Ishq Bina

I promise I'll post whereabouts about Chicago tomorrow. But right now I'm listening to the soundtrack a Bollywood movie called Taal. Some deep lyrics from a track in the movie called "Ishq Bina"

Ishq hai kya, yeh kis ko pata
Yeh Ishq hai kya, yeh sab ko pata

Yeh dard hai ya dardoon kee dava
Yeh koi sanam ya aap khuda

Back from Chiiiiiicago

Just got back from Chicago yesterday. Definitely had a blast. Got wasted every single night and got to make friends with the people in the firm. Most of them are really cool. Especially the ones in other offices who I will probably never see again, which kind of sucks. Some cool peeps: Chicago girls, Julie Baltimore and Phoenix Bradford (the coolest straight boy I know and who I developed a crush on). Anyway, hopefully I’ll remain in with these people through email and get a chance to reconnect if I am ever visiting their respective cities.

The training sessions, replete with long boring lectures during the day and excesses of alcohol in the evenings, seem like such a haze. I know drinking wasn’t on my agenda, especially since it’s Ramadan. But with complete intransigence, I indulged myself in the decaying elements of the city; malls, bars and pubs. Can’t say it wasn’t fun though.
There goes my month of redemption. Shit happens. I should’ve expected it and perhaps should’ve known better.

I really don’t have the time to write about the torrid events of each night, but some distinct happenings include:

* Indulging in personal emaciation and tomfoolery due to heavy drinking every night of the week
* Getting shit-faced on wine my first day in the city and distinguishing myself by being the only one to arrive late for class the next day
* Jolting from a wakeup call from Angela Vogler (HA, HA, HA)
* Running voraciously around Chicago during a dull and tiring Scavenger Hunt
* Bloating myself with free food every night. Highlights include Ginos and the Chinese place where you create your own stirfy
* Partaking in the handwriting analysis, personal caricatures and 75c beers at the Blue Iguana
* Droning trolley ride around the city where one of the Managing Directors asked our tour-guide to “get us out of this fucking prison”
* Shopping at the cool hip stores flanked on Madison Avenue. Loved Marshall Fields, Saks Fifth Avenue (SO overpriced) and Hugo Boss.
* Crushing over Bradford: coolest straight boy ever.
* Stumbling around Boys Town, the abominable gay Mecca of the city, only to extremely disappointed by the lack of hot men

I’ll add more light on the last event. Unable to bottle my mania for unvisited gay establishments, I ended up waddling inside Boys Town, trying to find out where to go and who to bring back to my hotel room. However, I was unpleasantly surprised to discover that there was nobody worthy of such honor. Maybe, I went to the wrong places but I feel that Chicago men care a lot less about personal appearance and hygiene than DC men. Most men were was dressed as if they’ve never picked up a fashion magazine. And they have no excuses for their inability to look nice because Chicago is full of awesome stores. I guess every city has it’s own flavor. So yeah, Love Chicago but not so much the gays in Chicago.

Another thing I want to talk about is straight people. I know this blog doesn’t really talk about my interactions with straight people, which is not because I don’t KNOW straight people. It’s just that most of the time straight people are dull and boring. Not so much, I found out, after this trip. Straight people are as, if not more, lascivious than gay people. Give them a few beers and witness the blatant public display of their incontinence. As you’ve probably guessed, I’m referring to my colleagues right now, who, despite being in “relationships”, were all over each other after drinking a few beers. I don’t mind sex or romance in the workplace. In fact, I think that, though weird, it’s sort of inevitable. However, I just don’t want to SEE two of the people who I work with impetuously humping on the dance floor with complete disregard of the people around them. That’s just rude and inconsiderate. And thanks to the unrelenting display of affection all week, I’ve lost a lot of respect for some of my colleagues.

Before I forget, I MUST talk about this handwriting analysis thing. So basically, on our last day in Chicago, the training peeps organized a handwriting analysis activity inside the restaurant where we made our own stirfry (delicious). I had my qualms about this whole affair especially after glancing at the senile hippie look-alike who was going to provide us information that we already knew about ourselves. But nevertheless, I decided to give it a try. And boy, was I amazed. That woman had some skills. She told me a bunch of stuff that I thought was quite on the mark. She said that I enjoy my freedom and won’t settle for anything or let anyone barricade my independence. I’m always looking to learn and expand my horizons and want to be challenged, which is again pretty accurate. And I also have a creative and spontaneous side to myself, which I strive to balance with the side that demands order and organization. But what caught me off guard was her remark about me putting up a happy-go-lucky farce in front of people so as to conceal my private self.

Yeah, so basically I’m not really who people think I am. And it’s not that I want it to be that way. It’s just that it’s easier to be someone that you’re not. People don’t understand emotions, love, feelings, especially relating the same sex. And I don’t think this is only related to my sexuality. It’s not worth it making other people understand unless the stakes are really high. And perhaps they are not, in this case, since I am the only one who has to deal with myself. I live alone. I sleep alone. And for the time I’m with people, I can pretend to be what they want me to be.

I LOVE CHICAGO

ONG...tipsy right now..but I LOVE chicago and the the awesome ppl that work with me - not at my office but at other offices, particulaly Bradford. Gawd, so in love with this straight boy who is absofuckinglutely perfect. BRADFORD!!!!!

Slacker Face

Kinda hung-over right now. New Employee School ROCKS! And so does having a nice ass hotel room to yourself where you can pass out when you are drunk after every night of the week. I LOVE CHICAGO. Totally wanna move here. People here are so friendly in comparison to those in that shithole where I live called WashinFuckingTon DC. Anyway, this place is cool.

I just woke up an hour late for my class. What an impudent display of irresponsibility. I’m in SO much shit. I hope they don’t hate me after today or make an example out of me. Jeez. And I was the only one late after last night’s debauchery. It was an Open Bar. I feasted on a surplus of wine until I lost memory. Until I woke up this morning with a ghastly thought churning in my head asking me if it was a weekend (safe) or was I late for class (FUCK). Unfortunately, it was the later. And then, encumbered by a terrible hangover, I washed my face and put on some dirty clothes to rush downstairs in less then five minutes.

Blah, I have to listen to this long and boring lecture about confidentiality right now. DUH! At least I have my laptop in front of me. But I think I’ll stop now cause I think that everyone can hear me as I type. Later.

Air Troubles: Part 2

I’m back didn’t get that flight. So yeah, I’m fucked. I just hope I get a chance to board the next one, which is in another hour. I better cause I MUST make it to Chicago by six for a mandatory opening-day dinner. I think I’ll just pay an additional $100 to make sure that I get on the next flight. I hope my company doesn’t hate me for the imprudent spending of their money and for being such a slacker.

Oh, but I did just run into Swedish Victor at the airport, which was a pleasant surprise. Swedish Victor went to school with me and was in a couple of my classes. What distinguishes him from other people though is his amazing designer wardrobe and lack of class participation. I mean seriously. This guy NEVER spoke in a class where participation was 60 % of our final grade. But I also remember Victor cause he’s really cute, particularly when I can see the extended outline of his rosy lips and fat dimples when he smiles. Being the unfettered extrovert that I am, I sat down next to Victor, inquiring of his whereabouts. Apparently, he is currently working for Deloitte and is also living in Dupont Circle. Oh, and during out short-but-friendly conversation, I managed to exchange business cards with him. Perhaps I’ll give him a call when I’m back in town. We do live in the same neighborhood, after all.

