Privacy? What would you need that for?

Never confuse identifying a person with looking at an ID.

For a couple of years, the United States has been working on a plan for more secure passports, and using their position as a great nation to force other nations to do likewise. In an effort to contain a lot of information, make it difficult to forge, and have it be processed at a customs office in minimum time, the new passports will include an RFID chip — a very small, low power radio transmitter. This will allow customs officials to gather all kinds of information almost instantly with a mechanical reader. The reader doesn’t even have to physically contact the passport; depending on who you believe the passport can be read anywhere from one to ten meters away.

Business Week calls it “Big Brother’s Passport to Pry.” CNet cites “high tech snooping concerns.” Security expert Bruce Schneier lays it out:

Unfortunately, RFID chips can be read by any reader, not just the ones at passport control. The upshot of this is that travelers carrying around RFID passports are broadcasting their identity. Think about what that means for a minute. It means that passport holders are continuously broadcasting their name, nationality, age, address and whatever else is on the RFID chip. It means that anyone with a reader can learn that information, without the passport holder’s knowledge or consent. It means that pickpockets, kidnappers and terrorists can easily–and surreptitiously–pick Americans or nationals of other participating countries out of a crowd.

The Bush Administration thinks that’s just fine. Really! Maybe out of ignorance, maybe out of pure hubris, they seem to think that surely such readers will never ever be possessed by Bad Guys. Anyone who carries such a passport will be subject to identity theft and potential nationalistically motivated violent acts.

As if that isn’t bad enough, these passports will contain biometric information so primitive that a mere smile can cause identification failure. Talk about “not ready for prime-time” technology.

And have I mentioned the use of covert x-rays as a security device? Or a provision in the new 3000 page federal budget (passed only 2 months late) that allows certain Congressmen or their “agents” to look at anybody’s tax return they case to see? Or a proposal that would force every college in the nation to send the name and Social Security Number of every student to the Federal Government, regardless of their status or financial aid eligibility?

This goes far beyond the over-reaching anything-to-keep-us-safe only-a-criminal-would-object privacy invasions of the PATRIOT Act.

In closing, I bring you abusive employers who demand unpaid overtime rather than create a new job, a possible Senate rule to silence dissent, and a must-bookmark site for anyone who travels frequently, the official FAA airport delay site.

Apple of My i

If you bought shares in Apple Computer a few months ago when it broke 30, now might be an excellent time to look at lightening up.

In case you don’t watch the blow-by-blow financial news, here is the short version of what has happened. Monday, the stock was upgraded by Piper Jafray, with a new price target of $100 per share. This level was just short of double the previous price target, and 90 percent more than where it traded last Friday. So Monday, the stock jumped! In fact it looks as though the stock has jumped a few more points today to close pennies under $64 per share.

The rationale for this upgrade is that digital music is hot, hot, hot, and no digital music player is more hip than the iPod. Of course, some people point out that this makes them a one trick pony. Where are the computer sales? The Operating System sales? The software sales?

Frankly this thing smells like Blodget’s famous $400 price target for Amazon.com. Yes it got there, and in a hurry, but it didn’t stay there for long. Who are these people bidding Apple up this high? Was there a big short squeeze or something?

Consider a “stop” order on this, so if the price drops suddenly your broker will sell it to keep you from losing money (hence, stopping your loss). Or, if you bought in the low 30s, sell half; the remaining half can go to zero and you still don’t lose money. You get to enjoy the roller coaster almost risk free. Insert the usual disclaimer here that I own Apple shares.

In closing, I hope everybody has a Happy Thanksgiving. As a topical item I offer this item on “heritage turkeys.”

And thank you all for reading.

Just in Time for Christmas

You have probably heard that Sears and KMart are merging. Or more accurately, that KMart is buying Sears. This is all the more remarkable when you remember that 18 months ago, pundits were wondering if KMart would survive bankruptcy, and Sears was finalizing the purchase of catalog retailer Lands End. The merger will created the nation’s third biggest retailer (behind WalMart and Target, if you are curious). Although the company will be called Sears Holding Company, the retailers will still be run as two different brands. Wall Street is pleased.

