GREAT IDEAS: Aspiring to Be the Wikipedia of Numbers

On the home page of Numberpedia today, visitors will find the latest estimates of the death toll from the Peru earthquake, the percentage of women who gain more than 40 pounds during pregnancy and the number of doctorates awarded during the 2004-05 school year. The site, launched two weeks ago and still small, aspires to be the Wikipedia of numbers—a place where anyone can contribute (or seek out) statistics about a wide range of topics.


Numberpedia is full of promise and pitfalls. Like Wikipedia, each entry is supposed to include a link to source material and there are forums where other users can discuss and question entries. Unlike Wikipedia, a contributor can opt to prevent other users from editing a certain entry. Mr. Silverberg doesn’t guarantee the numbers will be accurate, saying, “It’s up to the user who finds one of these statistics to judge the credibility of the author and the source.”

A wellspring of material for this blog is the failure of news media and press releases to provide adequate sourcing, context and caution about numbers. Numberpedia threatens to take that a step further, by stripping the number of out of its surroundings, and offering the nearest source—such as a newspaper article—even if that source was in turn citing another, which was citing another, and so on.

“I could see how someone could misuse a service like Numberpedia, to lend this false authority,” Mr. Silverberg told me. “Numberpedia is the beginning. It is meant to start a discussion. … It’s a place to get a number to frame a broader research endeavor. It would certainly be a shame if Numberpedia was the beginning and the end of a research project.” He adds that sometimes, getting a number in the correct ballpark can suffice for a research or business purpose; that was often his experience when seeking market-research data while working at several tech companies before enrolling in business school.

Companies and organizations may input numbers directly on Numberpedia, as long as they are open about their submission. By way of example, Mr. Silverberg says, “Microsoft has all kinds of fascinating statistics about the number of users of their products, growth rates and sales results from product launches. These are often buried in press releases.” Mr. Silverberg adds, “Hopefully this will lead to better analysis and more transparency of statistical information.”

What do you think? Would you use Numberpedia? Could it improve the use of numbers, or encourage people to grab numbers without carefully considering them? Please let me know in the comments.

Calculating the REAL Cost of Weddings

The press consistently reports that the average cost is nearly $30,000, basing that on one of several commonly cited surveys (such as surveys from the Wedding Report, wedding site the Knot and magazine publisher Condé Nast Bridal Media). Yet this figure is the mean — the sum of all wedding costs reported in the surveys, divided by the number of survey responses. Any one survey respondent who had a very expensive wedding could skew this number. A more useful representation is the median — the middle figure, when you line up all the costs in order. Let's see if it is true.


My print column this week examines how the median of these surveys — which isn’t commonly reported, but was shared with me by the surveyors — is a more useful representation, and how these wedding surveys may not be reaching people with the least-expensive weddings.

These issues have plagued the reporting of many other surveys. Darrell Huff begins his classic “How to Lie With Statistics” (which is on my recommended reading list) with a dissection of a stat, reported in the New York Sun and Time Magazine, that “The average Yalesman, Class of ‘24, makes $25,111 a year.” All of the issues plaguing the survey behind that stat — false precision, down to the nearest dollar; mean rather than median; and selection bias — also affect the average wedding-cost figures.

Yet these surveys are covered frequently, with little skepticism. For example, see this Associated Press article in June about wedding-insurance policies. Even a San Francisco Chronicle article about a new book on weddings quoted uncritically the average wedding-cost numbers. The author of that book, Rebecca Mead, questions the numbers in her book and in my print column this week.

The Gallup Organization conducted a survey of wedding costs in May, asking people to guess the average cost of a wedding these days. The mean estimate was $13,609, which Gallup pointed out was half of the Wedding Report’s estimate. Gallup’s news release, entitled “Americans Underestimate the Cost of Tying the Knot,” didn’t compare the medians of the two surveys. Frank Newport, editor-in-chief of the Gallup Poll, said medians aren’t commonly reported for these surveys. “If we had had the median available to us, it might have been appropriate to mention that, in addition to the mean,” he told me.

What do you think? Are these survey results representative of all American weddings? Is a mean or median more appropriate? Do you know exactly how much your wedding cost?

Further reading: Many of the articles citing wedding-cost figures also discuss wedding insurance, which covers cancellation or postponement. Some of these articles are collected on this Web site of one of the U.S. providers. A U.K. provider, Weddingplan, produces its own estimates that are frequently reported in the British press. (Weddingplan didn’t respond to my inquiries about their methodology.) You can see the Wedding Report’s cost-of-wedding survey here, and enter in your ZIP Code to see its local estimates here. (These are based on adjustments for cost of living and other factors, not on surveys for each locality.) The Centers for Disease Control and Prevention reports national marriage statistics in its National Vital Statistics Reports. In its review of Ms. Mead’s book, the Washington Times pointed out that wedding-cost stats could be inflated. Finally, on Slate, mathematician Jordan Ellenberg explained last week how mean and median can differ, and why that matters.

The Trouble With Ranking Life-Expectancy Numbers

A widely reprinted recent Associated Press story painted a dire picture of the U.S. health-care system. Headlined “U.S. Slipping Down Life Expectancy Rankings,” the article reported the U.S. had fallen to 42nd in the world in life expectancy in 2004, down from 11th two decades earlier.The story isn’t quite so simple. Multiple data sources confirm that the U.S. has slipped in these rankings since the 1980s. But the United Nations and the U.N.’s World Health Organization, which each maintain their own life-expectancy numbers, have the U.S. ranking higher overall.Among the complicating factors: The AP’s international data source, the U.S. Census Bureau, includes nearly 30 more places in its rankings than are covered by the U.N. and the WHO. Many of these places are territories or small parts of other countries. Nonetheless, the AP’s article began, “Americans are living longer than ever, but not as long as people in 41 other countries.”

Seven of the places ranking ahead of the U.S. in 2004 had a population under 50,000, including Montserrat and San Marino, while another 10 had populations under 500,000, including the U.S. Virgin Islands and Andorra. (Andorra topped the ranking with a life expectancy of 83.5 years.) Such places have so few deaths each year that their mortality numbers are subject to big swings. Meanwhile, 18 of the 41 places ranked ahead of the U.S. by just a year or less, a small difference.

Comparing the latest data with two decades ago also obscures that the U.S.’s ranking hasn’t budged much in recent years — it was 41st in 1997, by the AP’s ranking method. (And keep in mind, as I wrote in a recent post, that life expectancy is more complicated than the popular perception that it predicts how long someone born today is likely to survive.)

Other life-expectancy trackers show the U.S. ranking higher, thanks in part to the absence of dozens of territories that aren’t independent countries. The U.N., which hews closely to its list of 192 member states for its data collection and reports life expectancy over five-year periods, shows the U.S. at 35th in 2000-2005, down from 31st in 1995-2000 and 17th in 1980-1985. The U.S. ranked 31st in the WHO’s 2005 numbers.

The Census’s own data included far fewer countries in the 1980s (just 133 in 1984, compared with 222 in 2005), which helps account for the U.S.’s big decline from 11th in that decade.
There are other differences between the data sets. Each agency has its own statistical models and supplements data supplied by countries, where available, with its own considered judgment. This can result in some discrepancies — not so much for the U.S. and other large countries with reliable health statistics, but for some nations alongside the big ones near the top of the rankings. The WHO, for instance, shows a shorter life expectancy for Albania (by about five years) and Andorra (three years), and a longer one for Monaco (two years) than does the Census Bureau.

“We wouldn’t pay too much attention to [life-expectancy data from] Andorra and Monaco,” Mie Inoue, a Geneva-based WHO statistician involved in producing the agency’s life expectancy numbers, told me. “There are very few deaths, so there are lots of fluctuations, so the result wouldn’t be very reliable.” Added Thomas McDevitt, chief of the population studies branch within the Census Bureau’s population division, “For small areas, constructing life tables is a challenge.”

The Associated Press combined the Centers for Disease Control and Prevention’s domestic figures with the Census Bureau’s world numbers (explained here). “I combined the most accurate U.S. numbers available with the most accurate numbers available for the rest of the world,” Stephen Ohlemacher, author of the AP article, told me. “Several researchers recommended this strategy, and several others agreed it was the best way to get the most complete and up-to-date numbers for the U.S. and the world.”

Asked why he included places that aren’t countries, some of which are very small, he replied, “I relied on the Census Bureau’s expertise on these issues.” Of the non-countries, Mr. Ohlemacher added, “I believe that many of those areas are listed separately because their demographic characteristics are different than the rest of the country. Think Hong Kong and China.”

What do you think? What should be included and excluded from such rankings? Are differences of a year or less significant? What’s the best way to compare the health of different countries? Please let me know in the comments.

Further reading: Speaking of life-expectancy comparisons, New York Magazine recently reported that New Yorkers live longer than their counterparts around the country.

