Tuesday, March 31, 2015

When Businesses Gain the Right to Bigotry

It is a sad day already when “religious freedom” becomes a euphemism for “right to bigotry,” but that does not begin to explain why people are so horrified by Indiana’s new right-to-bigotry law. It is the effort to extend the right to bigotry to businesses that is at the heart of the law. The law as stated allows any business to work actively to chip away at the standing of gays, Muslims, or any other arbitrarily selected group or category of people, as a publicly declared objective of the business. It is a more corrosive effect than it might seem at first.

Consider the specific scenario mentioned most often by the law’s supporters, which is that florists and bakers shouldn’t be forced to sell their products to customers who might be planning a gay wedding. There is an obvious problem with this scenario: how does a business know what their customer’s event is? Even if the customer has a detailed story, the business is just taking the customer’s word for it. And if the customer doesn’t have much to say about their upcoming event, and is a man who “looks gay,” is this enough of an excuse for a florist to turn a customer away? Will there be florists who refuse to sell their larger floral arrangements to any man at all, lest they be secretly planning a gay wedding? It sounds ludicrous, yet if we are to take them at their word, this is exactly the scene that the most outspoken supporters of the Indiana right-to-bigotry law seem to be talking about when they say businesses shouldn’t have to answer for acts of discrimination.

It get worse. Now that businesses are allowed to advertise that they discriminate, how many religious extremists will look for these statements when they choose a supplier? Will extremist groups organize boycotts of businesses that refuse to take a vow of discrimination? In fact, we have seen boycotts just like this within the last year, so it is not so far-fetched to imagine extremist groups threatening whole towns with anti-gay or other equally arbitrary boycotts. It’s easy to see why most businesses say they don’t want to the “right to bigotry.”

All this trouble just because you start drawing lines between one kind of person and another? Well, yes, it is almost as simple as that. You can’t start to discriminate without also isolating yourself as part of the same process. The governor of Indiana, who as the leader of the state is obliged to stand up in public and defend his state’s new notion of the right to bigotry, must be feeling very isolated right now.

Saturday, March 28, 2015

Saltines Without Trans Fats

For years, I ignored the little packet of saltines I got whenever I ate soup at a diner. I didn’t want to eat them because they were made with margarine, or to be more precise, partially hydrogenated soybean oil. This is a food ingredient made from a synthetic chemical, a trans fat, that for a quarter century has been linked to cell wall breakdown and inflammatory diseases generally. Now that dietary risk is fading as trans fats are phased out of the U.S. food supply. For the first time that I can remember, my diner crackers were made without any trans fat ingredients.

When the FDA announced the phase-out of trans fats, it said the change wouldn’t affect much of the food you eat. They intentionally exaggerated the progress that had already been made in order to downplay the impact of the policy change. In truth, nearly half of the food in restaurants would have to be reformulated slightly, a process that is still not so far along. But the transition has reached the packet of saltines, at least.

Friday, March 27, 2015

This Week in Bank Failures

Banca Privada d’Andorra is insolvent after all, regulators admitted. It will be resolved by putting its money-laundering assets into bankruptcy in what is called a bad bank, while the more sound assets are used to set up a new bank to carry on banking operations.

The deposit flight from banks in Greece last month was around €8 billion, reducing the nation’s bank deposits to the lowest in 10 years. That the banking system survived that degree of turmoil is a hopeful sign that the worst troubles there may have already happened.

Bank of America could be 25 percent more profitable if split into smaller companies, analysts believe.

Deutsche Bank revealed a plan to become more like a Wall Street bank, with fewer deposits and branches and more emphasis on its large institutional and international operations. The plan has received some political support.

Tuesday, March 24, 2015

Batteries and Cutting Trees

Chain saws are powered by batteries. This is a technology transition that is sure to surprise more than a few people. Chain saws cut through trees, so they need a lot of power, and for most of the history of the technology, they have been driven by internal combustion engines that burn gasoline. Battery-powered chain saws have been around for a few years, but as curiosities, not quite powerful enough for the ordinary user. As of last fall, if you went to a store to look for a chain saw, you would probably see two or three battery-powered chain saws off to the side, and you would probably wonder who used them.

This year, though, the battery-powered chain saws are in the middle of the display and account for more than half of unit sales. Incremental improvements in design give battery-powered chain saws the same cutting power as the average gasoline-powered chain saw, and the battery-powered units are quieter, easier to use, and a little less expensive.

