Category: Business

So The New York Times Has Added a Paywall

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I’m not sure exactly how it works, so I am unsure how the paywall, which limits you to 20 page views a month, would work off a link to this blog, but, at least for now, it works off of Twitter, so I have created a Twitter account, The Sh%$ I Read on the New York Times, and I will link to that tweet, which will allow one to see the article without having to deal with their paywall.

It appears to me that this is in accordance with both the spirit and the letter of their paywall, since I am manually tweeting the articles.

There are a number of alternatives, most notably the NYTClean applet, and while I might use that myself, I’m not going to put that on my link page, I figure that someone might go all TOS on my flabby white ass and finding a human at Google/Blogger in that case is well nigh impossible.

As to how the paywall will work, the Times had a paywall for a number of years for their opinion pieces, and the net result was that they got a lot less buzz, which is probably why Frank Rich and Bob Herbert both decided to leave the paper in the past few weeks.

The problem with the NYT is too fold, first, and uniquely to them, is the fact that they built, and paid cash for a ruinously expensive new office building in Manhattan, and second, and this is not unique to them, Craigslist is completely eating their lunches in the tremendously profitable classified ads section.

Not sure as to the solution, though any solution should involve cutting Tom Friedman’s travel budget.

Well, Here’s a Surprise

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Warning, listening to Rush Limbaugh may cause substance abuse, impotence, failed marriages, and hypocricy

We had a report that right wing radio talk shows were hiring actors to juice up their phone callers:

But what exactly was the work? The question popped up during the audition and was explained, the actor said, clearly and simply: If he passed the audition, he would be invited periodically to call in to various talk shows and recite various scenarios that made for interesting radio. He would never be identified as an actor, and his scenarios would never be identified as fabricated—which they always were.

“I was surprised that it seemed so open,” the actor told me in an interview. “There was really no pretense of covering it up.”

Curious, the actor did some snooping and learned that Premiere On Call was a service offered by Premiere Radio Networks, the largest syndication company in the United States and a subsidiary of Clear Channel Communications, the entertainment and advertising giant. Premiere syndicates some of the more sterling names in radio, including Rush Limbaugh, Glenn Beck, and Sean Hannity. But a great radio show depends as much on great callers as it does on great hosts: Enter Premiere On Call.

, as the CJR notes, it’s Ensuring the authenticity of your programming… with paid, planted callers.

Well, we now have confirmation, because Rush “Drugs are bad, marriage is sacred, I did not f%$# little boys in the Dominican Republic” Limbaugh has now officially denied that he used actors as phoney call-ins.

I consider this to be confirmation because Rush lies about everything, and the story is nearly a month old, and any innocent person would have let it slip beneath the waves.

AT&T Has No Right to Privacy

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In a unanimous decision, the Supreme Court decided that corporations do not have a right to personal privacy under the Freedom of Information Act statute.

It was not even close.  It was unanimous, and there wasn’t even a separate concurring opinion.

The facts are clear:  AT&T cheated the government when it was wiring up schools and libraries, got caught, and paid a fine.

What happened next was that its competitors made FOIA requests to find out exactly what they did, and AT&T claimed that this would constitute an unwarranted intrusion of the corporation’s personal privacy which might “embarrass” it, which some some federal appellate judge who did too much LDS in the 60s actually bought that crap.

In reviewing the opinion, written by John Roberts (see here)what is exceedinbly clear is that John Roberts thought that this was an opportunity to sound “arch” or “witty”:

We disagree. Adjectives typically reflect the meaning of corresponding nouns, but not always. Sometimes they acquire distinct meanings of their own. The noun “crab” refers variously to a crustacean and a type of apple, while the related adjective “crabbed” can refer to handwriting that is “difficult to read,” Webster’s Third New International Dictionary 527 (2002); “corny” can mean “using familiar and stereotyped formulas believed to appeal to the unsophisticated,” id., at 509, which has little to do with “corn,” id., at 507 (“the seeds of any of the cereal grasses used for food”); and while “crank” is “a part of an axis bent at right angles,” “cranky” can mean “given to fretful fussiness,” id., at 530.

Maybe it’s just me, but he sounds neither “arch” nor “witty”, but rather like an 8th grade student who thinks that he is far more clever than he actually is.

It was a good decision, but Roberts’ opinion is just plain lame.

Big Surprise: Boeing’s 787 Outsourcing Cost Money Instead of Saving It

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To the tune of billions of dollars:

The airliner is billions of dollars over budget and about three years late. Much of the blame belongs to the company’s farming out work to suppliers around the nation and in foreign countries.

