China’s defense ministry said the nation’s much-publicized first aircraft carrier, a Soviet-era hulk being refitted in a north China shipyard, will be used purely for research and training and not for deployment in military situations, Xinhua reported.
Speaking at a ministry news briefing for Chinese journalists on Wednesday, the spokesman, Geng Yansheng, said the ship would be used in part to train pilots in the delicate art of taking off and landing carrier-based jets from the deck of a ship rolling in ocean waters.
Friday, July 29, 2011
China's High-Speed Politics
HONG KONG — In the wake of a deadly train collision in China that claimed at least 39 lives, a single photograph has for many Chinese become emblematic of a callous, unresponsive political culture that prioritizes instant results over public well-being and accountability.
The news photograph shows a high-speed train zipping along a viaduct in Wenzhou, the site of the accident last Saturday, less than a day after rescue work was halted, some say far too soon. The wreckage of the crash is piled carelessly on the barren ground below, a tragedy swept rashly into the past.
From the outset, China’s government did its utmost to keep public doubts from gathering speed. The Central Propaganda Department instructed media across the country to avoid hard questions and focus instead on “stories that are extremely moving, like people donating blood and taxi drivers refusing to accept fares.” The overarching theme, it said, should be “great love in the face of great tragedy.”
Meanwhile, China’s rail ministry cited lightning as the cause of the accident, sidestepping questions of human error and institutional failure. When journalists asked pointedly how a young girl had been found alive after officials called an end to the rescue effort, the ministry again favored emotion over candor, calling the discovery a “miracle.”
Over the last several days, however, Chinese have insistently pushed the Wenzhou tragedy front and center, refusing to accept the government’s rationalizations and distractions. Using Twitter-like platforms on an unprecedented scale, people have clamored for answers to a hornet’s nest of questions.
How was the accident caused by lightning? Why was the train behind not aware there was a train in front? Why was the rescue effort halted so soon? Why was the wreckage piled up into shallow pits before there had been a proper investigation into the accident’s cause? Why has a list of victims not been made public?
Magazines and newspapers have followed suit, reporting boldly on the facts and pressing for answers.
At the very heart of all of these questions — and indeed of the tragedy itself — is a government that refuses to be held accountable for its decisions, and that admits no criticism when criticism might make the difference between bold vision and monstrous folly.
Questions about the rapid development of China’s high-speed rail network have simmered under the surface for years but were never given a proper hearing. Led by the former railway minister Liu Zhijun, who was jailed for corruption in February, a handful of government officials were entrusted with vast resources while being exempted from public scrutiny. (The general budget estimate for the Beijing-Shanghai high-speed railroad alone surpasses the entire budget for the Three Gorges Dam Project.) China’s railroads were Liu’s private fiefdom, and he was rewarded politically for pushing ahead with big plans through unilateral decision-making, earning the nickname “Great Leap Liu.”
Dominating resources of both power and money, Liu monopolized the debate among would-be experts. Dissenting voices, like that of Zhao Jian, a professor at the Economy Management Institute of Beijing Transportation University, were elbowed aside. In an interview published on the eve of the Wenzhou tragedy, Zhao told a magazine in southern China that his university president had discouraged him from criticizing high-speed rail development because it might hinder the school’s ability to secure research grants.
Until this month, Chinese media were almost entirely complicit, trumpeting high-speed rail as a glorious enterprise reflecting the prestige of the Chinese Communist Party. No matter that the cost of tickets placed it out of reach for the vast majority of Chinese.
Last December, the party’s flagship People’s Daily newspaper ran a front-page story valorizing an ordinary train driver who had been given a “dead order” from superiors back in 2008 to master a new high-speed train in just 10 days, against the judgment of a German trainer who said trainees needed at least two months. With all the high foolishness of state propaganda, the article relished the fact that the odds were stacked against the trainees and the fact that there was “no room for error.”
The “great leap” culture that Liu Zhijun epitomized is the way things operate across China, from county towns bursting with development all the way up to the top. Party and government officials are accountable only to superiors with whom they hope to score expedient political points. The legitimate concerns of citizens are routinely ignored.
Chinese people have pleaded with their leaders to slow down and prioritize the quality of development. “China, please slow your soaring steps forward,” one social media user wrote. “Wait for your people ... wait for your conscience! We don’t want derailed trains, or collapsing bridges, or roads that slide into pits. We don’t want our homes to become death traps. Move more slowly. Let every life have freedom and dignity.”
China’s leaders must recognize that the political culture of expediency and secrecy is the root cause of this and other tragedies, from food and mine safety to violent property demolition. Political reform is needed to empower Chinese citizens to monitor the government and eliminate corruption and mismanagement. Reform is the only way to enable real and sustained accountability.
In the face of mounting public anger, the government is now dealing more seriously with the crisis. Prime Minister Wen Jiabao has visited the crash site, pledging to hold those responsible to account, and the government has ordered an “urgent overhaul” of the national railway system. But this urgency must not, yet again, become mere expediency, another high-speed solution to a crisis of public opinion.
The news photograph shows a high-speed train zipping along a viaduct in Wenzhou, the site of the accident last Saturday, less than a day after rescue work was halted, some say far too soon. The wreckage of the crash is piled carelessly on the barren ground below, a tragedy swept rashly into the past.
From the outset, China’s government did its utmost to keep public doubts from gathering speed. The Central Propaganda Department instructed media across the country to avoid hard questions and focus instead on “stories that are extremely moving, like people donating blood and taxi drivers refusing to accept fares.” The overarching theme, it said, should be “great love in the face of great tragedy.”
Meanwhile, China’s rail ministry cited lightning as the cause of the accident, sidestepping questions of human error and institutional failure. When journalists asked pointedly how a young girl had been found alive after officials called an end to the rescue effort, the ministry again favored emotion over candor, calling the discovery a “miracle.”
Over the last several days, however, Chinese have insistently pushed the Wenzhou tragedy front and center, refusing to accept the government’s rationalizations and distractions. Using Twitter-like platforms on an unprecedented scale, people have clamored for answers to a hornet’s nest of questions.
How was the accident caused by lightning? Why was the train behind not aware there was a train in front? Why was the rescue effort halted so soon? Why was the wreckage piled up into shallow pits before there had been a proper investigation into the accident’s cause? Why has a list of victims not been made public?
Magazines and newspapers have followed suit, reporting boldly on the facts and pressing for answers.
At the very heart of all of these questions — and indeed of the tragedy itself — is a government that refuses to be held accountable for its decisions, and that admits no criticism when criticism might make the difference between bold vision and monstrous folly.
Questions about the rapid development of China’s high-speed rail network have simmered under the surface for years but were never given a proper hearing. Led by the former railway minister Liu Zhijun, who was jailed for corruption in February, a handful of government officials were entrusted with vast resources while being exempted from public scrutiny. (The general budget estimate for the Beijing-Shanghai high-speed railroad alone surpasses the entire budget for the Three Gorges Dam Project.) China’s railroads were Liu’s private fiefdom, and he was rewarded politically for pushing ahead with big plans through unilateral decision-making, earning the nickname “Great Leap Liu.”
Dominating resources of both power and money, Liu monopolized the debate among would-be experts. Dissenting voices, like that of Zhao Jian, a professor at the Economy Management Institute of Beijing Transportation University, were elbowed aside. In an interview published on the eve of the Wenzhou tragedy, Zhao told a magazine in southern China that his university president had discouraged him from criticizing high-speed rail development because it might hinder the school’s ability to secure research grants.
Until this month, Chinese media were almost entirely complicit, trumpeting high-speed rail as a glorious enterprise reflecting the prestige of the Chinese Communist Party. No matter that the cost of tickets placed it out of reach for the vast majority of Chinese.
Last December, the party’s flagship People’s Daily newspaper ran a front-page story valorizing an ordinary train driver who had been given a “dead order” from superiors back in 2008 to master a new high-speed train in just 10 days, against the judgment of a German trainer who said trainees needed at least two months. With all the high foolishness of state propaganda, the article relished the fact that the odds were stacked against the trainees and the fact that there was “no room for error.”
The “great leap” culture that Liu Zhijun epitomized is the way things operate across China, from county towns bursting with development all the way up to the top. Party and government officials are accountable only to superiors with whom they hope to score expedient political points. The legitimate concerns of citizens are routinely ignored.
Chinese people have pleaded with their leaders to slow down and prioritize the quality of development. “China, please slow your soaring steps forward,” one social media user wrote. “Wait for your people ... wait for your conscience! We don’t want derailed trains, or collapsing bridges, or roads that slide into pits. We don’t want our homes to become death traps. Move more slowly. Let every life have freedom and dignity.”
China’s leaders must recognize that the political culture of expediency and secrecy is the root cause of this and other tragedies, from food and mine safety to violent property demolition. Political reform is needed to empower Chinese citizens to monitor the government and eliminate corruption and mismanagement. Reform is the only way to enable real and sustained accountability.
In the face of mounting public anger, the government is now dealing more seriously with the crisis. Prime Minister Wen Jiabao has visited the crash site, pledging to hold those responsible to account, and the government has ordered an “urgent overhaul” of the national railway system. But this urgency must not, yet again, become mere expediency, another high-speed solution to a crisis of public opinion.
Lessons From the U.S. Economy's Malaise
When I began covering the American economy 11 years ago, it was the envy of the world.
The last 11 years have not been kind to it. First came the dot-com bust. Then there was the weakest economic expansion in decades, followed by the worst financial crisis and deepest recession in decades. Now we’re suffering through a painfully slow recovery, which Washington may soon make worse.
The malaise obviously has several causes, some of which are beyond our control. One major cause, however, is entirely our doing. We do not spend enough time focusing on our actual economic problems.
We are too often occupied with distractions, rather than trying to answer a simple question: What works? What economic policies have succeeded before and are most likely to lead to the best life for the largest number of people? Instead, we’ve effectively decided that because the United States is the richest, most successful country in the world, it is guaranteed to remain so.
Today’s column is my last in this space. I will continue to write in my next job, as Washington bureau chief, but not every week and not this column. So I want to take a step back today and look at what we know about the American economy and, almost as important, what we do not.
One of the tricky things about the subject is that almost nothing is certain in the way that, say, two plus two equals four. Economics — which is at root a study of human behavior — tends to be messier. Because it’s messier, it can be tempting to think that all uncertainty is equal and that we don’t really know anything.
But we do. It’s just that the knowledge tends to come with caveats and nuances. Economic truths may not rise to the level of two plus two equals four, but they are not so different from the knowledge that the earth is round or that smoking causes cancer.
The earth is not perfectly round, of course. Some smokers will never get cancer, while most cancer is not caused by smoking. Yet in the ways that matter most, the earth is still round, and smoking does cause cancer. Both of these facts are illustrative in another way, too: seemingly smart people spent decades denying them.
When it comes to economics, we know that a market economy with a significant government role is the only proven model of success. The United States has outgrown Europe partly because of our greater comfort with market forces. China and India boomed after allowing more of a market economy. On the other hand, unencumbered market forces often lead to disaster, as 1929 and 2008 made clear.
We also know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us — the college wage premium has been higher than ever lately — but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children.
We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military. Anyone who won’t get specific about which ones they favor is not a fiscal conservative.
We know this country spends vastly more on health care than any other country — about 75 percent more per person than other rich countries — without getting vastly better results. The waste in our medical system offers the best chance to reduce the deficit without harming our living standards.
We know the planet is getting hotter. Last year tied for the warmest on record, and the 10 hottest have all occurred since 1998. The resulting risks, economic and otherwise, may be even more serious than the risks from the deficit, but receive far less attention in Washington. (And climate worriers do not need to be so skittish about making the connection between heat waves and the larger trend. The thing about global warming is that it warms the globe.)
We know that Wall Street, having bounced back from the crisis, remains a historically large part of the economy. Not coincidentally, we know that income inequality remains sharply higher than it used to be.
The most common income statistics can exaggerate the stagnation of middle-class pay, partly because they exclude health benefits. The American middle class is not disappearing. But it’s not doing well, and has not been for some time.
The bottom 50 percent of households, based on pretax income, make less combined than the top 1 percent. Only three decades ago, the bottom half made more than twice as much. The middle class has also received a much smaller tax cut in recent decades than the affluent.
•
This list is obviously a partial one. You could add the fact that the United States has benefited enormously from immigration, especially high-skill immigration, or the fact that discrimination, while hardly vanquished, is greatly reduced. But I think the issues here cover most of the high points.
The place where economic knowledge gets murkier is how to best deal with many of our biggest problems.
We cannot know, for example, what would happen if the government raised taxes to cut the deficit. A moderate increase seems unlikely to do much damage to economic growth, given that the increases by George H. W. Bush and Bill Clinton did not prevent the 1990s boom — and that George W. Bush’s tax cuts were followed by mediocre growth. All things equal, though, tax increases do not lift growth.
Likewise, we do not know precisely how to regulate Wall Street so that it will remain the global financial capital without also being a drain on our national resources. We do not know whether the most promising attack on climate change involves a carbon tax or more money for clean energy research. We don’t know how much medical costs would fall if people had to pay more out of pocket, as conservatives advocate, or how much costs would fall if Medicare tried to crack down on dubious care, as the Obama administration prefers.
The real problem with so many of these issues is that the political system is not even trying to find solutions.
Instead of a spirited, even partisan, debate over how health reform could be do a better job of controlling costs, lawyers are skirmishing over whether all Americans should have health insurance. Some of the world’s most talented people — students and would-be entrepreneurs who would like nothing more than to remain in this country — are told they are not welcome. Amazingly, Congress may be about to create a whole new economic problem by voluntarily defaulting on the national debt.
