Monday, March 31, 2014

On Climate, We Should Be Listening to the Alarmists Too

I have to write about the new UN climate report that is all over the news this morning. There is not much to say about the substance of the report, as none of it is news to those who have been following climate impacts over the past 20 years. This is to be expected in a report that has to be agreed unanimously in every detail among 100 nations. The authors are forced to weigh the benefits of mentioning a possible impact against the greater ease of remaining silent on a topic that is in some doubt. The result of that heavy political environment is a policy report that is very cautious and reserved when it points to future impacts of climate change. The impacts mentioned in the report are essentially those that are already set in stone. It is, in all likelihood, ten years too late to prevent any of them, aside from the obvious measures of getting people out of the way.

The UN report is valuable for remediation discussions that must work within severe economic constraints, but for planning purposes we should be listening to the alarmists too. There will be impacts that go beyond those that are obvious now. With change, there always consequences that are not obvious until after they occur. Climate alarmists are, for the most part, the people who can see impacts coming, even if they cannot forecast with the precision that a political process requires. We know, to cite just one example, that we are facing a global sea level rise of 7 meters somewhere out on the planning horizon. It will happen regardless of future industrial greenhouse gas emissions. The likely time for this degree of sea level rise is 1 to 2 centuries from now. That is a lot of uncertainty, so much that the UN report does not attempt to quantify the amount or timing of sea level rise, but the timing is a minor detail. As long as we continue to build buildings, roads, tunnels, bridges, pipelines, and other facilities that we know with a good degree of certainty will be submerged within their potential useful lives, we are drawing up future disasters. As a very simple example, a flood-plain shopping center currently under construction 4 meters above sea level will with certainty be demolished by flood waters in a storm before 2125, and perhaps much sooner. We can start to redirect ourselves from the most immediate of those planned disasters even though, at this point, we do not know whether it is us or our grandchildren who will be affected.

Some of the policy discussions surrounding climate change are based on plans to limit global temperature increase to 2 kelvins, or 2° Celsius. It is already too late in a political sense for that. In theory it could be done but we would have to completely stop burning all fuel by around 2040 — how? There are discussions about how to save the Greenland Ice Sheet from melting. If that could be done, it would reduce sea level rise by 7 meters, but it is too late for that too. In the current climate conditions, all the ice in Greenland will melt away in less than 1,000 years, but a better guess based on past greenhouse gas emissions only is 300 years. It is painful to observe policy discussions that are so far behind the flow of events, but at least policy discussions are taking place, and with that, there is the hope that the discussions could catch up with what has already happened.

Friday, March 28, 2014

This Week in Bank Failures

Citigroup’s new financial plan was rejected by the Fed. The Fed report says it rejected the plan in advance because of errors in form that meant that the plan was too far removed from real life. It had instructed the bank to correct the errors, but for reasons unknown, the bank failed to do so. Citigroup is left to pay a smallish dividend of 1¢ per share for another year. Zions Bancorp and three foreign-owned banks also had capital plans rejected and cannot increase dividends this year. Goldman Sachs and Bank of America had their plans approved only after they scaled back their dividend plans.

Banks that last year were rushing to lend to Russia now hope they did not overextend themselves. Russia, more than any other country, depends on exports of materials to keep its economy going, and if those exports are a little smaller than planned because of other countries’ worries about Russia’s intentions, Russia’s economy will be in recession and debt payment will likely be late. Just the slowdown in foreign investment and lending that has already taken place is enough to cause a recession in Russia through the end of this year, according to consensus estimates. And things could get much worse if a trade war breaks out. In that situation, observers think, a depression is assured. That scenario was made more likely by Russia’s moves to ban specific foreign investors and traders this week.

Gotti Tedeschi, the Vatican Bank head who was removed in 2012 by an apparently corrupt board in an apparent attempt to silence him and delay reforms at the bank says he may sue his former employer to clear his name. The board said in its dismissal action that Tedeschi was ineffective and divisive, but badly needed reforms at the bank have not gone forward since then. The board members who had moved to block reforms remain in their posts.

Jiangsu Sheyang Rural Commercial Bank in China was hit by an extended run which was exacerbated by extensive media coverage. The bank took to displaying huge stacks of bills in its teller windows in an attempt to reassure depositors that it had plenty of cash on hand. It stayed open all night to process withdrawals, and the central bank made special arrangements to supply as much cash as needed. Depositors in China have understandably become nervous, as China is now for the first time permitting ineffectively managed businesses to go under, and the country officially has no deposit insurance. A deposit insurance plan is in the works but is probably two or three years away from being implemented.

