Will Limited Purpose Banking Prevent the Next Crisis?

As I have written about the 2008-09 financial crisis (here and here), bailouts appeared to be the only solution at the time. Serious people opposed to bailouts in general, because of their potential to create a moral hazard where there is no dis-incentive to engaging in risky behavior.

Niall Ferguson of Harvard and Laurence Kotlikoff of Boston University write in the December 03 edition of The Financial Times that the solution is reinstating the Glass-Steagall Act and Limited Purpose Banking (LPB). LPB, as stated in the article:

It transforms all financial companies with limited liability, including insurance corporations, into pass-through mutual fund companies. Limited purpose banks would process securities and sell them to mutual funds. They would not be permitted to borrow to invest. Hence, they would never face a run and never fail. Risk-taking would be done by us, the people, via our purchase of more or less risky mutual funds.

They further state this would be done under the watchful eye of a single regulator. From the article:

Under LPB all mutual fund investments would be fully and instantly disclosed on the web by the system's single regulator - the Federal Financial Authority (FFA). The FFA would verify the credit histories, income statements and third-party custody of all fund securities. It would also hire non-conflicted companies to rate the securities and value their collateral. This does not preclude private rating, but it provides the public with independent assessment.

Although the FFA would provide for instant disclosure and reduced bureaucracy, the authors don't explain what, if anything, the FFA would replace. If it could replace and reduce existing agencies, fantastic! However, if it is another layer of bureaucracy, it should be reexamined.

While world financial markets and firms have been shaken, most economies are returning to some sense of stability. In the US, unemployment remains at 10%+, but credit is becoming easier. Is now the time to establish a new agency? Is now the time to return to previous regulation? The proposition put forth by Ferguson and Kotlikoff should be discussed. Far better to take their advice than that of the current US Congress!

A More Efficient Hybrid?

Will the flywheel overtake the battery in the hybrid of tomorrow? Quite possibly!

If you have ever ridden a bicycle or watched a potter's wheel, you have seen a flywheel in action. When you pedal a bike, the wheels continue to spin even when you are not pedaling because the pedal energy has been stored and then released through the wheel.

Although flywheels have been known since ancient time, only now has their automotive potential become apparent.

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In an article by Gizmag.com, Williams Formula 1 (F1) racing was looking for a solution to capture, store and use brake force energy (Kinetic Energy Recovery System KERS). While they had considered the typical battery solution, but found that a flywheel was lighter and more efficient. Were that the whole story, it would be great, but wait, there's more!

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Williams created a separate company, Torotrak, to apply the flywheel KERS system to automobiles and found, surprisingly, that buses behave in a manner similar to F1 race cars. The similarity is found in the stop-start nature of buses and time between energy capture and release in F1 cars.

Here is a video explaining the flywheel's use in F1 racing.



What makes this concept economically efficient, and could possibly spell the end to the battery hybrid is that it can be retrofitted to existing transmissions and is more efficient. From the article:

“Our solution offers a much shorter pay back time on investment and does not reduce the number of passengers that can be carried,” explains Chris Brockbank of Torotrak. “It is also a fundamentally more efficient approach as energy remains in the mechanical state; with electrical regeneration there is an efficiency loss at each state change from mechanical to electrical to chemical and back again.”

Consider the economic benefits of a flywheel system versus a chemical battery. The flywheel is lighter, generally made of recyclable materials, and uses less hazardous materials than batteries. Additionally, they can be easily (relatively speaking) retrofitted onto existing transmissions. Finally, there are fewer components. Although I am huge fan of the hydraulic hybrid, the need for a direct drive transmission is slowing its development. However, if the flywheel technology proves itself, the need for hydraulic hybrids may no longer exist.

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In the examination of hybrids, like any other capital investment, one has to consider if the money spent will provide larger returns. When considering a technology that can possibly deliver a 30% improvement in fuel economy and can reasonably be retrofitted to existing automobiles, it may make sense. I look forward to seeing the results of the continued studies and will report back with any updates.

Proof that Al-Qaeda is a Bunch of A-holes

In case you weren't sure, Al-Qaeda is now officially a bunch of A-holes.

