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

Thursday, June 23, 2005

Storing America

There's no doubt that we like spending on stuff and since we like our stuff [check out Deborah Branscum's Stuffola blog] we need more than just our attics and garages to store that stuff...which has made the self-storage industry a $15B mega-industry. According to this Wall Street Journal story (subscription required):

Many families spend more than they earn; hence the big increase in consumer debt. They also seem to buy more than their houses can store.

[T]here is enough space in rentable self-storage lockers in the U.S. for each man, woman and child to stand on a spot 2½ feet by 2½ feet, with room left over.

The U.S. has 1.875 billion square feet of self-storage space, according to the Self Storage Association. That is three times the area of the island of Manhattan or the square footage of 426 copies of the 110-story Sears Tower in Chicago.

Here comes China

Against the backdrop of the growing discussion/concern in Silicon Valley about China as an economic superpower that might eclipse the US one day comes this first bid by a Chinese company for a major US corporation. According to this New York Times story (registration required):

One of China's largest state-controlled oil companies made a $18.5 billion unsolicited bid Thursday for Unocal, signaling the first big takeover battle by a Chinese company for an American corporation.

...CNOOC's bid, which comes two months after Unocal agreed to be sold to Chevron, the American energy giant, for $16.4 billion, is expected to incite a potentially costly bidding war over the California-based Unocal, a large independent oil company. CNOOC said its offer represents a premium of about $1.5 billion over the value of Unocal's deal with Chevron after a $500 million breakup fee.

Moto is back

Both my significant other and I reminisce about our old Motorola StarTAC flip phones from 1996 since they were so incredibly good (and still have one of them sitting around in case we ever want to go back to it!).

Now, it seems Motorola is coming back with cool phones once again -- phones that aren't just hip and meant for teenagers but phones that you can use for work and be cool! Not sure why Verizon is still not carry the ultra-thin RAZR but hopefully they will soon just like that had a serious lag time for the Treos. According to this WSJ interview with Motorola CEO, Ed Zander:

WSJ: Your company likes the buzzwords "seamless mobility." Can you give us some examples of how you use seamless mobility in your own life?

Mr. Zander: Here's my latest toy. (He pulls out of a bag a pair of Oakley sunglasses with a tiny cellphone earpiece and microphone attached to one of the arms and puts them on.) This actually works. I've been using these all day. (He then pulls out another pair, this time with an MP3 player attached to one of the arms.) We are making these into one device, where you can play music and get a phone call.

I just built a home in California. And now we have a home monitor system, which I can connect to with my cellphone. So I can sit here and look at rooms live or get alerts if there's anything wrong.

Keeping the Schiavo case alive

Bush politics (this time Jeb) are at play in Florida according to this New York Times Op-Ed column about the Florida Governor's orders to the state attorney to conduct a "witch hunt" against Terri Schiavo's husband even when she is now dead and the autopsy has revealed that there was nothing that could have been done to help her if she had lived:

He [state attorney Bernie McCabe] then explained: "When I conduct an investigation, it would mean that I have a criminal predicate. In other words, that I have some indication that a crime has occurred. That's my job.

"In this circumstance, that does not exist at this time. So what I'm attempting to do is respond to the governor's request by conducting what I'm calling an 'inquiry' to see if I can resolve the issues he raised."

He chuckled at his use of the word inquiry. "It may be a distinction without a difference," he said.

Phishing taking bite out of ecommerce

As my junk email folder gets filled up each day with random emails and various scams trying to get me to reveal my bank or PayPal account information, this Wall Street Journal story (subscription required) on a new survey reveals that "phishing" is beginning to impact customer confidence online:

In a disturbing message for online retailers and bankers, more than 42% of online shoppers and 28% of people who bank online are cutting back on their activity because of "phishing" attacks and other assaults on sensitive data, according to a May survey of 5,000 U.S. online consumers by Gartner, scheduled for release today.

The firm estimates that growth in electronic commerce and online financial services during the next three years will be one to three percentage points lower than if electronic information were better safeguarded. Before taking into account the concerns about doing business online, Gartner had predicted e-commerce -- excluding travel, entertainment tickets and car sales -- would grow 18% in 2005, 15% in 2006 and 11% in 2007.

Careful what you write

According to this amusing Wall Street Journal story (subscription required), the recently found guilty former Tyco CEO Dennis Kozlowski wrote the following letter in 1995 for the trial of a Tyco employee who had stolen almost $1M from the company.