Treasury has announced an IPO to sell a 20 percent share in Ally Bank, the successor to GMAC. GMAC was perhaps the most puzzling of the large bank bailouts from the Wall Street Bailout era, as the bank at the time was losing money and lacked a credible business plan. Worse, its mortgage business appeared headed for bankruptcy. GMAC’s turnaround and Treasury’s apparent profit on its bailout are a testament to how easy it has become for banks to make a profit on legacy loans with interest rates kept artificially low.

There is a troubling boom in subprime auto loans, with loans being extended to middle-income workers who do not earn enough to meet the payments. This squeeze is the result of an increase in new car prices to their highest levels ever and lenders’ failure to adjust to the changes.

Thursday, March 27, 2014

Diet Coke Sales in Decline

Here is good news: Diet Coke sales are falling. U.S. soft drink sales in general have been declining by about 1 percent per year for the last decade or so, but the trend reached diet soda late, and Diet Coke specifically declined by 4 percent compared to a year ago. The chief complaint about soda is that it causes weight gain. Consumers had been switching to diet soda because of the promise that it wouldn’t contribute to weight gain. That promise was long since proven false, and that news, it seems, is now getting out to the public.

The price of soft drinks, particularly bottled soda, is another complaint. Consumers know that soft drinks are just dressed-up tap water, that they are paying premium prices for an empty product, but this thought may intrude only after prices go up beyond a certain point. I remember how I stopped buying milk, a product with similar problems. The thought was something along the lines of, “I’m paying $70 a year for this?” I was never a regular soda drinker, but the price of soda is now high enough that I imagine it could be inspiring the same reaction.

European Energy

A consensus has developed across Europe that it must seek ways to be less dependent on imported energy. This thought started with nightmares of the Russian army running roughshod over country after country, but the resolve may soon be reinforced when the damage from summer storms and drought is added up, along with new alarm about a warming planet as El NiƱo conditions return. In Germany, worries over Russia might well give the government the excuse it is looking for to keep a few nuclear plants open a few years longer than previously planned. Germany has also indicated it will be seeking natural gas from the United States as a stopgap measure. In the long run, though, wind, solar, and tidal energy will have to become a bigger part of the energy mix in western Europe. It won’t take any breakthroughs to give Europe a greater measure of energy stability. That can be accomplished using existing technology and a whole lot of construction work. Energy construction is something that economists have been suggesting for years as a way for Europe (and the United States, for that matter) to revive its languishing economy. Politicians have talked about energy diversity before, but I believe this time the trend will actually get off the ground and lead to permanent changes in Europe. If so, we may look back to this month as the point when it all got started.

Tuesday, March 25, 2014

Digital Currency Treated as Property for U.S. Tax Purposes

IRS rules treat digital currency as property rather than currency, according to a new clarification from the agency. This rule especially affects the transaction accounting for U.S. businesses as their customers pay them in bitcoin. Businesses can’t keep books in bitcoin, but will typically have to value these transactions in dollars as of the date of the transaction.

Monday, March 24, 2014

The E-Book Conversion

I have been an author of print books for most of my adult life. Starting Tuesday I will also be an author of an e-book.

The e-book medium is a frustrating maze of limitations if you are used to the printed page. In print, if you are the author, you can arrange things on the page in any way you can think of that helps you get a point across. In an e-book there are no pages. There is little leeway to arrange anything in a visual sense. The author cannot present anything that relies on shape or position — tables are perhaps possible if they are very small, but things that you take for granted on the printed page, such as diagrams and captions, suddenly become problematic. The only special typographic device that is guaranteed to make the transition to the e-book medium is the list, and in writing my latest book I found that any arrangement of information can be reduced to a list if need be.

I had previously tried to convert some of my print books to e-books, and this is how I discovered how limiting the e-book medium is. The e-books I came up with for my existing books would display more or less as intended in some e-readers, but in others, key information was obliterated: truncated, scrambled, or shrunk to the the point where the meaning was lost. When every reader may have a different view of a book, the design becomes quite a different challenge. I hope someday to make e-books of all my books, but to make things easier, I wanted to start with a new book, one that was written as an e-book from the beginning. That book was Routine SAS SQL, which finally is ready for release.

I wrote the book in the XML markup required for an e-book. When I was done I converted the e-book to a print book layout. That conversion was also surprisingly difficult and required some difficult design compromises. I had to give up hyphenation and justification, for example, and that required a leap of faith. High-quality hyphenation and justification had been the hallmarks of a well-printed book for five centuries. To suddenly say, “I don’t think we need that anymore,” does not come easily to someone raised on print books. But in the end, converting an e-book to the print medium was far easier than converting a print book to the e-book medium.

