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August 31, 2010

Cost overruns plague Colorado smart-grid program

This is a small pilot program, not a huge smart-meter rollout like the one planned by Baltimore Gas & Electric. Nevertheless, it seem to show yet again that electric infrastructure rarely comes in on budget. Thanks to Carol Clements for the pointer. From the Associated Press:

The Office of Consumer Counsel, representing customers' interests, says customers shouldn't have to bear all of the overruns.

"The amount being spent has really increased from what was told to consumers initially and the commission. That's what concerns us," said William Levis, director of the office.

Xcel Energy initially estimated it would spend $15.3 million on technologies associated with SmartGridCity, with partners contributing the rest of a project with estimated costs of $100 million.

The utility's own costs are now approaching $45 million, in part due to higher estimates for some costs like installing fiber, and in part due to recategorizing some expenses into SmartGridCity's budget.

PUC staff, Xcel Energy and the Governor's Energy Office have agreed that Xcel wouldn't seek to recover any costs above $44.5 million from customers through electricity rates, but commissioners have to approve the deal. The Office of Consumer Counsel wants to cap the amount recoverable from customers at $27.9 million.

Posted by Jay Hancock at 1:17 PM | | Comments (3)
Categories: BGE/electricity
        

Constellation rival in $1 billion wind-energy deal

In another sign that wind-driven energy is here to stay on a substantial basis, Exelon Corp., a rival of BGE owner Constellation Energy, is expanding its wind-power business. It's buying Deere & Co.'s renewable-energy division for $900 million. (OK, it's not quite a billion dollars. But I couldn't fit $900 million in the headline.)

The deal gives Exelon, a big nuclear operator, like Constellation, 735 megawatts of wind-generation capacity. That's about the capacity of a good-sized nuclear-power reactor. The deal also includes projects in development of twice that amount. Exelon has been marketing wind energy as a wholesaler, including in West Virginia and Pennsylvania, reports the Associated Press.

Constellation, for its part, is now behind Exelon in wind. CEG is getting ready to launch its Criterion wind project in western Maryland. It's 70 megawatts and is projected to cost $140 million.

Posted by Jay Hancock at 10:06 AM | | Comments (0)
Categories: BGE/electricity
        

Social Security is a comfort blanket in a risky world

Yglesias puts his finger on why letting Social Security beneficiaries direct the investments of SS assets is a bad idea. Putting SS funds into the stock market is not necessarily a terrible idea. Letting SS participants pick the investments is:

A large body of research indicates that individuals are not well-equipped to engage in speculative investments, and experience teaches that financial managers are moderately well-equipped to duping people into paying management fees.
Posted by Jay Hancock at 9:25 AM | | Comments (1)
        

Dithering by Obama team will hurt home sales

The worst government policy, any business person can tell you, is uncertainty. Consumers and business owners need reliable information on the future to make informed decisions about buying, hiring, investing and ordering. Finn Kydland and Edward Prescott won the economics Nobel a few years ago because they showed the damage that can result from inconsistent government policies. What's even worse is when government sends mixed signals about its possible intentions to be inconsistent!

That's what the Obama administration is doing with regard to the homebuyer tax credit. The economy is terrible, elections loom and the administration is getting a little frantic. Home sales plunged after the expiration of the last (second) home-sale credit, and now there is talk of reviving it. But offhand discussions of resurrecting the credit will almost certainly make home sales even worse. The credit probably won't be brought back, but the happy talk of doing so is going to make people hold off on buying a home with the expectation of more free money from the government.

Here's HUD Secretary Shawn Donovan on CNN last weekend. I've taken the quotes from Calculated Risk, where the comments of economist Tom Lawler on this issue were posted yesterday:

[Donovan said he was] “very concerned,” and would “do everything we can” to stabilize the shaky housing market. While he said that “it's too early to say after one month of numbers whether the tax credit will be revived or not,” he also said that "we're going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers."

The message from Donovan is: Don't buy that house! Stop! Yesterday White House spokesman Robert Gibbs said bringing back the credit "is not as high on the list as many other things are."

Posted by Jay Hancock at 8:47 AM | | Comments (4)
Categories: Real estate
        

August 30, 2010

Intel's Infineon acquisition a better fit than McAfee

Intel's acquisition of McAfee, the security-software company, might turn out to be a smart deal for $7.7 billion. Its acquisition of the wireless business of Infineon, a German maker of chips for smartphones and laptops, looks like a more compelling deal. Intel has to get on board the mobile-computing bandwagon, and the Infineon deal, announced this morning, will help it do it. Desktops aren't dead, but they aren't the sweet spot of the growth stats, either.

The McAfee buy could turn out well. Cyber-security is another hot piece of the info-tech business and will certainly continue to grow. And Intel intends to weave McAfee into its mobile strategy, aiming the security solutions toward mobile users. But Intel is a semiconductor hardware company at its heart. Privacy and anti-virus programs are not a central part of its mission. Intel has been buying software operations with products that it claims "take advantage of silicon." It'll be interesting to see how it bridges the hardware-software divide, which still very much exists from a marketing and manufacturing standpoint.

Posted by Jay Hancock at 9:11 AM | | Comments (1)
Categories: Technology & Innovation
        

How to tell if the CEO is lying

For many years now the transcripts of conference calls in which CEOs and other executives discuss quarterly profit results have been available on FD Wire (for the Fair Disclosure law that requires corporate information to be distributed evenly to all parties.) Two Stanford researchers analyzed the language in tens of thousands of calls, correlated it with which profit results turned out to be bogus, and teased out the weasel words that signaled fraud, reports The Economist.

If the CEO swears during the conference call (Enron's Jeff Skilling being the most famous example), he might be a liar. If s/he uses superlatives and refers to knowledge that supposedly "everybody" knows, he might be a liar. If he or she speaks in smoothly composed cadences rather than hesitating over the language, s/he is probably speaking from a script that could have been written to fudge and deceive.

The Economist expects mendacious CEOs and their flacks to adjust.

This study should help investors glean valuable new insights from conference calls. Alas, this benefit may diminish over time. The real winners will be public-relations firms, which now know to coach the boss to hesitate more, swear less and avoid excessive expressions of positive emotion. Expect “fantastic” results to become a thing of the past.

Posted by Jay Hancock at 8:30 AM | | Comments (1)
        

August 27, 2010

John Maynard Keynes on the radio

Today's radio yacking with WBAL's Bill Vanko. In which I slip in an allusion to JMK, without naming him. Can you detect it?

UPDATE: More broadcast stuff. This is from MPT talking about the rise of title-insurance shenanigans.