CBS News reports that the recent attempt on the life of Saudi counter-terrorism chief, Prince Mohammed Bin Nayef, used a technique from drug smugglers, though novel to homicide bombers.

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"Taking a trick from the narcotics trade - which has long smuggled drugs in body cavities - Asieri had a pound of high explosives, plus a detonator inserted in his rectum. This was a meticulously planned operation with al Qaeda once again producing something new: this time, the Trojan bomber."

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Although this is a humorous take on a very serious subject, notice that the enemy is changing his tactics. While Al-Qaeda continues to be a bunch of cowards, they now reduce themselves to the level of drug smugglers to commit murder.

Should you be concerned? Damn straight! Unless and until the world community crushes this heinie-stuffing goon squad, more bloodshed will occur. Call on your political leaders to use not just force, but overwhelming force to crush this enemy now.

President Teleprompter, listen to your theater-area commanders and send the necessary troops to finish the job.

Government Knows Best You Dummies!

In case you didn't know it, "The American public…just like your teenage kids, aren’t acting in a way that they should act." Thank you for the insult and condescension Secretary Chu!

Dr. Steven Chu, Secretary of the Department of Energy, made the statement above, quoted in the Wall Street Journal, at a Smart Grid conference. His remarks mirror the Democrat party line which is that government knows best, and citizens should just sit down and shut up.

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What has this to do with economics? Simply, everything! From the moment you wake until the moment you sleep, you make economic decisions. Whether it is turning the light on in the middle of the night when going to the bathroom, or having a midnight snack, those decisions have economic consequences.

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Would you be willing to let a bureaucrat mandate no lights may be turned on between 10:00pm and 6:00am? Would you be willing to pay a tax for opening your refrigerator after 1:00am? Of course not! As an adult, you reserve the right to make your own decisions. However, the current ruling party in the US believes you lack the intellect and knowledge to make the "right" decisions.

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While I generally support energy conservation through proper insulation, caulking, and other low-dollar, high-return solutions, I don't believe anybody has the right to force me to do it. Economic common sense and simple arithmetic demonstrated I should put in higher efficiency HVAC units when I remodeled my house, as well as Energy Star doors. I didn't put up solar panels, nor did I install a windmill, because they didn't make economic sense.

When government thinks it is smarter than its citizens, it is doomed to make poor decisions with horrific consequences. Consider Sen. Max Baucus's "health care" plan. Buy insurance or we will tax you $3800. Were I a 23 year old male, with excellent health, I may not want to buy health insurance and the government has no business telling me I must. In short, all citizens must have the freedom to make their own economic decisions.

I will leave you with a quotation to help distill in your mind what the current Congress and President are thinking:

"We are going to take things away from you on behalf of the common good."

Was that: (A) Joseph Stalin, (B) Ronald Reagan, (C) V.I Lenin, or (D) Hillary Clinton?

If you want to be secure in papers, property, and person, it is incumbent upon you to speak up! Contact your representatives in Congress and remind them of your right as an adult to make up your own mind, and that includes whom you vote for in the 2010 elections. If you like bureaucrats making decisions for you, stick with President Teleprompter and his gang. If you like making up your own mind, consider an alternative.

A Different Point of View on Unemployment

Another 216,000 jobs lost, but the employment picture is brighter? Only Joe Biden thinks the recession is over with 15 million people out of work!

In the United States, current unemployment, as reported by the Department of Labor, stands at 9.7% (ending August, 2009), the highest unemployment rate in 26 years, and expected to rise to 10%.

Approximately 15,000,000 people are out of work, yet we hear from many politicians that the economy is picking up, or that the employment situation is settling down.

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I have a different point of view. What the unemployment numbers tell us is companies continue to shed jobs, maybe at a slower rate, but they not hiring folks in any great numbers. Factory inventories are about empty and order rates for goods and services are seriously down, thus no demand for increased production. Further, the likelihood of a major market correction becomes more likely as unemployment continues to rise.

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The American consumer is aware of the untenable amount of leverage they have taken on, and are adjusting to lifestyle of diminished spending. Further, great concerns about a dramatic increase in taxes, both from Cap and Trade, as well as the end of the "Bush Tax Cuts", and the potential destructive force of Obamacare are crushing consumer optimism and a willingness to invest in capital goods.