Ok, have to run in order to fork out an extra $100. Laters.

Air Troubles: Part 1

First of all, YAY for having a free laptop that I am forced to carry with me during “business-trips”. Killing time looking at your computer screen seems to be more fun than staring at unfriendly strangers at the airport. I used to think, what is so important that people can’t wait to write on their indispensable laptops, typing away furiously at airport terminals. But now I understand. And it sure feels nice to write since its been a while that I’ve had time to post my whereabouts.

So where am I flying? I’m going to Chicago to attend “New Employee School”, which is the name that my firm gives to its training program. It’s the first time that I’m visiting Chicago, so sort of excited. New city, new people. New clubs, new gays. But I’m not really planning on visiting the gay area in Chicago, also known as “Boys Town” (how appropriate to call an area full of ungodly, vulgar, promiscuous homosexuals BOYS TOWN). The reason for my self-immolation is the vast quantity of time that I am scheduled to spend “training” and doing the get-to-know-you thing with my colleagues. But shit happens. Especially when I don’t plan on it.

Speaking of not planning and shit happening, I just missed the 2 o’clock flight that I was originally scheduled to board. Somehow, I forgot that passengers are supposed to arrive two hours prior to departure. And it’s not the first time that I’ve forgotten this small piece of information, which makes me somewhat pissed at myself. But I’m not berating myself too much since I’m now a standby for the 3 o’clock flight, only an hour after the time that I was supposed to fly. Ok, I just hear they are going to start boarding, so I’m going to continue this later.

When offshoring doesen't make sense for some

Excellent article in today's WSJ written by two McKinsey partners explaining what a firm needs to examine before outsourcing its operations.

Big companies "sending jobs overseas" is a hot topic in the presidential race. Well, here's a question for both candidates: Ever wonder why, in an age when companies are sending thousands of high-wage jobs offshore, Toyota still makes Corollas in Silicon Valley, one of the costliest places on earth?

The answer lies in a fact of business life Toyota knows well. The best supply chain is short. Sending goods 500 feet in 24 hours is better than shipping them 5,000 miles in 25 days across logistical and political boundaries.

Offshoring can make good economic sense. But it is not a panacea. Manufacturers, in particular, should study potential drawbacks before pursuing it. In our experience, many overrate the value of wage savings and underestimate the inventory, obsolescence and currency risks. Some also overlook the top-line benefits of staying close to customers. Unlike companies in service industries -- where wages are typically a higher share of costs and no physical goods change hands -- manufacturers may do better in the U.S.

To better understand the complex calculus of the offshoring decision, we've begun looking into the performance of companies in California, a good proxy for diverse, advanced manufacturing economies world-wide. We've found compelling evidence that, in certain circumstances, offshoring is the wrong choice.

One reason is wage rates. They are the heart of the offshore case, yet the importance of direct labor is falling quickly for many manufacturers and often hovers around 7% to 15% of costs of goods sold. Hence, hard goods and high-tech manufacturers often say wages are not critical determinants of their performance.

At the same time, staying at home shortens lead times and heightens responsiveness to market change. One Los Angeles maker of casual wear can fill orders of up to 160,000 units in 24 hours. How? The entire supply chain -- including weaving, dyeing and sewing -- is downtown. The company carries less than 30 days inventory and is thinking about becoming a "build-to-order" producer.

Speed like this is a competitive weapon -- and its absence can be a trap. The fashion apparel industry has spiky, unpredictable demand, and five-month lead times offshore can leave firms with too much inventory of a fading fad or too few of a hot item. For instance when a knicker craze ended before one California designer's delivery arrived from China, the firm was left with a boatload of velvet knickers that could only be sold at a large discount. With mass retailers penalizing suppliers as much as 2% per day for late orders, the cost of miscalculation can be high.

Long lead times also stand out in high-tech electronics, where on-water time can translate to price declines between 2% and 6%. It's a painful penalty to pay, since today almost every product requires just hours or minutes to manufacture. For instance, high-end telecom routers take about two hours, a car needs six hours, and an iPod roughly 30 minutes. Much of the remaining lead time for these products is waste in the form of waiting or rework.

So how should goods makers decide whether to offshore? Certainly not by starting the decision-making process with a geographic location target or wage-rate goal, as some companies seem to. Manufacturers should instead consider offshoring in the context of a broader operations strategy. They should:

• Clearly define their main competitive advantages in key product markets. This understanding should reach down to specific operating metrics, such as customer response time, product cost, or inventory. Firms should also know their tolerance for risks like supply interruptions, cost variations stemming from currency swings, and compromised process or intellectual property.

• Cut direct labor costs. When labor is 40% to 50% of a product's cost, seeking low wages is imperative. But lean manufacturing techniques regularly improve labor productivity by 30% to 50% and advanced automation yields further gains.

• Cut costs further by sourcing strategically, designing products to minimize production costs, and obtaining greater efficiencies in overhead functions. It's common to find factory-like gains in areas such as human resources, finance, and customer service centers.

Some manufacturers who take these steps will still reasonably decide to offshore. But others will try to reach the operational nirvana of a short, direct supply-chain with production sites scaled to match local market size. Getting there won't be easy, yet those who succeed will gain an edge that sets them apart from rivals.

Belief in Efficient Valuation Yields Ground to Role of Irrational Investors

Noteworthy article in the WSJ today explaining the discourse between efficient and irrational markets.

For forty years, economist Eugene Fama argued that financial markets were highly efficient in reflecting the underlying value of stocks. His long-time intellectual nemesis, Richard Thaler, a member of the "behaviorist" school of economic thought, contended that markets can veer off course when individuals make stupid decisions.

In May, 116 eminent economists and business executives gathered at the University of Chicago Graduate School of Business for a conference in Mr. Fama's honor. There, Mr. Fama surprised some in the audience. A paper he presented, co-authored with a colleague, made the case that poorly informed investors could theoretically lead the market astray. Stock prices, the paper said, could become "somewhat irrational."

Coming from the 65-year-old Mr. Fama, the intellectual father of the theory known as the "efficient-market hypothesis," it struck some as an unexpected concession. For years, efficient market theories were dominant, but here was a suggestion that the behaviorists' ideas had become mainstream.

The shift in this long-running argument has big implications for real-life problems, ranging from the privatization of Social Security to the regulation of financial markets to the way corporate boards are run. Mr. Fama's ideas helped foster the free-market theories of the 1980s and spawned the $1 trillion index-fund industry. Mr. Thaler's theory suggests policy makers have an important role to play in guiding markets and individuals where they're prone to fail.

Take, for example, the debate about Social Security. Amid a tight election battle, President Bush has set a goal of partially privatizing Social Security by allowing younger workers to put some of their payroll taxes into private savings accounts for their retirements. In a study of Sweden's efforts to privatize its retirement system, Mr. Thaler found that Swedish investors tended to pile into risky technology stocks and invested too heavily in domestic stocks. Investors had too many options, which limited their ability to make good decisions, Mr. Thaler concluded. He thinks U.S. reform, if it happens, should be less flexible.

