Recessions, as the name indicates, are when economic output shrinks. So to technically indicate a recession, a country's GDP has to be going backward. Economists declare the recession over whenever the slide stops and the economy starts creeping up again -- no matter how deep the hole it fell into. If you topple down a well a mile deep, the experts basically say the crisis is over once you've climbed back a few inches.

Maybe this is a better definition of the end of a recession: when you get back to the top of the well. We reached that point according to last quarter's GDP figures, says Bloomberg:

The value of goods and services produced in the U.S. surpassed its pre-recession level after 15 quarters, taking three times longer than the average for 10 previous recoveries since World War II.

“The American economy finally has accomplished the recovery and has now entered the expansion,” said Neal Soss, chief economist with Credit Suisse in New York, who was an aide to former Federal Reserve Chairman Paul Volcker. “But the growth is clearly too slow to solve the most significant problems the economy faces: jobs and getting the public budgets under control.”

Today's economy is adding the marginal GDP that economists once expected to come years ago.

Posted by Jay Hancock at 8:59 AM | Permalink | Comments (3)
Categories: The Great Recession
        

Michael Mandel in the Atlantic on the path forward:

It all comes down to this: We have to match growth to debt. If we can't create miracles from growth, we have to consider inflation to reduce the value of our debt. We have only two ways out of our current global economic mess: innovation and inflation. And as the saying goes, we should hope for the best (more innovation) and prepare for the worst (higher inflation).

Growth equals productivity (innovation) increases plus population (labor force) increases. So over the long term there is a third alternative: Having lots of kids or inviting in lots of productive immigrants. Each is problematic, including the pressure these would put on scarce resources and the time they would take to have macro effects.

But without one of these ways out, we may end of taking the fourth alternative: turning Japanese.

Posted by Jay Hancock at 8:45 AM | Permalink | Comments (1)
Categories: The Great Recession
        

I often call Obamacare "Obamacare," and I usually get objections from people who say it's a poltically laden term, shows my bias etc. Actually for me it's just a convenient shorthand. Fits better in a headline than the Patient Protection and Affordable Care Act. I was for Obamacare, although it's certainly not an example of ideal policy.

Now, as Kaiser Health News notes, groups in Colorado are trying to make the Obamacare brand appealing and positive:

But now, two nonprofit advocacy groups, ProgressNow Colorado Education and the Colorado Consumer Health Initiative, are trying to take back “Obamacare,” painting it as a positive brand in a new campaign (complete with its own Twitter feed and hash tag, #thanksobamacare) launched Monday.

The campaign highlights 10 reasons people should be thankful for the health law. Among them: allowing people younger than 26 to stay on their parents’ health insurance plans and stopping insurers from denying coverage to children with pre-existing conditions (the law does the same for adults beginning in 2014).

Posted by Jay Hancock at 11:13 AM | Permalink | Comments (1)
Categories: Health Care
        

Because time travel will never be possible, says Stephen Hawking via Robin Hanson. Even if it were going to take 5,000 more years before scientists perfected time travel, the visitors from 7011 would have already been here. Hawking:

If sometime in the future, we learn to travel in time, why hasn’t someone come back from the future, to tell us how to do it. Even if there were sound reasons for keeping us in ignorance, human nature being what it is, it is difficult to believe that someone wouldn’t show off, and tell us poor benighted peasants, the secret of time travel. …

If governments were hiding something, they are doing a pretty poor job of extracting useful information from the aliens. … Once you admit that some are mistakes, or hallucinations, isn’t it more probable that they all are, than that we are being visited by people from the future, or the other side of the galaxy? If they really want to colonize the Earth, or warn us of some danger, they are being pretty ineffective.

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

As it should have, the Maryland Court of Appeals handed down a decision today striking down the law that revoked the rights of ground-rent landlords who failed to register their titles with the state.

What it means for landlords who missed the deadline: Your property interest is held to be intact and it looks like you will get a new chance to register ground rents with the state's database. From the opinion:

Maryland's Constitution, Declaration of Rights, and long standing relevant federal case law provide specific prohibitions on the retrospective application of statutes that lead to the abrogation of vested rights and the taking of property without just compensation. For reasons that we shall elaborate, we hold that the extinguishment and transfer provisions of Chapter 290 are invalid under Maryland law. The registration requirements of the statute, however, survive...

From my June 12 column on Charlie Muskin's challenge of the ground-rent law:

Don't be surprised if Murphy and other judges on Maryland's highest court rule against the ground rent law and set the stage for more reasonable enforcement. Under any sensible understanding of principles that have stood the test of centuries, the Court of Appeals must reinstate the rights of the Evans descendants and other ground rentiers who missed the deadline.

The government can't take your car just because you forgot to renew the tags. It doesn't let banks keep money from depositors who lost track of their accounts. And it shouldn't wipe out the property of ground rent owners whose only fault was not paying attention.

Posted by Jay Hancock at 2:13 PM | Permalink | Comments (7)
        

A couple months ago I got pushback on my column making fun of Groupon. Some readers objected to the mocking of Groupon customers patronizing nice restaurants while clutching their cheapo coupons and leaving no tips. "Consumers need Groupon in this terrible economy!" was the basic refrain. "How dare you disparage struggling Americans trying to make ends meet!"

Well, if you're really struggling you probably shouldn't be eating out and shopping. The Groupon model is constantly evolving, but I don't believe they've started offering many discounts yet on BGE bills and other necessities. A new Accenture survey shows that, yes, Groupon customers tend to be better off and have disposable income. So Groupon is not the same as food stamps. From the article on the Accenture study:

The survey showed that, of households with annual incomes of at least $150,000, 54 percent are signed up for a daily deal site. The participation rate drops to 27 percent when annual household income falls to $35,000 or less. Daily deal subscribers also skew young, as 47 percent of respondents between 18 and 24 are signed up. In the 55-to-64 demographic, only 37 percent are subscribers.

Chicago-based Groupon, the leader of the daily deal industry, is planning to go public next month. Groupon and its rivals are facing skepticism over the daily deal business model, with critics saying that the sector's gangbusters growth is vulnerable to coupon fatigue among consumers who are being bombarded with multiple daily emails.

Posted by Jay Hancock at 11:22 AM | Permalink | Comments (11)
        

To make you feel better after reading all the terrible economic news. From the WSJ (subscription required):

Analysts have been raising their estimates of U.S. economic growth, an about-face from just a month ago, when they were lowering those forecasts and fretting that the country was on the cusp of recession.

In mid-September, a weekly poll of forecasters by consulting firm Macroeconomic Advisers showed economists expected gross domestic product to grow at an annual rate of just 1.7% in the third quarter. Now, the economists expect Thursday's GDP report from the Commerce Department to show a 2.7% gain, and some are looking for more than a 3% pace.

Posted by Jay Hancock at 9:27 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Felix Salmon is not impressed by HARP II, Obama's new refinancing program:

Sounds impressive, eh? It is, until you read the official FHFA press release. At which point you learn that

* If you’re a homeowner whose mortgage isn’t owned or guaranteed by Frannie, you’re out of luck.
* If your mortgage was sold to Frannie after May 31, 2009, you’re out of luck.
* If you want to get out of negative-equity hell by doing a principal reduction, you’re out of luck.
* If your bank doesn’t feel like participating, for whatever reason, you’re out of luck.

However, check out this Bloomberg story:

Oct. 25 (Bloomberg) -- The mortgage-bond market is showing investors are bracing for a larger-than-anticipated wave of refinancings following President Barack Obama's push to stoke the economy by helping more homeowners reduce loan payments.

