The Daily Biz

Global Variance in the Price of Gas

Sat, 12 Mar 2011 01:01:00 -0600

Another riveting article title COMING AT YOU! I should write romance novels.

Anyhow, I know I write about oil and gas almost as much as I write about retail. Stories about fossil fuels tend to dominate financial news because fuel determines how much transport costs, and transport affects many businesses. Fuel prices can even affect how some businesses develop- back in January I wrote about the state of “brick and mortar” businesses. These businesses must routinely pay to have product shipped to stores all over the country. That can get pricey, and as such many retailers are exploring digitized content like e-books or MP3s which do not require physical delivery.

So, gas gets things from one place to another place. Great. But what makes gas cost more or less from country to country? CNNMoney.com posted a great article about why gas prices “at the pump” vary so much internationally. It can mainly be chalked up to government taxes or, alternately, government subsidies. Some countries like Norway tax their gas heavily (gas is currently $9.28 per gallon there). Other countries like Venezuela decrease the cost of gas for consumers (Venezuelans paid about 12 cents per gallon during the epic gas hikes of 2008). The United States falls between these two extremes.

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Elasticity of Demand

Thu, 10 Mar 2011 22:00:08 -0600

Elasticity of demand is an important concept within the consumer sphere. Businessdictionary.com defines “elasticity of demand” as

The degree to which demand for a good or service varies with its price.

The typical play is for demand to INCREASE as price DECREASES and vice versa. I will buy one delicious Cadbury Cream Egg if they are a dollar apiece. I will buy two if they are 75 cents apiece and I might well buy none if they go up to five bucks apiece.*

A good or service is said to be “elastic” if this variance is very strong- for instance, when the cost of a car goes down the company might sell more cars. In that case (indeed, in most cases) cars are said to be “elastic”. An example of an “inelastic” product is one that people just need regardless of price. Necessities like bread and toothpaste are examples of inelastic products.

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*All lies. I will buy as many of those heavenly confections as will fit in my sadly INelastic pants pockets no matter the cost. They are the greatest things ever. I live for them and through them. All praise be to Cadbury.

Proud Iowan Moment

Wed, 09 Mar 2011 22:00:07 -0600

Check it out! According to an article in my hometown Des Moines Register, Men’s Health magazine has named Des Moines one of the 18 “coolest places to live in America”. I couldn’t agree more.

The article cites our growing technology sphere and cultural hotspots like the Pappajohn sculpture park. It also touts Des Moines as having a cost of living 10 percent below the national average (I didn’t know it was that low!). The article kind of goofed up listing Dell as a “strong presence” in the local employment scene, but whatever. The thought is there.

My favorite part about living in Des Moines is how we have everything a city boy like myself wants and needs, but in many cases we have JUST ONE. Just one Trader Joe’s, just one Apple store, just one art museum, just one Imax. Why is that a good thing? Do I enjoy driving all the way over to West Des Moines for fancy groceries or first-hand iPods? Not exactly. But there is something cozy about the shared experience- if someone says they “went to the Apple store” last weekend, I know exactly where they’re talking about. It creates a unified city spirit in a way.

Go Des Moines!

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Wal-Mart Takes Sustainability Into its Own Hands

Tue, 08 Mar 2011 22:00:07 -0600

Wowzers. This article in Advertising Age absolutely delights my imagination. Apparently Wal-Mart has a set of policies that rewards suppliers who adhere to certain sustainability parameters and initiatives. These include reducing greenhouse emissions, investing in “community-development” activities, and even reducing sodium and sugar in food products!

There’s more: old Wally World is actually spearheading an initiative to create a “Sustainable Product Index” that they can slap on products. Initial going has been tough, but they are 19 months into the effort and show no signs of giving up.

Like any half-aware midwesterner I grew up nursing a wary love-hate relationship with Wal-Mart. Or should I say, I had a hate-hypocrisy stance whereby I railed against Wal-Mart while still shopping there on a more or less regular basis. A lot of recent developments are really making me question the dogma. I still believe that Wal-Marts squash local economies, and that’s awful, and their treatment of employees is suspect, but… but… now things are more complicated.

Regardless of my personal beliefs, Wal-Mart is a treasure trove of retail case studies and general interest. I will continue to keep a keen eye on their social and environmental policies (and watch out- I might take a look at some of the economic aspects as well).

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Retail Poised for Big Gains

Mon, 07 Mar 2011 22:00:07 -0600

Sure, oil prices are skyrocketing and rising gas prices might doom us all. Let’s not worry about that right now. Check out what’s going on in RETAIL! According to this article on Marketwatch, retail is set to make a big splash when February numbers are reported. Year-on-year sales are set for a whopping 9.3% gain, the largest gain since March of 2000.

