Weekend Cocktail Chatter
By the time most of you read this, the Producer Price Index for November
will have been released, and if this month's other economic statistics are any
indication, the PPI will show only very mild inflationary pressure back up the
producer pipeline. With the exception of energy prices, in fact, inflation
remains about as quiescent as it can be, despite the fact that the economy
continues to grow at a better-than-4 percent clip and that the unemployment
rate has reached levels no one thought were possible anymore. If you take
energy and food prices out of the Consumer Price Index--giving you the
so-called core rate--prices in 1999 will have risen around 1.75 percent, which
is the lowest annual inflation rate we've had during this entire business
cycle. (Is "cycle" even the right word anymore?)
No one, of course, really knows why this is happening. But there is one
remarkable statistic (which itself is difficult to explain): Since the middle
of last year, the falling unemployment rate has become decoupled from wage
increases. In other words, even though it's getting harder and harder to find
workers, the tight labor markets are not yet translating into wage increases in
excess of productivity. This may be evidence of the new winner-take-all
society, or of continued anxiety among workers, or it may be that the wage
gains due to productivity are enough to keep workers happy. Or perhaps it's
just evidence that Alan Greenspan really is God. In any case, on to the
Chat.
1. "Hasbro announced it was cutting 20 percent of its workforce and
taking a restructuring charge of $97 million, even though it owns the U.S.
license for Pokémon trading cards . Analysts blamed sluggish sales of
Star Wars merchandise. For instance, reportedly only 17 Jar-Jar Binks
action figures have ever been bought in the United States"
2. "Coke CEO Douglas Ivester unexpectedly announced he was retiring
after just a couple of years as head of the company. Ivester, who will be
stepping down in April, gave no real reason for his retirement , though
he must be tempted to scream, 'It was those damn Belgians!' as he walks out the
door."
3. "Explaining why Pixar decided to release Toy Story 2 in movie
theaters rather than making it a straight-to-video production, Pixar
chairman Steve Jobs said, 'We looked at films like Godfather 2
and Terminator 2 and said, "We can do that."' Ah yes: 'I know it was
you, Mr. Potato Head! You broke my heart.'"
4. "The putative recovery of the Japanese economy appears to have stalled
yet again , since the latest economic data show that the country fell back
into recession last quarter without the artificial pump-priming of extravagant
public-works spending. The Japanese yen, though, continues to be the world's
strongest currency , raising the question: 'Are Internet-stock day traders
speculating in currencies in their spare time?'"
5. "The Federal Reserve's latest beige-book regional economic survey
declares the impact of Y2K concerns to be uneven across the country, although
one lumber producer said Y2K worries had prompted customers to hold off
buying wood until the new year. Apparently there wasn't enough room in the
tree rings to include '2000,' so no one knows what'll happen when '00 rolls
over."
6. "Presidential candidate Al Gore reiterated that he planned no new tax
increases if he's elected president, but did allow that if the economy went
sour, it might be necessary to raise taxes. Hmmm. Let's get the logic
here : Economy in recession, demand weak, increase taxes so demand will be
even weaker. Economy booming, people spending freely, keep taxes same so demand
will keep going up. Oh right. That's straight of Econ 101. On the planet
Venus."
7. "Linux maker VA Linux went public today at an offering price of
$30, but the first trade was at $299 . Don't you have to believe the guy
who bought that first block of stock was doing it just so he could say, 'Yes, I
was that dumb'?"
