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Russian rights activist Navalny wins over a quarter of the votes in Moscow's mayoral election. The search for pluralistic democratic system in Russia and a truly functioning multi party democratic system continues.

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The system of using performance evaluations for "forced" or "stack" ranking of employees started with Jack Welch at General Electric. Microsoft adopted the system under Ballmer till 2013, when it decided that the need for teamwork was more important and discontinued the practice. Welch used it to get rid of "underperformers" or managers who did not conform to his requirements when he became CEO of General Electric. It was his personal style and way of bringing change to GE. The practice of "forced" ranking increases competition inside the company instead of teamwork, say managers, and leaves a lot to the caprice of individual managers. In December 2013 Ballmer facing criticism from his Board for missing some of the disruptive technologies in the information tech business and falling behind Apple and Google, sought the advice of Alan Mulally of Ford Motor Company. Mulally had to fight entrenched Japanese competitors and pull Ford out of a crisis in which even Ford's logo had been put up as collateral for loans. Meeting for 4 hours on Mercer Island in Seattle Mulally told Ballmer that he focussed on teamwork and simplifying the way Ford did things. Ballmer phased out the "forced" ranking system as one of the last major steps before he leaves Microsoft. In today's environment for tech companies of intense competition worldwide and disruptive technologies without teamwork and employees looking to come up with new and exciting products the future is surely lost. Having the "bottom" 50% of the employees compete for limited positions can be dangerous or suicidal without the dominant position in markets that GE and Microsoft had. It also makes no sense to substitute internal competition and capricious manager behaviours for teamwork. It is the responsibility of managers to do as much as possible to make good hiring decisions, and then motivate and help employees to achieve their best performance with frequent helpful feedback, and to promote teamwork. This is the lesson Ford learned through its crisis and Microsoft is now learning....

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U.S. bank Wells Fargo is paying $175 million in a settlement with the Justice Department for "systemic discrimination" in mortgage lending to Blacks and Hispanics. The lawsuit was originally filed by the city of Baltimore over violations of fair lending laws. The Justice Department started its own investigation following the lawsuit. The Justice Department said 4500 black and Hispanic homeowners in the Baltimore and Washington region were targets of loans at unfavorable rates and excessie fees. Federal officials described this as a pattern of unfair lending practices that spanned 36 states and 34,000 minority customers over 5 years. As part of the settlement Wells Fargo is providing $50 million to Washington, Baltimore and six other metropolitan regions to help residents make down payments on new homes. Separately Wells Fargo in its settlement with the city of Baltimore, will provide $3 million in homeowner assistance to residents, and make $125 million in lower cost loans to low and moderate income people for the next 5 years....

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Kessler says the assumption that pension systems such as Calpers (California Public Employees Retirement System), can make returns of 7.5% is fantasy considering that U.S. Treasury bonds are yielding 1.74%. Calpers reduced its expected rate of return on its portfolio to 7.5% fom 7.75% in June 2012. Public pension funds in Illinois use 8.18% for expected returns. U.S. public companies with defined benefit pension plan assets of $1.3 trillion use an expected rate of return of 7.5%, even though these assets have return of 5.6% since 2000. Kessler's estimate for expected rate of return is about 3%- fixed income yielding negative real rates of return and pulling returns down. For equities he estimates return at the total of inflation component at +2%, productivity component at +2%, and multiple expansion at -1% because interest rates are at zero.

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Medvedev appears to have little role in setting policy in Russia, even though he has presented a different view of liberal groups and showed interest in pluralistic democracy and free expression of opinion. Putin has expressed a very different view about liberal groups, as representing foreign interests in Russia. The media remains tightly controlled in Russia, and elections are determined in the Putin way. A mayor picked by Putin won the Sochi elections even without campaigning, as many opposition candidates were disqualified or discredited before the campaign. He won with 77% of the vote. In this way elections take place in Russia but are conducted in a way which makes it very difficult for the opposition parties, and keeps media television coverage heavily pro-government.

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The head of the Chinese Communist Party's rural policy office, Chen Xiwen, says about 20 million migrant workers or one sixth of a total of about 120 million migrant workers have lost their jobs in the 2008 global financial crisis. About 5-7 million migrants join the workforce each year, and this brings the total to about 25 million migrant workers looking for jobs. This presents a major problem in job losses for China. The government is making every effort to ease the problems of migrants, to retain jobs, talk to migrants to explain the situation, and provide asistance. Ian Johnson and Andrew Batson of the WSJ visit the village of Shuangyao in rural China and talk to migrants there.

