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Apple is in a quandary about what straegy to pursue in the large China market. Apple's pricing depends on its image of bringing in exciting new products. With growth slowing in iPhone sales and lack of new products like the iPhone Apple can go after the market of lower end smartphones to maintain growth. In that segment Apple faces strong competition from manufacturers who make products in-house and have the scale to compete effectively such as Samsung. Other manufacturers such as Lenovo are also surging in this part of the market. Sales figures for the smartphone market give some idea of the problem Apple faces. Smartphone sales for the industry slowed to growth estimated at 41% for 2013, compared to 136% in 2012. In 2014 IDC forecasts growth slowing even further to 17% and by 2015 the smartphone segment looks even less promising with only 12% growth. And much of this growth is likely to go to regional smartphone companies such as Lenovo Group of China, and other brands which are better at competing in the lower priced smartphone segment of below $100, say analysts. Apple sales were 7.9% of the smartphone market in China, Samsung had 15.4%, and Lenovo 13.1%, in the 4th quarter of 2012, according to IDC....

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Sears Holdings spent $1.46 per square foot in 2012 on its stores compared to an average of $9.45 per square foot for Target, Penneys, Walmart, Lowe's and Home Depot, according to this report. Lampert counters this by saying his fund made investments in technology and online retail. Yet Sears stock is up 41% for the year by Oct 2013 largely on the basis that Sears Holdings is worth much more for its parts. Land's End is being put up for sale as well as other pieces of Sears Holdings by Ed Lampert's Hedge Fund ESL Investments.

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Plastic water bottle use surged with a shift to single bottle use of bottled water as a preferred option to using sugar drinks and sodas. In the U.S. this use has surged 284% since 1994, with 67% of the bottled water sold not in jugs but in single use convenience type plastic water bottles.  Manufacturers of plastic water bottles have failed to come up with a technology that makes the kind of plastic that can be easily recycled. Danone's bottled water company Evian brand makes about 30% of its plastic water bottles from recycled plastic and no aims at shifting entirely to recycled plastic by 2025.  Images of bottles filling landfills and hurting sealife have led to consumer opposition to their prolific use. Ocean Conservancy says plastic water bottles are behind cigarette butts and food wrappers the thrid most item washing up on shorelines.  Curbs- Cities in Massachusetts along the coastline are banning their use. New York City is banning the sale in parks, beaches, of these bottles. And the European parliament  is backing laws for member states to collect 90% of these bottles for recycling by 2025. Mumbai has banned this year eater being sold in small bottles. The importance of this is now sinking in. ...

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The U.S. market looks like it is becoming the kind of maturing market that Japan and Germany have become for automobiles. Germany and Japan saw sales peak at high levels and then decline. And they have been declining steadily for several years. The US has a growing population and demographics because of immigration compared to Japan so there wil be continued demand for new cars. However since 2000 carmakers have introduced so many price incentives, interest free loans, and other ways of pushing sales that sales have continued to climb to unsustainable levels. All through the 1990's sales were in the 15 million range, then after 2000 sales climbed, except for the short period of uncertainty after 9/11/2001 Trade Center bombings. Sales climbed up to 17 million and stayed at these higher levels till the recent crises in 2007 saw a drop in sales and a shift to smaller fuel efficient cars. GM was offering 0% financing for 5 years through its Keep America Rolling campaign in the aftermath of 9/11. By 2005 automakers were offering as much as $8000 in discounts on pickup trucks. Employee pricing enabled regular customers to buy at employee prices. The Big Three sold to rental fleets unsold cars, so much so that by 2005 25% of all vehicles made by GM and Ford went to rental fleets, to rental companies in which these companies had large ownership stakes. For GM this became part of strategy. Fixed costs were high and the UAW contracts made it difficult to layoff workers, a jobs bank in which layed off workers could remain till rehired was itself quite costly as money had to be paid to the workers in the job bank. With this kind of inflexibility in the labor market GM could only spread all the fixed costs for its aging workforce which required pension payouts to retirees and health payments to retirees, by selling more automobiles. During this period of inflexibility in labor, and the legacy costs of previous boom years since the 1950's with generous UAW contracts, GM and Ford pushed sales to unsustainable levels; without considering the furture implications of this short term strategy. Another way this could hurt is by pulling sales in future years into current years because of interest free financing or huge discounting which probably happened in 2004-2005 and is seeing a payback today in 2008. At the peak in 2005 carmakers were planning further expansion of SUV capacity or expansion of other carmaking facilities. Gas was still not at the high levels of today. In 1999 gas cost $1.15 cents a gallon, and it was a little higher than that, but nowhere near what we are seeeing today. These new plants are coming up just as the sales are dropping dramatically, the half million SUV's sold in 2008 is about half the sales in 2003, enough to fill 2 plants when many more plants are being built or opening. The new capacity of 4 plants capable of producing 1 million vehicles is looking like a big mistake, like the new Toyota Tundra plant in Texas. Some of the new carmaking capacity is a Toyota plant in Tupelo, Mississippi, a Honda plant in Indiana, and a Kia Motors plant in Georgia. All this means a big drop in factory utilization rates. GM has 2 plants making full size SUV's. Later this year GM will cut production at these plants and at 2 plants making pickup trucks to utilize them only for 1 eight hour shift a day. Toyota has 1 full plant of excess capacity, not including the plant opening in Tupelo, Missisippi, making it likely to be down in utilization very significantly as well. Nissan is only using 65% of capacity at plants in Canton, Mississippi and Smyrna , Tennessee. And these utilization rates reflect the impact at the early stage of the housing crisis, consumption spending is only now beginning to bite, and unemployment is still to take a hit, so th economic recession immpact is still not reflected in auto sales. Even now GM and Chrysler cling to the hope of a sales pickup in late 2008 and in 2009, which is looking less likely by the day. J.D. Powers survey show the North American auto making capacity at 18.7 million cars and production this year at 14.1 million. This means the automakers have disastrously misjudged the auto market, and the role their own actions in pushing sales have affected the market in inflating the sales numbers beyond what is a sustainable sale increase. When credit tightening and lower consumption spending, housing crisis, and higher unemployment all hit the US in full impact by 2009 the situation is likely to worsen significantly and could become a disaster. ...