Posted by Jay Hancock at 9:59 AM | | Comments (1)
        

Fannie, Freddie did not cause the housing crisis

This is an old theme, but it bears repeating when new information is presented. The right keeps blaring that liberals caused the housing bubble by showering money upon poor people through Fannie Mae and Freddie Mac. (And through other channels via CRA requirements, as commenters have noted. Thanks Josh.) So it must be repeatedly countered. I have no love for Fannie/Fred. Almost nobody other than the Wall Street Journal's editorial page was more critical of them than me in the years leading up to the disaster. They were ghastly government/private mutants, with taxpayers taking on all the risk and shareholders reaping incredible profits until the end.

But the fact is that they played a relatively minor role in the subprime bubble. They got into subprime only after they started losing market share to Wall Street, which was leading the subprime and Alt-A parade. They never had more than 13 20 percent of their originations in subprime. The table below shows the action. It's from a new "autopsy" of Fannie and Fred, of which the NYT's Economix blog has a good summary.

The vast majority of loan defaults have not been made by the poor. And Fannie & Fred weren't lending much to low-income folks anyway.

UPDATE: For the complete demolition of the "Fan/Fred caused the bubble" argument see the blog Big Picture by Barry Ritholtz, who's hardly an apologist for soft-headed liberals. See Ritholtz posts here and here and especially here. Then read his book, Bailout Nation FFmortgages.jpg

Posted by Jay Hancock at 8:17 AM | | Comments (19)
Categories: The Great Recession
        

August 26, 2010

Savings & info: How smart meters should work

Many of you are asking how BGE's smart meters will work in practice. As reported, the Public Service Commission approved BGE's modified smart-grid proposal and BGE has agreed to proceed. We'll see how it all works out. But the intentions are good: to reduce the use of expensive, polluting electricity and to reduce pressure on the grid and the need to build costly new power plants.

It'll take several years for BGE to replace existing dumb meters with computerized ones. It's still unclear exactly which of numerous possibilities for digital engineering and information management the meters will offer. But at a minimum the meters will a) instantly tell BGE about power outages b) give BGE billing information, eliminating the need for meter readers c) Deliver much more detailed information about a household's energy use.

That last one is very open ended, but it's also an easy prediction. At the moment each household basically gets only one piece of electricity-use data only 12 times a year: monthly kilowatt-hour consumption. Smart meters should be able to tell you not just daily but hourly electricity use, although it's too early to tell exactly how BGE will enable them. You'll have a "Smart Energy Manager" Web portal that ties into your meter and tells you what's going on. BGE promises that the meters will be upgradable and scalable, that the utility will be able to remotely improve software and, if needed, enable new apps "such as electric vehicles, customer energy portrals, mobile device applications, distribution automation and distributed solar and wind generation."

Most importantly, the meters are supposed to give BGE the information it needs to pay rebates to customers who cut kilowatt use at times of peak demand. Peak electricity is outrageously expensive, and the idea is to get people to scale back for a few hours on hot summer days -- on their air conditioning, sure, but also other stuff such as computers, pool pumps, dehumidifiers and so forth. The smart meters will track your normal energy use. Then, when

super-hot weather is forecast, BGE will let customers know by 6 p.m. the previous day that tomorrow is a "critical event day" and that cutting kilowatts will earn you rebates.

For the pilot program BGE notified people of critical days using a green orb. But it could use emails, automatic phone calls, TV and radio ads or almost anything. Then, the next day, you try to save energy during peak hours. You set the AC temperature a little higher, or if you won't be home, turn it off. You avoid running the washer & dryer and dishwasher. You wait to use the treadmill until evening. From the computerized meters BGE can detect your energy reduction from the normal baseline. You get rebates on your bill based on how much you cut back. The more you reduce, the bigger the rebates. Those who reduce kilowatt use get rebates; those who do nothing, BGE says, won't be penalized.

Posted by Jay Hancock at 6:00 AM | | Comments (25)
Categories: BGE/electricity
        

August 25, 2010

Nate Silver's NYT blog debuts

A great addition to the Times blogohood.

Posted by Jay Hancock at 12:56 PM | | Comments (0)
        

Pay TV subscriptions fall for first time ever

From CNET:

In the second quarter of 2010 paid TV subscriptions fell for the first time ever, with cable taking the biggest hit, according to the research firm SNL Kagan.

A weak U.S. economy is the main reason the firm cited for the dip in subscriptions, as more consumers look for ways to cut down on monthly expenses. Last year's digital TV conversion may have also played a role in lower growth rates with some people canceling service after promotions on new digital TV packages ran out, the firm said.

The entire paid TV industry, which includes cable, satellite, and phone companies, lost 216,000 customers in the second quarter. A year ago, the industry gained 378,000 new customers, according to SNL Kagan. Six of the eight largest U.S. cable operators reported their worst quarterly video subscriber losses.

Surely the recession has much to do with this. But, as CNET's Marguerite Reardon notes, part of what's going on is people switching to Hulu and other Net-based video services. That allows them to choose what they want to watch for free and not pay for a 400 garbage channels that they never watch. I wonder whether, in response to lost eyeballs to "over-the-top" video, cable companies will rethink their opposition to a la carte pricing. I would be happy to pay Verizon FiOS more than I pay now if more high-quality channels and networks were available and I could pick and choose among them and not have to pay for all the junk.

Posted by Jay Hancock at 11:24 AM | | Comments (3)
Categories: Media
        

Realtors' home-sales spin continues

I have heard nobody impugning the monthly data on home sales from the National Association of Realtors. And the July stats announced yesterday were miserable enough to vouch for the research's integrity. If ever the realtors were tempted to fudge the numbers, it might have been now. As usual, however, the commentary from realtor officials continues to be wildly optimistic.

NAR chief economist Lawrence Yun says "a soft sales pace likely will continue for a few additional months," according to the press release. (Try "years," Dr. Yun.) Then he goes on to say existing-home sales from last month don't look so bad when you compare them with historical averages -- including from 20 and 30 years ago, when the population was far smaller!

I'm surprised home sales last month were as strong as they turned out to be. The tax credits are gone, unemployment is near 10 percent, and yet 389,000 homes still changed hands. (That's the raw number, not the decline in the seasonally adjusted annual rate that you get from most news stories. The actual number of homes sold should be included in the stories, IMHO.)

UPDATE: Barry Ritholtz, as is often the case, is a bit more caustic:

Everyone knew that Existing Home Sales were going to stink the joint up today — but I just had to laugh when I read the NAR commentary; The headline along was priceless: July Existing-Home Sales Fall as Expected but Prices Rise. Too bad they don’t cover other events: “Lincoln attends theater opening; leaves early with headache.”
Posted by Jay Hancock at 9:07 AM | | Comments (3)
Categories: The Great Recession
        

August 23, 2010

Tell me I'm awesome every single day -- I'll pay you

This is the opposite of the method employed by the shrink Mortiz in the film Local Hero, who tried to resolve the Burt Lancaster oil tycoon character's issues by telling him what a piece of cr*p he was. (He was "demonized and vilified," as Tony Hayward would say.) For $10 a month, Awesomeness Reminders will phone you every day and tell you of your limitless awesomeness. And gullibility, I suppose.

