what i learned today

is roughly the percent of GM that we each own.

$362 is what each of us paid for that equity stake.

That’s because $50,000,000,000 is the total amount the US Treasury has spent of GM’s survival. (That’s $30.1 billion for 60% of New GM’s equity + $20.6 billion that we spent trying to keep them out of bankruptcy.) And that’s just the beginning of it.

So $83,000,000,000 is what New GM would have to be worth in order for us to break even on our investment.

But $56,000,000,000 is what GM was worth at its all time peak in 2000.

And it’s only worth about $7,300,000,000 now.

So New GM would have to have about a 48% increase in value from its all time peak. Likely?

You may have heard that Geithner, the US Secretary of Treasury, went to China this week to assuage the Chinese government’s concerns about US Treasury securities. See, China is one of the largest buyers of US Treasury securities, owning over trillions of dollars of government bonds. We rely on them to buy more bonds in order to strengthen our budget, but they’re concerned about the value of their investments and the strength of the declining US dollar. The dollar index, which measures the performance of the dollar against other currencies, saw the largest monthly decline in almost 25 years in May.  And typically US government bonds are the safest investments and are considered “risk-free.”

So Mr. Geithner Goes to China (no doubt there will be a book written about it with this as its title) to convince them that investment in US securities is in their best interest, that we are turning around, that the Obama Administration’s intent is to “go back to living within our means; that we bring our fiscal deficits down to a sustainable level; that we unwind and reverse these exceptional measures we’ve taken in the financial sector.”

You may have heard that.  But what you may not have heard was how he was laughed at. Apparently he did not just “elicit some laughter” as the NYTimes cursorily described, he was straight up laughed at. The American press did not necessarily pick up on the importance of this. Instead, they pegged the meetings as successful. But as The Telegraph describes, “US Treasury Secretary Tim Geithner was laughed at by an audience of Chinese students after insisting that China’s US assets are safe…. The comment provoked loud laughter from the audience…”  We’re a laughingstock! A bit disconcerting.

I’m off again on what may be the last spring break of my life. This time to Peru. I’ll be doing volunteer service work in the Urubamba Valley for one part of the trip, and hiking Machu Picchu for the other. Be back in about a week!

The feel good movie of the year returns its stars to their homes… in the slums of Mumbai.

After a week of walking the red carpet, riding the rides at Disneyland, and sleeping in actual beds, the child stars of Slumdog Millionaire returned to their homes last week. This segment from ABC News last week and all of the recent coverage floors me for a number of reasons.

• These kids actually live in the slums.  In windowless huts. In fact, Azharuddin Ismal’s (the young Salim) family’s hut was illegal and was therefore demolished by local authorities in early January. He now sleeps under a sheet of plastic tarp.
• Boyle states the actors were paid a “good salary.” But £500 for Rubina Rafiq (who played young Latika) and £1700 for Azharuddin hardly seems like a good salary, even if it is “three times the amount of an annual adult salary” in the local area. Compare that to the £9,000 salary paid to the child actors in the Kite Runner, or what some of Hollywood’s stars are paid these days.
• While I applaud Boyle’s efforts for setting up a trust fund for when the children turn 18, it is predicated on them finishing school. That may may be a difficult task in such living conditions. Additionally, he can learn from the Salaam Balaak Trust, set up by the producers of Salaam Bombay, a film about Mumbai street kids. The producers provided 27 slum kids an education and a safe place to live, supervised their investments until they were 18, and arranged for vocational training for some. Yet most of the kids took to petty crime.
• How can the movie studio expose the children to luxuries in America, then return them to the slums and expect everything to be okay? Rubina has stated, “I don’t want to sleep on the floor anymore. I want a proper bed and live where the air does not smell of poo. I have seen what it is like in America. Here, there is garbage everywhere, people get angry, swear and shout. I have realized how bad life is here. I just want to get out.”
  
  But what is the studio supposed to do - extract the children and their families from their homes and bring them to America? Well, some films have done so. The filmmakers of Born Into Brothels, a documentary about the lives of Calcutta’s red-light district, helped the girls featured in the film get out of the slum and into America. One is even studying at the Tisch school at NYU.
  