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Leakage of state funds is serious. Just think how many hospitals and schools, how many solar panel farms or wind farms can be built with $4.5 billion that is reported as the money laundered in the 1MDB leakage of state infrastructure funds? Here it is reported that Goldman Sachs settles for its involvement in the 1MDB with $2.5 billion in cash and guarantee recovery of $1.4 billion in proceeds from assets lost by the Malaysia state infrastructure fund. This is what the WSJ says on July 24, 2020, Ben Otto and Chester Tay- "Goldman Sachs was the main banker for the Malaysian fund 1 Malaysia Development Bhd. or 1MDB. The bank raised billions of dolars for the fund which was allegedly stolen by people working for the fund, government officials and two senior Goldman bankers." It also says Goldman raised $6.5 billion for the 1MDB through bond sales in 2012 and 2013, much of which was stolen by a Malaysian government advisor. And that Goldman received $600 million in fees which would be about 10%. Many of the countries in Asia and Africa have a colonial past in which little or no investment was made for centuries in heath, education and infrastructure. This makes it all the more appalling and heartbreaking. Goldman bankers were also involved in advising China during the hyper growth years which are leading today to little or no growth and concentration in property sector, with appalling devastation of the climate in China over a compressed period of 10-15 years 1995-2010,  leading to fires, floods, drought in China and worldwide, including in Africa and Asia. Was this good advice or self-serving for investment banks as this was accompanied by shift of manufacturing to China leading to decay of communities throughout America and and now a reversal after the pandemic all compressed so as to wreak havoc first one way and then the other way leading to a world more prone to conflict and war. Was this good advice or a cautionary tale for both America, for African and Asian countries and for China most of all a country that has a colonial past and treated with respect by Americans. Two Americans come to mind  Theodore Roosevelt who helped establish the now famous Tsinghua University in Beijing in 1911, and Joe Stilwell who led the Allied operations in China against the Japanese. Were Roosevelt, Stilwell sincere friends of China and Asian countries or the Goldman bankers is a question that just comes up. ...

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Honda's market share slipped from 11% in 2009 to 9% in 2011 in the U.S. after the tsunami and earthquake led to shortages of cars. Sales are expected to be 50% higher in May 2012, as inventory shortages are reduced, according to Edmunds.com. With increased competition, and new models such as the Crosstour Accord in 2009, CR-Z hybrid coupe, Insight hybrid in 2010 failing to catch on, Honda is increasingly falling back on its best selling Accord, Civic, and CRV sport utility vehicles for increasing sales. The Ridgeline pickup truck introduced in 2005 may be discontinued. The Honda Fit subcompact sales declined by 61% in April 2012 from the prior year. Fiat and Kia small vehicles have increased sales compared to the Fit. The Fit is manufactured in Japan and the strengthening yen makes it unprofitable. A cost competitive Fit will be made in Mexico starting in 2014. Honda's strong point is its higher customer retention rate of 60%, second to Hyundai's 64% repeater ratio, according to January 2012 survey of J.D. Power. Honda normally relies on the U.S. market for over half its operating income, and for the year ending March 31, 2012 most of the operating income, 223 billion of 231 billion yen, was from the U.S., which gives some idea of how much rests on the U.S. market. For now Honda is using incentives to recover market share at the expense of operating profit. During the last fiscal year Honda's operating profits declined to 2.9% of sales. Honda's goal is to move this up to 6% in the coming fical year, still short of the 9% in 2002, and between Nissan's estimated 4.5% and Toyota's 6.8% in the coming year. ...