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What this means, is that until a period of reasonable certainty and stability returns, we are in for a very long ride. While credit markets may be easing, US home prices are still far below their highs, which is actually a good thing. Additionally, with decreased overall demand for goods and services, companies are in no hurry to hire. Without a marked increase in employment, don't count on the American consumer to go back to its spending habits.

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The only bright spot in this dismal period of unemployment is the potential for entrepreneurial growth. Usually, periods of high unemployment lead to smart, out of work people getting together to come up with goods and services adjusted for the new economic reality. While I hope this is the case, I think the fear around major tax increases are somewhat depressing interest in "going it alone." The lesson to take from all of this is the lesson of history. Left wing parties, regardless of country, always bring in high taxes and anti-business agendas. Productive capacity is taken from the private sector and put in the hands of inefficient governments. Forget power to the people, it becomes domination by the state.

Quantifying Phone Tag

How much does playing phone tag cost your business? More than you think! You can get your costs under control with some simple tools.

For my quant friends, how do you measure the cost of phone tag? It is really quite simple. Assume your estimated hourly rate is $50. Each day you spend one hour on the phone, and only 50% of the calls were conversations. The cost of non-productive calls is $25 a day. 260 days times $25 equals $6500 per year, per employee! Ouch!

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Fortunately, RingCentral and now Google (to a limited extent), have products that help keep you connected and receiving calls, whether you are on your cell phone, home phone, or vacation home phone.

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RingCentral utilizes your internet connection to handle the call hand offs. It allows you to keep a central number, including area code, and then forwards the call to one of a set of numbers you provide. Additionally, RingCentral also provides similar products for fax solutions.

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Not to be out done, Google is soon to offer a service called Google Voice. Although it is only available by invite only (?), it is said to offer call forwarding, screening, voice mail, etc. It appears this will be a "free" service, but I don't have anything definitive as of 01 September 2009.

From Google:

Google Voice is a service that gives you one number for all your phones, voicemail that is easy as email, and many enhanced calling features like call blocking and screening, voicemail transcripts, call conferencing, international calls, and more.

Clearly, missed phone calls are costing companies thousands of dollars a year, as well as lost productivity, lost business opportunities, and general frustration. Fortunately, with products from RingCentral and Google, businesses can better manage these costs.

Government Health Care is Rationed Health Care!

If the government runs health care, it will ration it. Bureaucrats will set the quantity and price of care, limiting what can be consumed. This is also known as a command economy.

For those of you not familiar with command economies, they currently exist in Cuba, China, and North Korea. Command economies for health care exist in most of Western Europe, Japan, many other states.

If much of the developed world relies on a system of government-owned and operated health insurance/delivery, why shouldn't the US?

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Simply stated, the US is the most demand-driven economy in the world. The understanding of liberty and personal freedom in the US means citizens spend their money on the goods and services they demand, in the quantities they demand, with the government butting out. While this statement isn't 100% accurate, it is pretty close.

In 2009, most US citizens have health insurance, and most are satisfied with it. There is a dispute about how many residents don't have health insurance, yet US law requires equal treatment of all patients, regardless of the ability to pay.

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Americans recoil, rightly, when they read about rationed care in Canada, namely this story out of the Vancouver Sun:

Vancouver Coastal — which oversees the budget for Vancouver General and St. Paul’s hospitals, among other health-care facilities — is looking to close nearly a quarter of its operating rooms starting in September and to cut 6,250 surgeries, including 24 per cent of cases scheduled from September to March and 10 per cent of all medically necessary elective procedures this fiscal year.

So, if you were one of the 6,250 cases to have waited for surgery between September '09 and March '10, well, sorry about that. Perhaps you should get in your car and drive to Seattle and get the surgery you need tomorrow. While I am not going to relate every horror story from socialized medicine, such as the case of the women delivering on a sidewalk due to no ambulance, or the case of Oregon paying for assisted suicide, but not cancer treatment, rather, it is to highlight the loss of liberty in socialized medicine.