You knew batteries were improving if you noticed longer battery life in your phone or increased range in your electric car. Apparently the improvements suddenly reached the point where gasoline can no longer hold its ground as a power source for chain saws.

That is not to say that gasoline-powered chain saws are about to disappear. Serious tree workers and emergency responders couldn’t even consider a tool that makes you plug it in to recharge after just a few minutes of cutting. But obviously, a far greater number of chain saws are sold to homeowners and facility managers who never have multiple trees to cut down all at once. Also, chain saws are durable, so it will take years for the new designs on store shelves to predominate in actual use. Still, it’s clear that the era of battery-powered chain saws has arrived.

Sunday, March 22, 2015

A Low Peak for Arctic Sea Ice

Arctic sea ice usually goes up and down in March, hitting its peak for the year somewhere along the way. This year, the peak was in February, and that day was followed by more than a week of rapid decline. The decline was so rapid that a similar period of regrowth has barely begun to make up for it, and with March now winding down, it is unlikely that any ice growth to come will revisit the earlier peak.

The details of timing of the ups and downs of ice in March have little lasting significance, but this March is noteworthy because ice levels were already tracking near record lows in February before they made their precipitous decline. The result is the lowest peak for Arctic ice ever recorded, followed by ice levels at record lows during March. Ice only declines from April through August, and this year, it has what looks like a two-week head start. This makes low ice levels at the late summer minimum more likely than they would have been after a near-normal March.

The decline in Arctic sea ice is one of the most prominent indications of global climate change, with the most definitive being the slow melting of permafrost, the underground ice that previously held together the land areas of the Arctic. Ice loss is also leading to a change in global shipping, with shipping routes across the Arctic Ocean open for several weeks every summer in recent years.

Friday, March 20, 2015

This Week in Bank Failures

A loss of deposits from Banco de Madrid put the bank into insolvency on Tuesday, just a week after the bank, the Spanish subsidiary of Andorran bank Banca Privada d’Andorra was put into administration during a money-laundering investigation. This was not a textbook case of a bank run but the result of a small number of big-money depositors taking their money out. Banco de Madrid has filed for bankruptcy protection. Spain’s bank fund says it will not bail out the failed bank, so depositors will get back only the first €100000 of their deposits. The lack of a bailout could be seen as a rarity in the recent history of banks in Europe, a reflection of the bank’s niche status, or part of a transition to a new regime in which failed banks are resolved in an orderly fashion.

BNY Mellon will pay $714 million to settle cases related to its use of currency exchange market timing against its customers. In a longstanding practice, the bank charged some customers a slightly higher price for foreign currencies than the market price at the time of the transaction, by quoting a less favorable exchange rate from a different time of day. About half of the money will go to reimburse customers, including pension funds. Over the years, the extra money added up to billions of dollars. As part of the settlement, the bank will fire several executives who were involved in the scheme to misprice transactions.

TSB, the U.K.’s former Trustee Savings Bank that was bought out by Lloyds 20 years ago, then spun off in a substantially different form when Lloyds had to be bailed out in 2008, will be sold to Spanish bank Sabadell in a deal announced last week and approved today.

Sunday, March 15, 2015

Energy Carbon Use May Have Peaked

Global energy-sector carbon emissions did not increase in 2014, the IEA said. It is the first time in history that gains in efficiency have been large enough to balance out increases in activity.

There were recession worries in many areas in 2014 but global economic output increased 3 percent, considered a normal rate of growth. An energy independence initiative in China must have helped. Japan and Europe are seeing more self-conscious energy policies after concerns about nuclear safety and regional stability, and any official attention will tend to lead to improvements. In North America, programs of official labels and incentives seem to be making a difference in efficiency.

Energy production and consumption involve durable equipment, so it is hard to make rapid gains. Looking at the most visible example, only five percent of the gains from improved motor vehicle design are seen in the first year if vehicles last 20 years on average. This delayed impact also means that if there were efficiencies last year, there will be more this year and next. Probably it is too optimistic to say that carbon emissions can be held steady, but the results of 2014 show that it is reasonable to make the attempt.