If markets are sometimes inefficient, and stock prices a flawed measure of value, corporate boards and management teams would have to rethink the way they compensate executives and judge their performance. Michael Jensen, a retired Harvard economist who worked on efficient-market theory earlier in his career, notes a big lesson from the 1990s was that overpriced stocks could lead executives into bad decisions, such as massive overinvestment in telecommunications during the technology boom. Even in an efficient market, bad investments occur. But in an inefficient market where prices can be driven way out of whack, the problem is acute. The solution, Mr. Jensen says, is "a major shift in the belief systems" of corporate boards and changes in compensation that would make executives less focused on stock.

In its purest form, efficient-market theory holds that markets distill new information with lightning speed and provide the best possible estimate of the underlying value of listed companies. As a result, trying to beat the market, even in the long term, is an exercise in futility because it adjusts so quickly to new information.

Behavioral economists argue that markets are imperfect because people often stray from rational decisions. They believe this behavior creates market breakdowns and also buying opportunities for savvy investors. Mr. Thaler, for example, says stocks can under-react to good news because investors are wedded to old views about struggling companies.

For Thaler and Fama, this is more than just an academic debate. Mr. Fama's research helped to spawn the idea of passive money management and index funds. He's a director at Dimensional Fund Advisers, a private investment management company with $56 billion in assets under management. Assuming the market can't be beaten, it invests in broad areas rather than picking individual stocks. Average annual returns over the past decade for its biggest fund -- one that invests in small, undervalued stocks -- have been about 16%, four percentage points better than the S&P 500, according to Morningstar Inc., a mutual-fund research company.

Mr. Thaler, meanwhile, is a principal at Fuller & Thaler, a fund management company with $2.4 billion under management. Its asset managers spend their time trying to pick stocks and outfox the market. The company's main growth fund, which invests in stocks that are expected to produce strong earnings growth, has delivered average annual returns of 6% since its inception in 1997, three percentage points better than the S&P 500.

Mr. Fama came to his views as an undergraduate student in the late 1950s at Tufts University when a professor hired him to work on a market-forecasting newsletter. There, he discovered that strategies designed to beat the market didn't work well in practice. "In an efficient market at any point in time the actual price of a security will be a good estimate of its intrinsic value," Mr. Fama wrote in a 1965 paper titled "Random Walks in Stock Market Prices." Stock movements were like "random walks" because investors could never predict what new information might arise to change a stock's price. In 1973, Princeton economist Burton Malkiel published a popularized discussion of the hypothesis, "A Random Walk Down Wall Street," which sold more than one million copies.

Mr. Fama's writings underpinned the Chicago School's faith in the functioning of markets. Its approach, which opposed government intervention in markets, helped reshape the 1980s and 1990s by encouraging policy makers to open their economies to market forces. Ronald Reagan and Margaret Thatcher ushered in an era of deregulation and later Bill Clinton declared an end to big government. After the collapse of Communist central planning in Russia and Eastern Europe, many countries embraced these ideas.

As a young assistant professor in Rochester in the mid-1970s, Mr. Thaler had his doubts about market efficiency. People, he suspected, were not nearly as rational as economists assumed.He decided that people had systematic biases that weren't rational, such as a lack of self-control. Most economists dismissed his writings as a collection of quirky anecdotes, so Mr. Thaler decided the best approach was to debunk the most efficient market of them all -- the stock market.

Even before the late 1990s, Mr. Thaler and a growing legion of behavioral finance experts were finding small anomalies that seemed to fly in the face of efficient-market theory. For example, researchers found that value stocks, companies that appear undervalued relative to their profits or assets, tended to outperform growth stocks, ones that are perceived as likely to increase profits rapidly. If the market was efficient and impossible to beat, why would one asset class outperform another? (Mr. Fama says there's a rational explanation: Value stocks come with hidden risks and investors are rewarded for those risks with higher returns.)

Moreover, in a rational world, share prices should move only when new information hit the market. But with more than one billion shares a day changing hands on the New York Stock Exchange, the market appears overrun with traders making bets all the time.

Robert Shiller, a Yale University economist, has long argued that efficient-market theorists made one huge mistake: Just because markets are unpredictable doesn't mean they are efficient. The leap in logic, he wrote in the 1980s, was one of "the most remarkable errors in the history of economic thought." Mr. Fama says behavioral economists made the same mistake in reverse: The fact that some individuals might be irrational doesn't mean the market is inefficient.

Mr. Thaler's views have seeped into the mainstream through the support of a number of prominent economists who have devised similar theories about how markets operate. In 2001, the American Economics Association awarded its highest honor for young economists -- the John Bates Clark Medal -- to an economist named Matthew Rabin who devised mathematical models for behavioral theories. In 2002, Daniel Kahneman won a Nobel Prize for pioneering research in the field of behavioral economics. Even Federal Reserve Chairman Alan Greenspan, a firm believer in the benefits of free markets, famously adopted the term "irrational exuberance" in 1996.

In 1991, Mr. Fama's theories seemed to soften. In a paper called "Efficient Capital Markets: II," he said that market efficiency in its most extreme form -- the idea that markets reflect all available information so that not even corporate insiders can beat it -- was "surely false." Mr. Fama's more recent paper also tips its hand to what behavioral economists have been arguing for years -- that poorly informed investors could distort stock prices.

But Mr. Fama says his views haven't changed. He says he's never believed in the pure form of the efficient-market theory. As for the recent paper, co-authored with longtime collaborator Kenneth French, it "just provides a framework" for thinking about some of the issues raised by behaviorists, he says in an e-mail. "It takes no stance on the empirical importance of these issues."

The 1990s Internet investment craze, Mr. Fama argues, wouldn't have looked so crazy if it had produced just one or two blockbuster companies, which he says was a reasonable expectation at the time. Moreover, he says, market crashes confirm a central tenet of efficient market theory -- that stock-price movements are unpredictable. Findings of other less significant anomalies, he says, have grown out of "shoddy" research. Defending efficient markets has gotten harder, but it's probably too soon for Mr. Thaler to declare victory. He concedes that most of his retirement assets are held in index funds, the very industry that Mr. Fama's research helped to launch. And despite his research on market inefficiencies, he also concedes that "it is not easy to beat the market, and most people don't."

Hybrids Could Hit 20% of Car Market by 2010

Car buyers could adopt hybrid and alternative-fuel vehicles at a much faster rate than the auto industry and oil refiners are expecting, says a recent study by consulting firm Booz Allen Hamilton.The entire automotive industry should track consumer behavior and weigh longer-term actions carefully

Gas prices have hovered around $2 a gallon for months, making it more economical to buy a car with a gas-electric hybrid engine, even if it costs more. Hybrid engines use standard gas-engine technology at higher speeds and use power from the battery to propel the car at speeds lower than 25 miles an hour. Auto makers have been charging about $3,000 to $5,000 more for the engines.

