Weakonomi¢s » business

The Megalist of Calling the Housing Bottom

The Weakonomist — Tue, 07 Feb 2012 15:23:50 +0000

As of this writing we are converging on the 6th year of this housing mess, and for almost 6 years we’ve heard people from the head of the Federal Reserve to real estate experts to Jim Cramer say we’ve reached the bottom of the housing market. For too long self-interested parties have made claims the worst may be over. They’ve all been wrong. It’s time to chronicle this journey. Starting with the end of January in 2012 and going back to 2006 I’ve compiled a list. Please note the listed sources aren’t always the ones making the claims, it’s just who published the claim.

Please enjoy the list:

1/31/2012 Homeownership rates fall to 66% as downturn nears a bottom – USA Today
1/10/2012 Has The Housing Market Hit Its Bottom? – Forbes
12/8/2011 Is the Housing Bottom Finally in Sight? – Kiplinger (my favorite!)
9/27/2011 This Has To Be The Housing Bottom – Seeking Alpha
6/21/2011 The Housing Bottom Is Here: Economist Russell Price Explains – Daily Finance
4/24/2011 We Could Be Near a Housing Bottom – Seeking Alpha
2/2/2011 Why the Housing Bottom Might Be Here – US News
1/28/2011 U.S. housing bottom seen in mid-2011: poll - Reuters
11/19/2010 Housing downturn has hit bottom – The Business Journal
10/25/2010 Rising Home Sales Point to a Housing Recovery – Daily Finance
10/8/2010 3 Signs the Mortgage Market Has Hit Bottom – Smart Money
5/12/2010 US Housing Prices Projected To Reach Bottom In Q3 2010 – NuWire Investor
4/27/2010 We Have Met the Housing Bottom, Maybe – The Atlantic
4/22/2010 More Signs of a Housing Bottom – Seeking Alpha
1/29/2010 In hard-hit markets, some see signs of bottom – MSNBC
2/12/2010 Builders: Housing bottom is here – SunSentinal
12/15/2009 Builders Say 2009 Marks Housing’s Bottom, 57% Predict Revenues Increase in 2010 (I checked, and a few did have revenue growth, most didn’t, and 2011 was worse) – World Property Channel
10/30/2009 Moody’s: No Housing Bottom Until Q3 2010 – Wealth Daily
8/21/2009 We Called It: The Housing Bottom – The Street
5/13/2009 Yet Another Greenspan Housing Bottom Call – Barry Ritholtz
2/9/2009 U.S. Housing Market May Bottom in 2009, Zandi Says – Bloomberg
10/27/2008 UCLA sees O.C. housing’s bottom by next summer – OC Register
8/27/2009 Cramer Calls the Housing Bottom (Q3 2009) – CNBC
8/17/2008 Greenspan sees housing bottom, criticizes bailout – Fosters
7/24/2008 The Media Are Missing the Housing Bottom – National Review (Larry Kudlow called this one)
2/21/2008 No housing bottom until ’10: CP Morgan – Reuters
1/15/2008 Mortgage bankers expect housing market to bottom out in third quarter – BizTimes
1/8/2008 Stable Existing-Home Sales Expected in Early 2008, then Gradual Rise – National Association of Realtors
12/19/2007 Is Collapse of Home Prices About To Hit the Bottom? – The Sun New York
12/1/2007 Will Home Prices Hit Bottom in 2008? Yes, but . . . – Kiplinger (again? of course!)
11/26/2007 Deere Sees a Housing Bottom in 2008 – Seeking Alpha
9/14/2007 Hovnanian Chief Says Housing Bottom Is `Very Near – Bloomberg
8/16/2007 Contradictory News Suggests Housing Bottom Could Be In View – Realty Times
5/25/2007 Housing Market Nears Bottom – Forbes
4/20/2007 Housing Bottom Callers – Calculated Risk (Hank Paulson here)
4/17/2007 IMF believes US housing market may bottom out – Reuters
2/17/2007 NAR Says Existing Home Sales Have Hit Bottom – Realty Times
2/8/2007 Housing still on down slope Economists say no recovery until midyear; prices face record fall – Market Watch
12/21/2006 Housing ‘close to bottom,’ realtor-group economist says – Market Watch
12/5/2006 Home builders see bottom of housing slump – CNN Money
11/15/2006 Housing slide may deepen; New forecast sees bottom in 2008 – Boston Globe
10/6/2006 Greenspan Says `Worst’ May Be Past in U.S. Housing – Bloomberg