The e-book-first approach to books makes sense for another reason. For a new book being published in 2014, surely more people will read it in e-book form than in print. For all the advantages of the print medium, there are disadvantages too that for most readers most of the time hold more weight. Weight is the key word. I know I won’t miss carrying 200 cartons of books from the truck to the warehouse. And with costs of energy and security going up, readers in most of the world have been unhappy with the roughly $20 cost of shipping a book from one continent to another. For about the same price as the shipping cost of a print book, you can have the e-book instead — and you can get it the same day instead of waiting for a couple of weeks.

There are still print copies for those who want to pay the price of paper and shipping, and e-book readers are encouraged to imagine that the e-book is based on the print book. The e-book listing, for example, shows the page count of the print edition. It could hardly be otherwise. For most of us pages still provide the easy way to understand the length of a book, even though there are no pages in an e-book. In general, the connection between the e-book and the print book is mainly for the purposes of imagination. Just as most people who buy a music album will never see the CD, most people who buy a book will never see the print edition. But the physical medium serves as a kind of icon that makes the electronic medium seem more real.

Sunday, March 23, 2014

The Lure of an Air Disaster Mystery

One of the reasons airplane crash mysteries hold such appeal is that everyone can have a different view of events. For flight MH370, which disappeared and is officially thought to have gone down in the eastern Indian Ocean, I have heard dozens of theories from my personal friends. One explained how a plane flying low enough to evade radar could reach a remote place such as Tajikistan undetected. Another theory is that the GPS navigation system went loopy and sent the flight the long way around. I have heard these stories about GPS systems in cars, so it almost sounds credible. There are theories about China, Lost, Antarctica, the Australian desert, structural failure, electrical systems failure, Iranian hijackers, Malaysian spies, drugs, fumes, snakes, radar shadows, radio jamming, lasers, cell phones, freak weather, and of course, space aliens. The skeptic in me says there is a chance that all of these theories are wrong.

It is only natural that there are so many theories. It is a mystery, after all. The actual known information about the flight is very slight. There are just a few points of information along the way. When some of these points seem to match up with something in someone’s prior experience, this past experience is the hypothesis the person will jump to first. And then, for the most part, there is no further information to disprove the hypothesis. But different people have different past experiences, so the theories people hold are, in a weird way, a measure of their past experience. A person who is asking who on board might have been a spy has a different background than the person who is looking at the possibility of food-borne poisoning.

It is also only natural for people to feel that their own past experience is more telling than what other people have to offer, and so people track the news, waiting to see if there is anything to prove that their theory of events is correct. Who knows what the next headline will tell? The plane reappears in mid-air and passengers tell vague stories of strange lights. Then the people who had put forward that theory can say, “See? I told you it had to be space aliens!” This is ego at work, perhaps, but it helps to explain how the search for a missing plane can stay at the top of the news for weeks.

Friday, March 21, 2014

This Week in Bank Failures

In the past the economy of Crimea largely depended on tourists visiting from the mainland of Ukraine. That era would seem to be over now, as the region has voted to sever its ties with Ukraine and join the more distant and less prosperous neighbor, Russia. The split is more serious than just a formal political action; Russian armed gangs roam the streets and Ukrainians who visited Crimea today would risk getting beaten, kidnapped, or shot. The way things look now, it is hard to imagine the tourism business recovering soon. But this also means the economy of Crimea will shrink permanently and its population will have to decline as workers seek jobs elsewhere, even if this decline occurs mostly from Ukrainians fleeing the region. Of course, a declining population means that real estate development can come to a stop, and many loans in Crimea are unlikely to be repaid as building projects are abandoned. It is hard to imagine the banks going back to normal business short of a forced currency conversion and financial system bailout from Moscow, and that scenario is less likely now that the treaty between Crimea and Russia has already been signed. In the meantime, ATMs in Crimea are out of cash.

Bankia, one of Spain’s most desperate banks, today promised shareholders a dividend starting next year as it tries to persuade investors and regulators that it will be able to continue to operate. It has paid out €1 billion to small investors it (and its predecessors) defrauded in the run-up to its crash, and it hopes to complete that arbitration process this year. Most of these small investors were merely account holders whose savings accounts were converted to bank stock or similar securities.

In the United Kingdom, the Royal Mint will begin producing a new £1 coin in 2017. The 12-sided coin will incorporate security features similar to those found in most current bank notes. It is estimated that 3 percent of the current one-pound coins in circulation are counterfeits.

