Archive for the ‘Economic Crisis’ Category

Gunman ‘lying in wait’ kills 3 Pittsburgh officers

April 5, 2009

Gunman ‘lying in wait’ kills 3 Pittsburgh officers By RAMIT PLUSHNICK-MASTI and DAN NEPHIN, Associated Press Writers Ramit Plushnick-masti And Dan Nephin, Associated Press Writers Sat Apr 4, 6:58 pm ET PITTSBURGH – A gunman wearing a bulletproof vest and “lying in wait” opened fire on officers responding to a domestic disturbance call Saturday, killing three of them and turning a quiet Pittsburgh street into a battlefield, police said. Police Chief Nate Harper said the motive for the shooting isn’t clear, but friends said the gunman recently had been upset about losing his job and feared the Obama administration was poised to ban guns. Richard Poplawski, 23, met officers at the doorway and shot two of them in the head immediately, Harper said. An officer who tried to help the two also was killed. Poplawski, armed with an assault rifle and two other guns, then held police at bay for four hours as the fallen officers were left bleeding nearby, their colleagues unable to reach them, according to police and witnesses. More than 100 rounds were fired by the SWAT teams and Poplawski, Harper said. The three slain officers were Eric Kelly, 41, Stephen Mayhle, 29, and Paul Sciullo III, 37. Kelly had been on the force for 14 years, Mayhle and Sciullo for two years each. Another officer, Timothy McManaway, was shot in the hand and a fifth broke his leg on a fence. Poplawski had gunshot wounds in his legs but was otherwise unharmed because he was wearing a bulletproof vest, Harper said. He was charged with three counts of homicide, aggravated assault and a weapons violation. The shooting occurred just two weeks after four police officers were fatally shot in Oakland, Calif., in the deadliest day for U.S. law enforcement since Sept. 11, 2001. The officers were the first Pittsburgh city officers to die in the line of duty in 18 years. “This is a solemn day and it’s a very sad day in the city of Pittsburgh,” Harper said. “We’ve seen this kind of violence happen in California. We never would think this kind of violence would happen in the city of Pittsburgh.” At 7 a.m., Sciullo and Mayhle responded to a 911 call from Poplawski’s mother, who remained holed up in the basement during the entire dispute and escaped unharmed, Harper said. When they arrived at the home, Sciullo was immediately shot in the head. Mayhle, who was right behind him, was also shot in the head. “It appears he was lying in wait for the officers,” Harper said. Kelly, who was on his way home after completing his overnight shift when he heard the call for help, rushed to the scene and was killed trying to help Sciullo and Mayhle, Harper said. SWAT teams and other officers arrived and were immediately fired on as well. Don Sand, who lives across the street from Poplawski, said he was woken up by the sound of gunfire. Hunkering down behind a wall in his home, he saw the first two officers go down and then saw Kelly get shot. “They couldn’t get the scene secure enough to get to them. They were just lying there bleeding,” Sand said. “By the time they secured the scene enough to get to them it was way too late.” Deputy Chief Paul Donaldson, who lives nearby, was one of the first officers to arrive. He saw Mayhle by a bush to the right of the door; Kelly was in the street and McManaway, his hand injured, was kneeling beside him, yelling that Kelly needed help. Donaldson suggested using a police van to get them. They draped a bulletproof vest on the window to protect the driver and several officers got into the van to get Kelly and McManaway. During this time, Poplawski was somehow distracted, Donaldson said. “We were fortunate that he didn’t fire on us. I don’t know why he was distracted, but he apparently didn’t see us coming down to get them,” he said. “It could have been worse.” Poplawski had feared “the Obama gun ban that’s on the way” and “didn’t like our rights being infringed upon,” said Edward Perkovic, his best friend. Perkovic, 22, said he got a call at work from him in which he said, “Eddie, I am going to die today. … Tell your family I love them and I love you.” Perkovic said: “I heard gunshots and he hung up. … He sounded like he was in pain, like he got shot.” Poplawski had once tried to join the Marines, but was kicked out of boot camp after throwing a food tray at a drill sergeant, Perkovic said. Another longtime friend, Aaron Vire, said Poplawski feared that President Barack Obama was going to take away his rights, though he said he “wasn’t violently against Obama.” Vire, 23, said Poplawski once had an Internet talk show but that it wasn’t successful. He said Poplawski owned an AK-47 rifle and several powerful handguns, including a .357 Magnum. Obama has said he respects Americans’ constitutional right to bear arms, but that he favors “common sense” gun laws. Gun rights advocates interpret that as meaning he would approve some curbs on assault and concealed weapons. Poplawski had been laid off from his job at a glass factory earlier this year, said another friend, Joe DiMarco. DiMarco said he didn’t know the name of the company, but knew his friend had been upset about it. The last Pittsburgh police officers killed in the line of duty were Officers Thomas L. Herron and Joseph J. Grill, according to a Web site that tracks police killings. They died after their patrol car collided with another vehicle while chasing a stolen car on March 6, 1991. In 1995, an off-duty officer was shot with his own gun after he confronted a group of teenagers about graffiti. Tests later showed the officer had been drinking. According to the National Law Enforcement Officers Memorial Fund, 133 law enforcement officers died in the line of duty in 2008, a 27 percent decrease from year before and the lowest annual total since 1960. Poplawski had often fought with neighbors and had even gotten into fist fights with a couple, Sand said. “This is a relatively really quiet neighborhood except for him,” Sand said. “He was just one of those kids that we knew to stay clear from.” Harper confirmed police had responded to calls from the Poplawski house several times but said the incidents were still being investigated. Rob Gift, 45, who lives a block away, said the well-kept single-family houses with manicured lawns are home to many police officers, firefighters, paramedics and other city workers. “It’s just a very quiet neighborhood,” Gift said.


