Lessons for Brands in a Polarized Economy

October 6, 2008

Excerpted from BrandChannel “Best Global Brands: Lessons Learned” by Jim Thompson, September 17, 2008  

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Despite this past week, the year 2008, in general, has been an excellent one for developing nations. China, Brazil, Russia, India and other historically troubled economies continue to enjoy burgeoning middle and upper classes that are spending money on purchases they could not afford in the past.

In contrast, this has not been a good year for developed nations. The United States, and now every country tied to America’s radioactive financial service industry, is suffering because deluded borrowers and irresponsible lenders were circulating money they never actually had.

So, what can Interbrand’s 2008 Best Global Brands report teach us about the world’s top 100 brands in this bipolar global economy? Plenty.

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Lesson #1: Brand Engagement is Crucial

Here is how Merrill Lynch positions its brand online:

Merrill Lynch demonstrates its commitments to clients and shareholders through the firm’s emphasis on excellence, integrity and ethical behavior…

Though individual citizens share much of the responsibility, financial services touting a devotion to fiscal responsibility and economic viability failed to maintain brand engagement among their ranks, and the result has been a devastating collapse of trust and shivers of recession that are reverberating across the globe.

Investing in the proper training of employees so they embrace and live corporate brand attributes is a key component of branding, so it is not surprising that myopic financial service brands such as AIG, UBS, and Morgan Stanley have all dropped in Interbrand’s 2008 Best Global Brands rankings…

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Lesson #2: Luxury Brands Adjust to the Tides of the Global Economy

…Luxury brands benefit from a consumer-driven psychological buoyancy that allows them to paddle the currents that stir the global economy…

People like nice things. Unfortunately, most of us can’t afford the highest in quality, the finest in elegance, and the sleekest in design. The vast majority of the human race cannot afford a Rolex watch. However, as many economies around the world thrived during the past year, increasing numbers of people came within financial reach of luxury brands…as these demographics become accustomed to nice things, something compelling happens.

Ricca explains, “In a mature economy, a consumer’s self-confidence derives from being discerning rather than merely rich. Subtle details, which add depth to the product experience, are not within reach of the wealthy, but the wealthy cognoscenti.” Indeed, being able to afford Iranian caviar, and being able to deconstruct Iranian caviar, represent two different levels of experience with the luxury-brand lifestyle.

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Lesson #3: Know Thyself and Build Trust in Others

Branding communicates a set of values and promises to customers. When a brand delivers on those promises, trust is created, and a relationship based on shared experience and loyalty ensues. That bond is vital to brands, particularly when the economic climate sours and consumers shift their spending habits.

As the 2008 Best Global Brands Executive Summary states, “The uncertainty of a downturn drives consumers to want more for their money and demand a more emotionally rewarding experience for their hard-earned and limited cash.” In such times loyalty often competes with necessity. “It’s no longer a choice between Nike or adidas shoes. The question becomes, ‘Do I buy shoes or an iPod?'”…

Brands that have and continue to consistently build trust with consumers are better off in tough times than brands that seek to capitalize on the latest trend or exploit the sincerity of the moment…

Brands who aren’t true to who they say they are can be more susceptible to outside forces and peer pressure from changing markets and emerging trends. There is a difference between being thoughtful, engaged, and flexible, and simply being something you are not. Like trustworthy.

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Lesson #4: Brands are Defining Borders in the Global Economy

…With the incredible expansion of international commerce and advances in transportation over the past 100 years, immigrants—both legal and illegal—have become the blood coursing through today’s economic circulatory system. The phrase “Made in _____” should be expanded to say “Made in _____, by _____.” For example, “Made in the U.S.A., by Mexicans.” …Or even “Made in France, by some Algerians, four Russians, a Brazilian, and nine Saudi Arabians.”

Dr. Häusler explains that when consumers around the globe think of fine “Italian” menswear, they aren’t thinking of Italy, the actual country, at all; they are, in fact, collectively thinking of Italian brands such as Armani, Brioni, and Ermenegildo Zegna…Though particular nations may benefit from the halo effect of these brands, which is certainly warranted, credit should be attributed to the brands for the quality of their products and their admirable unwillingness to compromise the brand values that consistently ensure quality.

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Lesson #5: Technology Continues to Empower the Consumer

…Understandably, a brand’s worst nightmare is of being hijacked by disgruntled customers with plenty of attitude, heaps of time, and a high-speed Internet connection.

Brands, however, must respect social networking. Corporations spend millions of dollars on marketing research to understand what their customers, and potential customers, are thinking. With the Internet today, that information is everywhere.

Brands must deal with positive feedback by being grateful, intelligent, and gracious, reaching out to loyal customers and building mutually beneficial relationships with prospective ones. Negative feedback should be treated deftly and honestly, and never create the impression of being defensive, paranoid, or dismissive. How a brand reacts to negative feedback and criticism speaks volumes about its values, ethics, and maturity. Above all, respect the power of pedestrians on the Web…

After all, brands that don’t value input from their customers don’t have much value themselves.

At least that is what online consumers are telling us. 

Edit by SAC

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Full article:
http://www.brandchannel.com/start1.asp?fa_id=441

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Watch out Bud, Pepsi Wants to Win

October 6, 2008

Excerpted from the Wall Street Journal “PepsiCo Seeks to Raise Stakes on Super Bowl Ads” September 24, 2008

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When it comes to pumping out Super Bowl ads that score well with viewers, Anheuser-Busch is widely acknowledged to be the master. This year, PepsiCo has a new tactic to steal some of the brewer’s limelight.

The snack-and-beverage company is offering $1 million to anyone who can create a Super Bowl commercial for its Doritos tortilla chip brand that trumps all other ads in viewer rankings during the gridiron matchup…

By dangling a $1 million prize, it hopes to dominate the months of pregame buzz, which many public-relations and ad executives say is far more valuable than winning the myriad Super Bowl ad polls.

This has become a critical way to help offset the high costs of advertising during the Super Bowl. Ad time for this season’s game is selling for about $3 million for 30 seconds, up about 10% from last season.

To top the polls, PepsiCo’s consumer-generated ad would have to outperform the King of Beers, which has won the top spot for the past 10 years in a row, thanks in part to a highly detailed pregame ritual. Its formula involves multiple ad shoots and pregame focus groups around the country to measure viewers’ minute-by-minute reactions to its spots…

Doritos’ marketers are trying to revive the excitement they created at the Super Bowl two seasons ago with a contest inviting consumers to submit their own 30-second ads for the famous triangular chip. It marked the first time marketers used consumer-generated ads at the big game…The contest generated $36 million in free publicity for Doritos before and after the game…

Now, Doritos’ marketers face the challenge of finding an ad that will stand out at a time when consumer-generated advertising is no longer a hot trend.

“The newness that made it special in 2007 is gone — now it’s just another ad,” says Dave Balter, chief executive of BzzAgent, a word-of-mouth media company based in Boston. “They are trying to manufacture buzz”…

Edit by SAC

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Full article:
http://online.wsj.com/article/SB122221123298169049.html

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Tax hikes won’t impact you if you’re in the 95% … or will they ?

October 3, 2008

Excerpted from WSJ: “The Tax Issue Still Resonates”, Karl Rove,
Oct. 2, 2008

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Conventional wisdom says tax cuts have lost their political power. One reason offered for the alleged decline of tax cuts as a potent issue is that since 2000, tax cuts have taken 13 million filers off of the income tax rolls. Today, one-third of all filers have no federal income tax liability and nearly 40% of all federal income taxes are now paid by the top 1% of taxpayers (60% by the top 5%). The fewer people who are paying taxes, the fewer people who care about tax cuts, or so goes the reasoning.

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In a July 2008 Pew Poll, 52% of Americans said it was “difficult to afford” taxes. By comparison, 46% said the same about health care, 49% about home heating/electric bills, and 38% about food.

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Obama says that only the top 5% will pay higher taxes under his proposals.

But, nearly three out of every four filers who’ll pay higher taxes under a President Obama are small businesses, the source of most new jobs and growth.

An Urban Institute-Brookings Institution Tax Policy Center study found that 73% of the filers hit by Mr. Obama’s tax increases report business income — i.e., they are small business owners. His tax hikes will affect every worker at those enterprises.

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Ken’s POV:

The bottom line is that Obama’s tax hikes won’t impact you unless you work for a big company, a small company, or buy stuff from either big or small companies — who will simply increase prices to offset higher taxes.

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Re: Fannie and Freddie – Who said what … and when did they say it ?

October 3, 2008

Excerpted from WSJ: “What They Said About Fan and Fred”,
October  2, 2008

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A special word is in order here for Congress. Today we’re running a collection of greatest Member hits in defense of Fannie Mae and Freddie Mac.

The guilty deserve such attention because those two government-sponsored enterprises did so much to turbocharge the credit mania. By providing subsidized rates of return to global investors, they helped fuel the bubble in housing and mortgage-backed securities that is now haunting so many financial institutions.As the quotes make clear, the Members fought furiously against any attempt to make Fan and Fred less dangerous.

The Bush Administration was on the right side of this debate for eight years, as was the late Clinton Treasury. This was a scandal in plain sight that all but a few ignored.

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Worst of the Worst

Rep. Barnie Frank: I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing. House Financial Services Committee hearing, Sept. 25, 2003

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Worth reading – the complete list of quotes:
http://online.wsj.com/article/SB122290574391296381.html

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September Madness – The Wall Street Final Four (bracket attached)

October 3, 2008

For entertainment only … wagering is illegal (unless its on mortgage backed securities)

 

 

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And, it will save gas …

October 3, 2008

Excerpted from Rasmussen Reports: “53% Think Driving Age Should be 18 or Older”.September 21, 2008

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The National Highway Traffic Safety Administration reports that car crashes are the leading cause of death among those between the ages of 15 and 20.  

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Just over a week ago, the Insurance Institute for Highway Safety issued a new report urging lawmakers to raise the legal driving age to 18 … 53% of adults nationwide think it’s a good idea … 49% of men like the idea, 67% of women do.

Surprisingly, younger adults seem to take the same opinion as their elders on this question.

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When asked which age young adults should be allowed to get behind the wheel, 35% said 18 and 5% said 21.

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http://www.rasmussenreports.com/public_content/lifestyle/general_lifestyle/53_think_driving_age_should_be_18_or_older

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Who are all those bloggers?

October 3, 2008

Excerpted from Tech Crunch “State of the Blogosphere…” by Erick Shonfeld September 22, 2008

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Technorati, the blog search engine, put out Part I of its…State of the Blogosphere report this week. This year, it conducted a random survey of 1,079 random bloggers to paint a more detailed picture of just who exactly is out there blogging. Technorati has indexed a total of 133 million blogs since 2002. In terms of how many are active, 7.5 million blogs have added a new post during the last four months, and 1.5 million have been updated during the last week.

And the average blog that runs ads, according to Technorati, is actually making money:

Among those with advertising, the mean annual investment in their blog is $1,800, but it’s paying off. The mean annual revenue is $6,000 with $75K+ in revenue for those with 100,000 or more unique visitors per month.

…Who are these bloggers?…The vast majority of all bloggers (79 percent) write about their personal interests…more than half of all bloggers also write about business. While only 12 percent identify themselves as official “corporate bloggers,” a full 46 percent consider themselves “professional bloggers” (meaning that they write about their industries, but not in an official capacity). ..

And blogs continue to be read: blogs in the aggregate now attract 77.7 million unique U.S. visitors per month according to Comscore, nearly double the number of people who visit Facebook…

Edit by SAC

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Full article:
http://www.techcrunch.com/2008/09/22/technorati-survey-says-the-average-blog-makes-6000-a-year/

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Paying the piper …

October 2, 2008

Excerpted from WSJ: “Bailing Out Ourselves – Bankers weren’t the only ones who enjoyed the credit mania”, October 2, 2008

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“If banks, in spite of every precaution, are sometimes betrayed into giving a false credit to the persons described, they more frequently enable honest and industrious men of small and perhaps of no capital to undertake and prosecute business with advantage to themselves and to the community.”

So wrote Alexander Hamilton in 1790, amid an earlier populist backlash against American bankers. Hamilton didn’t hesitate to use the powers of the Treasury to calm markets amid a speculative panic for the good of the larger community. The U.S. is at another Hamiltonian moment, if Congress has the nerve to act in the national interest.

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We are told this is a “bailout for Wall Street.” But if Americans are honest with themselves, they will admit that bankers are far from the only cause of our current predicament.

The U.S. is living through the aftermath of a classic credit mania, one that all of us enjoyed while it lasted. We don’t remember many protests when home prices were rising by 15% a year, or when interest rates stayed at 1% for a year and real interest rates were negative for far longer.

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Our point isn’t to absolve Wall Street or Washington — far from it. The point is that credit manias are by their very nature societal, which is why the panics that follow can do so much damage to Americans outside the financial arena. They are part of a larger psychology that sweeps everyone up in euphoria for a time, only to send everyone into a defensive crouch when the credit stops.

