63 Brand-New Quotes From Warren Buffett; “More kids are ruined by the behavior of their parents than the size of their inheritance.”

63 Brand-New Quotes From Warren Buffett

By Matt Koppenheffer | More Articles | Save For Later
May 12, 2013 | Comments (8)

The tried and true “classic” Warren Buffett quotes are classics because they’re great, timeless bits of investing wisdom. But sometimes they can also feel a bit too well worn. Following are 63 brand-new quotes from Buffett, fresh from the May 4 Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) shareholder meeting.

1. On playing table tennis with Ariel Hsing at Borsheims: “If you’re courageous you’ll show up with your paddle and you’ll look like an idiot.”

2. “If the market continues as it has in 2013, this will be the first five-year period that Berkshire has underperformed. … It won’t be a happy day, but it won’t totally discourage us.”

3. On what makes ISCAR great: “[They] never stop improving the product, never stop trying to make customers happy.”

4. Responding to a shareholder who thanked him for letting attendees in early from the cold and rain: “If we had a company that sold coats, we would have left you out there.”

5. On his successor: “It would be rejected like a foreign tissue if we got the wrong person in there.” Read more of this post

Why Low-Risk Innovation Is Costly

Why Low-Risk Innovation Is Costly

Companies are finding it hard to churn out “the next big thing”. Instead of the disruptive products, services and business models of yesteryears, innovations coming to market today are typically line extensions.

An Accenture survey of more than 500 executives has found that while one in five (18 percent) respondents rate innovation as their top strategic priority and two-thirds depend strongly on innovation for their long-term strategy success, and more than half feel they have a sluggish innovation process. Companies are seeking to innovate but are increasingly less satisfied with the results. The respondents also have an answer to why this is happening. They are aware that a cautious approach and reduced investment by companies to generate renovation or, at best, incremental innovation is a potentially perilous strategy. By putting formal systems in place to manage innovation, companies can protect themselves from such risks. Enterprises able to successfully innovate at a breakthrough level are far more likely to dominate and prosper in the new markets they create. They can also position themselves to master change.

Last updated: May 17, 2013 10:26 pm

Companies see innovation without results

By Paul Taylor

The vast bulk of corporate innovation initiatives are failing to deliver the results that senior executives expected. Despite increased investment in innovation, only 18 per cent of executives believe their company’s innovation efforts deliver a competitive advantage, according to a survey conducted by Accenture and published this week. Read more of this post

What Value Creation Will Look Like in the Future

What Value Creation Will Look Like in the Future

by Jack Hughes  |   9:00 AM May 17, 2013

Organizations have nearly perfected implementing the industrial model of managing work — the effort applied toward completing a task. For individuals, this model ensures that we know what we’re supposed to do each day. For organizations, it guarantees predictability and efficiency. The problem with the model is that work is becoming commoditized at an increasing rate, extending beyond manual tasks into knowledge work, as data entry, purchasing, billing, payroll, and similar responsibilities become automated. If your organization draws value from optimizing repetitive work, you’ll find that it will be increasingly difficult to extract that value.

The value of products and services today is based more and more on creativity — the innovative ways that they take advantage of new materials, technologies, and processes. Value creation in the past was a function of economies of industrial scale: mass production and the high efficiency of repeatable tasks. Value creation in the future will be based on economies of creativity: mass customization and the high value of bringing a new product or service improvement to market; the ability to find a solution to a vexing customer problem; or, the way a new product or service is sold and delivered. Read more of this post

The ‘Believe It or Not’ Life of Ripley: The godfather of reality shows and purveyor of freaks empathized with struggling people; he’d been there.

May 17, 2013, 9:17 p.m. ET

The ‘Believe It or Not’ Life of Ripley

The purveyor of freaks and godfather of reality TV empathized with people on the margins; he’d been there

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The man primarily responsible for mainstreaming our voyeuristic tendencies was Robert ‘Believe It or Not!’ Ripley. In his cartoons and books, on radio and TV, the globe-trotting Ripley tapped into Americans’ appetite for the oddly titillating, the unbelievable, the uncomfortable.

By NEAL THOMPSON

America’s TV and computer screens are crammed with people doing extreme, dangerous, exotic, bizarre or embarrassing things. They crab-fish or dive for gold in Alaska; they compete in little-girl beauty pageants or run moonshine in the South; they attempt outrageous feats, striving to set records and, above all, get noticed.

