Archive for the ‘Economics’ Category
A Thought
A downpayment on a relatively nice one bedroom apartment in HK in a good location costs about the same as fifty Chanel bags.
I measure life in units of Chanel bags.
You know who else has a passion for fashion?
Dick Fuld. Excerpt from the Daily Intel:
Richard Fuld once berated his deputy Joe Gregory for wearing an “unfashionable green suit,” and fired CFO Erin Callan for what many (us) believe was (among other things) her usage of appalling nude lipstick. But we did not know how deep his passion for fashion ran until we read the excerpt from Vicky Ward’s new book in Vanity Fair this morning. Put a chic bob and some oversize sunglasses on the man, and he’s basically Anna Wintour.
Like Anna, Fuld, who declared it “a dark day for the firm” when Casual Fridays were voted in, was always impeccably turned out.
He always dressed immaculately for work, in a navy-blue suit purchased from Richards department store in Greenwich, Connecticut, along with a white shirt, black lace-ups polished to a high sheen, and an Hermès tie. He had a tailor put special stitching in his suit pants and tops so he could easily see which coat went with which pants.
Jakarta Wrap Up
Halal Sprite in the airport lounge
Kitschy table lamp at Potato Head
Was in Jakarta last week and wishing I was still there. My client arranged for me to stay at the Lippo Karawaci Village, which is a rich suburb where everything from the grocery store to the hospital is owned by the Lippo Group (Note 1: Lippo Group is now bankrupt due to a rather delicious scandal. Note 2: in SE Asia, the same person owns everything. See book Asian Godfathers.) Sometimes I woke up in the morning, opened my curtains, saw a bunch of palm trees, and mistakenly thought that I was on vacation. But alas, the 8 am conference calls never fail to bring me back to reality.
I’m really appreciating these Southeast Asian cities. Jakarta is chaotic and charming all at the same time — in a way that only a city with 13 million in population and severe income inequality could be. Coincidentally at coffee this morning I glanced at some article suggesting that Indonesia, which has consistently achieved 4 percent growth, should be included in the BRIC countries. I finished the coffee before finishing the article, so am not sure whether the suggestion prevailed (against growth-hindering political instability), but I’m leaning towards YES, based on purely anecdotal evidence, bien sur!
Exhibit A. Technological Infrastructure (prevalence of the Blackberry)
Everyone. *Everyone* uses the Blackberry as their regular mobile phone. The combination of reasonable RIM service rates for individuals and the Blackberry Messenger program not being blocked on corporate machines make the BBM preferred method of communication.
The result is everyone from teenagers to CEOs alike talk to their friends and even subordinates on the BBM. For the first time ever, my clients asked me for my pin. Our conversation ranges from when the car is picking me up to how they are going to make the international wire. The display picture, by default, is always one of those outstretched arm pictures with one’s significant other. Display names vary from “ * ~ $ Anna $ ~ * “ to something simpler and thus more professional. Same goes for status messages.
What’s more, I was not the only who gasped at the prevalence of BBM use. See here for my friend’s analysis on AsiaWheeling.
Exhibit B. Availability of Capital (as seen at the Grand Hyatt pool)
Although I was exiled in the faraway wealthy ‘burb, I made time to visit my friend who was staying in the more centrally-located, traffically-congested CBD. While I primped in the locker room afterwards, I saw a woman slouched in the chair behind me smiling at her pink bedazzled Blackberry, looking very much like a teenager.
Upon closer inspection, I realized it was a true specimen of the Indonesian tai tai. She was wearing a printed A-line sundress. The fabric was stiff yet softly draped which conveys that it’s real silk from miles away. The print was giant royal purple polka dots against a nude background, which matched her nude patent Louboutin slingbacks and purple Hermes Birkin exactly. It’s crazy, because you know she has a Birkin for possible shade of sundress there is.
Exhibit C. Stylish Human Capital (as observed at Potato Head)
Located in the Pacific Place mall and next to the Ritz Carlton, this was my favorite restaurant/bar from the trip. The interior designer is a personal friend of my college friend E’s, and I was totally impressed. It was an interesting combination of industrial elements and kitsch. The lamps at the bar are made out of airplane noses, and antique vents painted in aqua colors are sprinkled on the ceiling. On each dining table are funny lamps which look like their belong in a nursery from the seventies. The result is unexpected and totally hip.