Democracy, not unlike economics, is often messy. And there are certainly some reasons for optimism, whether it’s the bipartisan push to improve schools or the simple fact that American society in 2011 is quite different from what many people could have imagined only a few decades ago. Much of that change has been for the good.
Perhaps the last refuge for optimists is Churchill’s reputed line: “In the long run, Americans will always do the right thing — after exploring all other alternatives.” The sentiment is nice. It would be comforting to have a little more reason to believe that history was going to repeat itself.
The last 11 years have not been kind to it. First came the dot-com bust. Then there was the weakest economic expansion in decades, followed by the worst financial crisis and deepest recession in decades. Now we’re suffering through a painfully slow recovery, which Washington may soon make worse.
The malaise obviously has several causes, some of which are beyond our control. One major cause, however, is entirely our doing. We do not spend enough time focusing on our actual economic problems.
We are too often occupied with distractions, rather than trying to answer a simple question: What works? What economic policies have succeeded before and are most likely to lead to the best life for the largest number of people? Instead, we’ve effectively decided that because the United States is the richest, most successful country in the world, it is guaranteed to remain so.
Today’s column is my last in this space. I will continue to write in my next job, as Washington bureau chief, but not every week and not this column. So I want to take a step back today and look at what we know about the American economy and, almost as important, what we do not.
One of the tricky things about the subject is that almost nothing is certain in the way that, say, two plus two equals four. Economics — which is at root a study of human behavior — tends to be messier. Because it’s messier, it can be tempting to think that all uncertainty is equal and that we don’t really know anything.
But we do. It’s just that the knowledge tends to come with caveats and nuances. Economic truths may not rise to the level of two plus two equals four, but they are not so different from the knowledge that the earth is round or that smoking causes cancer.
The earth is not perfectly round, of course. Some smokers will never get cancer, while most cancer is not caused by smoking. Yet in the ways that matter most, the earth is still round, and smoking does cause cancer. Both of these facts are illustrative in another way, too: seemingly smart people spent decades denying them.
When it comes to economics, we know that a market economy with a significant government role is the only proven model of success. The United States has outgrown Europe partly because of our greater comfort with market forces. China and India boomed after allowing more of a market economy. On the other hand, unencumbered market forces often lead to disaster, as 1929 and 2008 made clear.
We also know that ever-rising levels of education are crucial to a country’s success. Not only is the evidence all around us — the college wage premium has been higher than ever lately — but careful studies have found that, on the margin, education itself tends to make people wealthier, healthier and happier. The next time you hear naysayers poormouth college, ask them if they plan to send their own children.
We know that the federal government has promised more benefits than it can currently afford. The only way out of this problem involves some combination of tax increases and cuts to Medicare, Social Security and the military. Anyone who won’t get specific about which ones they favor is not a fiscal conservative.
We know this country spends vastly more on health care than any other country — about 75 percent more per person than other rich countries — without getting vastly better results. The waste in our medical system offers the best chance to reduce the deficit without harming our living standards.
We know the planet is getting hotter. Last year tied for the warmest on record, and the 10 hottest have all occurred since 1998. The resulting risks, economic and otherwise, may be even more serious than the risks from the deficit, but receive far less attention in Washington. (And climate worriers do not need to be so skittish about making the connection between heat waves and the larger trend. The thing about global warming is that it warms the globe.)
We know that Wall Street, having bounced back from the crisis, remains a historically large part of the economy. Not coincidentally, we know that income inequality remains sharply higher than it used to be.
The most common income statistics can exaggerate the stagnation of middle-class pay, partly because they exclude health benefits. The American middle class is not disappearing. But it’s not doing well, and has not been for some time.
The bottom 50 percent of households, based on pretax income, make less combined than the top 1 percent. Only three decades ago, the bottom half made more than twice as much. The middle class has also received a much smaller tax cut in recent decades than the affluent.
•
This list is obviously a partial one. You could add the fact that the United States has benefited enormously from immigration, especially high-skill immigration, or the fact that discrimination, while hardly vanquished, is greatly reduced. But I think the issues here cover most of the high points.
The place where economic knowledge gets murkier is how to best deal with many of our biggest problems.
We cannot know, for example, what would happen if the government raised taxes to cut the deficit. A moderate increase seems unlikely to do much damage to economic growth, given that the increases by George H. W. Bush and Bill Clinton did not prevent the 1990s boom — and that George W. Bush’s tax cuts were followed by mediocre growth. All things equal, though, tax increases do not lift growth.
Likewise, we do not know precisely how to regulate Wall Street so that it will remain the global financial capital without also being a drain on our national resources. We do not know whether the most promising attack on climate change involves a carbon tax or more money for clean energy research. We don’t know how much medical costs would fall if people had to pay more out of pocket, as conservatives advocate, or how much costs would fall if Medicare tried to crack down on dubious care, as the Obama administration prefers.
The real problem with so many of these issues is that the political system is not even trying to find solutions.
Instead of a spirited, even partisan, debate over how health reform could be do a better job of controlling costs, lawyers are skirmishing over whether all Americans should have health insurance. Some of the world’s most talented people — students and would-be entrepreneurs who would like nothing more than to remain in this country — are told they are not welcome. Amazingly, Congress may be about to create a whole new economic problem by voluntarily defaulting on the national debt.
Democracy, not unlike economics, is often messy. And there are certainly some reasons for optimism, whether it’s the bipartisan push to improve schools or the simple fact that American society in 2011 is quite different from what many people could have imagined only a few decades ago. Much of that change has been for the good.
Perhaps the last refuge for optimists is Churchill’s reputed line: “In the long run, Americans will always do the right thing — after exploring all other alternatives.” The sentiment is nice. It would be comforting to have a little more reason to believe that history was going to repeat itself.
Saturday, July 23, 2011
Surveys Point to Slowdowns in Euro Zone and China
LONDON — While most investor attention was focused on a meeting of European leaders attempting to resolve the Greek debt crisis, survey data released Thursday suggested a backdrop of stagnating economic activity in the euro zone and softening output in China.
The composite euro zone purchasing managers’ indexes, known as P.M.I.s and complied by Markit, showed growth in the euro area’s manufacturing and service sectors stalled in July, with the composite index showing its lowest reading in 23 months.
In China, a closely watched survey of purchasing managers produced the lowest level in 28 months, according to HSBC, which published the index.
That suggested that a series of regulatory and policy measures is having the desired effect of cooling the red-hot Chinese economy.
The euro zone composite P.M.I. fell to 50.8 in July from 53.3 in June, Markit said. The consensus forecast among economists had been for a more modest decline to 52.6. The drop in the P.M.I.s was broad, with the services index slowing to 51.4 from 53.7 and manufacturing falling to 50.4 from 52.
The indexes provide a fairly good indication of where quarterly economic growth rates are heading, according to analysts.
Nick Kounis, head of economic research at ABN Amro in Amsterdam, said higher oil prices, budget cuts and the global economic slowdown having been dragging on growth in Europe.
“More recently,” he added, “it’s possible that business confidence also took a blow because of the escalating sovereign debt crisis.”
He said the P.M.I.’s current levels were consistent with a slowdown in euro area growth in the third quarter to flat or up just 0.1 percent from the previous quarter. The region posted a preliminary growth rate during the second quarter of 0.2 percent after a gain of 0.8 percent in the first three months.
“The slowdown in euro zone G.D.P. growth to near-stagnation levels is another warning shot to Europe’s leaders about the high stakes at today’s summit,” Mr. Kounis said. “It might not take too much of a shock to push the economy into recession from these levels.”
The releases of both sets of data came before European leaders reached an agreement Thursday in Brussels on new aid for Greece.
In China, the vast manufacturing sector appears to have contracted in July for the first time in a year, according to the closely watched HSBC survey.
The initial results of the poll of purchasing managers produced a reading of 48.9 in July, the lowest level in 28 months and down from 50.1 in June. The final reading will be released Aug. 1.
Readings below 50 represent contraction, so the slide below that level indicated that manufacturers had seen business slow markedly over the past few months, based on a combination of feeble global demand and tighter conditions at home.
For the past year and a half, Chinese policy makers have used a wide variety of tools to rein in booming growth and limit the rising prices that have accompanied it. Formerly free-flowing bank loans have become harder to obtain, for example, as banks were instructed to lend less.
Those measures have slowed the economy, but at a gradual pace that leaves room for still more tightening by Beijing in the coming months, most analysts say.
A P.M.I. reading of below 50 does not imply a “hard landing” for China, said Qu Hongbin, chief China economist at HSBC.
Industrial growth is likely to continue to decelerate in the coming months as tightening measures filter through, Mr. Qu said, but “resilient consumer spending and continued investment in ongoing mass infrastructure projects should support a G.D.P. growth rate of almost 9 percent for the rest of this year.”
The International Monetary Fund echoed that sentiment in its latest assessment of the Chinese economy, published Thursday, noting that “China’s near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment.”
“Wage and employment increases have fueled consumption, the expansion in infrastructure and real estate construction has driven investment upward, and net exports are once again contributing positively to economic growth,” the fund said.
The I.M.F. projects 9.6 percent economic growth for China this year, and 9.5 percent expansion for 2012, in line with many other forecasts. That is down from 10.3 percent last year, but well above what developed nations like the United States are managing.
But an aging population and gradually shrinking labor force risks fanning inflation in the longer term, the I.M.F. said, while low interest rates and a lack of places for savers to invest their cash mean there is a lingering risk of bubbles in the already hot property sector.
Those factors could lead to potential “significant risks” to financial and macroeconomic stability in China, the fund said, and it urged Beijing to address the challenges by raising interest rates further and allowing the renminbi to strengthen.
Beijing has so far relied heavily on so-called reserve requirement ratios for lenders as a policy tool. Successive increases in the ratio since early last year have gradually restricted the amount of money banks have been able to lend. Interest rate increases came into the policy mix relatively late: The central bank began nudging rates up again in October 2010.
Alexander F. Yuan/Associated Press
Assembling a wind turbine in Baoding, in northern China. China's manufacturing showed contraction for the first time in a year.
The composite euro zone purchasing managers’ indexes, known as P.M.I.s and complied by Markit, showed growth in the euro area’s manufacturing and service sectors stalled in July, with the composite index showing its lowest reading in 23 months.
In China, a closely watched survey of purchasing managers produced the lowest level in 28 months, according to HSBC, which published the index.
That suggested that a series of regulatory and policy measures is having the desired effect of cooling the red-hot Chinese economy.
The euro zone composite P.M.I. fell to 50.8 in July from 53.3 in June, Markit said. The consensus forecast among economists had been for a more modest decline to 52.6. The drop in the P.M.I.s was broad, with the services index slowing to 51.4 from 53.7 and manufacturing falling to 50.4 from 52.
The indexes provide a fairly good indication of where quarterly economic growth rates are heading, according to analysts.
Nick Kounis, head of economic research at ABN Amro in Amsterdam, said higher oil prices, budget cuts and the global economic slowdown having been dragging on growth in Europe.
“More recently,” he added, “it’s possible that business confidence also took a blow because of the escalating sovereign debt crisis.”
He said the P.M.I.’s current levels were consistent with a slowdown in euro area growth in the third quarter to flat or up just 0.1 percent from the previous quarter. The region posted a preliminary growth rate during the second quarter of 0.2 percent after a gain of 0.8 percent in the first three months.
“The slowdown in euro zone G.D.P. growth to near-stagnation levels is another warning shot to Europe’s leaders about the high stakes at today’s summit,” Mr. Kounis said. “It might not take too much of a shock to push the economy into recession from these levels.”
The releases of both sets of data came before European leaders reached an agreement Thursday in Brussels on new aid for Greece.
In China, the vast manufacturing sector appears to have contracted in July for the first time in a year, according to the closely watched HSBC survey.
The initial results of the poll of purchasing managers produced a reading of 48.9 in July, the lowest level in 28 months and down from 50.1 in June. The final reading will be released Aug. 1.
Readings below 50 represent contraction, so the slide below that level indicated that manufacturers had seen business slow markedly over the past few months, based on a combination of feeble global demand and tighter conditions at home.
For the past year and a half, Chinese policy makers have used a wide variety of tools to rein in booming growth and limit the rising prices that have accompanied it. Formerly free-flowing bank loans have become harder to obtain, for example, as banks were instructed to lend less.
Those measures have slowed the economy, but at a gradual pace that leaves room for still more tightening by Beijing in the coming months, most analysts say.
A P.M.I. reading of below 50 does not imply a “hard landing” for China, said Qu Hongbin, chief China economist at HSBC.
Industrial growth is likely to continue to decelerate in the coming months as tightening measures filter through, Mr. Qu said, but “resilient consumer spending and continued investment in ongoing mass infrastructure projects should support a G.D.P. growth rate of almost 9 percent for the rest of this year.”
The International Monetary Fund echoed that sentiment in its latest assessment of the Chinese economy, published Thursday, noting that “China’s near-term growth prospects continue to be vigorous and are increasingly self-sustained, underpinned by structural adjustment.”
“Wage and employment increases have fueled consumption, the expansion in infrastructure and real estate construction has driven investment upward, and net exports are once again contributing positively to economic growth,” the fund said.
The I.M.F. projects 9.6 percent economic growth for China this year, and 9.5 percent expansion for 2012, in line with many other forecasts. That is down from 10.3 percent last year, but well above what developed nations like the United States are managing.
But an aging population and gradually shrinking labor force risks fanning inflation in the longer term, the I.M.F. said, while low interest rates and a lack of places for savers to invest their cash mean there is a lingering risk of bubbles in the already hot property sector.
Those factors could lead to potential “significant risks” to financial and macroeconomic stability in China, the fund said, and it urged Beijing to address the challenges by raising interest rates further and allowing the renminbi to strengthen.
