Understanding Changes in the Pork Market

Reading the local paper this morning, I stumbled across an article about predictions in the pork market from the 2008 Central Indiana Pork Conference (welcome to the Midwest!). Had you been able to attend you could have listened to sessions on "air quality in swine production systems, reproductive inefficiencies and failures and how to incorporate dry distillers grains."

One quote in the article from an agricultural economist perplexed me: "large pork supplies may result from the lowest pork prices we've seen in five years." Anybody else share my confusion? Low prices should lead to supply reductions, not supply increases. Perhaps it's a misquote. Any pork experts out there?

Customizing Perks

Although economics often focuses on the relationship between cash rewards and job effort, non-salary incentives can be an important motivational tool as well. With the increasingly global market, however, these perks need to be tailored to the local environment.

This week's issue of Business Week has an interesting description of how perks vary across the world. A few highlights of perks offered in different countries:

• India: health care coverage for parents
• Hong Kong: health care coverage for traditional Chinese medicine
• Japan: family allowances depending on size of family
• Mexico: "pollution-escape" trips
• Brazil: kidnapping protection
• Russia: company-sponsored mortgages

AT&T trying to make the rules so its rivals won't

AT&T is trying to enter the Huntsville market with its new U-verse product:

... more than 300 channels, remote recording of programming and interaction between Internet, phone and TV functions. The system, which is based on running fiber lines to a "node" that completes the transmission over copper lines to the home, includes a set-top box with a built-in digital video recorder that allows recording of up to four programs at once. ...'

But it is a wide-open question whether Huntsville customers will ever enjoy the service.

AT&T says it will be reluctant to enter the Huntsville market if the City of Huntsville seeks to require it to enter a franchise agreement for video services, similar to deals the city has with Comcast and Knology.

Latest Presidential Nomination Futures prices

From intrade.com:

	2008.GOP.NOM.MCCAIN John McCain to be the Republican Presidential Nominee in 2008	M	Trade		50.2
	2008.GOP.NOM.GIULIANI Rudy Giuliani to be the Republican Presidential Nominee in 2008	M	Trade		16.7
	2008.GOP.NOM.ROMNEY Mitt Romney to be the Republican Presidential Nominee in 2008	M	Trade		20.0
	2008.GOP.NOM.HUCKABEE Mike Huckabee to be the Republican Presidential Nominee in 2008	M	Trade		5.5

	2008DEM.NOM.CLINTON Hillary Clinton to be the Democratic Presidential Nominee in 2008	M	Trade		65.2
	2008DEM.NOM.OBAMA Barack Obama to be Democratic Presidential Nominee in 2008	M	Trade		33.0
	2008DEM.NOM.EDWARDS John Edwards to be the Democratic Presidential Nominee in 2008	M	Trade		1.1

Clinton & Edwards want to "freeze" mortgage rates

From Fortune:

"I have a plan - a moratorium on foreclosures for 90 days [and] freezing interest rates for five years, which I think we should do immediately," Clinton announced at what was the last Democratic debate before the Nevada Caucus on Jan. 19. ... John Edwards, has endorsed an even broader rate freeze - one lasting seven years

....such a freeze would be disastrous. Interest rates on new mortgages would skyrocket - perhaps past 8 percent, as the mutual funds, pension funds and other investors who typically provide capital to the mortgage market shift their money into other investments where the government isn't impairing returns. With higher mortgage rates eroding buying power, the downward pressure on home prices would only increase. Lower home prices would lead to even more defaults, as more folks who'd lost the equity in their homes choose to walk away from their mortgages.

Are borrowers this stupid?

From WSJ:

...most folks underestimated how much savings would grow and how much debt would end up costing.

The problem: People think in terms of simple interest, not compound interest. For instance, if our investments clock 8% a year for 10 years, we don't earn 80%, as many people assume.

Rather, we would notch a cumulative 116%. Remember, we earn returns not only on our original investment, but also on the investment gains earned in earlier years. Similarly, with credit-card debt, we pay interest both on our original purchases and on any monthly interest charges we didn't pay off in full.

Boards vs. CEO's

From WSJ:

In order to properly oversee these companies, boards need to believe that the CEO -- who's often their main source of information -- is giving them an accurate picture. "In the past, CEOs had carte blanche to do what they needed to do to run the company," says Dirk Hobgood, a governance and risk-management consultant, and chief financial officer, at consulting and executive-search firm Accretive Solutions, based in Hauppauge, N.Y. "Today's CEO really has to work effectively as a team member with the board and keep them up-to-date, and keep the players involved."

....

Why is it so tough for CEOs to keep the board informed in a timely manner? Simply enough, CEOs want to appear to be in control, experts say. It can be hard for them to concede defeat or to admit they don't have all the answers.

"I think sometimes CEOs struggle with the question of when to share bad news largely because they want to bring solutions, not problems, to the board," says Mr. Copeland, the former Deloitte & Touche CEO. "They want to be able to say, 'We have this problem, and here's what we're going to do about it.' "

Defending the Indefensible: Pimps

From the Economist:

...prostitutes do better with pimps—they work fewer hours and are less likely to be arrested by the police or preyed on by gang members. The paper's discussant at the conference, Evelyn Korn of Germany's University of Marburg, said that her favourite result from the study was that pimps pay “efficiency wages”. In other words, pimps pay above the minimum rate required by sex workers in order to attract, retain and motivate the best staff. Mr Levitt said that a few prostitutes asked the researchers to introduce them to pimps.

Note: Walter Block has a fun book by the same title as this post.

Virtual banks can fail too

Technology Review reports that Second Life has decided to close its banks after a series of frauds,

Robert Bloomfield, a Cornell University economist and virtual-world watcher who had argued that self-regulation deserved a chance to fix Second Life's financial problems, says he believes that banks will face runs and be unable to pay depositors, triggering new losses. (See "Second Chance for Second Life.") But he says that the larger Second Life economy, which by one recent measure has more than 300,000 participants, would not be profoundly affected because people will still be able to make, buy, and sell digital goods and exchange virtual and real dollars.

The Reality of Entrepreneurship

In addition to my studies in strategic management and economics, I am very interested in entrepreneurship. It only seems natural given the increasing rates of entrepreneurship in this country and the fact that the United States leads the world in rates of entrepreneurial activity. Plus, people are risking very large pools of capital in launching new start-ups.

So, what’s the problem? The problem is that the three facts I just cited are flat wrong. The rate at which start-ups are forming in the US is actually declining over time, and the US ranks quite low across a number of measures of entrepreneurial activity. And the large capitalization of new businesses? The typical start-up only requires about $25,000 in capital.

How do I know these facts are wrong? Because I just finished reading The Illusions of Entrepreneurship by Scott Shane, one of the top scholars in the field of entrepreneurship. With a very readable approach, Shane shatters some of the most common myths surrounding entrepreneurship using the best evidence we have available regarding those who actually engage in the process of starting new businesses. Shane also provides useful advice for those who want to become entrepreneurs themselves based on the real facts. Take the quiz and see how well you know the facts.

My favorite quote from the book:
But the odds of getting venture capital are lower than the odds that you will get hurt mowing your lawn (3,623 to 1) or fatally slip in the bath or shower (2,232 to 1). When you are thinking about your new business in the shower tomorrow, don’t ponder getting venture capital, think about making sure you don’t fall. The chances are that it will be a better use of your time.

For less than $20 on Amazon, this book is a steal for anyone interested in studying or practicing entrepreneurship.