Business Minded

Marketing and the Internet: A Love Story.

Wed, 23 Sep 2009 09:42:36 -0400

Media is changing rapidly. Marketers have the ability to reach people at a much deeper level and can create much more interaction. The video below is a good overview of how the marketing landscape is changing.

Enjoy.

P.S: I embedded this video from the Economist and due to that fact the video does not mesh with my layout. Classic Tradeoff.

School is back. Less time = more posts.

Tue, 22 Sep 2009 21:28:46 -0400

Ahem. I will start with sorry for the nonexistence of posts over the summer. It seems that when I have more time I find it harder to write here. I think it may be a combination of summer weather and a need to relax.

Whatever the reason is it doesn’t matter. Now I am ready to get back to regular posting. I will keep my ear to the internet to keep you informed on developments in the business world and economics, but I will also post about humourous topics as well. I want this to be more fun.

Please feel free to email me if you ever have any questions or just want to shoot the ____. Also, comment posts and get some debates started. It makes this way more fun.

Hope all is well with everyone.

Everyone is human. Here's proof

Fri, 10 Jul 2009 16:17:31 -0400

Via Kempt:

“From time to time, a gentleman’s eyes may wander.

This is not to be taken as a sign of his character, but as a reflex of the eye resulting in a momentary suspension of the higher faculties. Neither priests, eunuchs nor husbands are entirely immune. And all things considered, the eye is one of the less dangerous organs.

So let’s not embarrass anyone whose wife might be watching.

—R.B.”

BM: This is too funny. I don’t think Obama is actually looking at that lady but it sure looks like it. We are all human though. This will probably be on CNN with the headline of “Obama and Michelle: relationship trouble”.

A reason to love the U.S.A....drug innovation

Fri, 10 Jul 2009 09:46:30 -0400

Via Carpe Diem

Most all the world pays a marginal cost for drugs, medical devices, and procedures that does not come close to repaying the development effort that went into those products. Further, most of the world has regimented medical systems that have very strong immune systems against any sort of innovation. As a result, almost all medical innovation occurs and is paid for in the United States, with the rest of the world acting as a free rider. Sure, some Swiss or Japanese firms still develop a few drugs, but most of those efforts are still justified by profits in the US market.

~Coyote Blog

The U.S. is still driving quite a bit of product innovation. Our messy, organic, wasteful, unfair, irrational system allows experimentation, and Europe cherry picks the best results. If we stopped doing this, their system would stop looking so good.

~Megan Mcardle

BM: I never thought of this at all, but this is so true. What a great example of a free rider problem.

I am completely uninformed on health care in the U.S., but I believe currently it is private. If Obama makes health care public, will this innovation slow due to a lack of monetary incentive? Then the rest of the world suffers as the newest innovations in medicine will dramatically slow as no one wants to sink a bunch of money into R&D and not even cover the cost. I never thought I would be somewhat happy about privatization in health care, but now I am a little more supportive although I still firmly believe everyone should have access to healthcare.

Inflation!?!?!? Who's scared?

Sun, 21 Jun 2009 22:12:06 -0400

Via Carpe Diem:

“Arthur Laffer in the WSJ on June 11, “Get Ready for Inflation and Higher Interest Rates”:

As bad as the fiscal picture is, panic-driven monetary policies portend to have even more dire consequences. We can expect rapidly rising prices and much, much higher interest rates over the next four or five years, and a concomitant deleterious impact on output and employment not unlike the late 1970s.

The percentage increase in the monetary base is the largest increase in the past 50 years by a factor of 10. It is so far outside the realm of our prior experiential base that historical comparisons are rendered difficult if not meaningless.

Banks now have huge amounts of excess reserves, enabling them to make lots of net new loans. At present, banks are doing just what we would expect them to do. They are making new loans and increasing overall bank liabilities (i.e., money). The 12-month growth rate of M1 is now in the 15% range, and close to its highest level in the past half century.

Alan Blinder counters in today’s NY Time article “Why Inflation Isn’t the Danger:”

The mountain of reserves on banks’ balance sheets has, in turn, filled the inflation hawks with apprehension. But their concerns are misplaced. To understand why, start with the basic economics of banking, money and inflation. In normal times, banks don’t want excess reserves, which yield them no profit. So they quickly lend out any idle funds they receive. Under such conditions, Fed expansions of bank reserves lead to expansions of credit and the money supply and, if there is too much of that, to higher inflation.

