I'll be taking the next week off to celebrate the 25th anniversary of marriage to my awesome spouse. Back after July 5.

Posted by Jay Hancock at 8:52 AM | Permalink | Comments (1)
        

From Baltimore Brew. The whole story is here:

Power Plant and Power Plant Live, two popular Inner Harbor tourist attractions, are in financial trouble and owner David S. Cordish wants Baltimore to forfeit $3 million in annual rent payments to help bail them out.

In return for the rent reduction, Cordish pledges to invest $16 million in the properties, which are about 40 percent vacant and face “serious challenges” in attracting retail and office tenants, Cordish told the Baltimore Development Corp. (BDC) today. (The glut in office space downtown has become widespread, leading to near record levels of office vacancies.)

UPDATE: From The Sun's story:

The Cordish Cos. pay the city $1,000 a year in rent for the 161,000-square-foot Power Plant complex, which includes about 45,000 square feet of retail space. Cordish has proposed that abatements come from the rent the company pays on two nearby properties: The ground rent for land beneath the Pier 4 Power Plant Annex, for which it pays $129,000 a year, and the ground rent under the Pier 6 garage. City officials said they did not have an immediate figure for how much rent Cordish pays for the garage.

In response to the Cordish Cos. request, the BDC directors made a recommendation to be forwarded to Mayor Stephanie Rawlings-Blake. The recommendation was made in closed session, and the terms were not disclosed afterwards.

Posted by Jay Hancock at 3:13 PM | Permalink | Comments (1)
        

A few days ago Comptroller Peter Franchot said he didn't want to enforce the ban on online sales of premium cigars. He asked legislative leaders and the attorney general for their opinions. Now he has decided that he will refrain from enforcing the law until the legislature has an opportunity to fix it, probably in the fall's special session. Here is the entire letter:

Dear Concerned Citizen: Please be advised that effective immediately, the Office of the Comptroller will temporarily defer enforcement of the online sales ban on premium cigars, as defined in Business Regulation Article 16.5-101 (p), until the Maryland General Assembly has had an opportunity to consider legislation that would permanently repeal the ban.

As you may know, Comptroller Franchot expressed a preference to take this action --which would apply as well to telephone and mail orders of premium cigars --in a June 13 letter to the

presiding officers of the legislature. His authority to do so was confirmed by a June 20, 2011 letter from the Office of the Attorney General, which states that "the Comptroller is fully empowered with the discretion to enforce or decline to enforce the online sales ban against buyers ofpremium cigars."

As you may know, the online sales prohibition was a provision of House Bi1l88, which was passed and signed into law in 2010, with an effective date of May I, 2011. This legislation was introduced as a response to, and a remedy for, the widespread incidence of tax avoidance and illegal sales activity associated with "other tobacco products" (OTP), which includes cigars, little cigars, pipe tobacco, chewing tobacco and moist snuff. The legislation established a long-overdue process for licensing those who distribute and sell these products in Maryland. Since this legislation was modeled to a large extent after existing cigarette statutes, it also included a prohibition on Internet sales.

It was not until this new law had been enacted that we were made aware of an unintended consequence -the ban on the online sale and distribution of premium cigars. Contrary to the other products that are included in the statutory definition of OTP, these are unique, high-end products that are customarily sold within a community of aficionados. These products typically are not sold at convenience stores and other general retail outlets. Moreover, it is not uncommon for consumers to desire a particular brand of cigar that isn't readily available at local specialty shops.

Simply put, our concerns about the illegal trade practices that motivated the introduction and passage of House Bill 88 are not pertinent to premium cigars, but it is the consumers of these products who are unintentionally, and disproportionately, affected by this provision in law. It was based upon his longstanding commitment to the principle of consumer choice, and his desire to devote the finite resources of his agency to far more critical priorities, that Comptroller Franchot has pursued this temporary stay of enforcement.

However, our concerns that these products have routinely been sold in the State of Maryland without the appropriate collection and remittance of taxes are wellfounded. In order to ensure a climate of tax fairness for Maryland-based businesses, and to ensure that the State of Maryland receives the revenue to which it is entitled, I must remind you to exercise due diligence in remitting the appropriate sales, use and orp excise taxes resulting from the sale of these products.

Finally, it is worth restating that this is simply a temporary stay of enforcement. It is Comptroller Franchot's hope that the legislature will enact a remedy that will permanently restore consumer choice in this area, while ensuring that we have the tools to collect the taxes owed. Should the General Assembly have an appropriate opportunity to do so, and choose instead to leave the terms of the current legislation intact, our office will once again act to enforce the letter of the law.

Should you have any questions about this action, or need additional information, please do not hesitate to call.

Posted by Jay Hancock at 1:55 PM | Permalink | Comments (8)
Categories: Taxes
        

The decision to tap the strategic petroleum reserve looks based much more on politics than economics. Obama needs to do "something" about the economy to look like he's doing his job. Yesterday the Federal Reserve said it was halting the escalation of monetary stimulus. There is no chance of further fiscal stimulus, and Republicans in Congress are talking about cutting back. So this is Obama's largely symbolic response. Thirty million gallons, barrels, the amount of U.S. reserves to be released, is a teeny portion of the reserve. It's also less than two days' average consumption in the United States. (Heh. 30m gallons REALLy would be teeny.)

Texas crude is down about $4 this morning, perhaps responding more to the symbolism of the administration intervening in the markets than in the substance of a little bit of extra oil for sale. Oil prices were already declining. This isn't what many people believe the petroleum reserve is for. It's widely thought of as being there for true emergencies such as war and severe supply shocks. This isn't as nakedly political as if reserves had bene tapped in summer 2012. Nevertheless, the political overtones could hurt Obama.

Posted by Jay Hancock at 11:56 AM | Permalink | Comments (7)
Categories: Energy
        

Baltimore Development Corp. director Jay Brodie tells Julie Scharper that mayors-at-the-time Martin O'Malley and Sheila Dixon were aware of the deal with Sam Polakoff, which required the city to pay some of Polakoff's expenses even if he never bought the Gateway South property.

"We don't make any decisions without the mayor knowing about it," said Brodie, adding that the deal was brokered at the end of Martin O'Malley's term as mayor and the beginning of Sheila Dixon's tenure, and both were briefed on the deal.

City Solicitor George Nilson had said this week that the sportsplex deal was signed by a junior employee of the Baltimore Development Corp. and did not receive approval from the law department.

It's not the mayor's job to review legal contracts. It's the mayor's job to look at the big picture and let the many people who supposedly work for the taxpayers, including the Baltimore Development Corp., handle the details. Here is The Sun's editorial page:

The Board of Estimates is a unique Baltimore institution and a key safeguard to make sure city business is being handled properly. In general, contracts valued at above $5,000 are supposed to go before the board, but the BDC, a quasi-public agency, sometimes operates outside of that system — even in a case like this, when 11 acres of city-owned, waterfront property are at issue. That is a mistake, and this deal shows why.

I haven't seen on follow on this yet from The Baltimore Brew, which had a good story yesterday, in which Brodie declined to comment.

Posted by Jay Hancock at 8:56 AM | Permalink | Comments (0)
Categories: Corporate welfare
        

By traditional measures tied to the cost of raw materials and labor, I got soaked on my investment in flowers the other day. Two dozen red roses in a glass vase for $120, bought from an online florist. This is the arrangement that I bought, as pictured in their catalog. Mine had pink ones mixed in with the red. The sticker price was $105. Then when you click through to buy it, there's a "service fee" of $15. Ouch. I probably could have gotten them from Walmart for $40.

But economic utility derived from a product is often different from the economic inputs that go into the product. It was the morning of our anniversary. I had only a few hours to arrange an appropriate gesture. The consequences of failure were terrible to think about. I was too busy to go to a florist or to Walmart. The magic genie box called the Internet offered to solve my problem. This is hotel minibar effect, when you overpay for snacks and drinks because they're right there and you're too lazy or jetlagged to explore alternatives. So I clicked "Buy this Item," and the genie brought it to my house.

Next time, I'm telling myself, I'll do a better job of planning and save some money. But I probably won't. 

Posted by Jay Hancock at 6:32 AM | Permalink | Comments (3)
        

The upshot of Julie Scharper's piece on the deal settling a dispute over a potential slots site is that a Baltimore Development Corp. mistake is going to cost the city $1.2 million. Scharper:

The 2007 agreement stipulated that if the city terminated the deal, it would be responsible for reimbursing Polakoff for any costs he had incurred in planning the project, Nilson said, including environmental surveys, marketing studies and legal work.

The agreement had been approved by a youthful employee of the Baltimore Development Corp., Nilson said. It had not been reviewed by the city's law department, he said.

The city owed Polakoff anywhere from $40,000 to $4 million for his preparations, Nilson said, and settled on the $1.2 million after considerable negotiations.