It should be noted that aircraft manufacturers do not make money off of the sales of aircraft, but rather on spares and support down the road, and in outsourcing, Boeing has thrown that revenue stream to its suppliers, an act that Atrios calls, “obviously insane,” additionally, it makes the entire process of creating an aircraft more riskier, because you have less control over whether tab A fits in slot B, or, as Felix Salmon notes, it’s like, “picking up pennies in front of a steamroller“.

Boeing was told that this was an issue by a senior fellow, L.J. Hart-Smith in 2001, (also here, where the PDF cuts and pastes better) and but chose to ignore it:

The inescapable problem with outsourcing work that could be done in-house is that it necessarily increases the tasks and man-hours to carry out the work way above those needed to perform all assembly, including most subassemblies, at one site. Experience in the electronics industry has shown that out-sourcing work to regions of low labor rate is only a transitory phenomenon. The reason why the rates were low was that there had previously been no work there. Once the work became available, hourly rates increased, so that the primary electronic companies kept moving the work to yet another as-yet-under-developed area, and the cycle was repeated. This may be cost-effective for small items, with production lives of only a few years at most, but it is inappropriate for large aircraft that may need spare parts throughout a service live in excess of 50 years (80 or more for some military aircraft) and for which the manufacturing program itself may last 40 or 50 years. There are so many aircraft components that must be out-sourced, such as engines, avionics, and systems, because today’s prime aircraft manufacturers are no longer equipped to undertake such work themselves, that the retention of a determinable minimum fraction of the structures work is a pre-requisite to developing sufficient cash to develop new products. Without new products, as distinct from derivatives, all companies will go out of business, no matter what their line of business.

The correctness of the author’s position on these matters is easily confirmed by two facts. It was the suppliers who made all the profits on the extensively out-sourced DC-10s, not the so-called systems-integrating prime manufacturer. (The same thing has happened on aircraft assembled by Boeing, in Seattle, too.) Also, when plans were being formulated for the proposed MD-12 very large transport aircraft, almost all potential suppliers indicated a preference for being subcontractors rather than risk-sharing “partners”. Could they have known more about maximizing profits, minimizing risk, etc., than the prime manufacturer who sought their help even though it could borrow money at lower rates of interest than potential suppliers could? The DC-8 was manufactured and assembled almost entirely within the Long Beach plant, with only the nose coming from Santa Monica. That policy was changed after the acquisition of the former Douglas Aircraft Company by the former McDonnell Aircraft Company, but the change did not improve the company’s profitability. It is time for Boeing to reverse this policy.

(emphasis original)

So, McDonnell, a company which was a complete failure in the commercial arena (only 1 project, a failed bizjet), took over what was the number two (and had been the number 1) commercial aircraft manufacturer in the world, and implemented its defense contracting monopsony* driven business model, where it failed, and then Boeing bought McDonnell Douglas, and implemented their failed business model.

Boeing bought MACDAC, but MACDAC took over Boeing, and set the tone for its corporate culture, despite the fact that it was largely a failed company, having lost the JSF competition, and having only 2 major programs that it had initiated, the F-15 and the C-17 over the past 30+ years (the F/A-18 was initiated by Northrop).

One good thing that has come of this is that it will make a fascinating case study for the size of operations for economists, as Paul Krugman rather smugly notes:

In Boeing’s case, they outsourced far too much, only to find that they were getting parts that didn’t do what they were supposed to — and also to find that the subcontractors were seizing a lot of the rents. They discovered, in effect, that there are times when it’s better to rely on central planning than to leave things up to the market.

Obviously this isn’t always true. There’s a tradeoff. But that’s the point — and it’s this tradeoff that determines how big firms should be. Boeing has now provided a clear motivating example. Their loss, the economics profession’s gain.

Heh.  Here’s hoping that I’m never a good case study for some academic.

*A monopsony is the flip side of a monopoly. Instead of having only one seller and many buyers, a monopoly, you have only one buyer and many vendors, in McDonnell’s case, the US military.

Not Enough Bullets

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So, BP is whining because it thinks that Ken Feinberg’s slow walking of meager settlements is too generous:

In the eight months since Kenneth R. Feinberg took over the $20 billion fund to compensate victims of the Gulf of Mexico oil spill, he has been attacked by many of those filing claims and by coastal state politicians who argue that the process is opaque, arbitrary and slow. Many of them have also argued that Mr. Feinberg’s recently published estimates of future damage to those in the gulf are too optimistic, and thus his offer of compensation in a final settlement is too low.

