Archive for March, 2012

A pouch of soup … hmmm, hmmm good!

March 30, 2012

Punch line: Campbell Soup Co. tests another packaging innovation – this time in a pouch geared at younger consumers – to support its turnaround.

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Excerpted from adage.com, “Campbell Counts on Soups in a Pouch to Spur Turnaround

Campbell Soup Co. — which has put soup in see-through tubs and sipping cups — is now shoving it in a pouch as the marketer embraces innovations and new packaging in search of a turnaround.

The new microwavable pouches will be sold under the name, Campbell’s Go! Soup, and will launch in up to six flavors ranging from Coconut Curry with Chicken and Shitake Mushrooms to Moroccan Style Chicken with Chickpeas. The flavors, which are a mouthful even to say, are aimed at younger consumers.

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… Campbell reported domestic soup sales down 2% last quarter. The new strategy,first announced in July, seeks to reverse Campbell’s overemphasis on sodium reduction and its failure to reach out to young shoppers, who increasingly skip the soup aisle for other simple meals, such as frozen foods.

… CEO Denise Morrison framed the new approach as one that “requires moving from a high dependence on line extensions to more disruptive innovation, new and differentiated products, packaging and category segments that create new pathways for growth.” At the same time, Campbell is sticking by its plan to pour an additional $100 million this year into brand-building, research and development, and product launches.

Pouches and boxes aside, the can will remain at the company’s core. “When we talk about our U.S. soup strategy, we talk about first celebrate the can, then expand soup beyond the can, and then expand them to the greater simple-meals arena,” Ms. Morrison said.

Edit by KJM

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According to investment guru Burton Malkiel …

March 29, 2012

In a recent WSJ op-ed,  Burt Malkiel stopped random walking and cut to the chase re: the near-term economic climate and  investment options. 

Malkiel says:

The economic data, as a whole, suggest the economy is growing at a rate nearer to 2% rather than its previous trend rate of 3%-4%.

  • The strong employment gains may well have been aided by our unusually warm winter.
  • Rising gasoline prices will put increased pressure on consumers. And a number of strong economic headwinds still exist.
  • The economies of the euro zone are getting worse, not better.
  • The housing sector has yet to make a convincing turn for the better.

Given the present economic outlook, let’s look at three asset classes ranked them from worst to best – bonds, equities, and real estate.

Bonds are the worst asset class for investors.

Usually thought of as the safest of investments, they are anything but safe today.

At a yield of 2.25%, the 10-year U.S. Treasury note is a sure loser.

Even if the overall inflation rate is only 2.25% over the next decade, an investor who holds a 10-year Treasury until maturity will realize a zero real (after-inflation) return.

Even if the inflation rate remains moderate, interest rates are likely to rise to more normal levels as the economy continues to recover.

Given the likely trends, U.S. Treasurys and high quality bonds are likely to be extremely poor investments and are very risky.

Equities on the other hand are still attractively priced.

Despite their substantial rise from the October 2011 lows.

A good way to estimate the likely long-run rate of return from common stocks is to add today’s dividend yield (around 2%) to the long-run growth of nominal corporate earnings (around 5%).

Equity returns should be about 7% — five percentage points more than the safest bonds.

This five-percentage point equity risk premium is close to the historical average.

In other words, while equities appear to be favorably priced relative to Treasury bonds, returns are unlikely to be at the double-digit level enjoyed from 1982 through 1999.

Real estate is a particularly attractive asset class

Real-estate prices have fallen sharply, if not to their absolute lows, then certainly very near to them.

Long-term mortgages are below 4% for those who can qualify.

Housing affordability (a measure based on house prices and mortgage rates) has never been more attractive.

Housing has been a dreadful investment since the housing bubble burst in 2007.

I believe it will be one of the best investments over the next decade.

In today’s environment, the minimization of investment fees is more important than ever.

A 1% investment management fee may appear to be very low when measured against assets.

But when measured against a 7% equity return, that fee represents more than 14% of the return.

Against a 2% dividend yield, the fee absorbs one half of the dividend income.

The only way to ensure that you can enjoy top quartile investment returns is to choose investment funds that have bottom quartile expense ratios.

During 2011, over 80% of actively-managed equity funds were outperformed by the broad-based S&P 1500 Stock Index.

Investors can’t control returns generated by world financial markets.

But, they can control is fees paid to investment managers.

And, the quintessential low-expense instruments are broad-based, indexed mutual funds and ETFs.

* * * * *

Personal note: My very first class at Princeton was Econ 101 taught by Burton Malkiel. He was one of the “inspirers” for my majoring in economics. 

As a senior, he was one of my thesis graders … gave me an A, then wrote a Journal of Finance article debunking my findings.  Ouch.

Still think he’s a great economist and a great guy.

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Flashback: Obama disses the Supreme Court justices …

March 29, 2012

Remember the 2010 State of the Union address when Pres. Obama took the unprecedented step of criticizing the Supreme Court while they were sitting in the audience as distinguished guests?

click to view
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Do you think Obama would like  to have that shot back now that the fate of ObamaCare is in the Justices’ hands?

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MBA Rankings: A loser’s uh-oh upsets conventional wisdom …

March 28, 2012

In a prior post, we looked at changes in Business Week’s rankings of MBA program in the 10-year period from from 2000 to 2010.

The key observations:

  • 13 MBA programs (e.g. HBS, Wharton, Kellogg) held their top 30 positions – plus or minus a spot or two – between 2000 and 2010
  • 6 MBA programs were in the 2000 Top 30 and improved their position by 6 or more spots between 2000 and 2010
  • University of Chicago  jumped 9 spots to take over the #1 ranking
  • 6 MBA programs that weren’t in the Top 30 in 2000 broke into the 2010 Top 10
  • 5 MBA programs dropped a whopping 15 places or more from 2000 to 2010 (more on that later, too)
  • Another 6 MBA programs dropped 5 spots or between 2000 to 2010

Also in a prior post, we observed that among the 6 MBA programs that weren’t in the Top 30 in 2000 and broke into the 2010 Top 10, SMU is the shining star.

SMU came out of nowhere – unranked as late as 2006 – and soared to #12 in 2010.

They did it with A+ Teaching and A+ Career Services … that earned them a #6 ranking with Corporate Recruiters and a #12 ranking overall.overall.

While SMU’s formula reflects mucho common sense, it’s not exactly conventional approach.

More often, MBA programs try to boost their rankings through intensified faculty research.

The logic: publish in academic journals, get recognized as thought-leaders, attract better students and recruiting companies … and a virtuous cycle becomes unstoppable.  Makes dense.

Our neighbor, the University of Maryland’s Smith School of Business tried that approach … with some disappointing results.

In 2000, Maryland was  at #27.

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Given its relatively low #33 rating in Intellectual Capital, Maryland turned up the research jets.

Successful?

Well, Maryland’s ranking in Intellectual Capital skyrocketed to #2 … trailing only Duke – a perennial research giant.

What happened to it’s overall ranking?

Maryland dropped 15 spots … out of the Top 30 … to #42.

Ouch.

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Source: Business Week – 2000 & 2010 MBA Rankings

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BTW: The #3 program in Intellectual Capital is Wake Forest.

Its overall rank?

According to Business Week … #47.

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Hey, can I have your job (for awhile)?

March 28, 2012

Punch Line: Businesses are giving employees the opportunity to work in a different department or temporarily swap places with a coworkers overseas in order to improve collaboration and retention.

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Excerpt from WSJ: “Co-Workers Change Places”

Companies are discovering that short- to medium-term moves for rank-and-file employees help workers sharpen their skills, stay motivated and identify new roles. Moreover, they help address a challenge: how to better foster collaboration across different specialties and regions.

At Intel employees search an internal database with hundreds of job listings. These assignments allow workers “to test-drive a job or make connections in different departments.”

At Virgin America, a handful of flight attendants recently traded places with colleagues at Virgin Australia.