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Closing the plant at Genk in Belgium cost Ford an estimated $750 million and years of difficulty with workers and the community. The plant employs 4300 workers and the cost comes to about $190,000 per worker. Many auto plants in Europe are operating at about 60% of capacity in 2013, and about 7-8 million units of car and light truck capacity remains idle, by some estimates. Ford was compelled to take this action because of billions of dollars of losses for Ford Europe as sales declined because of the eurozone financial crisis and austerity measures.

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The 25% auto imports tariff goes into effect April 2nd 2025. How much will it increase prices in the US for automobiles? The average is about 10%, say some experts cited in WSJ. This includes price increases on higher priced brands such as German brands BMW's and Audis, Mercedes Benz, and VW cars made in Mexico to ship into the US. It also includes European car makers including Stellantis that make cars in Europe and Mexico to ship into the US which could lose market share to American car makers who make most of their cars in the US. Ford makes 80%, GM 60%.  Overall US international Trade Commission in 2024 looked at the 25% US tariff in a study and showed 5% increase in auto prices in the US. President Trump's call to GM and Ford asking for restraint in pricing may be coupled with the government returning some of the money in tariffs revenue pool to American or foreign manufacturers investing more to make more cars in the US including to Hyundai which announced a $21 billion investment. More such investment decisions are expected from Japanese automakers. For example Subaru has capacity for 450,000 cars in Lafayette Indiana plant and sells 650,000 cars in the US. One would expect it to increase the capacity of the plant or add a new plant in the US. The Japanese government and Japanese business will have additional incentives to invest in the US because of the US support for Japan in the Asia-Pacific, US openness to give trade benefits to Japan in the post war period, incentive to make the Republican DJT plan for tariffs to work as a united Japan-US effort. This would include restraint on pricing.  Toyota is in much better financial shape than VW and has a large market share in the US which it will work protect with pricing restraint and more US investment. Only VW and German luxury car makers BMW, Mercedes may not cooperate. Yet VW sells only 300,000 cars in the US compared to 2.3 million for Toyota. BMW and Mercedes sell luxury cars where buyers could absorb the additional luxury brand cost without impacting inflation overall. Some of VW's car sales would be absorbed by American and other automakers considering VW was losing market share and nearly exiting the US market. before this. ...

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Following positions heading manufacturing in 2006 and the expansion of Ford's China operations in 2008, Joe Hinrichs is now president of the Americas group in 2014. Hinrichs is responsible for the product launches in 2014-2015, including the new aluminium body F-150 pickup. Hinrichs supported a strategy for expanding SUV sales in China, which helped increase Ford market share to 4.4% in China in 2013. He started at GM after getting an electrical engineering degree from the University of Dayton in 1989. He is one of the younger managers who came up through manufacturing and feel at home in factories, talking to workers telling them why things should be done a certain way, and problem-solving on the factory floor. Apple CEO Tim Cook also started in manufacturing, with roots in Alabama, and joined Apple in 1997 as Apple struggled with quality issues in factories.

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The Hindu's Piyush Pandey describes the fire sale of assets that is planned as the Reserve Bank of India pushes forward with the effort to clean up the balance sheets of Indian banks. Indian banks have an estimated 5 lakh crore of bad loans. Separately Crisil ratings agency cited the bad loans in the banking system as a hurdle that must be cleared for India to make the necessary investments in infrastructure in the next five year period 2018-2022. The Hindu's own review shows a startling amount of debt in the ten largest corporate business groups in India-  500,000 crore of debt to the banks. Anil Ambani's group alone owes 121,000 crores to the banks, with some of the businesses not able to service the debt. Canadian pension funds, Nippon Life Insurance and other foreign companies are taking stakes in business as this process takes place. The Mukesh Amani Group alone has increased the debt load as a result of the 150,000 crore rupees spent on Reliance Jio. Other investments that have led to losses is the steel business of Tata Group in Britain, which is down to zero value, says the Hindu. This report gives details of the fire sale for the other leading companies in India. ...

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The European Stability Mechanism made its first short term debt auction Jan. 8, 2013, by selling 1.927 billion euros of treasury bills. Japan remains a key investor. Japanese finance minister, Taro Aso, said Japan plans to to be an active investor in the ESM bond sales. He told a news conference: "Japan will purchase some ESM bonds using its foreign exchange reserves as it monitors progress in efforts to stabilize the European situation." Japan holds $1.27 trillion in foreign exchange reserves. The move pushed the yen lower. Investors pay the ESM to keep cash for three months- the ESM treasury bills had an average yield of minus 0.0324%. The ESM fund will be used for aid to Spain's banking sector, Greece, Ireland and Portugal. Plans are for the ESM to issue three month and six month bills twice a month to reach 18.5 billion euros by the end of 1st quarter 2013. The ESM fund rating is Aa1 by Moody's Investors Service, and AAA by Fitch Ratings.