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Useful insights for the auto industry. Its not just your big hits that matter. You have to follow up on the big hits quickly, as Motorola could not. Life of a cellphone is 12-18 months, for a super duper car model how much time before it loses lustre and becomes like chewing gum with all the taste gone out of it. Or conditions change, as the automobile is coupled to gasoline, so its 2 products that you have to think of the hardware and the juice that powers it. Companies need lower end products such as Nokia's N series, lower cost phones for emerging markets. You see this happening in autos as attention shifts to emerging markets because this is where future sales are and this is where manufacturing is headed. Auto parts costs being by some estimates 5 times costlier to make in USA than in Asia. And there is always the surprise that the competitor's better product decisions can spring on you or their steady perseverance and innovation- the Prius in autos and the Apple iPhone in cellphones and music. The trends and the economic environment are constantly changing. The Tata Nano is also a result of a vision, decisions and perseverance and its another of the surprises with a longer term impact. The economic conditions can change an entire market as is seen in the U.S. automobile market....

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Inozemtsev of the Institute of Post-Industrial Studies in Moscow, asks the question wht if the Russian economy shows no growth in 2017, and 2015-2016 become the beginning of a serious downturn. If oil prices remain low for an extended period as now looks likely with factors such as shale oil technologies, Iranian oil, and Saudi policy, playing an increasingly long term role, Russia could face some of the problems former finance minister, Alexei Kudrin, other business leaders including head of Sberbank, warned about. A major problem that Inozemtsev points to is the change in the business climate for foreign investment in 2012-2016 as the Russian economy looks more inward, and the departure of many foreign companies. During the period 2000-2008, a major boost to the economy came from foreign investment which brought with it management and technological improvements. No emerging market country, including China, can have a bright future without access to new technologies and investments from foreign investment. The current period starting in 2009 stands in sharp contrast to the earlier period with the Russian economy lacking the boost from foreign investment, facing capital outflows, and international conflicts creating a long term effect on oil prices. Russia needed time to move its economy away from commodity dependence through technological improvements and investment, yet this does not appear to be happening, raising serious questions....

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Germany benefits from the lower value of the euro in relation to other currencies. Germany's exports to the eurozone as a percentage of all exports increased from 38.4% in 2009 to 41.7% in 2011, according to the Germany Federal Statistical Office and the German Chambers of Industry and Commerce. Exports to China increased from 4.64% to 6.11%, and to Asia from 11.8% to 13.73%, and to the U.S. from 6.77% to 6.95%. This increases the gap between Germany and other eurozone countries with smaller exports. Ireland with its large export base and foreign investment is likely to benefit from the lower euro. German companies VW, BMW, Mercedes, Heidelberg Cement and EADS also benefit from the weaker euro. France's Peugeot with sales concentrated in Europe does not benefit from the weaker euro compared to German auto companies with higher sales overseas, especially in China.

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The SPD's Peter Steinbruck's criticism of Merkel's handling of the eurozone crisis. Speaking to the Bundestag Steinbruck said Merkel had wasted time and billions of dollars of taxpayers before committing to keep Greece in the eruozone. "You should have held this speech three years ago... Never has Germany been so isolated in Europe as it is today." He said Merkel was not being honest with Germans that to be part of Europe Germany had to take on some of the cost and that it was worth it. Instead she was riding the wave of negative opinion for the eurozone and at the same time trying to keep up Germany's influence in Brussels, creating a perception of a new kind of German "industrial imperialism." This comes as France's president Hollande expressed serious dissatisfaction with Merkel's handling of the eurozone crisis in an interview with reporters of 5 European newspapers in October 2012.

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Since 2004 consumer spending's share of the economy in China has fallen from 40% to 35%.

