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Senate Battleground States

Friday, March 31, 2006 | 05:15 PM

Interesting map via WSJ on the Senate races. It looks like the Senate will stay under GOP control, while the House is more up for grabs

click for larger graphic


Friday, March 31, 2006 | 05:15 PM | Permalink | Comments (10) | TrackBack (0)
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Myhrvold on Patents

Friday, March 31, 2006 | 11:54 AM

Following up yesterday's Patent discussion, I noticed that Nathan Myhrvold, who spent 14 years as Microsoft's chief technology officer, had an Op-Ed piece in the WSJ yesterday on Patents.  Myhrvold explodes the myths about the danger "patent trolls."

The section I had found most intriguing was this:

"Large tech companies do amass significant portfolios, but often not directly related to their business model. If a rival company asserts a patent, a company like this plays defense and threaten the asserter's products right back. While "defense" sounds benign, what it can mean in practice is having enough patents that you can steal from anybody else with impunity. Between big companies this works like a powerful shield, much like the doctrine of mutually assured destruction with nukes. But the shield is impotent against universities, companies without products or independent inventors. Owners of large defensive portfolios hate that. (emphasis added)

That's a pretty straight forward indictment by someone who knows, right from the heart of the tech industry.

Myhrvold continues:

In the 14 years I served as Microsoft's first chief technology officer, I saw this firsthand across the ranks of the computer industry. Tech companies work extremely hard to use state-of-the-art technology, and either be first to market or a fast follower -- all else falls by the wayside. Big tech companies are happy to hire the best people from rivals, universities and small companies. Their employees attend conferences and study technical papers to stay on the cutting edge. But they pretend that the patents on the technology in those papers, or from universities or small companies, don't exist. Many of the largest tech companies have a standing policy that engineers are not allowed to read patents or check whether their work infringes. Why bother to look, if you know you'll find lots of infringement? Besides the cost, it's a distraction that might hurt time to market. Their strategy is simple -- damn the torpedoes, full speed ahead.

And the problem with this is . . .?

The trouble is, this cavalier attitude toward the law runs afoul of the rights of legitimate patent holders and the big tech companies know this. Rather than pay out a small fraction of their huge profits, they're fighting a campaign to weaken patent laws for the little guy. Some of this has taken place in Congress under the banner of "patent reform." The eBay case aims to achieve the same ends in the courts.

It's hard to go to Congress or the courts and admit that you're one of the richest companies in the world, have huge profit margins and infringe lots of valid patents held by honorable people . . . but you don't want to pay them. So naturally, these companies paint a different picture. They claim that patents are low quality; yet there is no objective evidence of this. They claim patent litigation is exploding; but the actual figures show just the opposite. There are fewer patent lawsuits than copyright, trademark or other major forms of commercial litigation. (emphasis added)

I think Myhrvold paints a pretty compelling picture -- but then again, I am biased.

Inventors Have Rights, Too!
WSJ, March 30, 2006; Page A14

Friday, March 31, 2006 | 11:54 AM | Permalink | Comments (13) | TrackBack (1)
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At the Margins

Friday, March 31, 2006 | 07:14 AM

How significant has the rise in energy costs to households been over the past 5 years? 

The answer might surprise you.

New data released by the commerce department shows that Energy costs have risen nearly 50% as a percentage of a household's spending. That is significant  -- its up to more than 6% from 4.2% a few years ago -- but its far below prior peaks.

Floyd Norris notes that while the increased fuel costs have a bite, they haven't derailed the economy:

"The energy cost figures, while up, are far from unprecedented, which may help to explain why the economy has not been more severely affected by the rise in oil prices. Including both household utility costs for electricity and oil, and drivers' fuel costs, the share for energy use climbed to 6.2 percent of personal consumption expenses.

That is the highest in 15 years, but it is far below the peak of 9.3 percent reached in the first quarter of 1981, during the second oil-price shock. In 1972, before the first oil supply cutoff caused lines at gasoline stations and sent prices soaring, energy costs were also 6.2 percent."