An executive caught stealing money from a company is guilty of a "particularly egregious crime" and "should be sentenced to incarceration for a maximum term," said the 1995 letter to a sentencing official in Houston.

Mr. Kozlowski was found guilty last week of stealing more than $150 million from Tyco, and prosecutors may use the 1995 letter to help argue for a lengthy sentence for him, according to a person familiar with the situation.

Wednesday, June 22, 2005

Your boss next to you in the cubicle

An interesting take -- the pros and the cons -- on the (especially) Silicon Valley culture (such as eBay) of having your boss next to you in a cubicle rather than his/her office. According to this Wall Street Journal story (subscription required):

Few management gestures can rival the we're-in-this-together symbolism of top executives who choose to abandon a plush private office to sit with everyone else. The move humanizes them and makes them easier to approach -- even though few people do. The big drawback: sitting near even the most relaxed boss can make for some awkward, nerve-racking moments.

In fact, executives have sat among the masses for more than a century in businesses ranging from banking -- J.P. Morgan himself had a desk on the trading floor, though he also had a private office -- to small companies. "I'm willing to bet that it goes back to the earliest parts of the Industrial Revolution, where you had sweatshops and the owner was right there cracking the whip," says Sydney Finkelstein, a professor of leadership at Dartmouth's Tuck School of Business.

Marketing this author to success

Thanks to the support of her family members Janet Evanovich has become a huge success according to this New York Times story (registration required):

And they have transformed Ms. Evanovich, 62, from a failing romance writer who once burned a box of rejection letters on her curb into a mini-industry whose success is beginning to emulate the sprawling domains of authorial heavyweights like James Patterson....While her success speaks to her tenacity and devotion to family, it owes as much to marketing prowess.

...Last year, she sold an estimated one million books in hardcover and three million more paperbacks, earning more than $3 million in royalties from the paperbacks and several million more in advances and royalties on the hardcovers. The empire now includes two continuing mystery series: one featuring the sharp-elbowed bounty hunter Stephanie Plum, published by St. Martin's Press, whose latest installment, "Eleven on Top" went on sale June 21, and a second, published by HarperCollins, which began last fall with "Metro Girl."

Tuesday, June 21, 2005

Housing market correction predicted

According to this San Francisco Chronicle story, economists at the UCLA Anderson Forecast are releasing a report today that predicts a housing bubble correction by the end of next year:

The reason? Home values simply have flown too high, too fast. In California, for example, home prices have vaulted 70 percent in the past five years, compared with 55 percent in the mid-1970s and 45 percent in the late 1980s.

"Prices are not associated with reality," said UCLA economist Christopher Thornberg, whose paper on the state's economy is subtitled "Beware the Froth!" Home buyers "are gambling on massive amounts of appreciation, and it's not worth the price compared to the rental value. It's a house of cards."

Nonprofits in the post-Enron world

According to this Wall Street Journal story (subscription required), even nonprofits are beginning to improve their corporate and fiduciary governance due to the post-Enron Sarbanes-Oxley corporate reform law passed by Congress:

As president of New York's prestigious Juilliard School, Joseph Polisi gets to hang out with actor Robin Williams, opera singer Renée Fleming and other famous alumni in the performing arts. But he also has to know how to analyze a balance sheet, negotiate faculty contracts, oversee big fund-raising drives and achieve consensus among the school's 26 trustees on issues ranging from curriculum to the current $150 million capital campaign and campus expansion.

..."Sarbanes-Oxley doesn't apply to nonprofits, but like ink in water it's changing the way they operate," says Charles Elson, director of the University of Delaware's Weinberg Center for Corporate Governance. "Suddenly you've got accounting firms that audit nonprofits clamoring for the same financial controls now in place at for-profits." And nonprofit trustees want more transparency. Although they're exempt from financial liability in most states except in cases of fraud, they worry that in this climate their reputations could be hurt if money is misused or the organization falters.

PayPal competitor won't be easy for Google

This is first thoughtful article I've read about the news that Google is working on a competitor to PayPal possibly called Google Wallet. According to this BusinessWeek story Google may be in for a harder task than it expects as it takes on PayPal in an area that Yahoo! just threw in the towel:

Nonetheless, Google will have a very tough time taking on PayPal. For one thing, PayPal got lucky by latching onto eBay and riding that e-commerce rocket past every other competitor. Google doesn't have nearly the same base of users specifically primed to buy something. So it remains unclear whether its offering can attain the same kind of "viral" growth, says analyst Scott Devitt of Legg Mason Wood Walker.

