The story posted by The Financial Times yesterday saying The Sun would be a top candidate to be sold after Tribune Co. is taken private has now been completely rewritten - to say that it's really The Orlando Sentinel - NOT The Sun - that would be on the block. How something like this happened, we have no idea. But here's the new version, for the record:

The Orlando Sentinel, a Florida-based newspaper and asset of the Tribune Co, is an attractive and potentially likely divestiture after Tribune’s take-private deal closes, sources familiar with the company told mergermarket. The first of the sources, who is a former advisor to Tribune and who continues to hold shares in it, as well as an industry analyst, speculated the newspaper may sell for more than USD 100m.

Tribune plans to close its take-private deal, under which Tribune employees have ownership but Sam Zell has control, by year’s end. The deal must close by 15 May 2008 or the company will risk termination of the deal, according to regulatory filings.

Posted by Bernie Kohn at 10:56 AM | Permalink | Comments (0)
        

From the Financial Times. Nobody quoted on the record. Ted Venetoulis, who fronts a local group that says it wants to buy the Sun, told my colleague Andrea Walker this afternoon that he hasn't talked to Tribune recently and has no indication they want to sell.

The Sun newspaper is among assets that Tribune could sell if cash is needed after its take-private deal closes, three sources familiar with the company told mergermarket. This news comes as Federal Communications Commission chairman Kevin Martin has proposed exempting Tribune from rules prohibiting the ownership of newspaper and television stations in the same market for the next two years.

Two of the sources stressed that this could be the case only if Illinois-based Tribune feels pressure from the approximately USD 13bn in debt which it will have as a result of its planned USD 8.2bn take-private deal. One of the sources said a sale of The Sun, a daily newspaper in the Baltimore, Maryland area, is “highly likely” in the year following the closing of the deal, under which Tribune employees have ownership but Sam Zell has control.

Among Tribune’s holdings, The Sun is likely the largest paper the Tribune Company would look to sell, the sources said, as other metropolitan dailies such as New York-based Newsday, the Chicago Tribune and the Los Angeles Times are likely to continue to be held by the company.

The Sun has seen declining revenues and faces competition stemming from last year’s arrival of the Baltimore Examiner, a free daily newspaper in its market, the sources said. Tribune has started its own free dailies in Chicago and elsewhere, but not in Baltimore, where The Examiner circulates more copies than the Sun. One source speculated the paper could be sold to an individual or group looking “to reach into [Washington] DC,” and named area billionaire Daniel Snyder as someone who could seek to buy it.

Baltimore Media Group, headed by Theodore Venetoulis, has previously expressed interest in purchasing the Sun. Earlier this year, an analyst said The Sun could garner a purchase price of up to USD 517m. A second analyst now estimates The Sun’s worth to range from USD 100m to USD 300m.

One of the sources familiar with the situation said a purchase price would likely be between the highest of the second analyst’s estimate and the top of the Lehman Brothers estimate. The second analyst said it may be tough for a buyer purchasing The Sun to break into the Washington Post’s market, which has been dominated by the latter paper for decades. However, the analyst noted, the two newspapers “battle… in a handful of Maryland counties immediately north of DC.

“I wouldn’t be surprised if they [Tribune] sold it,” the analyst said of the possible divestitures of The Sun. For buyers, the analyst said, The Sun and Baltimore are attractive because the city has recently seen an increase of development and a growing affluent community. For the Tribune, selling such a large asset would be beneficial because it would not cut from the company’s three flagship papers, the analyst said. The sale of The Sun would generate a large amount of funds with which to pay down debt. The analyst said that because the paper is not one of Tribune’s three largest, it could be considered “non-core” by the organization.

The first two of the sources familiar with the situation said that The Sun would be sold before newspapers in New York, Chicago, or Los Angeles, which they said are key markets for the NYSE-listed Tribune. Last month, Tribune sold other newspapers outside those three areas - two southern-Connecticut based newspapers.

Tribune plans to close its take-private deal by year’s end. The deal must close by 15 May 2008 or the company will risk termination of the deal, according to regulatory filings.

Posted by Jay Hancock at 6:48 PM | Permalink | Comments (0)
        

This is decent news for the Maryland economy. State new car sales, which plunged 14 percent in September (compared with sales in September 2006), did much better in October -- falling by less than 1 percent compared with sales 12 months previously. It was the best year-over-year performance since October 2006, when new car sales rose a bit over those of October 2005. Used car sales also fell slightly in October. (We compare year-over-year figures to clean out seasonal variations. Car sales normally fall when the weather gets colder.)

So far this year Maryland new car sales have fallen 5 percent. October car sales are not yet posted on the Motor Vehicle Administration's Web site, says spokesman Jack Cahalan, because of a computer upgrade. But here are the numbers:

New cars sold: 32,965
Value: $885.7 million

Used cars sold: 59,348
Value: $516.2 million

Thanks to reader John for prompting the MVA to release the numbers (they're two weeks late) and forwarding them to me. Here is a recent column on Maryland car sales and what they might be trying to tell us.

Posted by Jay Hancock at 9:24 AM | Permalink | Comments (0)
        

Dickie Scruggs, Trent Lott's brother-in-law and a Mississippi trial lawyer known for reaping millions from lawsuits against tobacco and insurance companies, was indicted on charges of trying to bribe a judge, various news outlets are reporting. Here is the indictment. From WLBT TV in Jackson:

Dickie Scruggs and Four Others Indicted

A federal grand jury has indicted prominent attorney Richard "Dickie" Scruggs and several other attorneys on criminal charges of trying to bribe a state court judge in a civil case.

The indictment also charges two other attorneys in Scruggs' law firm, his son Zack Scruggs and Sidney Backstrom, with conspiracy. It says they conspired with another lawyer, Timothy Balducci and former state auditor Steve Patterson to bribe Circuit Judge Henry Lackey with $40,000 to enter an order in a lawsuit favorable to the Scruggs' law firm.

In that suit, Jones versus Scruggs, the lawyers were fighting over how to split more than $26 million dollars in attorney's fees.

The suit claimed that Scruggs was withholding fees in a Katrina insurance litigation. That suit was assigned to Judge Lackey in the 3rd Circuit District which encompasses Oxford and Lafayette county.

