August 24, 2005

The Bob Huggins Situation: Exhibit A in How to Mishandle a Loyal Employee and Alienate the Community

Filed under: Business Moves,Taxes & Government — Tom @ 1:43 pm

FOLLOW-UP POST: Comparing Basketball Program Graduation Rates
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I didn’t mean this to be Sports Day, but a local story is making national sports news, and with good reasons that go well beyond the national preoccupation with sports and the stupid amounts of money involved in the contract buyout offers cited:

No matter what Bob Huggins might have done during the final two years of his contract, he would not have been permitted to return as the University of Cincinnati basketball coach in 2007-08.

UC president Nancy Zimpher made that clear at a Tuesday night news conference when she was asked why she agreed to let Huggins, 51, finish the final two years of his contract in May if she had already decided that she didn’t want him to be UC’s coach.

“It was an acknowledgement of his rich history here that we wanted to give him an opportunity to coach in the Big East,” Zimpher said, “and to have a wonderful, sort of termination of his career at UC. Obviously, that didn’t turn out to be a viable option for him.”

UC effectively terminated Huggins’ employment at the school Tuesday, offering him three options:
- Accept a position generating financial support for student-athletes in need through March 31, 2008.
- Accept a payment of approximately $3 million to buy out the remainder of his contract.
- If Huggins rejects both of those options, the university will exercise its rights under the existing contract and terminate it with a buyout of $1.9 million.

Huggins’ UC bio is here. It begins: “Bob Huggins has established himself as one of the nation’s premier major basketball coaches.” It presumably won’t be there for long; backup text saved at BizzyBlog will replace it when it does.

Huggin’s tenure at UC has been marked by annual appearances in the NCAA basketball tournament; a 399-127 record; a drinking problem (reportedly under control); repeated refusals of more generous offers from other schools and pro teams; disciplinary problems with a few too many players; and, until recently, a poor graduation rate for his players. On balance, less than perfect, but awfully darn good.

What is going largely unreported, as far as I can tell, is a laundry list of things you DON’T do in employee relations, especialy with loyal employees:

  • Zimpher waited until new recruits had made commitments to attend UC based on “knowing” that Huggins would be coaching the next two seasons. One has already backed out after turning down (and at this point losing out on) offers from other schools. Apparently, Zimpher doesn’t know or doesn’t care about how the timing of her decision affects other people.
  • Huggins learned of the 24-hour ultimatum on Tuesday from reporters while out of town at a clinic.
  • Local talk show host Bill Cunningham is reporting that UC cleaned out Huggins’ office yesterday and had the contents delivered to his home.
  • To top it all, Cunningham also claims that UC President Zimpher has never met with Huggins since becoming UC’s President in October 2003.

If all of this is true, Cindy Sheehan has nothing on Huggins (see Update 6 below for what should be an unnecessary clarification).

And if that isn’t enough, Ms. Zimpher is managing to alienate just about everyone else in the community, including people who normally could care less about sports:

  • In the process of trying to raise academic standards, an admirable goal, she has made remarks that appear to demean the value of diplomas earned by previous UC graduates.
  • She has allowed tuition increases of 8% or more in each of the past two years while expressing little interest in controlling operating or construction costs.

There is a silver lining in this: Unlike many heavy-handed bosses, Zimpher does not appear to have the political capital to be able to survive at UC for more than a few years. The bad news: Regardless of whether my take on her staying power is correct, it will be difficult to recover from the damage she’s inflicting on the school, and not just in the Athletic Department.
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UPDATE: Mike Meckler at Red-State.com thinks the firing is an act of “courage.” I would say that it would have been an act of courage before the recruiting season began (all the reasons to fire Huggins were present at the time). Waiting until late August to fire a Division I basketball coach makes it an act of sabotage.

UPDATE 2: Lance McAllister of 1360 Homer reports that UC and Huggins have reached “a mutual agreement to terminate the contract.” He’s gone.

UPDATE 3: The financial fallout begins:
– McAllister is also reporting that a bank has withdrawn a $5 million naming rights offer for the football stadium.
– 1360 Homer also reports that the University is offering refunds of some sort to season-ticket holders and boosters.
– One of the team’s major sponsors has also publicly announced that it is terminating its sponsorship.

UPDATE 4: Don’t forget that if UC’s cash-cow basketball program falls on hard times, taxpayers will in some way, shape or form get socked for the losses.

UPDATE 5: Other employees at UC with far less leverage than Huggins are watching. What do you think they have learned about loyalty and gratitude during this sorry saga?

UPDATE 6: Of course, my Sheehan comparison relates to the amount of time spent waiting for a meeting, and is not meant to minimize the horrible experience of losing a son in wartime. Zheesh.

UPDATE 7: This point also needs to be made: Bob Huggins is THE reason UC had the opportunity to join the Big East Conference–the, only, one.

Pro Sports Owners and Athletes: Supersized Welfare Queens

Filed under: Corporate Outrage,Economy,Taxes & Government — Tom @ 10:33 am

BizzyBlog, a former avid sports fan, is sick and tired of taxpayer subsidies of sports stadiums, and increasingly absurd campaigns by the coddled owners of professional sports franchises to have ever-bigger palaces built.

First, Washington, capital of colossal subsidies, applies the pork barrel approach to pro sports in a big way:

In its quest to bring professional baseball back to Washington, the D.C. Council agreed to build a new stadium for the Washington Nationals that is to be largely financed by taxpayer dollars. This is a sweetheart deal that will allow Major League Baseball to sell the team at a price that virtually guarantees it a profit while likely creating a burden for D.C. taxpayers.

