Don’t Call Us, We’ll Call You

Yesterday, a Federal District Court ruled that the Federal Trade Commission does not have the authority to run the National Telemarketing Do-Not-Call list. The ruling appears to hinge not on First Amendment free speech issues, but rather on issues of formal jurisdiction. Thus, my comments may be obsolete by the time you read them. As an example of how popular the Do-Not-Call list is, there are 50 million numbers registered compared to 46 million dial-up internet customers in the United States. Please keep in mind when comparing these figures that some households have registered multiple phone numbers, and that some broadband internet customers have a dial-up account as backup connectivity. Nevertheless, this list clearly has popular support and is already being funded by a tax on telemarketers themselves. Expect Congress to act quickly.

I fully support the idea of a Do-Not-Call list. Like many people, I refuse to buy products from some stranger who calls me on the phone. I frankly don’t understand why anyone would whip out the credit card for some unknown person who calls claiming to be a representative of some business that he or she did not first call personally. Furthermore, the idea that I would set up an appointment for an unknown salesman to visit my home on such a basis is ludicrous.

The Direct Marketing Association should not be fighting this list in court; they should be embracing it. It represents a comprehensive list of people like me, who will not do business with their clients under any circumstances. By properly using such a list, they increase productivity of their employees by sharply reducing the number of failed sales calls. That’s right. By not calling people who will not buy, they increase odds of reaching someone who will. The people who make a living as telemarketers should not see this as job threatening; they should see this as potentially improving their close ratio and thus increasing their bonuses.

Unfortunately, the list is useless. Exempted are “political organizations, charities, telephone surveyors, the business of insurance (to the extent that it is regulated by state law), or companies with which you have an existing business relationship.” Apparently, the FCC ceded authority to the FTC to regulate “telemarketers from financial institutions, telecommunications companies and others.” In my case, at least 90% of the telemarketing calls I have received in the last 3 years are exempted from Do-Not-Call list restrictions.

In the immortal words of Bugs Bunny, “What’s all the hubbub, bub?”

A Yen for Dollars

Unless you really like financial news, you may not have noticed that the value of a dollar has been sharply declining this week. The dollar has been declining for quite a while, but the pace has started to alarm investors, economists, politicians, and businessmen both here and abroad.

The good news — if it can be called that — is that a weak dollar makes American goods more competitive overseas. For example, a Volkswagen will cost more relative to a Ford in the states, while the Ford will seem to have a price cut in Germany. Unfortunately, this logic applies to everything Americans buy that is imported: fruit, meat, clothing, computer chips, Canadian lumber, Italian leather sofas, Bosch spark plugs; frankly Americans import most of what they buy. That is the definition of a trade deficit. That is where this policy will hit you in the wallet. The theory is that a weak currency will make it more cost effective to manufacture things here in the Good Old U. S. of A. and cause companies to hire back those 3 million or so factory workers whose jobs have evaporated during the Bush II Administration. This assumes several unrealistic things, not the least of which is that companies that have moved manufacturing overseas to take advantage of cheap labor and brand new factories are willing to move back.

The same devaluation that makes it desirable for foreigners to buy American cars makes it undesirable for foreigners to have American assets, such as stocks and bonds. Big deal, you say? Asian banks own over $1 Trillion (with a T) of the United States’ national debt. Imagine what happens if they decide to sell just a tenth of their positions.

Furthermore, the weak dollar makes it undesirable for foreigners to travel to the United States, as if current visa policies do not do the job. Has anyone told the Treasury Secretary that the Commerce Secretary is trying to encourage tourism? Secretary Snow, who replaced the largely ineffective Paul O’Neill,* has made a series of statements that make sense in a vacuum, but not in reality-land.

For example, back in June, Snow defined a “strong currency” as follows: “You want people to have confidence in your currency. You want them to see the currency as a good medium of exchange. You want the currency to be a good store of value. You want it to be something people are willing to hold. You want it hard to counterfeit, like our new $20 bill. Those are the qualities.” This may be his personal definition, and it may even be the Administration’s official definition, but it is not the definition most people use. It’s like defining all computers as using Microsoft Windows; saying it does not make it so. As CNN’s Justin Lahart put it, “Most currency traders had thought that the “strong dollar” policy had something to do with fostering economic policies — like low inflation, reduced debt and strong growth — which lead to a higher exchange rate for the dollar.”