In abnormal times like these, however, providing frightened banks with the reserves they demand will fuel neither money nor credit growth — and is therefore not inflationary.

MP: [There has been] significant growth in both the monetary base and excess reserves over the last year. According to Laffer, banks are lending out the excess reserves, which will be inflationary, and according to Blinder, banks are holding onto the excess reserves, which will not fuel inflation.

Who’s correct? Total Loans and Leases of all commercial banks suggests that Blinder is more correct, at least for now. Total bank loans peaked in late 2008 and have actually been gradually declining since last October, falling by almost $200 billion from the peak. And the graph above shows that excess reserves at banks have increased lately, which is consistent with the recent decline in bank loans. As the Fed has expanded the monetary base and bank reserves, banks have been holding a majority of those increased reserves as excess reserves, and they are NOT lending them out.”

BM: In regard to inflation, I don’t know where I stand. The banks do need to pay back this bailout money and therefore it won’t all be lent out so inflation won’t be as pronounced as the negative Nancies think it will be. But once times get better banks will lend some of this money out which will create more money and therefore inflation. Will inflation be out of control? I have no clue. Quantitative easing is known to causes inflation, but these are irregular times. Hold on to your seat!

Given my lack of time this summer, I will reblog more than in the past. I can’t find the time to write my own pieces, but I will try to get a few original items up every once in awhile. I don’t like only reblogging but if I keep it pretty interesting I won’t be too unhappy with myself. I hope everyone is enjoying their summer (or winter if you are in Australia).

Quick Fix

Wed, 17 Jun 2009 15:00:00 -0400

Via Mankiw

From MSN Money :

former Federal Reserve chief Alan Greenspan is a fan of men’s underwear sales as an important economic indicator.

BM: Who isn’t? We need more exciting economic indicators.

Sorry for the hiatus

Thu, 11 Jun 2009 14:40:51 -0400

I have been completely swamped lately and unfortunately I have been poor at managing my time outside of work. With the NHL and NBA playoffs plus summer and work, I have had little time to blog on BusinessMinded.ca. That doesn’t make me happy.

This Sunday I am going to reorganize myself and get posting regularly again. So please stick around and read and comment and make this site fun.

Here is a great little story (unfortunately I don’t know the author, but if someone does please message me and I will be sure to link to him):

“CREDIT CRUNCH… WHAT CREDIT CRUNCH ??!!

It is the month of August, on the shores of the Black Sea . It is raining,and the little town looks totally deserted. It is tough times, everybodyis in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 Euro note on the reception counter,and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt tothe butcher.

The butcher takes the 100 Euro note, and runs to pay his debt to the piggrower.

The pig grower takes the 100 Euro note, and runs to pay his debt to thesupplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay hisdebt to the town’s prostitute that in these hard times, gave her “services”on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro noteto the hotel proprietor to pay for the rooms that she rented when she broughther clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so thatthe rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, andtakes his 100 Euro note, after saying that he did not like any of the rooms, andleaves town.

No one earned anything. However, the whole town is now without debt, andlooks to the future with a lot of optimism..

And that, ladies and gentlemen, is exactly how the World is doing businessand barely surviving today.”

BM: This is truly how the world works. Money is debt. It is built into our economy.
P.S. GO PENS GO!

Women are in a happiness decline

Tue, 26 May 2009 11:48:00 -0400

Via Greg Mankiw:

“According to new research from Justin Wolfers and Betsey Stevenson :

The Paradox of Declining Female Happiness
By many objective measures the lives of women in the United States have improved over the past 35 years, yet we show that measures of subjective well-being indicate that women’s happiness has declined both absolutely and relative to men. The paradox of women’s declining relative well-being is found across various datasets, measures of subjective well-being, and is pervasive across demographic groups and industrialized countries. Relative declines in female happiness have eroded a gender gap in happiness in which women in the 1970s typically reported higher subjective well-being than did men. These declines have continued and a new gender gap is emerging — one with higher subjective well-being for men.

I am not at all sure how to interpret this finding. It sounds like either the women’s movement was a mistake or subjective happiness is not the right objective.”

BusinessMinded: This further adds to my inability to understand women. This is a very interesting finding. Whenever you dig into anything a little further you may find out that things are exactly as they seem. Many people would probably assume that if the well-being of women is increasing that happiness would be increasing as well, but apparently this is not the case.

