Monday, April 28, 2014

Solar Arrays on Building Sites

Here is a new trend: commercial building sites being used for solar arrays. I first saw this in an office park that was drawn up to have eight office buildings. The first was completed and opened in 2010, in spite of the recession, but the others are postponed indefinitely and may be built around 2030 at the rate things are going. So why not use the second building site, already wired for electricity, as a place for a solar array? The electricity generated can go almost entirely to power the office building next door, and the solar panels look more intentional than the bare gravel that was sitting there for the previous six years.

A solar array is a much smaller project than the office tower that was planned for the site, but it isn’t necessarily a sign of a builder in retreat. The building can still go ahead when the occupant and financing come along. If there is a change of plans and the site has to be used for an actual building at some point, perhaps next year, it isn’t so expensive to set the solar panels aside for two years and reinstall them on the roof of the new building. In the meantime, the solar array helps to pay the bills.

Friday, April 25, 2014

This Week in Bank Failures

Mt. Gox started the year as the largest bitcoin exchange ever, but then it closed, filed for bankruptcy, and this week began liquidation after a bankruptcy judge in Japan concluded it was unrealistic to hope that the exchange could be reopened. Mt. Gox has relatively few assets, so the liquidation is likely to go quickly.

Portugal held its first bond auction in four years and easily sold €750 million in bonds.

The United States got through March without a bank failure, and nearly April too. Tonight, though, South Carolina state regulators closed the five locations of Allendale County Bank. This was a very small bank with $51 million in deposits. Palmetto State Bank is assuming the deposits and purchasing the assets.

Tuesday, April 22, 2014

When Customers Are Rich Enough to Eat at Home

Being rich means you don’t have to go out to eat — and more and more people, it seems, are “rich” in that sense.

It’s a conundrum for U.S. restaurants, whose offerings are too expensive for the poorest 30 percent of the population while at the same time, representing a quality compromise that the richest 30 percent are reluctant to make — a pattern that is easier to make out in the under-50 demographic.

You see the extent of the problems if you look at the fastest-growing large restaurant chain, Chipotle, which has stumbled with its two latest initiatives. One is a speed-up in food production — this, in a restaurant that already threw together its custom-made items with such ferocity that nearly anything you might select would have a couple of mistakes in it. The other is a price increase averaging apparently around 10 percent. It was moves just like this a decade ago that killed Subway’s novelty effect and turned it from a Chipotle to a McDonald’s (where U.S. same-store sales were down 2 percent in the latest report). Before Subway abandoned its fresh-bread concept to try to move customers through quicker, it was the high-growth “healthy” alternative in fast food. Since, it has struggled like the rest of the industry just to keep sales level from one year to the next.

This kind of desperation in innovation is characteristic of the corporate restaurant sector. But when an industry employs so many bright people and still can’t find the right answers, you have to eventually conclude that there are no answers. It may be that the fundamental financial constraints of the restaurant cut too close to the edge. Consumers demand food that is prepared with attention to detail, and they may want a place to sit or stand while they eat. As long as that is the case, labor costs and real estate costs are heavy constraints a restaurant can never break free from.

And now, food preparation is becoming a leisure activity for the wealthy again. A semi-skilled cook with a home kitchen can spend ten times as much as a restaurant spends on ingredients to prepare a meal for the same price, and in about the same length of time. To win over these customers, restaurants will never be able to compete on quality, price, or convenience — it will have to be something else.

Monday, April 21, 2014

Two Trends

In the news, there is corroboration for two trends we’ve been observing.

  • In a survey a consensus of economists now believe the winter slowdown in the United States was weather-related and expect improvement as we get farther into spring. Previously, you could find conservative-leaning economists and ones based in California who were skeptical of the weather effects, but several early indicators from unemployment reports to health care sign-ups seem consistent with a pronounced weather effect in half of the country.
  • The Bureau of Labor Statistics found near record high levels of temporary and contract workers in March, which seems to be part of the broad shift toward a more loosely structured workforce that observers have been tracking for some time.

Friday, April 18, 2014

Change All Your Internet Passwords

The taxes are in and Friday is here, but it is not time to drink a toast to getting back to normal. That’s because if you drink, you are likely to have extra trouble remembering all your new Internet passwords.

Well, you are changing your passwords, aren’t you? The headlines on Heartbleed may have died down, but the need to change your Internet passwords — all of them — is no laughing matter. The flaw in OpenSSL software put the communication between you and most secure web servers at risk for a period of time. Unlike other Internet security flaws, this one was not focused at a particular place, so exploits, when criminals use the flaw to gain access to data, are not necessarily possible to detect. Along with other data, your passwords could have been accessed. This means you don’t know who has your passwords, but you can fix that by choosing new passwords.