That's consistent with my overall view -- increasingly stretched househoild budget, but by no means exhausted, with short term swings in gasoline prices impacting consumer spending.


On an unrelated note, a Federal Reserve analyst has reviewed the jobless rate, and said it hasn't been artificially depressed by a failure of many discouraged workers to be counted as unemployed. I'd like to look at this later today . . .

UPDATED March 31, 2006 11:13am

Here's a chart I whipped up on household energy consumption.


Source:  BEA

4th-Quarter Growth Put at 1.7%
NYT, March 31, 2006


Friday, March 31, 2006 | 07:14 AM | Permalink | Comments (18) | TrackBack (0)
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Media Appearance: Kudlow & Company (3/30/06)

Thursday, March 30, 2006 | 02:00 PM
in Media



This is the regular gig:  Today's Kudlow & Company, is on CNBC today at 5pm. I'm scheduled to be on from 5:10 to 6:00 pm.

Also on is Marketwatch’s Herbert Greenberg, John Rutledge of Rutledge Capital, and Noah Blackstein of Dynamic Mutual Funds.

Topics will include the Market Rally, Metal Rally, Senators trading on Congressional Inside Information, and Major League Baseball steroid scandal.


UPDATE March 30, 2006  11:12pm

After the show, I met John Rutledge, who was in the NYC remote studio also. John's a fascinating character, a true old world gentleman. He's been to China as often as some people go out eat chinese food.

We spoke about a ton of things -- I mentioned that Larry is becoming a very vocal Bush White House critic (He should have Krugman back on), and John regaled me with some Reagan stories. Say what you will about RR, but he was less obsessed with loyalty than competance. Under Reagan, the shake up going on now in the White House would have happened about 3 months into the Iraq war.

John and I discussed part of the immigration issue not getting much press; Economically, I care less about the Mexico situation and more about the Brain Drain threatening our tech companies and research universities.  There is now a global competition for talent -- one that we are on the verge of losing through dumb immigration policies. Post 9/11 national security issues should not become a force in shifting the balance of scientific power.

I'd like to see this discussed in a future show . . .

Thursday, March 30, 2006 | 02:00 PM | Permalink | Comments (16) | TrackBack (0)
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Rise of the Pure Patent Business Model

Thursday, March 30, 2006 | 06:42 AM

Back in December 2004, I wrote a column titled "Five Under-the-Radar Trends for 2005". One of the below radar trends I predicted was the acceleration of intellectual property lawsuits. That turned out to be rather prescient.

There are actually two different issues here: The first is, should the USPO be issuing so many patents, especially those for business methods? Amazon's One-click buying, and MercExchange's Buy it now auction are certainly questionable "inventions." That's an issue for Congress, who needs to adequately fund the Patent Office so they can hire many more patent examiners, rather than merely have an under staffed patent office rubber stamp applications.

The second issue is that once a patent becomes issued, who gets to use it and how? Very often, we see the first issue inappropriately raised as a PR defense in the second. I don't get the sense that all of the financial media really has a firm grasp on this. There is an entire world of patents, innovation, USPO issues, and large corporate litigants that have not been adequately discussed. Some get it, some don't. Compare  this story: "eBay Takes on the Patent Trolls" with this one "In Patent Case, EBay Tries To Fight Its Way Out of Paper Bag." (For some intercorporate litigation, see Apple against Apple Corps. Ltd., and TiVo's against EchoStar's Dish Network).

Incidentally, the term "Patent Troll" was invented by Peter Detkin when he was defending a patent case against Intel. Ironically, Detkin is now managing director with Intellectual Ventures, an intellectual property firm suing patent infringers.

If you recognize the property right inherent in patents, then the term "Patent Troll" is quite meaningless, meant to stir up political opposition to patents. How you use your property is irrelevant to the property right attached to it. What does it matter if you choose to manufacture widgets -- or merely license the patent to thos ethat do? 