Posted by Jay Hancock at 9:21 AM | Permalink | Comments (1)
Categories: The Great Recession
        

From Reuters:

Adamovich said a model portfolio designed to protect people's wealth in the face of global catastrophe has attracted more interest as financial turmoil spread in recent months.

The "catastrophe portfolio" allocates one third of money to gold, one third to defensive and internationally diversified blue chip company shares and a third to the debt of ultra safe developed countries.

Adamovich said interest in the portfolio is still limited to the most "paranoid" clients but interest is rising, particularly among people who have seen previous episodes of societal breakdown and financial collapse in Europe.

Posted by Jay Hancock at 9:14 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Maryland's job growth continues to slightly outperform that of Virginia during this slow, miserable recovery. Neither state is spinning prosperity. But according to the numbers for September, released this morning, Maryland has added 55,000 jobs -- 2.2 percent -- to its job base since employment hit bottom in February 2010. Virginia touched bottom in the same month, but since then it has added only 40,000 jobs -- 1.6 percent.

Maryland's recession was worse, however. The state lost 5.6 percent of its jobs from its peak employment of Feb. 2008 to its trough of Feb. 2010. In Virginia, whose peaks and troughs were in the same months, the job loss was 4.8 percent. Maryland's unemployment rate for September, however, was 7.4 percent -- worse than Virginia's. Virginia's September unemployment was 6.5 percent. Thanks largely to federal spending, both states are doing substantially better than the country as a whole.

Posted by Jay Hancock at 11:49 AM | Permalink | Comments (1)
Categories: The Great Recession
        

Constellation Energy CEO Mayo Shattuck has agreed to testify in person at regulatory hearings on Exelon Corp.'s proposal to buy Constellation and BGE, according to new filings with the Public Service Commission. The move comes after the Maryland Energy Administration asked the PSC to subpoena him as a witness, arguing that he needed to be available to answer many questions about the merger and his planned role at the combined company.

"In an effort to be fully transparent and to resolve any possible confusion, the Applicants will voluntarily produce Mr. Shattuck as a live witness in the proceedings on a panel with Mr. [Christopher] Crane," the No. 2 executive at Exelon, the companies' lawyer J. Joseph "Max" Curran III, wrote in a filing made Thursday.

That wasn't good enough for EDF Group, the French-controlled electricity giant that is Constellation's partner in a large nuclear energy venture. EDF has expressed concern that its multibillion-dollar investment in Constellation would be at risk if Constellation is absorbed by Exelon.

"... EDF submits that Mr. Shattuck does not need the protection of mr. Crane to address the many outstanding questions related to the proposed merger..." EDF's Thursday filing said.

Look for lawyers to grill Shattuck about his responsibilities, why he thinks the deal is a good one and how he would simultaneously act as chairman of the board and an employee reporting to Crane.

Posted by Jay Hancock at 6:02 AM | Permalink | Comments (3)
Categories: BGE/electricity
        

Landing in my mailbox is a fixed-price offer for natural-gas from IGS Energy. It's "a low fixed rate of 79.9 cents per therm that's guaranteed through your September 2012 billing cycle! That means you can lock in your rate now before your winter heating bills arrive -- and be assured of no price changes through next September."

This is a terrible price -- almost as bad as the 83.9 cents per therm that the Office of People's Counsel says is being offered by Spark Energy. As you can see, Baltimore Gas & Electric's standard, floating gas price hasn't been over 80 cents in more than two years. This month's price is 56 cents. Last winter the price never got over 64 cents. This winter's price is unlikely to be much different.

The one good thing to say about the IGS offer is that you can cancel it any time without an early-termination fee. But if you don't sign up for it in the first place, you won't have to worry about that.

Posted by Jay Hancock at 8:54 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

Gov. Martin O'Malley says he is open to a Maryland gas-tax increase of 15 cents, which would raise Maryland's gas tax from 23.5 cents per gallon to 38.5 cents per gallon. By one measure -- gauging only the excise tax, and assuming other states don't raise their gas taxes, too -- that would make Maryland's fuel tax highest in the country. See the Tax Foundation's table below.

However states such as California add a regular sales tax on top of the excise tax, and Maryland doesnt. The Tax Foundation also counts other gas-related fees to try to compare apples with apples. Even at 38.5 cents per gallon, Maryland's total gas tax would be less than California's 2011 total of 47.7 cents per gallon. But Maryland would still jump from 27th highest to 6th highest, based on total 2011 rates. Other states, however, will probably raise their own gas taxes in the next three years. Connecticut's governor, for example, tried to raise the gas tax this year and may try again.   

Posted by Jay Hancock at 6:30 AM | Permalink | Comments (6)
Categories: Taxes
        

Yesterday I blogged about a Texas company offering prepaid electricity plans the way some companies sell prepaid phone plans. Payless Power will set you up with no deposit and no credit score as long as there is a positive balance on the account. And when the account is drained, they shut you off.

Maryland Public Service Commission spokeswoman Regina Davis responds:

I just wanted to respond to your post on smart meters. The PSC wants to reassure you and your readers that: (1) the company you referenced is not licensed in MD, (2) we have not authorized any company to offer prepaid electricity, and (3) no company could do so unless we gave approval.

It's hard to imagine Maryland would OK something like this. Meanwhile Paula Carmody, Maryland's People's Counsel representing consumers before the commission, says:

Prepaid options have been offered by a few companies for a number of years (e.g. Arizona’s Salt River Project), and Texas has been actively pushing this as an “option” for customers. There are a number of specific consumer concerns that have been flagged by utility consumer agencies, in addition to the general concern that prepay is not the way to go for essential electric and heating services. I’ve attached a NASUCA resolution on this issue, FYI.

The resolution by the National Association of State Utility Consumer Advocates expressing concerns about prepaid plans is below the fold.

1
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
RESOLUTION 2011-3
URGING STATES TO REQUIRE CONSUMER PROTECTIONS
AS A CONDITION FOR APPROVAL OF
PREPAID RESIDENTIAL GAS AND ELECTRIC SERVICE
Whereas, the National Association of State Utility Consumer Advocates (“NASUCA”) 1 has a long-standing interest in issues and policies that affect the access of residential 2 consumers to essential gas and electric services; and 3

Whereas, some gas and electric utilities have sought to replace traditional credit-based 4 service to some residential customers with prepaid service delivered through prepayment 5 meters or digital meters with remote connection and disconnection capabilities; and 6
Whereas, prepaid gas and electric service requires customers to pay in advance for their 7 service, with prepaid account balances decreasing as service is delivered; and 8

Whereas, automated and remote disconnection of service can and does occur when 9 prepaid account balances are depleted; and 10

Whereas, experience in the United States and United Kingdom demonstrates that prepaid 11 metering and prepaid billing (1) is targeted toward and concentrated among customers 12 with low or moderate incomes that are facing service disconnections for nonpayment, (2) 13 results in more frequent service disconnections or interruptions, and (3) is delivered at a 14 higher rate than traditional credit-based service;1 and 15

Whereas, most of the current state consumer protection requirements regarding the 16 disconnection of service were not developed in anticipation of prepaid services, and such 17 protections may be bypassed or eliminated when services are provided on prepaid basis; 18 and 19

Whereas, proponents of prepaid service have sought legislation in at least one state 20 providing that automated, remote disconnection of service upon depletion of prepaid 21 account balances be considered a voluntary termination of service by the customer and 22 not a disconnection by the utility subject to consumer protection laws and regulations 23 regarding the disconnection of service;2 and 24