At current gasoline prices, the premium paid for hybrid technology will be offset in five years by gas savings and tax rebates, the study by the consulting firm said. If buyers demand hybrid technology at the same pace as they demanded air bags and antilock brakes they were first introduced, cars equipped with hybrid engines could make up 20% of the overall car market by 2010 and 80% by 2015.

Several new hybrids have entered the marketplace this year or soon will be on the market. Japan's Toyota Motor Corp. has had much success with its Prius and said it plans to boost manufacturing of the small sedan to 100,000 vehicles next year. The company also will launch a hybrid version of the Lexus RX400h sport-utility vehicle in early 2005, which will be about $4,000 more than the base version.

Ford Motor Co., based in Dearborn, Mich., recently introduced a hybrid version of the Escape small SUV that costs nearly $7,000 more than the base model. According to Ford's Web site, the base Escape is priced at $19,995 and the hybrid is $26,970.

The study said oil refiners could face a significant drop in demand for gas and should plan for a potential downturn. Auto makers as well should start planning for a changing marketplace.

American, Norwegian Win Nobel in Economics

A really well-written article explaining the relevance of the work done by Kydland and Prescott, this years Nobel Prize winners in economics. In their paper that was published in 1977, the authors conducted research crucial for central banking by examining how government policy makers invited long-term trouble when they strayed from their goals to address short-run problems. The men's work has profoundly influenced monetary policy in many countries, being responsible for the attempt made by central banks around the world to maintain low and stable inflation.

This year's Nobel Prize winners in economics - 60-year-old Norwegian Finn Kydland and 63-year-old American Edward Prescott - earned the award for contributions on the "time-inconsistency problem" and "real business cycles."

According to many, these terms are crucial to current policy issues.Take real business cycles. The Keynesian view, which had dominated from the late 1930s to the '70s, could not account for the combination of high inflation and low growth, "stagflation," that occurred in the early '70s. Virtually all of the action in the Keynesian model was on the demand side. But Kydland and Prescott pointed out that supply-side shocks, such as increases in oil prices to an oil-importing country, could slow growth and increase inflation and unemployment at the same time. Also, they noted, if technological change occurs unevenly - which it does - that could account for differences in growth rates over time. Indeed, their model showed that such "real changes," as opposed to demand-side changes emphasized by Keynesians, could account for 70% of the U.S. economy's postwar fluctuations in real output. Their work was one of the bigger nails in the Keynesian coffin.

How about time inconsistency? A huge issue facing government policy makers is inflation, which is caused by government increasing the money supply too quickly. Because high inflation is bad, a government concerned about its citizens' well-being would avoid high inflation. But governments are tempted to increase inflation in the short run to drive down unemployment. This is the time-inconsistency problem. As people come to expect high inflation, governments find themselves driving inflation ever higher, as happened in the '60s and '70s.

What's the way out, assuming we don't abolish central banks? In 1985, economist Ken Rogoff, drawing on Kydland's and Prescott's work, called for an independent central bank, headed by someone highly averse to inflation who would resist the government's pressure to inflate. Just two years later, inflation hawk Alan Greenspan became chairman of the Fed. The result: in the last 17 years, U.S. inflation has averaged only 3%. And this overstates inflation by about one percentage point annually because the consumer price index fails to account adequately for quality increases and for the "Wal-Mart effect" of people purchasing lower-price items at big-box stores. Reforms that gave more independence to central banks in New Zealand, Sweden and the U.K. were explicitly based on Kydland's and Prescott's work.

One Kydland/Prescott example of time inconsistency relates to patent protection. Patents are legal monopolies for a fixed number of years that exist to encourage innovation. But once the innovation occurs, governments are tempted to let others violate intellectual property rights by imitating the invention. This brings the price down and helps current consumers. The future result will be less innovation and less consumer well-being. Canada's government does that with drugs: it threatens drug companies with its power to license generics even while the patent is in force, and uses this stick to negotiate lower drug prices. Future generations pay.

Take another example of time inconsistency: the Social Security nightmare in our future. In a November 2003 paper, Prescott shows that the reason the average American age 15 to 64 works 50% more hours than his counterpart in Germany or France is that marginal tax rates in those countries are about 60%, whereas in the U.S. they're more like 40%. Prescott points out that in the early '70s, when marginal tax rates between Western Europe and the U.S. were almost identical, so were working hours.

How does this relate to Social Security? Many people anticipate keeping promises to the elderly by raising Social Security taxes dramatically in the next 10 to 20 years. But, writes Mr. Prescott, "The high labor supply elasticity [work hours fall as tax rates rise] does mean that . . . promises of payments to the current and future old cannot be financed by increasing tax rates." He has a solution. He writes, "These promises can be honored by reducing the effective marginal tax rate on labor and moving toward retirement systems with the property that benefits on margin increase proportionally to contributions." In other words, privatize Social Security so that what otherwise would be taxes are in fact people's contributions to their own retirement. For that insight alone, every American under age 55 should thank Mr. Prescott. Here's mine.

Me loves me some Starbucks

Timely article on Starbucks, considering that there is an endless supply of Starbucks-sachets (which I have authority to brew any time I want) right next to my cubicle. The proximity of the addictive coffee beans enables me to load my guts with caffeine till I reach the point where my tongue is hanging out like a sick dog. But, at least I'm not spending any money drinking myself silly, which is good.

I believe Starbucks will be fine despite their recent 11 cent /cup price increase. The company has transformed coffee into an inelastic good by offering the "Starbucks Experience". The strategy behind this experience centers on maintaining customer loyalty by establishing ubiquitous retail outlets and adding more caffeine per drink than other coffee brewers. Even though Starbucks coffee is more expensive than it's competitors, management is betting on the sucesss of the firm's strategy and unrelenting caffeine addictions to combat the additional price hikes.

Anyway, here is the article.

For many Americans—at least those of us addicted to the national drugs of petroleum, nicotine, and caffeine—life is increasingly unaffordable. Crude oil topped $50 per barrel. Cigarettes have become more expensive in many states thanks to new taxes. And this week, faced with sharp increases in the costs of sugar and coffee, Starbucks announced it would boost the price of its already-pricey espressos and macchiatos by an average of 11 cents.

The interaction of inflation and addiction makes for fascinating economic case studies. In New York City, where state and city tax hikes in 2002 pushed the price of cigarettes up to $7.50 a pack, the number of smokers dropped 11 percent from 2002 to 2003, "the fastest drop in smoking rates ever recorded nationally," according to the city.

But Starbucks may be luckier than the cigarette makers. It is in the happy position of marketing coffee, a substance that, unlike gasoline, is physically addictive, and that, unlike tobacco, governments don't want to regulate.

For Starbucks to publicly announce its price increase is either an act of hubris or supreme confidence. Some people come to Starbucks for the bonhomie, others for the soothing music, still others for the wi-fi access. But pretty much all come for the liquid caffeine. And when a retailer loudly raises the price of its main product, it runs the risk of pricing some consumers out.