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Facebook has invested heavily in proving that digital ads on Facebook are effective. Some of the research was done with Datalogix and other firms. About 60 ad campaigns were carefully tracked to show how consumers seeing ads on Facebook spend their dollars on products in brick and mortar stores. One ad with cuddly bears for Coca-Cola was more effective than ads on television, says CEO Sandberg. In addition to targeting users based on what users share in their Facebook profiles advertisers can now see the effects on sales. Facebook's vice president of measurements and insights, Brad Smallwood, says advertisers were given the first big report on how consumers acted after seeing ads in the real world. The results are most evident in digital advertising for mobile phones. Facebook has 6% of the $118 billion digital advertising global ad market compared to Google's 31%. The share in mobile is 18% in 2013, up from 5% in 2012. Facebook shares were up 14% or $7.55 to $61.08 on Jan. 30, 2014. Facebook's share price increased by 20% in July 2013 after a similiar announcement of improvement in mobile ad revenues. Facebook's IPO price was $38 in 2013....

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As interest rates for housing moved up from 3.1% to 5.25% on. 30 year mortgage the sales in the housing market in the US have slowed down. This WSJ report says the housing sales are expected to decline in future. The average existing home sold for an average price of $391,200 in April 2022 compared to $340,700 a year earlier.

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A new family sedan will come out of a new manufacturing plant VW has built in Chattanooga, Tennessee, in 2011. The plant will turn out a new version of the Passat to compete with the Toyota Camry and the Honda Accord. Production capacity will be 150,000 A new Beetle will also be introduced. This is the first time VW has built a car specifically designed for the U.S.. During its previous efforts in the 80's VW used European designs and transferred them to the U.S. Its plans are to sell 400,000 VW's in the U.S. by 2013. VW sold 213,000 cars in the U.S. in 2009, so this means doubling sales in 4 years. At it height VW sold 577,000 cars in 1970, but this was before the Japanese and the Koreans entered the market in a significant way, and now the potential is there for Chinese and Indian imports at the low end of the price scale. Another factor making this goal difficult to achieve is the smaller car market and lower economic growth. By 1992, sales had dropped to 49,000, after the boxier replacement to the bug- in its Rabbit and Golf models- never took off. The new Beetle's introduction in 1998 improved sales, which reached 356,000 in 2001, and then declined as a result of too few new models, declining quality and a weakening dollar. There is a feeling among VW's American dealers, that VW's European headquarters staff is not giving the US the priority it deserves. The revolving door change in CEO's for the US operations, has only reinforced this impression. Mr Browning of GM's European operations replaced Jaccoby recently. Jaccoby joined Volvo as its new CEO. Steps taken to address these issues are to revamp the Jetta model for American customer preferences, and advertising that appeals to price conscious customers with the line: "Great for the price of good." Another innovative effort is an ad strategy that tries to capture Hispanics in the US market, with ads on Spanish language television networks. A sign of how much German management is involved in the detail of the new Jetta, is the discussion at the management board level about whether the new model should have American style cup holders. This meant pushing the brake two inches forward towards the driver, a decision that was made to do so after some deliberation at the management board. This will lead to intense competition in the US market, with Asian, European and US manufacturers all vying for the same price conscious customers....