Beijing has so far relied heavily on so-called reserve requirement ratios for lenders as a policy tool. Successive increases in the ratio since early last year have gradually restricted the amount of money banks have been able to lend. Interest rate increases came into the policy mix relatively late: The central bank began nudging rates up again in October 2010.
Former China Mobile Official Sentenced in Bribery Case
SHANGHAI — A former executive at China Mobile, one of this country’s biggest state-owned telecommunications companies, was sentenced to death with a two-year reprieve Friday for accepting bribes, according to Xinhua, the state-run news agency.
Zhang Chunjiang, the former vice chairman of China Mobile, the world’s largest mobile phone operator by subscribers, was charged with accepting more than $1.15 million in bribes while working at a series of state-run telecom companies between 1994 and 2009, when he was removed from his post. The two-year reprieve means that with good behavior his sentence could be commuted to life in prison. The sentence, which was handed down by a court in north China’s Hebei province, is the latest development in an unfolding corruption investigation into this country’s powerful telecom oligopoly.
While state executives and government officials are regularly arrested on corruption charges, only a handful have received the death penalty in recent years. Four years ago, the head of China’s Food and Drug Administration was executed for corruption and failing to protect consumers.
In 2009, the former chairman of Sinopec, the Chinese oil giant, was also sentenced to death with a two-year reprieve for accepting millions of dollars in bribes. And this week, two former vice mayors in China were executed for accepting millions of dollars worth of bribes.
Beijing is in the midst of a major corruption sweep ahead of a leadership change expected next year. In some cases, analysts say those charged with corruption may be singled out because of their relationships with high-ranking officials who are engaged in power struggles.
Recently, prosecutors have focused their attention on the telecom industry. At least seven other executives from China Mobile are under investigation in corruption cases, according to the nation’s state-run news media. And investigators are also looking into the role of several prominent Chinese businessmen, including Zeng Liqing, one of the founders of Tencent, a top Chinese Internet company, according to Caixin magazine, one of the nation’s most respected publications.
State-run news media said that Mr. Zhang, the 53-year-old former China Mobile executive, confessed to his crimes and therefore was given a penalty mitigated by the two-year reprieve. Xinhua said Mr. Zhang took the bribes while working as deputy director of the Liaoning Provincial Postal Administration, and also while working as general manager of the China Netcom Group and party chief and deputy general manager of China Mobile.
Bobby Yip/Reuters
Zhang Chunjiang, the former vice chairman of China Mobile, was sentenced to death with a two-year reprieve.
Zhang Chunjiang, the former vice chairman of China Mobile, the world’s largest mobile phone operator by subscribers, was charged with accepting more than $1.15 million in bribes while working at a series of state-run telecom companies between 1994 and 2009, when he was removed from his post. The two-year reprieve means that with good behavior his sentence could be commuted to life in prison. The sentence, which was handed down by a court in north China’s Hebei province, is the latest development in an unfolding corruption investigation into this country’s powerful telecom oligopoly.
While state executives and government officials are regularly arrested on corruption charges, only a handful have received the death penalty in recent years. Four years ago, the head of China’s Food and Drug Administration was executed for corruption and failing to protect consumers.
In 2009, the former chairman of Sinopec, the Chinese oil giant, was also sentenced to death with a two-year reprieve for accepting millions of dollars in bribes. And this week, two former vice mayors in China were executed for accepting millions of dollars worth of bribes.
Beijing is in the midst of a major corruption sweep ahead of a leadership change expected next year. In some cases, analysts say those charged with corruption may be singled out because of their relationships with high-ranking officials who are engaged in power struggles.
Recently, prosecutors have focused their attention on the telecom industry. At least seven other executives from China Mobile are under investigation in corruption cases, according to the nation’s state-run news media. And investigators are also looking into the role of several prominent Chinese businessmen, including Zeng Liqing, one of the founders of Tencent, a top Chinese Internet company, according to Caixin magazine, one of the nation’s most respected publications.
State-run news media said that Mr. Zhang, the 53-year-old former China Mobile executive, confessed to his crimes and therefore was given a penalty mitigated by the two-year reprieve. Xinhua said Mr. Zhang took the bribes while working as deputy director of the Liaoning Provincial Postal Administration, and also while working as general manager of the China Netcom Group and party chief and deputy general manager of China Mobile.
China Fake Apple Stores Get Fake News Video
Earlier this week I wrote about a series of fake Apple Stores that have been cropping up in China. They look so real that even the store employees, who wear authentic Apple T-shirts and branded name-tags, believe they work for the real Apple.
Now the Apple stores have their own Taiwanese cartoon news video, which have become an Internet staple with major news events. You can watch the video in full above.
All the media attention has not been good for the fake stores. Reuters reported Friday that “customers at an apparent Apple Store in the Chinese city of Kunming berated staff and demanded refunds on Friday after the shop was revealed to be an elaborate fake.”
Now the Apple stores have their own Taiwanese cartoon news video, which have become an Internet staple with major news events. You can watch the video in full above.
All the media attention has not been good for the fake stores. Reuters reported Friday that “customers at an apparent Apple Store in the Chinese city of Kunming berated staff and demanded refunds on Friday after the shop was revealed to be an elaborate fake.”
Wednesday, July 20, 2011
The True Cost of a Speeding Ticket
Car insurance rates soar for drivers who have one moving violation and jump by more than 50 percent after three violations, according to an Insurance.com analysis of more than 32,000 insurance policies sold in 2010.
Drivers who bought a one-car, single-driver policy last year and had one violation in their driving history paid an average of 18 percent more for car insurance than drivers with no violations.The numbers get worse as your offenses pile up. Drivers with two violations paid 34 percent more for insurance, and drivers with three violations tacked on a whopping 53 percent to their insurance costs when compared to drivers who were violation-free.
Car insurance rates soar for drivers who have one moving violation and jump by more than 50 percent after three violations, according to an Insurance.com analysis of more than 32,000 insurance policies sold in 2010.
Drivers who bought a one-car, single-driver policy last year and had one violation in their driving history paid an average of 18 percent more for car insurance than drivers with no violations.The numbers get worse as your offenses pile up. Drivers with two violations paid 34 percent more for insurance, and drivers with three violations tacked on a whopping 53 percent to their insurance costs when compared to drivers who were violation-free.
Some of the violations that hurt your car insurance rates include:
- Speeding tickets
- Driving under the influence of drugs or alcohol
- Careless or reckless driving
- Running red lights
- Failure to yield or stop at a sign
- Fleeing from police
- Driving the wrong way down a divided highway
- Improper passing
- Unsafe U-turn
- Failure to use a child restraint
He says insurers raise rates on repeat offenders to account for the higher risk of insuring such drivers.
“It’s a pattern of behavior,” Passmore says. “If a person has one ticket in 10 years and someone else has three tickets in six months, you tell me [who is going to get the lower rate].”
The news is especially bad for drivers age 65 and older. A separate analysis of nearly 400,000 rate quotes from 2010 found that quoted car insurance rates for drivers in the 65 and older age group jumped 57 percent after two violations when compared to drivers with no violations. The next closet age group – drivers ages 55 to 64 – saw a less damaging 47 percent rise in their quoted rate after two violations.
Lowering your car insurance rates
Which violation hurts your rate the most?
“Obviously, a DUI is going to be one of the worst” for rate increases, Passmore says. But he adds that each insurer calculates rates differently, so a specific type of violation may be priced higher by one insurer than by another.
If an insurer raises your auto insurance rate after a violation, there are still ways to cut those costs, including:
- Shop around for a better rate. The first thing you should do is to compare quotes from various car insurance companies to see if you can find a lower rate. “Shopping around is great advice almost any time,” Passmore says.
- Take a driver safety course. Some states reduce or expunge points from your driving record if you take a defensive driving class. Depending on where you live, your auto insurance company may be required to lower your car insurance premium after you complete the class.
- Raise your deductible. Drivers who raise their collision and comprehensive deductibles from $250 to $500 or $1,000 will see their annual premium fall. However, before taking this route, make sure you have enough money in savings to cover the deductible should you have to make a claim.
“Insurance has gotten pretty competitive,” he says. “It’s not a matter of who is insurable and who is uninsurable. It’s a matter of finding the right rate for that risk.”
In other words, you can still find insurance if you have multiple infractions – but expect to pay for it.
MethodologyAverage annual premium on sold policies calculated by examining 32,746 single-driver, one-car insurance policies sold through Insurance.com in 2010. Average quoted rate calculated by examining 397,000 insurance quotes generated through Insurance.com in 2010.
Three Ways to Keep Those Secret Purchases Secret
Not everything in life is meant to be aired in public, and in the same vein, not all our purchases are ones we necessarily want others knowing we make. Fortunately, it is possible to buy things both online and off that keep you anonymous.
Here, we’ve compiled a few ways that you can buy those products and services that are not for public knowledge. Plus, since these strategies avoid your purchases being reflected on your monthly credit card bill, these can be great ways to keep a surprise away from a significant other who deals with the bills.
Google Checkout and Paypal
When your credit card bill or bank statement comes in, whatever purchase you make will read “Paypal” and not the company or individual you’ve bought from, keeping that purchase anonymous. However, another person knowing how to get into your Paypal account can compromise this anonymity since the name of whomever you’re giving money to will show up in your record of payments.
Google has also thrown its hat into the ring, creating Google Checkout to compete against Paypal. As with Paypal, any purchase made through Google Checkout will simply appear as “Google” on any records related to the bank account or credit card the payment is made from.
Checkout’s original purpose was to make online shopping more convenient by eliminating the need for consumers to have lots of hard-to-remember login information with different merchants. Sites that use Checkout allow online shoppers to log in with their Google account information. This not only keeps your purchases discreet, but closing your registration with Checkout will also allow you to nix your payment history.
Prepaid Gift Cards
These cards let you shop basically anywhere that takes credit cards without any anxiety about your purchases being linked to your identity.
In Conclusion
The major pitfall across these options is getting help if something goes wrong. Paypal and Google Checkout offer safeguards against getting scammed, but using them can be a hassle. At the moment, prepaid gift and debit cards don’t offer much in the way of assurance against fraud, though that will probably change in the future since ‘09’s CARD Act is ushering in more complete regulation of the burgeoning market in providing electronic money transfers.
If keeping your purchases hush-hush isn’t your top priority, a credit card is the safest way to buy. Speaking broadly, credit card companies are compelled by law to have fairly accessible mechanisms to deal with fraud and disputes over charges. Not only that, Regulation EFTA allows credit card companies to hold cardholders liable for up to fifty dollars as a result of fraud.
Here, we’ve compiled a few ways that you can buy those products and services that are not for public knowledge. Plus, since these strategies avoid your purchases being reflected on your monthly credit card bill, these can be great ways to keep a surprise away from a significant other who deals with the bills.
Google Checkout and Paypal
Paypal was founded to provide consumers with a method to shop online without needing to use a credit card directly. Today, their more than one hundred and fifty million users make Paypal the largest internet payment processor. Paypal’s services function by letting you spend and receive money using your email address. Through your Papal account, you can pay businesses or people either by drawing money from your credit card or taking it directly from your checking account.
When your credit card bill or bank statement comes in, whatever purchase you make will read “Paypal” and not the company or individual you’ve bought from, keeping that purchase anonymous. However, another person knowing how to get into your Paypal account can compromise this anonymity since the name of whomever you’re giving money to will show up in your record of payments.
Google has also thrown its hat into the ring, creating Google Checkout to compete against Paypal. As with Paypal, any purchase made through Google Checkout will simply appear as “Google” on any records related to the bank account or credit card the payment is made from.
Checkout’s original purpose was to make online shopping more convenient by eliminating the need for consumers to have lots of hard-to-remember login information with different merchants. Sites that use Checkout allow online shoppers to log in with their Google account information. This not only keeps your purchases discreet, but closing your registration with Checkout will also allow you to nix your payment history.
Prepaid Gift Cards
To start, it is important to remember that as far as your anonymity goes, gift cards and prepaid debit cards are two very different animals. When you buy a gift card, you buy something with no connection to your identity, particularly if you are using cash to make the purchase. On the other hand, setting up a prepaid debit card requires that you provide your social security number.
They may not be the technological cutting edge, but as far as keeping your identity under wraps, gift cards are perhaps the most effective strategy if you can get the one you want. Of course, if you get a gift card from the store at which you’re making the purchases you want to keep discreet, your credit card statement will probably blow your cover unless you buy it with cash. But, you can instead buy a non-specific prepaid gift card through a credit card company such as American Express. The supermarket or convenience store in your town probably carries this sort of product, which costs an additional five dollar fee to use.These cards let you shop basically anywhere that takes credit cards without any anxiety about your purchases being linked to your identity.
In Conclusion
The major pitfall across these options is getting help if something goes wrong. Paypal and Google Checkout offer safeguards against getting scammed, but using them can be a hassle. At the moment, prepaid gift and debit cards don’t offer much in the way of assurance against fraud, though that will probably change in the future since ‘09’s CARD Act is ushering in more complete regulation of the burgeoning market in providing electronic money transfers.
If keeping your purchases hush-hush isn’t your top priority, a credit card is the safest way to buy. Speaking broadly, credit card companies are compelled by law to have fairly accessible mechanisms to deal with fraud and disputes over charges. Not only that, Regulation EFTA allows credit card companies to hold cardholders liable for up to fifty dollars as a result of fraud.
The Best Credit Cards You’ve Never Heard Of
The internet is often a great source of information. In fact, these days it seems like it’s almost the only place to find information. But there’s a real economy behind providing and distributing all that information, and consumers would do well to keep that in mind when looking for advice.