With AwesomenessReminders, a real person will call you every day to tell you how much you rock. If you're not around, we will leave you a voicemail. Our founder, Zack Burt, has studied psychology in-depth at the university level and found that social reinforcement is critical to maintaining our "frames", also known as our "point of view". Getting positive social feedback, via a daily reminder call, is instrumental to progress. Experts agree. This study from Wake Forest University also shows that social feedback has clear effects on self-esteem, even if individuals claim that they are unaffected by social feedback.
Posted by Jay Hancock at 9:17 AM | | Comments (4)
        

August 20, 2010

Smart meters: The theory

Here are WBAL's Bill Vanko and me talking on the radio about the approval of BGE's smart-meter project. We also discuss the possible sale of and layoffs at the Sparrows Point steel mill.

Posted by Jay Hancock at 11:10 AM | | Comments (0)
Categories: BGE/electricity
        

Maryland sales tax: Low compared with other states

The centerpiece of former Gov. Robert L. Ehrlich's economic platform is his attempt to regain the governorship is cutting Maryland's sale tax from 6 percent to 5 percent. Gov. Martin O'Malley, you'll recall, raised it from 5 percent to 6 percent. But a study by the Tax Foundation shows that, when ranked nationally, and when local sales taxes are taken into account, Maryland's sales tax doesn't look all that high.

In "low-tax" Tennessee, for example, the weighted average local sales tax brings the statewide rate up past 9 percent -- highest in the country. By this measure Texas, New York, Arkansas, Arizona and many other states -- a total of 32 -- all have higher sales taxes than Maryland. To repeat, the Tax Foundation didn't cherry-pick the highest local rates from each state. It produced an average rate for a whole state, weighted according to how much retail activity took place in a locality.

Here's Sunday's column on why Ehrlich should favor cutting Maryland's income tax instead.

Posted by Jay Hancock at 8:22 AM | | Comments (17)
Categories: Taxes
        

August 19, 2010

Ralph Lauren takes crass commercialism to new low

s-RL-GANG-large.jpg This makes you want to puke. A huge banner ad across the top of the NYT's home page today shows an adorable little girl clad in a WASPy, faux-period outfit including a cable-knit sweater and an artful-dodger cap with a pheasant feather jauntily sticking out. Ralph Lauren presents The First Shoppable Children's Storybook RL GANG, says the copy.

The WSJ tells us:

"Harry Connick Jr. narrates a story of eight tots as they embark on their first day of school. Since it's never too early to teach children to shop online, young readers will also be able to click and purchase fall pieces, including the ones worn by characters in the story."
I see no difference between this and ads to sell sugary junk cereal on kids' TV shows. This may be worse because it corrupts the magical experience of juvenile reading. You can buy "Willow's" cable-knit sweater-jacket for $250. Unless, of course, you're one of the 10 percent of Americans who is unemployed.
Posted by Jay Hancock at 9:22 AM | | Comments (4)
Categories: Marketing
        

Fear, loathing and smart meters

Our Monday coverage of the decision to go forward with "smart," computerized electricity meters for BGE customers got a lot of reaction, much of it negative toward smart meters. This is not necessarily representative. People with complaints are usually the ones who pipe up; those who are glad or don't care don't take the trouble to respond.

Still, there seems to be a significant amount of skepticism out there as to whether BGE's new meters will be a good thing. There was a lot of "big brother is getting even more intrusive" reaction, although one could argue that smart meters will eventually give you more, not less, personal control over your energy. Many of you have also asked: Please tell us again, how exactly will smart meters work? I promise I'll get to that once I get a free moment or two.

Meanwhile, here's a sampling of reactions from my email and from blog comments:

So let me get this straight. BGE customers will pay for the installation of meters that will allow BGE to charge us more for electricity at times when we need it most, so that we can save money on our electricity by turning off our air conditioners during this time. Sorry, but that doesn't sound like a good deal to me. I don't need a "smart" meter to know how much electricity I'm using - I can hear my air conditioner running. "Smart" meters are a great deal for BGE and a lousy deal for BGE customers.

And:

I object to the mandatory installation and subsequent charge of these units, because I resent the implication that I'm too stupid to control my own decision about when to use electricity in my home. But even more important is the very real possibility, that at some point in the future BGE would decide for me, by way of the "Smart Meter" when and how much electricity I am entitled to receive at any given moment. When this issue first surfaced, I notified BGE that I did not wish to participate in their program, and was assured that there would be no installation at my home. I presently receive my "juice" from WGE. Competition MUST be a primary consideration with this utility.

And:

I can't believe that BGE has suddenly morphed into a benefactor of the energy consumming public with this shiny new Smart Meter experiment. They must figure on making a ton of money eventually. Why do I feel that "Big Brother" will soon be watching over our electrical useage.

And:

BGE (Constellation) customers who are interested in conserving energy (money) must resort to a proactive alternative life style rather than reacting to a meter reading. A customer's monthly bill's KWH usage comparison for 2 consecutive years is a true "free" result of effective conservation. (It is also an unavoidable indication of a trend) Very few people will run to a meter every time they light a light, plug in an appliance or change the thermostat to determine the energy increase or decrease.Instead of advocting energy conservation, the Constellation executives are proposing an unnecessary expense to consumers and a very poor use of stimulus money.

And:

People know the plan is to cut their power at peak times, and they know power to wealthy people will never be cut, and they know that cuts will fall heaviest on the most vulnerable, yet they know everyone's job is dependent on that power which will put them at greater disadvantage to the wealthy. People do not want wealthy-people, utility company investors, or foreign owners in charge of their power switch. Smart meter brings all three.

And:

Anybody that swallows the bunk that BGE is installing "smart meters" for the consumer's benefit aren't paying attention. This is about control. They will decide when you can use lights, heat and air. Just more "Big Brother".
Posted by Jay Hancock at 6:00 AM | | Comments (9)
Categories: BGE/electricity
        

August 17, 2010

The guy who predicted the iPhone 100 years ago

Tyler Cowen blogs on an essay written by Robert Stoss in 1910, predicting what the world would look like in 100 years.

In 1910 Stoss published an essay called "The Wireless Century," intending to predict the world of 2010. In this world everyone carries around a "wireless telegraph" which:

1. Serves as a telephone, the whole world over.

2. Either rings or vibrates in your pocket.

3. Can transmit any musical recording or performance with perfect clarity.

4. Can allow people to send each other photographs, across the entire world.

Cowen finds a total of 15 "wireless telegraph" apps that are basically what can be done with a smart phone or iPad. Read them all here.