When will we see the real bottom? It could be soon, one of the few people I trust to have an unbiased opinion (and someone who has attempted to track all the prior claims for a bottom) explains there are actually two housing bottoms to look for and they may be closer than you think. We’ll see if he’s right, or if he gets added to this list.

If you have more articles you want listed claiming a housing bottom, put them in the comments. While there are many stories that talk about the bottom, for the sake of this list just look for headlines.

Image: Nick Bastian Tempe, AZ

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Sorry, But When Did Super Bowl Commericals Get This Big?

The Weakonomist — Fri, 03 Feb 2012 20:21:30 +0000

Cars are a huge part of our economy, and automakers spare little expense in terms of advertising. They notoriously go all out for the Super Bowl too and I enjoy the commercials. Volkswagen had a great Star Wars commercial last year, easily one of the most memorable.

And for some reason I already know they’re doing another Star Wars commercial this year. In fact, I know just about everything that’s going to be shown at this year’s Super Bowl because every company advertising has already “leaked” their commercials.

Of course it isn’t a leak, they do it on purpose. And why wouldn’t they? People love the commercials so much that they’re willing to watch them online. Posting the videos to YouTube and having every blog out there show it is tons of free advertising.

But are we really so sad that we watch commercials before they’re supposed to air? I for one have refused to watch a single commercial because I intend to enjoy them during the Super Bowl on Sunday. Join me, don’t be the kind of person that watches commercials before they’re supposed to be on TV.

They will be good, and they will be funny. And if you’re sitting there watching the commercials with all your friends and you already know what happens you’re really going to be that guy we all hate.

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A Warm Thanks To Apple

The Weakonomist — Mon, 30 Jan 2012 15:45:33 +0000

Not much bandwidth is wasted on this blog cheer-leading companies. Especially companies that already have a track record of creating incredible products and generating enormous profits.

Please don’t consider me an Apple fanboy. This post is being written on a Samsung/Windows machine using a Google document and by the time you’re reading this I’ll be in a world of Windows XP and Blackberry. A world I prefer. But between The Sheconomist and me, we’ve owned 4 iPods, 4 iPhones, and a Macbook Pro. These are all Apple products and very rarely have we ever had an issue with them.

Which brings me to my issue. The Sheconomist got me a brand new iPod Nano for Christmas, a wondrous and highly desired surprise. This iPod is touted for fitness types with a built in tool for tracking your jogging and is light enough to not be felt. It even has a convenient clip. Ahh the clip.

There is a problem with the clip. It’s not a manufacturing one but one of design. It doesn’t grip things easily. And just barely a month after I received this prized possession, the clip slipped off my shorts during a routine walk and the following happened.

Tragedy!

An accident, some asphalt, and a heartbroken Weakonomist. Knowing how expensive consumer electronics are I’ve always bought protective cases. My original iPod Nano doesn’t have a scratch on it. Because this device was so small and had a clip, I never bothered to acquire a case for it. As a matter of fact, my local Apple store only sold one case that protected it, and the case was an ugly thing with a carabiner attached to it. Apple appeared to be sending the message this device was durable enough for its intended purpose.

This was the cusp of my plea to my local Apple store for help. Apple is smart, they looked up my account and can see all my activity. This essentially allows them to determine if I’m profitable enough to help out. My service history with them has been zilch, other than a replacement iPhone that was defective. My relationship is profitable to them. And so, much to my delight, they replaced my Nano free of charge!

That last sentence alone sets apart Apple from most other companies I’ve ever had a relationship with. Apple does this for two reasons. First, they’re willing to eat some profit on the hope that I will reward them in the future with more business, which I will. Second, they’re able to price their goods in such a way they can build in the cost of such consumer friendly behavior.

