?

WSJ's David Wessel joins the News Hub and discusses why Europe's problems threaten not just Europe. Note the great view of the Sydney Opera House seen from St. Aloyisius? The next building after that is the Parthenon in Athens.

Has Greece's Profligacy Made Some Top European Stocks A Buy?

The Euro crisis has driven the currency down versus the dollar making Europen stocks cheaper for those of us who buy with greenbacks. It has also driven European stock prices down in Euros.

Does this mean there are bargains?  Vito J. Racanelli, Barron's European Editor suggests some candidates:

As Australia Goes, So Goes the Global Economy?

Andria Cheng previews this week's news from Asia.

Australia's GDP and Rate Decision: Among the world's central banks, the Reserve Bank of Australia (the RBA) has aggressive withdrawing monetary stimulus The RBA is expected to keep its rates steady as European debt worries roil global markets.

China's Purchasing Managers' Index will show where the world's second largest economy is going.

Here is a Barron's video:

Ryan Air and Ahold to Report

Aude Lagorce reports on the forthcoming earnings reports by Ryan Air and Ahold:

Are Stocks Cheap?

May 24 2010:   On FT,com, investment editor James Mackintosh asks whether stocks are cheap.  In this video he compares European stock and bond yields and the basis point spread in LIBOR markets.

U.S. Retail Sales

Jason Weisberg of Seaport Securities talks about upcoming US retail sales figures and last week's glitch that saw equity markets sell off sharply.  (2m 39sec)

The Giant To The South: Prometheus Bound?

In this Financial Times video, Jonathan Wheatley reports on the colossal challenge facing Brazilian farmers and manufacturers because the country lacks the infrastructure, the roads and port facilities, to export its wealth.  (3m 24sec)

May 26 2010

Risk Aversion

Aline van Duyn reports that investors are running away from risk.  Could it be that we are mostly talking about speculators who being subsidized by too cheap money compliments of Chairman Bernanke? 

The Voice Crying Out In the Wilderness

Maria Anastasia O'Grady normally writes about Latin America.  She is the Wall Street Journal's Americas columnist.  Perhaps her experience with Latin American inflationist policies and monetary proflicacy made her the appropriate person to interview Tom Hoenig, the one hawk on the Federal Open Market Committee, the only member who seems to think loose money sinks economies.  Ms O'Grady explains this is in part because Tom Hoernig learned bank supervision in the the 1970s in the mid-west when the energy and farmland bubbles burst in the late 1970s and early 1980s.  He saw the effect on the local economies, businesses, employment, and growth.  He is no stranger to the human costs of bubbles.

Yet our policy makers are once again pursuing a policy of negative real policy rates (i.e., the federal funds rate is set below what inflation is expected to be.  Investing in T-Bills is a guaranteed mug's game.  it would seem new bubbles are on the way. "But if it happens the fault won't lie with one stubborn voice of dissent, crying out in Missouri."

It is refreshing to hear Hoenig tell us that "'Monetary policy has to be about more than just targeting inflation. It is a more powerful tool than that. It is also an allocative policy, as we've learned. In other words, when we kept interest rates unusually low for a considerable period we favored credit and the allocations related to it over savings, and we created the conditions that I think facilitated a bubble."

Here Is One Investor Who Thinks Fighting Bubbles Is In Dr. Bernanke's Job Description!

Many still think Alan Greenspan walked on water.  Jeremy Grantham is not one of them.  The good Dr. Greenspan seemed to think that preventing bubbles was neither part of his job nor realistically feasible. Having suffered thorough the aftermaths of the high tech bubble and the housing bubble, has thinking on Constitution Avenue changed?  unfortunately not.  Pauline Skypala writes that "Mr Grantham sees Ben Bernanke, chairman of the Federal Reserve, following the same path as his predecessor." He and his firm have identified thirty two bubbles over the last ninety years. 

As to his own business, the investment business, does it add value?  "The business is a zero-sum game, he points out, and 'we collectively add nothing but costs'. Costs have grown because there is no fee competition, due to the agency problem and the information advantage the agent has over the client. Growing complexity has increased the client’s dependence on the industry."

What Has Paris Got to Do with What My Lady Buys at Kohl's or Penny's?

While some of us ask whether the oddly proportioned ladies on the fashion runways were genetically engineered, a reader of the Wall Street Journal asks Teri Agins, the Journal's fashion editor, about "How Fashions Trickle Down From Runways to Stores."

Agins tells us, "Runway creations provide many ideas that trickle down to the masses. Alexander McQueen's low-riding 'bumster' pants [see picture by Rex] seemed downright radical in the mid-1990s. But the revolutionary silhouette inspired many interpretations—and gradually morphed into the low-rise jeans that are so ubiquitous in shops today. Of course, not every design has a runway origin; Capris date back to the 1950s but were revived as recently as a decade ago.


"The mainstream market offers a mix of original designs and runway interpretations."

Penny's, J. Crew, and the rest keenly follow the traveling fashion show as it goes from Milan to Paris to New York. They then design for their own customers. Agins writes that stores "have design teams who possess a keen sense of their consumer fans and give them what they want." Consequently, "what's offered in stores doesn't really change very much. Most customers gravitate to familiar styles that work on many body types, tweaked just enough to look new."

One of the cleverest firms is Zara which has honed the art of imitation and design. Its competitive advantage lies in the speed with which it can put trendy designs on the racks and turn over their fashions. Zara is headquartered in Coruña, Spain. It has ridden its design cycle and supply chain management to spectacular growth and profitability for its parent,Inditex.

Inditex earned €1.3bn on sales of €11.1bn over its fiscal year ending January, 2010, up from the prior year's €1.25bn. Retailers typically have fiscal year ends ending in January. This permits a general inventory after Christmas and January "white sales."  Mark Mulligan explained in the Financial Times that "sales rose 7 per cent," not bad in a global recession which hit particularly hard in Europe. Mulligan attributed it to "expansion in Asia [which] helped offset weakness in the domestic market and other faltering European economies. After stripping out currency factors, global revenues rose 9 per cent, the company said."

Benjamin Graham and Commodity Based Money

Vivian reviews World Commodities and World Currencies, by Benjamin Graham (McGraw-Hill, 1944) on the website bufferstock.org . She writes that Graham "wanted [the IMF] to finance international multi-commodity buffer stocks which would be bought and sold automatically; and to monetize what was in these pools to back paper money as gold did in 1944 with a commodity reserve currency.

"Curiously enough, Graham's views - called "groceries first" - garnered support from economists as divergent as von Hayek and Lord Keynes."

Payrolls Are Up, Employment is Up, and the Labor Force Surges Causing a 9.9% Unemployment Rate

BLS released its April jobs report. Unemployment hit 9.9% because the labor force jumped by 805,000 including almost 200,000 re-entrants. Payroll jobs were up 260,000. Private jobs up 231,000 including 44,000 manufacturing jobs.

Although the unemployment rate rose, the household survey showed employment growing faster than population for the fourth straight month.

As for Wichita's unemployment situation, aviation is the core of its economic base. There was no evidence of a rise in aviation jobs in the report motor vehicle manufacturing jobs rose by 4,100 jobs while other transportation equipment employment fell by 4,000.

Correction:  The last sentence should read: "There was no evidence of a rise in aviation jobs in the report: motor vehicle manufacturing jobs rose by 4,100 jobs while other transportation equipment employment fell by 400."