Some pundits are skeptical that two struggling retailers can make one healthy company. They point out — and rightly so — that part of KMart’s journey to profitability involved selling off a bunch of stores, some of them to Sears! Others point out that KMart is run by a very smart man, who already owned 14% of Sears, who managed to get KMart from bankruptcy to profit.

In short, if anybody can make this thing work, it’s Eddie Lampbert.

Don’t think that this deal will mean you can buy Kenmore Appliances or Craftsman Tools at KMart; the KMart shopper is looking for $5 sets of screwdrivers, not $5 screwdrivers. Nor should you expect to see KMart brands at Sears. You don’t expect to see Marshall Field’s brands at Target, do you? Sure, there will be economies of scale for certain items, particularly in the IT department. And have no fear, Martha Stewart will get her cut. Instead of a cross-marketing frenzy, I think it is reasonable to expect a streamlined parallel strategy.

On the Sears side, the endless remodels should stop. Yet more paint and paper and “excuse our mess” signs don’t move product nobody wants. All the stores are pretty recently remodeled, and really should focus on merchandise. Another thing that costs money and doesn’t move merchandise is the Sears game of musical managers. Maybe if one team stayed in place long enough to understand their particular store, improvements would come about. Finally, stop undercutting themselves on Lands End products. There is no reason that I should pay a lower price and no shipping if the product I want happens to be in Sears.

On the KMart side…. well make people like me want to go into a KMart for some reason, any reason. The time may well have come for advertising. It made sense not to pay for a bunch of ads when they were emerging from bankruptcy, but now the company is profitable. You can’t sell things if you have no customers.

Although KMart has already addressed the issue of closing underperforming stores and “unlocking value” by selling unused property, the day will come when Sears stores will have to look carefully at its own underperforming stores. Sure, give management a chance to make things work, but some stores will just have to go. Maybe some of these would make better KMarts. Indeed, maybe a few KMarts will become Sears.

Of course these are just my ideas. Mr. Lampbert surely has plenty of ideas of his own.

Oh, and as a follow-up, Alan Greenspan is concerned about the Budget Deficit, the Trade Deficit, and the lows on the Dollar.

Nothing Better To Do

Congress is currently in a “lame duck” session, trying to finish up a veritable buffet of issues that they should have resolved before the elections. Little things, like the Federal budget — no hurry, the fiscal year only started in October. This happens every year, as if they never see the new budget year coming. Oh, and since we are having record deficits, they are going to have to pass an increase on the deficit cap. Of course, Congress has other things in mind, too. Like that intelligence reform thing that the 9/11 Commission recommended (their report is in the running for an award, you know). Hopefully they can pull this off without a witchhunt. Of course my inner cynic wants to know why, if this could be put off until late November, it couldn’t have been handled in early January when the newly elected congresscritters arrive.

Among the issues they hope to tackle, an issue clearly on a footing with whether or not the expenses of the Federal government get paid, is taking away your fair use rights regarding media you legally own. Currently under consideration is a bill written so poorly or craftily, depending on your bias, that it boggles the mind. In addition to providing a prison term for people who bring video cameras into movie theaters, it would make it illegal to use iTunes music sharing, a feature that allows people to listen to but not copy items on the local network. Under this proposed law, it is legal to fast forward over gory bits of a horror film, but illegal to skip commercials. Will it at least be legal to use the bathroom during the commercial break?

I wonder how that will be enforced.

A wide array of groups are protesting, but your voice is needed as well. Let your Senators know that although you are a registered voter, the RIAA and MPAA are not.

And tell them to finish that darn Federal budget already, skip the pork.

Two Dollars a Pound

That’s what they are saying in London, that the dollar is falling such that it will take $2 to buy one British Pound, the first time that has happened in 12 years. They fear that “more loose fiscal policy” is on the way from Washington, and have “concerns about the future of the US economy as a whole.”