Regulators have warned that new rules that limit bankers’ bonuses in the European Union do not just apply to the traditional annual bonuses, but also if bonuses are paid quarterly or monthly. HSBC and others have started to pay bonuses in small monthly increments to try to avoid the new limits on bonuses, but it appears that strategy won’t be sufficient to get around the new rules after they go into effect at the end of this year.

China, it appears, is beginning to let overextended business go bankrupt. The high-profile case this week is Zhejiang Xingrun Real Estate, a real estate developer in the southeast which defaulted on about $500 million in debt, most of it owed to state-run banks. Though insolvent, the company has not declared bankruptcy and is said to be working on a way to continue operating. In the past, the government has taken extraordinary measures to rescue businesses before they got to this point, partly to protect banks from the consequences of bad loans.

One U.S. credit union was liquidated today. Parsons Pittsburg Credit Union in Kansas had been in conservatorship since January. It had 1,466 members. Member accounts have been transferred to Golden Plains Credit Union.

Wednesday, March 19, 2014

China Bets on Thorium

China is concerned enough about the limited supplies of uranium that it has launched a program to develop thorium power plants. At The Guardian:

The Chinese government emphasizes the ugly health consequences of coal-generated smog and the dangerous economic instability that results when energy must be purchased from other countries around the world. The world’s uranium might be mostly used up, but thorium is plentiful, at least in comparison. Thorium is easier to handle than uranium. It is said to have little potential for weapons use.

There are other things to like about the idea of thorium-power nuclear reactors when compared to current nuclear technology. The “world’s first” line in the Guardian headline is perhaps a bit of an exaggeration — many different thorium reactor design concepts have been tested over the past half century, and generally have been shown to work. A thorium reactor is inherently more controllable than one based on uranium. It has an on-off switch like a normal appliance, unlike uranium that may take a year to cool down after it is turned off. Thorium reactors probably could operate on a much smaller scale than the scale needed for a uranium-based reactor, a thought that has some engineers thinking in terms of thorium-powered computers and cars.

There are also reasons to be cautious. The knock on thorium reactors, like all nuclear reactors to date, is that the cost to build them is greater than the value of the energy they generate over a lifetime of use. Proposed thorium reactor designs are potentially more toxic than uranium-based designs, though this can perhaps be countered with thorium’s greater controllability.

Of all the countries in the world, China has the most to gain from a new mineral-based energy source. The way things work now, China’s prodigious manufacturing capacity could come unplugged with relatively little warning. No one is saying thorium is a simple answer, but if engineers have a few lucky breaks, maybe in ten years, it could be part of the answer.

Tuesday, March 18, 2014

What Might Happen to the Russian Economy

With the vote over in Crimea, and having proved to be relatively uneventful, press reports are beginning to worry about what may happens to the Russian economy as a result of its interference in Ukraine. It’s a question that can’t be answered without knowing what Russia will do. European economic moves will have little long-term punitive effect, but if Russia is about to shoot itself in the foot, there is no one who can come to its rescue either. This is important to consider because the talk two weeks ago in Russia was of the Russian army invading Ukraine to force regime change, then occupying as much as half of Ukraine for years to come. That is a scenario that would have unimaginable costs for Russia, not just in terms of money, but also in human lives. One must remember that the occupation of Afghanistan was instrumental in bringing down the Soviet economy. The occupation of half of Ukraine is a far bigger challenge than Afghanistan, and Russia is a smaller country than the old Soviet Union. But observers may take some reassurance from Putin’s speech today, in which he insisted that the territory of mainland Ukraine is not a proper concern for Russia.

Russia will nevertheless take a hit economically if it steps forward to right Crimea’s economy, and it may take years to mend fences with Ukraine. If Ukraine is wary of serving as Russia’s western gateway, as it surely will be for decades to come, that’s a relatively new problem that leaves Russia more isolated from Europe than it historically has been. Perhaps it is a chance for Russia to try to fix its broken manufacturing sector and in general to seek the ideal of economic self-sufficiency that was abandoned in the Putin years. But Putin is still in charge, so these are steps that are not likely to be taken very soon.

Monday, March 17, 2014

Pirate Oil Tanker Seized in Mediterranean

“Pirate oil tanker” is not a phrase that comes naturally to native English speakers, but we may want to practice saying it. A criminal enterprise with support from a rebel militia group in Libya managed to steal an oil tanker, load it with crude oil, and send it off to the open seas, although that is as far as they got. The BBC News story:

It used to be the assumption that anything as substantial a full-sized oil tanker would tend to be under civilized control, but not in this case. This was an unregistered ship with something close to a quarter billion dollars worth of oil. This might be the first story of its kind, but it is far from the first time pirates have taken control of an oil tanker. Over the last few centuries we have come to expect that large size is a sign of legitimacy, but that era may be ending.

