cotton

Cotton’s rally bodes well for the economic recovery, as it is the longest leading economic indicator of all the commodities. From a bag of cottonseeds to a T-shirt, it takes about 18 months as it goes through planting, ginning, spinning and weaving. “No other raw material takes that long and is influenced by that many different things,” Mr. Lawson said.

Banks still fucked

...according to data compiled by Bloomberg (see table below). Citigroup’s 2011 EPS is forecast to be 89 percent lower than in 2006, while Bank of America and Zurich-based UBS AG will probably fall more than 60 percent below 2006 levels on a per- share basis, estimates show.

Bank Reported Estimated Change
2006 EPS 2011 EPS


Bank of America $4.72 $1.53 -68%

Barclays GBP 0.67 GBP 0.39 -42%

Citigroup $4.25 $0.45 -89%

Credit Suisse CHF 7.53 CHF 5.74 -24%

Deutsche Bank EU 12.48 EU 7.79 -38%

Goldman Sachs $19.69 $18.53 -5.9%

HSBC GBP 1.22 GBP 0.99 -19%

JPMorgan Chase $3.82 $4.64 +21%

Morgan Stanley $6.82 $3.34 -51%

UBS CHF 5.17 CHF 1.99 -62%

-Bloomberg

Greg Mankiw on libertarian public universities

At a faculty lunch yesterday, I heard about an ingenious scheme used by some universities in New York, where much rental housing is rent controlled. Here are the three key elements, as it was described to me by one of my colleagues:

1. The university buys a rent-controlled building. The purchase price is low, because the existing landlord cannot make much money renting it.

2. The university then rents the apartments to its own senior faculty, who view this as a great perk. In essence, the difference between the free-market rent and the controlled rent is a form of compensation for the professor. As a result, the university can reduce the professor's cash compensation by an equivalent amount. The university is effectively earning the market rent for the apartment.

3. But it gets even better. The implicit rental subsidy is a form of non-taxed compensation. Normally, if an employer gives an employee a perk like this, the subsidy is taxable income (unless the perk is deemed a working condition required to do the job, like a hotel manager living in a hotel). But here, the university can claim there is no subsidy: It is only charging what the rent-control law requires. Because of this tax treatment, the implicit subsidy is worth even more to the professor than the equivalent cash compensation. This fact allows the university to reduce the professor's cash compensation by an even greater amount. Thus, the university effectively earns even more than the free-market rent on a real estate investment purchased much lower than the free-market price would have been.

In the end, the goal of the rent control laws is thwarted (the low rents are enjoyed by well-paid tenured faculty rather than the needy), the income tax laws are thwarted (a sizable part of compensation is untaxed), and all this is done by a nonprofit institution (the university) whose ostensible purpose is to serve the public interest.

buying it

Although the “science” of this kind of marketing is sometimes debated and questions constantly arise about the messy, qualitative side of this discipline—something I can discuss more, later on—powerful statistics act as a call to shopper marketing. Namely:

—70% of brand selections are made at stores

—68% of buying decisions are unplanned, and

—5% of consumers are loyal to the brand of just one product group (Stahlberg & Maila 2010)

In other words, while sometimes highly effective, there seems to be something very ineffective with traditional marketing, advertising and branding efforts. As a result, shopper marketing budgets are growing rapidly.

Problem

Economists will say–and they have the studies to back it up–that employees actually pay the full cost of premiums (including the “employer” share) in the form of slower wage growth. Nevertheless, few workers understand this. The perception is that only the employee share is paid by workers. But that’s gone up too, so perception and truth align. Employees are paying more.

life

The Olive Garden brand is built around the notion that guests are treated like family, but Pickens knows that isn't likely to happen unless employees feel like family too. Employees, he says, need to believe that serving meals and cleaning tables and cooking pasta in a hot kitchen is meaningful. "It's very difficult for the experience of the guests to exceed the experience of the staff," Pickens says. "We put the two together."