This, the first of our regional blogs, is authored by the technology and financial journalist Dominic Basulto. Dominic is a New York native, has been a senior editor at Corante since day one and has written for a number of online and offline media companies. Send tips or story ideas to: firstname.lastname@example.org.
About this weblog
Here we'll report daily on the latest tech and business developments in New York City. Impossible we concede: comprehensive coverage of the city's every story. What we hope you'll find: tips, tidbits and perspectives you won't find elsewhere. As well as unique insights, original interviews and more that should be of interest to New York's vibrant community of technologists and those who track, invest in and report on them.
If you enjoyed the post-Thanksgiving sales at Century 21 over the past few days, good for you. As Felix Salmon of MemeFirst discovered from a recent rendering of the new World Trade Center development plans, it's quite possible that Century 21 will no longer be part of Lower Manhattan a few years from now:
"We know the Deutsche Bank building is slowly coming down. But will the same fate befall New York's very own Century 21? The Port Authority has sent up a trial balloon regarding its plans for retail at the WTC site, and according to the rendering (above), Century 21 (which is located on Church Street between Cortlandt and Dey) has simply ceased to exist! All that is left in its place is a patch of brown – one might almost say scorched – earth. It's not clear what's happened to 1 Liberty Plaza, either."
Already, the post on MemeFirst has generated about 25 comments, so it's obviously a topic of interest to New Yorkers. Or, at least, a topic of interest for New Yorkers concerned about high-quality discount shopping options.
Song, Delta's discount carrier subsidiary that was positioned as a worthy rival to JetBlue (anyone still remember the cool launch party for the Song store in SoHo?), is no more. The airline filed for Chapter 11 bankruptcy protection in September (at the same time that Delta filed), and now Delta has announced that it will discontinue service on the airline and incorporate Song's fleet into Delta's regular service by May 2006. That means new paint jobs for the airplanes and a few structural changes to the insides of the planes: Delta plans to refit the single-class Song airplanes to include first-class seating to make the planes conform with Delta's regular service. Does this mean the end of leather seats, free personal entertainment systems, and the Song Bistro?
In the current issue of City Journal, Steven Malanga (author of The New New Left) tries to get a handle on Bloomberg's new-found pessimism when it comes to economic development in the city. As Malanga points out, Bloomberg's recent negativity about the prospects for Ground Zero are a jarring disconnect with the upbeat, pro-growth message he has been sharing on the mayoral campaign trail:
"What’s strange about the mayor’s position, though, is that for months his campaign has bombarded us with commercials celebrating how vibrant the city’s economy is supposed to be, thanks of course to the mayor’s policies. The ads have declared that the city has revived from the effects of 9/11, supposedly creating tens of thousand of jobs in the process. In announcing his new economic development package recently, the mayor boldly predicted that he would create 250,000 more jobs.
But how can we possibly square these messages with the mayor’s sudden admission that New York may not be able to support 10 million square feet of new office space in Lower Manhattan, which would house only about 40,000 jobs? Can it mean that candidate Bloomberg is guilty of a bit of hyperbole about the city’s economy?"
It's hard to argue with Bloomberg's pro-business credentials, but it's also a bit disheartening to see what's happening in Lower Manhattan. It's been four years now since 9/11, and thus far, the only tenant the city has found for the World Trade Center site has been the developer responsible for bringing in other tenants. And now, even Larry Silverstein has apparently been given the boot by Bloomberg. 1,504 days later, and we're back to square one.
Joel on Software has posted a mini-essay on why New York's tech scene comes up short when attempting to emulate Boston's can-do, entrepreneurial vibrancy:
"Visiting Cambridge for a party at Y-combinator made me jealous about how much more vibrant the hacker/startup scene is in the Boston area than it is in the New York area... Is New York just lame compared to Boston? Or does it just seem that way? Why is that... is it because of MIT? or all the other high tech stuff going on there? Is it the high cost of living in New York? Or the fact that we have too many distractions, and it's not a good place to concentrate on making a startup? Or maybe it's because investment banks, hedge funds, advertising agencies, and media companies suck up all the oxygen?"
Anyway, it looks like Joel Spolsky (aka Joel on Software) is up to something - I noticed that he's meeting with Union Square Ventures in New York on the 20th. Might that be a sign that Fog Creek Software is thinking about lining up some VC backing?
We all know that New York is #1 when it comes to media, finance, fashion and just about any other category you'd care to think up. Well, New York now ranks #1 as the "Most Logistics Friendly Metro", according to a poll of the Top 50 Logistics-Friendly Cities in the U.S. The study, which looked at 362 metropolitan areas in the U.S., used a combination of ten different factors - road infrastructure, road congestion, road conditions, interstate highway access, vehicle taxes and fees, railroad access, water port access and air cargo access - to come up with the final rankings. Other cities in the top five included Houston, Chicago, Cleveland and Detroit.
"The Real Deal, the only monthly magazine exclusively covering the New York City real estate market, is searching for freelance writers. We are looking for someone who is excited about business reporting, who sees the possibility for great stories in the most competitive real estate market in the world, and who is willing to go up against media rivals for scoops. Negotiable per-word payments and opportunities to grow with 40,000-circulation, fast-expanding trade magazine that the New York Post labeled "the hot new real estate glossy" and that recently launched the nation's first real estate Podcast."
Using the hype surrounding the economics bestseller Freakonomics as context, New York Magazine has a feature article ("Freakonomizing") on Columbia University's attempts to build a Freakonomics-friendly economics department. Apparently, there are all kinds of world-class, but largely anonymous, economics researchers in the world coming up with Freakonomics-type findings, and Columbia made a one-time, blow-out-the-doors effort to attract 13 of them within a two-year period.