In February 2002 Major League Baseball purchased the lackluster Montreal Expos for $120 million. Three years later, it agreed to bring the team to Washington on the condition that a publicly funded stadium would be built. The league now is trying to sell the Washington Nationals.

The prospect of a free stadium is tantalizing to prospective buyers, who are expected to bid between $300 million and $400 million for the team. That would make the Nationals one of the highest-priced professional baseball teams ever, and the sale would be one of the most lucrative deals Major League Baseball has ever made.

With construction costs estimated at $535 million, Major League Baseball and a few well-connected investors stand to make a killing, while D.C. residents and businesses are left to pay the bill.

The D.C. Council has said that construction of a new stadium will spur economic development in a neglected area of the District. However, this is a promise the city may be unable to keep.

Economists seldom agree, but the many studies done over the past decade all arrived at the same conclusion: Publicly funded stadiums do not deliver the benefits they promise. A recent paper by the Cato Institute concluded, “The academic research overwhelmingly concludes that the presence of professional sports teams has no measurable positive impact on economic growth.”

On to Indianapolis, where the crybaby Irsay family, who moved their football team from Baltimore in the dead of night in 1984 when they didn’t get their way in that town (scroll down a little less than halfway), have been pleading poverty for eight years:

Since at least 1997, only 14 years after the 63,000-seat Hoosier Dome was built for $82 million, Indianapolis Colts owner Jim Irsay was publicly lobbying for a new stadium to host his team.

….. He has repeatedly said that his NFL franchise cannot survive on the revenues provided from the RCA Dome, and that a new stadium is needed sooner or later.

It’s tough making big money on an NFL franchise in a market this size without taxpayers subsidizing much of the costs. Taxpayers coughed up $20 million in 1998 to enlarge the RCA Dome’s suites and enhance the value of its expensive box seats. This actually cut the dome’s capacity to 57,900 seats, making it the smallest stadium in the league. In 2003 the team ranked 27th out of 32 NFL teams in terms of revenue and 29th in value.

“We’re significantly, significantly below the average (in revenue), and that disparity is growing, Irsay told Indianapolis television viewers. Yet the average determines what our expenses are with the salary cap. That’s what makes things so difficult.”

However, as the Cincinnati Bengals have proven, a new stadium does not ensure a better profit. Even with a new stadium, the Bengals were 24th in revenue in 2002, with only $4 million more in revenues than the Colts.

Oh, Cincinnati. How is Cincinnati doing with its two stadiums? Not well:

Stadium sales tax coming up short
Deficit looms, county says

The fund used to pay off stadium debt and cover property tax rollbacks could be $8 million in the red as early as next year, according to Hamilton County projections. The deficit could hit almost $300 million by 2032, when the debt is to be repaid.

“‘Wow’ is right,” said County Commissioner Todd Portune.

“Any way you slice it, you’re still looking at big numbers,” County Commissioner Pat DeWine said.

“We are in serious financial difficulties,” County Commissioner Phil Heimlich said.

The commissioners’ alarm comes as they are set to prepare a county budget for next year. The biggest issue for them is the sales tax fund and projections that show more money going out than coming in as early as next year.

Measures being considered to address the deficit are refinancing the debt, stretching the debt beyond the current 30 years, and using money now spent on daily county operations.

The last option in the previous sentence means that Hamilton County’s overburdened taxpayers could see money for essential services diverted to paying off stadium debt.

But what does this have to do with the high salaries of the athletes who play the games? Plenty.

Apologists will say “These salaries are just the result of the free market at work.”

Baloney. Stratospheric salaries occur because owners who have conned taxpayers into paying for the places their teams play in are therefore able to devote extra money to buying on-field talent. Collectively, this works to bid up players’ salaries well beyond what they would be if the owners had to pay for all of their operating costs.

Hence the title of the post. What has been taken from taxpayers effectively goes into the pockets of the owners and players. It is totally ridiculous, and as Cincinnati has shown, has the potential to be financially ruinous. The fact that the money goes to public-trough feeders who publicly pose as “businessmen” and too many spoiled brats on the field who never grew up just adds to the outrage.

August 23, 2005

Blog Interrupted

A whirlwind one-day business trip prevents new blogging for today.

In the meantime, a few still-relevant blasts from the past:
- The Backlash against the Kelo Backlasch
- End the Realtor Racket
- Public Retirement Systems: A “Small” Peek at a Huge Problem

August 22, 2005

Marvels of the Day: Taming Light, Nanotube Sheets

Filed under: Marvels — Tom @ 2:15 pm

Every once in a while, it’s good to step back and marvel with childlike awe at amazing technological breakthroughs when they occur. This is one of those days. Two items that caught my attention not only have awesome potential to change the world for the better, but it looks like their potential can be realized pretty quickly, not decades from now.

Click “more” to learn more:
(more…)

They’re Blogging about What I’ve Blogged About, So I Don’t Have to Blog About It Again

On Mainstream Media resistance to reporting good economic news (previously here, here, here, and many more):

  • Betsy Newmark, guest blogging at Michelle Malkin, is tired of the Mainstream Media badmouthing the economy, and goes to The Wall Street Journal and the Media Research Center for the statistically stunning proof of the slant.
  • After hearing for so many years about how the consumer has been carrying the economy, it’s especially gratifying to see Willisms report very good news about business investment.