What is actually going on now is a massive land grab underway by large corporations, looking to keep the fruits of entrepreneurs and innovators labor for themselves. These are not meek and vulnerable entities at the mercy of lawyers; rather, these are very astute players seeking to use the patent to further their own goals -- often at the expense of innovation.

Take Intel, where Detkin was vice president and assistant general counsel, for example. They are certainly no stranger to patent litigation. As the book Inside Intel makes clear, INTC used its patents as a club to thwart competition in the CPU market for decades. That's why its taken AMD so long to become a legitimate competitor to the chip giant.

The stealing of entrepreneurial innovation by large firms is fairly common place. My own experience with patent enforcement is that it is an enormously expensive, difficult, time consuming venture, fraught with peril. Consider the case of Robert Kearns, the inventor of the intermittant windshield wiper. In 1967, he received several patents on his design, which he tried to license to the Big 3 in Detroit. They sent him packing, but later the intermittant windshield wiper somehow found its way into autos. Long story short, he ended up in litigation for decades before finally winning. Thats decades later.

Continue reading "Rise of the Pure Patent Business Model"

Thursday, March 30, 2006 | 06:42 AM | Permalink | Comments (14) | TrackBack (1)
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Obnoxious Dell Pre-Installs

Wednesday, March 29, 2006 | 06:30 PM

Time for a rant:  This is one of those things that makes me look at Dell and wonder WTF happened to their vaunted customer service. I blame either a) a McKinsey ("the people who brought you Enron:™ ") -type consultant, or 2) some jackass MBA.

Dell no longer "delights" their customers -- at least not this one. They have become a commodity supplier of low cost goods, which are IMO spyware/popup infected.

Seriously, who is the Putz that greenlighted this collection of obnoxious sales pitches?

- Type in a bad address, and instead of Google, you are directed to a Google like page with ads for Dell's products (see below);

- Print anything, and the default printer utility will launch a sales pitch on toner;

Someone should fire that bastard. Hardly delightful day after day.

Here are the fixes:

To delete the printer pop up, you must uninstall the printer software, and then uncheck a box during the install process. Not only did it take a Dell tech support person an hour to figure that out, but it guaranteed that my next printer will be an HP. (Morons).

The other McKinsey/MBA type abrasiveness is this stupidity below. Mistype an address, or leave any site that auto refreshes (WSJ, TheStreet.com, Briefing), and you get a Dell/Google co-branded sales page.

Go away.

To remove that program, go to the Control Panel Add/Remove Programs. Look for the application named "Browser Address Error Redirector" or it may be called "GoogleAFE". Select "Uninstall."

btw, I do not recall giving permission for that to be installed. (Jerks)

If the sales / marketing people at HP had any smarts, they would be paying attention to these sorts of customer service rants. The shame is, the machine -- once the obnoxious-ware was uninstalled -- is a reliable screamer. 


This sort of poor customer experience will certainly make me hesitate before  if I order something from Dell again . . .




For prior discussions on this topic, see Consumer Issues and Investors and  Consumer Issues (Feedback)

Hey! Your cranky when your off the meds!

Wednesday, March 29, 2006 | 06:30 PM | Permalink | Comments (35) | TrackBack (0)
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Econ 101 Class

Wednesday, March 29, 2006 | 10:15 AM

I am teaching an Intro to Economics class this spring at NYU's (School of Continuing and Professional Studies). The syllabus for the class is about done, but it is not yet etched in stone.

I am starting with the basic law of Supply and Demand, Incentives, then on to Utility for individuals and Profit Maximizing for firms, Smith's Invisible Hand. Then, its on to the amorality (versus immorality) of capitalism, a history of economic schools of thought. Micro vs Macro, What is Inflation?, Paper currency versus Gold, Real Estate, Commodities, the role of the Fed, Monopoly & Anti-Trust, Free Trade & Globalization, Competition & Creative Destruction, Banking and Debt, Capital markets, and Economic Cycles, finishing up with behavioral economics. I also want to address the idea that there is "no free lunch" throughout the class. (The course is 6 weeks)

I want this to be less boring than the Econ classes that put me to sleep in college, and less technical than the Economics and Anti-Trust classes I took in law school.

