April 2009 Archives

So we stand finished with the term's blogging. Whether this page will now fall into oblivion as many blogs do, or be revived by a new generation with different intentions remains to be seen, and there is little benefit in speculation. One thing remains certain, it's tough times for econoblogging. The news we hear from the mainstream media regarding our economic fortitude remains endlessly southward, and keeping youthful optimism and originality in relating our lives to the desperate economy proved, as notable from the staggering 9 posts here on the last day of deadline, more a chore than a creative joy. It's difficult - so difficult - to sit down and create a pithy, irreverent and bright post that could keep with our recurrent off-the-wall theme. We are a group of young adults that continually looks for the sunny, hilarious or bizarre effects of this recession, not because we think we're funny but simply as a matter of how we were raised. Maybe as a generation we're not yet willing to accept the incredible burden being placed on us, or rather we refuse to admit it in spite of it's glaring omniprecence. So we joke, hold in reverence the satirical and cynical, and wonder if that extra year or two before graduation will give us any lee-way. We are a generation raised by the likes of Jon Stewart, Jay Leno, and Conan O'Brien - even the worst news has a silver lining to help us cope, and if it doesn't we try our damndest to create one. Our parents grew up on paternal nightly news anchors and a relentless, fear inducing 30 minute broadcast for daily digestion. We do not accept that, and having grown up with "the fear" we choose not to get spooked - we've moved past shock and awe, even with the economy.  This is our gift and our curse, we simultaneously disallow panicking while remaining (perhaps dangerously) detached from the situation at hand.
I don't hear enough from people our age about the economy. Where are the other bloggers out in that blogosphere (or is it blogiverse?) our age that have relevent opinions? Because even with Lord Obama flooding money into the market on a semi-daily basis, we are, in fact, the ones that will have (and excuse the cliche) to eventually fix it. I wish I saw smart ideas for ten years down the road in our generation's blogs, as opposed to silly woeful looks at the economy as an indicator of one thing or another. This stands true for journalists of all ages: What about the economy as a problem in need of solving as opposed to a problem in need of further explication? Is it possible to say the story's been reported to death, and if so does saying that make me a failed journalist? We know the recession is here, we know people are hurting, we DO NOT NEED another story about so-and-so's mortgage going under, or what colors/designs/logos people are wearing in times of need. I'd rather read another story about the Obama dog hunt than what the stars are doing to show sympathy for the recession. Maybe I'm just frustrated.
Conversely, I should note that I do have undying faith in our generation, especially regarding an economic fix. We hear pundits such as the ever frightening Glenn Beck and just about everyone else that still uses the word whipper-snapper refer to us as the entitlement generation... this seems peculiar. Where were the 20-something hippies when election day came about in the 1960s... not in the voting both, that's for certain. We are there, in record numbers. Where was your Mark Zuckerberg or Biz Stone or even Paris Hilton for that matter? We are incredibly innovative and creative, in a world where it's all been done we can still find ways to capitolize on everything and constnatly reintroduce the wheel. I can't wait to see our generation in charge of reinvigorating the newspaper industry, assuming one still exists by the time we're editors-in-chiefs.

So maybe someone, some company, some government oversight or lack there of, has left us a tremendous problem. I think we can solve it. Crossing my fingers, it may be presumable that Gen Y never has a test of mettle on foriegn battle fields, such as the greatest generation. We may not accumulate massive wealth like the babyboomers. But we've been delivered a singular mission to reemerge from generations of compounding problems always put off for another day. That day is now ours to squander. I know I'm totally up for the challenge, economy and all. You with me?

-Mike White
2010

I've tried to incorporate the following theory into common conversation way too often.  I'm that "casually, yet unsucessfully use Long-Tail Theory in conversation"-guy.  After you've read it, I'll apologize to you.  This theory does not fit into any aspect of daily life.  Or does it?

The Long-Tail, originally acknowledged by Chris Anderson, addresses marketing strategy, particularly resource allocation phase.  More specifically, large businesses that sell a vast quantity of different goods (or services) should continue to offer the low-volume goods (the most obscure ones).  Why?  The summation of the lower-selling volumes (the bottom 80%) will be just as profitable as the upper-selling items (upper 20%).  In conclusion, the collective of small guys are just as important as the few big ones.

Who cares?  Applying this to the notion that globalization will overtake small business makes the Long Tail Theory matter.  Thus, my proposition and warning.