Posted by Jay Hancock at 9:28 AM | | Comments (0)
Categories: Technology & Innovation
        

Mann Bracken loses collection-agency license

This was only a matter of time, but Maryland-based law firm Mann Bracken, which in its heyday was perhaps the biggest debt-collection agency in the country, had its collection license formally yanked by DLLR last week. For all practical purposes Mann Bracken has been defunct since January.

Mann Bracken hit the financial skids after the arbitration process it used to adjudicate debt disputes was shut down. In surrendering its license, Mann Bracken admitted "false or misleading representations and unfair practices" as well as "inaccessibility to the public, to the Agency, to the courts, and to opposing parties and counsel."

Mann Bracken is dead, but the thousands of cases it handled live on. In June The Baltimore Sun reported:

Mailed payments from delinquent debtors are still being routed to Mann Bracken - months after the Rockville debt-collection law firm collapsed and shut its doors.

Figuring out who should get the money, garnisheed from the wages of people across the country, is one of the challenges facing the receiver appointed to oversee the firm's unwinding. Mann Bracken has opted to be placed into receivership by the Montgomery County Circuit Court, a seldom-used alternative to bankruptcy.

Six months after the firm unraveled, Maryland's courts are still trying to sort out Mann Bracken's cases against debtors, claims against the firm are multiplying, and more lawsuits are in the works. The firm imploded in January after the spinoff company handling its support work toppled into Chapter 7 bankruptcy, cutting the law firm off from the computerized files it needed to function.

Posted by Jay Hancock at 9:11 AM | | Comments (2)
        

Sun editorial: Smart meters is smart policy

The Sun's editorialists weigh in on the BGE smart-meter decision:

But for all the contentiousness that the smart meter decision evoked in recent weeks, it’s still not clear what effect the PSC’s changes will have. The major sticking point was over how to pay for meters. That will still ultimately be the obligation of ratepayers, but BGE won’t be reimbursed for several years, and only as part of the PSC-supervised rate-setting process.

That means that the utility will have to borrow money and rack up a potential $100 million in financing charges. Instead of a monthly charge of 28 cents in the near term, customers may see a much larger tab put on their bills in 2014 or 2015 (perhaps as much as $4, according to one estimate).

Nevertheless, the fee should pale compared to the savings smart meters will bring — at least if BGE’s pilot program is any guide. For all the fuss the issue of cost-recovering generated, it could turn out to be little more than a forgotten footnote in the early development of a smart energy grid.

Posted by Jay Hancock at 8:41 AM | | Comments (3)
Categories: BGE/electricity
        

August 16, 2010

BGE says "yes" to smart electricity meters

So BGE says "yes" to the smart grid. Today was the deadline for a decision -- when the Energy Department said it had to pull the trigger on $200 million in stimulus money. BGE posted its intention to proceed with the $800 million investment on its Web site this morning.

Late Friday the Public Service Commission approved BGE's smart-grid application -- but under a condition BGE said repeatedly it would never accept. The PSC wanted to reimburse BGE for the computerized meters the way it has paid for utility infrastructure for decades -- by paying BGE back, over a number of years, based on the size of the investment, a reasonable return on capital and the prudence with which BGE carries it out. BGE wanted a guaranteed, accelerated payback outside the normal regulatory process.

On Sunday I wrote that, if BGE really thought the project was as good as it claimed, it would go forward regardless. If smart meters will be even close to the extravagant claims made for them, they'll be a win-win for everybody -- whatever the reimbursement mechanism. BGE's decision to go forward implies they believe smart meters are as good as they say.

From BGE's Web site:

Baltimore Gas and Electric Company to Proceed with Smart Grid Implementation BGE today announced that it will move forward with implementation of smart grid throughout its Central Maryland service territory. "Following the Maryland Public Service Commission's approval of our project this past Friday, BGE is pleased to move forward with our ambitious smart grid program and deliver the significant transformational benefits of smart grid to each of our 1.2 million customers," said Kenneth W. DeFontes Jr., president and chief executive officer of BGE.

"Those benefits include at least $2.5 billion worth of savings for BGE customers over the life of the project, as well as major new enhancements in customer service and reliability. In addition, BGE will be able to take advantage of $200 million that the U.S. Department of Energy awarded BGE for its innovative program, reducing the cost of the project for BGE's residential customers by 80 percent."


Posted by Jay Hancock at 9:52 AM | | Comments (5)
Categories: BGE/electricity
        

August 13, 2010

Nucor would have been a good owner for Sparrows

Andrea Walker reports that Sparrows Point, the big steel mill in Baltimore County, may change hands again. The trades are reporting and the Steelworkers are confirming that present owner Severstal send out bid packets for its U.S. assets. Last month Nucor CEO Dan Dimicco was asked by an analyst about buying the plant.

Q. Okay. Have you looked at the potential alternative instead of building -- that of buying Sparrows Point, which has one of the largest furnace on a deepwater port and also would take out 3.5 tons of capacity in the industry as well?

Dimicco: Certainly making a very good point, Michael, about the Sparrows Point facility in terms of it being on the deepwater port, pointed out a couple of the positives. There are a host of negatives as well and while we have looked at that, I will tell you over the years we have looked at that, but as you know, it's presented itself on numerous occasions, we don't believe that would be the best way to go. If we are to move forward as we plan on with an iron project in Louisiana.

Sparrows' integrated steelmaking (they smelt the iron from ore) and port would have blended well with Nucor's operations, which are dominated by minimills that melt scrap. For Nucor, one of the "negatives" cited by Dimicco is the presence of the United Steelworkers. None of Nucor's plants is unionized.

Posted by Jay Hancock at 8:55 AM | | Comments (1)
Categories: Manufacturing
        

August 12, 2010

Is BGE's air-conditioning shutoff worth the reward?

Like thousands of Baltimore Gas & Electric households, we signed up for BGE's "Peak Rewards" program, in which they pay rebates for being able to shut down your air conditioning on really hot, high-demand days. Like Wednesday. And Tuesday.

BGE "cycled" my AC for almost five hours on Tuesday and for about three hours yesterday, according to data for my account on their Web site. I signed up for "50 percent" cycling, so during those periods BGE was supposed to run my AC compressor for only half the time that it normally would have run.

Yesterday was my third cycling episode of the summer. The other was July 6, near the start of the heat wave, when the AC was cycled for about four hours. Given the excessive temperatures, I was wondering when the utility would start to shut me down. By temporarily turning off the AC on really hot days, BGE saves energy and saves money by not having to buy megawatts when they are at their very most expensive -- from around 1 p.m. to 7 p.m. They pass part of the savings to you in the form of annual credits of between $50 and $200 depending on how much you let them mess with your cooling and whether it's your first year in the program.

