Category Archives: Economy

Immoral Market or Incompetent Marketer?

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As you’ve probably noticed, I’m interested in the way the market operates….and how it intersects with the way we think….. our perceptions, our misperceptions,  our ethics — or lack thereof

Can you be good…. and make good?

Is conscience always tugging at your bottom-line like a whiny brat?

Should it?

The Triple Bottom Line comes up with some answers:

“It seems as if there’s a bit of angst among believers in sustainable business over the demise of Nau, an apparel company based in Portland, Oregon, that aimed to make and sell outdoor clothes and sportswear made from recycled materials using environmentally friendly business methods. “Is this a bad omen for sustainable startups?” wonders at least one blogger.

For what it’s worth, my answer is No. The failure of Nau reflects less the inherent weakness of the sustainable business concept and more a series of miscalculations made by the company’s management, most of which had nothing to do with environmentalism or social consciousness but rather with plain old business sense.

As this article details, Nau committed some of the same management blunders that have doomed thousands of other startups. They counted on a website to generate 50 percent of their sales, then dawdled over repairing the site when it proved to be awkward and difficult to use. They chose not to make their products available through traditional retailers, thereby eliminating a potential source of vitally-needed early revenue. They decided to “mute” the appearance of their logo on their garments, eschewing a powerful tool for building brand awareness and loyalty.

And most dangerously, they overspent, especially on personnel: “Among the 60 employees at [Nau’s] Pearl District headquarters, about 10 held the title of vice president or higher . . . Most hailed from large companies such as Nike.” In other words, they hired pricey talent accustomed to big-company perks and working conditions–always a risky choice for a brand-new company.”

(Read more here)

Bad Subjects On The Right Not to Drive…

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“I certainly don’t’ fault people for using cars or supporting their right to drive, because like every other critic of automobility, I recognize that there are few options for people to do otherwise. But that’s exactly the point that automobile critics are trying to make: people are significantly limited in their ability to choose between different forms of mobility. Pro-automobile advocates love to talk about the ‘right to drive’ or the ‘freedom’ to travel, but they never talk about the freedom to choose any other mode of transportation—particularly ones that don’t pollute the Earth or require an infrastructure that engulfs most of the usable public space in our cities. Pro-automobile advocates don’t like to talk about how automobile accidents are the #1 cause of death for people between the ages of 4-34, killing approximately 43,000 people a year. Nor do they address the fact that the 2.9 million annual injuries caused by auto accidents costs our society roughly $230 billion a year. Even when people aren’t getting maimed or killed, the literal financial costs of automobility are staggering. According the National Highway Traffic Safety Administration, traffic congestion collectively costs an average of $168 billion a year and the Texas Transportation Institute estimates that the 75 largest metropolitan areas experienced 3.6 billion vehicle-hours of delay, resulting in 5.7 billion US gallons (21.6 billion liters) in wasted fuel and $67.5 billion in lost productivity, or about 0.7% of the nation’s Gross Domestic Product. One would think that this raw financial data alone would surely convince people that there are better ways to simply get around. However, it’s hard to make informed decisions about transportation when groups like the Reason Institute can utilize major news outlets to push their agenda.”

More here at Bad Subjects.

Barry Dyke On the Corruption of Bank-owned Life Insurance

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“Barry Dyke, a New Hampshire investment adviser who has studied BOLI, said other banks will likely face losses. “It’s a much bigger issue,” he said.

Bank-owned life insurance had been seen as a safe place for banks to invest their capital but it’s grown increasingly risky, said Dyke, president of Castle Asset Management LLC. “What has happened is banks took a really good thing and corrupted the purpose,” he said.

The insurance writedowns is one of a number of missteps that has plagued Wachovai in recent weeks. It reached a $144 million settlement with regulators over its ties to telemarketers and has said it expects a $1 billion charge in the second quarter because of the accounting of controversial leasing tax shelters.”

More at the Charlotte Observer, from our friend Barry Dyke, whose “Pirates of Manhattan” is selling like hot-dogs at a ball game just off his own website, with no big-time New York agent, no big-time New York publishing house, no big web seller like Amazon, no big bookstore chain like Borders, or anything else but his own lung power on local radio shows. Way to go, Barry.

Brits Buying in New South Wales

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People from the UK are among the most prolific buyers of property in Australia, new figures have revealed.

According to the Real Estate Institute of Australia, Britons are third-largest group of foreign property buyers in the country, reports Homes Overseas.

Statistics from the group showed that British investors bought more than £1.27 billion worth of property in Australia last year.

This accounts for more than a tenth of the overall amount of foreign investment in Australia attracted last year.