Our obsession with peculiar people is nothing new, though, nor did it originate with P.T. Barnum, whose genius was for sideshow spectacle. The man primarily responsible for mainstreaming our voyeuristic tendencies was Robert “Believe It or Not!” Ripley. In his cartoons and books, on radio and TV, the globe-trotting Ripley tapped into Americans’ appetite for the oddly titillating, the unbelievable, the uncomfortable.

Until his death in 1949, at age 59, Ripley was the unrivaled impresario of freaks of the natural world (compare today’s “River Monsters”), exposes of popular falsehoods (cue “Mythbusters”) and celebrations of charismatic underdogs (“Here Comes Honey Boo Boo”). He gave a platform to every sort of specialist in self-abuse and pseudo-torture: sword swallowers, glass-eaters, contortionists and self-mutilators, from the man who lifted weights with hooks in his eyelids to the one who took a shot in the gut with a cannonball to the one who ate an entire sack of portland cement. During the Depression, as Americans sought affordable means of escape and entertainment in a world before television, Ripley provided both in abundance. In his day, he possessed the combined cultural clout of YouTube, “American Idol” and Monday Night Football. Read more of this post

The Tyranny of the Micromanager: It is notoriously difficult to get rid of a micromanager once he or she holds power. They rule without mercy, turning the minute and the mundane into weapons of war.

May 17, 2013, 9:09 p.m. ET

The Tyranny of the Micromanager

It is notoriously difficult to get rid of a micromanager once he or she holds power.

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By AMANDA FOREMAN

As anyone who has had the misfortune to work for a micromanager knows, success only makes the manager worse. Nor is this observation limited to CEOs of Fortune 500 companies.

Frederick the Great of Prussia was a notorious micromanager of his generals. During the battle of Zorndorf in 1758, he shunted around his battalions like a boy playing with tin soldiers. Finally, goaded to the point of exasperation by the king’s interference, his brilliant cavalry general Friedrich von Seydlitz had the following message relayed to headquarters: “After the battle the king can do what he likes with my head, but during the battle will he please allow me to use it?”

Frederick partially relented, once he made sure that their plans for battle were essentially the same, and Seydlitz went on to achieve a decisive victory against the Russians. But the following year at Kunersdorf, poor Seydlitz was not so lucky, and Frederick insisted on sending his beloved cavalry straight into the waiting guns of the Russian artillery.

It’s notoriously difficult to get rid of a micromanager once he or she holds the reins of power. They rule without mercy, turning the minute and the mundane into weapons of war. The trick is to recognize the danger signs early on and take the appropriate preventive measures. Read more of this post

The Book of Kings: A fast-paced, blood-soaked history of the dynasty that transformed England from a loosely-governed patchwork into a powerful nation

May 17, 2013, 3:30 p.m. ET

The Book of Kings

A fast-paced, blood-soaked history of the dynasty that transformed England from a loosely-governed patchwork into a powerful nation.

By STEPHEN BRUMWELL

In April 1349, as an epidemic of bubonic plague devastated his subjects, King Edward III of England staged a lavish tournament at Windsor Castle. This spectacular festival of jousting culminated in the creation of an exclusive club, the Order of the Garter. Edward was fascinated by stories of the legendary King Arthur. In founding a new order of chivalry, he sought to establish his own Knights of the Round Table, with an expanded Windsor standing in for Camelot.

Yet as Dan Jones amply demonstrates in “The Plantagenets: The Warrior Kings and Queens Who Made England,” such ostentatious display amid the horrors of the Black Death was justified by harsh personal experience: Edward’s father, Edward II, had been deposed and murdered in 1327 because of his failure to win the respect of his war-minded nobles. By inviting them to join his new fraternity, Edward III was not only rallying the military support he needed to pursue a claim to the crown of France—he had invaded the country in 1346 and warred there consistently through 1359—but taking steps to ensure that he would never share his father’s dismal fate. Read more of this post

Scientist who beat Nasa to the ozone hole: Joe Farman, physicist and environmental hero, 1930-2013

May 17, 2013 7:11 pm

Scientist who beat Nasa to the ozone hole

By Pilita Clark

Joe Farman was not long out of university when he nearly turned his back on the job that led him to make one of the most important discoveries in environmental science.