On the Victimization of the Kelo 7 (previously here, with backlash against the backlash here):

On Hollywood’s box-office struggles (previously here):

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UPDATE: Yet another previously blogged about topic (over three months ago here and here, and more recently here), the post-presidential election decline of talk radio:

  • Instapundit plays center field for a lot of other posts and comments.
  • Kaus catches Rush’s and Hannity’s decline in Minneapolis. Rush is cleverly reminding us that he is whipping the talk-radio competition everywhere, but he’s neglecting to note that his audience is down at least 10% nationwide. Hannity is down similarly, if not more. Exceptions to the downward trend include Michael Savage and Glenn Beck, who are in my opinion bucking the trend because they’re greatly reducing their head-on discussions of politics.
  • Ann Althouse definitely buys the “people are tired of politics” meme, and notes that it goes for established conservatives and fledgling liberals.
August 21, 2005

Three Reasons (At Least) Why Mac Users Need to Cool the Smugness and Condescension

Filed under: Business Moves,General,Taxes & Government — Tom @ 2:46 pm

Note: This post is also useful for Windows users who feel the need to keep overbearing Mac users in their place.
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As a 20-year Macintosh user going back to when the machines didn’t even have hard drives, I confess to being a big fan of Apple and the Mac OS.

I also confess to being a nearly-insufferable Mac evangelist (some would say “delete ‘nearly’”) until about seven years ago, when, as a result of Windows 98, the differences between Windows and the Mac as a platform for the average user became so small that they didn’t matter. Those differences remain small, despite the exceptionally cool advances in the Mac OS through Jaguar, Panther, and Tiger.

I still believe that advanced users can get a lot more work done on a Mac, and much more elegantly, but I’m not going to push the issue. The reality of Apple’s 3%-at-best market share and the need to stay on speaking terms with clients and business associates serve as useful reins on my enthusiasm.

Also cooling my ardor for the Mac is the remarkable air of condescension still present in “the Mac community,” which is pretty amazing considering Apple’s puny market share. I believe that the attitudes of too many current Mac users prevent a lot of those who might consider ditching Windows from doing so, simply because they don’t want to be seen as joining what has almost become a cult (some would say “delete ‘almost’”).

So, in the interest of knocking Mac users down a peg or two, I offer three reasons, based on news of the past week or so, that we in “the Mac community” should cool it on the arrogance. At the same time, I’ll knock down three myths about the Mac and its users (bolds are mine in all three reasons).

REASON 1–Exploding the myth that Mac users are so much more civilized than the rabble who use PCs:

Seventeen injured during used laptop sale

RICHMOND, Va. — A rush to purchase $50 used laptops turned into a violent stampede Tuesday, with people getting thrown to the pavement, beaten with a folding chair and nearly driven over. One woman went so far to wet herself rather than surrender her place in line.

“This is total, total chaos,” said Latoya Jones, 19, who lost one of her flip-flops in the ordeal and later limped around on the sizzling blacktop with one foot bare.

An estimated 5,500 people turned out at the Richmond International Raceway in hopes of getting their hands on one of the 4-year-old Apple iBooks, which retail for between $999 and $1,299. The Henrico County school system was selling 1,000 of the computers to county residents.

Officials opened the gates at 7 a.m., but some already had been waiting since 1 a.m. When the gates opened, it became a terrifying mob scene.

People threw themselves forward, screaming and pushing each other. A little girl’s stroller was crushed in the stampede. Witnesses said an elderly man was thrown to the pavement, and someone in a car tried to drive his way through the crowd.

Don’t try to tell me these were all Windows users trying to reach Mac nirvana. As a side note, the school district has gotten some grief over the supposedly too-low $50 price tag (as if that excuses the behavior of the hooligans), but this quick look at Ebay indicates that the price was reasonable. CORRECTED — I was looking at memory prices; G3 iBooks are selling for $200 and up. I apologize for missing that. The district did underprice the machines, causing the district’s taxpayers to miss out on $15,000 of additional revenue, but of course that doesn’t excuse the disgraceful behavior.

REASON 2–Busting the legend that the Mac OS is soooooo secure:

Safari Flaws Fixed in Monster Mac OS X Update

August 16, 2005–Apple has shipped a monster security patch for Mac OS X to fix 34 flaws in the operating system and bundled third-party utilities.

The 17MB security update, available through Software Update and Apple Downloads, corrects a wide range of flaws in Mac OS X 10.3.9 (client and server).

Security alerts aggregator Secunia Inc. rated the update as “highly critical” and warned that Mac users are at risk of security bypass, cross-site scripting, data manipulation, data leakage, privilege escalation, denial-of-service and system access attacks.

The update includes two fixes for bugs in the default Safari Web browser that could allow phishing attacks.

The article’s full recitation of flaws is shocking. If this level of vulnerability had been exposed in Windows all at once, you’d hear about almost nothing else in the computer world for the next week. Mac users are fortunate that there aren’t enough of us (yet?) for the bad guys of the world to care about going after us. It’s the lack of market share that protects us; it certainly is NOT the Mac OS itself.

REASON 3–Exposing the misguided belief that OS 10.4 Tiger is as near-perfect as an OS can be, and the fantasy that Apple’s techie geniuses are really on top of things.

First, an embarrassing patch of a patch (bolds are mine):

Apple Computer Inc. had to hurriedly issue an update Wednesday to fix a Mac OS X 10.4.2 security patch that prevented the operating system from running 64-bit applications.

… Both versions of the update address multiple performance and security issues and roll in many previous system updates.

“We have issued a new version of the 2005-07 security update, which resolves an issue affecting 64 bit applications,” an Apple spokesperson said.

The problem occurred because the first version of the security update included only a 32-bit version of a crucial system component, LibSystem, according to an Apple technical note. The latest update includes both a 32- and 64-bit version.

