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February 2009 Archives

Where do we go from here?

Our afternoon session at the economic bloggers forum has been especially lively. That’s because we’re talking about how the hell we can get out of this mess. What’s the economy going to look like next year? In 5 years? In 10? Several of the people here are economists so they tend to look at history for answers.

Continue reading Where do we go from here?

Reg-you-lay-shun

Our economic blogging conference has broken into smaller groups for lunch, and the session I’m attending is called “The Fate of Finance.” The moderator, Robert Litan of Kauffman and Brookings, pointed the discussion toward regulation, which he says will be the hot topic for the next month. How are we going to regulate these financial institutions? Who’s going to do it? And do you seriously think it will work?

Continue reading Reg-you-lay-shun

Is Journalism Dead?

That’s the title of the seminar I’m in right now at the Kauffman Foundation. It began with a speech from former Boston Globe writer David Warsh, who proclaimed that printed newspapers are not going away. He said there will always be an audience for the convenience of a physical paper. I’m not so sure.

Continue reading Is Journalism Dead?

If it quacks like a duck...

At this economic bloggers conference I’m attending, we had a discussion last night about how no one in charge will say the word “nationalization.” It’s obviously a politically potent word. But then I wake up this morning to read about Citigroup. As Dan Grech’s Morning Report story points out, this is nationalization, plain and simple:

Finance professor Peter Hahn: The government is not just taking an equity stake at 40 percent. Citi’s deposits are guaranteed, the hand of the government really is all over the institution. The real risk is being born by the taxpayer.

Then, the people running the government should respect the taxpayer. Stop playing semantics. Be straight with us.

I may need some face wipes

I’m heading to a battle of the barbecues tonight here in KC. It’s being hosted by well-known economic blogger Tyler Cowen. His blog, Marginal Revolution, is always good reading. But before I get my face messy, I thought you might be interested in this chart, pointed out by Kai Ryssdal. As Kai says — Citigroup, GM, and B of A could go to zero tomorrow and the Dow would barely budge. Sign o’ the times.

Airplane Reading

I read some interesting stuff on my flight to Kansas City, which I’ll get to in a moment. But first, my flight. I don’t fly Southwest often, but I love their boarding policy now. I know some people hate it, but since I’m a militant disciple of the 24-hour online check-in, I win. I sit at my computer with the airline’s web page open two or three minutes before the 24-hour deadline. And then I pounce.

Continue reading Airplane Reading

Kansas City, here I come

I’m off to KC today for a conference on economic blogging. It’s being sponsored by the Kauffman Foundation, which focuses on entrepreneurship. I’m looking forward to discussing issues like this one: How does blogging affect the economic debate? I’ll post some entries later today once I arrive and tomorrow during the conference when I can. And I’ll try my best not to get barbecue sauce on the blog.

Just take your clients to Putt-Putt

Now that Northern Bank’s been busted for hosting a golf tournament, the other bank lemmings are lining up to do their part. Today, Morgan Stanley said it will not entertain clients and executives at a pro tournament in June. The bank still plans to sponsor the event. Wells Fargo is doing something similar.

Continue reading Just take your clients to Putt-Putt

A ballpoint pen or a share of stock?

AP writer Mark Williams has a telling breakdown on the stock values of some major companies. I’ll give you the highlights with up-to-the-minute prices: Office Depot’s stock is down from $38 to $1.11. A package of ballpoint pens goes for $1.89.

Continue reading A ballpoint pen or a share of stock?

Will there be blood?

I just read a very compelling interview with respected Harvard historian Niall Ferguson. Here’s the interview by the Toronto Globe and Mail, and here’s a synopsis of it. Ferguson’s picture of the near-future is even uglier than most.

Continue reading Will there be blood?