The young Cambridge physicist had spotted an advert in New Scientist magazine for a researcher to go to Antarctica. “I sort of blinked at it,” he later said, before eventually deciding: “Well if I don’t do it now I won’t ever do it.” That he applied was just as well. Farman, who has died aged 82, became the man who found the hole in the world’s ozone layer. Even so, it was not something that happened in the most straightforward way. By 1956 he had begun a life with what is now theBritish Antarctic Survey in Cambridge. “They were just doing curiosity-based research,” says Chris Rapley, a former BAS director. This included measuring the ozone in the stratosphere – the bluish-green gas that filters out ultraviolet solar rays, which hasten skin cancers, cataracts and other ills. Read more of this post

Financial Advice, Served Rare; A new wave of private firms that cater to clients’ every imaginable financial need are increasingly courting the merely wealthy

Financial Advice, Served Rare

A new wave of private firms that cater to clients’ every imaginable financial need are increasingly courting the merely wealthy. Here’s what they offer.

By Julie Steinberg, Kelly Greene

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You don’t have to be a Rockefeller to join a family office.

Family offices are private firms that manage just about everything for the wealthiest families: tax planning, investment management, estate planning, philanthropy, art and wine collections—even the family vacation compound.

Now many family offices are courting the merely rich.

The price of admission is still steep, and having your own personal chief financial officer doesn’t come cheap. But the help is worth considering.

Single-family offices gained popularity in the 1800s to manage the burgeoning fortunes of tycoons such as the Rockefellers. The offices offer many of the same services as top-tier private banks and wealth managers but are devoted to a single family. Read more of this post

Researchers at Princeton and Johns Hopkins universities used a 3-D printer to create bionic ears with auditory powers far beyond the natural human endowment. A look at the implications.

All Ears for a Revolution

By DANIEL AKST

The singularity may not be near, but it’s getting close enough that you might just hear it coming—if you had the kind of synthetic ears scientists recently developed.

The singularity is a term used by futurists for the merger of human and machine into an infinitely malleable, self-determining species with powers of intelligence that flesh-and-blood-mortals can only dream of. Although superhuman mental powers aren’t yet on the horizon, the new ears remind us that our future is very likely bionic.

Human ears are a problem for plastic surgeons. But writing in Nano Letters, researchers at Princeton and Johns Hopkins universities described how they used a standard 3-D printer to create bionic ears with auditory powers far beyond the natural human endowment. The technique lets scientists mimic the structural complexity of the ear while achieving a wider range of audible frequencies through the embedded electronics. They used the printed ear to culture genuine cartilage in vitro from calf cells. Read more of this post

Children’s Mental Illness Costs $247 Billion, U.S. Says

Children’s Mental Illness Costs $247 Billion, U.S. Says

Mental illness in children costs $247 billion annually, a figure increasing along with the number of kids hospitalized for mood disorders, substance abuse and other psychiatric disorders, according to a U.S. report.

As many as 1 in 5 children ages 3 to 17 years old has a mentally illness, with attention deficit hyperactivity disorder as the most prevalent diagnosis, according to the report from the Centers for Disease Control and Prevention. The rate of children hospitalized for mood disorders increased 80 percent from 1997 to 2010, the report said, citing a U.S. study from that year.

The CDC report released yesterday draws on a number of U.S. surveys that collect data on children’s mental health. The Atlanta-based agency uses the report to mark the prevalence of the disorders and promote public health initiatives to treat and prevent them. Researchers found that suicide, often stemming from mental illness, was the second-leading cause of death in 2010 among adolescents ages 12 to 17.

“Millions of children in the U.S. have mental disorders that affect their overall health and present challenges for their loved ones,” Thomas Frieden, the director of the CDC, said in a statement. “We are working to both increase our understanding of these disorders, and help scale up programs and strategies to promote children’s mental health so that our children grow to lead productive, healthy lives.” Read more of this post

How do you monetize a digital service?

Forget Ads! Here are the Money Making techniques every startup should know.

by Nick De Mey With 2 Comments

How do you monetize a digital service? Why would clients put their money on the table? In fact it doesn’t matter if you pick a freemium, subscription, license or any other model if you don’t understand the emotional context of your customers. You have to see what drives people to open up their wallet. Just look at other companies. The small nudges and psychological tricks they have in place can often be copied to your own product or service. In order to help you out we’ve selected 17 remarkable techniques documented with 36 cases.