Fed Paper Looks at Yield Curve-Recession Connection

The ability to predict a recession is a skill that seems to elude most forecasters, but a new working paper from the San Francisco Federal Reserve suggests the yield curve may be a reliable indicator that many overlook.Glenn D. Rudebusch and John C. Williams of the San Francisco Fed write in a paper entitled “Forecasting Recessions: The Puzzle of the Enduring Power of the Yield Curve” that “the yield curve, specifically the spread between long- and short-term interest rates, does contain useful information at that forecast horizon for predicting aggregate economic activity and, especially, for signaling future recessions.” Although ignored by most forecasters, a vocal minority places a lot of emphasis on an inverted yield curve as a predictor of recession. The inverted yield curve is an unusual occurrence in which short-term interest rates are higher than long-term rates. The study used the average spread between the yield on a 10-year U.S. Treasury note and the 3-month Treasury bill over the course of a quarter.


The authors offer some possible reasons why forecasters may not use the yield curve to predict recessions. They suggest economists may dismiss the yield curve because of it is unclear why it would predict recessions, and although it has worked in the past since its relationship isn’t understood it may not work in the future. “This paper, however, shows that the relative predictive power of the yield curve does not appear to have diminished much, if at all [in some 20 years],” the authors said.

The conclusions are at odds with the views of Fed Chairman Ben Bernanke, who believes the yield curve isn’t as good a recession predictor as it once was. “I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come,” he said early last year. In the past, when the yield curve was inverted, short-term rates were “quite high,” but now, they aren’t. Second, the flattening could result from a structural fall in the “term premium,” that is the additional return investors require for holding long as opposed to short-term debt securities
The reason why the inverted yield curve is a good predictor of recessions is because it indicates that the market is being manipulated. If the interest rates in our country were not controlled by a central bank then an inverted yield curve would probably never happen. The federal reserve artificially inflates the money supply, this makes it easier for institutions to make long term loans to, for example, home buyers. Eventually their standards for lending become very low and vehicles such as interest only mortgatges become popular because the bankers are trying to lock in long term returns and they need to compete with each other. Long term rates eventually go down a lot because of this competition. Asset prices rise, risk tolerance goes up, prices keep rising, Fed realizes they put to much money into the system (INFLATION) and they raise the interest rates. Money becomes more scarce, asset prices fall and hence a “recession” happens. The people being hurt by what is happening now took credit they could not afford unless asset prices rose. The government should let nature take its course and let the bankers who were irresponsible pay for their hubris

Bernanke Breaks Greenspan Mold

When Ben Bernanke was nominated to head the Federal Reserve in 2005, he promised to “maintain continuity with the policies and policy strategies established during the Greenspan years.” But in handling his first financial crisis, Mr. Bernanke shows signs of a break with Alan Greenspan, the Fed’s chairman from 1987 to 2006. As the Wall Street Journal’s Greg Ip reports, that shift is important in understanding why Mr. Bernanke hasn’t cut the Fed’s main interest rate yet, and it could alter investors’ expectations of how the Bernanke Fed will function.


The Fed historically has had two major economic duties. Maintaining financial stability is one. Controlling inflation while preventing recession is the other.

To Mr. Greenspan, market confidence and the economy’s growth prospects were so intertwined as to make the Fed’s two duties almost inseparable. He cut rates after the 1987 stock-market crash and the near-collapse of hedge fund Long-Term Capital Management in 1998 to prevent investor reluctance to take risks from undermining the nation’s economic growth.

By contrast, Mr. Bernanke distinguishes between the central bank’s two functions. So, on Aug. 17, the Fed cut the interest rate and lengthened the term on loans to banks from its little-used discount window in hopes banks would use the window — or at least the knowledge it was available — to lend to solid borrowers having trouble getting credit amidst the market turmoil. The action was aimed at restoring the normal functioning of disrupted credit markets, not primarily at boosting growth.

Ethanol Without Borders

Monthly U.S. imports of ethanol in June rose to 820,000 barrels, up 24% compared to May, according to preliminary company level import data supplied by the federal Energy Information Administration. Imports of the plant-derived gasoline additive averaged about 27,333 barrels a day over 30 days in June. There were 14 shipments in June, two more than in May.Brazil, the largest exporter in the month, increased exports by about 87% in June to 488,000 barrels in seven shipments, from a total of 261,000 barrels in three shipments in May. The Brazilian material made way to ports in New Jersey, Massachusetts, Connecticut and Pennsylvania.


Jamaica was the next largest exporter in June, increasing shipments by about 71.4% to 192,000 barrels in three cargoes, compared to 112,000 barrels in three shipments in May. Two of the cargoes were shipped to East Coast ports in New Jersey and Connecticut and one was received in Honolulu, Hawaii.

El Salvador’s exports were up by about 33% in June as two cargoes, while Trinidad’s shipments to the U.S. fell by about 31%. Canada’s export level was steady at 1,000 barrels to North Dakota.

Nobel Americas was the largest ethanol importer in June, receiving four cargos; three from Brazil and the one from Trinidad, for a total of 209,000 barrels. Major oil companies Shell Oil, a unit of Royal Dutch Shell, and ConocoPhillips each imported one cargo. Refiners Valero Energy; Citgo, a unit of Petroleos de Venezuela SA; Sunoco; and CHS also imported one cargo each. Global trader/marketer Vitol Holding imported two cargos in June, while merchant wholesaler Northville Industries received one shipment. Ethanol processor and trader ED&F Man Holdings also imported one ethanol cargo in June.

A Role Model?

Sports stars get paid millions of dollars a year to perform on the field and serve as role models to America's youth. Young children go to sporting events to see their favorite players and meanwhile their parents dish out a substantial amount to make this happen. Within the last day, former MLB star Jose Offerman lost his cool while playing in a minor league game and hit both the catcher and pitcher with his bat, fracturing the pitchers wrist. Are these the kind of people we want our children looking up to? Why are athletes like these who have a disregard for a civil society and who cannot control their anger considered role models? Why are people who work hard for a living, are model citizens and show respect overlooked? The answer is simple. we look up to people who have money regardless of how they earned it. People need to realize that we are all equal and no person regardless of how much money he/she makes or how they dress is better than a regular hard working individual.

Much Ado About Nothing?

NASA data for average annual temperatures in the lower 48 states received a small downward adjustment earlier this month, after blogger Stephen McIntyre of climateaudit.org pointed out an error to NASA in its numbers. No big deal, except Mr. McIntyre also blogged that the error altered rankings for the warmest years on record since 1895 — key fodder in the global-warming debate. The warmest year became 1934, rather than 1998, although the temperature difference was small enough to be considered statistically meaningless.Skeptical bloggers took the opportunity to denounce global warming as fabricated, and talk-show host Rush Limbaugh quickly called the data adjustment “proof” that global warming was a man-made notion, according to several publications. Meanwhile, the mainstream press took pains to emphasize the fact that robust evidence of global warming remains available:

Thomas H. Maugh’s article in the L.A. Times said that the corrections resulted in a decrease of 0.27 degrees Fahrenheit in yearly temperatures in the lower 48 since 2000 and a smaller decrease in earlier years. 1998, which had been 0.02 degrees warmer than 1934, re-ranked 0.04 degrees cooler. (Not exactly enough to make you go put on a hat and gloves.) He also mentioned that the adjustment didn’t affect global records, and that 1998 remains tied with 2005 as the hottest year on record.

Andrew C. Revkin noted in the New York Times that Mr. McIntyre and James E. Hansen of NASA had traded a few choice barbs online in their debate — but that both agreed on the “merit of shifting away from energy choices that contribute heat-trapping greenhouse gases to the atmosphere,” and that the global temperature trend remains unaffected.
The adjustment did affect global temperatures, though only by some 0.03 degrees. That may not sound like much, but its 4% of all warming recorded so far (0.75c). That’s a pretty huge adjustment. In one stroke it erased more “warming” than Kyoto would have ever done.

Oil Rises Above $73 in N.Y. on Larger-Than-Expected Supply Drop

Crude oil rose above $73 a barrel in New York to a three-week high after an Energy Department report showed U.S. oil and gasoline inventories fell more than expected. Crude-oil stockpiles fell 3.49 million barrels to 333.6 million in the week ended Aug. 24, the report showed. A 600,000 barrel drop was forecast, according to the median of responses by 13 analysts surveyed by Bloomberg News. Prices have fallen 6 percent this month on concern that fuel demand will decline as a credit crunch in the U.S. slows economic growth.


Crude oil for October delivery rose $1.78, or 2.5 percent, to settle at $73.51 a barrel at 2:54 p.m. on the New York Mercantile Exchange. It was the highest close since Aug. 3. Prices are up 5.5 percent from a year ago.

The market's strength over the last few days shows that fears about the credit crunch hitting demand were overstated. It will be many months before any effect on demand is felt.
Gasoline supplies fell 3.67 million barrels to 192.6 million, the lowest in almost two years, the report showed. A 2.5 million-barrel decline was expected. The drop left stockpiles 5.2 percent below the five-year average for the period, the department said. Demand for the fuel fell an average 136,000 barrels a day from a record 9.76 million a day the prior week.

The days of gasoline supply available are the lowest since at least March 1991 when the Energy Department began collecting the data. There are now 20 days of gasoline supply in storage, the department said.

Gasoline for September delivery rose 8.54 cents, or 4.2 percent, to $2.1008 a gallon in New York, the highest close since July 31. It was the biggest one-day gain since July 18. Heating oil for September delivery rose 4.56 cents, or 2.3 percent, to $2.0419, the highest since Aug. 2.