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Some of the statements on the IMF Blog on Inclusive Growth raises the question-Does the IMF, the International Monetary Fund, as an American institution funding developing countries, and economists, grasp what people find troubling in 2022? One of the lessons of the economic crises for families and workers in the US and other countries is that wisdom, a grasp of the soul of a country and its people through the thinking of its founders, and common sense, should drive managing of economies, with a knowledge of how economies work- not economists. Some of that is already happening. America's central bank is headed by Jerome Powell who has wide experience and has knowledge of how the economy runs, is not an economist. He was chosen by president Trump and continues to have the confidence of president Biden for this very reason. Some of the statements on the IMF economic blog are- "Why jobs are plentiful and workers are scarce" Jan 2022 "In the US and UK recent labor market the puzzle, can be partly explained by mismatch, the pandemic's effect on women and older workers leaving the work force." The Reality Wages for teachers are depressed compared to workers in the financial and economics industries, in a frighteningly disproportionate way. When it comes to logistics, hospitality, leisure and restaurants industries workers were paid poorly for what is hard work and long days. In case the IMF economists, and economists at companies, missed this it was called the Great Resignation, people simply choosing to reject the conditions that were handed down to them by the financial industry and economists who built the economic structures of recent decades. Women leaving the workforce are faced with issues of mental health coping with added responsibilities of children at home for the two years, loss of income and widespread mental health problems. The word mental health may be beyond the grasp of economists and the financial industry, yet it is the one of the biggest problems for people. Another pernicious effect noted on the pages of the WSJ is that young white men are dropping out after school because they cannot afford college in alarming numbers. Leading to the kind of discontent for workers and families that president Biden is struggling to address. On IMF Blog- "IMF Podcasts: The Year in Review" Dec. 2021 "The past year has brought us new challenges even as the old ones persist. If anything, the ongoing pandemic has taught us to think differently abut tackling the challenges and questions when it comes to thinking about big issues such as climate change, gender equality, inflation and economic measurement." The Reality Climate change lumped in with economic measurement and inflation. The floods, fires, river and reservoir water levels affecting access to basic life supporting water, drought, all over the world are of a magnitude that is missed entirely.The response to a challenge of this type requires the kind of leadership that president Biden has provided for the world with his $360 billion climate change bill as just the first step of many, and  comprehensive policies covering all aspects of the climate crisis. ON IMF bog- "How Domestic Violence is a Threat to Economic Development." "Stopping violence against women is not only a moral imperative, new evidence shows it can help the economy." The Reality Domestic violence hurts children growing up in such households. It is not so much a moral imperative as it is bad for men, women and children. So many things are wrong about it and it is made worse in conditions of low wages and poor working conditions in poor neighborhoods lacking education. These neighborhoods are also affected by lack of healthcare and the opioid crisis and mental health issues. Not investing in education and healthcare in these communities is what is simply wrong, and which the founders of America as a nation, particularly Lincoln, would find appalling.   Relationship between Capital (the Financial Industry) and Labor (Workers and Families) On the basic issue of the relationship between capital and labor, the IMF and the financial industry, economists, and the economic structure they built in recent decades, have simply got it wrong. It violates both common sense and wisdom, and violates the spirit of the founders particularly Abraham Lincoln. This is what Abraham Lincoln had to say on Upward Mobility, the ease with which each generation can do better than the one before it, as critical in the fight to save the Union. This is from the Annual Message to Congress Dec. 3, 1861, at the start of the Civil War. That upward mobility has been lost in the US with ideas that "place capital on an equal if not above labor, in the structure of government," for the last three decades in the US after the early post war period of Truman and Eisenhower, Kennedy-Johnson.  And Lincoln says this about a hired laborer being fixed in that condition for life, or of future generations of that hired laborer facing disabilities and burdens, similar to the loss of upward mobility for the people today. "Now there is no such relation between capital and labor as assumed, nor is there any such thing as a free man being fixed for life in the condition of a hired laborer. Both these assumptions are false, and all inferences based on them are groundless." "Labor is prior to, and independent of capital. Capital is only the fruit of labor, and could never have existed, if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration. Capital has its rights, which are worthy of protection as any other rights." "Again: there is not, of necessity, any such thing as the free hired laborer being fixed to that condition for life. Many independent men everywhere in these states, a few years back in their lives, were hired laborers. The prudent penniless beginner in the world, labors for wages awhile, saves a surplus with which to buy tools or land for himself, then labors on his own account another while, and at length hires another new beginner to help him. This is the just, and generous, and prosperous system, which opens the way to all- gives hope to all, and consequent energy, and progress, and improvement of condition to all." Lincoln even offers this warning- No men living are more worthy to be trusted than those who toil up from poverty- none less inclined to take, or touch, aught which they have not honestly earned. Let them beware of surrendering a political power which they already possess, and which if surrendered, will surely be used to close the door of advancement against such as they, and to fix new disabilities and burdens upon them, till all of liberty shall be lost." US president Biden has these ideas in mind as he struggles with one piece of legislation after another to restore what once was, to open the door of advancement, to remove these disabilities and burdens that Lincoln speaks of, and in so doing restoring liberty.   ...

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This report in WSJ says at an event in Germany in 2022 Merkel said that after annexing Crimea in 2014 Putin told her he wanted to destroy the European Union. Yet Merkel did not hesitate to double gas imports from Russia after 2014. Joachim Gauck, president of Germany when Putin invaded Ukraine in 2014 says Merkel's decision to boost energy imports from Russia after that aggression was surely a mistake. Gauck stated "some people recognize their mistakes earlier, some later. Her decisions for over concentration of Germany's manufacturing in China led to a similar situation with China that is only now beginning to unravel. The two decisions overconcentration of energy dependence on Russia and manufacturing dependence with overconcentration in China have had interwoven effects and shows Merkel did not grasp the implications and dangers of overconcentration or excessive dependence on any one country. Merkel instead doubled gas imports from Russia and had the Nord Stream 2 pipeline built at a time when Germany was already 55% dependent on Russian imports of energy. She moved too quickly to phase out nuclear energy completely after Fukushima accident leading to Russian gas imports rapidly increasing. When leaving office she said LNG which Germany has now used to replace Russian gas from places such as Norway to Qatar under efforts of Deputy chancellor Habeck was a third more costly.  It could be said that with her sheltered upbringing in the more affluent sections of Communist East Germany's, the GDR's, educational sector, Merkel had such limited exposure to the world that when she emerged as Kohl's preferred choice in ministry positions she was headed for the chancellorship without the right qualifications for leadership. When one considers the experience of an Konrad Adenauer or a Willy Brandt through the World War II years, Merkel's experience for the chancellorship not only pales by any comparison, but also shows significant limits of comprehension and sound or right thinking of the issues facing Germany and the world in the twentieth and twenty first century. ...