Sweden is leading the world in allowing private companies to run public institutions

Sweden is leading the world in allowing private companies to run public institutions

May 18th 2013 |From the print edition

SAINT GORAN’S hospital is one of the glories of the Swedish welfare state. It is also a laboratory for applying business principles to the public sector. The hospital is run by a private company, Capio, which in turn is run by a consortium of private-equity funds, including Nordic Capital and Apax Partners. The doctors and nurses are Capio employees, answerable to a boss and a board. Doctors talk enthusiastically about “the Toyota model of production” and “harnessing innovation” to cut costs.

Welcome to health care in post-ideological Sweden. From the patient’s point of view, St Goran’s is no different from any other public hospital. Treatment is free, after a nominal charge which is universal in Sweden. St Goran’s gets nearly all its money from the state. But behind the scenes it has led a revolution in the relationship between government and business. In the mid-1990s St Goran’s was slated for closure. Then, in 1999, the Stockholm County Council struck a deal with Capio to take over the day-to-day operation of the hospital. In 2006 Capio was taken over by a group of private-equity firms led by Nordic Capital. Stockholm County Council recently extended Capio’s contract until 2021.

St Goran’s is now a temple to “lean management”—an idea that was pioneered by Toyota in the 1950s and has since spread from carmaking to services and from Japan to the rest of the world. Britta Wallgren, the hospital’s chief executive, says she never heard the term “lean” when she was at medical school (she is an anaesthetist by training). Now she hears it all the time. Read more of this post

Obamacare Sees Swiss Show Mandatory-Private System Works

Obamacare Sees Swiss Show Mandatory-Private System Works

Money manager Tim McCarthy has worked in the U.S., Russia and Switzerland, and has seen doctors in all three countries for Hashimoto disease, a condition in which his immune system attacks his thyroid. He has no doubt which health system is best.

“On a price-quality ratio, Switzerland is better,” McCarthy said in a phone interview. “It’s not cheap, but you get what you pay for.”

McCarthy, 46, has lived in Switzerland for about five years, where he oversees more than $1 billion at Valartis Asset Management SA in Geneva. He said he pays about 16,500 Swiss francs ($17,220) a year in insurance premiums for his family of four. Buying private health coverage has been obligatory in Switzerland for all residents since 1996.

As the U.S. moves towards mandatory health insurance, the small alpine nation offers clues about what does and doesn’t work, said Valerie Paris, a senior health policy analyst at the Organization for Economic Co-operation and Development, who co-authored a 2011 report on the Swiss health system.

“Everybody has access to a wide benefit package, which is uniform and very popular,” Paris said in a telephone interview. “It is a unique system that makes sense.” Read more of this post

US energy revolution gathers pace as the Obama administration approved wider exports of liquefied natural gas and international companies committed billions of dollars for new infrastructure.

Last updated: May 17, 2013 9:21 pm

US energy revolution gathers pace

By Ed Crooks in New York, Jonathan Soble in Tokyo and Guy Chazan in London

The growing role of the US in world energy markets was underlined on Friday as the Obama administration approved wider exports of liquefied natural gas and international companies committed billions of dollars for new infrastructure.

The developments were both consequences of the shale revolution in the US, in which improvements in the techniques of horizontal drilling and hydraulic fracturing, or “fracking”, have unlocked new supplies of oil and gas, and raised the prospect that the US will be an increasingly important supplier of energy to the rest of the world.

The Department of Energy on Friday authorised the Freeport LNG project in Texas to export to countries that do not have a trade agreement with the US, including Japan and the members of the EU. It was the first such approval to be granted for two years and only the second ever. Read more of this post