The U.S. crude-oil market often follows gasoline during the summer driving season. U.S. gasoline demand peaks between the Memorial Day holiday in late May and Labor Day in early September.

Refinery operations and crude-oil imports also slumped last week, the report showed. Refineries operated at 90.3 percent of capacity, down 1.4 percentage point from the week before. Analysts expected the report would show no change. Crude-oil imports fell 9.2 percent to an average 9.82 million barrels a day last week.

Total SA closed a unit at its Port Arthur, Texas, refinery because of a power cut. That followed unplanned interruptions at U.S. plants run by Citgo Petroleum Corp. and by Chevron Corp., whose largest refinery is operating at reduced capacity after a fire. Other refiners are planning to make repairs next month because of the end of the driving season.
Brent crude oil for October settlement rose $1.58, or 2.2 percent, to $72.13 a barrel on the London-based ICE Futures exchange, the highest close since Aug. 3.

Big day on Wall Street

U.S. stocks rebounded on Wednesday, pushing the Nasdaq to its best day in more than a year, as investors snapped up beaten down technology shares, while the energy sector benefited from a surge in oil prices.A letter from Federal Reserve Chairman Ben Bernanke, in which he said the Fed was "prepared to act as needed" to ensure credit market troubles do not adversely affect the economy, added to investor speculation for a much hoped-for interest rate cut.Both the Nasdaq and the S&P 500 rose more than 2 percent.


Shares of energy companies such as Exxon Mobil XOM.N soared as oil prices rocketed to $73.53 a barrel after a sharp drop in U.S. crude and gasoline stockpiles revived supply concerns.

The New York Stock Exchange imposed restrictions on certain automated trading programs 30 minutes before the market close as shares surged, but trading was thin ahead of the long Labor Day weekend.

"Anytime you hear something out of the Fed that it is monitoring the situation, that is reassuring as the thought is that they are leaning towards a rate cut," said Bennett Gaeger, managing director at Stifel Nicolaus in Baltimore.

The Dow Jones industrial average <.DJI> was up 247.44 points, or 1.90 percent, at 13,289.29. The Standard & Poor's 500 Index <.SPX> was up 31.40 points, or 2.19 percent, at 1,463.76. The Nasdaq Composite Index <.IXIC> was up 62.52 points, or 2.50 percent, at 2,563.16 -- its best day since June 29, 2006.
The rally gathered pace as some investors who had bet the market would fall reversed their positions, a day after worries about the impact of ailing credit markets on the economy triggered Wall Street's biggest slide in three weeks.

Apple gave one of the biggest boosts to both the Nasdaq and the S&P 500 indexes after Goldman Sachs recommended buying the tech bellwether, saying a September 5 company event would bring the "almost certain launch" of new iPods.

Apple shares climbed 5.7 percent to $134.08 and International Business Machines Corp.
The Nasdaq outperformed the S&P and Dow, helped by positive sentiment about prospects for technology companies' earnings. Seagate Technology (STX.N: Quote, Profile , Research), the world's largest maker of computer hard-disk drives, raised its profit forecast, sending its shares up 3.8 percent to $25.39.

"Technology companies have had some pretty good reports so people think they have the chance to do well, and oil's above $73 a barrel so energy stocks are up," said Warren Simpson, managing director at Stephens Capital Management in Little Rock, Arkansas.

"A lot of people are on vacation or at the U.S. Open, but luckily there are enough bargain-hunters around today to make the market go up," Simpson added.

But negative headlines trickling out of the credit market continued to unnerve investors. A structured investment vehicle managed by British hedge fund Cheyne Capital Management said it was seeking to restructure after being forced to start selling assets to pay down debt.

Volume was light on the NYSE, with many traders away on vacation. About 1.33 billion shares changed hands, far short of last year's estimated daily average of 1.84 billion, while on Nasdaq, about 1.65 billion shares traded, also well below last year's daily average of 2.02 billion.

Rising stocks were outnumbering falling ones by a ratio of about 7 to 1 on the NYSE and by 3 to 1 on Nasdaq

Michael Douglas, 20 years after 'Wall Street'

Twenty years after Michael Douglas appeared in "Wall Street," he is conducting interviews for his latest film in the kind of apartment Gordon Gekko might be living in if he were, like Douglas himself, flush with cash and in his early 60s.It's a ninth-floor aerie on Central Park West, one of three homes the actor owns - the others are in Quebec and Bermuda - and it's a monument to easy living and good taste
Shelves are lined with books, tables are filled with pictures of Douglas and his dad, Douglas and wife Catherine Zeta-Jones, the couple with their two kids, even Douglas with international figures like Nelson Mandela and Kofi Annan (Douglas has long been involved with United Nations programs promoting nuclear disarmament and human rights). Douglas' two Oscars - for acting (as Gekko) in "Wall Street" and producing "One Flew Over the Cuckoo's Nest" - are unobtrusively tucked away in a side cabinet.

But the 63-year-old actor is not here to discuss past glories. He's publicizing a small indie film called "King of California," opening Sept. 14, in which he plays a schizophrenic convinced there's a Spanish treasure buried beneath the concrete floor of a nearby Costco. It's a charming little picture, and features one of Douglas' best, most endearing performances.
And it's a long way from the iconic, infamous, heart-of-steel "Wall Street" tycoon of 1987.

"It's fun playing crazies," Douglas says with a smile on his face and a glint in his eye. "The only thing you have to look out for is going too far over the top. Mania can get irritating if you don't find ways to mix it up."

"They were just seduced"

That he did in "Wall Street," whose 20th anniversary will be celebrated with a two-disc DVD due out Sept. 18 from Fox Home Entertainment. Douglas' Oscar-winning performance as the financial industry's most cutthroat, amoral wheeler-dealer still packs a wallop, as does writer-director Oliver Stone's incisive look at the "greed is good" '80s.

"If I told you the number of drunken investment bankers who've come up to me in restaurants and stuff over the years and said, 'You're the man,'" notes Douglas, "and tell me I was the guy that got them into the business. Well, I'm looking at them and you know, Gekko was the bad guy. He goes to jail. And they say, 'No man, you were so cool,' and it's wild. They just were seduced. It was such a well-written script. If you're gonna be the devil, you're gonna look good. The devil is not something ugly, the devil is there to seduce."

"That says a lot about the power of corruption in the social values," Stone says in a telephone interview, referring to Gekko's fans. "The worship of money came into being in the 1980s, and has grown to phenomenal proportions. Now corporations have replaced Gordon Gekko."

Stone admits he originally offered the Gekko role to other actors - Warren Beatty and Richard Gere turned him down - and that at the time Douglas, coming off the huge successes of "Romancing the Stone" and "Jewel of the Nile," was "a light comedian who did not have a heavy reputation." But Stone met with Douglas, liked him, "and I knew he was sharp with business, very financially oriented, he knew these people from Wall Street. And I always felt he had the genes of his father, that edge that Kirk had."

For his part, Douglas credits Stone for the success of the film. "It was such a well-written script ," he says, "and it was just a fantastic role that was handed to me."

A morality tale

Looking back after two decades, both men note that very few movies have dipped their toes into the Wall Street cesspool, probably because, says Douglas, "we did it really well." But the film holds up because, says Stone, "it's a morality tale, a 'Pilgrim's Progress.'" He is referring here to the Charlie Sheen character, Bud Fox, who is seduced by Gekko's wealth, flamboyance and amorality. "Every man gets lured by the bait," Stone says. "It destroys all his values, he realizes he crossed the line, so he makes things right and takes the guy down."

In the meantime, Douglas has his own ideas about Gordon Gekko 20 years down the road. "Wall Street" ends with the obvious implication that the Feds are onto him and going to send him to jail on any number of securities charges. So what happens next? Douglas has teamed up with screenwriter Stephen Schiff on "Money Never Sleeps," a sequel that will follow the financial industry's lizard king after he gets out of the slammer. (Stone will not direct.)

The film is only in the first-draft stage, but Douglas has already said that when it comes to Gekko, "I don't think he's different. He's just had more time to think about what to do."

And how will Gekko make a living in the hedge fund era? Well, says Douglas, "We first had to do some homework on what your limitations are after you've done time, what you can and cannot do on the market." So, he adds with a mischievous grin, obviously not wanting to give away too much, "we're kind of fascinated about these charitable foundations, and we're exploring that area."

Gordon Gekko, prince of philanthropy. The mind boggles.

Chicago's fabled pork-belly pit to fall silent

The once-raucous pork-belly trading pit at the Chicago Mercantile Exchange, featured in the 1980s Dan Aykroyd-Eddie Murphy comedy "Trading Places," will fall silent, swept aside by the rush to do business on screens.It will be the passing of an era, another step in Chicago's evolution from "Hog Butcher for the World" to a top financial center with the $12 billion July merger of the CME and Chicago Board of Trade into the world's largest derivatives market.

It used to be the most tradable market in the world in its heyday," said Bill Cipolla, who traded pork belly futures for 25 years before switching to another market. He was sorry to see the "end of an icon in the futures trading world."

The CME-CBOT combined company, CME Group Inc. (CME.N: Quote, Profile, Research), said on Tuesday that frozen pork belly futures and options will exclusively trade on its electronic platform from May 2008.

Pit trading of frozen pork belly futures, introduced in the 1960s, has been slowly dying amid changes in the food industry and pork production that began in the 1990s.