Antidote spending

The House started debate this morning on a $410 billion spending bill. A vote could come later today. Yes, this is $410 billion on top of the $787 billion stimulus package. This new bill is essentially the antidote to President Bush’s lack of spending on domestic programs. For example, some of the items in the bill include:

Continue reading Antidote spending

Still no confidence

Wall Street sure doesn’t think much of President Obama’s speech last night. Not that I want to care what Wall Street thinks, but let’s face it, most of us have to care. Anyway, the consensus seems to be — inspiring political speech, but not enough substance. There are still way too many “ifs.” Felix Salmon at Portfolio sums it up well:

Continue reading Still no confidence

Mall Rats II

I wrote a blog entry last week about the country’s glut of shopping centers and how they’re starting to empty out. Money-losing tenants are leaving, and the property owners can’t refinance their mortgages. I figured a follow-up was in order, based on some of the comments people submitted.

Continue reading Mall Rats II

Hamsters with loans

There’s a lot of wheel-spinning when it comes to restructured loans. A bank regulator testified to Congress today that more than half of modified mortgages default again with six months.
I know the President’s goal is get to people before they’ve defaulted the first time, so perhaps this statistic just reinforces the need for that. But it also makes me question how successful any of these loan modifications will be. It still feels like we’re trying to “fix” the problem instead of “solve” the problem. You know what I mean?

Parting Gifts

Scruples question of the day: If you get laid off, is it okay to take company information with you? A new survey from security company Symantec finds that 59% of employees admitted to stealing data on their way out the door. 67% said they used their former company’s confidential info to get their next job. Hmmm. Seems pretty black and white, but of course, it never is.

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Continue reading Parting Gifts

The new Manhattan Project

As we watch the stock market sink to 1997 levels, this article in Wired Magazine should send chills down your spine. It says a formula created by a Chinese-born mathematician, David X. Li, might have set in motion the collapse of Wall Street and our economy. This model was invented to reduce financial uncertainty, and for a while it worked. Until it didn’t.

Continue reading The new Manhattan Project

A few minutes with George Wendt

There’s a new musical here in LA that’s set in the ummm… yeah… Great Depression. But it’s fun. And a little naughty. “Minsky’s” is about a real New York City burlesque show from the ‘30’s. Burlesque was a hot ticket in those times because it was much cheaper than Broadway. Of course, not everyone thought it was proper, and so, the story unfolds.

One of the performers in Minsky’s is actor George Wendt. Yes, “Norm” from Cheers…

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A very likeable fellow. I got a chance to sit down with George, and you can listen to the interview here:

Your take on taxes

Let’s have it out on the President’s budget plan. He wants to cut the deficit in half by the end of his term. Some of it is a deficit he inherited because of massive war spending. Some of it is a deficit he just created by passing a $787 billion stimulus package. The people the President will lean on are individuals and businesses making at least $250,000 a year. He’ll let the Bush tax cuts for those people expire at the end of 2010. Now, the question is: is this smart or fair policy?

Continue reading Your take on taxes

Blood from a wallet

The recession is forcing retailers to hone the science of separating you from your money. The Wall Street Journal has a story today about how stores are playing the paycheck cycle.
Pepsico noticed that sales of Frito Lay snacks were diving at the end of the month and picking back up at the beginning:

“The first of the month we might promote bigger sizes and at the end of the month we might shift down to smaller sizes in order to keep our sales growth going. It’s worked well.”

There’s also a really interesting interview on Time’s website with retail expert Paco Underhill.

Continue reading Blood from a wallet

Bring on the Tweets

Okay, I’m convinced. I’ve signed up for Twitter. You can access my profile and start following me at http://twitter.com/scottjagow . I’m beginning to see the potential of this thing, and the possibility that it will profoundly change journalism and business. There’s an eye-opening article in today’s Washington Post about how TV news anchors are using Twitter while they’re on the air — soliciting questions to ask guests, for example.

Continue reading Bring on the Tweets

"Slumdog" could bring fortune

It’ll be fascinating to see where this Best Picture Oscar takes Mumbai — India’s largest city and financial capital. At the very least, the success of Slumdog Millionaire will provide a short-term tourism boost. Expedia is already promoting an Oscar vacation package to Mumbai and Dharavi, the massive slum depicted in the film. But wait, there’s more.