There were no complaints from Hancocks who were in the house yesterday and Tuesday. You can also sign up for 100 percent or 75 percent cycling, which yield greater rebates. With those programs I imagine there is more discomfort. Sharon, who left this comment on the blog, was less than happy about her Peak Rewards experience yesterday:

It is over 98 degrees outside and "peak reward savings" just kicked in. It's 80 degrees in my apartment with no A/C running. Why "savings" at the worst part of the day -- when the beating sun is at its peak? I've made mistakes in my life, but signing up for this is really at the top of my list.
Posted by Jay Hancock at 6:00 AM | | Comments (53)
Categories: BGE/electricity
        

August 11, 2010

T. Rowe Price chips in to keep Baltimore pools open

Good for T. Rowe Price, one of the outstanding corporate citizens of Baltimore. The firm is putting up $117,000 to help keep Baltimore pools open for the summer, along with "a major Baltimore City individual" who put up $300,000. The individual wants to remain anonymous.

“We are pleased to help keep the City's swimming pools open during this particularly hot summer,” said James A.C. Kennedy, chief executive officer and president of Baltimore-based T. Rowe Price Group.

Here is the whole press release:

BALTIMORE, MD. (August 11, 2010)—Mayor Stephanie Rawlings-Blake thanked a major Baltimore City individual and the T. Rowe Price Foundation for their unsolicited donations, $300,000 and $117,000 respectively, to the Baltimore Community Foundation to fund continued operations of all City park pools through Labor Day. With these generous donations, pools at
Cherry Hill, Roosevelt, Patterson Park, Riverside, and Clifton Park will be open today. Both donors urge other local businesses to provide the additional $177,000 needed to keep 13 neighborhood walk-to pools open as well. Individuals or businesses should call Gregory Bayor, Director of the Department of Recreation and Parks at (410) 396-6132. Earlier this week, the Mayor announced an unsolicited donation of $90,000 from Grant Capital Management, Inc. to keep the Druid Hill Park Pool open. “I am grateful for these generous gifts to help Baltimore City’s youth and families enjoy the rest of their summer in a cool and safe place,” Mayor Rawlings-Blake said. “In a year when the City is facing serious budgetary challenges, it is refreshing to see that Baltimore business leaders are willing to take concrete action.” “We are pleased to help keep the City's swimming pools open during this particularly hot summer,” said James A.C. Kennedy, chief executive officer and president of Baltimore-based T. Rowe Price Group. Each park pool is able to serve as many as 1,200 citizens on a daily basis. Admission is $1.50 per two-hour session. Residents may also visit three indoor pools at Callowhill, Cherry Hill, and Chick Webb Aquatics Centers. For pool operating hours, please contact the Aquatics Division at (410) 396-3838.
Posted by Jay Hancock at 1:36 PM | | Comments (6)
        

Why no indictments in the Wall Street disaster?

Barry Ritholtz says they still could happen:

It turns out that this was more than mere incompetence, this was a malicious fraud, a full on intent to deceive the investing public in order to grab huge bonuses, economic consequences tot he nation be damned.

But the noose is slowly tightening. The FCIC has undercovered documented illegal behavior, while a newly revitalized SEC opens more cases.

In the post Sarbanes-Oxeley era, where CEOs signed off on their accounting statements and quarter earnings release, that calls for investigation, prosecution, confiscation — and jail time. As much as the public has been frustrated, they may very well see some justice soon . . .

Posted by Jay Hancock at 1:09 PM | | Comments (0)
Categories: The Great Recession
        

Worried about flunking? Buy grade insurance

A few days ago I blogged about divorce insurance. Now we have another risk-management product: grade insurance. The people who run Ultrinsic don't describe their product that way. It's billed as a "motivator" that pays off if you get top grades. But, as HuffPost reports, you can also bet that you'll fail.

From Ultrinsic:

While hanging out together one Sunday afternoon, I mentioned to my friend Steven Wolf that I had an exam the following day and that if I were to study I was sure to get an A. (At the time, I was a student at University of Pennsylvania.) But I was enjoying my Sunday afternoon, and I told Steven that I had no intention of studying. That's when, in order to provide me with motivation, we made the following agreement: If I got an A on the exam, he would give me $100, and if I didn't get an A, I would give him $20. Steven and I quickly realized that lots of other students might like this kind of motivation. To that end, we began developing what is now Ultrinsic Motivator Inc. - Jeremy Gelbart

They're tried it out at Penn and NYU and say they're rolling it out this fall at more than 30 other, so-far unidentified schools. Googling "Johns Hopkins" and "Ultrinsic" turned up no relevant hits. To keep people from gaming the system, Ultrinsic says it has algorithms that account for prior performance of individual students and set the odds accordingly. So you have to "exceed expectations" (or sharply fall below them, if you bet on flunking) to make money.

Posted by Jay Hancock at 9:07 AM | | Comments (3)
Categories: Education
        

August 10, 2010

We are looking more and more like Japan

The drop in second-quarter productivity reported by the Labor Department this morning is bad news. It is another way in which the U.S. economy is becoming similar to Japan's economy in the 1990s, the "lost decade" which is now turning into two lost decades.

Even as output and demand dropped and deflation loomed in the U.S., just as they did in Japan in the 1990s, at least we still had this: U.S. companies were still boosting productivity at impressive rates. In Japan productivity fizzled in the 1990s, which contributed mightily to its problems. But the Labor Department just said U.S. productivity dropped in the second quarter.

The United States still has a growing population and entrepreneurial culture, which Japan lacks. But the productivity news is not good at all.

Posted by Jay Hancock at 12:09 PM | | Comments (5)
Categories: The Great Recession
        

Liberals love their country too

I don't know why liberals let conservatives monopolize the rhetoric on patriotism. Perhaps they recoil from the hooey in much of the flag talk by the right. But liberals love their country too.

Brad DeLong, one of them, makes the obvious point that long-run federal debt weakens the economy. He notes uncontroversially that the only way to reduce the long-run debt is to cut spending or raise taxes. And he suggests that those who encourage crippling debt by retaining the Bush tax cuts -- absent revenue or spending offsets to pay for them -- are anti-American. DeLong:

And I am very tired of seeing the Wall Street Journal try, yet again, to weaken and impoverish America by raising the long-term debt and its burden on the economy. I've watched this for thirty years. America is poorer and weaker because of it. And I am sick of it.

There is room for legitimate debate about the timing of the expiring tax cuts. Do their long-run contribution to solvency and the political ease with which Democrats can accomplish them (they have to do nothing) outweigh the burden the expiring cuts will put on what's likely to be a still-gasping economy?

Timing aside, the long-run solution of course involves both spending cuts and tax increases, as the NYT's David Leonhardt has shown. Wisconsin's Paul Ryan has been getting attention for his fiscal plan, but even the tea partiers looove their Medicare too much to buy what he's offering.

Posted by Jay Hancock at 9:23 AM | | Comments (0)
Categories: Slo-mo fiscal train crash
        

Did Hewlett-Packard just want a new CEO?

