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Good Riddance ’08, Hello ’09!

December 31st, 2008 No comments

Many weeks of this year felt like months. The Lehman collapse, the weeks leading up to the election, and some weeks in November as the markets continued their relentless fall. It seemed as if the year would never end. What a foolish sentiment – “the year would never end”. As if time could be stopped or its rate of passage changed in any way. Regardless, it’s now December 31st, and the year is over. Here’s a quick recap of the year from a finance standpoint:

  • There was much strain on the U.S. and the world’s financial markets. I don’t think the world has ever seen anything like this on a global basis. Domestically, 2008 was the worst year since the Great Depression, marked by steep losses (in equities and just about every other market), sensational volatility, and deep economic impact that we’ll continue to feel in 2009.
  • Though the financial crisis started in the second half of 2007, the markets didn’t really freeze (and believe me – some markets like Auction Rate Securities froze solid to the core) until 2008.
  • Many events completely redefined the face of the American financial system:
    • 1/11: It’s announced that Countrywide Financial will be bought by Bank of America.
    • 3/17: Bear Stearns failed and was eventually acquired by JP Morgan. There was much speculation around Bear’s failure – many conspiracy theories and the sort. The initial offer was $2/share, but it was then revised to $10/share.
    • 7/14: Mortgage bank IndyMac was seized by the feds. Customers waited for hours in lines outside the banks branches to get their money.
    • 9/15: This was probably the day that did the most damage in the year. Lehman Brothers filed the biggest bankruptcy in U.S. history. It was really the result of bad timing – had Lehman been a bank sooner or a bank later, the government would likely have saved them (i.e. Bear and AIG). But, Lehman ended up being the government’s guinea pig to see what would happen if a large bank failed. Bank of America also announced its acquisition of Merrill Lynch on the same day, and the announcement of an AIG bailout followed soon after.
    • 9/25: JP Morgan bought the assets of Washington Mutual after WaMu collapsed and was taken over by the FDIC.
    • 9/29: A Wachovia acquisition by Citigroup was announced, though eventually Citi would be outbid by Wells Fargo.
  • Oil reached a high of $145.29 per barrel on 7/30/2008. It opened the year at $99.62 on 1/2/2008 and closed at about $40.16 on 12/31/2008 (or at least at the time of this writing). Commodity prices in general grew at a staggering pace, only to fall right back down as a global slowdown set it.
  • As a result of oil, unleaded gasoline reached about $4.11 on a national average.
  • U.S. equity markets posted the largest yearly decline since the Great Depression, losing about 35%. At the lowest point this year, in November, the losses were nearly 50%. The second-half of November and December bought a 20% rebound.

Besides major financial events, there were many other historical things that should be noted about 2008:

  • Senators Hillary Clinton and Barack Obama fought tooth and nail to the very end for the Democratic presidential election nomination. Eventually Senator Obama would win the nomination to battle Senator McCain for the presidency.
  • The world met Sarah Palin – the Republican vice-presidential nominee. This was a mixed blessing for the Republican camp, though many say she did more harm to the campaign than good. Tiny Fey should be noted here for her exceptional Palin impersonations on Saturday Night Live.
  • The biggest non-financial event of the year: Senator Obama wins the presidential election. The victory was nowhere near close – something the country hadn’t seen since Bush Sr. vs. Clinton.
  • California permits (though they subsequently voted down) same-sex marriages.
  • The 2008 Olympic Games are held in China. Michael Phelps wins a record-setting 8 gold medals during the 2008 Olympics and sets seven world records along the way.
  • Russia invades Georgia.
  • China gets hit by a massive earthquake in May. There are many, many deaths, and a lot of infrastructure destruction. Looking for the silver lining, this does create an opportunity for China to invest in some domestic infrastructure projects, creating many jobs and helping support the economy during the global slowdown.
  • The terrible terror attacks in Mumbai during Thanksgiving. Islamic terrorists take hostages in several landmark sites in Mumbai and the city is in a three-day siege. 171 people die and there is much anger and frustration among the Indian people.

It’s been a remarkable year, and we as a race have survived it for the better. It hasn’t killed us, and therefore we must we stronger than we  were before. I, for one, am certainly ready for the year to be over and to cheer in 2009. I hope it brings us luck and better fortune than 2008.

Happy New Year  everyone…

Categories: Life, Work Tags:

Getting the top-level parent

December 25th, 2008 6 comments

After hearing a lot of rave reviews, I decided to use WordPress as the blogging system for The Y-Factor. I’ve spent some time over the past couple of weeks tweaking WordPress to get it to do exactly what I want it to. It’s somewhat intimidating to get started with, but taking it a step at a time, I got to where I want to be.