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(Children in Mumbai celebrate the Slumdog victory)

Continue reading "Slumdog" could bring fortune

Will Blog for Food

Speaking of catharsis, I discovered this little gem of a web site today, thanks to a tip from Marketplace Money producer Eve Troeh. It calls itself the definitive unemployment blog and has sections such as the “Survivor Guide” and “Resources for the Screwed,” in case you’re looking for a job. I also found this site, which has some wonderfully simple charts like this one:

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Neighbor vs Neighbor

One reason I think the housing bailout is raising so much ire is that it pits Americans against each other. A family on one side of the street might qualify for restructuring, but their catty-corner neighbor might not. They could be in similar financial situations. Or they might have different definitions of “living within your means.” The debate in the comments section of this blog captures what I’m talking about.

If you’d like to see an in-depth, calm analysis of the President’s housing plan, you might want to watch this from the Lehrer NewsHour last night. Or if you want utter catharsis, Rick Santelli’s rant on CNBC yesterday can’t be beat. Wow.

Mall Rats

I moderated a panel last fall about the financial crisis, and one comment that stood out to me was that commercial real estate would be the big story of 2009. It appears that prediction is coming true. NPR had a story this morning about the huge mall company, General Growth Properties. GGP is in big trouble. And one ridiculous fact explains why.

Continue reading Mall Rats

We, the undersigned

One of my friends from the Buffalo, NY area sent me a petition to sign this morning. It’s a request that the ABC show Extreme Makeover Home Edition rebuild a home for the family who lost theirs in the Continental plane crash. Here’s the petition if you’d like to sign. I am signature 127,725. The show’s producer is aware of the request and says he’s considering it. Something else struck me about this.

Continue reading We, the undersigned

Liquor and gambling, that's the answer

Cities and states are desperate for revenue, and I think they’re starting to crack. Georgia’s having a debate about whether to begin selling booze on Sundays. Opponents say it would be “one more tear” in the state’s moral fabric. Yesterday, Philadelphia officials debated whether to charge an admission fee to people thrown in jail.

Continue reading Liquor and gambling, that's the answer

Gotta have more bailout!

Remember the Saturday Night Live sketch with Will Farrell and Christopher Walken? Walken plays a famous record producer, and he keeps telling band member Farrell that he needs more cowbell. He can’t get enough cowbell. “I’ve got a fever, and the only prescription is more cowbell!” It’s truly hilarious, but for some reason it makes me think of the current situation, and the laughter turns to sobbing.

Continue reading Gotta have more bailout!

The Countrywide Rap

Countrywide’s reputation is in the toilet, so Bank of America is flushing that name forever. The company will now be called Bank of America Home Loans. But if you need a good scream, you can still watch the old “Countrywide Can” ads on Youtube. I can’t remember a more infuriating campaign, especially in hindsight. Somebody made a very catchy rap song about it. A sample of the lyrics:

No money, no worry, refinance and get cash out in a hurry. Need to refi man.

So if you need to get a loan, you’re not alooone. Pick up the phone. Call Countrywide and welcome home.

Man, I love recession art.

You go, Sweden

The board of car company Saab is reportedly meeting right now to go over the details of reorganizing. This move is short of bankruptcy but would grant Saab protection from creditors. Saab, as you know, is owned by GM, and GM was hoping the Swedish government would step in and rescue Saab from its perilous situation. The Swedes are saying no way, Rick.

Continue reading You go, Sweden

A cool drink of (ocean) water

A start-up company that specializes in taking the salt out of seawater just announced a $10 million round of venture capital. Oasys claims it can produce drinkable water at half the cost of current desalination methods with a new patented process. This could be a huge breakthrough, considering the water shortage issues around the world. I mean, if we can drink the ocean for a reasonable price, we’d be set, right? This picture, though, just makes me think of too much saltwater up my nose.

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The housing plan is out

President Obama unveiled his plan for the housing market this morning. Here’s a detailed article from Bloomberg about the proposal, but I’ll also give you an abridged version. The plan is worth $275 billion and there are three main components:

Continue reading The housing plan is out

A thousand words

Here’s my picture of the day. It was sent to us by a listener who heard the story by Marketplace’s Amy Scott about Greenwich, Connecticut — home to many Wall Street bankers. The listener says he saw this ad in a Connecticut train station yesterday. No further explanation required.