The challenge at such a moment is to prevent a panic from becoming a crash that does far more extensive damage. This is where we are now, and this is why the House should pass the bill that passed the Senate last night, even with its flaws. The government needs the power to use public capital to defend and stabilize the financial system. In that sense, we are really bailing out ourselves.

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Credit markets are ceasing to function by any normal standard, with banks refusing even to lend to one another, much less to credit-worthy borrowers on Main Street.

Yesterday, the Institute for Supply Management’s manufacturing index reported its largest one-month drop in 24 years. While at 43.5 the index remains above the recession level of 41, the credit vise may soon guarantee one.

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Fannie Mae and Freddie Mac … those two government-sponsored enterprises did so much to turbocharge the credit mania. By providing subsidized rates of return to global investors, they helped fuel the bubble in housing and mortgage-backed securities that is now haunting so many financial institutions.

The Bush Administration was on the right side of this debate for eight years, as was the late Clinton Treasury. This was a scandal in plain sight that all but a few ignored.

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The Paulson plan isn’t what we would have drawn up. It will not by itself inject capital into troubled banks, and it carries risks in how Treasury will price toxic assets when it buys them. But it is one more policy tool at a time when something needs to be done, and it is the only one currently up for a vote. Passing it won’t by itself revive the banking system, but defeating it will guarantee far more damage to far more Americans.

In this sense, too, the votes this week in Congress are about bailing out our political class from its own embarrassing performance. Americans are anxious, even frightened, about the financial system. They are looking for leaders who will act to defend it.

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Full article:
http://online.wsj.com/article/SB122292003161497455.html

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Ken’s POV:

The bailout simply closes a loop.  The government ‘encouraged’ lower mortgage loan qualifying criteria with the Dem’s Community Reinvestment initiatives and Bush’e Ownership push.  Now, the government will be stuck holding the bad paper that it thought it was feisting off on the banks.  It would be poetic justice if the government weren’t playing with our money.

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Sticking with Your Strategy

October 2, 2008

Excerpted from Harvard Business Online, “Why the Mortgage Meltdown Hasn’t Burned These ‘Square’ Lenders”, by Bill Taylor, September 11, 2008

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How do you keep your head when all those around you are losing theirs? This has become a defining challenge for leaders in an age of technology bubbles, private-equity overreach, and, most recently, the mania (and meltdown) in the mortgage market.

What can we learn from this heartache and misery? The most valuable insights come from those few leaders who refused to be seduced by the promises of fast growth and easy profits.

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One case in point is Hudson City Bancorp, a 140-year-old company based in Paramus, New Jersey that has managed to avoid the mortgage meltdown and continues to post tremendous results. Business journalists have discovered this quiet little outfit and marveled at its strategic insights. Its shares are up 50 percent since last August, when the credit crisis really kicked in. (A leading index of bank stocks is down 40 percent over the same period).

“Hudson City banks the old-fashioned way,” Newsweek marveled. “It takes deposits and makes mortgages to people who buy homes in which they plan to live. And then it hangs on to” the mortgages, rather than sell them in the secondary market.

Imagine the brilliance! Take deposits. Make sensible loans. Repeat over and over again, until your market cap approaches $10 billion.

The New York Times tried to unpack the secrets of Hudson’s success and offered this analysis: “The bank carefully screened loan applicants to ensure they would be able both to afford a new house and reside there, rather than flip it. And the bank demanded hefty down payments…as a cushion against any sharp drop in home prices, because it planned to hang on to the loans.”

What a formula! Make sure borrowers can afford their loans. Insist that they make a big down payment. Favor owners over speculators.

Hudson City’s mindful approach to banking only looks remarkable because so many established banks lost their minds. ING Direct, a cutting-edge banking innovator, also managed to avoid the march of folly in its industry. The bank avoided the subprime meltdown because it stuck to simple, plain-vanilla mortgages rather than exotic instruments that sounded too good to be true (and were). The bank has written 100,000 mortgages worth $26 billion and has a grand total of 15 foreclosures. Not 15 percent, just 15 mortgages out of 100,000.

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These successes speak to one of the unappreciated elements of strategy and creativity:

Sometimes, the most important form of leadership is resisting an innovation that takes hold in your field when that innovation, no matter how popular with your rivals, is at odds with your long-term point of view. The most determined innovators are as conservative as they are unique. They make big strategic bets for the long term and don’t hedge their bets when strategic fashions change.

Edit by DAF

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Full article:
http://discussionleader.hbsp.com/taylor/2008/09/why_the_mortgage_meltdown_hasn.html?cm_mmc=npv-_-WEEKLY_HOTLIST-_-SEPT_2008-_-HOTLIST0929

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Building Better Customer Loyalty

October 2, 2008

Excerpted from Wall Street Journal “Rewards that Reward” by Jean Halliday September 17, 2008

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Used by businesses for more than 25 years, loyalty programs aim to entice consumers to make repeat purchases by offering them rewards — things like discounts on future purchases or points toward free airline tickets.

Since companies continue to expand them, one would think loyalty programs are powerful tools for boosting market share. Our research indicates many aren’t, at least not as designed.

The biggest problem with loyalty programs, we would argue, is that most retailers adopt a one-size-fits-all approach: They use monetary rewards to encourage repeat purchases. But product discounts won’t change buying behavior in the long run in shoppers who value things like personalized service, convenience or shopping pleasure more. These types of consumers may change their behavior to access the price promotion, but they likely will revert back to their regular brands or buying habits shortly thereafter, resulting in, at best, a temporary change in sales and market share.

Loyalty programs also seem to be mainly of interest to existing customers — the heavier, more frequent, more loyal buyers of the store, who tend to live closer to it…

A more effective way to woo customers and maintain their patronage is to offer them individualized rewards, based on what they value. By offering different types of rewards to different groups of shoppers, companies set themselves apart and give people a reason to keep coming back…

Here is how to build a loyalty program with the best chance of paying off:

Group customers according to purchase motivations…

Increase intrinsic rewards; decrease extrinsic ones…

Determine if customers perceive a loyalty program’s rewards to be valuable…

Weigh other factors that may influence the effectiveness of reward types…

Edit by SAC

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Full article:
http://online.wsj.com/article/SB122160028857244783.html

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Krispy Kreme doubles down … huh?

October 2, 2008

Excerpted from Chicago Tribune, “Krispy Kreme looking for hot sales in smaller stores, ice cream in latest turnaround plan”, by Lauren Shepard, September 21, 2008

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Krispy Kreme’s signature glazed doughnuts may be best hot, but its sales have been anything but in recent years. Now the chain is hoping that going cold — with its new soft-serve ice cream — will be the catalyst it needs.

The company has been trying to revive its sales for nearly three years, amid a health craze that made its glazed doughnuts an indulgence that many just couldn’t stomach.

Now industry watchers say Krispy Kreme Doughnuts Inc.’s latest turnaround plan — which includes launching the new ice cream as well as opening smaller stores and expanding overseas — still may not be enough to help the chain climb out of its hole.

“They’re trying to reposition themselves as more of a treat concept” that offers consumers desserts and indulgences, said Bob Goldin, executive vice president at food industry research firm Technomic. But “it’ll be hard to argue it’s a growth business” given trends toward eating healthier, he said.

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Krispy Kreme will begin opening smaller locations that are less expensive to build than its older “factory store” model that allowed consumers to watch the doughnuts being made.

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Another key part of the plan is the company’s new Kool Kreme soft serve, which will be featured with a toppings bar.

Whether the new offering will boost sales remains to be seen, but analysts have yet to be impressed — especially as Krispy Kreme’s competitors are trying to attract health-conscious customers with egg-white sandwiches and whole-grain pastries.

“There’s no question that Americans are changing their attitude about health as a way to add good things to your diet,” said Harry Balzer, vice president of consumer research firm NPD Group.

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Regardless of whether it speaks to consumers’ desires, ice cream may not be different enough from other products already on the market. McDonald’s Corp., for example, sells a soft serve treat for less than a dollar in some areas.

“I’m not saying it won’t work, but how are you going to compete against that?” Bob Goldin, executive vice president at food industry research firm Technomic, said. “I just don’t think that’s a product that’s going to carry that well.”

Still, he said, “they’ve got to do something.”

Edit by DAF

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Full article:
http://www.chicagotribune.com/business/chi-krispy-creme-ice-cream-sep22,0,5045476.story

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A public relations milestone …

October 1, 2008

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“A man claiming to be the spokesman for pirates holding a Ukrainian ship laden with Russian tanks said they wanted $35 million to set it free.”

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Full article:
http://www.timesonline.co.uk/tol/news/world/africa/article4836974.ece

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Ken’s POV: Since when do pirates have a “spokesman” ?

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Game-changing idea for the candidates …

October 1, 2008

Millions of baby boomers are delaying retirement because their IRAs are tanking; millions of retirees are crushed by rising energy and food costs.

Attack these two “kitchen table” issues directly:

1) Increase Social Security benefits by 10% (to help Seniors with rising living costs)

2) Make IRA withdrawal taxable at capital gains rates (they’re currently taxed at ordinary tax rates)

3) Make the first $100,000 of annual capital gains tax-free (they’re currently taxed 15% for many folks)

The last initiative would effect more than retirees, but would exclude “fat cats”.  And, the move would certainly buoy the stock market — at least a little.

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Mortgage mess: Blaming the victim ?

October 1, 2008

Excerpted from WSJ: “The GOP Blames the Victim”, Thomas Frank, Oct. 1, 2008

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“Capitalism sure is fragile if subprime borrowers can ruin it.”

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We hear from some on the right that the disaster on Wall Street was the handiwork not of those with unbridled pecuniary motives but of Fannie Mae and Freddie Mac, which were government-sponsored enterprises and therefore partially exempt from market discipline and of theoretical necessity the sole culprits.

There is no doubt that Fannie and Freddie enabled the subprime neurosis, but for certain conservatives they are virtually the only malefactors worth noting.

The dirge goes like this: Fannie and Freddie were buying up subprime mortgages, and they were doing it for (liberal) political reasons. Mortgage originators thus had no choice but to hand out mortgages like candy. Had market forces been in charge, loans would, no doubt, have been administered with (more) rigor and sternness

Bill Black, a professor of economics and law at the University of Missouri-Kansas City and an authority on the Savings and Loan debacle of the 1980s, … points out that, for all their failings, Fannie and Freddie didn’t originate any of the bad loans — that disastrous piece of work was done by purely private, largely unregulated companies, which did it for the usual bubble-logic reason: to make a quick buck.

Most of the mistakes for which we are paying now, Mr. Black told me, were actually made “by four entities that under conservative economic theory should have exercised effective market discipline — the appraisers, the originators of the mortgages, the rating agencies, and the investment banking firms that packaged the subprime mortgage-backed securities.” Instead of “disciplining” the markets, these private actors “served as the four horsemen of the financial apocalypse, aiding the accounting fraud and inflating the housing bubble.” It is they, Mr. Black says, who “turned a crisis into a catastrophe.”

Ah, but truth is no ally to a conservative with his back to the wall. So much more helpful are the trusty narratives on which the movement was built. So when we have dispatched this first canard, we learn from other conservatives that it is the sub-prime people who are to blame; that by taking out loans they couldn’t possibly pay off, these undesirable borrowers have ruined us all.

Full article:
http://online.wsj.com/article/SB122282690823092989.html

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Ken’s POV:

Bailing out greedy Wall Streeters irks most folks– me included.  So does bailing out people who lied on their mortgage application (even if coached to do so by an unscrupulous originator), who put little or no money down, and made few if any payments (some of which may have been interest only — at low teaser rates).  These folks are culpable, too.  “Keeping them in their homes” is nonsense.  What makes them “their” homes ?

Denying government’s role in encouraging the drop in loan criteria is also nonsense.  Fannie and Freddie played a  mega-role in creating the crisis.  Period.

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J&J Reacts Fast to Put People First

October 1, 2008

Excerpted from Forbes “J&J Gets Proactive About Bad News” by Lisa LaMotta, September 27, 2008

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Sometimes being proactive can be your best bet in countering a bad situation.

In an effort to be transparent, the U.S. Food and Drug Administration has been rigorous in issuing early communications to the public whenever problems, large or small, arise that are even remotely related to a drug. These early communications often come out before the FDA has had time to investigate the underlying cause of the problem, and they can have detrimental effects on a pharmaceutical company and its pipeline.

The latest drug to be part of an early communication is Johnson & Johnson’s Eprex, or epoetin alfa, which is approved for the treatment of anemia and is currently being tested in high doses to treat patients who have had an ischemic stroke. The FDA announced on Friday that it had received preliminary information from a study that J&J is conducting in Germany, which showed patients taking Eprex in high doses, about 40,000 units daily for three days, had a higher incidence of death than those in the placebo group. About 14.0% of the Eprex patients died, compared with 9.0% of the placebo group patients.

