I wanted to link to this blog following the developments related to the Iowa Rainforest Project, a massive undertaking planning on producing a tourist trap/research project that would create an enclosed rainforest in Coralville, Iowa.
I've been skeptical of the project from the start, primarily because I'm fairly skeptical of the government in general, especially when they announce big spending projects. My main beef with it is: if Iowa really needed a rainforest, wouldn't some enterprising business person come along and build one? Wouldn't he or she charge and make a profit off of it? The answer to both questions is "no." So then, I ask, why do we need this again?
People say that it will provide jobs and increased revenue due to the flocks of tourists that will want to see it. These are benefits (unproven though they are), but I feel guilty spending federal dollars (of which a tiny percentage I myself contributed to) on this "pork project." I certainly wouldn't want someone to use my money and build this in Alabama or Alaska. However, just like all pork projects, this is what happens.
John Stossel wrote a great opinion piece today on just this topic. Click here and give it a read.
Wednesday, October 26, 2005
Iowans Have the Lowest Insurance Rates
An article in the Press-Citizen cites a survey claiming that in Iowa we have the lowest average insurance rates. In case you're wondering, the average Iowan pays $676 a year. New Jersey, the most expensive state, pays double that, on average. With all the money we save here in Iowa, what should we do? Fill up the tank, of course!
Gold's price is rising. Why? There may not be much left to mine.
You may have received an email/spam touting the wonderful investment opportunity that gold provides. Some investors think that gold is a good hedge against inflation (it really isn't any more). Some people think that gold is one of the worst investments, as it fluctuates often and has a poor record of return in comparison with the S&P 500. An article in the Economist points out that gold has underperformed even inflation of the US Dollar (meaning if you have bought gold in the past, you have actually lost money, as the value of what a dollar could buy drops).
This article in the Independent talks about gold mining and how at this point and technology level, mining companies can barely get an ounce from 30 tons of ore. The price of gold, the article speculates, is primarily driven by increasing demand for jewelry around the world, but also in developing countries like India and China. Does this mean that the price of gold will increase even further? It might, especially if environmental regulators begin to crack down on the use of cyanide in mining.
So should you invest in gold? Keep an eye on demand. If countries like China continue to want more and the supply increasingly becomes depleted, then naturally, like any commodity, the price will rise. You may make some money, but there are also better ways.
This article in the Independent talks about gold mining and how at this point and technology level, mining companies can barely get an ounce from 30 tons of ore. The price of gold, the article speculates, is primarily driven by increasing demand for jewelry around the world, but also in developing countries like India and China. Does this mean that the price of gold will increase even further? It might, especially if environmental regulators begin to crack down on the use of cyanide in mining.
So should you invest in gold? Keep an eye on demand. If countries like China continue to want more and the supply increasingly becomes depleted, then naturally, like any commodity, the price will rise. You may make some money, but there are also better ways.
Economics Professor Weighs in on Municipal Power
Jane Driscol sent me this article by John Solow, a professor of Economics at the University of Iowa. I took a class with Prof. Solow and while he may not be the most interesting person to listen to, he has some good arguments in this article.
The article comes from the Iowa City Press-Citizen.Thursday, October 20, 2005
A 'yes' vote not prudent
During the past several months, supporters of a municipal utility have gone to great lengths to make a political case for a government take-over of facilities of MidAmerican Energy Company, Iowa City's electricity supplier. They have turned what should be a serious public policy question into a referendum on "big business." Now, as citizens face their only opportunity to vote on the issue, Citizens for Public Power claims a "yes" vote allows them to see whether they can come up with a viable business plan.This is seriously putting the cart before the horse. No intelligent business person would approach a lender or investor without a financial plan, but that is exactly what CPP is doing. Iowa Citians deserve to have the facts in front of them before they decide whether to support this scheme. Yet when pressed for details, CPP's response is, vote "yes" to give us an opportunity to figure that out, trust the City Council to only go forward if the numbers work out, and count on the Iowa Utilities Board to prevent us from making a mistake.
Here are just a few of the biggest questions that ought to be answered before we authorize the City Council to establish a municipal utility:
- What will it cost to buy MidAmerican's distribution system?
The Latham Report assumes it will cost roughly $11 million to purchase the necessary MidAmerican facilities. This is a gross underestimate. More than a decade ago, the Iowa Utilities Board told Sheldon, a town of roughly 5,000, that it would cost residents almost $14 million to purchase the assets they needed to municipalize. How much are we, a city of more than 60,000, going to have to pay?
- Where will Iowa City purchase its electricity, and how much will it have to pay for it?
Iowa City's average load in 2003 was 94 megawatts, and the peak load was roughly 180 megawatts. The companies in the best position to supply this amount of power to Iowa City are, of course, MidAmerican and Alliant. Buying power from more distant utilities is more expensive and less reliable. On hot summer days when power supplies get tight, our municipal utility would lack sufficient secure supply and would have to purchase additional electricity at higher spot-market prices. Or we could build our own peak load generating capacity. What will this cost?
- What other facilities will Iowa City have to build, what additional employees will we have to hire, and how much will that cost?