Oversaving, a Burden for Our Times

April 4, 2009
March 24, 2009

We interrupt this recession to bring you news of another crisis that is much more pleasant to deal with. Now that shoppers have sworn off credit cards, we’re risking an epidemic of a hitherto neglected affliction: saver’s remorse.

The victims won’t evoke much sympathy — don’t expect any telethons — but their condition is real enough to merit a new label. Consumer psychologists call it hyperopia, the medical term for farsightedness and the opposite of myopia, nearsightedness, because it’s the result of people looking too far ahead. They’re so obsessed with preparing for the future that they can’t enjoy the present, and they end up looking back sadly on all their lost opportunities for fun.

It’s hard to imagine this excessive foresight being much of a burden for, say, Bernard L. Madoff. Nor for the optimists who took out balloon mortgages (and the A.I.G. executives who insured them). But hyperopia does seem to affect a wide range of people in some circumstances, to judge from clever experiments with people shopping for bargains and redeeming prizes.

Splurging on a vacation or a pair of shoes or a plasma television can produce an immediate case of buyer’s remorse, but that feeling isn’t permanent, according to Ran Kivetz of Columbia University and Anat Keinan of Harvard. In one study, these consumer psychologists asked college students how they felt about the balance of work and play on their winter breaks.

Immediately after the break, the students’ chief regrets were over not doing enough studying, working and saving money. But when they contemplated their winter break a year afterward, they were more likely to regret not having enough fun, not traveling and not spending money. And when alumni returned for their 40th reunion, they had even stronger regrets about too much work and not enough play on their collegiate breaks.

“People feel guilty about hedonism right afterwards, but as time passes the guilt dissipates,” said Dr. Kivetz, a professor of marketing at the Columbia Business School. “At some point there’s a reversal, and what builds up is this wistful feeling of missing out on life’s pleasures.”

He and Dr. Keinan managed to change consumers’ behavior simply by asking a few questions to bus riders going to outlet stores and to other shoppers shortly before Black Friday.

The people who were asked to imagine how they would feel the following week about their purchases proceeded to shop thriftily for basic necessities, like underwear and socks. But people who were asked to imagine how they’d feel about their purchases in the distant future responded by spending more money and concentrating on indulgences like jewelry and designer jeans

“When I look back at my life,” one of these high rollers explained, “I like remembering myself happy. So if it makes me happy, it’s worth it.”

Aesop told a fable of two types of people: the virtuous Ant who saves for the winter and the improvident Grasshopper who’s punished with starvation. But even the most conscientious Ants sometimes recognize the need to lighten up — and, with typical Ant discipline, will find ways to “precommit to indulgence,” as Dr. Kivetz discovered in a lottery experiment he conducted with Itamar Simonson of Stanford University.

The experimental participants, who were all women, were given a ticket for a lottery drawing to be held three months later, and asked to choose in advance which prize they’d prefer if they won: $85 in cash, or a voucher for an $80 massage or facial at a spa. They were reminded that they could simply use the $85 in cash to buy the spa treatment (and have $5 left over), but even so, more than a third of the women chose the voucher for the spa.

Similar results turned up when the researchers asked men and women to pick other kind of prizes or to redeem points earned in frequent-buyer programs. When choosing between cash and “hedonic luxuries” like bottles of wine, dinners or vacations, a substantial minority chose the luxuries even though the cash was a better deal.

“If I took the cash,” one person explained, “it would end up going into the rent.” Another wrote of her decision: “That way I’d have to pamper myself and not spend the $ on something like groceries.”

Other experiments showed that people will work harder for luxuries than for more practical prizes — and the more effort that’s required, the more they feel entitled to a self-indulgent reward. That’s a motivation strategy for managers and marketers to keep in mind, Dr. Kivetz said.

During the current recession, hyperopic Ants are presumably having a harder time than ever parting with their own cash, no matter how often President Obama and his economists urge them to do some stimulative shopping. But would these Ants — and the economy — be better off if they relaxed a little? (You can provide an answer at TierneyLab, ) I asked Dr. Kivetz for his advice to shoppers.

“Don’t be too hard on yourself,” he said. “Obviously you need to be responsible and conserve your savings. But it’s been a depressing winter, and there’s nothing wrong with indulging yourself a little. This is a chance to reassess the quality and the balance of your life and to think how you’ll feel in the future. As long as you can afford it, it’s not a bad thing to be enjoying yourself.”