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As I have stated above, in socialized medicine, the government, who delivers the service, also sets the quantity to be consumed, and must pay for it. Government will set the budget based on political constraints, and not on the medical needs of individuals. Government also becomes free to regulate other elements of people's lives in the name of "health care." In short, socialized medicine is overwhelming regulation of human behavior and destruction of personal liberty.

To help you better understand this point of view, let late President Ronald Reagan explain it to you. This speech, given in 1961, is critical to understanding what is at stake in today's socialized medicine debate.

BusinessWeek Blows it on India

The Communists may be gone, but the Trinamool Congress Party isn't much better! West Bengal is struggling and all Trinamool has to show is running out Tata and good jobs, but that's not the story out of BusinessWeek.

Mehul Srivastava writes, wrongly:

With its Communist leadership out, the former Calcutta is poised for quick growth

It would appear that Mr. Srivastava hasn't read any of the articles written about the poverty pimps of the Trinamool Congress Party, particularly the Premier of Poverty, Mamata Banerjee.

For review, here are the articles I have written on the subject (here, here, here, and here). Clearly, you will find that Trinamool and Banerjee are not friends of business, nor are they true friends of the poor. Rather, they are true friends of power and themselves! Great fares to Europe and beyond on Air France!

It is quite a laugh to read Banerjee's statement:

Unless [the Communists] are ousted from power, no development is possible in West Bengal.

While there may be some truth in that statement, it has more to do with Banerjee and her cronies finding a way to line their pockets than it does with the Communists. Let's be clear, communism has never delivered on any of its promises, except for tyranny. West Bengal is proof of that, particularly, as BusinessWeek gets right, "Corruption, electricity shortages, and a rejection of foreign capital have left the city in rough shape."

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However, BW gets it wrong when they claim the Communists "seized" land. The farmers were to be paid for their land, and Tata was going to provide new, better paying jobs for the regrettably poor subsistence farmers. At least until Banerjee organized a violent mob.

While there is no evidence that either she or her party were involved in a plant manager's murder, Banerjee was behind the agitation directed at Tata Motors in Singur.

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For now, the problem of good government isn't solely the realm of West Bengal. Rather, it is a great shame that so many suffer at the hands of petty politicians. People are living in grueling poverty, subsistence farming, dirty water and limited educational opportunities. Perhaps Trinamool can stand up to encourage a positive business climate that will create a tide of prosperity. Sadly, they won't, as a struggling underclass provides them what they love most, power.

A Dose of Reality with those Unemployment Numbers

Hooray, only 247,000 lost their jobs in July 2009! What terrific news! Woo hoo! As one of those 247,000 people, give me a break.

People are so eager to see an improved economy that they are willing to accept such a figure as good news. I say, "rubbish!" Look at the facts, despite the fact that unemployment is a lagging indicator of the economy, it should tell everyone that companies don't think the worst is over.

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Additionally, this number should tell you that both demand for goods and services continue to decrease, and employers are not willing to start hiring again.

Here is some of the cheer leading being reported by the Wall Street Journal:

"The economy is at the turning point from the recession as the labor market is starting to heal," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi."

But recent data suggest GDP will start growing again this quarter. The Institute for Supply Management manufacturing index ticked higher in July and is now consistent with GDP growth of a little over 2%.

Sorry to be a party pooper, but recent data show 247,000 lost their jobs in July! If that isn't bad enough, from the SAME article,

U.S. gross domestic product contracted 1% at an annual rate during the second quarter. That was the fourth-straight quarterly decline in GDP -- the first time that's happened since the government started keeping track in 1947.

When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers was 16.3% last month, down slightly from June.

Do you see that things are still pretty lousy and that our economy is bleeding jobs? So why all this "glass half full" optimism? A simple way to answer this question is ask who benefits.

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If I were a politician, I would tout these numbers as positive to demonstrate I was "doing something" about the economy. If I were a CEO of a public company, I may want to discuss these numbers positively to encourage optimism and boost my share price. If I just couldn't take that our economy is in shambles and government programs are making things worse, I might just accept the positive spin to sooth my broken spirit.