A municipal utility will need additional facilities, such as a control center and emergency back-up generators. What will this cost? MidAmerican has a staff of 37 people who work around the clock to monitor their power system, a billing department, a customer service department and so on. A municipal utility will have to provide those services as well. How big will that staff be, where will it be housed, what equipment will it require and how much more will this cost?
- Who will provide the service, both on a day-to-day basis and in the event of an emergency?
The IBEW, our electrical workers' union opposes the formation of a municipal utility because its members receive better pay and benefits from MidAmerican than they would as municipal workers. Our local electrical workers have publicly stated they will stay with MidAmerican. Where will a municipal utility find the workers needed to keep our electrical system up and running, and what will it have to pay them? Following the 1998 windstorm, MidAmerican was able to draw workers from surrounding communities and states to restore power, at a cost of more than $1 million, without raising rates. If a similar catastrophe were to occur, how would a municipal utility provide an equally quick response, and at what cost?
Ordinarily, the City Council would study the costs of establishing a municipal utility first. If it chose, the Council would put forth a detailed proposal for establishing a municipal utility, and, under Iowa law, the citizens would vote on whether to "authorize the City Council to establish a municipal utility." By forcing the vote through a referendum, CPP is making the voters use their only opportunity to speak without the facts they need to make an informed choice. CPP says that a "yes" vote is only to allow further study, but we don't need a vote for that. Nothing prevents the City Council from researching the costs of municipal power now.
Starting a municipal utility is not a simple matter. CPP has failed to provide any credible evidence that doing so is in the best interests of Iowa City electric customers. We don't know what we are buying, what we will need to build, what will it cost to buy and operate, and who's going to be in charge.
These fundamental questions need to be answered before we have any idea whether this is a worthwhile endeavor. Until they are answered, it is premature and unwise to authorize the City Council to establish a municipal utility. A "no" vote on Nov. 8 is the prudent course of action for Iowa City voters to take.
John L. Solow is an associate professor of economics at The University of Iowa and a member of the Coalition to Preserve Safe and Reliable Energy.
Tuesday, October 18, 2005
Economics from an Austrian Point of View
A recently released white paper summarizes the view of the Austrian School of economic theory. I must admit that I never knew about this area, but reading the summary (only 4 pages long) gives a good idea their theory. It is often credited with predicting the downfall of the Soviet Union and has inspired many free-market capitalists and entrepreneurs.
Delphi and GM: To Buy or Not to Buy?
Many of you are aware of the recent news about Delphi filing Chapter 11 bankruptcy. A friend of mine who works for Delphi assures me that this is one of the better things that could have happened for the company. He says that the bankruptcy will allow them to renegotiate their union contracts, renegotiate their sales contracts, especially with GM, and remove the enormous pension liabilities they had on their accounting books. He suggests picking up shares of Delphi at a bargain 30 to 40 cents a share and esimates a rise of at least $2.00 a share in the next two years.
There is good news for Delphi in that that no longer have the pension liability. Their new CEO, Steve Miller, has a strong history of working with distressed companies like Bethlehem Steel.
According to the Economist, the combined liability of GM and Delphi's pension liabiltiy is about $450 billion. This is insane and might finally be a wakeup call to people who think that their pensions will be around when they retire. Even more reason to take steps to secure alternate means of retirement protection, like investing in an IRA. But this does not seem to be good news for either company.
GM has also announced that they are negotiating hard with the Union of Auto Workers (UAW) to get concessions and cuts in order to just stay afloat. With falling sales, increased raw material costs, and these continuing liabilities, they may not be around much longer. Some say their chance of filing chapter 11 is at least 30% now that Delphi has done the same.
Should you buy the Delphi stock? Or even GM? It is risky. Because of the Chapter 11 filing, the people who hold Delphi's bonds get first dibs on any money produced by the company. The shareholders get whatever is left. Any money/dividends paid out to shareholders will only be made after the debt obligations can be settled. Because a stock's value is based on its perceived future dividends, the stock will probably remain low for quite some time (it has actually been delisted from the NYSE. It now trades on a "stock clearning house," basically for pennies on the dollar). Will Delphi rise again? They make good parts, they have a lot of customers, they also might get paid for what their product is worth, now that they can restructure their contracts. Miller also has a fairly good track record. He's even decided to take a salary of $1 a year. I'll let you be the judge.
There is good news for Delphi in that that no longer have the pension liability. Their new CEO, Steve Miller, has a strong history of working with distressed companies like Bethlehem Steel.
According to the Economist, the combined liability of GM and Delphi's pension liabiltiy is about $450 billion. This is insane and might finally be a wakeup call to people who think that their pensions will be around when they retire. Even more reason to take steps to secure alternate means of retirement protection, like investing in an IRA. But this does not seem to be good news for either company.
GM has also announced that they are negotiating hard with the Union of Auto Workers (UAW) to get concessions and cuts in order to just stay afloat. With falling sales, increased raw material costs, and these continuing liabilities, they may not be around much longer. Some say their chance of filing chapter 11 is at least 30% now that Delphi has done the same.
