Dynamism or Irresponsibility

Mr. Obama praised Reganomics as a 'sense of dynamism and entrepreneurship that had been missing,' while Bill Clinton called it 'a Gilded Age of greed and selfishness, of irresponsibility and excess, and of neglect.' (see Debunking the Reagan Myth) So, who makes more sense?

In recent years, we witnessed two round of massive tax cuts, based on idea of supply side economics.

In 1974, a group of economists and journalists got together in a bar and
launched supply-side economics. It was a superb political and economic
package. It addressed a big problem: stagflation. It had a clear policy
focus: marginal tax rates. It celebrated a certain sort of personality:
the risk-taking entrepreneur. It made it clear that the new,
growth-oriented Republican Party would be different from the old,
green-eyeshade one. (see Middle-Class Capitalists)

It tried to provide an alternative to Keynesian economics which could not 'prevent or even moderate business cycles, rising inflation, and a bias
toward the public sector at the expense of the private sector' according to supply side economics. (see Bush's tax-cut talk more keynesian than Reaganesque)


The rise of supply side economics and its practice leave the Federal Reserve as the only viable player when facing economic crisis. Just today,

The Federal Reserve, responding to an international stock
sell-off and fears about a possible United States recession, cut its
benchmark interest rate by three-quarters of a percentage point on
Tuesday. (see Fed Cuts Rate 0.75%, but Dow Drops)

Yet, the possibility of low investment cost not always lead to a right correction path. Just take a look at tech bubble in late 19990s (see Who Benefited from the Tech Bubble? an Interview with Michael Hudson) and subprime mess (see Economists Brace for Worsening Subprime Crisis) we are facing now. No investor would put money in an alternative if there's a promising high rate of return, even if the assumption seems unrealistic or somewhat distorted. The resulting dynamism is a dangerous tide which in many cases boarded on irresponsibility.

Technorati Tags: Obama, Clinton, supply side, Keynesian, Federal Reserve, irresponsibility

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Inconvenient and Uncertain

For some people, it's inconvenient to discuss An Inconvenient Truth, which lead Al Gore to accept Nobel Peace Prize for

[h]is strong commitment, reflected in political activity, lectures, films and books, has strengthened the struggle against climate change. (see The Norwegian Nobel Institute - Nobel Peace Prize)

For example, the National Science Teachers Association would rather distribute 20,000 copy of DVDs to its members produced by ConocoPhillips for 'vivid, real-life examples of the nature of science and technology' (see NSTA :: Pressroom), while 'reject 50,000 free DVDs of Al Gore's global warming documentary An Inconvenient Truth' (see Laurie David: Oil Company Money Scandal at Nat'l Science Teachers Association Deepens).


Yet, for others, it's a speculative opportunity

venture capitalists and new investors like Google are eagerly pouring money into just about any startup that brands itself as pursuing "clean tech" or renewable energy. As a result, technologies that remain unproven on a massive scale are seeing huge run-ups in value. Stock in U.S.-based First Solar, for example, has returned nearly 600% over the last 12 months. (see Separating Hype from Reality: A Confluence of Hot Air in the Debate over Green Technology)

It's just like something happened a decade ago,

The venture capitalists saw record-setting rises in stock valuation of these and other similar companies, and therefore moved faster and with less caution than usual, choosing to mitigate the risk by starting many contenders and letting the market decide which would succeed. (see Dot-com bubble)

The uncertainty is not only reflected on capital investment front. It's also been reflected in many's backyard.

Curt Mann's neighbors are livid, accusing him of erecting an ugly wind turbine among their historic homes for no other reason than to show off his environmental "bling." ... The towering turbine, which overlooks majestic trees and Victorian rooftops, pits preservationists in Atlanta's Grant Park Historic District against a property owner and his individual rights. (see Neighbors fight, states scramble over clean power)

A paradiagm change would be molded by both resistence and speculations or somewhat indirection.

Technorati Tags: Al Gore, Nobel Peace Prize, National Science Teachers Association, clean tech, google, wind turbine

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Speed of Asia Market

Booming Asia markets could be characterized by two words: connected and disorganized.

It is connected in at least two senses. First, Asian families are knitted tightly and survived adversities together for generations. They are bonded through crawling networks. Second, Asian countries witnessed frenzied broadband growth.

