Friday, December 06, 2013

Jet Blue Speaking Arabic?

FlyDubai Sets Out Stall with Boeing Binge

Boeing was a big hit at the Dubai Airshow, but it was not just 777s that it sold.  FlyDubai committed to buy up to 100 737 MAX 8 airplanes and 11 Next-Generation 737-800s (Boeing's single-aisle jets.)  Presumably much of these will be made here in Wichita by Spirit AeroSystems. Hubbed in Dubai like Emirates, FlyDubai's strategy is as a low cost, shorter haul flight airline as it tries to capture destinations (particularly in the Arab/Muslim world) currently not being served by Emirates Airline, the regional powerhouse. 

In this video, WSJ's Rory Jones looks at where the company is headed and what might be some of the challenges it faces:

Photo: Getty Images

Monday, November 18, 2013

What Is the 777X and Why Are the Unions Upset?

 Boeing launched its newest version of the 777, the 777X, at the Dubai Air Show yesterday (Sunday.) The 400 seat twin aisle plane is its response to Airbus's A350. Jon Ostrower gives us a peek at the plane in this Wall Street Journal video:

The 777X is the center chessboard in a match between Boeing and its unions. Boeing had built a huge new plant at the cost of a billion dollars in South Carolina. Just as it was to open it, its union brought a complaint against it before the NLRB that claimed Boeing built the plant to break the union.  With the help of a friendly NLRB, the union was able to reach a settlement with Boeing that shifted certain work to Seattle, including some from Wichita.

Now it is Boeing's move.

When it came to deciding where to build the 777X, Boeing's last big development project, it presented a deal to the State of Washington and its union with which it would build most of the 777X in Seattle.  The state offered $8.7 billion in incentives (that is a lot of money.)  It proposed a new contact to the union that would shift to a defined contribution pension plan among other concessions. However, "the 32,000 unionized members of the International Association of Machinists and Aerospace Workers, also known as the IAM, rejected the deal by a 67% to 33% margin."  With no deal, Boeing is looking around the country and the world to decide where to assemble the new jetliner and build the wings and other parts.  Molly Mullins reports in the Wichita Eagle that there is an attempt to get some of that work here in Wichita. She reported that "Greater Wichita Economic Development Coalition officials met Thursday morning to discuss going after the 777X work for Boeing’s facility in Wichita Boeing."

Read more here:

Boeing says it will decide where to build the plan in the next two to three months.

Boeing Hits a Home Run With the 777X

At the Dubai airshow, Boeing launched its 777X Largest and manage the biggest launch in commercial jetliner history with over 200 orders. Emirates Airline placed a $76 billion order for 150 of the new 777X jets. In this video, the Wall Street Journal's Rory Jones reports from Dubai.

Sunday, November 10, 2013

ANZ: We Are Still Bullish on Natural Resoures

According to the conventional wisdom, if China slows down, Australia will catch a cold.  A natural resources boom has fueled a twenty year expansion in Australia's economy. Does the slowdown in the BRICs, and particularly the "C" (China), mean the end of this Aussie expansion? No says Mike Smith. The chief executive of ANZ discusses his country's and his bank's prospects and plans with FT's Jeremy Grant in this 5:19 minute video.  But Mr Smith does not see everything as rosy in the Lucky Country: he argues the wider Australian economy needs modernization:

Wednesday, November 06, 2013

Why Are 'Natural' Foods Disappearing From Shelves?

Why Are 'Natural' Foods Disappearing From Shelves? (WSJ Media & Marketing,11/5/2013 ) A growing number of food and drink companies are quietly removing "all natural" claims from packages amid lawsuits challenging the “naturalness” of everything. Mike Esterl reports on the News Hub. Photo: Naked Juice.