First, the proposition:  someone could attempt to conglomerate small businesses, pledging to relinquish direct managerial control, allowing the small businesses to retain what makes them special.  The profits here, according to the Long Tail theory, would be well worth the trouble.

Warning: don't let this happen.  Period.  Businesses fill a small, selective niche for a reason.  If everyone knows about them, no one will care about them.  This is marketing 101.  Don't skip strait to the 102 level.

Jamie Goodin

As a Kentucky Wildcat fan, I was devastated when the team didn't make it into March Madness this year for the first time since 1991. But I was expecting it. What I wasn't expecting, however, was that Kentucky would be involved in an even bigger contest just a week after the season's end. This time, Kentucky played defense as the nation took an aggressive offensive stance against the hiring of John Calipari, Kentucky's new coach, for $32 million.

 

 John Calipari, who for nine seasons had pushed the University of Memphis to the pinnacle of college basketball, was introduced to Kentucky on Wednesday as the last chance for a franchise that had fallen on hard times. The contract came just one month after the state accepted nearly $3 billion in federal stimulus cash - a move that has struck controversy across the nation. The state's appeal to the federal government for funds was described by Kentucky Gov. Steve Beshear as a decision necessary to save jobs and preserve quality of life. Moreover, the state has been forced to cut $20 million in aid to the University - citing revenue shortfalls. As a result, both incoming and current students are facing a five percent hike in tuition rates next fall. To make matters worse, UK trustees voted months ago to cut 15 staff members and eliminate 170 unfilled jobs. Why has the Kentucky school allocated so much money to the basketball program in such terrible economic times? Kentucky Athletic Director, Mitch Barnhart, is facing severe taxpayer backlash from citizens who are angered that the University's basketball coach is paid more than 35 times what the governor of the state earns.

 

 

 

But the argument made by Barnhart and Calipari is clear. Wildcat coaches are not paid out of state or tuition funds, but from revenue generated by the school's basketball and football teams. Kentucky basketball is profitable. Last year, the school's athletic department reported $6.3 million in profit after overhead and travel expenses. According to UK fans, the question isn't whether Kentucky could have afforded Calipari; it's whether they could afford not to take him. If Kentucky basketball continues to produce losing seasons and the winning tradition of the 90's fades for good, there's a risk that Rupp Arena will no longer be able to sell tickets to students and fans alike. After all, at the end of the day, the athletic department is a major financial asset to the University as a whole.

 

John Calipari may be the highest paid coach in basketball. But there's an argument to be made, despite the blue economic times, that he just might be worth it.  

 

Leann Gerlach

When I think of the word "Amurica," several things always come to mind.  Lazy-boys.  The option to have my sub-sandwich toasted at Subway.  Bob Barker.  Fried Snickers bars.  And until recently, the image of a half red, half white can of delicious  Campbell's Soup--which would have easily beaten Bob Barker--would appear, melting the snow from my now-cozy body.  But alas, remnants the economy's bitter winter remain.

Campbell's Soup Company was an easy pick for my stock portfolio.  After all, the savory blends of happiness and flavor were one of the first brand names in American history.  However, the company's stock loss 6.47% this term, costing me $646.00 "Luecke-bucks".  (Un)Luecke-bucks, as it turns out.

So how do I interpret this stock decline?  Although the recession undoubtedly had a direct effect on the stock's failure, the indirect effects are what worry me. 

First, whatever happen to product differentiation by heritage, market leader, category-creator, or just being awesome?  Campbell's has each.  Unfortunately, Campbell's also has tradition.  The country has taken a sharp left towards the future.  Look for some cultural separation from the tradition and routine.

If it's memories and experiences of the past that are holding Campbell's back, perhaps it's the fact that eating  soup requires sitting down.  No one does this anymore...Campbell's only solution is to add caffeine, guarana, and magic to it's already convenient "To-Go Cups".

Finally, Health-crazed trend setters pick a new ingredient (likely found in Campbell's Soup) to be terrified by.  I am willing to bet that any material/chemical contributing to a government-set definition of "any taste or smell of or relating to 'comfort foods'" will be unnecessarily ostracized in the next few years.  This soup has kept America warm for 140 years.  Until some hemp-wearing, toes-showing hippie lives to be 141, I'll take my Cream of Chicken.

Jamie Goodin

Many people are quick to point out the deficiencies, and resulting decline, of print media.  Actually, I find it difficult to imagine a single day of class in which this very topic was somehow alluded to or addressed.  However, the class never discussed at length about the huge declines of the newspaper's counterpart, advertising.