So they're blaming a "youthful employee" for promising expenses reimbursement even though a definitive contract to develop the land was never struck. Somebody had to sign the tentative deal, and somebody is responsible for not having the "youthful employee's" work reviewed by a lawyer. And why wasn't there an expiration date on the agreement? The deal gave Sam Polakoff negotiating rights to the site for a non-slots project, but that was four years ago. Here's part of Mayor Sheila Dixon's press release at the time:

An integral part of the project is "The Ray of Hope Center," Ray Lewis' new educational and mentoring center that will help motivate and teach children citywide, while leveraging connections to both business and sports. Total project costs are estimated at $200 million.

"The people of Baltimore will benefit from the giant leap forward we are taking," said Mayor Dixon. "The Gateway South Project will make the city an even better place to live, learn, play and earn and has the added benefit of bringing hope to the lives of thousands of children."

UPDATE: Mark Reutter at Baltimore Brew has details on the screwup. From his piece:

In its letter to the Board of Estimates, the city law department said the agreement between BCD and the Polakoff group was not only “unusual in that … it contained a relatively generous cost reimbursement provision favoring the would-be developer in the event the ENP [Exclusive Negotiating Privilege] was later allowed to expire or was later terminated by the city,” but “it was unfortunately ambiguous.”

Posted by Jay Hancock at 10:05 AM | Permalink | Comments (11)
        

I recommend this Justin Wolfers Father's Day post.

My feelings toward my daughter Matilda aren’t easily expressed in analytic terms. I struggle to express it, just as I struggle to understand it. I think about my daughter, and I smile. Her laugh is the greatest joy, and it thrills me that she shares it with me. I’m fiercely protective of her, love (as you can tell) talking about her, and she’s central not only to my life, but to who I am. (You can hear more from me and Matilda in the second episode of the hour-long Freakonomics Radio show, “The Economist’s Guide to Parenting.”)

There’s something new and strange about all this. Today, I feel the powerful force of biology. It’s visceral; it’s real; it’s hormonal, and it’s not in our economic models. I’m helpless in the face of feelings that overwhelm me.

Posted by Jay Hancock at 7:09 AM | Permalink | Comments (0)
        

Krugman is scoring some points by noting that Medicare spending, for all its escalation, has risen less than premiums on private health insurance. There are many reasons for this, including private insurance's profits and duplicative administrative costs.

But one huge reason for the private-insurance inflation doesn't especially cast credit on Medicare and Medicaid and is unmentioned by Krugman. Medicare and Medicaid reimbursement for docs and hospitals is notoriously low and getting skimpier. Hospital officials frequently complain, plausibly, that Medicare payments don't cover their expense. So they raise costs for private insurers to compensate. This kind of cost-shifting has been going on in most states for decades. It doesn't happen in Maryland because of this state's unique system in which the Health Services Cost Review Commission sets one hospital price for all payers.

But that's the exception. In other states, the ability of Medicare to shuck expense off on the private sector isn't exactly great testimony to the program's ability to control costs. Here is Paul Levy from the Not Running A Hospital blog:

Here's where Mr. Krugman is wrong. The Medicare rates paid to doctors and hospitals are set by government fiat. They are based on Congressional appropriations, political decisions resulting from the give and take of the legislative process. Ditto for Medicaid rates set by the states. They have little or no relationship to the cost of providing service to patients. When there is a shortfall in Medicare and Medicaid revenues, the difference is made up by the rates paid by private insurers.

Posted by Jay Hancock at 6:45 AM | Permalink | Comments (5)
Categories: Health Care
        

Here's an argument I hadn't heard before. On the Cato blog Johns Hopkins Prof. of Applied Economics Steve Hanke says increasing overnight lending rates between banks -- the rate that the Fed controls most directly -- would prompt banks to make actual business loans instead of buying Treasury paper.

The willingness of a bank to make such forward commitments depends, to a large extent, on a well-functioning interbank market — a market operating without counterparty risks and with positive interest rates. With the availability of such a market, even illiquid (but solvent) banks can make forward commitments (loans) to their clients because they can cover their commitments by bidding for funds in the wholesale interbank market.

At present, the major problem facing the interbank market is what can be termed a zero-interest rate trap. In a world in which the fed funds rate is close to zero, banks with excess reserves are reluctant to part with them for virtually no yield in the interbank market. Accordingly, the interbank market has dried up — thanks for the Fed’s “zero” interest-rate policy. And, with that, banks have been unwilling to scale up their forward loan commitments.

Hanke is an Austrian economics, hard-money guy to begin with, so he probably favors an increase in short-term rates for other reasons. But it's an interesting argument.

Posted by Jay Hancock at 4:26 PM | Permalink | Comments (3)
        

From Eileen Ambrose's column on getting a live customer service rep on the phone:

If that doesn't work, try raising your voice or dropping an expletive when the system asks you to select an option, Goldkamp says. Some companies screen for tension in customers' voices and will route callers about to blow a fuse to the top.

Posted by Jay Hancock at 10:23 AM | Permalink | Comments (1)
        

If this is true, it's depressing and maddening. Gresham's Law of media content is taking hold with a vengeance. Crap content drives out good. From The Faster Times, by a guy who says he wrote about TV for AOL.

I was given eight to ten article assignments a night, writing about television shows that I had never seen before. AOL would send me short video clips, ranging from one-to-two minutes in length — clips from “Law & Order,” “Family Guy,” “Dancing With the Stars,” the Grammys, and so on and so forth… My job was then to write about them. But really, my job was to lie. My job was to write about random, out-of-context video clips, while pretending to the reader that I had watched the actual show in question. AOL knew I hadn’t watched the show. The rate at which they would send me clips and then expect articles about them made it impossible to watch all the shows — or to watch any of them, really....

I had panic attacks; we all did. My fellow writers would fall asleep, and then wake up in cold sweats. I worked the graveyard shift — 11PM to 7 or 8AM or later — but even the AOL slaves who wrote during the day would report the same universal experience. Finally falling asleep after work, they would awake with a jump, certain that they had forgotten something — certain that they hadn’t produced their allotted number of articles every thirty minutes. One night, I awoke out of a dead sleep, and jumped to my computer, and instantly began typing up an article about David Letterman. I kept going for ten minutes, until I realized I had dreamed it all. There was no article to write; I was simply typing up the same meaningless phrases that we all always used: “LADY GAGA PANTLESS ON LATE NIGHT WITH DAVID LETTERMAN,” or some such.

The whole thing is worth a read, especially the graphic on how AOL decides what its galley slaves should write about. (Hint: It's not climate change or the housing crisis.)

Posted by Jay Hancock at 9:42 AM | Permalink | Comments (1)
        

John Mauldin passes on Simon Hunt's analysis of the U.S. economy, in which Hunt is the latest seer to predict an American manufacturing turnaround. Rising costs in Asia and a desire by manufacturers to locate closer to customers, he says, could do it.

Once Washington puts its act together, (it will have to or else the crisis will get so deep that US markets will become dysfunctional), America will find a large number of companies which had vacated the shores of the USA for China and other parts of Asia returning to their homeland.

There are two main reasons for this change, what we call reverse globalisation. First, manufacturers want their supply chains located close to the market, not on the other side of the world. And second just as important is the cost differential trend which is narrowing together with the increasing logistical costs. It is not only the wage profile looking 10 years forward, but the other costs, such as land, electricity, taxes together with the indirect supply chain cost increases. There is also the reluctance of the system in China to allow foreign companies to gain access to government contracts.

Within a decade, the USA could supplant China as the manufacturing hub of the world.

In terms of dollars, the U.S. is still the manufacturing king. But if what Hunt says comes to pass, there would be a turnaround in factory jobs, too. The whole analysis is posted on Big Picture.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (8)
        

I thought this Crain's headline was from the Onion:

Sears eyes moving HQ to Washington, D.C.: report

Whoever leaked the "news" about Sears's interest in the District is probably more interested in the publicity than in the highly remote possibility that Sears would actually move its HQ to DC. If it came from Chicago, then Sears is trying to whip up the auction fervor for tax breaks and other giveaways. If it came from economic development people in DC, they're trying to show that DC is a player and that they're doing their jobs, as if their jobs were to give away taxpayer money to the big retailer.

(I say "highly remote." I could see a Northrop Grumman situation in which Sears puts up a skeleton headquarters with a couple hundred people. But that's not a traditional corporate HQ.)

Posted by Jay Hancock at 10:58 AM | Permalink | Comments (1)
Categories: Corporate welfare
        

Medicare fraud ought to be puke-inducing for any taxpayer who understands what's going on. Largely at the direction of Congress, Medicare pays bills first -- even bogus, highly suspicious bills -- and asks questions later, if at all. Now, AP reports, Medicare is installing the kind of antifraud software that credit-card companies had 25 years ago.