However, I am a realist. As I have written in the past (Financial Crisis Primer), we are suffering the effects of market distortion of the credit markets and the aftermath. Financial positions are being unwound. Companies are de-leveraging, and lenders are beginning to remember risk management not merely as an academic pursuit, but a requirement to stay in business.

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Will the economy recover? It should, provided that Congress and President Teleprompter don't pass this crushing ObamaCare abomination. It should recover, provided tax policy doesn't punish small business and success. In other words, the market will heal itself if the government keeps its' hands out of it. The inflation damage will soon be with us, since the quadrupling of the national debt beginning in January of 2009.

To all of you who have lost your jobs, I am with you and pray you find new, meaningful work soon. To all of you with a job, keep working hard, but be ready for a double-dip recession. Finally, to all US citizens, contact your members of Congress and strongly urge them to reject ObamaCare.

How Quickly We Forget

Well, well, well. It seems like President Teleprompter can't take a little public ridicule. The Daily Mail, out of the UK, has an article stating that Obama backers call the image "...mean-spirited and dangerous." I guess the "tolerant" left just can't abide by dissent. Chuck Norris wants YOU to get into shape! - Total Gym® Official Store. Try Total Gym® for 30 Days for only $1 - FREE Shipping.

How quickly they forget, however, that on July 29, 2008, Vanity Fair posted a piece of art depicting then President George W. Bush as none other than, you guessed it, the Joker. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Huh, how about that? I don't recall anybody, especially the left, calling that image "mean spirited and dangerous." What I did see in the comments are these gems of kindness and adult conversation:

"I'm saying Bush is just an idiot thug who has been used by Dick Cheney to meet his ends." - Posted 7/30/2008 by deadaluspark

"Bush is obviously the antithesis of this. He can't even construct a freaking sentence without sounding like an idiot." - Posted 7/30/2008 by deadaluspark

"I should add that .....no further evidence of dubya's psychopathology is needed after yesterday's final appalling press conference." - Posted 1/13/2009 by something

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Please also note, on a different topic, that the White House wants you tell them if somebody is emailing or talking in opposition to ObamaCare. Here it is, with the link:

There is a lot of disinformation about health insurance reform out there, spanning from control of personal finances to end of life care. These rumors often travel just below the surface via chain emails or through casual conversation. Since we can’t keep track of all of them here at the White House, we’re asking for your help. If you get an email or see something on the web about health insurance reform that seems fishy, send it to flag@whitehouse.gov.

Wow, rat out the dissenters! Resistance is futile! Tell on your neighbors! When is Hillary going to stand back up and say:

I'm sick and tired of people who say that if you debate and disagree with this administration, somehow you're not patriotic. We need to stand up and say we're Americans, and we have the right to debate and disagree with any administration.

I also wonder if any late night, or any comic for that matter, is going to start making fun of Obama? He's had almost 8 months of media and comic immunity. Maybe this poster will loosen them up. Have some fun. Even Bill Clinton was a good sport.

One Single Dime? More Like Thousands!

"...you will not see any of your taxes increase one single dime."

Does anybody remember the flowery rhetoric of Candidate Teleprompter and his claims of tax stability? Lest you still believe the nonsense coming off the Presidential teleprompter, perhaps you should listen to what Treasury Secretary and tax cheat Tim Geithner has to say.

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Geithner, in an interview with George Stephanopoulos, refused to rule out tax hikes. Rather, he stuck with the rhetorical flourish of, "We’re going to have to do what’s necessary.”



CBS5 explains it this way:

President Barack Obama's treasury secretary said Sunday he cannot rule out higher taxes to help tame an exploding budget deficit, and his chief economic adviser would not dismiss raising them on middle-class Americans as part of a health care overhaul.

One more time America, Obama and his enablers in the Congress are tax and spend liberals! Obama has definitely gotten the spending part down, now he is moving in for the taxes. Whether it is his ObamaCare albatross, "stimulus" package, or "Cash for Clunkers," this administration and Congress have spent this nation into the ground. What's worse, is that they are foolish enough to believe they can tax their way out of this spending crater.

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When American consumers have less money with which to consume, the economy suffers and revenue to the US Treasury decreases. Their no disputing that fact. When Americans are engaging in economic activity, whether it is spending or investing, the economy grows. When the economy grows, tax receipts grow.