What's more, Starbucks already has a reputation for having the most expensive coffee in the marketplace. When I left Moneybox's New York headquarters to conduct research at the closest Starbucks (a block away), I passed a half-dozen other coffee vendors. There's the guy with the cart who sells the little Greek diner cups for 50 cents; the deli with the scalding 75-cent generic joe and the thin paper cup; the convenience store with $1.00 faux gourmet stuff; and Cosi, where a latte costs $3.59. Only after running this gantlet could I enter Starbucks, where a java chip Frappuccino runs $4.75.

Starbucks must be banking on the theory that the people who buy its coffee don't just need coffee, they need Starbucks coffee, which packs a higher caffeine punch than many competitors. The Wall Street Journal earlier this year sent samples of coffee from Starbucks, 7-Eleven, and Dunkin' Donuts to Central Analytical Laboratories. The lab reported that a 16-ounce Starbucks house blend coffee contained 223 milligrams of caffeine, compared with 174 and 141 milligrams in comparable amounts of Dunkin' Donuts and 7-Eleven coffee, respectively. According to the Journal, the average Starbucks coffee drink contains 320 milligrams of caffeine.

In fact, it could be that many of Starbucks' customers—I see them, lining up in the morning, clutching the brew like a security blanket—literally need the stuff to get through the day. A recent survey of scientific literature by psychiatrists Roland Griffiths of Johns Hopkins and Laura Juliano of American University found that people who have a one-cup-a-day habit can become addicted. It's not so much the buzz—pleasant as it is—that keeps people coming back for more: It's the symptoms of withdrawal. In other words, Starbucks may not have to fret about the impact of raising prices because a goodly portion of its customer base may begin to feel sick without its products. Talk about a great business plan!

Of course, it could be that Starbucks consumers are motivated by rationality rather than impulse. If Starbucks delivers more caffeine per cup than its competitors, and if people buy coffee primarily because it is an efficient caffeine delivery, then Starbucks' high prices don't seem so high. You'd have to buy a lot more Coke, or coffee from the guy on the corner, to get the same rush you can get from a Starbucks. If one dose is enough to get you through the day, in other words, Starbucks' expensive brews could save you both time and money.

Banks and hedge funds

Should banks buy hedge funds to take advantage of the booming returns posted by these funds?


Hedge funds are private investment partnerships that cater largely to institutions and wealthy people and invest in a range of instruments, from stocks and bonds to oil futures and derivatives. They have found many new fans in recent years among pension plans, charities, school endowments, and individual investors, with funds under management doubling to about $870 billion (almost 1 trillion) from four years ago and a number of funds rising to about 5,900 funds today from 2,500 a decade ago. TASS, a research firm, reckons that funds under management will balloon to $2.4 trillion by 2008.

Hedge funds require an initial investment of at least $250,000, and the investor needs to have $1million to $1.5 million of net worth. Hedge funds have recorded annual gains of 10.7% since 1994, according to CSFB/Tremont, which tracks about 400 hedge funds. That tops the annual gains of 10.4% for the S&P 500. And hedge fund returns often move in a different direction from the overall market.

Until a year or two ago, most hedge funds charged an annual frees of 1% of their assets under management, to cover the expenses of running a fund, and took 20% of the gains each year as an “incentive” free. But the bite from the fee has been rising.

At the same time many invest in hedge funds through intermediaries, such as fund of funds or salespeople, who add their own layer of fees. Fund of funds appeal to mainstream investors by putting together a series of hedge-fund managers in one diversified portfolio.

The rising fees come as the new money coming into the business is surging. The percentage of institutions investing in hedge funds increased to 23% last year from 12% in 2000. As all of this money floods in, some hedge-fund managers are finding it harder to locate ripe opportunities.

Currently, hedge funds are unregulated by the SEC. But the Commission is considering a new rule that would require advisers to larger hedge funds to register with the SEX and provide additional information to investors.

In late September, J.P. Morgan Fleming, one of the world’s biggest asset managers, spent $1.3 billion for a majority stake in Highbridge Capital, a fund with $7 billion in assets. Lehman Brothers is apparently in the talks to acquire GLG Partners, an even bigger fund. Whisper abound that more deals are in the works.

However, even with it’s dream team, Highbridge could have a tough time repeating its past performance (12-yr track record of strong returns). In the current year, hedge fund returns have been falling. According to CSFB/Tremont’s index of hedge fund returns, investors earned 2.6% in the eight months to August, against 15.4% in the same period last year. Reasons to blame:

* Tough markets and economic situation
* Enormous amount of cash flooding into hedge funds. There are only a limited number of things the funds can do to make money, mostly different types of arbitrage, when investors play on the mispricing of two similar financial instruments. For a fund, growing bigger means taking bigger positions and risk driving down returns.

There are only a limited number of strategies. Most hedge funds are “market neutral”. That is, they do not bet on a market going up or down but on the perceived mispricing of one security compared with another, or one market compared with another; or they strip down complex securities into their component parts and take advantage of mispricing in this way.

Funds that specialise in convertible arbitrage, for example, used to buy the convertible bonds, strip out the bond part and sell the cheap option that was left. But with so many investors now scouring the globe for mispricing, such opportunities have disappeared in many markets. In convertible arbitrage, the option is no longer cheap, and funds are now mostly forced to take a view on the creditworthiness of the borrower instead; or to play in markets in which they have no special expertise; or to leverage up their bets still further with borrowed money.

The amount of money sloshing into hedge funds also seems to have brought down returns. While moving lots of money into and out of currencies is cheap, because the markets are so liquid, the same does not apply to, say, shares in smaller companies, or corporate bonds, or emerging markets. It is for this reason that many of the more venerable funds have closed to new entrants.

Largest firms: Tudor Investment Corp. of Greenwich Conn,. Highbridge Capital Management of New York and D.E. Shaw & Co. of New York; charge 2% to 4% of assets as annual fee.

Its Closets Full LVMH decides to return to basics

LVMH’s (the French luxury-good giant) strategy of turning the company into a potpourri of 60 profitable fashion, cosmetics and liquor brands has faltered. A recession has plummeted sales with consumers shying away from the newly acquired lines. Four-fifth of the company’s profit is coming from one brand, the luggage and hand-bag maker Louis Vuitton.

This has called for a strategic about face for LVMH: a back-to-basic focus on top brands, which are driving fashion’s rebound today. It’s the latest restyling for the $100 billion industry, which went on a dramatic spending spree in the 1990s. Back then fashion group icons like Gucci and Prada reasoned that diversification would protect them from the fickle forces of fashion: when one brand lost buzz, another would sparkle. They eyed economies of scale in advertising, shop leases and department-store space. Ultimately, they tried to outbid each other in a brutal race to become the biggest in the industry.

The acquired brands have generally disappointed, however, partly due to a three-year slump and because many were in worse shape than thought. Potential synergies can’t necessarily be realized because brands are wary of sharing factories and stores lest they cannibalize one another’s image. Economies of scale in areas such as advertising don’t compensate for unappealing collections or slow deliveries. Synergies are great, but they don't make a product or a brand," says Gianluca Brozzetti, a former Vuitton CEO who now heads British luxury-goods firm Asprey & Garrard.