This is what is amazing about economics. It doesn’t JUST deal with money. It looks to explain relationships and tries to find causality. Economists, especially Steven Levitt, can sometimes show that society’s way of thinking is quite backward and flawed.

Pay off your credit card on time? Now you will be punished.

Wed, 20 May 2009 11:09:00 -0400

Below is an exert from NY Times (via Carpe Diem). Credit card companies make most of their revenues from charging late accounts, but now congress is stepping in to limit the amount of fees they can charge. Uh-oh. Now credit card companies will need to make up for this slack (They can’t make less money. How will they support their affluent life styles?). How will they do that? Read below:

“Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years. Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.” (Bold added via Carpe Diem.)”

BusinessMinded: Awesome!

By: Greg Morton (via EclectEcon) This was a great way to start...

Wed, 20 May 2009 10:40:55 -0400

By: Greg Morton (via EclectEcon)

This was a great way to start my day. I hope it kick starts your day too!

Ahren

The rich don't like taxes.

Tue, 19 May 2009 13:20:00 -0400

Via Carpe Diem

“Here’s the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

We believe there are three unintended consequences from states raising tax rates on the rich. First, some rich residents sell their homes and leave the state; second, those who stay in the state report less taxable income on their tax returns; and third, some rich people choose not to locate in a high-tax state. Since many rich people also tend to be successful business owners, jobs leave with them or they never arrive in the first place. This is why high income-tax states have such a tough time creating net new jobs for low-income residents and college graduates.

~Art Laffer and Stephen Moore in today’s WSJ “

BusinessMinded: I wonder why taxes rate aren’t more similar across the U.S. if you get so many rich moving from unfriendly taxe states to friendly ones. You think these high tax states would like to keep the rich.

Why the rich move is simply explained by economics. You make things more costly and people move away to less costly substitutes. Therefore, if living in one state becomes more costly due to more taxes than people will move to a somewhat similar state that is cheaper (less taxes). This is what economists call the substitution effect.

Norway - 1. U.S.A - 0.

Fri, 15 May 2009 13:36:55 -0400

Norway is doing something right. With the largest recession since the Great Depression, Norway’s economy expanded by almost 3% last year and its government currently has a surplus of 11% of GDP and is debt free. Wow! The U.S. on the other hand aren’t so impressive. The U.S. government will be racking up a deficit of 12.9% of GDP this year and it will grow its debts to $11 trillion (that’s a lot of zeros), which is roughly 65% of its entire economy. On top of all this, unemployment in Norway is 3% vs. 8.9% in the U.S.

One thing that contributes to Norway’s strong economic performance is the large amount of oil it continually exports and will continue to export into the foreseeable future. Also, the Government has intelligently and ethically invested Norway’s pension fund, which has put it to a worth of USD$ 300 billion or USD$ 62 000 per capita making it the largest capital reserve per capita in the world.

Norway thinks as a whole unlike the U.S. where it is survival of the fittest which has lead to people bettering themselves at the expense of others. That way of thinking brought the U.S. economy to where it is now. Rock bottom. Norway knows how to think. The future relies on people making actions that better themselves, but not at the expense of others and Norway, among many other European countries, has known this for some time. Norway is a free market economy, but at the same time it is somewhat of a socialist state. This allows for the proper allocation of resources while allowing for betterment of all people. Not just the rich and famous.

Case in point. Go Norway. Boo the U.S. We can learn from cases like Norway. And if we don’t I think we are doomed.

Check out how beautiful Norway is:

Who wants to move?

Amazing.

Fri, 15 May 2009 12:05:19 -0400

Amazing. :

This is outside the realm of my usual postings but this is truly amazing and sounds so beautiful. Enjoy. (Click the title to go to the link!).

P.S. I am thinking of sharing some of my music via BusinessMinded.ca now. I want to make this site a little more personal.

Diamonds are Forever

Tue, 12 May 2009 14:50:26 -0400

With the global economic slump, demand for diamonds is down which should mean falling prices but not if you cut supply too. If you can believe it, Russia has surpassed De Beers as the largest diamond producer and with that has gained an ability to control prices through its significant control of the world supply of diamonds. With demand down, the Russian diamond company Alorsa has cut its supply significantly - it hasn’t sold a single rough diamond on the market since December 2008.