Here's my question for y'all: If you were to take a course such as this, what would you want taught? What topics and specific subjects would you like to see discussed? I am looking to balance current topics with historical examples. Some theory is fine (hey, its economics)

Any ideas?


UPDATE March 29, 2006 4:20pm

Wow -- huge inflow of suggestions -- Many thanks.

The books I am going to recommend -- note these are not textbooks -- are Naked Economics by Charles Wheelan, and New Ideas from Dead Economists by Todd G. Buchholz . . .

Wednesday, March 29, 2006 | 10:15 AM | Permalink | Comments (91) | TrackBack (0)
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Real Fed Fund Rates

Wednesday, March 29, 2006 | 06:14 AM

Last week, we looked at the historical range of Federal Reserve Funds since 1946. 

It was a simple mean reversion, and did not incorporate the post WWII price controls, the 1970s inflation spike, or the Bretton Woods agreement.

As such, some implied that it overstated Fed Funds rate. Marketwatch's Rex Nutting had the suggestion that it would be instructive to look at real versus nominal Fed rates (see update 2).

After the Fed meeting, Rex did just that, and analyzed the real (after inflation) Fed Funds Rate. His conclusions? 

"Adjusted for the increase in the consumer price index, the real federal funds rate has averaged 1.75% since 1956. Currently, the real rate is about 1.10%, with a fed funds rate of 4.75% and a trailing inflation rate of 3.65%.

To bring rates back to the 50-year average, the Fed would need to raise rates or lower inflation by a cumulative 0.65%."

Ahhh, but that's a simple mathematical exercise (like ours) that does not consider all the variations in economic time periods -- including periods of "low inflation and modest growth, times of high inflation and no growth."

Which raises the obvious question:  What has the Fed Funds Rate looked like in similar periods of high productivity and high growth? 

"The Fed achieved a soft landing in the economy in 1995. From late 1994 through mid-1998, the Fed managed to keep the fed funds rate relatively steady between 5.25% and 6%. The economy prospered, growing at an average rate of 3.7%. Inflation averaged 2.5%.

During that time, the real fed funds rate averaged 3.1%, two full percentage points higher than today.

This analysis suggests that, in a period of high productivity and high growth, it may take a somewhat higher real funds rate to keep inflation low.

If the Fed wants a 3.1% real funds rate, it might have to boost nominal rates another 2 percentage points to 6.75%. The Fed probably wouldn't have to do all eight quarter-point hikes, because that much tightening would probably have some impact on lowering the inflation rate (otherwise, why do it?).

If inflation rates moderated to 2.5% or so under the pressure of Fed tightening, the Fed could probably stop at 5.50%

That's my number (as well Lehman Brothers). To get there requires three more 1/4 point hikes.

As to that soft landing, I would point out that the 1995 was a period in the middle of a secular Bull Market. Technology, networking and computers were the prime drivers, creating a virtuous cycle that powered the economy and markets higher. It was an organic business cycle expansion that kept going until it reached an upside blowoff in Spring 2000.

That is quite different than the present stimulus driven economy. The Fed's tools are not being used to moderate this hot economy; Rather, they are slowly removing the economic stimulus namely, pulling interest rates up from 46 year lows.

Those are the prime differences between 1995 and 2005:  a secular bull market driven by organic economic expansion, versus an economy that has been driven purely by a combination of government (war spending, tax cuts, deficit spending) and Monetary (rate cuts, increased money supply) stimulus.


Monetary policy still far from normal
Rex Nutting
MarketWatch, 8:24 PM ET Mar 28, 2006

Wednesday, March 29, 2006 | 06:14 AM | Permalink | Comments (14) | TrackBack (1)
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So much for "One and Done"

Tuesday, March 28, 2006 | 02:40 PM

So much for "One and Done."

In raising rates the expected 1/4 point, the Fed announced that they are likely to keep increasing short term rates for the next few meetings.

They threw a little bit of a head fake in there, noting "Economic growth has rebounded strongly in the current quarter but appears likely to moderate to a more sustainable pace."