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The joint statement after the G-8 summit stated that "our imperative is to promote growth and jobs." It stated the budget deficits need to be addressed but said "spending cuts must "take into account countries' evolving economic conditions and underpin confidence and economy recovery." Germany's Merkel in her remarks said growth and deficit reduction supported each other, that "we have to work on both paths, and the participants have made clear, and I think this is great progress." Opposition Social Democrats in Germany say Ms. Merkel is adept at changing as the situation changes, and it appears Merkel is making the transition away from strict austerity policies she had championed earlier. Especially now with fresh elections in France, Netherlands and Greece, and the election of Francois Hollande on a pro-growth platform, the German position of strict austerity is being increasingly questioned on all sides. French president Hollande met U.S. president Obama at a pre-arranged meeting prior to the summit. Obama and Hollande see the need to reduce high unemployment in the U.S. and Europe by encouraging growth, creating a common interest....

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Narendra Modi is now the choice of the BJP party in India to lead it against the ruling Congress party of Sonia and Rahul Gandhi. The corruption in government and the slowing growth have improved the chances of Modi, the chief minister of Gujarat state in northwestern India, near Mumbai. Modi has done well in Gujarat state in a number of areas- from foreign investment in manufacturing, infrastructure development, and better governance. His plan is to replicate this at the national level. His slogan is minimum government and maximum governance.

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Joseph Stiglitz describes policies and programs of the Obama administration that favor banks and avoid a government takeover of over leveraged and badly managed banks in the U.S. President Obama's policy transfers financial assets to banks on highly favorable terms even though some of the banks made bad decisions and highly overleveraged assets creating the 2008 global financial crisis. The policies avoid a government takeover of banks, policies which the U.S. aggressively pushed for in other countries such as S. Korea during the 1997 financial crisis with Rubin, Summers and Geithner at Treasury. These policies would come under strong criticism because it rewarded risk taking and kept in place an incentive system that led to such behaviours- creating "heads I win, tails you lose" psychology. It also delinks the performance-reward relationship that is the basis of free enterprise in western economies. A problem that would be left from the crisis and the Obama administration's response to it is "Too-Big-To-Fail," with banks larger than before. The FDIC and U.S. Fed's plans for banks to have living wills for an orderly windup under Dodd-Frank legislation only goes a part of the way in tackling this problem. In the U.S., and in Britain, France, Germany, Switzerland, the related problem of high bonuses continues into 2014, with RBS bank in Britain one of the egregious examples and highly unpopular with the British public. The lack of similiar government help to homeowners, advocated by Reagan economic advisor Martin Feldstein and FDIC chairwoman Sheila Bair from the beginnings of the crisis stands in sharp contrast to the response of the Obama administration. See the links for Barr, Feldstein and Hoenig. In an ultimate irony from the crisis handling much of the damage from foreclosures was done to minorities which supported the administration. ...

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Washington Post editorial on the Obama Georgetown speech of April 13, 2009. It questions whether President Obama has the candour and courage to tackle the tough issues of deficit reduction and entitlement reform. New healthcare spending for coverage itself will add to entitlement, and it says some of the savings mentioned by the President are phony or already needed for new spending for the economic recovery and health care. At the same time the paper gives Obama good marks for his clarity and grasp of the crisis and steps for recovery, and the policy agenda in the areas of health care, energy and education. The questions about courage and candor also raise all the questions about facing upto the facts about insolvent banks that Krugman, Rosenfeld, the Economist and others have raised. Is Obama dodging the hard choices, is he dithering? On the toughest issues like foreclosures, insolvent banks, global regulation pushed by the Europeans, will he end up making inadequate or faulty choices, and when he comes around to making the tough choices, will he have lost so much valuable time as to prolong the crisis and stretch it out to many years....

