UNSAFE IMPORTS FROM CHINA

It can seem like a hassle when you learn that a product you recently bought has been recalled. Will you go through the hassle of returning it?

It depends, right? If the product was inexpensive, you may not.

Take flip-flops, for instance.

I received an email from Asia that contained these photos of injuries suffered by a woman who purchased flip-flops from Wal-Mart.

I googled it and was led from this site to this one. The latter belongs to the woman whose feet are apparently in the photos.

Quoting from her site's homepage:

For those of you who are not familiar with this story, I will sum it up for you.

I bought a pair of cheap flip flops from Wal-Mart. I got what appears to be chemical burns from them. I took pictures.

I was blown off by Wal-Mart, they actually told me to call China. I put up these pages because I was feeling a bit betrayed after their attempted dismissal and to my surprise, I have gotten several emails telling me that the sender is experiencing or has experienced the same thing.

Now it is September and the shoes are no longer being sold, but I can not seem to find much out yet, they are being very quite (sic) on the issue. They have also said that they only have 9 reports, actually, they said that in July, and they said the same thing in August, and they said the very same thing in Sept.

I am wondering what is going on here ... read my story and you will see what I mean.

Her account of the reception she received after she brought it to Wal-Mart's attention screams of bad customer service. Her story reinforced some of my emotional feelings about Wal-Mart. On the one hand, it's made many products more affordable. On the other, it's success has decimated many independent stores.

In this instance, what's galling is the indifferent attitude exhibited by the front line manager who dealt with her.

This is the letter she posted on her website that apparently came from Wal-Mart's vendor's representative.

MYOPIC OR NOT?

Walgreens considering slowing pace of new stores



Nov. 14, 2007

Walgreens Co., one of America's largest drugstore chains, is considering slowing the pace of store openings. This is a move away from one of its key sales drivers, but it's a decision that its chief executive said would help earnings.
Shares of the company rose 3 percent Wednesday morning.

Could this turn out to be a classic example of corporate short-sightedness; of paying more attention to the near-term rather than the long-term? If so, the stock market appears to have the same myopia.

"We have discussed that within our company," Jeffrey Rein, chairman and chief executive, said of slowing the store opening pace during an investor conference on Wednesday. "We have not made any decision one way or another." Rein said the idea of slowing store openings had good and bad points.

On the plus side, it would reduce the need to develop managers. Rein noted that in 2008 the company would need about 875 new managers due to the new stores, promotions and retirements. The company currently plans to open 550 new stores in the fiscal year ending Aug. 31, 2008, a spokesman said.

On the downside, if the company slows its store opening pace, it risks losing some of the best locations to competitors like Rite Aid Corp., as well as to companies outside the drugstore business, such as banks that are adding branches.

Walgreens operated 6,059 stores as of Oct. 31. The company has expanded at a rate of about 8 percent annually on a square-footage basis for the past several years, a spokesman said. "In the past, organic store growth has been an important part of Walgreens' strategy."

Rein said the company could reduce some of the items it sells to make space for other offerings that could lift sales. "There is clearly an opportunity to wring more sales out of the store base. A lot of it would depend on execution."

Walgreens, like rival CVS Caremark Corp., has expanded aggressively in recent years and has relied on convenient locations to spur sales of nonprescription items such as milk and bread, sometimes commanding a higher price in return for that convenience.

Rein noted that McDonald's Corp. Chief Executive James Skinner is a board member and that McDonald's in recent years had drastically slowed its own expansion to focus on store operations. "If we were to cut back, we would definitely help earnings," Rein said.

Walgreens shares rose $1 to $40.10 on the New York Stock Exchange at midday, after trading as high as $40.35 earlier in the session. For the year, the stock is down 12 percent, compared with a 26.6 percent increase for top rival CVS Caremark Corp.

Notice the comparison between Walgreens and CVS. Could this be what Walgreen's board is concerned about? Is it the pressure to boost the share price?

WHAT'S BEEN THE SECRET OF AMERICA'S ECONOMIC SUCCESS?

What are the big, basic things that make economies grow?

ECONOMISTS AND POLITICIANS argue about degree and detail—and they surely do—but generally speaking:

• Encouraging competition

• Keeping taxes low, and

• A tight monetary policy

are the three drivers of economic growth.

HERE'S HOW THOSE POLICIES worked for America these past 25 years.

Encouraging competition.

When companies fiercely compete with one another, the result can be lower prices and more innovative products and services. Competition forces companies to constantly innovate—whether through new technology or business models or management processes—to keep ahead of rivals. And key to competition is keeping government regulation as light as possible while also keeping products safe and preventing harmful monopolies.

Starting in the 70s, many American industries were deregulated, including airlines, trucking, railroads, banking, electricity, and communications. This broke down concentrations of market power and unleashed innovation.

Deregulation and increased competition through global trade in many ways have created a more vibrant economy. (London, Paul. The Competition Solution. 2005.)