What further sets them apart is their empowerment of the workforce on the ground to make these decisions. Surely a tool probably helps them, but the final decision is likely theirs. I didn’t have to ask for a manager, I just presented my case.

Why aren’t more companies operating this way? Surely Apple isn’t just a diamond in the rough. In some ways Apple is. For too long companies have been focused on short term results. It’s easy to make a chart showing how great margins will be this quarter if we just cut a couple of corners on outstanding customer service. And when profits start to suffer, going the extra mile for the customer is the first thing to go.

For the last decade or so Apple has been able to avoid short-term thinking. Many times the pressure to thin short-term comes from Wall Street, and the late Steve Jobs wasn’t a fan of “the analysts”. Should Jobs’s successor have a similar disdain for the street I would expect such high levels of service to continue. So thank you Apple. I am impressed.

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What Created The Rise Of Finance?

The Weakonomist — Fri, 27 Jan 2012 14:43:59 +0000

Does this statement disturb you?

In 1950, finance and insurance in the United States accounted for 2.8% of GDP, according to US Department of Commerce estimates. By 1960, that share had grown to 3.8% of GDP, and reached 6% of GDP in 1990. Today, it is 8.4% of GDP, and it is not shrinking. The Wall Street Journal’s Justin Lahart reports that the 2010 share was higher than the previous peak share in 2006.

It’s certainly not surprising is it? It makes perfect sense considering the rise of banking and Wall Street over the last generation or so. This blog has said before that this rise also lead to greater levels of compensation, and thus drew talent that may have otherwise focused on other areas (like science or education). This probably further grew the industry’s share of the economy. And when people read these kinds of comments about the rise of Wall Street it is worrisome that they always think this is a bad thing.

Consider the following. Your grandparents likely retired on a pension and collected social security and hardly ever needed to save for retirement. In 1950 the average person lived to be 68 years old. Retirement didn’t last very long, if at all. In 2009, we were living to be 78, and we all know this number is only going to rise with time. That’s an extra decade of living expenses. How is that being paid for? Pensions have had to invest considerably more money in order to deal with the burden of people living longer. Reforms here and there occasionally soften the blow for them, but the burden is still much higher than it used to be. Pensions now invest in riskier securities, and get better returns too. Wall Street’s role was to facilitate the transactions that enabled these pensions to survive just a little bit longer and pay the retirements of all these people. And to say nothing of the rising insurance needs of the aging population. Those premiums are invested too. When a new demand is born, an industry grows.

When you consider that baby boomers are just now retiring the rise of Wall Street makes even more sense. These were the first group of people that may have to sustain their retirement with personal savings and investments. 401(k)s became very popular in the 1980s and of course still are; IRAs too. Now people were taking their retirement into their own hands. This gave rise to the mutual fund industry and now you have a bulging population entering the prime of their careers and saving for their own retirement. Again, an industry grew to service this demand.

Just as everyone was taking responsibility for their own retirements, the internet was about to start growing too. With the internet, people were able to take their own financial management to a new level. Soon, people would be able to buy and sell stocks within a few minutes, and then seconds through online brokerages. Once again, an industry rose to meet this demand.

Further still, consider the globalization that has occurred. More so than ever before, we are engaging in huge levels of trade, moving trillions of dollars to Moscow, Beijing, Tokyo, London, Singapore, Dubai, and Rio. This movement happens at the speed of light and the infrastructure to enable it was built and managed by the finance industry.

The rise of Wall Street shouldn’t be concerning at all. Given the changing demographics and economy, it makes perfect sense. And what of the greed and the financial crisis? Unfortunately, finance is not a stable industry. The financial crisis had a lot of causes, and Wall Street was certainly part of that. Together with a poor incentive structure, they again rose to meet a demand. This is a case of the industry getting ahead of itself.

No one should be surprised nor concerned that the industry continues to be a large part of the economy. Our lives are more financially complicated. The financial crisis is a perfect example of the growing pains. It’s impossible for this industry to grow and meet demand without making mistakes. Everyone made mistakes. I’m no apologist for the criminal, greedy, and immoral acts in any industry. But the rise of finance as a share of GDP is merely a reactionary metric of the way the world has changed.

