Ready, Fire, Aim! - Mihail's Public Blog

The Internet has come of age -- with people getting more comfortable using their credit cards online, in this case to support a presidential candidate -- according to this AP story in the Wall Street Journal (subscription required):

Mr. Dean hit the $1 million mark in Internet fund raising last week, becoming the first 2004 presidential hopeful to announce he has done so. Dean supporters also are using the Internet to organize volunteers across the country

...Mr. Dean raised far less overall in the early money chase than his rivals from Congress in the nine-way Democratic race. From January through March, the most recent figures available, Mr. Edwards raised $7.4 million, Mr. Kerry $7 million, Mr. Gephardt $3.5 million, Connecticut Sen. Joe Lieberman $3 million and Mr. Dean $2.6 million.

From selecting who'll show up in the backdrop to how they're dressed (for instance asking people to take off their ties when George W. was making a speech promoting his economic plan) to actually designing the whole backdrop, this White House has hired experts from the TV industry for just that according to this New York Times story (registration required):

George W. Bush's "Top Gun" landing on the deck of the carrier Abraham Lincoln will be remembered as one of the most audacious moments of presidential theater in American history. But it was only the latest example of how the Bush administration, going far beyond the foundations in stagecraft set by the Reagan White House, is using the powers of television and technology to promote a presidency like never before.

Officials of past Democratic and Republican administrations marvel at how the White House does not seem to miss an opportunity to showcase Mr. Bush in dramatic and perfectly lighted settings. It is all by design: the White House has stocked its communications operation with people from network television who have expertise in lighting, camera angles and the importance of backdrops.

What a surprise. More and more of the country is unemployed as we go spend $1B+ a day on the war rather than helping jumpstart the economy, and the thrill of the 0% financing for one's brand new car has been increasingly tempered by the one's need to buy food instead! According to this New York Times story (registration required):

April sales fell 6.1 percent to a seasonally adjusted annual selling rate of 16.44 million units, according to Ward's AutoInfoBank, a data tracking service. Sales for the month a year earlier came in at an annual pace of 17.3 million, a robust performance that made for a tough comparison....

"When one considers the heavy incentives for the month, the sales levels are quite disappointing," said Domenic D. Martilotti, an analyst for Bear, Stearns. "Each iteration of this zero-percent-for-60-months push, there are clearly diminishing returns. So the question is, where do we go from here?"

The unemployment rate rose to 6% in April according to Labor Department statistics. This is at its "highest level since July 1994, when it hit 6.1 percent" according to this New York Times story (registration required):

``The unemployment rate is going higher,'' said Paul L. Kasriel, director of economic research at the Northern Trust Company in Chicago. ``The economy is poking along at a rate of growth of 2 percent or less. That is not fast enough to keep the rate from rising. To merely stabilize employment, the economy needs to grow somewhere between 3 percent and 4 percent.''

...Over the past three months, more than half a million people have lost their jobs. The number of unemployed workers rose to 8.8 million. Nearly 2 million of those people have been out of work for 27 weeks or more, the Labor Department said.

Mortgage rates fall again according to this AP story in the New York Times (registration required):

The average interest rate on a fixed-rate 30-year mortgage fell this week to 5.70 percent, Freddie Mac, the mortgage company, reported today in its weekly nationwide survey. The rate was down from 5.79 percent last week.

For 15-year fixed-rate mortgages, a popular option for refinancing, rates declined to 5.03 percent this week, compared with 5.12 percent last week.

Rates for one-year adjustable mortgages dipped to 3.74 percent, down from 3.79 percent last week.

Starbucks has a quiet success growing inhouse in its CD sales according to this Wall Street Journal story (subscription required):

Last year, Starbucks stores sold Norah Jones's debut CD well before she burst onto the national scene, taking home five Grammy Awards earlier this year. She even gave a live performance at an Austin, Texas, Starbucks. The chain's first CD, "Blue Note Blend," a compilation featuring Louis Armstrong and Duke Ellington, sold 40,000 copies in its first six weeks -- a rate that probably would have pushed it into the top 10 of the Billboard jazz charts if it had been tracked as a traditional album.