Now he is getting complaints from another quarter: BP.

The oil giant is arguing that if anything, Mr. Feinberg’s proposed settlements are too generous. The planned payments far exceed the extent of likely future damages because they overstate the potential for future losses, the company insists in a strongly worded 24-page document that was posted on the fund’s Web site Thursday morning.

And after that, BP murdered its parents, and asked for mercy because it was an orphan.

AOL Buys HuffPo

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For $315 million dollars.

I think that this explains why they have been moving to a paid writing staff lately.

Many of the celebrities who have contributed non-remunerated articles to the Huffington Post may be less inclined to do so now that it is part of the AOL empire, if just because the whole “cool factor” is much diminished. (See the term “AOLamer”)

Ms. Huffington will stay in charge of her web site, as well as taking over supervision AOL’s media operations, things like Techcrunch and its hyper-local news operations.

I think that this will turn out better than the AOL/Times Warner merger, but that’s a very low bar.

WooHoo!!!! Verizon Has CurrentTV on Their Non Premium Channels

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Channel 192 in Baltimore County.

Olbermann will be moving there sometime in the spring:

Keith Olbermann, the former MSNBC anchor, will host a prime time program for Current TV, the low-rated cable channel co-founded by Al Gore. The one-hour program will begin sometime in the spring.

Mr. Olbermann will also become the chief news officer for Current, the company said in a news release Tuesday.

“We are delighted to provide Keith with the independent platform and freedom that Current can, and does uniquely offer,” Mr. Gore said in a statement.

It appears that Olbermann will be getting an equity state in the network, which is probably most of his remuneration, it currently only draws about 60,000 viewers nationwide, and would therefore be very hard pressed to pay him a salary commensurate with his media profile.

He will also become “Chief News Officer,” whatever that means.

I kind of hope that it’s not what is normally called a “News Director,” as my sense is that this would not be a good use of his skills. A news director at a cable network is someone who has to manage ……… People like Keith.

Keith is any number of things, but a calming influence he is not.

Yahoo’s Decline

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A Testament to Management Selfishness

I was discussing this graphic on the Stellar Parthenon BBS.

It details the history of Yahoo’s acquisition activity, and it is grim.

Pretty much everything that they ever bought never made money when they bought it, and never made money after they bought it, and they sold it for a loss.

In any case, someone was wondering why companies keep making purchases like this, and I put in my 2¢:

Carly bought Compaq, and then promptly demanded a raise from the board, since HP was now a larger firm.

Buying this sh%$ provides a justification for upper management to demand a raise, and provides a bump in visibility which raises their profile when they apply for the next position, where they demand even more money.

It’s the virtue of selfishness, baby.*

Basically, this is the problem with corporate governance in the United States, there isn’t any.

Basically, we don’t have managers, we have pillagers running companies in the United States, and it is destroying us.

Not only has our politics become klepto-capitalist, but so has our entire culture, even when the government is not involved.

H/t Barry Ritholtz.

*Why yes, this is a reference to the execrable Ayn Rand’s even more execreable book by the same name, why do you ask?

Understanding Christine O’Donnell

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When one looks at the craziness out there, why is it that Christine O’Donnell appears to get the lion’s share of the attention?

Well Matthew Yglesias has a good explanation:

That’s true, but I think there’s more in play, namely logistics. The Alaska Senate race should be excellent copy. Joe Miller is nuts, Scott McAdams is fascinatingly amateurish, the Palin-Murkowski feud is interesting, everyone likes to talk about Sarah Palin, etc. But Alaska is also cold and remote. Sending a reporter there would be expensive and annoying. The time zones are inconvenient. By contrast, Wilmington is a 2 hour drive or 90 minute train ride from both Washington, DC and New York City. So if you want to get some “real reporting” done it’s convenient. And logistics count in life.

I would note that even some place less remote, like Angle in Nevada, or Paladino in New York, or McMahon in Connecticut, they were also much less willing to expose themselves to the press.

Basically, if you wanted to cover “the crazy,” it was easier, and cheaper, to cover Ms. O’Donnell.

The Most Morally Repugnant Industry on the Face of the Earth

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It’s the private prison industry, which is lobbying for draconian immigrations laws, like Arizona’s “Papers Please” law, because more people in detention means more money for them:

NPR spent the past several months analyzing hundreds of pages of campaign finance reports, lobbying documents and corporate records. What they show is a quiet, behind-the-scenes effort to help draft and pass Arizona Senate Bill 1070 by an industry that stands to benefit from it: the private prison industry.