However, when taxes are increased, economic activity decreases, as does revenue to the Treasury. No amount of government spending or "stimulus," can replace the multiplier effect of the American consumer. Keynesian economics just doesn't work.

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If you are serious about reducing the budget deficit, contact your elected representatives. Tell them to quit spending like drunken sailors (apologies to drunken sailors)! Also tell them to keep their hands off of the best health care system in the world. Finally, register to vote, if you are legally eligible to do so. The 2010 elections are just a year away. Do you have a message you want to send?

India Rejects Carbon Bullies

It should come as no surprise that I find all of the panic and hysteria around "global warming," wait, now it just "climate change," utter nonsense. Fortunately, India holds the same view and has told the EU carbon bullies to take a hike.

The Financial Times online reports:

India rejected key scientific findings on global warming, while the European Union called for more action by developing states on greenhouse gas emissions.

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I say good for India! Much of the so-called science around "climate change" has either been debunked, disputed, or just plain junk! What really is happening is the EU and developed-world hand-wringers are busy trying to protect their economic backsides from rapidly-developing BrIC (Brazil, India, China).

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All of the Kyoto climate regulations aim at reducing emissions (not a bad thing), but for the developing world, that means reducing its ability to grow their manufacturing economies. Although I encourage clean air, clean water, and healthy working conditions, developing countries currently lack the resources to accomplish all three. Instead, they have to work to improve their economies to afford expensive pollution controls, municipal water treatment, and modernized plants.

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Although the other angle being played here is over financing for emission reductions, I think the bigger issue is that the science doesn't support the dire claims of climate cry-babies.

From the article:

Mr Ramesh on Friday reiterated that India would not accept emissions caps to held curb global warming, Bloomberg reported. “The world has nothing to fear from India’s development ... An artificial cap is not desirable and not even necessary as we haven’t been responsible for emissions in the first place,” he said.

I agree with Mr. Ramesh on this issue and support India's stance. As a sovereign, responsible nation, it must do what is best for its citizenry. In the case of India, it is to promote economic prosperity, freedom, and safety. While I hope India will more seriously address the need for clean drinking water, I do understand that things take time.

The iBum, a Market for Posterior Photography?

Have you secretly desired to photocopy your bottom at work? Now you can do it in the privacy of your own home! But is there a market for posterior photography? Mountain House Freeze-Dried Food

Gizmag.com reports in the article, "iBum chair automatically photocopies your butt" that Japanese designer Tomomi Sayuda has created the chair for "...positive and humorous reaction." Thank God for inventors with a sense of humor!

No doubt many will find the iBum tremendously entertaining, but will they buy one? Not to worry, Ms. Sayuda only built the chair as a design project, so it isn't a commercial endeavor. Chuck Norris wants YOU to get into shape! - Total Gym® Official Store. Try Total Gym® for 30 Days for only $1 - FREE Shipping.

For those of you who can't get enough of the iBum, enjoy the video of this positively petulant posterior photographic phenomenon!

The Case for Core Competencies

Simultaneously posted at “Ask a Manager” http://www.managerqanda.blogspot.com

Whether large or small, what keeps a business going is its’ core competencies. Those one or two things the company does best that distinguish it from its competitors should be, with customers, its top focus. In three cases, Topps baseball cards, Quiksilver surf merchandise, and Dial-A-Mattress, straying from core competency either ruined, or nearly ruined a successful business.

Topps, a multi-generational, family-owned business, was known in the industry as one of the top two producers of baseball cards. It was successful in the business because it had exclusive rights with players and clubs to the images used on the cards. Additionally, they also were successful selling the formula and base materials for the chewing gum that went into the packs of cards. RingCentral Online - Free Trial plus 10% Off

However, as the founding members passed away and the younger generations took control, the company began to change. No longer satisfied with business as usual, it was decided the business should rapidly expand and begin competing with larger confectioners, such as Wrigley’s and Beech-Nut. This proved disastrous. As the expansion and new products, such as chocolate flavored gum failed, the company neared bankruptcy. In 1984, the firm was bought by the leveraged buy out firm of Forstmann Little & Co.