Promoting music like never before, Starbucks this year plans to release 16 original CDs and seven reissues -- up from four CDs in 1995, the year it started selling music. For several days in March, Starbucks was the only major retailer selling the compilation CD of music that influenced the Rolling Stones. Last week, Starbucks released a similar inspiration CD from Sheryl Crow. Next up: Tony Bennett.

Interesting story on trends in European advertising -- one that gives us a sense of what's happening on the other side of the Atlantic from the country that now has burgers and "freedom" fries (is that freedom to get fat?). According to the Wall Street Journal (subscription required):

The commercials mirror Europeans' complex, changing attitudes toward the U.S., say some marketing consultants. "People have gone through the love affair with Americana and they're coming out of the other side," says Marie Ridgley, an executive at Added Value, a strategic marketing consulting firm owned by Britain's WPP Group PLC. "It's not necessarily totally anti-Americanism going on, but it's a reappraisal of that relationship. We've gone through the stage where we buy into the T.G.I. Friday's, we buy into McDonald's, we buy into Nike hook, line and sinker."

The war in Iraq nourished anti-American sentiment in Europe, with some restaurants removing Coca-Cola and Budweiser brands from their menus. Some French people started calling American cheese "idiot cheese," and vandals in Bordeaux, France, even torched a replica of the Statue of Liberty.

There's a new trend in outlet malls. Higher prices for higher-end labels. Some 20 such outlet stores -- brands such as Prada, Dolce & Gabbana etc. -- have opened since 2000 according to this Wall Street Journal story (subscription required). So while lower priced brands like Calvin Klein are not doing so great in outlet malls (a $14 billion industry) and a few are even pulling out, these new brands are moving in!

For shoppers, the newcomers mean the appearance of heavily discounted, albeit still quite expensive, designer clothes on the racks at regional outlet malls. A pink coat dress runs $1,200 at Chanel's outlet store, a relative bargain when compared with the original $3,200 price tag. A Gucci cashmere-and-silk men's turtleneck is $399, more than 50% below the original price. A tan silk pencil skirt, also Gucci, is on offer for $139, down from $460. Christian Dior is charging $1,200 for an evening dress with a black ruffled neckline, marked down from $4,000.

Some good news in the bleak economic outlook...that is if it were to translate into anything useful: consumer confidence increased significantly this month according to this Wall Street Journal story (subscription required):

The Conference Board said its index of consumer confidence leapt to 81 in April from 61.4 in March, the second largest gain since its monthly surveys began in 1977. The largest gain occurred in March 1991, after the end of the first Gulf War, when the index rose to 81 from 59.

Still, the gain doesn't mean the economy is out of the woods. Confidence is only a little bit above its January level and remains below the lowest levels reached in the 2001 recession. Furthermore, some of the details of the report suggest improved confidence won't translate into a burst of spending. The proportion of respondents to the mail-in survey planning to buy a car in the next six months fell to 5.9%, the lowest since 1996, despite generous manufacturers' incentives.

As people get more comfortable with ecommerce, some high-end shoppers are turning to the web to make their expensive purchase according to this Wall Street Journal story (subscription required):

According to J.D. Power & Associates, only 4% of the approximately 17 million new cars sold last year and 6% of the about 15 million late-model used cars were bought online. (J.D. Power doesn't track models older than six years)....Even those numbers are a bit misleading. "Buying online" in the automobile market refers to picking out a car and negotiating a price before going to a dealership to get the car...

"The sky's the limit," says John Baird, spokesman for Blue Nile. The most expensive diamond on the site is a 12.9 carat for $500,000; the priciest ring ever sold was an emerald cut diamond ring for $114,000. The man who bought it also purchased a similar ring for $85,000, but after proposing, let his fiancee choose which one she wanted to keep. (The most expensive item ever sold was a five-carat heart-shaped diamond solitaire set in a pendant, for $183,000.)