Credit cards are a perfect example, since there is big money in convincing you that certain cards are better than others. This means that almost every site that makes credit card recommendations gets paid to regurgitate the marketing of card issuers, and they rarely tell you that their “Editor’s picks” or “best credit card recommendations” are actually sponsored by the credit card companies. So you have to be on the alert for misinformation everywhere you turn.
Now that doesn’t mean that all sponsored credit cards are bad or that all credit card advice is flawed, just that there are often better cards out there, so make sure you do your research. Here I’m going to set the record straight on a number of credit cards that I feel too many websites recommend to users, and I’ll throw out some of my own recommendations for credit cards that outperform them, whether or not they pay big bucks.
This card suffers from all the same problems as the Chase Freedom, except that it also tends to have lower caps on reward categories, limiting your bonus rewards even further.
Check out: Discover Escape / Fidelity Amex / Fidelity Visa
A better option would be the Discover Escape since it pays 2% cash back on all purchases, which you can redeem for travel purchases. The $60 annual fee is more than made up for by the 25,000 bonus miles (or $250) you earn in the first two years. If travel rewards aren’t your thing, take a look at the Fidelity Amex, which pays a no-bull 2% cash back on every purchase, deposited directly into your Fidelity brokerage or checking account. The Fidelity Visa offers the same deal only after spending $15,000.
The first year is free and the card does pay a ton of bonus rewards–you’re eligible to earn more than 50,000 points the first year, and 47,500 every year after–but you also have to spend a ton of money to get them (more than $100k annually to get maximum bonuses). And if you account for the $95 annual fee going forward, your reward rate maxes out around 1.4% and decreases the more you spend.
Check out: Ink Cash or Capital One Venture
The fee structure on this card makes it hard to accept Russell’s claims that he’s trying to empower the un-banked. The “no monthly fee” version charges a $19.95 activation fee and $1 for every transaction (up to $10 per month). It also costs 50 cents to check your balance at an ATM and $1.95 any time you don’t use the card in a 90-day period. And since it’s a debit card, it doesn’t do anything to help your credit score.
Check out: Citibank Secured
Citibank Secured charges a $29 annual fee and no transaction fees, rather than the $120 that RushCard could cost you. Plus, your initial secured collateral earns roughly 4% in interest annually, and you can be eligible for a non-secured Citi card after 18 months. This helps users build credit, and is a feature that RushCard can’t offer.
Credit cards are a perfect example, since there is big money in convincing you that certain cards are better than others. This means that almost every site that makes credit card recommendations gets paid to regurgitate the marketing of card issuers, and they rarely tell you that their “Editor’s picks” or “best credit card recommendations” are actually sponsored by the credit card companies. So you have to be on the alert for misinformation everywhere you turn.
Now that doesn’t mean that all sponsored credit cards are bad or that all credit card advice is flawed, just that there are often better cards out there, so make sure you do your research. Here I’m going to set the record straight on a number of credit cards that I feel too many websites recommend to users, and I’ll throw out some of my own recommendations for credit cards that outperform them, whether or not they pay big bucks.
Rewards cards
Instead of: Chase FreedomDespite the claims of 5% cash back rewards, you’ll be hard-pressed to earn more than 1.5% to 2% rewards with this card. The bonus 5% rewards only apply to quarterly rotating categories, which means you can’t earn maximum rewards year-round on everyday purchases like groceries and gas. The bonuses are also capped, so you can only earn maximum rewards on $1,500 of spending over the months of Oct-Dec. You have to manually sign up online to get these rewards; it’s not automatic.
Check out: TrueEarnings Costco from AmexYou’d be better served with a card like the Costco TrueEarnings, whose 3% rewards on gas and restaurants, plus 2% rewards on travel are valid throughout the year. Rewards are unlimited except for a $3,000 spending cap on gas, and it’s the only card that pays bonus rewards on Costco’s discount gas.
Instead of: Discover MoreThis card suffers from all the same problems as the Chase Freedom, except that it also tends to have lower caps on reward categories, limiting your bonus rewards even further.
Check out: Discover Escape / Fidelity Amex / Fidelity Visa
A better option would be the Discover Escape since it pays 2% cash back on all purchases, which you can redeem for travel purchases. The $60 annual fee is more than made up for by the 25,000 bonus miles (or $250) you earn in the first two years. If travel rewards aren’t your thing, take a look at the Fidelity Amex, which pays a no-bull 2% cash back on every purchase, deposited directly into your Fidelity brokerage or checking account. The Fidelity Visa offers the same deal only after spending $15,000.
Business cards
Instead of: Ink Bold from ChaseThe first year is free and the card does pay a ton of bonus rewards–you’re eligible to earn more than 50,000 points the first year, and 47,500 every year after–but you also have to spend a ton of money to get them (more than $100k annually to get maximum bonuses). And if you account for the $95 annual fee going forward, your reward rate maxes out around 1.4% and decreases the more you spend.
Check out: Ink Cash or Capital One Venture
Compare this to its cousin card, the Ink Cash, which charges no annual fee, pays 1% on all purchases, and pays 3% on bonus categories your business needs, like fuel, home improvement, dining, and office supplies. Another option is the Capital One Venture for Business, which pays 2% rewards in the form of travel credits you can apply against your account statement. Plus the 15,000 mile sign-up bonus makes it well worth the $59 annual fee.
Poor Credit History Cards
Instead of: RushCard Prepaid DebitThe fee structure on this card makes it hard to accept Russell’s claims that he’s trying to empower the un-banked. The “no monthly fee” version charges a $19.95 activation fee and $1 for every transaction (up to $10 per month). It also costs 50 cents to check your balance at an ATM and $1.95 any time you don’t use the card in a 90-day period. And since it’s a debit card, it doesn’t do anything to help your credit score.
Check out: Citibank Secured
Citibank Secured charges a $29 annual fee and no transaction fees, rather than the $120 that RushCard could cost you. Plus, your initial secured collateral earns roughly 4% in interest annually, and you can be eligible for a non-secured Citi card after 18 months. This helps users build credit, and is a feature that RushCard can’t offer.
Best Sources for Summer Produce
The summer harvest season has finally begun here in Boston. Near my house, Farmers’ markets are popping up, brimming with fresh greens, ripe strawberries, and luscious radishes. Our first CSA share delivery of the season arrived last week. And my garden has started to cough up a few plump berries and herbs.
Image via Wikipedia
Make friends with the farmersMy family loves vegetables. The kids love kale chips and fresh strawberries. We all eat sugar snap peas by the fistful. Later in the summer, my husband and I will haul in the tomatoes that are just starting to grow in our yard and make as much salsa as we can.
Since we love vegetables so much, every summer I look for ways to economize on our fresh vegetables. There are two main aspects to this project: getting a good deal on the veggies, and making good use of them.
To get your veggies, you have several options:
Grow Your Own
J.D. has written extensively about the benefits, financial and otherwise, of growing a vegetable garden. Growing your own veggies is awesome. The more DIY you can be about it, the better deal you’ll get. For example, I paid about twenty-five cents for a packet of tomato seeds this spring that I grew half a dozen tomato plants from. When a few of them failed to thrive, I bought seedlings from my local garden shop. They cost $4 for a flat of six. Still a lot cheaper than buying fresh tomatoes, but much, much more expensive than starting from seed.
I find that growing your own vegetables is the most economical way to enjoy fresh summer produce, once you have a garden in place. Setting up your garden beds, buying tools and learning the ropes can be pricey the first year. After that, you’re looking at relatively small expenses for a lot of very high-quality produce.
If you have the time to invest in gardening. As one of my gardening guru friends likes to say, you can’t do half the work and get half the benefit. I’m a bit of a slacker gardener, and I still grow great veggies. But I don’t get nearly the haul my friend gets from the same amount of space, because I don’t put as much work into it as she does. I just plant some stuff and let it grow.
Not everyone can maintain a vegetable garden. Some people don’t have the space. Some don’t have the time. Some just really don’t enjoy gardening. If you’re not going to grow your own garden, you may want to get creative about how you buy your veggies.
Sign Up For A CSA
A CSA, or community-supported agriculture, is a program where a local farm sells shares of its summer produce directly to consumers. You buy a share for the season, paying up front. Then you get a weekly delivery of vegetables straight from the farm. You’re participating in the fortunes of the farm. If they have a great harvest, you get an abundance of produce at a great price. If it’s a lean growing season, you’ll get less.
It’s a great way to get fresh, local produce, but there are a few caveats.
For one thing, you need to be adventurous in your love of vegetables. You’ll get not only fresh heads of lettuce and juicy tomatoes, but a little of everything your farm grows. Kohlrabi. Brussels sprouts. Garlic. Sometimes we get vegetables in our share that I can’t even identify. This works for me because no one in my house is a particularly picky eater. We like trying new foods, and find a wide variety of vegetables exciting. But if you’d prefer to stick with your two or three favorites, a farm share might not be for you.
In addition to the adventuresome nature of a CSA, you want to be sure a farm share is a good value for you. I’ve experimented with several CSAs over the years. I found that they vary widely in value. They all cost different amounts, and you get different quantities of vegetables. Find out what the rough size of your share will be each week and do some math to compare those prices to your local farmer’s market or grocery store. Are you really getting the better deal?
The answer seems to be “usually”. Organic CSAs tend to be more expensive than conventional ones, but also a better bargain: you pay less for your organic produce getting it from a CSA than you would buying it at Whole Foods. At least in my neighborhood. Again, each farm share varies. The important thing is to do the math. Don’t assume it’s a good deal just because you’re getting it in bulk.
For a farm share to be a really good deal, you have to be sure you’ll use your full share of veggies each week. It’s like buying anything in bulk: it’s only a bargain if you use it. Seriously consider how many vegetables your family will eat, and how much time you’re willing to spend preparing and preserving your goodies. A farm share is a big commitment. If you let the produce go to waste, you’re wasting your grocery money as well.
Shop Farmers’ MarketsFarmers’ markets aren’t exactly a cheap source of summer produce, but they’re still often a great value. You may pay a little more for your food at a farmers’ market than you would at the local supermarket, but you’re getting much fresher, higher-quality produce. Often you’ll get things you just can’t find in the store.
To get the best deals at your farmers’ market, get to know the farmers who sell there each week. Ask about buying seconds quality produce, like bruised peaches or tomatoes. They’re not as pretty as the premium stuff, but they make great jams and sauces.
However you decide to get your summer produce, you’ll want to take care with how you use it. Getting a good deal on fruit and vegetables is just the first part of the equation. Next week I’ll talk about money-saving strategies for using and preserving your summer bounty so you can enjoy it all year long.
The Future Still Lives
In a week of big stories, the biggest didn’t take place in Pakistan or Washington, D.C., but in Santa Clara, California. Unlike Osama bin Laden, we managed to dodge a bullet. If we hadn’t, it wouldn’t have ended modern civilization, but it might have sent it off on a much different, and much less happy, path.
You probably didn’t read this story. So, put simply, Intel Corp. announced Wednesday that Moore’s Law isn’t going to end anytime soon. Because of that, your life, and that of your children and grandchildren are going to be a whole lot better than they might have been.
Today, almost a half-century after it was first elucidated by legendary Fairchild and Intel co-founder Dr. Gordon Moore in an article for a trade magazine, it is increasingly apparent that Moore’s Law is the defining measure of the modern world. Every other predictive tool for understanding life in the developed world since WWII – demographics, productivity tables, literacy rates, econometrics, the cycles of history, Marxist analysis, and on and on – have failed to predict the trajectory of society over the decades . . .except Moore’s Law.
Alone, this oddly narrow and technical dictum – that the power, miniaturization, size and power of integrated circuit chips will, together, double every couple years – has done a better job than any other in determining the pace of daily life, the ups and downs of the economy, the pace of innovation and the creation of new companies, fads and lifestyles. It has been said many times that, beneath everything, Moore’s Law is ticking away as the metronome, the heartbeat, of the modern world.
Why this should be so is somewhat complicated. But a simple explanation is that Moore’s Law isn’t strictly a scientific law – like, say Newton’s Laws of Motion – but rather a brilliant observation of an implied contract between the semiconductor industry and the society it serves. What Gordon Moore observed back in the mid-1960s was that each generation of memory chips (in those days they could store a few thousand bits, compared to a few billion today), which appeared about every 18 months, had twice the storage capacity of the generation before. Plotting the exponential curve of this development on logarithmic paper, Moore was please to see a straight line . . .suggesting that this developmental path might continue into the foreseeable future.
This discovery has been rightly celebrated for years. But often forgotten is that there was technological determinism behind the Law. Computer chips didn’t make themselves. And so, if the semiconductor industry had decided the next day to slow production or reduce their R&D budgets, Moore’s Law would have died within weeks. Instead, semiconductor companies around the world, big and small, and not least because of their respect for Gordon Moore, set out to uphold the Law – and they have done so ever since, despite seemingly impossible technical and scientific obstacles. Gordon Moore not only discovered Moore’s Law, he made it real. As his successor at Intel, Paul Otellini, once told me, “I’m not going to be the guy whose legacy is that Moore’s Law died on his watch.” And that’s true for every worker in the semiconductor industry. They are our equivalent of our medieval workers, devoting their entire careers to building a cathedral whose end they will never see.
And so, instead of fading away like yet one more corporate five year plan, Moore’s Law has defined our age, and done so more than any of the more celebrated trend-setters, from the Woodstock generation to NASA to the personal computer. Moore’s Law today isn’t just microprocessors and memory, but the Internet, cellular telelphony, bioengineering, medicine, education and play. If, in the years ahead, we reach that Singularity of man and computer that Ray Kurzweill predicts for us, that will be Moore’s Law too. But most of all, the virtuous cycle of constant innovation and advancement, of hot new companies that regularly refresh our economy, and of a world characterized by continuous change – in other words, the world that was created for the first time in history only about sixty years ago, and from which we can hardly imagine another – is the result of Moore’s Law.