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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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A big factor in U.S. car sales, which reached 7.5 million in 2015, exceeding the 7.3 million in 2000, is that a large portion of cars on the road were about 11 years old following the recession in 2008-2009. As Dexter Ford pointed out in a article in 2012 many car owners on the road had replaced the earlier 100,000 mile mark before buying a new car, with 200,000. This pent up demand, and the better technological features including gasoline conserving technology, gave new impetus to demand in 2013-2015. Lower gasoline prices at the pump of about $2.00 a gallon in Jan. 2016 across parts of the country made it economical to own SUV's and pickup trucks. The U.S. car companies Ford, GM and Chrysler-Fiat had sales of 2 million full size pickup in 2015, with the Ford F-150 leading. Car companies have come through a severe crisis and are taking steps to avoid a repeat of the mistakes of the past on fuel efficiency- Ford has introduced a lighter aluminium based version of the F-150 for example. Gasoline prices also provide buyers with extra money to meet car payments which now have been stretched to longer periods and lower rates by auto companies to reduce the cost burden per month. AAA says the average price in 2013 for a gallon of gas was $3.49, in 2014 at $3.34, in 2015 at $2.40. AAA says that 71% of gasoline stations sell gas at less than $2.00 in January 2016, and gas prices are likely to remain low for an extended period with lower demand from China, higher fuel efficiency going forward with stricter standards, new technology for shale oil production, and the replacement of cartel pricing by competing production from Saudis, Iran and Russia. On average Americans saved $115 billion on gasoline, or $550 per licensed driver, according to AAA's Daily Fuel Gauge Report of January 6, 2016. In addition to the $550 saved the higher fuel efficiency with new technology adds a corresponding amount to savings per driver. Add to this the lower payment at low rates over longer periods and the car payment per month has been reduced significantly in a improving job market, to support car sales....

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China's Finance Ministry is having a difficult time controlling local governments using local government financing vehicles to invest in more infrastructure, airports roads and subways. One such city is Wuhan which plans six subway lines, three bridges over the Yangste river and a new airport. Much of the money comes from land sales. The Finance Ministry in a 2013 report pointed to the unreliability of land sales for future borrowing as the property market is slowing, and because it is highly unpopular to requisition land for land sales. This matters because the IMF says debt is growing faster in China than when Japan, South Korea and the U.S. fell into deep recessions at different times between the late 1980's and 2009. Local government debt accounts for one fourth of the increase in China's domestic debt since 2008. New rules by China's bond agency in Dec. 2014 prevents investors from using low grade debt to borrow cash. In the past local governments found a way around the central governments effort to curb growth of debt by restructuring the local government vehicles or some other way, as Wuhan has done. Wuhan Urban is the local government financing vehicle for Wuhan and its debt increased by 20% in 2013. Wuhan's mayor, Tang Liangzhi, is pushing construction to the point where he is known as Mr. Dig, Dig. One reason for China's slowing growth below 6-7% is the need to control the growth of debt. Local government debt in China reached 36% of GDP in 2013, double the figure in 2008, and will increase to 52% of GDP in 2019, according to the IMF. And the increase is not proportionally delivering the same results as before. JP Morgan estimates that over 4 units of borrowing are needed in 2015 for every unit of investment, compared to less than 2 units of borrowing for every unit of investment in 2007. PRC Macro Advisors of Hong Kong says half of the borrowing by financing vehicles goes to pay interest on existing debt in 2014. There are 8000 such local government financing vehicles in China today each competing to build infrastructure in its neighborhood, in the case of Wuhan to build a computing back office for financial companies and as transportation hub, even though its uncertain whether this will be realized or not. The problem is that alternative investments as an opportunity cost are being neglected, the hospital not being built as China's population ages with underinvestment in health care, and the private company with better returns that is unable to find financing. A classic example of crowding out of better return investments as a glut of housing and road/bridge/ airport infrastructure gets built. The central government is wary but faced with slowing growth pushes problems down the road, what experts call a Japan syndrome....