I know I said you should change all your passwords, but that is a slight exaggeration. There is an exception, but if you want to be cautious, the exception is not much. If you are sure you did not log into a site between 2012 and now, or the site tells you it was not affected by the Heartbleed flaw, you may not need to change your password there. However, this exception applies only if you did not use the same password, or a password that is partly the same, at any other site. And, this exception does not apply if the password was ever emailed to you in an email account that was affected by the flaw. As I said, it’s not a very big exception. If there are accounts that you have effectively abandoned, you might choose to delete them at this point (or delete your more sensitive information from the account). That doesn’t save you any work, but it is something to consider along the way.

I know, changing all your passwords is a lot to ask. I personally have 200 accounts with passwords to change. I memorized almost half of them, and now I will be changing them all in a matter of days. My chance of memorizing dozens of new passwords quickly is in the don’t even try category. I will have to write them down. And, I will have to be systematic about changing them.

Being systematic starts with choosing good passwords. Even on sites that don’t enforce rules for password quality, a password should not be a single word that could be found in a dictionary. Most of all, don’t use any word that can be found on your Internet profile as a password. Of course, don’t reuse any of your old passwords — you know, the ones that might be posted on a message board somewhere by now?

Changing passwords might be the most tedious task you can think of, but it still has to be done well, so don’t rush through it. Making mistakes when setting passwords is a security flaw of its own. Realistically, you probably won’t change all your passwords in two or three days, so start with affected email accounts and banks. Go on from there to retail sites that have your banking account numbers. Keep track of which passwords you still need to change. And for your own safety, don’t drink and password, even if it is Friday.

Monday, April 14, 2014

The Energy Wars

As Russia angles for a way to annex the first hundred kilometers of the Ukraine natural gas pipeline, I can’t help thinking of the energy wars that were a recurring theme in 1970s American science fiction. That fictional theme was obvious enough if you think of the historical context. The fictional scenario was that energy producers — the massive corporations that run energy installations such as oil refineries and nuclear power stations — would amass so much influence that they would secretly be running the world. Then they would begin to fight proxy wars with each other for world dominance, but the energy giants’ involvement would be mostly a secret, hidden from the public.

Energy wars have been an unacknowledged part of U.S. policy for a generation, with the war in Iraq being conducted as much by an oil services company as by the U.S. military, even if you would not see the oil tycoon on television giving the press briefings. Russia currently is even more under the thumb of its energy sector than the United States is. It is not really the civil government in Russia that wants to control Ukraine, nor the military, but the natural gas producers, who lose enormous sums in revenue whenever the pipeline that crosses Ukraine is not operating.

So is the world heading for generations of energy wars, as the science fiction stories predicted? I don’t believe so. In the science fiction stories, the heart of the energy giants’ strategy was the suppression of information on all decentralized forms of energy. Corporations can dominate energy only when energy installations are engineered on a massive scale, beyond the financial reach of a homeowner or a small town. As long as ordinary workers can purchase rooftop solar installations and similar small-scale energy sources, centralized control of energy faces limits. In the novels, energy companies recognized this and used their political might to eliminate solar power. They made sure that information on a whole range of energy technology, from small-scale nuclear reactors to batteries, was a state secret. If the breadth of energy technology were to become known to the public, the continuing energy wars would lose their popular support.

In real life, no one industry has cornered the market on energy. We have certainly seen well-funded efforts in recent years to discredit energy technology, but I don’t think that campaign is having much effect. When people see solar-powered airplanes fly, hear music festivals powered by bicycles, or warm up by wood-burning stoves, it anchors the idea that there are choices. I don’t know if Europe is ready to say, “Maybe we can do without natural gas,” but there are legislators pushing that point of view. It is too late for the past two decades of innovation in energy technology to be turned into a secret. The more risky natural gas or any other centralized energy source becomes, the more speaking time those who want to build alternatives will be afforded.