We are still expecting a small slide in consumer confidence due to the aforementioned oilmaggedon*, but this retail health should help sustain economic growth until the world’s political stage stabilizes a little bit and pump prices head back down.

*I should probably trademark that.

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What is Organic?

Sun, 06 Mar 2011 22:00:08 -0600

Certainly not that box of Cadbury eggs I put down yesterday, am I right? Heh. I kid, I kid. The actual definition of “organic” is

Big business. Very lucrative.

I guess I’m feeling ornery tonight. This is all true, though- organic food is a $26.8 billion industry in the U.S., and it’s been growing at about 20% annually for the past 15 years according to this Times Leader article. Through the dot-com bust and the recent recession, “organic” has remained a hot label that keeps people spending. But what exactly is “organic”?

The precise definition of “organic” in the U.S. is maintained by the Department of Agriculture. According to their website,

Organic production is a system that is managed in accordance with the Organic Foods Production Act (OFPA) of 1990…

The referenced OFPA is a living document that was most recently amended in 2005. It is a fantastic and relatively easy-to-read guideline containing many worthwhile definitions and statutes. You can find the PDF version here.

So, loosely, “organic” is whatever the government says it is. Farmers, manufacturers, and handlers must partner with the Department of Agriculture to obtain organic certification in order to reap the competitive advantages of the organic label. After clicking around on the National Organic Program’s website a little bit, I found a cool document that more or less lays out their requirements in raw, specific terms. You can find the outline here- click around for yourself. It gets really juicy around section 205.203.

A little light reading to start off your week!

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Unemployment Drops to 22-month Low

Fri, 04 Mar 2011 22:00:07 -0600

Woohoo! The national unemployment rate dropped to 8.9% in February, its lowest point since April of 2009. Check out the lack of “yes, but”s that I gleaned from a CNNMOney.com article:

The drop was NOT caused by people giving up hope. The number of people who do not count as “unemployed” because they aren’t looking for work remained steady at 2.7 million.
The drop was NOT caused by temporary government hiring. Quite the opposite- state and local governments cut 30,000 employees.
The drop was NOT expected! CNN’s analysts had predicted a rate around 9.2%.

This is a huge positive sign for the economy with virtually NO hidden downside. So stop reading now.

…because oil is heading back up again and it caused the Dow Jones Industrial Average to plummet 1.2%. Oy. It’s the weekend, folks. Let’s all head out and party until we forget that last bit.

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What is "curated"?

Wed, 02 Mar 2011 22:00:00 -0600

“Curator” is not a new word. I’ve heard it used in relation to museums and art galleries all my life. According to merriam-webster.com, a “curator” is:

one who has the care and superintendence of something

However, I’ve seen the word “curate” pop up in two new contexts in the past month or so. The first time was in a recent CNNMoney.com article that I commented on in a post last month. It referred to U.S. Best Buys as taking a “curated” approach to retail: Best Buy looks at all the electronics products available and chooses certain products and brands to put on their shelves. That is “curating” a retail space. Think about how different chains carry different brands and how you can NEVER find New York Vanilla ice cream at Wal-Mart, only Target and DANG IT TARGET CLOSED HALF AN HOUR AGO.

…okay, I’m calm. Anyhow, I saw the term “curated” in a subtly different context today: a geekosystem.com articleabout the upcoming Nintendo handheld, the 3DS. Apparently Nintendo will host a “curated content” short-form video service for the 3DS. This means that Nintendo will make active decisions about what to offer on the service and when. Movie trailers, game trailers, interviews, advertisements… all of it will be intentionally selected to further Nintendo’s goals while appealing to their target audience.

“Curating” content and retail offerings is part of a trend towards businesses consciously maximizing every resource. Has this “curating” existed forever? Of course! TV networks, newspapers, a sales catalogues have always “curated” their content. But by boiling it down to a buzzword we can put new emphasis on this facet of business. Now where’s my New York Vanilla ice cream?

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Baltic Dry Index

Tue, 01 Mar 2011 22:00:06 -0600

I’m a big index fan. I enjoy tracking numbers up and down from day to day and week to week. Not month to month, though. Who has the attention span for THAT? Kidding.

The newest index I discovered is the Baltic Dry Index, or BDI. The BDI measures the demand for room on cargo ships that transport dry bulk materials. A lower index means that fewer bulk materials are being shipped, which can be inferred to mean that less production is occurring around the world. A higher index means that ships are filling up due to more materials being shipped.

According to this old slate.com article, the BDI is an excellent leading indicator of market health because it measures transport of the first indicators of economic growth- raw materials. In an age where everyone wants to know what will happen ten moves before it happens, leading indicators are extremely valuable.

