251 (10 February 2016)

Welcome to week 251!  The articles below caught my attention this week.  Please note that what are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********).  The links to articles preceded by [SR] require a subscription to be read in their entirety, although complete articles may frequently be found by an Internet title search.

(3 February 2016): “The Long White Line: The Mental and Physical Effects of Long-Haul Trucking” (http://www.psmag.com/health-and-behavior/the-long-white-line-the-mental-and-physical-effects-of-long-haul-trucking)

********I was led to this by JSTOR (http://daily.jstor.org/suggested-readings-truckers-stalkers-computers/).  The article makes it clear that the people who drive the 18-wheelers that move raw materials and goods across the highways of the U.S. pay a heavy price, indeed.  On a recent cross-country drive, I was once more filled with respect and gratitude for their presence, especially in a driving rainstorm west of Amarillo, Texas.  The article makes clear that compassion would be appropriate, too.

(4 February 2016): “A Liquor License Workaround: Fermented, Not Distilled” (http://www.nytimes.com/2016/02/04/business/smallbusiness/restaurants-work-around-liquor-laws-with-wine-based-drinks.html)

——–“Bar and restaurant owners are used to working through a tangle of regulations, but liquor licensing may be the most Kafkaesque.  Rules vary by state and county, and costs can be stratospheric, especially in areas that tightly limit the supply of licenses, usually through population-based quotas.  In parts of New Jersey, among the most expensive states, the cost of a restaurant liquor licenses now tops $2 million.  But when markets get convoluted, entrepreneurs get creative.  Around the country, restaurateurs and others in the industry are finding unusual ways to work around restrictive local laws or take advantage of their loopholes.”  One area of creativity relates to the differential cost of liquor licenses and those for beer and wine.  In Broward County, Florida the supply of full-service liquor licenses is restricted and “have a market value of about $150,000.  Licenses to serve only beer and wine, however, are unrestricted in number and cost $392 a year.”  As a result, Miami-based Premium Blend produces a range of “wine-based beverages intended to mimic the taste of popular liquors. . . . the substitutes come in a range of strengths—24, 20, 17 or 14 percent alcohol—to satisfy different states’ licensing laws.”

********A clear example of how the system of liquor laws in the U.S. give rise to a variety to a variety of opportunities for gain that entrepreneurs may act to realize.  Four different concepts of entrepreneurship, along with related material, are briefly explored at: https://theinvisibleforcesweekly.com/.  Look for Notes on Entrepreneurship under its Resources section.

(4 February 2016): “Financial turmoil half a world away is melting Minnesota’s iron country” (https://www.washingtonpost.com/business/economy/financial-turmoil-half-a-world-way-is-melting-minnesotas-iron-country/2016/02/03/ee2b4bf4-c9c2-11e5-a7b2-5a2f824b02c9_story.html)

——–In Itasco County, Minnesota, three of six iron ore mines “have been idled, forcing roughly 2,000 workers outs of a job. . . . Booms and busts are part of the circle of life here in the frozen northlands, but never before has the cycle started half a world away” in China.  “And never before have the residents here felt so help to stop it.”  China’s breakneck growth “is coming to an end and no one is sure how painful that will be.  The country that had helped power the world economy for years is now sowing fear across international financial markets.”  From 2001 to 2011, “the international price of iron ore skyrocketed from just about $13 a ton to nearly $200 a ton amide surging demand from developing countries.”  But the “international price of iron ore has fallen back down to below $40 a ton—less than it costs” mining firm Cliffs Natural Resources to mine it.

********The article includes 25 photos of the region, its people, and its work.  As the article points out, the global overcapacity for steel making has contributed to the turmoil: “At the end of the line is the Iron Range.  With the blast furnaces turned off at U.S. steel mills, there’s little demand for the taconite pellets that are the crux of the local economy.”

********During China’s breakneck growth period, it developed many large cities from scratch, cities that are now called “ghost cities” as they are “filled with apartment buildings, shopping centers, even libraries—but not people.”  These ghost cities, and the reasons for them, are discussed in “The Unreal, Eerie Emptiness of China’s ‘Ghost Cities’” (http://www.wired.com/2016/02/kai-caemmerer-unborn-cities/).  The article includes photos by Chicago photographer Kai Caemmerer (http://kaimichael.com/).

