Moon-ing Jupiter- but Praising Amazon

This weekend features a spectacular show in the sky. Jupiter, Venus, and the Moon will be very close- about 2 degrees apart.

There is an interesting article titled “Amazon.com Tries User-Generated Public Relations.” According to the story, “The company has announced what it calls its “Holiday Customer Review Team.” These are six Amazon customers who are particularly active in writing product reviews that it has offered to reporters to discuss gift picks. (They also contribute their recommendations on a page on Amazon’s site.)

Amazon says that members of the team are “real people giving unbiased advice to fellow consumers. They are not employed by Amazon.com, Inc. or its affiliates.”

That’s not quite the whole story.

Some team members have been flown to Seattle to conduct broadcast interviews on behalf of the company. Moreover, they have been given free products to review and keep.

The freebies are part of the Amazon Vine program the company started last year. Top reviewers get free products if they promise to write about them…”

Been a somewhat quiet and sober holiday. Crowds very significantly less than in previous years, based on my parking lot observations.

Truly Black Friday

According to NDTV, NSG reports that Taj has been cleared of terrorists, and looks like Mumbai can now rest. The death toll could easily exceed 200. Hundreds more are injured.

On the other side, a worker at Wal-Mart was trampled to death in NY this morning. The description of this event reveals savagery on the part of the public- it is astonishing that Wal-Mart does this insane Black Friday deals despite such tragedies over the past few years. It also shows the utter lack of decency among the public- a true “consumption-obsessed” culture.

Another incident, in California, resulted in 2 Men Dead After Shots Fired in SoCal Toys ‘R’ Us. Looks like this was a day of action.

Wall Street cheered by sending stocks up.

Time to contemplate life.

Too many people with no constructive purpose in life and too much time to "kill."

Into the second full day of the mind-numbing killing in Mumbai- I just found out that more than 125 people have been killed, including several top police and military personnel.
The special commandos are still clearing Oberoi-Trident hotel.

Suspicion is on terrorists entering Mumbai by sea, from Pakistan.

What a tragedy!

An Indian Tragedy…Mumbai attacked

Today, some really sick people attacked Mumbai, or Bombay as we oldsters call it. Nine or ten separate but coordinated attacks, death toll could easily climb into the hundreds.
Hospitals were also attacked..children and women died.

So many crimes committed in the name of religion…
Too many people with no constructive purpose in life and too much time to “kill.”

My heart bleeds…

Sustainable Living, Unsustainable Political Actions

According to the NYT article “U.S. Plans $800 Billion in Lending to Ease Crisis” —” Federal Reserve and the Treasury announced $800 billion in new lending programs on Tuesday, sending a message that they would print as much money as needed to revive the nation’s crippled banking system. The gargantuan efforts — one to finance loans for consumers, and a bigger one to push down home mortgage rates — were the latest but probably not the last of the federal government’s initiatives to absorb the shocks that began with losses on subprime mortgages and have spread to every corner of the economy. In the last year, the government has assumed about $7.8 trillion in direct and indirect financial obligations. That is equal to about half the size of the nation’s entire economy and far eclipses the $700 billion that Congress authorized for the Treasury’s financial rescue plan.” (emphasis mine).

Today, Jay Womack, ASLA, LEED AP, a Director of Sustainable Design at Wight & Company, a nationally recognized A/E firm based in Darien, IL., talked to my students about rain water and how we deal with it. He is a very engaging speaker, creates a compelling case, and is exciting to listen to. Sustainable living, as Jay said, is a life style issue. Amazing to see the amount of money going into the financial mess, but more money should be given to projects that promote sustainable living.

No Second Life, Except for Citi

First, I read in the NYT that “Google Unplugs Lively as Hype Fades Over Virtual Worlds.” According to the article, “Google announced that its Lively experiment will shut down at the end of the year. The Web-based portal to all things virtual only started in July, making this one of Google’s shorter experiments.”
I personally could not quite comprehend the value proposition of Second Life to businesses, though it could hold attraction (like anything else in the Universe) to some individuals.

On the other hand, BushObama and team dropped a lifeline to Citicorp. If Citi pulls too hard, it will take taxpayers down into a deep dark hole. Some details of this OPM addiction, i.e. a gargantuan spending of other people’s money: (info from the NYT- thanks for providing the world a great newspaper)

• Citi gets $20 billion in cash immediately, in addition to the $25 billion it had already received under TARP.
• $306 billion of Citi’s toxic assets are being guaranteed, with the Treasury taking the first $5 billion of losses, the F.D.I.C. the next $10 billion and the Fed the remainder. All of this is subject to a loss-sharing agreement where 10 percent of the losses are paid by Citi. The Fed is charging an interest rate on its own loan at the rate of the Overnight Swap Index plus 300 basis points.
• The government is also getting $27 billion in preferred shares in Citigroup. This preferred bars the paying of dividends above 1 cent per share for three years and has a higher rate of 8 percent from the get-go (unlike the other preferred shares, which pay 5 percent for the first five years).
• Finally, the Treasury is getting $2.7 billion in warrants but pricing them on a 20-day moving average, so the strike price is $10.61 per share. (Citi on Monday was trading at more than $6 a share and closed at $3.78 on Friday).Of course the warrants are under water and it does not appear plausible that they will be worth anything anytime soon. It is like my options in my former employer, which were priced at $85 and the stock is trading at $4 or thereabouts. It would be interesting to see if the government itself would ask for repricing of warrants if they end up being worthless.

• According to the NYT, the Treasury is only taking 10 percent of the total preferred being issued in warrants, as opposed to 15 percent in prior transactions.