Image: Jan Tik

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Healthcare Spending Finally Getting Under Control?

The Weakonomist — Thu, 19 Jan 2012 15:01:51 +0000

Obamacare hasn’t gotten much attention recently. And with Mitt Romney the likely frontrunner as GOP opposition, I doubt his strategists will be attacking the president on the controversial legislation too much.

But it’s certainly going to be a point of conversation and will once again grab some headlines leading up to the election which is now a short (some would say) 10 months away.

Almost everyone has an opinion on healthcare in the US. Some believe it’s a human right, others think costs are out of control due to liability, and still others note a big problem being poor record keeping. Almost everyone has a problem with the current system, and almost everyone agrees that the costs are out of control.

As the chart above points out, healthcare spending has been a runaway problem. Keep in mind, this isn’t a chart of increased healthcare spending over time. It’s a chart of how much of GDP is taken up by healthcare spending. It’s almost insane that close to $1 in $5 spent in the US is on healthcare.

But there is good news. Spending is leveling off. From 2009 and 2010, healthcare spending increased only 4%, the slowest pace in 50 years. As a result, the amount of GDP taken up by healthcare spending stayed flat just under 18%. Said another way, healthcare spending might be getting under control. Are digitized records and hospital mergers finally paying off? Are medical schools coming up with cheaper procedures? Sadly, no.

What is happening is people are cutting back on healthcare just like they have everything else since the recession struck. That wart on your finger isn’t hurting anyone, why pay someone to freeze it off? Coughing up blood is a part of my morning ritual, no reason to go to the hospital right? So maybe the second example is an exaggeration, but the first isn’t. People are cutting back on tests and procedures. And doctors are prescribing cheaper medications. It wouldn’t be surprising if hospitals are smarting up as well. If customers may not be able to pay for some needless tests, they might pass on them. Much like changing your oil every 3000 miles, there’s probably some urban legend type procedures that doctors order despite not necessarily being appropriate.

Though digitizing records, new pharmaceutical laws, and other innovations may help streamline the system, the real way to reduce costs is to reduce demand. Hospitals have demand generation procedures to drive business, and patients have demand for services. Both seem to be cutting back a bit. Hopefully this is a trend that can improve the lives of everyone.

Whether it’s a trend or not though, there’s still a long way to go. 5% of the population account for half of all healthcare costs and baby boomers have yet to start becoming a burden on the system. Getting healthcare costs under control will benefit everyone. Even if you don’t have insurance and don’t go to the doctor, you still pay taxes that pays for other people to go to the doctor. Hopefully this is a trend and maybe we’ll see a reversal of rising costs while still increasing quality of life.

Data: Centers for Medicare & Medicaid Services

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In The Future, We Won’t Own Anything

The Weakonomist — Wed, 18 Jan 2012 14:31:44 +0000

Do you remember when you used go to the store and buy music? Then you’d go home, put it in your player and listen to it? Then you would own that music forever or until you lost it moving but it doesn’t matter because you weren’t sure what you were thinking when you bought it in the first place?

You owned that cassette or CD or record and no one could take it away from you. These days, when you want music you might get it from a subscription service. Services exist where you pay $x per month and are allowed to download as much music as you want. The catch is when you stop paying the monthly fee you might lose the music. But even if you buy the music from Amazon’s MP3 store or iTunes, you’re really at the command of the service.

Those “stores” could shut down at any time. Or if they went out of business and could no longer support your library, you might not be able to access the music anymore if you didn’t store it locally. Essentially, you’re kind of renting it.

And with services like Netflix giving you access to movies and TV, you aren’t buying movies much anymore either. Heck, even with the housing bust people are reluctant to buy residences. We’re looking at a future of a lot more rentals. And it’s brilliant.

The children being born today will easily live to see the next century. Though few people will say such things, I think the increased lifespan has lead people to be less commital than their parents were. Divorce rates are higher, we get new phones every two years, and we are as loyal to our employers as they are to us these days. Back when a career was 20 years spending it all with one employer seemed like a good idea, and the employer rewarded it. Now careers can last 40 years and there’s little reward for loyalty.

