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Financial Crisis? Banks Say “Play Ball!”

Friday, September 25th, 2009

Financial institutions are forming increasingly tight and profitable relationships with athletic organizations like sports teams – melding finance and sports and showing how finance intersects with many different aspects of modern life.

  • Banks’ investment in sports has increased with its ‘gentrification’ – stadiums are newer, seats are more comfortable, and tickets are more expensive.
  • An exclusive deal with a team can be a source of great revenue by bringing in retail customers (through affiliated debit and credit cards), managing the wealth of a team’s players and owners, or arranging the financing for a new stadium.
  • There are indirect benefits as well – Swiss bank UBS uses its sponsorship of Alinghi, a sailing team, to enthuse its employees.

Facts & Figures

  • In North America, sponsorship of sports by all companies grew by 11.2% in 2007 and 14.8% in 2008, but is expected to grow by only 1.8% in 2009.
  • In 2007, Lloyds TSB (now Lloyd Banking Group) pledged to support the 2012 Olympic games with $124 million.
  • Bank of America claims to make a $3 profit for every $1 spent on sports marketing.

Best Quote

“What people don’t see is how we’re using the Olympic access for our training and development. This is timely. If ever Lloyds needed Olympians, it is now.” — Sally Hancock, Director of Group Sponsorship at Lloyd Banking Group

Bailing Out From The Bailout…

Friday, September 25th, 2009

Some banks are doing their best to free themselves of the regulatory requirements imposed on them to ensure the TARP bailout money is put to good use.

  • Early repayment of bailout funds may be a sign that the financial industry is recovering from last year’s crisis, but it’s not yet clear whether banks that repay will change any of their business practices.
  • These ten companies will no longer be subject to TARP-related oversight and restrictions by the government, giving them a potential competitive advantage over companies that have not repaid.
  • The U.S. Treasury began buying stakes in struggling financial institutions in October 2008, with the expectation that it would hold onto those investments for at least 3 years. But Congress recently forced the administration to allow some banks to exit the arrangement just eight months later.
  • The federal government will no longer have a direct stake in banks that repay, but it will continue owning warrants and, according to President Obama, will continue to closely monitor the business practices of all financial institutions.

Facts & Figures

  • Since October, the government has spent $199 billion on TARP funding for 600 different companies. The 10 companies now repaying the funds represent $68 billion of that total.
  • The big ten: J.P. Morgan, Goldman Sachs, Morgan Stanley, U.S. Bancorp, BB&T Corp., American Express Co., Capital One Financial Corp., Bank of New York Mellon Corp., State Street Corp., and Northern Trust Corp.
  • TARP restrictions addressed: “executive pay, dividend increases, hiring certain foreign workers for U.S. jobs, and lavish spending on corporate jets and conferences, which fueled a public backlash.”

Best Quote

“These are challenging times, and that’s not going to change simply because we repaid TARP.” – Michael Cavanagh, CFO at J.P. Morgan

Bernie Goes From The Penthouse To The Big House

Friday, September 25th, 2009

When something seems too good to be true, it’s probably because it is. Consider this a cautionary tale…

  • Bernard Madoff was sent to jail on March 12th after pleading guilty to one of the biggest fraud scandals in history. Many believe the international attention of Madoff’s fall has worsened our “national crisis of confidence and distrust of the financial system.”
  • His crime: a global, multi-billion dollar Ponzi scheme.
  • The jailing came 3 months after Madoff’s infamous confession of his crime to his sons. Madoff insisted two sons worked for a part of his business that was separate from the Ponzi scheme. Yet the court says they were “one.”

Facts & Figures

  • Madoff faces a maximum 150-year sentence, but will most likely get as little as 20.
  • Many of Madoff’s investors lost all of their money, and one even committed suicide.
  • If he’s sent to a general population prison, his new reality would look like this: a TV in a common area, a ping-pong table, library visits, a rooftop basketball court every other day, and a khaki prison uniform.

Best Quote

“I realized that my arrest and this day would inevitably come.” – Bernard Madoff

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Gucci’s Red And Green Racing Stripes Led It Straight To 1st Place

Friday, September 25th, 2009
Did your favorite designer make the top 5?
  • Nielsen surveyed consumers around the world about their favorite luxury brands. Gucci made first place, followed by Chanel, Calvin Klein, Louis Vuitton, and Christian Dior.
  • The study attributes much of Gucci’s success to CEO Mark Lee. Since he became president in 2004 and then CEO in 2005, sales have soared.
  • Designer goods were found to be most desirable in emerging markets where consumers also hold knock-offs in very low regard. North Americans were found to be more indifferent to authenticity of designer-labeled products.

Facts & Figures

  • 1/3 of consumers in the United Arab Emirates and Hong Kong buy designer brands, compared to only 7% of North Americans.
  • On North Americans’ lack of interest in luxury brands, 35% said they wouldn’t want to buy designer goods even if cost were not an issue.
  • More than ¼ of North Americans said they were fine with fakes while only 8% of Asians were comfortable with the idea.

Best Quote

“That red and green stripe is some of the most iconic luxury branding ever created, and people want a piece of it.” – Michael Macko, Fashion Director at Saks Fifth Avenue, on Gucci

Will Cheaper iPhones Create Converts?

Friday, September 25th, 2009

Even a company as glitzy and popular as Apple needs to cut prices to compete in this economy – nobody can escape basic economic relationships between price and demand.

  • Hoping to sustain the momentum for its trendy smart phone in the middle of the recession and among increasingly prominent competitors, Apple decreased the price of its entry-level iPhone 3G from $199 to $99.
  • Main competitors include Palm Inc. and Research in Motion Ltd. (creator of the BlackBerry line of devices).
  • Apple also decreased the price of some of its other products, including the MacBook Pro, the MacBook Air, and the Mac OS X Snow Leopard operating system.