Other nations are concerned as well, with Italy considering monetary intervention to prop up the falling dollar. That’s Italy, a country whose government Lonely Planet describes as follows: “Italy’s parliament has a reputation for scandal and resignation, and at times it has left Italy virtually ungoverned and utterly chaotic.” That Italy is worried about the price of American Dollars.

Even the Chinese want to get out of American currency, which will drive the dollar lower and — since China’s currency is linked to ours — make Chinese goods even lower priced for worldwide export. Unfortunately, it won’t make Chinese goods cheaper here in the States because, well, their currency is linked to ours.

There is some disagreement as to why this situation is occurring. Larry Kudlow, former Reagan advisor (and thus supply sider) beleives the drop of the Dollar against the Euro has little to do with what is happening here and everything to do with what is happening there. In a nutshell, there aren’t enough Euros, driving the price of them artificially high. Why this would effect the Pound and Yen — which float more or less freely against both Dollar and Euro — I can’t say.

Rather the “benign neglect” that international journalists speak of as the cause, I prefer to think this has been a calculated move on the part of the administration. Otherwise, John Snow might have said something about it. Why? Well, first, it’s an attempt to fix the trade deficit. When a nation has more imports than exports, that effectively funnels money out of the country. It’s also a big drag on the Gross Domestic Product. In short, you can’t have monster trade deficits indefinitely. A cheap dollar makes American goods “cheaper” overseas — encouraging people from other nations to buy them — and makes foreign goods more expensive here — encouraging us to “buy American.”

Second, the Administration was hoping to force China to de-link its currency from our own. Unfortunately, the same low dollar which is supposed to make American goods more affordable overseas makes Chinese goods cheaper too. China’s actions this week make it clear that they can play this dollar dump game too, and they are big enough to win: they have a population of over a Billion and a GDP of $6.449 Trillion, growing at over 9% annually.

Of course the falling dollar also has side effects. Aside from the international concerns detailed above, there is the fact that since oil is traded in dollar denominations, OPEC can no longer afford to pump oil for $22 per barrel.

What to do now? Jim Jubak has these tips for investing in a weak dollar world, or if you’d prefer, here’s some down to earth consumer advice from the Chicago Sun Times.

Things Are Tough All Over

I spent the weekend in San Francisco, and would like to share some observations with you. I was a block off Union Square, in one of the few hotels that did not have a picket line. That narrows down where I stayed remarkably. Yes, it was loud; no, I didn’t particularly mind; no, at no time did I cross a picket.

We are not talking about workers who are striking to force an employer to agree to a massive increase of pay and benefits. These people are just trying to keep even. Even the Mayor is on their side, perhaps remembering that employees vote, but companies do not.

Expect this to get uglier before it gets solved, and expect this scene to become more common until such time as we solve the problem of rising health insurance costs, as well as employee benefits in general. The great irony is that employer provided insurance may drive the price of insurance up. As an experiment, dig out your employee benefits information and pay-stub, figure out what health insurance costs, and get an online quote for similar coverage.

It may be harder to get a job these days, but employees are tired of being treated as nothing more than a commodity.

Other points of interest:

Chinatown is well worth seeing — and shopping! A suitably short woman can even find clothes that fit without alteration. Top notch Chinese cuisine is of course available.

The Metreon is a fascinating gallery of all things Sony. Words do not adequately describe this Temple of Geek.

The San Francisco Apple Store has a variety of events. I attended a GarageBand seminar that was not meant for power-users, but I learned things. Thank you, Geoff!

If you are planning on being in San Francisco on November 20-21, you should absolutely consider attending the International Taiko Festival, sponsored by the San Francisco Taiko Dojo. I got to see a free concert in Union Square and it was amazing! I have been to percussion concerts before, but this was more like dancing with drums.