J&J is also taking a transparent approach, which seems to have limited the damage to its shares. Its subsidiary Ortho Biotech issued a statement last week informing the FDA of the abnormal occurrences in the data…The FDA has yet to determine the underlying cause of the deaths and whether it’s related to the high doses of Eprex…Shares of J&J were little changed, rising 4 cents, to $69.40.

This hasn’t had a large effect on J&J thus far, but other companies have not been so lucky. Amylin Pharmaceuticals has been under fire for deaths reported by the FDA that were loosely linked to its blockbuster diabetes drug Byetta. While the cause of most of the deaths has been attributed to factors other than Byetta, Amylin’s share price has dropped dramatically, about 39.3% since the news broke in August.

Edit by SAC

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In late 1982 Johnson & Johnson recalled over 30 million bottles of Tylenol after several bottles were found laced with cyanide in Chicago, IL.  J&J has been widely praised for its reaction, which included the recall of $100 million worth of product, heavy use of PR, and paid advertising to communicate with consumers followed by reformatted product packaging and heavy use of promotions for the product re-launch.  After dropping from 35% to 8% market share at the time of the incident Tylenol regained its market share within a year. 

The J&J Credo, which speaks to putting its people and consumers first always has guided the company’s decisions since 1943; long before the Tylenol incident of 1982 and through the Eprex situation today.   

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Full article:
http://www.forbes.com/2008/09/27/jnj-fda-closer-markets-equity-cx_lal_0926markets34.html

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Using a Downturn to Build Your Brand

October 1, 2008

Excerpted from BusinessWeek, “Best Global Brands: Gutsy marketers spend into the teeth of a recession”, by Burt Heim, September 18, 2008

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Every time a recession threatens, executives glare at the balance sheet and wonder aloud about one particular expense: brand building. Trimming the marketing budget can seem eminently sensible. After all, doing so won’t hurt product quality or, most likely, next week’s sales. As the business climate has worsened in recent months, a number of blue-chip companies have announced plans to cut marketing costs.

Then there are the other guys—companies that refuse to let tough times distract them from their long-term brand-building efforts. Sometimes they see a recession as the perfect moment to get a leg up on a weakened rival. Others strengthen their brands to ward off discount competitors. Still others feel they have a knockout new product that requires support.

“There’s always pressure to cut,” says Jez Frampton, chief executive of Interbrand, a brand consultancy, which typically advises clients to spend harder during a recession. Consumers, he argues, “are more conscious they’re spending their hard-earned money. It increases what they expect they should receive in return.”

* * * * *

Still, it requires a gutsy chief marketing officer to ask the boss to invest in something as squishy as brand-building when the economy softens. CEOs typically set marketing budgets as a percentage of expected future revenue, a number that often shrinks in a downturn. Results-hungry investors, meanwhile, want marketing money spent on activities that ring cash registers now, like promotions or coupons. Even the competition can create temptations to play it safe. Advertisers closely monitor how often their ads appear vs. the competition’s. They call this their “share of voice.” A pullback by a timid rival gives penny-pinchers an excuse to pull back while still preserving share and save money. And most companies succumb to the pressure. During the last two recessions, in 1991 and 2001, overall ad spending fell.

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Real life isn’t so simple, of course. Many factors determine whether spending into a downturn will work, not least of which is the quality of the product and the advertising. Plus, the consumer you thought you knew, pre-recession, can be almost unrecognizable. When times get tough, people reexamine old habits and brand loyalties. Their tastes shift dramatically as they cut back. “The rate of change can be phenomenal,” says John Hayes, CMO at American Express. In the past year alone, he notes, consumers have far more negative perceptions of debt and spending on themselves.

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Defensive Spending
Many companies that continue to invest in their brands during a downturn are not so much going on the offensive as playing defense. AmEx is no exception. CMO Hayes says he has been “doubling down” in recent months on messages that promote trust and security.

Often a downturn ups the ante in a defensive battle companies have been fighting for years. In such cases, pulling back is a false economy. In 2000 Kellogg’s decided to increase its advertising spending to brand its cereals as premium products and avoid being commoditized. The strategy so far has worked. In the first six months of this year, Kellogg’s was able to pass along higher ingredient costs, while many other food companies couldn’t. “We believe it’s critical, when the economy gets tougher, that people should be seeing the value of our brands constantly,” says Mark Baynes, Kellogg’s chief marketing officer. “Brands are much more than flakes in a box.”

Kimberly-Clark, which owns the Kleenex brand, is also playing defense in the U.S. To justify charging more than its rivals, Kimberly-Clark is following the usual playbook for packaged-goods companies: creating new iterations of the same product—extra-soft tissues, anyone? It’s also trying to forge a more personal connection with consumers by spending heavily online and on TV. “The worst thing you can do,” says CEO Tom Falk, “is pull in your brand-building spending and become more of a commodity.”

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Offensive Spending
Then there are the companies that go on the marketing offensive. In some cases, they are perfectly suited to hard times and simply want to remind customers that they represent good value. Wal-Mart Stores, for example, has recently upped its advertising spending and returned to selling itself as a champion of the low- and middle-income consumer.

Some companies, having reached the top, are willing to spend to stay there. Louis Vuitton plans to continue to boost its marketing budget, downturn or not. “We never change the long-term strategy because of short-term problems,” says CEO Yves Carcelle. Louis Vuitton’s aim is twofold: keeping the aspirational masses hooked on classic luggage and handbags and ensuring that fashionistas continue to see the company as edgy.

Even underdogs can show some bite during a downturn. Amid slowing sales in the U.S., Volkswagen is going after a niche its Detroit rivals have pretty much left for dead: minivans. Pushing its new Routan minivan, says VW marketing manager Brian Thomas, strikes at the soft underbelly of his rivals: The Big Three have slashed ad spending on minivans, and the entire industry is running ads promoting fuel efficiency. That makes minivans a comparatively quiet niche, one in which its theoretically easier to grab consumers’ attention.

Edit by DAF

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Full article:
http://www.businessweek.com/magazine/content/08_39/b4101052097769.htm

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The Brown Bag Comeback

October 1, 2008

Excerpt from Brandweek “Brown Bagging it Becomes Fashionable” by Elaine Wong September 21, 2008  

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Noting a shift in consumer behavior, food giants like Kraft and ConAgra are targeting new launches at lunches.

Brown bagging is at an all-time high since 2001, per the NPD Group, Port Washington, New York. Adults ages 18-and-older consumed some 8.5 billion brown-bag lunches last year (38 bagged lunches per capita compared to 35 in 2006).

Nearly 12% of lunchtime opportunities were brought from home as of the year ended February 2008. In contrast, the February  2007 figure was 11.3%. Of those polled, cost-saving was the primary motivation.

“Brown bagging has been on the rise every year we look at it,” said Harry Balzer, vp at NPD Group, Chicago. “The options available to us for carried products do make life easier than people going out to eat at lunchtime.”

The return to brown bagging has prompted food companies to reexamine their portfolio of brands…

Take Kraft, for instance. The maker of Singles cheese slices introduced new packaging for its Deli Fresh Natural Cheese slices, new Oscar Mayer thick-carved and family-sized meat varieties and a mayonnaise with olive oil this summer…

Soup maker Campbell has teamed with Kraft for a joint FSI promotion dropping this November that pairs the two companies’ staple products.

The partnership marks the first time Campbell and Kraft have joined forces in the last five years. Since the introduction of Soup At Hand, Campbell’s heat-and-go line, and microwaveable bowls, the company has seen sales exceed $250 million…

Edit by SAC

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Full article:
http://www.brandweek.com/bw/content_display/news-and-features/packaged-goods/e3ie41d3cb71a4f0067adc18265ee39ef2d

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They just don’t get it … but who are "they" ?

September 30, 2008

Excerpted from The Washington Post, “They Just Don’t Get It”, by Steven Pearlstein, September 30, 2008

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The basic problem is that too many people don’t understand the seriousness of the [financial and economic] situation.

Americans fail to understand that they are facing the real prospect of a decade of little or no economic growth because of the bursting of a credit bubble that they helped create and that now threatens to bring down the global financial system.

Politicians worry less about preventing a financial meltdown than about ideology, partisan posturing and teaching people a lesson.

Financiers have yet to own up publicly to their own greed, arrogance and incompetence. And leaders of foreign governments still think that this is an American problem and that they have no need to mount similar rescue efforts in their own countries.

In the coming weeks and months, all of these people will come to understand how deep the hole really is and how we’re all in it together.

* * * * *

Restoring real stability to financial markets will require the kind of systemic approach and extraordinary government interventions that the public has refused to authorize and finance.

In better times, the public might have put aside its reluctance in response to the strong and unified recommendation of political and business leaders.

But it is a measure of how little trust remains in both Washington and Wall Street that voters are willing to risk a serious hit to their wealth and income rather than follow their lead.

Edit by DAF

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Full article:
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/29/AR2008092902762.html

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Mr. Romney, please call your office …

September 30, 2008

I didn’t see the Sarah Palin pick coming.  But, I thought it was a masterful coup that added energy and ‘authenticity’ to McCain’s campaign.  I still like that she’s a real person who has a strong value system and a record of achievements.

But, the economy has become the issue.  With McCain and Obama flaunting their economic ignorance with naive talking points,  I find myself wishing McCain had gone boring with Mitt Romney.  He’s the only one of the current batch of politicos who has any idea how the economy works. 

Just my opinion.

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Offshore drilling ban to lapse … (I’ll believe it when I see it)

September 30, 2008

Excerpted from CNN Money: “Democrats allow drilling ban to lapse”, September 23, 2008

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The Interior Department estimates there are 18 billion barrels of recoverable oil beneath coastal waters now off-limits.

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Democrats have decided to allow a quarter-century ban on drilling for oil off the Atlantic and Pacific coasts to expire next week, conceding defeat in a month-long battle with the White House and Republicans set off by $4 a gallon gasoline prices this summer.

Appropriations Committee Chairman David Obey told reporters that a provision continuing the moratorium will be dropped this year from a stopgap spending bill to keep the government running after Congress recesses for the election.

Republicans have made lifting the ban a key campaign after gasoline prices spiked this summer and public opinion turned in favor of more drilling. President Bush lifted an executive ban on offshore drilling in July.

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Just last week, the House passed legislation to open waters off the Atlantic and Pacific coasts to oil and gas drilling but only 50 or more miles out to sea and only if a state agrees to energy development off its shore.

Republicans called that effort a sham that would have left almost 90% of offshore reserves effectively off-limits.

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Full article:
http://money.cnn.com/2008/09/23/news/economy/offshore_drilling.ap/index.htm?cnn=yes

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The Numerati – Drilling through the Data

September 30, 2008

Book review excerpted from WSJ: “Drilling Through Data”, September 15, 2008

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The Numerati, Stephen Baker, (Houghton Mifflin

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The world is buried in data, great banks and drifts of the stuff. In recent years a new technology has emerged: computer programs that will drill through it all to pick out patterns and trends — information that may be useful to marketers, politicians, employers, doctors, matchmakers or national-security analysts.

Such programs are extraordinarily sophisticated, and their creators — the “Numerati” — need to be very clever indeed. Using “data mining,” they seek out veins of useful ore in the mountains of facts that computers accumulate every day.

* * * *
In “The Numerati,” Stephen Baker offers a highly readable and fascinating account of the number-driven world we now live in.

He shows us, for instance, how political consultants, mining databases that track consumer and “lifestyle” preferences, sort us into tribes by behavioral proxy. Cat owner? Likely Democrat. NRA member? Probably Republican. Mailings and phone calls can then be targeted more accurately.

Health professionals, especially when treating older patients, are now monitoring such things as weight, body temperature and pulse by having a computer follow data streams from sensors on clothing or even from sensor-laden “magic carpets” laid around the house. Disturbing patterns prompt the computer to signal a problem.

The Numerati are taking over dating services, too. How do you find that special one in a million? By mining the data of the million. How do you improve your own chances of being found? By the same techniques that companies use to show up first in a Google inquiry — “search engine optimization,” now a flourishing industry.

The Numerati are even mining the output of bloggers, those stream-of-consciousness online diarists and self-promoters. “What makes the blog world especially valuable to marketers,” Mr. Baker writes, is “its unfiltered immediacy.” What do consumers think of your new product? What desires are still not satisfied by products of this kind? You can commission a poll or wait for the sales figures to come in . . . or you can read the blogs. Better yet, you can hire Numerati to write programs that will read them for you, since there are now more than 20 million bloggers in the U.S. alone.

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Full article:
http://online.wsj.com/article_print/SB122143747437734337.html

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Facebook’s Hidden Politics

September 30, 2008

Excerpt from the Wall Street Journal “Facebook Political Ads Test Limits” September 15, 2008 

Political parties and interest groups have long cherry-picked news stories that promote their agenda to feature in campaign ads. But some new ads popping up on Facebook take that tactic to a new level.

