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Art Auction Draws Attention From Investors of All Types

Wednesday, November 4th, 2009

A batch of prestigious works of art that once hung proudly in the corporate headquarters of Lehman Brothers find new homes at auction in Philadelphia.

  • The works were sold for a total of $1.35 million in order to help repay Lehman creditors.
  • The sale lasted six hours and most pieces sold for significantly more than their presale high estimates.
  • The Lehman name attracted art collectors and investors that were looking for a piece of history.

Facts & Figures

  • 283 pieces were sold at more than double their projected total of $760, 800
  • Lehman owes $250 billion to its creditors
  • The top lot was Roy Lichtenstein’s Statue of Liberty print (1982) for $49,000, estimated presale at $25,000

Best Quote

“I think there was a certain amount of trophy hunting. What’s not to like? It’s nice boardroom art, presented nicely, ready to go up on the walls. People laced it up.” – Alasdair Nichol, Vice Chairman and Auctioneer of Freeman’s Auctioneers in Philadelphia

New GDP Figures Turn Decline Upside-Down

Friday, October 30th, 2009

Could the Great Recession be over because the GDP did not shrink for one quarter?

  • The gross domestic product of the United States grew at a rate of +3.5% in the third quarter of 2009, which is the same amount as the average growth rate of the last 80 years.
  • Although jobs are still sparse and the housing market is still in bad shape, government programs helped encourage consumer spending on all sorts of goods.
  • There is still a risk of slowed growth or a dip in GDP because the third quarter’s growth can be attributed in part to strong stimulus packages, which will expire in coming months.

Facts & Figures

  • The stimulus packages that encouraged growth in GDP include the $787 billion package approved in the winter of 2008-2009 and the Cash for Clunkers program.
  • Jobless rate reached 9.8% in September 2009, despite GDP growth.
  • American exports (goods being sold outside the country) grew at an annual rate of 14.7% and imports (goods coming in from abroad) grew at a 16.4% annual rate.

Best Quote

“The big-picture perspective is that things have improved. The question is, how sustainable is this growth going forward?” – Jan Hatzius, Chief U.S. Economist at Goldman Sachs

Pay Slashed at Firms That Received TARP Funds…Sort of

Monday, October 26th, 2009

The Obama administration appears to be punishing some executives at the financial institutions it helped bail out… except for those firms that have already repayed their TARP loans.

  • Despite the fact that pay for the top executives will be cut by roughly 50% of total compensation this year, in some cases salaries could still be multi-million dollar packages.
  • The “Pay Czar” – Kenneth Feinberg of the Treasury Department – created this compensation plan for the 7 companies that borrowed the most TARP funds.
  • The companies that have paid back their TARP funds, including JPMorgan Chase, Goldman Sachs and Morgan Stanley will not face restrictions on pay.

Facts and Figures

  • Executive perks that are worth more than $25,000 will require government approval.
  • The 7 companies where pay is restricted are: Bank of America, Citigroup, American International Group, General Motors, Chrysler and the two financing arms of GM and Chrysler.
  • The departing CEO of Bank of America won’t receiving a salary or bonus this year (his pension is still more than $50 million).


What If You Couldn’t Stop Shopping?

Friday, October 23rd, 2009

Do you consider yourself a shopper? A collector? Or is your habit something… more?

  • Hoarding, a psychological disorder that causes people to hold on to mountains of unnecessary items, is estimated to effect up to 2% of the U.S. population. Hoarders can collect anything from magazines to craft supplies to live animals, and are often unaware of the mess they live in.
  • Hoarding is often seen as a form of obsessive-compulsive disorder, but is different because it is less of a compulsion and more of a dissociated state focused on the frenzy and neurological rewards associated with acquiring something new. Many hoarders show signs of multiple background psychological disorders.
  • Experts recommend that concerned families avoid shaming the hoarder or trying to forcibly clean out their houses. Instead, focusing on the problems that the hoarding causes and dealing with some of the underlying psychological disorders seems to help.