The law could send hundreds of thousands of illegal immigrants to prison in a way never done before. And it could mean hundreds of millions of dollars in profits to private prison companies responsible for housing them.

The story leads off with a private prison pitching an immigration detention facility for women and children in Benson, Arizona.

There are certain functions that cannot be fobbed off on the private sector, and this is perhaps the most sterling example.

Economics Update

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The paradox of thrift continues

It’s jobless Thursday, and initial unemployment claims fell out of the 450K-485K sweet spot that they have been bouncing around in for most of the year. Initial claims fell by 11,000 to 445,000, better than forecast, with the 4-week moving average falling by 3,000 to 455,750, with continuing claims falling by 48,000 to 4.46 million, and emergency claims rising by 257K to 5.14 million.

So fewer people are losing work, but hiring has not picked, so overall unemployment has increased (257K – 48K – 11K = 198K more people collecting unemployment).

We also had good news on the retail front, with better than expected same store retail sales in September, though I am unclear how consumers are financing this, since wages are stagnant, and consumer credit fell in August. (See graph pr0n)

I guess that it could be that people took out their credit cards more in September, and that the conflicting figures are simply the result of month to month changes.

In Europe, both the Bank of England and the ECB held rates steady, and the BoE says that it will continue quantitative easing (printing money).

ECB bank president Jean-Claude Trichet went further full inflation idiot in statement to the press, tut-tutting other central banks easing moves, andstating that the ECB will be, “gradually phase out its non-standard liquidity measures.”

Yes, we are seeing more pronouncements from the pain caucus about austerity, and the most vocal of these folks, Tory PM David Cameron, has apparently succeeded in pushing UK house prices down by 3.6% in the month of September.

Note that I am not talking about a -3.6% annual rate, I am talking about a £6,000 drop in home prices in just that month. (!)
UK home prices -3.6% in a month (!)

We Are Completely Screwed……

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Barry Ritholtz is reporting that Morgan Stanley has frozen hiring at its investment banking division, because of, “low trading and underwirting volume.”

Additionally, the midsized investment bank Jefferies and Company is reporting that it had its worst quarter since last year.

If Jefferies does not ring a bell, there was a spate of stories about them a few months ago lauding how they avoided any damage from the financial meltdown because of their prudence and probity.

What we are seeing here is the slow unwinding of the Geithner/Obama bank bailout, which basically consists of extend and pretend, with the hope that banks will generate enough profits to eventually fill the holes in the balance sheets.

It’s why Geithner has actively fought against transparency in accounting and limits on executive compensation: He is afraid that someone who knows where the bodies are buried will take the whole rotten system down.

The problem with his solution is two fold:

  • There simply ISN’T enough money to allow them to fill their balance sheet hole. I don’t mean that they don’t have enough money, I mean that the whole f%$#ing world as well as Mars and most of Jupiter do not have enough money.
  • The banksters had no intention of rebuilding their balance sheets, they just continued looting, because they make their money this year from this.

What is going on now is that banks like Morgan Stanley are running out of suckers, who are increasingly realizing that they are just being taken, and banks like Jefferies are running out legitimate knowledgeable customers, because these customers are coming to realizing that, with the exit of the rubes, cash is going to be in very short supply.

If I am right, and I think that I am, when the sh%$ hits the fan this time, they won’t be able to panic congress into another TARP, and the Fed will be constrained by both its own hawks as well as the lack of buy in from the Congress, which will limit the legitimacy of any actions that they take.

It will be ugly, even if the next collapse is not as bad as Lehman, because there is much less capacity to accommodate such a shock.

The Next Chapter of the Airbus/Boeing Pissing Contest

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And it does not involve the tanker.

The WTO, after ruling that Airbus was the recipient of illegal state subsidies, has now ruled that Boeing has also received billions of dollars in illegal state subsidies:

The long-running trans-Atlantic spat over government support of the world’s two biggest aircraft makers gained fresh momentum on Wednesday as a trade panel found that Boeing had received subsidies that violated global trade rules, people briefed on the decision said.

American lawmakers said on Wednesday that the subsidies, $5 billion from federal and state agencies, were just a fraction of the $24 billion that Europe had alleged and were far less sweeping than the benefits its rival, Airbus, had received.

But European leaders said that the finding, by a panel of the World Trade Organization, showed that the United States had also relied on subsidies in the fight for plane sales, and that the ruling would help prompt negotiations to resolve the problems.