“AP Says: Palin Lied,” reads one ad, accompanied by an unflattering photo of the vice presidential candidate. Another ad — accompanied by the same photo — reads, “Washington Post breaks ANOTHER Palin scandal. Charging tax payers for her sleeping at home”…

Clicking on the ads takes visitors straight to a story on the Web sites of those publications…

But none of the publications cited in the ads bought them — or even was aware of them. The buyer — though never identified anywhere on the ads or on the pages that you land on after clicking on them — is the liberal group MoveOn.org. It’s the latest example of fuzziness about who’s behind what when it comes to political ads online…

Facebook says the ads comply with its policies…With Facebook’s self-service advertising system, anybody can log on to the site and create an ad. The site allows advertisers to select the text for the ad as well as a picture and the Web site to point consumers to. Most ads are bought through a cost-per-click model, so advertisers only pay if a person clicks on the ad.

Advertisers can pick specific groups of people who will see their ad, and they bid a certain amount to have their ads shown to target groups.

Edit by SAC

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Full article:
http://online.wsj.com/article_print/SB122143365240034005.html

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Macy’s Gets a Makeover

September 30, 2008

Excerpted from Fortune, “Macy’s Quest for the Fountain of Youth”, by Suzanne Kapner, September 24, 2008

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After years of losing ground to the likes of Abercrombie & Fitch in the battle for young and hip shoppers, Macy’s is considering an overhaul of its flagship Herald Square store to lure the under twenty crowd.

It entails relocating junior apparel from the fourth floor to the basement, now known as The Cellar, which would create a club-like atmosphere in the basement, complete with dim lighting and pulsating music – it could be a key part of a strategy to reverse a prolonged sales slump at the department shore giant.

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Department stores have for years been losing ground to specialty retailers, which is one reason they are called aging dinosaurs. But the name goes beyond semantics. As department stores fail to attract younger shoppers, their customer base is literally growing older.

Marshal Cohen, the chief industry analyst for market research firm the NPD Group, estimates that department stores have lost 8 percent of their market share since 2003. He attributes a good portion of that decline to the migration of teens and young adults to specialty retailers (Abercrombie, Urban Outfitters, J. Crew, etc.).

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By giving teens a separate entrance and their own place to hang out – similar to creating a rec room in the basement – Macy’s is hoping kids will feel less self conscious about shopping where their parents shop.

But should the Herald Square store find success with its subterranean experiment, Macy’s may have difficulty rolling the idea to its other 850 stores nationwide, many of which do not have basements.

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Going after the youth market has other risks, notably an alienation of core, older customers. Gap lost its mainstay thirtysomething shopper when it tried to appeal to a younger generation earlier this decade and has been in a tailspin ever since.

Edit by DAF

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Full article:
http://money.cnn.com/2008/09/24/news/companies/kapner_macys.fortune/index.htm?postversion=2008092413

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India’s Educom: computers to the classroom

September 30, 2008

Excerpted from  Forbes: “Lesson Plans: Educomp is cashing in by bringing computers to the classroom”,  September 29, 2008

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India is pouring billions more into education each year in a rush to feed its booming economy with well-prepared workers. That spells big opportunities for education businesses … that provide computer-aided lessons in schools. They’re using technology to make education more available–and more interesting–to students across the country. But the company doing the best in this market is Educomp Solutions.

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Educomp’s main business is developing and licensing digital lessons, which are uploaded onto servers provided to schools. It also trains teachers (75,000 just in the last quarter), provides vocational training to students with courses such as accounting and marketing, and offers online and in-person tutoring. “We are all about how the education sector can use information technology,” says Shantanu Prakash, the company’s 43-year-old founder and managing director.

In 2005 it began opening private schools with not-for-profit educational trusts, providing the computers, the digital lessons, the books and sometimes the land and building. It aims to start 150 schools in all over the next three years.

Educomp’s big money-maker is Smart Class, a range of interactive digital lessons with animation and graphics that’s marketed mainly to private schools because they have deeper pockets than public schools.

The multimedia lessons–it offers 16,000 so far–are based on the different curricula in place across the country and use 12 of the country’s languages. Lessons feature video images that students can rotate to see from different angles, explaining hard-to-visualize concepts such as the splitting of an atom or the structure of human DNA. Educomp has 400 people developing lessons at three sites, in the New Delhi suburbs of Noida and Gurgaon and in Bangalore.

At one of the private schools it helps run, the PSBB Millennium School in Chennai, seventh-grader Shreya Sreekumar peers into her laptop on a recent morning as her teacher walks her and her 38 classmates through a lesson on the human respiratory system. As they study brightly colored pictures of a larynx and lungs, a potentially dull biology class suddenly becomes much more engaging. “It’s a fun way of learning,” she says. Once the class is done, the teacher sends the homework assignment wirelessly to each student’s laptop.

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Educomp is expanding abroad. It entered the U.S. market last November by picking up a 51% stake–for $24.5 million–in an e-learning company called Learning.com, which reaches 2.5 million students in more than 2,000 school districts across the U.S.

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By the Numbers Education in India

$40 bil Size of the private education market.

$68 bil Projected size of the private education market by 2012.

8.9% Share of a middle-class Indian’s monthly budget spent on education.

Source: CLSA.

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Full article;
http://www.forbes.com/global/2008/0929/047.html?partner=alerts

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The bailout: Obama’s windfall

September 29, 2008

Strictly my POV:

All of the pundits are saying that the cost of the bailout will hamstring either Obama or McCain — whoever gets elected.  (see http://www.politico.com/news/stories/0908/14027.html)

McCain wouldn’t be able to cut (or hold) taxes;  Obama won’t be able to afford his expensive social programs.  I disagree — especially if Obama’s “$500 for everybody who votes for me” campaign succeeds.

First, Obama will use the cost of the program to justify even more tax increases.  The increases will hit more people and will be bigger.

Second, the $700 billion will become a permanent layer of the national debt.  It will never be paid down.  Any proceeds received from closing, renegotiating or reselling the toxic loans will simply be redeployed to other spending programs.  Think Iraq – it was originally off budget.  Now, there is talk of how to put the $10 billion per month to better use. 

Mark my words.

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MUST READ: The NY Times called the mortgage crisis … September 30, 1999

September 29, 2008

Excerpted from NY Times: “Fannie Mae Eases Credit To Aid Mortgage Lending”, Steven Holmes, September 30, 1999

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September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, Fannie Mae is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action … will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans.  

These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.

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Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

* * * * *

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.

”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

* * * * *

Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

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Full article:
http://query.nytimes.com/gst/fullpage.html?res=9C0DE7DB153EF933A0575AC0A96F958260&sec=&spon=&pagewanted=1

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Thanks to Chris Wargo, MSB MBA ’05 for the heads-up

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Young & Cynical vs. Old & Green

September 29, 2008

Excerpt from Marketing Daily “Boomers: The Greenest Generation” September 9, 2008

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While conventional marketing wisdom holds that it’s the idealistic Gen Y shoppers who are most committed to buying products that are less harmful to the environment, a new study finds that baby boomers are the greenest generation.

Both male and female groups 55 years and older are above-average users of environmentally friendly home goods in the U.S…Conversely, men and women from 25 to 34 years are among the “least likely to buy” category, compared to the national average…

One reason that older shoppers may be more committed, says Peter Meyers, ICOM’s marketing vice president, “is that they are spending more time in the store, looking at packaging and reading product claims. They know what they’re buying.”

Another possible explanation, he says, is that Gen Y is simply becoming more cynical, and is more likely not to believe a marketer’s claims.

For marketers to continue to be successful with earth-friendly claims, he says, especially with the economic slowdown, “they’re going to have to start considering price as a key issue, as well as finding ways to back up claims more clearly, to build trust.”

Edit by SAC

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Full article:
http://www.mediapost.com/publications/?fa=Articles.showArticle&art_aid=90191

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Huh? Most Adults Give Children’s Schools Good or Excellent Ratings

September 29, 2008

Excerpted from Rasmussen Reports:”Most Adults Give Children’s Schools Good or Excellent Ratings”, September 12, 2008

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81% of adults rate the performance of their children’s schools as good or excellent. Of that percentage, 47% of adults rate their children’s school as excellent.

Just four percent 4% give their schools poor ratings.

The positive grades span across both men and women, blacks and whites and party affiliation.

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However, the majority of adults (52%) think schools place too much emphasis on standardized testing.

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When it comes to , 53% say students receive just the right amount of homework …22% say students are assigned too much homework … 21% say they are not assigned enough.

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86% believe PE should be required

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Full article:
http://www.rasmussenreports.com/public_content/lifestyle/general_lifestyle/most_adults_give_children_s_schools_good_or_excellent_ratings

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Who’s Paying for CEO Excess?

September 29, 2008

Excerpted from New York Times, “Need a Job? $17,000 an Hour. No Success Required”, by Nicholas D. Kristof, September 18, 2008

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Richard Fuld, the longtime chief of Lehman Brothers, took home nearly half-a-billion dollars in total compensation between 1993 and 2007.

Last year, Mr. Fuld earned about $45 million, according to the calculations of Equilar, an executive pay research company. That amounts to roughly $17,000 an hour to obliterate a firm.

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Three decades ago, C.E.O.’s typically earned 30 to 40 times the income of ordinary workers. Last year, C.E.O.’s of large public companies averaged 344 times the average pay of workers.

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These Brobdingnagian paychecks are partly the result of taxpayer subsidies. A study released a few weeks ago by the Institute for Policy Studies in Washington* found five major elements in the tax code that encourage overpaying executives. These cost taxpayers more than $20 billion a year.

Edit by DAF

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Full article:
http://www.nytimes.com/2008/09/18/opinion/18kristof.html?ref=opinion

*IPS Report, “Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay”, 
 executiveexcess2008

IPS Site: http://www.ips-dc.org/reports/

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Been paying your mortgage, sucker ?

September 29, 2008

Excerpted from WSJ: “Rescue Includes Steps to Help Borrowers Keep Homes”, Sept. 29, 2008

* * * * *

Ken’s POV: Just imagine a non-citizen investor (e.g. a “flipper”) who lied on his mortgage application, didn’t put any money down  and hasn’t made any monthly payments.  He’ll get his mortgage adjusted.  You won’t

* * * * *
The bailout package includes more aggressive steps to help troubled borrowers keep their homes by requiring the government to do more to reduce loan balances and interest rates.

The bill calls on the government, as the owner of mortgages, mortgage-backed securities and other assets backed by real estate, “to implement a plan that seeks to maximize assistance to homeowners and use its authority to encourage the servicers of underlying mortgages, and considering net present value to the taxpayer, to take advantage of…available programs to minimize foreclosures.”

Such measures could reduce monthly loan payments for homeowners and, in theory, increase the likelihood that borrowers keep up mortgage payments. It could also slow down the growing number of foreclosures.

The modifications are designed so that the payments on a borrower’s mortgage don’t exceed 38% of gross income.

* * * * *
Although the latest plan may evoke anger among taxpayers who pay their mortgages on time, economists say helping those in trouble could benefit all taxpayers by blunting the impact of the financial crisis on the housing market and local communities.

Getting borrowers back on track could help reduce the cost of the bailout to taxpayers. In recent years, troubled loan portfolios have yielded about 32% of book value, compared with more than 87% for loans in which the borrower is current.

* * * * *
There are more questions than answers about how effective the government’s program will be. If the government buys entire loans.

Another crucial unanswered question is how many borrowers will be helped by stepped-up loan-modification efforts. “There’s a great deal of skepticism about the ability of modifications to improve the performance of loans.”

Deutsche Bank recently looked at subprime loans packaged into securities, most of which were modified in 2008. It found that roughly 35% of the loans were at least 60 days past due roughly six months after the modification.

“Investors think these loans will all redefault in a year or a couple of years and the losses will be higher.” Historically, modifications haven’t done that well.

One fear is that if mortgage companies or the government, is too liberal in offering help, more borrowers who might otherwise stay current on their loans will fall behind to get a better deal. “What we don’t want to do is undertake some kind of program that changes the behavior of those many, many people who undertake extraordinary effort to pay their mortgage and make sure they can stay in their home.”

As many as 40% of homeowners, or about 20 million households, will owe more than their home is worth by the time the housing market stabilizes.

[Chart]

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Full article:
http://online.wsj.com/article/SB122265697254684627.html?mod=article-outset-box

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Voter opposition to bailout plan creates an opportunity for McCain … does he have the stones ?

September 29, 2008

* * * * *

According to Rasmussen Reports, only 25% of voters favor the bailout plan.  Obama supporters are most skeptical of it. (More data and the link are below)  All of which creates an bold political opportunity fo McCain — as articulated by Dick Morris.

Note: Probably by the time your read this, the die will have been cast — one way or another.

* * * * *

Excerpt from: “MCCAIN’S TRUMP CARD”, Dick Morris,  New York Post, September 28, 2008

During Friday’s debate, John McCain assiduously and inexplicably avoided using the issue that might have won him the debate and the presidency: opposition to a taxpayer-funded bailout of the financial crisis.