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A landmine isn't combat-related?

This week, Marketplace is paying special attention to military families. Our weekend program, Marketplace Money, airs “Debt of Service,” an hour of stories about money issues facing soldiers and veterans. On this evening’s Marketplace, reporter Jeff Tyler looks at how the military may be shortchanging people on disability benefits. The process vets have to go through is complicated and frustrating, and you’ll hear why. One thing Jeff doesn’t get into in the story that’s also an interesting issue is the new definition of “combat-related.”

Continue reading A landmine isn't combat-related?

Getting lots of Mc-Lovin'

Does it bother you that the big winners in this recession are Wal-Mart and McDonald’s? Yesterday, Wal-Mart said sales set a record last quarter, and today, Mickey D’s said it plans to open 500 new stores in China. No one’s expanding like that in this economy! A lot of people loathe these companies, but they are very good at what they do.

Continue reading Getting lots of Mc-Lovin'

I'm all a-Twitter

I don’t know how much longer I can ignore Twitter. I’ve tried to stay away. “Micro-blogging” sounds like a major time-sucking activity to me. But on this particular day, I can’t seem to avoid intriguing stories about Tweeple Tweeting in Twitterville.

Continue reading I'm all a-Twitter

The banks are a bear

The banks that are too big to fail sure do have small stock prices. Bank of America, $5. Citigroup, $3. Wells Fargo, $14. And investors are still dumping them. Bank shares are a big reason Wall Street’s flirting with lows from last November — bear market lows. The Dow’s below 7,600 today. Ouch.

As for banks that are clearly not too big to fail, thestreet.com has a new interactive map where you can see all of the bank failures from the past year. They’ll be adding to it, I’m sure.

"Inside the Meltdown"

Tonight, the PBS show “Frontline” airs an episode called “Inside the Meltdown.” It looks back on the scary days of last summer and fall — the Bear Stearns collapse, Lehman Brothers, AIG, the Bailout. I haven’t seen it yet, but the Boston Globe calls the show “an indispensable primer on the financial carnage.” It includes interviews with former CEOs, economists and journalists like Joe Nocera from the New York Times:

If you bail somebody out of a problem they themselves cause, what incentive will they have the next time to avoid making the same mistake?

I’m a documentary hound anyway, but “Inside the Meltdown” sounds like it’ll be an hour well spent.

No wine before its dime

Reuters has a story today about two wine investment funds. The Noble Crus Fund returned more than 20% to investors last year, but the Vintage Wine Fund lost 33%. The difference? Noble Cru invests mainly in older French wines from the Burgandy region. Vintage invests primarily in younger wines from Bordeaux. Younger wines swing in price a lot more, and Vintage says it’s also getting whacked by currency fluctuations. I’ll dispense with the obvious analogies to wine and age and instead offer this old quote: “I like best the wine drunk at the cost of others.”

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Work on your technique, kid

EA Sports just announced a strange move. It’s getting into children’s sports equipment. EA will partner with Toy Island to make footballs, basketballs and hockey pucks that talk to kids. Sensors inside the equipment determine what the ball says. If the kid is using the right technique, for example, the ball might cheer. I doubt the ball will say, “You throw like a girl.”

Continue reading Work on your technique, kid

The Housing Conundrum

The President will sign the stimulus bill into law today in Denver. Then, he’ll focus on the housing market, with some kind of announcement coming tomorrow in Phoenix. He’s discussed several proposals for helping people who can’t pay their mortgages or won’t be able to pay much longer. I’ve read some interesting opinions about this issue. It’s a very touchy subject for most people.

Continue reading The Housing Conundrum

Whew... what a week

Between Congress and the Treasury, there was a lot to stomach — a thousand-plus pages and $2-3 trillion in solutions for the economy. On Marketplace Money this weekend, our Senior Editor Paddy Hirsch compares the stimulus and the bank bailout to the two barrels of a double-barreled shotgun. The President’s been handed the gun. My question is — what or who gets shot? He’s obviously targeting the recession and the joblessness and the lack of confidence in the markets. Here’s hoping he has good aim with all that money.