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The Hulme Company mail order catalog business in Minnesota may not be representative of small business, considering the errors and the scale of the debt taken on. But even if a small fraction of this debt taking tendency is representative of small business, it means that small business will not generate jobs as it did in the past. Small business will actually layoff people. And small business will not be able to provide the bounce the economy will need in years to come. The following is an an anaysis of this venture. The owners of this small business Bidwell and Ms. Guarino bought a luxury goods maker that was losing money for $600,000. Their business was to sell $500 garment bags and $1200 duffel bags. The experience of Bidwell was with Target, Tonka Toys and a cigarette distributor. Ms Guarino had a $130,000 job with a magazine publisher, running regional magazines like Minnesota Parent, which she quit. She had some experience as a handbag designer in California before that. They had never seen hard times, no, they had only seen good times. And were willing to spend heavily on the business like the $600,000 for a business, Hulme Company, that lost $150,000 on sales of $450,000 making duck hunting gear, the business they bought in 2003. All this for a tiny factory employing 3 seamstresses, and with no brand name for luxury goods like leather duffels. Their lender's experience- Kassim who founded Maple Bank in Champlin, Minnesota, considered it pretty typical of small business in those days to do everything on debt and loaned $550,000 over 5 years. So the lender was in for the ride. Another bank Stephens bank loaned on SBA approved loans which were later cut off. Guarino had no experience in this business, and simply relied on Bidwell's experience. The borrowing went on and on from friends, taking in debt with total lack of understanding of what debt means, from their daughter, the entire $50,000 savings of Bidwell's wife, and finally with banks refusing to lend after having friends put up their CD's and collateral on loans. Debt to equity ratio gets to 5 to 1. Second mortgages on the house getting Bidwell and extra $130,000. Even in the best year 2006 sales at $1.4 million, and earnings before taxes and other items at $325,000, not enough to pay the interest and other payments on loans that later totaled $2 million by year end 2007. $500,000 from friends and family including $20,000 from his daughter or two thirds of their savings. 600,000 catalogs went out in 2007. With the Hulme Company behind on payments in 2008, the catalogs mailed in 2008 dropped to 175,000. It is a very capital intensive business from the standpoint of catalog cost. $1 million in inventory at year end 2007, or two thirds of sales of $1.5 million in 2007, was a sign of how expansion preceded even getting the financing in place, and going out into the dark thinking sales wil materialize. So even in the best year 2006 the business was not viable, and would have collapsed even without the financial and credit conditions of 2008, ruining the owners in the process. By 2008 it led to the usual things in this kind of business failure, Bidwell's divorce, loss of his home as he falls behind on mortgage payments, Guarino's loss of job and friends whom she borrowed from, and both deeply in debt. Evaluation of the failure is as follows. Seamstresses and the small factory space could be obtained for a fraction of the cost in an emerging market country, even in an eastern European country, and no cost needed to be incurred for the purchase of Hulme Company or for sending out catalogs. Only travel expenses to meet high end retailers who might carry this merchandise, and go to the country where the plant was setup. Sales would come first, and expansion to meet sales very carefully done so that the plant could be downscaled if sales dropped. Even then scores of small luxury goods makers in China or other emerging market countries could put the owners out of business. The lesson if you can't watch costs, if you don't understand what debt means, then you don't pass the most basic of tests. You cannot run business on savings, home equity or credit card loans, or business loans with personal guarantees. Costs tend to just run up to the money one has artificially created. It will ruin you. If you don't have experience with the business and the product area, or can't put together a group of people with the experience to guide you on the pitfalls and what to watch for, you don't pass the next basic test. Only then does one get to the other tests about whether there is a market, the price and value of the offering and so on. This is before the current economic crisis. Now all these tests become more important than ever, or it will kill you and quickly. One has to be paranoid and very careful after 2008. Stephens Bank loaned money on SBA loans ...

