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Friedman on the $43 billion infrastructure he saw in China and the crumbling infrastructure in New York City and driving from dilapidated La Guardia airport in New York city into the city vs the new Shanghai airport and the magnetic levitation trains into Shanghai. He says don't forget that they are mere snapshots. And he is very aware that you go 100 milews outside Beijing and you find a poor developing country. So which is the real China, no easy answers. Give credit to their dedication and all the hard work and the motivation and planning to Chinabut still ask the questions about what we should do here in America and what countries like India have to ask what they should do and go about doing it. China will have its own questions and problems to think about too as it has to figure out what their best allocation of capital will be, what their policies should be from the birth rate and demographic changes, to the environment, and to ways to bring the rest of the country and farmers into the picture and see that the gains from now on reflect the imbalances in growth. The country building the latest infrastructure will always have the latest infrastructure and that will be the next country around the corner with the capital and energy to do it, the USA or India or Russia or some other country. The real progress is in the quality of life, of health and the resources for living productive healthy lives for most of the inhabitants of any country or region and that goes beyond politics or nationalism or rivalries or vested interests of groups of people, as it depends on learning from the best that every productive mind anywhere in the world or any productive place anywhere in the world has to offer. And the thing about this is its never a goal only because in a true sense the road well travelled is the destination for this kind of progress. ...

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How Sweden in 1992 and is Finance Minister Lundgren faced a similar crisis in its banking system after a housing bubble in that country collapsed. At that time the way Sweden approached it set aside 65 billion kronor or $11.7 billion dollars then or $18.3 billion in today's dollars, 4% of its gross domestic product, for rescuing failing banks. The US plan for $700 billion is roughly 5% of gross domestic product. But the way Sweden did it it extracted full price from shareholders and rescue was arrranged only after the Swedish government got a big equity share in the banks that were rescued. Lundgren is concerned that the US plan does not provide for the US government to take big equity stakes in the banks that receive government money. By selling off these shares in better times the government of Sweden has recovered most of the money depending on how its calculated. However the US government has taken big ownership stakes in Fannie, Freddie, and in AIG. And the plan is not yet spelled out. In terms of its size its similar to the Swedish plan an in this sense its similar, a big government effort to take a decisive and complete approach to the problem. In the short run this may create problems for the dollar according to currency experts like John Taylor, but some experts like currency strategist at Deutsche Bank think that in the longer term this rescue plan hel[ps American macroeconomic fundamentals and in doing so will help the dollar. Another factor is the European economy and as Europe also faces some problems of its own, from a housing bubble standpoint Britain, Ireland and Spain fall in the same boat as the Americans, and Germany may also have some bad loan problems of its own, so the macroeconomic fundamentals may weaken in Europe over time and this might also favor the dollar vs the euro in the longer term. ...

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Shoichiro Toyoda's son Akio takes over as new CEO of Toyota. He got the MBA degree from Babson College in Massachusetts and joined the company at 27. Initially Shoichiro was opposed to Akio joining the company. Even today with the Toyoda family owning only 2% of company shares there is a faction that supports Akio and a faction that dislikes the founding family's involvement in running the company. So the job has not been an easy one for Akio. At one point Akio admitted himself into a hospital early in his career after friction with one of his bosses. Things settled down after that and eventually Akio headed the China operations, where he engineered the merger of Tinajin with FAW to give Toyota a more capable partner to expand in China. And to get Akio to take on the new role, the elders at Toyota like his father and others had to ask Fujio Cho to stay on as chairman, even though he has a back ailment that made him keen on resigning. Current CEO Watanabe will become vice chairman and help Cho with his duties. The idea may be to have more experienced people at the top as Akio takes over and makes changes to the conservative culture and bureaucratic ways of Toyota. This eases the transition especially if there are people who are wary of the founding family and Akio's more direct and bolder style of management....

