This Opinion Journal piece discusses the likely outcome of an Electromagnetic Pulse (EMP) attack on the United States, which Department Department officials have been being discussing just below the public surface for the past few years. Not a pretty prospect.
The Expos came back to score two runs with two outs in the 12th to beat the Stros 6-5 for their sixth win in a row, three of which have come over the hapless Stros.
Chad Harville (does he not have any minor league options left or what?) blew his second straight save opportunity and took the loss for the Stros. After yaks by Carlos Beltran, Jeff Kent, and Morgan Ensberg had tied the game in the ninth and then given the Stros a 5-4 lead in the 12th, Harville pitched the 12th and actually got the first two outs. He then proceeded to give up a tater, two walks, and the game winning single. Why is this guy still on the major league roster?
Roger Clemens was not sharp, but he battled through six innings and kept his club in the game until the outburst in the ninth. Five other Stros relievers before Harville looked good. Again, why is this guy still on the major league roster?
Stros fans get to see former phenom Carlos Hernandez today get his first start in two years on his road back from shoulder surgery. Oh yeah, did I remember to ask why Harville is still pitching for the major league club?
Commenting on the flap over the Google owners’ Playboy interview that may delay the Google IPO that has already been postponed once, Professor Ribstein makes this common sense observation:
Can the Google boys be trusted with investors’ money if they think it’s more important to talk to Playboy than to protect their multi-billion-dollar public offering from regulators?
Continued lackluster corporate spending on technology is seperating the strong from the weak quickly in the high-tech industry.
That was certainly apparent yesterday as Dell Inc. and International Business Machines Corp. detailed continued growth and new hiring, while Hewlett-Packard Co. stumbled badly and fired three top executives.
The gloomy outlook has dashed hope among tech executives and investors that the sector will soon return to the supercharged growth of the late 1990s. Pummeled again yesterday, the tech-heavy Nasdaq Composite Index is down 12.5% for the year, and 19% from its peak in late January.
Curiously, demand for high-tech goods remains good. World-wide shipments of personal computers rose 15.5% in the second quarter, and Commerce Department reports indicate that U.S. companies’ spending on hardware and software increased 15% in the second quarter from a year ago.
H-P’s troubles were rooted in its unit that makes computer servers and storage devices for corporate customers, which suffered from a botched software installation and aggressive discounting. The unit posted an operating loss of $208 million on revenue of $3.4 billion, contributing to a surprising earnings shortfall.
Chief Executive Carly Fiorina called the blunders “unacceptable” and promised that the unit would return to profitability in the current quarter. In a terse memo issued a few hours after the disappointing results, Ms. Fiorina announced the departures of three executives, including Peter Blackmore, head of the H-P’s business sales division, who used to work for Houston-based Compaq before its merger with H-P.
Of course, now almost two and a half years after the questionable H-P – Compaq merger that Ms. Fiorina heavily promoted, could it also be said that that “blunder” is “unacceptable” and that Ms. Fiorina should be shown the door? Stay tuned on that one.
H-P is increasingly caught in a squeeze between Dell’s low prices for basic corporate computers and IBM’s increasingly innovative high-performance computers. Both rivals have been gaining market share against H-P since its acquisition of Compaq in 2002. As a result, H-P has been shifting toward lower-profit businesses. H-P’s personal-computer unit, which has relatively low gross margins is growing faster than its servers and storage business, which typically has much higher gross margins.
My sense is that this is not going to end well for Ms. Fiorina.
The Airline Pilots’ Association‘s investment bankers at US Airways Group Inc. warned yesterday that the carrier could fail in the near future and is highly likely to file for chapter 11 bankruptcy protection by mid-September without substantial cost cuts.
Such a bankruptcy filing would be known as a “chapter 22” because US Air is already operating under a structure adopted under a reorganization plan approved in a previous chapter 11 case in 2002-03.
Arlington, Va.-based US Airways said it concurs with the report’s conclusion that it is in the best interest of the company and its labor unions to reach consensual agreements quickly that will reduce expenses and help it implement its turnaround plan.
Although US Air is not far from its previous chapter 11 reorganization, the company has not been profitable because the domestic flight market is now controlled by discount airlines that have low costs and low fares. Add to that the recent spike in fuel prices and, before you know it, US Air posted a net loss of $143 million during the first part of its fiscal year.