Placing pork bellies into cold storage, thawing them out and then processing them is an old way of doing business. These days, more fresh bellies go directly into bacon processing.

The pork industry is also working with fast-food companies to produce more hogs that come to market during the summer.

BELLY PIT DREW SPECULATORS FROM AFAR

During its heyday, the pork belly pit was abuzz with activity, much like a casino, drawing speculators from as far away as Saudi Arabia, lured by the high volatility in prices.

The bright lights began to dim as other commodities markets emerged, luring investors into currencies, gold, crude oil, and other commodities.

"There were many more options to trade and bellies drifted under the radar. Instead of four slices, the pie was sliced up 50 ways," Cipolla said.

"Pork bellies ... just their name is an icon," he added.

Changes in the pork bellies contract itself and in the bacon business also led to a reduction in commercial players.

"The market has become antiquated. It used to be an elite contract," said Harvey Paffenroth, a belly trader since 1971.

He noted that buyers are looking for fresh bellies, not frozen ones, and that they also demand more pre-processed bacon. Those changes came along when McDonald's Corp. (MCD.N: Quote, Profile, Research), Wendy's International (WEN.N: Quote, Profile, Research) and other fast-food restaurants started promoting the bacon burger and needed the bacon to be a certain size and ready in the box.

Many changes to the belly contract were also made that allowed for a somewhat lower-quality belly to be eligible for delivery against the CME futures contract.

"It's not a prime belly anymore -- it's become a dumping ground for less desirable bellies," added Paffenroth.

CME launched its Globex electronic trading platform in 1992 and bellies were listed in 2003.

Electronic trading in other CME products has been surging. In 2000, Globex trading volume was 34.5 million contracts, up 114 percent from 1999. By 2006, volumes soared to 1.015 billion, or 72 percent of all CME traded contracts.

THEfile: Sarkozy is first Western leader to speak out loud about US plan to bomb Iran

This man is the French REAGAN!- Addressing 180 French diplomats Monday, Aug. 27, French president Nicolas Sarkozy said a nuclear-armed Iran would be unacceptable and the world must tighten sanctions while offering Tehran incentives to halt weapons development. “This initiative is the only one that can enable us to escape an alternative that I say is catastrophic: the Iranian bomb or the bombing of Iran,” he said. Sarkozy thus became the first important Western leader to declare with brutal frankness that Iran stands in peril of an attack on its nuclear installations.The file notes that he spoke out shortly after a long holiday in the United States and a day-long visit to the Bush family estate in Maine. His frank language – he called Iran’s nuclear ambition the world’s most dangerous problem – caused astonishment in diplomatic circles much like the jeans he wore on his visit to the US president.
Sarkozy did not indicate whether France would take part in an American or Israeli attack on Iran, but he did stress French backing for Security Council sanctions over Iran’s refusal to back away from uranium enrichment.

DEBKAfile’s diplomatic sources disclose that Sarkozy’s warning to Tehran was the bluntest but not the only one Tehran received of the Bush administration plans to bomb its nuclear facilities. Iran was discreetly warned by the Kremlin in early spring that an American attack was impending and would be coordinated with an Israeli strike against Syria. All three armies, the Iranian (plus Hizballah), Syrian and Israeli, have been deep in hectic war preparations ever since.

This war fever will be further heated by Sarkozy’s words. They certainly contradict Israeli defense minister Ehud Barak’s smooth assurance to the Knesset foreign affairs and defense committee, also on Monday, that he sees first signs of Syrian military suspense ebbing.

The French president’s reading of the situation was closer to that of the former US ambassador Edward P. Djerejian, whose impressions from talks with Syrian leaders last week were disclosed by DEBKAfile. Djerejian underscored the Syrian president Bashar Assad’s unshakeable commitment to Tehran’s foreign and military policies, even if his relations with Washington do improve.

Like Barak, Mohammed ElBaradei, director of the International Atomic Energy Agency, is trying to pour oil on troubled waters. He sent inspectors to Tehran to collect understandings and so fend off the third round of sanctions promised at the UN Security Council next month.

The IAEA and Iran jointly announced Monday they had “agreed a timeline for implementing a plan to clarify Tehran’s nuclear program.”

Iran took this some steps further, claiming “the IAEA accepted that earlier statements made by Iran (on the issue of plutonium) are consistent with the agency’s findings and thus this matter is resolved.” Tehran also announced cooperation with a nuclear watchdog probe of an “alleged secret uranium processing project linked by U.S. intelligence to a nuclear arms program.”

Washington is not buying this show of Iranian compliance and zeal for cooperation with the world community. The US ambassador to the IAEA in Vienna pointed to “real limitations” in the timeline understanding and accused Tehran of “manipulating the IAEA as a way to avoid harsher sanctions.”

ElBaradei had previously called a military attack on Iran “madness.”

The assessments of Sarkozy and ElBaradei therefore veer dangerously between “catastrophe” and “madness.”

Sarko the Illuminator

Kudos to the new French President for speaking a brutal truth. If diplomacy and sanctions fail to stop Tehran from gaining nuclear arms, Nicolas Sarkozy pointed out on Monday, the world will face a "catastrophic alternative: an Iranian bomb or the bombing of Iran.It is this stark choice that Europe's leaders usually pretend doesn't exist when they reject both a nuclear-armed Iran and the possibility of military action to stop the mullahs. Now that Mr. Sarkozy has clarified that they can't have it ... At least one european with BALLS! Thank's GOD

How to Get China and India Right

The breakneck economic growth in China and India presents tremendous opportunity for Western multinationals -- as well as major challenges.For all the big investments Western companies are making in the two nations, the vast majority of businesses don't have much of a clue regarding how to succeed in China and India, or how to leverage the strengths of these two countries for global advantage.Some of the most common mistakes companies make include looking at the markets solely through the lens of offshoring and cost reduction, building marketing strategies centered around just the rich cities and the top 5% to 10% of the population, naively choosing local partners, and treating these two countries as peripheral rather than core to the company's global operations.

Given the size and sizzling growth of these economies, a suboptimal strategy for China and India is no longer a matter of merely leaving some money on the table. Many of today's Western giants that don't have solid China and India strategies will face severe threats to their very existence in as little as 10 years' time. If they're not making the most of China and India, rest assured that somebody else is --either a Western competitor or a homegrown firm.
What follows are the central ideas for how companies can get their China and India strategies right.There are three reasons why multinational companies should pursue an integrated China and India strategy rather than waste time debating whether to pursue China or India.First, for many industries, China and India both present some of the highest growth rates in the world and are emerging as megamarkets. Take cellphones. The number of users in China exceeds 450 million, and the estimated figure for India is 150 million -- a number that is growing by six million new subscribers a month.
Second, China and India present different but complementary strengths that companies can use. China is much stronger than India in mass manufacturing and logistics; in contrast, India is much stronger than China in software and information-technology services...
Consider International Business Machines Corp.'s approach. Outside the U.S., IBM relies on China as the primary procurement source for its hardware business and has decided to relocate its global procurement headquarters to Shenzhen. Complementing these moves, IBM has made its Indian operations one of its most important global hubs for the delivery of IT services to clients world-wide. Nearly one-sixth of IBM's global work force is now based in India.

The third benefit of an integrated China and India strategy is intellectual-property protection. Companies can significantly reduce risks of intellectual property leaking out by distributing R&D and production activities across China and India, as well as other countries.
Consider the case of a European manufacturer that sells machinery to construction contractors. Burned by seeing a former Chinese partner producing copycat versions of its equipment, the company is now planning to spread the production of key subsystems across India and China. That way, the new designs can't be easily copied by competitors -- or allies -- in individual locations.
In each country, a company must think along two strategic tracks: how to make the most of the company's capabilities from other markets for success within China and India, and how to use the strengths of China and India for global advantage.

Of course, it won't always be apparent which track may yield faster results. Thus, it is often better to keep both in mind and let unfolding events dictate which path should get higher priority at any particular time...

In its early forays in China, Microsoft Corp. wasted years in futile efforts to generate meaningful revenue from local sales of its operating systems and applications software. In recent years, however, the company has done an about-face and started to place much greater emphasis on using Chinese universities for leading-edge technology development for its global operations.

The company, for example, has set up research labs at some of China's top universities, created Microsoft Fellowships for China's best computer-science Ph.D. students, and expanded the scope of its research center in Beijing, recently lauded by MIT's Technology Review as one of the hottest computer labs in the world.
This shift in strategy has also made it easier for Microsoft to get the government's cooperation in enforcing intellectual-property laws in the software sector. In the long run, then, the two tracks often serve as steppingstones for each other.
Each of the two markets is too big and too complex for broad attack. Such an approach runs a high risk of costly failure. A much smarter approach is to identify and occupy a beachhead that offers the best potential for early success and can serve as a launching pad for deeper market penetration.
Let's take a Look at McCormick & Co.'s entry into China. In the early stages, McCormick, a food-products company based in Sparks, Md., targeted Western fast-food chains -- such as McDonald's -- that were already its industrial customers in the U.S. and Europe. This meant that McCormick had a ready-made market with low risks. Using this customer segment as a beachhead gave McCormick an operational base from which to broaden its marketing efforts to include local industrial customers as well as retail chains...

