Black Friday indeed. The annual Friday after Thanksgiving tradition of teaser sales in US shops claimed a victim today when a Wal-Mart employee at a suburban New York store was trampled to death by bargain-seekers.
Elsewhere, someone filmed a crowd fighting over the last Xbox 360 at another Wal-Mart store (via Drudge). Read more
I agree with Fred Wilson about the challenge Research in Motion faces in improving on the BlackBerry Curve. I use a Curve and it feels like a near-perfect combination of size, weight and practicality, despite not being a 3G device.
That sounds dandy for RIM, but it brings with it a problem: its efforts to improve upon the Curve – and match the iPhone – feel vaguely doomed. I have a bad feeling about the BlackBerry Storm and the BlackBerry Bold is nice but not compelling.
My feeling about the Storm – the supposed iPhone rival that BlackBerry has just brought out in the US in combination with Verizon – is based on two things. One was holding the device for a couple of minutes and the other was David Pogue’s memorably dismissive review in the New York Times.
Mr Pogue went through all the problems with the device but simply playing around with one for a minute or two was enough for me. It felt too heavy to keep comfortably in my suit pocket and too complex and unintuitive to use. Read more
Should some complex financial instruments be outlawed by regulators in the same way that the US Food and Drug Administration refuses approval for some drugs?
Bill Donaldson, the former chairman of the Securities and Exchange Commission, thinks the idea should at least be considered as part of the reform of financial regulation in the US.
He mentioned this during a discussion on regulatory reform that I moderated yesterday at the Council on Foreign Relations in New York. The suggestion was not supported by the other panel members but it was certainly striking. Read more
My FT column this week is on the Sage of Omaha:
Michael Kinsley once defined a political gaffe as the moment “when a politician tells the truth” and is embarrassed by it. By that standard, Warren Buffett’s deal to write $35bn of put options on equity markets was a financial gaffe.
On the face of it, Mr Buffett’s gambit looks both unwise and uncharacteristic. Shares in Berkshire Hathaway, his holding company, tumbled last week (they have since recovered) because it is nursing a mark-to-market loss of about $5bn on the derivatives contracts.
In fact, a casual observer might question what Mr Buffett, who once condemned derivatives as “financial weapons of mass destruction”, was playing at when he bet that four equity indexes, including the Standard & Poor’s 500, would not be below their existing level in 2019 to 2027.
One group of people does not yet seem to have caught up with the crisis in financial services – Harvard MBA graduates.
Ray Soifer, the financial analyst, has just released his annual analysis of the career paths of Harvard MBAs, which shows that a record-breaking proportion of this elite became bankers or financiers when they graduated this summer.
According to Mr Soifer, newly-released HBA data show that 41 per cent of the Harvard MBA class of 2008 chose market-sensitive careers, just above the 40 per cent record set in 2007. He defines market-sensitive sectors as investment banking, fund management, sales and trading, venture capital and private equity. Read more
I do not find Bill Ford’s efforts to make us believe in a leaner, greener Detroit car industry very convincing. Ford’s executive chairman has talked this talk for a long time, and is now trying to do so with Barack Obama, but his company has not walked the walk.
When Mr Ford became chairman of Ford in 1999, he focussed on environmental initiatives and talked about pressuring executives inside Ford to take global warming more seriously. He even installed a green roof on a River Rouge truck plant. Read more
The downfall of Citigroup has taken place over a long time and involved many people, but attention is now focussing on the role of Robert Rubin, the former US Treasury Secretary, who is a Citi director and senior adviser and was briefly its chairman.
Mr Rubin has had an influential role at Citi since being brought on board by Sandy Weill in 1999 but has not been an executive. Having formerly been co-chairman of Goldman Sachs, he preferred to exercise influence behind the scenes.
He described his role thus when I interviewed him last year:
“People come by and want to talk about things. Some are unhappy with their jobs, others want to talk to me about how to approach a client or a government. My entire staff is two secretaries. That’s who reports to me.”