None of this good news is reason for complacency. A steady level of carbon emissions means that atmospheric carbon, which is already too high, will continue to rise. Atmospheric carbon dioxide is double what it was just one lifetime ago, and the only thing to stop the Greenland ice sheet (one of the two great ice caches in the world) from melting out completely is to reduce atmospheric carbon below its current levels. We don’t have a clue about how we might be able to accomplish that, but if we go from an accelerating rate of deterioration to a steady rate of deterioration, as the latest report from IEA suggests, that still counts as a step forward.

Friday, March 13, 2015

This Week in Bank Failures

The government of Andorra took over management of Banca Privada d’Andorra after two foreigners arrested in Spain were alleged to have collaborated with bank managers to do money laundering on a massive scale. The funds involved are believed to include about $2 billion embezzled from the state oil company in Venezuela. Larger sums of money funneled through the bank came from criminal enterprises in Russia and China. One of the two arrested men also carried money, authorities in Spain believe, for tax-dodging Spanish businesses. The bank, in turn, funneled money through four U.S. banks supposedly on behalf of a long list of shell companies, most apparently created by the bank itself. Andorra said some bank managers took bribes to arrange money-laundering transactions. Bank of Spain has similarly put managers in charge of the bank’s Spanish subsidiary, Banco de Madrid. In both cases, authorities emphasized that the financial stability of the banks is not in doubt. The United States formally declared the bank a suspected money-laundering operation earlier this week, though an investigation has apparently been going on for years.

U.S. banks passed Fed stress tests, if not exactly with flying colors. Bank of America must revise and resubmit its plan, but this must be seen as a victory for the bank after its previous efforts. Three of the banks most identified with Wall Street, JPMorgan, Goldman Sachs, and Morgan Stanley, passed only after extensively revising their plans to boost their financial strength. Two European-owned banks, Deutsche Bank and Santander, failed miserably, with the Fed hinting that these two banks do not quite seem to know where their money is. Citizens Bank, until recently owned by London-based RBS, is breathing easier after passing this year’s test. Its difficulties last year were tied to RBS’s financial difficulties and the turmoil surrounding the spinoff from RBS.

The tax-evasion case against HSBC has reached a court in France. Authorities there say they have a list of nearly 9,000 French customers that evaded taxes with the bank’s assistance — and that’s just looking at transactions conducted in Switzerland in 2006 and 2007.

CommerceWest earned $5 million in fees for 1.3 million fraudulent transactions it processed for a criminal customer and failed to alert regulators as required by law when other banks grew suspicious. Now the bank has agreed to pay $4.9 million in fines and admit wrongdoing. In a deferred prosecution agreement, the Department of Justice will ask to have the criminal charges dismissed if the bank can keep its hands clean for two years. Officials seized millions of dollars in assets from the customer that originated the fraudulent transactions. Plaza Bank separately settled its smaller part in the case and will pay $1.2 million. These enforcement actions might seem timid when you look at the size of the fines, but they represent a turnaround from the Bush years. In that era, Justice had an unofficial hands-off policy toward businesses that defrauded consumers using made-up transactions, fearing that if they went after criminal enterprises, they might be seen as being tough on business.

Doral Financial Corp., holding company for the failed Doral Bank and other financial subsidiaries, has begun the process of bankruptcy liquidation. Shareholders could get some money back if court rulings that blocked a tax refund for the company are eventually overturned.

An executive of Long Island’s Gold Coast Bank was arrested and charged after police reviewed security video that showed the executive assaulting a security guard at a sports event.

Thursday, March 12, 2015

Cable TV: More Observations

Since Verizon cut The Weather Channel from its channel lineup two days ago, I can’t sign on to Twitter without seeing paid tweets from The Weather Channel lobbying for reinstatement. This seems to be the usual pattern in recent years in terms-of-service disputes between TV providers and TV content providers. One party cuts off the other, and then both complain to the viewers. It makes sense that The Weather Channel would direct paid tweets to me since I tweeted about the situation. The advertising is probably wasted on me, though; I am not a Verizon TV customer and haven’t been a regular TV viewer for nearly a decade. My understanding of the TV customer experience is not my own, but is based on what I hear. The online lobbying is also wasted on a friend of a friend who canceled her Verizon TV subscription within a day after The Weather Channel got pulled. Another friend, I think, will gripe about Verizon for a couple of months before also canceling. In the past, the assumption would be that Verizon could try to bring these customers back after relenting and reinstating The Weather Channel, but in this situation, I don’t think that will work. Once viewers get in the habit of going to the cable channel’s web site for video content, it is not so easy to get them to switch back to cable.