Metro Group, a German retailer, entered India as a wholesaler by setting up cash-and-carry distribution centers targeted at business customers such as hotels, restaurants, caterers and small retailers. While Indian regulations don't permit foreign multibrand retailers to operate within the country, there are no such restrictions on business-to-business wholesaling. Although Metro has yet to state its ambitions in the retailing sector in India, by setting up business-to-business distribution centers, the company has positioned itself well to start retail operations through local partners or, if the regulations change, its own stores.
China and India are the only two poor countries among the world's 10 largest economies. Per capita incomes in China and India are a tiny fraction of those in the other large economies -- 1/20th of the U.S. in the case of China and 1/40th in the case of India. In essence, China and India constitute megamarkets with microcustomers.

Thus, unlike a U.S. firm entering Japan or vice versa, companies can't simply adapt their business models to China or India. In most cases, such an approach will do little more than scratch the surface of the vast market opportunity in each country. While employing their global capabilities, companies will have to invent their business models for China and India from the ground up...

Almost always, this reinvention will require designing products and services that can be manufactured and delivered at ultralow prices while still yielding satisfactory profit margins. Toyota Motor Corp.'s recently launched efforts to develop an ultra-low-cost car for China, India and other emerging markets reflects such an approach...
Dell Inc. also provides an excellent example of thinking from the ground up. The company recently unveiled the EC280, an inexpensive personal computer (base price starting at about $335) specifically designed for China, India, Brazil and other emerging markets.

FOCUS ON MARKET DEVELOPMENT

Given the combination of low per capita incomes and rapid growth rates, Chinese and Indian markets for most products and services are at a very early stage of development. Thus, companies must focus also on market development and creating demand for their products -- as opposed to focusing solely on grabbing bigger chunks of the existing market.

Consider the case of Adidas AG, the German sports-products company. Among many other efforts in China, Adidas is trying to build up the market for soccer shoes -- and make its image synonymous with soccer there -- with a number of initiatives. For instance, the company is developing soccer camps and sponsoring Chinese players.

SEGMENT, SEGMENT, SEGMENT

China and India have the world's two largest populations, two of the world's largest geographical areas, greater linguistic and sociocultural diversity than any other country -- and among the highest levels of income disparity in the world.

Given this scale and variety, one should abandon any notion of "an average Chinese customer" or "an average Indian customer." In each country, even the middle of the income pyramid consists of more than 300 million people encompassing significant diversity in incomes, geographic climates, cultural habits, and even language and religious beliefs. Because of this diversity, market success in China and India is rarely possible without finely segmenting the local market in each country, developing a strategy tailored to the needs of the targeted segments, and exploiting a strong position in one segment to enter and occupy one or more adjacent segments.
Haier Group, China's leading appliance maker, has proven to be particularly adept at fine market segmentation. For example, Haier's portfolio of washing machines for the Chinese market includes a washing machine for rural peasants that can clean not only clothes but also sweet potatoes and peanuts. Haier also sells a tiny washing machine designed to clean a single change of clothes, which has proven to be a hit with the busy urban customers in Shanghai.

In our judgment, arguing that intellectual-property issues constrain you from having aggressive China and India strategies is a cop-out. It is almost certainly true that more than 80% of the software and music consumed in China and India is pirated. But people forget that estimated piracy rates in the U.S., the bastion of intellectual-property protection, run upward of 30%.

It is also important to note that governments in both China and India are becoming increasingly serious about enforcement of laws on intellectual property. In each country, what's driving this trend is the ambition to beef up the country's science and technology base, coupled with the realization that weak intellectual-property protection inhibits technology development.

Instead of obsessing about these issues, companies should aim for a rapid rate of innovation that makes life difficult for imitators and pirates in developed and developing countries alike. Rapid innovation may not reduce piracy, but it will help ensure that pirates' products are viewed as consistently inferior, and thus less desirable.

Companies can also reduce piracy by making their products or services more affordable. This is what Microsoft is now attempting with the introduction of Windows XP Starter Edition, a no-frills and low-priced version of its operating system for India, Brazil and many other emerging markets.

Also, as discussed earlier, companies can reduce the risks of intellectual-property leakage by dispersing R&D and production across China, India and other locations.

MINIMIZE PARTNER RISK

Every company relies on a network of partners in the countries where it does business. In China and India, however, companies often find they must rely on partners even for their core operations because of regulatory requirements or the need to bridge gaps in local knowledge, capabilities and relationships.

Far too many companies act naively when deciding whether to partner, whom to partner with and how to manage the relationship. Companies should look for partners that bring the highest set of complementary capabilities but the lowest level of business overlap -- thereby reducing the potential for conflict. They should also minimize dependence on any single partner by assigning a narrow scope to each alliance. Finally, they should attempt to keep control over complementary activities such as R&D, component production and distribution channels.Honda Motor Co.'s efforts in India are examples of smart partnering. The company has used different partnering strategies for different product lines and activities. For instance, it has a motorcycle joint venture with Hero Group, India's largest bicycle manufacturer, and it entered the car business through a joint venture with Siel, a chemicals and vegetable-oil products company. Honda's stake in the auto venture has climbed from 90% initially to 99% today.

In contrast, there's General Motors Corp. The company claims success in China, but we believe that it has made itself overly dependent on Shanghai Automotive, or SAIC. The web of alliances that support Shanghai GM -- the joint venture between GM and SAIC -- is controlled by SAIC rather than GM. Also, as one of China's largest and oldest car companies, SAIC has explicitly declared that it aims to become one of the world's 10 largest auto companies within the next five to 10 years. Tellingly, about a year ago, SAIC hired Philip Murtaugh, former chairman of GM China, to run its SAIC Motor subsidiary. Could it be that SAIC is taking GM for a ride?

Asked about the alliance, a GM spokeswoman says that SAIC and GM "operate as partners, not just to the letter of the contract, but to the spirit of the contract. To say either partner controls the alliances is a gross misrepresentation.... Both parties bring a great deal to the partnership, and frankly, there is not a great feeling that either side is keeping score."

As for SAIC's plans, the GM spokeswoman says, "Yes, they are ambitious. So are we. Hopefully, we can help each other realize our individual and combined ambition." She adds that both sides are taking advantage of the partnership, and "it's strong and getting stronger."SAIC officials have said they remain deeply committed to their joint ventures. They play down the potential for competition between SAIC's own models and those made by Shanghai GM.

OFFER A FUTURE

No matter how large the opportunities and how brilliant a company's strategy, success in China and India is impossible without winning the war for local talent.

One of the byproducts of explosive growth in each market is that top-quality scientists, engineers and managers are scarce, and job-hopping is far too common. Salaries are rising more than 10% a year, and even for blue-chip companies, turnover rates can run in the 15% to 20% range.

Winning the war for local talent requires a fundamental shift in mind-set about the future role for Chinese and Indian stars. They need to see that their local operations are central rather than peripheral to the parent company's global agenda, and that they have a career track in the company's global operations. In addition, they must see that the flow of knowledge, capabilities and people runs both ways, not just from the U.S., Europe, or Japan to China and India, but also the other way round.Given the changing economic topography of the world, we take it as a given that the large corporation of tomorrow will be much more China- and India-centric than at present. The only open question is whether this will be your company or your competitor's.

New Arabian Gulf Oil Pipeline Network Will Detour Hormuz

Saudi Arabia, Bahrain, the United Arab Emirates, Oman and Yemen have launched the vast Trans-Arabia Oil Pipeline project with encouragement from Washington, DEBKA-Net Weekly 313 revealed on Aug. 10, 2007. By crisscrossing Arabia overland, the net of oil pipelines will bypass the Straits of Hormuz at the throat of the Persian Gulf and so remove Gulf oil routes from the lurking threat of Iranian closure.The 35,000-strong new Saudi security force, disclosed this week, will protect the new project, together with the oil installations of the world’s biggest oil exporter, from attack by such enemies as al Qaeda or Iran. The first 5,000 recruits are already in training, as plans advance to start laying the first section of the new pipeline system in November, 2007.

Because of the sensitivity of their mission, Saudi security experts assisted by American advisers are thoroughly screening each recruit about his family, tribal and past associations to weed out religious extremists. DEBKAfile adds that the new oil security force will be the third largest in Saudi Arabia, after the armed forces and the National Guard.

The first Trans-Arabia pipeline will carry 5 million barrels of oil a day, almost one third of the 17 million barrels produced by Gulf emirates. The crude will be pumped through pipes running from the world’s biggest oil terminal owned by Saudi Aramco at Ras Tannura, south to S. Yemen’s oil port of Mukallah and west to the Red Sea port and industrial town of Yanbu north of Jeddah.

The $6 billion investment in the first stage will come from the participating governments within the framework of the Gulf Cooperation Council – GCC.

Rising regional tensions and the vulnerability of the Straits of Hormuz, the only maritime outlet for Gulf oil, to hostile blockade has galvanized the partners into urgent action to get the project up and running.

The Straits of Hormuz are a chokepoint in every sense.

Only 37 km wide, they consist of two lanes able to accommodate oi tankers entering and exiting Gulf ports. Every 24 hours, an average 30 vessels transit the straits loaded with roughly one-quarter of the world’s oil consumption.