Should you buy the Delphi stock? Or even GM? It is risky. Because of the Chapter 11 filing, the people who hold Delphi's bonds get first dibs on any money produced by the company. The shareholders get whatever is left. Any money/dividends paid out to shareholders will only be made after the debt obligations can be settled. Because a stock's value is based on its perceived future dividends, the stock will probably remain low for quite some time (it has actually been delisted from the NYSE. It now trades on a "stock clearning house," basically for pennies on the dollar). Will Delphi rise again? They make good parts, they have a lot of customers, they also might get paid for what their product is worth, now that they can restructure their contracts. Miller also has a fairly good track record. He's even decided to take a salary of $1 a year. I'll let you be the judge.
Run Schools Like a Business
The CEO of Central Educational Center in Georgia writes a commentary about ways to change the public school system to reflect and utilize successful business practices. He cites Jim Collins' book Good to Great as a model for school superindendents and principals to follow. He also mentions supporting teachers more and allowing them to be more independent in the classroom.
At Cashtalk, we value education, particularly when it comes to financial and business-minded topics. We also believe that there is a lot to be learned from the "real" world, like business. Through education, you empower yourself to control your destiny. Without teachers and a system that supports them, this becomes more difficult. Consider the ideas by Russ Moore and get involved in improving your local schools.
At Cashtalk, we value education, particularly when it comes to financial and business-minded topics. We also believe that there is a lot to be learned from the "real" world, like business. Through education, you empower yourself to control your destiny. Without teachers and a system that supports them, this becomes more difficult. Consider the ideas by Russ Moore and get involved in improving your local schools.
Friday, October 14, 2005
Rising Inflation and Some Suggestions on How to Deal With It
According to the Washington Post, consumer prices have risen faster in September than they have in the last 25 years (1.2% in one month). Obviously if you've been around in the United States, you can guess that Hurricane Katrina cuased most of this increase becuase of the effects from rising fuel costs (12% last month). This in turn has an effect on the price of goods that are transported across the U.S., like food.
Inflation is a reality that most people are aware is inescapable. What I ask myself is, "is there a way to avoid it or protect my money from it?" Inflation destroys cash. Or more accurately, it destroys your purchasing power. The longer you hold money with inflation as a consideration, the less that money can buy.
So how can I protect myself from inflation? Well, first you could look at investing. Normally, when you invest in stocks, bonds, mutal funds, etc. they generally have a higher return than what the inflationary rate is. There are even inflation-linked indexes that gaurantee a higher rate of return than the inflation rate. What these options boil down to is this: if you own something tangible with a commonly perceived value, you can beat inflation.
If you have ideas on how to beat inflation, please post them in the comments section.
Inflation is a reality that most people are aware is inescapable. What I ask myself is, "is there a way to avoid it or protect my money from it?" Inflation destroys cash. Or more accurately, it destroys your purchasing power. The longer you hold money with inflation as a consideration, the less that money can buy.
So how can I protect myself from inflation? Well, first you could look at investing. Normally, when you invest in stocks, bonds, mutal funds, etc. they generally have a higher return than what the inflationary rate is. There are even inflation-linked indexes that gaurantee a higher rate of return than the inflation rate. What these options boil down to is this: if you own something tangible with a commonly perceived value, you can beat inflation.
If you have ideas on how to beat inflation, please post them in the comments section.
Wednesday, October 12, 2005
Municipal this, Municipal that...
(Sigh) Okay. I just came across this article at Wired.com written by Jennifer Granick, a Stanford University Law School Professor. She is an advocate for municipally funded Wi-Fi access, or as she puts it, "free wireless internet access." She equates this service with public toilets, drinking fountains and park benches. She also states that the only major argument against this is its potential for abuse (i.e. people downloading illegal material, hacking, etc.).
I would like to propose that an even greater argument strikes through the heart of her primary assumption that we are entitled to free Wi-Fi: "nothing in life is free." I find it preposterous that she believes Wi-Fi could be deemed a "need" that our city council members or mayor should have an obligation to provide to their constituents for "free."
Let's take a macroeconomical perspective for a moment and look at a hypothetical procedure for setting up this "free" service. First, the city would need to purchase the infrastructure from the current providers or another wholesaler (roughly in hundreds of millions of dollars). Then they would have to install that infrastructure (wireless servers with enough power to broadcast over the air) and maintain it (a line item in the city budget). I don't know about your own experience, but at my company, our servers occasionally crash and maintenance is constantly being done on them. Finally the true cost to you. Perhaps a few cents added to the city sales tax, or maybe a few dollars onto the property tax, or maybe just an overt "Wi-Fi" tax on your next tax return. Any way you slice it, you're going to pay. And what I find even more outrageous is that not everybody has Wi-Fi; I sure don't and I don't want to pay for someone else to have it.
This isn't a need. It's a want and a frivolous one at that. In the cities considering these proposals, you already have service providers, sometimes more than one (which is a good thing if you believe in competitive capitalism). In Iowa City, you can go to a local coffee shop or Panera Bread Company. They provide the service for free because they know it will lure customers who will in turn buy products to help subsidize that "free" service. This, in my opinion is the route to go. If there is a demand, a private company will provide. Obviously in Ms. Granick's hometown, there is a demand because there are two companies offering the service that the city wants to grab.