In a more recent example of Bizarro-World Economics, just yesterday Snow proclaimed before an international audience of leading bankers and economists that the United States’ budget deficit would be cut in half by 2008. He went on to say that would take place due to growth and “disciplined spending” without tax increases. I fail to see how this is possible without hiring accounting experts from Enron and Worldcom. The fact that an expert from the International Monetary Fund thought this was reasonable should raise big red flags. Granted, it only took 2.5 years to go from budget surplus to an over $400 Billion deficit. But that was before the War on Terror, nation building in Afghanistan, overthrowing the albeit oppressive government of Iraq, two massive tax cuts, adding an entire new Department to the Executive Branch, proclaiming that No Child should be Left Behind, and giving sweeping new powers to the Department of Justice. We haven’t even figured out how to make Social Security work out after the Baby Boomers start retiring, and we’ve had since 1946 to work on that.

In the end, the currency devaluation is a high stakes game of chicken with China and Japan. The primary aim is to force China to de-link it’s currency with the dollar.** This link is one of the reasons Chinese goods are so darn cheap you almost can’t avoid buying them in the States — well, that and slave labor. The secondary aim is to force Japan to stop artificially lowering the value of the Yen, making Japanese goods cheaper overseas and stimulating Japanese manufacturing.

Should prices of Asian goods rise, inflation will result. That will force Greenspan to raise interest rates. That in turn will effect mortgage rates, the availability of investment capital, and the amount of interest the United States has to pay on the National Debt.

No matter who blinks, you lose.

*O’Neill was a good CEO, lousy Secretary of the Treasury. When he was nominated, Wall Street was pleased, thinking it meant someone competent and clueful would be running the show. It is unknown why exactly the administration thought another good CEO would succeed where another failed.

**Linking a currency may be a good short term idea. For example, certain South American nations did it to halt hyper-inflation. However, in the long term, Alan Greenspan is paid to care about how monetary policy effects America, not any other nation whose currency may be linked to our own.

A Message to Madison Avenue

I’d like to take a moment to talk about advertising. I begin with the basic premise that advertising is supposed to make the people who see it do something.

This appears to be a radical concept.

There is a lot of really lousy advertising out there. It’s not just misleading banner ads on websites, or spam that promises low mortgages. Be honest, have any of you actually bought anything based on a pop-up ad? Television and radio ads are quite awful these days. Here are some examples of basic ad types that I can’t imagine being effective.

Hey kids! Adults are idiots! Make Mom and Dad buy this product for you! Mistake one, forgetting where the money to buy things comes from. Mistake two, insulting that source of money. That “idiot” adult is where kids get their revenues. You don’t see kids counting up their allowance money to buy breakfast cereal and hyper-mega sugary snacks.

“Wow, that was a funny commercial for…. what was it again?” Stop me if this is too logical, but if your customer can’t remember your product from the time he sees the commercial to the time he buys something, it wasn’t a very good commercial. Remember those “Ernest” commercials back in the late 80s? Very funny. What were any of them for? Darned if I remember. By contrast, we all know that Gilbert Gottfried’s characterization of the Aflac Duck is supposed to remind us to ask our employers about supplemental insurance. Those of us old enough to remember know that the “Where’s the beef?” lady was exhorting us to go eat at Wendy’s. We know that when he’s not getting high, Steven thinks all us “dudes” need to call Dell and get a computer sent straight to our doors. This case, by the way, illustrates the dangers of having a single, visible, fallible spokesperson.

Hey hey! Who here likes to polka?? It doesn’t matter how good an ad is if it doesn’t reach people apt to buy the product. Thankfully, advertisers have more or less realized that kids looking to buy dolls, toy cars, and GoGurt are not watching Cartoon Network at 11 PM on a school night. Likewise, the readers of Sesame Street Magazine are not in in a position to buy a new minivan. They aren’t even in a position to reach the pedals.

Here, have some heavy-handed morality to go. Public Service Announcements (PSAs) are not actually trying to sell us anything. They are trying to get us to do something — or not do something. Just Say No. Save Water. Talk To Your Kids. All are generally good messages. But sometimes they take themselves way too seriously: if you use drugs you support terrorism; won’t somebody please think of the children. Even the best of this class of ads lends itself to parody: This is your brain; this is your brain on drugs; this is your brain on drugs with a side of bacon. Let’s take it easy here. I think we all know the PSA message of the week.