The incompatibility was first reported by Wolfram Research Inc., the makers of Mathematica, a visual computational tool.

As a result of the flaw in the security update, the 64-bit Mathematica 5.2 software would not run on any hardware based on the G5 processor that has Version 1.0 of the update installed on it, according to Wolfram.

Oops.

Second, a badly needed patch that hasn’t come out yet, and won’t for at least a while:

Although two updates to Apple Computer Inc.’s Mac OS X Tiger have fixed many compatibility problems, enterprise networking problems persist. A new update, version 10.4.3, is expected this summer, and will address some of the remaining problems, according to sources. (Ed. note: “This summer” very likely means “September 21 at 11:59 p.m.”)

Sources say that the update will fix continuing problems with integration with Microsoft Corp. Activity Directory, SMB file sharing and lower-level networking issues.

…. VPN (virtual private network) connectivity, including connecting to Cisco Systems Inc.’s concentrators, is one of the more persistent problem areas. Most VPN clients that worked under previous versions of Mac OS X were incompatible with Tiger 10.4.0. Apple’s 10.4.1 update fixed a kernel bug, enabling some VPN client developers to release Tiger-compatible versions.

Cisco has released two post-Tiger versions of its Mac OS X VPN client, but some problems have persisted.

It’s not a good idea to tick off the corporate users who represent the best hope for greater market share, but that’s exactly what the tech wizards at Apple have done with their dithering.
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So, chill out, Mac fans, we’ve got a great machine and a great OS. But it’s not the crowning achievement of Western civilization (nor is the iPod–zheesh). Having a Mac is no reason to feel superior to those dumber than a box of rocks Windoze Windows users.
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See the next post below if you need reassurance that I’m not a total grouch about the Mac and its users.

An Interesting Experiment (Maybe): A High School without Textbooks

Filed under: Business Moves,General,Taxes & Government — Tom @ 2:40 pm

Now, lest Mac fans, based on this post, think that I’m not up on the good news in MacLand:

Ariz. high school trades books for laptops

VAIL, Ariz. — Students at Empire High School here started class this year with no textbooks — but it wasn’t because of a funding crisis. Instead, the school issued iBooks — laptop computers by Apple Computer Inc. — to each of its 340 students, becoming one of the first U.S. public schools to shun printed textbooks.

School officials believe the electronic materials will get students more engaged in learning. Empire High, which opened for the first time this year, was designed specifically to have a textbook-free environment.

“We’ve always been pretty aggressive in use of technology and we have a history of taking risks,” said Calvin Baker, superintendent of the Vail Unified School District, which has 7,000 students outside of Tucson.

Schools typically overlay computers onto their instruction “like frosting on the cake,” Baker said. “We decided that the real opportunity was to make the laptops the key ingredient of the cake. … to truly change the way that schools operated.”

Backpack makers are not pleased, unless they also happen to make laptop cases.

The idea sounds cool, but I’ll withdraw my support if I find out that the kids aren’t reading Dickens, Shakespeare, or the Greek classics on their computers.

August 20, 2005

This Weekend’s Unanswered Questions (082005)

Filed under: Economy,General,Taxes & Government,TWUQs — Tom @ 6:59 am

Another installment in a nearly-regular series of mysteries and pseudo-mysteries (usually 3-4) this inquiring mind would like to have answers for (some links included may require free registration):

QUESTION 1: Is there anyone who still supports the long-discredited idea of “comparable worth” compensation schemes?

USA Today must think so, as it uses Supreme Court nominee John Roberts’ opposition to the idea in an attempt to discredit him (HT Michael Barone):

As an assistant White House counsel in 1984, John Roberts scoffed at the notion that men and women should earn equal pay in jobs of comparable importance, and he belittled three female Republican members of Congress who promoted that idea to the Reagan administration.

The memo from Roberts, now President Bush’s nominee to the U.S. Supreme Court, was a response to a letter that the three women — one of whom was Olympia Snowe of Maine, now a U.S. senator — had sent to the administration. The women had said that the concept of “equal pay for equal work” had not sufficiently boosted women’s wages because women were not in many of the same fields as men. The three were promoting the notion of equal pay for different jobs of comparable value, based on factors such as skills and responsibility.

In his memo to White House counsel Fred Fielding, Roberts said the women’s letter “contends that more is required because women still earn only $0.60 for every $1 earned by men, ignoring the factors that explain that apparent disparity, such as seniority, the fact that many women frequently leave the work force for extended periods of time. … I honestly find it troubling that three Republican representatives are so quick to embrace such a radical redistributive concept. Their slogan may as well be, ‘From each according to his ability, to each according to her gender.’”

Comparable-worth implementation would throw out the supply-and-demand driven employment market and replace it with what would be in effect a “Ministry of Comparable Worth” that would decide what people should be paid based on the “value” of what they do. It would be guaranteed to create shortages of available talent in some lines of work and surpluses in others. It would be a gold mine for litigants and their attorneys who dispute the Ministry’s findings.

Comparable worth is so divorced from reality that even those who claim to support it won’t touch it with a 10-foot pole when they have a chance, as Barone notes:

Almost every sensible person knows this is a terrible idea.

….. But don’t take my word on comparable worth. Look what happened when the Clinton administration took office and, for two years, the executive and legislative branches were controlled by Democrats. So far as I know, no significant effort was made to enact a comparable worth program. The Clinton administration was staffed with a lot of smart women, almost all of them feminists of one stripe or another, well educated and knowledgeable about government. Did Health and Human Services Secretary Donna Shalala, one such person, push for comparable worth? Did first lady Hillary Rodham Clinton? Did Attorney General Janet Reno? If so, I missed it.