The technology upgrade should help deter flagrant abuses such as the small clinic that suddenly starts billing more for a particular outpatient procedure — intravenous infusions, for example — than major hospitals in its area. But it’s not likely to help crack sophisticated schemes that involve outwardly respectable companies with the expertise to cover their tracks.

Medicare “is putting in place the kind of computer program it should have had in 1980 or earlier,” said Patrick Burns of Taxpayers Against Fraud, a nonpartisan group that supports whistleblowers who expose corporate scams against the government. “The bad news is that the largest Medicare and Medicaid frauds are designed at the highest levels of companies, with accountants, billing experts and salespeople smoothing over the paperwork so that it will slide past all the proctors.”

Posted by Jay Hancock at 10:06 AM | Permalink | Comments (3)
Categories: Health Care
        

We in the financial media like to think of ourselves as solving the economics information problem, as promoting efficient markets by giving investors and consumers what they need to know. But to point out the obvious, going with the dominant media vibe is not the way to invest, as Barry Ritholtz is the latest to point out. I especially enjoyed this bit:

Worse yet, old news can have an impact on your thought process. That’s why I read The Wall Street Journal on the train home, and not on the way to work. Why? It forces me to recognize that the news is stale, and I avoid allowing it to influence my decision-making process. Instead, it becomes for informational proposes only (Yes, I really do this).

UPDATE: As Barry points out in comments, he originally published this in 2005.

Posted by Jay Hancock at 9:30 AM | Permalink | Comments (1)
        

Good piece in the Washington Post by Peter Whoriskey, pointing to a study showing that executive pay is the largest single factor in soaring incomes for the super rich.

For years, statistics have depicted growing income disparity in the United States, and it has reached levels not seen since the Great Depression. In 2008, the last year for which data are available, for example, the top 0.1 percent of earners took in more than 10 percent of the personal income in the United States, including capital gains, and the top 1 percent took in more than 20 percent. But economists had little idea who these people were. How many were Wall street financiers? Sports stars? Entrepreneurs? Economists could only speculate, and debates over what is fair stalled.

Now a mounting body of economic research indicates that the rise in pay for company executives is a critical feature in the widening income gap.

And the study didn't include Wall Street firms.

Posted by Jay Hancock at 9:19 AM | Permalink | Comments (1)
Categories: Executive Pay
        

The licensing officers in Montgomery County, now famous thanks to 9 News Now's report yesterday and links from Drudge, are basically in the same position as Maryland Comptroller Peter Franchot with regard to Internet cigar sales. They are required to enforce a law they probably don't really want to enforce.

Thanks to U.S. Open golf crowds, the streets near Congressional are packed and entrepreneurs are trying to make a buck. A couple families with adorable, made-for-TV, towheaded kids set up a drinks stand and put up a sign saying half the proceeds would go to charity. On cue, the heavy from the county showed up just as the TV cameras were there.

"Kids selling lemonade and making $5, $10 is a little bit different than making hundreds," the inspector told the mom on camera. "You've got coolers and coolers full of drinks here."

It looks like a larger-than-average kids' drinks operation. Like everything else involved with the pro golf tour, lemonade stands are big business. The county and its inspectors busting the place are in a no-win situation. They're getting tons of terrible publicity, but if the guy gives the kids a pass and his supervisors find out, he'll get in trouble. I can't find any accounts of outraged politicians getting involved yet, but that's the next step. Of course the incident has prompted tons of Twitter comments about nanny state etc. At least they could have waived the $500 fine!

HT Jim Pettit

Posted by Jay Hancock at 11:26 AM | Permalink | Comments (20)
        

Barry Rascovar, no kneejerk O'Malley fan, defends the governor's trip.

This was not your typical government junket. O’Malley’s previous mission to Ireland might fall in the rest and relaxation category, but this one was a serious trade trip.

The world, as author Thomas Friedman reminds us, is flat. It is shrinking, too. Interdependence is crucial for success. We’ve got to learn to cooperate and collaborate.

That’s especially true in Asia, home to fast-developing economies and a gigantic, growing middle class. Making contacts and establishing relationships with companies in these booming countries is essential.

“We’re in Asia because we want to win,” O’Malley said in a message from abroad to Maryland citizens.

But measuring success is difficult. O’Malley didn’t come home with a billion-dollar auto plant. Instead, he laid the groundwork for future announcements that may be years away.

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

I thought I was negative about Groupon. Listen to this guy, in a press release from Washington University.

While Groupon is popular at the moment, the company’s business model may not be sustainable over the long term, says a marketing expert at Olin Business School, Washington University in St. Louis.

“The only way for businesses to justify the ‘loss leader’ promotion that Groupon uses to acquire new customers is to hope that the acquired customers return to the business in the future and pay regular, profitable prices,” says Seethu Seetharaman, PhD, the W. Patrick McGinnis Professor of Marketing.

“I doubt very much if this is happening,” he says.

A Groupon promotion is not profitable for a business unless it drives repeat traffic, as Groupon takes 50 percent of the money collected from Groupon sales, Seetharaman says.
“I suspect for the vast majority of businesses, Groupon is a money-losing proposition,” he says.
A report released this week by Rice University finds that only 19.9 percent of Groupon buyers returned for a full-price purchase.

“Groupon has not invested much in customizing deals to individual customers, so there is no ‘stickiness’ built in to the customer relationship, unlike Amazon or Netflix, which have built customer loyalty for the long haul,” he says.

Seetharaman also argues that employee morale in service establishments, like restaurants and hair salons, may be hurt if Groupon traffic makes the employees’ work life tough with the sudden spurt in traffic from Groupon shoppers.

“Those shoppers are probably more price conscious, less courteous to employees and may not tip well,” Seetharaman says.

In other words, the business owner’s incentives are not necessarily well-aligned with the employees’ in offering Groupon promotions.

Seetharaman says that Groupon is onto a money-making model for now, “even if their clients have nothing to show for it.”

“As long as businesses keep fooling themselves that the Groupon promotion works, Groupon will keep doing well,” he says. “Since there are far more businesses in a large U.S. city than available promotion slots on Groupon per year, this model seems sustainable for a few years."

Posted by Jay Hancock at 6:08 AM | Permalink | Comments (3)
        

Yahoo's headline on the Reuters stock story:

Stocks Rise From Oversold Levels

Why are stocks rising? They were oversold. How do we know they were oversold? They are rising.

Posted by Jay Hancock at 10:51 AM | Permalink | Comments (0)
        

Yesterday I reported that Peter Franchot told General Assembly leaders that he would prefer not to enforce the ban, effective May 1, against shipping premium cigars direct to Maryland consumers. The law, part of a larger effort to increase regulation of cigars and pipe and chewing tobacco, effectively outlaws Internet cigar sales.

Smokers complained to Franchot, who requested the law, and he said he didn't intend for the statute to cover premium cigars, only cheap cigars and other tobacco sent in bulk. But he wanted to check with the legislature to see if it was OK not to enforce the law. Later in the day I talked to Senate President Mike Miller and a spokeswoman for House Speaker Mike Busch. They both said: the law is the law. From today's column:

"Neither the governor nor myself nor the speaker has the authority to suspend a law that was enacted by the General Assembly and signed by the governor," said Senate President Thomas V. Mike Miller.

Miller said he has never received such a request. "It's contrary to Government 101," he added.

Look, a lot of this is theater. Any law enforcement authority makes choices every day about what rules to enforce and which ones to overlook. In Baltimore you can blow through stop signs and make illegal right turns on red lights and are not likely to be cited even if a police officer is a witness. But the Man can't admit in public that some laws are more important than others. I would be quite surprised if anybody gets busted for premium cigars bought on the Internet.

Posted by Jay Hancock at 8:48 AM | Permalink | Comments (8)
Categories: Taxes
        

Last week Drew Greenblatt of Marlin Steel Wire sent me some pix and videos from Gov. Martin O'Malley's trade trip to Asia. Yesterday he followed up to make sure I got them. As I explained in response, people like me take a dim view of politicians galavanting around the globe at taxpayer expense.

Come on, I basically told him. These things are just entertainment junkets for everybody involved. Wouldn't these deals have happened even without the governor's personal visit? Here is Greenblatt's response, which was detailed and persuasive enough that I thought it worth passing on:

I understand what you are saying about politicians and I am sure that occurs in many cases however, not on this trip. Because the Governor was there, I had appointments with [I removed this name because Greenblatt said he signed a confidentialty deal with the company -- JH], GM Korea, Borg Warner Korea, Visteon Korea and Japanese companies that make parts for Komatsu (and others).

I would not have gotten these “ins” if the Governor did not open the door for me. His prestige enabled me to get appointments. It is up to me to close now (I will – you know me). Then I will get orders and hire more Baltimore City Unemployed steel workers. This was not a junket. He worked hard. He worked early in the am till late at night.

For example we had an event at 930pm (start time) for the American/Korean Women’s Chamber of Commerce. At that event, I met the owner of the company that does 30% of all the steel work for the GM Korea plant (they make 400k cars a year). I would never have met her if it was not for this program. She would not have come if the Governor was not there. I respect your views (I am very fiscally conservative), but they do not match with this trade mission.