Quiksilver, a popular surfboard and surf merchandiser is currently suffering from its expansion into Rossignol skis and Cleveland Golf equipment. Rossignol was purchased in 2005. Its recognizable name in Europe and among ski aficionados appeared to fit with Quiksilver’s sports brands. However, the manufacture and marketing of skis and golf clubs proved radically difficult to integrate into the other product sets. Both units have been sold, and in 2009, according to multiple sources, is on Moody’s Bottom Rung list of companies unlikely to pay back their debt. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Finally, Dial-A-Mattress, the firm started in 1976 allowing customers to order mattresses over telephone is being sold to it rival, Sleepy’s Inc. The Wall Street Journal reports in the July 14, 2009 print edition that “…the two major changes in his business were largely to blame: an expansion into brick-and-mortar sales and a culture clash brought on by new management.”

While the story from the Journal sheds light on how new, big company executives squashed the entrepreneurial, employee-input driven culture, the real story is that Dial-A-Mattress strayed from its direct sales model into competing with other established storefronts. Find high-end jobs on Doostang. It takes 30 seconds to join. JOIN TODAY. www.doostang.com

In these three cases, failure to adhere to core competencies has ruined or nearly ruined the businesses. While many find a core competency approach too conservative and not growth-oriented, it can be clearly argued that in many cases, such a conservative approach rewards businesses and investors. While I don’t discourage risk taking, it should be done fully understanding the consequences. While Boeing was able to radically change air travel with the release of the 747, many other companies failed miserably. For companies, understand the risk and prepare for it. Investors, do the same. However, don’t be ashamed to make a profit from doing that at which you do best.

Telco Competition Creates Efficiency

The modern telephone system is about 100 years old, though it faces new competitors everyday. Competition from VOIP, hosted fax and telephone services continue to drive down costs and force innovation.

Having spent about 5 years directly in the telco business, and 10 more years dealing with data solutions, I have witnessed the changes, innovations, and cost improvements. One of the biggest drivers has been the internet and the data-centric thinking from it.

While none of this is news, what is news is that more and more people consume telco services from non-traditional telco providers such as RingCentral and eFax. RingCentral Online - Free Trial plus 10% Off

RingCentral is a hosted solution which offers individuals and businesses toll free numbers, fax services, as well as hosted and managed PBX. Here is a description of their products:



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Toll Free and Local hosted phone & fax service for small businesses & mobile professionals delivering all the power of a “big company” phone system but with no hardware to buy and nothing to maintain.

RingCentral Office
Complete, hosted phone and fax system that combines virtual PBX and VoIP phone service with unlimited calling and full-featured IP phones ready for use.

RingCentral Fax
Easy, secure, and affordable internet fax service for small businesses and mobile professionals.

While the traditional telcos, Verizon, AT&T, and Sprint also offer these services, RingCentral is focused on the smaller business.



Another competitor to the larger telco, particularly in the fax arena is eFax. This is a product I have used, and my spouse at a large firm uses as well. eFax allows the user to send and receive faxes over the internet, without a fax machine. This is a great advantage for the road warrior sales rep or consultant. Additionally, eFax is convenient for the home user, as it offers of subset of its products free. Try eFax Annual Plan For 30 Days Free - Get $34 Off the Monthly Rate

In both cases, the internet has been the catalyst or enabler for RingCentral, eFax and others to compete, at least at the fringes, with the larger telcos. As the recession of 2009 continues, businesses large and small will be looking to stretch their communications budgets further than ever.

The Changing Game of Oil

Up until 2009, the oil blame game began just before Memorial Day in the US. Politicians would line up to paint oil companies as greedy price fixers, jacking up the price of gasoline before the summer driving season. What a difference a year makes.

Politicians being what they were (and still are), chose not to acknowledge that increased demand for a scarce resource leads to increased price. Most of us older than 4 understand patterns. Summer is when Americans drive the most. Thus the increased demand for gasoline and the increased price.

However, in the 2009 global recession, the price of oil is less than half of its 2008 record ($145 bbl). Why has the price fallen so much? Because oil is a leading economic indicator, meaning that its market price is a prediction of demand one month in the future. The market correctly believed(s) that the global economy would tank.