A future that let’s us rent more and own less is supportive of this change as well. We can pay monthly rates and own things for only as long as we intend to use them. I believe a new service called ybuy believes that as well. For $25 a month you can get all the coolest gadgets. You can try them out and should you decide to buy them the $25 goes towards the purchase. It lets you rent, and you don’t have to commit. They have stuff like espresso machines, iPads, and even golf clubs.

I don’t normally talk about specific companies and this is certainly not an endorsement of ybuy, but new businesses like this that capture our issues with commitment interest me immeasurably. I only expect to see this trend continue, especially over the next decade as we continue to sort out our issues with committing large sums of money to anything.

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Kiplinger, Mutual Funds, and Monkeys

The Weakonomist — Tue, 17 Jan 2012 14:30:17 +0000

I’d almost forgotten about how much I loathe the personal finance magazine and site Kiplingers (see here and here). Should you not be familiar with the publication, Kiplingers publishes many articles which I find to be lazy and in some cases, irresponsible. A lot of people subscribe to the site and magazine and probably think the advice is good and properly vetted.

But the problem is that couldn’t be further from the truth. The Editor in Chief is a career journalist who was born into money. The Executive Editor is also a career journalist. That doesn’t matter too much, they surely know what good content is. But to say they know what responsible content is, especially in the space of personal finance, is an aberration.

The Kiplinger 25 is a list of actively managed mutual funds published by the magazine every year. For all intents and purposes, it’s their recommendation of the funds you should be invested in. The Executive Editor published an article at the beginning of the year summarizing the performance of their list in 2011. In general, he seemed quite pleased with the performance of the mutual funds they picked. The table below summarizes the performance.

Nothing to sneeze at, nothing to brag about. But there’s one glaring omission from this table. And I’d expect you to perhaps not notice it, but Kiplinger should.

The magazine publishes this list each year in an issue that doesn’t arrive until the end of March. So 2011 performance matters not since you’re already 3 months off. For the website’s sake, I’ve created a chart showing the returns of these funds against a simple S&P 500 index from April to 2011 last year.

Hmmm, I wonder why they didn’t track performance from the time of publication? Certainly doesn’t make them look as good. And to say nothing of the fact that the simple S&P 500 index fund has about 20% of the fees as Kiplinger’s worst performer. If you want crappy performance and lots of fees, the Kip 25 is the place to go.

Kiplinger could admit they should have measured performance from publication date, but that doesn’t account for the performance of funds that were added or subtracted from the list last year. So let’s look at them.

One was added: BBTEX. As you can see, it handily kicked the butt of a simple index fund. I can’t knock it, even after adjusting for risk and fees, it beats the standard low maintenance benchmark. There are perhaps critiques worth investigating, but I’ll let Kip have a win here.

What about the removed funds? There were two: SLASX and FAIRX. I’ll save you the math, but they just removed two funds that were under performing already. But since you would have bought them from the prior year list you’d already have lost some of the money. The simple index fund outperformed SLASX by 1% and FAIRX by 7% from 2011 before Kiplinger told you to dump them. This doesn’t take away from the fact that these funds blew for the whole year and you would have been right to sell, but it makes them look less omniscient.

If you want, ignore everything before this paragraph.

And for the sake of argument let’s just throw out everything I said and make this as easy as possible to understand. Even by the magazine’s own flawed metrics only 6 out of 13 funds outperformed my simple index fund for the full year (VFINX was up 0.2%). Using the estimated time of publication that number drops to 4 out of 13. Statistically speaking, a monkey should be able to do better than that.

But no one should have to do that. The dirty truth about investing in the 21st century is quite simple. And if you’re a reader of independent personal finance blogs, you already know it. Don’t buy actively managed mutual funds. Track records don’t matter, they were in the past. Active funds are expensive for you and your money. Index funds are dirt cheap, and don’t try to do anything but track an index. If you want diversification, you should be looking for indexes in different classes, but specific funds. But you can’t beat the market year over year. Neither can Kilinger’s list.