Posted by Jay Hancock at 6:09 AM | Permalink | Comments (7)
        

Maryland Comptroller Peter Franchot has reiterated that he did not intend recently passed legislation banning cigar shipments to apply to high-end cigars, and he has asked General Assembly leaders for permission to not enforce the law with regard to those products.

As previously chronicled, fans of fine cigars got angry over the ban on buying cigars over the Internet, passed in 2010 and effective this year. Franchot, who requested a wider law covering cigars, chewing tobacco and other non-cigarette products, got deluged with complaints last month from people who like to smoke $10 stogies on the golf course.

He quickly said that he didn't intend for the law to cover "premium" cigars and that he would suggest the General Assembly pass an exception for those products. The law was intended to crack down on smuggling of cigars, pipe tobacco etc. and to deter kids from making huge marijuana blunts by hollowing out cheap cigars. But smuggling and sales to minors aren't a big problem with high-end cigars, Franchot says. Legislators are talking about amending the law in the special legislative session in the fall.

The question then became, Would Franchot's office enforce the new law with regard to premium cigars in the meantime? We now have a partial answer. Here are parts from a letter he sent to House Speaker Mike Busch and Senate President Mike Miller on Monday.

... it would be my preference to defer any further enforcement activity by my Office until the legislature has an opportunity to take action. Out of deference to the legislative branch,however, I would respectfully request your concurrence with this stay of enforcement.

Please keep in mind that this stay of enforcement would only apply to the sale of those products that meet the statutory definition of premium cigars, and it would only remain in effect until the legislature has had an appropriate opportunity to repeal the ban. Should the legislature choose to leave the terms of the current legislation intact, we would act promptly to enforce the letter of the law.

While I recognize that this is an uncommon request, I do believe it is warranted in this particular case.

Premium cigars, I have been told, are anything over $2. I'll call Miller's and Busch's offices to see what they say.

Posted by Jay Hancock at 11:12 AM | Permalink | Comments (9)
Categories: Taxes
        

Fed Chairman Ben Bernanke is getting flack for urging Congress to fix the debt-ceiling problem without gamesmanship.

Federal Reserve officials are supposed to be reticent about fiscal policy. Among Greenspan's errors was supporting the Bush tax cuts in 2001. (Last year he atoned by saying they should be allowed to expire. Completely.) But geez, in this case Bernanke is stating the blindingly obvious.

Posted by Jay Hancock at 9:02 AM | Permalink | Comments (1)
        

When you look at worker compensation stats for recent years (and decades), pay increases look better than they should because of the rising cost of health care. For those of us who are employed and have employer-provided health insurance, the medical plan is counted as part of our compensation. Because health-care costs and therefore health-insurance costs are soaring, the Labor Department says that that portion of our compensation is also soaring. Even though our cash raises haven't been that great, our overall "pay" has been rising at a moderate clip because of health inflation.

Do out-of-control health-care costs feel like a pay raise to you? Didn't think so. Most of us are not better off because of health inflation. True, medicine is improving and making people healthier. But not nearly at the same rate that its costs are going up. WindyAnalysis has the goods:

So just because health-care benefit costs have been rising, pushing up total employer costs, does not mean that real wages, including benefits have been increasing. And if you take into account that defined benefit pensions were common in the past, whereas they are virtually non-existent in the private sector, then there is no reason to believe that benefits, in real terms, have been increasing. If anything, previous generations received more benefits, but the cost of those benefits, particularly in terms of pension plans and medical plans for retirees, are only being realized now.

HT Marginal Revolution.

Posted by Jay Hancock at 8:45 AM | Permalink | Comments (9)
        

From Annie Linskey's account of the trip:

A spokeswoman for DBED, which organized the trip, said tax dollars were used to fund travel for six officials. That does not include O’Malley’s security detail or University System of Maryland staff.

A more complete accounting is expected later this week.

Posted by Jay Hancock at 8:38 AM | Permalink | Comments (1)
        

A few days ago I linked to a piece in ABA Journal that quoted local California media saying agents from the Department of Education broke down a guy's door with all the neighbors watching. The TV stations quoted the man, Kenneth Wright, as saying the agents were searching for evidence related to his wife's defaulted student loan. Civil libertarians took note.

The Education Department is denying that the raid had anything to do with an overdue student loan. And it is taking some pains to make that known. Yesterday a department spokesman emailed me a denial from the department's Office of Inspector General, which said the OIG only goes after serious stuff such as fraud and embezzlement. I said I would look at it. Today he emailed me again, and then his boss called on the phone.

"We are not going out there busting down doors of people who are late on their loan payments," said department spokesman Justin Hamilton.

OK. But neither is the department denying the other sensational aspects of the raid as reported by the TV stations in California, where it took place. The accounts had the agents breaking down Wright's door, cuffing him and taking him outside in his boxers. The department and the OIG say they can't talk about details of the case, but I hope it's something REALLY serious.

Posted by Jay Hancock at 6:03 AM | Permalink | Comments (1)
        

Johnny Mattei, who says he's an owner operator for the incumbent BWI taxi contractor, says my column advocating deregulation of BWI cabs ran out of gas. Having an exclusive deal keeps cabs clean and safe, he says, and the drivers can't pick up fares anywhere but BWI. Mattei:

I am a owner/operator of a BWI Taxi and I feel your article is worthless!! All of our cabs are subjected to twice a year inspections for cleanliness and serviceability! Have you ever taken a county cab or city cab and see how they look and smell? We wear uniforms and are presentable and make our customers happy and want to use our service time and time again! There are close to 400 drivers at BWI who have families and mortgages, all of our work comes from BWI and BWI only we are not allowed to pick up in the city or surrounding counties! The city has their cabs, the counties have their cabs and the airport has their own! That is just the way it is!! People will pay for comfort and convenience!!

The Board of Public Works meets Wednesday to again consider awarding a new contract to Dulles Airport Taxi. Liz Kay covered Tuesday's driver protest against the deal, which drivers say would put their jobs and income at risk.

Posted by Jay Hancock at 6:37 PM | Permalink | Comments (6)
Categories: Regulation
        

Analysts are putting a positive spin on the May retail sales report, saying the 2 percent month-to-month decline wasn't as bad as expected. Still, it's the first monthly drop in a while. And as Invictus shows on Big Picture, retail sales are a leading indicator of job creation. The red line is jobs, the blue line is retail sales.

Posted by Jay Hancock at 9:32 AM | Permalink | Comments (1)
        

The problem faced by Expedia, Orbitz and Travelocity is that they always have extra inventory, no matter how many trips they sell direct to consumers online. They are revenue-driven companies like any other, and the more product they move the more money they make. So what to do about a warehouse full of airfares and hotel rooms and rental cars? Don't just sit there. Get a sales force. A live, breathing sales force, not a banner ad.

So Expedia has tried to ally with the industry's traditional sales force, the travel agents, who are profiled in Lorraine Mirabella's article in today's paper. The online travel agencies are the enemies of brick-mortar travel agencies just as Amazon is the bane of Borders. But Expedia began signing deals with travel agents in Italy and expanded the arrangement to the U.S. last year, says Travel Market Report. In return for commissions agents get extra software that helps them track tickets and plan trips. Here's TMR:

Expedia, which is currently marking the first anniversary of the U.S. launch of its Travel Agent Affiliate Program (TAAP), is a case in point. The giant OTA believes it has transformed its relationship with travel agents worldwide from that of competitor to supplier, enlisting them as an effective sales channel for its vast array of product in return for commission payments.

In the U.S. 1,840 agents have enrolled in TAAP during its first year of operation here, and there is no indication that interest in the program is slowing. Diego Pedrani, Expedia’s global director of travel agent distribution, told Travel Market Report the OTA signs up 100 to 200 new agent affiliates in the U.S. every week.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (0)
        

None dare call it journalism. From Julian Moos at Poynter.

During an interview with Howard Kurtz on CNN's "Reliable Sources" Sunday morning, "20/20" co-anchor Chris Cuomo defended paying Meagan Broussard for photos she sent Anthony Weiner, part of the sex scandal that has jeopardized the U.S. Representative's job and led him to enter treatment. Cuomo confirmed that ABC paid Broussard $10,000-15,000 for the photos, which aired as part of its exclusive interview with her last week. The practice of paying licensing fees to sources has become more common and remains ethically troubling as it creates an incentive and reward for dramatic information, made available to the news organization that will pay the most for it. Cuomo said the payment did not bother him and he took responsibility for it.