China deal ends distraction, but not questions, for Caterpillar

China deal ends distraction, but not questions, for Caterpillar

Fri, May 17 2013

By James B. Kelleher

CHICAGO (Reuters) – Caterpillar Inc’s (CAT.N: Quote,ProfileResearchStock Buzz) deal to cut the purchase price of a Chinese mining-equipment maker it bought last year ends an embarrassing episode that overshadowed the company’s effort to expand in China and distracted its executives for months. Now, analysts say, comes the hard part: Proving to investors that ERA Mining Machinery, the Chinese maker of hydraulic roof supports that Caterpillar purchased, really can help penetrate China’s huge underground mining market. In January, Caterpillar took a $580 million impairment related to the ERA deal after discovering what it characterized as a “deliberate, multi-year, coordinated accounting misconduct” at Siwei, a subsidiary that handled ERA’s principal business. Late on Thursday, Caterpillar said it reached a deal with the former controlling shareholders of ERA to cut $135 million from the $886 million purchase price – a move welcomed by analysts even if the money involved was, in the words of one, “a blip” in the U.S. company’s overall finances. “Outside of the reduction in purchase price, the chief benefit of the settlement is to eliminate the management distraction caused by the issue and get on with realizing the potential that led Caterpillar to buy this company in the first place,” said Alex Blanton, a senior analyst at Clear Harbor Asset Management in New York. “Whether or not it realizes the potential is another question,” he said. Read more of this post

Less guff, more puff: Thanks to new digital tools, marketing is no longer voodoo

Less guff, more puff: Thanks to new digital tools, marketing is no longer voodoo

May 18th 2013 |From the print edition

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WHEN a power cut interrupted this year’s Super Bowl, advertisers lit up. “Sending some LEDs to the @MBUSA Superdome right now,” tweeted Audi, swiftly plugging its own LED-accented car while taking a dig at its rival Mercedes, sponsor of the New Orleans Superdome. Tide, a detergent, came up with: “We can’t get your #blackout, but we can get your stains out.” But by general consent Oreo won the tweet-off with “Power out? No problem. You can still dunk in the dark.” The biscuit baker’s reward: 16,000 retweets and 20,000 Facebook likes.

Super Bowl TV commercials are the Broadway spectaculars of the marketing world, broadcast to millions. The blackout banter is more like improv, created on the fly for a select audience. Marketers these days must master both. It is not easy. Lightning reflexes have never been part of a marketer’s toolkit. Chief marketing officers (CMOs) “used to deliver big iconic brand ideas on a seasonal basis,” says Luke Taylor of DigitasLBi, a digital advertising agency. Some “are outside of their comfort zones”.

Nearly 40% of CMOs do not think they have the right people and resources to meet their goals, says an Accenture report entitled “Turbulence for the CMO”. Martin Sorrell, the boss of WPP, the world’s biggest marketing and advertising group, says that since the 2008 financial crisis marketers have been elbowed aside by finance and procurement chiefs. Dominique Turpin, the head of IMD, a Swiss business school, writes that “the CMO is dead”. Read more of this post

Korea still behind in software power; “The biggest issue is the lack of appreciation for intangible assets imbedded in Korean culture”

2013-05-17 17:23

Korea still behind in software power

State-run program needed to nurture software talent

By Cho Mu-hyun

Korea’s competiveness in the global IT industry has to date been from making durable, high quality hardware. Though many use Samsung Electronics’ Galaxy S3, few would say they’ve ever used a program made here and if they did, with satisfaction. The local industry has been well aware of the problem, even before big-named brands such as Samsung and LG kicked off abroad. But now that the new administration is pushing for a “creative economy,” there have been more visible initiatives for more software.
However, many say there is a fundamental issue that needs resolving. Hiring a bunch of software developers or pouring in money, which many conglomerates have been doing, doesn’t touch the heart of the matter, they say. “The biggest issue is the lack of appreciation for intangible assets imbedded in Korean culture,” said an executive of an enterprise software developer, requesting anonymity. “Piracy is embarrassingly high compared to other mature markets in the Asia Pacific region.” Read more of this post

Intel’s Outgoing CEO Says He Passed On A Chance To Get Intel Chips Inside The First iPhone

Intel’s Outgoing CEO Says He Passed On A Chance To Get Intel Chips Inside The First iPhone