Today's column is about Mark Hurd, the Hewlett-Packard boss who resigned in disgrace after fiddling his expense accounts and hanging out with a former contestant from a reality dating show on NBC.

Patrick Thibodeau suggests that perhaps HP's board wanted to get rid of Hurd anyway and just used the Jodie Fisher episode as an excuse. Thibodeau:

Hurd's chief task at HP became surviving the recession and preparing the company for growth. He cut thousands of employees and worker salaries across the board. The company consolidated its own operations, taking 85 data centers down to six.

It was tough and scarring work, and the company may have wanted a new face to lead a leaner HP.

Hurd's focus on operations may have run its course

The board may have been asking itself whether Hurd was the best person to integrate HP's recent string of acquisitions -- including Palm and 3Com -- and keep ahead of the industry's fast pivot to mobile, Android and the cloud. It wants an innovator.


Posted by Jay Hancock at 8:24 AM | | Comments (4)
Categories: Technology & Innovation
        

August 9, 2010

Now that's the way to take a job and shove it

JetBlue flight attendant Steven Slater looks to be in a bit of trouble, having been charged with felony criminal mischief and reckless endangerment, according to the NYT.

But this guy is going to become a hero to flight attendants everywhere as well as martyr for travelers fed up with cut-rate air travel and obnoxious fellow passengers. The beer detail could only have been written by a Hollywood script writer. I guarantee you flight attendants are lifting beers in Mr. Slater's honor tonight. If Sully Sullenberger is the toast of airline pilots for displaying poise, courage and skill under stress, Slater is the god of flight attendants for deciding when enough stress is enough. From the NYT:

After a dispute with a passenger who stood to fetch his luggage too soon on a full flight just in from Pittsburgh, Mr. Slater, a career flight attendant, had had enough.

He got on the intercom, let loose a string of invective, pulled the lever that activates the emergency-evacuation chute and slid down, making a dramatic exit not only from the plane but, one imagines, also his airline career.

On his way out the door, he paused to grab a beer from the beverage cart. Then he ran to the employee parking lot and drove off, the authorities said.

Posted by Jay Hancock at 9:45 PM | | Comments (11)
        

Stupid Press Release of the Day

Hi Jay,

One of the fastest-growing dating websites is about relationships driven by money. So, what’s life really like for someone pursuing a Sugar Daddy? And what’s it like for the Sugar Daddy himself?

Why do they want this type of relationship? Has the recession changed the dynamics of these relationships?

Would you be interested in speaking with members of the #1 site for “sugar daddy” dating – SugarDaddyForMe.com (2,000,000 members and growing every day).

- What’s the Sugar Daddy or Cougar’s point of view and why do they want a relationship like this?
- Has the recession changed the dynamics of these relationships?
- The best gifts ever given or received
- Is this a form of prostitution?

- Insider stories of the first “sugar daddy” date – what happens, what is expected. - The story of a man who met Sugar Baby on the site and says, “I recently took her to Sicily and we got married in Capri. Now we are living in the Time Warner Center in NYC.” - What if it all comes crumbling down? - What they all say to passionate female and male critics. - How to weed out liars on any dating website. - Tips for men to meet beautiful women. Tips for women to meet men with money. - Questions to ask yourself to determine if a Sugar Daddy – Baby relationship is right for you, including, simply: Why do I want to date a millionaire. The answer says more than you would expect. - What if one or both of the partners is a parent? How that changes the playground.

Sugar Daddies and Sugar Babies are available to reveal all like never before.

SugarDaddyForMe.com, with its ultimate search criteria and other tech features like iPhone remote access, is the LARGEST and most popular Sugar Daddy dating site. Miss Howard Stern found her sugar daddy on the site and has been happy for years.

The site’s founder - featured on Joan River’s “How’d You Get So Rich?” - is also available for interviews.

Would you be interested speaking
further?

Thanks,
Somer
------------------------------
Somer Stephenson
908.439.3660 office
415.225.4332 mobile

Posted by Jay Hancock at 1:24 PM | | Comments (1)
Categories: Stupid PR pitches
        

Divorce insurance: Another bad bet

NYT tells us that SafeGuard Guaranty of North Carolina is offering divorce insurance.

The casualty insurance is designed to provide financial assistance in the form of cash to cover the costs of a divorce, such as legal proceedings or setting up a new apartment or house. It is sold in “units of protection.” Each unit costs $15.99 per month and provides $1,250 in coverage. So, if you bought 10 units, your initial coverage would be $12,500 and you’d be paying $15.99 per month for each of those units. In addition, every year, the company adds $250 in coverage for each unit.

Then, if you get divorced and your policy has matured (see below for the maturation rules), you would send WedLock proof of your divorce. In return, you’d receive a lump sum of cash equivalent to the amount of coverage you had purchased.

The company tries to discourage adverse selection (people likely to divorce will buy the policy) by requiring a "maturation" of the policy. You can't just buy it and get divorced tomorrow. Still, I'd be surprised to see this as a moneymaker. It seems expensive, anyway.

As Alex Tabarrok says:

My wife tells me she already has divorce insurance, it's called a job.
Posted by Jay Hancock at 8:57 AM | | Comments (6)
        

Poor Hagerstown economy hurts home prices

During the housing and general economic boom of circa 2007, Hagerstown and even Cumberland gained residents who commuted to Frederick, Washington and even Baltimore. Houses were more affordable the farther west you got. People chose to spend lots of time in the car in return for more square footage at home.

I wonder how Hagerstown commuter economy is doing these days. As Gus Sentementes reports in today's newspaper, Hagerstown has one of the highest unemployment rates in the state. I'm guessing the commuter economy is intact. Most of the government-dependent jobs that were drawing people from the western part of the state are still there; the government sector has been hit much less severely than the private sector.

But in any event Hagerstown property values have been badly hit. Unlike home prices in metro Washington and Baltimore, they show no sign of recovery. From the charts below you can see that Zillow shows a peak-to-trough decline of 37 percent for a couple Hagerstown zip codes, and no uptick. A similar chart for Columbia, which I can't get to embed, shows a 20 percent drop, bottoming out in early 2009, and an upsurge since then. At about 5 percent Columbia's unemployment rate is half Hagerstown's.

21742 Zillow Home Value Index
Posted by Jay Hancock at 8:49 AM | | Comments (1)
        

August 6, 2010

What will Mark Hurd's parachute look like?

HP boss Mark Hurd "resigned" because internal investigators found "violations of HP's Standards of Business Conduct" after allegations of sexual harrassment made by a former contractor to the company.

The public doesn't know what happened, but the question now is what kind of parachute will Hurd get? It looks at first blush like the board isn't deeming him fired for cause even though he transgressed corporate policy. The delicate language from the press release says Hurd "has decided with the Board of Directors to resign his positions effective immediately."
The big bosses always get off more lightly than the lower-level folks when they break the rules.

