Archives for July 2008

I like Edgar.

I enjoy learning new things and whenever I need to locate corporate securities data, say in relation to a company’s announced workforce layoff or regarding a proposed merger, Edgar always points me in the right direction when I hunt for reports.

You know Edgar, right? The Electronic Data Gathering, Analysis, and Retrieval system? Maybe you’ve used the U.S. Securities Exchange Commission’s productivity tool, Edgar, too?

I also like Emma, from what I hear about her.

Do you know her?

I didn’t either.

The regulatory Municipal Securities Rulemaking Board launched the Electronic Municipal Market Access system four months ago on March 31 as a pilot program. Its intent was to establish an electronic clearinghouse for municipal bond information.

Until Emma came around, municipal bond issuers sold disclosure reports to for-profit repositories, who resold the data to retail investors for a fee.

The impact is huge, using 2007 as a benchmark:

• 6.6 trillion long and short municipal trades
• 9 million transactions
• 50,000 state and local government issuers
• 2 million bonds outstanding

When you consider Edgar provides corporate data for free in real-time over the internet, you can imagine why the MSRB was eager to seek a comparable Edgar, or Emma if you will, for municipal securities and ease the burden of the investors and the market as a whole.

The pilot was so successful that SEC Chairman Christopher Cox announced, yesterday, that Emma is going live:

Retail investors — who own two-thirds of municipal securities — will soon have the same one-stop, cost-free, instant electronic access to disclosure documents about municipal bonds that they’ve long had for corporate stocks and bonds. This is a giant step forward for municipal bond investors.

And that’s not all…

Cox also announced yesterday that tech-savvy corporations are allowed to provide financial disclosure data (in the form of, say, a social media-enhanced press release) directly to current and prospective investors through their blogs.

If interested in this big bang, check out Brian Solis’ massive commentary at Social Media Today.

Unless if you’ve been locked in a food pantry for 50 years, you probably know that the onion is the only agricultural resource not traded on the U.S. futures market.

Whether you buy onions at the supermarket or a local farm stand, you know the cost of an onion is relatively stable.

You probably also know that the cost of pumping your regular unleaded gas is about $4 a gallon with no ceiling in sight.

Despite a June 27, 2008 story in Fortune Magazine, a July 7 article in the Financial Times, and a July 8 op-ed in the Wall Street Journal, you may not realize the mainstream media missed a crucial element when comparing the volatility of onions to oil: perishability.

Background to the cessation of onion trading

Reacting to speculators causing a volatile onion market in the 1950s, the National Onion Association lobbied freshman Republican Senator Gerald Ford and Democratic Senator Hubert Humphrey to co-sponsor a piece of bipartisan legislation called the Onion Futures Act.

Codified under 7 USC Sec. 13-1, the 1958 law prohibits regulated trading of the bulbous genus Allium, and mandates enforcement to the U.S. Commodity Futures Trading Commission.

Before enacting the law, the U.S. Senate Committee on Agriculture and Forestry stated “that speculative activity in the futures markets causes such severe and unwarranted fluctuations in the price of cash onions…[a] complete prohibition of onion futures trading in order to assure the orderly flow of onions in interstate commerce” was necessary, according to a 2005 research paper by David Jacks, assistant professor of economics at Simon Fraser University.

In other words, according to a then-commentator whom Jacks quoted, “It seems clear that futures trading in onions was prohibited simply because too few members of Congress believed that the onion futures market was, on balance, economically useful.”

Speculation does not cause price volatility

“I firmly believe,” Fortune senior writer Jon Birger speculated in a companion online video to his printed story, “If there was no futures trading in oil, you would see oil prices much higher today.”

Birger is confused.

Citing USDA gains in oil and corn at 100% and 300%, compared to a roller-coaster ride of fluctuation for onions, Birger wrote, “The volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics’ belief that futures trading diminishes extreme price swings.”

CFTC Commissioner Joseph Dial reinforced this idea in a 1997 speech:

…onion producers prevailed upon Congress to include in the Commodity Exchange Act a prohibition against futures trading in onions. This had the twin effects of killing the onion futures market, which the producers so hated, and giving futures economists a perfect test case.

When those economists later studied this case, they found more cash market volatility in onion prices before and after the period of futures trading than there was while the onion futures market was operating. Futures markets don’t cause volatility; they respond to and decrease volatility.

However, the Financial Times spoke to a senior Indian official (as India is also considering an onion trading ban) who responded, “When a commodity is scarce, its price rises, whether it is traded on an exchange or not.”