With such control, one can expect diamond rings, necklaces, and everything else diamond to remain pricey. It is economics 101. If you control a significant amount of production, then you can be a price setter. So for those of you who were/are waiting for diamond prices to fall due to the belief that the recession is demand driven you can stop waiting. Prices will remain high and may even go higher. Sorry to break the news.

Competition to the Toronto Maple Leafs?

Wed, 06 May 2009 16:29:54 -0400

Could there be another NHL team coming to Southern Ontario?

Jim Balsillie, CEO of Research in Motion (maker of Black Berry), sure hopes so. Balsillie has made his third attempt to get an NHL team into Southern Ontario.

In the past he had made offers to both the Pittsburgh Penguins and the Nashville Predators, but both were rejected. Now Basillie has made the “third time is a charm” $212.5 million US offer to the Phoenix Coyotes with the condition that the now bankrupt Coyotes move to Southern Ontario (Hamilton or Kitchner-Waterloo).

According to the CBC, “Moyes, [former owner of the Phoneix Coyotes], told the newspaper that the court process will attach a new owner and location to the Coyotes by June 30, but the sale of the franchise will still need league approval.”

Balsillie has made an excellent offer, but it all lands on Gary Bettman, NHL commissoner, to decide what will happen with the Coyotes. Bettman is somewhat notorious for wanting to further develop the NHL in the U.S. and not Canada so it should be interesting to see what happens.

To support Belsillie’s attempt to bring a seventh NHL team to Canada, check out his website makeitseven.ca.

Obama's Law

Thu, 30 Apr 2009 15:42:40 -0400

Interesting post by Greg Mankiw:

“Via the WSJ, here is the view from a “secured (sic) creditor” of Chrysler:

“Like many others I made the mistake of buying what I believed was ‘value,’” Mr. Gwin says, adding that investors who bought at the time believed the loans were worth more than their market price. “We did not contemplate having our first liens invalidated by a sitting president,” he adds.

As the President intervenes in more and more industries, a key question is how he does it and what he is trying to achieve. Is he trying to reorganize insolvent firms while, as much as possible, preserving the rights of stakeholders as established under existing contracts? Or is he trying to achieve a “fair” outcome as he judges it, regardless of preexisting rules and agreements? I fear it may be the latter, in which case politics may start to trump the rule of law.”

Fuel Efficiency doesn't equal decreasing demand for oil. Uh-oh.

Thu, 30 Apr 2009 15:37:39 -0400

Very interesting Article I stumbled upon:

The Fuel Efficiency Paradox by Jeff Jacoby:

It seems intuitive: Increasing the fuel efficiency of automobiles - or anything else that runs on gas - should lower the demand for oil.

It was with precisely that expectation that Congress enacted the Corporate Average Fuel Economy (CAFE) standards in 1975, following the Arab oil embargo. At the time, US oil imports amounted to a little more than one-third of consumption. Today we import two-thirds. After more than three decades of CAFE standards, heightened environmental awareness, and steady improvements in fuel efficiency and engine technology, America’s demand for oil is greater than ever. In 1975, highway fuel consumption amounted to 109 billion gallons, according to the Federal Highway Administration. By 2006 it had climbed to 175 billion.

“It seems obvious that rising efficiency in cars, furnaces, and lawn mowers should, in the aggregate, significantly curb demand for energy,” write Peter Huber and Mark Mills in “The Bottomless Well,” their perceptive 2005 book on the supply, demand, and pricing of energy. “Sad to say, however … efficiency doesn’t lower demand, it raises it.”

Why? Because improvements in fuel economy effectively make fuel less expensive, and when costs fall, demand tends to rise. As driving has grown cheaper in recent decades, people have done more of it - choosing to drive to work instead of taking the bus, for example, or buying a second car, or moving to a house with a longer commute, or sending the kids to college with cars of their own. Between 1983 and 2001, data from the Energy Information Administration show, the number of annual vehicle-miles driven by the average American household rose from 16,800 vehicle-miles to more than 23,000.

“Efficiency may curtail demand in the short term, for the specific task at hand,” Huber and Mills acknowledge. “But its long-term impact is just the opposite. When steam-powered plants, jet turbines, car engines, light bulbs, electric motors, air conditioners, and computers were much less efficient than today, they also consumed much less energy. The more efficient they grew, the more of them we built, and the more we used them - and the more energy they consumed overall.”