Nowwwwww the bad news: According to this easy-to-read chart on bloomberg.com, the BDI has been on a clear downward trajectory since October. I will dig deep and venture one guess as to why this does NOT mean that the economy is headed down down down: perhaps countries are sourcing more from their own materials reserves as oil prices rise? Eh? Who likes my idea?

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Rich People Loooooove Fast Food

Mon, 28 Feb 2011 22:00:07 -0600

I live for stories like this. According to this article at CNNMoney.com, rich people are eating more fast food. I totally get it. Chipotle tastes good no matter how much money you earn. My wife and I ate it four or five times per week for several months back in 2005. But this post isn’t about my eating habits past or present. It isn’t even really about rich people eating bad food. It’s more about the interesting organizations I learned about in the article’s references.

The article cites American Express Business Insights as saying that among American Express’ top 10% most affluent customers, fast food purchases are up 4%. The aforementioned AEBI is an organization that leverages American Express’s vast transaction data warehouse to deliver all kinds of data to consumers.

The other interesting nugget hidden in the article is a quote from the Luxury Institute. Who? The Luxury Institute is an organization that studies spending habits of extremely wealthy consumers. They have published white papers with titles like “Wealth & Luxury Trends: 2011 and Beyond” and “12 Rules for the 21st Century Luxury Enterprise”. It’s really interesting what you find when you follow a news article a little further!

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Wow This is Cool!

Sun, 27 Feb 2011 22:00:07 -0600

One of the keys to learning about business and the economy is saturation. I listen to business podcasts every day, I monitor several business-themed websites, and I read the Wall Street Journal every time some kind soul leaves it in my work bathroom.

Rejoice! Thanks to an article on about.com I found a wonderful resource on the website of the Federal Reserve’s New York branch:

This, my dear readers, is an economic indicators calendar.

This lays out a day-by-day collection of links to all kinds of great information such as consumer credit reports, construction starts, and price indexes. I intend to monitor this site daily over the next several months to get a better feel for what makes the economy tick. You should do the same!

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Logistics!

Fri, 25 Feb 2011 22:04:07 -0600

Logistics is a hot topic in business management circles right now. Thanks to UPS it even has a theme song.

According to my BFF businessdictionary.com, logistics is

Planning, execution, and control of the procurement, movement, and stationing of personnel, material, and other resources to achieve the objectives of a campaign, plan, project, or strategy.

Logistics is an important topic because it directly impacts the timeliness, quality, and overall efficiency of any process. It has been at the forefront of factory design for many years, but now many industries are investing in logistics as a way to increase their bottom line.

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Oil Prices Rising

Thu, 24 Feb 2011 22:00:06 -0600

Crude oil hit $103 a barrel today, according to this CNNMoney aritcle. Political unrest in Libya is causing the price to soar. There are a few interesting points in the article that I’d like to highlight:

This week oil reached $100 a barrel for the first time since the dreaded 2008. In this New York Times article an Edward Jones investment strategist commented that “we would have to see higher oil prices stay around for longer to have much serious impact [on the market]”. However, when gas prices rose back in 2008 consumer spending dropped a whopping 3.5% according to this Yahoo News article.
I am interested in how the impact of Libya’s upheaval is magnified in the price increases. Oil jumped 11.3% between February 14 and today, yet Libya produces less than 2% of the world’s oil. It seems like fear might be trumping observable global impact!

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The Long Position

Mon, 21 Feb 2011 22:00:07 -0600

I was reading an article about gold values (they topped $1400/ounce today) and I saw a reference to investors increasing their “long positions” on gold. Huh? What is a long position? The answer (according to freedictionary.com) is extremely simple. The long position is:

The ownership of a security or derivative, or the state of having bought one or the other.

That’s it. Someone has the “long position” on a stock (or other security) if they own shares of that stock. So basically, the “long position” is ownership. You can contrast that with the “short position”, but I’m late for a movie* so you’ll have to piece that together on your own.

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*False

Lazy Sunday video! Because talking at a camera is easier than...

Sun, 20 Feb 2011 11:25:43 -0600

[Flash 10 is required to watch video.]

Lazy Sunday video! Because talking at a camera is easier than writing thoughtful content. Everyone enjoy the All Star Game tonight… why is it that the NFL’s Pro Bowl is God’s punishment for a wicked world, but the NBA All-Star Game is pure delight? Mine is not to wonder why- mine is but to enjoy the spectacle.

360-Degree Feedback

Sat, 19 Feb 2011 22:00:07 -0600

Employee assessment is a delicate, high-stakes science. In some work environments(call centers, factories, production) defined metrics can provide a snapshot of employee performance over a period of time. However, in most cases the numbers alone do not tell the story. 360-degree feedback has become more popular in recent decades for assessing employees. According to businessdictionary.com, “360-degree feedback” is

Performance-appraisal data collected from ‘all around’ an employee- his or her peers, subordinates, supervisors, and sometimes, from internal and external customers.