(4 February 2016): “Payday Lenders Are Changing the Game Ahead of a U.S. Crackdown” (http://www.bloomberg.com/news/articles/2016-02-04/payday-lenders-are-changing-the-game-ahead-of-a-u-s-crackdown)

——–The Consumer Financial Protection Bureau (CFPB) “is poised to release new [payday loan] regulations this year, after more than four years of studies and speeches.  The agency, which hasn’t finalized the details, says the rules will stop borrowers from taking out short-term loans they can’t afford and racking up fees week after week to buy more time.  Lenders say the CFPB will kill off payday advances and similar loans, hurting borrowers with no other options.”  Some payday lenders are not waiting for the rules before acting.  Matt Martorello, who owns Bellicose Capital, is selling out to an American Indian tribe in Michigan “for just $1.3 million upfront, plus as much as $300 million in future payments.”  Some payday lenders have partnered with American Indian tribes, as such deals “allow companies to get around state laws that cap interest rates by claiming the tribes aren’t subject to those rules.  Avoiding federal regulations, like those the CFPB will propose, is tougher.  The Federal Trade Commission already has won cases involving tribal payday lenders.”

********The CFPB released a draft proposal in March, 2015.  Here is the 57-page draft: http://files.consumerfinance.gov/f/201503_cfpb_outline-of-the-proposals-from-small-business-review-panel.pdf.  An overview of the proposal is available at: http://www.consumerfinance.gov/newsroom/cfpb-considers-proposal-to-end-payday-debt-traps/.

(5 February 2016): “Why your Super Bowl vegetable platter might cost more this year” (http://www.latimes.com/business/la-fi-super-bowl-produce-20160205-story.html)

********Nothing particularly surprising here: weather affects vegetable supply and thus their price.  Still, it provides a look at market conditions for the three Cs: carrots, cauliflower, and celery.

(7 February 2016): “Cover Crops, a Farming Revolution With Deep Roots in the Past” (http://www.nytimes.com/2016/02/07/business/cover-crops-a-farming-revolution-with-deep-roots-in-the-past.html)

——–Long ago, agricultural cover crops were replaced by fertilizers but they are making a resurgence.  The case of Mark and Doug Anson is a case in point.  They had concerns about the soil they farmed in their commercial soybean and corn operation in Indiana and Illinois.  They noticed that its “texture was different, not as loamy as it had once been, and a lot of it was running off into ditches and other waterways when it rained.  So in 2010 the family decided to . . . [sow] some 1,200 acres, which Mark describes as highly eroded farmland, with wheat cleanings and cereal ryes.  Additionally, they spread some cover crops to eroded areas in a few fields.”  Over time, the changing texture of soil and increases in corn productivity during a drought, showed the more skeptical brother, Doug, that cover cropping “made financial sense. . . . Now some 13,000 of the 20,000 acres that the family farms across nine counties are planted with cover crops after harvesting, and farmers around them are beginning to embrace the practice.”

********I recently read The Hidden Half of Nature: The Microbial Roots of Life and Health (http://www.amazon.com/Hidden-Half-Nature-Microbial-Health/dp/0393244407/), by David R. Montgomery and Anne Biklé, which nicely supports the move from chemical-only agricultural practices to one that is mindful of the biological, especially bacteriological, reality of soil as a living thing.  As the article points out, cover cropping makes financial, as well as biological, sense, although this will always be an empirical question dependent upon a host of factors.  As Indiana farmer Dan DeSutter notes, “We’ve concentrated on the physical and chemical aspects of farming but not the biological.”  This has started to change.  Perhaps change will come more quickly if agrichemical businesses take a look at Peter Drucker’s The Five Most Important Questions You Will Ever Ask About Your Organization (http://www.amazon.com/Peter-Druckers-Five-Important-Questions/dp/1118979591/).  For example, “Is our business selling chemicals to farmers or helping farmers grow abundant crops?”  As the article indicates, Monsanto is sufficiently curious about cover crops to put up funds for cover crop research.

