Free trade

Today's WSJ mentions a poll about rising anti-global sentiment in the US. Not just immigration, but economic sentiment as well, which is more my interest:

The nation's integration into the global economy began to accelerate in the mid-1990s, as barriers to trade and capital flows fell around the world. The transformation has opened markets for U.S. exporters and given consumers access to low-cost goods made abroad. But the changes have come with a cost, as tens of thousands of American manufacturing jobs have been shipped overseas, and 58% of those polled said the tradeoffs haven't been worth it. Only 28% said globalization has been a good thing.

Last week, Joanne & I discussed what issues would be the most important to us in the election. My feeling is that an issue like free trade is very important because it is very open to presidential influence, whereas something like abortion isn't really (save the nomination of judges). And it concerns me that support for free trade is at 28% and candidates are shaping their international trade positions around that. To me, it is a clear cut that free trade is good, fewer economic barriers are good and so on. I haven't decided if my feeling on this is strong enough to be a litmus test, but I it will be an issue in which I carefully review a candidate's rhetoric, since I think it can also speak to the approach a politician will take to issues in terms of pandering versus principles.

61 Cheval Blanc

If you've seen the movie Sideways, then you're aware that Miles is very much a wine connoisseur. If you haven't, Miles is a wine connoisseur. But what happens when the expert attacks the beliefs of those with a less refined palate?

Jack: If they want to drink Merlot, we're drinking Merlot.
Miles Raymond: No, if anyone orders Merlot, I'm leaving. I am NOT drinking any fucking Merlot!

This exchange was an affront to Joanne. She likes Merlot!

As for the movie, I liked it better than I thought. By that, I mean I (we) enjoyed it. We got it cheap at Target, making it an impulse buy. I knew it was about a wine tasting trip and got good critical reviews, but wasn't as well received by a general audience, a divide in which I'm rarely on the side of the former. I haven't really thought about it too critically yet, but it passed a main test of keeping us entertained, and the Miles-Maya wine exchange in the middle is gold, as is the recovery scene.

And no, it didn't inspire me to try and acquire a taste for wine. It might spark some interest in Joanne to explore non-merlots though.

Stock tip

In my inbox (past the spam folder)this morning from the Motley Fool...

You've heard the slogan "Intel Inside." We all have. But did you ever consider how it came about and just how revolutionary it was when you first heard it?

It's a microprocessor, for Pete's sake... a tiny wafer we can't even see, touch, or hear -- yet so powerful we dig deep and pay up for one computer and turn up our nose at another.

Before Intel, nobody dreamed a market leader like Dell would feature another company's logo front and center on its top-of-the-line computers. But you see how it worked for them!

"Intel Inside" conveyed "speed, quality, reliability, even prestige."

That's the sort of "brand mystique" that makes investors fortunes... and why thousands of otherwise ordinary Intel investors banked their first million long ago.

Ok, but can you really make that kind of money today? Well, read on because here's your opportunity...

The "new" LOGO top manufacturers display proudly on their products, packaging, and marketing:

• This new "Brand-Inside-a-Brand's" cutting-edge technology helps drive a multi-billion dollar industry -- in this case, audio electronics and entertainment media.
• Serious consumers and professionals actively seek out this brand wherever and whenever they listen to music, buy expensive audio-visual equipment, or even go to the movies.
• This name is synonymous with top-end, premium quality and performance. In fact, it's not only the industry standard... it's the GOLD standard.

But unlike Intel, this company has its biggest gains ahead. In a moment, I'll tell you more about this amazing company, its patented technologies, and phenomenal upside potential. Plus, exactly what you need to do to get your share of the profits.

Well, I can tell you. Buy Dolby Laboratories. That saves the trouble of clicking through and getting the spiel for the $70 newsletter that only mentions the hits and none of the misses.

Dolby may go Intel, but it generates 74% of its revenues from licensing rather than hardware, which I would think is makes a rather significant difference, but I have a lot to learn about business models, revenue potential, inventory and what not. Plus it's already in everything of everything that people buy (AV Receivers, DVD Players, etc), so that's a little different that the explosion of home computing, which drove Intel production.

Still, this will be the new AJU "what if?" or discussion stock, replacing any further discussions of MOT, since it combines finance with home theater. It's a natural fit!