Saturday, March 15, 2014

The Irrationality of Corporate Decision-Making

Corporate decision-making is hard to explain. It is not rational, not even approximately rational. Many people make the mistake of thinking that corporations are rational in financial matters, but fail to balance financial priorities with other priorities. But it is easy to find examples to show that even when only financial consequences are considered, decisions are still not rational.

Two of the top news stories this week are about the consequences of weak corporate decision-making. One story is about Target, one of the largest U.S. retailers. It ignored initial warnings of spyware on its networks, reacting only after records of 80 million customers had been copied out to unknown destinations. The other story is about the investigation into decisions that led to a design defect being incorporated into more than 1 million cars manufactured by General Motors.

We don’t know the details of the thinking at Target, but it sounds as if less than 1 hour, or less than $100, was spent looking into reports of the network intrusion. At that point, it seems the intrusion was noted and logged, but there were no specific plans to investigate further or take actions to correct it. Target seems almost certain to spend more than $1 billion in technology costs alone in its belated response to the problem. So even if the initial reports indicated only a slight chance of a major problem, the scale of the initial reaction was not in any rational proportion to what was at risk.

At General Motors, the design defect at issue was noted and discussed, and a solution was proposed that would have cost an estimated $1 per vehicle. This was rejected at the time as being too expensive, so instead, the defect was built into three years of cars. Investigators both inside and outside the company are trying to find out how that decision could have been made. The cost of the preemptive fix would have been tiny compared to what General Motors now must pay for a recall, which is on the order of $200 per vehicle. Looking at the decision in the narrowest financial terms, it shows a disregard for consequences that cannot be described as rational.

Corporate decisions in general reflect a resistance to change. The actions of change are regarded as more risky than they are, but it goes deeper than this. Information that change is needed or that change is taking place is also resisted. Target apparently did not want to take even one cash register offline to find out the nature of the spyware that had been installed, presumably because interrupting a cash register, even one known to be corrupted, was considered too big a change to make. General Motors perhaps did not want to reopen a design that had already gone through the painful process of approval at approximately ten levels of management. And these are not bizarre, extreme cases of corporate decision-making, even if the negative consequences happen to be unusually large and extremely visible. Large organizations every day make decisions that put their own financial future at risk in order to avoid thinking about change. The risk of financial failure that corporations take on is not merely theoretical, as you can see from the parade of large corporate bankruptcies.

The resistance to change is just one of the more obvious irrational properties of corporate decisions. The division of attention that goes into the corporate structure makes it impossible to keep considerations in their proper proportions. It is said that a corporation can approach rationality in the long run, but that is only a theory, and it depends on the assumption that the corporation is able to change faster than any changes that take place in the environment it operates in. All evidence and the very nature of the corporation point to the contrary. Once you recognize the built-in irrationality of corporate decisions, you can deal with corporations more constructively than if you imagine that corporations must be making decisions that reflect their own interests if those interests are defined narrowly enough.

Friday, March 14, 2014

This Week in Bank Failures

Depending on what happens next, Crimea could become the next Cyprus (or the new Puerto Rico, as some in the Russian media have suggested without any intentional irony). The autonomous maritime region of Ukraine is relying more on tanks and machine guns than on the legal process as it considers its political future. Amid the tense standoff, depositors are withdrawing as much money as they can from their bank accounts. The largest bank is limiting withdrawals to $150 per day as there are few options for delivering more cash to the region, and other banks are having similar difficulties. Banks likely won’t be able to pay depositors if the region becomes an independent country or a territory of Russia. On the other hand, there will be difficulties even if Crimea elects to maintain its current status. The already weak economic base of Crimea has surely been shaken by the military occupation and the threat of war.

Fannie Mae and Freddie Mac will finally be wound down under a plan worked out in the Senate Banking Committee — though that assumes the two mortgage giants don’t fail on their own first. Legislation has not been drafted yet and is not expected to clear the Senate, never mind the House, before the end of this year. Assuming legislation passes next year, it is sure to be challenged in court. It could be 2016, then, before Fannie Mae and Freddie Mac go into wind-down mode. In recent quarters, legal victories and gains in the real estate market have allowed the two companies to report profits, but that doesn’t provide a path to sustainable operations.

Citigroup executives are leading an investigation into fraudulent loans made by the bank’s Mexican operations. This escalation of the internal investigation suggests that the bank worries some of its senior managers in both Mexico and the United States might have been in on the scheme.