Tuesday, October 29, 2013

Meet Burberry CEO Angela Ahrendts

Burberry CEO: Fashion in the Age of Social

YouTube, Instagram, Facebook... Burberry, a company that was founded in 1856, is all over social networks. Burberry CEO Angela Ahrendts discusses how a heritage brand stays nimble with emerging technology:

Thursday, October 24, 2013

Apple Hires a Fashionista to Add Some Bling to Its Online & Instore Retail

Kathy Gordon, Ian Sherr and Joann S. Lublin report Apple is "hiring Angela Ahrendts, the chief executive behind a seven-year growth spurt at British luxury-goods company Burberry Group Inc." They report Apple's 365 stores generate average sales of over $50 million a store.

Helen Thomas interviews Kathy Gordon, the Journal's Retail Reporter, about why:

To understand Ahrendts uses media, consider this YouTube video based on Burberry's work with

Wednesday, October 09, 2013

Dividends: To Pay or Not To Pay, That Is the Question.

Dividends do not matter

Oct 9, 2013 : Low bond yields have led investors to place more importance on stock dividends. John Authers argues that these are special circumstances, and that there is still some truth in the Miller & Modigliani theorem – which implies dividends do not matter.  He is referring to the M&M Dividend Irrelevance, as opposed to the M&M capital structure irrelevance:

Tuesday, October 08, 2013

Airbus Cracks the Japanese Market

Airbus wins first ever Japan Airlines order worth $9 billion.

Three U.S. based scientists win Nobel Prize for Medicine.

Nielsen launches TV Twitter ratings.

White diamond fetches record $30.6 million at auction. Joanne Po reports.

Sunday, October 06, 2013

Is the Dow Fatally Flawed? Maybr Not.

Defending the anachronistic Dow

Sep 23, 2013 : The Dow Jones Industrial Average is the world’s longest running stock index. Long View columnist John Authers argues it is on its last legs and David Blitzer, chairman of the index committee at S&P Dow Jones, tells him why it might still be useful:

Is it Time to Buy COCOs?

Is there value in European banks?

Oct 1, 2013 : Are European banks becoming attractive again? Philippe Bodereau, managing director at Pimco, explains to John Authers where to avoid, and suggests that the UK and Switzerland may offer the most promising returns.

Tuesday, September 10, 2013

When Will They Ever Learn? II

“The Big Picture” blogger and Fusion IQ CEO Barry Ritholtz looks back at the events of 2008 and makes the case for the true legacy of the financial collapse and ask, "Did Anyone Learn From the Financial Crisis?"

How Bad Is It to Get Kicked Out of the Dow?

The Dow Jones Industrial Average is just that: an average.  It is not a stock price index.  Yet it is the oldest stock market indicator in use today and as the flagship indicator of Dow Jones (Wall Street Journal, Barron's, Market Watch, etc.) it gets far more notoriety than any of the stock price indices.  When the Dow changes, it is big news.

The powers that be are kicking Alcoa ($14-15), Hewlett-Packert (c.$22), and Bank of America (c. $8) out and adding Goldman Sachs ($165), Nike ($66) and Visa ($184).  The stock prices in parentheses tell the story.  The Dow is implicitly weighted by stock price.  Companies with low stock prices have little effect on the Average, while companies with higher prices have a bigger impact.  It has nothing to do with their market capitalization, sales, or assets.

Look at the evictees and the newcomers' betas: Alcoa (1.89), Hewlett-Packert (1.64), and Bank of America (2.07) Goldman Sachs (1.85), Nike (.61) and Visa (.45). The changes appear to reduce the Dow's systematic risk.

MoneyBeat's Paul Vigna interviews David Blitzer, managing director and chairman of the Index Committee S&P Dow Jones Indices, to get the scoop:

Is Koch overpaying for Molex?

Yesterday's (9/9) Wall Street Journal proclaimed that Koch Industries (a "conglomerate known for unglamorous industries") is buying Molex.  Koch, privately held, is one of Wichita's largest employers and one of the two largest privately held U.S. companies.  Cargill is the other.