Frankly, I do not understand how US Air can avoid going into the tank even with union concessions. It has a $130 million pension-plan contribution due on Sept. 15 that will consume liquidity if it is made. Its regional-jet financing arrangements with two manufacturers and General Electric Co. mature on Sept. 30 in the absence of a turnaround, and it is on the verge of defaulting on Sept. 30 on the terms of a federally guaranteed loan that provided the company with a portion of its exit financing out of Chapter 11 in 2003.
As Professor Ribstein has insightfully noted on several occasions, the market needs to be allowed to put at least one of these financially-strapped airlines out of its misery.
Houston-based National Oilwell Inc. announced plans to acquire Houston-based Varco International Inc. in a stock deal valued at about $2.22 billion. The deal will combine two companies that provide products and services for oil and natural gas drilling.
Terms of the agreement call for Varco stockholders to receive 0.8363 of a National Oilwell share for each Varco share. Based on National Oilwell’s Wednesday closing price of $30.85 on the New York Stock Exchange, the transaction values each Varco share at $25.80, a 9.2% premium to Varco’s Wednesday closing price of $23.62.
National Oilwell President and Chief Executive Pete Miller will serve in the same capacity of the combined company. John Lauletta, Varco’s chairman and CEO, will serve as chairman of the combined company. Varco’s president and chief operating officer, Joe Winkler, will serve as the operating chief. Each company will be equally represented on the board and, after closing of the deal, National Oilwell will change its name to National Oilwell Varco Inc.
National Oilwell expects that the transaction will add to earnings and cash flow per share in 2005. National Oilwell expects about $40 million to $50 million in pretax cost cuts as a result of production facility consolidation, expense reductions in sales and marketing and corporate overhead cuts that should be achieved by the end of 2005.
The Stros looked like a team that needed to catch a flight as they could muster just two singles against four Mets pitchers and lost on Thursday afternoon at Shea Stadium, 2-1.
Andy Pettitte looked uncomfortable as he struggled with his control, giving up four hits and four walks in 5 2-3rd’s innings against a Mets’ lineup that has been eviscerated by injuries. The Stros were pathetic offensively, as Berkman singled in the only one and Manager Garner inexplicably benched two of his club’s only five above average hitters — Bags and Bidg.
I realize Garner is trying to shake the Stros up and get something started, but sometimes he appears to be trying too hard. This club struggles to hit generally and to hit with power particularly. Thus, there is simply no good reason not to be playing his five above-average hitters — Berkman, Beltran, Bidg, Bags and Lamb — almost every game. Beyond those five, it doesn’t make much difference who hits for the Stros. Except for Kent, who represents exactly an average National League hitter this season, the rest of the Stros are either below average or well below average. Playing more of those guys than is necessary simply increases the risk of loss.
The Rocket gives the folks in Montreal one last opportunity to see one of the best pitchers of the past generation on Friday. Let’s hope the Stros do some hitting rather than simply watching, too.
Peter Gordon is a clever professor in the University of Southern California’s School of Policy, Planning and Development and in its Department of Economics and is director of USC’s Master of Real Estate Development program. Professor Gordon also runs a smart blog called Peter Gordon’s Blog, which explores “the intersection of economic thinking and urban planning/real estate development and related big-think themes.”
In this post, Professor Gordon addresses the L.A. City Council’s recent decision to require more impact studies of possible harm before large centers such as Wal-Mart are allowed to be built in Los Angeles. With brevity and razor sharp insight, Professor Gordon points out the unintended consequences of such governmental action:
I imagine that the 13 of 15 L.A. City Council members who voted for this measure also dream of requiring studies of the “possible harm” before anyone can legally file to compete with them at the polls.
For now, the professional harm detectors have a windfall. The influence of politicians and their acolytes is extended. Inefficient retailers get a pass. The poorest customers have to travel further for lower prices and more variety. Entry level jobs are foreclosed, etc., etc., etc.
Conventional measure of the size of government understate the harm that politicians do. The full consequences of this stuff are not so easily detected.
Peter G. Peterson is founder of the Blackstone Group and founding president of The Concord Coalition, which is a bi-partisan citizen’s group organized in 1992 for the purpose of building a constituency of fiscal responsibility.