The giants haven't abandoned the conglomerate approach. LVMH is trying a tough juggling act -- maximizing profit at Vuitton, while buying time to nurture the fashion brands it considers most promising, such as Fendi and Celine -- all while keeping open the possibility of selling others. This leaves several well-known but struggling brands on the sidelines, including Givenchy, Thomas Pink and Donna Karan.

But, Vuitton faces big challenges. Sustaining growth in the all-important Japanese market -- where Vuitton makes more than half of its $3.7 billion in yearly revenue and where one out of every three women owns a Vuitton bag -- could grow tougher. Also, LVMH executives say that when they bought Fendi, 80% of the brand's stores were not directly owned, and the decision to close many of them - and to reduce the amount of products sold in wholesale outlets - has meant sacrificing short-term revenue for longer-term profitability.

Currently, LVMH is setting out to extend the Vuitton franchise, which had been bolstered further by successful products such as the multicolored Murakami bag. The firm is opening 27 new Vuitton shops this year, double the pace of 2001, and quickening the label's entry into markets such as Russia, India and China.

Male Bonding Club for Fraternity, Military Men

OMG, I just read the funniest shit ever. I can't believe the dude who wrote this is serious. Maybe I should join, LOL.


Reply to: anon-45139283@craigslist.orgDate: 2004-10-10, 7:31PM EDT

Imagine a special, discreet club for masculine, cleancut All-American guys – A Few Good Men - who meet regularly for a group fun and camaraderie.

...a party where you can relax, maybe shoot some pool and watch some football on TV, then begin embracing a bro or two and reaching for the bulges in those Levis, boxers or white briefs, tonguing two guys at once .... lots of extended foreplay...bedding down a bro or two of your choice, soapin up all your bros in the shower.., ...and? The sky is the limit. The key is to enjoy the joys of male bonding and to connect with several other similar cleancut guys in ways you may have fantasized about but never dreamed could happen.

Imagine getting together with a group of studs once a month in a private home on a regular basis, reconnecting with your bros and over time developing a stronger bond similar to that of fraternity bros, only obviously having a unique erotic connection as well. Over time you will come to know each of your bros intimately, and they will each help you come to grips with your manhood and share their deepest desires with you as men. Fantasies you wish had happened in your fraternity house finally coming true...

To further the bond of brotherly friendship and camaraderie, the club will occasionally do some outings, such as dinners, a hike in the Shenandoah, an overnight camping trip, or hot tub fun. Rest assured that there will be plenty of playful fun with your bros.

This club exists now and is perfect for collegiates, soldiers, jocks, or preppy younger professionals who just want safe fun and brotherly friendship (with benefits) with a select group of masculine men. Gay, Str8, married, bi, just curious, or inexperienced fine. It's a way to chill from stress and to be completely discreet and safe, yet highly erotic.

What an exciting way to form a deep, common bond of intimate friendship with other guys and a chance to explore new heights and adventure in erotic play! If you can hack the thought of several studs giving you full attention at the same time, this is for you. The club grows by few new members each month.

A fraternity or military background is very helpful, but not required. A sense of humor is a must. There are no club dues, just cooperation on hosting. The parties will be BYOB, but otherwise drug-free.

Fine Print: No STDs, drugs, or cigs. If you are out in the bar scene every night, this club is not for you. If you only can meet daytimes, sorry. If you do escorting, bare backing, or enjoy the Crew Club, nope. No hazing or S/M accepted. Consensual fraternal paddling or rope up with another bro or two fine, but no one will be asked to do anything they don’t want to do. This is not a nudist club, though certainly you can strip down with your Bros. If you know what A&F means, yep. If you have a high and tight, extra bonus yep. If you've fantasied about fraternity house homerotic horseplay, this is for you. For more info., simply reply back... We'll be having a "Rush" social in November at a sports bar.

The Uneventful Life

The title of this post says it all. From now on, that is how most of my weekends will be like, so that I can spend time on the things that I am passionate about - books, shopping, painting and cooking. Note: boys are not included in the list. That's cause most gay boys in this city are more poisionous than the venom of the king-cobra and more bitter than the gile of a slaughtered deer. No need to involve myself in things that are unhealthy for me. And will cause me to live the remainder of my life in drama, misery and pain.

It was nice to go shopping today. After a LONG ass time. It feels nice to have money in your pocket and be able to spend it on things that can supposedly make you happy. Bought a pink and white checked shirt and an electric blue jacket from this chic outlet called MEXX, which recently opened its door in Georgetown. Not sure where exactly in Europe the brand originates from but I think it's either London or Germany. Will check on that later. I definitely saw some nice stuff. And it was nice to see that I could afford some of it.

It sucks living alone. And it sucks even more to realize that all the people that you know in a certain location are the people that you don't want to see anymore. Don't want to talk to or associate with in any way, shape or form. I hardly speak all day. The only time I say a word is on the streets; the occasional use of the word "excuse me" or "thank you". It's hard to take comfort in your loneliness when you're used to speaking and rambling all the time. Like in college; gossiping, bitching, squabbling. Participating in class. But if I had a choice, I'd rather be lonely than bitter. And maybe 'tis better this way. I tell myself all the time.

At this point on my life, I'm pretty certain that there is no boy out there for me. I've come to accept that. Let me tell you that I'm usually very optimistic in my life. In fact, I've survived the last eight years of my life by looking for the silver lining in every cloud. And telling myself that everything happens for a reason. And not to give up, and move on, and keep on going.

But life has also taught me to be realistic. And by virue of this well-earned lesson, I've come to conclude that there is never going to be a real-life manifestation of the man of my dreams. He will stay in my dreams, forever. Until he fades away one day, like a malodorous fart evanescing from an enclosed public restroom. There will be no real boyfriends. No fake boyfriends. No internet boyfriends. And I'm trying to learn to live with the reality of my abysmal love-life. It's hard though, especially when you still have the specter of the perfect boy in your implacable mind. The mind, the most unrelenting part of the human body, always thinking, always imagining. Imagining the perfect person who is out there looking for me as much as I am for him. Imagining beauty in a form that can only be seen by me, and is made only to be cherished by my senses. Imagining this person who wants to understand me, wanting to know the little things about me. Imagining loving and being loved.

Imagining a happy ending to solitude.

HUH?

Ok, so I am at work right now. Kind of bored, really. I mean, what the hell are the paying me for? Surfing the internet? Reading the paper? Or doing these boring "How to use Access and Excel" tutorials. Either way, I'm coming out as a winner - getting a good return in the form of financial compenstation and memory refreshment (since I am already familiar with both programs) while spending the only thing that I have: free time.

Consultants are the most useless people in the world (rant on that later).

Cendant and Orbitz Deal

On September 29th, Cendant, an American travel conglomerate, paid $1.3 billion in cash for Orbitz, an online travel website. By teaming up with Cendant, Chicago-based Orbitz moves ahead of Expedia (owned by InterActiveCorp) to become second only to Travelocity (owned by Sabre) in the online travel business.