Facts & Figures

  • The Collyer brothers became famous hoarders in 1947, when they died at home surrounded by 14 pianos, 25,000 books, thousands of newspapers, and part of a car.
  • Approximately 2% of the population, across all socioeconomic dimensions, meets diagnostic criteria for hoarding.
  • Experts at Tufts University have seen cases of animal hoarding with 1,000 animals living in the same home.

Best Quote

“Attorneys, surgeons, business executives—some very bright and successful people that you’d never suspect have this problem. Sometimes they’re the life of the party, but nobody’s ever been invited to their home.” – Michael A. Tompkins, Psychologist

Recession Or Not, The Wealthy Are Passing

Thursday, October 22nd, 2009

There are some ways that money moves around in an economy that have very little to do with the stock market or unemployment statistics.

  • Even though the recession has ruined many a good portfolio, Boston College’s Center on Wealth and Philanthropy is predicting a “golden age of philanthropy” between 1998 and 2052.
  • Wealthy individuals often distribute their assets at death among heirs, tax payments, charities, and legal fees, and these distributions are largely unaffected by the current economic climate. As a result, analysts project that this is the largest wave of charitable giving ever in the United States.
  • Some people, though, are donating large chunks of their net worth while they are still alive, thereby eliminating the portion that would typically go to the government after death, and confounding the researchers at Boston’s CWR.

Facts & Figures

  • CWR researchers projected an overall wealth transfer of $41 trillion between 1998 and 2052, mostly as resulting from asset exchanges at death.
  • The $41 trillion estimate still applies during the recession because researchers used a very conservative 2% annual increase in wealth in their calculations.
  • Federal data show approximately $12 trillion being transferred to heirs between 1998 and 2017.

Best Quote

“The downturn is not going to keep people from dying, and it is not going to keep a wealth transfer from occurring.” – Paul Schervish, Director of The Center on Wealth and Philanthropy at Boston College

The Educated, Unemployed Generation

Wednesday, October 21st, 2009

It’s normal to be unemployed right after college, but being young and unemployed for a long time is bad for everyone.

  • Young people are being disproportionately affected by the recession because they’re missing out on entry-level employment opportunities, even when they’re highly qualified. Employers lose, too: young employees bring freshness and ambition to the job.
  • Being unemployed in one’s youth can lead to lower lifetime earnings due to missed opportunities, experiences, and sometimes a stigma. On a large scale, this will adversely affect tomorrow’s retirees, who will depend on this generation’s earnings to fund their Social Security benefits.
  • Some call for government action in the form of a more flexible minimum wage (employers that must pay the increased minimum wage are increasing their education and experience requirements commensurately), or increased training and apprenticeship programs. But the budget deficit makes these options unlikely.

Facts & Figures

  • The unemployment rate for 16- to 24-year-olds is more than 18% in the U.S., 39% in Spain, 24% in France, and 19% in Britain.
  • 46% percent of 16- to 24-year-old Americans were employed in September 2009.
  • A study showed that 15 years out of school, workers began their careers in a recession earned 2.5% less than workers who began in a better economic climate.

Best Quote

“Every morning I wake up thinking today’s going to be the day I get a job. I’ve not had a job for months, and it’s getting really frustrating.” – Dan Schmitz, recent college graduate

Pay More For Peace Of Mind?

Monday, October 19th, 2009

Seems like you can buy an extended warranty on anything these days, but is it really worth the investment?

  • Extended warranties are a big source of profit for both the retailers selling the product, but also for third party warranty dealers that operate outside of the retailers’ awareness.
  • Car dealers in particular try to sell extended warranties to increase their bottom line because the average car purchase today results in a net loss for the dealer.
  • In most cases, springing for the extended warranty probably isn’t worth it. But if you’re famous for breaking your cell phone, or the item you’re buying is known to break down a lot, it may save you a lot of repair and replacement money in the end.

Facts & Figures

  • 34.4% of new car buyers bought extended warranties in the first half of 2009.
  • 65% of Consumer Reports survey respondents reported that they spent more on their car warranties than they recouped in repair savings.
  • To extend the coverage on a Toyota Highlander to 8 years or 100,000 miles, an extended warranty will cost between $1,325 and $1,600.