HUGE HEAD START.  Moreover, with eBay, PayPal has spent tens of millions of dollars a year to build a reliable system, navigate regulatory hurdles state-by-state, and reduce the fraud that nearly did in the company a few years ago. Indeed, PayPal has spent years honing antifraud technology and techniques. Merchant losses from fraud on PayPal are now only 0.17% of revenues, vs. 1.8% for online merchants that take credit cards (see BW Online,
"The Truth About Credit-Card Fraud"). "There are criminals who would love to go to a new service that might not be as secure," notes Jackson.

Monday, June 20, 2005

Get placement, forget ads

With product placement taking off within television programs, where companies pay the producers of those shows to include them and realizing that they don't need to also advertise on the networks or cable channels carrying those programs. According to this Wall Street Journal story (subscription required):

Instead, the program's producer, reality show impresario Mark Burnett, received SLS stock options with a current value of about $100,000. CBS was cut out of the equation. SLS isn't buying traditional commercials on the show and hasn't dealt with CBS for the program, says SLS Chief Executive John Gott. With the sort of exposure SLS products will get, traditional commercials "probably won't be necessary," he says. The show is scheduled to air July 11.

...As a result, product placement may take money out of the broadcast networks' pockets, says Rino Scanzoni, chief investment officer of WPP Group PLC's Mediaedge:cia, an ad-space-buying firm. He estimates that in the recent negotiations with broadcast networks for the coming prime-time TV season, advertisers shifted between $100 million and $125 million out of traditional ads into fees associated with product placement. Advertisers have in recent years committed $9 billion to $9.5 billion for ad time in this market.

Riskiest distraction for drivers = cellphones

I avoid speaking on my cellphone when I'm driving unless I'm on Hwy 280 between the Penninsula and San Francisco where people drive more carefully and leave a decent distance between cars. Glad I've been doing that since according to this Wall Street Journal story (subscription required)

Among the many distractions faced by car drivers, cellphones and other wireless devices contributed to far and away the most crashes, near-crashes and other incidents, according to a new government study expected to be released next week.

...The researchers also found drivers looked at the road ahead less while dialing manually (40% of time) than hands-free dialing (50%). That compares with 70% of time looking ahead in driving without talking on a cellphone. While talking, drivers became less aware of their surrounding situation -- instead looking straight ahead most of the time (90% of time for hand-held phones and 77% for hands-free phones, compared with 70% in normal driving).

Friday, June 17, 2005

Father's Day cards = $743M

According to this New York Times story (registration required):

Father's Day is the fifth largest card-giving day of the year, after Christmas, Valentine's Day, Mother's Day and Easter. The National Retail Federation, estimates that Americans will spend $743 million on Father's Day cards this year.

...American Greetings, the world's second largest greeting card company (after Hallmark), has a new line for "today's sophisticated dads." Promotional materials promise cards that "speak to men who are connected with the Internet, whose tastes include electronic sports cars and home fitness equipment; who appreciate brands like Louis Vuitton and Tommy Hilfiger." Hallmark promotes cards with "more direct, more personal, more 'real life' ways of expressing thanks, appreciation and love."

Tuesday, June 14, 2005

Size matters

Even with the New York real estate market cooling a little in the $1.5M and above range, size still matters when it comes to the width of your single-family home townhouse according to this amusing New York Times story (registration required):

But we all know how life works: savvy stockholders like to brag about their shrewd investments, smart people enjoy revealing their perfect SAT scores, and people with 25-foot-wide brownstones tend not to be overly shy about discussing their measurements.

"Size matters - and let's face it, it's the first thing everyone wants to know when they start looking," says Kirk Henckels, senior vice president and director for Stribling Private Brokerage, who specializes in high-end East Side town houses. "Most people will say right off the bat that they won't look at anything under 20 feet. I can tell them it's the most beautiful place in the world, with fabulous layouts and lots of light and a great facade, but it won't matter if it's 16 feet wide. There's ego involved."

Monday, June 13, 2005

Uninsured in America

A friend and Harvard classmate, Dr Rushika Fernandopulle and Susan Sered, is out with his new book which sounds timely and interesting, "Uninsured in America: Life and Death in the Land of Opportunity" based on some 120 interviews with those who are living in the US without health insurance. And today, this New York Times column by Paul Krugman quotes another book, "One Nation Uninsured: Why the US Has No National Health Insurance" by Jill Quadagno that cites that 75% of Americans wanted a national health insurance system in 1945. But Truman failed because of the American Medical Association lobby and southern politicians who feared integrated hospitals:

The great advantage of universal, government-provided health insurance is lower costs. Canada's government-run insurance system has much less bureaucracy and much lower administrative costs than our largely private system. Medicare has much lower administrative costs than private insurance. The reason is that single-payer systems don't devote large resources to screening out high-risk clients or charging them higher fees. The savings from a single-payer system would probably exceed $200 billion a year, far more than the cost of covering all of those now uninsured.