What is interesting here is that they cite the military contracts that Boeing gets, but also the tax abatements with the WTO board determining that, “Boeing had received subsidies through some of the research contracts from the National Aeronautics and Space Administration and the Pentagon, as well as through tax incentives linked to its facilities in Washington State, Kansas and Illinois.” (emphasis mine)

This is about more than just the Airbus/Boeing subsidies. The WTO just ruled that the shakedowns that business inflict on communities by way of tax breaks are illegal subsidies under the current international trade regime..

This is a good thing.

I’d like to see Congress to find a way to ban this little bit of corporate pay-to play.

So Now You Can Patent Recipes

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It appears that a French company has patented Plumpy’nut, a fortified peanut butter as a treatment for severe malnutrition:

Should a revolutionary humanitarian food product be protected by commercial patent, when lifting restrictions might save millions of starving children?

That is the moral conundrum at the heart of a bitter transatlantic legal dispute.

On one side are the French inventors of Plumpy’nut, a peanut paste which in the last five years has transformed treatment of acute malnutrition in Africa.

Nutriset, the Normandy-based company, says the patent is needed to safeguard production of Plumpy’nut in the developing world, and to stop the market being swamped by cheap US surpluses.

And on the other side are two American not-for-profit organisations that have filed a suit at a Washington DC federal court to have the patent overturned.

They say they are being stopped by Nutriset from manufacturing similar – and cheaper – peanut-based food products, despite the proven demand from aid agencies.

“By their actions, Nutriset are preventing malnourished children from getting what they need to survive. It is as simple as that,” said Mike Mellace, of the San Diego-based Mama Cares Foundation.

I will spare you the picture of the severely malnourished child in the article, but it appears to me that this patent is not only morally indefensible, but also a very real expansion of IP law to an area where it had not previously applied, recipes, which are rather famously not covered by copyright (see here), and the patent appears to be rather broad, covering pretty much every nut based food with milk in it, which would include the Nutella from which Plumpy’nut was originally derived.

The problem here is that the other potential players in this market (EVIL term, that) are all small not for profits who would be driven to extinction with a loss in a patent court.

One solution here is to make patents like civil rights law, and allow people to file suit before infringing, for the same reason that they do with civil rights suits: because the chilling effect occurs even if no one breaks the law.

I Want to Vacation in Iceland

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I company called ECA Program is in talks to purchase 15 Su-27 Flankers from Belarus in order to set up a private air-to-air combat academy at Keflavik airport in Iceland.

The primary customer is dissimilar air combat training for NATO forces, but I would really like to get a ride on one of these aircraft, and my guess is that they will make this available to private individuals as well.

Of course, now I just need a few million dollars.

I would also note that there are some differences of opinion amongst the various players in the Icelandic government about the merit of this proposal.

Not Enough Bullets: CEO Pay Disclosure Edition

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What Cee Lo Green Said (NSFW)

It looks like the overpaid CEOs have decided that telling shareholders just how overpaid they are is an unreasonable burden:

US companies face a “logistical nightmare” from a new rule forcing them to disclose the ratio between their chief executive’s pay package and that of the typical employee, lawyers have warned.

The mandatory disclosure will provide ammunition for activists seeking to target perceived examples of excessive pay and perks. The law taps into public anger at the increasing disparity between the faltering incomes of middle America and the largely recession-proof multimillion-dollar remuneration of the typical corporate chief.

S&P 500 chief executives last year received median pay packages of $7.5m, according to executive compensation research firm Equilar. By comparison, official statistics show the average private sector employee was paid just over $40,000.

If you cannot determine the number of employees, and your total payroll (total payroll $/number of employees=average pay) in under 10 minutes, then you aren’t doing your f^%$ing job.

Yes, I know that the actual number is the median salary, so that should only take 15 minutes.

The real problem is not the ratio, it’s that they don’t want the shareholders, who, you know, actually own the damn company, to know how much they are getting paid.

It’s f%$#s like this that make me say to people, “If you plan on going postal, take out upper management first.”

What Lindsay “Majikthise” Said

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She writes on the impending retirement of Cathy Guiswite and notes that while Ms. Guiswite might be a bit of a feminist trailblazer, the character, a desperate woman obsessing about a husband and her thighs is not:

If “Cathy” has any feminist value, it can be subsumed under the maxim: “If you can’t be a good example, you can at least be a horrible warning.”

I would further note that Ms. Guiswite’s actual “feminist trailblazer” cred is pretty thin.

She is not the first female syndicated mass market cartoonist, that would have been Dale Messick, the creator of Brenda Starr.

Though to give Ms. Guiswite her due, she certainly was a trailblazer in coffee mugs, t-shirts, and other commercial knock-offs.