That advice sounds sensible to me, but then I, like a lot of baby boomers, have always had a strong Grasshopper streak anyway. The bigger challenge will be persuading serious Ants like my parents, who remember the Depression and have looked with horror on the money spent by my generation (particularly those of us living in New York).

In the past, I’ve tried pointing out to my parents that all money not spent by the Greatest Generation will only be spent by their heirs — and in not-so-great ways. Sometimes, after I’ve threatened to blow the inheritance on a box at the Metropolitan Opera or nightly meals at Le Bernardin, my parents will consent to a little extravagance for themselves, and my mother will remind my father of an old proverb: “There are no pockets in shrouds.”

But maybe now, thanks to Dr. Kivetz’s research, there are better arguments to use on Ants of any age. They can be presented with a scientific rationale for going on a shopping binge: It’s essential therapy for your hyperopia! If that doesn’t convince them, if they seem puzzled by the term, then try this question on them:

When you’re on your deathbed, how much time will you spend wistfully thinking, “If only I’d bought the smaller plasma TV. . . .”?

Rapid Declines in Manufacturing Spread Global Anxiety

March 20, 2009

March 20, 2009

Since it was founded by his great-grandfather in 1880, Carl Martin Welcker’s company in Cologne, Germany, has mirrored the fortunes of manufacturing, not just in Europe but around the world. That is still true today. In a pattern familiar to industrial businesses in Europe, Asia and the United States, Mr. Welcker says his company, Schütte, which makes the machines that churn out 80 percent of the world’s spark plugs, is facing “a tragedy.” Orders are down 50 percent from a year ago, and Mr. Welcker is cutting costs and contemplating layoffs to prevent Schütte from falling into the red. That manufacturing is in decline is hardly surprising, but the depth and speed of the plunge are striking and, most worrisome for economists, a self-reinforcing trend not unlike the cascading bust that led to the Great Depression. In Europe, for example, where manufacturing accounts for nearly a fifth of gross domestic product, industrial production is down 12 percent from a year ago. In Brazil, it has fallen 15 percent; in Taiwan, a staggering 43 percent. Even in China, which has become the workshop of the world, production growth has slowed, with exports falling more than 25 percent and millions of factory workers being laid off. In the United States, until recently a relative bright spot for manufacturing despite the steady erosion of blue-collar jobs, industrial output fell 11 percent in February from a year ago, according to statistics released Monday by the Federal Reserve. “Manufacturing has fallen off the cliff, and it’s certainly the biggest decline since the Second World War,” said Dirk Schumacher, senior European economist with Goldman Sachs in Frankfurt. The pattern of manufacturing and trade ominously recalls how the financial crisis of 1929 grew into the Great Depression: tightening credit and consumer fear reduced demand for manufactured goods in one country after another, creating a downward spiral that reduced global trade. “Plunging manufacturing suggests that as bad as things were in the fourth quarter, they are at least as bad now,” said Robert J. Barbera, chief economist at ITG, a New York research and trading business. “This is a classic adverse feedback loop. It won’t quickly correct itself.” That means more workers can expect to lose their jobs around the world in coming months as manufacturers continue to cut production, especially as global trade contracts. In fact, trade is shrinking even faster than production. Germany’s exports down are 20 percent from a year ago, Japan’s have plunged 46 percent, and in the United States, exports fell at an annualized rate of 23.6 percent in the fourth quarter of 2008. Mr. Welcker says he has never seen anything like it. For parallels, he has to hark back to the Great Depression and World War II, when Schütte’s factory was destroyed. After focusing on Germany and Europe in the decades after the war, Schütte thrived recently as globalization opened new markets in Eastern Europe and Asia. In the last five years, Schütte’s sales soared to about 100 million euros ($131 million) from 58 million. The sudden reversal in global manufacturing suggests that Americans should not expect economic relief from abroad soon, despite a slightly more optimistic mood on Wall Street lately and President Obama’s call for more stimulus spending by foreign governments. While manufacturing equals about 14 percent of gross domestic product in the United States, it totals 18 percent worldwide, and accounts for 33 percent of G.D.P. in China, according to the World Bank. That means that China, Brazil, India and other fast-growing emerging market countries that have escaped the worst of the fallout from the credit crisis will increasingly suffer, dragging down demand in more advanced Western economies even as government-led stimulus packages kick in. The damping effect works both ways. Despite the misperception that America no longer makes anything, falling demand for goods made in the United States, including jet engines, locomotives, medical equipment, pharmaceuticals and some high-tech products, will hurt American growth prospects. “Manufacturing makes up about two-thirds of U.S. exports, and contributed more to G.D.P. growth over the last 20 years than any other sector of the U.S. economy,” said David Huether, chief economist for the National Association of Manufacturers in Washington. “Our share of global manufacturing output has remained steady at 20 to 23 percent over the past decade.” Elsewhere, even relatively healthy industrial companies like Toyota are also slashing production, which contributed to Japan’s huge export decline. Toyota halted work at its 12 auto plants in Japan beyond its normal break in February and March. It also cut its production forecast for the year ending March 31 by 20 percent, to slightly more than seven million vehicles, and has warned that it will post a net loss of 350 billion yen ($3.6 billion), its first in decades. In Europe, new figures for January manufacturing are due Friday, and they are expected to show that the decline is still worsening. Although the problems of manufacturers supplying the auto industry and other so-called big iron manufacturers of products like locomotives, jet engines and power turbines have gotten the most attention, makers of a variety of other products, including handicrafts, clothes and jewelry, are suffering too. India’s manufacturing sector, which accounts for about 16 percent of G.D.P., recently recorded its first quarterly production decline in more than a decade. Since last April, handicraft exports have fallen by 55 percent to $1.35 billion, and textile makers estimate they have slashed half a million jobs. Banks, meanwhile, are restructuring loans for diamond makers and polishers. And despite tax cuts and a $64 million stimulus package announced in February, Indian textile makers are pushing for more government help. “We’re competing with countries like Bangladesh, where wages are lower,” said Rakesh Vaid, the chairman of Usha Fabs, a Delhi textile manufacturer. “We’re competing with China where the currency is well managed, and Vietnam where the industry is getting strong support from the government.” At Schütte, which has 550 workers and is emblematic of Germany’s bedrock Mittelstand sector of family-run businesses, perilous times are part of the company’s history. Mr. Welcker recalls family tales of trucks filled with cash to pay workers during the hyperinflation of the Weimar era, and how after G.I.’s crossed the Rhine in 1945 near where his factory stands today, “not one stone stood atop another.” Today, he is thankful the situation is nothing like those days. “But the speed of the decline in orders,” he said, “is the worst we’ve ever seen.”