Skills-based rotations are more valuable than swaps that are purely geographic. While a program like Virgin’s offers employees some short-term benefits, it may have less impact on a company’s overall effectiveness.

Global exchanges can be a valuable retention tool for multinational companies.

Edited by ARK

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MBA Rankings: A big winner’s keys to success …

March 27, 2012

In a prior post, we looked at changes in Business Week’s rankings of MBA program in the 10-year period from from 2000 to 2010.

The key observations:

  • 13 MBA programs (e.g. HBS, Wharton, Kellogg) held their top 30 positions – plus or minus a spot or two – between 2000 and 2010
  • 6 MBA programs were in the 2000 Top 30 and improved their position by 6 or more spots between 2000 and 2010
  • University of Chicago  jumped 9 spots to take over the #1 ranking
  • 6 MBA programs that weren’t in the Top 30 in 2000 broke into the 2010 Top 10 (more on that later)
  • 5 MBA programs dropped a whopping 15 places or more from 2000 to 2010 (more on that later, too)
  • Another 6 MBA programs dropped 5 spots or more between 2000 to 2010

Among the 6 MBA programs that weren’t in the Top 30 in 2000 and broke into the 2010 Top 10, SMU is the shining star.

SMU came out of nowhere – unranked as late as 2006 – and soared to #12 in 2010.

How did they do it?

Here are the details that support the SMU ranking in 2008 – SMU’s first time in the Top 30:

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Answer: heavy emphasis on Teaching (A+) and Career Services (A) yielded a #17 ranking among Corporate Recruiters … and a number #18 overall ranking.

Not bad! But, apparently, not good enough for SMU.

Things got even better in 2010.

SMU kept Teaching at an A+ level and boosted Career Services from a plain old A to an A+ … the result: up to #6 with Corporate Recruiters and #12 overall.

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Source: Business Week – 2000 & 2010 MBA Rankings

* * * * *

Bottom line: Get good students, teach them a lot, help them find jobs …. and, BINGO, MBA program success.

You’d think that’s common sense, right?  No surprise.

Well, tomorrow we’ll look at one of the biggest losers … with a twist that may surprise some of you.

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iPad loses its grip in the tablet market

March 27, 2012

Punch line: While iPad sales volume is up and expected to increase, but  its share of the tablet market is expected to drop to 62% this year, down from 66% last year, and 87% the previous year.

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Excerpted from cnet.com, “iPad’s share of tablet market to dip to 62 percent this year

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The iPad will maintain its lead, though its share will drop because of competition from Android devices, estimates research firm TrendForce …

Though the iPad’s market share may be on the downswing, its sales are still headed higher.

Estimates from TrendForce call for global sales of about 59 million units in 2012, up from nearly 41 million last year and 14 million in 2010.

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(Credit: TrendForce)

Certain Android vendors have captured some of Apple’s former market share, but they’ve failed to catch up with the iPad’s advancements.

Amazon’s low-priced Kindle Fire ignited strong sales during the holiday quarter. But the Fire “still does not quite match consumers’ expectations for a tablet PC,”

Further, Amazon’s orders for display panels have fallen for the first half of 2012, indicating that the Fire won’t be a threat to the iPad’s dominant lead.

Some tablet vendors have been slowly cutting back on Android to focus on Windows 8 as Microsoft prepares its new tablet-friendly OS. But even here, success is far from assured.

“The makers are counting on Windows users’ high commitment to Microsoft Office to spur the sales of Windows 8 tablets,”

“But several issues persist, such as whether or not the ARM Windows 8 tablet is able to release as scheduled, the weight and battery life, and whether the software compatibility and interface design cater to the users’ preferences.”

With a new high-resolution display expected, the iPad 3 will help Apple hang onto its leading market share …

Overall, tablet makers are forecast to sell 94 million units this year, a 53 percent jump from the 62 million sold in 2011.

Edit by KJM

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MBA Rankings: A 10 year perspective … and, some surprises.

March 26, 2012

There has been a lot of talk around here about the MBA school rankings.

Typically, the conversation revolves around the changes – up or down – from the last rankings.

I got curious … wanted to see the landscape change over a longer-term … and picked a 10-year time horizon of the Business Week rankings – 2000 to 2010.

My going-in hypothesis was that there would be heavy inertia … that the top slots would be occupied by the usual suspects.

And, I expected schools to show relatively little movement up or down.

Here’s what I found …

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13 MBA programs held their top 30 positions – plus or minus a spot or two – in 2000 and 2010:

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6 MBA programs that were in the 2000 Top 30  improved their position by 6 or more spots between 2000 and 2010:

  • UC Berkeley had the sharpest rise … 10 spots to #8
  • Univ. of Chicago (my alma mater) had the most impressive gain … “only” 9 spots since they couldn’t do better than taking over the #1 ranking
  • Stanford cracked the Top 10 by moving up 6 spots.

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Surprising (to me), there are 6 MBA programs that weren’t in the Top 30 in 2000 and that broke into the 2010 Top 10 … 5 just made it into the Top 30 … a proud accomplishment, but one that pales in comparison with SMU … SMU came out of nowhere – unranked as late as 2004 – and soared to #12 in 2010.

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Of course, if there are winners, there must be losers.

5 MBA programs dropped a whopping 15 places or more from 2000 to 2010.

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* * * * * *

Another 6 MBA programs dropped 5 spots between 2000 to 2010.

  • 5 of the programs stayed in the Top 30 despite their skids
  • Cornell and MIT-Sloan dropped out of the Top 10
  • Unfortunately, my beloved Georgetown’s slip was enough to lose Top 30 status.  (Don’t worry, we’ll be back …)

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Source: Business Week – 2000 & 2010 MBA Rankings

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In subsequent posts we’ll drill down to “why?” and “so what?”

Stay tuned.

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Once mighty AOL now selling off its patents … ouch!

March 26, 2012

Punch line: AOL has hired Evercore Partners to help it shop around its patent portfolio in hopes of offsetting lost dial-up business and  “accelerating shareholder value creation.”

Meanwhile, Facebook has acquired around 750 patents from IBM in order to “bolster the social network’s defenses against litigious rivals”.

Excerpted from: CNET: AOL, lacking better options, hires firm to sell its patents

Citing three people with knowledge of the hire, Bloomberg says AOL tapped Evercore to find a buyer for more than 800 patents and to “explore other strategic options” — code for a possible sale or private buyout of the entire company.

Last December, AOL announced plans to reorganize the company, combining its declining dial-up Internet service business and its Web services arm, the latter of which was recently scaled back with layoffs in the Instant Messenger group.

AOL has previously said it’s looking for ways to raise cash from its patent portfolio and is making efforts to “accelerate shareholder value creation.”

AOL’s move follows Facebook’s acquisition of some 750 patents from IBM, a deal made to bolster the social network’s defenses against litigious rivals.  Facebook has been targeted by Yahoo for allegedly infringing on a number of its patents that cover customization and advertising.

Easy to pile on AOL for its strategic mis-steps over the years (e.g. hanging with the “walled garden” too long, failing to find a way to migrate to high-speed internet service), but gotta give the company credit for its role in the Internet explosion.

And, in a timely fashion, the original owners dumped the bag on Time-Warner … walking away with a fortune …

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From the faculty lounge: False Positives

March 23, 2012

Punch line: Sometimes, published academic research results are flat out wrong.  Hmmm.

Excerpted from HBR’s Daily Stat: Researchers Can Easily “Prove” False Findings
 
Using legitimate statistical analyses, researchers were able to show in an experiment that participants were nearly 1.5 years younger after listening to the Beatles’ “When I’m Sixty-Four” than after listening to a song that comes with the Windows 7 operating system …

… an obviously ridiculous finding that demonstrates how easy it is for research to yield “false positives,” say Joseph P. Simmons and Uri Simonsohn of The Wharton School and Leif D. Nelson of UC Berkeley.

Too often, researchers aren’t aware of the high likelihood of finding false evidence, and the pressure to publish leads scientists to convince themselves of the validity of their findings, the authors say.
 