This volume varies according to weather conditions, currents and whether it is day or night. The traffic during the navigable hours tends to be heavy, no more than 6 minutes between each vessel. Even if the US Navy and Air Force deployed in the Persian Gulf succeed in keeping the Straits of Hormuz open to shipping in an emergency situation, their very presence must slow the traffic down. The flow could be reduced to about half its regular capacity.
Net-Weekly’s Gulf sources report that the Trans-Arabia Oil Pipeline project’s second stage for rerouting South Iraqi oil will start in early 2009 without waiting for the first to be completed

Consisting of about 60% of Iraq’s oil product, the oil from the Basra terminal will be diverted from the Shatt al-Arb outlet to the Persian Gulf, which Iraq shares with Iran, and flow into pipes crossing the Iraqi Desert directly into Saudi Arabia – according to the plan. On August 9, Tehran countered by announcing negotiations with Baghdad on a deal to build a pipeline to carry 200,000 barrels per day of southern Iraqi crude to refineries in Iran.According to another part of the plan, Tapline will be resusciated. The story of how this pipeline fell into disuse mirrors half a century of Middle East conflict.

The Trans-Arabian Pipeline Company started operating in 1950 as the largest oil pipeline of its time, a joint venture of Standard Oil of New Jersey (Esso), Standard Oil of California (Chevron), The Texas Company (Texaco) and Socony-Vacuum Oil Company (Mobil). It transported Saudi oil from Persian Gulf fields to a Mediterranean outlet, whence it was shipped to Europe and the eastern United States.

The conflict in Palestine in 1946 caused the Tapline Company to seek alternative routes, which went through Jordan, over the Golan Heights and up to the north Lebanese port of Tripoli on the Mediterranean. The section running across Golan was discontinued after the 1967 war.

Net-Weekly’s oil sources report that Kuwait and Qatar, though members of the GCC, have opted out of the Trans-Arabia pipeline project.

The two emirates are deeply involved in building a gas pipeline network which is a higher priority for them than the transport of oil - especially Qatar which has large gas reserves but not much oil.

Southern Iraq’s oil is therefore projected to flow directly into Saudi Arabia and bypass Kuwait.

The Trans-Arabia Oil Pipeline network will consist of five main branches:

Pipeline No. 1: Work begins on this section in November. It will run 350 km from Ras Tannura on the Saudi easern coast to Al Fujairah in the United Emirates, also collecting cruide from Abu Dhabi’s Habashan oil field. Its 48-inch diameter provides a capacity of 1.5 million bpd.

Pipeline No. 2: This will link Ras Tannura to Musqat, Oman.

Pipeline No. 3: This will run southwest from Ras Tannura through Hadhramouth and onto Mukalla, on the Yemeni shore of the Gulf of Aden.

Pipeline No. 4: This pipeline will will also terminate at Mukalla, but first circle round from Ras Tannura to the UAE before turning back into Saudi Arabia and on to Yemen.

Pipeline No. 5: This line will slice across Arabia from Ras Tannura in the East due west to Yanbu on Saudi Arabia’s western coast on the Red Sea.
This route is already occupied by two older pipelines. They were laid in the 1980s during the Iran-Iraq war for the very same purpose as the contemporry project, namely to circumvent the Straits of Hormuz. One was built to carry Iraqi oil out to market away from the war zones of the Iranian-Iraqi frontier.
Alive to possible Iranian or al Qaeda sabotage attempts, the Trans-Arabia Pipeline partners have decided to sink large sections underground and secure the system with such obstructions as fences, earthworks, moats and roadblocks. The new oil force will man the system.
even after the US pulls its army out of Iraq, it will retain troops for securing both the northern and southern oil fields and installations. They will be there to keep Iran at a distance, especially from the the Basra oil center.
The project also fits into the preparations underway in the Gulf oil emirates and Saudi Arabia to step up oil production by 4 million bpd to rein in skyrocketing prices before they hit $100 per barrel.On the inter-Arab plane, Riyadh hopes Syrian Bashar Assad will appreciate the benefits accruing to his country from the pipeline across its territory - enough to draw away from his close clinch with Iran and mend his fences with Washington. The Saudis are pinning their hopes on Tapline’s resurrection helping to put Damascus-Washington relations on a new footing.

Bajó índice pobreza entre hispanos EEUU

El índice de pobreza entre los hispanos bajó del 21.8 por ciento en 2005 a 20.6 por ciento el año pasado, pero también aumentó el número de latinos sin seguro médico, según un informe divulgado ayer por la Oficina del Censo.El análisis, que ofrece un panorama de la salud económica de Estados Unidos, señaló también que el número de hispanos que viven por debajo del nivel de pobreza se mantiene en 9.2 millones de personas.Así, el índice de pobreza entre los hispanos se sitúa por encima del índice nacional de 12.3 por ciento que, a su vez, representa una baja sobre el 12.6 por ciento de 2005. Entre los hispanos, el número de personas sin cobertura médica aumentó de 14 millones en 2005 a 15.3 millones el año pasado. Ahora, el 34.1 por ciento de la población hispana carece de seguro médico.

A CRUDE TUTORIAL: It Takes Crude to Contango

One of the real problems involved with rules of thumb is the tendency of thumbs to show up in the most unexpected places.many observers link the price of commodities with their forward curve. The rule of thumb for crude oil has been that rising prices are accompanied by backwardation, or the price of distant futures below those of near-term futures, and falling prices are accompanied by contango, or near-term futures below those of distant months.
Actually, to be precise in our definitions, let's stipulate that a forward curve wherein prices rise over time is a "carry" curve, one in which the buyer pays the seller all or part of the storage costs associated with carrying an inventory forward over time.

Contango is a subset of carry; it exists when there is a glut of present supply and when the price of a distant futures contract exceeds the full-carry price.

These supposed linkages between price and the forward curve were supported by two decades of data in the crude oil futures market. If we measure backwardation as [Month 1 - Month 2] / Month 2, we readily can see how price and backwardation were correlated between 1986 and May 2003, the accomplishment date of the U.S.' mission in Iraq.

The relationship broke, and broke by 180 degrees, thereafter. On first blush, this is contrary to financial theory: Crude oil, like all commodities whose deliveries are constrained logistically -- think of the capacities of field production, tankers, pipelines, loading jetties, etc. -- should see its front-month price rise more in a bull market. When you need it, you need it now, not six months from now. And producers looking to lock in the current high prices cannot sell futures for immediate delivery in excess of their production capacity, so they have to sell the back months. The combination of buyers buying now and sellers selling later creates backwardation.


What Changed?

Given the above, why do we see a pattern after May 2003 counter to both previous experience and financial theory? The answer proposed here is the arrival and acceptance of long-only commodity index funds and a flood of money into managed futures programs in general, a development predicted here in October 2001. Dogs chase cars and investor funds chase performance. Consider how managed-futures assets have exploded in the last two decades.



One source of returns identified for long-only commodity index investors was the harvest of backwardation. The concept was that the funds would buy the distant-month futures, hold them as they rode up the backwardation curve, sell them prior to expiration and buy another set of distant-month futures.

But, as I noted here last December, that strategy carried the seeds of its own destruction. Remember those producers selling the distant months above? If they are selling a distant future for less than today's cash market price, they are taking a known and finite loss. This is a form of insurance. Globally, there is a finite pool of insurance, and this pool needs to be split among the long-only commodity indexers.

Worse, the success of this strategy depends on everyone else's mothers raising stupid children. How long would it take for the counterparties to these long-only indexers to catch on to the game and front-run the strategy?

Judging from the price and backwardation chart above, the music stopped playing after May 2003, but the dancing continued.

We can illustrate the extent to which opportunistic traders began picking off the indexers by going short the front month and long the second month and then waiting for the funds to provide a payday with the Commodity Futures Trading Commission's Commitment of Traders data for spread positions held by non-commercial traders. The drop in the last week is associated with the recent expiration of the May 2005 contract.


All Trading Is Local
As a matter of fact, the opportunistic traders must have been having such a good time at the funds' expense that they went and told their friends. Let's see how the price-forward curve relationship has changed on a daily basis since the end of 2004.

Each ribbon in the chart below represents a forward curve beginning with the front month and ending with the December 2005 contract. The near months are on the left of the ribbon; the far months are on the right of the ribbon. As time goes forward and as price rises, the switch from a backwardated structure -- front months over the back -- switches to a deeper and deeper carry and a bona fide contango.

Impact on Inventories
The phrase "bona fide contango" means an operator should be able to buy front-month crude, take delivery, pay associated storage charges and hedge the inventory by selling the second-month future. Let's run some numbers from April 22, 2005:


Go long June crude oil at $55.39;

Go short July crude oil at $56.54;

Take delivery of June crude on May 24:
a. Pay $55,390 for 1,000 barrels;
b. Incur interest of three-month repurchase, 2.80%, for one month, or approximately 13 cents per barrel;
c. Incur storage and pumping charges of approximately 60 cents per barrel;


Deliver the stored crude oil on June 23, the July expiration date, and receive $56,540.
Commercial traders should be able to clear 42 cents a barrel on this deal; others should not try this at home. Contango, if it is emitting the proper price signals, should lead to increases in inventories and to lower prices in the future. Has this been the case?