When Gordon Moore first enunciated his Law, only a handful of industries – the first minicomputers, a couple scientific instruments, a desktop calculator or two – actually exhibited its hyperbolic rate of change. Today, every segment of society either embraces Moore’s Law or is racing to get there. That’s because they know that if only they can get aboard that rocket – that is, if they can add a digital component to their business — they too can accelerate away from the competition. That’s why none of the inventions we Baby Boomers as kids expected to enjoy as adults – atomic cars! personal helicopters! ray guns! – have come true; and also why we have even more powerful tools and toys – instead. Whatever can be made digital, if not in the whole, but in part – marketing, communications, entertainment, genetic engineering, robotics, warfare, manufacturing, service, finance, sports – it will, because going digital means jumping onto Moore’s Law. Miss that train and, as a business, an institution or a cultural phenomenon, you die.
So, what made this week’s announcement — by Intel — so important? It is that almost from the moment the implications of Moore’s Law became understood, there has been a gnawing fear among technologists and those who understand technology, that Moore’s Law will someday end – having snubbed up against the limits of, if not human ingenuity, then physics itself. Already compromises have been made – multiple processors instead of a single one on a chip, exotic new materials to stop leaking electrons – but as the channels get narrower and bumpier with molecules and the walls thinner and more permeable to atomic effects, the end seems to draw closer and closer. Five years away? Ten? And then what? What will it be like to live in a world without Moore’s Law . . .when every human institution now depends upon it?
But the great lesson of Moore’s Law is not just that we can find a way to continuously better our lives – but that human ingenuity knows no bounds, nor can ever really be stopped. You probably haven’t noticed over the last decade the occasional brief scientific article about some lab at a university, or at IBM, Intel or HP, coming up with a new way to produce a transistor or electronic gate out of just two or three atoms. Those stories are about saving Moore’s Law for yet another generation. But that’s the next chapter. Right here and now, this week, the folks at Intel were almost giddy in announcing that what had been one of those little stories a decade ago – tri-gate transistors – would now be the technology in all new Intel chips.
I’m not going to go into technical detail about how tri-gate transistors work, but suffice to say that since the late 1950s, when Jean Hoerni, along with the other founders of the semiconductor industry at Fairchild (including Gordon Moore), developed the ‘planar’ process, all integrated circuits have been structurally flat, a series of layers of semiconductors, insulators and wiring ‘printed’ on an equally flat sheet of silicon. For the first time, Intel’s new tri-gate technology leaves the plane of the chip and enters the third dimension. It does so by bringing three ‘fins’ of silicon up from beneath the surface, having them stick up into the top, transistor, layer. The effect is kind of like draping a mattress over a fence – and then repeating that over a billion fences, all just inches apart. The result is a much greater density of the gates, lower power consumption, faster switching and fewer quantum side-effects. Intel claims that more than 6 million of these 22 nanometer Tri-Gate transistors can fit in the period at the end of this sentence.
The first processors featuring Tri-Gate transistors will likely appear later this year. And you can be sure that competitors, with similar designs, will appear soon after. But that’s their battle.
What counts for the rest of us is that Moore’s Law survives. The future will arrive as quickly as ever. . .
You probably didn’t read this story. So, put simply, Intel Corp. announced Wednesday that Moore’s Law isn’t going to end anytime soon. Because of that, your life, and that of your children and grandchildren are going to be a whole lot better than they might have been.
Today, almost a half-century after it was first elucidated by legendary Fairchild and Intel co-founder Dr. Gordon Moore in an article for a trade magazine, it is increasingly apparent that Moore’s Law is the defining measure of the modern world. Every other predictive tool for understanding life in the developed world since WWII – demographics, productivity tables, literacy rates, econometrics, the cycles of history, Marxist analysis, and on and on – have failed to predict the trajectory of society over the decades . . .except Moore’s Law.
Alone, this oddly narrow and technical dictum – that the power, miniaturization, size and power of integrated circuit chips will, together, double every couple years – has done a better job than any other in determining the pace of daily life, the ups and downs of the economy, the pace of innovation and the creation of new companies, fads and lifestyles. It has been said many times that, beneath everything, Moore’s Law is ticking away as the metronome, the heartbeat, of the modern world.
Why this should be so is somewhat complicated. But a simple explanation is that Moore’s Law isn’t strictly a scientific law – like, say Newton’s Laws of Motion – but rather a brilliant observation of an implied contract between the semiconductor industry and the society it serves. What Gordon Moore observed back in the mid-1960s was that each generation of memory chips (in those days they could store a few thousand bits, compared to a few billion today), which appeared about every 18 months, had twice the storage capacity of the generation before. Plotting the exponential curve of this development on logarithmic paper, Moore was please to see a straight line . . .suggesting that this developmental path might continue into the foreseeable future.
This discovery has been rightly celebrated for years. But often forgotten is that there was technological determinism behind the Law. Computer chips didn’t make themselves. And so, if the semiconductor industry had decided the next day to slow production or reduce their R&D budgets, Moore’s Law would have died within weeks. Instead, semiconductor companies around the world, big and small, and not least because of their respect for Gordon Moore, set out to uphold the Law – and they have done so ever since, despite seemingly impossible technical and scientific obstacles. Gordon Moore not only discovered Moore’s Law, he made it real. As his successor at Intel, Paul Otellini, once told me, “I’m not going to be the guy whose legacy is that Moore’s Law died on his watch.” And that’s true for every worker in the semiconductor industry. They are our equivalent of our medieval workers, devoting their entire careers to building a cathedral whose end they will never see.
And so, instead of fading away like yet one more corporate five year plan, Moore’s Law has defined our age, and done so more than any of the more celebrated trend-setters, from the Woodstock generation to NASA to the personal computer. Moore’s Law today isn’t just microprocessors and memory, but the Internet, cellular telelphony, bioengineering, medicine, education and play. If, in the years ahead, we reach that Singularity of man and computer that Ray Kurzweill predicts for us, that will be Moore’s Law too. But most of all, the virtuous cycle of constant innovation and advancement, of hot new companies that regularly refresh our economy, and of a world characterized by continuous change – in other words, the world that was created for the first time in history only about sixty years ago, and from which we can hardly imagine another – is the result of Moore’s Law.
When Gordon Moore first enunciated his Law, only a handful of industries – the first minicomputers, a couple scientific instruments, a desktop calculator or two – actually exhibited its hyperbolic rate of change. Today, every segment of society either embraces Moore’s Law or is racing to get there. That’s because they know that if only they can get aboard that rocket – that is, if they can add a digital component to their business — they too can accelerate away from the competition. That’s why none of the inventions we Baby Boomers as kids expected to enjoy as adults – atomic cars! personal helicopters! ray guns! – have come true; and also why we have even more powerful tools and toys – instead. Whatever can be made digital, if not in the whole, but in part – marketing, communications, entertainment, genetic engineering, robotics, warfare, manufacturing, service, finance, sports – it will, because going digital means jumping onto Moore’s Law. Miss that train and, as a business, an institution or a cultural phenomenon, you die.
So, what made this week’s announcement — by Intel — so important? It is that almost from the moment the implications of Moore’s Law became understood, there has been a gnawing fear among technologists and those who understand technology, that Moore’s Law will someday end – having snubbed up against the limits of, if not human ingenuity, then physics itself. Already compromises have been made – multiple processors instead of a single one on a chip, exotic new materials to stop leaking electrons – but as the channels get narrower and bumpier with molecules and the walls thinner and more permeable to atomic effects, the end seems to draw closer and closer. Five years away? Ten? And then what? What will it be like to live in a world without Moore’s Law . . .when every human institution now depends upon it?
But the great lesson of Moore’s Law is not just that we can find a way to continuously better our lives – but that human ingenuity knows no bounds, nor can ever really be stopped. You probably haven’t noticed over the last decade the occasional brief scientific article about some lab at a university, or at IBM, Intel or HP, coming up with a new way to produce a transistor or electronic gate out of just two or three atoms. Those stories are about saving Moore’s Law for yet another generation. But that’s the next chapter. Right here and now, this week, the folks at Intel were almost giddy in announcing that what had been one of those little stories a decade ago – tri-gate transistors – would now be the technology in all new Intel chips.
I’m not going to go into technical detail about how tri-gate transistors work, but suffice to say that since the late 1950s, when Jean Hoerni, along with the other founders of the semiconductor industry at Fairchild (including Gordon Moore), developed the ‘planar’ process, all integrated circuits have been structurally flat, a series of layers of semiconductors, insulators and wiring ‘printed’ on an equally flat sheet of silicon. For the first time, Intel’s new tri-gate technology leaves the plane of the chip and enters the third dimension. It does so by bringing three ‘fins’ of silicon up from beneath the surface, having them stick up into the top, transistor, layer. The effect is kind of like draping a mattress over a fence – and then repeating that over a billion fences, all just inches apart. The result is a much greater density of the gates, lower power consumption, faster switching and fewer quantum side-effects. Intel claims that more than 6 million of these 22 nanometer Tri-Gate transistors can fit in the period at the end of this sentence.
The first processors featuring Tri-Gate transistors will likely appear later this year. And you can be sure that competitors, with similar designs, will appear soon after. But that’s their battle.
What counts for the rest of us is that Moore’s Law survives. The future will arrive as quickly as ever. . .
The Cisco in the Coal Mine
Here’s why Cisco Systems’ bad financial news last week should (maybe) scare the hell out of you.
First, in case you missed it, here are the details of the announcement. On Thursday, Cisco stunned both the tech world and the stock market when it cut its sales forecast for the second quarter in a row. Worse, chairman and CEO John Chambers said that the company’s current situation is the result of outside forces beyond the company’s control – in particular, declining orders from cable companies and government agencies.
The market responded quickly and strongly to such depressing news from one of the linchpins of the U.S. economy: the Dow fell nearly 74 points, or 0.7 percent to close at 11,283.10. It could have been a lot worse – at one point in the day trading was down as much as 126 points.
Needless to say, Cisco stock was bloodied as well: it fell $3.97 (more than 16 percent) to $20.52. That instantly erased nearly $24 billion in worth from one of the world’s most valuable companies.
Still, having been buffeted by hard economic times for the last two years, the Cisco announcement was quickly assimilated as just the latest piece of bad news in what seems like an endless run of such bleak corporate announcements. What seemed at the beginning of last summer as the long-awaited start of a turnaround in the U.S. economy, now is beginning to feel like the beginning of a long malaise and a dishearteningly shallow recovery. Even the careful optimism coming from other tech bellwethers like Intel and Google (notably the across-the-board raises and bonuses at the latter) hasn’t been enough to raise spirits in the tech world.
And so, despite the Cisco announcement, both the stock market and the tech world ended the week about where it began, with an attitude of More of the Same. . .and awaiting that one message that will point which way the economy is going to go: towards recovery or a double dip; inflation or deflation, optimism or despair.
But what if that message just got delivered? Anyone who knows the history of tech – especially if they were journalists in early 2001 – must have shuddered with a sense of déjà vu.
I know I did. I was running Forbes ASAP magazine in those days, spending my days scrambling to keep up with an industry boom of the likes I’d never seen before. Billionaires were being made overnight from businesses that had never seen a penny of profit, the rules of capitalism seemed to be suspended in order to reward everyone, and anybody – even doctors and other dilettantes – could become successful venture capitalists without having ever read a balance sheet.
It was at the absolute screaming apogee of all of this insanity that I found myself having a late lunch in Valley hotel bar watching John Chambers being interviewed on a business cable show. He was announcing an unexpected shift in Cisco’s fortunes – a stunning drop in orders – and he was quickly changing the company’s earnings forecast. But Chamber’s appearance said far more than his words: he was pale, measured and flat-voiced. It was an effective performance; but anyone who knew Chambers could see that the man was clearly terrified, as if he had seen his own ghost.
And he had. We now know, as John himself has subsequently admitted, that he had returned from the holiday break to discover that Cisco’s enormous backlog of orders had essentially. . .evaporated. In the course of a single day, Chambers had gone from believing Cisco was atop the business world to fearing that the company might already be doomed. Looking back, it was the moment that the dot.com bubble began to pop.
Needless to say, Cisco survived and went on to even greater success – not least because Chambers ran the company in such a way that he would never again be surprised as he had that day in early 2001. Indeed, one can even make a pretty strong case that Chambers is today one of the world’s best CEOs.
And that’s what made Cisco’s announcement last week so troubling. After all, IBM and Motorola had already announced that were optimistic about further growth in sales to government in the fourth quarter. Were they deluding themselves and their shareholders? Or was something wrong at Cisco?
We still don’t know the answer. But it seems to me that are three possible scenarios, none of them good. Let’s look at them from least scary to most terrifying.
1. Cisco’s got problems – Over the last few years, Cisco has undergone a major organizational transformation from what can best be described as a traditional, monolithic $30+ billion corporation into a radically knew ‘matrix’ organization of more than thirty largely independent operating units empowered with their own profit/loss responsibilities. Chambers admitted at the time that this was a risky move, with little precedent. So, perhaps the challenges of decentralization and coordination are proving more difficult that Chambers and his executive staff ever imagined. After all, it wouldn’t take more than a couple incompetent unit executives to damage the company’s bottom line. This is bad news for Cisco shareholders if those business units have to be fixed – and really bad news if the Cisco organizational model is a failure . . .especially as Cisco is facing a lot of big and small competitors these days. But it means little to the larger economy.