Who’s right: Birger, Dial, or the Indian?

Perishability causes volatility; and bans cause innovation

Vermont Senator Bernie Sanders wants to ban oil speculation to stabilize barrel cost swings.

Sanders doesn’t get it.

He should pay attention to Newsweek business producer John Schoen who reminded readers that the oil market is global; and read a July 20 op-ed in The New York Times with the message that the economy, not speculation, “is driving the recent run-up in commodity prices.”

Those who say the 1958 ban ought to be lifted and onion trading should commence are forgetting that onions are perishable goods.

“Perishability makes prices inherently volatile,” stated University of Houston professor and commodity wonk Craig Pirrong last winter.

Oil, corn, soybeans, wheat, carrots and virtually every other commodity (except potatoes, which were almost banned in the 1960s) are not perishable, yet folks such as FOX Business reporter Brian Sullivan stereotype onions with grains and soybeans in the same sentence.

The perishability of onions “was a key factor in passing the law,” said Wayne Mininger of the National Onion Association when I spoke to him yesterday.

Mininger, a 38-year veteran in the onion industry, said the association continues to support the law, adding he does not recall any annual meetings with proposed resolutions to lift the ban.

(On a side note, why the mainstream media failed to speak to the group that lobbied for the 1958 bill and continue to represent the desires of 500+ onion growers and wholesalers is a mystery to me.)

Curiously, one of the association members, Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler, voiced his support of a ban lift in the Fortune story.

…a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it.

The Onion Futures Act led to mass reforms and strategic planning at the Chicago Mercantile Exchange and New York Mercantile Exchange, including CME to start trading livestock and meat products (such as the notorious pork bellies) and NYMEX to trade energy futures. Moreover, the foreign exchange board (which trades our favorite subject of oil) was later implemented.

None of this would occur today, presumedly, without an onion ban, say Pirrong and Risk Magazine’s Alexander Campbell.

Among other bloggers who referenced the Fortune, WSJ, and FT stories, check out:

• U
  niversity of Michigan-Flint economics professor Mark Perry‘s blog
• Alex Tabbarok at Marginal Revolution
• Don Boudreaux at Cafe Hayek
• Market Based Management
• Byrne Hobart at Byrne’s Eye View

You may also enjoy revisiting the 1983 Eddie Murphy farce, “Trading Places,” including a pivotal scene involving futures trading of frozen concentrated orange juice.

Brian Clark at Copyblogger suggests there are two types of writers: those who get the scoop and those who ring a cowbell and amplify the sound around the world wide web.

I tried to do both here. I amplified the sound of onions ringing (pun intended of the WSJ headline) and introduced the idea that you can cry to onions all you want but allowing perishable onion trading would be equivalent to lifting oil speculation because both actions would cause more harm than good.

What do you think?

Barring unforeseen obstacles, the 13th location of the Upper Crust should open shortly in Newburyport.

With existing locations in Boston’s Beacon Hill, Back Bay, South End, and Financial District neighborhoods; Brookline’s Coolidge Corner; Cambridge’s Harvard Square; Lexington; Waltham; Hingham; Watertown; Salem; and Key West, Florida, plans for a Newburyport store were first reported in February 2006 in the Boston Business Journal.

Echoing my former excitement of the chain that offers whole-wheat slices of the day: Hooray!

Work is progressing at the former office of Schooner Financial Associates, as seen in this photo which I shot earlier this afternoon at 42-44 State Street.

The Newburyport License Commission holds a public meeting on August 6 to vote on a submitted beer and wine application.

The company is also developing a site on Plymouth Harbor. Let’s see which opens first.

From hemp hats and halter tops to recycled rubber walking shoes and sandals, green fashion is everywhere… but I can’t find anything for men.

White Apricot lists the top 10 vegan shoes, which look fine for a classy gal. I’m a guy, though, and unless if I want to buy a hemp heel, what’s in it for me?

Other lists, such as Laurel and Kate’s green fashion roundup, are great but again, what’s in it for me? And I don’t mean one or two examples out of 10 nor the limited links on discussion boards.

C’mon, guys, you know what I’m saying?

Everyone’s talking about Princess Amidala, better known as Natalie Portman, who recently teamed up with eco-friendly footwear firm Té Casan (Gaelic for “a woman’s path”) and is touting the boutique brand everywhere including a recent green episode of Project Runway.