Whereas, the proliferation of digital meters with remote connection and disconnection 25 capabilities makes implementation of prepaid service more feasible economically for 26 utilities; and 27

Whereas, prepaid utility service reduces or eliminates utility incentives to negotiate 28 effective, reasonable payment agreements and to implement effective bill payment 29 assistance and arrearage management programs; and 30

2
Whereas, increased service disconnections of vital gas and electric service that come 31 with implementation of prepaid service and prepaid metering threaten the health and 32 safety of customers, particularly those who are most vulnerable to the effects of a loss of 33 service, including the elderly, disabled and low-income families, as detailed and 34 documented in a companion resolution encouraging state legislatures and state public 35 utility commissions to institute programs to reduce the incidence of disconnection of 36 residential gas and electric service based on nonpayment; and 37

Whereas, utilities offering prepaid service benefit financially from reduced cash working 38 capital requirements, uncollectibles amounts and credit and collections risk; and 39
Whereas, utilities in at least one state require customers to pay deposits for a customer 40 prepayment device or system;3 and 41

Whereas, providers of residential electric service in at least one state impose additional 42 fees on customers choosing to make payments more frequently than once every thirty 43 days and under other circumstances;4 and 44

Whereas, in at least one instance, a company has reportedly gone out of business after 45 receiving prepayment funds from customers, resulting in large unpaid fines and more 46 distressingly in an undetermined number of customers having lost their money;5 47

Now, therefore, be it resolved, that NASUCA continues its long tradition of support for 48 the universal provision of essential residential gas and electric service for all customers; 49
Be it further resolved, that proposals by utility companies that seek to replace traditional 50 credit-based service to some residential customers with prepaid service delivered through 51 prepayment meters or digital meters with remote connection and disconnection 52 capabilities should not be approved unless they guarantee that current consumer 53 protections are not bypassed or eliminated and that adequate and comparable consumer 54 protections are developed and in place. At a minimum, if prepaid services are offered, a 55 utility should be required to satisfy each of the following conditions: 56

(1) All regulatory consumer protections and programs regarding disconnection 57 limitations or prohibitions, advance notice of disconnection, premise visits, availability of 58 payment plans or deferred payment agreements, availability of bill payment assistance or 59 arrearage forgiveness, and billing disputes are maintained or enhanced; 60

(2) In the event that the billing credits of a customer receiving prepaid residential 61 electric or natural gas service are exhausted, the customer shall be given a reasonable 62 disconnection grace period, after which the customer shall revert to traditional, credit-63 based service, subject to all rules and customer protections applicable to such service; 64

(3) Prepayment households include no one who is 65
3
(a) income-eligible to participate in the federal Low Income Home Energy 66 Assistance Program (LIHEAP); or 67

(b) protected under state law from disconnection for health or safety reasons; 68

(4) Prepaid service is only marketed as a purely voluntary service and is not marketed 69 to customers facing imminent disconnection for non-payment; 70

(5) Utilities offering prepaid service also offer effective bill payment assistance and 71 arrearage management programs for all customers, including customers with arrearages 72 who choose prepayment service; 73

(6) Rates for prepaid service are lower than rates for comparable credit-based service, 74 reflecting the lower costs associated with reduced cash working capital requirements, 75 uncollectibles amounts and shareholder risk affecting a utility’s return on equity; 76
(7) Utilities demonstrate the cost effectiveness of any proposed prepaid service 77 offerings through a cost versus benefit analysis and reveal how costs will be allocated 78 among various classes of customers; 79

(8) Prepayment customers are not subjected to any security deposits or to additional 80 fees of any kind, including but not limited to initiation fees or extra fees assessed at any 81 time customers purchase credits; 82

(9) Utilities ensure there are readily available means for prepayment customers to 83 purchase service credits on a 24-hour a day, seven-day a week basis; 84

(10) Prepayment customers can return to credit-based service at no higher cost than the 85 cost at which new customers can obtain service; 86

(11) Payments to prepaid accounts are promptly posted to a customer’s account so as 87 to prevent disconnection or other action adverse to the customer under circumstances in 88 which the customer has in fact made payment; and 89

(12) Adequate financial mechanisms are developed and in place within the state to 90 guarantee that funds prepaid by customers are returned to the customers who prepaid 91 them if and when a company becomes insolvent, goes out of business or is otherwise 92 unable to provide the services for which the funds were prepaid; 93

Be if further resolved, that the implementation of prepaid service programs should be 94 monitored to ensure that it does not in practice result in an increased rate of service 95 disconnections for non-payment; 96

Be it further resolved, that utilities implementing prepaid service programs should track 97 and report to the state regulatory commission separately for credit-based and prepayment 98 customers each of the data points delineated in the companion resolution urging the states 99
4

to gather uniform statistical data on billings, arrearages and disconnections of residential 100 gas and electric service; 101

Be it further resolved, that NASUCA authorizes its Executive Committee to develop 102 specific positions and take appropriate actions consistent with the terms of this resolution. 103 The Executive Committee shall advise the membership of any proposed action prior to 104 taking action if possible. In any event the Executive Committee shall notify the 105 membership of any action pursuant to this resolution. 106

Submitted by Consumer Protection Committee
Approved June 28, 2011
San Antonio, Texas
Abstention: Tennessee
1“SRP’s prepaid electricity plan found to have higher rates,” The Arizona Republic,(July 11 2010), www.azcentral.com/private/cleanprint/?1299004402750; Electric Power Research Institute, “Paying Upfront: A Review of Salt River Project’s M-Power Prepaid Program, (October 2010); Talbot, “Prepayment meters: A scourge penalising the poor” (June 2009), http://www.energychoices.co.uk/prepayment-meters-a-scourge-penalising-the-poor.html; Centre for Sustainable Energy and National Right to Fuel Campaign, “Counting the Hidden Disconnected,” (1998).
2See 2011 Iowa Proposed Legislation, House Study Bill158, http://coolice.legis.state.ia.us/Cool-ICE/default.asp?Category=billinfo&Service=Billbook&menu=false&hbill=hsb158.
3“Paying Upfront” A Review of Salt River Project’s M-Power Prepaid Program,” EPRI, Palo Alto, CA: (2010), http://www.srpnet.com/environment/earthwise/pdfx/spp/EPRIMPower.pdf.
4Biedrzycki, “New Fees On Residential Electric Bills Complicate Cost Comparisons For Consumers Shopping For A Better Deal And Penalize Those Who Save Electricity And Those Struggling To Pay Their Bill” (February 2011), http://www.scribd.com/doc/49467979/Fees-Report-FINAL-2232011.
5Texas Public Utility Commission, News Release, “PUC orders $3.7 million in penalties: two former retail electric providers fined millions (Jan. 14, 2010), http://www.puc.state.tx.us/nrelease/2010/011410.pdf; “Consumer group: Electricity companies have big fees hidden in small print,” KHOU11 Houston (April 30, 2011) , http://www.khou.com/news/local/Consumer-group-Electricity-companies-have-big-fees-hidden-in-small-print--121014164html.

Posted by Jay Hancock at 6:04 AM | Permalink | Comments (1)
Categories: BGE/electricity
        

There is much anxiety and distrust over the coming of smart meters in many communities where they are appearing. BGE will start installing them in Baltimore-area households soon. Smart meters are basically computerized electricity meters to record your kilowatt usage by the minute and beam it to the electricity company.

They give utilities the power to shut off or turn on your juice more or less immediately, and eventually they could even feed fluctuating daily wholesale prices straight to your household account, letting you respond accordingly.