“The commercial exigencies of the business reach into every aspect of reporting now ... It is my decision. I’m the anchor of '20/20.' I could have said, ‘Don’t do it.’ I don’t because it is the state of play right now. I wish it were not. I wish money was not in the game. But you know, it’s going to go somewhere else. You know someone else is going to pay for the same things. The question becomes what you’re paying for. You’re paying for these photos, why? Because they are the key to the exchanges. And this became about photos. This became about things that had to be real. So I needed them. And that is the state of play, Howie, I wish it were not. You do too. But it is the state of play. And to say otherwise I think is false.”

Reminds me of what everybody in investment banking was saying about subprime mortgages in 2006. Everybody else is doing it.

Posted by Jay Hancock at 11:52 AM | Permalink | Comments (0)
        

From a reader identifying himself as Nick Taylor:

Hancock, you've got it all wrong for several reasons. Ground rents are a questionable process whether they are registered or not. Secondly, expirations for property claims happen all the time. Look at it as casinos calling chips. Ignorance of a law does not mean it does not exist. Finally, I knew they were expiring and I don't even own any. What if these folks missed the fourth of july? You going to pay to repeat the fireworks?

In Sunday's column I argued that ground rents are a vested property right that cannot be abolished by an arbitrary deadline. The reader uses the example of casinos calling chips to suggest that property rights expire on deadline all the time. Here is another example that would seem to undermine my argument much more: When countries change currencies (ie. going from French francs to euros), sometimes the old currencies expire upon a certain date.

The casino example is between private parties, and presumably there is fine print in the deemed contract that allows the chip expiration. Currencies, however, are government obligations and perhaps more relevant to ground rents. However, ground-rent extiguishment is the government intervening in a contract between two private parties. There are three parties. Currency expiration is between the government and person who holds its paper.

Posted by Jay Hancock at 10:57 AM | Permalink | Comments (0)
        

Sunday's column was about people who forgot to register their ground rents by the deadline and now, if current law stands, have lost their rights to collect from tenants. Got this email yesterday from another ground rent owner who didn't know about the registration requirement:

Dear Mr. Hancock, Add another old lady to your list of owners who "lost" ground rents! I never got the full payment for my ground rents (2), even when I owned them, because people tried to get away with not paying even though they knew they had ground rents. My lawyer then "forgot" to register them. If I had realized they needed to be registered, I would have done it myself! My 2 small ground rents were inherited from my parents.

I wrote to the Sun reporter who was so proud she protected others. My questions and observations at the time were the same as your questions. I don't want to hurt anyone else; but how about my rights - I had a registered deed! I was shocked when I realized what had been done by our legislature. I assumed it was a vote getting ploy. These deeds were recorded, legally, in Baltimore City. Why was I paying lawyers and recording fees and no one knew how to contact me to notify me of the need to "re-register" them? The City and the State certainly know how to reach me when they want my tax payments!
Thank you for your article.

Posted by Jay Hancock at 10:43 AM | Permalink | Comments (2)
        

Doubt it. But it's good to see that the Public Service Commission dinged North American Power for telling blatant falsehoods about how much money BGE customers could save by switching from BGE's standard power package to North American's. A woman from North American who called me at home a few months ago said I could save up to 20 percent when the savings were nothing of the kind. Here's the column I wrote about it.

North American got fined $100,000, which is a decent hit for the small but rapidly growing outfit. Here is Hanah Cho's story on the fine. From the PSC's news release:

In response to a Complaint filed by Commission Staff, and after evidentiary hearings, the Commission found that: (1) four deceptive statements were contained in placemat advertisements marketing NAP services, which were placed at certain diners by four NAP representatives (e.g., claiming that there is “no contract to sign” and that “customers can ‘save up to 20%’”); (2) NAP falsely stated in its Terms and Conditions that they had been approved by the Commission; and (3) NAP failed to provide a complete and accurate price description in its Terms and Conditions, along with the Commission’s toll-free number and Internet address for complaints, as required.

Here is the statement put out by the company:

"We are so pleased to have resolved this issue to the satisfaction of the Commission and to our internal standards of doing business. While the fine is significant, we are grateful to the PSC Staff for bringing our attention to these matters and for acknowledging that this was not intentional-it was the result of an early stage company experiencing rapid growth. This process has caused us to re-examine our practices and hire some of the best compliance and energy experts in the business - we are a better company because of it."

They're probably not THAT grateful. Now let's see if they and others can clean up their act. When BGE's expensive electricity-supply agreements finally disappear in October and BGE's standard price falls again, the third-party marketers will have a hard time delivering any savings. That would pressure salesfolks to enhance reality again.

Posted by Jay Hancock at 9:03 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Falling prices for solar power won't just help the environment. They'll help the economy. A positive shock from genuinely low solar prices would have salutory economic repercussions across the world, especially in the U.S.

Even better, they could end dumb arguments about global warming. If carbon-free power becomes genuinely cheap, it makes sense to buy it whether or not you think climate-change is a global liberal conspiracy. If my hunch that global-warming skepticism correlates with libertarian tendencies is correct, all those climate-change skeptics should be thrilled with the way distributed solar generation will let them go off the grid. Even if they have to embrace a tree-hugger technology in the bargain. From the Financial Times:

US solar power will compete on price with conventional generation within three years without subsidy thanks to plummeting costs, industry leaders say.

In a breakthrough for renewable generation that will lessen the dependence on fossil fuels, the cost of solar power in California is near that of gas-fired plants at times of peak demand.

Solar power costs have dropped about 60 per cent in the past five years due to technological advances, manufacturing efficiency and squeezed profit margins created by overcapacity among suppliers.

UPDATE: Here is more evidence from Climate Progress. Stephen Lacey writes that "Solar is Ready Now: 'Ferocious Cost Reductions Make Solar PV Competitive" HT Stuart.

Posted by Jay Hancock at 11:57 AM | Permalink | Comments (4)
Categories: Energy
        

So I'm eating dinner at about 8:00 last night, going through the mail. There's a cardboard flyer from BGE Home for standby electric generators. "When the lights go out... You won't have to!"
"Be prepared to handle any power outage with a standby generator from BGE HOME."

On cue, thunder rolls and the lights start flickering. Fortunately we kept our power, but more than 50,000 other area households didn't. Of course the power is delivered by BGE, which, as the companies keep taking pains to point out, is not the same company as BGE Home. (But if they were that worried about people mistaking one for the other they could change BGE Home's name.) BGE Home is an unregulated company owned by Constellation Energy, which is also BGE's parent. BGE Home is in the electric/gas appliance and maintenance biz.

But they're both owned by the same parent. Could the repeated BGE outages be an evil plot to spur generator sales from BGE Home? Not really. The BGE outages occur because the company hasn't hardened its system enough to withstand storms. The money it saves from not burying lines etc. is a lot more than anything from generator sales. (I'm not saying they need to get to zero outages, but BGE's and Pepco's records the past two years have been pretty poor.)

This morning, waiting to go on WBAL with Bill Vanko, I heard a backup generator commercial from some other company.

Posted by Jay Hancock at 9:04 AM | Permalink | Comments (11)
Categories: BGE/electricity
        

Under Armour went public in late 2005 and two months later analysts already were saying the stock was looking pretty foamy. Here's a story from The Sun in January 2006:

Some Wall Street analysts recently warned that the price of the stock leaves little room for future growth. The Baltimore company, known for its line of athletic apparel that wicks perspiration from the body, would have to meet hard-to-meet sales goals to justify its stock price, some financial experts warn. Shares of Under Armour rose 51 cents, or 1 percent, to close at $39.02 on the Nasdaq stock market Friday.

It is sort of difficult to be enthusiastic about the stock because it is highly overvalued," said Robbert Van Batenburg, head of research at Louis Capital in New York, who likes the company but not the stock price. "There are certain variables the company will have to meet."

The Goldman Sachs Group Inc. this month sent out what amounted to a warning message when it initiated stock coverage of the company at a "neutral" rating, not a "buy" recommendation. That was all the more striking because Goldman was one of the underwriters for Under Armour's initial public offering.

Under Armour, however, had a rock-solid, cool brand, profits and a terrific management team. Its high price relative to earnings has been justified so far, although at a PE 46 it's STILL looking foamy. The Bloomberg machine tells us that those who bought into the UA IPO in 2005 have earned a 400 percent total return. Somehow I don't think some of the companies pursuing IPOs this year will fare as well.

Posted by Jay Hancock at 6:53 PM | Permalink | Comments (0)
        

Having defended the freedom-defending credentials of Maryland and the rest of the United States, I see this dispatch from the ABA Journal on a California raid by Education Department agents.

UPDATE: The Education Department seems to be contacting everybody who wrote or posted about this to deny Kenneth Wright's statement to local media that this was about an overdue student loan, saying that the department's inspector general only investigates criminal fraud, bribery, embezzlement and similar offenses. I'll comment and post the full statement tomorrow.

Kenneth Wright originally told News10/KXTV that a SWAT team broke down his door in a search for evidence of his estranged wife’s defaulted student loans. The Stockton man said he was in boxer shorts when officers broke down his door, hauled him out to his front lawn, put him in handcuffs and forced his three children to sit in a squad car for hours.