Britons were only outnumbered by people from Singapore, along with investors from the US.

Figures showed that New South Wales was one of the main hotspots for foreign buyers during 2007, along with Queensland.

Collectively, these two regions were said to account for nearly half of the overseas investment in Australia last year.

This comes after the country was described as a “safe bet” for investors by the Foreign Property Buyer website.

Inflation-Inflicted Foreign Governments Buy the Farm…..

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Farmland, that is. To wit.:

“The Financial Times reports that Chinese companies will be encouraged to buy farmland abroad, particularly in Africa and South America, to help guarantee food security under a plan being considered by Beijing.

A proposal drafted by the Ministry of Agriculture would make supporting offshore land acquisition by domestic agricultural companies a central government policy. Beijing already has similar policies to boost offshore investment by state-owned banks, manufacturers and oil companies, but offshore agricultural investment has so far been limited to a few small projects.

If approved, the plan could face intense opposition abroad given surging global food prices and deforestation fears. However an official close to the deliberations said it was likely to be adopted.

“There should be no problem for this policy to be approved. The problem might come from foreign governments who are unwilling to give up large areas of land,” the official said.

The move comes as oil-rich but food-poor countries in the Middle East and north Africa explore similar options. Libya is talking with Ukraine about growing wheat in the former Soviet republic, while Saudi Arabia has said it would invest in agricultural and livestock projects abroad to ensure food security and control commodity prices….”

 

Read more in a fascinating article on the prospects for Asian Pacific business at FinFacts.com

(etymological note from Snopes.com)

Buying In a Buyer’s Market

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Your First Offer is Your Best Offer

This is the most counter-intuitive part of buying in a buyers market. Ordinarily sellers, or more accurately the seller’s realtor, try to create a sense of urgency to buy the house. They want you to think other people are looking, there is going to be a bidding war, you need to get your offer in today, etc. Remember, in a buyer’s market these ploys are all lies. You are the only buyer, and you can take as long as you want to buy the house. Your task in negotiating is to create a sense of urgency and panic in the seller. This is why you make your first offer your best offer.

Start with a bid at least 10% below asking price; however, it can be less if the most you are willing to pay is less. Lower your bid as follows:

***If you are actively bidding on the property, make your offers expire in 5 days. If you are still interested in the property resubmit a fractionally-lower offer after 7 days (make them sweat for 2 days.) Don’t make is so much lower as to lose consideration, but make it enough lower that the seller gets the message that they need to come to your price before it gets any lower.

***If the seller makes a counter offer, retract your offer and resubmit a lower one. Works the same as the time decay offer above. After you have lowered your offer a few times, the seller may panic and take your offer before it goes any lower. This is what you are after.

***Lower your offer $500 each time you speak with the seller’s realtor. Every time they communicate with you, they will pressure you to buy. Lower your bid each time they speak with you to send a message that their pressure is not working, and it is, in fact, hurting their client.

***Lower your offer $2,000 if the realtor uses one of the standard lies I mentioned above.

***If the realtor tells you there is another bidder on the property, immediately withdraw your offer and tell them to call you if it falls out of escrow with the other buyer. Since this statement from the realtor is almost certainly a lie, it will cause them to have to explain to their client why the only buyer around has pulled their offer.”

More at Redfin’s Real Estate forums

The Boom Follows the Boomers…DC Housing Insiders Say Downtown Prices Will Hold Up

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MB: Predictions for a year from now? Are we going to be sitting here talking about another 20 percent appreciation?
JB: I think there’s going to be a healthy seven to ten percent growth. There is a strong, healthy market here, and you have a lot of well qualified buyers who have a lot of cash.

MB: You do not think it is going to stop?
JB: It has stopped in other markets already. People forget what happened after September 11? You couldn’t give away an $800,000 house in Washington D.C. for a year. Take Columbia Heights for example. You have a lot of people who bought $350,000 condos and wanted to sell them for $450,000, but you can buy a house for $355,000. It makes no sense. That is a clear example of a housing imbalance. Where you have good housing stock at a fair market price, you will have willing buyers. That is what makes this market very healthy.

