Archive for May, 2007|Monthly archive page

Carbon offsets, Carbon Trading, and Other Nonsense.

A couple weeks ago, a colleague told me about a website called

 

http://www.terrapass.com/index.html

All you have to do is provide your car and a number of miles you drive, and the website calculates how much carbon you need to offset.  You give them your credit card information and then you have been absolved from carbon sin.

The website indicates great support from the environmental community.

Read on and tell me how this sort of scam will help global warming.  What’s even more important is that a bigger scam — carbon trading — is the preferred method for dealing with global warming.

BusinessWeek published an exposé of what this company really provides. Continue reading

Another Private Equity Scam

Supposedly these operations can take a company, extract huge profits, load it with debt, and then expect to flip it back to the public. All the while the process removes stock from the market, making shares rise, pumping [pimping?] up the bubble, and setting the stage for a disaster. Or maybe these financial geniuses are so brilliant that they create enormous value — as in the case of the proposed Sears marketing of intellectual property bonds.

http://michaelperelman.wordpress.com/2007/05/07/pr…

Continue reading

Where does the risk go?

One of the ways that takeovers hide risk is to have the company borrow money; another is to put the risk onto the workers — both to demand them to take lower wages or to extract value from pensions and the like. Both are often used in the same deal.

In an earlier post, I noted the borrowing associated with the Zell takeover of Tribune.

http://michaelperelman.wordpress.com/2007/05/26/tr…

Here is what it means to workers: Continue reading

Little Investment, Lots of Speculation

This article from BusinessWeek illustrates an important feature of capitalism as it is practiced in the United States. While frenzied speculators are pumping cash into financial speculation, business is being very frugal with its real investments. So we have a low tolerance for risk in investment, financial coupled with a voracious appetite for risk in finance. These divergent attitudes toward risk cannot continue forever. Sooner or later these two tendencies are going to collide.

Palmeri, Christopher. 2007. “Pumping Cash, Not Oil: Exxon’s Risk-Averse Stock-Buyback Strategy Is The New Profit Model.” Business Week (28 May). Continue reading

Poisonous Intellectual Property Clauses Korea-US Free Trade Agreement

This message was sent to me.  It looks very bad.  Keep in mind that these clauses will affect us in the US as well as the Koreans.
Continue reading

Tribune: Strip and Flip Slips

The financial markets did not seem particularly excited about the prospects for the Tribune. Here is the story. It looks like most of its cash flow will have to go for interest. Continue reading

Consumer Behavior and Tipping

One of my students wrote a very interesting paper about his experience working in a music venue.  When the owners raised the price, demand remained constant, but tips fell, leaving customers out of pocket costs relatively constant.

Here is the paper.econ389.doc

 

Khmer Rouge — Environmentalists

“Until recently it was war that saved the turtles, but it is peace that threatens them now. For decades this 30-mile strip of river was a refuge for Khmer Rouge guerrillas, the armed remnants of the regime that cost the lives of 1.7 million people from 1975 to 1979. The area became accessible when the guerrillas disbanded at the end of the 1990s.”

Mydans, Seth. 2007. “How to Survive in Cambodia: For a Turtle, Beneath Sand.” New York Time (18 May).

Cerberus puzzles

I’m trying to make sense of the Cerberus takeover of Chrysler. The private equity firm is getting Daimler only $1.3 billion not much of a return for the original $36 billion that Daimler paid for Chrysler. The rest of Cerberus’ $7.4 billion goes to a $5 billion investment in Chrysler and $1.05 billion for the financial arm.

I do not understand this $1.05 billion since its lending arm is already quite profitable.

Finally, pension funds are investing in Cerberus, as a company that will no doubt damage the existing pensions of Chrysler workers.

Adam Smith and the Stock Market Boom

With the stock market booming, and private equity snapping up everything in sight, I thought that we might think back to the words of Adam Smith: “the rate of profit … naturally low in rich and high in poor countries, and it is always highest in the countries which are going fastest to ruin”

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