investment

Mubarak’s Exit Lifts U.S. Stocks

by Kathryn Ciano on February 15, 2011 · 1 comment

in Economy, International

As Egypt settles into a cautious detente, stock markets around the world recover from their Jan 25 dip. As Mubarak ceded the presidency Friday, all three New York Stock Exchange indices and NASDAQ saw modest lifts. As stability is restored, people are more confident making investments.

Egypt’s own market has yet to recover. Mubarak dithered in office, first announcing that he would remain in place as a “figurehead,” then claiming that he would stay til the end of the summer.

Mubarak finally stepped down Friday afternoon, leaving Egypt in military hands while the government regroups. The Swiss Federal Department of Foreign Affairs has frozen Mubarak’s Swiss bank accounts and the funds that belong to “his circles” to avoid any risk of “embezzlement of state property” pending a resolution in Egypt.

American Apparel Almost Bankrupt; Supply and Demand Alive and Well

by Kathryn Ciano on February 3, 2011 · 7 comments

in Culture, Economy, International, Odds & Ends, Trade, Zeitgeist

American Apparel has started dumping shares, so stock up on your leggings and Ts now.

Explanations are below, if you’ll try for a moment to ignore that arched seductress hawking thigh-highs perched atop your screen. Or the ad below, launched this week, that makes every website Not Safe For Work:

It’s just this kind of presumptive marketing that makes the company seem tawdry and cliched. American Apparel opened its doors in 2003 as an earnest appeal to progressives who believed themselves weary of sweatshop wares.

Those of us who embrace mass production shudder at the money-making alternatives left to women and children in developing nations when “sweatshops” close their doors.

Los Angeles-based, “100% sweatshop-free” atelier American Apparel has been flailing for awhile. Bankruptcy rumors circulated when the clothing company missed SEC and auditors’ deadlines. The company’s financials have been in sharp decline since early 2010:

Explanations for the company’s slide vary.

Many blame Canadian CEO Dov Charney, the hipster’s hipster. Here’s a photo of Charney:

Wouldn’t you like to be clothed by this man? I certainly wouldn’t want to be not clothed by him.

Charney famously fills the AA website and ads with half-naked young men and women in a text and position context that is…suggestive, at best. News stories ask whether the marketing is advertisement at all, or if it’s straight sexual harassment. Employees could ask the same question — isn’t this sexual harassment? — about Charney’s controversial employment practices. Charney rose to fame in part for his focus on brand consistency, hiring and firing employees based on full-length photos alone.

In response to an employee suit in 2005 for sexual harassment when Charney regularly walked around American Apparel offices in his underwear, Charney said at his deposition: “I frequently drop my pants to show people my new product.”

But enough about the controversial chocies a private company makes to garner attention in a competitive market. Mores and morals aside, and all of that. This all-American flagship has been losing upwards of $40 million per quarter for the past year.

American Apparel is marketed as the urban brand, angling for a new American mentality. Perhaps fittingly, the company has been taking hits as dramatic as the House’s turnover to the Republicans last election. This week billionaire major investor Ron Burkle dumped his AA shares, possibly in response to fast-fashion competitor H&M’s announcement that they will move into a major AA demographic, online ordering, by the end of this year. The dump puts Burkle’s interest below 5 percent, which means he no longer has to report his holdings at all.

You know things are bad when even the guy who owns a jet dubbed “Air F*** One” sells out.

What sank American Apparel wasn’t its racy ads or irresponsible employment practices. American Apparel misunderstood what American branding is all about.

Americans are not generous because it’s ironic or funny; we’re generous because we all understand the American Dream. Sure, the American Dream includes being elevated out of sweatshops. But putting in sweat and underpaid time is all part of this. Our nation’s capital runs on unpaid interns’ striving, dreaming, sweat, and time.

AA has been paying employees $20/hour plus vacation time and benefits. Clothing prices reflect that. If all of the economies of the world operated as isolated actors, perhaps those prices would fly.