Congress is about to pass – and the president is about to sign – a bill that the American people detest by 2:1 margins. When Americans realize that there is, indeed, an alternative to handing over $700 billion to financial institutions as a reward for their failure, opposition to the idea will swell even further.

The bailout ideas proposed by the House Republicans and trumpeted by former Speaker Newt Gingrich make eminent sense. Indeed, they make so much sense that it is as if the roles of the parties have been reversed. It is the Republicans who are demanding that the banks and financial institutions pay for their own bailout, granting them only a mixture of loans and premium-paid insurance, while the Democrats want to pass the hat among the taxpayers to buy their dirty paper.

In an unusual act of political foresight and skill, the normally dead-headed House Republican leadership has crafted a platform that can carry the party to victory in November. All that remains is for the Party’s candidate – and perhaps even its president and Treasury Secretary – to get on board. McCain can recover at the negotiating table the economy issue he lost in Friday’s debate. He needs to have the courage of his convictions and insist on a bailout without requiring taxpayer-funded purchase of defunct mortgages from failing institutions.

The difference in the bailout plans is, of course, largely cosmetic. Dead paper is dead paper whether it is on the books of the government, purchased from banks, or on the books of the banks, insured by the government. The game is the same: Through loans or grants fund the deficient debt service on the defaulted mortgages until homes can recover their value in the cyclical real estate market.

Loans are politically viable. Purchase of bad debt with tax money is not.

The Democrats and our politically-challenged president have failed to appreciate the difference between spending and lending. Treasury Secretary Paulson can be excused for not realizing it. Politics is not his thing.

But John McCain must realize the crucial distinction and must use his leverage to stop a taxpayer-funded bailout, insisting instead on loans and insurance.

* * * * *

If McCain stands firm, the Democrats will either have to pass the bailout package on their own, without Republican votes, and rely on Bush’s signature on the bill to provide a fig leaf of bipartisanship – or they will have to cave in and pass the Republican package.

Either way, McCain comes out ahead.

If he gets his way, he gets credit for the bailout. If he doesn’t, he can spend the campaign attacking Obama and the Democrats for spending $700 billion of taxpayer money.

If the Democrats don’t adopt either course and play a game of chicken with the Republicans, their Congressional status as the majority party dooms them to taking the blame for any ensuing collapse.

Voters can count. They know that Reid and Pelosi are Democrats and that they control Congress. With this power comes responsibility.

And if the Democrats do nothing – that is they fail to use their majorities to pass a bailout or to cooperate with the Republicans in adopting the GOP version of the package – it is they who will get the blame for the catastrophe which will follow.

The Democrats don’t dare take that chance.

The cards are dealt for John McCain. All he has to do is have the guts to do what he didn’t have the courage to do in the debate: Play the hand.

* * * * *

Full article:
http://www.vote.com/mmp_printerfriendly.php?id=1115

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From Rasmussen Reports, Sept. 27, 2008

The more voters learn about the proposed $700-billion taxpayer-backed Wall Street rescue plan, the less they like it.

Just 24% of U.S. voters now favor the plan first proposed by Treasury Secretary Henry Paulson [and modified by Congress] … 50% oppose it, and 25% are undecided.

72% say they have followed stories on [the financial crisis], including 37% who say they have been following the news Very Closely.

* ** * *

House Republicans, who regard the unprecedented government involvement in the financial markets as nothing short of socialism, are demanding significant downsizing of the plan and other changes.

The White House and Democratic leaders argue the plan to buy up bad mortgage debt from private firms is the surest way to free up credit for all Americans, but many GOP legislators fear the potential losses to taxpayers. Congressional Democrats are worried about voter opposition to the plan and don’t want to pass it without significant Republican support.

* * * * *

Both men and women oppose the bailout plan two-to-one. Likely McCain and Obama voters reject the plan by similar margins, although Obama supporters are slightly more skeptical.

* * * * *

Full Report:
http://www.rasmussenreports.com/public_content/business/general_business/support_for_bailout_plan_now_down_to_24

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Bailout: A checklist of Republican demands …

September 28, 2008

When the deal gets revealed — later today or tomorrow — check to see if the House Repubs had any impact on the final legislation.  If they didn’t, uh-oh.

Here’s a handy checklist of what they wanted.

* * * *

Excerpted from Rasmussen Reports: “A Paulson-Cantor Plan Is a Win-Win for Taxpayers”, Lawrence Kudlow, September 26, 2008

* * * * *

Basically, the House Republicans want a “cleaner” bill with

1. Inclusion of a federal bond insurance guarantee for straight mortgage-backed paper, financed by private-sector insurance premiums. (The “Cantor Plan”)

2. Removal of the ACORN slush fund   [Ken’s POV: Ostensibly, this provision is to provide more affordable housing to certain communities.  That’s the policy that got us into this mess to start with.  ACORN is Obama’s major mobilizer for voter registration.]

3 Removal of the so-called union proxy to run a slate of corporate directors

4. Requirement that all profits from the Treasury rescue mission must be used to reduce the national debt — 100 percent. [Ken’s POV: This is key … otherwise, the $700 billion will become a permanent layer of national debt — with any paydown simply diverted to other programs]

5. Removal of authority to  bankruptcy judges for setting mortgage terms and interest rates  [Ken’s POV: Otherwise, non-citizens who lied on their mortgage apps and never had an ability to repay loans will be getting more favorable terms than their neighbors who played by the rules]

6.  Elimination of the  so-called government equity ownership of banks … because it effectively creates a corporate tax increase on banks at a time when they are struggling.

7. Scaling back the Treasury secretary’s request for $700 billion … or at least phasing it in.

* * * * *

Full article:
http://www.rasmussenreports.com/public_content/political_comentary/commentary_by_lawrence_kudlow/a_paulson_cantor_plan_is_a_win_win_for_taxpayers

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Flawed logic ? The Real Cost of the Bailout …

September 28, 2008

Excerpted from WSJ: “What’s the Real Cost of the Bailout?”, Sept. 26, 2008

* * * * *

Assume Hank Paulson gets his $700 billion appropriation.  And, assume he then spends it all, immediately, buying up the financial toxic waste that is rapidly destroying the banking system.

How much would that actually “cost” taxpayers?

The Federal government pays just 4.34% interest on long-term, 30-year loans. So the government could borrow this money for 30 years at a cost of just $30 billion in interest per year.

To put that in context, that is about one-fifth of 1% of our gross domestic product. One-fifth of 1%.

* * * * *

Obviously, the story doesn’t just end with the interest cost. When you take out a loan, you’ve got to be able to repay the principal in due course as well.

Let’s take a worst case scenario. Let’s imagine Uncle Sam borrows $700 billion to buy these assets and never gets a single penny of it back. Let’s imagine this paper ends up completely worthless. So instead he has to tap taxpayers to pay off part of the principal every year for 30 years, until the loan is all redeemed.

How much would that cost per year?

Try $42 billion. That’s the interest and principal repayment.

That’s less than one-third of 1% of our annual gross domestic product. That’s the true, annual cost of this bailout. Not $700 billion.

And that’s the worst case scenario. That’s assuming Uncle Sam never gets back one penny on these assets. In reality, the Treasury will certainly get some of its money back and will probably get most.

It may even make a profit. Someone with deep pockets, the ability to borrow long-term money for just 4.34%, and the expertise to analyze today’s distressed mortgage market could make an absolute killing here.

Full article:
http://online.wsj.com/article/SB122245659564179649.html

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Ken’s POV

The author’s “worst case” is hardly the worst case. The worst (and most likely) case is that the $700 billion becomes a permanent layer of the national debt, i.e. any potential pay-down just gets diverted incrementally to other spending programs.  If so, the full cost of the program is the value of the perpetual annuity stream of interest payment — which is $700 billion [$30 / 4.34%].

Why is the worst case the most likely?  Think Iraq spending — the $10 billion per month.  It was originally ex-budget. Now, at least one presidential candidate is talking about repatriating the $10 billion per month into domestic spending programs.  Suddenly, ex-budget becomes on-budget.

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Marketing to hockey moms …

September 26, 2008

Excerpted from BrandChannel.com: “Do Hockey and Soccer Mom Brands Share Goals?”, Abram Sauer, September 11, 2008

* * * * *

Alaska governor Sarah Palin opened a (marketing) debate: Is hockey mom the new millennium’s soccer mom, just as soccer mom was the 1990’s version of the 1980’s super mom? Are soccer moms and hockey moms different? Is the branding that represents them accurate, or are the terms just oversimplified stereotypes?

* * * * * 

There are about 350,000 hockey players under the age of 20 in the US, and that these hockey families have a median household income of nearly US$ 100,000—which is far higher than the national average.

A soccer mom is “most likely married, aged late 20s to early 40s, probably driving an SUV; she works, Some are college graduates and some are not.”

“The demographics of hockey moms and soccer moms are very similar … Hockey moms might have a reputation for being a little tougher—perhaps due to the nature of the sport.”

Celinda Lake — often credited for coining the term “soccer mom” in the 1990s — explains that, despite an average household income of almost US$ 100,000, “Hockey moms are more blue collar than soccer moms,”

The hockey mom demographic is also called “Wal-Mart Moms.”

“Hockey moms’ respond to male communication styles—competitive, assertive, hierarchical, us vs. them. Soccer moms respond to more female communication styles—cooperative, focused on common ground, connecting and sharing values.”

There is a consensus that “hockey mom” has a more blue-collar feel: “Some have gone so far to say that hockey moms are anti-intellectual and worse.”

Paradoxically, the generalization of “soccer moms” has made many women anxious to disassociate themselves from it. 

Often, when you think of a soccer mom, you think of a mom consumed with her kids driving a mini-van. You don’t have pictures of a highly accomplished career woman, or a technologically savvy woman, or a world leader. That’s why the label is so loaded, you associate many attributes to it that may or not be true of a particular woman.

Brands looking to reach these moms need to make solid information readily available: “There’s still a perception out there that soccer moms are only online to email, do a little shopping, and perhaps visit blogs. What they do want is information. Women are going online to research everything from buying a car, to health care insurance, to planning the family vacation. They want a lot of information, not just fluffy celebrity stories.

Women often have more questions than men do, which is another reason she is going online to do research on information she can’t find in the stores or from the sales people. There’s a huge opportunity here for companies to provide answers to her questions. Because even if she shops offline, that search very often begins online.

* * * * *

Full article:
http://www.brandchannel.com/start1.asp?fa_id=440

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Where do the poor live ?

September 26, 2008

     Interesting info from the Census Department :

image

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AOL – Trying to win ’em back …

September 26, 2008

Excerpted from WSJ: “AOL Pushes to Win Back Lost Subscribers”, September 10, 2008

* * * * *

Web Portal’s Changes Are a Bid to Keep Up With How People Surf

When AOL in 2006 ditched its subscription service in favor of an advertising-based model, millions of subscribers deserted the site. Now, AOL is making its biggest push yet to win them back.

In a bid to remain relevant, AOL is unveiling a new home page as well as a slew of Web sites aimed at women, pop-culture addicts and parents of gamers.

The revamped AOL.com will for the first time let visitors access email accounts from outside providers like Google and Yahoo and will include updates from major social-networking sites and automatically personalize content for users.

The changes are an effort to recalibrate AOL’s portal model with the way people use the Internet these days.

In recent years, Web traffic has fragmented across thousands of sites and people often use multiple email accounts. But AOL was rooted in an era when most Web surfers did very little actual surfing, choosing instead to remain within the confines of a single gateway (or portal), as they read the latest news headlines, checked their horoscopes, shopped and sent email.

* * * * *

AOL still aims to be a hub of sorts, but one that serves as more of an entry point to the rest of the world than a self-contained content bubble.

Other portals, including Yahoo and Microsoft’s MSN, also provide links to third-party sites, but not access to accounts on other email or social-networking sites. AOL’s new automatic-personalization feature — where a person, for example, who looks at finance sites frequently will see finance content news featured more prominently — is also unique.

* * * * *

The big question is whether the company will be able to translate those new visits into ad dollars.

Anemic ad sales have been a big drag on the earnings. While the rest of the online ad market climbs at a healthy clip — increasing 20% in the U.S. in the second quarter — advertising growth at AOL stalled at 1.5% in the second quarter following four previous quarters of deceleration.

In particular, AOL’s ad sales growth was dragged down by a 14% slump in display ads, graphical ads that border a Web page. These ads typically are the main unit sold on a portal’s home page and can fetch some of the highest prices in the business.

For the past year, (AOL has been talking) about how traffic is not the problem, monetization is. I don’t need to be convinced that traffic can return. I just want to understand how they can convert that traffic to advertising growth.”

In an effort to address that issue, the new AOL.com will start allowing types of ads on the home page that marketers find more desirable. It will prominently feature a photo gallery and video player, which can offer ad formats that are particularly interactive and obtain higher ad rates than other more static ads.

