At his press conference last night, President Obama appeared to deliver his introductory remarks without a teleprompter.
True, his trademark twin-barreled, remote controlled teleprompter was MIA, but … in the back of the room were 2 gigantic big screen TVs that scrolled the speech. Same process, different media.
Call me cruel, but I’m still waiting for somebody to kick out a plug and give us a Milli Vanilli moment ….
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Excerpted from BusinessWeek, “What Falling Prices Are Telling Us”, by Peter Coy, February 4, 2009
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Consumer prices in the U.S. fell at an annual rate of nearly 13% in the last three months of 2008. Prices plummeted for all sorts of goods, ranging from clothing to TVs to furniture.
But deflation missed big chunks of the economy. For all of 2008, college tuition and fees increased by 5.8%, followed closely by price increases for hospitals and legal services. Even fees for preparing tax returns are going up.
This inconsistency in prices casts doubt on the usual explanation for the recession, which is that it’s mainly due to the credit crunch and the resulting squeeze on demand. It also hints at why government efforts to fight the downturn have been ineffective so far.
Here’s the big idea: If the lack of demand that the Obama Administration is fighting were the only problem, you’d expect prices to fall across the board. Instead, it appears that supply—that is, oversupply—is at least as important a factor. The sectors in which prices are falling are those plagued by an excess of factories and ways to get goods to consumers, often because of huge investment in plants in China and other developing nations. Most services, in contrast, are not in severe oversupply and have domestic labor as their main ingredient. Consider this: Prices of goods fell 4.1% last year; prices of services rose 3%.
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The government’s deflation-fighting weapons—low interest rates, financial bailouts, and spending packages—can boost demand but do little to deal with oversupply. The world’s productive capacity is simply too big. That means prices need to fall further, or more factories need to close in the U.S. and abroad, or some combination of the two.
A stimulus can ameliorate the downturn, but not prevent continued contractions in the sectors of the economy where global overcapacity is the most extreme. The world is able to make 90 million vehicles a year, but at the current rate of production, it’s making only about 66 million.
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“Pricing power is now deteriorating,” says a Morgan Stanley economist , describing a “vicious circle” of declining output, prices, and profits.
In many goods sectors, prices still aren’t low enough to bring forth enough buyers. There will have to be some combination of falling prices and destruction of productive capacity before supply and demand come back into balance.
Edit by DAF
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Full article:
http://www.businessweek.com/magazine/content/09_07/b4119000357826.htm?chan=top+news_top+news+index+-+temp_top+story
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Excerpted from WSJ, “Best Buy Confronts Newer Nemesis” By Miguel Bustillo, March 16, 2009
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Finally victorious over longtime archrival Circuit City Stores Best Buy is now gearing up to fight an even more powerful foe: Wal-Mart.
Leading the challenge will be Brian Dunn, the company’s chief operating officer … His new strategy is to head off Wal-Mart Stores Inc.’s brutal price competition by giving consumers something the discounter cannot: more interactive stores, where customers can step into the world of a new videogame or see their faces captured by a high-definition video camera, instead of trolling aisles stacked with merchandise.
Analysts expect Best Buy to pick up at least half of the business of Circuit City, which closed its doors earlier this month, a victim of management and sales miscues as well as the recession.
Mr. Dunn won’t have time to celebrate. Wal-Mart has ratcheted up its once-tiny selection of big-brand television sets, videogames and mobile phones to become a fierce contender … Best Buy remains well ahead of Wal-Mart in U.S. electronics sales, but Wal-Mart is gaining in critical growth areas such as flat-panel TV sets … By contrast, Best Buy’s sales have shrunk during the recession, and it has cut inventory to compensate, perhaps too sharply …
At a meeting of store managers from the Southwest earlier this month, managers complained to Mr. Dunn that they had lost sales of flat-panel TVs because of a lack of inventory, a sore point for the chief operating officer … Mr. Dunn hopes to leapfrog growing competition from Wal-Mart by transforming the retailer’s stores into lively showrooms for the latest gadgets …
Focusing on showmanship and service to combat Wal-Mart’s low-price draw is risky in a recession where consumers are clamoring for no-frills bargains. But Mr. Dunn said he intends to win customers by matching Wal-Mart on prices, and then offering something more, building on Best Buy’s existing strategy of helping customers navigate increasingly complicated technology. The key will be making the most of Best Buy’s tech-savvy sales force, he said …
Mr. Dunn hasn’t always agreed with some of the ground-breaking changes at Best Buy; most notably, he opposed the 1989 decision to do away with commissioned sales in favor of salaried staff, which was widely opposed by sales workers who feared losing income. He now concedes it was the most important shift in company history, lowering worker costs and changing the core model of electronics retailing. Best Buy expanded across the U.S., and Circuit City eventually followed by eliminating sales commissions …
Right now, retailing needs leaders who can guide companies through troubled times, not visionaries, said Advance Auto Parts Inc. Chief Executive Darren Jackson, a former Best Buy vice president … “Brian is someone who can still command respect from the rank and file.”
Edit by SAC
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Full Article:
http://online.wsj.com/article/SB123715878814235117.html?mod=djemMM
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