The current Merger and Acquisition market is pricey, if not frothy.  According to the Journal, Koch is paying 38.50 a share or $7.2 billion.  Given the scanty numbers in the article, that seems rich: about twice sales, thirty times earnings, and 1.78 times enterprise value.

Nevertheless, Koch only buys companies when it thinks its Market Based Management philosophy can produce positive results.  It has found that it has a core competence in managing process business.  Still this is an industry with powerful customers including Apple (14% of Molex's revenues) and the automotive industry.  They do not roll over for suppliers.

James Haggerty and Bob Tita report in the Wall Street Journal, "Molex, based in Lisle, Ill., makes products including connectors, sockets, antennas and switches used in cars, computers, cellphones and factory equipment, among other things."

MOLEX is traded on the NASDAQ. You can find their SEC filings online.

Monday, September 02, 2013

Cheap Or Dear?

Cheap or dear? That is the question: Whether it is nobler for the pocketbook to buy stocks or sell them! Aye, there's the rub.  

The FT's John Authers squares Robert Shiller off against Jeremy Siegel in a debate over whether stocks are over priced or under priced.

I met Robert Shiller when he was first attacking the Efficient Market Hypothesis, a dogma that commanded stronger belief among finance professors than the Real Presence did from Catholics at the time.  He showed statistically that if stocks represent the present value of future earnings and/or dividends, stock prices are much too volatile to be correctly valued.  Later he took the profession on using the Cyclically Adjusted Price Earnings Ratio as his lance.  You can link to his data online.

Market strategists and the like have tried to use it to guage when the market as a whole is too dear or too cheap.  Shiller's measure is signalling stock prices are too rich in Great Britain and the U.S.  

Jeremy Siegel, like Shiller a student of long data trends, argues against this conclusion and, specifically, that "The ratio’s pessimistic predictions are based on biased data."  The problem with any P/E ratio is measuring the denominator.  Earnings reflect accounting and even adjusted for inflation, as Shiller does, may not be the proper measure.  Earnings are affected by companies' use of leverage and the growth in earnings is affected by firms dividend payout practices.  Faster earnings growth should be associated with higher valuations.

One factor neither seems to address is my observation that the business cycle is now a ten year cycle in the image of the nineteenth century British trade cycle.  This is a departure from the immediate postwar cycle which was a five year inventory cycle.

As an investor, you still have to choose whether to buy and hold or make timly entries into and out of the market:  "The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings."

Monday, August 12, 2013

Koreans Demonstrate a Wireless Electric Bus Route

World's First Wireless electric buses started running this week in the southeastern South Korean city of Gumi.  The fifteen mile route has charging facilities built into the road allowing for less battery power and weight in the bus.  But, it requires infrastructure!

The WSJ's Jeyup Kwaak tells Jake Lee how this wireless-charging system works in this short video:

All this raises a number of questions.

If this get used, who pays for the power?  Will the vehicles' owners pay?  If the technology is installed to meter the power usage, will it also be used to charge for road usage? London installed a system for metering road usage many years ago, but there has never been the political will to use it.  London does have a congestion charge in the city center.

What is the cost of installing the hardware in the road and what does this imply for road repair?

Finally, what type of loads will this put on the power system?  In our anti-nuclear age, will we have enough base load power?

Thursday, July 18, 2013

The Emergency Meeting

The Economist reports Luiz Inácio Lula da Silva's hand picked successor, Brazilian President Dilma Roussef, has seen her popularity drop in half "after the eruption of nationwide protests involving more than 1m people."  The people are upset over corruption.

In response she "has put forward a five-point plan focused on political reform and investment in long-neglected public services. On July 2nd she sent a list of proposals to the Senate. She wants a consultative referendum on the public financing of campaigns, the abolition of secret ballots in parliament, an overhaul of rules that govern political alliances and a new electoral system (the current one uses an open-list, proportional-representation model for the lower house)"

Our correspondent on the scene, Friends University student Lucas Bariani Machado, tells us from Brazil that some may be skeptical.  He provided us with the YouTube spoof (in Portuguese with English subtitles) below: enjoy!