With adoption rates plateauing for the first time ("percentage of Americans who use the Internet, about 71%, was flat last "), and the economy causing Internet access subscribers to seek lower cost options, AOL lost subscribers for the first time according to this Wall Street Journal story (subscription required).

America Online and other Internet-service providers are feeling the pain. Last week, the company reported that its subscriber base shrank to 35.2 million world-wide as of Dec. 31 from 35.3 million at the end of September -- the first decline in the company's history. In the U.S., the number of subscribers fell 176,000.

Microsoft Corp.'s MSN, the No. 2 Internet provider in the U.S., said its tally of nine million subscribers didn't budge in the fourth quarter despite an aggressive $300 million marketing campaign. EarthLink Inc., the No. 3 provider, said subscribers to its $21.95-a-month dial-up service increased by 59,000 during the quarter, but is still down 4% from last year.

On the other hand United Online which operates the Juno and NetZero services with its more reasonably-priced $9.95/month plans increased subscribers by 48% to 1.9 million in the year ending Sept. 30, 2002.

"Same computer, same Internet. Why would you pay more?"

According to this Knowledge Wharton article on Southwest Chairman Kelleher's recent talk on what's allowed Southwest to continue reporting 48 quarters of profits while other airlines like United and American are struggling (“If you had invested $100,000 in 1972, it would have grown to $102 million by 2002.”):

Close attention to costs produced those results, he noted. “Even in the best of times, we kept our costs low and questioned every expenditure. For years, I used to approve every expenditure over $1,000. Why? To encourage a cost-conscious culture. I couldn’t look at all of them, of course. But I would question them selectively, and that kept people paying attention.”

 

Low costs have given Southwest its market niche – and its competitive advantage – of having the nation’s lowest fares. And that, in turn, has created a phenomenon known in the airline industry as the “Southwest effect.” Airports served by Southwest have lower average fares than those that aren’t because other carriers feel compelled to match Southwest’s fares.

While eBay has increased its advertising spending on TV significantly, Amazon decided to cut back and use those savings to improve customer experience by forgoing shipping fees etc. according to this Wall Street Journal story (subscription required):

Amazon has plowed the dollars once reserved for advertising into free shipping on orders of $25 or more, an offer Amazon put in place last year and has since credited with boosting sales. Last year, free shipping increased Amazon's direct losses from shipping to $40 million from $19 million the prior year. The company has said it expects to forego $100 million in shipping revenue this year because of free-shipping offers.

...Last year, the top dozen Internet companies spent about $181 million on TV advertising, a tiny sliver of the $51.9 billion in total TV advertising, CMR says.

While eBay has increased its advertising spending on TV significantly, Amazon decided to cut back and use those savings to improve customer experience by forgoing shipping fees etc. according to this Wall Street Journal story (subscription required):

Amazon has plowed the dollars once reserved for advertising into free shipping on orders of $25 or more, an offer Amazon put in place last year and has since credited with boosting sales. Last year, free shipping increased Amazon's direct losses from shipping to $40 million from $19 million the prior year. The company has said it expects to forego $100 million in shipping revenue this year because of free-shipping offers.

...Last year, the top dozen Internet companies spent about $181 million on TV advertising, a tiny sliver of the $51.9 billion in total TV advertising, CMR says.

Shares of Overture dropped by almost a third on news that the search copmany is reducing its earnings guidance for the year by about half due to what appears to be increased competition from Google which continues to grow rapidly according to this Wall Street Journal story (subsription required):

The warning was followed by a slew of outraged analysts' remarks.

"The level of the miss yesterday leaves us bewildered, confused and disappointed, and we believe that the level of uncertainty has risen significantly," U.S. Bancorp Piper Jaffray analyst Safa Rashtchy said in a note to clients Thursday.