Extravagance Has Its Limits as Belt-Tightening Trickles Up

March 15, 2009
March 10, 2009

ATLANTA — It is a sign of the times when Sacha Taylor, a fixture on the charity circuit in this gala-happy city, digs out a 10-year-old dress to wear to a recent society party.

Or when Jennifer Riley, a corporate lawyer, starts patronizing restaurants that take coupons.

Or when Ethel Knox, the wife of a pediatrician, cleans out her home and her storage unit, gives away an old car to a needy friend and cancels the family Christmas. “I just feel so decadent with all the stuff I’ve got,” she explained.

In just the seven months since the stock market began to plummet, the recession has aimed its death ray not just at the credit market, the Dow and Detroit, but at the very ethos of conspicuous consumption. Even those with a regular income are reassessing their spending habits, perhaps for the long term. They are shopping their closets, downscaling their vacations and holding off on trading in their cars. If the race to have the latest fashions and gadgets was like an endless, ever-faster video game, then someone has pushed the reset button.

“I think this economy was a good way to cure my compulsive shopping habit,” Maxine Frankel, 59, a high school teacher from Skokie, Ill., said as she longingly stroked a diaphanous black shawl at a shop in the nearby Chicago suburb of Glenview. “It’s kind of funny, but I feel much more satisfied with the things money can’t buy, like the well-being of my family. I’m just not seeking happiness from material things anymore.”

To many, the adjustment feels less like a temporary, emergency response than a permanent recalibration, one they view in terms of ethics rather than expediency.

“It’s kind of like we all went overboard,” said Ms. Taylor, 33. “And we’re trying to get back to where we should have been.”

Not everyone thinks the new restraint will last. Ms. Riley, 37, who lives in Atlanta, said she doubted it would extend beyond the recession.

“I do think that maybe now it’s a little bit chic or something to save money, or to be pinching pennies,” she said.

Just as she stopped carpooling when gas prices went down, Ms. Riley said, she predicted that people would start buying again when the economy rebounded. “That’s just my own, maybe, cynical belief,” she said.

Still, economists point out that the Great Depression created a generation of cautious savers. The longer the downturn this time, they say, the more likely it is to change financial habits permanently.

Holly Moreno, 30, a part-time Web site manager in the Dallas suburb of Rowlett, Tex., whose husband is a business analyst, said she had been taking their 2-year-old son to indoor playgrounds at the mall and free story-times at the library instead of paying to get into the children’s museum, their favorite wintertime haunt.

“Even though we’re secure with our jobs, you’ve still got to plan for just-in-case,” Ms. Moreno said, “especially because we have a kid.”

As many economists have noted, cutting spending is the worst thing people with means can do for the economy right now. But that argument seems to have little traction, especially because even those with steady paychecks and no fear of losing their job have seen their net worth decline and their retirement savings evaporate.

“I don’t think there’s been any other period in modern history where appeals to people to spend the economy back into health have worked,” said Ethan S. Harris, a co-chief of United States economics research at Barclays Capital. “The only time I’ve ever seen where that kind of urging people to spend worked was after 9/11, and I did think at the time that there was some patriotic buying going on.”