Oil prices have fallen since last year, down as low as $34, then settling in to the $70s, as of 08 July 2009, it is down in the lower $60s. Obviously, the case for price fixing is quite flimsy, or so it would seem. How’s your credit score? 0-600 Poor, 601-680 Fair, 700-774 Good, 775+ Excellent. Find out your Score now FREE!

While we aren't hearing the usual cast of characters demanding ExxonMobil and Chevron's chairmen explain why gas is more expensive, we are hearing cries of "Speculation!"

In the 08 July 2009 edition of the Wall Street Journal, the article starts:

"Policy makers on both sides of the Atlantic launched an effort to crack down on what they called speculation in oil markets, underscoring concerns that a sharp rise in oil prices could worsen the global economic downturn."

Perhaps Gordon Brown and Nicolas Sarkozy should take a deep breath and just try to control their instinct to regulate. Not to be outdone, Sen. Byron Dorgan (D-ND) declares the need to control "...oil speculators looking for a quick buck at the expense of the American consumer."

As I have written previously, traders in oil futures are airlines, utilities, and others who consume a regular supply of oil over a year and are trying to smooth out price variability. Sounds pretty reasonable to me. Additionally, since oil is a global commodity, denominated in US dollars, its price fluctuates with the value of the dollar. Inflation in the US spells higher oil prices, and conversely, recession or deflation spur lower oil prices. Of course, the 800lb gorillas in the room are China and India, as their consumption grows annually. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Does the trade of a global commodity need to be regulated? Only if it means the enforcement of contracts! Since oil hasn't followed its usual trends, government officials are struggling as how to propose more regulation. While oil is a critical component in the global economy, demands to regulate its future sale will only wreak havoc. Oil is generally an efficient market, though it is subject to swings. By allowing the swings and the pain it causes, the market will right itself, and hopefully teach important lessons. When government interferes and distorts the market, the swings are wilder and damage greater. Just look at housing bubble. Need I say more?

It's Good to Be the King

When it comes to socialized medicine, President Teleprompter will be using private doctors, thank you very much.

Although I didn't watch the Obamacare infomercial on ABC, I did read some incredibly elitist statements by the Dear Leader on abc.com. Great fares to India on Air France!

Here is the relevant quotation:

"Devinsky asked the president pointedly if he would be willing to promise not to seek such extraordinary help for his wife or daughters if they became sick and the public plan he's proposing limited the tests or treatment they can get. The president refused to make such a pledge, though he allowed that if "it's my family member, if it's my wife, if it's my children, if it's my grandmother, I always want them to get the very best care. "

OK, so the rest of us would suffer under Peasant Care, while the elites enjoy the best treatment. Boy, that sounds strangely similar to dictatorships of yore, or the IRS special treatment of Charlie Rangel and Timothy Geithnerof! Compare Long Term Care Insurance Quotes and Save!

Here is the proof that President Teleprompter has absolutely no clue how government competing with private business will destroy private business.

"The president rebuffed that, arguing that "we can set up a public option where they're collecting premiums just like any private insurer and doctors can collect rates," but because the public plan will have lower administrative costs "we can keep them [private insurance companies] honest."

Isn't it nice that he believes private insurance is dishonest? Funny how he also thinks a government-run program will have lower administrative costs. That is hilarious! Perhaps my tin foil hat is on just a little too tight, but perhaps his plan is to have socialized medicine, and this is just the first step to run out private insurance. Cheap? No. 100% Free. Trade stocks for free on Zecco.com. The Free Trading Community. www.zecco.com

Dear readers, if you wish to stop this free fall into socialized medicine, you better call your elected representatives today and register your complaints. You should also consider voicing your opposition to this cap and trade nonsense.

Driving Fun with Homer Simpson

I admit it, I love The Simpsons. They have made me laugh for many years. When I found out today that Homer's voice will be available in TomTom's Navigation unit, I jumped up and said "Woo Hoo!"

Sure, its silly, it doesn't have anything to do with today's economic issues, but hey, its fun.

TomTom has two audio samples. They are hilarious.

Hat tip to gizmag.com.