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Interview with Honda CEO Takeo Fukui. In June Honda will rollout a new hydrogenpowered fuel cell vehicle called the FCX Clarity. Its powered with electricity produced by combining hydrogen and oxygen in batterylike fuel cells. Honda will have this vehicle available for lease this summer in California and aims to deliver about 200 of these cars by 2010. Fukui's attitude is refreshing when compared to that of other automakers when answering a question by John Murphy of the WSJ about why try to build a hydrogen car when the stations to power the cars do not exist yet. He tells Murphy if you asked were there any gas stations when Henry Ford came up with the Model T, there weren't any, lets build the cars first and the infrastructure will follow. And Honda is working on the technology that will make it possible to charge hydrogen into fuel-cell vehicles at home . He sees it happening first in California and some other states, and in Japan and Europe. And he sees it taking about 10 years to get some sort of infrastructure in place. Considering the long term nature of the demand side with the gradual inclusion of billions of people in China and India as well as Brazil and Russia into the world economy as well as people in other developing countries this is a solution that takes patient and focused development of technology which Honda is setting out to do. He does not see a safety issue in use of hydrogen vehicles as he is confident Honda can develop the expertise to handle the safety issue for hydrogen. What is his thinking on green vehicles? What happened to the Insight the first hybrid car that Honda introduced? The Insight was never intended to be a mass seller, only to establish Honda's record as having the best record in fuel efficiency. What is Honda doing in this area. Honda does see a problem in this area. Toyota he says developed a green image largely on the back of one car the Prius. Honda will come up in 2009 with a dedicated hybrid vehicle to match the Prius. And Honda is setting the bar high for this Honda hybrid, saying that his feeling that this model will have to overwhelm and overtake the Prius. He goes on to say that this is key for us. Honda he says will take on the challenge and compete with Toyota with its products, its technology, and its racing spirit. This gasoline-electric hybrid will be introduced early next year in the USA, Japan, and Europe, and it will be the first of 4 hybrid models Honda will introduce by 2015. Regarding price the company says it will be "affordable". Honda's goal is to sell 500,000 hybrid vehicles a year. Toyota aims to sell 1 million hybrid vehicles early in the next decade and is working on developing its own hydrogen fuel-cell vehicle. Is Honda developing electric cars? Takeo Fukui thinks the practical feasibility of the electric vehicle is very limited. The two biggest issues in his view being driving distance and recharging time. The FCX Clarity can be recharged in one minute, compared to the several hours for an electric vehicle. In his view the electric vehicles will be uselful only for restricted applications like golf carts. Nissan and General Motors are planning to launch electric vehicles. What is Honda's environmental strategy? Honda being a smaller company has to focus its resources wisely with strategic choices. His focus is on the hybrid as the core product, and after that comes fuel cell and clean diesel as the core products to tackle fuel eficiency and CO2 issues. Takeo has spent more than a decade on Honda's racing teams. He drives a CR-V and enjoys driving up and down the mountains, does not race but does get on Honda's test track once or twice a year. And what has he learned from all the years in racing. When he was fully engaged in the motorcycle racing teams he says the pressure was very high and if they did not do well they got bashed by managers and the media. And actually the results were disappointing for years and the teams kept losing. For hime the series of difficulties and challenges was something that he feels everyone should experience because in some ways he acquired wisdom and creativity to get through these experiences. This is some thing Honda and Fukui will need as they try to develop their own hybrid to take the lead from Toyota and come up with industry leading technology in tackling fuel efficiency and CO2 issues. His own approach to management? Two things he always keeps in mind are take time to keep up good communication with associates at work, and testing Honda's own products with his own hands. What does he think about the auto industry in 2008, is it a turning point? He says it has becom clear in 2008 that a company has to have the technology to deal with carborn dioxide and fuel efficiency issues. And its clear that smaller vehicles are more attractive than larger vehicles. And its possible he says that we may go back from automobiles to motorcycles. In fact in India Honda is promoting motorcycles in a big way, while Tata is developing the Nano for mass market, so Takeo is talking about something that Honda sees happening in some places. ...

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Prices of natural gas in the US have risen 93% since August 2007 and as global demand continues prices are expected to fuel inflation in the US. Producer prices were up 1.1% in March according to Labor Department and natural gas prices contributed to this increase. Natural gas heats half of uS homes, supplies 20% of USA electricity and is used to make products from fertilizer to plastic bags. And demand from the US power sector is growing at 10% a year as natural gas is clean burning to produce electricity at power plants and preferrable to caol burning plants from environmental standpoint. With environmetal regulation and costs natural ga ma be preferred by plants for power generation. A revolution has ocurred in the way natural gas is cooled into liquid LNG and transported in LNG tankers so that places like Nigeria and Quatar can now ship to Japan and Europe. And LNG contracts are now written in less rigid terms so that supplies are not fixed over 10 year periods like before and can be diverted by suppliers to other markets where prices have risen so that when a nuclear power plant shuts down in Japan LNG supply can be diverted to Japan from other countries because of vastly higher prices in Japan. This also happens elsewhere last year a drought in Spain cut hydroelectric power and Spain turned to Algeria and Egypt which had already diverted supplies to Japan which paid prices twice as high as Spain, so Spain secured supplies from Trinidad a US supplier, which reduced supplies to the US by 31% over 2006. So this shifting global supply chain means shortages and prices in one place can reverberate all the way to the USA. Because of these and other reasons US prices are expected to go much higher by estimates from Barclays and Deutsche Bank....