Established financial institutions such as big New York banks, the New York Stock Exchange, and insurance companies had to compete with junk bond financing, the Nasdaq stock market, and bigger regional banks. Southwest led the challenge to United and American Airlines. And, of course, Wal-Mart challenged locally powerful department and grocery stores.

Deregulation creates flexibility and flexibility clears the way for innovation.

Keeping taxes low.

While the Reagan tax cuts of the early 80s—dropping the top rate from 70 percent to 28 percent and indexing tax brackets for inflation—get much of the attention by economic historians, there was also the capital gains tax cut of 1978 that Jimmy Carter signed reluctantly and the 1997 capital gains tax cut signed by Bill Clinton.

Lowering tax rates does the opposite of what high taxes do, namely, discourage job formation, discourage savings and investment, and encourage tax avoidance and evasion.

As Clinton's Council of Economic Advisors stated in 1994, "It is undeniable that the sharp reduction in taxes in the 80s was a strong impetus to growth."

Tax increases appear to cause a very large, sustained, and highly significant negative impact on economic output. Tax cuts, on the other hand, cause very large and persistent positive effects on economic output. (Romer, David and Christina. White Paper. Univ. of California - Berkeley. 2007.)

All things being equal, lower taxes stimulate economic growth while higher taxes depress it.

A tight monetary policy.

Let's start with the opposite, a loose monetary policy. A loose monetary policy flirts with the prospect of inflation and the dangers it brings. Inflation is bad because it devalues the currency and causes prices to rise. Rising prices cut purchasing power and distort investment decisions. Individuals and businesses look for inflation shelters instead of investing capital where it can be most efficiently allocated.

Inflation seemed out of control heading into the 1980s, but deregulation and tighter monetary policy under Fed Reserve chairmen Paul Volcker and Alan Greenspan helped inflation fall from double-digit rates to today's two to three percent.

Low inflation brings price stability and the two are seen by many economists as essential for long-term growth.

By preventing inflation, a tight monetary policy avoids inflationary spikes that usually leads to recessions. A recession is the natural consequence of an economy wracked by inflation. It's as if inflation sickened the economy and the medicine is recession.

To repeat, a sound monetary policy keeps inflation in check and avoids the danger of a recession.

SUMMARY

There you have it! The big three secrets to America's economic prosperity for the past 25 years are:

• Deregulation that encouraged competition that fostered innovation that made American industry more productive,

• Low taxes that encouraged beneficial investment decisions back into the economy, and

• A tight monetary policy that kept inflation under control and avoided a recession that would have contracted the economy.

REFERENCE

• BusinessWeek. "What's Been the Secret of America's Economic Success?" Internet. November 2007

I SAW COMET HOLMES TONIGHT!

Used a pair of binoculars. It was high up in the sky. Saw it despite city lights.


IS THAT A BIG DEAL?

If it were not for another comet...

My kids will have a good story to tell their kids and their kids to their kids and so on and so forth.

If it were not for Halley's Comet that last visited us in 1986, I would not have been able to date my ex-. And if we had not dated, my kids would not have been born.

So in 2062, when Halley's Comet returns, when my kids will be 72, 70, and 65, they can tell their kids to look up in the sky and thank God for Halley's Comet.

NOW BACK TO COMET HOLMES.

Amateur astronomers the world over have been stunned and amazed by the weirdest new object to appear in the sky in memory. And it's one of the brightest, too — it's easy to spot with your eyes alone if you know where to look.

On October 24th, Comet Holmes brightened unexpectedly and dramatically — by nearly a million times — virtually overnight.

For no apparent reason, the comet erupted from a very dim magnitude 17 to about magnitude 2½. Within a day its star-like nucleus had expanded into a perfectly round, bright little disk visible in binoculars and telescopes.

It looked like no comet ever seen.

THE COMPUTER IN SPANISH

This is humor.

A college teacher of Spanish explained to her class that in Spanish, unlike English, nouns are designated as either masculine or feminine.

• "House" for instance, is feminine: "la casa."
• "Pencil," however, is masculine: "el lapiz."

A student then asked, "What gender is 'computer'?" Instead of giving the answer, the teacher split the class into two groups, men and women, and asked them to decide for themselves whether "computer" should be a masculine or a feminine noun. Each group was also asked to give reasons for its answer. The men's group decided that "computer" had to be feminine in gender ("la computadora" ) because:

1. No one but their creator understands their internal logic;
2. The native language they use to communicate with other computers is incomprehensible to everyone else;
3. Even the smallest mistakes are stored in long term memory for possible later retrieval; and
4. As soon as you make a commitment to one, you find yourself spending half your paycheck on accessories for it.

The women's group, however, concluded that computers should be masculine (el computador") because:

1. In order to do anything with them, you have to turn them on;
2. They have a lot of data but still can't think for themselves;
3. They are supposed to help you solve problems, but half the time they ARE the problem; and
4. As soon as you commit to one, you realize that if you had waited a little longer, you could have gotten a better model

Incidentally it is feminine, "la computadora." The men were right!