Carpe Diem

The Redolent Smell of Profits Crosses All Borders

From the FT article “US Studios Get Taste for Bollywood“:

International investors are preparing to make an unprecedented onslaught on Bollywood this year, with several Hollywood studios and a group of London-listed funds looking to take a share of the world’s most prolific movie-making market.

Studio groups such as Sony Pictures Entertainment, Viacom – which controls Paramount Pictures – and Disney are working on new releases and partnerships that will give them an entry into India’s once closed and idiosyncratic movie industry.

Bottom Line: As developing economies like India grow and prosper, and as their middle classes emerge with increasingly higher disposable incomes, they become increasingly attractive as profitable consumer markets for firms in developed economies like the US. International trade and globalization are win-win, not win-lose as you would think from Lou Dobbs and the media. The “smell of profits” has a strong odor, penetrates globally across all international borders, and U.S. studios have picked up the redolent scent of profits in the booming Indian movie market.

Carpe Diem

Faux Populism

“You can’t create a job without a business. And unless an investor finances a business, you ain’t gonna have any jobs, you’re not going to have a middle class, and you’re not going to have any consumers. Therefore, this faux populism is a lot of crap.”

Larry Kudlow on tonight’s CNBC “Kudlow and Company,” in reponse to the anti-investor, anti-business, pro-government faux populism and political rhetoric of Huckabee and Edwards.

Carpe Diem

Is the USD Making a Comeback vs. the Euro?

Using foreign exchange data from FT.com, the chart above shows the one-year forward discount or premium of the USD vs. the euro from January 2006 to January 2008. (Mid-month rates were used for the months between January 2006 and December 2007, and yesterday’s quote was used for January 2008.) After trading at a one-year forward discount vs. the euro for at least 23 consecutive months, the dollar has been selling at a one-year forward premium vs. the euro for the last two months, and is now trading at a one-year forward premium of .40%. Over the last 6 weeks, the dollar has strengthened by about 1.5% vs. the euro in the spot market.

Carpe Diem

Homo Politicus: The Strange and Scary Tribes…

It’s a land where things are often not what they seem — at least to outsiders. They are, in fact, the opposite of what they seem. In his new book, “Homo Politicus: The Strange and Scary Tribes that Run Our Government,” Dana Milbank describes this place as Potomac Land, also known as Washington, D.C.

‘Potomac Land’ Speak Select phrases, followed by their English equivalents:

“You’re doing a heckuva job.”
You will be fired in ten days.

“Frankly…”
The following statement is false.

“You are either with us or against us.”
You are against us.

“The senator will deliver a major policy address.”
The senator is desperate to get on television.

And my favorite:

“I will continue to do the people’s business.”
I expect to be indicted.

From a story this morning on NPR.

Carpe Diem

The Coen Brothers’ Green Guilt and Their Purchase of Eco-Indulgences: The Eco-Extortion Scam

The credits of the Coen brothers feature film “No Country for Old Men” state that the film’s production was “carbon neutral,” thanks to carbon-offset credits purchased through Native Energy.

From the September 2007 LA Times article “Can You Buy a Greener Conscience?“:

The race to save the planet from global warming has spawned a budding industry of middlemen selling environmental salvation at bargain prices. The companies take millions of dollars collected from their customers and funnel them into carbon-cutting projects, such as tree farms in Ecuador, windmills in Minnesota and no-till fields in Iowa.

In return, customers get to claim the reductions, known as voluntary carbon offsets, as their own. For less than $100 a year, even a Hummer can be pollution-free — at least on paper.

Driven by guilt, public relations or genuine concern over global warming, tens of thousands of people have purchased offsets to zero out their carbon impact on the planet. Beneath the feel-good simplicity of buying your way to carbon neutrality is a growing concern that the idea is more hype than solution.

In this related commentary “Carbon Offsets: Eco-Extortion, Green Guilt, and the Selling of Indulgences,” Frank Pastore writes:

The selling of “voluntary carbon offsets”—eco-indulgences—is a $55 million per year industry, involving over three dozen companies worldwide. Total sales are anticipated to double both this year and next, and entrepreneurs are clamoring all over themselves for a piece of the action.

And it’s all a scam.

Yes, the money is very real, but the alleged benefits to the environment are fake. Paying someone to plant a tree to “offset” the carbon footprint of your SUV is just plain silly. Yet there are thousands of people spending real money on these kind of indulgences every day.

