Strong U.S. productivity to continue: Bernanke (MarketWatch)
When it comes right down to it, productivity is all there is. Even the MarketWatch stringer put it as such: "Productivity, an vital economic concept that remains elusive to gauge accurately, is important because it is the only source of improvement in U.S. living standards over the long-run." And we'll add that us humans have a natural inclination to improve our productivity over time; even a subsistence farmer will subconsciously look for ways to shave a few minutes off his daily routine. So for anyone to predict that productivity will continue to grow is sort of just saying that the government won't mess things up for us too much, and let us do our thing. And, if you're not a subsistence farmer, but a major multinational, then you gain productivity, not by milking the cows faster, buy by layoffs. Rumors are the Intel is set to drop the ax on as many as 10,000 workers. Of course, nobody likes to laid off, but if Intel can keep a consisteny level of output, with 10,000 fewer works, that's a pretty sweet gain in productivity ... "the only source of improvement in U.S. living standards over the long-run."
Pax May Bless Some 'Sin' Stocks (WSJ)
The Pax World Funds are the most well known socially responsible mutual funds in the business. Investors eschew businesses like breweries, casinos, tobacco companies, etc. But, like a vegetarian who wants to re-introduce a little meat back into their diet, the Pax funds may be looking to add a touch of the socially irresponsible. They'll still be socially responsible, of course, but, you know, they don't want to go crazy with it. Shareholders have now been sent a proxy, asking them whether they'd be interested in loosening their morals rules, just a touch. Some well-known socially responsible mutual funds have dragged behind the S&P, though in reality they're not behind by a whole lot. But even a statistically insignificant statistical deviation, just might be enough to push these investors down the road to hell.
Lockheed Martin lands Orion (AP)
May we all have clients who spend on such frivolities. Well, depending on your viewpoint, going to the moon and mars, just so that we can say that we were there, is the ultimate waste of money. Though there are others who are in awe of the metaphysical implications of man leaving his natural habitat, the earth. Reasonable people might straddle the line between these two viewpoints, though it would be nice if leaving the solar system were a profit-making enterprise. Well, in some way it is; if you're Lockheed Martin, then you've just landed a multi-billion dollra gig to build the next lunar lander. Of course, this isn't what anyone means when they talk about private space travel, but somehow we think it will be a long time before Burt Rutan's plane lands anywhere but earth.
Nightmare Mortgages (BusinesssWeek)
On a bus ride, last year, an investment banker from Credit Suisse, tipped us off that exotic mortgages would become a big story this year, as many ARMs would soon be adjusting for the first time. If you believe what people are saying, then millions of people who "shouldn't have bought homes in the first place" (in elitist parlance) are about to get a stunning shock, when their monthly payments soar, and they can't refinance to make up the difference. The subtext, or in the case of the BusinessWeek article the actual text itself, indicates a shadowy conspiracy to foist these loans onto buyers, as if foreclosure was always part of the plan. Even the popular, culture blog BoingBoing is concerned, which probably indicates that there's more to the story than what's being said.
U.S. consumer spending rises at fastest pace in 6 months (AP)
According to official statistics, the tired workhorse of the economy -- us -- continued to spend at a blistering rate this summer. Even early August back-to-school shopping looks pretty good, which we can take to mean that fashions for at school must have changed over the summer, and kids just couldn't be caught dead wearing the same thing on the first day of class (either that or kids grow out of stuff). But how to reconcile this with all the concern and consternation coming out of retailers? Several have come out with disappointing numbers of late. Not sure what to say, but when in doubt, just believe the more optimistic data.
H.J. Heinz Profit Rises 23% on New Product Sales (Bloomberg)
Is Heinz the company that Coke should be? Like Coke, it's strongly associated with one product that it does better than anyone else. Hunts, Pepsi? Get 'em outta here. Yet unlike Coke, it's been able to introduce new products and sell them. Well, to be fair, Coke has a killer unsweetened iced green tea drink that they sell in Japan (and Japanese grocery stores in NYC), but it, along with whatever other drinks it sells, doesn't contribute a whole lot to the bottom line. Meanwhile, Heinz sells stuff like Ore-Ida french fries, sauces, infant nutrition, chili sauce, etc. There's also a major board and management battle going on at the company, which Coke could probably use, just to light a fire under it.
A Broadband Redflag? (GigaOM)
A few months ago, the old optical networking gear makers were read hot again. Even old codgers, like JDS Uniphase, a darling of the last bubble, were starting to gain momentum again. It seemed for an instant that all of the overcapacity and excess gear that was bought during the boom was starting to get used, and that companies need to buy equipment again. Well, maybe, yeah, but not so much. All the glass companies are down again, JDSU, Ciena, Corning, etc. JDSU warned on profits this week, and suddenly a loud groan of "we fell for this again" could be heard for miles away.
The IPO Trough for VC-Backed Companies (Infectious Greed)
Speaking of bubbles, booms and technology, Paul Kedrosky makes the contrarian call that 2007 will be a banner year for the IPO market, after a week 2006. And what company will be next year's Vonage? He thinks YouTube, of all companies, will look to go public. What does seem clear is that the company has priced itself out of the acquisition market. In other words, it's gotten too big for its britches. It's an unprofitable company with just a trickle of revenue, and enormous fixed costs. Yet at the same time, it's the king of the world. Hardly a day goes by without watching something on YouTube. So it can't lamely sell for a reasonable value, yet nobody is going to pay what the company wants. So it'll be up to the suckers in the IPO market to bail it out. Sounds plausible.
MTV Awards: One snoozer of a show (AP)
We don't typically rely on the AP's version of events to know how the MTV VMA's went, but since we're not in the presence of any teenagers, we'll have to take their word for it, that it was a predictably dull affair. Oh, we suppose we could read through some MySpace blogs or something, but that sounds difficult, and besides, that's not the point. As we mentioned yesterday, the VMA's have become the Superbowl of advertising to teenagers. And yet, the whole thing feels old and lame, and we bet that whatever sponsors paid this year for a 30-second spot, will be higher than what they'll pay next year. And the year after that will follow the trend.