If John Roberts favored comparable worth, it would, in my opinion, instantly disqualify him from the consideration as a Supreme Court justice. How USA Today thinks the opposition he expressed 20 years ago could possibly hurt him is a mystery without a clue.

QUESTION 2: When will Cuba’s backers acknowledge its abject failure?

From the Dallas Morning News (requires registration; HT Babulablog, the go-to place to get news of Cuban dissidents):

Cuba: an island of despair

HAVANA, Cuba–At the risk of being devoured by sharks, Juan Carlos is secretly preparing to escape Cuba by boat.

“I’ve had enough,” said the 32-year-old cook, who earns less than $15 a month. “When I get home from work, there’s no electricity, no water and no gas. I swat mosquitoes all night, then get up at 6 to go to work again. If you were in my shoes, I guarantee you’d leave, too, even if you had to climb into a bedpan and paddle to Florida.”

The socialist government that Washington has spent hundreds of millions of dollars trying to topple is on the brink again. Not because of a lack of human rights or democracy, but because of something as simple as keeping the lights on and providing basic services, according to an August report by the University of Miami’s Institute for Cuban and Cuban-American Studies.

Most of the article is at Babula if you don’t want to register at the DMN (though I suggest you do; it is reasonably open-minded for a mainstream newspaper).

It’s bad enough that the Cuban people have endured a brutal dictatorship for 40 years. It’s worse when people who should know better still sing its praises, especially the tiresome “free health care for all” mantra. Based on the pictures and content at this post at Captain’s Quarters, no-cost Cuban health care is still way overpriced.

I actually think it’s to the point where all but the loopiest lefties believe in their hearts that Cuba has been an abject failure, but just don’t have the integrity to admit they have been wrong all along after so many years. It appears that Harry Belafonte is one of the few legitimate true-believer holdouts, as this bizarre interview from 2003 indicates. Whether he’s capable of critical thinking, however, is an open question.

Perhaps Mr. Belafonte can explain why an island nation of 11.3 million needs 300 prisons, instead of the 11 prisons that existed before Fidel established his Peoples Paradise (warning: many photos and narratives at internal pages at the linked site are graphic and disturbing).

Regime change in Cuba cannot occur soon enough.

QUESTION 3: How much pressure can California homeowners take?

One in five Californians who bought homes in the past couple of years has a house payment that is more than half of gross income (HT PrestoPundit):

Guidelines from the U.S. Department of Housing and Urban Development recommend that a household pay a maximum of 30 percent of its income on housing costs, which include mortgage, taxes, insurance, utilities and related costs such as condominium fees. (Lenders actually prefer 25%-28%–Ed.)

But the institute’s report says that 40 percent of all California households with mortgages are beyond this limit, and it’s even greater for recent home buyers.

Fifty-two percent of shoppers who bought a home in the past two years spend more than 30 percent of their income on housing, the report says. In fact, 20 percent of the newest buyers spend more than half of their income on housing costs.

To be clear, that’s over half of gross income before taxes, not half of net after taxes. Assuming a homeowner pays 20% or so of their gross in Social Security, federal income, and state income taxes, there’s not much left for everyday living, and certainly not a lot of room for financial mistakes or setbacks, especially if the ability to keep paying the mortgage is based on the continuation of two incomes. And the ratio described, usually referred to as the Front-End Ratio, doesn’t even consider other debt payments (cars, credit cards, etc.).

It seems that home prices and salaries almost have to continue going up quickly for people in these high-ratio situations to be able to hang in there. High-ratio buyers in variable-rate mortgages have a third worry of interest-rate increases. Although it doesn’t necessarily spell trouble for the economy as a whole, this level of house payment has to be stressful on the individual or family involved.

It would also be interesting to know, given the Front-End Ratio guideline, how loans with 50% Front-End Ratios are getting approved, even if the applicant is otherwise debt-free, which I would think is pretty rare.

August 19, 2005

Social Security at 70: FDR Did TOO Support Private Annuities; Kudlow Opines

Filed under: Soc. Sec. & Retirement,Taxes & Government — Tom @ 7:59 pm

Social Security celebrated its 70th birthday last week.

It also marked 70 years that the Social Security system has failed to carry out one of its godfather’s wishes:

Washington, D.C. – On January 17, 1935, President Franklin Delano Roosevelt explained that, “in the important field of security for old people, it seems necessary to adopt … voluntary contribution annuities by which individual initiative can increase the annual amounts received in old age.”

Larry Kudlow notes where the system should be, actually must be, steered:

Unless Social Security is reformed substantially, by providing for the ownership of personal savings accounts that will permit stock and bond investments to finance benefits rather than tax hikes, the system will continue to deteriorate.

Only through market wealth creation will pension benefits for older Americans be fully financed over the long-term. If the government does not embrace this solution, it will break both hearts and promises as it raises taxes and cuts benefits time and again in the future — just as it has in the past.

Simply, the Social Security system will never be fixed until Congress realizes that President Bush is right: The ownership of market asset wealth — which is also a huge policy incentive to maintain our capitalist, free-market, economic-prosperity-creating machine — is the only solution. Sooner or later Washington will come to this realization.

I part with Kudlow on his certainty as to whether Washington will come around on individual investment accounts. I am hopeful, but recognize the fierceness of the opposition. Those who oppose individual accounts know that if they run out the clock for something like 5-10 years, it will become very difficult financially to pull off the transition. It’s sad but true: These people would rather have the elderly depend on the ability and willingness of future generations finance part or all of their retirement than give them full control over their financial destiny.