Now, of course, a big loss has been disclosed at Citi and various people are asking what Mr Rubin had to do with it. That was among the subjects covered in a long article in The New York Times on Saturday. It found that Mr Rubin and Chuck Prince, Citi’s former chairman and chief executive, played “pivotal roles” in the bank’s disastrous push into underwriting and trading collateralised debt obligations. Read more
Tim Geithner, the new US Treasury Secretary-apparent, is very like his new boss.
First, they are the same age. They were both born in August 1961.
Second, they both have a modest, likeable manner (despite being ambitious and self-assured).
Third, they are both thin and youthful-looking.
Fourth, they both had an Asian upbringing. Mr Geithner went to school in Thailand, Mr Obama in Indonesia.
Fifth, they are both cautious, pragmatic policy wonks.
All in all, they should be able to work together well. Read more
Since the heads of the big three Detroit car companies have been told to go away on their private jets and come back with an actual plan for saving themselves, the prospects for a no-strings bailout by the federal government have dimmed.
Even Barack Obama’s transition team seems to be exploring the idea of planned Chapter 11 bankruptcy instead.
I believe that pre-packaged Chapter 11, with GM and Chrysler merging as part of the deal, is the best way forward for an extremely troubled industry. That is the approach backed by Jack Welch, and here are my own reasons for supporting it:
First, it provides a plausible path forward. Even the Democratic lawmakers who were inclined to give the Detroit companies up to $25bn could not justify it to themselves or the voters, faced with companies that could not explain how it would help in the long-term.
Rick Wagoner of General Motors estimated the long-term level of US car sales at 14.5m, which is a big fall from the peak. That in itself implies that the car companies need to restructure and shrink. But there is no evidence of how this would be done – or if it would be – outside Chapter 11. Read more
Wall Street is clearly going to cut bonuses this year, and next year does not look promising either. But financial industry types have not given up the hope of an eventual return to a system based on taking 50 per cent of revenues for the annual bonus pool.
Personally, I am sceptical about that for a couple of reasons. Read more
I am not sure quite what lesson to draw from the fact that Twilight, the vampire film that opens tomorrow, and could become a new Harry Potter-style franchise (for teen girls at least), has been made by a tiny studio after being dropped by Paramount Pictures.
The New York Times has an article this morning detailing how that fact that Paramount let Twilight and the other three books in the series by Stephenie Meyer slip through its fingers in 2006. It says that a “game of finger-pointing” is underway at Paramount. Read more
My FT column this week is about Jerry Yang and why founders can make bad CEOs. Read more
Further to Felix Salmon and Jim Surowiecki’s comments on the myth that Detroit auto workers cost $73 per hour to employ – that includes the healthcare and pension benefits of former employees – it seems unfair to me to blame the United Autoworkers union for Detroit’s plight.
Of course a union tries to get high wages and benefits for its members – that is what unions are for. The fault for Detroit’s relatively high labour costs ultimately lies with the managements of these companies, or to be more exact the former managements, for taking on liabilities that they could not afford. Read more
Rick Wagoner, chairman of General Motors, just told the Senate banking committee that the US market for cars and light vehicles could be 14.5m or so a year in the long-term, compared with a peak of 17m.
GM’s estimate of market size is as much a guess as that of any informed observer, but that indicates a realisation that Detroit will not be able to boost demand in future to anything like the level of the past. Read more
One argument advanced for bailing out Detroit is that it is a national security imperative to have a domestic auto industry. I do not take that argument very seriously, but here anyway is a photograph of a Cadillac factory in 1951, presumably making tanks for the Korean war. Read more
The view that the Detroit big three should be pushed into Chapter 11 bankruptcy, and not simply be bailed out by the US government, is growing.
The big three argument against this, apart from the general view that they only need a helping hand, is twofold. Read more
With regard to the proposed Detroit bailout, I find it curious that most people have accepted that it needs to be all or nothing – that either General Motors, Ford and Chrysler should all get government money, or none of them should.
Since my column last week noting the reasons why a Detroit bailout would be a bad idea, the mood has become more hostile to the idea (I am not, by the way, claiming any causality: lots of other people argued against it).
But the argument has generally turned into a three-way bailout versus none at all. So I want to reiterate my suggestion that the US government provides some finance to GM and Ford while letting Chrysler go bust. Read more