When the wave of Depression hit, the advertising industry had no choice but to hold its breath.  After all, as we mentioned in class, companies looking to cut costs often trim away advertising budgets first.  Do date, this has certainly proven true.

The financial and employment consequences for ad agencies aside, I predict several changes in ad content.  The first is a movement away from aggressive content or themes.  When the country hurts, its people hurt.  When people are hurt, they reach for a band-aid to cover the wound, not sea salt to light the wound on fire.   That being said, ad agencies know that people are seeking comfort.  Warm sounds, soft colors, and pleasant slogans will appear.  The grass will be green, unless the green is stained onto white play-clothes.  In that case, the mother, although busy will take opportunity to try...another Billy Mays product.

Our strong traditions are another type of band-aid.  Think about warmly-hazy images of the past, before you scraped your knee.  No pain then.  Ignore the pain now, until it goes away on it's own.  Uncle Sam has been using this style band-aid for years now.

If band-aid'ed pleasantries won't work, look for ambiguous depictions of the future.  Take car commercials for example.  It's dark out side as you speed ahead.  Only lights and vague shapes can be made out because you're moving too quickly.  Confidently.  Zoom ahead with a swagger--insight and foresight optional.

This may all seem dark.  It's dark times. 

Check This Stuff:

http://video.google.com/videosearch?q=car%20commercials&hl=en&client=firefox-a&rls=org.mozilla:en-US:official&hs=cUG&um=1&ie=UTF-8&sa=N&tab=wv#q=car+commercials&hl=en&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&hs=cUG&um=1&ie=UTF-8&sa=N&tab=wv&start=50

Jamie Goodin

Economist Tyler Cowen, who writes Marginal Revolution, which I have been reading for the past 3 months has just blogged about a radical suggestion help stimulate the troubled economy. Short on funds at the moment? Just legalize illegal practices like these ones to generate some stimulus!

1. Drugs: I think this might be a big one. An article in the Economist puts the entire illegal drug trade at $320 billion a year. But President Obama doesn't think legalizing marijuana will help the economy much.
2. Guns
3. Prostitution (except in Nevada)
4. Gay prostitution (even in Nevada)
5. Gambling
6. Trade with Cuba: Congress and Obama are current in talks of possibly lifting the trade embargo and lift travel restrictions to Cuba. But it's not like the embargo has accomplished its goal of democracy and human rights in Cuba.
   
7. Liberalized immigration
   

Illegal practices clearly generate a lot of money that could be counted in GDP if they were legal. If I was the government, I might think about legalizing these (in this order: 6, 5, 2, 1, 7, 3, 4) and then taxing them like crazy to make up for the deficit.

However, there is the issue of morality. Most, if not all, of these are considered repugnant by society's standards. If we are so desperate to get out of this economic hole and legalize some of these, then there's a chance that these societal taboos won't carry as much moral repugnance as they once did. If we legalized prostitution for purely stimulus reasons (the economic kind) and after legalized prostitution served its pragmatic purpose, it wouldn't be as looked down as it was and it would be hard to make illegal again. So there's a moral consequence with this possible source of stimulus funds. In a sense, once you go crack you can never go back.

But will it be so bad that we get to that point? I'll leave that to time.

Jess Ramos '09

And by "That is an all-time high," referring to the unemployment rate, I meant that it is the highest rate since 1983.  Sorry for the misinformation!

-Maggie Fiskow '10

In October, the New York Times published an article about the lack of the economic crisis (aka real world concerns) in popular TV shows, including Gossip Girl and 90210, which are both on the same network.

 

Did someone say "economic meltdown"? You wouldn't know it from the youth-driven pop entertainment currently topping the charts. Conceived and put into production well before the Dow plunged below 10,000, this patently escapist fare might seem stunningly ill-timed. But as the latest sales figures, television ratings and box-office grosses attest, ogling the consumption of the mega-rich retains a near-prurient allure.

For the most part, I agreed with the article, but it's not just Gossip Girl. The CW network, home to Gossip Girl and 90210 also ran another TV show earlier this year called Privileged, which follows the tutor of two spoiled rich girls in Palm Beach, Florida. MTV also has The Hills and The City and E! has Keeping up with the Kardashians, all which follow real people who have yet to be affected by the recession.