Sure, some municipal power companies charge less than the going rate, some municipal telephone companies have great service, but people are always paying for it in the end and why take a gamble? These companies don't necessarily innovate and bring out new products (Plus, water, power, sewage, garbage disposal and the such are needs of a city). The private sector is usually the driving force behind innovation. All those revenues and profits they're making is the motivating factor to better their products, make them cheaper, and expand their service. When was the last time a municipal utility came out with a revolutionary breakthrough in the way they do business?
Ms. Granick looks to the government to solve her problems and make her life better. I look to myself and those with a track record for success.
I would like to propose that an even greater argument strikes through the heart of her primary assumption that we are entitled to free Wi-Fi: "nothing in life is free." I find it preposterous that she believes Wi-Fi could be deemed a "need" that our city council members or mayor should have an obligation to provide to their constituents for "free."
Let's take a macroeconomical perspective for a moment and look at a hypothetical procedure for setting up this "free" service. First, the city would need to purchase the infrastructure from the current providers or another wholesaler (roughly in hundreds of millions of dollars). Then they would have to install that infrastructure (wireless servers with enough power to broadcast over the air) and maintain it (a line item in the city budget). I don't know about your own experience, but at my company, our servers occasionally crash and maintenance is constantly being done on them. Finally the true cost to you. Perhaps a few cents added to the city sales tax, or maybe a few dollars onto the property tax, or maybe just an overt "Wi-Fi" tax on your next tax return. Any way you slice it, you're going to pay. And what I find even more outrageous is that not everybody has Wi-Fi; I sure don't and I don't want to pay for someone else to have it.
This isn't a need. It's a want and a frivolous one at that. In the cities considering these proposals, you already have service providers, sometimes more than one (which is a good thing if you believe in competitive capitalism). In Iowa City, you can go to a local coffee shop or Panera Bread Company. They provide the service for free because they know it will lure customers who will in turn buy products to help subsidize that "free" service. This, in my opinion is the route to go. If there is a demand, a private company will provide. Obviously in Ms. Granick's hometown, there is a demand because there are two companies offering the service that the city wants to grab.
Sure, some municipal power companies charge less than the going rate, some municipal telephone companies have great service, but people are always paying for it in the end and why take a gamble? These companies don't necessarily innovate and bring out new products (Plus, water, power, sewage, garbage disposal and the such are needs of a city). The private sector is usually the driving force behind innovation. All those revenues and profits they're making is the motivating factor to better their products, make them cheaper, and expand their service. When was the last time a municipal utility came out with a revolutionary breakthrough in the way they do business?
Ms. Granick looks to the government to solve her problems and make her life better. I look to myself and those with a track record for success.
Baseline Budgeting: A Contemporary Illustration
Have you ever heard of basline budgeting? The majority of programs funded by the federal government use this principle to determine how much their budgets will be in subsequent years.
Because of the recent hurricanes in the southern United States, President Bush has asked Congress to "slash spending," in order to provide monetary relief without raising taxes. I applaud President Bush for not forcing me or a business to pay extra for this burden. Critics of the president say that the programs he is cutting are necessary and that any cuts will cause mass riots, millions to go hungry and countless others to be homeless. While I'm not sure about those claims, if we look at the details of these "cuts" we will find that they really aren't spending cuts at all. They are, in fact, a decrease in the amount of the budget increase.
Citizens Against Government Waste (CAGW) is a non-profit group that monitors the budget Congress submits and the President signs every year. They point out wasteful spending and unnecessary programs that our representatives sometimes sneak into the budget. They also point out ways to cut spending and thus have the Federal Government be less a burden to the common citizen.
CAGW points out that Baseline Budgeting is a way for Congress to increase spending when they really claim to be decreasing it. How does it work? Let's say that a specific department, let's say, the Agriculture Department's foodstamps program is expected to grow $100 million next year. In fact, we project that its need will grow $100 million every year. But this year we only increase its budget by $30 million. The headlines will exclaim that we just cut $70 million out of the Ag. Dept. budget! The example in the link says its like expecting to gain 100 pounds, only gaining 75 and then claiming to have lost 25 pounds! Absurd!
Well, the foodstamps program is in fact a nice target for the Congress to do such a cut. Last year, $2.1 billion went unclaimed and unused. Why? This article claims that it is because of lack of knowledge or language difficulties. My guess is that the budget has continually increased irregardless of the number of people that actually need or use this subsidy. This practice should stop!
So how should Congress go about finding the proposed $62 billion in aid without raising taxes? House Majority Leader Tom Delay (R -TX), after increasing the budget deficit up to over $400 billion with the proposed aid, said he would be willing to accept suggestions on locations to cut. The Cato Institute, a free-market think-tank, has offered these suggestions. While these are legitimate cuts, even decreasing the total amount of Baseline Budgeting increases would be sure to find the $62 billion.
A worthy (and wise) goal of any individual, business or organization is to have a balanced budget. What you spend should only equal what you take in. I myself have a balanced budget and it is treating me well. It is also responsible. Is it possible to balance the Federal Budget without raising taxes? Yes. Another paper, dated 1995 has seven suggestions on finding ways to keep the government in line and prevent such frivolous spending and irresponsibility. It is as relevant today as it was then.