Judge Lackey was cooperating with the FBI's Public Integrity Section in a scheme that began in March and ended a few weeks ago when the Judge received the payoff.

Both Scruggs and their lawyer were in Federal Court in Oxford this afternoon.

Just yesterday, the FBI seized a computer hard drive from the Scruggs lawfirm in Oxford.

Dickie Scruggs' brother-in-law is Senator Trent Lott who just announced on Monday, his plans to retire from the U-S Senate.

Posted by Jay Hancock at 9:59 PM | Permalink | Comments (0)
        

This Bloomberg story is a little breathless, but there can be no doubt now that the credit crunch has spread to commercial property. Will be interesting to see how this affects Baltimore.

The cost of derivatives protecting investors from defaults on the highest-rated bonds backed by properties more than doubled in the past month, according to Markit Group Ltd. Prices suggest traders anticipate defaults rising to the highest level since the Great Depression, according to analysts at RBS Greenwich Capital in Greenwich, Connecticut.

The seven-year rally in offices and retail properties ended in September when prices fell an average of 1.2 percent, according to Moody's Investors Service. More losses are likely because banks are holding $54 billion of commercial mortgages they can't sell, data compiled by New York-based Citigroup Inc. show.

Lenders are struggling to sell loans to investors after losses on debt backed by subprime mortgages to people with poor credit caused financial markets to seize up in July and August. Bonds with AAA ratings secured by properties ranging from the Sears Tower in Chicago to trailer parks in Delaware yield about 203 basis points more than similar maturity Treasuries, up from 92 basis points on Oct. 12, according to Morgan Stanley indexes.

Posted by Jay Hancock at 12:05 PM | Permalink | Comments (0)
        

Late yesterday the Western banking company -- sometimes touted as the natural future buyer of PNC Financial, which took over Mercantile -- disclosed big mortgage problems. Interesting that these are home equity loans -- second mortgages -- so presumably they weren't issued to investors who bought a property and simply walked away. From the AP:

After avoiding major trouble most of the year, Wells Fargo & Co. has finally bogged down in the mortgage muck that's muddying one major bank after another.

Wells Fargo, the fifth-largest U.S. bank, waded into the mess by saying it will recognize $1.4 billion in losses in the fourth quarter on home equity loans that aren't being repaid as the real estate slump deepens in California, the Midwest and other major markets.

Until Wells Fargo's disclosure late Tuesday, the San Francisco-based bank had been largely unscathed by the turmoil that has battered a long list of other major lenders.

"Clearly, this is a disappointment because (Wells) had been seen as better managers of credit than many other big banks," said RBC Capital Markets analyst Joseph Morford. "But now they have a big blemish on them, too."

Posted by Jay Hancock at 8:27 AM | Permalink | Comments (0)
        

I'll be on WYPR today at 1 p.m. talking with Marc Steiner and Bob Kaufman about "How a socialist and a capitalist both concluded that the United States needs to end the war on drugs." Kaufman's the socialist, in case you weren't sure! We'll be talking about this column: "Let Adam Smith Be the Drug Pusher."

Posted by Jay Hancock at 10:29 AM | Permalink | Comments (0)
        

23rd ANNUAL PNC CHRISTMAS PRICE INDEX UP 3.1 PERCENT; RISING WAGES FOR MILKMAIDS, HIGHER COMMODITY PRICES LEAD INCREASES -

Cost of “Twelve Days of Christmas” Song Items Reflect Consumer Pricing Trends -

PITTSBURGH, Nov. 26, 2007 – The significantly higher price of gold and increased compensation for minimum wage workers will make Christmas more expensive this year, according to the PNC Christmas Price Index. The tongue-in-cheek economic analysis by PNC Wealth Management is based on the cost of gifts in the holiday classic, “The Twelve Days of Christmas.”

According to the 23rd annual survey, the cost of “The Twelve Days of Christmas” is $19,507 in 2007, a 3.1 percent increase over last year. The rise in gift prices mirrored the U.S. government’s Consumer Price Index – a widely used measure of inflation calculated by the Bureau of Labor Statistics. The Consumer Price Index is up 3.5 percent so far this year.

“Each year, the Christmas Price Index reflects trends in the broader economy,” said James Dunigan, managing executive of investments for PNC Wealth Management. “This year, increased commodities prices, concerns about the value of the dollar and the first minimum wage increase in 10 years were major factors in the increases to the Christmas Price Index.”

Posted by Jay Hancock at 9:54 AM | Permalink | Comments (0)
        

While we were gone for Thanksgiving, the college kid got five credit-card offers. All of them blew blue smoke abouut how exclusive they are and how not just anybody can qualify. American Express Gold Card: "The road to financial success has many milestones marking how far you've come. You've just reached one such milestone. You're selected for the American Express Preferred Rewards Gold Card." Platinum MasterCard: "Carry PLATINUM. Command RESPECT." Etc.

All this for a kid who will earn less than $5,000 this year. The road to financial succes DOES have many milestones. One of them is the very first time you tell the Platinum MasterCard people to jump in a lake.

Posted by Jay Hancock at 10:32 AM | Permalink | Comments (0)
        

Blogging will resume Monday.

Posted by Jay Hancock at 2:49 PM | Permalink | Comments (0)
        

Pre-winter energy update: The cost of heating oil is way up along with the cost of crude and gasoline. The cost of natural gas is comparatively lower. And the wholesale cost of electricity is down, too, but it won't do you any good. BGE has locked into (higher) winter prices already, and unlike last year nobody is offering to undercut BGE's standard price and pass along the favorable wholesale prices. This year, those who heat their homes with natural gas are likely to be better off than people depending on oil furnaces or electric heat.

Check out Floyd Norris's piece in the New York Times recently, in which he writes: "A result is that those who heat their homes with natural gas -- by far the dominant fuel in the United States -- will see prices roughly in line with last winter's. But for those who use heating oil, as many do in the Northeast, prices seem likely to be about 50 percent higher than they were last winter."

The reason for cheaper natural gas now is the same as in times (see two years ago) when natural gas is more expensive: the stuff is hard to move around, and most users can't toggle between gas and oil depending in which is cheaper. Even though natural gas prices are higher overseas, exporting U.S. supplies by liquefying them and pumping them into tankers is very expensive, wiping out any potential profit. And even though U.S. gas prices are more affordable than oil these days, few people will buy gas furnaces for that reason alone. Thus U.S. gas supplies will remain relatively plentiful and relatively affordable. BGE's natural gas price (not counting delivery) for November is 92 cents per therm: 28 percent higher than last year's November price but 44 percent lower than 2005's November price.