In response to that Project Runway episode (which I missed), everyone from The Modern Gal to CROW Clothing owner damali ayo lament on the lack of imagination and innovation among sustainable designers, thanking the Bravo-TV producers for bringing eco fashion to the limelight but urging additional episodes.

ayo (she doesn’t like her name capitalized) elaborates:

I’d love to help them do a “scrapology challenge” where they are required to make a new garment out of all the scraps that they didn’t use from the previous several challenges. It would be a great way to show that re-using and conserving are as much a part of eco fashion as are hemp, soy and bamboo.

Maybe I’m on a lost cause. Maybe it’s better to support innovative green fashion designs than gallop on a gender gap.

I must give credit, though, to footwear firms like Timberland for manufacturing shoes and sandals built out of recycled rubber. I own one of their sneaker brands, for instance: an ugly brown pair of sneaks but they do the job and looks well with my denim and brown belt.

I’d like to see more, though. Any ideas?

If anything is definitive about the way that businesses are adapting to the lure of social media, it’s that the data frequently changes depending who you ask:

• 74 firms, or 15% of the Fortune 500, are blogging, including technology companies IBM, Dell, Motorola, Lucent, Intel, AMD, Amazon, and Google
• 39% of the Inc. 500 are using social media (which includes blogging)

Critics are quick to disagree how to interpret such data.

“A big challenge in the world of corporate blogging is getting busy people who already have a lot on their plates to commit to blogging,” writes Tom Diederich for Harvard Business Publishing. “One successful tactic in doing so is convincing them it’s worth their while.”

Business moguls Jack Welch, Bill Gates, and Steven Jobs are examples of people who “take risks and emerge as winners,” writes R. Todd Stephens. These men and their ilk, busy with their jobs, recognize the potential gain of a risky idea and bring it through the design stages to success.

Stephens, a technical architect at AT&T, elaborates:

…It is “they” that are the ones that take risks. We on the other hand, do everything we can to avoid risks. We buy flood insurance to protect us from the Noah’s revenge. We take those extended warranties to assure ourselves that the new Wii will last forever despite that fact that the next big thing is only a few years away. We take our children to the park that is surrounded by fences and six inches of cushion in case they fall off the monkey bars. We chuckle at warning labels that protect us from ourselves like McDonalds warning that the Coffee may be hot or the superhero costume that says that the “Cape does not enable user to fly”.

Society is resistant to change, and technology, like the invention of the abacus as brand-spankin’ new and wonderfully received, should not cause policy creation overnight.

But some companies are embracing this new technology, and not just the Fortune and Inc 500 bloggers.

An April 2008 Forrester Research report (via Sarah Perez vectored from Larry Dignan) predicts corporate spending to exponentially increase on Web 2.0 technologies, such as social networking, RSS syndication, blogging, wikis, mashups, podcasts, and assorted widgets.

Corporate spending was not mentioned in the Fortune or Inc 500 survey reports, but I wonder if it would have made a dent in the results.

Erin Byrne, chief of digital strategies for PR firm Burson-Marsteller, says, “I thought that the number [of Fortune 500 bloggers] would have been higher. I think the reason…is that companies are still grappling with how they participate in the conversation when they don’t have control over the message.”

That’s not always the case, as Kelly Spors indicates in The Wall Street Journal, focusing on smaller firms uniting with each other on social networks to raise their collective profiles.

“Small businesses are often better positioned to take advantage of social networking than larger businesses because they often seem more approachable and so customers and prospects are more likely to be interested in connecting with them online.”

Whether a large or small business, technologists agree, the Forrester report indicates, that businesses will focus on collaboration and productivity tools, not consumer-oriented services like Blogger, Facebook, and Twitter.

Viewed differently, of 140 organizations surveyed in Beeline Labs’ 2008 Tribalization of Business:

• 35% value the lure of social media by word of mouth
• 51% believe the greatest obstacle to success is getting people involved
• 45% question time management to maintain the momentum once it starts
• 34% don’t know how to attract people

“At conferences around the world we’ve heard marketers say that their biggest challenge is executives’ resistance because they fear losing control,” says Beeline Labs partner Lois Kelly.

“But this research indicates that this may not be as big of an issue as marketers think. The bigger challenge is focusing the community around a purpose that people want to contribute to and be involved with – and devoting the right resources to promote and support the community.”

One way of devoting resources is to follow Holli Maestas’ list of 12 proven methods to leverage social media tools. Her list, while not paragraph-indented, sufficiently gets the message across that if a business is not willing to tread the waters, the competition will to remain relevant.

What do you think?

Is your business embracing social media and spending money on the technology? Or are you restricted in your day job routine because of factors beyond your control?

If you’d like to interact in social media technologies with me, see my relevant connection links on the right.