(8 February 2016): “The Prince of the Smugglers” [SR](http://www.wsj.com/articles/the-prince-of-the-smugglers-1454880816)

——–[Review of Contraband: Smuggling and the Birth of the American Century, by Andrew Wender Cohen.]  “Every age has its quintessential crime, a trespassing of laws or norms that exposes deep vulnerabilities—and great opportunities.  In our own day, that title likely belongs to computer hacking, reflecting a moment in which personal data is an especially precious commodity . . . In the decades following the Civil War, as Andrew Wender Cohen makes clear in his engaging book ‘Contraband,’ the signal crime was smuggling.  Not only did tariffs generate the majority of federal revenues so that the stakes in evading them were particularly high, but the legitimacy and scope of the duties were also the day’s most fiercely contested political issue.  (Generally, Republicans favored higher tariffs and were more aggressive in policing smuggling, while Democrats preferred lower tariffs.)”  In, after the 16th Amendment was passed extending the federal income tax, “the tariff was no longer the government’s primary means of raising revenue, and federal regulations soon pushed it aside as the main instrument of domestic policy.”  With that, “Support for protectionism gradually eroded in many partisan precincts.   [And smugglers] . . . no longer capturer the public’s fascination.”

********The Prince of Smugglers, around which Contraband is based, is Charles Lawrence, né Lazarus.  You can learn more about the book at: http://www.amazon.com/Contraband-Smuggling-Birth-American-Century/dp/0393065332/.  I was taken by the notion that “Every age has its quintessential crime,” as it seems like it is an idea that coincides nicely with the invisible forces, i.e., such a crime would clearly show the invisible forces at work.  I’m trying to learn more about historical instances from the author of the Review.  While searching, however, I came upon the notion of ‘signal crime’ which, although not the same thing, is of current interest.  A signal crime or event “can be defined as an incident that is disproportionately influential in terms of causing a person or persons to perceive themselves to be at risk in some sense.”  The concept was first developed by Innes and Fielding in 2002.  You can learn more about ‘The Signal Crimes Perspective” in the section with that name at: http://repository.edgehill.ac.uk/5928/1/A.Millie_Reassurance_Policing_%26_Signal_Crimes_pre_pub.pdf.

(8 February 2016):Odd Lots: The World’s Only Stand-Up Economist Tells the World’s Oldest Economics Joke” (http://www.bloomberg.com/news/articles/2016-02-08/odd-lots-podcast-stand-up-economist-yoram-bauman)

********Smart economists learn to laugh at themselves, since others will surely be laughing at them!  This offering of Bloomberg’s Odd Lots provides a link to the funniest economics papers of all time, including “Japan’s Phillips Curve Looks Like Japan,” as well as a 24-minute podcast featuring Yoram Bauman, who has a Ph.D. in economics from the University of Washington; interestingly, three of the papers on the list were written by Nobel laureates.  The podcast provides an introduction, about five minutes of Bauman’s comedy routine, a more general interview with him, and some concluding remarks.  In order to appreciate the humor, it might be helpful to have some background in economics, although any well-developed stereotype of economists will probably serve equally well.

(8 February 2016): “Ground Shifts Under Wheat Export Market” [SR](http://www.wsj.com/articles/ground-shifts-under-wheat-export-market-1454754785)

——–“The global trade map in wheat is being redrawn . . . The transformation comes as record harvests, the strong dollar and cheap oil are combining to shake up the multibillion-dollar global wheat market.  Bulging silos are pushing producers to seek new markets, and cheap oil is bringing down transportation costs.  The surging greenback is undermining farmers in the U.S., the world’s second-largest exporter of the collar-denominated commodity behind Canada, making grain from Russia to Argentina more competitive.  Meanwhile, French grain is turning up in Indonesia and Russian grain in Nigeria.  On Thursday, a rare cargo of Argentine wheat arrived in Wilmington, N.C. . . . This crop year, Russia is poised to become the world’s largest exporter . . . [and] U.S. wheat exports are forecast to slump to a 44-year low.”

********A nice example of the consequences of the interacting elements of larger harvests, lower transportation costs, and a stronger dollar.