After the attacks of Sept. 11, though, President George W. Bush urged Americans to go shopping. President Obama has taken a different tack, issuing a budget whose very title, “A New Era of Responsibility,” strives for an austere tone. On Inauguration Day, the first daughters, Sasha and Malia, dressed not in designer labels but clothing from J. Crew. On television, the insurance giant Allstate is running a sepia-toned “back to basics” advertising campaign, and in Target’s “new day” commercials, the “new pedicure” is administered by a spouse and the “new vacation glow” comes from a spray bottle.

“Though the recession was always talked about in economic terms, we felt really strongly that, in fact, it was a crisis of culture,” said Tracy Johnson, research director for the Context-Based Research Group, a market research firm in Baltimore that views the recession as a rite-of-passage that will reorder consumer priorities.

Ms. Johnson has advised clients to focus on quality rather than quantity. Malls redecorated in screaming red “sale” signs are not the way to go, she said, because “if you just give people the opportunity to buy more, you’re not matching up to where their minds are.”

Carol Morgan, who teaches law at the University of Georgia and whose husband has a private law practice, said she felt a responsibility to cut needless spending. “That is probably something that is a prudent thing to do in any event, but particularly now I see it as the right thing, as the moral thing to do,” she said, adding that she also hoped to increase her charitable giving. “Before, extravagance and opulence was the aspiration, and if we can replace that with a desire to live more simply — replace that with time with family, or time for spirituality — what a positive outcome to a very negative situation.”

Kim Gatlin, a novelist who lives in Park Cities, in the Dallas area, said some of her friends had urged their husbands not to give them jewelry over the holidays. “They were like, you know, ‘There’s nothing I’m dying for right now — let’s just wait,’ ” she said. “It makes them feel like they’re participating, although they don’t contribute to the income stream.”

Even some of the very affluent said they were reluctant to be conspicuous in their spending.

“It’s disrespectful to the people who don’t have much to flaunt your wealth,” said Monica Dioda Hagedorn, 40, a lawyer in Atlanta who is married to an heir of the Scotts Miracle-Gro fortune. “I have plenty of dresses to last me 10 years.”

Ms. Hagedorn said she did not hold herself apart from the rest of society because of her money. “Everyone’s going to pull through together, or everyone’s going to sink together,” she said.

Fear and uncertainty have paralyzed even the most insulated clients, said Jack Sawyer Jr., who manages money for some of Atlanta’s wealthiest families. “I have clients who have $20 million, young grandparents, and they’re concerned about whether they can continue to pay tuition for their grandchildren. It’s not a rational process.”

Any sharp decline in consumer spending will feed on itself, said Juliet B. Schor, an economist at Boston College and the author of “The Overspent American: Upscaling, Downshifting and the New Consumer” (Basic Books, 1998). Typically, people spend when those around them are spending, but in a downturn, the need to compete evaporates. “You can stay right where you are without falling behind,” Ms. Schor said.

Consumers’ focus may have shifted, she said, from striving to catch up to those above them to contemplating the fates of those below them.

Craig Robinson, 34, a manager at a real estate investment firm in Atlanta, agreed, saying that he was not tempted to join those who were scooping up deals at department stores. “There’s one guy to the right of me showing me this great deal he got on his tie,” he said, “and there’s four guys to the left of me who got laid off and can’t find a job.”

Numbers of the Depression of the 21st Century

March 6, 2009

March 6:

  • 651,000 jobs lost
  • 25-year high jobless rate
  • 4.4 million jobs lost since December 2007
  • 161,000 more jobs lost in January & December
  • 12.5 million people unemployed in February
  • 787 bn – stimulus package of Obama
  • 681,000 – 2008 December’s payroll losses were adjusted to the deepest since October 1949
  • 8.1 percent unemployment rate surged January, its highest level in a quarter-century.
  • $600 million in long-term debt – Saks has more than
  • more than $2 billion – Claire’s, the accessories chain, is on the hook for
  • $6 billion in debt and more goes to Rite Aid
  • $8 billion – Macy’s debt is more than this
  • Manufacturing, Financial services and Retail — layoffs have accelerated so quickly in recent months
  • 650,000 jobs for three straight months, the worst decline in percentage terms over that length of time since 1975
  • 19 million houses and apartments — nearly one out of every seven — are vacant, the highest percentage since the 1960s
  • 10.6 percent – Michigan unemployment rate
  • 44,000 jobs in February lost in financial services

Chip Makers Watch Sales Fall Sharply

March 4, 2009
March 3, 2009

MOUNTAIN VIEW, Calif. — While accustomed to the boom-and-bust nature of their industry, the companies making the semiconductor chips that run computers, cellphones, digital cameras and even cars find themselves in the middle of a collapse in sales that resembles total chaos.

With sales of most manufactured goods plunging in this recession, demand for chips is evaporating. In January alone, chip sales plummeted by almost a third from the previous year, to $15.3 billion, according to the Semiconductor Industry Association.

“This is the worst recession the semiconductor industry has seen since its inception,” said Sean M. Maloney, the chief sales and marketing officer at Intel, at a news conference Monday.

