Financial Methods

Techdirt.com reports that the University of Nebraska has refused to identify students that have downloaded music since they do not keep such records. Additionally, the school has sent a request for the RIAA to pay for expenses incurred due to RIAA requests.¹

Also, the University of Wisconsin has refused to comply with RIAA requests, saying they will comply when the request is accompanied by a subpoena.¹

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Source:

1. Joe. RIAA University Campaign Sputters: Group Asked To Pay Up For Wasting School's Time.
Techdirt.com. March 21, 2007.
http://www.techdirt.com/articles/20070320/171228.shtml

© 2007 Michael Cale

Napster Redux

Viacom played Dr. Evil this week by announcing that it was suing YouTube for ... One Biiiilllleeeooon Dollars!

By doing so, Viacom is following down the path of the RIAA  -  Ignore the Customers! Attack with the Lawyers!

Consumers have spoken, and they don't like the way that electronic media--whether music, television or movies--is being packaged and sold to them. A decade ago they rebelled against being forced to buy entire CDs when they only wanted the few good tracks, and thus spawned Napster. Today, using YouTube, they are rebelling against being forced to watch entire programs when they only really want the 20-second part of American Idol last night where the contestant forgot the song lyrics and broke down in tears. Or a hockey fight. Or whatever.

Seeing that digital media can be sold to them in the equivalent of six-packs, sips and pint bottles, consumers no longer want to buy it by the truckload. And they resent being told by companies like Viacom that they can't have it, or that if they want it they have to go a different site for every clip owner. Consumers don't mind specialty stores, but they also want online Wal-Marts of media, mega-stores where they can buy whatever they want, without having to go to Viacom for this, ESPN for that, CNN for the next thing, and so on.

That is why, to be blunt, YouTube doesn't matter. Because if Viacom wins this suit and busts YouTube--and there is a very good chance it will win; it is, after all, uncontested that this is Viacom's media property we are talking about--that won't change what consumers want one whit. They are demanding unbundled media, sold everywhere and in myriad assortments. Period. And if Viacom won't provide it then some new media entrepreneurs will.¹

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Source:

1. Paul Kedrosky. Viacom v. YouTube.
March 15, 2007.
http://www.opinionjournal.com/editorial/?id=110009788

2. Thomas Claburn. Viacom Sues Google For Massive Copyright Infringement On YouTube .
Information Week. March 13, 2007.
http://www.informationweek.com/news/showArticle.jhtml?articleID=198000551

© 2007 Michael Cale

Compacency In A Dangerous World

Historian Niall Ferguson and investor complacency is the focus of a recent Barrons article (subscription required).

Ferguson comments on the"paradox of diminishing risk in an apparently dangerous world."

One of his key themes is the economic, social and political parallels between the world today and on the eve of World War I. The period from 1880 to 1914, which he calls "the first age of globalization," has more in common with our own time than "any other intervening period," he says. By recognizing the similarities, it follows, we can also learn from past mistakes.

The pre-war era was characterized by relatively steady economic growth, low inflation, growing world trade, benign and liquid capital markets and a widespread belief in the ability of Great Britain, the world's reigning military power, to keep world peace. Similar circumstances prevail today, though the U.S. has assumed the role of global cop.

The first age of globalization ended in the carnage of World War I and ensuing revolutions and financial dislocations. While Ferguson doesn't see another world war looming, a geopolitical shock, he argues, could dry up financial liquidity, now abundant, and shut global stock exchanges, as happened after war broke out in 1914.¹

Chart courtesy of Barrons

In Ferguson's view, Iraq and the greater Middle East are the most unstable parts of the world today, and the most likely site of the next major war, because of the disintegrating situation in Iraq, ongoing tension between the U.S. and Iran, and rising antiwar sentiment in America. All the more reason for investors to consider the potentially disastrous implications of an American military retreat in the Mideast, and understand that liquidity can vanish quickly, as it did on the eve of World War I.

"Some people think about political and military power, and other people think about money," he says. "There is a tendency not to see how intimately connected they are."

In today's world, especially, it is essential to think about both.¹

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Source:

1. Andrew Bary. Wake-Up Call.
Barrons. March 12, 2007.
http://online.barrons.com/article/SB117348419778832743.html

© 2007 Michael Cale

EU Economy 20+ Years Behind US

The GDP per person in the EU has reached the same level that the US reached in 1985.

New EU member states have increased the rate of economic growth, but have high unemployment and lower levels of investment.¹

The report was published by Eurochambers, a pro-business group.

If income (GDP per capita) would grow in the US at 2 percent per year and in the EU at 3 percent per year, meaning a 1 percent higher growth of the EU, the EU would catch up with the US around 2045.¹

The re-unification of Germany was certainly a factor in slowing economic growth in the 1990's. 

Socialist policies, such as enormous regulation and stifling taxation, are likely the underlying causes.

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Source:

1. Lucia Kubosova. Study: EU Economy 22 Years Behind U.S..
Business Week. March 6, 2007.
http://www.businessweek.com/globalbiz/content/mar2007/gb20070306_734986.htm?campaign_id=rss_daily

© 2007 Michael Cale

New National I.D. in the U.K.

Britain has a new national I.D. card set to roll out by 2009.  The new card (and new database to hold all the info) is 'voluntary'.  But if you opt-out, you are ineligible for a passport.

Applying for the new cards require people to give fingerprints, biometric data, and other intrusive details - such as insurance numbers and whether they own a second home.  All this data will be stored in a massive database which can be accessed by government departments, banks, and businesses.¹

It means that, despite the Government repeatedly insisting the scheme is voluntary, the only way to avoid signing-up is to never obtain or renew a passport. ¹

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Source:

1. James Slack. Don't like ID cards? Hand over your passport.
Daily Mail. March 9, 2007.
http://www.dailymail.co.uk/pages/live/articles/news/news.html?in_article_id=441329

© 2007 Michael Cale

Why the Fed Is Worried About Inflation

Productivity down, labor costs up.

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© 2007 Michael Cale

Rewriting History

Three professors have published a working paper that give another black eye to Wall Street analysts.

The professors found that a historical database of analyst recommendations had over 55,000 revised records. The revisions made over the period 1993 to 2002 made the recommendations more conservative (fewer Strong Buy and more Sell ratings).¹

As a result of the changes, the stock picks shown in the database would have created annual gains that were 15% to 42% better than the originally recorded recommendations, using a trading strategy based on analysts' recommendations.¹

Thomson, the company that maintains the database, contends that the changes reflect correcting inaccurate data.  The fact that the changes were overwhelmingly favorable to the analyst's gain/loss is reason to be skeptical of that explanation.

The working paper is "Rewriting History," by Alexander Ljungqvist (New York University), Christopher J. Malloy (London Business School) and Felicia C. Marston (University of Virginia).

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Source:

1. Bill Alpert. Mysterious Changes in Key Wall Street Data.
Barron's. March 5, 2007.
http://online.barrons.com/article/SB117288153945425442.html

© 2007 Michael Cale