Some of the most perplexing ads are “image ads.” Basically these are run by large companies, often with many subsidiaries, to remind us they exist. Sure, maybe you aren’t in the market for a GE product today, but maybe your dishwasher will break next week, maybe you’ll need a light-bulb next month, maybe your company will need jet engine next year, or maybe you’ll buy some GE stock for your retirement account. It’s hard to say whether these ads are effective.

An effective ad makes someone want to do something. That is all any of us needs to remember.

The Grasso is Greener on the Other Side

There. It’s done. Dick Grasso has resigned as head of the New York Stock Exchange. A man who was debatably the most powerful man on Wall Street is now unemployed, in answer to widespread calls for blood since disclosure of his $140 Million salary package. Please go ahead and feel free to sample some of the news coverage. Even the Head of the SEC and the Senate wanted to know what was going on. Many people are outraged that he received so much money. And yes, it certainly is a lot of money.

But personally, I’m inclined to think he worked pretty hard for it. Several of those news items in the last paragraph make it clear that he worked his way up from the bottom, earning less than $85 per week in the late 60s, and that he simply knows more about how the arcane NYSE system works than anybody. Who coordinated things such that the markets were only closed for 4 days after September 11, 2001? Dick Grasso, that’s who. For those who aren’t experts in Manhattan Geography, the World Trade Center was walking distance from the NYSE. Many brokerages, mutual funds, and financial advisors had offices in the WTC. There are faces you no longer see on CNBC because they were at Ground Zero. There were other companies that lost 3-letter types in the terrible incident — that falls under the category of what the SEC likes to call “material information.” Almost everybody on Wall Street lost someone they knew that day. Many of them watched the Towers go down live and in person. The financial markets would have fared far worse to be closed another week. This is to say nothing of the impact such a delay would have had on the economy as a whole. Yes, I do believe that not being able to access the capital markets would have had a negative effect on American business.

Fine, that was 2 years ago, what has he done lately? Where was Dick Grasso when the lights went out last month? In his office, making sure things would run smoothly in the morning, on generator power of course. He slept in his office that night.

Don’t start thinking this is the end of the story. The money was not just sitting on the floor of the NYSE waiting for somebody to pocket it. The Board of the NYSE had to sign off on this mess, and now they will have their noses rubbed in it. In fact, if you think Dick Grasso was overpaid, the Board is where to lay the blame. Expect heads to roll. The volatility of the situation is illustrated by the fact that they couldn’t find someone to replace Grasso before lunch.

My inner tin-foil hat wonders who stood to benefit from Grasso’s demise.

Why Can’t Johnny Make Ends Meet

It does not take an expert to see that families are having a hard time in America. Manufacturing jobs — long seen as one of the best ways for a man with no college degree to support his family — are vanishing. The tech bust has left many educated professionals scrambling to avoid long term unemployment. Among those lucky enough to still have jobs, Americans have less leisure time than anytime after the 40 hour workweek was “mandated.” Schools are by all accounts not giving young people an adequate education, particularly when compared to the education of 50 or 100 years ago. Our children’s academic accomplishments are dwarfed by those from most other industrialized nations. Crime rates are dropping, but Americans feel less safe than ever. Personal debt is at incredible levels, consumers are desperate to refinance where they can, and the Government has sold them down the river by tightening up bankruptcy law and adding needless layers of complexity under the guise of a “tax cut.”

There are many theories regarding the causes of “The Problem With America These Days.” Unfortunately, many of them center on such untenable ideas as “It’s because we’ve lost Old Time Religion” (oh yeah, things were much better in Salem) or “It’s because there’s no respect for the Family anymore” (define respect and family so we can talk) or even “It’s all the fault of Women’s Lib and mothers working outside the home.”

The idea of Moms With Jobs is really not that new. Moms have been helping out with the family finances since biblical times and through the ages, but the amount of work required to run a family home had generally prevented most moms from being full time members of the workforce.* Mandatory school attendance and labor saving devices have made possible the Mom With Career. However, both parents working can be a surprising drain on the family finances.