Actually, if one was to become a shareholder, would one still be allowed to listen to the DTS track on DVDs?

Wealth divide

META: I feel like I do my best blogging when I'm falling asleep--I recall composing more substantive commentary in my head lying in bed Sunday and Monday nights than what is below. this will have to suffice as I feel the need to generate some content! /META

On the back page of the Sunday Republic's Viewpoints section, Nicholas von Hoffman discusses the problem of wealth stratification in the US:

The collective net worth of the nation's mightiest plutocrats rose $290 billion, to $1.54 trillion. So 400 individuals, or about 0.00001 percent of the population, own the equivalent of more than 13 percent of the gross national product of the United States. This is bad news for everybody who sells anything to the American consumer because the consumers, as the figures show, have run out of money with which to buy... The rich cannot, even if they shop day and night, buy enough to keep the wheels of American and world commerce turning.

Also...

From the point of view of the big rich, getting young people into debt not only keeps the money coming in but also makes youths timid and obedient. Debt ensures that they won't turn up on the streets to demonstrate for some unwholesome cause. You could almost call it a rule that all people when put into debt pretty much do what they are told.

Talking the last point first, that runs counter in some ways to Marx's Proletariat Revolution, but I digress.

It's also interesting that the most recent other income peak mentioned was at the top of the other bubble, which may mean income through stock options/capital gains. So that can be taken to mean the rich aren't quite as rich as they think they are, since a market fall can effect their capital gain income.

Hoffman's perspective, while perhaps too dire, is compelling, not only for what it says, but the the associated issues it brings up in how our economy is structured and the problems that exist. A free market needs concentrated wealth for the necessary capital to expand. But if it is too concentrated, then consumer demand is too low because not enough people have money. Conversely, in a more egalitarian economy, everyone can spend, but the amount of accumulated capital is too low to sustain the supply side. So the issue becomes finding a ideal distribution in which savings and spending are maximized.

But what is the role of government? I'm a free marketer, so I don't see the governmental imperative to raise/have minimum wage floors, or impose salary ceilings, but the column has sparked some introspection about income disparity and its societal outcomes. The concentration of wealth is alarming because of how it can affect markets (think hedge funds). The last decade has seen huge surges of wealth due to bubbles (tech and real estate) that prompted unsustainable reactions in the market place.

What is driving the market? Institutional trading that's seeking payoffs in pennies per share (the legal equivalent of the Superman III/Office Space gambit). This makes the stock market come of as Ponzi-esque. The trading of shares doesn't create wealth or economic expansion, as the company derives no real benefit after the IPO (or sale of new shares). Shares are owned for a cut of the profits, but dividend stocks are decreasing in number and in their payout (the trend is for reinvestment of profits to strengthen market position rather than dole it out to owners. Executives are a different story, however...). This means equity investment really only pays off by their sale, which requires a similar (or better) valuation of the cost per dollar of profit (which you never see).

As for the debt explosion, how much of the real estate run up is the result of people without the means to buy a home thinking they had to do it now, or else they never could? How much spending was the resulted of home equity that no longer exists (similar to the paper wealth of the tech bubble)? This assumes, though, the negative debt/savings data that is trumpeted is accurate. I've read various accounts that savings vehicles like 401k are not counted and that home mortgage debt shouldn't be considered on the same level as other forms of debt because, basically, you have to live some where.

One thing that just occurred to me (because I'm slow sometimes) is that the Hoffman mixes wealth with income, which are different. One is savings; the other is earnings. The focus is politically/culturally seems to be so heavily focused on income/earnings that more emphasis needs to be placed on savings/wealth creation. That's a huge shift, though, battling the culture of consumerism, the Joneses, instant gratification, etc. How valuable, for example, would a required course in high schools be for personal finance? Heck, just take two weeks out of the required economics course. This is only micro-impact though. The wealth divide is a bit more systemic, so much like Hoffman, I can comment, but don't have a lot of solutions.

Like I said, my midnight stream of consciousness was a little better (although this was still fairly SOCy), but that does you little good now...