Update: The Multi-Billion Dollar Shareholder-Suit Payoffs Investigation Is Gaining Steam; Only the WSJ Cares

Filed under: Consumer Outrage,Corporate Outrage,MSM Biz/Other Bias — Tom @ 9:14 am

The “we knew it all along, we just couldn’t prove it” investigation of the manipulation of shareholder shakedown suits continues.

These are the “it’s management’s fault” lawsuits that have followed, as night follows day, almost any significant drop in a major publicly-held company’s stock.

Only The Wall Street Journal (link requires subscription) seems to care:

Federal prosecutors have stepped up their criminal investigation of Milberg Weiss, the nation’s largest class-action law firm, granting immunity to two former partners as they intensify their scrutiny of a third, prominent litigator William S. Lerach.

A grand jury in Los Angeles heard secret testimony three weeks ago from one of the former partners given immunity, Alan Schulman, lawyers close to the case said. Mr. Schulman’s cooperation is a major development because he worked alongside Mr. Lerach, a former senior partner at Milberg Weiss and one of the nation’s most prominent class-action lawyers.

The four-year investigation is focused on whether secret, illegal payments were made by the New York-based firm to plaintiffs whose names repeatedly appeared on securities class-action lawsuits brought by the firm, according to court documents and lawyers close to the case. Plaintiffs in such suits are not permitted to receive payments beyond those awarded by courts, to avoid conflict between their interests and those of the rest of the class. Often they must testify under oath that they haven’t received undisclosed compensation.

Prosecutors have informed Mr. Lerach and two other former partners, David Bershad and Melvyn Weiss, that they could face indictment for conspiracy, according to lawyers close to the case. The government also is probing payments made by Milberg Weiss to a financial analyst who repeatedly served as an expert witness in the firm’s cases, apparently taking the investigation in a new direction. Additionally, a new round of subpoenas has been sent to at least a half-dozen firms that were co-counsel with Milberg in securities class-action cases reaching back a decade or more.

The investigation is significant — and controversial — because it targets one of the nation’s most aggressive and successful law firms. Milberg Weiss has brought hundreds of securities lawsuits and won tens of billions of dollars in settlements and judgments against companies accused of defrauding investors.

… The outlines of the investigation first surfaced in an indictment handed up by the grand jury in June. The grand jury charged Seymour Lazar, a retired Palm Springs, Calif., lawyer who was a plaintiff in at least 50 Milberg Weiss securities cases, with fraud, conspiracy and money laundering, saying he had secretly been given $2.4 million for taking a leading role in those cases. Mr. Lazar’s attorney denied the charge and said that the payments, which were made by Milberg Weiss to Mr. Lazar’s lawyer, were legal and that no effort was made to conceal them.

… Prosecutors also are probing Milberg payments to John B. Torkelsen, a financial analyst based in Princeton, N.J. He testified as an expert witness in scores of Milberg cases and was paid tens of millions of dollars by the firm over nearly 20 years. Mr. Torkelsen typically testified on shareholder damages, which could influence the size of settlements or court judgments. Expert witnesses are not permitted to testify on a contingent basis or receive undisclosed payments.

This investigation doesn’t fit the media template of “poor, pitiful shareholder bamboozled by lying, greedy management” that is the basis for the (in my opinion) mostly phony suits over stock-price drops. So it’s being ignored, despite the enormous sums at stake and potential discrediting of some of the major “class-action heroes” of the 1980s and 1990s.

Part of the reason for the downplay of the story may be that observers think the partners and others involved are untouchable. We’ll see.

FLASHBACK: Payoffs to Shareholder Suit Plaintiffs Alleged

August 18, 2005

Bob Taft Should Resign

Filed under: Taxes & Government — Tom @ 5:55 am

With only the legal formalities pending, Ohio’s governor has committed and will be convicted for four misdemeanors for ethics violations:

Gov. Bob Taft has been charged in Franklin County Municipal Court with four criminal misdemeanors for failing to disclose golf outings and possibly other favors.

The charges were outlined at a press conference this afternoon with Franklin County Prosecutor Ron O’Brien and Columbus City Attorney Richard C. Pfeiffer Jr.

If convicted on the first-degree misdemeanor charges, Taft faces a maximum fine of $1,000 and up to six months in jail on each count.

Taft, 63, the great-grandson of William Howard Taft, the only American to serve as president and chief justice of the U.S. Supreme Court, made history on his own: He is the first Ohio governor to face criminal charges while in office.

The charges were the outgrowth of a two-month investigation by a task force consisting of the Inspector General Thomas P. Charles, the Ohio Ethics Commission and the State Highway Patrol.

The commission last week referred the matter to prosecutors who discussed it this morning.

Taft and Meeks have said the errors and omissions were inadvertent.

While it is not expected, the criminal charges could lead to Taft’s impeachment under the Ohio Constitution.

The Constitution says the governor, judges and any state officer can be impeached if they are charged with a misdemeanor, even if they are not convicted.

…… From the start, Taft has stressed that he initiated the investigation by voluntarily reporting the errors and omissions. He has cooperated fully, officials said, a contrast with Brian K. Hicks, Taft’s former chief of staff, who did not cooperate with the ethics investigation against him.

“I’m fully responsible for this,” Taft told reporters this week. “This is my report. I signed it.”

Hicks was found guilty of a misdemeanor for accepting lodging at Noe’s Florida homes in 2002 and 2003 without paying fair market value. His former executive assistant, Cherie Carroll, was found guilty on the same charge for accepting free meals as part of what’s been dubbed the “Noe supper club.”