MB: What is the price per-square-foot in your various markets?
JB: The price per square foot in Georgetown is $753 but a luxury condominium in Georgetown is about $1,000. In Kalorama, it is around the $650 to $700 market, and depending on renovation it can go as high as $750. Georgetown is about 20 to 25 percent more expensive than Kalorama. Logan Circle is comparable to Georgetown and Kalorama. The condo price per square foot could be as high as $700 to $900, and Capitol Hill is getting up there, too.
CM: I have a different market them what is going on downtown. I don’t see that much appreciation next year, maybe four to six percent. There is a possibility that we might get a bump because of the construction costs, because of Katrina. I also believe that the big builders are going to divert resources. Right now they artificially keep up their supply and demand by only allowing so many houses to be sold per month because they don’t want to get too far out and they don’t have the production capacity to build any more. Because the developers are national, houses are built in factories, and are shipped and assembled on site. I think they are going to take some of that capacity away from those projects and use that to deal with Katrina rebuilding. The effect may be a bigger housing shortage, but I also see that there is an affordability problem. When our average price of a home is over $550,000 and the mean is over $600,000 in Fairfax County, some people find it very difficult to afford housing. Even though I work on the luxury end of the market place, it still all trickles up. Long term, we’re going to go up. Short term, I don’t know if we’re going to have as great as an appreciation as we have had over the past few years.

MB: And what about square footage?
CM: We’re at $250 to $300 a square foot for houses and $500 per square foot for luxury homes. That is construction price, not including land. The lots are going anywhere from $500,000 on the low end to over $1 million.
JF: My market is different because we operate in scarcity of single family homes. Chevy Chase has a building moratorium that is going to further tighten the supply. Builders are not going to want to go in there and take the risk of knocking a house down and putting up a big house. The few houses that do come on in the market are going to continue to appreciate because there is no place to go. In the last three years, the price per square foot for land has gone from $315 to $750 to $800 in prime locations. If you want to buy something in Edgemoore you are at $2 million, and that’s a tear down. In terms of the condo market, unlike Northern Virginia, we are under built to an extreme. The Adagio, in downtown Bethesda, came on the market with 90 units and sold out in two weeks with a waiting list of 3,000 people. According to the last Census report baby boomers represent 52 percent of our market in the Washington metropolitan area. The last baby boomer will turn 55 in 2020. What do boomers want to buy? They want to buy downtown locations, water properties, golf communities—any kind of a second home market. Follow the boomer and you will make money….”

More at  Washington Life.

The Only Way to Control Greedy Capitalists

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“I agree with the sentiment that society’s problems can only be solved by a select group of individuals. However, I don’t believe this select group of people is composed of well-meaning politicians, but rather greedy capitalists. Both are self-serving, but while the politician cares only about your vote, the capitalist cares about your actual needs and wants. Furthermore, a politician only has to care towards the end of the election cycle, whereas a capitalist has to care at every moment a business transaction takes place. Ask yourself this question: in a world of greedy self-serving individuals, is society better off with more politicians or are we better off with more competing capitalists?

A free market’s fruits in a particular sector of the economy produce the optimal situation where product innovation increases dramatically, wages increase proportionally, and prices lower substantially. After time, the price, product and wages in a particular sector will plateau and entrepreneurs will look elsewhere for unexploited vistas where the cycle of better products, lower prices, and higher wages begin anew.

So yes, a capitalist only cares about himself, but by extension he must care for the customer – lots of them, or someone else will. Part of that customer care is hiring the right people, and to attract them, he must care about their needs too or some other employer will.

If you want the capitalist to care about the people, if you want the capitalist to pay his employees higher wages, I have one piece of advice – compete with him…..”

More at Lew Rockwell by Todd Steinberg.

Fighting for Food: Mobs riot as food prices soar in Somalia….

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“Down with those printing the fake money!” the young men yelled, denouncing the growing number of counterfeiters who have contributed to escalating prices. “Down with opportunists!”

The Mogadishu Traders’ Union said it decided Tuesday to again accept the old 1,000-shilling notes and ordered its private security units to enforce that at the city’s main Bakara market.

“We, the big traders, have already decided to accept the old note and today we want to tell other businesses also to accept the decision,” said Abas Mohamed Duale, deputy chairman of the union.

Protests and riots over rising food prices have recently hit other nations, including Haiti, Egypt, Cameroon and Burkina Faso. The price of rice and other staples has risen more than 40 percent since mid-2007.

The Asian Development Bank said Monday that a billion poor people in Asia need food aid to help cope with the skyrocketing prices.

Soaring fuel prices, growing demand from the burgeoning middle classes in India and China and poor weather have contributed to the jump in food prices worldwide, economists say. Africa has been particularly hard-hit.

In Mogadishu, the price of corn meal has more than doubled since January. Rice has risen during the same period from $26 to $47.50 for a 110-pound sack.

The cost of food has also been driven up by the plummeting Somali shilling, which has lost nearly half its value against the U.S. dollar this year because of growing insecurity and a market clogged with millions of counterfeit notes. The shilling has tumbled from about 17,000 to 30,000 per $1…..”

More from AP.