The agents worked for the Education Department’s Office of Inspector General and were not a SWAT team. But a neighbor confirmed other details of the raid on Wright’s home. “They surrounded the house; it was like a task force or SWAT team," the neighbor told News10. "They all had guns. They dragged him out in his boxer shorts, threw him to the ground and handcuffed him."

The Education Department is one of more than two dozen federal agencies that were granted full police power to carry out raids under the Homeland Security Act, Reason.com reports. Other agencies with such powers include the Department of Labor, the Export-Import Bank of the United States and the Tennessee Valley Authority.

Posted by Jay Hancock at 3:37 PM | Permalink | Comments (2)
        

Good of Mercatus Center scholars Jason Soren and William Ruger to note in their study, Freedom in the 50 States, that freedom variations in America are basically rounding errors when it comes to looking at global liberty:

Finally, we would stress that the variance in liberty at the state level in the United States is quite small in the global context. Even New York provides a much freer environment for the individual than the majority of countries. There are no Burmas or Zimbabwes among the American states. Still, we do find that our federal system allows states to pursue different policies in a range of important areas.

Maryland does poorly compared with other states, as you might expect. It came in 43rd in overall freedom and dead last in personal freedom, flunking measures of liberty on guns, gambling, marijuana, tobacco and same-sex marriage. But not allowing same-sex marriage is not the same as putting people in prison or executing them for sodomy. For everybody but perhaps libertarian purists, finding freedom differences among U.S. states is like comparing Pepsi with Coke as beverages while overlooking cyanide cocktails and battery acid.

Maryland Reporter's Megan Poinski writes about the Mercatus Study here and notes that, perhaps surprisingly, Mercatus ranked Maryland well on taxes and spending.

Posted by Jay Hancock at 9:06 AM | Permalink | Comments (5)
        

Classic move in the corporate welfare wars. UBS set off a bidding war in the 1990s when it shook down NYC and neighboring locales for bribes on where to move its huge and highly paid operation. It went to Stamford. Now it's shaking the money tree again, saying it needs to go back to New York. NYT:

Connecticut sweetened the pot for UBS by dangling what was supposed to be a $120 million package of tax breaks and interest-free loans, although the actual value of the incentives turned out to be substantially less. The bank erected a trading floor the size of two football fields, packed with more than 5,000 computer monitors.

At the time, Mayor Rudolph W. Giuliani charged that Connecticut had broken a 1991 nonaggression treaty among New York, New Jersey and Connecticut, in which state leaders promised not to use special incentives to steal jobs from one another.

Posted by Jay Hancock at 11:27 AM | Permalink | Comments (2)
        

Dear Jay: On Sunday, I read your column on NJ's withdrawl from the RGGI. Based on your past columns it is abundantly clear that you accept the scientific hypothesis of the man-made global warming.

Would you be kind enough to send me a detailed list of the sources you relied upon to reach your conclusion. Please provide the author's names, dates of publication and the titles of the relevant journals. All the best,

Hi Chris: Thanks for your message. It’s always good to be skeptical, but I believe the evidence and authority are on the side of those who believe in manmade global warming. Nobody argues about the physics – increased atmospheric CO2 will cause a greenhouse effect. Nobody argues about the levels. CO2 is rising. Nobody argues about the source of the CO2. It’s anthropogenic.

So you have a pretty good argument right there for paying attention and worrying about bad effects. But people a lot smarter than I am also believe that global temperatures are indeed rising and are connected to the CO2 increase, and I’m prepared to take their word for it. If you want a cite go to the 4th IPCC report, which I’m sure you already have. Given the weight of evidence and opinion, the onus is on skeptics to falsify the proposition that humans are causing global warming. And they haven’t done it. JH

Posted by Jay Hancock at 6:09 AM | Permalink | Comments (37)
Categories: Environment
        

On Tuesday I published a cranky column on Groupon, the red-hot online/email discount coupon service. Unlike regular coupons Groupon requires an investment from the consumer, like buying a discount gift card.

Several readers argued that Groupon is a great way to promote your restaurant if it's new and unknown. Sure, it's expensive, they said. But you're investing in your brand, filling the seats and laying ground for a sustainable business at full price. Indeed, that's what Mike Sproge, whom I quoted in the column, was thinking when he used Groupon to get The Falls off the ground, and he said it worked. However he also said he wouldn't use Groupon again because the economics were weighted too much in Groupon's favor.

Here is some of the feedback:

Your article read like it was written on some one's behalf, or to benefit their form of advertising, because you COMPLETELY MISSED why deals are the hottest form of advertising right now. So hot that Groupon turned down $6 billion from Google for their business.

Using the Charleston group restaurants as an example shows either your total lack of marketing knowledge or that it was free promotion for the group in exchange for something. All of Cindy Wolf's restaurants price a large percentage of the population out of their market, and the average income family might only afford to go their once a year if that.

Miss Shirley's in Roland Park as another example???? They charge $15 for eggs and bacon, a meal that costs $5 anywhere else.

What you did not go into is the point of running deals, the no out of pocket cost for the promotion, the social media attention, word of mouth and that deals should be structured so that the business can upsell, and capture long time customers, and not just take a loss.

Groupon delivers a promotion to 30 million people! A business has the 3 options, do nothing and get no new business and eventually fail, pay for traditional advertising which can be very expensive and risky driving up the cost of acquisition of a new customer, or they can run a deal that will make consumers aware of their business due to a large discount and get them into their establishment.

And:

I wish you would have called me when writing your column about Groupon. I think Groupon should have taken Google's money and ran but I don't agree it's a bad marketing tactic for restaurants.

I hired a young new chef and spent one million dollars renovating my fifteen year old cafe in 2009. The project was completed that June and instantly met with rave reviews. Problem was our sales were barely up 15% by the end of the year.

That horrible winter didn't much help the first quarter of 2010. Enter Groupon. They were just getting going in Baltimore and approached us after receiving a great response from another newish restaurant in town, Blue Hill Tavern. Knowing full well that once people heard of us they would love us we figured we had little to lose. We sold just under 700 Groupons. We were paid one-third of the face value less 2.5% to cover credit card processing fees incurred by Groupon. Over the course of the next 90 days we were steady-to-busy every night.

In 2010 my annual sales over the prior year were up 40%. Groupon taught me something most restaurants never learn- You have to get your name out there. I haven't done another Groupon. But I haven't ruled it out. I do something now though I never did before, I budget and spend 3% of revenue on advertising and marketing. I'm on WYPR, Baltimore Magazine, paid Internet search, social media (professionally managed), and maintain a well designed web site.

Our business is trending positive 20% in 2011. I don't think many restaurants in Baltimore can say the same thing. Restaurants fail to market at their own peril. Groupon (and maybe their copycats) is an effective non-cash way to get your name out there.

Sincerley,

Gino Cardinale
City Cafe
Cathedral & Eager Streets

And:

I think Groupon is a great way to try out a new restaurant or other product without fully investing your money into a full meal. It's then up to the restaurant to win you over. My wife

and I use them all the time. If we like the restaurant, we go back and pay full price. Groupon gets us in the door in the first place though. For instance, take Zen West in Belvedere Square. We never knew it existed, bought a Groupon for it last week, and went there to see how the food/atmosphere was. We loved it and have been back twice at full price since (yes, in only a week!) Without Groupon, we would have never discovered this excellent tex-mex venue so close to where we live.

And:

The restaurants may view this as being not worth the hassle to deal with the groupon deal, but by particpating in the deal, they are potentially drawing in a crowd of people that may have never tried their restaurant otherwise. The potential to lure in new long term customers should be a consideration to these restaurants- get the people in your doors and then hopefully your food is good enough to make them want to come back again someday- they may not come back often but eventually some of those people will either be wanting to go out to a nice place again or they will be suggesting nice places to their friends that may be asking around for opinions. Sure, the initial groupon deal might not be all that profitable, but if it's done correctly you could improve your future business.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (5)
        

Web czars say Moveable Type got barraged by comment spam over the weekend and turned off blog comments. So you can't comment. Hope that changes soon.

Posted by Jay Hancock at 3:44 PM | Permalink | Comments (0)
        

Looks interesting. Preview video is here.

BLOOMBERG GAME CHANGERS: CHARLES AND DAVID KOCH

Tonight, June 7th at 9:00pm ET/9:00pm PT on Bloomberg Television

The richest brothers in the world own a company that most Americans have never heard of…yet their activism has altered U.S. politics and their family feuds rival those on "Dynasty."

Tonight at 9pm/ET, “Bloomberg Game Changers” profiles billionaires Charles and David Koch, who quietly built a $44 billion fortune running Koch Industries, an industrial conglomerate with interests in everything from oil and gas to trading and paper products.