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Martin Feldstein believes the dollar's decline will strengthen US competitiveness and because the economy is likely to stay weak its a good time to gain in exports. Ronald McKinnon at Stanford University warns of higher inflation with the dollar devaluing further. The G7 finance officials want to see a gradual adjustment for the dollar. Feldstein's view tempered by the need for gradual adjustment with allowance for the need to keep in mind the Europeans concern of a weakening dollar vs. the Euro, seems to be the view the G7 are taking. There is also the feeling that the euro may overshoot in value at first and come back to a more reasonable rate after the US improves its trade balance by 2009 or thereafter.

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Union leaders at plants more receptive to the VEBA, Voluntary Employees Benefit trust.Trust funding at discounted rate an issue. The VEBA could work both ways if its short on funds GM could step in, if it has more funds due a national health care plan being passed then GM could have access to liquidity from the VEBA. Meanwhile Clinton speech in Des Moines, Iowa on new Health Plan addresses the burden on GM to fund retirees health and other costs in the range of 1600 dollars vs Toyota's 200 some dollars. Senator Clinton offers for Governnment to take up the burden of catastrophic coverage for the large companies like GM in her Plan. She also cites the Mayo Clinic study as example of a consensus on the need for action on health care.

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The results of the February 24, 2011, CBS/New York Times poll show strong support for public workers in schools, firefighters, police and other functions. On collective bargaining 60% opposes weakening the bargaining rights of public workers, only 33% support it. On reducing the benefits and pay of public workers to reduce deficits, 56% opposed cutting pay or benefits, only 37% support it. Are public workers overpaid or have overly generous health and pension benefits. On this issue 61% -including over half of Republicans- say the salaries of public workers were either "about right" or "too low" for the work they do. So how are states to reduce their deficits? The people polled say they prefer tax increases over benefit cuts for public employees- only 22% chose to reduce the benefits of public employees, 40% said they would increase taxes, 20% said they would cut financing for roads, only 3% said they would cut financing for education. How this breaks down in politcal groups. 71% of Democrats opposed weakening collective bargaining rights, the opposition was also strong from Independents with 62% of Independents opposing weakening of collective bargaining rights. Followup interviews showed independents saying the public workers work hard and still struggle to have a home, saving for retirement, and sending their kids to college, with both spouses generally having to work, which is why they oppose weakening collective bargaining rights. Which segment of the populations support cutting pay and benefits of public workers? The one income group that showed support for cutting pay and benefits- those earning over $100,000 a year! There 45% said they favored cutting pay and benefits, even here 49% opposed it. On the intentions of the governors and state legislators trying to cut pay or benefits of public workers- 45% said they did this to cut the deficits, and as many as 41% said the saw this as an effort to weaken unions. Which takes one to the last question, so how are unions perceived in the U.S. in 2011? A far smaller number of people, 37% saw unions as having "too much influence" on American life and politics vs. 48% who said that unions had the "right amount" or "too little" influence....

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It is a landmark agreement and more innovative than the GM and Chrysler agreeements, with the UAW getting a significant stake in Ford, something that is a first. UAW supported money going into creating 5 flexible body shops so that investment to get Ford new models and manufacturing capability is put in place in this agreement- showing union management unanimity in understanding Ford's situation. The UAW Ford Agreement details: UAW gets about 18% ownership of Ford and becomes Ford's largest shareholder with about 4 times the shares of the Ford family. Ford will build 5 new flexible body shops in unionized assembly plants, invest separately $200 million in new technology and equipment in unionized stamping plants, and make substantial new investments in engine operations. All new hires will get a starting rate of $14.20 an hour and a full rate of $15.34 an hour, nearly half the curtrent level and its good till Ford reaches 20% of the Ford UAW workforce. When this is reached for entry level positions Ford must first move those hired at the lower wage upto the higher wage before filling in more positions at the lower rate. The VEBA health trust will work this way. Ford will only put in $6.5 billion in cash into the trust and $450 million each year in current dollars. The rest is done innovatively to conserve cash and give the union a stake in Ford that will be a first time in such a deal. It may change the labor vs. management atmopsphere in the long run as Ford recovers. A $3.3 billion convertible debenture note will be issued giving the union a stake of about 18% at current share prices, which terms are still not clear. Ford will also issue a $3 billion secured note. And to cover retiree health obligations until the trust makes payments Ford will pay $2.2 billion. The Jobs Bank is restricted to 2 years. After 2 new job offers are declined the worker goes off the payroll. Ford will also trim about 10,000 to 14,000 workers with buyout packages. ...

