Amazon versus Apple Tablets

Marketplace has an interesting story about Amazon's new Kindle Fire. Amazon might succeed where others have be able failed because it might to exploit complementarities. Here's part of the transcript:

And something else is smaller too: the price.

Bezos: It's $199.

Sarah Rotman Epps: You could buy four Kindle Fires for the price of one souped-up iPad.

That's Sarah Rotman Epps, a tech analyst with Forrester Research. Epps says Amazon may be selling the Fire at a loss. That's because the online retailer wants the Fire is to function mainly as a virtual shopping cart.

Epps: Putting this device in consumer's hands pretty much guarantees that they will be a serious Amazon spender.

Loading up on digital content like music and books, and maybe some pots and pans too.

Analysts predict sales of the Fire could top three million this year. The tablet ships on November 15th -- in plenty of time for you know what.

Hedging One's Beliefs

This XKCD cartoon has a different message for social scientists. Why don't more college football fans bet against their alma maters? Wouldn't that make them happy no matter the outcome?

Why is this so shocking?

How does the current crisis compare to others?

Compared to post-war US recessions, it looks worse:

But compared to world financial crises, it doesn't look as bad.

Monitoring Through GPS Shoes

The GTX Corp has developed GPS enabled shoes so that loved ones can better monitor Alzheimers patients. I, of course, immediately though of the application in which jealous wives give them to their husbands.

It's Damned Hard Bein' Green

I'm not sure a solar powered trash compactor is ever efficient. But, when you place it indoors it becomes much less efficient.

What was Netflix Thinking II?

Reed Hastings, Co-Founder and CEO, Netflix fesses up about their pricing blunder. The best part has to do with overall business strategy.

Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

amen brother

Committing to Deficit Reduction Strategies

The Congressional Super Committee was charged with negotiating for deficit reduction and it membership is split evenly between the blue and red teams. It has been clear that, as part of the package, the blue team wants to raise taxes and the red team does not. No one doubts that the leaders of these two teams, President Obama and Speaker Boehner, are giving private instructions to the committee members from their team. So why should these two make public announcements here and here?

Perhaps these are commitment devices. Speaker Boehner can easily go back on a private "line in the sand" spoken to committee members. It is harder for him to repudiate a public statement (though it has been done). So President Obama has to stake out his territory and commit to his version of the deal in which one-third of the amount is from tax increases. Negotiations when both sides commit to intractable positions usually do not end well.

Sure to make booms higher and busts lower. Wow.

A bank's capital ratio is designed to measure a bank’s capital relative to its risk exposure and is one of the ratios that regulators like the FDIC and the Bank of International Settlements uses to measure the "health" of a bank.  Here is how a banker sees the new regulations:

When I returned to my office this morning I received a call from a trade group person who told me that the new Tier 1 Leverage ratio for banks is now unofficially 9%, up from 5% that has been in place for years.

The combined shock to the system of capping debit card fees, doubling the capital requirement, significantly restricting OD charges plus the impact of 263 new regs from Dodd-Frank and all within 3 years is severe.

The higher capital requirements (almost double) cut the returns to capital almost in half. This is part of the reason that Bank of America's is raising capital from Warren Buffet:

Under the terms of the deal, Berkshire will buy $5 billion of preferred stock that pay a 6 percent annual dividend, and receive warrants for 700 million shares that it can exercise over the next 10 years. Bank of America has the option to buy back the preferred shares at any time for a 5 percent premium.

If you take a step back, we see that the regulators are running a procyclical policy: reducing capital requirements in boom years (before 2008); and raising them in bust years (today).

What makes Germany so different?

ten years ago, German unemployment was just as bad as the rest of Europe's.  But now it has a 6% and falling .  What is their Secret?  Planet Money has a 16 minute podcast that gives you the answer:

1. make it easy for firms to fire workers, and 
2. reduce the benefits from being unemployed.