* * * * *

AOL drew 111.4 million unique U.S. visitors in July, down slightly from the 113.9 million people that visited the site during that month last year, according to comScore Media Metrix. But the site is still fourth-largest Web site in the U.S. (by that measure).

With its relaunched home page and new content, AOL is trying to get current visitors to its home page to stay longer and also broaden its appeal.  

The revamp also marks the first major attempt by AOL to integrate Bebo, the third-largest social-networking site, which AOL acquired this year for $850 million.

* * * * * 

Full article:
http://online.wsj.com/article/SB122100183521716953.html?mod=2_1567_middlebox

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"Paulson’s Folly" or Greatest Deal since "Seward’s Folly") ?

September 25, 2008

* * * * *

Ken’s POV: I never underestimate the government’s core incompetence — its bungling inefficiency — and, philosophically, I hate to see anything get nationalized or socialized.  Nonetheless, I’m becoming a believer in the favorable economics of the Paulson Plan.  This article is the crux of the reason why.

* * * * *

Excerpted from WSJ: “The Paulson Plan Will Make Money For Taxpayers”, Andy Kessler, Sept 25, 2008 

Mr. Kessler, a former hedge-fund manager, is the author of “How We Got Here” (Collins, 2005).

* * * * *

There is a saying on Wall Street that goes, “The market can stay irrational longer than you can stay solvent.”

* * * * *

Warren Buffett is now hoping to make big money on Goldman Sachs.

My analysis suggests that Treasury Secretary Henry Paulson (a former investment banker, no less, not a trader) may pull off the mother of all trades, which could net a trillion dollars and maybe as much as $2.2 trillionfor the United States Treasury.

* * * * *

Wall Street’s bread-and-butter business of investment banking and trading stocks stopped making much money years ago. So investment banks took their enormous capital and at first packaged yield-enhanced, subprime mortgage loans into complex derivatives such as collateralized debt obligations (CDOs). Eventually and stupidly, these institutions owned them for themselves — lots of them, often at 30-to-1 leverage. The financial products were made “safe” by insurance products known as credit default swaps, a credit derivative from companies such as AIG. When housing turned down, the mortgages and derivatives were worth a lot less and no one would lend Wall Street money anymore.

Then the piling on started. Hedge funds could short financial stocks and then bid down the prices of CDOs stuck on Wall Street’s balance sheets. This was pretty easy to do in an illiquid market. Because of the Federal Accounting Standards Board’s mark-to-market 157 rule, Wall Street had to write off the lower value of these securities and raise more capital, diluting shareholders. So the stock prices would drop, which is what the shorts wanted in the first place. It was all legit.

* * * * *

In a weird twist, it’s the government that is set up to win the prize.

Here’s how: As short-term financing dried up, Fannie Mae and Freddie Mac’s deteriorating financials threatened to trigger some $1.4 trillion in credit default swap payments that no one, including giant insurer AIG, had the capital to make good on. So Treasury Secretary Henry Paulson put Fannie and Freddie into conservatorship. This removed any short-term financing hassle. He also put up $85 billion in loan guarantees to AIG in exchange for 80% of the company.

Taxpayers will get their money back on AIG. Fannie and Freddie are a gold mine. For $2 billion in cash up front and some $200 billion in loan guarantees so far, the U.S. government now controls $5.4 trillion in mortgages and mortgage guarantees.

Fannie and Freddie each own around $800 million in mortgage loans, some of them already at discounted values. They also guarantee the credit-worthiness of another $2.2 trillion and $1.6 trillion in mortgage-backed securities. Held to maturity, they may be worth a lot more than Mr. Paulson paid for them. They’re called distressed securities for a reason.

* * * * *

Now Mr. Paulson is pitching Congress for $700 billion or more to buy distressed loans and CDOs from the rest of Wall Street, injecting needed cash onto balance sheets so that normal loans for economic activity can be restored. The trick is what price he will pay.

Firms will haggle, but eventually cave — they need the cash. I am figuring Mr. Paulson could wind up buying more than $2 trillion in notional value loans and home equity and CDOs for $700 billion.

* * * * *

It’s not without risk, but the Feds, with lots of [“patient capital”] and levers, can and will pump capital into the U.S. economy to get it moving again.

  • Future heads of Treasury and the Federal Reserve will be growth advocates — in effect, “talking their book.”
  • A stronger U.S. economy, with its financial players having clean balance sheets, will become a safe haven for capital.
  • Europe is threatened by an angry Russian bear.
  • The Far East, especially China, has its own post-Olympic banking house of cards of non-performing loans to deal with.
  • Interest rates will tick up as the economy expands — a plus for the dollar.
  • A stronger economy driven by industry instead of financials means more jobs, less foreclosures and higher held-to-maturity payouts on this Fed loan portfolio.

* * * * *

My calculations, which assume 50% impairment on subprime loans, suggest it is possible, all in, for this portfolio to generate between $1 trillion and $2.2 trillion — the greatest trade ever. 

The next president gets a heck of a windfall. In the spirit of Secretary of State William Seward’s purchase of Alaska for $7 million in 1867, this week may be remembered as Paulson’s Folly.

Full article:
http://online.wsj.com/article/SB122230704116773989.html

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From good intentions to a meltdown …

September 25, 2008

Excerpted from IBD: ” Good Intentions Paved The Road To Subprime-Stoked Meltdown”, September 23, 2008

* * * * *

You need to go back — way back — to 1977, and the Jimmy Carter presidency.

It was then, for the best and purest of reasons, that well-meaning members of Congress brought the Community Reinvestment Act … “to eliminate the practice of redlining by lending institutions.”

In the 1970s, redlining” was widely seen as the cause of housing disparities between white and black Americans.

The redlining theory: Banks set up shop in low-income areas, took deposits, then lent the funds to richer areas — leaving poor and minority communities starved of housing and capital.

President Carter saw CRA as a way to end the supposed practice of redlining …  nd bringing African-Americans into the American dream.

Unfortunately, this well-intended law eventually led to a housing boom based on shoddy loan practices, a subsequent bust, and the financial mess we are in today.

Initially, the CRA was supposed to not just lend to poor areas, but to do so “consistent with safe and sound lending practices.” That latter key proviso was ignored as CRA was implemented.

The CRA forced banks and savings institutions — then, far more heavily regulated than today — to make loans to poor, often uncreditworthy minority borrowers.

Banks were required to keep extensive records of their minority lending practices. Those that didn’t pass muster could be denied the right to expand their branches, merge with other banks, or boost lending in new markets.

If a community group decided a bank was operating in bad faith, it could affect the bank’s “CRA rating” — the scorecard for how well it was doing as a minority lender.

Banks became pliable, easy targets. No bank CEO wanted to be maumaued as an enemy of the poor.

Later, in the Clinton era, Fannie Mae and Freddie Mac got involved — buying up bad loans from banks, and securitizing them for sale on world markets. The seeds of the subprime meltdown were planted.

As of last year, the homeownership rate among all Americans was 68.1% — up from 63% in 1970. For black Americans, it’s up from just below 42% in 1970 to 47.2% last year. It’s still below 50%, and still the lowest of any minority group.

image

Full editorial:
http://www.ibdeditorials.com/IBDArticles.aspx?id=307061229501695#

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Of drunken and sober sailors …

September 25, 2008

According to the non-partisan Concerned Citizens Against Goverment Waste ….

Note: A high score means the Senator voted often against wasteful spending; a low means that a Senator voted often for bills that include wasteful spending provisions.

• Sen. Barack Obama’s (D-Ill.) 2007 rating was 10 percent, making his lifetime score 18 percent. The 2008 Congressional Pig Book contained 53 earmarks worth $97.4 million for Sen. Obama, including $1,648,850 for the Shedd Aquarium.

• Sen. Joe Biden (D-Del.) received the worst possible rating in 2007 with 0 percent, while his lifetime rating is 22 percent. According to the Pig Book, Sen. Biden had 70 earmarks for a total of $119.7 million in fiscal year 2008, including $246,100 for the Grand Opera House in Wilmington.

• Sen. John McCain (R-Ariz.) received a score of 100* percent and has a lifetime rating of 88, has never requested nor received a single earmark, and has pledged to veto any spending bill that contains any earmarks.

Source: http://swineline.org/2008/08/28/pork-in-the-presidential-race/

Full report, including specific tax votes and rankings:
http://councilfor.cagw.org/site/DocServer/2007_Senate_Ratings_Final.pdf?docID=3282 

Summary data below, sorted from high (voted against) to low (voted for)

image

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Winners & losers in a carbon-lite world …

September 25, 2008

Excerpted from  HBR Green: “Winners and Losers in a Carbon-Constrained World”, Andrew J. Hoffman and John Woody, February 19, 2008

* * * * *

We live in a fossil fuel-based economy. Any alteration in the cost of those resources–both as sources of energy and as raw materials–will alter the competitive dynamics of nearly all sectors of the economy.

And as in any market shift, there will be both risks and rewards, winners and losers. Certain industries, sectors, and companies will feel the impact more than others, but none will remain untouched.

The question to ask is whether your company has an economic opportunity to be green vis-à-vis your competitors; then you must ask how and when you can take advantage of that opportunity. 

The ultimate goal of any good business strategy is to create a measure of control over your future business environment. Consider examining the following three steps as you prepare to develop a (carbon-lite) strategy.

Know your carbon exposure — how potential changes in policy and market price will affect the positioning of your products and services in the months ahead and in the long term.

Take action. Once you know your carbon footprint, reduce it.

Influence the policy-development process. Policies will set the rules of the game and change the competitive landscape, favoring certain actions, companies, and industries.

* * * * *

Some companies are adapting out of near-term operational necessity, others are acting to mitigate long-term strategic vulnerabilities, and the most forward-thinking are devising ways to profit from clean energy and efficient technology.

* * * * *
Full article:
http://www.hbrgreen.org/2008/02/winners_and_losers_in_a_carbon.html

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Adding Value to Value-Brands

September 25, 2008

Excerpted from The Boston Consulting Group, “Premium Margins from Value Brands”, by  Rolf Bixner, Holger Gottstein, Sharon Marcil, and Just Schurmann, September 2007

* * * * *

Most companies have found that succeeding with brands in both the value and premium segments without inviting cannibalization can be a tricky balancing act.

To increase sales of their value brands, some companies add features without increasing price–tempting consumers of the premium brand to trade down to the value brand.  The lower-priced, lower-margin brand cannibalizes the higher-priced, higher-margin product, and profits go out the window.

Other companies eliminate features from their value brands in order to attract customers with a lower price–putting these products in competition with generic or private-label products, which often have advantageous cost structures.  The result is a loss of profitability for the value brand.

* * * * *

Consumers seek a particular combination of price and features.  Value-brand customers are interested in and willing to pay for only a very limited set of product features (“primary features”).  Benefits that fall outside this category (“secondary features”) are not, to a value-seeking consumer, worth the price, no matter how desirable they may be to others. Yet those secondary features are very important to primary-brand consumers who are willing to pay for them.

* * * * *

To redesign value brands:

1. Identify the features that value-consumers care about the most and shed the others that add to both the costs and price without providing substantial benefit.

2. Add an “extra portion” of the qualities provided by the primary features

* * * * *

Example:

With personal vehicles, value-conscious consumers prefer extra safety features and good mileage to many of the bells and whistles that drive up cost.

* * * * *

More is not necessarily better, and sometimes it can be worse. It is the quality of the primary features that attracts the value seeker, not the total number of features.

* * * * *

image

Edit by DAF

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Full Article:
http://www.bcg.com/impact_expertise/publications/files/Premium_Margins_Sept_2007.pdf

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The 10 Richest in America

September 25, 2008

Excerpted from Forbes: “The Top 10 Richest”,  October 06, 2008

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This year the 10 richest tycoons on The Forbes 400 could buy the bottom 175.

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William H. Gates III $57 billion

  • Sells shares each quarter … more than half of fortune is outside Microsoft.
  • The $36 billion Bill & MelindaGates Foundation donates to causes such as fighting hunger in developing countries, improving education in America’s high schools and developing vaccines against malaria, tuberculosis and AIDS.
  • Inflation-adjusted net worth would top $90 billion if he hadn’t given away any cash.

Warren Buffett $50 billion — Investments.

  • Studied under value investing guru Benjamin Graham at Columbia.
  • Berkshire Hathaway holding company invested in insurance (Geico, General Re), jewelry (Borsheim’s), utilities (MidAmerican Energy), food (Dairy Queen, See’s Candies). Also has noncontrolling stakes in Anheuser-Busch , Coca-Cola , Wells Fargo.
  • Iconic investor crowned the world’s richest man in march as Berkshire Hathaway shares ran up 25% between July 2007 and February 2008. Berkshire stock has fallen 15% since, erasing $12 billion
  • Irrevocably earmarked the majority of his Berkshire shares for charity in 2006, mostly to the Bill & Melinda Gates Foundation. Has given $6 billion worth of shares so far.
  • Note: (a) Under the Obama tax plan, he’ll still be paying a lower rate than his secretary (b) By bequeating his estate to the Gates Foundation, he’ll pay zero esrate taxes

Lawrence Ellison $27 billion  — software, Oracle.