Wholesale electricity prices on the Mid-Atlantic grid are down sharply. Juice for December delivery is down 33 percent from its price over the summer. But no company I'm aware of is aggressively taking these lower prices and offering to pass them onto BGE customers. I assume this is because competitive retailers are waiting to see what the Maryland legislature does in next year's session. They want the General Assembly to make it easier for rivals to reach BGE customers, and they're also afraid legislators may re-regulate the electricity market. So they don't want to invest a lot of money in marketing campaigns until they know what the landscape looks like.

Heating oil, meanwhile, has soared -- up 70 percent since late 2006 and and 25 percent since August. Hope you filled the tank early this year.

Posted by Jay Hancock at 10:30 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

From Bloomberg News this morning. Bloomberg also pronounces ethanol "2007's worst energy investment."

By Mario Parker Bloomberg News

CHICAGO: Cascade Investment, a company owned by Bill Gates, chairman of Microsoft, is preparing to sell its shares in Pacific Ethanol, which has lost almost two-thirds of its market value this year.

Cascade, which owns a 21 percent stake in the company, will convert its preferred stock to 10.5 million common shares and offer them to the public, according to a Pacific Ethanol filing with the U.S. Securities and Exchange Commission. At the closing price Friday, Gates has lost $24 million on the investment. He paid $84 million for his stake in 2005.

Pacific Ethanol, based in Sacramento, California, has fallen 63 percent this year in Nasdaq composite trading, as the burgeoning supply of the fuel additive drove prices down 25 percent. The company reported a third-quarter loss last week of $4.8 million.

The filing is "nothing other than optionality," Neil Koehler, chief executive of Pacific Ethanol, said Friday in an interview by telephone.
Cascade asked Pacific Ethanol to make the SEC filing, Koehler said.

Cascade may sell the shares from "time to time," Pacific Ethanol said in the filing. Gates bought the preferred shares two years ago to help the company finance construction projects on the West Coast.

A voice-mail message left for Michael Larson, who manages Cascade's investment holdings, was not returned.

Pacific Ethanol shares fell 13 cents, or 2.2 percent, to finish Friday at $5.70, their lowest level since January 2005.

Pacific Ethanol produces about 80 million gallons, or 190 million liters, of the additive annually at its plants in Madera, California, and Boardman, Oregon. The company owns a 42 percent stake in a 48 million-gallon plant in Windsor, Colorado.

Posted by Jay Hancock at 10:28 AM | Permalink | Comments (0)
        

A couple weeks ago the Mystery Economic Image of the Day was this:

What is it? I quote from the Maryland Port Administration Press release:

'The Maryland Port Administration announced today that the Helen Delich Bentley Port of Baltimore will begin receiving the first shipment of a series of wind turbine parts on Dec. 12 [2006] at the North Locust Point Terminal. The eventual number of turbines to be imported from various locations around the world over the next five to six months will be 32...

'The elements for these giant wind-power turbines once completed at their final destination, in Pennsylvania, will weigh 290 tons each, will span a diameter of 300 feet from blade tip to blade tip and reach a height of 250 feet.

' "The extreme dimensions of this cargo require planning equal in size. Our logistics team has worked hard in preparation of our first vessel to Baltimore and we look forward to a safe and efficient discharge," said Kris Helling, logistics manager for Suzlon Wind Energy Corp.' 

Posted by Jay Hancock at 3:17 PM | Permalink | Comments (0)
        

Hedge fund manager/blogger Barry Ritholtz has a bone to pick with the New York Times for its "Inflation Was Tame in October" headline regarding yesterday's consumer price index report. For the record, The Sun's headline was: "Consumer prices rise 0.3% in Oct./1.4% increase in cost of gasoline helps fuel inflation, makes Fed rate cut less likely"

Won't someone please fire these lazy headline writers?

Its amazing to read these headers on inflation, which are then belied by the underlying data. As the BLS table above should make clear to even the most starry-eyed fan of Alan Greenspan, even the official inflation data remains elevated.

The NYT's headline AND reporting was the worst of the entire crowd: Inflation Was Tame in October

Inflation remains contained despite high oil prices and a record low dollar, a government report showed yesterday, offering some reassurance to the Federal Reserve as it considers whether to lower interest rates again at its meeting next month.

But economists warned that sharp increases in food and energy costs will weigh on consumers in the coming months, putting a damper on spending in other parts of the economy.

Compare that headline with these:

CPI Rise Yet Another Headwind For Retailers Forbes
Pace of consumer inflation quickens Chicago Tribune
US Economy: Energy-Led Price Gains May Restrain Fed Bloomberg
Rising gas prices push up inflation AP
US inflation fears knock stocks BBC News

Partial credit goes to the Journal headline writer trying to convey the most info in their title:

Consumer Prices Grow Moderately As Low Housing Costs Offset Energy Wall Street Journal

Let's look at the actual data:

Headline CPI grew 0.3% over the past month, the same as September. The core index (excluding food and energy), rose 0.2% for the fifth straight month. Annualized, that's 3.7% and 2.2% (ignore the rounding).

At 2.2% gains year over year, Core inflation is above the Fed's target rate.

Starbucks (SBUX) was the latest company to feel the pinch of inflation: Rising wholesale prices forced the world’s largest chain of coffee shops to raise drink prices. This led to the first ever decline in visits, and a lowered profit and sales forecast.

Starbucks, up until recently, very much a stock darling, has seen their share price tumble by a third this year.

As we have repeatedly stated, there is no free lunch. When cyou drop rates as low as we have, you ignite price increases.

Expect to see more problems like these. Firms that have been absorbing their input cost increases can no longer do so. When they finally pass along these price increases, pinched customers have no choice but to cut back.

>

Posted by Jay Hancock at 10:59 AM | Permalink | Comments (0)
        

Study by Georgia State's Erdal Tekin and Roy Wada and available through the National Bureau of Economic Research.