The death of civility, Wi-Fi

More and more we're seeing the death of civility in all aspects of our lives. Whether it is on the road (yep, road rage incidents are up as we have experienced first-hand in Mountain View), on the sidewalk (where people will stand right in the middle blocking traffic), or even in restaurants and cafes -- where people are simply clueless about how they are impacting other people around them...or maybe just don't give a flying fig.

So we now have cafes that offer Wi-Fi having to cut off access on weekends or completely because Wi-Fi users were depriving other paying customers from having a place to sit (and purchase food and drinks -- the reason why these cafes are around in the first place!). According to this New York Times story (registration required):

Victrola started providing free wireless access two years ago after customers asked for it. As in hundreds of other cafes, the owners hoped it would encourage regulars and infrequent patrons to buy more food and drinks. But there was also a disadvantage, staff members said: the cafe filled with laptop users each weekend, often one to a table meant for four. Some would sit for six to eight hours purchasing a single drink, or nothing at all.

...Victrola is part of the emerging expectation that cafes will provide Wi-Fi, free or for a fee. In the United States, more than 8,500 cafes offer Wi-Fi, based on online listings of Wi-Fi locations; 3,500 provide it at no charge, according to, a site devoted to free wireless access. Those offering it free include chains like Panera Bread as well as independent stores; others, like Starbucks, provide the service for a fee through T-Mobile or other providers.

Saturday, June 11, 2005

Interest-only mortgages at highest levels

According to this BusinessWeek story San Diego leads the country in the percentage of interest-only (IO) mortgages issued, with San Francisco, Oakland and San Jose at #3, #5 and #6 with 45.3%, 43.1% and 41.1% respectively of all mortgages in 2004:

BusinessWeek Online has obtained the first-ever measurement by metro area of the increasing popularity of interest-only mortgages, and it shows that San Diego rates No. 1, by number of "IOs" in 2004. In metro San Diego, 47.3% of all mortgages required interest payments only in their early years. The survey covered the top 50 metro areas in the U.S. and measured by the total number of mortgages issued. Atlanta, San Francisco, Denver, and Oakland, Calif., followed close behind San Diego. Milwaukee turned in the lowest number, just 4.8% interest-only loans last year.

Thursday, June 9, 2005

AOL relaunches free content/portal

Google changed everything with its free services that make money via advertising rather than subscriptions, and so AOL is making one more effort to compete in the new online reality. According to this WSJ story (subscription required):

Hoping for a bigger piece of the fast-growing online advertising pie, AOL later this month will unveil a revamped Web site, offering free access to many of the features once available only to AOL's paying subscribers -- such as news, Internet radio, videos of music concerts and articles from magazines published by AOL's sister publications at Time Inc.

...AOL's goal is to bring its advertising sales in line with the industry so it can take advantage of rapid growth in online ad dollars. Nearly as many people visit AOL and its affiliated Web sites -- like Mapquest and Netscape -- as Yahoo and its affiliated sites, 110 million in April, versus 116 million. But last year, all of AOL sites had only $1 billion in ad sales while most of Yahoo's $3.6 billion in revenue came from advertising. Google's ad revenue was $3.2 billion.

Google bubble at $300+

According to this SmartMoney column in the Wall Street Journal (subscription required), Google this week surpassed the market cap of Time Warner which owns AOL that could benefit from the current rise in online advertising (which has a P/E ratio of 23, and a price/sales ratio of less than 2):

No other company is like Google, but any valuation has to begin by looking at its two major peers in the Internet sector, Yahoo and eBay, with Yahoo being the closer comparison. Google's trailing-12-month price/earnings ratio was around 115 yesterday, nearly double Yahoo's P/E of about 60. EBay, further along its growth curve, has a P/E of 62, comparable to Yahoo's. Google's price/sales ratio is a lofty 21.3; Yahoo's is 13.4; eBay's is 14.7. Back at the time of Google's IPO, I met stiff resistance when I argued that Google deserved to be valued on a par with Yahoo and eBay. Now that Google's valuation has far surpassed that of its peers, I find people arguing that Google deserves even higher multiples. This worries me.

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