Lucas offers this video as a 5 minute explanation of "why we are into these protests that you've been aware of lately." 

Tuesday, July 09, 2013

An "Ordinary Man" to Build a 180 Mile Canal Across Nicaragua. We Will See.

When the United States was deciding how to cut the passage from the east to the west it considered two alternatives: Nicaragua and Panama.  Thanks to fortuitous events and the opportunism of Panamanian patriots, it chose Panama.  The idea of a canal through Nicaragua is being revived by a Chinese businessman.

John Paul Rathbone wrote in the Financial Times that Nicaragua's "congress voted to give Wang Jing the go ahead to build a new canal in its country.  On June 13th, Daniel Ortega left-wing Sandinista government gave HKND, the newly-registered group [a] 50-year concession' to study the feasibility and build a canal."   So HKND is a special vehicle for this $40 billion project.  Furthermore "HKND is working on the feasibility study for the giant project with McKinsey as well as China Railway Construction, a large state-owned group."

Nicaragua is ruled by the left wind Sandinistas under Daniel Ortega.   Mr. Wang is a good friends of President Ortega's son.

And who is Wang Jing? Rathbone described Mr. Wang as a "40-year-old businessman...who also heads Beijing Xinwei, a midsized telecoms company."  The FT's Kathrin Hill interviewed this self described "very ordinary Chinese citizen" for its "Beyond the BRICs" blog. Hille tells us, "he lives with his mother, his younger brother and his daughter in Beijing."

Hille talks with Wang in this video about his plans and asks whether his US$40bn project is a front for the Chinese government's ambitions to extend its influence in the US's backyard:

This is a project not without risks.  Rathbone warns, "[a]lthough global trade is growing, the Panama Canal is nearing the end of a $5bn expansion plan to double its capacity, while global warming means melting ice packs in the Arctic could make a northern route a viable alternative to crossing the central American isthmus by canal."

Saturday, July 06, 2013

Why Wichita and Kansas Are Places to Move Your Business to or Start Your Business.

John Stears writes in the Wichita Business Journal that "Wichita businessman Wink Hartman hopes [he can[ elicit warm and fuzzy feelings about living in Wichita and Kansas — and catch the eye of job creators."  He has produced a pair of ads highlighting the type of people who make up our local economy and its culture of growth.  Spending his own money for production and airing the ads,  Stearns characterizes Hartman's campaign as "one man’s economic-development cause."

Meanwhile the American Legislative Council has boosted Kansas' economic outlook based on improved policies.  Kansas jumped 15 rankings in the ALRC's ratings of the fifty states' prospects: "Rich States, Poor States."

Friday, June 21, 2013

The Battle of Airline Business Models: Southwest Is On A Rocky Mountain High

There are three main approaches to running an airline: those of international, full service trunk carriers, low cost, reasonably priced, user friendly carriers, and no frills, charge for every thing carriers. All three business models are competing head to head in the Denver market.  Southwest had long shunned Denver.  But the Wall Street Journal's Middle Seat columnist Scott McCartney tells how Southwest bit the bullet in 2006.  In Denver, it competes directly with the other two business models represented by United and Frontier.

Which business model will out?  Scott McCartney writes the whole airline industry are are follwing the battle of Denver which is a fascinating microcosm of the industry. By one measure, Southwest has moved ahead:

Thursday, June 20, 2013

Surprise: Institutions Matter and Ours Are going Downhill!

The decline of America's institutions, and the related rise in red tape that hinders business, may spell the nation's economic doom. Harvard's Niall Ferguson talks to WSJ's Charles Forelle about the theory outlined in his new book The Great Degeneration (Penguin Press, 174 pages, $26.95):

On June 20th, George Melloan reviewed Ferguson book in the Journal. Melloan characterizes it as a jeremiad, but warns, "Doomsayers are never popular, but sometimes they're right."