This paper examines the effect of body composition on wages. We develop measures of body composition – body fat (BF) and fat-free mass (FFM) – using data on bioelectrical impedance analysis (BIA) that are available in the National Health and Nutrition Examination Survey III and estimate wage models for respondents in the National Longitudinal Survey of Youth 1979. Our results indicate that increased body fat is unambiguously associated with decreased wages for both males and females. This result is in contrast to the mixed and sometimes inconsistent results from the previous research using body mass index (BMI). We also find new evidence indicating that a higher level of fat-free body mass is consistently associated with increased hourly wages. We present further evidence that these results are not the artifacts of unobserved heterogeneity. Our findings are robust to numerous specification checks and to a large number of alternative BIA prediction equations from which the body composition measures are derived.

Our work addresses an important limitation of the current literature on the economics of obesity. Previous research relied on body weight or BMI for measuring obesity despite the growing agreement in the medical literature that they represent misleading measures of obesity because of their inability to distinguish between body fat and fat-free body mass. Body composition measures used in this paper represent significant improvements over the previously used measures because they allow for the effects of fat and fat free components of body composition to be separately identified. Our work also contributes to the growing literature on the role of non-cognitive characteristics on wage determination.

Posted by Jay Hancock at 10:31 AM | Permalink | Comments (0)
        

I am reading French President Nicolas Sarkozy's political memoir and policy prescription, Testimony. From his preface to the U.S. edition:

I respect the fact that in the United States it is possible for those who try hard and deserve it to get a second chance. In France and most European countries, you usually need the right diplomas to succeed in life. It also helps, if possible, to belong to the right families. Moreover, anyone who fails once -- by going bankrupt, for example -- hardly ever gets a second chance. By contrast, in the United States there are all sorts of opportunities for those who know how to seize them. Americans don't ask about the diplomas or the social origins of someone who comes up with a new idea; they just ask whether the idea's good or not. Past failures, if they're honorable ones, should be seen as an opportunity to learn, and not as a stain on one's reputation.

It's thanks to these values that American society makes possible the most impressive social advancement of any country in the world. Scientific research in the United States attracts the best researchers from around the world, who quickly become American patriots. Indeed, half the Americans who have won Nobel prizes have been immigrants. It is doubtless only in the United States that so many entrepreneurs without college degrees are among the richest citizens.

Posted by Jay Hancock at 11:40 AM | Permalink | Comments (1)
        

This is quite unusual. During the last real estate collapse, in the early 1990s, I remember a few firms shoring up their money-market funds so they wouldn't "break the buck." Now we're seeing it again. Money-market mutual funds are supposed to invest in short-term, high-grade paper so that they don't lose any investors' principal. Their share price is supposed to never go below $1 -- unlike shares of other mutual funds, which fluctuate based on the underlying value of the investments. Legg seems to have bought some poorly performing paper and is now injecting $100 million of its own money so the share price doesn't go below $1. The fund in question is an institutional fund, Bloomberg reports, not a fund involving retail investors. The Legg filing doesn't say anything about mortgages, but Bloomberg reports that the fund in question bought structured investment vehicles, many of which have gotten in trouble by owning mortgage-backed securities. From the Legg filing:

As discussed above in Note 10 of Notes to Consolidated Financial Statements, in November 2007 we entered into arrangements with a large bank to provide letters of credit (“LOCs”) for an aggregate amount of approximately $238 million for the benefit of two liquidity funds managed by one of our subsidiaries. As part of the LOC arrangements, we agreed to reimburse to the bank any amounts that may be drawn on the LOCs and, to support this agreement, we provided approximately $178 million in cash collateral, which will be increased to the full amount of the LOCs by December 28, 2007. In addition, in October 2007 we invested $100 million in another liquidity fund that a subsidiary manages in order to provide additional liquidity support to the fund. We may elect to provide additional credit or other support to liquidity funds managed by our subsidiaries if we deem this action necessary and appropriate in the future. If we do so, we may be required to use additional cash to pay for the support or as collateral. The pledge of cash and the investment in the fund restrict our ability to use the cash for other purposes and, together with any future uses of cash to provide additional support, reduce our flexibility to use these assets for other corporate purposes, including debt prepayments, stock repurchases and acquisitions.

Posted by Jay Hancock at 10:46 AM | Permalink | Comments (0)
        

Economics/life-navigation advice of the day:
Parents: Do not turn your children into actors/models/beauty-pageant contestants. Send them to college. Teach them who Benazir Bhutto is and how to solve polynomial equations. That is all.

Children's Modeling & Acting Ages 0-18 Start your child today, the legitimate way! No Fees, No Dues Ever! Easy as 1, 2, 3!

Make copies of your child's photo. On back put name, birth date & contact number.
Include short note telling them what you are seeking (modeling, commercials, etc)
Mail to the Children's Agents using our Preprinted Mailing Labels or Lists.

You will never be asked for money from anyone on our lists. We supply you the names and addresses of licensed agents nationwide.
Children's Photo's
Professional photos of babies are NOT required by the agencies on our list, rather the opposite. A few simple snapshots of your baby will do. Some parents may insist on having professional photos taken. Please do not do this strictly for modeling purposes. You will simply be wasting your money. At this stage of a baby's life, his/her looks change incredibly fast. Also know the agents on our lists will not force you to use their photographer. If you ask for a list, they will supply you with it.

Featured Items...

Parents:
for maximum exposure
also use these lists:

Personal Managers
Casting Directors
Producer/Production Co

Posted by Jay Hancock at 10:09 AM | Permalink | Comments (0)
Categories: Stupid PR pitches
        

The ethanol lobby has gone ballistic over comments made two weeks ago by Jean Ziegler, the United Nations' independent expert on the right to food for the world's poor. From an AP story on Ziegler's comments two weeks ago:

Jean Ziegler, who has been the United Nations' independent expert on the right to food since the position was established in 2000, called Friday for a five-year moratorium on biofuel production to stop what he called a growing "catastrophe" for the poor. Scientific research is progressing very quickly, he said, "and in five years it will be possible to make biofuel and biodiesel from agricultural waste" rather than wheat, corn, sugar cane and other food crops.

The world price of wheat doubled in one year and the price of corn quadrupled, leaving poor countries, especially in Africa, unable to pay for the imported food needed to feed their people, he said. And poor people in those countries are unable to pay the soaring prices for the food that does come in, he added.