Here is a smart-meter feature I hadn't heard about, which seems troubling. Thanks, Carol, for bringing it to my attention. A company in Texas, Payless Power, is offering pay-as-you-go, no-deposit elecricity accounts similar to what cellphone companies offer. You pay for the juice in advance. If you don't pay, you don't get power.

I understand that kilowatts need to be paid for. But electricity isn't a cellphone. Pay-as-you-go cellphone customers generally pay more per minute than folks with contracts. Pay-as-you-go electricity service has the potential to offer all the convenience and affordability of payday lenders and rent-to-own furniture stores. Here is Payless Power's the whole press release:

Payless Power Now Offers Prepaid Electric Service in Texas Utilizing Smart Meters

Get SmarTricity with Flex Pay for prepaid electric service in Texas with NO deposit, NO credit check, and NO long term contract .

 Fort Worth, Texas (PRWEB) October 17, 2011

Payless Power, a leading no deposit electric company in Texas, is now utilizing smart meters as part of its pay-as-you go electricity plans to help customers better manage their usage and budget. By monitoring electricity usage in real-time, smart meters let retail electric providers and consumers know just how much energy has been consumed at any time during the course of a month; therefore, by using these advanced meters, the consumer will be notified of how much energy they are consuming daily as a way to monitor usage and reduce their electricity costs.

 According to Brandon Young, a principal in Payless Power, prepaid services utilizing the smart meter data makes billing more accurate and timely

while allowing the consumer to pay less money to get service connected as opposed to post paid service, which typically requires a passing credit score or a large cash deposit. “Not only do we help people throughout Texas to obtain prepaid electricity with no deposit or credit check, but now we also offer them the best solution to track usage and make payments as often as necessary," explains Young.

The smart meter will be professionally installed by the Transmission and Distribution Utility (TDU) in nearly all homes within Texas by 2013. “Many people are experiencing cash flow shortages and need the most flexible payment options possible. Payless Power’s SmarTricity with Flex Pay will allow payments as frequently as monthly, weekly or even daily if need be." In the simplest terms, Payless Power’s SmarTricity with Flex Pay electric service works similar to a reloadable calling card or prepaid cell phone.

Customers put money into an account and as electricity is used, funds are deducted. The smart meter records energy usage on a 15 minute interval basis. Each day, Payless Power will send a notification updating the customer of the usage for the day, the balance on their account, and approximately how many days they have left before service will be interrupted if a payment is not made. Additional money can be put into the account, either by telephone or at a payment center, as often as needed to maintain electric service.

Online payments will be available to Payless Power consumers by the fourth quarter of 2011. With Payless Power, using a smart meter to obtain pre paid electric service in Texas is simple and provides the customer payment flexibility: To start service, the customer calls and creates an account with Payless Power. If the address is a qualified address with an installed meter, then Payless Power can offer SmarTricity with Flex Pay service. Payless Power then takes a payment to start the service. As electricity is used, it is deducted from the prepaid electric balance. Customers may add money to the account as often as needed.

If the balance reaches zero, the service is interrupted. Once a payment is posted to the account, service is restored within minutes. The customer will receive daily notifications via text or email as to what their account balance is and how many days they have left on their service before being interrupted. In addition, Payless Power will send out a weekly supplemental paper statement.

This insures the customer receives something by mail, which may help when a customer changes their email or telephone number and forgets to update their records with Payless Power. "Payless Power’s goal is to help people obtain prepaid electricity service with no hassles and then provide them with payment options to keep the lights on," says Young. "In today's economy, pre paid electric service is becoming more popular with homeowners and businesses." Since 2005, Payless Power has been helping people stay connected, regardless of income or credit history.

As a family-owned business, and not a giant electric company, we take great pride in serving our customers with care and respect. Our prepaid electricity plans are designed to meet the needs of your lifestyle and budget:

No Deposit Standard Connection Typically within 2-3 Business Days

Same Day/Next Day Priority Connection Available

Low Monthly Rates and Rates Per Kilowatt Hour

No Late Fees No Credit Check or ID Needed

No Long-term Contract or Early Cancellation Penalty

Flexible Pay Plans Multiple Payment Options Minimal Fee to Connect Service

Posted by Jay Hancock at 10:31 AM | Permalink | Comments (4)
Categories: BGE/electricity
        

Great story from AP on how the government is stumbling on fighting possible Medicare fraud:

Medicare Yanks Licenses, Gives Them Right Back Regulators fighting an estimated $60 billion to $90 billion a year in Medicare fraud frequently suspend Medicare providers, then quickly reinstate them after appeals hearings that government employees don't even attend, according to an Associated Press review. Federal prosecutors say the speedy reinstatements — though helpful to legitimate suppliers who get snagged on technicalities or minor violations — amount to a missed chance to cut off the flow of taxpayer dollars to bogus companies that in many cases wind up under indictment

And:

Making matters worse, Medicare officials have failed to collect a single cent from the security bonds that were instituted two years ago specifically to discourage crooked providers from vanishing at the first sign of trouble from regulators. Millions of dollars sit unrecovered; officials blame the delay on personnel changes

Hat tip Kaiser Health News

Posted by Jay Hancock at 10:16 AM | Permalink | Comments (0)
Categories: Health Care
        

From Technology Review's arXiv Blog:

Faster-than-Light Neutrino Puzzle Claimed Solved by Special Relativity The relativistic motion of clocks on board GPS satellites exactly accounts for the superluminal effect, says physicist....

So from the point of view of a clock on board a GPS satellite, the positions of the neutrino source and detector are changing. "From the perspective of the clock, the detector is moving towards the source and consequently the distance travelled by the particles as observed from the clock is shorter," says van Elburg.

By this he means shorter than the distance measured in the reference frame on the ground.

The OPERA team overlooks this because it thinks of the clocks as on the ground not in orbit.

How big is this effect? Van Elburg calculates that it should cause the neutrinos to arrive 32 nanoseconds early. But this must be doubled because the same error occurs at each end of the experiment. So the total correction is 64 nanoseconds, almost exactly what the OPERA team observes.

Posted by Jay Hancock at 5:24 PM | Permalink | Comments (2)
        

For three years it's been a bear market for natural-gas sellers and a boon for consumers. The wintertime price for BGE's natural gas has dropped from almost $1 per therm in 2008 to like 60 cents now. The big factors, of course, are the bum economy and huge new gas supplies made available by hydrofracking of shale formations.

A ConocoPhillips commodities analyst says this may not go on forever and he gives several reasons, including regulation of hydrofracking and rising demand for natural gas as a relatively clean fuel for electricity generation. From Platts:

"The talk of shale makes everyone think we're way oversupplied," said Jim Duncan, ConocoPhillips' chief analyst and commodities markets strategist, at the LDC Gas Forum Rockies & West in Los Angeles. "The reality is that we're not. The signposts are already here."

However, Platts reports that Duncan "remained bearish" on natural gas. My advice to BGE customers hasn't changed: Go with BGE's or WGES's month to month floating price. The deals that lock in your price probably won't save you money this winter and they don't let you lock in long enough to save money in future winters.

Posted by Jay Hancock at 2:06 PM | Permalink | Comments (0)
Categories: BGE/electricity
        

Van Hoisington's and Lacy Hunt's always-interesting quarterly economic outlook is out. They think the economy will shrink in this quarter and in quarters next year, thanks in part to rising taxes as states and cities try to balance their budgets.

Though budgetary reductions have yet to materialize, fiscal policy via tax increases is also acting as a retardant to growth. The effective tax rate on households can be calculated each month by expressing the sum of federal, state and local taxes as a percent of personal income. From the middle of 2009 to last month, the effective tax rate has risen from 17.5% to 17.9%, a $247 billion tax increase (Chart 4). This rise mainly reflects increased taxation by state and local governments to cover their persistent deficits.