Usurious Exchange

There's a pending class action lawsuit against Visa, MasterCard and Diner's Club the setting and disclosure of markups and fees imposed on transactions made in a foreign currency or a foreign country from February 1 1996 to November 8 2006. The defendants have established a $336 million settlement pool. The settlement website lists three options for payout, payable when the final settlement is reached:

• A flat $25 refund
• An estimate of expenses based on reported time out of the country refunded at 1%. An estimate I saw is that the break even point is about 5 weeks, based on studies showing an average daily expenditure of $80/day when traveling (higher for business).
• A more intensive listing of applicable charges, good if you have all your records.

More and more people are getting docs in the mail (I haven't yet), but you can also self report as part of the settlement. If you think it's fishy, you can file until May 30, 2008 to verify it.

My rough tally is 310 days out of the country (mainly my study abroad year) so that could be over $200 if I get the benefit of a formula. Not that I would deserve that much...

LIfe without TV

Well, network TV. In reading one annointed "best article on the writer's strike", I instead found the one that actually actually is (by Marc Andresson, of Netscape fame):

Consequences of the Hollywood writers strike: Reason #3:

Catalyzing faster development of new business models for entertainment media. Here's where things get really dramatic. The Internet has already been forcing a rethink of the structure of the media industry, particularly for entertainment. The strike is kicking that rethink into high gear. Here's why: The classic Hollywood economic model is built around the existence of a few very large companies -- studios -- that dominate production, marketing, and distribution.

Let's contrast all of that to the Silicon Valley model.

In Silicon Valley, there are many companies, large and small, that create, market, and distribute products -- and more such companies all the time. In fact, there is a whole industry -- the venture capital industry -- devoted to creating as many new such companies as possible, as rapidly as possible.

I believe the entertainment industry is in the early stages of being rebuilt in the image of Silicon Valley.

Before this argument gets made, Andresson explains the issues in the strike. It's an interesting read.

The Falling Dollar

Tyler Cowen, of Marginal Revolution, discusses the trade offs of the falling US dollar in a column in the New York Times:

A falling dollar does mean price inflation in the United States. But imports are only 16 percent of the American economy, and most foreign suppliers have been reluctant to risk their position in the American market by raising prices a great deal. Furthermore many price increases from Europe come on luxury goods and thus they fall on wealthy American buyers, who can afford it most easily. Wal-Mart serves a more working-class clientele and it is stocked with goods from Asia, where currency values have remained weaker against the dollar.

Of course the lower value of the dollar also makes American exports more competitive. Much of Middle America is booming because of its ability to sell tractors, food stuffs and other products abroad at favorable prices. Even after a serious real estate decline, the American economy is continuing to expand, and this is largely because of the strength of our export sector, as encouraged by a low value for the dollar.

So basically what we pay for in higher prices is mitigated by some amount of economic expansion from increased exports. The various directions of trickle may not reach everyone, but there is some thought that the export sector is already serving to buttress the economy in the face of the real estate burst.

One issue Cowan doesn't expand on is the dollar as global currency (or expand on enough). The Economist notes:

But now, with the euro as an alternative, the fear is of a sudden shift in the global monetary system, with investors switching quickly from one currency to the other. So far, this remains only a fear.

The concern is generally framed in the vast amounts of US dollars China holds (about 1.4 trillion dollars) and the brinksmanship that could result from a financial showdown.

And all this doesn't hit on doomsday scenarios and conspiracy theories.

• More from the Economist.

Election warmup

With debates seemingly every other day, Mike Huckabee enjoying is Dean-esque 15 minutes, and the Iowa caucus less than a month away, here's a slightly interesting perspective I came across:

My greatest concern about Clinton winning the election is not her ideology (although still a concern) but the inexorable continued partisan orbit that we would be forced to endure for 4-8 more years. At this point, I believe that any candidate who could reduce hostility might be welcome after nearly twenty years of the armed camp take no prisoner mentality. It may be an indulgence of fantasy to suggest that anyone could alter the current course, but Hillary's election could only fuel an already raging fire.

Clinton does have some record of working reasonably well with Republicans in the Senate, but it is difficult to image that being the case as President.

But, as mentioned in the last sentence above, can anyone actually alter the course? Obama talks of bi-partisan/post-partisan-ship, but by reputation is even more liberal than Clinton. On the Republic side, who knows? Romney seems to be developing some trust issues; McCain can plays both sides, but only has one side on board for things; and Rudy gives a Bush-like king-type impression.

Would you be comfortable voting for someone who you had reservations about issues-wise if you believed they offered some chance of improving the nature of political discourse?