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When experts say corporate earnings and balance sheets are healthy this is because they are speaking of the situation in aggregate. Companies that benefitted from the commodities boom like the oil companies and companies like Microsoft and Apple have hundreds of billions of dollars, but this is very deceptive and misleading. About two thirds of nonfinancial companies, 1600 companies, carry a junk rating according to S&P. How does this compare with earlier periods? Its up 50% from the beginning of the last bust in 2000 and 40% higher than in 1990. Also Wall Street hugely expanded the market for speculative floating rate loans with $1.2 trillion raised like this in the last 4 years to 2007, according to Thomson Reuters. And the junk bonds are much junkier. Between 2003 and 2007 lenders financed $194 billion worth of bonds in the bottom tier of non investment grades with B- or below. And that was twice the amount of the previous 4 years. Histoically it should be noted 23% of bonds in this group default within 3 yearsafter they are issued vs just 3% in the top 3% of junk. Which companies are likely to default? Amusement park operator Six Flags, construction products maker Georgia Gulf, trucking company Swift Transportation, and sports equipment maker Easton-Bell Sports. Private Equity owners who have loaded the companies they own with debt also could default. This includes real estate brokerage operator Realogy, newspaper company Tribune and pizza chain Uno Holdings. S&P's estimate that the default rate among US junk rated borrowers will jump from 1% last year to 4% this year but other experts estimate it at around 8%. And if history is any guide it will probably be in double digits. After the 2 lending booms the one in late 1980's for LBO's and commercial real estate and for telcom and tech in the late 1990's default rates reached double digits. And with a recession one expert Fridson of research service FridsonVision estimates default rates of upto 16% for two consecutive years considering the huge amount of debt that has built up....

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Toyota makes a sharp rebound after the recall and the tsunami in Japan. Still Takahiko Ijichi, senior managing officer, strikes a note of caution. He says "the latest numbers are not necessarily reflective of our true strength." Toyota has to contend with the slowdown in China, the problems in Europe, and the strong yen in coming months.

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This WSJ editorial welcomes the change in India in the form of Modi bringing his executive experience in Gujarat state to the national level. It also points out the risks of Modi following a simple model of state capitalism pursued by China which also has political controls, and of the form in Brazil which invites crony capitalism and limited results. Better says the WSJ to take a new approach to satisfy the growing aspirations of young people who overwhelmingly supported Modi in the hope of better access to jobs and improved standards of living.