Consumers have benefited from some of the underlying turmoil. Smartphones and the cheap laptops known as netbooks are getting more powerful even as they drop in price. And the prices for the memory chips used to store information in iPods, digital cameras and cable set-top boxes are plummeting as the companies making the products grapple with overcapacity at their factories.

Major chip makers like Intel, Advanced Micro Devices and Nvidia have felt the sting of businesses and consumers curtailing their spending on computers. Last month, Hewlett-Packard, the world’s largest PC maker, reported a 19 percent drop in computer sales, while Dell, the second-largest PC maker, posted a 27 percent decline in desktop sales.

On Monday, the research firm Gartner predicted that computer shipments would dive by 12 percent in 2009 to 257 million units — the steepest decline ever.

In the memory chip industry, conditions have turned cataclysmic.

In the last couple of years the production of memory chips swelled as companies chased rising interest in consumer gadgets. The result was a vast oversupply, which led to plummeting prices. Memory prices fell 60 percent last year and could fall 40 percent this year, according to Jim Handy, the director of the chip research firm Objective Analysis.

Now, on top of the oversupply, memory makers like Spansion and Micron Technology must also deal with falling demand for the consumer devices that use their products.

“We’re in unprecedented territory for the chip industry as a whole, and the memory makers are then in a category by themselves,” said Dale Ford, an analyst at the research firm iSuppli. “These companies put themselves in a position of putting in place so much capacity that they were bleeding cash when the downturn took place.”

Burdened with aging chip factories, Micron announced in October that it would lay off close to 3,000 people, or 15 percent of its work force. In February, it said it would eliminate up to 2,000 additional jobs. Qimonda, a German memory maker, began insolvency proceedings in January.

And over the weekend, Spansion, the largest maker of a type of memory popular in cellphones, automobiles and set-top boxes, filed for bankruptcy protection after having already cut 3,000 jobs, or 35 percent of its work force. The company has said it was open to acquisition proposals.

“There is no relief valve from the credit markets,” said Thomas T. Eby, an executive vice president at Spansion, which is based in Sunnyvale, Calif.

Mr. Eby conceded that the memory chip makers brought some of this misery upon themselves by building too many factories, which led to the declining prices. But he added that chip makers must try to anticipate demand and pay for and build their expensive factories two to three years ahead of time. “The bigger issue is that no one had a crystal ball to see what was coming from the economy,” he said.

With the complexity and cost of building chips only continuing to rise, the current market conditions could accelerate a trend toward consolidation while also making it less likely that start-ups will challenge the incumbents, say industry observers.

And credit problems will probably result in some companies just disappearing, Mr. Ford said. “The industry doesn’t have its historical ability to manage through this.”

Crashing standard of living

February 19, 2009

Posted Feb 17, 2009 12:53pm EST by Aaron Task in Investing, Recession Related: WMT, WFMI, FDO, ^GSPC, ^DJI, RTH, TGT There’s no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment. But “the worst is yet to come,” according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American’s standard of living is undergoing a “permanent change” – and not for the better as a result of: * An $8 trillion negative wealth effect from declining home values. * A $10 trillion negative wealth effect from weakened capital markets. * A $14 trillion consumer debt load amid “exploding unemployment”, leading to “exploding bankruptcies.” “The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car,” Davidowitz says. “A lot of that is gone.” Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy – as well as their aspirations. The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

Circuit City to Shut Down

January 17, 2009
January 17, 2009

Circuit City Stores, a bellwether American retailer, said Friday that it would go out of business, stripping the nation of its second-largest consumer electronics chain.

The company, which filed for bankruptcy protection in November but had hoped to emerge in a slimmed-down form, said instead that it would liquidate all its stores and assets.

Most of the chain’s 34,000 store employees will be laid off. Closing sales will begin as early as Saturday and will last until the merchandise is gone or about the end of March.

Just last week, Circuit City, with 567 stores, was in talks with two potential buyers, but it was unable to reach an agreement with its creditors and lenders.

“We are extremely disappointed by this outcome,” said James A. Marcum, acting president and chief executive of Circuit City Stores. He called the liquidation “the only possible path” for the 60-year-old company.

The demise of Circuit City, while not surprising given its declining sales, is part of a radical shift taking place in retailing. Weak chains — unable to weather the freeze-up in consumer spending and choked by tight credit markets — are closing.

The downturn comes after years of growth, when retailers — responding to a flood of demand from consumers spending borrowed money — opened thousands of stores. Now that the housing downturn and economic crisis have turned off the credit spigot and sent frightened consumers into hiding, it is becoming evident that many of those stores are not needed.

“We are incredibly over-stored in many sectors,” said Stacey Widlitz, an analyst with Pali Research. “If you don’t have the balance sheet to really weather the storm for a couple of years, then that’s it.”

Last year, a raft of retailers, including Boscov’s, Sharper Image, Mervyns, Linens ’n Things, Whitehall Jewelers and Steve & Barry’s, filed for bankruptcy protection. This week, Goody’s Family Clothing and Gottschalks also filed.

Many more retailers are expected to follow suit as they run out of working capital or are unable to refinance their debt.