Kevin McLaughlin | May 17, 2013, 7:48 AM | 2,765 | 2

When Steve Jobs unveiled Apple‘s first Intel-powered Macs at a January 2006 event in San Francisco, Intel CEO Paul Otellini made a dramatic entrance, emerging onstage from a cloud of smoke wearing a “bunny suit,” the protective outfit workers wear in Intel’s semiconductor fabrication plants. Otellini didn’t often engage in such bizarre pageantry during his 8-year tenure as Intel CEO, which officially ended Thursday. But the Apple Mac deal was a major coup for Intel, and the bunny suit helped Otellini drive that message home.  Now, as Otellini heads into retirement, he’s talking about an even bigger deal with Apple that he wasn’t able to close. When Apple was working on a prototype for the first iPhone, it approached Intel about making the processor for the device. But Intel passed on the opportunity because it didn’t make sense financially, Otellini told Alexis Madrigal of The Atlantic in an interview published Thursday.  “At the end of the day, there was a chip that they were interested in that they wanted to pay a certain price for and not a nickel more and that price was below our forecasted cost. I couldn’t see it,” Otellini told Madrigal. “It wasn’t one of these things you can make up on volume. And in hindsight, the forecasted cost was wrong and the volume was 100x what anyone thought.” While Otellini kept Intel on a profitable path, he wasn’t able to figure out how to make Intel relevant in smartphones, the majority of which are running ARM chips. Intel is still trying to figure out its mobile strategy, and incoming CEO Brian Krzanich said Thursday that he plans to fix this. Of course, Otellini isn’t the only tech executive who didn’t anticipate the impact the iPhone would have. Shortly before Apple launched the iPhone, Microsoft Steve Ballmer said it had “no chance” of gaining meaningful market share. Otellini told Madrigal his gut reaction was to pull the trigger on the Apple mobile deal. But he didn’t, and so it’s likely every time Otellini sees someone using an iPhone, he’ll cringe a little bit inside.

Target goes hunting in Silicon Valley, following Wal-Mart

Target goes hunting in Silicon Valley, following Wal-Mart

Fri, May 17 2013

By Alistair Barr

SAN FRANCISCO (Reuters) – Target Corp (TGT.N: Quote,ProfileResearchStock Buzz) said on Friday it opened a new San Francisco office to track down technology companies that can help the second-largest U.S. retailer grow its online commerce business. Target’s Technology Innovation Center is run by David Newman, an executive who spent six years at the online business of Wal-Mart Stores Inc (WMT.N: QuoteProfile,ResearchStock Buzz), which has had a major presence in Silicon Valley for several years. “Partnership is in our DNA and early-stage companies can sense that and are proving to be very willing to partner and co-develop,” said Newman. Many retailers are pouring money into new technology to help them catch up with Amazon.com Inc (AMZN.O:QuoteProfileResearchStock Buzz), which has become the world’s largest retailer by grabbing market share from traditional bricks-and-mortar stores. Mobile commerce, powered by smartphone-wielding shoppers, is a particular focus of retailers because this technology has the potential to revitalize in-store sales. Read more of this post

Coming to terms with China’s growth prospects

Coming to terms with China’s growth prospects

Yukon Huang

May 16, 2013

Markets have not been enthused by the numbers coming out of China in recent months. Typical headlines are “China’s production indicators disappoint” or “analysts are worried that rapid expansion is faltering”. Estimates of China’s economic growth this year are slipping from more than 8 per cent to something closer to 7.5 per cent. Those concerned about the country’s longer-term growth challenges, however, tend to be more relaxed about near-term outcomes but preoccupied with the new leadership’s commitment to reforms. Is there a trade-off between reviving the economy and establishing a sustainable basis for longer-term growth? Unfortunately there is. Beijing has run out of good options to further stimulate the economy as a strategy to buy time until western economies rebound. There are lessons from what happened in the aftermath of China’s post Asian financial crisis stimulus more than a decade ago. At that time China responded with a massive programme comparable to its more recent effort in the aftermath of the global financial/fiscal crisis spurred by the economic collapse in the US and Europe. China’s confidence in stimulus programmes was unrealistically buoyed by its success in dealing with the Asian crisis which resulted in a soft landing followed by years of sustained and rapid growth. But the lingering consequences of the 2009 stimulus package have not been as benign, with no signs that the resulting high debt levels are moderating and that continued expansionary credit policies are spurring production and real demand. Read more of this post

As cost of living rises, Singaporeans turn to pawnshops; Economist Intelligence Unit has ranked Singapore the world’s sixth most expensive city to live in.

As cost of living rises, Singaporeans turn to pawnshops

Agence France-Presse

Posted at 05/18/2013 12:31 PM | Updated as of 05/18/2013 12:32 PM

SINGAPORE – Singaporean housewife Siti Khadijah Abdul Rahman accumulated a few thousand dollars’ worth of gold accessories over the past two decades, but now a rising cost of living is forcing her to pawn them.