Trader's who left their feet on that were disappointed.

By itself, that statement might have been a sign that the Fed was all but finished -- which would have been the fuel sending the Bulls racing to new heights.  A moderating economy on a glide path to a soft landing would not require additional monetary tightening.

But as George Mason taught UConn, you have to play to the end of the game. In FOMC terms, that means reading to the end of the statement, where they shifted their focus to energy prices, noting the "potential to add to inflation pressures:"

"As yet, the run-up in the prices of energy and other commodities appears to have had only a modest effect on core inflation, ongoing productivity gains have helped to hold the growth of unit labor costs in check, and inflation expectations remain contained. Still, possible increases in resource utilization, in combination with the elevated prices of energy and other commodities, have the potential to add to inflation pressures."

Like the Huskies, the "One and Done" squad is now firmly eliminated from contention. Better luck next year.

FOMC statement
March 28, 2006

Tuesday, March 28, 2006 | 02:40 PM | Permalink | Comments (19) | TrackBack (0)
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Wired: How to Put Your DVDs on Your Video iPod

Tuesday, March 28, 2006 | 11:15 AM

Why is it that I can buy a CD and legally listen to its content on my iPod, but the DVD I legally purchase cannot be watched on my video iPod?

Does that make any sense?

You can physically (or virtually) do that, but you are -- believe it or not -- actually breaking the law. That's right, transferring your store bought DVD to your own iPod is a violation of The Digital Millennium Copyright Act  (you are permitted to make a back up copy of a DVD).

The content industry is doing all they can to destroy their own business, and drag down the technology industry with it. 

For you "scofflaws" who think there is nothing inappropriate about viewing your legally acquired content on your legally acquired hardware, (i.e., watching movies on a your iPod), here's how its done, according to Wired Magazine:


1. Decrypt the DISC
Software like DVDFab Decrypter (www.dvdidle.com/free.htm) removes a DVD's copy protection. Remember, this is the illegal part, which is why DVD decrypting software is always a moving target. Should DVDFab disappear, a replacement is just a Google search away.

2. Combine the Video files
Ripping a DVD produces a bunch of cryptically named .VOB files. VOBMerge 2.5 (medlem.spray.se/evilmastr/mainmenu.php) will string them together. To find the movie, look for a series of very large files named something like VTS_07_1.VOB, VTS_07_2.VOB, and so on.

3. Convert the Movie
Use an app like 3GP_Converter (www.videohelp.com/tools?tool=3GP_Converter) to turn your movie into an iPod-compatible MPEG-4 file. Select "Model: MP4, for iPod" as the conversion mode (there is also an option for the PSP). The resulting file is ready for iTunes.

The Mac version comes from Macteens web site:


1. Download Handbrake

Download HandBrake for Mac OS X (http://handbrake.m0k.org/download.php). HandBrake is an open source app and doesn’t require any installation

2. Rip DVD

After doing so, HandBrake should have selected for you (if not, select the DVD manually by choosing “DVD Folder/image) and clicking “Browse"). Hit Enter and the HandBrake window should become available. Give the file the appropriate name and destination.

3. Applying these settings:

File Format: MP4 file
Codecs: AVC/H.264 / AAC Audio

Framerate (fps): 15
Encoder: x264 (Baseline profile)

Average bitrate (kbps): 192

Sample Rate (Hz): 44100
Bitrate (kbps): 80


Its pretty absurd that you cannot watch what you want on whatever device you own . . .



Putting Your DVDs on a Video iPod
Issue 14.03 - March 2006

Putting DVDs onto your iPod
Sam Rothenberg
12/31/2005 at 09:08 PM                                                  http://macteens.com/index.php/features/fullstory/putting_dvds_onto_your_ipod/

See also:
Coming Attraction:  Downloadable Movies  From Amazon
WSJ, March 10, 2006; Page B1                                       

Tuesday, March 28, 2006 | 11:15 AM | Permalink | Comments (15) | TrackBack (1)
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