Most decidedly yes: The ability to buy and hedge inventories permits their rebuilding. Will this lead to lower prices down the road? That is a far tougher question; the amounts of crude oil in U.S. storage may not be sufficient to cool prices if global demand growth remains strong.

One final answer to Dave Merkel's question whether contango represents panic and over-hedging on the part of the buyers: I would say no, not unless someone out there is fretting about September deliveries to the extent they are willing to pay a $2-per-barrel premium. When buyers panic -- and they do all the time -- they panic over prompt delivery. And that, as a rule of thumb, produces backwardation.

Energy Midday Roundup

Following is a summary of top stories in the energy sector at midday Tuesday.Lehman Bullish on Oil Services and Deepwater Rigs. Lehman Brothers remains positive on the oil service and drilling sector, saying prices will remain high for the foreseeable future.Tight spare capacity within OPEC, limited production growth from non-OPEC countries, more aggressive strategies being exhibited by national oil companies and foreign governments, as well as relatively strong demand are all creating an environment that we believe will keep oil prices at elevated and attractive levels well into the next decade and perhaps beyond.
underinvestment over the last 25 years means there should be a prolonged upturn in exploration and production spending that will benefit oil service and drilling companies. Demand for deepwater rigs - those capable of drilling in 10,000 feet of water - will rise into the next decade, Crandell said, as major oil companies seek large-scale discoveries.

On the other hand:
Oil and gasoline futures fell as concerns about refinery output faded and investors shrugged off OPEC comments that suggest the oil cartel sees no need to boost production.
The economy continues to concern investors as the Standard & Poor's housing index showed the sharpest decline in home prices last quarter since the S&P index began 20 years ago.

Gasoline for September delivery fell 2.63 cents to $2.013 a gallon on the New York Mercantile Exchange while October light, sweet crude fell 18 cents to $71.79 a barrel. Both contracts rose Monday.

In other Nymex trading, heating oil futures fell 0.82 cent to $2.0015 a gallon, and September natural gas rose 23.7 cents to $5.617 per 1,000 cubic feet.

Heating oil followed the lead of oil and gasoline, Ritterbusch said. But natural gas rose as investors who bet that gas futures will fall sell to lock in profits or to cover their positions ahead of the contract's Wednesday expiration, analysts said.

And finally the US BioEnergy Buying Millennium Ethanol US BioEnergy Corp. said it has agreed to pay $133.3 million to purchase Millennium Ethanol LLC.

US BioEnergy, which went public in December, agreed to the acquisition in late May. The transaction includes a Millennium ethanol plant under construction in South Dakota, expected to begin production in the first quarter of 2008.

The ethanol producer will pay about $11.8 million in cash and 11.5 million common shares valued at $10.57 per share.

The acquisition has been approved by both companies' boards, and the deal is expected to close in the third quarter, subject to regulatory and shareholder approval.

Kroger to Sell VeraSun's E85

Ethanol producer VeraSun Energy Corp. and Kroger Co. announced the opening of 20 E85 fueling locations at Kroger convenience stores in Ohio and Kentucky. Kroger becomes the first national retailer to offer VeraSun's branded E85, a blend of 85 percent ethanol and 15 percent gasoline for Flexible Fuel Vehicles. With the addition of the Kroger locations, VeraSun now has more than 100 retail fueling stations in 11 states and the District of Columbia selling its E85 ethanol product.

Encore Energy in IPO

Encore Energy Partners LP expects to raise about $172 million from an initial public offering of 9 million common units representing limited partner interests, according to a regulatory filing.

In the Securities and Exchange Commission filing, the Fort Worth, Texas-based company said the offering should price between $20 and $22 per common unit.

Encore Energy Partners was formed in February by oil and natural gas company Encore Acquisition Co. to acquire, exploit and develop oil and natural gas properties and to operate related assets.

Encore Energy said its assets consist primarily of oil and natural gas properties in the Elk Basin of Wyoming and Montana and the Permian Basin of West Texas. As of the end of 2006, total proved reserves, on an adjusted basis, were estimated to be 21.4 million barrels of oil equivalent. Of the total, 68 percent were oil and 86 percent were proved developed.

U.S. Poverty Rate Down Significantly

Five years into a national economic recovery, the share of Americans living in poverty finally dropped.The nation's poverty rate was 12.3 percent in 2006, down from 12.9 percent a year before, the Census Bureau reported Tuesday. Median household income increased slightly, to $52,200.The numbers provided some good economic news at a time when financial markets have been rattled by a slumping housing market. But they were tempered by an increase in the number of Americans without health insurance, from 44.8 million in 2005 to 47 million last year.The poverty level is the official measure used to decide eligibility for federal health, housing, nutrition and child care benefits. It differs by family size and makeup. For a family of four with two children, for example, the poverty level is $20,444.The poverty rate -- the percentage of people living below poverty -- helps shape the debate on the health of the nation's economy.The share of Americans without health insurance hit 15.8 percent last year, the highest percentage since 1998. In 2005, 15.3 percent were without insurance.The Census Bureau on Tuesday released 2006 income and poverty figures for all the states and every city and county with a population of 65,000 or more.

As Europeans See Us

By AMY FINNERTY.- In "The Anti-Americans," a gleeful but alarming documentary (Monday, 10-11 p.m. EDT, on PBS; check local listings), the producers psychoanalyze our conflicted relationships with some of our historical allies in Europe. Resentment mingles with admiration, envy and co-dependence in those regarding us from afar, but a good portion of this hour-long film -- part of the "America at a Crossroads" series -- is devoted to old-fashioned, ill-informed chauvinism, mostly of the Gallic variety.
Some of the criticism is richly deserved; we are fat, we don't learn foreign languages and we do export cultural trash. We are more often busy than reflective, a black mark in societies where introspection is revered. Some Americans might feel offended by the opinions solicited, perhaps selectively, by the filmmakers. But the diatribes here range from good-natured satire by those who do love us deep down to hilarious misconceptions by those who don't really know us at all.

'Adolescent Self-Definition'

American food is "worthless," spits a Camembert-nationaliste. Another Frenchwoman thinks all Americans are racist, except in New York. (Has she been to New York, one wonders.) A Pole riffs on American backsides spacious enough to provide a ride across a parking lot to one's gas-guzzler, and -- in ironic tribute to our insane entertainment culture -- an Englishman explains why he composed "Jerry Springer: The Opera."

A loquacious British MP -- one of the many public figures, intellectuals and cab-driving philosophers who provide comment -- calls this sort of disparagement a form of "adolescent self-definition," by which the European teenagers throw stones at a gauche but all-powerful parent. In this analysis, they look to us as an example from which to distance themselves, reinforcing their own cultural identity while collecting their allowance and taking us for granted.

In Britain, American culture is devoured, but at a fashionable London dinner party, the guests' horrified fascination takes a snooty turn. Over wine and, doubtless, organic fare, a blonde in cleavage-enhancing pearls worries about the "idiot" masses electing our politicians, who in turn trespass haplessly on their side of the trans-Atlantic chasm. In much of Europe, citizens feel that they should have a say in American affairs, due to our exceptional impact abroad.

The message is not lost on their children. Pupils at an elite French elementary school, sons and daughters of the intelligentsia, produce drawings of illiterate Americans, Bush "massacring the planet," and a Yank with "a machine gun that he's killing someone with." French and other politicians are adept at using anti-Americanism to win votes, we learn, though even Jacques Chirac himself loves America. (His successor, Monsieur Sarkozy, does as well.)

Also at work in the European psyche is a kind of transference, in which each nation loves or hates us (or both) in a way that reflects its own history -- and its own unresolved traumas -- more than it reflects, say, the objective facts of McDonald's, Hollywood or the Iraq War.

French Rappers

Just as some resent us for the long shadow that makes them feel inadequate, or endangered, others look to us as a preferable alternative to the bad relationship they're in. Some French rappers, representing the disenfranchised outskirts of charming cities, covet big cars and thick chains, and, Iraq notwithstanding, they admire Bush as "a guy who succeeds at doing his own thing." One rapper boasts that he was the first in France to affix diamonds to his teeth.

Poland, after being in the custody of an abusive parent, the old Soviet Union, is willing to overlook our flaws. Many Poles still view us as part of an axis of benevolence that included Ronald Reagan, Pope John Paul II and Lech Walesa. Singing cowboys imitate our music and attract fans at a Polish country music festival. Notably, some of those fans seem to have taken on American dietary habits.

Unlike the French, a substantial percentage of Poles have first-hand experience of America. They travel back and forth for work and, indeed, seem to be far less critical of the war in Iraq than they are of our immigration policies, which allow the America-hating French to visit our shores sans visa, but force Poles to line up for abuse at consulates -- for an extortionate fee, with no visa guaranteed.

As in love, each country brings its own baggage to the relationship and sometimes struggles to fathom the heart and mind of its counterpart. We fight beside you in Iraq, a Pole complains with an air of resignation, and give you our hearts. In return, you treat us "like a woman that you beat."