Source: False-Positive Psychology : Undisclosed Flexibility in Data Collection and Analysis Allows Presenting Anything as Significant

Surprise, surprise, surprise.

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Watch out for the boomerang effect …

March 23, 2012

“Boomerang kids” are young adults who move out of the family home for school or work and then return home.

According to the Cristian Science Monitor, a Pew Report indicates that the recession has exacerbated a trend that was already under way since the 1980s.

  • In 1980, some 11 percent of young adults lived in multigenerational households.
  • Today, some 29 percent of 25- to 34-year olds either never moved out of their parents’ home or say they returned home in recent years.
  • Among 18- to 24-year olds, that figure is even higher – 53 percent of young adults in that age group live at home.

Of those living at home, some 78 percent say they’re upbeat about their living arrangements … 24 percent say it’s been good for their relationships with their parents.

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Uh-oh: Law school deans and U.S. News “may have committed felonies” in “publishing false info”

March 22, 2012

According to Prof. Mark Perry

A paper by two professors at Emory University School of Law, provocatively titled “Law Deans in Jail” reports:

“A most unlikely collection of suspects – law schools, their deans, U.S. News & World Report and its employees – may have committed felonies by publishing false information as part of U.S. News’ ranking of law schools.

The possible federal felonies include mail and wire fraud, conspiracy, racketeering, and making false statements.

Some law schools and their deans submitted false information about the schools’ expenditures and their students’ undergraduate grades and LSAT scores.

Others submitted information that may have been literally true but was misleading. Examples include misleading statistics about recent graduates’ employment rates and students’ undergraduate grades and LSAT scores.

U.S. News itself may have committed mail and wire fraud.

It has republished, and sold for profit, data submitted by law schools without verifying the data’s accuracy, despite being aware that at least some schools were submitting false and misleading data.

U.S. News refused to correct incorrect data and rankings errors and continued to sell that information even after individual schools confessed that they had submitted false information.

In addition, U.S. News marketed its surveys and rankings as valid although they were riddled with fundamental methodological errors.”

Geez, if you can’t even trust law school deans

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A celeb that walks the energy talk … no Gulfstream for this dude.

March 22, 2012

Apparently, President Obama’s recent energy speech gained at least one influential endorsement.

I usually don’t put much stock in celebrity endorsements.

But in marketing parlance — this one, from a star who was way ahead oh his time — might have “legs” …

* * * * *
Questions:

1. Wouldn’t it be faster for Fred to leave the car at home and just walk to work ?

2. Are rock hard wheels more energy efficient than fully inflated tires ?

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So, is employment up or down since Obama took over?

March 21, 2012

Team Obama keeps crowing about the millions of jobs they’ve added with their trillions of dollars of fiscal and monetary stimulators.

Hmmm.

Here are the facts, direct from the BLS

In February 2008 — right as the financial crisis was becoming evident — employment was 136.356 million.

Employment dropped by about 5 million between February 2008 and February 2009.

In February 2009 — when Obama took office — there were 131.314 million workers employed.   Real jobs, no seasonal adjustment.

Note: Obama’s Stimulus was passed January 28, 2009

The comparable number in February 2012 was 131,164 million.

By simple subtraction,  there are 150,000 fewer jobs now then there were in February 2009.

Note: During the same period, the labor force (i.e. those folks who are employed or looking for work) grew by about 300,000 … from 153.804 million in Feb 2009  to 154,114 million in Feb. 2012. 

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* * * * *

Let’s dig a little deeper with another view of the data:

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Cutting to the chase, “real” employment is back to where it was when Obama was inaugurated … but up substantially from the low point in Obama’s term.

The “issue” is who owns 2009 — Bush or Obama?

Obamites argue that the drop in 2009 is simply a reflection of the momentum coming out of the Bush years … slowed by effects of the Stimulus.

GOPers argue that — since Obama’s Trillion-dollar Stimulus was passed in January 2009 and since the administration made promises re: keeping unemployment in check — that Obama owns 2009.

The answer is probably somewherw in between.

You decide … 

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Wasn’t it cheaper to park here yesterday?

March 21, 2012

Punch line: Airlines have priced dynamically for years — raising or lowering prices depending on how fast a flight’s seats are selling.

Some sports teams have started charging different prices depending on the  day-of-week and and drawing power of the opposing team.

Coke was busted in some locales for electronically jacking up prices when dispensing machines were running low on inventory.

Now, some cities are using high tech meters to dynamically change parking prices.

* * * * *
Excerpted from NYT: A Meter So Expensive, It Creates Parking Spots

As much as a third of the traffic in some areas has been attributed to drivers circling as they hunt for spaces … causing  lost time, polluted air and illegal parking.

In his 2005 book, “The High Cost of Free Parking”, Donald Shoup, a professor of urban planning at UCLA advocated dynamic pricing of metered parking spots — finding the lowest price a city can charge and still have one or two vacant spaces available on every block.

San Francisco is putting the theory to test.

San Fran is using new technology and the law of supply and demand, raising the price of parking on the city’s most crowded blocks and lowering it on its emptiest blocks.

San Francisco installed high tech parking sensors and new meters at roughly a quarter of its 26,800 metered spots to track when and where cars are parked.

And beginning last summer, the city began tweaking its prices up and down and shortening (or lengthening) time limits — trying to to leave each block with at least one available spot all the time.

Eventually, the metes may charge different prices at different times of the day.

“We only need a few people to see there is a price difference and choose to park in a different location to open up just a few spaces here and there.”

But raising prices is rarely popular … and the program was “complicated on the social equity level” since high parking prices can shut out poorer parkers. 

Thanks to JF for feeding the lead.

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Head-scratching polling results …

March 20, 2012

We haven’t been posting re: presidential approval numbers for awhile … the numbers have been bouncing around so much based on the news cycle that I largely dismiss them.

But, something in last week’s poll numbers caught my eye …

Note that right-leaning FOX News has Obama +2 in approval, Rasmussen and Bloomberg — also usually a bit to the right — have him +1.

But, left-leaning Gallup has Obama down 7 points.

Far left-leaning CBS/NYT and ABC/Wash Post have him down 6 points and 4 points, respectively.

I think the latter two are what caused last week’s hand-wringing among Obamites, since NYT & Wash Post have a reputation for over-sampling Dems in their surveys.  So, it’s harder for Dems to dismiss them than, say, Fox News.I still don’t make much of the results, but think they’re interesting …

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Source:
RCP

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The business of business cases …

March 20, 2012

Punch line: Publishing business case studies is big business, and more schools are looking to cash in.

* * * * *
Excerpted from WSJ: “The Business of Case Studies”

The three largest case-study publishers and distributors jointly sell more than 10 million cases and see tens of millions of dollars in revenue each year.

Harvard Business School Publishing Corp. dominates the market, recording sales of 8.5 million case studies in fiscal 2011 and estimating that 80% of the cases used world-wide come from there.

To maintain its edge, about five years ago Harvard started offering “simulations,” or online role-playing exercises.

Though simulations still represent a minor share of sales, they are growing fast. Sales in 2011 rose 37% from the prior year, which was double the 2009 figure.

There also has been growing interest in short cases as publishers market to part-time M.B.A. programs for time-crunched working adults, which have seen a surge in enrollment in recent years.

Harvard’s “Brief Cases” and concise offerings from other publishers can run just three or four pages, about one-quarter the length of a traditional case.

Case publishers and distributors are pushing hard into emerging markets, too, accepting cases written by faculty at up-and-coming schools in India, China and Latin America and selling products to those same institutions.

* * * * *
Top five cases from Harvard Business Publishing, fiscal 2011

  • Cola Wars Continue: Coke and Pepsi, 2006 — Competitive strategies of the soft-drink giants
  • Starbucks—Delivering Customer Service — Efforts to improve customer-service satisfaction
  • Apple Inc., 2010 — Can the iPad take the company to new heights
  • Walt Disney Co. — The Entertainment King—Disney’s 1980s turnaround and strategic challenges in the early 2000s
  • Toyota Motor Manufacturing, USA, Inc.—Solving assembly problems with the Toyota Production System

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What qualities are coveted by employers?

