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Andrew Tobias
Andrew Tobias

Money and Other Subjects

Bad

January 24, 2006January 16, 2017

CARS – BAD MANAGEMENT

How could the executives at GM and Ford have failed to see that oil might rise sharply – not necessarily this year, but some year – and that a major R&D effort on fuel efficiency was in their shareholders’ (and our national) interest? Toyota saw it. We even saw them see it. How could we have allowed this to happen again, as it did when the first oil shock hit, in the Seventies? A tragedy for our team.

GAS – BAD GOVERNMENT

The New York Times reported yesterday that, though natural gas prices have sky-rocketed, American taxpayers – who own much of the land from which the gas comes – have seen their royalties go up almost not at all. The discrepancy? About $700 million.

From 1998 to 2001, a dozen major companies, while admitting no wrongdoing, paid a total of $438 million to settle charges that they had fraudulently understated their sale prices for oil. Since then, the government has tightened its rules for oil payments. But with natural gas, the Bush administration recently loosened the rules and eased its audits intended to uncover cheating.

☞ Aye, ’tis a grand time to be rich and powerful in America! Vote Republican!

SHANGHAI – BAD KARMA

Click here for the Los Angeles Times‘ tale of a real estate bust that surely couldn’t happen here, because . . well, hmmm. The top line:

American homeowners wondering what follows a housing bubble can look to China’s largest city.

Once one of the hottest markets in the world, sales of homes have virtually halted in some areas of Shanghai, prompting developers to slash prices and real estate brokerages to shutter thousands of offices.

For the first time, homeowners here are learning what it means to have an upside-down mortgage — when the value of a home falls below the amount of debt on the property. Recent home buyers are suing to get their money back. Banks are fretting about a wave of default loans.

“The entire industry is scaling back,” said Mu Wijie, a regional manager at Century 21 China, who estimated that 3,000 brokerage offices had closed since spring. Real estate agents, whose phones wouldn’t stop ringing a year ago, say their incomes have plunged by two-thirds.

Shanghai‘s housing slump is only going to worsen and imperil a significant part of the Chinese economy, says Andy Xie, Morgan Stanley’s chief Asia economist in Hong Kong.

☞ I’m not exactly predicting this for America’s hottest real estate markets, but I do think it’s an awfully good time to be cautious.

NTMD – BAD SCRIPS

BiDil prescriptions written for the week ending January 13 were 1,206, a new high. If all of them are for full price pills (vs. the company’s subsidized voucher program), that’s 90 pills per prescription times $1.80 per pill times 1,206 prescriptions times 52 weeks a year = $10 million a year in sales . . . against projected expenses of about $100 million, for a loss of $90 million. Presumably, the prescription rate will continue to build (and the average number of pills per prescription may rise), making for a smaller loss, perhaps just $70 million or $80 million. The stock is now $11, down from $22 when we started this thread last July. Don’t sell your puts.

NEW YORK TIMES SELECT – NOT BAD AT ALL

Rachel: ‘OK, you’re right … I subscribed.’

Gary Konecky: ‘Apparently you get a different version of the Times from the one I get. The one I get tells Bush administration lies about WMDs in Iraq. The one I get tells how Israel is always picking fights with their peace-loving Arab neighbors. The one I get used to be extremely homophobic. Sorry to tell you, but my dog is past puppy training and I no longer need the New York Times, despite Paul Krugman (the only thing in it worth reading).’

☞ Oh, my. I did say the Times was ‘surely not perfect’ . . . but obviously you think it’s a lot less perfect than that. On the homophobia piece, at least, can’t we agree to welcome the enlightenment of the past decade-plus rather than bear a grudge? And Krugman? Yes, he alone is worth that $1 a week. (And Frank Rich! And Floyd Norris! And so much more!)

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John Kenneth Galbraith, The Age of Uncertainty

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