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Steve Lee Myers reporting from Moscow and St. Petersburg, Jo Becker from Washington and London, and Jim Yardley from Nicosia, Cyprus, provide this extraordinary and exceptional report on the rise of a small group of friends, mostly from Mr. Putin's time in St. Petersburg, into a new sort of oligarchy replacing the old one under Mr. Yeltsin. This includes more familiar names such as Sechin at Rosneft, but also less familiar names such as Mr. Kovalchuk, chairman of Bank Rossiya, which owns major television and radio stations and newspapers in Russia. M. Kovalchuk is described as having acquired many of these media properties at a fraction of their real value. Bank Rossiya assumed management of assets of Gazprombank, and Gazprom bank purchased Gazprom Media with five television and a number of radio stations for $166 million, when Medvedev, a Putin associate put the value at $7.5 billion 2 years following the acquisition, according to this report. Other assets acquired in this manner include Channel 5 and Ren TV, giving Putin's inner circle control of the media and reducing any critical or different views on issues facing Russia. Many of Gazprom's assets were transferred to Bank Rossiya, say critics, including insurer Sogaz which was acquired for $100 million, later valued at $2 billion, says the report. Names on the this inner circle also include Yakunin, head of Russian Railways, also include names like Fursenko and Timchenko. Most of the people in this inner circle are now targets of western sanctions. Missing in this report is mention that that this inner circle of the second term as president replaces the larger circle of the first terms as president and prime minister, with Putin benefitting from experts and advisors in the first terms. That circle included Finance minister Kudrin known for his successful management of the economy, and others who left the administration after flawed parliamentary elections. Even prime minister Medvedev is not mentioned as part of this inner circle, suggesting a degree of isolation which could be perilous for the Russian economy as it deprives the Russian president of different opinion and useful advice. This is a pattern seen in many emerging market countries which experience corruption during the period of industrial development. A pattern seen also in China under the Communist Party. And in Venezuela where a new Bolivarist class was created. In emerging market democracies such as India and Turkey the problem is also present, except that in India the recent open election led to the ouster of the Congress led government with many cases of corruption in its second term. A similiar election led to a new government in Indonesia, showing that there is another way beyond the Putin Way. Behind the protests in Hong Kong and in Russia, as well as in India, were the huge gaps in wealth and the growing inequality, corruption, lack of responsiveness of ruling governments. In Russia this takes another dimension with efforts to control the internet and media, and efforts to spread this style of democracy. This has created problems in the Putin government's relations with western nations having open societies and free media, and unwilling to accept a distorted model of democracy. Another less noticed aspect of the evolution of these emerging markets is that upto a point development proceeds even accelerates even in the presence of corruption, and then reaches a point where development and growth slows with problems of corruption, mismanagement of resources, declining productivity, economic and political errors, or unfavorable external environment. India faced this problem in 2012-2013, Russia is likely to face this in 2015, and China faces the prospect of growth slowdown by 2016. This feature of emerging markets also reminds one of the frequently quoted old English saying by Lord Acton- "Power tends to corrupt, and absolute power corrupts absolutely." An idea also attributed to William Pitt the Elder who said- "unlimited power tends to corrupt the minds of those who possess it." ...

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Italy vs. Brazil in World Cup Soccer 1982 in Barcelona. Memories from that game in which Paolo Rossi of Italy scores a hat trick to knock Brazil out of the World Cup. With the passing away of Rossi this report looks at the legends of the game. Rossi also scored the opening goal in a 3 to 1 win for Italy against Germany in Madrid. 

Amazingly Rossi was seen as coming out in personal redemption after getting a 3 year suspension from the game for a match fixing scandal of 1980.  When it was reduced to 2 years Rossi got the opportunity to redeem himself. The World Cup Soccer was to be held in Spain only a few months after he started playing again. Rossi was declared unfit to play and did not score in the first three pool matches. Then came the Brazil game. Followed by 2 goals in the 2-0 win over Poland in the semi final. And then on to play Germany in the final with the opening goal. 