Target knew on November 30 that its transaction network was being targeted by spyware that would copy data outside the network but managers did not investigate the intrusion immediately. It was only after the Justice Department noticed a suspicious pattern of payment card transactions two weeks later that the retailer began to remove the spyware from its point-of-sale terminals.

You might be surprised to learn that most ATMs worldwide run on Microsoft Windows XP, a trouble-prone and now end-of-life operating system. After several extensions, Microsoft will stop supporting the aging OS next month. A few banks are rushing to upgrade the operating systems for their ATMs, but most will be paying Microsoft for extended support for the terminals, giving them more time to upgrade over the next three years. Extended support is an expensive arrangement, and even with that, security experts worry openly about what could happen to the ATM networks with most terminals running obsolete software. Even if there aren’t any troubles, it will be an added cost for banks. It is a surprising problem for banks to have stumbled into, as experts say the cost to replace an obsolete ATM terminal with an up-to-date terminal is only about $2,000.

Thursday, March 13, 2014

When the Numbers Don’t Add Up

General Motors says there were 12 deaths linked to the 1.6 million cars it is recalling, but another look at the data released today finds 303 deaths. If the latter view is accurate, these cars had a horrifying death rate, but with such a divergence in the two reports, it is important to get a closer look at the data. Obviously there is something more to be learned.

Wednesday, March 12, 2014

First Cars, Then What?

Now New Jersey has a law banning Tesla Motors from the state. Tesla will close its showrooms at the end of the month.

The new New Jersey law is black market logic, more suited to the underground economy of heroin and counterfeiting. Our boys are going to be wanting a piece of the action if you are going to be doing business around here.

Of course, New Jersey can’t actually prevent people from buying new-generation cars. The new law only makes it illegal to sell new cars in the state. Sales of used cars remain relatively unregulated, and 100 percent of New Jersey is within a day trip of Philadelphia or New York, so if drivers have to go to another state to buy a car that is no real obstacle.

With a little imagination, it is easy to see how this kind of official corruption can create zones of economic deprivation. After people get used to the idea of leaving New Jersey when they need to buy a car, they may think of leaving the state for other purchases and purposes. As the economy declines, the more enterprising citizens think of leaving the state just in general. But this is how it starts.

Friday, March 7, 2014

This Week in Bank Failures

How well are banks doing? The answer to this question very much depends on whether you ask around Wall Street or among the banks’ customers. The contrast could not have been greater in this week’s headlines. From the Wall Street end, Bank of America was floating a plan for “free” “checking” that it thought would be profitable for the bank. The accounts would have a fixed monthly maintenance charge of $5, so they would be “free” only in the sense of being relatively free of transaction charges. At the same time, there is some indication that customers cannot actually write checks on these accounts, apparently the bank’s way of discouraging heavier users from signing up for this new bargain-basement plan. The senior bank managers who came up with this plan can be assumed to be earning salaries of $200,000 and up, so it is perhaps understandable if they think a fee of $5 a month is pretty painless, barely distinguishable from getting banking services for nothing. The bank is patting itself on the back for coming up with a plan to stay relevant and profitable while reaching out to “low-end” customers who make $100,000 a year and under. (Update: The no-check checking account as released is similar to the advance information on it. Those who imagine it sounds like a good deal may want to compare it to several more mature online checking offerings from other banks that don’t have a maintenance fee.)

Meanwhile, if you ask banking customers how the banks are doing, you get a completely different answer. Scratch (at Viacom) released results from a three-year study of “Millennials,” Americans born between 1981 and 2000, at

The stark headline reads, “Banking is at the highest risk of disruption.” The details are more damning, among them (quoting the report):

  • All 4 of the leading Banks are among the ten least loved brands.
  • 70% say that in 5 years, the way we pay for things will be totally different.
  • 33% believe they won’t need a bank at all.
  • 73% would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their own nationwide bank.

So while the giant banks say, “Look at how well we’re doing,” a substantial contingent of their customers are basically just waiting for the banks to go away.

A bitcoin bank of sorts, Flexcoin, closed this week after it was robbed of all of its transactional currency. Based in Edmonton, Alberta, the bank kept bitcoin savings accounts safe by keeping them offline, or “cold.” Any transactional deposits in the bank are gone, though, and unlikely ever to be recovered.

Target’s U.S. customer base has declined by one fifth as consumers wait for details of the retailer’s data breach. The retail chain is working on technological fixes for its problems. In the middle of this activity, Target’s chief information officer resigned this week.