The gravity of the situation that TV providers are facing is captured by the words one friend used to convey the HBO story to another: “Now you can get HBO just straight.” The key words are “just straight.” That is, it’s simpler now: you can go directly to HBO to get HBO content, instead of being forced to muddle through the byzantine distribution system that cable has become. I think this view probably represents a consensus of viewers under 45 years old: cable TV is now seen not as a convenience, but as an obstacle, something you have to get around in one way or another in order to get the TV content you want. Consider the one line it takes to explain how to get HBO content from HBO (“Go to hbonow.com and sign up”), then compare that to the way you might explain the eight-step process, possibly including the need to stay home from work for a day, that you may have to go through to get cable. It is no wonder if viewers see the new way as simpler. An industry can become an obstacle and still hang on for many years, but it will be an industry in decline. There has to be a compelling reason to get new customers to jump through hoops when there is a simpler alternative, all the more so when the alternatives are so much less expensive. Traditionally, in TV, that would be compelling content like that found on HBO or The Weather Channel. But these are the exact advantages that cable is losing the fastest.

Tuesday, March 10, 2015

New Signs of Move Away From Cable

New signs of the move away from cable TV:

  • Verizon cut The Weather Channel from its lineup overnight. The Weather Channel is not just another channel, but the cable channel with the most viewers in the United States. Cutting it is like saying, “We’re not really a TV service anymore.” The Weather Channel is the most important channel for hotels, because it’s the one channel virtually every traveler wants to see. Without it, hotels won’t pay for cable. Verizon is basically conceding the hotel segment of its business. The Weather Channel is also often the last channel people still watch when time pressure forces them to cut back on television. Verizon will surely lose 1 percent of its subscribers as a result of this move. The TV business is losing that many subscribers every six months anyway, but this may be the beginning of a snowball effect, where subscriber loss leads to cuts in service, which leads to an accelerating subscriber loss. The cornerstone of cable deregulation was the idea that phone companies like Verizon would be able to compete effectively with cable networks. With Verizon faltering, that theory seems to have fallen by the wayside.
  • It is not just that Verizon cut The Weather Channel. The excuse it provided for doing so is even more concerning. To paraphrase, its press release says, “No one watches TV anymore. You can use our app to check on the weather.”
  • HBO is now available without a TV subscription. HBO was the original success story of premium cable. If it is cutting the cord, every other premium cable channel will follow.
  • A hit sitcom cut from cable, Community, relaunches next week on Yahoo. This week five million households are trying to work out how to plug in their new Internet set-top boxes so they can watch the new season on their TV screens.

Retirees aside, people are watching TV less and less. Summer, the traditional down season for TV, is coming soon. For the first time, the TV business may be looking at summer and asking, “How many of our viewers will come back in the fall?”

Sunday, March 8, 2015

With Better Light Bulbs, There Is No Need for Daylight Time

If the idea of daylight time is to save energy on home lighting, then its time may be up. There was never any conclusive data to show that daylight time saves energy on lighting in the first place, but a likely guess is that it saved about 1 percent. Why so little? The gains from the lights people don’t use at home in the early evening are mostly negated by the losses from lights people must turn on when they get up in the morning in the dark because of daylight time.

And now home lighting uses a lot less power to begin with. When you replace a 60 watt light bulb with a 10.5 watt bulb, that is a savings of not 1 percent, but 82.5 percent. Put simply, LED lighting solves the problem that daylight time was meant to solve, and it does it 80 times better. At this point, it is fair to describe daylight time as a bizarre policy based on a superstition. After we repeal it, we will be hard pressed to explain why we ever had it in the first place.

Friday, March 6, 2015

This Week in Bank Failures

The British government plans to sell its stake in Royal Bank of Scotland before the end of the year, despite taking a loss around £6 billion. The government gave the bank a £45 billion bailout in 2008 and 2009, but the bank is still losing money, posting losses of £43 billion since.

An appeals court affirmed an $8.5 billion 2011 settlement between Bank of America and institutional buyers of mortgage-backed securities.

All 31 giant banks passed the first round of U.S. stress tests.

The FCA has banned Bank of Beirut from taking on new customers in high-risk areas for four months after the bank missed deadlines and lied to regulators about its progress in implementing money laundering controls. The bank and two employees will pay fines in the case.