Bloomberg Television explores how the brothers' deeply held Libertarian convictions inspired them to spend millions to founding think tanks and PACs including Americans for Prosperity foundation, a major supporter of Republican candidates during the 2010 midterm elections and beyond.

Posted by Jay Hancock at 11:37 AM | Permalink | Comments (2)
        

A revealing table and wise words from (conservative) Bruce Bartlett, from the NYT's Economix site:

Bartlett:

When Americans see these data they are usually incredulous that Europeans submit to such seemingly oppressive tax levels. Conservatives, in particular, tend to view freedom as a fixed sum: the bigger government is as a share of G.D.P., the less freedom there is for the people (if government consumes, say, 40 percent of G.D.P., then people are only 60 percent free).The late Milton Friedman popularized this idea, but even he thought that freedom would not be seriously threatened in Western democracies until government spending reached 60 percent of G.D.P. We are far away from that “tipping point,” as he called it; in 2010, total federal, state and local government spending amounted to 36 percent of G.D.P.

American conservatives tend to ignore the composition of spending; to them, just about all spending is equally bad. Europeans don’t have this attitude because their governments provide them with benefits from which all residents gain....

In short, a substantial portion of the higher tax burden that Europeans pay is really illusory. They are really just paying their health insurance premiums through their taxes rather than through lower wages, as we do.

Posted by Jay Hancock at 11:04 AM | Permalink | Comments (2)
Categories: Taxes
        

The Global Commission on Drug Policy tells the truth.

The global war on drugs has failed, with devastating consequences for individuals and societies around the world. Fifty years after the initiation of the UN Single Convention on Narcotic Drugs, and 40 years after President Nixon launched the US government’s war on drugs, fundamental reforms in national and global drug control policies are urgently needed.

Vast expenditures on criminalization and repressive measures directed at producers, traffickers and consumers of illegal drugs have clearly failed to effectively curtail supply or consumption. Apparent victories in eliminating one source or trafficking organization are negated almost instantly by the emergence of other sources and traffickers. Repressive efforts directed at consumers impede public health measures to reduce HIV/AIDS, overdose fatalities
and other harmful consequences of
drug use. Government expenditures on
futile supply reduction strategies and incarceration displace more cost-effective and evidence-based investments in
demand and harm reduction.

Our principles and recommendations can be summarized as follows:
End the criminalization, marginalization
and stigmatization of people who use drugs but who do no harm to others. Challenge rather than reinforce common misconceptions about drug markets, drug use and
drug dependence.

The findings are unassailable. The commissioners are blue chip. Here they are:

Asma Jahangir, human rights activist, former UN Special Rapporteur on Arbitrary, Extrajudicial and Summary Executions, Pakistan Carlos Fuentes, writer and public intellectual, Mexico César Gaviria, former President of Colombia Ernesto Zedillo, former President of Mexico Fernando Henrique Cardoso, former President of Brazil (chair) George Papandreou, Prime Minister of Greece George P. Shultz, former Secretary of State, United States (honorary chair) Javier Solana, former European Union High Representative for the Common Foreign and Security Policy, Spain John Whitehead, banker and civil servant, chair of the World Trade Center Memorial Foundation, United States Kofi Annan, former Secretary General of the United Nations, Ghana Louise Arbour, former UN High Commissioner for Human Rights, President of the International Crisis Group, Canada Maria Cattaui, Petroplus Holdings Board member, former Secretary-General of the International Chamber of Commerce, Switzerland Mario Vargas Llosa, writer and public intellectual, Peru Marion Caspers-Merk, former State Secretary at the German Federal Ministry of Health Michel Kazatchkine, executive director of the Global Fund to Fight AIDS, Tuberculosis and Malaria, France Paul Volcker, former Chairman of the United States Federal Reserve and of the Economic Recovery Board Richard Branson, entrepreneur, advocate for social causes, founder of the Virgin Group, co-founder of The Elders, United Kingdom Ruth Dreifuss, former President of Switzerland and Minister of Home Affairs Thorvald Stoltenberg, former Minister of Foreign Affairs and UN High Commissioner for Refugees, Norway

Posted by Jay Hancock at 7:19 PM | Permalink | Comments (2)
Categories: War on Drugs
        

Maryland Gov. Martin O'Malley has ordered an in-depth study of shale-gas drilling. The study is supposed to be complete in December, before the next regular session of the legislature. Maryland hasn't issued any shale-gas drilling permits and was unlikely to do so anytime soon. Nevertheless, the study pushes everything back at least until next year.

It's a good idea to investigate the damage and pollution that hydrofracking is causing. I argue that hydrofracking, under adequate regulation (there is none now), could be a lesser environmental evil given the alternatives of coal, oil etc. (Natural gas is pretty clean and emits much less carbon dioxide than coal.) The governor is correct to look at the downsides. At stake among other things are millions of dollars for Garrett County farmers with potential wells on their land. Below is O'Malley's press release.

Governor O’Malley Announces Study of Marcellus Shale Drilling Governor signs Executive Order establishing task force to include science, business, environmental advocacy, local representatives ANNAPOLIS, MD, (June 6, 2011) – Governor Martin O’Malley today signed an Executive Order (Order) establishing the Marcellus Shale Safe Drilling Initiative. The Order requires the Maryland Department of the Environment (MDE) and the Department of Natural Resources (DNR), in consultation with an advisory commission made up of a broad array of stakeholders, to undertake a study of drilling for natural gas from the Marcellus Shale in Western Maryland. “While we are mindful of the potential economic and energy benefits that could arise from the

production of natural gas from the Marcellus Shale reserves in Maryland, we are also very concerned about an array of issues that have been raised regarding the use of hydraulic fracturing to extract this fuel,” said Governor O’Malley. “Our decisions must be guided by scientific knowledge about the effects of this type of drilling to ensure that we protect public safety and health, groundwater, surface water, and the rural lifestyle and natural resources in Maryland.” Under the Executive Order, the study will be conducted in three parts: • A presentation of findings and related recommendations regarding the desirability of legislation to establish revenue sources, such as a State-level severance tax, and the desirability of legislation to establish standards of liability for damages caused by gas exploration and production. These findings and recommendations will be made by December 31, 2011. • Recommendations for best practices for all aspects of natural gas exploration and production in the Marcellus Shale in Maryland by August 1, 2012. • A final report which will include findings and recommendations relating to the impact of Marcellus Shale drilling including possible contamination of groundwater, handling and disposal of wastewater, environmental impacts, impacts to forests and important habitats, greenhouse gas emissions and economic impact. This report will be issued no later than August 1, 2014. The Study will also include a review of available results from studies on the issue being done by the U.S. Environmental Protection Agency, the U.S. Department of Interior, the U.S. Department of Energy, the State of New York, and the Delaware River Basin Commission, among others. Membership in the advisory committee is designed to ensure that the study includes individuals from the drilling industry, Western Maryland where Marcellus Shale reserves are located and members of the environmental community. The advisory commission will include: an expert on geology or natural gas production from a college or university; a private citizen from Western Maryland; representatives from the gas industry and an environmental organization; and representatives from Western Maryland local governments and business. “I applaud the Governor and his administration for taking this step toward insuring that any drilling in Marcellus Shale or the use of ‘fracking’ techniques in Maryland will be safe for our citizens,” said Maggie McIntosh, Chair of the MD House of Delegates’ Environmental Matters Committee. “While I acknowledge that the extraction of natural gas is important to our state and country, we must also understand that oil and gas activities, including hydro-fracking, are exempt from many federal environmental laws. Experiences in nearby states have demonstrated that the Departments of Environment and Natural Resources and the legislature must set standards to protect our drinking water, land and air when drilling in Marcellus Shale.” “Fortunately, Maryland is taking the time to ensure drilling occurs only after proper safeguards are in place. Given that our drinking water and other natural resources are at risk, and given Pennsylvania’s checkered experience with fracking, we applaud the Governor for his leadership on this issue. Maryland has the opportunity to get it right,” said Kim Coble, MD Director of the Chesapeake Bay Foundation. The Marcellus Shale is a geological formation that underlies a large area of the northeastern United States, including portions of Western Maryland. It is believed to contain significant amounts of natural gas, which when burned to produce electricity produces lower greenhouse gas emissions than oil and coal. The production of natural gas from the Marcellus Shale involves deep wells with long horizontal sections and a process known as hydraulic fracturing. Advances in technology have helped spur a dramatic increase in the use of this process in the United States. Exploration for and production of natural gas from the Marcellus Shale in nearby states have resulted in injuries, well blowouts, releases of fracturing fluids and methane, spills, fires, forest fragmentation, road damage, and evidence of contamination to groundwater and surface water. Other states have revised or are reevaluating their regulatory programs for gas production or assessing the environmental impacts of gas development from the Marcellus Shale. State law allows MDE to specify conditions that the Department deems reasonable and appropriate in a permit to ensure that an operation fully complies with the law and to provide for public safety and the protection of the State’s natural resources. Maryland law requires that the proposed activity be subjected to a formal public review and comment process prior to any permit decision.