Thursday, March 6, 2014

Staples Closes Stores

Now it is Staples’ turn to announce store closings. It already closed 40 stores in North America last year, and it says it will close 225 more this year. This is perhaps a prudent adjustment for a retailer that sells supplies for office paperwork. It becomes more urgent after sales declined by 6 percent in 2013.

Staples’ largest competitor, Office Depot/Office Max, will surely be closing stores too, but perhaps not right now. It will not want to lose customers by closing stores too soon after its recent merger. Office Depot and Office Max have tried to imitate Staples’ broader product selection with items such as furniture, but they have not been entirely successful, so that most customers probably think of their stores as sources for paper, ink, and toner. But paper and printing are in decline. The days of printing a computer document just to put it in a file cabinet are all but over, so it is a dubious market position looking forward to next year.

This is a problem for Staples too, and it knows it, even if it does not quite know what to do. Staples’ main initiative of the past year, to sell more of the same products on its web site, is not much of an answer in the long run. Another experiment, operating post offices in some stores, targets another declining category and is not likely to return much of a profit unless Congress succeeds in closing the real post office.

Of course, part of Staples’ difficulty is the decline in big box stores in general. Shoppers increasingly find the big-box environment oppressive and bewildering and are eager for any alternative.

Wednesday, March 5, 2014

Radio Shack Adjusts As Phones Get More Durable

Radio Shack had pinned its hopes on mobile phones, and that strategy made some sense in 2009, when a phone would break at the drop of a hat. Someone, you would think, would have to provide the place where you can go, no matter where you are, to get a replacement phone. Phones are more durable now, though, and that situation doesn’t come up nearly so often. Radio Shack has been closing stores, about 4 percent since the beginning of 2011. After a dismal holiday season, it says it will close another 20 percent.

If it cannot be the country’s emergency mobile phone vendor, Radio Shack may have too many stores even after these closings. It still expects to have 4,000 locations, a number large enough that you can compare it to Starbucks’ 13,000 or Bank of America’s 6,000. To support so many locations, you need a product that is local, urgent, frivolous, and disposable. Radio Shack is still the go-to place for device batteries and connectors, but that may not be a large enough category to support the store.

Of course, Radio Shack is not the only one having to make adjustments. Retailers in virtually all categories are adjusting to changing replacement cycles, shopper fatigue, and the increasing cost of energy. This doesn’t mean the whole retail sector is about to fall over. Radio Shack has so few direct competitors it is hard to understand why it couldn’t make a profit just by focusing on its unique strengths.

Below: Radio Shack’s 2014 Super Bowl commercial, in which it seems to admit that its retail concept is a little out of date. “The ’80s called. They want their store back.”

Tuesday, March 4, 2014

No Easy Way Out for Republicans on Health Care Obstruction

The Republicans’ scorched-earth approach to health coverage, which might be paraphrased as “you’ll see a doctor over my dead body,” is looking more and more ludicrous as time goes on. The turning point, I think, was the beginning of 2014. Millions of people, I forget how many, had health coverage for the first time in years, or the first time ever. Analysts and politicians had worried aloud about a tsunami of doctor and hospital visits among the newly insured that could break the whole health care system. Some serious predictions held that the number of doctor visits and treatments could double for a month or two. Instead, the boost in visits in the first week was so slight it was detectable only by careful statistical analysis. Letting more people have access to health care hasn’t broken anything yet, and there are hardly any more major transitions ahead under the law. Given its history of relative success, the guarantee of health coverage for freelancers and unemployed workers is as popular among Republican voters as it is among everyone else.

The latest conundrum for House Republicans is the cynically named Save American Workers Act which would exempt many employers from providing health coverage by allowing them to categorize their full-time workers as part-timers while still having them work full-time. This loophole would result in a million workers losing health benefits, according to CBO estimates. It would eliminate thousands of jobs and put half a million more people into the ACA plans that the Republicans are trying to do away with. Another loophole in the bill would cost the government about $8 billion a year in revenue by allowing businesses to dodge taxes. The bill is sponsored by essentially the entire House Republican caucus, who now must decide whether they can vote for a bill that boosts the government deficit and enrolls more people in the government-managed health care exchanges they claim to oppose. The alternative is to vote against a bill they sponsored in the first place. Either way, it looks bad.