 

As the recession continues, the networks keep churning escapist content, while ironically, networks cancel TV shows because they aren't making money. The Hills has a new season coming up soon, and good 'ol Gossip Girl keeps pumping out episodes and has also been renewed for a third season this fall.

 

Twenty years ago or so, it looks like a similar story. Economic crisis?  Check. The nation was in a deep recession in 1982 and unemployment was at a high (10.8 percent). In 1987, there was a global stock market crash where the Dow dropped 508 points on October 19. Popular TV shows blatantly ignoring economic crisis? Check. Dynasty and Dallas. Dynasty had a spot on the top 30 highest ratings from 1981-1987, and it reached #1 from 1984-1985.

 

Rewind all the way back to the Great Depression and you have the same concept with just different technology. Since TV shows weren't around, the next best thing to escape from economic woes was to go watch a movie about the rich and famous.

 

I'm not saying that the Gossip Girl writers should in write that:

- Blair Waldorf's dad lost millions from his investments in those repackaged securities and had to sell his chateau in France

- massive layoffs at Bass Industries (and the fact that a high school kid is in charge of the company) had the workers holding Chuck Bass hostage for 24 hours

-  Rufus Humphrey closed his art gallery because no one buys art from him in this economy.  

 

I doubt the writers will turn to the economic angle because that's not what we as viewers want to see or hear. We get enough of that from the news. But maybe us drooling over the clothes and wares constantly peddled by the shows will inspire us to go out and buy them. So in some twisted way, the absence of economic troubles on this show might actually help the economy.

 

xoxo,

Jess Ramos '09

We're above 8000!!!  Exciting and not-so-exciting news in the market today.  The unemployment rate was released this morning, reaching 8.5%.  That is an all-time high.  These are truly unprecedented times.  663,000 jobs were lost in the month of March.  Now, although this might sound bad--it is actually less than the market analysts had predicted. Could that be the reason the market closed up 39.51 points, or a half percentage, at 8017.59?  Maybe.  I, for one, am not authorized to give anything more than my opinion-but that's exactly what I am going to do...

 

-Ben Bernanke, in a speech this morning, defended the Fed's actions over the past few months

-The Treasury Department released developments about Obama's new bonds programs, which help local governments give assistance to their public schools with interest-free borrowings

-Unemployment ratesànot as bad as expected

-We are still unwinding from the G-20 Summit in London

-Bank Of America released the information that they are to pay $713 Million in TARP Dividends, which resulted in its stock price rising 7.55 points or 4.72%

 

So, are these the reasons for the rise in the market today?  I can't say for sure.  But I do know: they didn't hurt...

 

-Maggie Fiskow '10

The New York Times recently ran a story about China's dedication to building their electric car industry. 

http://www.nytimes.com/2009/04/02/business/global/02electric.html?_r=1&scp=1&sq=china%20electric&st=cse

This plan capitalizes on the best parts of a government stimulus package - giving smart loans and incentives to encourage the growth of a sector which will be increasingly vital to consumers of the future.  In the meantime, the U.S. approach to stimulus seems to be to throw money into companies whose business models have demonstrated essential flaws (GM, Chrysler, AIG).  Fortunately there are some American companies trying to adapt to the future.  Tesla Motors (founded by PayPal mogul Elon Musk) is attempting to grow into the first large-scale electric auto manufacturer in the U.S.  They are currently seeking a $350 million loan to launch their new Model S sedan. 

http://www.businessweek.com/bwdaily/dnflash/content/mar2009/db20090326_679423.htm?campaign_id=rss_daily

This is the kind of forward-thinking that American industry should seek to emulate if we hope to remain competitive with foreign manufacturing.  Korea, Japan, and China lead the world in battery manufacturing.  In the increasingly technology-dependent world, where everything from iPhones to cars run on batteries, the U.S. is already falling behind in battery production just as we fell behind in alternative energy.  Smart incentives, tax plans, and loan programs could take a forward-looking approach to addressing national problems rather than the crisis management approach we have seen so far.  Prevention is worth a pound of cure, and there's no point in locking the barn after horse is stolen.  If we succeed in weaning ourselves from foreign oil, let's make sure we don't exchange it for a dependency on foreign batteries.  As foreign governments lend increasing support to developing industries, our domestic counterparts risk falling behind without corresponding help.  Hopefully, the Obama stimulus will help address this shortfall of innovation in time to preserve America's place in the 21^st century. 

 

-Joel Poelhuis