Emerging from bankruptcy is harder than ever because of changes in the bankruptcy code and trouble in the credit markets, which are largely refusing to put new money into troubled companies.

Wall Street analysts said in November that the prospects of long-term survival for Circuit City were bleak. Months of declining sales sent the company over the edge, although its problems go back a decade. They include buying cheap real estate leases in inferior locations and laying off the company’s most experienced sales staff. The latter saved money, but at the price of employee morale and countless customers.

“They basically destroyed all their customer loyalty among all their best customers in one fell swoop,” said Britt Beemer, chief executive and founder of America’s Research Group.

“That was really the beginning of the end.”

The disappearance of the national chain means that in many markets consumers are running out of places to buy electronics, though shoppers are not the only ones being affected. The loss of Circuit City will probably be felt throughout the supply line as electronics manufacturers find themselves less able to negotiate prices.

The biggest electronics retailer left is Best Buy. Circuit City’s liquidation sales are likely to put pressure on Best Buy in the short run, but retailing analysts say the company will ultimately emerge with more market share.

“Even accounting for a softer economy,” said David A. Schick, an analyst at Stifel Nicolaus, “the business will go to specialty players in the sector and it will also go to mass merchant discounters.”

Analysts say they believe the biggest winner will not be Best Buy, but Wal-Mart.

Ms. Widlitz said consumers who shopped at Circuit City were more likely to defect to Wal-Mart than to Best Buy, especially at a time when Wal-Mart has aggressively built up its stable of name-brand electronics at low prices.

“This is perfect timing for them,” Ms. Widlitz said.

Frugal Kitchen

January 9, 2009

The frugal kitchen

This year’s keyword is “tipid” (in English, frugal). Gone are the devil-may-care days of buying. Around the world, everyone is searching for means to cut corners, and reusing and recycling whenever possible. In keeping with the needs of the times, we start the year with tips on saving money while serving nutritious meals.

1. Buy in bulk. Avoid buying little packets or sachets of ingredients, especially the ones you often use. Retailers make a bundle by repacking spices, beans, dried fish, and noodles in small retail plastic packets. You can save thousands of pesos a year by buying supplies by the kilo or ¼ kilo in shops outside the supermarkets.

2. Get your vegetables from wet markets.

Supermarket vegetable suppliers often go through two or three levels of middlemen and add on interest for the 30-day checks they get paid with.

3. At wet markets, cheaper is not always a better bargain.

Often, vendors offer mounds of vegetables for P 5 or P 10 at the end of their vending day. Before you get tempted, inspect the veggies for overripe or wilted spots. You may be better off buying good-quality, select veggies at a stall that sells by the kilo.

4. While at the market, make sure the food items are stacked in your basket properly.

Tough stuff like potatoes, onions, garlic, and shellfish should be at the bottom of the basket; tender ones like tomatoes, tofu, fish, and meat should be on top.

5. Upon reaching home, immediately take everything out of the basket.

Place fish and meat in the freezer and sort out the vegetables and other purchases. Every minute counts. The veggies could turn yellow and wilt; the fish and meats could spoil.

6. Fruits and vegetables with skin like apples, oranges, melon, tomatoes, potatoes, cucumber, upo, zucchini, and radish should be washed in water with a little detergent.

Dry them before packing and storing in the fridge. This process removes dirt, mud, E. coli, Salmonella, and whatever preservatives the vendors used on their displayed products.

7. Fish should be gutted, patted dry, packed in plastic bags with the air squeezed out, and then frozen.

If there’s a lot of fish, they should be packed in twos or threes to facilitate thawing when you finally need to cook them. Large fish that has to be cooked in slices should be gutted and partially frozen to make slicing easier. The slices or fillets can then be packed and stored individually.

8. Meats should likewise be packed and stored in small quantities.

Pork chops and steaks should be packed individually or in layers separated by plastic films.

9. Eggs should be washed with detergent and rinsed before storing in the fridge.

Most of the eggs sold in the Philippines are soiled with chicken coop refuse, which contains Salmonella. Unwashed eggs could contaminate your hands, which transfer the Salmonella to everything else you touch, including food.

10. Make your menu depend on what’s in season.

For example, do not insist on making tortang talong (eggplant omelet) when eggplants are sold at P 70 per kilo. Be inspired and challenged by what you have in the fridge and freezer.

11. Be practical and use substitutes when following recipes.

No one will send you to jail if you use kalabasa instead of potatoes in making a stew. You could even win praises for being innovative. When I am out of bean sprouts, I use shoestring kalabasa for ukoy and lumpia.

12. It’s okay to serve instant mami from cellophane packs as long as it is made more nutritious with vegetables, herbs, and meat, even leftovers. Top with fried garlic and hardboiled egg, and you have a meal.

13. Save time and energy; double the volume of a recipe; freeze half.

This is what I do with recipes of adobo, mechado, stews, dinuguan, bopis, menudo, kaldereta, and other dishes that need a lot of time and effort to cook. Mark the packs well so you know what you’re pulling out of the fridge. It will need only a couple of minutes in the microwave and it’s ready to serve.