And it won’t get any easier for the Republicans. They can’t openly threaten to cancel health coverage, now that people actually have it. That stance could cost them the votes of many Republicans, who would rather hold their noses and vote for Democrats than say goodbye to their family doctors. So Republican are reduced to trying to offer an “alternative plan” or an “improvement.” But there is an obvious double-bind there. If the Republican alternative is an actual improvement in letting people get health care, it is the opposite of what the Republicans are trying to do, which is to reduce access. Worse in a political sense, it would mean conceding that the current laws, which they were willing to destroy the country to repeal, were essentially right in the first place. But if the Republican alternative takes away people’s health care, it will be politically unpopular. Probably the only politically survivable approach Republicans can take at this point is to do nothing, but of course, they are being pilloried as do-nothings for their record of the past nine years, so that approach has its political costs too.

Some of the Republicans saw this problem coming, and that is one reason why they were so adamant about shutting down the federal government for 14 months, from last October through this year’s elections, to try to prevent the health insurance exchanges from launching. But Republicans so disagreed about that strategy that it led a dozen of them to decide to retire after this year’s elections. In truth, it was already too late. They might as well have formed picket lines in front of every clinic and hospital with signs reading, “Medical care unfair to billionaires.” It is a small contingent of the super-rich who want to keep workers off-balance by keeping them perpetually sick, and the Republicans have agreed, for reasons I will let you work out, to do the bidding of this group. Yet it is an issue that, at this point, they cannot win.

Monday, March 3, 2014

E-Waste Laws That Aren’t Quite Working

E-waste laws in Pennsylvania, New Jersey, and other states make it illegal to place various electronic devices in the trash. In Pennsylvania, the law focuses on televisions, computers, computer peripherals, mobile devices, and batteries. Different jurisdictions have different lists. All seem to be having the same problems. In New Jersey, these electronic devices are picked up with materials for recycling, but no one knows what to do with the electronic debris after it is collected. In Pennsylvania, it is individual citizens’ responsibility to find a way to get an electronic device recycled, and so far the government isn’t providing much help. The state web page that is supposed to list drop-off locations for electronic trash only says that the information is not yet available.

The United States might need to seek help from Germany, which has had a little more success disassembling and recycling electronics. But as long as disposal problems remain unresolved, the e-waste laws could hurt the already faltering sales of personal computers. If buying a new PC means you first have to figure out what to do with the one you already have, and no one has the answer to that question, you might want to put off that transaction. PCs last much longer than they used to, so the PC replacement could plausibly by postponed for five or ten years.

Saturday, March 1, 2014

A Social Media Storm Over a Storm Forecast

One weather blogger took a pot-shot at another more successful weather blogger early in the week, and the unfortunate result is that we now have hundreds of people posting messages and links on social media saying that the forecast of a major U.S. winter storm for the coming week is a HOAX, in all capital letters. I won’t tell you who the two bloggers involved are because I don’t want to encourage you to read blogs for current weather information — and it is only the social media storm and the actual, real weather that are important for my purposes here.

The problem with the shower of storm hoax messages all over Twitter and Facebook is that the storm forecast is not a hoax, but is based on sober, if imprecise, meteorological analysis. The National Weather Service in particular has a very good track record of presenting the weather honestly, and as of this morning, it has issued warnings, watches, and advisories for part or all of 35 states. In most of the areas affected, snow of 5 inches or more is likely — enough snow that you would want to know it is coming. In some of these areas and others, unusually cold weather is expected, with temperatures below zero at some point in most of the northern states. If people disregard these weather warnings because a weather blogger has assured them the forecast is a hoax, the consequences could be quite serious. Yet with so many people repeating the “hoax” message, it can start to sound credible by the phenomenon of social proof. The result is that the prospect of people relying on this misinformation is something that could really happen.

And I don’t know what to do. The solution ought to be simple. Those of us who are not meteorologists should get our weather forecasts not from weather bloggers and social media hearsay, but from web sites (or other real-time media) that do local forecasts every day, such as National Weather Service, Weather Underground, and The Weather Channel. The local aspect of forecasts is important — a forecast that can’t be localized is not just irrelevant, it is also not a real forecast. Everyone should know that weather forecasts more than five days out are not to be taken literally, and that those three days out are subject to revision more often than not. But I see the character of the people repeating the storm hoax message, and I realize that even those of us who are justified in seeing ourselves as serious thinkers can sometimes be conned by rumors intentionally planted by an anonymous weather blogger we never heard of.

The best answer I can come up with for today is to say that the expected major winter storm is “not a hoax” and link to the National Weather Service’s National Weather Hazards map so people can look up the weather hazards for themselves. But this reeks of fighting fire with fire. If hundreds of people are shouting “HOAX” and there are also a few people saying, “Hey, I think this is real,” it’s not that big a help. There must be a better answer, but as I said, at this point, I don’t know what that answer is.