The Da Vinci Code by Dan Brown, a little-known murder-mystery writer, made its debut at No. 1 on The New York Times best-seller list recently selling 8,000 copies in the first two days with 354,000 in print according to this New York Times story (registration required):

Normally jealous rivals have been relieved to see that an aggressive marketing campaign and enthusiasm among booksellers can fuel sales, particularly for newer writers...

"That Doubleday was able to make this book No. 1 in its first week on sale gives us something to talk about in the industry — and try to duplicate," said Michael E. Morrison, publisher of the Morrow/Avon division of HarperCollins, the publishing division of the News Corporation. "It gives renewed hope that it is possible to reach more customers willing to take a chance on an unknown author. In the 80's and 90's it seemed easier to break out new fiction writers."

Landlords are now having to suffer for the crazy prices they continued to charge tenants in the go-go days of the dotcom boom according to this San Francisco Chronicle story:

Bay Area rents dropped in the first quarter by an average of about 5.3 percent compared with last year, and the occupancy rate dipped to 93.7 percent from 93.9 percent a year ago, according to a study released today by RealFacts,

...Since the second quarter of 2001, the average Bay Area rent has fallen more than 18 percent. The average rent in San Jose has fallen about 26 percent in the same period. According to the San Francisco Tenants Union, the average rent for a two-bedroom apartment in San Francisco jumped by more than 36 percent a year during the dot-com frenzy.

Now that he no longer needs to distance himself from having studied at an East Coast liberal school as he did during his Texas years, President Bush is hosting his 35th Reunion Yale class at the White House according to this New York Times story republished in the SF Chronicle:

Although Bush has been warming in recent years to the alma mater he derided as an incubator of intellectual snobbery when he was governor of Texas, the May 29 picnic dinner to be held on the South Lawn is a milestone in his rapprochement.

This time Bush is the host, not just the commencement speaker, as he was in New Haven in 2001. This time Bush is opening up his house to as many as 1,200 people, which may be a record number for an early-to-bed, teetotaling president who has vowed never to hold the monster parties that the Clintons did.

The change started to occur when President Bush probably realized it was advantageous to accept an honorary degree from a good school like Yale, soon after he became president, to counter the accusations that he isn't very bright. Or maybe it was the fact that his daughter Barbara had decided to apply to and attend Yale. According to a May 22, 2001 Washington Post story that was republished in the SF Chronicle:

For the first time since George W. Bush entered the national stage -- really for the first time since he graduated in 1968 -- he let his old Yale ties show yesterday.

"I'm a better man because of Yale," Bush told several thousand new graduates as he received an honorary degree at Yale's 300th commencement. "Yale for me is a source of great pride. I hope that there will come a time for you to return to Yale to say that, and feel as I do today. And I hope you won't wait as long."

A good indicator of the terrible impact this downturn has had on consumers is the fact that consumer debt is at an all time high and backruptcies are rising according to this New York Times story (registration required):

...The Federal Reserve reported this month that consumers added $5.4 billion to revolving credit in February, and that total consumer debt stood at $1.74 trillion, excluding home mortgages. Last year, though, banks had to write off an average of 6 percent per quarter on outstanding credit-card balances, according to the Fed. At the same time, a record 1.5 million people filed for bankruptcy protection, about 6 percent more than in 2001, according to the American Bankruptcy Institute. The group's executive director, Samuel Gerdano, said it expected that pace to continue this year.

According to this AP story in the New York Times (registration required) a potential competitor for the $10M X Prize to encourage space tourism may have arrived:

A private manned spaceflight program was unveiled on Friday at a desert airport where it has been in secret development for two years.

The program's developer, the aircraft designer Burt Rutan, displayed a rocket plane called SpaceShipOne and a jet to carry it, the White Knight, in a hangar at Mojave Airport. Mr. Rutan is best known for creating Voyager, the airplane that made the first nonstop, unrefueled flight around the world, in 1986.