Strategy Analytics' report also highlights the Internet's explosive growth in China, and forecasts that the number of homes using broadband Internet in the Asia-Pacific region will triple, from 61 million today to 176 million by 2010. China will make up 64 percent of residential broadband users in the area, up from less than 40 percent today. Indeed, broadband isn't an American phenomenon, even today. Seventy seven percent of South Korean homes use broadband, and over half the homes in Taiwan, Hong Kong and Singapore all have broadband. (Internet Usage Grows in Asia-Pacific)

These connections could swirl like a volatile storm with applicable agitation. It was happened for Colgate in 2004 when 'an academic study in the United States alleged that it [Triclosan, New Triclosan Problems, Overuse of the antimicrobial triclosan in antibacterial soaps may promote triclosan-resistance] could cause cancer when combined with fluoride.'

"In China, the study got picked up and, because we're the leading brand of toothpaste, we were singled out," Hofheimer said. "All of the major newspapers led with stories saying, 'Colgate causes cancer.' At first our management said, 'This isn't true, so let's not overreact.' But within two weeks, our business in China had dropped by 25%. ('What Are You Giving Away?')

It is disorganized in the sense that there is no mature coordination or regulation for a bursting Asian market. Free spirited merchants would squeeze profit through every possible way, some times at cost of intellectual properties, .

You can buy Callaway golf clubs here for the price of hordeurves. I mean, come on, I can walk you down the street to a five places to buy fake Callaways that are just like real or to buy DVD's and movies or any product (Intellectual Property Rights Violations in China).

and sometimes through so called gray market

But Apple's much-hyped iPhone is finding buyers in early-adopter geeks who will pay $800 to $1,500 for the latest gizmo to show off. The phone, which will officially be shipped to Asia only next year, costs a lot more on the grey market here than the US$399 (S$581) in American stores. But geeks are splashing out because the versions sold here have been 'unlocked' or modified by parallel importers to use cellphone networks here. (SINGAPORE: iPhone in demand on grey market here)

So, be prepared if you are ambitious to seek an Asian opportunities.


Technorati Tags: intellectual property, gray market, iPhone, Asia, Internet, triclosan, antibacterial

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Measurement and Misaccounting

So, how is nonprofit doing accounting wise after Sarbanes-Oxley? It's improving, yet not enough. (see Sarbox's Influence Seeps into Nonprofits)

Part of the reason is that there's not enough qualified professionals to handle complex accounting issues, especially for those small and medium sized organizations. In this sense, it's a good idea to provide specialized education, such as one provided by New York University's Stern School of Business. (see Not-for-Profit Accounting Goes to School)

On the other hand, I think it's more important to see whether nonprofit organizations intend to disguise their practice through a set of befogged accounting mirrors.

In particular, donors are looking at two metrics. One is the efficiency ratio, which compares how much a nonprofit spends on fulfilling its mission (known as its programs) with what it spends on overhead and fund-raising. The other is the fund-raising ratio, which compares fund-raising costs as a percentage of contributions. The higher a nonprofit's efficiency ratio and the lower its fund-raising percentage, the more comfortable donors will feel about giving money, knowing that most of it will be spent on programs. (Misgivings)

To duck any unwanted attention, organizations would move their fund raising activities around as supporting organizations. Just like special purpose entities did for Enron, it effectively obscured cost and shore up ratios.

Trent Stamp, president of Charity Navigator, an online nonprofit monitor, says supporting organizations are sometimes used to hide fund-raising costs, enabling nonprofits to conduct lavish fund-raising events without fear of criticism. Supporting organizations also provide charities with a means of keeping huge CEO compensation out of sight, asserts Stamp, with each organization reporting only a reasonable-looking portion of the compensation. (Misgivings)

Technorati Tags: Sarbane Oxley, Enron, Stern School of Business, efficiency ratio, fund raising ratio, lavish, huge compensation, nonprofit, supporting organizationo, special purpose entity

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Credit Crunch Connection

Thomas Palley described connection between trade deficit and mortgage crunch. (see The Subprime - Trade Deficit Connection)

Actually, trade deficit could be traced well back. Take example of China, the deficit 'rose twenty-fold, from $6.2 billion to $124 billion.' (see Negative Impact of U.S. Trade Deficit with China) Others argue that the number is misleading. (see US-China trade deficit overstated) So, the deficit is not the culprit.