Next time you hear about spending cuts and the horrors that might befall us all if they are allowed, remember baseline budgeting and look into the issue some more to be sure that the Congress or other special interest groups aren't pulling the wool over our eyes.
Because of the recent hurricanes in the southern United States, President Bush has asked Congress to "slash spending," in order to provide monetary relief without raising taxes. I applaud President Bush for not forcing me or a business to pay extra for this burden. Critics of the president say that the programs he is cutting are necessary and that any cuts will cause mass riots, millions to go hungry and countless others to be homeless. While I'm not sure about those claims, if we look at the details of these "cuts" we will find that they really aren't spending cuts at all. They are, in fact, a decrease in the amount of the budget increase.
Citizens Against Government Waste (CAGW) is a non-profit group that monitors the budget Congress submits and the President signs every year. They point out wasteful spending and unnecessary programs that our representatives sometimes sneak into the budget. They also point out ways to cut spending and thus have the Federal Government be less a burden to the common citizen.
CAGW points out that Baseline Budgeting is a way for Congress to increase spending when they really claim to be decreasing it. How does it work? Let's say that a specific department, let's say, the Agriculture Department's foodstamps program is expected to grow $100 million next year. In fact, we project that its need will grow $100 million every year. But this year we only increase its budget by $30 million. The headlines will exclaim that we just cut $70 million out of the Ag. Dept. budget! The example in the link says its like expecting to gain 100 pounds, only gaining 75 and then claiming to have lost 25 pounds! Absurd!
Well, the foodstamps program is in fact a nice target for the Congress to do such a cut. Last year, $2.1 billion went unclaimed and unused. Why? This article claims that it is because of lack of knowledge or language difficulties. My guess is that the budget has continually increased irregardless of the number of people that actually need or use this subsidy. This practice should stop!
So how should Congress go about finding the proposed $62 billion in aid without raising taxes? House Majority Leader Tom Delay (R -TX), after increasing the budget deficit up to over $400 billion with the proposed aid, said he would be willing to accept suggestions on locations to cut. The Cato Institute, a free-market think-tank, has offered these suggestions. While these are legitimate cuts, even decreasing the total amount of Baseline Budgeting increases would be sure to find the $62 billion.
A worthy (and wise) goal of any individual, business or organization is to have a balanced budget. What you spend should only equal what you take in. I myself have a balanced budget and it is treating me well. It is also responsible. Is it possible to balance the Federal Budget without raising taxes? Yes. Another paper, dated 1995 has seven suggestions on finding ways to keep the government in line and prevent such frivolous spending and irresponsibility. It is as relevant today as it was then.
Next time you hear about spending cuts and the horrors that might befall us all if they are allowed, remember baseline budgeting and look into the issue some more to be sure that the Congress or other special interest groups aren't pulling the wool over our eyes.
Monday, October 10, 2005
Retailing Uneasy About the Near Future
An article in the Economist points out a worldwide trend of consumer confidence dropping. In Germany consumer confidence has dropped for its third straight month. In America, confidence is down in October almost 15%. Retailers are worried about this trend, especially as the Christmas spending orgy, er, "buying season" nears.
The thing I find most useful in the article is that from the perspective of the consumer the growing retail establishment and their catering to the specific tastes of the consumer (mostly because the market is growing more competitive) is a real boon for consumer advocacy. The article talks about Target comissioning their own fashion designers and other stores around the world are looking at local fashion providers instead of Chinese imports, because they are more timely and in tune with finicky "consumer trends." Wal-mart is looking into carrying organic foods to compete with some specialty chains. Wal-mart is also exploring the idea of having consumers send their digital photos to them over the internet, to be produced and picked up within the hour at their local store. Brilliant!
Each of these efforts will most likely decrease the overall costs of these traditional "specialty" goods and bring their prices down to earth. And with lower prices comes greater economic value for our hard-earned dollars.
The thing I find most useful in the article is that from the perspective of the consumer the growing retail establishment and their catering to the specific tastes of the consumer (mostly because the market is growing more competitive) is a real boon for consumer advocacy. The article talks about Target comissioning their own fashion designers and other stores around the world are looking at local fashion providers instead of Chinese imports, because they are more timely and in tune with finicky "consumer trends." Wal-mart is looking into carrying organic foods to compete with some specialty chains. Wal-mart is also exploring the idea of having consumers send their digital photos to them over the internet, to be produced and picked up within the hour at their local store. Brilliant!
Each of these efforts will most likely decrease the overall costs of these traditional "specialty" goods and bring their prices down to earth. And with lower prices comes greater economic value for our hard-earned dollars.
Friday, October 07, 2005
Wine: The Expression of Civilization
Wine has interested me for a while. The way it has begun to impact and grow in cultural relevance is curious to me. I don't claim to be an expert, but I am fascinated by this "living, breathing thing. Constantly able to change and gain complexity." That quote is from the movie Sideways (2004). The movie follows a wine Conessiur, Milo, and his friend on a tour of wine country. It touches on some cultural issues that surround wine drinking and the wine community. The movie alone may have caused an increase of 147% in sales of Pinot Noir, the movie's unofficial star.