Orbitz current strength lies in selling cheap air tickets. Like other online travel agent, it is also trying to get into business travel, which has higher margins. It was originally conceived as a way for its founders – Amerian, United, Delta, Northwestern and Continental airlines – to sell directly to customers and so avoid paying commissions to other travel sites. But American airlines are in financial trouble and need cash. Additionally, Cendant can use Orbitz to aggregate its assets into a single sales channel that can be displayed on its customers’ computer screens.

Within a few years, the majority of all travel purchases are expected to take place online. According to Forrester Research, in American, online bookings will rise from $53 billion this year to $111 billion by 2009. Travel websites already represent roughly 45% of all online sales in America.

That places a premium on sites that are able to offer one-stop shopping with the lowest prices. But the cost relationship b/w shop window and inventory owner may not at all be appealing to the customers. They will rightly suspect that Orbitz is not an independent travel shop scouting out the best deals for them, but one that deliberately pushes travel options from Cendant’s subsidiaries to the top of its list of offerings. Businessmen call this “synergy”. Whether customers also see it as a good deal remains to be seen.

Family Values

Recent research from John Ermisch, as Essex economist, concludes that the mere possession of a university degree makes children 20% less likely to phone their mothers regularly, and a more 50% less likely to pay them a visit. This is puzzling because self-interested children might be expected to behave in the opposite way since they’d have a lot of patrimony to lose by cutting back on the fawning. But, according to the Ermisch, rich kids are such brats because of the:

a) Diminishing returns theory: It isn’t worth the children’s time to help with daily chores, particularly since affluence helps to increase the distance b/w parents and children. In other words, as their income increases, the marginal cost of providing service goes up. And, since personal contact correlates with telephone contact, they are less likely to phone, too. Out of sight, out of mind.

b) Strategic bequest theory: Children provide only enough service to ensure that they get a reasonable share of the inheritance. Wealthier families, which tend to be smaller, fail to ensure the optimum amount of competition.

First day as a Con-slut-ant

Today was my first day at work. And, right now, at around seven thirty in the evening, I feel tired. Very tired, as a matter of fact. And sleepy, even though I had three cups of coffee earlier in the day. Well at least, if nothing else, I’ll be getting a plentiful supply of free caffeine, which is awesome because it makes me upbeat, attentive and sometimes even hyper. So, I’ll be needing lots of coffee to keep up the energy during the rest of my tiresome, monotones life.

I woke up at five this morning to go for a run (something that I plan on doing regularly), like the good boy that I am aspiring to become. And that good boy will also be avoiding unhealthy food, irresponsible drinking and casual sex. Anyway, it’s always fun to be running around the landmarks in the city especially early in the morning when a) you can see the sunrise b) avoid getting run over by asshole drivers. And it was really soothing to see the darkness changing into light and the waters of the Potomac transfiguring from a bluish charcoal to bluish orange. You should’ve been there, ‘twas nice.

Everyone at work seeks pretty friendly. At least so far. Maybe that’s cause it was my first day. But, overall, I think I like the culture of the firm. It’s pretty welcoming and laid back as opposed to being stuffy and pretentious. But, the best thing about today was the free laptop that I now own. Nice, eh? Now I can be more mobile; do all my writings and illegal downloading or pornography in public spaces with internet access, such as airports, cafes, bookstores etc.

I’m gonna read some and then go to bed. There is a stash of crap that my employer is expecting to read, but I’m not really interested boggling my mind with unimportant information right now. But I’m afraid that work is going to give me very little time to read other books and write this blog. I hope not though. But it’s definitely expected. And my quality of writing will suffer if I’m gonna be this tired everyday after work. So, yeah, we’ll see what the future holds.

OH, and did I mention that I am going to Chicago later this month for a week for training. I bet that will be exciting. Can’t wait to DO Chicago.

God..

Dear God,

If you exist, please let me never visit another gay bar ever again. Why do I torture myself? Am I a masochist? I am completely aware of the fact that gay establishments are for the weak-hearted, people who are bitter, or just want sex, or who wanna talk about things I don't give a shit about. Then, why do I go? I don't wan't another guy to tell me I am cute. And I know that I don't know a lot of people in this new city, and that I'm lonely. But seriously, who do I expect to meet? The love of my life? Or my future ex-boyfriend? Am I THAT sad and lonely?

I just spend a night out with Gleason and South-African Kevin at JRs and Halo (DC gay bars). I really don't want to waste time and words to describe my evening. Sure it was entertaining and what not. Just like every time. But fuck that, who cares? The more I drank, the more I felt empty. And sad. And bitter. This are the exact same feelings that I wanted to escape when I came to this country. The feeling of biterness and loneliness and emptiness. It's the worst thing ever, I swear.

It feels nice to be back in my appartment though.

Why the hell do I even bother? SO, I see someone cute, and then? THEN WHAT? Do I want to go up and talk to him? NO. Do I want them to talk to me? No, not so much. Do I want to talk to someone who I think is not attractive? NO. What do I want? I don't know. Well I do now. A nice cute loyal boyfriend. Someone who I don't have to pretend to make conversation with, someone who I fall for just by talking to, and him wanting to get to know me, and him taking the initiative to form a bond between us. Something formed as a result of the physical AND the mental. Something that comes as a result of getting to know each other through conversations had and time spent. Looking deep within each other's souls, and hearts. Mutual love. And, obviously, these are things that I won't find at gay bars.

Someone like..um..Alexi? Someone who I will probably never meet in my life. Someone who is a figment of my imagination. Someone who can only be a ghost, a specter, an illusion. But then it would suck even more to fall for someone who doesen't exist cause the love would never be returned.

God, I want to fall in love with you. I mean it. If I can't have another person love me the way I love them, then at least I can try to love You the way You love me. At least, that way I'll know that I died loving someone who loved me back.

And I'm gonna say one more thing, before I leave:

I'll be waiting for you
Here inside my heart
I'm the one who wants to love you more
You will see I can give you
Everything you need
Let me be the one to love you more

P.S: If you read another post involving me going to a gay club, PLEASE strike me with lightning so as to remind me of the fountain of my misery.

Why yields on American Treasury bonds so low?

I just read a bunch of articles on the current message of the markets. To summarize, U.S. economic growth is starting to dampen amid rising short-term interest rates, falling long-term yields, and a roller-coaster of a stock market. It's strange that long-term rates are falling when the Fed is increasing short-term rates by targeting the funds rate (The Fed increases the funds rate as a signal of inflationary pressures). But this is happening because people are still skeptical about future economic prospects due uncertainity over the outcome of the election, future of Iraq and rising oil prices. The industries that are hit the hardest by rising oil prices are airlines, transportation and financial services.

In the past three months, Treasury bond prices have been rising and their yields falling amid concerns of rising oil prices, uncertainty over the election, and the future of Iraq. Additionally, short-term interest rates are increasing, thereby flattening the gap between long-term and short-term interest rates.

But what makes the latest quarter unusual is that bond yields (long-term) fell even while the Fed continued to raise its target short-term interest rate to reach its current 1.75%. That is atypical. Usually, when the yield curve flattens, it is in the context of rising rates - short-term rates rising by more than long-term rates.