Besides doing this blog, I’m hosting a podcast called After the Bell - there’s a new one every Friday. If you want to make sense of what happened during the week and listen to some great Marketplace radio, this is your podcast! You can get it here.

Enjoy your weekend.

Gas Prices 101

I was on the phone with my parents last night, and my Dad was grumbling about the price of gasoline. Why is it, he asked, that oil prices keep dropping and gas prices keep going up? His answer was that energy companies have us by the uh… shirt collar. We talked about refining capacity, blah, blah, all the things you hear about when it comes to this. But I wanted to understand it better. So I called this guy in Texas who writes about energy issues. His name is Robert Bryce.

Continue reading Gas Prices 101

The Cliche Crunch

See how many cliches you can spot in this blog post. The current economic climate has spawned a new wave of cliches, starting with the ever-present Credit Crunch. It’s happening on Wall Street and it’s happening on Main Street. Even in Britain, new eye-rolling jargon has invaded the office, according a story this week in The Telegraph. Let me take a high altitude view of this situation and explain how we handle things at Marketplace.

Continue reading The Cliche Crunch

This is Spinal TARP

While it doesn’t look good for President Obama to have cabinet nominees backing out on him, I suppose it’s better than having them take the job half-heartedly. In withdrawing as the nominee for Commerce Secretary, Republican Senator Judd Gregg said he was a little too conservative to play for the Obama team. Thankfully, none of these nominees was involved in a bizarre gardening accident or spontaneously combusted, a la the string of drummers for Spinal Tap. But Paul Kedrosky points out the eerie similarities in his financial blog, Infectious Greed.

A lot of Hocus Pocus

If you’re superstitious, 2009 could have you on edge. Today is the first of three Friday the 13ths. If you’re stock investor, you’re already on edge, so how can Friday the 13th make things any worse? Here’s some historical data on the Dow’s performance on all Friday the 13ths. Turns out, things aren’t that bad, but I wouldn’t want to see this today:

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Housing plan coming together

Stocks are having a late rally because of this news from Reuters. The story says the President is working on a new program for homeowners that is quite different than anything we’ve seen. Under the plan, mortgage companies would use a “standardized test” to determine the borrower’s situation even before they become delinquent. And the “before” part is the critical difference. If the homeowner qualified, they’d be able to restructure their loan and hopefully avoid late payments, not to mention foreclosure.

Really, Mr. Greenspan?

Tonight, CNBC airs a two-hour documentary on the economy’s collapse called “The House of Cards.” It includes comments from former Federal Reserve Chairman Alan Greenspan. Greenspan says he was baffled by what was happening in the subprime mortgage market until late 2005, when it was too late. Greenspan is often blamed for letting interest rates sink too low for too long, but he says if the Fed had stepped in, the outcome would have been painful:

“We could have basically clamped down on the American economy, generated a 10 percent unemployment rate. And I will guarantee we would not have had a housing boom, a stock market boom or indeed a particularly good economy either.”

Uh, excuse me, but with all due respect, Mr. Greenspan, what in the world do we have now?

Continue reading Really, Mr. Greenspan?

And the Raspberry goes to...

Which economy is getting hit hardest by the global recession? According to this analysis from The Economist, the answer is Taiwan. Taiwanese exports dropped 44% last month. Exports to China are down 59% the past year. Taiwan is a big exporter of flat-screen TVs and semiconductors, both of which were in oversupply even before the financial crisis hit.

The phone named after a fruit

And I’m not talking about Apple. I’m referring to the pomegranate phone. This product may be old news in some circles, but if you haven’t had the pleasure of seeing it, I encourage you to give it a try. NPR did a story about it this week, which you can listen to here, but don’t go there until after you’ve visited pomegranate.com. You’ll spoil all the fun. Come back and tell me what you’ve discovered.

Mark Cuban's Stimulus Plan

NBA owner Mark Cuban is pitching his own little plan for creating jobs. You can read about it on his website. Cuban says he’ll invest in businesses, existing or start-up, that can show a profit within 90 days. The business cannot generate any revenue from ads. It has to sell something. Cuban says that’s the only way to get and stay profitable in such a short period of time. It can’t hurt, right?