Taft has reported at least one golf outing involving Noe at Inverness Club in Toledo in 2001, and it was after authorities began investigating Noe in April and May that Taft announced the “errors and omissions” in June.

A few more details from this morning’s Cincinnati Enquirer:

Gov. Bob Taft, under investigation for not reporting as many as 60 golf outings as required by state law, was charged Wednesday with four criminal misdemeanors, a city prosecutor said.

…. O’Brien said Wednesday the outings that Taft failed to disclose included a Columbus Blue Jackets hockey game.

Even considering the total number of events, the total amounts involved appear to be ridiculously low, especially considering Taft’s wealth. Whether or not the errors are truly “inadvertent,” the governor will probably get the benefit of the doubt on his contention that they are, and that will probably be enough to head off the possibility of jail time.

But, Bob Taft should resign. Someone convicted of crimes while in office should not be serving as Ohio’s governor. If I were the prosecutor, I would demand Governor Taft’s resignation, regardless of “inadvertence,” as a precondition for avoiding jail time.

But he won’t.

I also expect that Bob Taft won’t resign.

They hardly ever do any more. Kentucky Governor Paul Patton didn’t, and Maryland Governor Parris Glendenning didn’t; heck, in both instances resignation was barely discussed or even considered, despite ethical and other violations that dwarf Bob Taft’s. To get someone to resign from office, you almost need the posse to be at the door, as was the case with Connecticut governor John Rowland. Ten years ago, all of these men would have resigned quickly, and if there were any signs of hesitation, their party leaders and the voters who elected them would have demanded that they leave office.

But it’s not 1995, it’s 2005. And we now have the example of Bill Clinton (lying under oath, contempt of court) and the Senate that would not convict after the House impeached him. No Senator that I’m aware of has ever suffered any consequence for voting against conviction. And though Congress changed hands and his party’s fortunes have steadily declined since he was first elected president in 1992, Clinton is still something of a folk hero to a substantial portion of the left.

So now they hang on, in Mr. Clinton’s case for nearly two years, their ability to govern effectively eviscerated. In Mr. Clinton’s case, domestic initiatives, including Social Security reform that may very well have resulted in individually controlled accounts (they were actively discussed in the post-1996 election planning, though no one wants to remember that), never even got off the ground. More important, despite posturing, the response to the growing terror threat was inconsistent at best and negligent at worst. I’ll let the commissions and historians sort out the details, but am I really supposed to believe there is no relationship between a crippled chief executive totally lacking in moral authority and the failure to recognize, communicate, or act on the terrorist clues that were there?

But no one seems to care if nothing gets done, or even if life-and-death matters of national security get second billing. That’s not what’s important. All that matters is hanging on to the office and whatever greatly diminished power, pomp, and ceremonial satisfaction remain from going through the motions. Mr. Clinton set the tone; lesser politicians are simply following a program that, from all appearances, worked. Now that’s leaving a legacy.

So barring nobility I don’t expect from our sitting governor, Ohio will drift for another 17 months or so. Ohio’s House, which apparently can impeach with a simple majority, will conclude that Taft’s offenses don’t rise to the level of impeachment (remember that unctuous phrase?). The 50% or so of eligible adults who don’t take part in the political process will feel vindicated in their apathy, and their numbers will increase.

And please, not a word about the party or political calculations of Taft’s staying or leaving. I don’t care. Bob Taft should just resign, regardless of who it “helps” or “hurts.”
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UPDATE: Taft pleads no contest fined $4,000:

Gov. Bob Taft pleaded “no contest’’ and was fined $4,000 today – the maximum fine — for accepting 52 illegal gifts, mostly golf outings, without paying.

Franklin County Municipal Court before Judge Mark S. Froehlich, a Democrat and former mayor of Obetz, ordered Taft to send an email to all Ohio media and all state employees within a week apologizing for his actions.

August 17, 2005

Quote of the Day (Oops–from Two Weeks Ago)

Filed under: Consumer Outrage,Taxes & Government — Tom @ 4:16 pm

Missed in the runup to the August 2 Congressional Election–From The Wall Street Journal’s Brendan Miniter, August 1 (last paragraph, link requires subscription):

This year the federal government will celebrate its 40th anniversary of being in the financial-aid business. During all that time federal aid has done about as much to fuel tuition increases as it has to help make college “affordable.” Along the way parents and students pile up more debt each year. Until our institutions of higher learning start to feel pressure on their pocketbooks — something federal financial aid is designed to prevent — expect that chase to continue.

Crisis? What Crisis? Landfill Space “Shortgage” Solved

Filed under: Business Moves,Economy,Marvels — Tom @ 11:05 am

Excess garbage and shortages of landfill space aren’t the looming disasters they were thought to be in the 1980s. The fact that the normally envirowacky NY Times says so (link may require registration) is only further confirmation (HT Instapundit; bolds are mine):

Simply put, operators of garbage dumps are stuffing more waste than anyone expected into the giant plastic-lined holes, keeping disposal prices down and making the construction of new landfills largely unnecessary.

The clearest winner in this development is the City of New York, which exports 25,000 tons of trash a day to other cities and states, making it the waste industry’s biggest customer. But the benefits stretch coast to coast and will continue for years to come.

The productivity leap is the second major economic surprise from the trash business in the last 20 years. First, it became clear in the early 1990′s that there was a glut of disposal space, not the widely believed shortage that had drawn headlines in the 1980′s. Although many town dumps had closed, they were replaced by fewer, but huge, regional ones. That sent dumping prices plunging in many areas in the early 1990′s and led to a long slump in the waste industry.