Happily, we are living in international times and enjoy a global economy. Much of the world benefits enormously from Americans’ “greed” and urge to acquisition. Clothing commodities may trade hands numerous times during their long second life, but more importantly, the market for clothing produced en masse in developing nations is a job boon to their economies and a part of what fuels such an acquisitive market.

American Apparel has not declared bankruptcy, even after repeated quarterly failures to file number on time, and even after laying off $1,500 illegal workers (all paid well above minimum wage) under threat of a federal raid. Yet even as AA skirts the law in so many sex and harassment arenas, it’s clear that people simply won’t reward unclever ads and prices designed to force the square peg of fast garment making into the round hole of a living wage.

What is most certainly bankrupt is the idea that a company (much less a government!) can somehow negate the law of supply and demand.

Chuck Schumer: “We’ve Got to Stand Still”

by Jack O'Connor on August 4, 2009

in Precaution & Risk, Regulation, Trade

High-frequency stock trading — the markets where sophisticated algorithms running on bleeding edge hardware trade assets using information only fractions of a second old — is under attack from Senator Chuck Schumer. In response, The Business Insider has republished a detailed piece explaining why Schumer’s criticism is unfounded.

Readers interested in the full details of the debate should take a look at that piece; this short post will simply clear the air around one concern. ArsTechnica described what many are probably thinking:

The real issue is that when the average retail investor gets an E*Trade account and tries to play the stock market, she typically has no idea that she’s going up against the market equivalent of IBM’s chess grandmaster-thumping supercomputer, Deep Blue.

That’s true, and it should be frightening. Most of us have no business betting against those odds. But if that sounds unfair, we should remember that it’s not the only game in town.

As far as we little people are concerned, we can divide investments into two big categories. Let’s call them “growing the pie” and “cutting the pie.” If we think of the stock market as a pumpkin pie, growing the pie means spreading your money throughout the whole dish, hoping that it gets bigger. Cutting the pie, on the other hand, is like trying to guess which slices of the pie will grow faster than others and putting your money only in those slices.

In practical terms, growing the pie could mean investing in an index fund. These funds invest in stocks according to broad public indices, like the S&P 500.  That index rises and falls along with the whole economy, and because the economy grows reliably over time, the index fund does too. With the S&P 500, investors can expect long-term average growth around 8-10% per year, and anyone can piggyback off that growth essentially for free.

Cutting the pie, on the other hand, means trying to do better than average. This describes investors who pick stocks, like day traders or i-bankers. Unlike growing the pie, cutting it is a zero-sum game. For every investor who beats the averages, another falls short. It’s in this kind of trading that people are competing against computers, and the computers are only getting better.

Personal investors really have nothing to worry about, though, because they shouldn’t be playing that game in the first place. Trying to beat professionals at their own sport–literally competing with investment bankers for the same dollar–is always going to be a losing proposition. The only prudent approach is to invest in the whole pie, let other people spend their time on the pieces, and just sit back and watch it grow.

Of course, some people will always want to gamble against the odds, and that’s a risk they’re allowed to take. But if we try to “level the playing field” for them by banning the superefficient trading that goes on in high-frequency markets, we’ll end up slowing down the pie for everyone else.

D.C. Event: BB&T’s John Allison on the Financial Crisis

by Richard Morrison on January 15, 2009 · 1 comment

in Bailout Watch, Economy, Stimulus to Nowhere

Our friends at the Ayn Rand Center for Individual Rights are hosting what promises to be a fascinating public lecture on the state of the U.S. economy and what it means for the future of capitalism. Former CEO and current Board Chairman of BB&T bank, John Allison, will explain the interventionist government policies that brought us where we are today and their anti-capitalist underpinnings.

Location and Details:

The Financial Crisis: Causes and Possible Cures
Thursday, January 29, 2009

National Building Museum—Great Hall
401 F Street NW
Washington, DC 20001
Red Line Metro, Judiciary Square

Doors open: 6 PM
Lecture and Q & A: 6:30 PM

This event is FREE and open to the public.