March 20, 2012

According to Jenn Folsom of Momentum Resources (MSB MBA ‘02):

Nothing beats A+ communication skills, both verbal and written.

Our clients also love to see creative problem solvers and “get it done” types of people.

They need those who can strike the balance of being able to work successfully in a team and without direction.

It’s all about results

Jenn’s full interview in ForbesWoman is worth reading

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Flat-earthers vs. Obama’s pipe dreams …

March 19, 2012

OK, so anybody who wants to keep using fossil fuels, to drill for oil and gas in the U.S., and to buy gas for a couple of bucks per gallon is a member of the flat earth society, lacking the the President’s vision.

Why Obama wants to insult the vast majority of Americans is beyond me, but that’s his tactical choice.

So far, the GOP has simply thrown back softballs: Solyndra, the Volt and the many other alternative energy busts.

Given my lack of tact, if I were a Romney adviser, here’s the line I’d offer up to Mitt:

“President Obama and I both have pipe dreams … mine in the Keystone Pipeline bringing oil from Canada … his goes back to his college days, I guess.”

Two for the price of one.

Keeps focus on the money wasted and lack of results from the President’s alternative energy gambles … and dregs up some old stuff re: Obama’s drug use that got wiped under the carpet in 2008.

Not rumors… straight from the horse’s mouth.

Obama first told of his early drug use in his 1995 memoir, “Dreams from My Father: A Story of Race and Inheritance” … published audaciously just after he became president of the Harvard Law Review.

He wrote re: his personal experience:

“Pot had helped, and booze; maybe a little blow when you could afford it.”

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Picture source:  Coed Magazine,
“10 Most Influential Pot Smokers”

Hmmm.

I guess that I hadn’t thought of the full range of hardships inflicted by the bad economy …

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Wanted: trend-setting young professionals who spend at least 14 hours online every week.

March 19, 2012

Punch line: The young, trend-setting, urban professional, who loves entertainment and places a premium on technology is the main target for Verizon’s new hyper local FiOS 50 campaign.

* * * * *
Excerpted from mediapost.com “Verizon Targets Young Professionals

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Verizon is targeting what it calls “trend-setting young professionals” who live in apartments and condominiums in four major markets via a hyperlocal FiOS campaign …

The multimedia effort was tested in a metro-Washington D.C. pilot last fall and is now being rolled out in the New York, Philadelphia, Dallas/Fort Worth and Los Angeles metropolitan areas.

Many of the hyperlocal campaign elements used during the pilot — including immersive digital advertising combined with social media engagement, plus a concentrated presence of out-of-home advertising and local events with prospective customers — will be repeated in the broader campaign. Gyms, restaurants, bars, movie theatres, malls and transit centers are target venues …

Most 25- to 39-year-olds who make up a significant portion of multidwelling unit tenants are major users of social media and the Internet and spend as much as 14 hours online per week, said Pedro Correa, vice president of Verizon Enhanced Communities …

“Some people think they have to live in a single family home to get the very best broadband and video entertainment services, but that’s not true,” he said in a release.

To assist young professionals in finding MDUs with FiOS, Verizon has created a region-specific microsite at http://www.musthavefios.com that shows the MDUs where FiOS is available in metro New York, Philadelphia, Dallas/Fort Worth, Los Angeles and Washington, D.C. …

Verizon FiOS are available to more than 2 million multifamily units, and growing in parts of 12 states, and the District of Columbia. About half of all Verizon’s FiOS lines opened for sale this year will be in apartments and condos …

Edit by KJM

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Devalued Currency: According to Goldman Sachs, 40% of its employees are VPs … really?

March 16, 2012

By now, everybody has heard that a GS VP has turned states-evidence on the company, decrying in a NYT op-ed that company executives “callously” talk about “ripping their clients off” in order to make more money for the securities firm and that the firm’s culture is “toxic and destructive.”.

That’s a shocker, isn’t it?  Right up there with accusations that baseball sluggers juice-up.

Also unsurprising is that Goldman is wasting no time in fighting back against a disgruntled ex-employee.

According to the WSJ, GS immediately tried to marginalize   the dude by minimizing his role at the firm.

In a memo to employees, Goldman Chairman and Chief Executive Lloyd Blankfein and President Gary Cohn wrote that Mr. Smith was one “of nearly 12,000 vice presidents” among more than 30,000 employees at the company.

Now, that caught my eye …. 40% of employees are VPs.

Either it’s “all chiefs, no warriors” or within GS, the title is more honorary than substantive … providing clients with the peace of mind that only comes when dealing with “callous” VPs who are “ripping them off”.

Go figure …

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Remember when Southwest was the ‘no frills’ airline?

March 16, 2012

Just back from vacation … nice trip if you ignore the travel to and from Punta Cana.

Friends know that I’ve been a SWA loyalist for years.  I liked their cut-rate prices, was willing to forego some frills, and perversely enjoyed the fight to get a pass to board in the prized “Group A” and rush to get a prime seat.

My vacation flights were on United.  Ouch.

Base ticket price was ok … but, then the add-ons.

$25 for the 1st bag … $35 for the 2nd … 50 pound limit — strictly enforced.  C’mon, man.

Good news: United and Continental were converting to their new combined computer systems the morning I was flying … the agents weren’t able to collect the baggage fee because of a systems glitch.  Bank error, my favor

Then, the seat pricing scam.

Of course, I booked at the lowest available fare … with seats in the back.

Going — no problem. Got 2 pre-assigned seats close to the lavs in the back.

Got a couple of emails inviting me to shell out $59.99 each for seats closer to the pilot.  No thanks.

Returning — not so easy.

Initially told: no seats available at this time.  See agent when checking in for the return flight.  Huh?

Kept checking for seat availability.  Kept getting told: None, except for the $59.99 upgrades.  Hmmm.

During online check-in, a miracle.  UAL found 2 seats for us and took the liberty of pre-assigning them.

You guessed it … a couple of $59.99 special upgrades.

May we have you credit card number?  NO !!!

OK, Mr. Cheapskate … here are 2 seats back by the lavs.  Enjoy your trip.

Reminded me of an old restaurant tactic.  Servers were getting spiffed for wine sales.  So, they’d ask “would you like wine with your meal?”.  If the answer was “no”, they’d come back in a few minutes and query: “Excuse me, did you say red or white wine?”.  If the answer was “none”, they’d bring a glass of wine anyway to see if the customer had the nads to send it back.  Folklore had it that wine sales soared.

Hoped my bag would fly free again, but no luck. Got charged $29 (note- not $25) and had to carry on stuff to stay under the weight limit.  Bummer.

In flight, noticed there weren’t many takers for the relatively high priced (and presumed low quality) airplane food.

But, did see a dude walk-in with an extra large pizza.  Not the mini Papa John’s you get at the Verizon Center …. a full 16 inchers.  Thought the guy was going to get mugged.

What an experience.

As a friend observed: Southwest is suddenly the frills airline …

Go figure.

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Whew! A Presidential task force to ponder high gas prices …

March 15, 2012

In a TV interview, President Obama responded boldly re: rising gas prices:

“The only way to stabilize gas prices is to reduce our dependency on foreign oil …  In the meantime, because I know people are hurting right now and it feels like a tax out of their paychecks, what we’re doing is looking at every single area that can affect gas prices …  we’ve set up a task force.”

image

I assume it’ll be modeled after the Jeffrey Immelt-led Jobs Task Force.

That’ll let us all sleep a little easier, right?

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Inflation is in check … oh, really.

March 15, 2012

Punch line: The Feds are reporting that inflation is in check at just over 3%.  An independent assessment puts the number over 8% … more credible given what’s been happening on supermarket shelves.

Excerpted from the NY Post

On the face of it, the government measure of consumer prices, the CPI, is just mildly alarming — with the government estimating prices to be rising at a 3.1 percent annual rate.