Since then, the industry and its followers have been relying on time – about 330 million tons of trash went into landfills in the United States last year alone, according to Solid Waste Digest, a trade publication – to fill up some of those holes, erase the glut and send disposal prices skyward again. Instead, dump capacity has kept growing, and rapidly, even as only a few new dumps were built.

How could that be? Waste companies and municipalities have fit much bigger dumps than originally permitted onto existing acreage, piling trash deeper and steeper, and vastly expanding permitted capacity. They are burying trash more tightly, so that each ton takes up less space, increasingly using giant 59-ton compacting machines guided by global positioning systems that show the operator when he has rolled over a section of the dump enough times. They cover trash at the end of the day, to keep it from blowing away, with tarps or foam or lawn clippings instead of the thick layers of soil that formerly ate up dump capacity.

Some operators are blowing water and air into landfills to hasten rotting and thus the shrinkage of buried garbage piles, creating more capacity.

Each practice is fairly prosaic, and many operators have yet to adopt the improved methods, but taken together the waste industry is in the early stages of the kind of increase in efficiency more typically seen in technologies like computer chips and turbines that generate electricity.

A well-run dump, tightly packed and using minimal dirt as cover, can hold 30 percent or so more trash than a poorly run site, said Thomas M. Yanoschak, a senior project manager at Camp Dresser & McKee, an engineering firm that advises waste sites. “Operators are much better now,” he said.

The change is shown in the published disposal records of the three largest waste haulers – Waste Management, Allied Waste Industries and Republic Services – which combined handle more than half the nation’s trash. In the last four years, they buried 882 million tons of waste. But the remaining permitted capacity of their combined 410 dumps did not shrink. It expanded over those four years by more than one billion tons. The three companies now expect expansions of another 1.8 billion tons. At that level, their combined capacity could handle the nation’s trash sent to dumps for about 26 years.

This quiet development is indeed a marvel on one level. Then again, it’s really just another example in a long line of them throughout history of how human ingenuity has trumped the sky-is-falling crowd, time and time again.

So stop bugging me if every recyclable item I handle doesn’t make it into the recycle container, or if I occasionally drink coffee out of a styrofoam cup.

Two Questions for IT Departments Hit by Computer Worm

Filed under: Business Moves,Economy — Tom @ 6:26 am

I mean this one, which affected, among others CNN, ABC and The New York Times (resisting snarky comment); some offices on Capitol Hill; Caterpillar Company; and several other multibillion-dollar S&P 500 companies BizzyBlog knows of who have somehow kept the their problem away from public knowledge.

Question 1:

Why are you still

running Windows 2000?

Question 2:
Were some of you even more vulnerable because you weren’t current with your critical Windows 2000 patches?

August 16, 2005

Biz Weak Inadvertently Tells Us Why CNOOC-Unocal Was a Bad Idea

Filed under: Biz Weak,Business Moves,Economy,Taxes & Government — Tom @ 2:11 pm

Now they tell us.

Oh, they didn’t mean to. They were just trying to enlighten us on how things really work in China.

But Business Week’s August 22 article on “The State’s Long Apron Strings” tells us in a few paragraphs the kind of world Unocal would have been absorbed into (requires subscription; bold is mine) if the deal with CNOOC had been allowed to go through, and therefore why the deal’s prevention was for the better:

But even if it doesn’t interfere in day-to-day matters, the state — really the Communist Party — still has plenty of clout. Every state-linked company has a Party organization that acts as a kind of shadow management and vets all senior appointments. The state-owned Assets Supervision & Administration Commission (SASAC), a sort of über-holding company with a controlling stake in nearly 200 big enterprises, keeps a close eye on the results of China’s giants, tracking metrics such as return on equity, gross margins, and sales growth just as closely as Wall Street might.

Like activist shareholders in the West, SASAC also sometimes shakes up management. In November, SASAC rotated the heads of rival phone companies China Telecom (CHA ), China Unicom (CHU ), and China Mobile without any explanation. And Wei Liucheng, who earned praise as chairman of CNOOC, was promoted to governor of Hainan Province in October. “Senior managers have to keep their finger on the pulse of their business, but also on the pulse of the Communist Party,” says George J. Gilboy, a researcher at the Center of International Studies at Massachusetts Institute of Technology. “They ignore either one at their peril.”

State control can clearly give these businesses advantages at home. In the early 1990s, when China began embracing the market economy in earnest, state-owned companies in key industries were chosen to lead the country’s development drive, landing lucrative contracts or receiving tariff protection, cheap land, easy credit from state banks, and preferential access for listing their shares. Legend Group, which owns 60% of Lenovo, is 65%-owned by the Chinese Academy of Sciences, the country’s top research body. Its staff of more than 60,000 has lent a hand in developing Lenovo’s PCs and servers.

Another big benefit: The government has steered foreign joint-venture partners to these national champions to ensure they have access to imported technology and management knowhow.

To those like the normally quite sane James Glassman, who opposed and now warns of the dire consequences of preventing the CNOOC-Unocal deal: If you don’t mind a Communist Party-controlled company that is part of the mother of all cartels buying a US company, simply say so, in those words (Glassman still clings to the fantasy that CNOOC is a “foreign company,” not a de facto part of a still-tyrannical speech-repressing government whose unapologetic legacy goes back to this guy, and which still has no regrets over this more recent massacre). Otherwise, what about the above features of Party control don’t you understand?
_________________

Outside the Beltway Jammer.
_________________

UPDATE: The August 10 Wall Street Journal (requires subscription) points out that there’s also this little problem of thousands of Chinese Communist spies in the US engaging primarily in industrial espionage.