Wine is also a business. Last year, the Californian wine industry was estimated to be worth $45.4 billion. Traditionally an old world specialty, wine has increasingly become more popular in America and so has its production. America, Australia, and South America have really begun to see sales of their wines take off. While in France, the government had to bail out their wine industry last year. And America is also the largest consumer of wines in the world.
Another film, Mondovino (2005) explores the differences between small wineries and large companies such as Mondavi and EJ Gallo. It interviews small vintners and they claim that the wine industry is falling apart and that there is no personality left in wine. Large companies are happy with their sales and strive to increase their market share. The movie explores the idea of terroir, literally "soil" in French, but has increased in meaning to the taste that an agricultural product takes on based on where it is located. The small wineries claim that they have a rightful claim to terroir and that is what produces the tastes of a Burgundy or Bordeaux. Large companies use technology to make up for their lack of geographic location. Mondavi and Rothchild for example, add new oak to their production process to add flavor to their wines.
An article in the Economist points out another issue affecting the wine industry. In California, grapes are able to grow larger and contain more sugar. When fermentation takes place, this causes more alcohol to be produced, which generally does not taste good in a wine. Some wineries in California are adding water to their batches in order to "mellow" the alcohol content. Most of the wine world frowns upon this practice, but consumers might not tell the difference, and it is wondered if they even care.
Wine is also sometimes seen as an investment. You can buy a good bottle of wine, place it in a safe location for a few years and then sell it at a higher price. While I don't know much about this process, it intrigues me and I have posted some websites that explain more about the differences of wine.
The Internet Wine Guide
A Guide to French Wines
A Guide to Italian Wines
Check out the above sites and go out and enjoy the world of wine!
Wine is also a business. Last year, the Californian wine industry was estimated to be worth $45.4 billion. Traditionally an old world specialty, wine has increasingly become more popular in America and so has its production. America, Australia, and South America have really begun to see sales of their wines take off. While in France, the government had to bail out their wine industry last year. And America is also the largest consumer of wines in the world.
Another film, Mondovino (2005) explores the differences between small wineries and large companies such as Mondavi and EJ Gallo. It interviews small vintners and they claim that the wine industry is falling apart and that there is no personality left in wine. Large companies are happy with their sales and strive to increase their market share. The movie explores the idea of terroir, literally "soil" in French, but has increased in meaning to the taste that an agricultural product takes on based on where it is located. The small wineries claim that they have a rightful claim to terroir and that is what produces the tastes of a Burgundy or Bordeaux. Large companies use technology to make up for their lack of geographic location. Mondavi and Rothchild for example, add new oak to their production process to add flavor to their wines.
An article in the Economist points out another issue affecting the wine industry. In California, grapes are able to grow larger and contain more sugar. When fermentation takes place, this causes more alcohol to be produced, which generally does not taste good in a wine. Some wineries in California are adding water to their batches in order to "mellow" the alcohol content. Most of the wine world frowns upon this practice, but consumers might not tell the difference, and it is wondered if they even care.
Wine is also sometimes seen as an investment. You can buy a good bottle of wine, place it in a safe location for a few years and then sell it at a higher price. While I don't know much about this process, it intrigues me and I have posted some websites that explain more about the differences of wine.
The Internet Wine Guide
A Guide to French Wines
A Guide to Italian Wines
Check out the above sites and go out and enjoy the world of wine!
Thursday, October 06, 2005
Manufacturing Jobs Disappearing: That's a Good Thing!
This article from the Economist calls attention to the high number of manufacturing jobs disappearing in highly-developed, richer countries.
It suggests that less than 10% of jobs in America are of the manufacturing variety, yet America still leads the world in manufacturing (by dollar amount). This gets to the heart of an observation and its implications.
The article implies that manufacturing in richer countries is inefficient. Change is a good thing and those economies are changing toward more service-oriented economies. R&D, marketing, and management are becomming the strong points of the American economy. Putting together shoes or cars is left to economies that may have an edge on wages, but don't necessarily have an edge on inovation.
With respects to the common worry about China taking everyone's jobs the article has this to say:
The Economist article illustrates this point at the closing:
It suggests that less than 10% of jobs in America are of the manufacturing variety, yet America still leads the world in manufacturing (by dollar amount). This gets to the heart of an observation and its implications.
The article implies that manufacturing in richer countries is inefficient. Change is a good thing and those economies are changing toward more service-oriented economies. R&D, marketing, and management are becomming the strong points of the American economy. Putting together shoes or cars is left to economies that may have an edge on wages, but don't necessarily have an edge on inovation.
With respects to the common worry about China taking everyone's jobs the article has this to say:
a basic principle of economics, proven time and again, is that even if a country can make everything more cheaply, it will still gain from specialising in goods in which it has a comparative advantage. Developed economies' comparative advantage is in knowledge-intensive activities, because they have so much skilled labour. For years to come, China will be more likely to assemble the best computers than to design them.Tom Peters, a management guru, in the book Re-Imagine! talks about a white-collar chateclism, which will change all our jobs forever. He forsees a world where companies are no longer eternal entities. People will come together with a good idea, produce the idea, and when the idea is beaten by another or becomes obsolete the "temporary company" will disolve and those workers will move on to other projects. His point is that business and the world change. It is up to us to change with it.