The Importance of the Europre's Luxury Industry

The Ft's fashion editor Vanessa Friedman reports from the FT Business of Luxury summit in Vienna on how the luxury industry has emerged as a key player and how it is uniting to influence its own future:

Fashion: the Revolt of the Curvy Customer and the Return of the Circle Skirt

What do calendar makers catering to car mechanics know that fashion designers don't?  The women haters in the fashion world have never seemed to notice what the calendar makers have know for years: attractive women have something to them!

On June 13th, On Style columnist Christina Binkley wrote in the Wall Street Journal about Kate Upton and how the fashion industry is finally starting to understand that the emaciated runway models are not very typical of their customers.   Capitalism is a great thing: money talks where nothing else will!

Vogue editor-in-chief Anna Wintour put Kate Upton on the magazine's June cover.  She writes, "if the high-fashion world seems incapable of figuring out what to do with her … then that's it's its loss:" 

Talk about retro: Binkey also advises Mad Men to move over because Happy Days are back in style. Many designers are fixating on 1950s looks: think high school, circa 1955, updated to look 2013-funky, for early fall:

The Paris Air Show

What's big at this year's Paris air show? 

Bloomberg's Guy Johnson sees the show as a battle of the "wide-body" planes: Boeing's Dreamliner versus the Airbus 350.  With Airbus pushing Boeing for market leadership in the twin engine aircraft market, might that mean a price war?  On June 17th, Andrew Parker reported:
Just days before the show begins, Airbus held a public test flight of its new A350. EADS confident on profitability goal 4:46 PM From the Paris air show, EADS chief executive Tom Enders tells the FT's Andrew Parker he is confident that the group will hit its profitability targets.  Enders is bullish on the A350:

Is Boeing worried?  CEO Jim McNerney tells Bloomberg's Betty Liu he welcomes the challenge.  Boeing took orders for the 787-10, its biggest version of the Dreamliner. 

Wednesday, June 12, 2013

India Isn’t Shining Anymore

Opinion: India Isn’t Shining Anymore Gurcharan Das, author of “India Grows At Night,” explains why Asia’s most populous democracy is struggling to grow its economy. Photo credit: Getty Images.

Wednesday, May 22, 2013

Thursday, April 25, 2013

Baby Boomers, You Too Can Be a '70s Punker!

Designer Hedi Slimane injects a youthful, rock-n-roll spirit into his collection for Saint Laurent during the Fall/Winter 2013 Paris Fashion Week.

Tuesday, March 12, 2013

How Airbus Makes Wings

Last December 21st, FT manufacturing editor Peter Marsh visits the wing factory of Airbus/EADS at Broughton in north Wales. There he learns how the factory works on a process of continuous innovation in technology, and he assesses the impact on skills and jobs across the UK:

Data & Retail

You may not physically see software and data bases and algorithms, but firms' investment in IT and their use of it is just as important as their investment in physical capital.  There has been a shift from data as what and where we sell to who buys and why.  Technology is changing the way retailers do businesses with some brands combining analytics and mobile apps to learn about their customers and giving their customers reason to benefit from their snooping. 
In this March 7th video (four minutes and twenty five seconds), the FT's Bede McCarthy discusses the introduction of technology on to the high street (i.e., the downtown shops) with Scott Morrison of Diesel UK and Computer Weekly's Bryan Glick: 

Sunday, February 17, 2013

A Media Mogul Invades Britania

  Liberty Global, John Malone's international media conglomerate, wants to buy Virgin Media.  This would be his biggest move into the UK. 
Will the deal work?   Liberty is loaded with debt.  Although Virgin Media is selling at a significant discount from comperable European media properties, Malone will have to pay a premium.  Will the price be a bridge too far?
In this February 4th video, Lex's Stuart Kirk and Nikki Tait discuss the financing of a potential buyout, and whether Virgin Media's shareholders see Liberty as a good enough suitor for the UK cable operator:

Fashion, Conglomerates, & Calvin Klein

French company PPR is a mix of things.  Is there any synergy between its businesses?  PPR's shares rose after it announced strong earnings, driven its luxury division, which includes brands such as Gucci and Bottega Veneta. The group's sport and lifestyle business – dominated by Puma – was less glittering with operating profit down 12 per cent.