Finally, it was my pleasure to have lunch with Elisa Camahort. We — and our significant others — had a lovely time, good food, and great conversation.

Open Letter to the President

Mr. Bush,

News has been circulating that one priority of your second term will be “tax reform,” specifically simplifying the tax code. Indeed, it seems to have been one of the things your associate Mr. Mankiw was to discuss in his CNBC appearance this morning. If you are truly interested in simplifying tax code and closing loopholes, I have a proposal for you.

Make the standard deduction equal to the poverty line for a family of four, adjusted each year. This means nobody will ever be taxed into poverty. It also means you can eliminate any portion of the tax code meant to lessen taxes on the working poor.

Cap itemized deductions at 3 times the standard deduction. This has the intended effect of the original Alternative Minimum Tax — making sure the very wealthy do not itemize themselves out of taxpaying altogether — with none of complicated rules. Also, because it is indexed, it does not suffer from the “bracket creep” that ensnares some middle class taxpayers. The AMT could then be eliminated with no loss to government revenue.

Leave exemptions pretty much the way they are. This means bigger families will not be taxed into poverty either.

Add a half dozen high priority deductions that anybody can take, regardless of whether they itemize. I propose that these include money paid for Health Insurance premiums, mass transit (bus passes, ferry passes), IRA contributions, and adoption expenses. These items should be things that we as a nation agree are important.

At this point, the tax brackets may have to be reconsidered, but you have a team of people who can figure out what those rates need to be. Also, these proposals do not address corporate taxation, dividends, or capital gains. If these 4 steps are taken, any American whose income comes solely from a paycheck and maybe interest from a savings account can do their taxes on a one page form in less than an hour. This means improved compliance and accuracy. It means the IRS will need to spend less money printing forms and processing paperwork. Also, because these returns will be simpler, the IRS can concentrate on fraud and, more importantly, tracking terrorist funding.

Oh, and if you need an expert on tracking illegal funds, you might consider asking Senator Kerry. He has some experience bringing down money laundering operations.

Why Politics Will Always Stink

The polls are barely open. I can’t tell you who will win the Presidential Election. But I can tell you one thing about him: he’ll be a Yale graduate.*

No, Yale is not the problem.

Yale is not exactly State University. It has high standards and even higher tuition. You know the mortgage company ad where the guy is selling everything he owns because his kid got into an “Ivy League” school? That’s the kind of place we are talking about. But George Herbert Walker Bush didn’t have to take out a second mortgage to send little Dubya. And even though John Kerry married a fabulously wealthy woman, he was by no means poor as a young man.

Even my favorite politician, Eliot Spitzer, is a Harvard graduate and hedge fund investor. You have to have a cool million in net worth before hedgies are allowed to let you invest. Slate describes him as having “the classic New York rich kid résumé.”

The bottom line is that you have to be wealthy to play in the game of politics. Contributions aside, how else can you afford to spend hundreds of millions of dollars to earn a job that pays $400,000 per year that you only get to keep 4 years?

It gets even worse at the state level. While a United States Senator makes a nice six figure salary, with which he must effectively maintain two residences, State Senators earn a pittance. In Texas, for example, the salary is $7200 per year. In North Carolina, a State Senator earns $13,951. These numbers are not unusual. And they can’t vote themselves an increase that would make the job anything less than a financial drain, because the headline would read something like “State Senate votes 300% pay increase.” Let the angry letters begin.

Oh, but those are part time jobs. Few states have full time legislatures. They are only supposed to be in session something like 3 months a year, depending on the state. Let me ask you something: How would your boss feel about letting you have 3 months off every year? Oh, and another 3 months off for campaign season every other year. Even if you offered to take the time off without pay, I think many employers would seriously look at replacing an employee who was gone that often. I am guessing most people can’t afford to do run for office, much less fulfill that office if elected.

And I haven’t even touched on what a political campaign can do to one’s personal life.