• Ipso facto, the BusHankObama group has been tough on executive compensation. “The only requirement in the term sheet is that “[a]n executive compensation plan, including bonuses, that rewards long-term performance and profitability, with appropriate limitations, must be submitted to, and approved by, the USG.” Compare this to the requirements the government put forth under its EESA rules for a systemically significant failing institution. These requirements are stricter and require a ”prohibition on the financial institution from making any golden parachute payment” to any senior executive officer. It remains to be seen how the government classifies this bailout, but it will be interesting to see if Citi and its chief executive, Vikram Pandit, are put in this mix by the government imposing these stricter limits. Citi certainly qualified under these rules as such a systemically significant failing institution. From the term sheet of the Citi deal, though, it looks as if the government will not qualify Citi as one. But the government should, if only for consistency’s sake. Citi was bailed out because it was failing, after all. Of course, the executive compensation question for poor Mr. Pandit is small beer: if anyone should have their compensation clawed back, it is Citi’s former chief, Charles Prince.” (NYT)

To show solidarity with Bush, Obama appears to have dropped his commitment to restoring the pre-Bush tax rates for the wealthy. Further, he is apparently looking for a $500 B -$700B STIMULUS package- no need for Viagra. The sheer magnitude of government intervention is enough to send a free-market believer into cardiac arrest.

As my favorite comic Dave Allen used to say in Dave Allen at Large: ‘May your God go with you.’

A FEDeral case of a C(ri)ITIcal situation

NYT reported today that “Plan to Rescue Citigroup Begins to Emerge.” Apparently, “Under the proposal, the government would shoulder losses at Citigroup if those losses exceeded certain levels, according to people briefed on the talks, who spoke on the condition that they not be identified because the plan was still under discussion.”

The WSJ has an article titled “Fed Has More Ammunition After Firing Rate-Cut Bullets” in which the writer presents some additional steps the Fed could take, in addition to reducing the short term rates to 0%. One of these would be for the Fed to buy long-term debt, including Treasuries and debt of Fannie and Freddie. This would be incestuous, if it happens.

The actions of the Fed and the Treasury are emblematic of the tail wagging the dog phenomenon. Equity and debt are not risk-free. It was the assumption, on the part of quite a few, that there was no risk associated with these “investments” that has caused the current mess. Rather than focusing on the fundamentals, i.e. education and job creation, the government is focusing on the financials. Risk-takers have to accept the downside. To the extent that regulatory failures contributed to the current mess, both the bureaucrats and the members of Congress on the appropriate committees should be held accountable.

Obama has announced a job creation program over the weekend. I have not had the time to take a look at the details. The key is the cash flow to support the investments. Apparently, Obama would not raise the tax rates for the ‘wealthy’ back to pre-Bush levels, but would just let them expire in 2011. This would signal that Obama is not concerned with debt levels and will add more deficits. Perhaps he will follow his guru, Ronald Reagan, in creating record deficits.

An Afternoon Tea Party might provide Answers to Common Sense Questions-

Teaparty raises an excellent question regarding my post..
While acknowledging that “there are no answers to your questions” he/she asks the question, “What should we do?”

Actions, in my model, should spring from thoughts, which should develop based on principles- ethical, moral,spiritual, economic, and others. Therefore, before we get to a discussion of possible actions, we should discuss the underlying thinking, and digging deeper, the core principles. One of the core principles should be integrity and another should be clarity in stating one’s position.

If we are “free-market capitalists” then we should let the chips fall where they may. In the short-term there will be major job losses and dislocations but new markets will spring up- that’s the thinking. The Big Three might go bankrupt, might restructure, and perhaps one of them might emerge in a strong position to invest for future products. The labor force will be impacted, but that is no different from the impact of other dislocations- the disappearance of typists when word processing software took over, or the disappearance of pay phones and long distance operators, for example.

One of my core principles is seeing that everyone has basic living means and access to health care. Another is to leave, in aggregate, within one’s means. A third is to support, to the maximum extent possible, others who are less fortunate, irrespective of cause. So, asking the wealthy to pay more to support the creation of new industries, with no expectation of “personal financial returns” is reasonable.
I recommend that readers watch an interview with Mohammed Yunus-
http://www.pbs.org/newshour/bb/business/july-dec06/yunus_11-22.html

Private Label & President’s Choice..

An interesting article in the Tribune on the increasing popularity of store brands (a.k.a. private labels). The article cites Dominicks chain of stores, which offers the Safeway private label brand.
Jewel-Osco, part of the SUPERVALU chain, markets its store brand, President’s Choice. These are becoming more popular with customers.

Talking about Presidents and choices, the NYT has a good piece titled “Presidents of Colleges Give Back Some Pay” in which Tamar Lewin writes “In the week since The Chronicle of Higher Education published its annual survey of university presidents’ pay — a week in which the nation’s economic troubles worsened — several of the highest-paid presidents said that they would give back part of their pay or forgo their raises. Pat Callan, president of the National Center for Public Policy and Higher Education, said he had never heard of such a wave of givebacks. “When you see a cluster like this,” he said, “it seems like sort of belated recognition that this presidential pay thing has gotten out of hand. People are getting tuition increases, some faculty are facing layoffs, it just doesn’t look too good for presidents, no matter how capable they are, to be getting so much money. Americans have had a touching faith in higher education; it’s losing its good image with the public.””

Obama’s choices

On our bus drive to Minnesota this evening I contemplated the cabinet choices of Obama. Hillary, Daschle, Geithner, etc.
I hope Obama gets some fresh people in. They are sorely needed.

***
Citi has really been knocked down. It is amazing.