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Sony has lost its focus, it is in so many lines of business, that its brand identity has been lost. Especially in Japan where it is in cosmetics, massage, mailorder shopping club, insurance, finance, robots etc. It has 1000 subsidiaries and affiliates worldwide, of which a third are unrelated to its core electronics business. How does this hurt? It hurts because management is distracted, and when top management is distracted then its not focussing on customers, changing business trends, creativity in its business pioneering new products. In a big company this problem is just magnified by the bureaucracy that develops. Problems similiar to the ones faced by IBM and General Motors. The analysts and Howard Stringer talk about restoring the Sony premium. What is a premium, its not just the brand, its the innovation or something special behind the brand that enables it to command the premium. Stringer probably understands that its the innovative edge that Sony as lost. See the other piece "Howard Stringer, Sony's Road Warrior" by Siklos and Fackler in the Sunday NYT, May 30, 2006 with Stringer shown in a large picture imagining him as a Sumo wrestler. An unforgettable picture. In that piece it becomes clear that Stringer is keenly aware about Sony's and Japan's weakness in software which is increasingly driving success in products when combined innovatively with new bold concepts. He says there that Sony takes great pride in its hardware, and this is true of Japanese creative spirit in innovative and miniature gadgetry, but its capabilities in software are very modest. As one action step Stringer has hired Tim Schaaf , a senior Apple executive to lead that effort at Sony. The other part, getting the focus back by focussing on customers of electronic products is evident in this piece. Ryoji Chubachi, head of electronics and co-head of Sony with Stringer, regularly visits large retailers to offer incentives for making Sony products more visible, something the prior management failed to do. The prior management failed to focus on customers, and thought it beneath their highflying ways. One of the decisions by Chubachi in TV's is to price HDTV sets close to the price of Panasonic, Samsung and Sharp at large retailers in Japan. This makes sense to gain market leader status, as it shows Sony is living in the real world and taking decisions appropriate and relevant to a premium free environment in television sets. You a manufacturer cannot imagine a premium, a premium is a perception in the minds of customers and most likely reflects a perception of uniqueness, creativity, fashion and some other attribute, which can include engineering. Sony's philosophy has stated in Akio Morita's book "Made in Japan", was to be a pioneer, to walk the untrodden ways, break new ground. One aspect of this in comparison to Matsushita, Sharp and other competitors, was going to be its individuality, something Morita borrowed from his days in the US, because it is typically American and sort of unJapanese in a way. Though this is a generalization and many American companies merely follow and some Japanese companies have their own way of doing things even if it is thought of as being very Japanese like, witness Toyota in its Aichi prefecture surroundings. In this light the surveys show Sony significantly deteriorating in "conspicuous individuality." The New York Times cites a survey from BP Nikkei Consulting in Tokyo that the number of consumers saying that Sony showed "conspicuous individuality dropped to about 25% from about 40% the year before. ...

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S. Koreans do not like the Wal-Mart style large warehouse type of retail stores as a place to shop in. What they want is the Korean outdoor market comfortably tucked inside. A better comparison to Korea's own E-Mart owned by Shinsegae is Target stores in the U.S., where there is a a nicer spacious layout, lower shelves. Then you have to add the feeling of a Korean outdoor market with vendors in the form of girls with polo shirts showing the brands they represent calling out to customers, above the sound of butchers calling out prices of meat and fish. A senior executive at Shinsaegae's E-Mart says S. Koreans hate the warehouse format. As a result Wal-Mart and Carrefour had to withdraw from the Korean market. E-Mart's founder, Lee Myung Hee, is the daughter of the Samsung Group's founder Le Byung-chul. The company is now run by her son, Mr. Chung, who is combining professional mangement with ownership management to run E-Mart. The original E-Mart was a small operation acquired by the Samsung founder in 1963, and separated from Samsung under Ms. Lee in 1991. The first E-Mart opened in 1993. In 1999 Samsung took a 11% interest in Samsung-Tesco discount chain retail stores, a joint venture with Tesco Corp. of the UK. Shinsaegae expanded quickly after the 1998 Korean financial crisis, by acquiring land at attractive prices. With the failure of the Wal-Mart stores in S. Korea, Shinsaegae acquired the Wal-Mart operation for $872 million in 2008. ...

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Experts say Chief Justice Roberts somehow found a path through in bridging the ideological divide and avoiding a show of partisanship in an election year. He somehow navigated and found a path through in his vote on the U.S. healthcare law letting it stand. Early on Roberts advocated "judicial modesty and humility" in jurisprudence. He compared the judge's role to that of an umpire in baseball during the 2005 confirmation hearings. The umpire would not pitch or bat, his job would be to call balls and strikes. It was seen as a determmined show of independence at a time when Justice Kennedy was seen as the swing vote. He has also earned political capital to be able to vote independently on other issues before the court instead of becoming embroiled in controversy about the role of the Court in overturning the work of Congress during the early part of the Obama administration.

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The Markit/HSBC Purchasing Manager's Index for China declined to 49.6 in Jan 2014 from 50.5 in Dec. 2013. A score below 50 shows contraction. China's GDP growth declined to 7.7% in the 4th quarter of 2013.