Finally, the last time I wrote an article against Kiplinger one of their editors called me out for being a short term oriented investor. Full disclosure: I own three mutual funds (VITPX, VFINX, and VFWIX). I own one stock, about $100 in a former employer that I bought on a whim and am too lazy to sell. I have long term horizons on my investments (with >99% held in retirement accounts) and have never changed fund holdings unless something I own is no longer offered.

If Kiplinger thinks I have a short term horizon when tracking them, it’s only because they change their holdings every year and I just don’t have the time to track their entire portfolio of recommendations through time. Happy to do it, but no one is going to pay me to. But I sleep easy knowing I don’t get paid to give terrible advice and hide it in well-edited content.

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Mitt Romney: The Job Creator

The Weakonomist — Fri, 13 Jan 2012 15:02:58 +0000

Let’s be honest with ourselves for a second and acknowledge that for all intents and purposes, Mitt Romney is the Republican nominee. As a passive observer of campaigns so far, he seems to spend more time attacking Obama than defending himself against his GOP rivals. But that hasn’t stopped them from continuing to attack him.

Unfortunately for folks like Newt Gingrich, Mitt doesn’t have many real legitimate points at which he can be attacked. Much of the focus has been on his past at Bain Capital. By now we should all be familiar with the story. He ran a company called Bain Capital that bought other companies and then later sold them for (hopefully) a huge profit. Mitt made hundreds of millions running Bain and continues to collect income from it even today. What actually happened to the companies Bain bought under Mitt’s leadership is a point of contention between Romney and his rivals.

The media have not been helping the matter as it’s pretty clear they don’t understand how all this works. Here’s what people like Newt or Perry would say: Mitt raided down-home good American companies, laid off down-home good American people, sent jobs overseas, and then sold the companies for a huge profit. He got rich at the expense of others (Not to digress but it’s freaking hilarious that Republicans are bashing Romney for being a better capitalist than they are).

So the story goes. Romney would tell it differently, his claim is that he created 100k jobs. It’s an impossible number to verify, but it really doesn’t matter. I actually don’t care at all if he created jobs or removed them, because whatever number you come up with can be contested. What matters is the bad rep private equity has been getting.

Here’s the thing about what Romney and Bain Capital did. They came in and bought companies no one else really wanted. Companies owned by people who didn’t want to own them anymore or perhaps didn’t even have the money to stay up and running. Bain bought Domino’s when the founder wanted to retire. He wasn’t forced to sell to them, he chose to.

Bain Capital got into this business because the Bain consulting company had been very successful at consulting. They thought, “if we’re so good at helping other companies fix problems, why don’t we just buy some companies and fix them ourselves?” That’s what Mitt did. Yes he likely was responsible for a number of layoffs he did what every other executive does. They run the company the way they best see fit. Sometimes layoffs are necessary for survival. And if 500 jobs need to be outsourced or eliminated so that 7000 can survive, so be it.

The key here is that Romney wasn’t a job creator, he was perhaps a job preserver. He helped keep companies moving. If someone wanted to sell their company he bought it. He would do what he thought was best to improve it, just as any owner would. In some cases he, along with Bain, saved companies and jobs. In others, they eliminated jobs.

That is the world of private equity. I no more endorse Mitt than any other candidate, but it’s a flat out joke for Romney to be attacked for his past, especially by Republicans. He’s a capitalist through and through. And if you own mutual funds of any kind it is very likely you own companies that do the same thing. You likely own companies that employ thousands of people that wouldn’t exist without Bain too.

Romney enriched himself by making smart investments and employing his knowledge to run companies. Jobs are a byproduct of business, and they come and go like tides. They are never the point, in any way.

Read more: Private Equity, Venture Capital, and the difference.

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Cosa Nostra è la Mia Banca

The Weakonomist — Thu, 12 Jan 2012 14:49:18 +0000

Times are rough in a number of European countries. Much like in 2008 here in the US, credit markets are tightening across the pond. But, whereas things froze overnight here, there things are just tight; like your pants usually are in January. And like the US the banks are cutting back on lending and only extending loans to the most credit-worthy customers. The difference between the crises is the banks are in danger from owning too much European debt, and in the US it was too much bad housing debt.