14. When eating out, I automatically ask the waiter to pack half of my order to take home.

This practice is so acceptable these days that economists on the pages of the most prestigious newspapers in the United States regularly advise it. The beef, pork, or chicken portion taken home could be recycled into chop suey, omelet, or added to fried rice.

15. Buy cheaper cuts of meat, and learn recipes especially suited for them.

There are hundreds of pesos to be saved monthly by serving brisket instead of sirloin, pork neck in lieu of pork chop and liempo.

16. Serve more vegetables, either in meat dishes or on their own.

Vegetables not only stretch your kitchen budget; they also make the family healthier. Mince them into the meatballs, add them into lumpia, stuff them in shawarma, or layer them like lasagna in a cheesy casserole.

17. Think twice before buying convenience ingredients like frozen mixed vegetables.

You can save a lot of money by starting from scratch, mixing diced carrots, corn and peas yourself.

18. Learn to use dried peas.

A kilo of dried green peas (gisantes) costs P 30/kilo. When soaked and boiled, it swells to become three kilos of protein. That’s P 10 per kilo! Use gisantes instead of, or in addition to, potatoes in menudo and corned beef. Mashed boiled gisantes can also be used instead of mung beans in ginisang munggo.

19. Dried beans are great for health and wealth.

Whether white, black, red or black eyed, they swell to three times their size and weight after soaking and boiling. Cook with the cheaper, less tender cuts of beef and pork. Or simmer with leftover lechon head, bones, skin, and feet.

20. Canned sardines can be a mom’s best friend.

I normally stock several 155-gram cans of local sardines in three variants distinguishable by the color of their paper labels: white, red, and green. White is in natural oil, red is in tomato sauce with chili, and green is in tomato sauce without chili.

The first dish I learned was plain ginisang sardinas which is canned sardines sautéed in garlic, onions, and tomatoes. Later, I learned to add shredded pechay or mustasa leaves. Then someone taught me to stir in a beaten egg shortly before the burner is turned off. A Chinese relative says she adds fried tokwa (tofu) cubes and tausi (salted black beans) plus a dash of sesame oil for an Oriental touch. There are thousands of sardine recipes and other frugal tips which we will share with our readers in future columns.

Saving money chinese style

January 8, 2009

Some are responding by joining the kou kou zu and limiting their spending – keeping money in the bank for the rainy day that few until now had forecast.

China’s newly frugal youths

Amid the global economic downturn, young people in China are defying government initiatives to boost spending and coming up with novel ways to save money.

Back in July 2008, Wang Chao, a 28-year-old office worker from Shanghai, told the BBC he spent 2,000 yuan (then about $290; £150) in a single day on trainers, clothes and gadgets.

But when last month his company cut salaries by half, Wang said he was forced to cut back on luxuries and swap restaurant meals for homemade packed lunches.

“My monthly income has been cut by 50%. I have had to reduce my living costs, though I’m still able to eat well.”

Blogs and popular internet forums are full of stories and advice from young people looking to stretch their money further.

This is despite the government’s allocation of some $586m-worth of funds to encourage spending to keep China’s economic growth around what it believes is the minimum necessary to maintain social stability.

‘Stingy group’

The young savers, or the “kou kou zu” (“stingy group”), come from the generation born around the 1980s; now 20- and 30-somethings who have been regularly accused of being spoilt and lacking financial awareness.

In large cities like Beijing and Shanghai, young white collar workers were well-known for their ability to overspend. A recent Shanghai government survey revealed that office workers in the city spent an average of 2,500 yuan per month – a disposable income beyond the grasp of most Chinese.By contrast, the kou kou zu are eschewing restaurants for school and company canteens; taxis and public transport for bicycles; and high street shops for online ones. It remains a grassroots movement, but it appears to be growing.

Zhang Yan, a “kou kou” from Fujian province, said learning to spend wisely had been more than just a reaction to the global recession.

She told the China Daily newspaper: “This is not just a response to the crisis – it’s something you can benefit from your whole life. Plus, it is environmentally friendly and represents a healthy and positive life attitude.”

In 2006, Ms Zhang set up an online accounting system – – to help others like herself to balance their budgets.

More than just an accounting system, the website allows users to discuss money matters, comment on posts about cost-cutting homemade dishes, and remind each other to record their expenses.

Other websites promoting money-saving campaigns have become increasingly popular.

Wang Hao, a 24-year-old Beijing-based photojournalist, has recently been posting on his blog on how to live on 100 yuan a week.

At the last count his blog – – had received some 185,700 hits.

The Chinese social networking websites Douban and Kaixin Wang have also seen the emergence of similarly themed groups.

Feeling the pinch

Some analysts suggest that such measures are an indication of a loss of consumer confidence, which could ultimately exacerbate the problems affecting China’s slowing economy.

Until recently, China’s rapid economic growth meant it avoided the main affects of the global economic downturn.

World Bank predictions place China’s growth at 7.5% this year, compared to around 9% just a few months ago, before the global financial crisis hit.

Wang Chao told the BBC that despite the gloomy outlook he feels fortunate.