But as anyone who pays the bills or does the household grocery shopping knows, a government-reported 3.1 percent inflation rate is laughably low.

Bought cereal or mac and cheese for the kids lately? If so, you’re aware of the near double-digit increase in prices in the supermarket aisles.

So what is the true inflation rate?

The folks at the American Institute of Economic Research have resurrected the idea.

Their Everyday Price Index (EPI) strips away the cost of big-ticket items, like homes and cars, and looks at the cost of things that consumers encounter on a daily or monthly basis, such as groceries, prescription medicine, and telephone and cable bills.

By that measure, the Everyday Price Index shows inflation galloping ahead at an 8.1 percent annual rate.

Reference:  AIER Report

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Think global: Are you in the 1% ?

March 15, 2012

If you’re a loyal HomaFiles reader, you bet you are.

Even the Wall Street Occupiers are the 1% by Global Standards 
 
According to HBR’s Daily Stat:

Many of the occupiers who have been decrying the wealth of the “1%” probably are the 1% if you look at it in a global context.

Because the developing world is so poor in comparison with the U.S., the cutoff for the global 1% is an income of about $34,000.

Reference: Foreign Policy

Thanks to Tags for feeding the lead

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Get out your wallet: CBO says ObamaCare to cost twice the original estimates.

March 14, 2012

According to a new projection released by the Congressional Budget Office, ObamaCare will cost $1.76 trillion over a decade,  rather than the $940 billion forecast when it was signed into law.

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The CBO now projects  that more people will be obtaining insurance through Medicaid than it estimated a year ago at a greater cost to the government, but fewer people will be getting insurance through their employers or the health care law’s new subsidized insurance exchanges.

According to the Washington Examiner:

Democrats employed many accounting tricks when they were pushing through the national health care legislation.

The most egregious of the accounting tactics was to delay full implementation of the law until 2014, so it would appear cheaper under the CBO’s standard ten-year budget window and, at least on paper, meet Obama’s pledge that the legislation would cost “around $900 billion over 10 years.”

When the final CBO score came out before passage, critics noted that the true 10 year cost would be far higher than advertised once projections accounted for full implementation.

The projection for 2022, the last year available, indicate that the cost is likely to exceed $2 trillion over the first decade, or more than double what Team Obama advertised.

Surprise, surprise, surprise.

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Limiting “unlimited” cell phone plans … it’s called “throttling”

March 14, 2012

Late last year, AT&T started slowing down data service for the top 5 percent of its smartphone subscribers with “unlimited” plans — often to speeds slower than AT&T provides to subscribers on limited or “tiered” plans.

When slowed down, the phone can still be used for calls and text messaging, but Web browsing is painfully slow, and video streaming doesn’t work at all.

AT&T’s throttling of “unlimited” data comes as it tries to deal with limited capacity on its wireless network.

When the iPhone was new, AT&T had ample capacity on its network, and wanted to lure customers with the peace of mind offered by unlimited plans.

One ‘throttled’ subscriber took AT&T to court … and won !

Judge Awards IPhone User $850 In Throttling Case

When AT&T started slowing down the data service for his iPhone, Matt Spaccarelli took the country’s largest telecommunications company to small claims court. And won.

His award: $850.

The judge said it wasn’t fair for the company to purposely slow down his iPhone, when it had sold him an “unlimited data” plan.

Verizon Wireless and T-Mobile USA also throttle users, but their policies are gentler.

Verizon only throttles if the specific cell tower a “heavy user” subscriber’s phone is communicating with is congested at that moment.

Thanks to TH for feeding the lead.

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Flashback: Why do gas prices move up and down ?

March 13, 2012

Another piece from my oil & energy archives.  Chris Hairel — an MSB alum — recaps the the oil-to-gas value chain.

Good background reading as gas prices soar.

* * * * *
Originally posted Aug. 27, 2008

In an earlier post “Thinking about $4 per gallon gas”, I wondered why oil companies waited so long to push prices up to $4 — the apparent price that the market will bear — and why they don’t just let the price stick at $4 now that it has been tested.

Chris Hairel , MSB MBA alum, sent me a nice recap of the oil to gas value chain.

Bottom line: cost-plus pricing in a very competitive market.

Worth reading …

* * * * *

The downstream refined products value chain — from crude oil to retail gasoline and other oil-based products — has six segments, each with its own unique industry structure, pricing levers and regulation:

* * * * *

Refineries – the key asset in the business where the object is to maximize the economic value added of the refined products.

Refineries are basically price takers since their company trading group supplies them with crude oil and the projected prices for refined products.

Working with the trading group, the refinery is charged with turning that crude oil into the most profitable collection of products given the quality of the crude and the capabilities of the refinery.

* * * * *

Bulk Markets – The trading group assumes title of the product as it leaves the refinery and arranges transportation to the terminals based on projected demand in the rack (or wholesale market).

Along the way the traders seek to increase the realized price for their products, react to supply disruptions or unexpected demand.

Bulk is a relatively efficient market with good price transparency based on key trading hubs like New York Harbor, Houston and Chicago.

The NYMEX futures market provides a facility for hedging and for paper speculation. Trading parties include oil companies, major users of petroleum products, independent pipeline companies and speculators.

Pricing is market-based and profit-optimized by the traders.

* * * * *

Pipelines – Interstate pipelines with multiple customers are regulated by the Federal Energy Regulatory Commission .

Their tariffs (i.e. prices) are set based on a government sanctioned rate of return. So. pricing is essentially a cost-plus process.

Pipeline owners are not permitted to share information about who else is using the pipeline with their affiliated companies, nor can they give (or take) preferential treatment with respect to supply allocation or delivery scheduling.

* * * * *

Rack Markets and Terminals – Rack markets cover the wholesale market for a city.

Prices in rack markets are set daily for the next day. The marketing group for an oil company looks at demand by channel of trade (i.e. branded, unbranded, spot), recent price history in the area and the supply situation.

The pricing mechanism itself may be based on an index, a cost plus or other model, but there’s some leeway on the decision under certain circumstances. For example, pricing is actually used as a key demand management lever since companies can purposefully price themselves out of the spot or unbranded channel in order to save product for branded customers.

Despite what the pricers do, most transaction pricing is determined by long term contracts. These contracts usually allow customers to “swing” their volumes. A customer may commit to buying an average of 5,000 gal a day, but the contract management process will look at the monthly volume and divide by 30 – the customer can usually manage their buying pattern to buy more on days when gas is cheap and less when it’s more expensive. .

* * * * *

Secondary Transportation – These are the tanker trucks that move product from the terminal to the retail station. The logistics are typically handled by jobbers or independent marketers that almost always price on a cost-plus basis.

* * * * *

Retail – Retail gas stations typically price on a cost-plus basis with a slim retail margin added on.

The bulk oil stations’ profits isn’t from the gasoline ! Gas is simply the “leader” product that attracts traffic (literally) which often loads up with high margin coffee, soda, cigarettes, etc.

* * * * *

Retail gasoline prices

Retail gasoline prices tend to respond quickly to market forces for 3 reasons: (1) cost-plus pricing, (2) retail competition, and (3) fear of government intervention.

* * * * *

(1) Cost-plus pricing

Since cost-plus pricing is prevalent at all stages of the value chain, refined products’ prices and crude oil prices tend to move together.

Refiners’ margins are often forecasted using what’s called the 3-2-1 spread. Take the price difference between three WTI NYMEX contracts and the sum of two NYMEX gasoline contracts plus one heating oil contract – then trade accordingly.

When crude falls. the entire complex floats down with it since the bulk market is fairly efficient and the downstream segments all use a cost-plus pricing model.

If domestic bulk markets fail to react to lower crude prices, several large players can bring product in from Europe to capture the arbitrage.

Since the vast majority of transactions are priced on a cost-plus basis, companies compete on their ability to “buy right”, on the efficiency of their operations, and their opportunity for more profitable ancillary sales. .