Cutting the Risk

By TOM HERMAN.- No-income-tax states such as Florida, Nevada and Texas are looking increasingly attractive to people getting ready for retirement.Some individuals want to cut their tax burden because of mounting concerns they could outlive their savings, while others simply want to keep more for themselves and their heirs. But before moving to a tax haven, it's important to pay attention to the fine print of how to move. It's easy to make seemingly minor mistakes that can trigger a painful audit -- and a hefty bill -- from the high-tax jurisdiction you thought you had left behind.
State residency rules can be complex, and audits conducted by tax officials can be highly subjective. So tax experts suggest individuals make sure their move is genuine. Some tips: Don't leave personal items such as family photos and jewelry in a part-time residence or a safe-deposit box in your former home state, and join clubs and execute a new will in your new home state.

More red flags for auditors: People with homes in more than one state, especially those with large incomes, and people who made a large sale of a partnership interest or stock in their business shortly after saying they'd moved to a low or no-tax state, warns Mark Klein, a lawyer at Hodgson Russ LLP in New York.

Lawyers and accountants say they're doing a brisk business catering to the growing numbers of high-income people seeking advice on how to relocate to low-tax places. "It's our primary source of new clients. We've made a niche business out of it," says George Ashley of Ashley Quinn, an Incline Village, Nev., CPA firm that works with many clients who move from high-tax California to Nevada, which has no state income tax.

Some relatively high-tax states are increasingly cracking down on individuals who claim to have moved out of state, but still maintain strong connections to their former homes. Massachusetts plans to hire additional tax examiners over the next few months, some of whom will be assigned to a special "domicile unit" as part of its tax-audit program. "We are confident there are a significant number of cases for us in this area," says a Massachusetts Department of Revenue spokesman.

And in New York, considered among the most aggressive states in pursuing such cases, tax officials say they have improved their techniques for targeting tax dodgers. New York state-tax revenue collections from residency audits rose to $112.9 million in fiscal 2007 from $83.4 million a year earlier, although the number of audits is down.

Of course, people who change states are still subject to federal income tax rules. State and local jurisdictions levy a variety of taxes and fees, such as sales and property taxes, which can make direct comparisons difficult. Still, state income tax rates can run as high as 10.3% in California and 8.97% in New Jersey. Besides Florida, Nevada and Texas, other states with no state income tax for individuals include Washington, Alaska, South Dakota and Wyoming. New Hampshire and Tennessee don't have a broad wage-based income tax but do tax interest and dividends. (For more on state taxes, see www.retirementliving.com/RLtaxes.html
It isn't clear how many people move exclusively or mainly for tax reasons. But from April 2000 through June 2006, there was a net migration of 2.3 million people moving from states with income taxes to states with no income taxes, an average of more than 1,000 people moving per day, says Richard Vedder, an economics professor at Ohio University in Athens, Ohio, based on an analysis of census data. He says the data, which exclude immigrant populations, don't reveal the reasons people moved.

Careful planning before moving is especially important these days because of the recent rapid spread of the alternative minimum tax, which doesn't allow certain taxpayers to deduct any state or local taxes. About four million people were caught by the AMT for 2006. Unless Congress overhauls the law in coming months, the AMT will hit more than 23 million for 2007.

For wealthy people, another key factor is that more states have begun imposing their own estate taxes. Nearly half of the states now have their own estate or inheritance taxes in addition to federal estate taxes, says Bruno Graziano at CCH, a Riverwoods, Ill., unit of Wolters Kluwer. Moreover, while the federal estate-tax exemption for an individual this year is $2 million, some states have much lower exemptions, meaning that more money may be subject to estate taxes. For example, New Jersey's estate-tax exclusion is $675,000.

Florida, long a favorite retirement spot, has no state or local individual income tax and no state estate or inheritance tax either. This year, Florida became even more appealing for many wealthy investors: It eliminated its "intangibles" tax, an annual levy imposed on the fair-market value of certain stocks and other assets. State officials said the demise of this tax would benefit an estimated 300,000 people.

Gibraltar Private Bank & Trust, a Coral Gables, Fla., unit of Boston Private Financial Holdings Inc., has put together a special booklet to help growing numbers of "Northern transplants" avoid tax headaches, says Fred Sandstrom, Gibraltar's wealth-management director. Among the tips: Use your Florida address when traveling and when corresponding with out-of-state utility and telephone companies.

New York's residency rules are complex. In general, though, if you maintain a permanent abode in the state and are in the state more than 183 days a year, you're considered a resident. Even if you're in the state less than that, you still may face a challenge because New York looks at numerous factors to gauge where your "domicile" really is, says Mr. Klein, the New York lawyer. This is a subjective test based on many factors, including your business and family ties, a comparison of your New York residence with the location you're claiming as your domicile, and where you keep "near and dear" items. That's why Mr. Klein recommends people keep near-and-dear items, such as artwork, family photos, jewelry and furs, in their non-New York home. He also recommends closing a New York safe deposit box. "It's hard to explain to auditors why your most valuable possessions are not in your home but are with you" in New York, he says.

In an audit, you need to be able to prove to skeptical tax examiners that you've really transferred your life to some new place, and auditors often demand large amounts of proof. A New York residency audit often feels like a "tax colonoscopy," says Israel Keller, a CPA and tax manager at RSM McGladrey Inc. in New York.

Mr. Keller says that in one recent case, a money manager and his wife moved from New York City to Florida. Among the items that New York state auditors have asked for are three years of diaries, appointment books or office calendars; three years of personal and business credit-card statements, and three years of phone bills for New York and their Florida residence, he says.

In your new home state, tax experts say it's important to make your move official. Register to vote, get a driver's license and register your car in the new state, and change your address on bills and important documents. Even so, establishing a legal residence in the eyes of the taxman is often based on subjective factors, including the intent of the taxpayer, which is why it's important to get advice from a tax-savvy adviser.

Does Credit Crunch Signal Deep Woes in Economy?

By JAMES B. STEWART. Is the recent credit crunch a "financial" crisis, likely to be short-lived, or is it a more profound "economic" crisis, likely to have longer-lasting, more serious consequences?This is now the great debate on Wall Street, Main Street and in global capitals as investors try to assess the recent credit paralysis and market turmoil. The answer is of pressing interest, since the first scenario makes the recent stock-market decline a compelling buying opportunity, while the other is cause for caution.Last week, as markets stabilized and credit began to flow, however haltingly, proponents of the more benign, short-term financial crisis seemed to gain the upper hand. In this view, the problem is largely psychological -- a panic-induced fear of risk -- rather than anything more fundamental.
Apt comparisons are the market crash of 1987, aggravated by the failure of program trading, and the collapse of Long-Term Capital Management in 1998, which prompted the Federal Reserve to cut interest rates. While those crises were painful for many investors, they had negligible impact on the broad economy and represented buying opportunities for stock investors. Market averages were significantly higher six months later in both instances.

History, however instructive, never repeats itself exactly. The current crisis can't be dismissed quite so easily. Apart from the credit panic, several more-fundamental forces are at work. First is the broad and sharp decline in real-estate prices. The result has been a plunge in construction, home sales and housing-related consumer spending, and an alarming rise in foreclosures. The recent credit crisis had a very real economic underpinning, which was the failure of borrowers to make their mortgage payments. The scope of the problem has been unfolding slowly, originating in subprime but moving up the ladder of creditworthiness and affluence.

A second, related fundamental development is the broad deleveraging now under way in everything from commodities to private equity-led buyouts. As long as credit was easily available and packaged into seemingly safe, triple-A rated packages of debt obligations, anything could be bought, leveraged, and sold off to a higher bidder. Now that lenders have rediscovered the notion of risk, those days are over.

Faced with these two fundamental threats to the economy, market historians might point to the savings-and-loan crisis of the late 1980s and early '90s, and the 1989 collapse of the junk-bond market after the failure of a proposed leveraged buyout of UAL. Both entailed some degree of financial panic, but also involved real economic issues. The S&L crisis unfolded over years, not days, and took a massive bailout from Congress. The collapse of the UAL deal led to a near halt in buyouts and mergers. There was a recession in 1990-91, albeit a relatively mild one. The S&P 500 peaked in July 1990 at 369 and reached a low for the year of 294 in October.

I could argue the similarities and differences between then and now at some length, but one thing I can say with confidence is that the present isn't exactly like anything in the past.

Let's assume that the housing/mortgage/debt crisis is bad, but not as bad as the S&L mess. The major market averages have already undergone 10% corrections, which suggest that further downside risk isn't all that great. Nonetheless, I remain wary of private-equity and hedge-fund stocks, investment banks and all but the largest and most diversified companies in the financial sector. I doubt the market has fully priced the likelihood of more bad news on the buyout front, just as it failed to anticipate the severity of the subprime defaults.

Yet I was very comfortable buying stocks recently, even if further declines are in store. While we're pondering history, it's worth considering that most bear markets don't begin with a "crisis" or a sudden plunge in stock prices. It would be so much easier for investors if they did, thereby announcing their arrival with fanfare.

More often they creep up with slow, agonizing declines punctuated by occasional "suckers' rallies." No crisis or sudden selloff marked the beginning of the 2000-2002 bear market. Yet the bear market of 1990 set the stage for the massive bull market of the rest of the decade. When I wrote that the S&P peaked at 369 in 1990, that wasn't a typo. Seventeen years later, it's at 1450. Looked at from the long term, even the S&L bailout and junk bond collapse of 1989-90 was a buying opportunity.