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Speaking of basketball, I’m very happy to report this score from last night: North Carolina 101 Duke 87.

Ticketmaster, embrace your awfulness

Google’s informal motto is Don’t Be Evil. I think Ticketmaster should come up with one of its own: “We’re Evil, Whatchya Gonna Do About It?” Yesterday, the Justice Department launched an investigation into Ticketmaster’s proposed merger with Live Nation. You can read more about that and listen to NPR’s story from this morning here. There’s also an article in today’s Washington Post about the recent controversy over Bruce Springsteen tickets. What happened there is this…

Continue reading Ticketmaster, embrace your awfulness

Yelp, Kindle and other strange words

If you’re tired of reading about stimulus and TARPs, here are a couple of technology stories that drew my attention. One is about the new Amazon Kindle 2 digital book reader. As cool as this thing sounds, a writers advocacy group called the Authors Guild objects to the Kindle’s read aloud feature. You can read about the controversy here. At issue is whether a computer reading a book aloud is a copyright infringement. Who knew a computer reading a book aloud would ever be an issue?

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The other story involves the restaurant review site, Yelp.

Continue reading Yelp, Kindle and other strange words

I'm not listening, I'm not listening!

When I watch one of CNBC’s roundtable chatfests or when I read the avalanche of economists’ opinions on the web, sometimes I just want to cover my ears like a little kid. While I appreciate the healthy debate and respect many of these opinions, sometimes it just overwhelms. Maybe Camille Paglia has it right in her column today on salon.com when she talks about “economist fatigue:”

This one calls for tax cuts; that one condemns them. One says we’re wasting hundreds of billions of dollars; the other claims that sum falls pathetically short. A plague on all their houses!

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            (Artist Dave Coverly/Speedbump.com)

Bailouts are not addictive?

As I watched the bank CEOs testify before Congress this morning, what came to mind was the “seven dwarfs” hearing on cigarettes in 1994. The tobacco CEOs were all lined up with their hands raised in oath, and they all said nicotine was not addictive. Now, I’m not saying these bank leaders were lying or trying to mislead the public. But down the road, will we look back on this testimony and scoff?

“We are frugal,” said Wells Fargo & Co.’s John Stumpf. “We’re Americans first. We’re bankers second.”

I assume that Stumpf and his cohorts chose their words carefully, but as they attempt to regain the trust of a disgusted public, can they back up their claims?

Continue reading Bailouts are not addictive?

Write-downs explained

Marketplace’s Senior Editor Paddy Hirsch reminds me of a geometry teacher I had in high school. He just knew how to explain things in a way that made sense. And he used stick-figure drawings, just like Paddy! This is my way of telling you not to miss Paddy’s latest Whiteboard session on what the heck a write-down is.


The cost of stimulus

Two well-respected economists have a column in the Wall Street Journal on the stimulus package. Gary Becker and Kevin Murphy say Congress should think very carefully about what it’s doing. The bottom line of their argument is this:

It is very hard to spend wisely large sums in short periods of time. Nor can one ever forget that spending is not free, and ultimately it has to be financed by higher taxes.

Here’s my take on the stimulus package and the question taxpayers should be asking:

Continue reading The cost of stimulus

Sirius problems abound

Things do not look good for satellite radio company, Sirius XM. The New York Times reports that Sirius XM is considering bankruptcy. The company has a debt payment due this month that it probably can’t pay. What could happen is that EchoStar, the TV satellite company, might take over. It’s been buying up Sirius XM debt. Sirius XM shares are worthless.

Continue reading Sirius problems abound

Let's haggle!

We have this wonderful operation connected to Marketplace called the Public Insight Network. It’s the place where listeners and people in the web audience can share their experiences and possibly contribute to or be interviewed for a Marketplace story. The Public Insight people ask a lot of questions at their blog, The Trading Floor. Today, they’re asking about haggling. Have you ever haggled at a retail store? Any luck? Has the haggling climate changed with this economy? In response to their questions, I shared my own experience with haggling, which you can read here.