In this New York Times book review, Financial Times and Weely Standard columnist Christopher Caldwell reviews Mr. Peterson’s new book entitled “Running on Empty” in which Mr. Peterson lays out the case that politicians in both political parties have abandoned any pretense of fashioning responsible fiscal policy. That has resulted in the highly-leveraged state of various government entitlement programs such as Social Security and Medicare:
How we reached this pass can be stated simply: Republicans undertax, while Democrats overspend. For decades, Mr. Peterson writes, Democrats ”labored patiently to purge America of its traditional aversion to deficits,” bribing voters with jobs and social-service programs that the country could not afford. Starting with the Emergency Recovery Tax Act of 1981, though, Republicans have learned that tax cuts and write-offs can be used as bribes in exactly the same way. Dependent on deficit spending, both parties have blown through every institutional constraint erected against reckless tax cuts and benefit expansions, from the Gramm-Rudman deficit ceilings of the 1980’s to the Budget Enforcement Act of 1990. And they have blown the Social Security-tax surpluses meant to offset predictable future shortfalls.
And although he blames both political parties for this fiscal debacle, Mr. Peterson takes dead aim at the Bush Administration:
While Mr. Peterson blames both parties for conniving against fiscal common sense, he puts the present administration in a class of its own. George W. Bush has discarded traditional Republican qualms against big government, replacing the old Democratic model of tax-and-spend with his own model of borrow-and-spend. Thanks to three unaffordable tax cuts and an unfinanced Medicare drug benefit that will eventually cost $2 trillion a decade, Mr. Peterson writes, ”this administration and the Republican Congress have presided over the biggest, most reckless deterioration of America’s finances in history.”
But even more interesting is why politicians continue to ignore these clear warning signs of fiscal disaster? Mr. Peterson has a theory:
”[O]ur national leaders are providing the American people with precisely what they want.” Debt, he notes, is particularly alluring in periods of partisan intransigence. If the two sides cannot compromise on priorities, each can take what it wants while dumping the bill on future generations. Americans used to understand this temptation and flee it. Thomas Jefferson warned: ”To preserve our independence, we must not let our rulers load us with perpetual debt. We must make our election between economy and liberty, or profusion and servitude.”
Mr. Peterson’s book highlights the watershed nature of this year’s Presidential election. The Bush Administration has done precious little during its first four years to merit the support of voters who yearn for prudent fiscal reform of government entitlement programs. On the other hand, the Democrats have nominated a candidate with an extraordinarily weak record on the same issues.
Is Peterson correct that most voters simply do not care anymore about fiscal responsibility of government? Or has the public simply given in to the dark side of using debt to pay for our government’s lack of fiscal responsibility? Interesting questions with no easy answers.
And to get a good idea of just how far the Bush Administration has strayed from sound economic policy, Tyler Cowen over at Marginal Revolution outlines what he believes the Bush Administration’s economic platform should be.
Labor relations at UAL Corp.’s United Airlines hit a new low yesterday as United’s the International Association of Machinists union asked the bankruptcy judge overseeing the carrier’s chapter 11 case to appoint a trustee to operate the company.
Still fuming over over United’s recent decision not to make required contributions to its underfunded pension plans, the machinists contended in their trustee motion that United has shown “misconduct, … dishonesty and incompetence” by breaching fiduciary duties related to the plans, favoring some classes of creditors over others and failing to produce a workable business plan for a reorganization.
Frankly, the machinists’ motion has about as much of a chance of succeeding on their motion as I have of winning the “Most Handsome Cowboy” contest at the Bluebonnet Dance Palace this Saturday night. United’s decision not to make the pension payments was prudent and made to attract new capital to the company that would fund a reorganization plan that would avert a liquidation of United. The machinists have not accepted the reality that a United liquidation would be even worse for them than a reorganized United that terminates its pension plans but continues to provide jobs for the union’s members.
Although it is unlikely that the bankruptcy court will grant the union’s motion, the discord between the union and United management could affect United’s improved operational performance of the past two years, which would cause further delays in generating the private capital necessary to fund a plan for United to emerge from chapter 11.
From my vantage point, the unions lack of a coherent strategy in the United reorganization is appalling.