 A hat tip to the Immobilienblasen blog for the cartoon and observations: "So this remains the Houdini rally — no jobs; no pricing power; no broad participation; and no volume." 2 Comments  Remember the Saturday Night Live sketch with actor Christopher Walken portraying a music producer who prods a rock band to use more Cowbell? Quite comical. Now, replace Cowbell with Education, and we get a sense of the laments of many highly educated, motivated and personable people. Two blogs at Mish’s Global Economic Trend Analysis expose the proverbial elephant in the room. The topics relate to a structural economic shift and the educational system. The broad theme is the U.S. has an oversupply of highly educated and experienced professionals and an undersupply of employment opportunities that align with said talent. The current economic environment accentuates this point, yet it has been an undercurrent for more than a decade. The subtext of the topics highlights the rampant inflation of the cost of higher education and a preference for mediocrity, or worse, at many organizations. Perhaps an outcome to these dynamics will be a resurgence of individual creativity and innovation, which doesn't necessarily equate to earning college degrees.  For those interested in strategy, adapting to a changing environment, consumer behavioral trends, and, well, outright mismanagement, then analyzing the newspaper and print media industry provides a real-world, in-progress case study. Although headlines of the death of the newspaper might be an exaggeration at the moment, there is clear and present danger. The business model of newspapers depends on advertising revenue, which comprises about 80% of its total revenue. In 2008, advertising revenue dropped 16.5%, according to the Newspaper Association of America. Barclays Capital projects a 22.0% decline in advertising revenue in 2009 (see Mint.com below). Startling, but also mirroring the economic recession. Nonetheless, organizations that will most likely survive the economic challenges and thrive will create a new business model, with digital media being more prominent. The extinction of the traditional daily is not likely in the near term, although it will probably play a more niche role. Similar dynamics are occurring with telephones, internet connections, software, music and movies, to name a few. Mint.com presents a concise one-page visual of key metrics of the top 25 U.S. newspapers. Many others have written about the struggles of print media; Slate.com highlights the strategic and mismanagement aspects of this topic. Well, that’s all for now, as I need to check my favorite news and entertainment blogs.  sneigwh.blogspot.com Say it ain’t so. How many more obscure, undercapitalized financial institutions are lurking in the midst? According to a New York Times investigative article, and summarized here, Customer Asset Protection Company (Capco), based in Burlington, Vermont, may be at risk. Capco provides catastrophic insurance to wealthy clients in the event their brokerage firm collapses. Basically, it provides coverage above the $500,000 offered by the Securities Investor Protection Corporation (SIPC). The concern with Capco sounds eerily similar to the abuses regarding credit default swaps in which some firms, including AIG, sold protection without having adequate reserve capital. In Capco’s case, the article indicates that it might have only $150 million of capital to support an estimated $11 billion of potential claims. It is prudent for investors and customers to hedge their hedges. One example is to retain a public company as a hedge provider and then create a hedge on that hedge-providing company via puts/calls, short position, or both.  Ted Crow/The Plain Dealer To many Clevelanders and Ohioans, the economy never recovered from the last recession, or several prior to it, for that matter. Today’s headlines and stories in the Cleveland Plain Dealer highlighted the state’s 10.2% unemployment rate in April, exceeding the nation’s 8.9% rate. Even worse, foreclosures and Sheriff’s sales in Cleveland have pummeled the median sales price of existing homes, down 73%, from $62,000 in 1Q 2007 to $17,000 in 1Q 2009. Understandably, citizens have looked to a sports figure - in this case, the prodigy of Akron and Fighting Irish alumnus, King James - to deliver temporary relief in the form of an NBA Championship. It was not to be. Instead, fans were brokenhearted witnesses of the importance of team composition, despite the immense talents and leadership qualities of one member. Accordingly, it’s a timely reminder to all, whether it’s a business or a sports team such as the Cavaliers, that to compete and succeed among the best, appropriate and complementary team members are vital. That said, it’s not all gloom-and-doom. Today’s headlines also mentioned that the Cleveland area has become the U.S. leader in Alpaca farming, and will host the Second Annual World Alpaca Conference this week, where Alpaca Farmgirl will be blogging and tweeting. And, if that doesn’t adequately lift one’s spirits, then those “At Least We Are Not Michigan, err, California” bumper stickers might deliver some sort of consolation.  Pinocchio by Enrico Mazzanti (1883) As mentioned in our previous blog, there is an article in today’s New York Times Magazine titled My Personal Credit Crisis, summarized here, which relates to the topics discussed previously. The subtext of the article touches upon universal themes of human nature, on a personal basis and within a corporate environment. Given the number of recent business mishaps and mortgage foreclosures, several people might relate to the author’s circumstances. The experiences he recounts demonstrate psychological elements relating to materialism and insatiability that contributed to the unwise use of liar loans, credit cards, and home equity advances. Yahoo! Finance's TechTicker dubbed the story a subprime borrowing nightmare. Well, perhaps Yogi Berra can best summarize the financial and housing crisis: “We made too many wrong mistakes.”  There is a resounding truth to the cliché “easier said than done,” whether it relates to losing weight, managing a budget, or beating the market. Most laypersons and professionals understand the actions needed to achieve these goals (consume fewer calories than one burns; spend less money than one generates; buy assets below intrinsic value), but find it exceedingly difficult to master the psychological aspects often required to advance on the path of progress. To this point, The New Yorker published an interesting article by Jonah Lehrer titled The Secret of Self Control, which highlights a study conducted at Stanford University about children’s ability to exercise self-control. The study concluded that approximately 30% of participants demonstrated an ability to delay immediate gratification. The others couldn’t quite control themselves, some even displayed binge behavior and deliberate rule-breaking. It’s likely the results mirror our own adult self-control abilities, from corporate CEOs perpetuating moral hazards to suburban neighbors “keeping up with the Joneses”…which is a nice prelude to our next blog... | Blogentary
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