2. The other guys are wrong – This is a whole lot more scary. Chambers really is one of the best business leaders alive, he’s got a decade more experience since the crash of 2001, and, approaching retirement, he is very focused on his legacy. It’s hard to believe he got caught flat-footed – by the economy, by surging competitors or by an organizational breakdown. So, if he says the problems are external and beyond Cisco’s control, a betting man should probably believe him. But if you do, what that means is that: a) IBM, Motorola and others are flat-out deluding themselves – which may explain the commensurate drop in Big Blue’s stock on Cisco’s announcement; and b) What little momentum the U.S. economic recovery had is now fading away . . .and we face the prospect, at best, of sitting dead in the water for yet another year.
3. Chamber’s ghost is back – This is the one that should really scare the hell out of you. The simple fact is that John Chambers has not had to make an announcement like the one he did last week since that day in 2001. He didn’t look as frightened this time – but then, he’s already been through it once, and he’s had nine years to become a better actor. If the hidden message of this new announcement is the same as the hidden message of that historic announcement, then we are looling at the prospect of a double-dip crash . . .and given the state we are already in, with massive debt and high unemployment, the prospects for the U.S. – and world – are almost unthinkable.
I’d say that’s three good reasons why we should pay a whole lot more attention to what’s going on at Cisco Systems right now, and not treat it as More of the Same. Right now, John Chambers is sitting on information that may decide the near-term fate of the economy. We should stick around and listen.
First, in case you missed it, here are the details of the announcement. On Thursday, Cisco stunned both the tech world and the stock market when it cut its sales forecast for the second quarter in a row. Worse, chairman and CEO John Chambers said that the company’s current situation is the result of outside forces beyond the company’s control – in particular, declining orders from cable companies and government agencies.
The market responded quickly and strongly to such depressing news from one of the linchpins of the U.S. economy: the Dow fell nearly 74 points, or 0.7 percent to close at 11,283.10. It could have been a lot worse – at one point in the day trading was down as much as 126 points.
Needless to say, Cisco stock was bloodied as well: it fell $3.97 (more than 16 percent) to $20.52. That instantly erased nearly $24 billion in worth from one of the world’s most valuable companies.
Still, having been buffeted by hard economic times for the last two years, the Cisco announcement was quickly assimilated as just the latest piece of bad news in what seems like an endless run of such bleak corporate announcements. What seemed at the beginning of last summer as the long-awaited start of a turnaround in the U.S. economy, now is beginning to feel like the beginning of a long malaise and a dishearteningly shallow recovery. Even the careful optimism coming from other tech bellwethers like Intel and Google (notably the across-the-board raises and bonuses at the latter) hasn’t been enough to raise spirits in the tech world.
And so, despite the Cisco announcement, both the stock market and the tech world ended the week about where it began, with an attitude of More of the Same. . .and awaiting that one message that will point which way the economy is going to go: towards recovery or a double dip; inflation or deflation, optimism or despair.
But what if that message just got delivered? Anyone who knows the history of tech – especially if they were journalists in early 2001 – must have shuddered with a sense of déjà vu.
I know I did. I was running Forbes ASAP magazine in those days, spending my days scrambling to keep up with an industry boom of the likes I’d never seen before. Billionaires were being made overnight from businesses that had never seen a penny of profit, the rules of capitalism seemed to be suspended in order to reward everyone, and anybody – even doctors and other dilettantes – could become successful venture capitalists without having ever read a balance sheet.
It was at the absolute screaming apogee of all of this insanity that I found myself having a late lunch in Valley hotel bar watching John Chambers being interviewed on a business cable show. He was announcing an unexpected shift in Cisco’s fortunes – a stunning drop in orders – and he was quickly changing the company’s earnings forecast. But Chamber’s appearance said far more than his words: he was pale, measured and flat-voiced. It was an effective performance; but anyone who knew Chambers could see that the man was clearly terrified, as if he had seen his own ghost.
And he had. We now know, as John himself has subsequently admitted, that he had returned from the holiday break to discover that Cisco’s enormous backlog of orders had essentially. . .evaporated. In the course of a single day, Chambers had gone from believing Cisco was atop the business world to fearing that the company might already be doomed. Looking back, it was the moment that the dot.com bubble began to pop.
Needless to say, Cisco survived and went on to even greater success – not least because Chambers ran the company in such a way that he would never again be surprised as he had that day in early 2001. Indeed, one can even make a pretty strong case that Chambers is today one of the world’s best CEOs.
And that’s what made Cisco’s announcement last week so troubling. After all, IBM and Motorola had already announced that were optimistic about further growth in sales to government in the fourth quarter. Were they deluding themselves and their shareholders? Or was something wrong at Cisco?
We still don’t know the answer. But it seems to me that are three possible scenarios, none of them good. Let’s look at them from least scary to most terrifying.
1. Cisco’s got problems – Over the last few years, Cisco has undergone a major organizational transformation from what can best be described as a traditional, monolithic $30+ billion corporation into a radically knew ‘matrix’ organization of more than thirty largely independent operating units empowered with their own profit/loss responsibilities. Chambers admitted at the time that this was a risky move, with little precedent. So, perhaps the challenges of decentralization and coordination are proving more difficult that Chambers and his executive staff ever imagined. After all, it wouldn’t take more than a couple incompetent unit executives to damage the company’s bottom line. This is bad news for Cisco shareholders if those business units have to be fixed – and really bad news if the Cisco organizational model is a failure . . .especially as Cisco is facing a lot of big and small competitors these days. But it means little to the larger economy.
2. The other guys are wrong – This is a whole lot more scary. Chambers really is one of the best business leaders alive, he’s got a decade more experience since the crash of 2001, and, approaching retirement, he is very focused on his legacy. It’s hard to believe he got caught flat-footed – by the economy, by surging competitors or by an organizational breakdown. So, if he says the problems are external and beyond Cisco’s control, a betting man should probably believe him. But if you do, what that means is that: a) IBM, Motorola and others are flat-out deluding themselves – which may explain the commensurate drop in Big Blue’s stock on Cisco’s announcement; and b) What little momentum the U.S. economic recovery had is now fading away . . .and we face the prospect, at best, of sitting dead in the water for yet another year.
3. Chamber’s ghost is back – This is the one that should really scare the hell out of you. The simple fact is that John Chambers has not had to make an announcement like the one he did last week since that day in 2001. He didn’t look as frightened this time – but then, he’s already been through it once, and he’s had nine years to become a better actor. If the hidden message of this new announcement is the same as the hidden message of that historic announcement, then we are looling at the prospect of a double-dip crash . . .and given the state we are already in, with massive debt and high unemployment, the prospects for the U.S. – and world – are almost unthinkable.
I’d say that’s three good reasons why we should pay a whole lot more attention to what’s going on at Cisco Systems right now, and not treat it as More of the Same. Right now, John Chambers is sitting on information that may decide the near-term fate of the economy. We should stick around and listen.
The Biggest Show in Silicon Valley
Guest contributor: Scott Budman, technology reporter at NBC-KNTV in San Jose, Calif.
Apple, to paraphrase Jay-Z, Kanye West, and Rihanna, is still running this town.
And once again, Apple has answered with stunning financials. Great news — but, as always, with Apple we are left wanting to know more.
First off, how is Steve Jobs? The CEO may not be on the conference call, because he’s still on a medical leave of absence, but he’s been known to show up to launches lately, which always stokes the faithful. What about the rumor that just ran here on Forbes.com that the Apple board may be quietly interviewing potential replacements for Jobs.
Secondly, how are sales? Lately, easy to answer — iPads and iPhones are moving like hotcakes. So what’s next? Is the planned release of the Lion OS and MacBook Air updates on schedule? Will we see the iPhone 5 soon? And, with all that cash, how about a dividend? Surely, Apple is mature enough to share the wealth with its patient (and admittedly very satisfied) shareholders.
And — but probably less important to shareholders — what about these pesky patent lawsuits? Will any of them stick?
Bottom line: Apple, like Silicon Valley itself, is setting a pace way ahead of the rest of the economy. The stock price has been hot for a while, and investors will probably demand staggeringly good numbers before lifting the price much higher. That said, as yesterday’s news showed, Apple is still capable of delivering home runs every three months.
But it still feels like a high-wire act.
Apple, to paraphrase Jay-Z, Kanye West, and Rihanna, is still running this town.
As the Cupertino, consumer-tech giant once again opens its books to the public, its stock price has been red-hot, with a market capitalization nearing $400 billion, its cash pile continues to grow, and its products are flying off store shelves — economic slowdown be damned.
But as with any successful company in the tech industry, investors are not historians, but are rather concerned about the future. They quickly move beyond “What have you done for me lately?” and straight into “What will you do for me next?”And once again, Apple has answered with stunning financials. Great news — but, as always, with Apple we are left wanting to know more.
First off, how is Steve Jobs? The CEO may not be on the conference call, because he’s still on a medical leave of absence, but he’s been known to show up to launches lately, which always stokes the faithful. What about the rumor that just ran here on Forbes.com that the Apple board may be quietly interviewing potential replacements for Jobs.
Secondly, how are sales? Lately, easy to answer — iPads and iPhones are moving like hotcakes. So what’s next? Is the planned release of the Lion OS and MacBook Air updates on schedule? Will we see the iPhone 5 soon? And, with all that cash, how about a dividend? Surely, Apple is mature enough to share the wealth with its patient (and admittedly very satisfied) shareholders.
And — but probably less important to shareholders — what about these pesky patent lawsuits? Will any of them stick?
Bottom line: Apple, like Silicon Valley itself, is setting a pace way ahead of the rest of the economy. The stock price has been hot for a while, and investors will probably demand staggeringly good numbers before lifting the price much higher. That said, as yesterday’s news showed, Apple is still capable of delivering home runs every three months.
But it still feels like a high-wire act.
Carol Bartz On Why U.S. Ad Sales Dropped
Carol Bartz attributed Yahoo’s unexpected weakness in display ad revenue to a major transition in its ad sales team, in a conference call describing its quarterly earnings Tuesday.
That caused Yahoo’s revenue to come in at the low end of its exepcted range. “Obviously I’m not happy about our U.S. display performance,” Bartz said.
The first half of Q2 came in as expected but June brought “increasing softness,” $40 million below expectations, said CFO Tim Morse. Europe/Middle East and Asia/Pacific performed as expected but the drop was specifically in the U.S. This was not due to competition, or the larger economy or audience engagement, Bartz said. The problem was due to changes in sales leadership and structure, pointing to a large number of sales force turnover. That includes both people let go by Yahoo and sales people leaving on their own.
That resulted in premium ads selling through Yahoo’s low priced ad exchanges. There was plenty of premium ad supply, Bartz said, but not enough sales people to sell it. For example, Yahoo sold “significantly fewer” days on its Home Page–one of Yahoo’s prized ad sales properties–than last year. It’s a somewhat startling admission for a company like Yahoo which basically lives and dies by its ad sales force.
As a result of the sales force changes, Yahoo is guiding revenue flat in the upcoming third quarter. She said Yahoo has been working on a step by step process to fix things, but that it will take time to see results.
“First we had to get the strategy right,” Bartz said. “Clearly designed a vision of Yahoo as a premier digital media company. We focused on getting scalable technology platforms in place. Then we launched new, more dynamic sites. Now we’re intensively focused on monetizing those sites with solutions for advertisers. We believe the changes we make will bear fruit later this year and next year.”
The challenges for Yahoo in display come as the company faces challenges from two sides: from Google’s growing display ad efforts on one side, and upstart Facebook’s fast-growing social networking-based ads on the other side.
Other major points:
That caused Yahoo’s revenue to come in at the low end of its exepcted range. “Obviously I’m not happy about our U.S. display performance,” Bartz said.
The first half of Q2 came in as expected but June brought “increasing softness,” $40 million below expectations, said CFO Tim Morse. Europe/Middle East and Asia/Pacific performed as expected but the drop was specifically in the U.S. This was not due to competition, or the larger economy or audience engagement, Bartz said. The problem was due to changes in sales leadership and structure, pointing to a large number of sales force turnover. That includes both people let go by Yahoo and sales people leaving on their own.
That resulted in premium ads selling through Yahoo’s low priced ad exchanges. There was plenty of premium ad supply, Bartz said, but not enough sales people to sell it. For example, Yahoo sold “significantly fewer” days on its Home Page–one of Yahoo’s prized ad sales properties–than last year. It’s a somewhat startling admission for a company like Yahoo which basically lives and dies by its ad sales force.
As a result of the sales force changes, Yahoo is guiding revenue flat in the upcoming third quarter. She said Yahoo has been working on a step by step process to fix things, but that it will take time to see results.
“First we had to get the strategy right,” Bartz said. “Clearly designed a vision of Yahoo as a premier digital media company. We focused on getting scalable technology platforms in place. Then we launched new, more dynamic sites. Now we’re intensively focused on monetizing those sites with solutions for advertisers. We believe the changes we make will bear fruit later this year and next year.”
The challenges for Yahoo in display come as the company faces challenges from two sides: from Google’s growing display ad efforts on one side, and upstart Facebook’s fast-growing social networking-based ads on the other side.
Other major points:
- The Alipay situation: Bartz said Yahoo has “made substantial progress on definitive agreements.” But that it’s not done until “every word is finalized.” She said Yahoo is working to preserve value in Taobao and Alibaba group.
- On search, revenue ex-TAC was up slightly driven by owned-and-operated sites.
- Yahoo now has 67 websites on its new publishing platform and plans to have 135 sites up by year-end. The new platform allows more flexibility and scalability, Bartz says. In June, Yahoo brought close to 20 entertainment and lifestyle websites online
Apple’s Guidance Is Now, Officially, A Joke
On Tuesday, Steve Jobs & Co posted quarterly income 125% higher than the corresponding year-ago period. You don’t do that by playing games with investors. Which only makes the game Apple plays with its earnings guidance so baffling.