Only four years ago, explains the article, Columbia was nothing close to being a hot destination for rising stars in the economics world: "The once-formidable economic department at Columbia University was stuck in a rut. Its stars were aging... and the few first-rate faculty still in their prime faced a constant pull from rival schools."
That all changed once Columbia devoted its attention and resources to building a first-rate economics department. And it came with a bang, not a whimper. Columbia decided that the only way it could compete with the likes of Princeton or Yale would be by hiring ten to fifteen star economists within a 24-month period - a "game-changing move designed to alter people’s perceptions."
What's interesting is that the school scrapped efforts to go after high-profile "names" like potential Nobel Prize winners. Instead, the university focused on lesser-known world-class economists who were coming up with novel ideas like those found in Freakonomics. The university also made it a point to go after "people who had reasons to want to work together—co-authors, people with similar interests, etc." Once the first economist accepted, then the next one accepted, and so on, and so forth, until all 13 had accepted.
It's an interesting article - the only problem is that New York Magazine claims (in quite some detail) that the impetus for Columbia's unprecedented move was something called "Sunspot Theory." Are you joking? That theory has long been discredited. Check out what Economy Professor has to say:
"Advanced by English economist William Jevons (1835-1882), sunspot theory is a trade cycle theory stating that trade is linked to the regular occurrence of solar flares, or spots, which affect the earth's climate and agricultural output. Critics, while acknowledging the cyclical nature of the sunspot activity and that of agricultural production, view the theory as unduly simplistic. Consequently, it has little validity today."
Maybe that's why Columbia was able to attract 13 professors so easily -- would a real economics department like Harvard or MIT or Princeton really give tenure to someone spouting off about a 200-year-old theory about the sun and moon?
Stephen J. Dubner and Steven D. Levitt, the co-authors of the bestselling Freakonomics, have a bit of fun in the New York Times, as they use their new-found celebrity as an opportunity to chatter on about the economics and social incentives of dog poop in New York City. Since dog owners are only fined $50 for a failure to pick up after their pooch in NYC, the two authors find themselves asking the inevitable question: "Why do so many people pick up after their dogs? This would seem to be a case in which social incentives - the hard glare of a passer-by and the offender's feelings of guilt - are at least as powerful as financial and legal incentives."
"Here's an idea: DNA sampling. During the licensing procedure, every dog will have to provide a sample of saliva or blood to establish a DNA file. Then, whenever a pile of poop is found on the sidewalk, a sample can be taken to establish the offender's DNA... Once the fecal DNA is matched to a given dog's DNA file, the dog's owner will be mailed a ticket. It might cost about $30 million to establish a DNA sample for all the dogs of New York. If people stop violating the law, then New York has spent $30 million for cleaner streets; if not, the $30 million is seed money for a new revenue stream."
Oh, and here's the real kicker -- the two Freakonomics guys suggest that the city should pay dog owners for licensing the mutts (it's all about incentives, ya' know). On top of that, the city should then expand its police force to keep a close eye on dog poop and to conduct spot checks of dog licenses.
Dude, this makes no sense. It's a bunch of mumbo-jumbo economics talk of rational behavior and incentives and other economics keywords that make you sound all smart... New York City would spend $30 million to create a DNA sample database for dogs, and then pay 1 million dog owners some kind of payment for licensing their dogs (so that's another 10 mil or so), and then pay police officers to hunt down dog poop? If the city won't spend $40 million to install a city-wide Wi-Fi network, it's not gonna install a dog DNA sampling database.
The latest economic data for New York is out from the National Association of Purchasing Management, and it's perhaps no surprise that higher energy costs are slowing down economic growth in the city. However, the impact of higher energy prices has thus far been much less than expected: according to the New York Report on Busines, non-manufacturing activity was 65.5 in September, only slightly lower than the level of 66.2 recorded in August. In addition, purchasing managers are currently more optimistic about the future than they have been at any time in the past four months: "The outlook index, which reflects expectations of business conditions six months from now, stands at 70." (Any number above 50 is an indicator of economic growth)
How is it still possible, asks Murray, that real estate middlemen are able to pocket 5% on every transaction? The answer could be that real estate brokers are dipping into their bag of dirty tricks to fend off Internet competition. At a time when middlemen have been squeezed out of the online travel business and out of the stock brokerage business, real estate brokers are making record windfalls. This, at a time when technology (in theory) is making their work easier. Murray explains:
"It's remarkable that in today's economy, this classic middleman business model survives -- and not just survives, but flourishes, like a hardy breed of insect. There are more Realtors out there today -- 1.2 million -- than there were a decade ago. Compare that with what happened to stockbrokers, a similar breed who saw their commissions fall from dollars to pennies over the course of three decades. Or look at the even more dramatic fate of travel agents, whose commissions on airline travel plummeted from 12% to nothing between 1995 and 2002. In an age when information was scarce, Realtors could claim big commissions, because they controlled the gold -- the information on houses for sale. But in an age when information is ubiquitous, it's hard to understand how they continue to rake in such fees."
Last week in the print edition of the Wall Street Journal, there was an article on "Bridging China's MBA Gap." Apparently, more than a few Western universities are pairing up with Chinese universities to offer international MBA programs. Two New York-area universities were mentioned in the piece: New York University, which has partnered with China-Europe International Business School and Tsinghua University School of Economics & Management; Fordham University, which has partnered with Peking University.
Then, later in the week, the Wall Street Journal appeared to contradict itself, running an article about the value of home-grown business talent in China. The gist of the story was that VC firms looking to fund new businesses in China are overlooking Western MBAs with slick marketing skills in favor of long-time China veterans with gritty (and more practical) business plans.