Sunday, April 13, 2014

Tax Weekend and Feeling Old

More than a few people are feeling older this weekend. I say this because the U.S. income tax deadline is the middle of April, and this weekend is the last chance most taxpayers have to get their tax forms together before the deadline. The simple accounting that goes into a tax form is the kind of thing that makes most people feel old — putting transactions in categories and adding them up, with hundreds of details and tens of thousands of rules to observe, and real money at stake if you make a single error at any point along the way. And the time pressure is real: if you look at the tax law, in general you are better off with a complete and filed form with errors that you hope are not too serious than you are if you miss the deadline. If your form has errors, you may, in the worst case, have to persuade a judge that these were honest last-minute mistakes from a taxpayer who is not so skilled with taxes. But if you do not file on time, even a judge cannot save you.

Of course, it is more than just the difficulty of the forms themselves. There are all the things you miss out on while you are hunched over a table covered with letter-sized papers. Just one example from Twitter three evenings ago, during the Rock ’n’ Roll Hall of Fame induction ceremony:

Things are not necessarily better for the people to whom tax forms are simple and obvious, the natural accountants among us. A tax professional might prepare a hundred people’s taxes this weekend, a mind-bending task that researchers say results in almost the same error rate that you see when people do their own tax forms. The advantage of hiring a professional is not getting everything right, but getting it done faster and with less fuss.

Some people, of course, have much simpler taxes, but that is not necessarily a good thing. For the college graduate who managed to string together three temporary jobs over the course of the year, the tax form that combines this income is not too much to ask, but adding the numbers together and double-checking and finding that one is officially living below the poverty line can be a sinking feeling. Tax forms are nothing if not nosy. It is on line 1 that Form 1040 asks how your family is doing. If you were eager to tell the government that your only child died or that your marriage is over, this is where you do it. And the form doesn’t get much better as you go along.

I fell into tax weekend myself in spite of filing my forms two months ago. A letter arrived yesterday from the IRS asking me to fill in one key line I mistakenly left blank on schedule A. The computer-generated letter is careful to explain that they don’t want an explanation, just the corrected schedule. And so, I have an envelope going out to the IRS tomorrow morning too, along with 100 million other people. It looks bad that my mistake is on Schedule “A” — I didn’t get very far with my attempt at an error-free tax filing, did I? But I know I will make these mistakes sometimes and I am glad there is a system to sort it all out.

In the end, it is probably a good thing that tax filings go out with a relatively unforgiving deadline. It is bad enough that so many people postpone tax work until April when it can more easily be done in February and March. With a softer deadline the procrastinators among us might still be worrying about their tax forms when summer comes. The United States might lack the political will to address the emotional mess that the tax system entails, but at least we can put tax season behind us every year.

Friday, April 11, 2014

This Week in Bank Failures

It has become a little harder for the largest banks to make a profit — at least in the securities markets. Trading desks turned an impressive profit as long as the stock market was going up, but the strategy began to show strain last year and fell apart, based on the early reports, in the first quarter of this year. We knew all along that giant banks could not continue to make their money in the markets indefinitely. The interest rates banks pay to borrow money for trading will not stay low forever, the stock market cannot go up forever, and every gambler eventually places a bad bet. But also, some of the shadow-banking investors that have funded banks’ trading desks have come under scrutiny; banks have been paying too big a share of gains out as bonuses, while absorbing the losses; new regulations narrow the range of trading that banks can do on their own accounts. The era of securities trading at banks is certainly not over, but the big profits may be harder to find now.

A federal court in New York has approved SAC Capital’s insider trading settlement. The fund manager will pay $1.8 billion in fines and penalties and will scale down its operations, no longer managing investments for the public. Eight employees have been convicted for their involvement.

Vatican Bank will remain open for now, as Pope Francis has decided to pursue reform instead of closing the bank.

The Commodity Futures Trading Commission may draft clearer guidance on swaps and related derivatives, it is hoped, after a Senate committee approved Timothy Massad to head the agency. Massad has worked in the international swaps trade in recent years and may be more able to spot potential loopholes in the rules.

Wednesday, April 9, 2014

The Nozilla Campaign and Its Ironic Effects

Mozilla didn’t completely dodge its political problem with the resignation of its CEO. In the aftermath, a coalition of dodgy-looking anti-gay groups have managed a fairly spectacular boycott of Firefox, Mozilla’s best known product. It may be splashy, but it is an amusingly inept boycott. First, it is a boycott of a charitable organization which makes its products freely available to the world as a matter of course, so Mozilla will not see any loss of market presence or revenue — the boycotters never paid anything in the first place. Second, most major browsers derive in various ways from work done at Mozilla, so if people are using Chrome, Internet Explorer, or Safari, among others, they are still living in Mozilla’s world. Third, there is little reason to believe the anti-gay activists who say they are deleting Firefox from their computers. It seems more likely that they never heard of Firefox before and have no Firefox to delete. This scenario seems all the more likely when you look at the petition pages. The petition authors felt the need to explain in detail what Firefox is and the process for uninstalling it. The instructions seem to be written for a person who has never installed or uninstalled an application before and might not quite understand what an application is. Fourth, the petition has no leverage. At set forth, it is a permanent boycott, meaning the signers will never use Firefox ever no matter what Mozilla does in the future, so the boycott isn’t meant to exert any influence over Mozilla’s future actions.