"So it's a crime against humanity" to devote agricultural land to biofuel production, Ziegler said at a news conference. "What has to be stopped is ... the growing catastrophe of the massacre (by) hunger in the world," he said.

As an example, he said, it takes 510 pounds (231 kilograms) of corn to produce 13 gallons (49.2 liters) of ethanol. That much corn could feed a child in Zambia or Mexico for a year, he said.

Here is part of today's retort from the ethanol lobby, which called Ziegler's statements "rogue" and "apocalyptic":

As representatives of the world's leading ethanol producers, we are deeply concerned with the Interim Report of the United Nations Special Rapporteur on the Right to Food submitted to the General Assembly on August 22 and with Mr. Jean Ziegler's public declarations to the international media in late October.

The apocalyptic statements made by the Special Rapporteur, calling biofuels production a "crime against humanity" and a "recipe for disaster," are not only unjustified but also unacceptable to those of us who contribute to this emerging industry and millions of people around the world who benefit from renewable biofuels everyday.

Biofuels do not lead to famine. The report preys on the food vs. fuel debate, claiming that biofuels are responsible for current and future significant increases in food prices and suggesting that biofuels will lead to widespread hunger in poor countries. As Nobel Prize winner Dr. Amartya Sen pointed out ten years ago, worldwide hunger does not result from insufficient food production but rather from low income and unemployment, which limit the access to food. Lack of infrastructure, weak institutions and misguided public policies also contribute to the unequal distribution of food around the world.

Blame petroleum, not agricultural prices. The report ignores the fact that food prices have increased far less than petroleum prices. Over the last three years, when biofuels gained momentum, agricultural prices have gone up by 7% while oil prices jumped by more than 70%. In fact, the sharp increase in oil prices is largely responsible for the increase in food prices. Moreover, higher oil prices are the result of rising demand in fast growing emerging countries like China and India, adverse climatic conditions in some regions, and speculation on international markets. Contrary to the interim report, higher agricultural prices provide additional income to farmers in developed and developing countries negatively affected by low international prices during many years.

Ethanol: Enormous subsidies for the energy industry. Environmental degradation. Higher food prices for everybody. Greater risk of hunger. What's not to like?

Posted by Jay Hancock at 12:28 PM | Permalink | Comments (1)
        

Hey, I thought NAFTA outlawed this! On my desk I have Alan Greenspan's new book, The Age of Turbulence. (Not really. Greenspan will be remembered as a great central banker partly because he was lucky enough to preside over The Age of Moderation -- when communism went away, inflation died, productivity boomed and recessions practically became extinct. But I digress.) On the cover flap is the price -- or I should say, prices: "U.S. $35.00, Canada, $43.50."

For almost forever, U.S. publishers have charged Canadian book buyers more in Canadian dollars than they charged U.S. book buyers in U.S. dollars. Why? The Canadian dollar was always worth much less than the greenback, and the price on the dust jackets reflected this. Now, of course, the Canadian dollar is worth MORE than the U.S. dollar. Takes about $1.10 U.S. to buy a Loonie. But the traditional literary price differential remains. Now, reports the Toronto Globe & Mail, book purchasers, normally a docile lot, are rebelling.

Ever since our dollar achieved exchange parity with the United States on Sept. 20, “books have been under the microscope,” notes Yvonne Hunter, director of marketing and publicity for Penguin Group, one of the country's biggest publishers. And the consumer hasn't liked what he's been seeing. His ire has focused on the discrepancy between what a Canadian pays for an imported, American-made book in this country and what an American consumer pays for that same title, with the two different prices printed right there on the book flap for all to see. The bookstore serves as the conduit for what publishing historian and novelist Roy MacSkimming calls “this predilection for feeling ripped-off. There's been an attack of sticker envy out there.”

The gap between the two prices printed on the inside flap of a U.S. book's dust jacket has been steadily narrowing in the last five years and drastically so in just the last three weeks as the industry heads into the critical holiday gift-buying season – a time that, in some years, has accounted for as much as 65 per cent of the industry's total annual revenue. As one observer remarked earlier this week, “we're saying to the consumer, ‘Don't assume because the last time you went into a store and the prices hadn't been reduced that you should just give up on it and shop south [either by travelling to the U.S. or shopping on-line] or something like that.' ”

If the cheap dollar increases foreign demand for American scribes -- if they become for literature what Bangalore is for software coding -- I'm all for it. Maybe entrepreneurs can make hay out of this: Trucks smuggling cheap Canadian drugs to the United States can be filled with cheap American books for the trip back. (Note to pedants: Yes, I know that a cross-border pricing mismatch is not the same as an export tariff. But it sorta is.)

Posted by Jay Hancock at 10:52 AM | Permalink | Comments (0)
        

Read Mike Dresser's great column today. He'll tell you about non-I-95 backroads that'll get you to New Jersey or New York. Those who follow his advice, says Dresser, will be spared "time, money, aggravation, ugliness and Delaware." Gee, I thought Mike was a good writer. Surely he knows those last two terms are redundant.

Posted by Jay Hancock at 9:56 AM | Permalink | Comments (3)
        

I am outsourcing this item to colleague Jamie Smith Hopkins, who has some interesting reading on how the real estate industry is blaming newspapers for the housing slump because they are -- OMG! -- reporting on it. Her posts are here and here.

Clearly, the homeowning and homebuying public would have been much better served by listening to David Lereah, chief economist for the National Association of Realtors. Lereah, author of Are You Missing the Real Estate Boom?: The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade - And How to Profit From Them (2005), was so wrong so often about housing trends that he inspired a whole blog dedicated to tracking his goofs. Lereah is no longer with the Realtors. This chart from the blog, via InvesTech Research, is very interesting. It tracks Lereah puffery alongside what was going on in housing stocks. 

Posted by Jay Hancock at 1:44 PM | Permalink | Comments (0)
        

I am shocked at the overwhelmingly positive response to yesterday's column favoring the legalization of herion and cocaine. More emails:

-- In yesterdays SUN you said it all! This column should be published in every big city newspaper. It's time we all faced the truth. The drug problem will only get worse unless we change the way we look at how it infects our cities and the failure on the "war" on drugs which is going as badly as the war in Iraq.

-- I agree wholeheartedly with your thoughts on legalizing drugs. The violence and death related to the profits of the drug trade affect the whole world in many terrible ways. I'd love to see the drug lords' valuable inventories become worthless. The billions spent on fighting the drug trade could be put to better use.