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Trofimov of the WSJ gives exceptional insights into Iraq in 2017 under prime minister Abadi. Iraq he points out survives as a democracy under Abadi with free elections unlike most of the Middle East. Even pro-Iranian militia leaders who fought U.S. troops are willing to concede that after many mistakes by the U.S. in the region there is hope and the U.S. action led eventually to this positive outcome.  Under prime minister Haidar Abadi Iraq has an opposition with TV channels opposed to the Abadi government freely operating. Abadi is a British educated engineer and says here that he believes in a multi ethnic democracy for Iraq. He was chosen to replace the openly sectarian government of Nouri Makliki which led to the loss of parts of Iraq to Islamic State. With that part of the conflict coming to a close and Iraq regaining most of what was Iraq before the conflict Mr. Abadi's stature has risen. Abadi says he will bring all pro-Shiite militias under government control. The lessons of the last couple of years, the failures of sectarianism under Maliki leading to the rise of Islamic State are not lost on the Abadi government. It is taking steps to maintain friendly relations with Turkey and Saudi Arabia, and present a multi ethnic image. Abadi and Maliki both are from the Shiite Daiwa party. During the recent dispute with the Kurdish government of Mr. Barzani, the legitimacy of a democratic government played a role in winning over Kurdish politicians so that control of the oil rich province of Kirkuk was reclaimed by the central government. Mr. Barzani was seen as overstaying his term by 2 years. This has further increased the credibility of the Abadi government. Particularly as it lets a free press and freedom of expression operate in Iraq through the media and respects this. Abadi says: "We suffered a lot under a dictatorship. We should never allow dictatorship to come back." New elections are to be held in Iraq with Mr. Maliki representing other parts of the Daiwa party, elections in Kurdistan region with politicians opposed to Mr. Barzani taking part, and in other parts of Iraq. Iraq's democracy is still struggling, but there is hope if the lessons of recent years of sectarianism are not lost for the leaders and peoples of Iraq's different ethnic regions. Just as Iranian election gave a new term to the moderates under prime minister Rouhani there is a sense that the elections will do the same in Iraq. Rouhani won 57% of the vote with 23 million votes to 38% for the other candidate Mr. Raisi who won 15 million votes. Except for the eastern part of the country Mr. Rouhani prevailed in all the provinces of Iran.  ...

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Yoshimi Inaba, who now heads the North American operations of Toyota, thinks Toyota became complacent and lost touch with the customer. He says Akio Toyoda, the new CEO, wants to put some "passion" back in the company, and to see local executives speed up the decisionmaking at the company.

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Toyota plans to spend $1 billion on a marketing and advertising plan, spending that is 30-40% more than normal, to ramp up production and fill out inventory. It includes money to subsidize lease and loan rates, customer incentives and dealer ads. One aim is to raise the projected resale value of its vehicles used in calculating montly lease payments. Akio Toyoda is also giving more decisionmaking power to local executives for the markets they are more familiar with.

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Akio Toyoda and Yoshimi Inaba answer unrelenting questioning by a Congressional panel. Toyoda reafffirms the principles his grandfather stood for in building Toyota. A rare comment by former Toyota executive Jim Press throws light on the struggle going on inside Toyota betweeen the Toyoda family and career managers from the previous two CEO's. Jim Press said that the company was hijacked some years ago by anti family financially oriented pirates as he called the two previous CEO's Okuda and others working for them. And he added these managers lacked the character to preserve the company legacy.

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Some of the hrdles Blu Ray is facing are the price of Blu-Ray disc players priced by Sony at $399 vs. $60 for a standard machine, and BluRay discs priced at $11 more than regular DVD's. Sony has said that the price of the disc players won't fall below $200 till the end of the year by which time consumers in the USA may further tighten their spending. An April report by Sanford Bernstein & Co. predicts sales of BluRay discs will add only 1% to sales of DVD's this year, so the outlook is very uncertain for BluRay. Part of the problem is that its a discretionary spending item and consumers may ask themselves why spend so much on the discs when there is not a signifcant appreciable difference in performance? Blu Ray discs do not provide that much of a noticeable difference except for action films.