To be sure, it is kind of incredible that a business as big as Apple is can grow as fast as it has. Moreover, big companies work hard to manage investor expecations, and understating a company’s prospects is a part of that process. You might even argue that it’s a little irresponsible to tell investors to bet on new business that you’re not absolutely certain will materialize.
However Oppeheimer’s guidance — and that of the Wall Street analysts who take their cues from him — has been too low for too long to be useful. It’s an old story, at this point, but it’s worth touching on again with Apple crushing not just Wall Street’s estimates, but making a mockery out of the figures its Chief Financial Officer provided to investors just three months ago.
Most investors have picked up on this. On Tuesday, Oppenheimer said Apple will likely make “about” $5.50 worth of earnings per diluted share on sales of roughly $25 billion, well below the earnings per share of $6.45 on sales of $27.7 billion analysts surveyed by Thomson Reuters are expecting. At many companies, that would be enough to tank the stock. Apple shares, however, jumped $17.15, or 4.55%, to $394.
Image via CrunchBase
Investors got another example of that Tuesday. Following last quarter’s earnings, Apple Chief Financial Officer Peter Oppenheimer promised earnings per share of roughly $5.03 a share on sales of about $23 billion. The results Apple turned in — net income of $7.3 billion, or $7.79 per diluted share, on $28.6 billion in sales — don’t even look like they come from the same plane in space-time continuum.To be sure, it is kind of incredible that a business as big as Apple is can grow as fast as it has. Moreover, big companies work hard to manage investor expecations, and understating a company’s prospects is a part of that process. You might even argue that it’s a little irresponsible to tell investors to bet on new business that you’re not absolutely certain will materialize.
However Oppeheimer’s guidance — and that of the Wall Street analysts who take their cues from him — has been too low for too long to be useful. It’s an old story, at this point, but it’s worth touching on again with Apple crushing not just Wall Street’s estimates, but making a mockery out of the figures its Chief Financial Officer provided to investors just three months ago.
Most investors have picked up on this. On Tuesday, Oppenheimer said Apple will likely make “about” $5.50 worth of earnings per diluted share on sales of roughly $25 billion, well below the earnings per share of $6.45 on sales of $27.7 billion analysts surveyed by Thomson Reuters are expecting. At many companies, that would be enough to tank the stock. Apple shares, however, jumped $17.15, or 4.55%, to $394.
Monday, July 11, 2011
The Next Big Boom Towns In The U.S.
What cities are best positioned to grow and prosper in the coming decade?
Perhaps less expected is the No. 3 ranking for Nashville, Tenn. The country music capital, with its low housing prices and pro-business environment, has experienced rapid growth in educated migrants, where it ranks an impressive fourth in terms of percentage growth. New ethnic groups, such as Latinos and Asians, have doubled in size over the past decade.
The three other regions in our top 10 represent radically different kinds of places. The Washington, D.C., area (No. 6) sprawls from the District of Columbia through parts of Virginia, Maryland and West Virginia. Its great competitive advantage lies in proximity to the federal government, which has helped it enjoy an almost shockingly ”good recession,” with continuing job growth, including in high-wage science- and technology-related fields, and an improving real estate market.
Our other two top ten, No. 9 Phoenix, Ariz., and No. 10 Orlando, Fla., have not done well in the recession, but both still have more jobs now than in 2000. Their demographics remain surprisingly robust. Despite some anti-immigrant agitation by local politicians, immigrants still seem to be flocking to both of these states. Known better s as retirement havens, their ranks of children and families have surged over the past decade. Warm weather, pro-business environments and, most critically, a large supply of affordable housing should allow these regions to grow, if not in the overheated fashion of the past, at rates both steadier and more sustainable.
Sadly, several of the nation’s premier economic regions sit toward the bottom of the list, notably former boom town Los Angeles (No. 47). Los Angeles’ once huge and vibrant industrial sector has shrunk rapidly, in large part the consequence of ever-tightening regulatory burdens. Its once magnetic appeal to educated migrants faded and families are fleeing from persistently high housing prices, poor educational choices and weak employment opportunities. Los Angeles lost over 180,000 children 5 to 17, the largest such drop in the nation.
Many of L.A.’s traditional rivals — such as Chicago (with which is tied at No. 47), New York City (No. 35) and San Francisco (No. 42) — also did poorly on our prospective list. To be sure, they will continue to reap the benefits of existing resources — financial institutions, universities and the presence of leading companies — but their future prospects will be limited by their generally sluggish job creation and aging demographics.
Of course, even the most exhaustive research cannot fully predict the future. A significant downsizing of the federal government, for example, would slow the D.C. region’s growth. A big fall in energy prices, or tough restrictions of carbon emissions, could hit the Texas cities, particularly Houston, hard. If housing prices stabilize in the Northeast or West Coast, less people will flock to places like Phoenix, Orlando or even Indianapolis (No.11) , Salt Lake City (No. 12) and Columbus (No. 13). One or more of our now lower ranked locales, like Los Angeles, San Francisco and New York, might also decide to reform in order to become more attractive to small businesses and middle class families.
What is clear is that well-established patterns of job creation and vital demographics will drive future regional growth, not only in the next year, but over the coming decade. People create economies and they tend to vote with their feet when they choose to locate their families as well as their businesses. This will prove more decisive in shaping future growth than the hip imagery and big city-oriented PR flackery that dominate media coverage of America’s changing regions.
To determine the next boom towns in the U.S., Forbes, with the help of Mark Schill at the Praxis Strategy Group, took the 52 largest metro areas in the country (those with populations exceeding 1 million) and ranked them based on various data indicating past, present and future vitality.
We started with job growth, not only looking at performance over the past decade but also focusing on growth in the past two years, to account for the possible long-term effects of the Great Recession. That accounted for roughly one-third of the score. The other two-thirds were made up of a a broad range of demographic factors, all weighted equally. These included rates of family formation (percentage growth in children 5-17), growth in educated migration, population growth and, finally, a broad measurement of attractiveness to immigrants — as places to settle, make money and start businesses.
We focused on these demographic factors because college-educated migrants (who also tend to be under 30), new families and immigrants will be critical in shaping the future. Areas that are rapidly losing young families and low rates of migration among educated migrants are the American equivalents of rapidly aging countries like Japan; those with more sprightly demographics are akin to up and coming countries such as Vietnam.
Many of our top performers are not surprising. No. 1 Austin, Texas, and No. 2 Raleigh, N.C., have it all demographically: high rates of immigration and migration of educated workers and healthy increases in population and number of children. They are also economic superstars, with job-creation records among the best in the nation.
Perhaps less expected is the No. 3 ranking for Nashville, Tenn. The country music capital, with its low housing prices and pro-business environment, has experienced rapid growth in educated migrants, where it ranks an impressive fourth in terms of percentage growth. New ethnic groups, such as Latinos and Asians, have doubled in size over the past decade.
Two advantages Nashville and other rising Southern cities like No. 8 Charlotte, N.C., possess are a mild climate and smaller scale. Even with population growth, they do not suffer the persistent transportation bottlenecks that strangle the older growth hubs. At the same time, these cities are building the infrastructure — roads, cultural institutions and airports — critical to future growth. Charlotte’s bustling airport may never be as big as Atlanta’s Hartsfield, but it serves both major national and international routes.
Of course, Texas metropolitan areas feature prominently on our list of future boom towns, including No. 4 San Antonio, No. 5 Houston and No. 7 Dallas, which over the past years boasted the biggest jump in new jobs, over 83,000. Aided by relatively low housing prices and buoyant economies, these Lone Star cities have become major hubs for jobs and families.
And there’s more growth to come. With its strategically located airport, Dallas is emerging as the ideal place for corporate relocations. And Houston, with its burgeoning port and dominance of the world energy business, seems destined to become ever more influential in the coming decade. Both cities have emerged as major immigrant hubs, attracting on newcomers at a rate far higher than old immigrant hubs like Chicago, Boston and Seattle.The three other regions in our top 10 represent radically different kinds of places. The Washington, D.C., area (No. 6) sprawls from the District of Columbia through parts of Virginia, Maryland and West Virginia. Its great competitive advantage lies in proximity to the federal government, which has helped it enjoy an almost shockingly ”good recession,” with continuing job growth, including in high-wage science- and technology-related fields, and an improving real estate market.
Our other two top ten, No. 9 Phoenix, Ariz., and No. 10 Orlando, Fla., have not done well in the recession, but both still have more jobs now than in 2000. Their demographics remain surprisingly robust. Despite some anti-immigrant agitation by local politicians, immigrants still seem to be flocking to both of these states. Known better s as retirement havens, their ranks of children and families have surged over the past decade. Warm weather, pro-business environments and, most critically, a large supply of affordable housing should allow these regions to grow, if not in the overheated fashion of the past, at rates both steadier and more sustainable.
Sadly, several of the nation’s premier economic regions sit toward the bottom of the list, notably former boom town Los Angeles (No. 47). Los Angeles’ once huge and vibrant industrial sector has shrunk rapidly, in large part the consequence of ever-tightening regulatory burdens. Its once magnetic appeal to educated migrants faded and families are fleeing from persistently high housing prices, poor educational choices and weak employment opportunities. Los Angeles lost over 180,000 children 5 to 17, the largest such drop in the nation.
Many of L.A.’s traditional rivals — such as Chicago (with which is tied at No. 47), New York City (No. 35) and San Francisco (No. 42) — also did poorly on our prospective list. To be sure, they will continue to reap the benefits of existing resources — financial institutions, universities and the presence of leading companies — but their future prospects will be limited by their generally sluggish job creation and aging demographics.
Of course, even the most exhaustive research cannot fully predict the future. A significant downsizing of the federal government, for example, would slow the D.C. region’s growth. A big fall in energy prices, or tough restrictions of carbon emissions, could hit the Texas cities, particularly Houston, hard. If housing prices stabilize in the Northeast or West Coast, less people will flock to places like Phoenix, Orlando or even Indianapolis (No.11) , Salt Lake City (No. 12) and Columbus (No. 13). One or more of our now lower ranked locales, like Los Angeles, San Francisco and New York, might also decide to reform in order to become more attractive to small businesses and middle class families.
What is clear is that well-established patterns of job creation and vital demographics will drive future regional growth, not only in the next year, but over the coming decade. People create economies and they tend to vote with their feet when they choose to locate their families as well as their businesses. This will prove more decisive in shaping future growth than the hip imagery and big city-oriented PR flackery that dominate media coverage of America’s changing regions.
How To Check Out Your Stock Broker
There is a new reality for investors in the post financial crisis era. “Stocks for the long run” might not always be the best option, and almost all of the experts paid to help us invest wisely failed during 2007 and 2008. Many have chosen to go it alone, but others still find it necessary to hire a pro. Choosing the right financial advisor is critical, and luckily it has become much easier to check on your broker.
In the post-Madoff environment, everyone should check up on their financial advisor’s background. It’s one of the most basic steps that a majority of investors just don’t bother to do. A survey by the Financial Industry Regulatory Authority (FINRA) found that just 15% of investors have checked an advisor’s background or credentials with a state or federal regulator.
John M. Gannon, senior vice president of investor education at FINRA says knowing that you’re doing business with a licensed financial professional is the first critical step in avoiding investment fraud. “One of the first things investors should do when considering a financial professional is to look up their licenses and make sure they’re registered. Investors who already have financial professionals should check up their broker’s registration on an annual basis,” he says.
Gannon is referring to a database on FINRA’s Web site dubbed BrokerCheck. FINRA, which is a self-regulatory organization that oversees brokerage firms and their employees, maintains the database that stores some vital information on about 1.3 million current and former FINRA-stockbrokers and 17,000 current and former FINRA-registered brokerage firms.
BrokerCheck’s files disclose information about a stockbroker’s employment history (in and out of the financial services industry), where he’s registered, licenses he holds and, perhaps most importantly, it lists any investment related investigations, disciplinary actions, arbitrations, criminal records and bankruptcies.
Those disciplinary actions or disputes, while they don’t always tell the whole story, are important when vetting a financial advisor. Don’t be hesitant to ask about prior customer disputes or arbitrations with a potential advisor.
Not every financial advisor you come across will be found on FINRA’s BrokerCheck. There are more than 275,000 so-called investment advisor representatives registered with the Securities and Exchange Commission. The main difference between a FINRA registered stockbroker (who carry a Series 7 license) and an SEC-registered investment advisor (Series 65) is that the later is bound by a fiduciary duty meaning the law requires them to put their clients’ interests before their own.
A Series 7 stockbroker, on the other hand, is held to a suitability standard meaning he is able to sell you investment products that are, well, suitable. In other words, a Series 7 broker could sell you a pricy mutual fund that suits your needs even though there’s a less expensive one that does the same.
It’s easy to quickly look up either type of advisors’ records. Investment advisors held to the fiduciary standard must register with the SEC (or state regulator if they manage less than $25 million in assets). Their registration can be found on the SEC’s Web site through its Investment Adviser Public Disclosure page . Investment advisors are required to disclose more information than their Series 7 counterparts, including the amount of money they manage, the number of clients they work with, the type of clients they typically work with, and types of services offered.
The appeal of an investment advisor is great on the surface. Fiduciary, fee-only conflict free advice—what’s not to love? But fee-only investment advice doesn’t necessarily mean fraud-free. Let’s put it this way, Bernard Madoff was an SEC registered investment advisor.