While sipping martinis in tropical flavors like lemongrass, dragonfruit, and cucumber, I had fun people watching. Interestingly, senior bankers wear batik, and junior bankers wear Prada. I spotted a bib necklace and braided hair a la Prada FW09, both fashion forward statements.
Some stock would be good too
I totally called it.
Press Release Source: Coach, Inc. On Wednesday January 20, 2010, 7:00 am ESTNEW YORK–(BUSINESS WIRE)–Coach, Inc. (NYSE: COH – News), a leading marketer of modern classic American accessories, today announced sales of $1.07 billion for its second fiscal quarter ended December 26, 2009, compared with $960 million reported in the same period of the prior year, an increase of 11%. Net income for the quarter totaled $241 million, with earnings per diluted share of $0.75. This compared to net income of $217 million and earnings per diluted share of $0.67 in the prior year’s second quarter.
Lew Frankfort, Chairman and Chief Executive Officer of Coach, Inc., said, “We were very pleased with the strong sales and earnings growth we generated this holiday, driven in part by a return to positive North American comparable store sales. Our performance reflected continued traction of the initiatives we have put in place to adapt to the changed environment. Our customers embraced our innovative and relevant products and collections while our focus on digital and social media delivered a more engaging brand experience for many consumers.”
Hello Idyllic Life!
It has been a few weeks since our office moved, but due to my jetsetting lifestyle (between industrial cities of China only), I have not been able to fully appreciate the new location.
So far I have been adhering to a strict schedule of waking up precisely 15 minutes before I’m supposed to arrive at work. This means I speedily doll up within 10 minutes then run outside to hail a cab. In this situation I have also been deep in thought of the fungibility of money. Taking a cab to work costs about 4-5 times more than my old form of transportation which is taking the double-decker bus to work. But it has two distinct benefits: 1) Those last few minutes of sleep – priceless! 2) Sometimes my outfits just don’t go with public transportation. 
I usually walk home at night. Walking outside is lovely these days. The road is also quite idyllic. I pass by no fewer than two fruit stands and three puppies per night! Wee! 
Thinking about Value
Bought a pair of shoes over the weekend and was just shocked to find out that it’s about the same price as the little pink camera I’ve been wanting, ever since my current little pink camera is consistently freaking out… probably because I have dropped it too many times.
Either shoes are really expensive or cameras are really cheap.
Uh, actually, Richard Freeman predicted so in 1995
Saw the Paul Krugman op-ed piece today, “Falling Wages“. Wages are falling in the US and unemployment is rising. Krugman called for “more stimulus, more decisive action on the banks, more job creation”.
But I think it is a losing battle. Take the case of the orange growers in Florida. They cannot produce oranges as cheaply as South American growers, and thus resort to lobbying the government to artificially raise orange prices through import tariffs in order to stay competitive. But essentially, a Florida orange is pretty much like a South American orange, and consumers are not necessarily willing to pay that much more for it. The model works for a short time, but is unsustainable in the long run.
Now compare the case of oranges to workers. Heard Richard Freeman speak on the Wage Equalization Theory in college, where “in the long-run equilibrium factor prices are equalized and workers of the same skill level are paid the same wages throughout the world.” It was a highly controversial theory in academia. Economists deemed it would never be true because transaction costs would never allow for complete equalization. This might be true for goods, where at the peak of oil prices, transaction costs were hefty. However, the US is mostly a service-producing economy. Service can be delivered via phone calls and email, making transaction costs really low. While there are definite benefits to face-to-face meetings and speaking to someone without a heavy Mumbai accent, but just how much is one willing to pay for it? Is it as much as the person’s living expenses in an expensive suburb and the whole family’s health insurance? As chronicled in Krugman’s article, most likely not.
I recently experienced precisely the same situation myself. My company wanted to send me to the Shanghai office to lead the team there. An exciting opportunity, I concede, but my company also wanted to reduce my wages to 75% of my current pay to adjust for cost of living. They could hire someone in Shanghai with more or less the same skill set for much less, why pay me the same to live in Shanghai? Surely I have experience, but is it worth 25% of my pay? I did not bother to find out as I think I know the answer.
Finally, in the interest of full disclosure, want to point out that I once interviewed Richard Freeman for my Economic Journalism class. He is a really nice guy. We showed up in his NBER office armed with a list of questions and a tape recorder. I loved it. It was experiences like these that made the 40k+ tuition worth it. (But even with the 120k+ education under my belt I am not safe from international competition!)
