Chad Brand at The Peridot Capitalist points out one reason why Apple may have refused to return any of its $18 billion in the form of stock buybacks or dividend payouts: to come out ahead after an economic downturn.
Fortune senior editor Betsy Morris interviewed Apple CEO Steve Jobs in February, and this is what he said in regards to managing the company during an economic downturn:
We’ve had one of these before, when the dot-com bubble burst. What I told our company was that we were just going to invest our way through the downturn, that we weren’t going to lay off people, that we’d taken a tremendous amount of effort to get them into Apple in the first place — the last thing we were going to do is lay them off. And we were going to keep funding. In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time.
Sounds like an excellent strategy to me. When most companies are probably skimping on R&D and trying to cut costs during a downturn, Jobs’ plan seems to guarantee Apple will be further ahead with new products and services that people will want.
Five experts from the American Enterprise Institute (a former employer of mine) have graded and assessed the Federal Reserve’s recent policy decisions. Each expert gives good analysis, but the feeling I get is that the majority of would give Fed should get an “A” for effort and good intentions but a “C” for delivery.
Next, the Resourceful Bear Blog says Lehman Brothers is likely another Bear Stearns. The fact that Golman Sachs and Lehman Brothers debt was downgraded on Good Friday by S&P is cited as an indicator of this possibility.
Finally, according to Oppenheimer analyst Meredith Whitney, Merrill Lynch and and UBS may suffer respective first-quarter write-downs of $6.03bn and $11.06bn.
Throughout the years, many Democrats have complained of the so-called power and influence of “big oil,” the companies like Exxon who apparently have too much power and have gouged consumers by charging too much, especially after hurricanes and powerful weather events. I say this in sarcasm. But still, some politicians have called for taxing profits of these companies and now Obama has hinted that he would use the Strategic Petroleum Reserves to combat increased oil prices.
With all this in mind, the QandO blog does an excellent job of debunking the myth held by liberals and Democrats that “big oil” wields too much power. Some of the points made is that almost 80% of the oil market is controlled by foreign national oil companies. These are entities like the Saudi Arabian Co., National Iranian Oil Co., and the Iraq National Oil Co.
Another piece of evidence are the earnings of the oil industry. The oil and natural gas industry falls far behind many other industries in terms of earnings, so why is “big oil” constantly picked on by liberal politicians? Perhaps they’re just easy targets and scapegoats, but nevertheless, the so-called big oil companies wield a VERY insignificant amount of power and influence compared to the oil cartel OPEC and the foreign national oil companies.
The Financial Times on banks and regulatory backlash:
Wall Street crises have consequences. By 1932, John Maynard Keynes viewed financiers as “subhuman” and “of gangster mentality”. In 1933, at his inauguration, President Franklin Roosevelt told America that “the money changers have fled from their high seats in the temple of our civilisation”. The next two years saw the Glass-Steagall Act, which split commercial and investment banking, and the birth of the Securities and Exchange Commission.
The severity of the fallout from today’s crisis partly depends on the scale of loss borne by the public sector. So far central banks can, just about, present their activity as that of lenders of the last resort: lending to banks (and now dealers) in return for good collateral. Even the UK Treasury says nationalised Northern Rock’s assets exceed its liabilities.
But it is easy to imagine scenarios in which the public sector bears large and explicit costs. The collateral’s value could fall; central banks might feel obliged directly to prop up the prices of risky assets; bailouts of clearly insolvent banks might occur. High inflation might conceivably be tolerated to cut the real value of private debt – as Professor Niall Ferguson puts it, a re-creation of the 1970s to avoid the 1930s. Such public costs could render peripheral today’s regulatory debate. This is dominated by technical goals: making banks’ capital positions less pro-cyclical and boosting their liquidity. Faith in voluntary codes to reform bankers’ pay, such as that hinted at by Deutsche Bank’s Josef Ackermann, or credit ratings, might come to be seen as hopelessly naive.
Last week Barney Frank, chairman of the House committee on financial services, proposed a new US risk regulator. But the backlash could be more radical. Its objectives? Try these two. First, in an echo of Glass-Steagall, to prohibit some risky business lines at any institutions with implicit state guarantees. Second, to require central banks to take action to limit asset bubbles as well as conventional inflation. If the private losses “socialised” by the public sector do become drastic, so will the proposed remedies.
Rich Karlgaard of Forbes.com writes about how South Korea’s newly elected President seems to understand economics better than any of our own presidential candidates:
Wouldn’t it be cool if America elected a president in November who said things like this:
“Business is the foundation of the economy, and the economy will recover only when business activities are re-energized,” Mr. Lee said in a wide-ranging interview over the weekend. “And business here means big and small companies–and the workers and management of the companies.”
Unfortunately, this guy is not available. He is South Korea’s President Lee Myung-bak, the former CEO of Hyundai Construction.
How is it that some foreigners understand the ideas behind freedom and capitalism better than America, the country that once believed in and acted upon such ideas and ideals?
I took this screen shot last night. It’s the front page of Bloomberg.com showing a large block of dour international economic news, which I highlighted in red.
Medinnovationblog, authored by Dr. Reece, has an interesting post on how Wal-Mart can teach the physicians a few lessons in business and service. All the factors important to improving health care are discussed:
- Price matters. Wal-Mart’s slogan of “We sell for less” has been a smashing success. Some physician groups have taken the clue by opening and owning their own clinics and by lowering overhead in “cash-only” practices.
- Access matters. Longer hours, no waiting and quick patient processing appeals to health consumers. Some physicians have responded with open-scheduling, see patients on the day they call.
- Transparency matters. Patients like to know in advance or at the site of care what things will cost. Some physicians, particularly in cash-only practices, are posting prices in their offices.
- Predictability matters. Consumers like to know what they are in for. Predictability is what successful corporate franchises, and other in-store clinics, like CVS and Minute Clinics, strive for.
- Location and convenience matters. Walmart got its start by placing its stores in rural and suburbs where competitors had not gone and where parking was ample and free.
I agree with Dr. Reece that these new clinics are or are going to be one of the biggest innovations in the world of health care. But one potential road block for this innovation is that “in-store clinics take two to three years to show a profit, and at least seven clinic operators – short on capital – have closed up shop.” If anyone can make this innovation work, it is probably Wal-Mart.
After subprime, the next financial crisis could be the result of credit default swaps.
Merrill to Repay Massachusetts City for CDO Purchase:
Feb. 1 (Bloomberg) — Merrill Lynch & Co. agreed to pay Springfield, Massachusetts, $13.9 million to settle a dispute over collateralized debt obligations that tumbled in value.
The money will reimburse Springfield for the cost of the CDOs, securities tied to home loans and other debts shunned by investors as losses on subprime mortgages mounted. New York-based Merrill said it agreed to the refund after discovering its brokers bought the CDOs without the city’s “express permission.”
The money will reimburse Springfield for the cost of the CDOs, securities tied to home loans and other debts shunned by investors as losses on subprime mortgages mounted. New York-based Merrill said it agreed to the refund after discovering the purchase was made without the city’s consent.
How nice of them, considering the purchase was made without the city’s consent.
The American interviews Charles Koch, the CEO of Koch Industries, the largest privately owned company in the U.S. Some facts about the size of the company: for starters, if it were a public company, Koch would rank about 16th on the Fortune 500 list, ahead of Proctor & Gamble and Boeing. And since Kock joined the company, the value of Koch Industries has risen 2,000-fold, compared with 110-fold for the average S&P 500 firm. Quite impressive. Continue reading ‘Interview With CEO of Largest Privately Owned U.S. Company’