Best Quote

“It’s insurance. It depends on the customer’s views about risk.” – Paul Taylor, Chief Economist for the National Automobile Dealers Association

Record Pay For Recession Bankers

Thursday, October 15th, 2009

Thinking about a job on Wall Street? If you don’t already, you should know they take their compensation and benefits very seriously…

  • Despite increased regulation and public outrage over Wall Street salaries and bonuses, financial firms are about to break a record for total compensation this year.
  • Some of these companies are feeling free to shell out for top talent after paying off their TARP debt to the government. Others are made confident by the rallying stock market and easier credit. This is all despite a national unemployment rate that is almost at 10%.
  • Not all banks are increasing the percentage of their revenue that goes toward compensation; some increases are simply a result of larger banks absorbing smaller ones, and some firms have actually decreased their corporate compensation.

Facts & Figures

  • According to a Wall Street Journal analysis of 23 financial firms, the average employee will earn $143,400, which is $2,000 more than the average salary in 2007.
  • These firms will pay a total of approximately $140 billion to their employees in 2009.
  • The typical compensation rate at large investment banks is about 50% of every dollar of revenue.

Best Quote

“Compensation played a role in the financial crisis, and yet nothing has changed.” – J. Robert Brown, Professor at University of Denver Law School

Winter Forecast: Fewer Flights And Higher Fares

Thursday, October 15th, 2009

American airlines are taking a hint from European discount airlines: pack ‘em in and charge extra for everything.

  • Though the economy is picking up elsewhere, the airline industry is still struggling. And that means higher fares and more annoying fees for you, the traveler.
  • To save money, many airlines are paring back their schedules, which will decease the total number of  flights available. At the same time, business travel is expected to increase, which will limit supply even more.
  • Many airlines have already added a holiday travel surcharge, and are also considering additional fees for online booking, advance boarding, and infants.

Facts & Figures

  • According to Tom Parsons of BestFares.com, the cost of domestic flights has increased recently by more than 50%.
  • Delta, American, United, and US Airways will be charging an extra $10 per ticket on certain holiday travel dates this winter.

Best Quote

“Even with the new fees, airlines are losing billions. So it’s either fees, higher fares, or we’ll see some more airlines fall into the aviation ash heap along with TWA, Pan Am, Skybus and Independence Air.” – George Hobica,  Founder of AirfareWatchdog

Rainforest Action Network Targets Fashion Houses

Thursday, October 15th, 2009

Would you want a beautiful shopping bag if it meant clearcutting a section of rainforest in Indonesia?

  • Rainforest Action Network, an activist group (and TILE Cause) that focuses on corporate responsibility when it comes to rainforests, seems to have made a major victory in the fashion industry by targeting a supplier of high-end shopping bags.
  • In a letter to 100 fashion firms, RAN explained that paper goods supplier Pak 2000 had very close ties with Asia Pulp and Paper, a company notorious for damaging the environment in order to harvest wood pulp. (Pak 2000 has since indicated that it may soon cut ties with the company.)
  • Several large clients have since ended their relationships with Pak 2000, many citing normal business relations. But some companies, like H&M, credited the supplier shift to RAN’s letter specifically, and RAN says it is talking to 20 additional companies about switching to sustainable bag suppliers.

Facts & Figures

  • Some current and former clients of Pak 2000 include: Barney’s, Billabong, Cartier, Chanel, Coach, Estee Lauder, Gucci, J.Crew, Marc Jacobs, Montblanc, Movado, and Ralph Lauren.
  • Deforestation is responsible for a fifth of total greenhouse gas emissions.
  • The United States and China are the largest producers of greenhouse gases, followed by Indonesia, where Asia Pulp and Paper does much of its wood harvesting.

Best Quote

“Because Pak 2000 is selling to very high-profile companies, it’s a good place to start our work, to introduce this issue to a new sector, the fashion industry.” – Lafcadio Cortesi, RAN’s Forest Campaign Director

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