And where does that leave all the people who need loans and can’t get them? In Italy at least, they have the Mafia. Mafia is a generic term for many organized crime syndicates around the world, but Cosa Nostra refers to the families that are still very prevalent in the Italian economy. Their operations are sizable, enough so that if the crime were shut down completely over night the economy would likely fall into a depression. And in the absence of lending from traditional banks they’re breaking into new territory.

And it’s not like loan sharks either handing out a few bills in back alleys either. They’ve gotten a lot more sophisticated. Considering how intertwined Italy is with the Mafia it stands to reason they’ve got people in law, government, and banking. They have the resources to do actual due diligence on their loans. They’re doing real banking. I doubt they take deposits, but I’m sure they hold collateral.

Putting aside the fact they are a criminal organization capable of doing terrible things to delinquent borrowers, the Cosa Nostra are likely providing a valuable resources to struggling Italians. In a time of crisis, they’ve got the money, and are willing to take the risk, on lending to otherwise risky borrowers. If no one else is willing to risk their funds, these guys apparently will.

I can imagine some economists are dripping at the thought of learning more about what is going on in the country. Mob banking is likely the best example of a free market. Admittedly, I’m curious too. What kinds of interest rates to they charge? Do they have different types of loans? What percentage of the loan portfolio is 90 days late (a standard measure of a borrower about to go under)? How cruel are they actually about collection? Even if they are operating outside of the law, if they bang up people too much for not paying, no one will want to borrow from them. Free market indeed.

What will be the most interesting observation over the next few years will be to see how big of a role the Cosa Nostra play in Italian banking and the economy altogether. If things continue to get worse, will they step up their efforts further? Have the mob already effectively bailed out the country? If the economy stabilizes will their lending efforts decline or will they step up efforts in light of competition from legitimate banks?

Read: Mafia now “Italy’s No.1 bank” as crisis bites-report (Reuters)

Photo: TaxBrackets via Flickr

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This Is What Women Burned Bras For

The Weakonomist — Tue, 10 Jan 2012 14:55:30 +0000

Less than 100 years ago, an American woman might not have had the right to vote depending on where she lived. Various states had granted some rights but it wasn’t consistent by a long shot. The 19th Amendment fixed that, but the right to vote was really just one milestone towards equality. The journey continued, and bras burned.

It’s pretty clear that women today have achieved equality. They have the same opportunities as men and were very close to getting their first president a few years ago (I’m sure it’s coming soon ladies). They can make as much money as men (despite one of my favorite shows joking that the proper way to treat a lady is to pay her 74% of what men make). Women do still make less than men, but this is partially due to women working in lower income jobs and more often than not, sacrificing career for family.

Women do have the same opportunities as men today though. They’re leading Fortune 500 companies, ruling nations, and wearing pants. But equality wasn’t really what women were fighting for. No, they wanted something better. And with our 21st century society and a little help from the Great Recession they finally got what they wanted:

Stay-at-home dads

That’s right. Women have accelerated a trend of becoming the primary breadwinners. The recession laid off 3 times as many men than women. Women now make up 23% of all wives and in women under 30 are out-earning men in most of the major cities. This is the real victory. It’s not enough to have the right to vote, or for the laws to state you can’t discriminate. Having the men stay at home with their children represents two victories that were earned.

The first one is that women are getting to the tops of organizations. They are leading teams and getting into positions that can only be earned by merit and performance. They are making more than men and it’s because of hard work; equal rights laws have nothing to do with it. As I said before, it’s not enough to have laws say you are equal. The only way to truly be equal is to show that at least sometimes you’re better.

The second victory is over the spouse. Not only are women earning more and some instances, they’re convincing a growing number of men to stay home and raise the children. That’s a massive cultural shift that’s barely a generation old, if that. Of course many men these days are fine with this, but that still represents a win for women.

This is a progression we all expected in due time. That time has now come. The numbers still show men being most of the breadwinners, but the number is slowly changing. Due to gender differences I can’t expect women to become the dominate earner of most households in my lifetime. But the victory has already occurred. Women truly do have the option to do what they want, and it’s in their control.

Read: Behind Every Great Woman (BusinessWeek)

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