These increases more than offset the first quarter reduction in FICA taxes. Econometric research indicates the U.S. economy will not grow out of the ongoing slump if additional major tax increases are implemented.

Of course state and local governments are laying off employees and avoiding hiring, too, which also is a fiscal drag.

Posted by Jay Hancock at 3:05 PM | Permalink | Comments (1)
        

Krugman debates GMU's Russ Roberts on whether there is evidence supporting the idea that fiscal intervention has macro effects. And he pushes back against Roberts when Roberts says:

Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews.

Krugman's response:

while conservatives see smaller government as an end in itself, liberals don’t see bigger government the same way. Think about it: while you often see conservatives crow about, say, reducing discretionary spending as a good thing just because the number is down, do you ever see liberals crowing about a rise in spending, never mind what on? Liberals want government to do certain things, like provide essential health care; the size of government per se isn’t the objective.

It seems to me that the question to ask liberals is not, Do they want big government for its own sake? The proper question is: Do liberals ever think government can be too big, even hypothetically? And for conservatives, How small is too small? Those are more likely to lead to an interesting conversation.

Posted by Jay Hancock at 1:52 PM | Permalink | Comments (3)
        

Corporate buyouts of local companies always quickly shift jobs and resources out of town, but it didn't used to be this quickly. The apparent new trend for important Baltimore companies selling to out-of-towners is to shift the shareholder vote on the deal to a venue far away from the company's home town.

Nolan Archibald was so proud of selling Black & Decker to Stanley Works that he moved the shareholder vote to the Dulles Marriott hotel. They couldn't even come up with an excuse for having it there. "Since the meeting is only days away, we have no comment" on why the meeting is in Virginia, Black & Decker spokesman Roger Young told me at the time.

Why is Constellation having its meeting in New York? It's "a central location for our institutional shareholder base," a company spokesman told my colleague Hanah Cho. No, that's not it. The real reason is probably that Constellation's board is worried about embarrasing demonstrations outside the meeting and awkward questions from longtime Baltimore shareholders inside.

My 2010 column on Black & Decker's merger-meeting venue:

Taking a play from the Baltimore Colts, Black & Decker's headquarters is heading out of town on the sly.
For years the toolmaker has held its annual shareholder meeting in or near its Towson headquarters. The company's stock is widely owned in metro Baltimore, its home for a century.
But Friday's meeting, at which shareholders are expected to approve Black & Decker's sale to Stanley Works, isn't even happening in Maryland. If you want to vote in person or express an opinion, you'll have to make it by 9 a.m. to the Washington Dulles Airport Marriott in Virginia, 70 miles from Towson.
Putting the meeting at a Black & Decker factory in Mexico could hardly have cordoned it off more effectively from Baltimore. Instead of darkness and Mayflower moving vans obscuring the end of a Baltimore institution, it'll be the Capital Beltway at rush hour.

Read the whole thing here.

Posted by Jay Hancock at 10:23 AM | Permalink | Comments (0)
Categories: BGE/electricity
        

Here is a small piece of good news, at least for the San Diego real estate market. This may or may not be representative of what's going on in San Diego generally and probably isn't representative of what's going on on an aggregate basis nationally. Still, it's good to have any good news about residential real estate anywhere these days. And if what he's talking about has any kind of momentum or volume, it suggests Ben Bernanke's "Operation Twist" is working.

Jim the Realtor, made famous by Calculated Risk, says record-low mortgage rates have brought buyers out of the woodwork in San Diego. “The market is abuzz currently," he says. "the action is incredible. Offers flying everywhere, I think the buyers are scrambling knowing that these rates are incredible righrt now. I think it’s going to be a very healthy fourth quarter, looking back at the results. The listings I have, both the ugly REO and the nicer homes, all of them are getting lots of action."

Jim the Realtor is not a kneejerk, "it's a great time to buy a house" agent. He was quite down on the market for a long time. Watch the whole video here:

Posted by Jay Hancock at 10:44 AM | Permalink | Comments (0)
Categories: The Great Recession
        

Sunday's column was about why the Maryland Public Service Commission should reject Exelon Corp.'s applicaiton to take over Constellation Energy and BGE. One reason is what knowledgeable people describe as Exelon's and utility ComEd's unstated motivation to close their Zion Station nuclear plant: to decrease the supply and increase the price of electricity.

There has been a lot of discussion about this on the Atomic Insights site, including this post by Rod Adams, titled "Exelon's Strategy is Working for Stockholders but not Always for Customers." Adams:

When I dug into Exelon’s corporate history and current market position, I realized that its analysis of the economics of restarting Zion might have something to do with concerns about the effects of a new supply on the prices for electricity in their current markets. Since Exelon is operating a large number of plants already, just a 10% drop in sales price could overcome the benefits of selling a higher volume from the new supply. In the electricity business, a huge financial risk that is well known and understood by decision makers is “overcapacity”.

Posted by Jay Hancock at 3:51 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Exelon Corp. is seeking regulatory approval to buy Constellation Energy, parent of BGE. As I wrote on Sunday, the deal raises all kinds of concerns. Among them is the quasi-monopoly power that the combined company would gain in the mid-Atlantic generation market. The combined company would own quite a bit of generation capacity in Maryland, Pennsylvania and New Jersey.

To try to overcome sure objections from antitrust regulators, Constellation and Exelon agreed to sell off three of Constellation's older, coal-fired generation plans: Brandon Shores, CP Crane and HA Wagner. Joseph Bowring, who runs the independent market-monitor operation for the mid-Atlantic grid, objected that market concentration in the region might not be improved and could even worsen if the plants were sold to a third company that also owned plants in the area.

Now, in a letter to regulators, Bowring says the companies have agreed to a bunch of restrictions that would cause Bowring to drop his objections. The chief restriction is a list of companies to whom the coal plants cannnot be sold, including AEP, First Energy, Dominion, GenOn, Calpine and PPL. This significantly reduces the potential bidders and, if anything, may increase the uncertainty for the people working at those plants.

The other thing to note about the agreement is that, once again, it erodes any notion that the PJM wholesale market is efficient, free or fair. In addition to restrictions on who can buy the plants, Constellation and Exelon agreed to a bunch of fussy rules about bidding behavior etc. over the next 10 years.

Among them: The combined company has to "calculate its RPM auction Market Seller Offer Caps, as that term is defined in Attachment DD of the PJM Tariff, using the methodolgies set forth in Attachment DD of the PJM tariff." Energy bids from non-nuclear units "will be consistent with the physical capabilities of the units." (This rule all by itself is quite telling.) Offers from peaking gas units must calculate unit costs "in accordance with the PJM Cost Development Guidelines as set forth in PJM Manual No. 15, plus (2) the higher of ten percent of such costs or the applicable percentage of cost permitted under the PJM Tariff to the extent a unit is a frequently mitigated unit, plus (3) an adder not to exceed $1.00/MHw."

A real market wouldn't require a bunch of Calvinball rules and a bunch of bureaucrats to administer them.

Posted by Jay Hancock at 12:16 PM | Permalink | Comments (1)
Categories: BGE/electricity
        

Environmentalists are vaunting the Gonzales Research poll showing that a majority of Marylanders would favor paying as much as $2 extra per month to pay for a wind farm in the Atlantic. The problem with Gov. O'Malley's proposed offshore wind project is that it could end up costing more than $2 extra a month.