With a stretched household budget that must also cater to school expenses for her two teenaged children, the 49 year-old is pawning her gold to relieve pressure on her security guard husband, who earns Sg$1,500 ($1,211) a month.

“Pawning is better than going to friends or family when you have budget problems,” said Abdul Rahman. “When I have money, I will claim it back.”

She is one of a rapidly increasing number of people opting to take short-term pawnshop loans to try to keep up with rising prices, in what the Economist Intelligence Unit has ranked the world’s sixth most expensive city to live in. Read more of this post

American Capital Fights Fed Exit Worry as Investors Flee

American Capital Fights Fed Exit Worry as Investors Flee

Gary Kain built American Capital Agency Corp. (AGNC) into the fastest growing real estate investment trust as the Federal Reserve pushed borrowing costs to record lows. Now he’s trying to persuade investors to stay with him as he navigates the central bank’s retreat.

American Capital slumped 11 percent since May 2 through yesterday, the worst performance in a Bloomberg index of 34 companies that invest in mortgage bonds, after reporting an 8.6 percent drop in book value from the prior quarter. Annaly Capital Management Inc. (NLY), the only mortgage REIT bigger than American Capital, said its book value, a measure of its assets minus its liabilities, fell 4 percent.

“The issue isn’t if the Fed exits, it’s a question of whether they exit way earlier than expected,” Kain said in a telephone interview. “We feel like positions are in much better shape now than they were in the January-February time frame.”

Firms that buy government-backed home-loan bonds are under pressure as investors speculate the Fed will withdraw from buying $40 billion of mortgage securities each month as the economy shows signs of strengthening. American Capital, which increased assets over three years more than 20-fold to $100.5 billion at the end of 2012, plunged the most of mortgage REITs after targeting higher-priced bonds that would benefit from continued Fed intervention. Read more of this post

Europe’s EUR 500 Billion Ticking NPLTime Bomb

Europe’s EUR 500 Billion Ticking NPLTime Bomb

Tyler Durden on 05/17/2013 20:14 -0400

Europe’s non-performing loan problem is such an issue that there is increasing bluster that the ECB may take this garbage on to its balance sheet since policymakers realize that bad debts and non-performing loans (NPLs) reduce the capacity of banks to lend, hindering the monetary policy transmission mechanism. Bad debts consume capital and make banks more risk averse, especially with respect to lending to higher risk borrowers such as SMEs. With Italy (NPLs 13.4%) now following the same dismal trajectory of Spain’s bad debts, the situation is rapidly escalating (at an average of around 2.5% increase per year). As we discussed in detail here, the bottom line is that at its core, it is all simply a bad-debt problem, and the more the bad debt, the greater the ultimate liability impairments become, including deposits. As we answered at the time – the real question in Europe is: how much impairment capacity is there in the various European nations before deposits have to be haircut? With Periphery non-performing loans totaling EUR 720bn across the whole of the Euro area in 2012 and EUR 500bn of which were with Peripheral banks, it seems the Cyprus deposit haircut non-template may indeed become the key template. Simply put, the greater the unemployment the more the strain on banks to generate “profits” by any means possible (GGBS?) to cover the capitalization shortfall from NPLs until at some point liability haircuts have to begin… 

Non-performing loans as % of total loans across the Euro area; Unemployment rates across Euro area countries

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Via JPMorgan: It is not surprising that the periphery is exhibiting a rising pattern in terms of NPL ratios. What is worrying is the speed of increase, at 2.5% per year. Within the periphery, Greece is the outlier with a NPL ratio of 25%, and no signs of abating yet. Ireland follows with a NPL ratio of 19%. Italy (at 13.4%) is above Spain and Portugal (at close to 10%)… The German divergence is making the task of the ECB very difficult both in terms of setting monetary policy for the whole region, but also in terms of dealing with an impaired transmission outside Germany. Draghi clarified in its latest press conference that it is not the ECB’s role to clean up banks’ balance sheets, meaning that the ECB is unlikely to deal itself with the €500bn large non-performing loan problem in periphery.

Stranded Dad Decries Frankfurt Ban on Night Flights Aiding Dubai; “You can hub through Dubai rather than Heathrow or Frankfurt. There is no curfew in Dubai.”

Stranded Dad Decries Frankfurt Ban on Night Flights Aiding Dubai

Shortly after 10 p.m. in Frankfurt, Peter Meany settled into his seat on Qantas Airways Ltd. (QAN) flight QF6, looking forward to reuniting with his family in Sydney for his son’s birthday after a two-week business trip across Europe.