(8 February 2016): “Why a Business-Tax Overhaul Is So Tricky” [SR](http://www.wsj.com/articles/why-a-business-tax-overhaul-is-so-tricky-1454864343)

——–In 1986 a sweeping law “invited business owners to avoid the corporate income-tax system and enjoy lower taxes by passing profits through to their individual returns.  Now, instead of a neat separation between business and personal taxes, the U.S. system muddles them together.  The two are tied so closely that any attempt to equalize tax rates across industries changes taxes for individuals.  That is complicating Congress’s ability . . . to address discrete business-tax problems such as inversions . . . or the forces that left the U.S. with the developed world’s highest corporate tax rate.  The links between corporate and individual taxation inevitably lock policy makers in intractable disputes about popular deductions and the question that divides the parties most bitterly: Is the U.S. collecting enough money from wealthy individuals?”

********According to the article, the tax overhaul gave rise to “a proliferation of so-called pass-through firms, which pass on profits to owners’ individual returns.”  These firms have decreased the separation between business and personal taxes and made tax overhaul much more challenging.  You can learn more about pass-through firms at: http://taxfoundation.org/article/overview-pass-through-businesses-united-states.

********Tax inversion is one reason why firms are leaving the U.S. and establishing their homes elsewhere.  Another is “earnings stripping” (http://www.nytimes.com/2016/02/10/business/dealbook/corporate-inversions-arent-the-half-of-it.html).  This tax place when inverting company “arranges for the United States parts of its operations to borrow large amounts of money from the now-foreign parent.  The indebted American subsidiary will pay interest on that debt to the parent.  Under the United States tax code, the interest payment can be used to offset the American earning.  Voila!  The earnings of the company are now offset by these payments.  What used to be a significant tax bill disappears. . . . A 2004 study of 12 corporate inversions found evidence that after inversion, companies engaged in earnings stripping.”  There is a link to the study in the article, as well as a 2007 article by the U.S. Treasury indicating “strong evidence” that inverting companies also stripped earnings.

(9 February 2016): “The Bloomberg Job Skills Report 2016: What Recruiters Want” (http://www.bloomberg.com/graphics/2016-job-skills-report/)

********The two characteristics that are more desired and more common in the Report are: Analytical Thinking and Work Collaboratively.  You might also be interested in Bloomberg’s ranking of the “Best Business Schools 2015” (http://www.bloomberg.com/features/2015-best-business-schools/).  It provides a variety of rankings, including one for Part-Time MBAs, as well as some valuable additional information.  The article leads off by noting that “Business school has been called a two-year job interview,” which struck me as an interesting perspective.  I didn’t know, but I am not surprised, that “More graduate degrees in business are awarded each year than in any other field in the U.S.”  To identify the best, Bloomberg “compiled data from more than 13,150 current students, 18,540 alumni, and 1,460 recruiters across 177 distinct B-school programs.”

(10 February 2016): “Taming Drug Prices by Pulling Back the Curtain Online” (http://www.nytimes.com/2016/02/10/business/taming-drug-prices-by-pulling-back-the-curtain-online.html)

——–“Most major pharmacies do not list the price of the drugs they sell.  And even if they do, prices for the same drug can vary strikingly and cost far more than the rate that most insurers pay.”  Now, however, GoodRx and Blink Health “are aiming to fundamentally change the way people buy drugs bringing the industry into the digital age by disclosing the lowest prices for generic prescriptions to allow comparison-shopping.”  For example, “The listed price for a 30-day supply of the generic version of Lipitor . . . is $196 at Kmart, according to GoodRx, and $61 at Kroger.  With a coupon obtained through GoodRx, the drug is about $12.  Blink Health is offering Lipitor for $9.94.”

********According to Lisa Gill, who is deputy editor of Consumer Reports Best Buy Drugs, drug prices “are all over the map, even within the same ZIP code . . . It’s a retail transaction that doesn’t actually act like any retail transaction.”  Indeed, consumers “often don’t know how much they will owe until the pharmacist tallies the purchase at the cash register.”  Hardly a case of perfect knowledge of available prices.

May you have a good week!

Bruce

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