In this video (2 minutes and 51 seconds) Lex's Nikki Tait and Oliver Ralph consider whether it's time for PPR to divest Puma:

In this February 15, 2013 video, Vanessa Friedman, the FT's fashion editor, speaks to Paul Thomas Murry, president of Calvin Klein about how couture fits into the business of running a global lifestyle brand. She also talks with Francisco Costa, women's creative director at Calvin Klein, about the new fall collection.

Danger: Low Returns Ahead

In this video James Mackintosh talks about his article, "Be prepared for future low returns," which appeared in the Financial Times on February 10th.  Low interest rates now mean lousy returns for both stocks and bonds.  This is based on work by three academics from the London School of Economics:  "Looking across 20 countries since 1900, Elroy Dimson, Paul Marsh and Mike Staunton of London Business School found a clear link between real interest rates and future returns."  Their research can be found in the Credit Suisse Global Investment Returns Yearbook 2013. It is free.

Is Capitalism Moral? Is Wall Street Capitalism?

George Gilder has a new edition of his justly famous Wealth & Poverty. (Available in print form and audio book.)  I would argue that the case against capitalism is a failure of imagination.  Gilder goes a long way to address that void.

He makes the case that seeing capitalism as the blind pursuit of self interest is myopic.  Capitalism is moral in a way that socialism is not: the entrepreneur wants to help people and is utterly dependent on others. As Schumpeter stressed, greed is not what motivates entrepreneurs and entrepreneurs are the ones that make an economy dynamic.

It has been said that Gilder's book was the economic bible of the Regan revolution.  In this new edition, he addresses more recent phenomena such as the financial crisis.  Far from being entrepreneurial capitalism, he sees Wall Street as the corrupt collusion of big government and big finance. The financial crisis was the inevitable result of "the usurpation [by] crony capitalism of real capitalism."  He exponds his views in this interview that runs close to ten minutes:

Friday, February 15, 2013

Six High-Dividend Stocks With Upside Potential

On MarketWatch, Laura Mandaro discusses six stocks in the S&P 500 that currently pay a dividend yield in excess of four percentage points and sport market capitalizations greater than $10 billion and therefore are among hedge funds' favorites.

Saturday, February 09, 2013

The Yen's Down; the Nikkei's Up

The Nikkei 225 jumped nearly 4 per cent on Wednesday, Since the financial crisis, thaat is its tenth best day since the financial crisis. 

In this four minute, nine second video, the FT's investment editor, James Mackintosh, attributes this primarily to the weakening of the yen. 

Careful: the return recently in $s is not the same as that in ¥s.

Friday, February 08, 2013

Blankfein Is Bullish on the U.S. Economy & Stocks

Davos, Switzerland is where the world's fanciest people get together, network, and opine about the world.  

In this video, CNBC's Andrew Ross Sorkin and Lloyd Blankfein, Goldman Sachs chairman & CEO, discuss the global economic outlook. 
From the World Economic Forum:

Thursday, February 07, 2013

IT & Banks

What has IT got to Marketing?  Or banking for that matter?  With a bank, when you think infrastructure and operations, think IT.  
In this February 6th, 2013 video, Butch Leonardson, Boeing Employees' Credit Union's chief information officer, tells Paul Taylor, the FT's Connected Business editor, about the opportunities and challenges facing the CIO of this leading credit union, and how IT supports BECU's strategic objectives.  The video lasts 5 minutes and 17seconds.

Monday, February 04, 2013

Interview with Ford CEO Alan Mulally

Joshua Topolsky interviews Ford CEO Alan Mulally at Hotel on Rivington in New York City. They talk about Alan Mulally's time at Boeing, new alternative energy sources, and how space exploration inspired Mulally to become an engineer.