* * * * *

(2) Retail CompetitionFew prices are signaled to potential customers more visibly than gasoline prices.

There are often 2 or 3 gas stations on a corner, so consumers are tempted to chose the cheapest one even if it’s only a cent or two cheaper per gallon. The conventional wisdom is that brand loyalty is low.

The same price pressures evident in the wholesale rack markets since unbranded retailers have the option of buying from multiple terminals. If Shell is less expensive than Exxon on a particular day, Shell gets the sale in the unbranded and spot channels of trade.

* * * * *

(3) Threat of Regulation

A third force is the threat of government action.Pricing through the entire oil value chain is very transparent. Timely price data available from multiple sources for every segment of the market (DOE data, NYMEX, bulletin board exchanges, broker quotes, daily PLATT and OPUS surveys, AAA retail surveys, etc.).Oil companies generate two-thirds of their profits from crude oil production and refining. The wholesale and retail marketing and distribution parts of the business is generally considered mote of a cost of going business (i.e. overhead) than a profits source. So, oil companies would rather play it safe (from government regulators) than try to eek out an extra half percentage point of profit at the wholesale or retail level.

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Obama better buy his Volt now …

March 13, 2012

On a campaign stop a couple of weeks ago, after a photo op sitting in a Volt, President Obama told a crowd of United Auto Workers:

“It was nice. I bet it drives real good,” he said. “And five years from now, when I’m not president anymore, I’ll buy one and drive it myself.”

image

Well, he might want to place his order now …

WSJ reports that despite advertising galore, Chevy has sold under 10,000 of the green machines so far — less than 1,000 per month — and GM has decided to idle production of the battery-powered car for five weeks.

The plant had just resumed production on Feb. 6 after a prolonged holiday shutdown.

Former GM Vice Chairman Bob Lutz the main force behind the Volt, said recently that GM’s lofty targets for the Volt are its main problem.

“The Volt is a bases-loaded home run,” Mr. Lutz said. “It will overcome.”

Another GM spokesperson says:

“This technology is here to stay, we have all kinds of people who want to copy it and go after it. We are not re-evaluating anything … The only question here is what the rate of sales will be.”

In other words, great dog food …. it’s just that the dogs aren’t eating it.

Thanks to SMH for feeding the lead

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The unemployment numbers … digging deeper.

March 12, 2012

The Feds said last Friday that the economy added over 200,000 jobs and the unemployment rate stayed at 8.3%

I’d predicted 8.5% or higher … hmmm.

First, unemployment claims increased in each of the 4 weeks in February

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That would make you think that the unemployment rate would go up, right?

Not so, using Fed math … the BLS reported that the  seasonally adjusted unemployment rate stayed at 8.3% …

image

But, take a peek at the raw unemployment rate … the one before the Feds adjust for seasonality.

Hmmm.  Looks like the rate has ticked up in the past couple of months … and is now around 8.7%

image

The secret sauce: the seasonal adjustment factors.

I guess a guy doesn’t feel unemployed if he’s unemployed in February  … seasonal unemployment is different.

Really?

Let’s look at the main data series that goes into the unemployment rate: the number of employed people.

Again, the Feds report steady improvement on a seasonally adjusted basis.

image

But,  when the seasonality factors are backed out, actual employment levels have been going down … consistent with the unemployment claims data.

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Finally,  for fun, let’s match the seasonally adjusted unemployment rates data (which is reported by the Feds) against the raw numbers (which the Fed calculate but don’t shout out).

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Pretty interesting … says we’re in a period when seasonally adjusting helps the unemployment rate appear more favorable … but when we head into Aug, Sept, Oct, Nov … seasonally adjusting makes the unemployment rate look less favorable.

My next prediction: about mid-summer, the Feds will come out with some cock-and-bull story explaining why they’re going to start report unemployment data that isn’t seasonally adjusted.

And, they’ll say with a straight face that the change in reporting methods has nothing to do with the election.

Yeah, right.

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Wanna pop a Duff’s brewski … just like Homer Simpson?

March 12, 2012

Punch line: Ever wish you could be Homer Simpson, drinking a Duff beer on the couch? Well, you’re in luck! UK consumers can now purchase a 6 pack of Legendary Duff Beer for £12.50.

* * * * *
Excerpted from psfk.com “Homer Simpson’s Duff Beer Goes On Sale In The UK

The fictional beer enjoyed by Homer on The Simpsons television show is now a reality for consumers in the UK. The Legendary Duff Beer, a premium German pilsner with “a crisp, light refreshing taste,” can be bought online and delivered to locations in England, Scotland, Wales and Northern Ireland.

                    image_thumb

The lager, brewed by Eschweger Klosterbrauerei, is available in cans and bottles featuring the iconic red, white and black packaging design. 1 can or bottle costs £2.99 ($4.72) and a 6 pack is £12.50 ($19.74). The UK partner and distributor for The Legendary Duff Beer, Duff Beer Distribution, writes:

Having seen the great success the beer enjoyed in Europe and the rest of the world we have made it our goal to ensure everyone in the UK market cannot be without a Duff!

Edit by KJM

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Getting America moving again … the view from the UPS truck.

March 9, 2012

In a recent HBS blog post, the CEO of UPS opined how to get the economy “Moving at the Speed of Business”.

The essence of his pitch:

The recovery’s been slower than expected. Why? The  I talk to lack the confidence to increase investments and expand hiring. They’re concerned with growing budget deficits, uncertain tax policy, rising energy costs, and crumbling infrastructure.

Four key changes could reassure business leaders — and ignite private-sector growth.

  1. Develop a strategy for energy security
  2. Fix the transportation infrastructure
  3. Simplify the tax code and lower business taxes
  4. Focus on trade policy

Well stated, UPS-skewed (that’s ok), but fairly common stuff.

What caught my attention were a couple of “throw in” points.

First, regarding natural gas as an energy source:

Natural gas is plentiful in the United States, and it works well for short-haul trucking (compressed natural gas) and long haul trucking (liquid natural gas).

Heavy tractor trailers consume about three quarters of the diesel fuel used by all commercial trucks.

Imagine the amount of imported oil we’d save — along with improving the air quality — by converting our nation’s long haul fleet of heavy tractors from diesel to natural gas.

Second, regarding road congestion:

Today, we address critical transportation needs in isolation. We go from one appropriation to the next, often with politics guiding priorities.

As a result, our investments are not targeted at alleviating bottlenecks in our road, rail, maritime, and air networks.

The cost of congestion in the United States in 2010 was about $101 billion — up from $79 billion in 2000.

Across our UPS network, a five-minute delay each day for each of our vehicles costs us $100 million per year.

Extrapolate that across the whole economy, and you get a sense of the huge economic burden of congestion.

Interesting points …

Thanks to Justin Bates for feeding the lead.

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How many people watch online video content each day?

March 9, 2012

Answer: Over 100 million !

So, the online industry is following in TVs footprint by organizing a two week long event to woo advertisers with the ultimate goal of pulling spending away from TV and towards online.

* * * * *
Excerpt from WSJ: “TV’s Big Ad-Sales Bazaar Inspires an Online Copycat”

This April the biggest online media outlets are planning a two-week event in New York. Each company will take a different day to woo advertisers by presenting different marketing opportunities.

Coming as more companies are creating more original online video programming, the event signals an intensifying effort by the online video world to challenge television.

TV drew $60.7 billion in advertising versus online video totaled only $2.02 billion. More than 100 million Americans watched online video content on an average day, a 43% increase from the year prior.

“There is a big gap between the time consumers are spending on digital platforms and the amount of ad spend”.

Edited by ARK

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Unemployment: The final nums before tomorrow’s final nums …

March 8, 2012

Tomorrow’s BLS report will be very interesting.

On the plus side: ADP, released their proprietary private payrolls jobs report earlier this week. Its usually – but not always – a good leading indicator of the the BLS nums.

Form February, ADP reported a gain of 216,000 private sector jobs.