Why? The answer is that it’s part green guilt, part eco-extortion, and part just plain novelty.

MP: Both articles point out this part of the scam: Native Energy and other companies selling eco-indulgences often contribute only 1% of the total cost of windmill projects and alternative energy plants, yet they claim and sell 100% of the carbon reductions.

Carpe Diem

Is A Recession Looming on the Horizon in 2008?

I say NO in this commentary that has appeared nationally in these papers (circulation in parentheses):

JANUARY 2 — AKRON BEACON JOURNAL (141,073) / Op-Ed “Our economy is strong”

JANUARY 2 — ROCHESTER (MN) POST-BULLETIN (42,391) / Op-Ed “Key indicators show few signs of financial trouble ahead”

JANUARY 1 — KANSAS CITY STAR (261,776) / Op-Ed “No, a recession isn’t looming in 2008”

JANUARY 1 — COLUMBUS DISPATCH (259,000) / Op-Ed “Global economy will keep U.S. economy vibrant”

JANUARY 1 — JANESVILLE (WI) GAZETTE (26,682) / Op-Ed “Expanding global economy will keep U.S. economy humming”

DECEMBER 31 — AUSTIN AMERICAN-STATESMAN (183,952) / Op-Ed “Despite pressure, America’s economy will remain strong in 2008”

DECEMBER 31 — CHARLOTTE OBSERVER (232,000) / Op-Ed “U.S. economy is resilient enough to handle changes”

DECEMBER 29 — YOUNGSTOWN (OH) VINDICATOR (64,763) / Op-Ed “We’re thriving in this economy”

Carpe Diem

2008: 100% Chance of Alarm About Global Warming

Science columnist John Tierney’s prediction in today’s NY Times:

In 2008, your television will bring you image after frightening image of natural havoc linked to global warming. You will be told that such bizarre weather must be a sign of dangerous climate change — and that these images are a mere preview of what’s in store unless we act quickly to cool the planet.

Unfortunately, I can’t be more specific. I don’t know if disaster will come by flood or drought, hurricane or blizzard, fire or ice.

Tierney also writes about the “availability entrepreneurs: the activists, journalists and publicity-savvy scientists who selectively monitor the globe looking for newsworthy evidence of a new form of sinfulness, burning fossil fuels.”

When the Arctic sea ice last year hit the lowest level ever recorded by satellites, it was big news and heralded as a sign that the whole planet was warming. When the Antarctic sea ice last year reached the highest level ever recorded by satellites, it was pretty much ignored. A large part of Antarctica has been cooling recently, but most coverage of that continent has focused on one small part that has warmed.

When Hurricane Katrina flooded New Orleans in 2005, it was supposed to be a harbinger of the stormier world predicted by some climate modelers. When the next two hurricane seasons were fairly calm — by some measures, last season in the Northern Hemisphere was the calmest in three decades — the availability entrepreneurs changed the subject. Droughts in California and Australia became the new harbingers of climate change (never mind that a warmer planet is projected to have more, not less, precipitation over all).

Carpe Diem

Maybe CEOs Like Jack Welch Are Underpaid?

Aren’t CEOs overpaid? Here’s part of George Mason economist Walter Williams’ column today:

What about complaints about CEOs earning so much more than the average worker? Before looking at CEOs, let’s look at another area of huge pay differences. According to Forbes’ Celebrity 100 list, Oprah Winfrey earned $260 million. Even if her makeup person or cameraman earned $100,000, she earns thousands of times what they earn. Among the celebrities earning hundreds or thousands of times more than the people who work with them are: Steven Spielberg ($110 million), Tiger Woods ($100 million), Jay Leno ($32 million) and Dr. Phil ($30 million). According to Forbes, the top 10 celebrities and athletes earned an average of $116 million in 2004 compared to an average of $59 million earned by the top 10 corporate CEOs.

When Jack Welch became General Electric’s CEO in 1981, the company was worth about $14 billion. Through hiring and firing, buying and selling decisions, Welch turned the company around and when he retired 20 years later, GE was worth nearly $500 billion. What’s a CEO worth for such an achievement? If Welch was paid a measly one-half of a percent of GE’s increase in value, his total compensation would have come to nearly $2.5 billion, instead of the few hundred million that he actually received.

Bottom Line: You could probably make a stronger case that Jack Welch was underpaid and exploited by his shareholders and GE’s Board of Directors than making a case that he was overpaid as a CEO.