Negative interest rates are causing technical glitches across Western Europe. Transaction and control systems built with the design assumption that interest rates can only be positive are causing unexpected problems as they are adapted to the current environment in which interest rates can be negative.

Thursday, March 5, 2015

Wall Street Unraveling Has Begun

When a U.S. court issued a stop-payment order for all of Argentina’s debts, it raised difficult ethical, legal, and economic questions. Most of all, from my point of view as an American, with U.S. courts ignoring the principles of law and instead using it as a mechanism for the strong to retaliate against the weak, would Wall Street lose its favored place in international finance? We can now say that the unraveling has begun, with a U.K. court overturning much of the effect of the last two dozen U.S. court orders in the case. If U.K. courts are lawful while U.S. courts are capricious and vindictive, what does that say to investors? “With the stakes so high and the system so broken, debt markets have little reason to remain in the US,” write Joseph Stiglitz and Martin Guzman in The Guardian:

At this point, if China decides its interests are better protected if debts are issued in Shanghai or any other venue of its choosing, there is nothing to keep those markets in New York. Looking farther ahead, systematic reform is dearly needed, and if this reform is not led by Wall Street then there is every reason to think that Wall Street will find itself on the outside when it is all over.

Tuesday, March 3, 2015

Consumer Spending: Just a Mood?

The latest U.S. retail data shows consumers are saving most of the extra money they are getting from lower motor fuel prices. The unusually cold winter weather is a factor, but the unusual weather has had a continuing effect on less than half of the consumers in the country. Weather alone is not enough to explain the nationwide lull in consumer spending.

I have been through some of the same shopping phases as a lot of other people, so my experience may again be emblematic of something. There was a year when I virtually didn’t buy any new clothes — that was the fashion that year — and afterward I was slow to get back into the clothes-shopping habit. Over the last two years, though, I’ve made up for that, to the point where I again have more clothes than I can reasonably expect to wear. This year when I think of clothes-shopping, I think, “You know, I really shouldn’t,” and I end up not buying much. I thought about replacing my 20-year-old car, but that purchase doesn’t seem to have any special urgency. I think about it, but I don’t seem to do anything. On the other hand, I feel as if I am due to make more improvements in my home, but that won’t happen quickly either — when will I find the time? And so I have become a net saver this year, putting the biggest part of my earnings into savings and debt payments.

My hunch is that some fraction of consumers are in a similar cautious, reserved mood, in which shopping doesn’t have its usual urgency and paying down debts or saving for retirement feels more real. The failure of one fashion retail chain after another this winter points in that direction, but so does the ongoing malaise, if you can call it that, in household firearm purchases. I can’t account for where this mood might have come from, though the hazardous weather obviously doesn’t help. Moods, though, come and go, so I wouldn’t be in any hurry to take the current pattern in consumer spending as a trend.

Monday, March 2, 2015

The Dress, and Hidden Assumptions

A blue and black dress was a sensation in social media last week. It became a raging controversy because of a photographic illusion that made the colors appear to be white and gold. But it is important to note that it got so much attention because people were almost evenly split between those who saw the dress as white and gold and those who saw it as blue and black. This uncharacteristic split allowed an important philosophical question to spill over into popular culture for a couple of days.

The question about the color of the dress is the question of how much of what we see in the world around us is a reflection of our unexamined assumptions. The people who responded that you could not tell the color of the dress because the camera had altered the colors were the ones who were ultimately correct. It should be humbling to see that that group was so much smaller than the groups who were indignant that everyone else did not see the dress in the same colors that they saw.

We could notice the hidden assumptions in this case because were so evenly split. But there are things we are equally sure about where we do not get the same opportunity to examine our assumptions. Often there is a consensus of opinion about what we are all seeing. Often the consensus is mistaken.

Sunday, March 1, 2015

A Month-Long Clutter Challenge

People asked me to create a month-long challenge on the topic of clutter. Almost everyone in the industrialized Western world owns more things than they really want to have, but don’t quite know how to cut back. March seemed the perfect month for the clutter challenge, nestled as it is between the cabin fever of winter and the windows-open whole-house exercise of spring cleaning. Today is the first day of March, so the challenge is here, ready or not. If you’re up for a challenge, get all the details and your official scorecard at The March of Trash Challenge, then get daily tips at Take Chances Pay Attention.