Facts & Figures

  • Apple has sold more than 20 million iPhones so far.
  • The new $99 iPhone 3G could increase iPhone demand by as much as 50%.

Best Quote

“These are very aggressive prices.” — Richard Doherty, Analyst with Envisioneering Group (a technology consultancy)

Who Let The Dogs Out?

Friday, September 25th, 2009

Pet Airways services a niche carved out by the recent social phenomenon of large expenditures for our furry friends.

  • Pet Airways was launched after an increase in the number of deaths of pets flying in the cargo hold of commercial airliners.
  • Pet Airways believes pets are not simply passengers but “pawsengers” and even allows you to track your pet along his or her flight with a feature on their website called the “Pet Tracker.”
  • The process is simple: you drop your pet off at the “Pet Lounge” and an attendant tends to your pet throughout the flight. After landing, your pet is shuttled to another Pet Lounge where you can pick it up.

Facts & Figures

  • Flights will be pet-only; no owners are allowed on board.
  • Pets can fly to and from New York, Chicago, Denver, Los Angeles, and Washington DC.
  • Airfare starts at $149 each way.

Best Quote

“Currently, most pets traveling by air are transported in the cargo hold and are handled as baggage. The experience is frightening to the pets, and can cause severe emotional and physical harm, even death. This is not what most pet owners want to subject their pets to, but they had no choice, until now.” – Dan Wiesel, President and CEO of Pet Airways

VIPs Can’t Afford The Gala… Should The Party Go On?

Friday, September 25th, 2009

Everyone is feeling the recession – even the rich – and that’s making it difficult for nonprofits to find honorees for their glitzy gala fundraising events.

  • The spring benefit season in New York (usually heavily funded by Wall Street) has been hurt by the struggling financial sector.
  • Potential honorees are opting out, not wanting the responsibility of asking friends and family for money in such lean times.
  • Some organizations, like Carnegie Hall, have canceled their galas, while others have gone ahead with their events without an honoree.

Facts & Figures

  • Groups earn anywhere from a few percentage points of the annual budget to the majority of a year’s expenses.
  • Nonprofit endowments are down 25 to 30%.

Best Quote

“This idea of getting on the phone and saying, ‘Wouldn’t you like to be honored at our gala?’ – that’s more difficult, more challenging now than in my 30 years of experience at this.” – Will Maitland Weiss, Executive Director of the Arts and Business Council of New York

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Climate Change An Increasingly Popular Career Path For College Students

Friday, September 25th, 2009

This translation explores the changing landscape of the economy and different ways young people are getting involved with issues that matter.

  • Concern about climate change is inspiring unprecedented numbers of undergrads to study science and engineering, which is timely as there will soon be a shortage of engineers in this country.
  • The White House’s multi-billion dollar push to support “clean energy” will foster a new sector of  “green jobs.”
  • Helping solve large-scale societal problems is a major draw for young people.

Facts & Figures

  • Enrollment in graduate engineering programs dropped more than 5% from 2003 to 2005.
  • The rate at which American workers with science and engineering skills retire is expected to triple over the next decade.

Best Quote

“The most critical challenge over the long-term is people and brainpower.” – Karen Harbert, Executive Vice President and Managing Director of the U.S. Chamber of Commerce’s Institute for 21st Century Energy

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Asia Is Going Green And Leaving The U.S. In The Dust

Friday, September 25th, 2009

If you thought that the U.S. and Europe were the powerhouses of green technology, you should probably check out what Asia is proposing to do below. Just a hint: it involves a lot of money!

  • In August, leaders from China, Japan, and South Korea will try to work out a plan that proposes sharing resources and technology to create a green-technology powerhouse.
  • Japan and South Korea have highly advanced technology sectors while China is one of the strongest manufacturing powers in the world. By combining forces, they hope to easily dominate the green economy.
  • The U.S. and Europe may respond to the Asian countries’ effort with renewed intensity and investment or could find themselves falling behind in a new low-carbon economy.

Facts & Figures

  • In their economic stimulus programs, green investments account for 81% of South Korea’s and 38% of China’s spending – the U.S.’s is at 12%.
  • Estimates put Europe’s investment in clean energy at $50 billion for 2008, while North America’s is only at $30 billion.
  • In June 2009, the U.S. started a $25 billion program to help car makers retool their assembly lines for more fuel-efficient car production.

Best Quote

“[South Korea hopes to create] a new paradigm of qualitative growth which uses less energy and is more compatible with environmental sustainability.” – Han Seung-Soo, Prime Minister of South Korea

Battered Bonuses, Dropping Donations

Friday, September 25th, 2009

You may find it interesting which type of charities see the most decline during bad economic times. Just like certain industries might be hurting more than others, charities see uneven declines as well – this piece might help you when thinking about different donation strategies.

  • In 2008, charitable donations fell drastically as the effects of the recession were being fully realized.
  • Even with such a decline, total giving was still at at an historic level – higher than every previous year except 2007.
  • Charities are uncertain how the recession will continue to affect donations, but they are pretty sure that giving will keep declining for a while longer.

Facts & Figures

  • In 2008, gifts and pledges decreased 5.7% to $307.65 billion.
  • Charities that provide basic services (food banks and shelters) saw an estimated 15.95% decline in donations for 2008.

Best Quote

“We saw corporations begin rethinking their giving in greatly different ways, and we saw individuals begin to revisit their philanthropic priorities.” – Del Martin, Chairman of the Giving USA Foundation

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