All that is bad enough, but the whole sequence plays into the stereotype of the culture-war social conservatives as religious extremists who never create anything and only want to destroy things. They never created an application or even asked someone to install a piece of software — at least that is what the stereotype would have you believe — but they don’t mind telling you to delete things. Pity the activist who follows the boycott instructions to uninstall Firefox — then after dutifully deleting the browser, finds that there is no way to return to the Internet for further instructions. At that point, they will realize that they’ve been had, but then what can they do?

The commentators who view the Mozilla episode as a management case study say the lesson is that you can’t undo a bad hire by firing the person — and that is certainly true enough. This episode could lead to real change, then, if other boards of directors look at the sequence of events and conclude that anti-gay activists or political extremists in general can never be considered for any executive position, lest it lead to a boycott when they are passed over or are fired or quit. If that is the way this episode is understood, then it could result in freezing out the very political extremists who the Nozilla campaign is supposed to protect.

An essential part of understanding the Nozilla campaign is that there isn’t any way observers can measure it directly. No central database records the deletion of an application, so we will never learn if the number of Mozilla installations that were actually deleted was just 30, or a few thousand. In any case, the number is too small to show up in the global browser usage statistics that browser makers compete for. The Nozilla campaign gets most of its might from the fact that its effects can’t be measured. You are supposed to imagine that the number of uninstalls is tens of thousands, something similar to the number of signators recorded on the petitions. In reality, the actual number would have to be much smaller, just based on browser share statistics. The actual number of uninstalls could be tiny if you compare the difficulty of signing a petition to that of uninstalling an application. But no one knows, and that allows Nozilla to be taken seriously.

In my view, the Nozilla campaign is the most important part of this whole story, but I worry a little about the state of Mozilla after this glimpse at its inner workings. No one there seems to have any inkling that they did something wrong in appointing a CEO who did not share the organization’s priorities and who, in barely a week, proved himself utterly inept in speaking on behalf of the organization he was supposed to be leading. To be blunt, Mozilla selected a figure-head for an organization that needs a real leader. Perhaps they do realize this and just don’t want to say publicly anything more than the bare minimum necessary at this point. Or perhaps they really don’t have any appreciation for the struggles and challenges of the past year and the year ahead. Only Mozilla’s future success or failure will really answer that question.

Sunday, April 6, 2014

A Conflicted CEO at Mozilla

Freedom is full of paradoxes. The very idea of freedom of speech implies a fundamental paradox. Where there is freedom of speech, it guarantees you the ability to speak out against freedom of all kinds, including the freedom that allows you to speak.

This paradox was never more apparent than in the case of Brendan Eich, who for reasons that have not been explained, somehow became CEO of Mozilla. I was mortified when I learned this had happened. I am an everyday user of Mozilla’s popular Firefox web browser, and a very occasional financial and technical contributor, and I was already unhappy to see the way the quality and stability of the browser has declined in recent years. From what little I had heard of Eich, his background is not identified with software quality. Perhaps worse, he is noted for an indifference to matters of software security, which is a matter of utmost importance when it comes to network communications tools such as web browsers.

Eich’s professional background probably should have disqualified him from an executive post at a software company, but his political activities are reason enough to disqualify him. The media, understandably, seized on just one of Eich’s political contributions, but Eich, I learned along with everyone else, has a long history of contributions to political causes that may fairly be characterized as extreme. The only apparent connecting link is that the causes and candidates all actively oppose the principle of personal freedom. This is a big problem if you want to be a Mozilla executive. You cannot comfortably be taking public positions against personal freedom while at the same time occupying a position of trust, shepherding Internet communications tools where the potential to undercut users’ personal freedom is an everyday concern.