-- I agree with you 100%. Legalize drugs and eliminate the crime. Unfortunately, only you and I and a few others understand this. And, it will probably never happen because the big shots, the drug lords, don’t want to be put out of business. They have the money and money buys a lot of politicians and lawmakers. Arresting the guy on the street corner is akin to taking a bucket of water out of the ocean. It’s the “big guys” who import and distribute the stuff that are the problem. Consider Amsterdam where you can buy drugs most anywhere and also carry a gun. They have a very very low crime rate. Never-the-less, keep up the good work and try to get the message out.

-- My congratulations for an excellent column on Nov 7th. As a libertarian, I think you said what needs to be said by many people, but you said it very well.
In my opinion, Kurt Schmoke lacked courage. He should have stuck to his gunsinstead of backing down. many of us would have supported him.

-- I couldn't agree more. A few months ago, a editorlist in the Baltimore Sun wrote about the money states could make by legalizing Marijuana, taxing the growers, along with raking in taxes of selling it,
and the numbers where unbelievable. I wrote to my Senator who represents the county district I reside, and he agrees to the point where he may introduce a bill to legalize the weed. Start small and move forward each year if it takes that long. I support the legalization of all drugs, put the dispensary in the hands of the States, but provide substantial
recovery sites for those who choose to stop. It's a well know fact that the Federal Government has wasted billion and billions of tax money on "War on Drugs". It could have paid for 5 Iraqi wars easily. Had this state taken the lead on this years ago, we wouldn't have the 1.7 million dollar deficient.

-- Have enjoyed your column for some time, but have not felt prompted to write until today. I am so pleased to see someone take this position publicly. I have heard and read enough circular conversations on this issue to be quite certain that no one has anything new to offer. As you pointed out, has anyone got any better ideas? Brace yourself for the flak, but I sincerely hope you'll get someone's attention in the political arena

-- How long do you think it will take people to realize that everything you are saying is true? We have been trying punishment and incarceration for what--50 years--100 years? Has it ever worked? You would think at some point the powers that be would see the light. And you know what? I am not at all sure it would lead to new addicts. After all, many people become pushers to pay for their addiction; it would probably take sellers off the streets. And as for the message to kids--they are already inundated with a 100 ways to go "bad," and this wouldn't push anyone over the edge who wasn't so inclined.

-- This is a tremendous column. 100% dead on point. According to my U.S. Illicit Drug Market Value Calculator the city of Baltimore has an annual consumer demand for intoxicant drugs worth between $ 306,843,876 and $ 463,422,644 depending on the estimates used.
http://aleftindependent.blogspot.com/2007/08/us-illicit-drug-market-
value-calculator.html Now let me respond to the questions that you pose. "Would it lead to new addicts? Of course. Would it send a bad message to kids? Yep. Would it cause problems we can't envisage? Probably. And it would be an enormous improvement."

Legalization or regulation of addictive substances in a clinical dispensary setting similar to the heroin prescription clinics being used widely in Europe would not increase addiction. It will stabilize the current population and start to age it out while better discouraging new addiction.

Most addiction starts among young people encouraged by already addicted peers who need to sell to support their addiction. Getting these addicts into maintenance or rehab reduce their marketing to new curious young users which would reduce new addicts in that age group.
Also, the clinical setting would serve to change the character of addiction from rebel status to sick people status. This is what has happened in Switzerland according to the official Swiss information service reports about their heroin maintenance program.

Posted by Jay Hancock at 11:21 AM | Permalink | Comments (11)
        

David Walker, comptroller general of the United States and chief of the U.S. Accountability Office, is demanding accountability again. I wrote about his Fiscal Wake Up Tour last week, in which he and experts on both sides of the political spectrum came to Baltimore to implore the country to wake up and restore fiscal sanity. Yesterday, just in tiime for the U.S. national debt odometer to click past $9 trillion, GAO issued its annual audit of the U.S. accounts, which contains more of the same. It's worth repeating. And repeating and repeating.

Auditors such as the GAO or PriceWaterhouseCoopers are paid to come in, comb through the books and make sure everything is recorded accurately and presented fairly. But they have another job, which is to sound alarms when the books show that the health of the enterprise is in danger. In the private sector this is called the "going concern" section, and an auditor's finding that a business may not have the wherewithal to be a going concern is very serious. Indeed, it is an implicit warning of bankruptcy. Here is what we might consider the "going concern" section of GAO's audit:

... Our nation's real challenge is not short-term deficits, rather, it's the U.S. government's impending longer-term structural deficits and related fiscal burdens. Indeed, what we call the longer-term fiscal challenge is not in the distant future. The first baby boomers become eligible for early retirement under Social Security on January 1, 2008 -- only two months from now - and for Medicare benefits just 3 years later...

Simply put, our nation is on an imprudent and unsustainable long-term fiscal path that is getting worse with the passage of time. Absent significant changes on the spending and/or revenue sides of the budget, these long-term deficits will encumber a growing share of federal resources and test the capacity of current and future generations to afford both today's and tomorrow's commitments...

Given the size of the projected imbalance, the U.S. government will not be able to grow its way out of this problem; tough choices will be required.

Posted by Jay Hancock at 9:45 AM | Permalink | Comments (0)
        

Didn't have room for this in the column. These statements by the famous libertarian economist were written years ago, when the war on drugs was discredited -- but not nearly as discredited as it is now:

"In our private lives, if we try something and it goes awry, we don't just continue and do it on a bigger and bigger scale. We may for a while, but sooner or later we stop and change. Why does not the same thing happen in government's policy?"

And: If drugs are legalized...

"I see America with half the number of prisons, half the number of prisoners, ten thousand fewer homicides a year, inner cities in which there's a chance for these poor people to live without being afraid for their lives, citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug, being able to get drugs for which they're sure of the quality. You know, the same thing happened under prohibition of alcohol as is happening now.

"Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up."

Posted by Jay Hancock at 2:20 PM | Permalink | Comments (1)
        

I expected to get blasted for advocating, in today's column, that government fight drug dealers by taking their business away from them and selling cocaine and heroin legally through licensed clinics. So far I haven't. Almost all the emails have been positive. A sampling:

-- After reading The Sun's front page article Sunday on the tragedy of women addicts contracting diseases from prostitution, I came to the same conclusion myself! Not only would legalizing drugs solve many crime and health issues, but it would provide a contact point for recovery and rehabilitation of addicts.