  Turns out the Indian government has actually stepped in and has provided these children and their family free homes because they “have made the nation proud.” We’ll see if that actually happens.
• So yes, it appears there were some problems with the payment and treatment of these kids. But beyond that - where is the change? Slumdog is a film that exposes some awful truths that need to be addressed.  Instead of exploiting these people and marketing the film as the feel good movie of the year, what about using it as a platform for change? Is it enough to pay for the three child stars’ education? Where is the fund that is set up to help these millions of slum dwellers? Where is the fund that helps keep beggars off the street, and helps keep children from being maimed, as the film exposed? Where is the establishment of a microfinance program to help them self sustain and attain better living conditions?

I’m coming back! I apologize for having been MIA for a while, but things have become quite busy in 2009. Here’s a bit of what I’ve learned…

India is an amazing conundrum. Here’s a little video I made.

The energy of a million people rallying behind one man is pretty amazing. Here’s a photo I took of the sea of people at the Inauguration.

Our world is collapsing, and I’ve been trying to make sense of it all.

Our new administration is attempting to fix it, and I’ve been trying to make sense of it all.

That’s all for now, but I’ll be back with more very soon.

I leave for India today for a three-week travel adventure. I hope it will look more like this and less like this. I will try to update with what I learn along the way.

Sex
Will the financial crisis spark a baby boom? It just might. According to the Telegraph, sales of sex toys, pregnancy tests, maternity clothes, and baby equipment are soaring. But that’s not the only place sex may have increased. Jonathan Alpert, a Manhattan psychotherapist, has seen a threefold increase in the number of Wall Street workers who seek help for the sex addictions. Apparently, the economic crisis has sparked “maladaptive coping mechanisms” among bankers, according to Jodi Conway, a sex addiction therapist in New Jersey.

The Lipstick Index
The Lipstick Indicator is an economic theory  proposed by Leonard Lauder, the chairman of Estée Lauder Companies, that a direct relation exists between rising sales in tubes of lipstick and a falling financial market—the worse the economy, the more women indulge in small purchases, like $10 tubes of lipstick. Although the theory does not seem to be holding true for lipstick thus far (nude lips are in!), hosiery seems to be taking its place. Overall hosiery sales rose 2.3% this year, with Spanx seeing a 77% increase in sales compared to last year.

Beer
Anheuser Busch (now Anheuser-Busch InBev) seems to have an inverse relationship with the Dow.

Its stock price had been soaring since May of this year. It seems people turn to alcohol, namely cheap alcohol, during tough times. Though what may be great for Bud may not bode well for the smaller craft brewers who price at a premium.

College Endowments
The Ivy League isn’t immune to the financial crisis. Since many college endowments are invested in alternative asset classes, which have lost value, they’re seeing unprecedented losses. Many college and university endowments are projected to have decreased by 30% this fiscal year. For Harvard, that may mean an $11 billion drop.

That may mean decrease in financial aid. Especially because lenders can no longer sell their securitized loans in the secondary market to get new money to offer new student loans. Despite  Congress’ Ensuring Continued Access to Student Loans Act of 2008, which authorizes the Education Department to buy federal student loans from education lenders for the 08-09 and 09-10 school years, it seems financial aid may fall short . For everywhere except Princeton, that is, who just announced it would meet the increased demand of $3-4 million in financial aid requests.

Iceland
Looking for a good holiday or spring trip. Look to Iceland! Once an economic success story, this small country is now, well, bankrupt. If you were attune to Fannie and Freddie and the big Wall Street break-up, you may have missed Iceland’s fall. Its three largest banks were oversized and highly leveraged, and seemed ready for collapse in early October. Iceland’s currency, the krona, is essentially valueless, and foreign trade has come to a halt. Luckily, the IMF and its Nordic neighbors have stepped in, lending $2.1 billion and $2.5 billion respectively to help the country recover. The one upside? Tourism! Airfare search engines report a 400% increase in Iceland flight searches. Round trip flights from New York are at a record low of about $450.

Love and Marriage
Breaking up is hard to do, especially in this economy. While it may be too early to know the impact of the crisis on divorce rates, it appears divorces may have slowed down since the financial crisis. That’s because despite most arguments being over financial issues, it may just be too expensive to pay the legal fees of a divorce and support two households. In fact, during the Great Depression, divorce rates dropped sharply, though they picked back up immediately thereafter.