When you look at Eich, you see the paradox of freedom that I mentioned. He is not merely, or mainly, a supporter of anti-freedom causes. He is also a fervent supporter of open-source software, a cause that fundamentally is identified with freedom. Some of the politicians he has supported would ban the very open-source software Eich has worked on if they got the chance, but that is the paradox of freedom at work. This kind of conflicted public presence is perhaps what you expect from an ordinary worker, but corporate officers are held to a higher standard. They cannot undercut their official duties with these kinds of contradictions. An office is, by definition, a position of trust. An officer cannot publicly stand against the principles that his office stands for. The Mozilla CEO in his public persona cannot stand against personal freedom any more than he can make public statements in opposition to the ideas of Internet standards or network security, or any of the other principles or qualities that Mozilla specifically stands for.

Eich had a chance to distance himself from his past actions, but elected not to do so. And so Eich, rightly, is out, and Mozilla’s users and supporters can hope the board is not so reckless when it chooses its next CEO. Despite all its recent problems, Firefox is still the most imitated web browser and the one that all other web browsers are compared to. With a well-chosen leader, I hope, perhaps the level of quality that Mozilla represented in the past can come back.

Friday, April 4, 2014

This Week in Bank Failures

New evidence that the AIG bailout was a mistake: AIG has sued New York state, asking a court to find that the insurance giant is exempt from the enforcement of laws meant to prevent fraudulent insurance marketing practices. Well, if having an office on Wall Street doesn’t place you above the law, then I don’t know what does.

U.S. student loan debt has shot past the $1 trillion mark, in part because college graduates from the last 7 years are having difficulty finding the kind of professional employment that would allow them to repay their loans on schedule. Student loan debt would jump higher under the House budget plan. The budget resolution that the House passed without irony on April Fool’s Day would limit college grants and raise the interest rates that students pay while they are still in school.

As China moves away from its past practice of propping up every bonehead business, banks are recording more bad loans than ever, $10 billion in 2013, still not a large amount in the scheme of things, but perhaps enough to get banks to start taking underwriting seriously. China says bank stress tests will be coming in the near future.

The Russian Central Bank said today it may “temporarily” close most of the banks in Crimea because of liquidity problems there.

Cyprus is working on legislation to make it easier for banks to foreclose when borrowers stop making payments on loans. The head of the central bank says it is the key step needed to speed up the recovery of the country’s banks, but everyone agrees it won’t be easy legislation to write.

Thursday, April 3, 2014

The Inbox Index

If my email inbox is any indication, the U.S. economy is in for a booming Q2. Since the second quarter began on Tuesday, I’ve been deluged with email coming in, most of it promoting something new, most of it intentionally scheduled to arrive in April rather than March.

Along with the commercial email, there has been more than the usual new-quarter flow of job openings. I don’t have time to read these messages — they arrive in spite of every online profile indicating I will not be on the job market for the foreseeable future — but the subject lines suggest I am being considered for jobs I am arguably not qualified for. For example, I worked on mainframe systems for years, so would I be willing to learn Cobol? That degree of recruiting desperation is surely a sign of a tightening technology job market in which hiring managers can’t find the workers they really want.

There are also the usual newsletters and event announcements. All put together, my email inbox is about twice as heavy as it was on March 31, and three days in, I consider it a trend. I can’t really give the increase in email much weight as an indicator of where the economy is going, but it does seem like a sign that activity is picking up, and usually that’s a positive for the economic aggregates.

Wednesday, April 2, 2014

Shopping at the NSA

A new Harris Interactive survey shows that Americans have become more wary of online shopping and banking because of government snooping. Amrita Jayakumar writes at the Washington Post:

The NSA is intentionally undermining Internet security with its spyware and break-ins and its sponsorship of compromised software. But it is safe to say that the NSA does not mean to undermine the U.S. economy. If 26 percent of consumers are shopping less, or are slower to put their money in the bank and take it out again, that is a sign of lack of marketplace confidence, and it can slow down the entire economy. It is not so much that consumers feel like they are putting themselves at risk by shopping online (though some, of course, do feel that way). Rather, people are stopping to ask what kind of impression their online actions might make on the spies who are watching everyone’s transactions. It might not seem like much of a slowdown, but the result of this self-conscious approach to online transactions is that each transaction takes more time. When individual transactions take more time, it allows fewer transactions in any given period of time. Metaphorically, the wheels of commerce turn slower.

This is not what the politicians in charge of the NSA want to see. To paraphrase a former president, if people everywhere become self-conscious about shopping, then the terrorists have won. Ironically, this effect may lead to corrective action where the abstract concern about the ideal of personal privacy did not. Taking on the Washington mindset, if people want to protect their private lives, well, they’ll get over it. But if people are reluctant to go shopping, now that’s a real problem.