Five Things You Need to Know: Slackers Gettin' Busy!, Making Porridge For The Man, China: "We Meant To Do That!", Smart Money Vanishes, Adult M&Ms
What you need to know (and what it means)!
Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Slackers Gettin' Busy!
Looks like we finally rolled off the collective couch and into work for once, actually doing the jobs we're paid to do instead of sitting at our desk and playing around with stuff like this on the Internet all day, according to the 17,347 employees in the Labor Department who "guesstimated" that Productivity rose 3% last quarter.
- U.S. worker Productivity accelerated more than forecast last quarter, checking in at a 3% clip, well above the 2% most economists expected, the Labor Department said this morning.
- "Productivity" is defined by the Labor Department as a measure of how much an employee produces for each hour of work.
- For example, if it takes me two hours to produce "Five Things" then the Labor Department would say that my Productivity is, in technical economic-speak jargon, "totally incredible."
- Anyway, the 3% rise in Productivity last quarter followed a revised 0.1% decline in the third quarter.
- And for all of 2006, Productivity rose by 2.1%, down from 2.3% in 2005 and the slowest pace since 1997.
- So while the fourth quarter showed marked improvement, we're not exactly making porridge for Goldilocks here... or are we?
2. Making Porridge for the Man
Meanwhile, as worker Productivity came in higher than expected, Labor Costs grew at a slower pace, the same Labor Department report showed. That's good news... unless you are a worker.
- Labor Costs increased 3.2% last year, up from 2% in 2005, the biggest rise since 2000.
- However, in the fourth quarter Unit Labor Costs, calculated by dividing total compensation – wages plus benefit costs – by real output, rose at an annual rate of 1.7%, less than the 2% gain expected by economists.
- If you think back to last November when third quarter Productivity and Labor Costs figures were released, the conventional wisdom at that time was that slowing Productivity and rising Labor Costs would create inflationary pressures (that despite the fact most companies haven't had a whiff of pricing power in more than six years).
- So does this report mean we're out of the woods with respect to inflationary pressures?
- Are we getting paid (not enough) to make porridge for Goldilocks (read: The Man?)
- Does a bear... never mind.
- The answer is, in a way, yes. The reality, as we argued in November, is that we should never have been overly worried about inflationary pressures.
- What's worse, the real irony is being conditioned by economics to applaud the fact that we're working harder and making less money!
- Man, that's the American Dream, isn't it?
3. China: "We Meant To Do That!"
A Chinese central banker said the recent strength in the yuan is not a response to U.S. pressure, but that a gradual appreciation of the currency is in the best interests of China and the global economy, according to XFN-Asia.
- In an online interview on Sina.com, Fan Gang, the only non-government representative on China's central bank's monetary policy committee said the recent strength in the yuan is not a response to U.S. pressure.
- The yuan has risen more than 6.5% since being loosened from its peg to the U.S. dollar in July 2005.
- Yesterday at a hearing before the House Ways and Means Committee, U.S. Treasury Secretary Henry Paulson, said, "China needs to restructure its economy to help trim its huge trade surplus with the U.S."
- Paulson added that, through the reforms, China can have an exchange rate that is set in the competitive marketplace in the intermediate term, which is a fancy way of saying the U.S. remains committed to continuing the hollow verbal sparring with China over the value of the yuan.
- Meanwhile, People's Bank of China vice governor Xiang Junbo said overnight that inflationary pressure is building from rising consumer prices in China, according to XFN-Asia.
- Closer to home, the whole ball of wax was summed up neatly, if inadvertently, in a speech yesterday by San Francisco Fed President Janet Yellen who noted that China's loose yuan peg to the dollar "complicates the use of monetary policy" by the People's Bank of China to slow the economy.
- Bottom line: What happens when both the U.S. and China are caught between a currency and a hard place? We'll soon find out.
4. Smart Money Vanishes
Toll, Centex, Lennar Join "Moron" Speculators in Land Grab Bust, reads the Bloomberg headline this morning.
- According to Bloomberg, Brian Tuttle owns so much land that he paid $3.6 million to get rid of 125 acres ready for development in the middle of Florida's Palm Beach County.
- "In 2005, I was a brain surgeon, and in 2006, I was a moron,'' Tuttle, who walked away from his deposit on the land rather than lose even more money buying it and building homes on it, told Bloomberg.
- Of course, Tuttle wasn't alone. There are some pretty "smart" names on the list of those losing money on plummeting land prices, including Toll Brothers, Centex, Lennar, Pulte Homes and DR Horton.
- When land prices reached a point where the speculators quit buying, homebuilders like Toll, Centex and Lennar were forced to abandon so much property they helped create a glut that drove down land prices more than 9% last year, according to data compiled by Real Capital Analytics, Bloomberg reported.
- "Land grab bust." Yikes. Can we go out on a limb and say that whenever the word "grab" gets added to an asset a bust will soon follow?
5. Adult M&Ms
The company which makes Mars and Snickers chocolate bars announced yesterday it will stop marketing its products in the UK to children under the age of 12, according to The Herald.
- Masterfoods, which also makes M&Ms, has confirmed it will no longer produce marketing and advertising aimed at youngsters, The Herald said.
- According to The Herald, a spokesman for the company said: "Over the last few years, concerns have been expressed by governments and parents about the marketing of products to children... yes they have... yes they have... cutie little concernaroos have been expressed by mommy and daddy, little snookums, yes they have."
- The spokesman added that, "Mars believes that it is important to listen to concerns and respond directly to consumers, like a big boy and girl with yummy chocolate bars for a yummy little tummy, mmm mmm ,mmm mmm, yum yum time for yummy tummy."
Minyanville has learned the policy may mean some product name changes are in store, especially for more "kid-friendly" brands like M&Ms:
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