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The declining prospects for construction and heavy equipment manufacturers in the Chinese market with the slowdown in growth in China. This affects Caterpillar Inc, Volvo AB and Komatsu Ltd. Between 2008 to 2010 investments in machinery, construction projects and other types of fixed assets went up by 61% to $4.36 trillion. China's domestic manufacturers Sany Heavy Industry Co. and Zoomlion Heavy Industry Science and Technology Co. also expanded during this period. Now analysts see demand in China as having collapsed compared to the earlier period. Monthly sales of hydraulic excavators for July 2012 declined by 23% to 5886 units, and first half sales were down by 38%, according to machinery trade association. China's stimulus spending also contributed to the surge. The new stimulus planned for 2013 is more selective in investments and much smaller because of overcapacity and overbuilding in many sectors. Some investments such as John Deere's new plant under construction in China and two in Brazil also under construction, will move forward at a slower pace and impact margins. Cummins CEO, Linebarger sees the situation continuing throught he second half of 2012 and recovering gradually in 2013. The slowdown is not deterring construction machinery equipment manufacturers. Caterpillar CEO, Doug Oberhelman, sees demand accelerating after the lull and is slowing its plan to double workforce in China to 11,000, and quadruple excavator production by 2015, but not idling assembly plants so that he has inventory on hand for a recovery. Exports of made in China excavators is also an option, and exports increased 115% in July 2012, over the prior year. But this may be based on manufacturers belief that the drop in demand in 2008 and recovery in 2010 will recur, which may only result in higher inventories as the current stimulus is much smaller and selective. The Chinese government plans to follow the DRC/ World Bank Report and is moving away from the large role of state run firms in the economy....

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One big concern says Nancy Keates of the WSJ about the National Association of Realtors, is that the organization collects and puts out objective data about home sales, and at the same time provides a commentary on the statistics. It also has a mission to advance the interests of its members. There are 2.6 million licensed real estate agents, and NAR represents about 1.3 million of these real estate agents. Would the real estate agents and the NAR tolerate an economist who raised concerns about the boom in lending? David Lereah, is former chief economist for the NAR ,and worked there from 2000 to April 2007. He remained upbeat throughout these years, even when the market was headed downwards. And the way he sees it he was doing for 7 years everything the NAR wanted him to do, and he was pressured to issue these upbeat reports. Critics called him "Baghdad Dave", after a Iraqi information minister for his false upbeat reports even when the war on the Iraqi side was lost. And a Credit Suisse analyst called him Liar-eah for some of these upbeat assesments, when things were clearly going wrong. The way Nancy Keates sees it this economist was eager to profit himself in the boom years. He was an economics Professor at Rutgers, at the University of Virginia, and later an economist and regulator at the Federal Deposit and Insurance Corporation. He himself bought condos 2 in Washington in 2003 and 2004, and one each in Tampa, Richmond, Va. and Alexandria, Va. and Naples, Florida. Owning by 2006 six condos worth between $150,000 and $400,000 a condo. He had an expensive lifestyle says his wife, with a big house worth $780,000, a country club, sports fishing boat. So in some ways suggests this reporter, he was caught up in the boom himself with his investments and the demands of a expensive lifestyle, with little room left for independent opinion and analysis. This is a striking example of things gone wrong, with all the meticulousness and comprehensiveness with which data is collected having its value destroyed by the lack of strict objectivity in the analysis. And the intrusion of strong personal interest bias in one direction making the destruction of objectivity complete. Looking at the economists at companies and associations, there is a subtle bias in operation that needs to be discounted by CEO's and association heads, a bias for giving the CEO's better and optimistic assessments on a consistent basis. An example is the way a large number of economists see the recovery taking place in 2009. Another related example is the sales forecasts for the Detroit auto companies that continued to assume sales in the 16-17 million a year rate into the latter half of 2008, even after the Bear Stearns collapse in March and the increasing foreclosures suggested something was amiss. All with horrendous consequences for the companies or industries involved, and the US and global economies....

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Is the market in S. Korea reflecting the bursting of the housing bubble in the USA, or is it simply a result of the Roh government's new taxes and rules for real estate such as the capital gains taxes of a shigh as 60% and the restriction on loan size so that monthly payments do not exceed 40% of monthly income. If its the new rules then it must be true that the crisis in the USA must have made the pause from the Roh measures give the market time to reflect. One factor is the oversupply from the building boom especially since the new housing had become increasingly unaffordable to average South Koreans at 100 time average income a 3 bedroom apartment cost $2 million in Seoul. A real estate Professor at Konkuk University estimates that about 1 million units will come onto the market by 2013. 2013 thats because the construction has continued even as sales have come to a near halt. Apartment prices have gone up 3% in 2008 compared to 93% in the last 5 years according to Kookmin Bank. What does this mean for the other Asian markets such as China, India and other Asia. Its not just speculation thats disappearing, but is there a sense that the market for Asian goods in the USA, especially for export powerhouses in Asia such as South Korea, is taking a hit from the credit and housing crisis in the USA. And if thats the case what does this mean for other Asian housing markets in bubble mode, consider this a Early Warning Link. See the link to the South Korean election where even corruption charges against the favored candidate are not affecting his popularity because he is seen as a candidate to who could help S. Korea overcome fears about the economic future. Comments that the current crisis is tougher for real estate and construction than the one during the Korean financial crisis of the 1990's suggest that this is something serious. ...