  • Database titan continues to buy up would-be competition; more than 40 acquisitions in the past 4 years.
  • Studied physics at U. of Chicago, didn’t graduate.
  • Owns 453-foot Rising Sun; built a smaller leisure boat because superyacht is hard to park.

Jim C. Walton $23.4 billion
S. Robson Walton $23.3 billion
Christy Walton & family $23.2 billion
Alice Walton $23.2 billion

  • Sons, daughter and daughter-in-law of Wal-Mart pioneer Sam Walton (d. 1992)
  • Wal-Mart is world’s largest retailer: 7,300 stores, 2 million employees serve 200 million customers. Sales: $378 billion.
  • Company become eco-friendly through partnership with environmental group Conservation International.

Michael Bloomberg $20 billion — financial services

  • Mayor Mike owns 88% of the financial data and news outfit he founded in 1982.
  • Boston-born son of accountant got engineering degree from Johns Hopkins, M.B.A. from Harvard.
  • Created financial information services firm Innovative Market Systems to sell financial data, analytic tools to Wall Street. Renamed Bloomberg LP 1987; added news service, magazine, cable network, radio station.
  • Spent $74 million to become mayor of New York City in 2001 and $85 million on reelection in 2005.
  • Has given away nearly $800 million to charity in the past 5 years; with Bill Gates, planning to invest hundreds of millions to combat smoking worldwide.

Charles Koch $19 billion
David Koch $19 billion

  • Father, Fred C. Koch (d. 1967), invented method of turning heavy oil into gasoline.Brothers transformed family refining business into America’s largest private company.  
  • Koch Industries has stakes in pipelines, refineries, fertilizer, fibers and polymers, forest and consumer products, chemical technology.
  • Sales last year: $98 billion. Employs 80,000 workers in 60 countries.
  • Charles: studied nuclear and chemical engineering at MIT, cofounder of conservative think tank Cato  David: Chemical engineering degrees from MIT; pledged $100 million to alma mater for cancer research last year. Pledged another $100 million to New York’s Lincoln Center this July.

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Full article:
http://www.forbes.com/forbes/2008/1006/046.html?partner=alerts

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Bailing out Main Street … not so fast

September 24, 2008

Excerpted from RealClear Politics.com:”The Mortgage Mess Began on Main Street”, Steven Malanga, September 24, 2008

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Ken’s POV: Should foreclosed speculators be bailed out?  No.  Should folks who lied on their applications get bailed out?  No.  Should folks who made no downpayment — and sometimes no payments at all — be bailed out?  No.  Should folks who couldn’t qualify for conventional loans then (or now) — about 80% of all subprimes — get them at favorable rates now? No.  Should honest, hardworking folks who got duped or are experiencing some extraordinary hardship get relief?  You bet.  Wonder how many of them there are ….

Here are some facts …

* * * * *

Article Extract:

Journalists like simple stories with clear-cut villains who are easy for readers (and journalists themselves) to recognize. And so, as the financial crisis has brought Wall Street to its knees in recent weeks, it’s become so much easier for journalists to cope. Time Magazine, for instance, tells us in its current issue that Wall Street “sold out” America.

It’s easy to forget that this mess began with a heap of bad mortgages made by American consumers who never came within a hundred miles of the card sharps on Wall Street. The inability (and in a good deal of cases, the unwillingness) of these same ordinary Americans to pay back these loans, many of which are sitting in mortgage backed-securities held by institutions around the world, helped tilt us toward this systemic threat to our financial system. And even as we focus on bad bets and lousy leverage ratios on Wall Street, these toxic mortgages continue to unwind, and as they do, we are getting a better look at how they were made—and it’s not pretty.

If it wasn’t clear before, it should be now, that speculation and fraud—much of it on the part of borrowers—were rampant.

* * * * *

The FBI says that reports of suspicious mortgage activity increased by 10-fold from 2001 through 2007.

70 percent of subprime loans that default before they reset (exactly the kind that trouble the market right now) contain some kind of misrepresentation by the borrower, lender or broker, or some combination of the three.

* * * * *

One big category of deception has been so-called ‘no-doc’ loans, where a borrower agrees to pay a slightly higher interest rate in exchange for not documenting his income. Originally designed for the growing number of self-employed workers in America who don’t have ready documentation from an employer, these mortgages became known as ‘liar loans’ because many people without sufficient income used them to qualify for financing they otherwise couldn’t get. One lender that compared what 100 applicants claimed as income on no-doc loans to what they reported to the IRS on their tax returns found that in 60 percent of cases borrowers were exaggerating their income by as much as half.

* * * * *

Fraud reports are most common on properties near the coastlines, that is, in places where there is an enormous amount of speculation and where many purchases are for investment purposes.

Speculators are a big part of the problem. As the housing market rose, more people got into the game of betting on higher prices by purchasing homes which they intended to flip quickly without ever occupying. As this became a popular form of investing, applicants starting lying about their intentions. They were trying to fool developers who grew wary of selling too many homes in new developments to people who would never occupy them, since these are the buyers most likely to walk away from a mortgage when the market turns down. This form of misrepresentation accounts for 20% of mortgage fraud.

* * * * *

Whether they were cheating or not, speculators clearly played a big part in the mortgage mess. The vast majority of delinquent mortgages and homes in foreclosure continue to be in a handful of states where the housing bubble was largest and where speculation was common, led by California and Florida, which together accounted for a whopping 58% of all subprime adjustable rate mortgages that went into foreclosure in the second quarter of this year.

And while the rate of new foreclosures for subprime ARMs in the quarter was a whopping 6.63%, for traditional fixed-rate mortgages, it was only 0.34%.

* * * * *

We seem to have had a generation of mortgage borrowers who at the least didn’t understand the types of loans they were taking out, and at the worst were committing fraud themselves.

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References and full article:
http://www.realclearmarkets.com/articles/2008/09/the_mortgage_mess_began_on_mai.html

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Marketing "green" …

September 24, 2008

Excerpted from MarketingProfs.com: “The Power of Green Lies in Marketers’ Hands”, Jacquelyn Ottman, September 16, 2008

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Many people think the power to restore our environment — to curb greenhouse gases, to clean up our air and water, to cut down on precious resources’ ending up in landfills—lies in the hands of technical types like scientists and engineers, even lawyers and legislators ready to clamp down on polluters.

But the real power of green lies in the hands of marketers …  who have the power to design and promote cleaner products and technologies and help consumers evolve to more sustainable lifestyles.

* * * * *

It may be hard to fathom, but over 75% of the environmental impact that a product throws off during its lifetime is determined at the design stage, when, for instance, the materials are chosen, the recyclability of a product is determined, and the amount of toxic chemicals it makes use of is decided.

* * * * *

Consider a toothbrush. Want to lessen its environmental impact? Start by making it out of recycled plastic, plastic made from corn, and educate on how to recycle or compost it. Then make the head replaceable and recyclable, too. Cut down on its packaging by only wrapping the bristly head. Think you’re finished? Not a chance! That’s because the toothbrush is part of a system—the water, the toothpaste, and the box the toothpaste comes in.

* * * * *

Marketers … are the ones who can sell them to mainstream consumers (not just the deep-green consumers who are born predisposed to all things “eco.”)

Take the Toyota Prius. A fine car with a hybrid engine. Premium price, not too likely to be offset by fuel savings. So what gets consumers over the premium-price hump as well as the risk posed by new technology? Answer: A distinctive silhouette that helps owners project their values, on-the-mark advertising that focuses on such direct benefits as super quiet ride and fuel efficiency. And a publicity machine that engenders the priceless support of Hollywood celebrities showing up at the Oscars in a Prius rather than a stretch limo.

* * * * *

We already know how to design homes and offices that use energy sparingly. We already know how to make construction materials and commercial and household furnishings that reduce the threats of indoor air pollution. We know how to design kitchens to make it easy for people to recycle and compost waste. We know how to reuse water from indoor plumbing systems to make lawns and gardens thrive. We know how to grow food using fewer or no chemical pesticides and fertilizers.

Some of these technologies are being embraced by deep-green consumers. But to really make a difference, they need to be embraced by the mainstream.

That’s where marketers can come in. Ask: What will it take to make greener products and behaviors cool? Get all consumers paying the small premiums necessary to bring such products to market?

* * * * *

Look to some recent green marketing history for help.

The Energy Star label is cool. Why? It relies on technology to create products that are highly efficient as well as high quality (read: requiring no trade-off in consumer habits.) A decade’s worth of advertising focusing on such benefits, plus the attendant savings on home and office electric bills, have made the Energy Star label the second most recognized eco-label behind the three chasing arrows denoting recycling.

* * * * *

The Tom’s of Maine line of personal care products, now owned by Colgate-Palmolive, stresses all that consumers desire in today’s personal care offerings: natural (i.e., safe), good-tasting, and trustworthy. How many toothpastes do you know that come with an ingredient statement with a full explanation of each ingredient’s role, as well as a letter from the head of the company?

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Jacquelyn A. Ottman advises corporations on strategies for gaining competitive advantage via green marketing and eco-innovation. She is the author of Green Marketing: Opportunity for Innovation.

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Full article:
http://www.marketingprofs.com/8/green-power-in-marketers-hands-ottman.asp?adref=znnpbsc398

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The minority who will be paying income taxes … regardless who wins

September 24, 2008

Excerpted from Tax Foundation: “Both Candidates’ Tax Plans Will Reduce Millions of Taxpayers’ Liability to Zero (or Less) “, Scott  Hodge, September 19, 2008

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Ken’s Notes:

1. The statistics below consider only tax filers.  Approximately 20% of adults don’t file returns — presumably since their incomes are zero or below the filing limits.

2.  The impact of the McCain proposal surprised me.  From a tax structure perspective, the plans are a push.  Of course, Obama would layer the health insurance provisions as added spending  (versus reduced revenue).

3.  Isn’t anybody concerned that a minority of citizens will be carrying the entirety of the tax burden ?

* * * * *

Article Summary

Over the past two decades, lawmakers have increasingly turned to the tax system rather than direct spending programs to funnel money to targeted groups of Americans, furthering some social or political goal. As a result, millions of Americans have been effectively removed from the income tax payment system while the tax code has been made more complicated to comply with and more difficult to administer. The tax plans of both the presidential candidates would exacerbate this situation greatly.

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1.3 of filers currently pay no income tax

One of the biggest challenges facing both John McCain and Barack Obama in their commitment to provide tax relief to working-class Americans is the simple fact that millions of them already pay no personal income taxes.

According to the most recent IRS statistics for 2006, some 45.6 million tax filers—one-third of all filers—have no tax liability after taking their credits and deductions. For good or ill, this is a dramatic 57 percent increase since 2000 in the number of Americans who pay no personal income taxes.

* * * * *

Obama or McCain — Essentially a Push (much to my surprise)

Tax Foundation estimates show that if all of the Obama tax provisions were enacted in 2009, the number of these “nonpayers” would rise by about 16 million, to 63 million overall. If all of the McCain tax proposals were enacted in 2009, the number of nonpayers would rise by about 15 million, to a total of 62 million overall.

* * * * *

Big Issue: Refundable Tax Credits = Negative Income Taxes

The tax code has always contained provisions that reduce the income tax burden for low-income workers, such as the standard deduction, personal exemption, and dependent exemption.

Between 1950 and 1990, the percentage of tax filers whose entire tax liability was wiped out by these provisions averaged 21 percent. Since then, lawmakers have expanded credits—such as the earned income tax credit (EITC)—while creating a plethora of new credits, including the child tax credit, the HOPE credit, lifetime learning credit, and the credit for adoption expenses.

Most tax credits can only reduce a taxpayer’s amount due to zero, but the EITC and the child tax credit were also made refundable, meaning that taxpayers are eligible to receive a check even if they have paid no income tax during the year. Those tax returns have become, in effect, a claim form for a subsidy delivered through the tax system rather than a direct payment from a traditional government program like welfare or farm supports.

* * * * *

As shown in Table 1 below, the Tax Foundation estimates that there will be 47 million tax returns with zero income tax liability in 2009 under current law. That’s one-third of all tax returns, and those 47 million tax returns represent 96 million individuals.

Both the McCain and Obama plans would increase this number by expanding existing tax benefits or creating new ones.

* * * * *

Senator McCain is proposing one expanded provision—the dependent exemption—and one new credit, a $5,000 refundable health care tax credit.

Taken together, the McCain proposals would increase the number of nonpayers by about 15 million, bringing the total number of taxpayers who pay no personal income taxes to 62 million, roughly 43 percent of all tax filers. Almost all of this is due to McCain’s health care credit, which dramatically realigns health care incentives and gives people a powerful motive to buy health insurance. This tax provision has a bigger impact on cutting people’s taxes than any single proposal from either party. 