Meany, a 38 year-old fund manager with Qantas frequent-flier status, would miss the party. As the plane crawled to the runway, passengers were surprised to learn that they were five minutes over the last permitted takeoff time and would need to turn back. Frustrated and tired, Meany and his fellow travelers spilled back into the deserted airport building.

“People knew they weren’t going to see their families as planned, or wouldn’t make their meetings,” Meany said. “Bad weather is unavoidable, but I haven’t been in a situation like this in 20 years of flying.”

Meany is among more than 28,000 passengers who have been left stuck on the outskirts of Germany’s financial capital since Frankfurt introduced the night-flight ban in October 2011. While creating a steady stream of involuntary guests for local hotels, the directive has eaten into Deutsche Lufthansa AG (LHA)’s earnings and encourages long-distance passengers to travel via Dubai, where operations run around the clock. Read more of this post

EU Ban Leaves Buyers Holding 144 Million Homeless Carbon Credits

EU Ban Leaves Buyers Holding 144 Million Homeless Carbon Credits

Companies holding United Nations carbon offsets equivalent to 7 percent of the European Union’s annual emissions cap risk losing their investment unless they find a buyer for the credits the bloc banned earlier this year. Power stations and factories in the EU’s emissions-trading system still hold 144 million of the UN offsets after surrendering 552 million in the five years through 2012, EU data compiled by Bloomberg show. The bloc banned the use of credits awarded to projects that destroy nitrous oxide and hydrofluorocarbon-23, two powerful greenhouse gases. The UN’s Clean Development Mechanism awards Certified Emission Reductions, or CERs, to projects in developing countries that reduce climate pollution. The projects can sell the offsets to buyers in cap-and-trade markets such as Europe’s, who use the credits to cover emissions, or to governments seeking to meet Kyoto Protocol emissions targets. The banned credits, known as grey CERs, will “either end up in the hands of the sovereigns, or they become worthless,” Trevor Sikorski, an analyst in London at Energy Aspects Ltd., said by e-mail May 16. “With market prices where they are, one should be able to pick up an issued grey CER spot for 10 euro cents or so.”

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Purloined Picassos Chased by FBI Art Sleuths for Wealthy; “Stolen art, stolen antiquities move into a legitimate market very easily.”

Purloined Picassos Chased by FBI Art Sleuths for Wealthy

Stored inside a laptop at FBI headquarters are photos of thousands of paintings, sculptures and artifacts, works by Vincent Van Gogh and Henri Matisse, Pablo Picasso and Paul Cezanne — international treasures worth millions of dollars each. All are missing.

The computer belongs to Bonnie Magness-Gardiner, a PhD in Near Eastern archeology who leads the agency’s art-theft program and considers herself one of the least-likely employees walking through the doors of the J. Edgar Hoover Building headquarters in Washington each morning.

As wealthy investors seek to diversify their assets and Wall Street art enthusiasts like SAC Capital Advisors LP founder Steven Cohen beef up their collections, art crime is a growth industry and an increasingly important target for the Federal Bureau of Investigation. Read more of this post

Multiproduct Multinationals and the Quality of Innovation

Multiproduct Multinationals and the Quality of Innovation

Sasan Bakhtiari University of New South Wales

Antonio Minniti Catholic University of Louvain (UCL) – Center for Operations Research and Econometrics (CORE)

Alireza Naghavi University of Bologna – Department of Economics

May 10, 2013
Quaderni DSE Working Paper N° 879

Abstract: 
This research sheds light on the role of product scope on the innovation activity of multinational multi-product firms. We use patent citation data to break down innovation into two types by measuring the degree to which innovation performed by firms is fundamental and the extent to which the output of the R&D can be spread across different product lines. We focus on two features in multinational production: (i) fundamental innovation is geographically more difficult to transfer abroad to foreign production sites, (ii) learning spillovers can occur from international operations. The results reveal that the second effect is more likely to dominate when a firm is active in more product lines. We argue that a more diversified portfolio of products increases a firm’s scope of learning from international operations, thereby enhancing its ability to engage in more fundamental research. In contrast, firms with less product lines that geographically separate production from innovation shift the innovation activities towards more specialized types of innovation.

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