Alan Mullay on Successful Teams

In this Thirty Second MBA video, Alan Mullay tells what he learned about making successful teams:

Thursday, January 31, 2013

Stuttering Santander

In this FT video (2m 41sec), Stuart Kirk and Oliver Ralph discuss Spain's premier bank, Santander.  Globalizing itself with major invasion into Latin America primarily, it has gone all out for growth over the past decade.  This diversification out of its home market has proven wise.  Spain is doing badly with 20% unemployment.  The path to earnings growth has not been a Yellow BRIC Walk. Its emerging market hope, Brazil, is falling short of expectations. 

The Great Rotation Part II

In this second video (4m 19sec), those hoping for a "great rotation" from bonds to stocks might start by looking for smaller rotations within the equity market. James Mackintosh, investment editor, says the signs are mixed.

The Great Rotation Part I

In this January 31st FT video (5m 18sec), David Bowers, global strategist at Absolute Strategy Research, discusses the main issue in asset allocation with Long View columnist John AuthersFinancial panic has subsided into mere nervousness that a great rotation by investors from bonds into equities could be imminent.  Is the shift in monetary regime clear enough yet, and there is a danger of over-exposure to defensive equities or 'bond proxies.'  

Monday, January 28, 2013

Would Alan Mallay Use the Verb, "Witchhunt?"

Boeing's 787, the Dreamliner, has been grounded worldwide because to fire worries with the lithium ion batteries used in it. According to the Economist's Schumpeter blog, the grounding "follows a string of safety problems, including two fuel leaks and an electrical fire aboard a domestic flight that required an emergency landing. There is particular worry about the potential for the plane’s lithium-ion batteries to catch fire."  Moreover the blog also quotes Sandy Morris of Jefferies who "points out that Airbus’s A350 (a forthcoming rival to the 787 which is already more than a year behind schedule) uses lithium-ion batteries like the ones suspected of causing some of the 787’s problems. So if they are to blame, the A350 programme may suffer too."

Jon Ostrower and JoAnn S. Lubin wrote in yesterday's Wall Street Journal that two very high profile CEOs have their names very firmly attached to the Dreamliner: Ford's Alan Mullay and Boeing's Jim McNerney, chairman and CEO since July 2005.

They write that in the summer of 2005, Boeing "hired Mr. McNerney as CEO, succeeding an interim chief after Mr. Stonecipher, who had resigned suddenly because of an affair with a subordinate. A short while later, Mr. Mulally, who had also been a contender for the CEO job, left.
"Boeing soon stumbled as a string of supply-chain and design delays pushed back delivery of the Dreamliner by 3½ years. 'We are trying to witch-hunt the issues in this program right now,' Mr. McNerney told investors in October 2006 as the problems became apparent."

I find it hard to believe Alan Mallay would have said that.  "Witch-hunt" does not sound like a word in his vocabulary.  In American Icon: Alan Mulally and the Fight to Save Ford Motor Company, Mullay's biographer, Bryce G. Hoffman, describes how he used the same techniques to turn Ford around that he used in managing projects like the 777. He built teams with his weekly "war room" meetings that thrived on a culture of both trust and accountability.  Hard bitten, cynical Detroit executives took his "aw shucks" Midwestern manners for weakness.  That did not last long. Those veterans of cutthroat corporate politics soon learned to either cooperate and be up front or play their political games somewhere else.

It would be interesting to learn how McNerney's management style differs from Mullay's.  It would be interesting to learn which style works better across the teams of engineers and managers from Boeing and its suppliers.

Hiring McNerney from the outside was forced on Boeing by the Department of Defense after successive scandals.  Military work is the other half of Boeing's business.  Such government induced changes in management can have unforeseen consequences.  Think of AIG after New York State's Eliot Spitzer forced Maurice R. Greenberg out in 2005.  It is hard to imagine Greenberg letting his trading desk get as out of hand as his successor did.  The subsequent near collapse of AIG and its bailout are now history. 