There are expenses associated with work beyond increased tax liability (the argument used by some Republicans in the past about “mom working just to pay the taxes” is ludicrous, since you aren’t taxed on money you don’t make). To send mom to work means she will need more reliable transportation than she would need to just get the groceries, take the kids to school, and pick up the dry cleaning. Speaking of dry cleaning, she will need work attire, and she will need to have it cleaned. She will also have to arrange child care, which is by no means inexpensive, particularly if she wants licensed care by someone who will not jeopardize the health and safety of her child. She will also be having lunch out more often, meaning she will spend a whole lot more on lunch than if she were eating peanut butter sandwiches with the kids. There will also be a lot more take-out and convenience food in the family menu, and that is going to cost more money. Despite the potentially deleterious effects on the family health and waistline, nobody is really going to want to cook a nice meal after working all day and fighting traffic home. These costs vary from family to family, but they add up in a hurry. They can easily consume mom’s paycheck.

Bankruptcy expert Elizabeth Warren admits this while offering up another way that the two-income family is falling behind. If I may quote: “Presenting carefully researched economic data to support their arguments, the authors contend that, contrary to popular myth, families aren’t in trouble because they’re squandering their second income on luxuries. On the contrary, both incomes are almost entirely committed to necessities, such as home and car payments, health insurance and children’s education costs. When an unforeseen event such as serious illness, job loss or divorce occurs, families have no discretionary income to fall back on.” Her thesis specifically includes the idea that, based on their aggregate income, families are buying (and bidding up) houses in desirable neighborhoods with good schools. Furthermore, that “more reliable transportation” I mentioned as a necessary expense of mom working often is turning out to be a new car that the family can only afford because both parents are working. Interestingly, this book was written with her daughter; this would tend to suggest she knows something about being a Mom With Career. This is not from some two-bit economist sociologist wannabe, but from a distinguished Harvard professor with a list of publications and accomplishments longer than your arm. Nevertheless, the ideas are controversial.

Be of good cheer, as she does provide suggested solutions. First, arrange the finances such that necessities can be paid out of one paycheck. Then the second income becomes truly “extra” and can be used on luxuries like saving for retirement or eating out without guilt. She furthermore suggests regulatory reforms to require bigger down-payments on houses to discourage getting overextended on mortgage payments, capping credit card interest rates and fees, school vouchers, and better education about financial planning for those of us who have more liabilities than assets.

Something to think about.

* The single mother has also been with us throughout the ages, since the first time a father died or walked out on his family. Single mothers almost by definition have to earn a living in addition to all the expected activities of Mom. There is nobody else to do it.

Same As It Ever Was, or Numbers Lie

The markets in the United States are having a nothing day, as everyone digests conflicting data. While manufacturing appears to be expanding, manufacturing output is falling. Meanwhile, there are fewer jobs and continuing layoffs. Nevertheless, some economists are predicting 4.0% growth in the Gross Domestic Product — a figure Reuters reminds us is “the fastest pace since the height of the boom in 1999.” Furthermore, although there is scant coverage of the fact, they are predicting profits to grow even more than that. Nevertheless, inflation is expected to stay low, that is as long as you don’t include gasoline or insurance rates. In the midst of all this, the Fed is expected to sit on their hands when they meet tomorrow. Nothing to see here, the economy is fine. Right?

Meanwhile, WalMart reports that same store sales growth will be near the top of the estimated range.

Growth is great! It is un-American to say otherwise. However, growth in profits in the long term cannot exceed growth in the GDP. Otherwise the GDP would rise, not just because all those goods were sold, but because they had to be manufactured and shipped. Short term, such hyper-growth is made possible by taking market share away from competitors (which only lasts until competitors change business practices to compete better, or go out of business), having an innovative product (which lasts until everyone who wants one has one), getting into new business segments (either by continuous research and development, or by acquiring other companies, neither is sustainable), or by accounting legerdemain (Enron, Cendant, Worldcom, the list goes on). Similar arguments go towards continual sales growth. One additional and important constraint exists on those “same store sales” that the retail sector is always on about: one business location has finite capacity. You can only cram so many people into a WalMart. You can only make them buy product so fast. You can only put so much merchandise on the shelves. Making the store bigger is expensive and only pushes the problem out a little.

If I sound skeptical about the idea of continued corporate growth in excess of GDP without creating inflation, it’s only because I am.