The yield curve plots the relationship between Treasurys of different maturities, with the benchmark referring to the spread between the 2-year and 10-year yields. Bond yields tend to move up and down with the economy. Because employers find it harder to fill jobs when the economy speeds up, wage pressures rise, and inflation often follows. To stop inflation from rising out of control, the Fed typically raises its short-term rates (the federal funds rate). Bond traders try to anticipate the movies, demand a higher yield to hold securities with a fixed payment (the fixed payment stays the same and does not increase with inflation). Therefore, the price of existing issues goes down.

One reason for bond-market strength has been that people are using bonds as a parking place for money they are reluctant to risk spending in the stock market. Even though, American shares have fallen only a bit this year, on September 29th, the Bureau of Economic Analysis (BEA) announced that corporate profits in the U.S. fell by 0.7%, after tax, in the second quarter compared with the first.

In light of these reports and other weak economic date (confidence, employment, inventories), if investors become more skeptical about the economy – as they did last quarter – they are more willing to buy bonds with lower yields. Already issued bonds will become attractive and go up in price (think demand and supply). The cycle of buying typically continues, reducing long-term yields and flattening the yield curve, until stronger economic data change investors’ minds and convince them that paying a higher price for a fixed return is no longer smart.

In the past, rising bond yields usually were associated with increase in oil prices. Rising yields indicated a stronger economy, which typically would provoke greater demand for oil. But in the past two months, oil prices have surged higher without much of a rise in the 10-year note’s yield. At the end of 2002, the 10-year treasury yield was around 4% and the price of oil was around $31 a barrel. Since then, the price of oil has risen more than 50%, but bond yields have been on a roller-coaster ride to nowhere.

What has changed: Oil and commodity prices in general are a small component of the U.S. economy that they used to be. Improved technology and productivity have combined with interconnected global labor markets to keep the costs of goods and labor relatively low, even when commodity prices are rising. Some economists also argue that oil-price increases today act as a consumer tax, curtailing spending, which because of its deflationary nature, actually has an opposite effect on bonds.

The worst-hit industries are the airlines and car manufacturers. This is because higher-fuel costs have increased operating costs while squeezing margins. So far this year, shares in airlines have fallen 23%, and the International Air Transport Association said on September 27th that, partly because of higher fuel costs, airlines would lose up to $4 billion this year. Similarly, higher oil price has increased the manufacturing costs of car companies while reducing the demand for sport-utility vehicles, which guzzle even more gas than the rest. Shares in car-makers are down by over a fifth this year.

But autos and transportation account for only some $200 billion of the $10 trillion market capitalization of the U.S stock market. But here is the biggie. Surging oil prices are very likely to have an impact on financial firm’s profits (currently financial firms make up of at least 40% of all corporate profits). The single most important determinant of the profits of financial firms is the steepness of the yield curve (the difference b/w short-term and long-term rates). A big part of the banking business is borrowing at lower, short-term rates, lending at higher, long-term rates and pocketing the difference. When the gap between long and short rates narrows, there is less to pocket, which is why a flattening yield curve long has been seen as a sign to sell bank stocks.

Also, there are to be sure, some factors distorting the market, in the form of big purchases of Treasures by Asian banks in general and the Bank of Japan in particular. For the last couple of years, Asian central banks have bought huge amounts of dollars to stop their currencies from rising. With those bonds they bought government bonds and bills, pushing prices up and so yields down a bit further than they would otherwise have gone. At the end of August, the Bank of Japan had some $122 billion in U.S. Treasuries.

Ultimately, low bond yields could help the economy since they help hold down other market interest rates, such as the rate charged for new, fixed-rate mortgages. Low market rates make it easier for consumers and companies to borrow and invest.

However, last quarter, American companies generated a financial deficit rather than a financial surplus (investment exceeded profits). Although the deficit was quite small, it is likely to get larger if profit margins fall further. This seems very likely. Consumers are too indebted, the trade deficit continues to widen, tax breaks are to be scrapped and the price of oil is rising.

Cville: The Final Chapter

With inexplicable melancholy, I regret to inform you that this is the final chapter of the “The Gays of Charlottesville”. I wish I could’ve continued to be a part of this panorama to provide you with a never-ending supply of entertainment. But, it seems as if I can’t. I’m moving not because there is anything wrong with this city, but it’s just that I’ve already spent four years here, and everyone – from the porky sandwich-maker at the University deli to the punk-ass harebrained queer bois – think that it’s time for me to offer my goodbyes and get the hell OUT of their lives. So, like all good things, my journey here must also come to an end, but this ending starts with a new beginning, which begins with my arrival in Washington DC - the nation’s power-hungry, barbarous, pretentious and squalid cesspit - to start a new life in a brand new city, full of gays, full of diseases, full of drama.

But first let’s take a final look at the lives of the major characters before we leave this ungodly, lecherous and decadent city.

Charles: Trying to bulk up, hitting the gym and taking in a shit-load of protein every day. Hopefully, being able to ward off the distraction that is Jesse, Charles will not let his god-father control his life and avoid failing all his classes to uphold his stellar academic record. I also wish Charles the best of luck getting into a good med-school. But more than that I hope that he can wash away his bitterness and get over Todd, his cheating ex-boyfriend, who is now in a happy and satisfying relationship with Alex, a twinkish second year who is a carbon-copy of Charles.

Jesse: Similarly to Charles, hitting the gym and taking monstrous dozes of protein everyday, but unlike Charles, also consuming a bunch of other unnatural supplements to add to his beefy musculature. Not that I have room to speak, but I hope that this boy can let go of his alcohol dependency and be more open with expressing his feelings and emotions. I also hope that he finds a nice boy who will help him get over his bitterness over being a single alcoholic.

JT: There’s just one word to describe this adolescent boy: PLAYER! He’s been getting more play in his first month than I ever did in my first two years. Allen-K and then Jack; boy he moves faster than the tramp who lives on the streets of West Hollywood. The secret to his success: maybe it’s the prudish, innocent demeanor, or the dumb nonchalant smile that brings out those cute dimples. Or perhaps he’s just the first one who pounces on the horned-up boys when they get drunk. But, even if it’s the later, rather than the former, it still requires a lot of balls, especially from a first-year. Whatever it is dude, its working. Cheers.

Young-Nicholas and english-major Dave: WTF buddies? I mean, seriously! At least you should’ve had the public decency to be more open about your physical relationship. And all that time we thought you two were just “friends”. What a blatant display of impertinence. Do you understand the meaning of friends? Oh, wait, I forgot that both of you were gay. Well, guess what. You never fooled me with that transparent façade, which reeked of incontinence behind it’s “we’re-just-friends-and-not-fucking” veneer. But, anyway, hope things work out, and if they don’t, hope Nick will be able to find a new boy after Dave graduates in December and leaves Charlottesville for good.

And the rest of the gays? Well, I hope that they enjoy every minute of their eternal damnation in the blazing fires of hell.

Tomorrow, I will be moving to a new city where, if I’m lucky, I'll meet different players, who won't mind acting as the new cast of this infamous blog. Who knows, the nation’s capital might just showcase drama of sublime, top-notch quality. Or perhaps, my life will just become dull, boring and miserable, similar to the lives of the majority of the American working-class population. Either way, like they say, “the show must go on”.