So this provides a comprehensive portrait of an employee, which is great. Of course, there are drawbacks- this assessment method is obviously vulnerable to politics and social games. Metrics are still invaluable whenever possible. That actually reminds me of a book I read a few months back: Super Crunchers. The author posited that numbers (more than human intuition) hold the key to predicting and analyzing performance of everything from stocks to employees to educational systems and sports teams. But now we’re wandering far from the original topic.

In closing: 360-degree feedback provides a comprehensive human view of an employee. It can be vulnerable to politics and scheming, and should be used in conjunction with metrics wherever possible.

Now you know!

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What is a "Bourse"?

Fri, 18 Feb 2011 22:00:07 -0600

While perusing Marketwatch this morning, I saw a headline about how strong Nestle profits are “supporting the European bourses”? Huh? I’ve never heard of a “bourse”. Is it a business? Is it a mass of consumers? Is it a special cricket move?

The Free Dictionary provides several definitions of “bourse”. The common thread is that a bourse is a

…common name for a securities exchange located in Europe.

So there we go. According to the Federation of European Securities Exchanges, some of these “bourses” include the Athens Exchange, the Luxemborg Stock Exchange, the Deutsche Borse, and the NYSE Euronext. The free Dictionary goes on to say that the word “bourse” originates from the French word for “purse”. Indeed, the national stock market of France is the “Paris Bourse”. So now you know!

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10 Worst States for Retirees

Thu, 17 Feb 2011 22:00:07 -0600

Topretirements.com recently published a list of their “Top Ten” worst states to retire in. This list has been analyzed by multiple blogs (check out this great article over at Marketwatch).

The list is very comprehensive- it folds in many important factors including tax laws, climate, and transportation services. The original article looks ahead and predicts civil unrest in the worst states and communities as their older populations grow angry and disenfranchised due to rising costs and declining services.

My main concern is not quite so dire. One thing I did not see discussed in these articles is that retirees are something of a “boom market”. Because of advances in health care, we have more and more elderly people every year. States and communities should be proactive in marketing to this population. If spun the right way, an elderly population could become a very profitable population. It will require a combination of shrewd policy, forward-thinking tax laws, and strategic services. Which states are up to the challenge?

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Borders Files for Bankruptcy: A Historical Perspective

Wed, 16 Feb 2011 22:00:07 -0600

I grew up with Borders. I remember visiting their stores when my family would travel out-of-town, and then I remember when the first Borders opened in the Kansas City area down in Overland Park. My family made the 45-minute drive south once or twice a month to wander around the sprawling bookseller. Over the next ten or twelve years I spent many an afternoon…

Woah, I didn’t see you standing there! Enough with my memory lane- cut to the present! As we reported recently, Borders is in some trouble. This article at CNNMoney.com details a bankruptcy filing that surprised exactly no one. Borders will close 200 stores (just under 1/3rd of its current locations) and reduce overall staff in the re-structuring.

Some chains persist after such drastic cutbacks. Reducing headcount, locations, and geographic breadth can be beneficial. One example is the fast food chain “Rax” that I remember from my youth: they still exist, but in an extremely reduced form (franchise-only) and only in five states.

Other chains, such as Circuit City, can lose their brick and mortar presence entirely over the course of several downsizings. Sometimes bankruptcy is an opportunity to regroup, and sometimes it is the beginning of the end. One thing is for sure: in order to succeed, Borders will need to focus their e-book strategy- that’s a growing field (as we reported some time ago (and for some reason the page is missing so I can’t link to it)).

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Bill of Lading

Tue, 15 Feb 2011 22:00:07 -0600

A bill of lading (B/L) is a specialized form of receipt used in the shipping industry. As businessdictionary.com puts it, a bill of lading is a

Document issued by a carrier, or its agent, to the shipper as a contract of carriage of goods. It is also a receipt for cargo accepted for transportation, and must be presented for taking delivery at the destination.

Businessdictionary.com goes on to list several key elements of a bill of lading, which include shipper and carrier names, shipping dates, and all manner of details about the cargo being shipped. It is important to note that the term “bill of lading” hinges on the seldom-used word “lading”. As part of a special two-for-one episode of the Daily Biz, businessdictionary.com defines “lading” as

1. Placement of cargo in its transporting vessel.

2. Cargo carried in a transportation vessel.

So lading is either a noun (the cargo being carried) or, more commonly, a verb (the act of placing cargo in a vessel for transport). The more you know!

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