Here is a good profile of Hurd from Business Week. Here is some of the language from the HP proxy on what happens upon a termination of Hurd or other executives:

Termination of Employment. In the case of stock awards, including stock units, unless the Administrator determines otherwise, the restricted stock or restricted stock unit agreement will provide that the unvested stock or stock units will be forfeited upon the awardee's termination of employment for any reason.

Under the HP equity plans, the Board and the Committee have the discretion to accelerate vesting of options and to release vesting restrictions on stock and cash awards in the case of a change in control, as well as in connection with individual employment terminations. The information reported in these three columns assumes that the Board or the Committee would exercise discretion to accelerate vesting and release restrictions in both of these circumstances, except


that in the case of a "not for cause" termination of Mr. Hurd, the amounts reported reflect the minimum amounts required to be paid under the terms of his employment agreement. From time to time, however, certain HP executives have received less than full acceleration of vesting on stock options, and no (or less than full) release of the vesting restrictions on stock and cash awards, so the amounts actually paid to an NEO [Named Executive Officer] upon a "not for cause" termination may be lower in some circumstances.

Under the terms of Mr. Hurd's employment agreement, a "not for cause" termination includes a substantial reduction in his duties as CEO without his consent and his failure to be re-elected to the Board during the term of his employment. In addition, upon Mr. Hurd's termination of employment for any reason, he is eligible to be indemnified to the maximum extent permitted under HP's Certificate of Incorporation and Bylaws.

Voluntary or "For Cause" Termination

In general, an NEO who remained employed through October 31, 2009 (the last day of the fiscal year) but voluntarily terminated employment immediately thereafter, or was terminated immediately thereafter as a "for cause" termination, would be eligible (1) to receive his or her annual incentive amount earned for fiscal 2009 under the PfR Plan (subject to any downward adjustment or elimination by the Committee prior to actual payment, except in the case of Mr. Hurd), (2) to exercise his or her vested stock options on or before the last day of employment, (3) to receive a distribution of vested amounts deferred or credited under the EDCP, and (4) to receive a distribution of his or her vested benefits under the HP 401(k) and pension plans. An NEO who terminated employment before the last day of the fiscal year, either voluntarily or as a "for cause" termination, would generally not be eligible to receive any amount under the PfR Plan with respect to the fiscal year in which the termination occurred, except that the Committee has the discretion to make payment of prorated bonus amounts to individuals on leave of absence or in non-pay status, as well as in connection with certain voluntary severance incentives, workforce reductions and similar programs.

Under Mr. Hurd's employment agreement, he is entitled to be paid any earned and accrued bonus under the PfR Plan for any completed fiscal year as of his termination of employment.

"Not for Cause" Termination

A "not for cause" termination would qualify the NEO for the amounts described above under a "voluntary" or "for cause" termination and also for benefits under the SPEO, if the NEO signs the required release of claims in favor of HP. The SPEO would provide a cash benefit to each NEO calculated as a multiple of the sum of base pay plus the average of the last three years' actual annual bonus payments; in the case of the CEO, the multiple is two, and for the other NEOs, the multiple is 1.5. In all cases, the cash benefit would be paid as a lump sum and would not exceed 2.99 times the sum of the NEO's base pay plus annual target bonus, unless approved by HP stockholders, consistent with the HP Severance Policy for Senior Executives, as currently in effect.

Under the SPEO, a "not for cause" termination generally includes any termination that is not due to a material neglect of responsibilities to HP (other than as a result of illness or disability) or conduct that is not in the best interest of, or is injurious to, HP. In addition, Mr. Hurd's employment agreement provides that a "not for cause" termination includes a substantial reduction in his duties as CEO without his consent and his failure to be re-elected to the Board during the terms of his employment.

In addition to the cash severance benefit payable under the SPEO, the NEO would be eligible to exercise vested stock options and receive distributions of vested, accrued benefits from HP deferred compensation and pension plans. The Committee may also exercise its discretion to accelerate vesting of stock options and to release restrictions on stock and cash awards in individual cases.

Posted by Jay Hancock at 5:52 PM | | Comments (3)
        

Human links forged by Hiroshima bomb

Don't miss Ari Beser's op-ed piece in today's Sun about the connection of his grandfather, the only man to fly on both the Hiroshima and Nagasaki bombing missions, with a Hiroshima survivor who moved to Baltimore. Highly recommended.

The anniversary of Hiroshima should be a day where we realize the messages that the ones involved strived to send out. From both sides of the bomb, although their journeys were opposite, the point was the same.
Posted by Jay Hancock at 9:37 AM | | Comments (0)
        

Remington residents seem resigned to Walmart

I wasn't at the Walmart hearing last night. But to judge from Julie Scharper's story, Remington residents with concerns about the planned stores for their neighborhood seem to be focusing less on blocking the project and more on ways to lessen neighborhood disruption.

Historic Fawcett and the Remington Neighborhood Alliance want walls built to shield homes from light and noise. The Charles Village Civic Association wants traffic improvements. Which are reasonable requests. City Council should listen to them.

Take the "economic impact" figures from the developers with a big pinch of salt. But what's indisputable is that construction will generate jobs and so will the stores, which after the Enterprise Zone credits wear off will become full, tax-paying citizens of Baltimore, which needs such citizens.

UPDATE: Pulled from comments, a great idea by Thomas:

One relatively cheap addition to what should be required of both retailers: automatically locking cart wheels. I confront trashy neighbors about taking carts when I see it happen, but there's no way to police every cart, and a few bad apples can make a whole (nice) neighborhood look like a ghetto just by discarding a few carts in visible places. Suburbs face this problem too: A state law requiring autolocking wheels for retailers above a certain size would not be unreasonable.
Posted by Jay Hancock at 8:22 AM | | Comments (10)
        

August 5, 2010

Don't let electric vendors overstate kilowatt use

Tuesday's column on electricity-supply offers from independent companies is still getting a lot of traffic. The gist: Even though Baltimore Gas & Electric households have more electricity vendors than ever before to choose from, the best choice for those who haven't switched is to wait a few months. BGE's standard price will plunge in less than two months, and the third-party suppliers will have to lower prices to compete, if they can.

The column is largely about companies such as MX Energy and Viridian that are using BGE's present, high price as a point of comparison, even though the price disappears in a few weeks. They calculate annual "savings" based partly on this price, even though it'll probably be gone by the time you switch. Another way companies may exaggerate savings is by estimated annual kilowatt-hour use. The typical BGE household uses about 1,000 kwh per month, on average. But MX's chart shows 12-month savings for households starting at 1,500 kwh per month and as high as 2,500 kwh per month. If you have a huge house and heat with electricity you could head toward those numbers, but that kind of load certainly won't be the experience of the typical BGE customer.