The fact that politicians are wealthy is not bad all by itself. But a man who has grown up with a trust fund has never had to carefully consider whether he can afford genuine Kraft Macaroni and Cheese. He has never worried about next month’s rent/mortgage. He has never wondered where he will come up with the money for necessities. He has never had to pawn anything, never considered a “payday loan.” In short, no matter how much he sympathizes with those among us who struggle, he will never completely understand what it is like. He may well feel a great duty to the poor, but in all likelihood he has no frame of reference for what things can truly help them.

Remember to vote today, alright?

*What, you don’t think Nader has a chance, do you?

Gross Duhmestic Profits

The new Gross Domestic Product numbers for the 3rd quarter of 2004 were announced today. It was up 3.7%, more than last quarter’s 3.3% but less than the expected 4.2%

What the heck does that mean? Well, GDP is everything any of us spend minus any money that got sent overseas. Consumer spending + business investment + government spending – trade deficit = GDP.

In consideration of comments made earlier this week, I would like to direct your attention to a paragraph about halfway into that last link:

“It’s a pretty good growth rate, but it may not be enough to create jobs,” said economist Robert Brusca of Fact and Opinion Economics in New York.

Now think about that, business investment is up 11.7% over last quarter, and that may not be enough to create jobs? That’s just one leg of this table, but frankly without jobs, there can’t be increased consumer spending, the second leg of the table — accounting for 2/3 of the economy all by itself, it’s the most important leg. We know that there is anemic job growth and wages rose less than a percent, but consumer spending rose 4.6%. Therefore either savings are being depleted or debt is being piled up. Neither is good for us in the long run.

So money is coming out of our pockets. Where is it going? Much of it becomes corporate profit. Another large chunk goes overseas, aided and abetted by tax loopholes that encourage companies to move their headquarters if not their workforce overseas and a Treasury Department that is of the mistaken belief that a weak exchange rate for the dollar will improve the trade deficit.

You can see both these forces at work in the world of oil. Look at oil company profits, which come from money that was spent by consumers, businesses, or the government. Oh, and don’t forget that the lions share of that oil came from outside the United States, and therefore gets subtracted from GDP. OPEC believes that the United States could single handedly bring down oil prices, by the way.

That’s right, the big oil cartel thinks the little ol’ United States is controlling oil prices, keeping them artificially high.

If you only have time to read one more thing today, let it be these 100 facts, complete with supporting links.

Obfuscation is Job One

This morning, I was listening to NPR. During one segment, they discussed the conflicting job creation numbers cited by Mr. Kerry and Mr. Bush as they slog through the last week of vicious campaigning before election day. Mr. Bush claims there have been 1.9 million jobs created on his watch, while Mr. Kerry contends that millions of jobs have been lost in this administration. The NPR interviewer asked an expert which of these figures is correct.

The expert replied basically that both were, depending which set of figures were used and when you start counting. Bush used the household survey — calling a random sample of Americans on the phone and asking if they are working — and begins counting in August of 2003. After all, he says, 9/11 happened and economists’ opinions aside, you can’t blame him for jobs lost because of that. Of course Reuters is kind enough to point out that the 1.9 million jobs also counts jobs expected to be created through February of 2005.

Mr. Kerry, on the other hand, starts counting at the beginning of the Bush Administration. After all, the buck stops there, right? Furthermore, he uses the employment survey — which most economists prefer because it asks companies exactly how many people are on the payroll. It doesn’t count illegal workers or contractors, but there you are.

The NPR interviewer then asked which number voters should be paying attention to. My answer is neither. The number you need to pay attention to is 6.75 million. That is the number: the absolute bare minimum number of jobs that should have been created in the 45 months and counting of the Bush Administration just to keep up with new people entering the workforce. Those 6.75 million people don’t count in the big unemployment number. They can’t collect unemployment benefits because they never had jobs.

If you are one of those “undecided” voters, here is a handy rundown of official positions on various issues. Please keep in mind that sometimes what they say is not necessarily what they mean.