JetBlue has posted 18 straight quarters of positive earnings, and now that streak could be in jeopardy, due to (even) higher fuel prices brought on by the threat of Hurricane Rita hitting somewhere along the Gulf Coast. Now, we've always been a bit skeptical of consecutive-quarter positive earnings streaks (the numbers usually look too perfect), but JetBlue is an exception -- a well-managed company that doesn't have to resort to a lot of creating accounting tricks to pad the bottom line. Anyway, the CEO of the Queens-based low-fare carrier all but admitted that Hurricane Rita is "going to put the final nail in this quarter..." In the first six months of the year, the five largest U.S. airlines posted $4.8 billion in losses. And there was the ugly bankruptcy at Delta, and so on, and so forth.
On the op-ed pages of Monday's Wall Street Journal, Chris Mayer, a real estate professor at Columbia University's B-school, and Todd Sinai, a professor at Wharton, explain that the "Chicken Littles" of the real estate market have it all wrong:
"Yet basic economic logic suggests that this apparent evidence of a bubble is anything but. Even in the highest-price cities, housing is, at most, slightly more expensive than average. Here's why: While house prices over the last decade have gone through the roof, the annual cost of owning a house has not."
According to the two B-school professors, "the annual cost of owning, not the price of the house itself, is what homebuyers should (and do) consider when contemplating a purchase."
In other words, forget about skyrocketing housing costs (the traditional method for determining whether a market is overheated or not) and, instead, focus on the annual cost of owning. As calculated by the two B-school professors, the annual cost of owning a house is "the net cash outflow required to own a house for a year - namely, the after-tax cost of financing the purchase price either by borrowing or through the lost risk-adjusted return on the equity tied up in the house, plus carrying costs such as maintenance and economic depreciation - less the expected depreciation on the property."
Now, we're not ones to question the math (although this mathematical definition did cause our heads to spin), especially since the two B-school professors had their results published in the Journal of Economic Perspectives. But, doesn't all this re-defining the terms of the debate sound strangely like the logic used to defend the Internet stock boom?
When Internet companies failed to show any kind of earnings whatsoever, analysts talked about future expected earnings and discounted cash flows. When that logic failed to assuage investor fears, analysts talked up all kinds of funky earnings numbers, like EBITDA (Earnings Before Interest, Taxes, and Depreciation, and Amortization)? Or, as some Wall Street wags liked to joke, "earnings before all the bad stuff"? Remember all those claims about it "being different this time"? Remember how companies came up with all kinds of theories about "first mover advantage" in order to justify multi-million-dollar Super Bowl ad spots?
Thankfully, the New York Post reports that MBA students aren't falling for it anymore:
"In the first poll of its kind, MBAs say they'd rather buy stocks than residential houses because housing prices aren't based on realities the way office buildings are. The booming residential housing market also faces a big tumble, said the survey of more than 1,400 MBA graduates of Dartmouth University's Tuck School of Business. MBAs overwhelmingly said they'd avoid buying houses as a growth investment over the next five years, with 76% giving it a thumbs down. Instead, 94% said they'd prefer to buy stocks for growth over the next five years."
Newsday reports that a Long Island-based company (Insource America) is setting up an online job board for Hurricane Katrina victims. Job seekers along the Gulf Coast can either use the Web site or use a toll-free number to find new jobs. According to an executive from Insource America, people can call from the field, post their resumes online and search for jobs over the phone.
As if we didn't have enough to worry about these days, the New York Times reminds all of us to lock our gas caps. If the anecdotal evidence is true, then it looks like stories about gas siphoners who raid unprotected gas caps will replace stories about iPod muggings in the subway:
"With the price of gas in the city hovering at $2.60 a gallon in recent weeks and rising to an average of $3.25 a gallon and up in the wake of the disruptions that followed Hurricane Katrina, many New York drivers are steeling themselves against the rise of a certain kind of petty criminal: gas siphoners."
In some parts of the Bronx, apparently, sales of gas caps are running 70-75% above normal. The NYPD, though, has yet to report a single documented case of gas siphoning. About a week ago, the USA Today published a story called "Is no gas tank safe?", evidently prompting the reporters of the New York Times to fan out into the boroughs, in search of the mysterious gas siphoners.
"With housing prices continuing to rise into the far reaches of the stratosphere, there's a lot of talk about a housing bubble on the brink of bursting. Scared at the possibility, industry watchers have been preaching impending doom, warning house shoppers to be wary of the real estate market.
As long as interest rates stay low and the dollar stays weak--which is an unfortunate situation, but it happens to be good for real estate--then there will be no burst in the current housing bubble. If interest rates go up precipitously and the dollar gets stronger, then there will be some reduction in housing prices."
So, if I'm reading this correctly, Trump acknowledges that there is indeed a "bubble," but that this one won't go "pop." It will be one of those Greenspan-esque soft landings, where prices decline in a nice, orderly fashion. Is that why Ivana Trump is now building luxury skyscrapers in Las Vegas?
Crain's New York provides an update of the New York-area businesses that are sending checks to help out with the Hurricane Katrina relief effort:
News Corp.: $1 million in cash, plus up to $1 million in employee matches Fox Networks Group: $5 million in free air time Siemens: generators, telecom equipment, heart monitors, water filtration items Pathmark Stores: cleaning disinfectant and water
A big hat tip to the executives and employees of these companies that are providing much-needed assistance to the battered Gulf Coast region.
In life, there's the carrot and then there's the stick. For businesses thinking about moving to Lower Manhattan, Governor George Pataki is offering the carrot. Newsday has more details on the newest tax breaks and incentives to lure businesses to the World Trade Center and other destinations downtown.
For example, all tenants south of Canal Street will no longer have to pay a 3.9% commercial rent tax for the next five years, and companies renting space at the World Trade Center site will have that tax permanently eliminated. In addition, there's a relocation program for companies adding jobs south of Houston Street as well as a host of incentives for companies leasing space at 7 World Trade.
The only question, say skeptics, is whether all these incentives will really work:
"It's been demonstrated that tax incentive programs don't provide enough benefit for [companies] to really alter their investment and location decisions. The most effective method of nurturing economic growth in lower Manhattan is to address infrastructure, security and community amenities."
The IBM-Lenovo deal was just the beginning, apparently, of a growing relationship between Chinese companies and the New York metropolitan area. Expect more link-ups between New York companies and Chinese companies over the next 12-to-24 months. Crain's New York is reporting that a huge Chinese real estate company is seeking up to one million square feet of office space in Manhattan to create a center for Chinese companies establishing operations in the U.S. New York officials are pushing for the Chinese to occupy 7 World Trade Center, but a move to midtown is also a possibility.
According to insiders, the Beijing real estate company would actually lease the space, and then sublease offices to Chinese companies that want a headquarters in New York City. The company would also provide those companies with support services such as conference facilities and translators, making it all sound much like a business incubator.
Currently, 68 Chinese firms have a presence in New York. Of China's 32 largest companies, 13 have a presence in the city.
In his Trump Blog, Donald Trump bucks the conventional wisdom when it comes to IT outsourcing. According to Trump, outsourcing actually creates jobs in the long-run:
"We hear terrible things about outsourcing jobs--how sending work outside of our companies is contributing to the demise of American businesses. But in this instance I have to take the unpopular stance that it is not always a terrible thing...
Last year, Nobel Prize-winning economist Dr. Lawrence R. Klein, the founder of Wharton Econometric Forecasting Associates, co-authored a study that showed how global outsourcing actually creates more jobs and increases wages, at least for IT workers. The study found that outsourcing helped companies be more competitive and more productive. That means they make more money, which means they funnel more into the economy, thereby, creating more jobs."
New York Times op-ed columnist Paul Krugman, though, begs to differ. According to Krugman, "Greenspan's words of wisdom come too late. He's like a man who suggests leaving the barn door ajar, and then - after the horse is gone - delivers a lecture on the importance of keeping your animals properly locked up."
Fortune looks into the myth and reality of the skyscraper curse. If you believe in the curse, then it's time to start packing your bags. After all, four media giants (the New York Times, Hearst, Bertelsmann and Bloomberg) are busy erecting huge new midtown skyscrapers in an orgy of vertical capitalism. If the past is any indication, it will all end badly:
"It's an architectural extravaganza - a spectacular display of money, power, and hubris. But if history is any guide, companies that build such monuments tend to do so at the peak of their power, when they are convinced they'll always cast as long a shadow over the business landscape as they do at that moment. All too often, though, they build these shrines to themselves on fundamentally shaky ground."
Don't believe it? Well, check out the "Skyscraper Index" created by Deutsche Bank research guru Andrew Lawrence. According to this index, the world's tallest buildings have been constructed before the onslaught of major economic downturns.
Keep in mind, too, that ground was broken on the $1.8 billion HQ of Time Warner in November 2000 -- two months later, the company announced its infamous merger with AOL, and the rest, as they say, is history. Another company building an imperial headquarters that crumbled faster than you can say "AOL Time Warner."
With gas prices expected to continue on their upward trajectory through the Labor Day weekend, now's the time to turn to Web Sites like GasBuddy.com and GasPriceWatch.com for tips on finding the cheapest gas in the city. While Mayor Bloomberg says that he has our backs when it comes to holding gas under $3 a gallon, New Yorkers still need to do what they can to search out and find the cheapest gas around.
So where on the Upper East Side can Mayor Bloomberg find a cheap gallon of gas? Outside of Gracie Mansion, a gallon of regular sells at about $2.75. If the Mayor is willing to walk up to East Harlem, though, he can get the price down to $2.55/gallon. (Go to GasPriceWatch and type in Gracie Mansion's zipcode: 10128).
Gotham Gazette points to a new report on IT jobs growth from the Fiscal Policy Institute: "Prospects for Information Technology Jobs in New York's Finance Sector." The report was prepared for the CUNY Institute for Software Design and Development, so it's perhaps no big surprise that the report concludes that "CUNY is in good position to train New Yorkers to fill such jobs if it focuses itself accordingly..."
According to a recent Reuters report, a best-selling item over at T-shirtHumor.com is the "Mr. Housing Bubble" t-shirt. The design has "the right mix of market timing and dark humor" to strike a chord with nervous real estate investors:
"The parody of the decades-old Mr. Bubble bath foam package offers a "Free Balloon Mortgage Inside." But the smiling pink house-shaped bubble also warns: "If I pop, you're screwed." A disclaimer at the bottom reads, "Not affiliated with Mr. Internet Bubble."
A big hat tip to Curbed, which unveiled the original "Mr. Housing Bubble" design back in March.
Agnes Crane of The Wall Street Journal takes a closer look at the growing number of economists and Wall Street pundits who have joined the blogosphere (link via the New York Sun):
"The economists - including prominent names from universities and even the Federal Reserve - have started blogging, posting their thoughts on the Web on a variety of things, including the rise in oil prices and the future of interest rates."
For blog readers-slash-investors, it's an easy way to get a new trading idea or pick up on an evolving trend, all before the rest of the market can catch up. Says one trader: "It's all about the memes... Those guys say it and about a week or two later, the guys on Wall Street pick it up."
With the price of oil edging up past the $66-a-barrel mark, it's no surprise that customers are facing sticker shock at the gas pump. Welcome to gas at $3/gallon in some parts of New York City. In fact, gas already sells at $3.20/gallon at one pump in Brooklyn. That price will likely move northward during the remaining days of summer, say oil traders, who are now predicting $80-a-barrel oil by Labor Day.
Gas gouging at pumps throughout the city will not go unpunished, though, responded Mayor Bloomberg. As Bloomberg pointed out, "High gasoline prices hurt everybody in this city." (even billionaires, we presume)
Housing bubble? What housing bubble? Even analysts once bearish about the housing market are no longer predicting a "sudden, painful drop" in housing prices, according to the New York Post. Despite all the talk in the media about a potential housing bubble (in June, there were 774 articles alone referring to "housing bubble"), bears are morphing into bulls mostly because U.S. property values simply show no signs of weakness and mortgage rates remain reasonable. In fact, as prices continue to edge up to "nosebleed" levels, bears are simply throwing in the towel. In Manhattan alone, unit sales of apartments increased by 7.5% in 2Q 2005, while the average price of an apartment unit ($1.32 million) increased by 30% compared to the year-earlier period.
A New York real estate speculator summarizes why so many people are willing to suspend reality when it comes to playing the real estate market:
"I'm concerned about all this bubble talk I see on CNBC and in newspapers because they are all correct about the dangers built into this housing market... But you can listen to a guy with a long list of degrees telling me that the bubble is going to definitely burst, while an equally accomplished fellow can say just the opposite on another channel. I don't know what to believe."
City Journal seems to think that economic growth in New York City is at a standstill. While mayor Michael Bloomberg maintains that the local economy is "strong and growing stronger," the reality may be otherwise:
"Hold on a second. The picture is nowhere near as rosy as the mayor paints it. The citys economy is stuck in neutral, and the budget could be deeply in deficit by next year... Under Bloomberg, New York is slipping back into an all-too-familiar pattern of lagging behind national job growth, after having outperformed the rest of the nation in the late 1990s under Mayor Rudy Giuliani."
What's all the more disturbing, Wall Street and the rest of the financial services industry is no longer acting as an engine of growth for the city:
"Equally troubling, the city slowly seems to be trading its reputation as a financial and mercantile capital for a place as Americas urban theme park and tycoon playground. Although New York is still probably the worlds financial capital, lately the city has mostly been producing employment in low-wage industries that serve tourists and the Bloomberg-style megarich..."
In case you missed it, mega-convenience chain 7-Eleven opened its first Manhattan store yesterday. (Technically, it's not the company's first store ever in Manhattan -- but the previous store shut down in 1982) Opening the new store on July 11 (i.e. 7/11), of course, was a no-brainer. As The Globe and Mail points out, there was additional symbolism in the choice of date: "The Manhattan opening coincided with the 40th anniversary of its Slurpee beverage, a slushy mix of ice and syrupy flavours, that was first served on July 11, 1966." The big question, of course, is whether 7-Eleven will be able to compete with all the delis and bodegas in the city.
Despite a frantic push over the past three weeks that included the high-level support of celebrities and star politicians, New York will not be getting the Olympics in 2012. On Wednesday morning, NYC was the second city to be knocked out of the five-city competition. Instead, the Olympics will go to London, "capping the most glamorous and hotly contested bid race in Olympic history."
A big hat tip to the NYC 2012 team, which worked long and hard to make the Olympics a reality for New Yorkers.
Does oil at $60 a barrel scare you? How about $70? At what price does the U.S. become susceptible to an oil shock? Remember, Wall Street analysts have been talking about oil at $100 a barrel for months. To get up to speed on the topic - or perhaps to prepare for a Hamptons cocktail party at a hedge fund manager's palatial spread:
BBC News: What does $60 a barrel mean to you?
Paul Schiff of Euro Pacific Capital: The U.S. is as vulnerable as ever to an oil shock
Guardian UK: The black stuff has world order over a barrel
Reuters: U.S. economy healthy despite high oil
Some good news from CNET for any job seekers in the NYC metropolitan area: New York, together with Philadelphia and Boston, is one of three East Coast cities experiencing impressive growth in high-tech job listings. According to online recruiting company Dice, listings for jobs in the New York region increased by 38% to 8,644 during the first five months of the year. Moreover, the New York area ranked #1 overall in terms of total job listings on Dice.com, outpacing even Silicon Valley.
Congrats to Heath Binder and Adam Wills, the winners of the Curbed 'Hoodwinked contest. They came up with RAMBO ("Right After the Manhattan Bridge Overpass"), which ended up winning almost exactly 50% of the online vote. For those keeping track, this humble editor's entry (TRUMPO) finished a distant 10th out of 10, with a paltry 0.7% of the vote.
Now we know how the Tampa Bay Devil Rays feel -- 17.5 games out of first, out of contention before the All-Star break, and facing the daunting prospect of trying to catch up with the Yanks and Red Sox with a roster comprised almost entirely of minor league prospects. A tip of the hat to RAMBO for running away with the race.
About a month ago, the city honored four NYC-based small businesses that were named by Inc. Magazine as among the 100 fastest-growing inner city companies in the country: American Christmas Decorations, Artuso Pastry, Cynergy Data, and Mosaica Education. Two of the companies are based in Queens, and the other two are based in the Bronx. Yo, Brooklyn, what happened?
In connection with its series of articles about class in America, the New York Times has provided a handy interactive graphic for anyone still confused about which class they're in. Hint: if you have a high personal net worth, a six-figure net income and some kind of degree from an accredited educational institution (it doesn't matter which one), there's no need to worry.
If this were continental Europe or the U.K., someone might care about your accent, about the way that you hold a fork, about your knowledge of the art world or classical music, or about some other Old World notion of what constitutes good breeding. But this is America, where the only relevant question is: How Much F***ing Money Do You Make?
The South Bronx, once a metaphor for everything that was wrong with the city, has turned into a beacon of economic growth over the past three years. Intrigued by signs of new retail and industrial development in the South Bronx, Jonathan Bowles of the Center for an Urban Future interviews Neil Pariser, SVP of the South Bronx Overall Economic Development Corporation (SoBRO), to get a glimpse of what's ahead for the borough. Parisi explains:
"Were no longer the same borough they saw back in the 70s when [sportscaster] Howard Cosell talked about the Bronx burning. We have turned a huge corner in the economy. Just recently, the Fulton Fish Market moved to the Bronx. The borough has one of the fastest rising populations in the city and land here is becoming increasingly scarce. Were not the stereotypical South Bronx."
Parisi also comments on the broadband gap in the South Bronx:
"We dont have sufficient Internet access. In Hunts Point, as an example, some companies still rely on dial-up. So if youre an international company that must buy fruit in Guatemala, or in South America and you dont have broadband access on a fast turnaround, youre in big trouble... Theres a lot of companies that need to learn about how to function in the electronic marketplace. Our people arent doing that, because they dont have access to fiber optics or to DSL. Its ridiculous and its going to hurt us. The winners in this global economy will be the ones that are in touch with the rest of the world, not with their neighbors across the street."
"The tours, known as Tech Tuesdays, have allowed chamber members to observe things they normally would not, such as how fire trucks are built, how paint is canned, how blunt needles are made, how the county disposes its wastes and how the local telephone company operates. They have visited places such as Nathan Littauer Hospital, Benjamin Moore & Co., Epimed International and the Fulton County landfill."
While visiting the local paint store may not be all that exciting, it's an interesting way to get government leaders more excited about local technology businesses and to showcase the practical implementations of disruptive new technologies. In New York City, I'm not aware of any similar programs -- although there have been attempts to extend the "I Love NY" campaign to specific niches of the tech world (i.e. nanotech).
In May, the pace of economic growth in New York City fell to its lowest level in the past five months, according to the National Association of Purchasing Managements New York Report on Business. In April, the index of current business conditions was 74.2; in May, the index had dropped to 42.3, signalling a contraction in business activity. According to survey results, the six-month outlook is at best, cautiously optimistic. Let's hope this is just a typical summer slowdown in the city.
Daily Gotham applauds grassroots efforts already underway in Queens to save the NY State Pavilion in Flushing Meadow Park (built for the 1964-65 World's Fair) by turning it an Air and Space museum. Create, an architectural and planning firm, has already come up with the sketches and vision to save the decaying New York State Pavilion, which is at risk of "collapsing into a pile of rubble" if steps are not taken soon.
Based largely on the city's dramatic economic recovery since 2001, S&P raised New York City's credit rating by one level to A+ -- the highest rating ever given to the city by the rating agency. (The A+ rating is the fifth-highest of 10 investment grades). The credit upgrade follows a similar move by Moody's, which recently upgraded its rating on New York City municipal debt to A1. Bloomberg.com has more on the economic outlook for the city as well as a sophisticated look at municipal debt yields.
The cover story in this week's New York Magazine asks a provocative question: Is Your Apartment Like a Dot-Com Stock? It's a timely question to ask, we suppose, but consider that the author of the story is none other than disgraced Wall Street analyst/stock shill Henry Blodget.
Real estate blog Curbed comments: "The mere experience of reading Henry Blodget's take on the real estate bubble nearly made our head explode. Blodget, the deposed king of the Amazons, makes two salient points: 1) the Internet collapse was not his fault and 2) the collapse of the real-estate market will not be his fault."
A number of high-ranking New York City government officials and captains of industry (like Goldman Sachs CEO Henry Paulson) will be in China this week to discuss ways of enticing more Chinese companies to set up shop in New York. Already, about 120 Chinese companies have offices in the metro area (including 68 in New York City alone). In fact, of the 32 largest Chinese companies that have a U.S. presence, 13 have already opened their doors for business in New York City.
According to Crain's New York, the Pentagon has proposed closing 17 military installations in New York, New Jersey and Connecticut and downsizing others "as part of a plan to shutter 180 bases worldwide and save nearly $50 billion."
A number of City Council Members are questioning the safety of the $300 million computerized subway train (the so-called "robo-train") planned for the "L" line. Concerned by recent delays and inexplicable software glitches, these politicians claim that "unsuspecting subway riders are being used as guinea pigs to try out untested technology." There's also the fear that hackers could somehow break into the computers and cause widespread havoc and mayhem.
After reportedly scuttling plans to build a new 1.9 million square foot tower in Battery Park City, Goldman Sachs is now looking around for a midtown alternative, according to the New York Post. The only problem, say insiders, is that another alternative in Manhattan may not exist: "Try finding a site than can immediately accommodate a nearly 2 million square-foot tower." For now, Plan B appears to be something along the lines of the Hotel Pennsylvania site on Seventh Avenue at 33rd Street -- but that would require demolishing the hotel and then designing and building a super-skyscraper from scratch. That's doable, of course, but Goldman needs a new HQ by 2008, when a number of downtown leases are set to expire.
Crain's New York reports that top-ranking New York business leaders will "attempt to cultivate ties with China and attract money from cash-rich state-owned enterprises" at the upcoming U.S.-China Investment and Trade Forum, to be hosted by the Manhattan Chamber of Commerce on April 12. The list of speakers includes the chairman of the AIG Consumer Finance Group and the director of Empire State Development Corp.
After Pfizer warned that it may suspend sales of its arthritis drug Bextra and possibly discourage sales of the pain killer Celebrex, Moody's countered with a warning that it might cut the company's top debt ratings. Moody is concerned first and foremost with the company's cash flow: lower sales mean less cash means a reduced capacity to service debt. There doesn't appear to be much to worry about, though: Pfizer is one of a handful of companies in the United States with a triple-A debt rating.
According to the New York Post, Goldman Sachs no longer plans to build a new $2 billion, 40-story tower in Battery Park City, "dealing a severe blow to downtown hopes for a commercial renaissance near the World Trade Center site." Mayor Bloomberg's office was "stunned" at the news. But was the move by Goldman just a clever negotiating tactic?:
"Goldman has bickered with the state over plans for a West Street tunnel adjacent to Ground Zero that might place wide entrance portals in front of the new headquarters. The bank's backing out could be a negotiating ploy to pressure the state to cancel the tunnel or move the portals north."
(NOTE: all of this apparently took place on April 1, so draw your own conclusions...)
"Corey turns 21 tomorrow. He won't be celebrating this rite of passage at '21' or over impetuous fistfuls of Jagermeister but will instead spend the night sleeping upright in a chair at a 24-hour Kinko's. Corey has been homeless in New York City for the past three and a half months.
He bathes in churches, spending $20 a week on mouthwash, shaving cream, and other necessities. The self-taught Midwestern transplant earns money by helping people with their computer problems at Kinko's come nightfall. During the day, he uses the ghetto-tech computer equipment, he discovered in a dumpster, to surf the Internet at Starbucks (picking up free wireless waves from the neighborhood)."
Some of New York's largest companies are facing "an embarrassment of riches as cash on their balance sheets swells to record levels," says Crain's New York. At the end of 2004, in fact, 20 of the largest nonfinancial companies in the New York metro area (e.g. PepsiCo, Pfizer, Time Warner, KeySpan) had a combined total of more than $80 billion in cash.
According to analysts, there are two ways of looking at things. Either these companies are reporting record profit levels at a time when there's simply "a dearth of attractively priced assets to buy" or -- and here's the glass-half-empty scenario -- these companies are building up "rainy-day" funds in expectation of a recession in 2006 or 2007.
In the wake of the New York Times article about a housing bubble in the making, this was bound to happen -- the sudden appearance of a cottage industry of "housing bubble blogs" and other naysayers looking for the New York real estate market to collapse. Curbed points to two blogs that popped up on its radar: Housing Bubble and Home Bubble. Curbed also provides a comprehensive list of its bubble coverage, with a caveat to its readers: "Of course there's a bubble; you can't do anything about it; go ahead, keep buying; see you in hell!"
We like what Curbed is doing -- opening up the corporate kimono, emphasizing transparency, and telling readers both sides of the story... Anyway, if you're worried about a possible housing bubble in the New York real estate market, check out an interesting post from Housing Bubble called Will Your Editor Get Priced Out of the New York Market?. It's from Jay Taylor, the editor of J. Taylor's Gold and Technology Stocks newsletter.
On Friday, a New York Times article analyzed whether or not there's a "real estate bubble" in the making, using the obvious comparison to the dot-com speculative frenzy of the 1990's. Whereas books like Dow 36,000 once added to the froth in the marketplace and TV shows extolled "can't miss" Internet stocks, now there's real estate blogs and TV shows about "can't miss" home improvement opportunities. In short, people are flipping housing properties the way that they once flipped Internet stocks. Not only that -- they're doing the equivalent of buying "on margin" -- putting no money down on properties that they have no intention of ever using.
Internet sites like Curbed.com, says the New York Times, are doing their part to fuel the speculative frenzy: "Real estate bulletin boards and blogs like Curbed.com and Real Estate Pimp have taken the place of financial chat rooms like Tokyo Joe's."
To which Curbed responds: "Knowing we've officially done our little part to one day bring down the global real estate market, we can now pass on from this life..." (Oh, and check out the cute little "Mr. Housing Bubble" graphic on the Curbed site, too.)
If you've been following the debate about U.S. innovation, you might want to check out an article that I wrote for Tech Central Station: "The Death of Idea Factories... and the Birth of Idea Networks." Business Week recently ran a cover story article about "Outsourcing Innovation," claiming that the same outsourcing trend that swept through the manufacturing sector is set to wipe out the U.S. R&D sector as well. That's serious stuff, if indeed the U.S. is willing to outsource innovation to places like China and India.
The fallacy, of course, is thinking about innovation in terms of factories, manufacturing and "things." In other words, R&D units are not "idea factories" that manufacture innovation and design and other goodies. Hence, the title "The Death of Idea Factories."
In The New Yorker, James Surowiecki takes a closer look at the "cult of the billionaire next door." Hotshot CEOs like Ebbers, Rigas, Lay and Scrushy all were local boys who made it big before seeing their hometown empires crumble away. They were "outsiders and visionaries" who also turned out to be "hucksters":
"They all presided over companies that they essentially built from nothing. They all treated these companies as their own personal property. And they all came to be dominant figures in their home towns... Some of these ponds are smaller than others, but in each instance the soon-to-be-disgraced C.E.O. was the biggest fish around."
With the departures of Michael Eisner from Disney and Hank Greenberg from insurance giant AIG, it looks like the end of an era, says Terry Keenan in the New York Post: "The reign of the imperial executive is officially over. R.I.P., celebrity CEO." Oh, and don't forget about Bernie Ebbers, the folks at Enron, the CEO of Boeing, and a whole raft of other top-level executives who now find themselves out of a job. In February alone, there were more than 100 high-level management changes, says the New York Post -- the highest number in more than four years.
It's tax time again and the Bush Administration is buzzing about ways to overhaul the federal tax code, so the Wall Street Journal invites economist bloggers Tyler Cowen and Max Sawicky to weigh in on the tax reform debate in Washington.
At the same time that the domestic airline majors like Delta and American are cutting costs to the bone in an effort just to survive, low-cost airline rivals like JetBlue continue to add premium in-flight technology options. The New York Times explores this seeming paradox, noting that Song (the low-cost subsidiary of Delta) has "quietly introduced a costly in-flight entertainment system that rivals the fancy audio-visual diversions found on the most luxurious international carriers - and one that is far superior to anything offered on any major domestic carrier, including Delta." Taking a cue from JetBlue (which pioneered the idea of in-seat TV monitors), the Song system offers 10 pay-per-view recent movies; 1,600 audio tracks; 11 video games; and satellite-transmitted TV programs.
Stop and gawk at the new technologies: DestiNY USA is building an 800-acre tourist theme park in upstate New York to highlight emerging new technologies. According to the online version of the Daily Telegraph, the park will be so massive that could "rival Silicon Valley." Is that all Silicon Valley is -- a giant theme park full of carnival amusements like Google and Yahoo? A British investment banker comments on the deal:
"It's really a very Victorian idea, like a bigger version of Kew Gardens. The concept is based around science and technology research but with opportunities to gawk, as well as shops and restaurants."
Out for bid: the New York City Taxi and Limousine Commission (TLC) is looking for "one or more highly qualified contractors to build, install, and maintain equipment that will deliver groundbreaking enhanced technology services to taxicab passengers." These technology services include -- but are not limited to -- credit/debit card payment capability, an interactive passenger information monitor (PIM) and text messaging capability.
According to the Commissioner of the TLC, bidders responding to the RFP will be doing their part to make New York City's taxi cab fleet the best in the world:
"This RFP allows the City to bring all of its knowledge, experience and buying power to bear on behalf of both the taxicab industry and the riding public. The way it was structured will allow this project to culminate in improvements in customer service that are light years ahead of anything taxicab riders have ever seen anywhere in the world..."
As the mega-merger spree continues, leading to more deals like Verizon's multi-billion-dollar bid for MCI, employees are wary that companies could be preparing to shed thousands of jobs. With that in mind, the New York Daily News takes a look at what steps rank-and-file office workers can take to avoid a layoff. According to some experts, the main priority is to solidify existing relationships at the office with people willing to go to bat for you: "The more people who know about you and your accomplishments - and feel comfortable with you - the more chance you have that a person will be in a meeting where decisions are made about who to save, who to let go, who to promote."
It's also not too late to brush up on brown-nosing skills: "Learn to be a 'company person,' 'yes man,' or however you define it, very quickly. You begin with a blank slate. Agree to anything new management says, do extra assignments and work others don't want."
The New York City Department of Buildings has given the go-ahead to Santiago Calatrava's $35 million townhome "cubes in the sky" project. It's the latest - and most expensive - twist on "skyscraper living": a dozen glass and stainless steel cubes (four stories each) stacked one on top of the other. Calatrava, of course, is also the visionary behind the new World Trade Center Transportation Hub. (Hat tip: Curbed)
GM and Shell are linking up to bring hydrogen fuel cell vehicles and hydrogen refueling to New York. As part of the agreement, GM will provide 13 fuel cell-powered minivans and fuel cell-powered SUVs to New York State, while Shell Oil will develop hydrogen refueling capabilities (presumably, at existing Shell gas stations). The first hydrogen fuel cell vehicles could arrive as early as 2006 in NYC. It's all part of an attempt to create an East Coast Hydrogen Corridor between Washington and New York.
In Why New York Loses Jobs, Brian McMahon (executive director of the New York State Economic Council) points out that New York must market its high tech strengths more aggressively:
"State investments have helped create technology assets, but New York spends nothing to tell this story to the world. The survey showed that the state's high-tech strengths beyond New York City are underestimated even though the state has invested some $2 billion in technology centers and incentives for high-profile, high-tech projects. New York needs a marketing program to promote its technology advantages to business leaders worldwide and to venture-capital sources closer to home.
Thanks to a new 5% city tax concession, the NYC film industry could be headed for a mini-boom in 2005, according to Crain's New York. The city tax concession, combined with a state tax credit granted last fall, means that New York is now competitive with places in Europe and Canada -- with the result that new films will be calling New York City home soon. Two major feature films --The Producers and The Departed (a Martin Scorsese movie) -- have already signed on to begin production soon.
After hinting that it might move its corporate HQ out of New York, it looks like Verizon Communications will be putting down permanent roots in Lower Manhattan. The company had put its midtown office up for sale, so it required a late intervention by Mayor Bloomberg (and, no doubt, a bag of economic goodies) to convince Verizon to stay. In fact, from the New York Times article, it sounds like Mayor Bloomberg sat down mano a mano with Verizon CEO Ivan Seidenberg and did a bit of arm-twisting. The bottom line: Verizon may move some back-office jobs out of the city, but there will be no net loss of jobs for New York.
For one day, at least, the New York Post puts away its tabloid sensationalism to look at what happens when real-world decision makers can't trust economic statistics released by the government. Quite simply, "in the real world, folks get hurt when the official gauges for an economy can't be trusted or when they need to be viewed with increasingly skeptical eyes." Even basic government statistics like employment figures can be terribly distorted or misreported. The lesson in all of this? "Most people are their own best economist. And as they say if an economic number looks too good to be true, it probably is..."
On a related topic: over at Tech Central Station, Arnold Kling tackles the problem of "Dollar Drama, Dollar Delusions" -- how unreliable international economic statistics can impact currencies and trade deficits.
After two years of hand-wringing, it's now official: according to FASB, companies must now account for stock options as typical business expenses. For publicly-traded companies, the rule will take effect starting July 1, 2005. The FASB's logic: "We believe that recognizing the costs of these arrangements in financial statements improves the relevance, the reliability and the comparability of financial information."
Yet, as anyone who witnessed the tremendous boom of the Internet era knows, it was exactly these stock options that encouraged the best and the brightest to take a bet on the high-flying companies that later became Amazon, eBay or Yahoo. A coalition of tech companies promises to fight the rule change, but it looks like a fait accompli at this point.
The Gotham Gazette has a multi-part feature on the Bloomberg Administration's development plan for 20 key neighborhoods in New York. Areas like Lower Manhattan and the Hudson Yards may garner the lion's share of the publicity, but there's a city-wide development initiative underway that will reach into each of the five boroughs. For example, according to Sandy Hornick, director of strategic planning at the Department of City Planning, regional business districts like Downtown Brooklyn, Long Island City, Downtown Flushing, and Jamaica, Queens will play an important role in creating new commercial office development opportunities.