The perpetrator is probably Fed's expansive monetary policy and investors' appetite. Ironically, one bubble leads to another. The dot com bubble at the end of 1990s (see Dot-com bubble - Wikipedia, the free encyclopedia) forced investors to find another venue, while the Fed worried about recession. As a result, we witnessed low interest rate for a extended period, with fashioned debt financing options.

The Fed’s “easy money” policy succeeded in avoiding a relapse into recession, but it came at the price of a housing bubble and a twisted expansion. The hallmarks of this twisted expansion were house price inflation, a construction boom, explosive growth of non-traditional subprime mortgages, a debt-financed consumer spending binge, and yet larger trade deficits. (Trade Deficit Connection)

Is there any similarity between the two bubble?

A combination of rapidly increasing stock prices, individual speculation in stocks, and widely available venture capital created an exuberant environment in which many of these businesses dismissed standard business models, focusing on increasing market share at the expense of the bottom line. The bursting of the dot-com bubble marked the beginning of a relatively mild yet rather lengthy early 2000s recession in the developed world. (Dot-com bubble - Wikipedia, the free encyclopedia)

Yes, it's the exuberant binge. Almost everybody put due diligence aside and savor another sunny day. They feed each other with deception, falsehood, and magnified snow job.

What we have now?

The large number of the bad loans alarmed mortgage analysts who follow the company. Several said the Countrywide report showed that housing market conditions were unraveling at an unexpectedly rapid pace. (Defaults Rise at Mortgage Lender - washingtonpost.com)

And

The pace of job losses in mortgage lending slowed in December, as some companies shifted workers to other areas of financial services, but the losses may pick up again in the new year as the U.S. housing market continues to weaken and credit remains tight. (More job cuts expected in mortgage banking - Boston.com)

[while the job loss does not seems to affect other sectors. (see Bifurcated Job Growth)]

Technorati Tags: mortgage, trade deficit, binge, bubble, foreclosure, bifurcation, debt, monetary policy, interest rate, recession, exuberant, jobs cut

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Is Nonprofit More Ethical

OK, the title may be misleading. But, the reality is that some nonprofit [financial] executives do commit fraud, just like their counterpart.

First, Roy Victor, a former financial executive of the Valhalla, a N.Y.-based Institute for Cancer Prevention submitted request for non-grant related expenses for reimbursement of Department of health and Human Services grant. (see One-Time Nonprofit CFO Admits Lying to Feds)

Then, a former finance manager of Helsinki Federation for Human Rights committed fraud and shut down the Federation. The accountant diverted funds to serve his girlfriend's gambling appetite, her nose and her breast. (see Nonprofit Destroyed by Accountant's Love Life)

It's just too human, nonprofit workers included, to rationalize one's personal need.

Technorati Tags: nose, breast, nonprofit, accountant, cancer, human rights, fraud, gambling, New York, Helsinki

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Competitive Coffee Shop

I drink coffee, especially when I'm driving in distance. However, I could not stand its hangover effect. So, I'm a tea person for the most time. I come cross this blog regarding McDonald's strategy to jump in the competition (see McDonald's Takes On A Weakened Starbucks).

It's interesting to see how competition brought more business. First, 'Howard Schultz popularized lattes and cappuccinos in the U.S. after borrowing the idea from espresso bars he visited in Italy.' He 'wanted the cafes to serve as a "third place" where people gather between home and work and feel some of the romance of the European cafe.' Apparently, the push generated a strong demand in 1990s, and brought others to the competition. As such, Dunkin' Donuts became the 'biggest competition,' at least in Northeast.

People fear that such expansion may wipe out small mom and pop stores. Yet, this is not the case. The reason is that, in lots of cases, the push could also bring in anti-Starbucks businesses as an alternative and ride on Starbucks' publicity. One business owner even 'bought a Chinese restaurant right next to one of their stores [Starbucks] and converted it, and by God, it was doing $1 million a year right away.' (see Why Starbucks actually helps mom and pop coffeehouses)

So, we can see that supply did lead to a strong demand, and it serves as a multiplier to bring in new businesses and propel them in the right direction.


Technorati Tags: competition, demand, supply, multiplier, coffee, latte, Starbucks, Dunkin' Donuts, McDonald

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