Last month (January) 2012 ADP’s final num was 173,000 jobs. In contrast, the BLS reported 257,000 seasonally adjusted private sector jobs for January.

image

On the minus side:

Today, the BLS reported that the number of U.S. workers filing new applications for unemployment benefits rose for the third consecutive week

Initial jobless claims jumped 8,000 to a seasonally adjusted 362,000 in the week ending March 3.

Most important, Gallup – which nailed the drop to 8.3% last month —  has been consistently reporting an unemployment rate of 9% throughout February.

image

The consensus of economists is that about 200,000 jobs will be reported and that the unemployment rate will hold at  8.3%.

Ken says: seasonally unadjusted jobs will decline, seasonally adjusted jobs will increase less than 200,000 … and the unemployment rate will bump back up to 8.5%

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Buffett: Giving to the Gates Foundation because it’s run more efficiently than the gov’t … no (bleep), Warren.

March 8, 2012

Interesting interview with Warren Buffett on CNBC last week.

The dialogue that caught my attention had to do, of course, with Buffett’s whining that his taxes are too low … paired with the hypocrisy that he’s sheltering his estate from taxes by dishing his end-of-life dough to the Gates Foundation.

CNBC’s Joe Kiernan observed to Buffett:

I’ve gotten you to admit in the past that one of the reasons you think the Gates Foundation will do a lot better with your 50 or 60 billion is because charities have a better — a much better reputation for watching how money is spend and for doing more good.

Buffetts retort:

Anytime an organization is as big as the US government or any other government, they are not going to be as efficient, obviously, as smaller organizations.

Kiernan followed up:

So with all that in mind, can you at least see how someone might, on an intellectual basis, be opposed to just giving a blank check to such a profligate entity?

Buffett’s answer:

On the other hand, we have successfully defended the country, we’ve built the greatest industrial machine the world’s ever seen, we’ve built the richest population the world’s ever seen.

The truth is, we can have a country that works wonderfully with 19 percent or so of revenues going to Washington and spending 21 percent.

Say, what?

Kiernan politely went in for the kill:

If the government was a business and Berkshire was looking at it, there’s no way Berkshire would even take a 1 percent stake in the government with their track record of investments. Right?

All Buffett could do was stammer …

Full transcript

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Another tipping point: married folks a dwindling majority …

March 8, 2012

Excerpted from the Wash Post:

The proportion of adults who are married has plunged to record lows as more people decide to live together now and wed later, reflecting decades of evolving attitudes about the role of marriage in society.

Just 51 percent of all adults who are 18 and older are married, placing them on the brink of becoming a minority, according to a Pew Research Center analysis.

That represents a steep drop from 57 percent who were married in 2000.

The marriage patterns are a striking departure from the middle of the 20th century, when the percentage of adults who never wed was in the low single digits.

In 1960, for example, when most baby boomers were children, 72 percent of all adults were married.

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What’s the best indicator of how much you’ll earn ?

March 7, 2012

Answer :  How much your parents earned.

There’s about a .5 “intergenerational earnings correlation” in the U.S.

That means, look at how much your folks earned and you have a good idea re: how much you’ll be earning.

Causation, or just correlation ?

Well, there’s a causal variable in there.

Children of high earning parents tend to get better educations … much better educations.

image 
Reported by the New America Foundation

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Overheard in the faculty lounge … re: the Target flap.

March 6, 2012

By now, everybody has heard how Target mines data on shoppers to ID when they’re approaching life events — e.g. having a baby — that make them “vulnerable to marketing initiatives.”

The reaction of many marketers seems to be: “why aren’t we doing that?”

The reaction of shoppers is predictably negative: “Invasion of privacy”, “manipulative”, “creepy”.

The reaction in the faculty lounge is interesting.

Background: a branch of marketing studies consumer behavior … how and why consumers think and act … why they pick one brand over another, etc.

There seems to be concern among some academic CB researchers that their findings are  being hijacked by evil profiteers, to the disadvantage of the masses:

Consumer behavior research clearly helps the stores in the “attack” on the consumer. Does CB help in the development of the “defense” of the consumer?

One colleague sought to allay any pangs of guilt:

The “consumerism” defense is that the findings can be used to benefit both producers and consumers.

Any way, as [a famous consumer researcher] used to argue “the effects we study are so small in the real setting that any harm done is minimal.”

Now, that’s a rallying cry for you …

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Flashback: Thinking about $4 per gallon gas …

March 6, 2012

Since gas prices are on many people’s minds these days, I pulled the following post out of the archives.  Originally posted August 22, 2008, it’s strikingly current today.

* * * * *.

Most folks wonder why the pump price of gas is surging this year.

I ask a different question: why didn’t the oil companies — branded by most folks as evil profit grubbers — push the price up into the $4 /gallon range a year or two ago?

In my pricing course, I harp on a basic point: marketers should be respectful of costs (i.e. never sell stuff below “fully-loaded cost” plus an acceptable profit), but they MUST price to the market. That is, they should determine the price that the market will bear, and then adjust accordingly to maximize profits — taking into account downward sloping demand curves and volume-related cost functions.

It’s starting to look like $4 per gallon gasoline is about what the market will bear. That’s the price point where folks started to cutback in gas consumption the past couple of months.

* * * * *

Question: Why did the oil companies wait for the cost of crude to push up gas prices? To me, it seems that the oil companies have actually showed restraint over the past couple of years.

* * * * *

Here’s a crude analysis (pun intended):

Simply divide the price of a barrel of crude over the past couple of years by 42 (since the are 42 gallons per barrel), and compare the result to the retail price of gasoline (which is usually expressed per gallon).

The difference — gasoline’s “back of the envelope” mark-up over crude prices — is plotted below.

Note that for the past 9 months, or so, the crude mark-up been about $1 per gallon — at the low end of the historical range.

image

* * * * *

Since the cost of a barrel of crude has skyrocketed over the past couple of years, the percentage mark-up has trended down. Hmmm.

image

* * * * *
Bottom Line:

It certainly looks like the oil companies price gasoline using some sort of “cost plus” formula.

I think the oil companies left a lot of profits on the table during the past couple of years — the retail gas market would probably have borne higher prices.

Now, I’m betting that retail gases will be “sticky” — there will be a “ratchet effect” and gas prices will come down proportionately slower than crude oil prices.

And, I predict that if the oil companies get hit with a windfall profits tax, they’ll just pass the tax along into retail gas prices. Just watch.

* * * * *

Analytical note:

The “real” calculations re: the economics of converting crude oil into gasoline are way more complicated than the above simple analysis (e.g. only about 1/2 of a barrel of crude is made into gasoline, there are refining and distribution costs, the 1/2 barrel that doesn’t go into gas earns other profits).

My bet: the conclusions drawn from a more precise analysis would be directionally the same, and probably pretty close to the $1 per gallon — which has a certain memorable ring to it.

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Sara Lee splits company … incorporates part in the Netherlands.

March 6, 2012

I bet you missed this one.

It announced on a Friday afternoon, so most folks missed it.  And, it sounds innocuous enough …

According to the WSJ:

Sara Lee Corp. said Friday it will seek a listing for its coffee and tea business on the Amsterdam stock exchange, as part of its plan to split the company in two.

Sara Lee said the business will be incorporated in the Netherlands, where its Douwe Egberts coffee brand is already based.

The new company, which also makes Pickwick Teas, will be headquartered in Amsterdam.

Maybe the move is simply to get company execs closer to the relevant markets.

Call me cynical, but I think we’re going to see quite a few of these offshore splits by U.S. companies.

Why?

Simple.  If Team O continues to push for taxation without repatriation of non-U.S. earnings, you can bet that more American companies will split and plant major parts of their companies in non-U.S. locations.

The economics are compelling …

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Your Diet Coke bottle is … well, quite chic!