Read his paper “Are Your Wages Set in Beijing?“, Richard B. Freeman, Journal of Economic Perspectives, 1995, vol. 9, issue 3, pages 15-32
Abstract: The economic troubles of less-skilled workers in the United States. and OECD-Europe during a period of rising manufacturing imports from third world countries has created a debate about whether, in a global economy, wages or employment are determined by the global rather than domestic labor-market conditions. One side argues that trade is all that matters; another side, that trade does not matter at all. The author rejects these polar views; empirical analysis has found modest but real trade effects in displacement of less-skilled labor and declines in the price of goods produced by low-skilled workers. Copyright 1995 by American Economic Association.
Daslu
I first read about Daslu as the epitome of luxury in Dana Thomas’s How Luxury Lost its Luster. Daslu is a Brazilian department so chic and so exclusive, that it leaves Bergdorf’s and Barneys in the dust.
Daslu is a unrivaled retail experience. Instead of changing rooms, the women simply tried on the clothes in the middle of the display floor. The Brazilian culture is so open about the body that nobody bats an eyelash. Obviously men are not allowed on to the women’s floors, and so there are waiting areas for them, complete with a lingerie boutique where they can pick up goodies for their wives and girlfriends.
The store also represents more than just fashion, but a lifestyle. Right after one buys a new outfit at Chanel, one could hop on over to the next floor to buy a Mercedes. The salesgirls, known as Dasluettes, come from the best families and live the lifestyle their customers do. That is perhaps the most valuable trait in a personal shoppers, that they completely understand their customers’ needs.
But things that are too good to be true, usually are. The way this story unraveled is quite symbolic of both how luxury can be a cover up for something else, and the lengths people go to to attain it.
RIO DE JANEIRO — Eliana Tranchesi, owner of the ultrachic São Paulo fashion emporium Daslu, was convicted late Wednesday of forming a criminal ring, tax evasion and falsification of documents, and was sentenced to 94 years in prison.
The trial took over two years, from early 2006 to June 2008 and, after deliberating for 10 months, Federal Judge Maria Isabel do Prado, of the 2nd Regional Court in Guarulhos, outside of São Paulo, convicted and sentenced Tranchesi, along with her brother, Antonio Carlos Piva Albuquerque, and their accountant, Celso de Lima. Federal Police imprisoned them early Thursday, according to Federal Police spokeswoman Raquel Victor. Albuquerque also received a 94-year sentence. The accountant’s sentence could not be learned, but four import agents who worked with Daslu received shorter prison terms, according to Tranchesi’s lawyer, Joyce Roysen.
…
Tranchesi was first arrested in her home and detained for 12 hours in July 2005 shortly after 250 Federal Police agents, part of a government sting operation called “Operation Narcissus,” raided her $70 million, 200,000-square-foot fashion emporium, modeled after a Florentine-style villa.
The government was investigating Tranchesi in connection with import-export firms that falsified invoices to show that foreign merchandise, delivered by them to Daslu, cost much less than their real prices. Federal Police said the scheme allowed Daslu to pay less than the 20 to 30 percent average import taxes on fashion imports.
When a new, expanded Daslu opened a month before the police raid, it featured 77 in-store shops and 120 mostly foreign labels. These included Chanel, Dolce & Gabbana, Valentino, Burberry, Salvatore Ferragamo, Gucci, Christian Dior, Chloé, Prada, Giorgio Armani, Louis Vuitton, Gap and Banana Republic.
The article from WWD
Banker-speak
Got an emergency call from the Honey seeking grammatical advice:
“The dining out consumption trails…” or “the dining out consumption trails behind…”
Both versions are nonsensical to me. At moments like these, I wonder what the Economist would say?
Diamonds
In other words, for the diamond illusion to survive, the public must be psychologically inhibited from ever parting with their diamonds.
The advertising agency’s basic assignment was to make women value diamonds as permanent possessions, not for their actual worth on the market. It set out to accomplish this task by attempting through subtly designed advertisements to foster a sentimental attachment to diamonds that would make it difficult for a woman to give them up. Women were induced to think of diamonds as their “best friends.”…
Today, however, with many generations of the diamonds it mass-marketed overhanging the market, and most of global diamond production in independent hands, it no longer is in a position to bring supply and demand into balance. Adding to this precarious situation, diamond cutters, manufacturers and dealers, have, as of Feb. 15, an estimated $40 to $50 billion worth of diamonds in mines in the pipeline that will intensify the downward spiral when the gems reach the market later this year.