In this video from January 24th, Ostrower tells the Journal why both McNerney and Mulally have much at stake:

Spirit, as a big supplier of the Deamliner, is of course vulnerable to the plane's troubles.  we here in Wichita hope for a speedy resolution.

Are Treasuries Turning?

The bull market in US Treasuries is three decades old. 
Michael Mackenzie, US markets editor, tells Long View columnist John Authers in this January 25th video (5m 10sec) that this could be about to change.   The rise in equities as a harbinger of a strengthening economy suggests bond yields are set to rise.  

Friday, January 25, 2013

America's airfleet getting long in the tooth.

Carol Massar on Bloomberg TV reports the America has the oldest fleet of commercial aircraft:

The video was on Bloomberg Television's "Bloomberg Rewind," January 18th.

Thursday, January 24, 2013

Deleveraging: When Will They Ever Learn?

The recent recession was caused by the overexpansion of credit.  Part of the financial recovery from a bubble is the reduction of debt on a society's collective balance sheets (businesses, financial institutions, households, and governments.)  This reduction is referred to as "deleveraging."

The Economist's Buttonwood columnist worries that "the US is the only nation where it's possible to argue that any deleveraging has occurred."  For most developed countries, overall debt to GDP ratios are higher now than during the financial crisis.

Even that is not enough, he says: "Nevertheless, if you think the system was overgeared in 2007, at the height of a credit boom, then it's hard to argue it's not overgeared now. " "Gearing is British for levering.  Americans convert the noun, "leverage," into a verb for the same purpose.

Wednesday, January 23, 2013

Monday, January 21, 2013

Will This Movie on Fracing Light Your Fire?

Ann McElhinney and Phelim McAleer have directed a new documentary about hydraulic fracturing that gives a very different picture from that portrayed in the Acadamy Award nominated documentary, "Gasland."  McElhinney is a bit of a fiery journalist, perhaps because of the attempt to muzzle the Irish pair (see below.)  Telling an Irishman or Irishwoman to shut up is hazardous.  Here are some things she has to say about what they found in researching "FrackNation: A Journalist's Search for the Fracking Truth:"

She is certainly right that the first hydraulic fracturing was done here in Kansas in 1947.  It was in the Hugoton field in southwest Kansas.  I doubt that that conventional well was in a shale formation since the field is "mostly Permian limestone and dolomite."

Video journalist Phelim McAleer questioned Josh Fox, the producer of the anti-hydraulic fracturing documentary "Gasland," about why he failed to disclose that methane has been present in Colorado water for decades and thus flammable at the tap:

In the New York Post, McAleer wrote last spring, "One of the most dramatic images in 'Gasland' is footage of a resident lighting his tap water with flames shooting out of the faucet.

"As a journalist, I wanted to learn more, so I went to a Q&A with Gasland director Josh Fox. As I questioned him, Fox eventually admitted that he knew people could light their tap water in these areas decades before fracking came on the scene.

"But he did not include the fact in his documentary because, he said, 'It was not relevant.'"

He then went on to tell of Fox's attempts to get the above video removed from YouTube and other internet sites.

Unlike "Gasland" and "Promised Land," Matt Damon's anti-fracing movie FrackNation is not financed by big Hollywood money.   It took a much more democratic route to finance itself.  Christopher Toto tells us "FrackNation, like many independent films of late, went the Kickstarter route to help bring its story to the masses."

According to the director's statement, "'FrackNation' was funded through the crowdsourcing website Kickstarter. The filmmakers raised $212,265 from 3,305 backers on Kickstarter on April 6, 2012. It was one of the most successful documentary campaigns in the history of Kickstarter."

John R. Hays, Jr., an eminent Texas attorney with an extensive practice in the oil and gas industry, tells me that the proper way to shorten "hydraulic fracturing" is "fracing" not "fracking," given industry practice.  I am afraid the industry is losing the spelling war: it is not the geologists and the petroleum engineers who are winning.

Friday, January 18, 2013