One of the challenges I faced was finding the root category (the top-most category in the category tree) for any given post. Specifically, I wanted this so I can determine which “section” of The Y-Factor the reader is in – work, life, or photo blog. Based on that, I can select certain elements in the top navigation, as well as customize the links in the right navigation. One would think that there would be a simple function that already exists in WordPress to go this, but that’s not the case, so I wrote one. Keep in mind that given that WordPress only allows a single parent for each category, this shouldn’t be too hard – it simply involves traversing up the category tree until to find a category that has no parent. I was surprised to see this didn’t exist and figured that this is probably useful to others as well since I saw several people asking for it, but no solution. So, here’s my code:

function get_root_category($category_id=”)
{
 if (is_category($category_id))
 {
  $parent_cats = get_category_parents($category_id);
  $split_arr = split(“/”, $parent_cats);
  return get_cat_id($split_arr[0]);
 }
 else
  return 0;
}

Paste the above code into the functions.php file. You can either paste it in the functions.php file in the wp-includes directory, or in the wp-content/themes/<your_theme_name> directory. I put it in the former since I didn’t want the function disappearing whenever the theme was changed. Once you’ve got that in place, you simply call the function, giving it the category ID for the category whose root parent you want to find. The function will either return the root parent, or 0 if it can’t find one. If you give this function the category ID of a root category, it’ll simply return that ID to you.

Hopefully this helps some other WordPress users out there. If you have any questions, please leave comments and I’ll get back to you…

Categories: WordPress Tags:

Winter Wonderland

December 24th, 2008 No comments
Winter Wonderland

We’ve had a lot of snow, and very early in the season, in the Chicagoland area this year. I’d guess about 18 inches before Christmas. It’s been a pain to get to work, but it does allow for beautiful pictures. Besides, there’s nothing like looking out of the window on Christmas and seeing a blanket of white…

Categories: Photo Blog Tags:

Happy Holidays!

December 21st, 2008 No comments
Happy Holidays!

A safe and happy holiday season to you and your family!

Categories: Photo Blog Tags:

Auto Worker Compensation

December 15th, 2008 No comments

I came across this New York Times article, shedding some more light on the highly controversial $70+/hour ($150,000+ per year) that auto workers allegedly make.

The essence of the article is that the $70+/hour figure that has been the focus of much attention is not entirely correct – it’s actually lower than that. However, it’s still much higher than Japanese auto makers like Honda, Toyota, and Nissan. The average hourly cost of a Big Three unionized worker is $73. The chart below breaks it down for Ford (whose cost is $71/hour).

Auto Worker Compensation Break Down

Auto Worker Compensation Break Down

 The cash paid to a worker (i.e. the salary your paycheck reflects) is about $40/hour, and benefits (health insurance and pensions) add another $15/hour, bringing this component of compensation to $55/hour. This is about twice what the average American makes, which should serve as a key counter-point to Mr. Stein’s comments:

They are our brothers and sisters. They fight our wars. They maintain our middle class lives. Maybe they get paid a lot, but they have been giving back for years. When will it ever be enough?

The NYT article notes that the salary plus benefits cost at Japanese auto makers is about $45/hour, with the $10/hour difference coming mostly from the benefits, not the cash compensation.

The remaining $15/hour of the about $70/hour for Big Three employees comes from benefits for retirees. These are costs that must be paid since they were promised, and are independent of the number of cars sold. So, in economic times like these, the revenue from car sales falls sharply, but the costs don’t since they’re fixed – now you see one dimension of the auto industry’s issues. The article goes on to say that this cost is a function of both the generours benefits and the number of retirees – suggesting that as Honda and Toyota mature to where the Big Three are on the American manufacturing scene, they too will have many retirees and similar costs. Of course, there are a few key differences – the benefits at the Japanese makers aren’t as high, and I doubt they’ve hired as many people due to improvements in automation as well as leaner product lines (they’re not making as many varietys as GM, thus likely employing fewer people). Yes, retiree costs at Japanese costs will go up in the future, but I’d be surprised if it was anything like what we’re seeing at the Big Three today.

The NYT article makes a very important point: Even if we took away the $10 of the $15 for retiree benefits and trimmed down the cash compensation to $45, to match the Japanese auto manufacturers, we’d save the Big Three $800/vehicle. The article also mentions that the Big Three typically sell their cars for about $2,500 less than the equivalent cars from Japanese manufacturers, suggesting that the cost saving won’t fix the problem. The issue – that Americans just don’t want to buy American cars.

Quality and efficiency problems have plagued American cars for years. The Big Three claim they have learned their lesson, yet their sales numbers beg to differ. For the 25 years or so that Japanese cars have been selling here, they continue to gain market share.

There is no doubt that improving the cost structure for the auto makers will help - in a situation like this, every penny helps. But it alone will not be sufficient to solve Detroit’s problems. The Big Three have to completely reorganize their operations. And it seems to me that the best way to do that is some kind of organized bankruptcy (where they re-emerge as much smaller, more efficient operations), or some kind of organized sale to the Japanese brands (with obvious conditions around keeping American jobs and manufacturing).

Categories: Economics Tags: ,