Posted by Jay Hancock at 2:21 PM | Permalink | Comments (1)
Categories: Energy
        

Here's Rich Walker, BGE's director of IT transformation, talking to Intelligent Utility. Obviously installing more than 1 million smart meters won't be a cakewalk, but Walker is a bit more candid in this interview than I would have expected.

As I've said, smart meters aren't the evil instruments of Big Brother that many believe them to be. Nevertheless, BGE customers to some degree will be experiment subjects for smart meters. The "lessons learned" that BGE will take away from the installation and teach to other utilities will be learned to a large degree at the risk of the BGE customer. HT Carol for the link.

Of the near-simultaneous implementation of multiple new systems, Walker said: "I wouldn't recommend this for the faint of heart." Intelligent Utililty:

BG&E has begun its ambitious implementation schedule, partially driven by the requirements of its federal grant, which accelerates this fall and is scheduled to end in 2014.

Among the lessons learned, Walker said, many will resonate with other utilities. Those lessons involved complexity, integration, resources and organizational change.

"You cannot underestimate the complexity of replacing the heart of your utility systems," Walker said. "If you're approaching the replacement of three systems, you need to closely consider your timeline and budget."

The integration challenge can be tackled in-house, but you'll need "a small army," Walker said. Better to see what options the market can offer.

Resources and expertise in the marketplace "go hand in hand," Walker said. "There aren't that many experts in the marketplace who can do this work, so you need to form alliances with your integrator and vendor."

Posted by Jay Hancock at 11:26 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Because of their ancient pedigree and lack of regulation, ground rents have long been subject to the classic market failure of asymmetrical information -- one party to the deal knows a lot more than the counterparty. For years this worked to the disadvantage advantage of some unethical ground rent owners who would initiate expensive legal proceedings and sometimes seize people's homes when tenants owned a few hundred dollars in ground rent. Because there was no statewide registry tenants sometimes had trouble knowing who the landlords were and where to send the rent. Ground rents could change hands and tenants would have no idea.

But after the state reformed ground rents thanks to The Sun's investigation, the shoe got switched to the other foot. Maryland required ground rent registration and set a date certain beyond which landlords would lose their title if they hadn't registered. But the informality that required ground-rent reform now worked to landlords' disadvantage. Some lived out of state. How was Maryland to notify everybody that they had to register? There was no list. Where once tenants were ignorant of important legal proceedings and in jeopardy of having their property rights violated, landlords seem to have found themselves in the same position.

As Andrea Siegel writes in today's paper, some landlords sued, and the case has reached the Court of Appeals. If there are indeed legitimate ground-rent owners who didn't know they had to register, an extension of the deadline seems like a a reasonable deal. However the high court probably isn't in a position to impose that kind of remedy; presumably that would be up to the legislature. But property rights are just as important to landlords as to tenants, an indication of why the case has gotten this far.

Posted by Jay Hancock at 8:51 AM | Permalink | Comments (0)
        

Meant to blog this earlier. Joe Nocera sends a well-deserved Valentine to M&T Banks Robert Wilmers:

On the other hand, it didn’t exactly surprise him [Wilmers]. In the run-up to the financial crisis, the giant national banks — which he viewed as a distinct species from the typical American bank — had done things that deserved condemnation. And, he added, “They are still doing things that I don’t think are very good.”

Such as? “It has become a virtual casino,” he replied. “To me, banks exist for people to keep their liquid income, and also to finance trade and commerce.” Yet the six largest holding companies, which made a combined $75 billion last year, had $56 billion in trading revenues. “If you assume, as I do, that trading revenues go straight to the bottom line, that means that trading, not lending, is how they make most of their money,” he said.

From my December 2008 column on M&T:

Meet the new American lender. M&T Bank Corp., which said yesterday that it will buy Baltimore's Provident Bankshares, will typify U.S. finance in the next few years.

Big. Based somewhere else. But something that looks like an old-fashioned bank, with branch offices and lollipops next to the teller. FDIC-insured.No investment banking division. No Masters of the Universe deal makers. No 30 dollars borrowed for every one dollar of capital. A lineup that recently would have seemed terribly dull for consumers as well as shareholders now looks very attractive. At the end of this cataclysmic year, tradition and safety are the most exciting things of all.

Posted by Jay Hancock at 10:54 AM | Permalink | Comments (0)
Categories: Finance
        

Ellicott City money manager John Hussman, in his weekly commentary published May 30.

Despite the "lost decade" since the extreme valuations of 2000, valuations are now presently at about the same level from which prior secular bear markets have just started. There is no basis to expect a secular bull until we observe the valuations from which they have invariably started. Meanwhile, the recent cyclical bull market from the 2009 low has already run the same duration and slightly further than the typical cyclical bull in a secular bear.

So from a secular, long-term perspective, my impression is that investors are very likely to observe much better opportunities to allocate capital toward equities at better valuations and prospective returns in the years ahead. The cyclical case is driven by a large variety of other factors apart from valuations, and we can't express equal confidence about shorter-term outcomes. For us, the appropriate strategy is to allow for windows of moderate opportunity within that fairly unfavorable long-term picture.

Posted by Jay Hancock at 10:26 AM | Permalink | Comments (0)
Categories: Finance
        

in the Maryland legislature in arguments about electricity rates? We have the emotion. But not, as apparently Illinois does, the punches.

The fracas began during a heated debate over compensation for injured workers and an approved utility rate hike after McCarter accused Jacobs of a conflict of interest.

While no reporters were on the floor to witness to following events, rumours about the altercation spread fast around Capitol building.

Jacobs walked over to McCarter's desk after the debate and 'proceeded to give me his opinion that I had broken the rules,' McCarter told STLtoday.

'He went further to begin using vulgarity and profanity, and cussing me out, and pointed his finger at my face, and then he punched me in the chest.'

McCarter said other senators broke up the fight and that he has since filed a police report about the alleged assault.

Posted by Jay Hancock at 6:47 PM | Permalink | Comments (0)
        

A great essay in The New Republic on what's wrong with American health care by Daniel Callahan and Sherwin Nuland.

Ours is now a medicine that may doom most of us to an old age that will end badly: with our declining bodies falling apart as they always have but devilishly—and expensively—stretching out the suffering and decay. Can we conceptualize something better? Can we imagine a medicine that is more affordable—that brings our health care system’s current cost escalation, now in the range of 6 percent to 7 percent per year, down to 3 percent, which would place it in line with the annual rise in GDP? Can we imagine a system that is less ambitious but also more humane—that better handles the inevitable downward spiral of old age and helps us through a somewhat more limited life span as workers, citizens, and parents?

The answer to these questions is yes. But it will require—to use a religious term in a secular way—something like a conversion experience on the part of physicians, researchers, industry, and our nation as a whole.

And they tell the truth that is taboo in U.S. politics:

Unhappily, however, some rationing and limit-setting will be necessary. There is no way the Medicare program can survive unless it both sharply cuts benefits and raises taxes. Certain benefits can be cut directly or indirectly—directly by reducing payments for treatments, or indirectly by increasing co-payments and deductibles to a painful level, sufficient to discourage people from insisting on them.

Posted by Jay Hancock at 1:01 PM | Permalink | Comments (2)
Categories: Health Care
        

Online Labor Demand Rises 148,800 in May, The Conference Board Reports

Labor demand rises in May to pre-recession monthly high of 4.5 million advertised vacancies Labor demand up an average of 66,000/month over the last 4 months (Chart 1) May marks an all-time high for 6 of 22 major occupation groups since the HWOL series began in May 2005 (see Table B1, page 5 and Table 7)

The red line is unemployment. The blue line is help-wanted ads. They're starting to converge. That is, in the technical, econometric term, "good."  

 

 

 

 

 

 

 

 

 

 

 

METRO AREA HIGHLIGHTS Washington, D.C., Oklahoma City, Honolulu, and Boston have the lowest Supply/Demand rates

In May, all of the 52 metropolitan areas for which data are reported separately posted over-the-year increases in the number of online advertised vacancies. Among the three metro areas with the largest numbers of advertised vacancies, the New York metro area was 11.5 percent above its May 2010 level, the Los Angeles metro area was 15.5 percent above last year’s level, and the Washington, D.C. metro area was 7 percent above its May 2010 level (Table C & Table 5).

The number of unemployed exceeded the number of advertised vacancies in all of the 52 metro areas for which information is reported separately. Washington, DC continues to have the most favorable Supply/Demand rate (1.17) with about one advertised vacancy for every unemployed worker. Oklahoma City, Honolulu, Boston, Baltimore, Minneapolis-St. Paul, and San Jose were metropolitan locations where there were just less than two unemployed looking for work for every advertised vacancy (Table C).

Posted by Jay Hancock at 10:55 AM | Permalink | Comments (1)
Categories: The Great Recession