Posted by Jay Hancock at 9:13 AM | | Comments (1)
Categories: BGE/electricity
        

GAO: Federal workers fraudulently on disability

One good thing about being the federal government is that you can check your own, vast employee records without violating privacy laws. You're the employer. They're the employees. You can check the record to see if they're lying about their employment status or incomes to qualify for welfare programs. The Government Accountability Office seems to be doing this with some frequency, and it's high time. Last month I wrote about a GAO audit that caught people collecting federal heating aid lying about their incomes.

A second GAO study crossed the database of people getting Social Security disablity with databases of federal employees and government-licensed truck drivers. Hundreds and perhaps thousands of the "disabled" workers were drawing paychecks from the U.S. and from transportation companies. Says the GAO:

GAO analysis of SSA and federal salary data found that there are indications that about 1,500 federal civilian employees may have improperly received benefits. In addition, GAO obtained data from 12 selected states and found that 62,000 individuals received or had renewed commercial driver's licenses after SSA determined that the individuals met the federal requirements for full disability benefits. Under DOT regulations, these individuals' eligibility must be medically certified every 2 years. Lastly, GAO found about 7,900 individuals with registered transportation businesses who were receiving SSA disability benefits.

The GAO report even includes video of supposedly disabled employees doing their jobs. Now, if only the GAO could similarly probe the records of private employers, who knows how much fraud they'd find?

Posted by Jay Hancock at 6:44 AM | | Comments (2)
        

Why dying patients cost Medicare so much

Read the entire New Yorker essay by Atul Gawande on medical decisions made in the last months of life, which are responsible for an enormous portion of Medicare expense. It's a moving explantion of why our reluctance to confront death proves so expensive for society.

A study led by the Harvard researcher Nicholas Christakis asked the doctors of almost five hundred terminally ill patients to estimate how long they thought their patient would survive, and then followed the patients. Sixty-three per cent of doctors overestimated survival time. Just seventeen per cent underestimated it. The average estimate was five hundred and thirty per cent too high. And, the better the doctors knew their patients, the more likely they were to err.

Second, we often avoid voicing even these sentiments. Studies find that although doctors usually tell patients when a cancer is not curable, most are reluctant to give a specific prognosis, even when pressed. More than forty per cent of oncologists report offering treatments that they believe are unlikely to work. In an era in which the relationship between patient and doctor is increasingly miscast in retail terms—“the customer is always right”—doctors are especially hesitant to trample on a patient’s expectations. You worry far more about being overly pessimistic than you do about being overly optimistic. And talking about dying is enormously fraught

The idea that "the customer is always right" can prove especially expensive when the customer is spending somebody else's (ie., the taxpayer's, via Medicare) money, carte blanche.

Posted by Jay Hancock at 6:34 AM | | Comments (4)
Categories: Health Care
        

August 4, 2010

Avalon Energy: Constellation offer not all it seems

Yesterday's column was about alternative electricity offers for BGE households that sound better than they may turn out. Basically companies are comparing themselves against BGE's high, summertime price that goes away in less than two months. On their blog, energy consultants Avalon Energy make a similar analysis of Constellation Electric's offer to Pepco households.

Based on this alone, Constellation's offer of 9.65 cents per kWh seems attractive. However, Constellation's rate is only 5.7% lower than the forward Pepco rate that runs through 5/31/11. Beyond 5/31/11, any discount or premium to Pepco’s rate cannot be determined as Pepco’s rates have not been defined and won’t be defined until sometime in the future.

Avalon, in its analysis, adds a really important footnote that you should always remember, not just for Constellation but for any of these deals:

In the "Term" paragraph, it says that the contract will automatically renew for an additional 12-month renewal term unless terminated. So, if you miss the window, or you don’t terminate the contract and pay a $150 penalty, you will be with Constellation for another 12 months at a rate they will define in the future.

Even if you sign up for a great deal, if you're not careful you can get automatically rolled over to a not-so-great deal a year later.


Posted by Jay Hancock at 3:50 PM | | Comments (0)
Categories: BGE/electricity
        

No, corporate America is not really solvent

Over and over again you read about the silver lining of the recession and credit crisis: At least big American companies have good balance sheets. They're swimming in cash and stand in encouraging contrast to the U.S. consumer and the U.S. government. Not so, says Brett Arends of MarketWatch:

There's just one problem: It's a crock.

American companies are not in robust financial shape. Federal Reserve data show that their debts have been rising, not falling. By some measures, they are now more leveraged than at any time since the Great Depression.

Posted by Jay Hancock at 8:49 AM | | Comments (1)
Categories: The Great Recession
        

Flush with cash, bankers discourage deposits

Here's a telling window onto the credit crunch, high unemployment and ongoing slump. Sitting on (ie., not loaning out) tons of cash, bankers are reluctant to bring in new deposits, reports National Mortgage News. Not long ago a lot of these guys were dying for deposits to stay liquid. Now, flush with TARP money in many cases and deposits from worried folks who want the FDIC guarantee, they're slowing down marketing efforts.

It's a sad commentary when you can basically get free money (ie., certificates of deposit paying 1 percent or whatever) and can't find anyplace to lend it or invest it profitably. National Mortgage News:

Now the primary options left for banks involve turning depositors away or housing deposits at the Federal Reserve.

In April, James Rohr, the chairman and CEO of PNC Financial Services Group Inc., said that deposits held at the Fed were "almost a nonperforming asset," given the negligible 0.08% PNC was getting for the holding. Though PNC has reduced such exposure, other executives expressed similar concern during recent quarterly conference calls.

"Excess liquidity has not dissipated as quickly as we had expected," said Beth Acton, the chief financial officer at Comerica Inc., during the Dallas company's conference call with analysts last week. Comerica had, on average, $3.7 billion parked with the Fed in the second quarter, which cost the company roughly 23 basis points on its net interest margin, she said.

Posted by Jay Hancock at 8:37 AM | | Comments (0)
Categories: Finance
        

August 2, 2010

Who needs sales force when the product is LeBron?

LeBron James isn't just a one-man bucket machine. He's a one-man sales force. After signing James the Miami Heat quickly sold all the season tickets. Then the team fired 30 members of its sales organization. From the Miami Herald:

``Now that the supply for [season tickets] has been exhausted we no longer require a season ticket sales team,'' the Heat said in a brief statement Friday afternoon.

A team spokeswoman, Lorrie-Ann Diaz, declined to comment or answer questions about the firings, which one staffer said cost roughly 30 people their jobs.

Tyler Cowen calls it "negative complementarities in the labor market." I'd call it another example of Robert Frank's winner-take-call principle in the modern economy.

Posted by Jay Hancock at 6:00 AM | | Comments (3)
Categories: Marketing
        
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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Tuesdays and Sundays.
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