Unemployment Worsening in Canada, but EI not keeping pace.

Wed, 29 Apr 2009 16:58:00 -0400

(Photo Credit: etftrends.com)

Unfortunately just when most people thought it couldn’t get any worse it is going to get worse. The number of people applying for employment insurance (EI) is up 19% from January, but the number of people receiving EI only increased by 7.8%. This means there a fair number of people needing EI who are not receiving it. With the number of unemployed predicted to continue rising over the next year, the Government of Canada needs to start making sure the unemployed receive the funds they need to live on. It is a sad state when people who are forced into unemployment cannot receive the funds they need to feed their families.

As reported by the Star, more than 1.4 million Canadians were counted as unemployed in February, but only 610,000, or 43 per cent, were collecting regular EI benefits, [Erin] Weir, [an economist with the United Steelworkers union], said.

The unemployment rate according to Stats Canada, has increased to a staggering 8% with the loss of 357,000 jobs since October 2008. According to the Star, TD Securities economics strategist Millan Mulraine believes ”this deterioration has important implications for the Canadian economy, as the weak labour market conditions will continue to breed further economic anxiety among Canadian households, thereby depressing consumer spending further.”

It is a self fulling prophecy. People see job losses and cut back spending and start saving more. This creates more job losses, more saving, even less spending and causes a continual depression of the economy. This is why it is a tough job being an economist. There are tools to help rebound economies, such as the interest rate, but you must convince people that it is ok to spend. And as you can see this is not easy.

The unemployment rate is most likely an understatement of the current turmoil in the labour market. Many people are currently underemployed (i.e. forced into part-time positions or self employed positions) and therefore still counted as employed. If underemployed people were counted in the unemployment rate, the Canadian Labour market would look much worse than it already does.

Even when the economy begins to rebound, it will be sometime after until the labour market starts showing improvements. Employers confidence in the future must be restored before they begin hiring again and that may come months or even a year after the economy starts rebounding. Hopefully, Mr. Harper will start getting more EI to the Canadians who truly deserve it.

I didn't want to talk about this.

Wed, 29 Apr 2009 15:10:00 -0400

But it seems I must. Swine Flu. If I have to hear about this anymore I am going to go crazy. Honestly the regular flu kills people all the time. If you are healthy chances are even IF you get it, you will fight it off.

There is no need to live in fear because of the swine flu. The media ALWAYS blows things out of proportion. Swine flu is not very prevalent in Canada or the U.S.A. The chances of catching it are microscopic.

I may not be a doctor, but I am a practitioner of common sense so if you don’t want swine flu follow these simple steps:

1) WASH YOUR HANDS.

2) Don’t touch your face with your dirty hands.

3) Don’t go into crowded areas.

4) If you know someone who went to Mexico consider not seeing them for the time being.

5) If you are overly concerned about swine flu then get a mask. I have linked to some mask designs for the fashion forward individual who may be concerned about the usual unfashionable mask designs.

(Photo Credit: samiraboon.com)

If you want to feel less at risk I advise against watching T.V., especially CNN. You will be fine if you take the precautionary steps listed above.

GM down to four core brands.

Tue, 28 Apr 2009 15:32:30 -0400

Via Eco Auto Ninja

“This morning, GM announced they were cutting 21,000 jobs and getting rid of Pontiac. Plans are in place to close more factories as the automaker fights to avoid bankruptcy.

GM has been surviving on on $15.4 billion in government loans and revealed that it envisions receiving an additional $11.6 billion. But if GM’s restructuring plan can’t satisfy the government by June 1, the struggling company could go into bankruptcy protection. The company also made an offer to bondholders to exchange of $27.2 billion of bonds for common stock.

The death of Pontiac, as well as GM’s decision to cease production on Saturn and Hummer brand vehicles after the 2009 model year, leaves GM with four core brands: Chevrolet, Buick, GMC and Cadillac.”

This is all part of GM reducing its number of brands to satisfy the requirements of the loan granted by the U.S. government. I think from here on in it is pretty obvious that GM will be going through Bankruptcy protection. So the bondholders who traded debt for equity will most likely see that equity go to zero.

I am still upset that GM dropped Saab. I was looking forward to driving one of those when I was older. I guess I will have to settle with this car: