Articles by mgedwards

The perfect Halloween costume

Inflation!  Boo!  Did I frighten you?  No?  I just scared Wall Street.  Stand on Wall Street in Manhattan between the Federal Reserve and the New York Stock Exchange and tell passersby, "I’m worried about inflation!"  You’ll likely elicit a panicked reaction.  The past week has seen the markets absolutely devastated by the looming specter of inflation, wafting from a wicked witch’s brew of high energy prices and the economic impact of hurricanes Katrina and Rita.  The fear is real, but it is much too overblown by Wall Street.  The price of a barrel of oil is down nearly $6 per barrel since Hurricane Katrina struck.  The devastation of Hurricane Katrina, while still immense and tragic, is not as great as initially feared.  Hurricane Rita did not impact the country as much as anticipated.  Juxtapose these disasters against the recent earthquake in Pakistan, and it’s easier to visualize that the effects of the hurricane season were muted compared to what could have been.  So why are investors so worried, and why do the markets react so negatively to the prospect of higher inflation?  Three reasons–the delay in publishing economic indicators, the shortsightedness of the markets, and the Federal Reserve.
 
I’ll admit–it’s been a bad week for my investment portfolio, which weighs more heavily in favor of NASDAQ (read technology) stocks.  My recent purchases I lauded in previous blog postings, including Caribou Coffee and Cogent Technologies, have been clobbered over the last seven days.  I believe both equities are being dragged down by the market, not by their fundamentals, and I am still bullish on their longer-term prospects.  Once the market turns upward again, I think they will recover.  So I’m sour grapes when it comes to investor panic over inflation fears that have not yet materialized.  The seers of Wall Street determine market momentum partly based on reports such as Consumer Confidence and manufacturing output published monthly and quarterly by many organizations, including the Federal Reserve.  These reports guage past data and help indicate future economic prospects.  Unfortunately, the delay between when the data is gathered, say in September, can be misleading when it is published in October and the data are influenced by large, volatile swings.  September’s data were impacted by high energy prices in September, but prices has come down in October.  The one- to three-month delay in publishing economic indicators leads the market to react to news that happened the month or quarter before, not when it is currently happening. 
 
The markets’ overreliance on periodic economic reports, corporate earnings announcements, and on the spot price of raw materials such as crude oil creates knee-jerk reactions on Wall Street.  It causes the market to be too short-sighted and panic at any hint of bad news.  For example, the price of crude oil falls substantially over the previous month and the market shrugs, yet when it goes up 50 cents a barrel in one day, the market plunges.  Apple Computer’s fourth quarter profits rise 400%, yet the company misses analysts’ targets, causing the stock to tank, taking the entire technology sector down with it.  The market transforms aggressive analyst targets for companies such as Apple into referenda on the future growth prospect of the entire sector.  This is extremely short sighted.  Call it "irrational exuberance" or "irrational trepidation."  Of course, good news can have the same, irrational effect on markets.  As one who prefers stable markets, I would rather sacrifice higher potential reward for less volatility.
 
Finally, the Federal Reserve is agitating the markets by insisting that inflation is the nation’s biggest economic concern, and it insists that it will continue to raise interest rates to combat inflation.  The market now fears that the Fed may continue to raise rates indefinitely.  I’m not sure I completely trust Fed Chair Alan Greenspan and the Federal Reserve to properly set interest rates this time around.  After all, the Fed was widely criticized following the 2000-2002 dot.com bust for holding interest rates too low for too long, causing the U.S. economy to overheat and resulting in the 2000 stock market crash.  Many now say that the Fed is moving too aggressively to raise interest rates, needlessly hampering a vulnerable, tepid economy.  If the Fed isn’t careful and overshoots the ideal rate, the next bubble to burst won’t be the technology sector–it will be the U.S. housing sector.  A housing crash would be very bad indeed.  Fighting inflation is important, but the Federal Reserve must handle it so that the economy comes in for a soft landing, not a crash.
 
And so, during this Halloween season, when you are looking for that perfect costume to wear on Halloween, I recommend that you dress up as Federal Reserve Chair Alan Greenspan and wear a bright, white shirt with one word painted across the front and back of the shirt in bright, red letters–"INFLATION."  That will be the scariest costume of all this Halloween season.

Koreans really do work long hours

I just got home from work.  Yes, I spent another long evening at the office.  I intended to go in yesterday for a few hours so I didn’t have to work late tonight.  Alas, I could not drag myself into the office on such a beautiful day.  Fortunately, I think this will be the only night this week when I need to work late.  I finished a couple of big projects that have been in work for months, and I got a good start on some new material that my boss will present to the Powers That Be when he returns to the United States later this month.  I’m excited that he will be taking the fruits of my labor on a roadshow.  Today was the busiest day I have seen since I moved to my new job.  Perhaps the holiday yesterday brought everyone out en masse.  I didn’t get much done during the day other than helping people.  Spending evenings at work isn’t fun, but often it’s the only time you can find time to get the job done.
 
The October 3rd edition of BusinessWeek Magazine features a great article analyzing what most Americans already suspect–many of us work more hours than we did just a few years ago.  It’s a great article; I highly recommend giving it a read.  Its hypothesis is that although work productivity is up, and workers have more tools at their disposal than ever to get the job done, there are more managers per worker than ever, and the old style of managing employees is impeding the development of global, dynamic employee networks.  The "Old school" or Dilbert’ "Pointy Hair Boss" style of management tends to emphasize micromanaging employees, engaging in "death by meeting," requiring layer after layer of management approval, submitted in triplicate and reported ad nauseum to all stakeholders, whether they care or not.  This hinders the free flow of information between employees who collaborate through network-style organizations.  This summarization of course is caricaturized.  However, it highlights the fact that Americans continue to work longer hours, and BusinessWeek offers some practical reasons why and possible solutions to mitigate this trend.
 
There’s good news and bad news for American workers.  Although American workers now work more hours per worker than any other G-8 nation, Korean workers work 30.4% more hours than their American counterparts.  That’s the good news.  The bad news is that between 1991 and 2004, Koreans worked on average 5% fewer hours, while Americans worked just 1.4% fewer hours.  According to the Organization for Economic Cooperation and Development (OECD), here are the number of hours per worker in 2004 for select countries featured in the BusinessWeek article:
  1. Korea, 2,380 hours
  2. United States, 1,825 hours
  3. Japan, 1789 hours
  4. Great Britain, 1,669 hours
  5. Germany, 1443 hours
  6. France, 1,441 hours
  7. Netherlands, 1,357 hours

I frequently hear in Korea how hard Koreans work.  I do not know what the average productivity rate is for Koreans and can’t comment on whether Koreans work harder than Americans.  Working hard is product of both productivity per hour and the number of hours worked.  However, the statistic above shows that the average Korean works long, long hours.  A friend of mine who works for a major chaebol, or Korean conglomerate, logs an average of 14-hours per day at work and works on weekends.  The good news for Koreans is that the number of hours per worker worked each year has steadily declined since 1991.  Many Koreans no longer work half days on Saturday and head home earlier. 

 

Americans also work long hours.  BusinessWeek mentions that although the number of hours worked has decreased for traditional "blue-collar" workers in recent decades, the number has actually increased for office workers.  That’s why many of us feel like we’re working more than ever.  As America transforms from a manufacturing economy to a service economy, the tendency to work longer hours in the office intensifies.  I just hope we never work as many hours as Koreans do.

Our next assignment

Last night my wife and I put together our list of preferred jobs for my next assignment.  Although I won’t leave Seoul until early 2007, I am eligible to bid early because I have enough Mandarin Chinese to qualify to bid.  I would normally bid next February.  For a variety of reasons, I decided to bid early.  I feel confident that I will qualify for one of the nine assignments on our list.  The finalists are Beijing, Chengdu, Shanghai, Hong Kong, and Guangzhou, in that order.  There are multiple jobs in some locations.  Most likely I will be heading to Guangzhou if I am chosen early for my next assignment.  I would prefer to go to one of the other four locations, but I would be happy with any of these locations.  If I am not chosen this time around, China assignments will certainly be at the top of my next bid list.  I should find out in about a month whether I will be heading to China.  I initially thought I was heading to China for this assignment, but I was given Seoul instead.  I’ve always wanted to end up in China because I know Mandarin Chinese and know Chinese culture very well.
 
I am at home today with my son.  He just went down for a nap.  This morning we took mommy to work, and then we played on the swing set outside our house.  Later after breakfast, I took him to the neighborhood playground.  He played with a vengeance!  I met a nice family with a young boy about the same age as our son.  They played together for awhile and had a great time.  When he looked tired and a close to sunburning, we headed home.  On the way, we stopped by a neighbor’s house.  They were having a tie-dye party, turning white T-shirts and other clothing into 1960’s-style psychedelia.  I stayed to talk to a few friends while my son watched everyone tie-dye.  The host gave him a Rice Krispy treat and some oversized sidewalk chalk.  He had a grand old time drawing on the sidewalk (he loves to color coloring books with crayons).
 
Blog Notes:  Apologies to Astros and White Sox fans everywhere for not having the confidence to think they could advance to the Major League Baseball championships.  Congratulations!  The Astros 18-inning marathon win over the Atlanta Braves was timeless.  I have to root for the Astros to win it all because they are the only team never to have won a World Series…in 43 seasons.
 
When I told my friend from Taiwan about this blog, he was surprised.  After talking awhile, we discovered that he had come upon it by accident.  He had no idea I wrote it even after reading some of the entries!  Fortunately, he had nothing but nice things to say about it.  I guess I succeeded in being inconspicuous enough that even friends don’t know who I am.
 
This blog still averages about 2,000 hits per week and is now up to about 45,000 hits.  Thank you!  As always, I appreciate your patronage.  Lately I haven’t had time to do long treatises on Korean culture, but I hope to have more soon.