March 6, 2012

TakeAway: Diet Coke partners with Diane von Fürstenberg to design new packaging for its Diet Coke bottle. Proceeds from the sales will go towards the Foundation for the National Institutes of Health. Diet Coke + Fashion + Health? Hmm…

* * * * *
Excerpted from psfk.com “Diane von Fürstenberg Redesigns Diet Coke

image_thumb1

Proceeds from the sales of Diane von Fürstenberg’s Diet Coke collection will go towards the Foundation for the National Institutes of Health.

Although there’s nothing new about celebrity bottles these days, we think the fashion designer has a fresh approach on an aging marketing gimmick – plus the charity angle is interesting (if a little ironic considering the discussion about the healthiness of diet soda).

Edit by KJM

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Big Apple, not Big Brother is following you and your iPhone …

March 5, 2012

And the irony is that, in this case, Big Brother is Apple … not the Orwellian-feared government.

How so?

Some Apple apps can jack your address book, photos, and location coordinates.

In other words, all your private stuff.

More specifically, according to the NY Times

The private information and photos on your phone may not be as private as you think.

There are reports that some apps are taking people’s address book information without their knowledge.

As it turns out, address books are not the only things up for grabs.

Photos are also vulnerable.

After a user allows an application on an iPhone, iPad or iPod Touch to have access to location information, the app can copy the user’s entire photo library, without any further notification or warning, according to app developers.

When the devices save photo and video files, they typically include the coordinates of places where they were taken — creating another potential risk.

Conceivably, an app with access to location data could put together a history of where the user has been based on photo location.”

“It’s very strange, because Apple is asking for location permission, but really what it is doing is accessing your entire photo library.”

I guess Apple was right … 1984 is here.

Thanks to MET for feeding the lead.

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How long does an average unemployed person stay unemployed?

March 5, 2012

Answer : In the old days, it used to be 10 weeks …  then a steady creep up to 20 weeks … then an explosion over the past couple of years to 44 weeks.

But, according to Team Obama, the long duration has nothing to do with the extension of unemployment benefits to 99 weeks.

Yeah, right.

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McBaguette, s’il vous plait …

March 5, 2012

Punch line: Is Mickey D. is going haute cuisine? No, not really.  The Mickster is just sticking a burger on baguette and charging the French a premium price.  Mon dieu.

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Excerpted from the WSJ “To Tailor Burgers for France, McDonald’s Enlists Baguett”

In France the fast-food giant is gearing up to offer a burger served on baguette, part of a wider effort to add more locally inspired fare to its menu and attract more upscale diners.

McDonald’s restaurants across France will test the McBaguette — a burger topped with French-made Emmental cheese and mustard.

The promotion is in line with the  company’s successful global strategy of updating its restaurants to appeal to a broader clientele, while offering a more varied menu, up and down the price scale.

In France that involves tapping into a national obsession: bread.

  • 98% of French people eat bread every day.
  • The French each consume about 55 kilograms (a21 pounds)of bread a year.
  • 65% of the two billion sandwiches sold each year in France are baguette-based.

The McBaguette will be sold for €4.50, more than a euro above the average price of a sandwich in France.

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Ken’s Take: “Obsession with bread”?  I thought the French were obsessed with something else.  Live and learn …

Thanks to AGC

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How does GM’s tax rate compare to Buffett’s secretary’s?

March 2, 2012

Interesting editorial in the WSJ re: the GM bailout.

Everybody knows the GM’s stock holders were wiped out, that secured debt holders were subordinated to the unsecured UAW claims and  haircut to about 50 cents on the dollar, and that “New GM” stock is trading about 25% below its IPO price — leaving taxpayers with a $15 billion book loss on Treasury holdings.

What most folks don’t know is that GM got a special deal that rolls old GM’s $45 billion in accumulated tax losses into new GM.  That’s usually not allowed when restructuring companies — as a means of stopping companies from just acquiring losses from other companies as a tax dodge.

Bottom line:

In a 2011 working paper, J. Mark Ramseyer of Harvard and Eric Rasmusen of Indiana University argue that by manipulating corporate tax rules by fiat, “Treasury gave the firm (and its owners, including the UAW) $18 billion more in assets.”

The WSJ observed:

Mr. Obama crowed yesterday about GM’s “highest profits in its 100-year history.”

We’d be interested to hear how its effective tax rate compares with Warren Buffett’s secretary’s.

Hmmm ….

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Forget price, what’s a company’s stance on, well, whatever?

March 2, 2012

TakeAway: The OpenLabel app allows consumers to make socially responsible shopping decisions real-time by simply scanning a barcode to read and contribute crowdsourced information.

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Excerpted from psfk.com “Add Crowdsourced Reviews To Scannable Barcodes

OpenLabel is inviting consumers to add reviews and information to everyday product barcodes to make socially responsible shopping much easier.

The app can scan barcodes and bring up crowdsourced information such as the company’s stance on workers’ rights, social justice, environment, health, and other corporate social responsibility aspects.

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Peter Kirwan, an investor of OpenLabel, explains that the app is “everything but price, we’re about actual information.” Although the app does allow consumers to submit pricing details, it hopes to deliver more in-depth information to help consumers decide if they should buy or avoid the product.

Edit by KJM

Oops … BLS unemployment report not being released until next Friday.

March 1, 2012

OK, I got a bit a head of myself this week …

The December unemployment report was released on January 6 — the first Friday in January,

The January unemployment report was released on February 3 –  the first Friday in February,

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So, I assumed that the February unemployment report would be released tomorrow March 2 — the first Friday in March,

Wrong.

The BLS says that The Employment Situation for February will be released next Friday, March 9, 2012, at 8:30 a.m. (EST).

My analysis and predictions still hold … a bump up in the rate.

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What to look for in next week’s jobs report …

March 1, 2012

Next week’s unemployment report will be quite interesting.

As we’ve posted before, Gallup’s daily tracking report indicated that the unemployment rate was about 9% in mid-February … and has risen to 9.2%. 

Gallup’s mid-month number is usually a good predictor of the BLS’s end-of-month number. 

A good test of whether the books are being cooked is to look at the seasonal adjustment factor being applied to total employment.

In January, the BLS increased its seasonal adjustment factor … so, total employment went from a seasonally unadjusted loss of jobs to a seasonally adjusted gain in the number of jobs … and the unemployment rate dropped sharply to 8.3%.

Below is the historical data for the past couple of years re: how much the BLS jacks up February’s total employment numbers via seasonal adjustment.

Takeaway: if the seasonally adjusted total employment is more than about 1.18% higher than the non-seasonally adjusted number, you can suspect some book-cooking.

Let’s see what happens …

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Shopping in Singapore is off the wall … literally!

March 1, 2012

Punch line: PayPal seeks to capture the attention of daily subway commuters in Singapore with ‘mobile shopping walls.’

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Excerpted from psfk.com “Shop Right Off The Subway Wall With PayPal”

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Online payment service company PayPal is trialing a new mobile shopping initiative that allows customers to point and purchase using QR codes. PayPal has created catalog ‘mobile shopping walls’ in 15 metro stations in Singapore.  QR is short for Quick Response. They can be read quickly by a cell phone.

They are used to take a piece of information from a transitory media and put it in to your cell phone.

You may soon see QR Codes in a magazine advert, on a billboard, a web page or even on someone’s t-shirt.

Once it is in your cell phone, it may give you details about that business (allowing users to search for nearby locations), or details about the person wearing the t-shirt, show you a URL which you can click to see a trailer for a movie, or it may give you a coupon which you can use in a local outlet.

The reason why QR codes are more useful than a standard barcode is that they can store (and digitally present) much more data, including url links, geo coordinates, and text.

The other key feature of QR Codes is that instead of requiring a chunky hand-held scanner to scan them, many modern cell phones can scan them.

The large display features Valentine’s Day offers from eight participating retailers. The user will need to first download the PayPal QR code reader app, which scans the barcodes and allow the user to log into PayPal to purchase the items.

QR codes are quickly on the rise with an incredible increase of over 4500% of QR code scans between 2010 and 2011.

These square barcodes have been particularly popular in Singapore due to the rapid growth of smartphone ownership and free accessible Wi-Fi across the city.

Edit by KJM

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