Last legislative session O'Malley agreed to cap marginal costs for the project at $2 a month for the first year. Then he agreed to cap extra costs at $2 a month for the life of the project. First, the $2 increment would be in inflation-adjusted dollars, so in nominal terms your bill could go up more than $2 a month after a while. Second, the $2 increase was being talked about in terms of "no more than $2 a month more than what conventional energy would cost over the same period."

Projecting what conventional energy will cost over a quarter-century is an impossible task and leaves lots of room for assumptions that conventional energy will be very expensive -- thus making offshore wind look like a bargain in comparison. But it might not work out that way.

Maryland and the world need more low-carbon energy. But it's a matter of finding the most economical way to deliver it.

Posted by Jay Hancock at 11:20 AM | Permalink | Comments (1)
        

Floyd Norris on the prospects for Greece dumping the euro and why Europe will ultimately lose the stare-down with its Hellenic member:

The message from Greece now may be summarized as, “I’m small. I’ve suffered. You can afford to rescue me. If you don’t, I can create chaos for all of you.”

They may be right.

Posted by Jay Hancock at 4:16 PM | Permalink | Comments (1)
        

The good news, such as it is: The economy added 107,000 103,000 jobs in September, according to the Labor Department. That's slightly better than people predicted. Businesses are adding jobs at a slow pace to compensate somewhat for continued shrinkage in government employment. The Post Office shed jobs last month. But the construction industry, of all places, added a few jobs. (Not in housing, however, so don't get hopes up about that.) Job-growth numbers for July and August were revised upward.

For August, when the initial report said zero jobs were added, the new number is growth of 57,000 jobs. For July the job increase was revised from 85,000 to 127,000. Today's report should give the stock market some comfort that we're not plunging into a new recession.

The bad news: Unemployment didn't budge. It's still 9.1 percent. 14 million people are unemployed. Unemployment for blacks is 16 percent. There are 9 million people working part-time who want full-time work. More than 2 million people want a job but have given up looking. And September's job-growth numbers were boosted by the return of 45,000 striking Verizon workers. So what looks like the addition of 103,000 jobs was really 58,000 jobs.

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

Still getting emails on Sunday's column, "Fixing America Needs Contributions From Everybody." Here's one from Paul Belz, an Army reservist and insurance agent who is surprised that his military Tricare health plan requires no premium contribution from him.

He wrote to the magazine of the Military Officers Association of America, he says, and suggested that retired officers ought to contribute a little more in the way of premiums, co-pays etc. The response was very negative, he said. Here is his entire email:

Hi, Jay..

I found that recent article very interesting...!

I have a good example of your point...

I am a 62 year old, retired Army Reserve Officer (part timer)..still working..I sell Property and casualty insurance...I receive a small pension for my service, and get Tricare health insurance.
.
I pay NO PREMIUM for Tricare..I have NO CO-PAYS, then a 25% coinsurance , to a max expense (like a deductible) to $3,000 out of pocket..It is very generous...!!

Recently, I wrote a letter (to the editor) of an organization that I belong to..the Military Officers Association of America (MOAA), suggesting that we, as retirred officers, ought to be willing to contribute a little to the whole "address the debt'"situation...perhaps pay some premium, accept co-pays, etc..

In Feb, 2011, my letter was included in the magazine..

In subsequent months' letters to the editor... membership OVERWHELMINGLY responded that they vehemently opposed ANY contribution/resolution assistance

..i.e.reduction in benefits..They state that they HAVE EARNED the bennies, and don't want to give up anything..!!

These are retired OFFICERS..often higher ranking officers from all branches...Many were active duty soldiers, who retired after 20 years of active service. They receive 50% of their pay at retirement (75% after 30 years..!!!!!!!!)...Many...most have gone on to second careers ..often in government..where they secure another pension..etc etc..

I was, quite frankly, quite shocked...a bit unnerved, actually....at the LOUD opposition to any suggestion that they "contribute" in a positive way to the country's dire underfunded pension/benefite/entitlement crisis..

It really concerns me..!! .....If EVERYONE does not wake up, prepare to be affected..and legislators craft a comprehensive resolution that affects everyone....be sure all participate in some way,....we are in deep trouble....!

Paul Belz

Posted by Jay Hancock at 6:06 AM | Permalink | Comments (4)
Categories: Health Care
        

Derrick Bell, who resigned a Harvard professorship in protest of the university's tenure policies for minority women, has died. Here is my 2002 review of his book, Ethical Ambition, and several other business-related books. The review's recessionary, post-bubble tone has a 2011 ring.

God's struggle with mammon is eternal, but any time the Nasdaq falls 75 percent, the Big Guy gets the upper hand. Bruce Wilkinson's 2000 best seller, The Prayer of Jabez (Multnomah, 96 pages, $9.99), was a commercially clever shellac job of religious sentiment over the idea that you deserve a Lincoln Navigator in your driveway, a perfect devotional for the bull market.

This confusion of salary with salvation, hundreds of years old, is not always bad. As German sociologist Max Weber and English socialist economist R.H. Tawney showed long ago, the idea that earthly and heavenly blessings go together was important to the economic growth of Protestant Europe after 1520. The modern primacy of the United States owes much to the legacy of the Puritan Pilgrims, who believed material prosperity was the mark of spiritual favor.

But when trouble calls and wealth vanishes, the traditional God of the modest and meek gains market share. Wilkinson's newest product, also commercially clever, is a post-Enron sermon, calibrated for recession and ethical recrimination. Instead of asking God to "enlarge my territory," as the earlier book does, A Life God Rewards -- Why Everything You Do Today Matters Forever (Multnomah, 124 pages, $10.99) focuses on the treasure of the afterlife and its relation to mortal deeds.

It is distastefully Pavlovian. Its implied message is that a virtuous life is worth living not for its own sake but for heavenly bonus points to be cashed in later. But the booklet is a cultural marker. The question asked by Confucius and Kant and a hundred sages in between -- How to live a good life amid vanity and venality? -- seems to be getting a renewed hearing.

None of the answers given by Derrick Bell in Ethical Ambition: Living a Life of Meaning and Worth (Bloomsbury, 176 pages, $19.95) is original, as Bell would admit. There is little new left to say after three millennia

of recorded philosophizing. But we always need reminding of the ratified wisdom, and Bell's book eloquently updates the ethical recipe for the age of the corporate rat race. Bell, who teaches law at New York University, resigned from Harvard a decade ago to protest a lack of tenured black women professors, and he is a veteran of the civil rights struggle. His arguments are often illustrated with his own experiences; his conclusions are universal. The "ethical ambition" of the title has double meaning. We should be ambitious to be ethical, Bell is saying, but it is also possible to be ambitious in the conventional sense -- for promotion, for reputation, for modest material gain -- in an ethical way. That's good news if you've been living in a cave and eating bugs for the sake of your soul, and it's really good news if you strive in the real world while sometimes suspecting that morality is a fatal impediment. According to Bell, the ingredients of an ethical life -- this won't surprise anybody -- are humility; meaningful work; loyalty and attention to spouse and family; realistic adherence to principle; succor for the less fortunate; and due attention to the divine. He believes there is a necessity -- a duty -- to brave the jungle of jobs, competition, discrimination and dollars. "If we sought to steer clear of situations that challenged us ethically," he writes, "we would make our lives extremely narrow -- and not necessarily ethical."

But he thinks that, with the proper adjustments, the course can be navigated with grace and conscience. Perhaps the biggest adjustment is to trim one's obsession with money and the means to get it. Money can be poison to almost everything in Bell's ethical prescription. Moral behavior, humility and religious inclination are in obvious jeopardy. But so, Bell shows, is the duty to family.