* * * * *

Obama uses a longer list of smaller tax credit ideas to reduce a similar number of taxpayers’ liability to zero. The Obama plan contains seven new provisions, including a new “Making Work Pay Credit,” a “Universal Mortgage Credit,” and a plan to eliminate income taxes for seniors earning under $50,000. About 16 million people who are currently paying at least a little income tax would see their liability zeroed out, bringing the total to 63 million, or 44 percent of all tax returns.

image

 

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Major structural tax changes enacted during the 1980s contributed greatly to the doubling of nonpayers. Perhaps the most significant was indexing the tax brackets in 1985 to prevent inflation from pushing people into higher tax brackets. Also, the Tax Reform Act of 1986 nearly doubled the personal exemption and replaced the zero-bracket with the basic standard deduction for nonitemizers.

Since the early 1990s, however, lawmakers have increasingly used the tax code instead of government spending programs to funnel money to groups of people they want to reward. Credits have been enacted to subsidize families with children, college students, and purchasers of hybrid cars, just to name a few of the most well known. In terms of tax revenue, the most significant of these socially targeted credits was the $500 per-child tax credit enacted in 1997. The 2001 and 2003 tax bills doubled the value of the credit to $1,000 and added a refundable component.

image

 

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Quite aside from the fact that these refundable credits remove millions from the roster of Americans who support the government by paying the income tax, these credits have some undesirable effects.

Added complexity. The explosion of tax credits has added a tremendous amount of complexity to the tax code, especially for low-income Americans who are the supposed beneficiaries of the programs. The EITC is so complicated that more than three-quarters of those claiming it pay a tax preparer to complete their forms.

Hidden marginal tax rate increases. To withhold the benefit of these credits from “rich people,” the definition of which changes from law to law, each of these credits has a phase-out range—that is, a range of income where the taxpayer has to pay back the credit that he no longer qualifies for. As a result, taxpayers in the phase-out range face unexpectedly high effective marginal tax rates.

Narrowing the tax base.  Expanding existing credits or adding new ones pushes people who used to pay taxes into the nonpayer range, shrinking the tax base and requiring higher taxes on everyone else. Undesirable volatility in federal revenue is the likely result, as the incomes of higher-income taxpayers include more business, dividend, and capital gains income which fluctuate much more wildly than wages.

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Full article:
http://www.taxfoundation.org/publications/show/23631.html

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XM-Sirius still reaching for the sky …

September 24, 2008

Excerpted from WSJ: “Sirius XM Sends Signals of Change”, September 15, 2008

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Since the merger of Sirius Satellite Radio Inc. and XM Satellite Radio  in late July, the company’s stock has fallen about 40%, and now trades at less than a dollar. The downward trajectory accelerated last week after the company issued subscriber forecasts that fell below analysts’ expectations and failed to reassure investors about looming debt payments.

CEO Karmazin … says there has been “a tremendous overselling of the stock” and that his company “is heading toward making a bunch of money in the future.”

* * * * *

The merger of Sirius and XM was supposed to build confidence in satellite radio, in which subscribers pay a monthly fee for programming that is delivered through special receivers.

The months ahead will be a crucial proving ground. Sirius XM hopes to regain traction with consumers during the holiday season with its first programming packages and radio receivers that combine the Sirius and XM services.

As an enticement to consumers who tried satellite radio but didn’t stick with it, Mr. Karmazin has considered a plan to reactivate the radios of lapsed subscribers and give them a small selection of programming free of charge. 

The company will soon introduce radios that allow consumers more flexibility in the programming, including a 50-channel plan that costs $6.99 a month. Sometime next year, radios that can play the entire lineup from both Sirius and XM will hit the market.

Starting next month, even those who don’t upgrade their radios will be able to pay an extra $4 a month and get a few “best of” channels from the other company’s service. For example, a current XM subscriber will be able to get Howard Stern and Martha Stewart, now exclusively on Sirius.

* * * * *

Talk-show host Howard Stern’s five-year, $500 million pay package, announced in 2004, included 34.4 million shares payable to him and his agent, Don Buchwald. Then, the shares were worth about $110 million; by the time he joined the company in 2006, they were worth more than $220 million because of the stock’s sharp rise. Today, those shares would be worth $32.6 million.

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Full article:
http://online.wsj.com/article/SB122143532408734143.html

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The Fallacy of 'Green Jobs'

September 23, 2008

Excerpted fro”The Fallacy of ‘Green Jobs'”, by John Stossel,
September 10, 2008

Obama has a great twofer pitch: “green jobs.” …  In one fell swoop he can promise to end unemployment and fix and save the planet from climate change.

“I’ll invest $150 billion over the next decade in affordable, renewable sources of energy — wind power and solar power and the next generation of biofuels; an investment that will lead to new industries and five million new jobs that pay well and can’t ever be outsourced,” (http://tinyurl.com/64szf7).

Politicians always promise that their programs will create jobs. The fallacy is the same in every case: Even if the program creates jobs building bridges or windmills, it necessarily prevents other jobs from being created. This is because government spending merely diverts money from private projects to government projects.

Governments create no wealth. They only move it around while taking a cut for their trouble. Overlooking this fact is known as the broken-window fallacy (http://tinyurl.com/ydasa2). The French economist Frederic Bastiat pointed out that a broken shop window will create work for a glassmaker, but that work comes only at the expense of the cook or tailor the shopkeeper would have patronized if he didn’t have to replace the window.

Creating jobs is not difficult for government officials. Pharaohs created thousands of jobs by building pyramids. Our government could create jobs by paying people to dig holes and then fill them up. Would actual wealth be created? Of course not. It would be destroyed. It’s like arguing the hurricanes create jobs. After all, the destruction is followed by rebuilding. But does anyone seriously believe that replacing destroyed buildings creates wealth?

* * * * *

According to his web site:”Obama will strategically invest $150 billion over 10 years”

Note that word “strategically.” It is there to suggest that Obama knows how best to “invest” the $150 billion. (Of course it is not his money, and he’ll have none of his own at risk, so from his perspective, it won’t really be investment.) But how does he know that the things he names ought to get the money?

Politicians have a lousy record trying to make “strategic investments.” Jimmy Carter’s Synthetic Fuels Corporation cost taxpayers at least $19 billion but failed to give us alternative fuels (http://tinyurl.com/5ex7v5).

Investing is about predicting the future, and the future is always uncertain  … People who have their own money at risk — who face a profit-and-loss test and possible bankruptcy — are much better predictors than people who play with other people’s money. Just compare North and South Korea.

Mistakes are inevitable. Some investments will be errors. Mistakes in the competitive market tend to be on a comparatively small scale. If one company invests in plug-in hybrids and it goes bust, only a relatively few people suffer. The assets of the bankrupt firm pass into more capable hands.

When government makes a mistake, the bureaucracy can’t go bankrupt. Instead, failure twill justify increased appropriations.

If “green jobs” make so much sense, the market will create them. They will be created by private entrepreneurs and venture capitalists.  The best ideas will rise to the top, and green energy will gradually replace coal and oil.

If politicians were serious about creating jobs and cleaner technologies, they would step aside and let the free market go to work.

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Full article:
http://www.realclearpolitics.com/articles/2008/09/green_jobs.html
Copyright 2008, Creators Syndicate Inc.

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Referenced web site worth browsing:
Foundation for Economic Educatiob
http://www.fee.org/

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A Bush clone ? The 90% canard …

September 23, 2008

Excerpted from Philadelphia Inquirer: “McCain a Bush clone? These numbers dispute that”. John R. Lott , Univ. of Maryland, Sep. 19, 2008

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Does John McCain represent a third Bush term? The Obama campaign claims … that McCain is “no maverick when he votes with Bush 90 percent of the time.”

This week Obama has begun a constant refrain that there is “not a dime worth of difference” between Bush’s and McCain’s views.

Is this the same McCain who drove Republicans nuts on campaign finance, the environment, taxes, torture, immigration and more? Where has McCain not crossed swords with his own party?

As it’s being used, the 90 percent figure, from Congressional Quarterly, is nonsensical. As Washington Post congressional reporter Jonathan Weisman explained, “The vast majority of those votes are procedural, and virtually every member of Congress votes with his or her leadership on procedural motions.”

* * * * *

The same measure has Obama voting with Democrats 97 percent of the time.

* * * * *

Fortunately, a number of organizations on the left and right provide useful evaluations on how congressmen and senators vote each year. These conservative and liberal groups pick the votes they care about most and figure out how often lawmakers match up with their positions.

Well-known organizations that rank congressional voting include the American Conservative Union on the right, Americans for Democratic Action on the left, and the nonpartisan National Journal in the middle. The League of Conservation Voters also ranks politicians from an environmentalist position.

These groups’ rankings from 2001 to 2007 paint fairly similar pictures, putting McCain to the left of most Republican senators and to the right of most Democratic senators – though usually much closer to the average Republican.

The American Conservative Union finds that the average Republican senator voted conservatively 85 percent of the time, and that the average Democrat voted conservatively 13 percent of the time. McCain voted conservatively 74 percent of the time.

Although it’s at the opposite end of the political spectrum, Americans for Democratic Action essentially agreed. It found that the average Republican senator voted liberally just over 12 percent of the time, and the average Democrat voted liberally 89 percent of the time. McCain voted liberally 24 percent of the time – twice as frequently as the average Republican.

National Journal found that McCain voted conservatively 59.4 percent of the time from 2001 to 2006.

* * * * *

According to the League of Conservation Voters, John McCain is the ultimate centrist. While the average Republican supported liberal environmentalist positions 13 percent of the time, and the average Democrat supported them 76 percent of the time, McCain’s 44 percent put him in the middle.

Another way to look at these numbers is to see how many of the 99 other senators voted more conservatively than McCain. In 2006, these four groups ranked McCain as the 47th, 46th, 44th and 51st most conservative member of the Senate, respectively.

* * * * *

What issues put McCain well to the left of the average Senate Republican? The American Conservative Union lists a number of specific votes on which he differed from most other Republicans, including:

Taxes. He opposed reducing capital-gains tax rates, eliminating the inheritance tax and lowering income-tax rates.

Environment. He opposed drilling for oil in the Arctic National Wildlife Refuge, supported compliance with the Kyoto global-warming treaty, supported requiring businesses to reduce greenhouse-gas emissions, favored stricter mercury-emission rules for power plants, and supported stricter fuel-efficiency standards.

Other regulations. McCain consistently supported stricter campaign-finance regulations and voted to mandate that handguns be sold only with locks.

* * * * *

In contrast to the very liberal ratings given to Obama, the interest groups find that there are about as many senators to McCain’s right as there are to his left. So, it is a real distortion to claim he is a Bush clone.

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Full article:
http://www.philly.com/inquirer/opinion/McCain_a_Bush_clone_These_numbers_dispute_that.html

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Who is walking the talk ?

September 23, 2008

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Note: Last Friday, BHO was making a big point of the fact that women get paid less than men for comparable jobs.  An injustice, for sure.  But, guess what …

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Excerpted from DickMorris.com 

7 of Barack Obama’s top 20 Senate staff positions are filled by women — they are paid — on average —  83 cents for each dollar his male staffers are paid

John McCain has 13 women among his top 20 staffers —  they are paid  — on average —  $1.04 for each dollar he pays to his men.

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Note: I haven’t verified this info.

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Stand Out on the Shelf

September 23, 2008

Excerpted from Beverage World “Isn’t That Special?” September 9, 2008 

It may seem like science fiction, but in the not-too-distant future, a beverage bottle might do more than just sit there when you pass it in the grocery aisle.

Several companies around the world are working on this kind of technology right now…breakthrough technology will replace stagnant images and text on a beverage label with digital ones that can be made to flow across the product, presenting information about ingredients, special promotions, or whatever the marketer desires…some pretty impressive technologies are already widely available.

One is called Liquid Lens. It can be used with glass or plastic bottles to make it seem as if an object is floating some 18 inches around the bottle, or inside the bottle…another technology called GWrap can display 3D images and animation on a beverage package. GWrap uses a thin film that contains a series of micro lens arrays that when printed to, or placed over, an interlaced graphic image, displays the eye-catching images…

Another company…Vacumet, is putting the finishing touches on holographic technology that will make it seem as if images are projecting out from the plane of the curvature of, say, a beer bottle…

Among the beverage marketers themselves, Coors stands out as one that has not been afraid to spruce up its packaging portfolio with special effects. Among these has been the Cold Activated Bottle, introduced in 2007. The packaging changes color when the beer is cold enough to drink. Coors says it resulted in a 7 point trend change for the brand…

Edit by SAC

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Another big trend in packaging is sustainability.  Many companies are re-working their packaging to use recycled materials and reduce overall waste.  In doing so companies are finding that not only are they able to appeal to consumer preference for “green” products, but also save money.  This year Coca-Cola introduced re-designed its bottle tops that are 24 percent lighter and reduce Coke’s plastic consumption by 4 million pounds a year.

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Full article:
http://www.beverageworld.com/content/view/35243/

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