The Economist article illustrates this point at the closing:
People always resist change, yet sustained growth relies on a continuous shift in resources to more efficient use. In 1820, for example, 70% of American workers were in agriculture; today 2% are. If all those workers had remained tilling the land, America would now be a lot poorer.
Municipal Power Utility in Iowa City?
Iowa City will be voting on the following two questions on November 8th:
Shall the City of Iowa City in the County of Johnson, Iowa, be authorized to establish as a city utility and power plant and system?
and
Shall the management and control of an electric light and power plant city utility be placed in a board of trustees consisting of five trustees as provided by law?
The reason this vote is being put to the people is because a certain group perceives our utilities prices as being too high in Iowa City. I've linked to some sites below that cover a range of opinions on this issue:
MidAmericanEnergy
Press-Citizen OpEd piece about the confusing wording of the ballot.
An Iowa City Law Professor talking about the implications of a "yes" vote (and favoring one).
A letter refuting the above letter.
Citizens for Public Power website. I encourage you to check the "Reasons to Vote Yes" section and the "What people you know and trust say" section.
Finally, a letter to the editor from a candidate for the Iowa City council.
Personally, I agree with the final letter. I like the points he makes about not all communities using public power have rates lower than Iowa City. A significant number have higher rates.
I also do not like the idea of a municipality claiming to be able to run something better than the private sector. Often times, people believe when the government steps in to run things, all their troubles and cares will disappear. A brief glance at the State and Federal government's handling of the Katrina disaster should snap them back to reality. Bureaucracy and delay is all they know how to do well.
The article by Rick Dobyns rightfully points out that to purchase the energy from a co-op or from an energy broker, the citizens will have to pay for it (in this case with bonds sold to make the purchase. Hopefully, the income from the public utility will meet the costs of interest and principle, while allowing the energy rates to stay lower). The power wholesalers are not going to give Iowa City power for free, just because we've taken a more "progressive" view of distribution.
Another fact Rick points out is the almost $100 million discrepancy between both camp's cost estimates for acquiring MidAmerican's distribution means. The "Yes" group says Iowa City will save $60 million dollars and the "No" group says the city will lose $58 million. This is just too large a gap between estimates, leading me to believe that neither is true.
A neighbor of mine is a strong advocate for the "yes" vote. She came around and knocked on our neighborhood's doors trying to gain support for the two initiatives. I told her I was leaning toward voting "no." She explained that MidAmerican Energy has a 12% profit margin and that was too high. She also said that we shouldn't trust a large company.
Had she let me get a word in edgewise, I would have replied that profits for a company are good and that even she could participate in those profits by purchasing stock in Berkshire Hathaway or even the company itself. Those profits aren't just squandered. They are reinvested in the infrastructure and used to fund R&D in order to provide more efficient and cost-effective ways to continue to deliver power.
By the way, I'm sick of people demonizing large companies. See my post about Wal-mart for more in-depth opinion on the issue, but it is because of these large companies that we are able to live the lifestyles we do. These companies are able to deliver to consumers what they want or need. Yes, they do it for profit. But only the foolish, shortlived companies would not use that profit to seek better ways of "delivering the goods." I'm not naive. I know about Enron and Worldcom, but please, these examples are few and far between when taken in the context of the number of capitalistic and entrepreneurial companies in America.
I'm still keeping an open mind and reading the local papers and talking to friends, but as of today, I'm probably going to vote "no."
Shall the City of Iowa City in the County of Johnson, Iowa, be authorized to establish as a city utility and power plant and system?
and
Shall the management and control of an electric light and power plant city utility be placed in a board of trustees consisting of five trustees as provided by law?
The reason this vote is being put to the people is because a certain group perceives our utilities prices as being too high in Iowa City. I've linked to some sites below that cover a range of opinions on this issue:
MidAmericanEnergy
Press-Citizen OpEd piece about the confusing wording of the ballot.
An Iowa City Law Professor talking about the implications of a "yes" vote (and favoring one).
A letter refuting the above letter.
Citizens for Public Power website. I encourage you to check the "Reasons to Vote Yes" section and the "What people you know and trust say" section.
Finally, a letter to the editor from a candidate for the Iowa City council.
Personally, I agree with the final letter. I like the points he makes about not all communities using public power have rates lower than Iowa City. A significant number have higher rates.
I also do not like the idea of a municipality claiming to be able to run something better than the private sector. Often times, people believe when the government steps in to run things, all their troubles and cares will disappear. A brief glance at the State and Federal government's handling of the Katrina disaster should snap them back to reality. Bureaucracy and delay is all they know how to do well.
The article by Rick Dobyns rightfully points out that to purchase the energy from a co-op or from an energy broker, the citizens will have to pay for it (in this case with bonds sold to make the purchase. Hopefully, the income from the public utility will meet the costs of interest and principle, while allowing the energy rates to stay lower). The power wholesalers are not going to give Iowa City power for free, just because we've taken a more "progressive" view of distribution.