Nine Eleven

Today is the anniversary of what is debatably the single saddest day in my lifetime.

Two years ago today, 19 nut-cases hijacked 4 airliners full of people and fuel. They destroyed the World Trade Center, damaged the Pentagon, killed about 3000 people — an astonishingly low number considering the time and place — and took away our innate sense of security.

The occasion was commemorated in New York City as well as other places with moments of silence.

Around the world wreathes were laid, prayers were said, names of the dead were spoken, commemorative gardens and art exhibits were opened, blood drives were conducted, parades were marched, school children sang patriotic songs, heads of state gave speeches denouncing terrorism. In addition, nations were put on alert, and there were calls for curtailing civil liberties in the name of the War on Terror.

Closer to home, a local mini-mart chain was giving away free deluxe car washes.

Clearly that’s what it’s all about. Moments of silence and car washes.

Free Travel Advice

Yesterday morning, I heard a brief interview with 3 members of the United States Travel and Tourism Promotion Advisory Board. The purpose of this board is to come up with ways to encourage international travel to the United States. They have been given a $50 million marketing budget by the President. Members include the heads of regional convention and tourism boards, hotel company executives, airline executives, and Commerce Secretary Don Evans. Some of these men are also members of the World Travel and Tourism Council. Although it does not surprise me that I was not invited to join this prestigious committee, I would like to offer my ideas on the subject. As usual, free advice is often worth what you pay for it.

First, I’d like to point out to the esteemed gentlemen that the majority of travel and tourism in the United States is done by people who already live in the United States. Sure, maybe it doesn’t bring “new” money into the system when someone from Iowa makes a trip to Chicago, but that person does spend money on food, hotel, activities, and collectors spoons that they would not have spent in Iowa. Furthermore, the kinds of things that keep us Americans from traveling are exactly the kinds of things that keep international tourists away.

Next, get the Department of Homeland Security to stop issuing warnings that say nothing more than Look Out! Speaking as an American, I don’t mind legitimate warnings, but most of what we hear is nothing more than vague scary stuff. We don’t want to hear “Orange. That is all.” We want something we can think about and maybe act upon. The few times there have been specific warnings — for example, recent warnings that there might be another hijacking or airliner bomb, or 2002’s warning that banks in the Northeast might be targeted — were met with no change in the terror alert level. To further complicate matters, genuine threats were met with no change; why didn’t the Washington area get an orange or even red alert when they had sniper problems? In short, we need something to “Look Out!” for, even if it’s a little vague, and we need regional alerts. People in other countries really do look at the terror levels before buying plane tickets.

Another thing you could do to encourage tourism is to stop treating everyone at the airport as a potential terrorist. There, I have said it. I don’t think most of us mind going through the metal detector. However, a lot of us are beginning to think that some small minority of screeners like to deliberately humiliate us through invasive searches and gratuitous confiscations. It is apparent that the list of prohibited items for carry-on luggage varies by screener and airport, regardless of what the official Federal list may say. Furthermore, now that it is perfectly legal for the TSA to break into our luggage and search it, have they found so much as a single bomb or vial of anthrax? Guns and ammo don’t count; it’s legal to pack those in checked luggage. Have we done adequate screening of the screeners to make sure they aren’t using this golden opportunity to steal from honest passengers?

Prescreening has been widely sold as an idea that will prevent unnecessary searches and speed up the security line. Nothing could be further from the truth. As long as it is suspected that people will bring weapons onto aircraft, the security line will stay where it is, and everyone will have to go through it. Today, we find out that the proposed prescreening system will color code travelers — color coding worked so well for the DHS — and rate them according to perceived security risk. Green passengers may board immediately; 8% will be rated yellow and get further screening; 1% to 2% will be rated red and not allowed to fly, maybe even get arrested, and there is absolutely nothing they can do about it. Now think about that. A Boeing 747-400 can carry up to 568 passengers. If 1% of passengers are designated code red non-flyers, that is an average of 5 on every single flight. On a busy holiday weekend, Chicago’s O’Hare airport has over 1 million travelers. Do they have room for 10,000-20,000 detained code red non-flyers at the airport? A single terminal at Dallas-Fort Worth International Airport accommodates 12.8 million flyers annually, an average of 37,000 every single day. That’s 370 code red non-flyers every single day from a single terminal. Double these numbers if you suspect the number of code red non-flyers will actually be closer to 2%.