Also keep in mind that a financial advisor could be registered as both a Series 7 stockbroker with FINRA as well as an investment advisor with the SEC or state regulator. These folks are typically referred to as duallyregistered advisors and can play two roles: one held to a fiduciary standard and the other to the suitability standard. So one minute a dually-registered advisor could be selling you a product that’s suitable for your needs and the next he could offer you investment advice that is held to a fiduciary standard.
This is one of the fastest growing sectors within the world of financial advisors. More and more stockbrokers are getting a license to provide fiduciary investment advice. The dual licenses are a nice way for advisors to collect both commissions and offer fee-based investment advice but it’s confusing for investors.
You should check if an advisor is registered with both FINRA and the SEC. If he is then make sure you always know which hat he is wearing because in a single meeting with you he can switch hats.
While looking up a financial advisor’s registration should be one of your first steps in your search for an advisor it’s by no means the only one in the process. Here are some issues to consider on your hunt for a financial advisor:
In the post-Madoff environment, everyone should check up on their financial advisor’s background. It’s one of the most basic steps that a majority of investors just don’t bother to do. A survey by the Financial Industry Regulatory Authority (FINRA) found that just 15% of investors have checked an advisor’s background or credentials with a state or federal regulator.
John M. Gannon, senior vice president of investor education at FINRA says knowing that you’re doing business with a licensed financial professional is the first critical step in avoiding investment fraud. “One of the first things investors should do when considering a financial professional is to look up their licenses and make sure they’re registered. Investors who already have financial professionals should check up their broker’s registration on an annual basis,” he says.
Gannon is referring to a database on FINRA’s Web site dubbed BrokerCheck. FINRA, which is a self-regulatory organization that oversees brokerage firms and their employees, maintains the database that stores some vital information on about 1.3 million current and former FINRA-stockbrokers and 17,000 current and former FINRA-registered brokerage firms.
BrokerCheck’s files disclose information about a stockbroker’s employment history (in and out of the financial services industry), where he’s registered, licenses he holds and, perhaps most importantly, it lists any investment related investigations, disciplinary actions, arbitrations, criminal records and bankruptcies.
Those disciplinary actions or disputes, while they don’t always tell the whole story, are important when vetting a financial advisor. Don’t be hesitant to ask about prior customer disputes or arbitrations with a potential advisor.
Not every financial advisor you come across will be found on FINRA’s BrokerCheck. There are more than 275,000 so-called investment advisor representatives registered with the Securities and Exchange Commission. The main difference between a FINRA registered stockbroker (who carry a Series 7 license) and an SEC-registered investment advisor (Series 65) is that the later is bound by a fiduciary duty meaning the law requires them to put their clients’ interests before their own.
A Series 7 stockbroker, on the other hand, is held to a suitability standard meaning he is able to sell you investment products that are, well, suitable. In other words, a Series 7 broker could sell you a pricy mutual fund that suits your needs even though there’s a less expensive one that does the same.
It’s easy to quickly look up either type of advisors’ records. Investment advisors held to the fiduciary standard must register with the SEC (or state regulator if they manage less than $25 million in assets). Their registration can be found on the SEC’s Web site through its Investment Adviser Public Disclosure page . Investment advisors are required to disclose more information than their Series 7 counterparts, including the amount of money they manage, the number of clients they work with, the type of clients they typically work with, and types of services offered.
The appeal of an investment advisor is great on the surface. Fiduciary, fee-only conflict free advice—what’s not to love? But fee-only investment advice doesn’t necessarily mean fraud-free. Let’s put it this way, Bernard Madoff was an SEC registered investment advisor.
Also keep in mind that a financial advisor could be registered as both a Series 7 stockbroker with FINRA as well as an investment advisor with the SEC or state regulator. These folks are typically referred to as duallyregistered advisors and can play two roles: one held to a fiduciary standard and the other to the suitability standard. So one minute a dually-registered advisor could be selling you a product that’s suitable for your needs and the next he could offer you investment advice that is held to a fiduciary standard.
This is one of the fastest growing sectors within the world of financial advisors. More and more stockbrokers are getting a license to provide fiduciary investment advice. The dual licenses are a nice way for advisors to collect both commissions and offer fee-based investment advice but it’s confusing for investors.
You should check if an advisor is registered with both FINRA and the SEC. If he is then make sure you always know which hat he is wearing because in a single meeting with you he can switch hats.
While looking up a financial advisor’s registration should be one of your first steps in your search for an advisor it’s by no means the only one in the process. Here are some issues to consider on your hunt for a financial advisor:
Highest Quality Cars of 2011
The driver’s seat cushion on the Dodge Charger kept squeaking as the car hit bumps in the road. It was starting to get annoying.
Although the bright red Charger left a positive impression, those two minor gripes proved how quickly even little things can spoil the enjoyment of owning a new car. That’s one reason why companies like J.D. Power and Associates in Westlake Village, Calif., track them.
The research firm’s Initial Quality Study surveyed 73,000 car buyers after 90 days of ownership and found that Lexus had the fewest issues overall, with “73 problems per 100 vehicles.” Honda, Acura, Mercedes-Benz and Mazda fill out the top five in the industry for 2011. Dodge was dead last.
Initial Quality Versus Long-Term Reliability
The first three months of ownership can be a good predictor of long-term reliability, says Raffi Festekjian, director of automotive research at J.D. Power. Lexus proves this point well: It is a perennial top performer, not only in terms of having the lowest problems during the first three months of ownership, but also throughout the first three years.
According to J.D. Power’s 2011 Vehicle Dependability Study, which tracks long-term reliability by looking at the number of problems on 2008 models, Lexus shows 109 per 100 vehicles. Statistically speaking, that might seem high, but that’s because of how J.D. Power’s surveys work. They not only root out defects and malfunctions—like the Charger’s squeaky seat—but also problems stemming from poor design—such as the unintuitive controls for the Charger’s navigation system.
In other words, the IQS survey results not only reflect actual problems, but perceived ones. And where the latter is concerned, it’s impossible to please everyone. A button that is within reach of a tall person might not work for someone with short arms, for example. “It’s just something that’s annoying to the consumer, and they will count that as a problem,” says Arthur Henry, market intelligence manager at Kelley Blue Book, who used to work for J.D. Power.
The Downside of Technology
Fancy new touch-screens and voice-command systems, like Ford’s MyTouch and Sync, are having the opposite of their intended effect on some consumers when it comes to perceptions of quality. Although meant to make life easier, some of the newfangled systems are so complicated or poorly executed that owners reported them as problematic on the IQS study.
Ford took a huge hit because of this, dropping from fourth place last year, with 93 problems per 100 vehicles, to 24th place in this year’s IQS ranking, with 116 problems per 100 vehicles. “The redesigned Edge, Explorer and Focus is what brought them down,” Festekjian says. “There was new technology, and integrating it into the vehicle can obviously be difficult. Ford is actively aware of this and they’re working to take care of it.”
The pursuit of better fuel economy is another area that bit automakers in the rear. Higher fuel prices and tougher regulations have prompted some manufacturers to tweak engine and transmission software for better fuel economy.
The result is often sluggish acceleration or a sense that the car hesitates before speeding up or shifting. Consumers reported this as a problem on 2011 models more often than vehicles from previous years.
The Top 10
There are as many mainstream brands as there are premium brands among the 10 vehicles with top IQS scores for 2011. “Consumers really don’t have to spend a lot of money and necessarily buy a premium car to actually get a vehicle that is made with the highest quality,” Festekjian says.
Lexus has the most models in the top 10, with a total of four, all sedans. Porsche’s 911, perennially at the head of the class when it comes to quality, takes third place, behind the
Lexus LS and ES. The Acura TSX rounds out the premium makes in the top-10 contingent.
The remaining models from mainstream brands—Ford F150, Honda Accord and Mazda MX-5 Miata—are all leaders in their respective segments, so it makes sense that consumers would rate them well, Henry says.
But getting back to the notion of actual versus perceived quality, all of the brands in the top 10 are known for building high quality cars. “Consumers are expecting it to be a good quality vehicle, so therefore they may be a little more lenient in terms of rating it that way,” Henry says.
It’s also interesting to note that all but one of the top 10 highest quality cars are mature have been out on the market for at least a couple of years, giving them to have their kinds worked out. But that’s not to say that automakers can’t get launch new vehicles with top quality. “To give you an example, the 2011 Hyundai Equus launched as an all-new vehicle and was the fourth best performing model in the industry,” Festekjian says. “But obviously your chances are probably greater if you’ve had a fifth-year vehicle that hasn’t required many changes.”
Top 10 Highest Quality Cars of 2011
1. Lexus LS — 54 problems per 100 vehicles
2. Lexus ES — 56 problems per 100 vehicles
3. Porsche 911 — 60 problems per 100 vehicles
4. Hyundai Equus — 61 problems per 100 vehicles
5. Mazda MX-5 Miata — 62 problems per 100 vehicles
6. Ford F-150 — 66 problems per 100 vehicles
7. Acura TSX — 67 problems per 100 vehicles
7. Lexus GS — 67 problems per 100 vehicles
8. Honda Accord — 71 problems per 100 vehicles
9. Lexus IS — 72 problems per 100 vehicles
9. Porsche Panamera — 72 problems per 100 vehicles
10. Honda Element — 75 problems per 100 vehicles
10. Toyota Tundra — 75 problems per 100 vehicles
Dodge Charger — Image by Getty Images
Like a pesky mosquito, the problem came and went a few times during a week-long test-drive recently. Fortunately, no other obnoxious sounds disturbed the car’s quiet, comfortable interior. The only other glaring fault was its finicky Garmin navigation system.Although the bright red Charger left a positive impression, those two minor gripes proved how quickly even little things can spoil the enjoyment of owning a new car. That’s one reason why companies like J.D. Power and Associates in Westlake Village, Calif., track them.
The research firm’s Initial Quality Study surveyed 73,000 car buyers after 90 days of ownership and found that Lexus had the fewest issues overall, with “73 problems per 100 vehicles.” Honda, Acura, Mercedes-Benz and Mazda fill out the top five in the industry for 2011. Dodge was dead last.
Initial Quality Versus Long-Term Reliability
The Lexus LS scored highest in J.D. Power's 2011 IQS ranking — Image by bbaunach via Flickr
According to J.D. Power’s 2011 Vehicle Dependability Study, which tracks long-term reliability by looking at the number of problems on 2008 models, Lexus shows 109 per 100 vehicles. Statistically speaking, that might seem high, but that’s because of how J.D. Power’s surveys work. They not only root out defects and malfunctions—like the Charger’s squeaky seat—but also problems stemming from poor design—such as the unintuitive controls for the Charger’s navigation system.
In other words, the IQS survey results not only reflect actual problems, but perceived ones. And where the latter is concerned, it’s impossible to please everyone. A button that is within reach of a tall person might not work for someone with short arms, for example. “It’s just something that’s annoying to the consumer, and they will count that as a problem,” says Arthur Henry, market intelligence manager at Kelley Blue Book, who used to work for J.D. Power.
The Downside of Technology
Ford Focus center console showing Sync menu — Image by HighTechDad via Flickr
Ford took a huge hit because of this, dropping from fourth place last year, with 93 problems per 100 vehicles, to 24th place in this year’s IQS ranking, with 116 problems per 100 vehicles. “The redesigned Edge, Explorer and Focus is what brought them down,” Festekjian says. “There was new technology, and integrating it into the vehicle can obviously be difficult. Ford is actively aware of this and they’re working to take care of it.”
The pursuit of better fuel economy is another area that bit automakers in the rear. Higher fuel prices and tougher regulations have prompted some manufacturers to tweak engine and transmission software for better fuel economy.
The result is often sluggish acceleration or a sense that the car hesitates before speeding up or shifting. Consumers reported this as a problem on 2011 models more often than vehicles from previous years.
The Top 10
Hyundai Equus unveiled April 1 at the New York International auto show — Image by AFP
Lexus has the most models in the top 10, with a total of four, all sedans. Porsche’s 911, perennially at the head of the class when it comes to quality, takes third place, behind the
Lexus LS and ES. The Acura TSX rounds out the premium makes in the top-10 contingent.
The remaining models from mainstream brands—Ford F150, Honda Accord and Mazda MX-5 Miata—are all leaders in their respective segments, so it makes sense that consumers would rate them well, Henry says.
But getting back to the notion of actual versus perceived quality, all of the brands in the top 10 are known for building high quality cars. “Consumers are expecting it to be a good quality vehicle, so therefore they may be a little more lenient in terms of rating it that way,” Henry says.
It’s also interesting to note that all but one of the top 10 highest quality cars are mature have been out on the market for at least a couple of years, giving them to have their kinds worked out. But that’s not to say that automakers can’t get launch new vehicles with top quality. “To give you an example, the 2011 Hyundai Equus launched as an all-new vehicle and was the fourth best performing model in the industry,” Festekjian says. “But obviously your chances are probably greater if you’ve had a fifth-year vehicle that hasn’t required many changes.”
Top 10 Highest Quality Cars of 2011
1. Lexus LS — 54 problems per 100 vehicles
2. Lexus ES — 56 problems per 100 vehicles
3. Porsche 911 — 60 problems per 100 vehicles
4. Hyundai Equus — 61 problems per 100 vehicles
5. Mazda MX-5 Miata — 62 problems per 100 vehicles
6. Ford F-150 — 66 problems per 100 vehicles
7. Acura TSX — 67 problems per 100 vehicles
7. Lexus GS — 67 problems per 100 vehicles
8. Honda Accord — 71 problems per 100 vehicles
9. Lexus IS — 72 problems per 100 vehicles
9. Porsche Panamera — 72 problems per 100 vehicles
10. Honda Element — 75 problems per 100 vehicles
10. Toyota Tundra — 75 problems per 100 vehicles
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