-- I enjoyed and totally agree with your column in today's paper. Thanks for putting it out there.
It is too bad that such a plan would never be implemented in Baltimore or anywhere in the US.
Taking the profit out of the drug trade seems to be the such an obvious solution.

-- That was an excellent article on drug policy. It reminds me of Prohibition. About 1920, the American voters changed the U.S. Constitution to prohibit the manufacture, distribution and sale of alcoholic beverages. The American voters repealed this 18th amendment about 1933 by adopting the 21st amendment. The "Roaring Twenties" were fueled by bootleg booze, organized crime, violence over turf and corrupt local police and judges. This outcome was very similar to the War on Drugs. I think Nixon started this latest war. It has gone on for over thirty years with no end in sight. Thanks again for your article.

-- OK Jay, Now it’s your turn to get beat up, relax I’ll do it painlessly. The legalization solution may appear good and in fact I would call it a worst case scenario one akin to dropping th A bomb on Japan. You know anything about the methadone program, like putting humans out to pasture. You were on the verge of figuring out the solution yourself in your column today but like all others are blind to it. Solution is so simple. I guess your solution to the hypothetical ant problem if it were your house would to be dedicate one room for the ants, give them whatever food source they liked and live with it.

-- I agree fully with your ideas and reasoning. Keep prodding our politicians to stop fiddling while the city burns! I commend your colleague Dan Rodericks for his support of recovering addicts. I wish politicians, as did former Mayor Schmoke, had the courage to admit that our drug prohibition policy since 1918 is a failure and the black market it spawns results in the devastation that you described. When I raise the topic with my MD delegate, he cites his efforts to increase drug treatment slots. I commend that, but ask him to address the root cause. Perhaps he will once he decides not to seek reelection.

-- I agree with everything Hancock wrote except "Would it lead to new addicts? Of course." I submit that re-legalizing all drugs would lead to substantially fewer drug addicts. If all types of recreational drugs were re-legalized and sold in regulated, controlled and taxed business establishments for pennies per dose, our overall crime rate would decline dramatically and our public safety would increase substantially. And, I believe, that our overall drug usage rates would decline substantially. That's because drug dealers as we know them today would disappear for economic reasons. The first time almost all drug users use a particular drug, they don't buy it -- either a friend or drug dealer gives it to them. Most retail drug dealers of hard drugs are addicts themselves. They sell drugs to finance their own drug habit and recruit new users by offering free samples to potential customers. With the end of drug prohibition this practice would end.

-- Congratulations on a truly excellent column this morning. I’m sure the drug warriors are out in force already with their non sequiturs and fallacies on full display. But you’re right, and I think an increasing number of people are recognizing that.

-- I want to commend you for your November 7, 2007 column, Let Adam Smith be the drug pusher. I think that it's absolutely on target. We can only hope that our nation will come to it's senses some day. Here's a theory about why the majority of our elected officials won't touch your proposal. It does not directly affect their families and their neighborhoods. I know that drug abuse affects people of all colors. However, proportionately, the illegal drug trade hits African-American and Hispanic people with far more vengeance. If white, suburban people and neighborhoods were as hard hit as inner-city Baltimore, elected officials would be much more open to your proposal. Let's keep talking about this and stay optimistic. I can remember when airline passengers were given four-packs of free cigarettes during their flights. Now, smoking is banned in the air and in most workplaces. We've come a long way. This has been a huge change, and we can hope that attitudes on legalizing drugs will make a similar leap.

-- Thank you for printing the article about drugs in todays paper. I couldn't agree more and have been advocating the same position for more than 25 years. Unfortunately most people don't agree and I know you will get a ton of mail telling you how naive or silly or stupid your idea is. I wouldn't be surprised if you even got a death threat or two. Stupid people act in stupid ways and you will certainly get a taste of it today. But, I want you to know that some of us see things the way they are, and appreciate others like yourself who speak the truth.

-- You have put into black and white what I and many of my friends have been saying for years. There would be other benefits to making drugs legal, such as a major impact on health with fewer overdoses and deaths due to poor quality or adulterated drugs and a decrease in needle borne diseases such as AIDS and hepatitis.
But the major reason your idea will fail is because of the damage to those who now profit so greatly from "the war on drugs". I am not talking about the drug dealers but the politicians and lawyers who depend on keeping this issue alive to keep up their positions and profits. Since all the laws are made by those two entities, the chance of your proposal seeing the light of day is less than nil. You are a brave man to have the temerity to print this in your paper and I commend you for it. I would bet that this e-mail is part of a small minority compared to the storm of protest letters you are going to receive, but please stick to your guns. Finally, a rational idea seeing the light of day.

-- You're absolutely right about legalizing drugs. Here's another reason to do it: the government has no moral right to prohibit drug use by adults. Of course, the punishment for selling drugs to children should be severe. Whether the drug is tobacco, alcohol, or heroin. The government declared the War on Drugs -- admittedly with the support of many citizens -- and it's time to declare an end to it.

-- I’ve been pushing the legalize drugs and get black market out issue for longer than I’ve been in the energy business. I was just discussing it yesterday, in fact. Take the money from legalization and push into education and build a supremely competitive workforce and start attracting international business here. Let’s stop being victims (relying on BRAC to bail us out – another word for government handouts) and make something of value out of our communities and the people here.

Posted by Jay Hancock at 10:58 AM | Permalink | Comments (6)
        

Two weeks ago the Labor Department published final rules for automatic 401(k) plans designed to increase employee savings. Last year the Pension Protection Act allowed employers to automatically enroll workers in 401(k) plans, which allow tax-sheltered retirement savings, often with extra contributions from the employer. But it hadn't ruled yet on what types of investments were suitable. Now it has, and the specifications are right up T. Rowe Price's alley. T. Rowe is one of the leading purveyors of "life cycle" funds that change their investment mix as participants get older. Look for flows into T. Rowe's target retirement funds to increase. Here are the four suitable types of investments for automatic enrollment:

-- A product with a mix of investments that takes into account the individual’s age or retirement date (an example of such a product could be a life-cycle or targeted-retirement-date fund);

-- An investment service that allocates contributions among existing plan options to provide an asset mix that takes into account the individual’s age or retirement date (an example of such a service could be a professionally-managed account);

-- A product with a mix of investments that takes into account the characteristics of the group of employees as a whole, rather than each individual (an example of such a product could be a balanced fund); and

-- A capital preservation product for only the first 120 days of participation (an option for plan sponsors wishing to simplify administration if workers opt-out of participation before incurring an additional tax).