That is just the practical consideration. Don’t forget the Civil Liberties considerations. Groups from the American Conservative Union to the ACLU are concerned. The TSA spokesman says “Not only should we keep passengers from sitting next to a terrorist, we should keep them from sitting next to wanted ax murderers.” The ACLU director replies “You could be falsely arrested. You could be delayed. You could lose your ability to travel.” What is the criteria for arrest anyway? Having an outstanding parking ticket? Having the same name as someone who is a criminal? Even victims of identity theft could find themselves spending their vacation not at a resort, but in jail. Is there the possibility this could be used in a politically expedient fashion? Yes.

So then, Secretary Evans, esteemed members of the Board, if you would like foreign tourists to come back to the United States, you had better do something about Americans traveling within our borders. They are not a captive audience.

Yes, in answer to your question, Look Over There!

Do you remember George Bush the First on the campaign trail in 92, expressing amazement at the technological marvel known as the supermarket scanner? His son’s administration is every bit as “in touch” with the American People as he was.

The War on Terror: This week we will pass the 2 year mark, and frankly the only real progress is being able to color code our semi-rational fears. We’ve arrested a bunch of people, browbeat some into plea bargains that are very likely of the “I can’t prove I didn’t do it, so can I at least go minimum security instead of Federal Asspounding Prison?” variety. We have consolidated a bunch of Federal agencies into a Medusan mess known as the Department of Homeland Security. We squandered the opportunity to meaningfully upgrade airport screening and instead gave them even more authority and even less accountability. Oh, was accountability only for school districts? Have no fear, we will know more tonight at 8:30 Eastern.

Afghanistan: We really took care of Osama there, didn’t we? Oh, right, we never found him. Well, we got rid of the Taliban. Sort of. We stood up for the human rights of women. In retrospect. But we did install a friendly government and Karzai is doing a great job. If he were the Mayor of Kabul, he would be doing a fabulous job. Unfortunately his grip on the rest of the nation is somewhere between tenuous and non-existent.

Iraq: Somewhere between the shifting reasons for being there and our shifting target for getting out lies Blood and Oil. Ironically, modern Iraq was created at the end of World War I when the British decided it would be bloody handy to carve out some nice oil producing region of the Ottoman Empire and install a nice friendly regime there. The Americans have arrived 85 years later with the same failed plan and are telling us how wonderfully it is working. Furthermore, if anything is going wrong, it is the fault of the pesky people who actually live there! Never mind the fact that almost everything they had 6 months ago is destroyed — except for the oil, and it turns out that won’t really be enough to pay for everything.

World Trade: The Administration wants free and fair trade, except when it comes to agricultural products, steel, and Iraq reconstruction. In those cases we will subsidize farmers for producing more than could possibly be needed, illegally tariff imported steel to protect long since closed uncompetitive steel mills, and award billions of dollars in contracts without any bidding and without any effort to involve the people already there. No, we’re too busy mucking about in Chinese monetary policy.

Civil Liberties: The PATRIOT Act has come under such fire that Ashcroft had to do an old fashioned road show. Several state and local governments have decided not to comply with PATRIOT. Some entities have decided that the easiest way to comply with potential search warrants under the act while still protecting the privacy of patrons is to keep as few records as possible. Congress has had to seriously reconsider some provisions and potential expansions. Ted Koppel has had enough.

The Economy: Oh yeah, the economy. The President himself says “We’ve got positive growth, which is good.” He goes on to assert that home ownership is good, it’s a shame there are so many people out of work, and kittens are cute. Just kidding, he said nothing about kittens. He does seem to be under the impression that somehow the changes in labor rules (there is still time to write your Congressman) which will reduce the number of people eligible for overtime and allow the insidious practice of “comp time” will result in more people getting overtime pay. I guess I’d have to get an MBA for that to make sense. The truth is that this country is losing jobs and this plan — like the tax cuts that were supposed to have already saved the economy — will make it worse. However, Labor Secretary Elaine Chao has good news for the 2.7 million people who permanently lost jobs in manufacturing: we will need 1 million new nurses in this country over the next 10 years. This figure, as announced on CNBC, will be of great comfort to their children.

No wonder the President’s approval rating is down.