Hot lead, cold feet

One of the most hot-button stories we’ve seen lately is government regulations on lead in children’s products. Today, new limits on lead and phthalates took effect, but there’s still a lot of confusion and apprehension about what this means for companies that make toys, clothes and anything that kids consume. Marketplace reporter Mitchell Hartman has been following this story, and frankly, it has been following him. He breaks it down really well and provides some good links.

Continue reading Hot lead, cold feet

Not a good sign

The Treasury’s bank bailout plan part Deux is out, and Wall Street isn’t impressed. The Dow fell 250-300 points after Treasury Secretary Tim Geithner laid out the rescue path. You can read more about it here (Bloomberg) or here (WSJ). We had a lively discussion about it at the Marketplace morning meeting.

Continue reading Not a good sign

Put this in your browser and read it

As part of the Treasury plan, the government is launching a new website : www.financialstability.gov. There’s nothing much on there yet, but it’ll be the place to find out who’s getting money from the bailout and what they’re doing with it. All contracts will be posted on this site. Even if the government’s plan is awful and doesn’t work, at least we’ll know what’s going on. That’s been a problem so far. Information is power, baby!

More of the same?

The Treasury Department will unveil its latest bailout plans in a couple of hours, so we won’t need to speculate anymore. But here’s an interesting interview with economist Tyler Cowen in The Daily Beast. Cowen’s concern is that the Treasury is still taking a piecemeal approach to solving the bank issue and that the new administration has no real conviction about its vision, beyond wanting to restore confidence in the markets.

A finger in the dike is better than nothing. But it’s not a great place to be.

Cowen says the piecemeal approach might work IF the banks are mostly okay. If large numbers of them become insolvent (the truly ugly scenario), then we’re talking trillions of dollars in losses and the government won’t be able to stay in the game. Makes sense. As Cowen says, “the fire department is there because your house might burn down, not because you think it will.”

Just a few thoughts

I jotted down some notes from the President’s news conference this evening - no great revelations, but some things that gave pause or were reassuring…

Continue reading Just a few thoughts

Hut, hut, what?

It doesn’t seem like a good time to start a professional sports league, but Nancy Pelosi’s husband thinks it is. The United Football League said today it will start playing in October. The House Speaker’s husband, Paul, is a major investor. So is Google executive Tim Armstrong and investment banker Bill Hambrecht. I suppose these people think competing with the NFL in the fall is easier than oh, I don’t know, playing the stock market? Hmmm. Tough call. Actually, the UFL isn’t really trying to compete. It believes there’s a separate market for this league.

Tickets will go for about $20. There will only be four teams to start, and they’ll play in seven cities: New York/Hartford, Las Vegas/Los Angeles; San Francisco/Sacramento; and Orlando.

Hoodoo that Voodoo

I’m picturing Ben Stein as the teacher in Ferris Bueller’s Day Off : “Does anyone know what Vice President Bush called (supply-side economics) in 1980? Anyone? Something-d-o-o economics. “Voodoo” economics.”

So, then what is this?

Blockbuster, an American company last time I checked, is handing out voodoo dolls to Mexican soccer fans in Mexico City. Fans were told to use the doll to wish for a Mexico goal when the US national team plays Mexico on Wednesday. The game is a World Cup qualifying match in Columbus, Ohio. A Mexico City newspaper provided the coupons that fans could trade in for a doll at Blockbuster.

“Hold a needle firmly between your thumb and index finger and prick slowly the part of the doll where you want to affect the opponent,” the instructions say. The back of the doll’s jersey read, “Gringos.”

Radioshack dropped out as a distribution partner for the dolls last week after learning details of the campaign. But Blockbuster stepped in. A newspaper spokesman says the promotion is a lighthearted attempt at helping Mexico, which hasn’t beaten the Americans on U.S. soil since 1999.

While I can’t condone an American company trying to put a hex on the American soccer team, this idea could have other applications. How about a bank CEO voodoo doll? Lend, I said, lend!