Posted by Jay Hancock at 11:16 AM | Permalink | Comments (1)
        

Lobbyists and company owners must be high-fiving this morning over the risible quotes they cooked up to argue why Maryland shouldn't enter the 21st century by levying a sales tax on service products as well as goods. Bereano, of course, is the king, but there are other beuts in Laura Smitherman's story this morning.

Gym owner Lynne Brick, on the proposal to tax health clubs: "People are trying to save their own lives, and we want to tax them for it?"

Bereano called a potential tax on tattoo parlors "a culture tax" and said that "in the time of Adam and Eve" there were tattoos, or body piercings, or something.

Bereano on taxing dating services: "How can you put a tax on love?" (Wasn't that a song by the Knack?)

Bereano on taxing junk food (snacks): "People eat it. You can't just take a segment of food and tax it."

A postcard sent to the legislature: "Dear Elected Officials: If taxing cigarettes deters smoking, what does taxing health club memberships do?" (It PROMOTES smoking, of course.)

Thomas Hucker, a Montgomery County Democrat, wants to tax car rentals. "No one is going to say, 'Sorry, kids, we can't go to Grandma's this year because they raised the sales tax on car rentals.'" No, Del. Hucker, but don't put it past the lobbyists to raise this as a possibility.

Posted by Jay Hancock at 9:40 AM | Permalink | Comments (1)
        

Stock in Baltimore financial house Legg Mason was down more than $4 this morning on the bad news from Citigroup, although it has been steadily recovering. Citi still owns a big chunk of Legg stock, resulting from a deal two years ago in which Citi got Legg's brokers and Legg got Citi's asset-management business. There is concern that the reeling Citi might sell the Legg shares to raise cash. Also, Wachovia downgraded Legg this morning to "underperform."

Posted by Jay Hancock at 12:08 PM | Permalink | Comments (0)
        

No wonder the position of chairman of of Citigroup's executive committee has been called "the best job in the world." Under former Treasury Secretary Robert Rubin it has carried huge prestige, huger pay and -- apparently -- little accountability. Rubin has pulled down more than $100 million from the job and at the same time avoided getting slimed by the mortgage meltdown that just claimed Citi CEO and Chairman Charles Prince. Rubin's role at the banking company was only "advisory," we're told. He's not as close to the markets as he used to be. Well, what the heck were shareholders paying him for, anyway?

Prince is now out and Rubin is in as chairman while the company looks for a new CEO. But Rubin bears some of the blame for $14 billion -- $17 billion bath that Citi shareholders are taking. He was a big supporter of Prince. Less than a month ago Rubin told The New York Times: ''Some people wilt under that pressure and some people rise to it. Chuck [Prince] has handled himself very well. It has not been easy. He has kept his focus with intellectual rigor and did what he needed to do." In the same interview, Rubin said: ''I would give you long odds -- I would bet you $100 that he will be the C.E.O. at the annual meeting five years from now, and as long past that as he wants to be."

So now Rubin swoops in and again gets to play the savior, as he did when he was Treasury secretary with the Mexican debt crisis, the 1997-1998 emerging markets meltdown and the Long-Term Capital Management debacle. Except this time, he had more than a little bit to do with creating the crisis he's trying to fix.

Posted by Jay Hancock at 10:15 AM | Permalink | Comments (0)
        

Unlike the price of electricity, the rate BGE homeowners pay for natural gas floats each month according to the wholesale market. For electricity BGE buys all its juice for many months and so changes the price less often. For gas BGE passes the market price to households each month. The price BGE customers will be paying for November natural gas was posted today: 92.08 cents per therm, up 8 percent from the October price.

Natural gas prices always rise in the winter with heating demand. They'll probably go up some more in December unless November is very warm. But they aren't as high now as they were after the Hurricane Katrina shortage, when BGE gas prices hit $1.63.05 per therm (Nov. 2005). Even so, they're higher now than they were at this time in 2006. BGE's price in November 2006 was 72.3 cents per therm. The highest prices got last winter was in January, when they hit $1.03.73 per therm. And I suspect -- but haven't done the research -- that heating with natural gas will still be cheaper than heating with oil this year.

Posted by Jay Hancock at 6:13 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Stephanie Desmon has a good story today about the Food and Drug Administration's consideration of a class of "behind the counter" drugs that now require a doctor's prescription but that would be instead be prescribed by a pharmacist after consultation with with patient. Doctors, which would be cut out of the loop, won't like it. But it would free up some of their time now taken up in basic prescriptions such as birth control pills for consultations in which their expertise could be better put to use. It could improve patient access to certain drugs. And it would make better use of pharmacists, whose training is often also underutilized.

Better customer service. Better use of doctors' and pharmacists' intellectual capital. What's not to like? The problem is that even to prescribe birth control pills or weight-loss drugs properly, you have to sit down and spend time privately with the patient. Pharmacies aren't built to do that now. The alternative -- doing a pro-forma "consultation" over the counter and letting patients buy this new class of drugs the way they buy vitamins -- would violate federal privacy laws and risk overdispensation of drugs. If the FDA goes ahead, it must ensure that pharmacists know their patients and that patients are not harmed. Would all that extra work for the pharmacist take too much time, require appointments, increase administrative costs and re-create all the hassles of seeing a doctor, only under a different name? Maybe. That's another reason the FDA should go slowly.

But maybe the biggest reason is this: It's illegal under federal law for pharmacies to own a medical practice. Such a combination would create incentives to prescribe drugs that make more profit for the pharmacy rather than drugs that are best for the patient. That's why Target and Wal-Mart, for their in-store physician clinics, lease space to independent practices rather than employ the docs. If the FDA approves a behind-the-counter system for pharmacy prescriptions, how could it prevent the profit incentive potentially influencing how pharmacists prescribe? I can't think of any.

Posted by Jay Hancock at 10:40 AM | Permalink | Comments (3)