"Unfortunately, our passion for our work may be real, but carried to extremes it can result in our neglecting the people we care about most passionately," he writes. "This ... is both wrong and unethical."

Even so, Bell points out, money is not always an enemy. It can be a valuable ally in setting the moral compass, and he's not talking about God's commandment for us to vacation in Aruba. His principled resignation from Harvard was cushioned by a modest personal financial reserve, he notes. He makes the crucial point that the freedom to live ethically increases as one approaches financial independence, and financial independence is nurtured by saying no to consumer-spending mania.

Dinesh D'Souza's The Virtue of Prosperity: Finding Values in an Age of Techno-Affluence (Touchstone, 304 pages, $14) also looks at wealth's double edge. But, while he touches on money's threat to contemplation and character, D'Souza emphasizes the positive side of riches, maybe because the book was first published in 2000 near the height of the bull market. Indeed, to read The Virtue of Prosperity is to see how much our assumptions about the world have changed since then.

"We're seeing more than faith in the capitalist system; we're seeing a huge surge of confidence on the part of the average American that the system will benefit him directly," D'Souza writes.

Ouch.

D'Souza rehearses Adam Smith's praises of capitalism: that it harnesses an eternal aspect of human nature -- selfishness -- for the good, that by seeking profits entrepreneurs make things people need, create jobs and reduce poverty. But he also sees money as the driver of technology, technology that he portrays as largely beneficial even as it encroaches on purviews -- in the life sciences, for example -- that once were God's only. Ever the optimist, D'Souza leaves us with the impression that the problems caused by money and technology will be ameliorated by more money and technology.

Yale School of Management Dean Jeffrey E. Garten also sees economic growth as beneficial, but he wants to salt it with altruism. Most commentators so far have seen curing U.S. business as mainly an outside job, with the onus being on Washington to provide economic impetus and better regulation. Garten believes CEOs and other corporate insiders have an important role to play, and his ambitious marching orders for them often look like something that Derrick Bell would recognize.

In The Politics of Fortune (Harvard Business School Press, 224 pages, $24.95) Garten advises CEOs to mind their profits and fight for free trade but also to support substantially increased aid for the Third World, strengthen the domestic social safety net and "see their responsibilities extending beyond insuring the health of their own companies or industries."

This is contrarian stuff for America's boardrooms. To see how contrarian, consider Garten's observation that "a market economy [is not] the same as a market society; prices and competition should not govern everything." Although he doesn't cite him, Garten is paraphrasing no less an enemy of U.S. capitalism than the former French Socialist Prime Minister Lionel Jospin. Garten hopes the current climate of reflection and urgency will speed the message.

Rakesh Khurana has a bone to pick with CEOs, too, or, more specifically, with the boards who hire them. In his excellent, readable and highly original Searching for a Corporate Savior (Princeton University Press, 295 pages, $29.95), Khurana lays bare the CEO search process and shows how directors at company after company favor executive glitz and corporate pedigree over demonstrated competence -- and then grossly overpay their recruits while demanding miraculous results. Not surprisingly, in trying to live up to expectations, the bosses often end up wrecking the company.

It was Max Weber, Khurana notes, who described the dangers of charisma in politicians. Khurana does the same for charisma in business leadership, concluding it is a fool's game "to hope that a high-powered CEO can be a corporate savior."

Garten might disagree. "Savior of what?" Bell would ask.

Jay Hancock is a financial columnist for The Sun who began working life as a public relations operative for Owens Corning Fiberglas Corp. He was The Sun's diplomatic correspondent from 1999 to 2001 and its economic correspondent from 1995 to 1999. He has twice been a finalist for the Gerald Loeb Award in business and financial journalism.

Posted by Jay Hancock at 6:19 PM | Permalink | Comments (1)
        

So says Der Spiegel. I wouldn't exactly call zero interest rates part of the Keynesian prescription, but the column is interesting:

American economists, central bankers and fiscal policy makers have reinterpreted British economist John Maynard Keynes's clever idea that government spending is the best way to counteract a serious economic downturn -- and have turned it into a permanent prescription. In their version of the Keynesian theory, declining growth or tumbling stock prices should prompt central banks to lower interest rates and governments to come to the rescue with economic stimulus programs. US economists call this "kick-starting" the economy.

Now the bubble has burst. This has not, however, prompted the US government to conclude that its prescriptions could have been wrong. On the contrary, now it wants to increase the dose. Obama plans to follow the largely unsuccessful 2008 economic stimulus program with a new program this year. Meanwhile, Federal Reserve Chairman Ben Bernanke says that he intends to flood the economy with cheap liquidity -- for years, if necessary.

Posted by Jay Hancock at 8:56 AM | Permalink | Comments (4)
Categories: The Great Recession
        

To have a chance at being interesting, columnists need to frequently risk being wrong. Let's just say I have tried very hard to be interesting. As evidence, here is a 2004 column I wrote on Google and Apple, pooh-poohing the messianic aspirations of tech companies and saying Google would eventually end up a gray, ho-hum multinational -- like Apple. The money graf:

Good luck, Google, but the odds are against you. Apple had the same dream. These days Apple is just another Standard & Poor's 500 member trying to hit quarterly earnings targets.

At the time Steve Jobs was in the process of pulling off his latest comeback, and he would soon blow the column's premise out of the water. Apple may be the most amazing company of all time. In tribute I reprise the whole thing here so you can see how wrong he proved me. The column may be wrong about Google, too. RIP Steve Jobs.
The column from May 5, 2004:

Twenty years have passed, but grizzled marketing troops still talk about Apple Computer's Super Bowl XVIII commercial.

In 60 expensive seconds of hubris and hope, it evoked George Orwell's spooky novel, Nineteen Eighty-Four, and insulted IBM, the incumbent computer overlord. A beautiful woman evades pursuing goons, bursts into room of zombies and hurls a sledgehammer through a video screen of Big Brother, freeing the serfs and initiating a new era.

"On Jan. 24, Apple Computer will introduce Macintosh," says the voiceover. "And you'll see why 1984 won't be like Nineteen Eighty-Four."

Google Inc.'s registration to sell public stock is the modern equivalent of Apple's famous ad.

Like Apple of the 1980s, Google proposes

to be a hip, iconoclastic, enlightened, good multinational corporation. It will challenge stale wisdom, fight evil and usher an envious corporate America into sunlit pastures.

Good luck, Google, but the odds are against you. Apple had the same dream. These days Apple is just another Standard & Poor's 500 member trying to hit quarterly earnings targets.

Here's Google co-founder Larry Page, writing in the shareholder "Owner's Manual," in the registration statement:

"We aspire to make Google an institution that makes the world a better place."

Here's Apple co-founder Steve Jobs in 1983, asking Pepsi executive John Sculley to come work for Apple:

"Are you going to keep selling sugar water to children when you could be changing the world?"

Here's Google's Page, referring to Sergey Brin, his founding partner, and Google CEO Eric Schmidt:

"Eric, Sergey and I intend to operate Google differently, applying the values it has developed as a private company to its future as a public company."

Here's Apple's Jobs, speaking to Playboy in 1985:

"I think Apple has a chance to be the model of a Fortune 500 company in the late ' 80s and early '90s... We are aware that we are doing something different."

Page, 2004: "Google is organized around the ability to attract and leverage the talent of exceptional technologists and business people. We have been lucky to recruit many creative, principled and hard-working stars."

Jobs, 1985: "We attract a different type of person -- a person who doesn't want to wait five or ten years to have someone take a giant risk on him or her, someone who really wants to get in a little over his head and make a little dent in the universe."