We're in a Repression

If you believe the International Monetary Fund, the US is already in a depression. Political leaders won’t say this because instantly people think dust bowls and jalopies and soup lines. But as Marketplace host Kai Ryssdal pointed out in our daily meeting this morning, “not every depression is Great.”

By the most basic definition, a depression is just a long recession. Maybe we’re somewhere in the middle - a Repression, if you will. Kai will have more on this subject on this evening’s Marketplace.

Earlier today, I posted a chart from Barry Ritholtz’s blog, The Big Picture. It compared job losses in all post-WWII recessions, but as Kai and a reader pointed out, it didn’t take into account the growing workforce. So, it was pure numbers of jobs not a percentage. So, Barry posted a different chart and you can see it here.

When a tax cut isn't...

If you need a visual on President Obama’s stimulus package, the Washington Post has a great breakdown of the House version. The key question being asked is - when is a tax cut not a tax cut? The answer : when it’s a credit going to someone who doesn’t pay taxes.

Mickey D Starbucks

Today, Starbucks announces its latest innovation: Becoming McDonald’s. Starbucks will offer “value” meals that combine coffee and breakfast foods for $3.95. The company isn’t calling them “value” meals - that would be unseemly - but Starbucks obviously realizes that people aren’t going to keep paying $6 for a hard boiled egg and some grapes. And McDonald’s is clearly putting it to them with their cheaper “premium” coffees. This whole thing just reinforces my prediction that Starbucks and McDonald’s are hurtling toward some kind of galactic war in the year 2030. Either that… or a merger.

McDonalds.jpg

(Scott Eklund, Seattle Post-Intelligencer)

Are You Ready?

Hello… I’m excited to be your host for the Marketplace Scratch Pad! Since this is our first day together, I have a short pop quiz. It’s pretty easy.

The blogosphere is:

  1. The layer of the earth’s atmosphere where airplanes fly.
  2. A closed ecological system in the Arizona desert powered by solar panels.
  3. The internet’s collective discourse, where people share opinions and experiences.

A blogger is:

  1. A 1980’s video game that involves jumping on lily pads.
  2. Someone who cuts down trees that start with the letter “B.”
  3. A person who provides news and commentary by writing on the internet.

Blogging is to journalism as:

  1. A nail is to a chalkboard.
  2. A cherry is to a sundae.
  3. Ask again later.

Ahhh, the last one’s a toughie. Blogging is here to stay, but it’s still a gray area for us. I believe blogging can enhance the news experience and provide a positive new outlet for people.

The goal of this blog is a healthy, respectful dialogue about what’s happening in the economy. I can’t promise to heal your 401-K, but I think we can gain a better understanding of what the heck is going on. And I’ll do my best to find “bright spots” because we cannot survive on economic doom and gloom alone, now can we?

Welcome to the Marketplace Scratch Pad.

Other details

As is usually the case with these things, details about the Treasury’s announcement tomorrow are leaking out to the media. CNBC says the government plans to open its checkbook to insurance companies. To this point, only AIG has gotten help, and that was during the panic time of last September. The Treasury’s also said to be working on a group of measures for struggling homeowners and small businesses. I’m very anxious to see what form that help takes. I’ve read a lot of angry emails in recent months with hardworking people rightly asking, “What’s in this bailout for us?”

Making 'em wait...

From what I gather, banks and other financial companies are on pins and needles about what the government will do with the second half of the $700 billion bailout. The Treasury postponing that announcement until Tuesday is a pretty shrewd move by the Obama people. The President seems to be saying: you’ll get the details on that when we pass the stimulus package. Of course, it could be that the Treasury hasn’t made its final decisions either.

But the idea seems to be that the government will create a “bad” bank in partnership with the private sector. This is all about trying to value the banks’ toxic assets, as the Wall Street Journal points out this morning:

The Treasury’s working theory for the government/private-sector partnership is that investors wouldn’t overpay, because if they did, they’d stand to lose money; but they also wouldn’t underpay, since the selling banks wouldn’t be willing to part with their assets too cheaply.

The importance of this valuation process cannot be overestimated. I met a guy in the commercial real estate biz this weekend who said, “How these assets are valued will determine whether or not we do business this year.”


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