Spam. A lot!
It looks like meat, it tastes like meat, but it’s a far cheaper substitute for meat. It’s spam! And it’s booming. Though Hormel’s share price has fallen with the overall market, Spam sales are soaring as the economic crisis leaves consumers strapped for cash. Interestingly enough, Spam, the “crazy tasty” mix of ham, pork, sugar, salt, potato starch and a sodium nitrite, was invented during the Great Depression and became a staple for Allied troops overseas in the 40s. Now it, along with value-oriented Kraft products, and good old fashioned rice and beans, are a staple for US households.

Recycling
The plunge in commodity prices has taken a toll on recyclers. In fact, the whole movement may come to a halt as oil and metal commodity prices fall. Used newspaper, used cardboard, and scrap metal prices have also seen a drop, partially due to dwindling home construction and slower automobile production. Some recyclers are closing their doors, and in the UK entire city councils are abandoning their recycling efforts, as they are just not economically feasible anymore.

Holiday Parties
Just as you suspected, companies are cutting back on their holiday galas. ABC News announced the cancellation of its annual celebration. American Express did the same and then some – announcing the cancellation of 2009’s celebration as well.

But what about the caterers? 56% of party planners say that their corporate holiday party numbers will be off more than 10% this year compared to last.  They’re scrambling to come up with innovative more somber types of gatherings like luncheons, pot-lucks, and receptions rather than galas, caviar, and glam.

Car Sales
The economic crisis is not detrimental to all - the used car business is flourishing! Specifically, used car companies that offer buy-here/pay-here financing for lower credit individuals who have been locked out of traditional lending. But if used it’s your thing, it may still be the time to buy new. That’s because even steady growth car makers like Honda and Toyota have seen 24% and 32% declines, respectively. Car dealers are desperate to get rid of inventory and are offering invoice and below invoice prices. A word of advice - look for dealers that have a lot of inventory, because they’ll likely offer the best deals. And buy American, if you know what’s good for our economy.

Sports
The A’s are cutting ticket prices for 2009 by an average of 5 percent. The Giants are lowering the price of a couple thousand of the cheaper season tickets from $10 per game to $8. The Red Sox are freezing the 2009 ticket prices for the first time since 1995. But not all franchises are sensitive to their fan’s economic troubles. The Yankees and the Mets need to recoup the cost of their new stadiums which cost $1.3 billion and $800 million respectively. How to do so in an economic crisis? Easy – raise prices. Yankees tickets are up $75-$80, with suites between $600,000 to $850,000 which are nearly sold out. The Mets managed suites, ranging from $250,000 to $500,000, managed to sell out just before the storm hit in October.

Baseball Free Agents
Speaking of baseball, what about the athletes? You’d think that in our current state, athletes would be offered less money in their contracts, right? On the contrary. We just saw the largest offer in baseball history, $140 million, by the Yankees to CC Sabathia, the left-handed free-agent. But some general managers are hesitant to follow suit, as they fear the market for premier players will collapse. Though the MLB generated $6.5 billion in revenues last season, this year may be different, as it relies on corporate sponsors and fan’s ticket sales, both of which are likely to decline this season.

Psychics
“There is no rhyme or reason to the way the market is trading,” says a personal trader. “When conditions are this volatile, consulting a psychic can be as good a strategy as any other.”

Psychics, astrologers, palm readers, and “professional advice-givers” say business is booming as clients come to them seeking financial guidance. Clients will typically pay $75 to $1000 for an hour’s worth of insight!

NASCAR
No sport has seen as detrimental an effect of the economic crisis as NASCAR. From ticket sales, to souvenir sales, to team sponsorship from large companies – auto-racing has been hit hard. That’s because an average NASCAR team relies upon corporate sponsors for 80% of its budget. That’s four times the percentage of an NFL team’s budget. And many of those corporate sponsors, including the Big Three (GM spent $578M in sports advertising in 2007, including NASCAR) are facing problems themselves. As a result, some NASCAR teams, including Chip Ganassi Racing and Dale Earnhardt Inc., have merged in an attempt to attract corporate sponsors.

Personal Maintenance
As disposable income wanes, gym memberships and plastic surgery follow suit. 53% of plastic surgeons of the American Society for Aesthetic Plastic Surgery say business has “slowed.” Gym memberships are also down. Since 2007, gym memberships have been on the decline for the first time in a decade, according to the International Health, Racquet and Sportsclub Association.