Page, 2004: "Don't be evil. We believe strongly that in the long term, we will be better served -- as shareholders and in all other ways -- by a company that does good things for the world even if we forgo some short-term gains."

Jobs, 1985: Everyone here has the sense that right now is one of those moments when we are influencing the future. Most of the time, we're taking things. Neither you nor I made the clothes we wear; we don't make the food or grow the foods we eat... Very rarely do we get a chance to put something back into that pool. I think we have that opportunity now."

Google is making a good stab at being extraordinary.

Its two-class stock structure, which gives disproportionate board control to founders, should cushion against Wall Street's sharp elbows. Its auction to discourage speculation in new shares will reduce shenanigans. Its admonition to investors to focus on long-term results is commendable.

But a million things can and will go wrong. Top executives could fall out. Competitors will bite. Profits might fall, spurring cost-cutting pain. The founders might tire of the rat race and, like so many other engineer/entrepreneurs, cash out their billions and go back to the lab.

Gargantuan corporate size and public ownership carry their own imperatives. At Apple, Sculley fought with Jobs and forced him out, then was axed himself. The stock gyrated, mass layoffs ensued, Jobs came back and so did Apple. But it's not the outfit it was or wanted to be.

"Google is not a conventional company," says the first line of the "Owner's Manual." "We do not intend it to become one."

Wanna bet?

Posted by Jay Hancock at 9:53 PM | Permalink | Comments (3)
        

If you're tired of reading about Greece and Italy, Jeff Thredgold tries to look on the bright side. Today he offers several dozen happy headlines concerning the United States and its economy. A sampling:

•Total U.S. retirement assets rose to $17.5 trillion in 2010, the most since the end of 2007 •During the early 1960s, the five-year survival rate from cancer for Americans was one in three. Today it is two in three…continuing to climb…and the highest in the world •The U.S. accounted for 34% of the funds spent globally on research & development (R&D) during 2010 •The country’s net petroleum imports peaked at 60.3% in 2005 and dropped to 49.3% in 2010. Within a year, North Dakota is expected to supply more oil for domestic use than the 1.1 million barrels a day that Saudi Arabia now exports to theU.S. •The number of violent crimes fell by a surprisingly large 12% last year versus the prior year •Roughly 80% of companies that suspended or reduced their 401(k) matches during the past 2-3 years reinstated them in 2010 or 2011

Posted by Jay Hancock at 10:25 AM | Permalink | Comments (1)
Categories: The Great Recession
        

I expected to get more hate mail for Sunday's column on shared sacrifice to reduce budget deficits, which said:

Psychologists and game-theory economists know that the best group solutions often come when all members agree to contribute. The opposite is also true. When nobody wants to give up anything, everybody loses.

So, if you think you're exempt from an obligation to make even a small sacrifice, you're part of the problem.

One email I received asked the obvious question: What if I don't have anything to give? The reader says:

I'm on S.S.I. I get very little in the way of money, my Medicaid benefits are almost nil, which's why I'm in constant misery due to gum disease because I can't afford a Periodontist, and they won't touch Medicaid. I'm so far below anybodys' version of poverty that I'm not included in any statistics. Tell me, what exactly am I supposed to give up/sacrifice?

You get the wealthy to sacrifice first-sacrifice their tax breaks, their opulent lifestyles, their medical care, their dental care, and so on, then get back to me about my being part of the problem because I think I'm exempt from having to make even small sacrifice, as you wrote in your column

Another reader says the column was liberal junk:

I usually appreciate your insights but this article was so full of liberal sarcasm that it made me wonder if you have flipped out. The biggest problem America has is that we have become a country of beggars from the government and the obliging politicians have given the beggars everything they demand and shift the responsibility forward. The other problem is waste and folly in the expenditure of tax dollars. For you to say anyone who does not want to contribute more is part of the problem in the face of all that is given away to so many pathetically dependent beggars and wasted on foolish policy initiates is insulting and disingenuous.

More emails from readers are after the jump:

From a senior Baltimore executive:

When Bowles-Simpson came out last fall, it called for revenue increases of about $1T and spending cuts of about $3T between now and 2020 (if my memory is roughly correct), thus generating $4T of cumulative revenues/savings. Everybody's ox was gored somewhat. I wrote to our senators advocating this as a comprehensive and fair way to address the issue even though yours truly's taxes would go up (interestingly, my taxes would go up even though marginal rates would be reduced). The President showed his true colors by shelving his own commission's report to gather dust. So now we have the supercommittee wrestling with the same trade-offs ... time will tell. What we really have to do is get rid of about fifty ideologues from each party

From an economics professor:

Jay, You are right but I'm afraid you are not going to be able to build a political coalition that way. Indeed, you may find yourself hung in effigy around the backdoor of some business, perhaps an investment bank.

From a reader I swear is not my mother:

Thanks for your thoughtful and challenging column this morning. You are truly a gift to Baltimore Sun readers for your even handedness and always enlightening analysis. I've long admired you and I want to say Thank you. I hope you'll stay with the Sun for a long time to come.

Posted by Jay Hancock at 6:49 AM | Permalink | Comments (1)
        

Ellicott City money manager John Hussman sees a new recession:

We are headed toward a new recession because our policy makers never addressed the underlying problem in the first place, which was, and remains, the need for debt restructuring. This is an issue that I suspect will re-emerge to the forefront of public debate in the next year. Hopefully, the response of our policymakers will be at different.

And he is not optimistic about stocks:

For investors, if you believe that current analyst estimates of forward operating earnings are correct, and you believe that the inappropriate bubble-era benchmarks for price-to-forward operating earnings are actually valid, and you've ignored all evidence that the Fed Model is spectacularly devoid of validity, and you believe that the only course for valuations is to move toward those misguided benchmarks regardless of what happens to Europe or the U.S. economy, then it's easy to believe that stocks will head higher. For our part, we believe none of those things. At present, we estimate that the S&P 500 is likely to average nominal 10-year total returns of just 5.7%, with the bulk of those returns most probably emerging in the back years, and significant risk of substantial losses in the earlier ones. Moreover, investors face not only an oncoming recession, but probable sovereign default out of Europe, and more likely than not, a compounding of both factors into heightened credit risk here in the U.S. (note that credit spreads are beginning to scream higher, particularly among banks and high-yield debt).

Posted by Jay Hancock at 6:14 PM | Permalink | Comments (0)
Categories: Stock Market
        

Michael Mandel calculates and contemplates the declining compensation being made by fairly young college graduates. Real earnings (2010 dollars) for male holders of bachelor degrees have fallen from $73,000 in 2000 to $59,000 in 2010. (See Mandel's graph below.) For women it's worse, with real earnings falling from $56,000 to below $48,000.

This actually doesn't give the full, bleak picture facing young college grads -- those figures are for people who are actually employed full time. And they include employees as old as 34 -- folks who have been employed for a while. Many, many grads can't find a full-time job. Mandel asks:

no one has given me a good explanation yet of why young American college grads should have been hit so hard. Is there increased competition with young college grads around the world? Are new college grads lower quality than their predecessors? Has information technology reduced the need for young grads? I really would like to know.

"People over the age of 55 are not dropping off the payrolls to retire early as they had been doing for years," says David Rosenberg, chief economist at Gluskin Sheff in Toronto and one of the first to identify the developing employment gap. "And then there are those who did drop out of the labor force who are coming back to secure work."

Meanwhile, he says, "we're creating massive pools of unemployment among 20-somethings."

Posted by Jay Hancock at 8:43 AM | Permalink | Comments (1)
Categories: The Great Recession