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Conversation with Ford's marketing chief Jim Farley who had 17 years with Toyota and marketed the Scion brand. He is a guy who likes to get a fresh look at things like talking to a security guard before coming up with a marketing plan for the Scion, and talking to a maintenance technician about the 150, all off the beaten track. This is reflective of the approach of Jim Farley. Even talking to psychologists about how to convince people to come and try out Ford cars. He is excited about Ford's Eco-boost engine which is a direct injection technology engine which Ford can democratize as he puts it to put it, on some 500,000 cars and trucks by 2013, something not done before. This is a technology that scales up pretty well. Drivers in Western Europe are familiar with direct injection diesels as a way to cut high gas costs and cut emissions, but Americans are not that familiar with it. It boosts fuel economy by 20% and reduces emissions by 15%, and giving a V6 the power and torque of a V8 engine. Basically it injects fuel directly into the engine in small specific amounts so that very little is wasted and the turbocharger uses waste energy from exhaust gas to drive the turbine. He is also in charge of promoting and marketing the Eco-Boost engine, which will show up first in the 2009 MKS Lincoln sedan. ...

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This NYT report looks at the 20 counties within 5 battleground states in the midwestern states of Wisconsin, Michigan, eastern state of Pennsylvania, southern state of North Carolina and western state of Arizona. It shows the percentage of votes gained by the Republican and Democratic parties in the last 3 presidential elections. A look at the trend and direction of vote percentages gained by each party in each of the 20 counties in different states may be a better indication of the final result than polls alone as both parties are pushing hard in the 2020 election down to the last day. The Republicans strong in the ground game and organized effort, and Democrats in television advertising outspending the Republicans. Because of the clearly delineated positions the Democrats and Republicans stand in sharp contrast to each other both in image and substance.  Because of the Electoral College and states assigned electoral votes based on size the U.S. system is not based on the total vote count in the country. Who wins each state by vote count and gets the assigned electoral college votes assigned to that state, an builds up more than 270 Electoral College votes wins the election for president of the USA.  In Michigan there is the impact of the resurgence of the auto industry, with president Trump pulling out of TPP agreement and renegotiating NAFTA in favor of the U.S. auto industry bringing back jobs from Mexico. This puts the union vote in the auto industry- with Ford, GM and Chrysler located in Michigan- favoring these auto friendly policies from the current administration. The resilience of the auto industry sales during coronavirus is part of the economic story in Michigan. The renegotiated NAFTA treaty also helped dairy farmers of Wisconsin increase sales to Canada. In Pennsylvania the coronavirus and economic impact has hit harder than in Michigan with the decline in oil prices and effect on fracking industry. Closure of coal plants is also having a negative impact on the state. Tariffs on Chinese steel by the administration are helping the steel industry. Offsetting these economic stories is perception of how the coronavirus pandemic has been tackled by the administration. Added to this is the suburban women's vote and the shift of out of state liberal voters to suburbs in North Carolina (Wake county), and in Arizona (Maricopa county and Tucson area). States not covered here but also relevant are Minnesota which could be a battleground state in the midwest and Iowa. Racial protests in Minneapolis add another dimension with controversies about the policing in cities such as Minneapolis and recently Philadelphia. The sharp contrasts in image as well as policy, the coronavirus pandemic and the handling of the pandemic as well as the way rallies are being conducted differently by both candidates, and the economic stories, present an election like no other since the 1960's. The contrast is as sharp as between Gen. Dwight Eisenhower of the wartime allied effort and Adlai Stevenson a liberal and humanist in the 1952 election. That election saw some of the highest turnouts since the second world war, and this is now happening today. That election also determined the direction of postwar growth and dominance of American industry, the setting up of the National Highway system and important changes that were later continued under the Kennedy administration. It also marked the beginning of the Cold War following the Korean War under the Truman administration, a situation that is emerging in a different way today with the free world and the tension from relations with China. ...

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With the sale of its stake in TNK-BP to Rosneft BP will have 19.75% of Rosneft. It will lose TNK-BP's oil production of 986 billion barrels of oil equivalent, and it will gain 900 million barels from its share of Rosneft output. BP's oil reserves will increase by 12.5% after the deal. TNK-BP has paid annual dividend of an average of $2.2 billion since 2004, BP payout from Rosneft is estimated at $500 million. BP's share of the new Rosneft after the deal would be $3.6 billion in expected earnings for 2013 compared to $4.1 billion from the 50% share of TNK-BP. Some of this dilution may be restored by share buybacks by BP.