Another fact Rick points out is the almost $100 million discrepancy between both camp's cost estimates for acquiring MidAmerican's distribution means. The "Yes" group says Iowa City will save $60 million dollars and the "No" group says the city will lose $58 million. This is just too large a gap between estimates, leading me to believe that neither is true.
A neighbor of mine is a strong advocate for the "yes" vote. She came around and knocked on our neighborhood's doors trying to gain support for the two initiatives. I told her I was leaning toward voting "no." She explained that MidAmerican Energy has a 12% profit margin and that was too high. She also said that we shouldn't trust a large company.
Had she let me get a word in edgewise, I would have replied that profits for a company are good and that even she could participate in those profits by purchasing stock in Berkshire Hathaway or even the company itself. Those profits aren't just squandered. They are reinvested in the infrastructure and used to fund R&D in order to provide more efficient and cost-effective ways to continue to deliver power.
By the way, I'm sick of people demonizing large companies. See my post about Wal-mart for more in-depth opinion on the issue, but it is because of these large companies that we are able to live the lifestyles we do. These companies are able to deliver to consumers what they want or need. Yes, they do it for profit. But only the foolish, shortlived companies would not use that profit to seek better ways of "delivering the goods." I'm not naive. I know about Enron and Worldcom, but please, these examples are few and far between when taken in the context of the number of capitalistic and entrepreneurial companies in America.
I'm still keeping an open mind and reading the local papers and talking to friends, but as of today, I'm probably going to vote "no."
Wednesday, October 05, 2005
The Economic Pulse of the Country
The Congressional Budget Office last week released a summary of economic indicators in the United States. Check it out here. Especially interesting is the unemployment rate and the number of new jobs created over the last two years.
Devils on the Deep Blue Seas
I read an article about the true financial windfall that Katrina enabled the Cruise industry to collect on. The federal government is leasing the three ships from Carnival to aid in the relief and rebuilding effort for Katrina. From Carinval's perspective, the money is just making up for the lost profits.
This reminded me of an interesting report from "The World" on NPR I heard about the way a cruise ship is run. The number of crew on a cruise is amazing. Cruises are also highly diverse. The report comes with a Marxist slant, but it is interesting nonetheless. I'd love to hear your perspective.
This reminded me of an interesting report from "The World" on NPR I heard about the way a cruise ship is run. The number of crew on a cruise is amazing. Cruises are also highly diverse. The report comes with a Marxist slant, but it is interesting nonetheless. I'd love to hear your perspective.
Avian Flu epidemic
I don't want to scare anyone, and this may be a bit off topic for the blog, but I thought I would post some links to articles about the H5N1 flu virus. It is transferred to humans from ducks and has already killed a number of people in Southeast Asia. So far it is not made the mutation to be able to transfer from human to human, but as most viruses do mutate constantly, many people think that time may not be far off.
This virus has a high death rate (over 50%) and the symptoms are similar to pneumonia. Scientists have been studying the virus and have been unable to create a vaccine for it. They have, however, identified a medicine which has a high success rate at treating the symptoms. The drug is called Tamiflu and is manufactured by only one company in the world: Rosche.
A number of news sites have posted articles about the potential economic and physical devastation a human outbreak could cause. ABC news ran a report on Primetime about the virus. Prudent people will prepare accordingly, possibly acquiring a Tamiflu regimen and preparing for possible social unrest and disruption of daily life.
Here are some articles:
CDC website
AP News article about U.S. potential response (not enough, in my opinion)
Council on Foreign Affairs article
Asian Times article
CNN website
This virus has a high death rate (over 50%) and the symptoms are similar to pneumonia. Scientists have been studying the virus and have been unable to create a vaccine for it. They have, however, identified a medicine which has a high success rate at treating the symptoms. The drug is called Tamiflu and is manufactured by only one company in the world: Rosche.
A number of news sites have posted articles about the potential economic and physical devastation a human outbreak could cause. ABC news ran a report on Primetime about the virus. Prudent people will prepare accordingly, possibly acquiring a Tamiflu regimen and preparing for possible social unrest and disruption of daily life.
Here are some articles:
CDC website
AP News article about U.S. potential response (not enough, in my opinion)
Council on Foreign Affairs article
Asian Times article
CNN website
Financial Aid for Casinos
Financial aid for casinos in New Orleans? The below email was copied me by a friend. I tend to agree with it. However, casinos are businesses too, and they weren't spared the wrath of Katrina. What do you think?
Please forward this to Representative Lewis:
Dear Mr. Lewis: I petition you to join with Rep. Frank Wolf of Virginia in opposing the half-billion dollar tax credit for the casinos on the Gulf Coast included in the GO Zone legislation. Government has avoided giving tax aid to the gambling industry in the past, and they should continue to do so. This is a misuse of tax money, especially in light of the fact that the casinos didn’t even ask for it!
Please support legislation that will put the money toward reconstructing the infrastructure, not toward a group of financially robust giants whose industry is known to increase crime rates and poverty within any society in which it is introduced. If indeed this is true, and there are many studies that show it is, then casinos actually exacerbated the problems caused by Katrina because many of those who did not leave the region didn’t do so because of financial woes probably indirectly or directly caused by casino industry.
This is an important issue for me and my family. Thank you for your time and I look forward to hearing from you.
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