Paul Kulchenko: finance

Is Real Estate Safe?. Are we in a housing bubble, and whether you own or rent, what should you do? [The Motley Fool] If you look at the prices here (Home prices changes in major U.S. markets, LA +17.7%) it seems like we are.

Chicago Fed: The growth of person-to-person electronic payments. "I offer three reasons why electronic payments have failed to capture the C2C market. First, technology limitations have hampered the adoption of electronic C2C payments. Second, most consumers find few problems with the use of cash and checks. Third, providers of electronic C2C payments face a large obstacle in implementing fees for these transactions." [Scott Loftesness] Very true. Third parties cannot provide the service for free (they have to pay their bills), and banks (who can provide the service for free) are hesitant to enter this market. There is probably one more reason, "chicken and egg problem". Checks are widespread, you can pay almost everywhere with checks. Any payment system implemented by third parties is limited in scope, so customers are reluctant to join. Case to the point. Why do we use so many checks? "We have identified several potential drivers of electronic payments, such as greater choice of payment instruments for consumers for different payment segments, greater non-face-to-face shopping opportunities, competition from non-bank payment providers, and a greater role by merchants to offer the low-cost payment alternatives. Anecdotal evidence suggests that U.S. consumers are slowly changing their payment habits, and we would expect this trend to continue."

Two related articles. International Monetary Fund Sees Gloomier Economic Outlook. "Despite that hope for an improving economy, the IMF conceded weak stock prices, exacerbated by accounting scandals and an uncertain corporate profit outlook, could yet undermine consumer and business confidence." Consumer Credit: Is a Crunch Coming. "... people are piling up huge debts. The amount that Americans owe on loans for houses, cars, credit cards, and other purchases adds up to nearly 100% of their annual income after taxes. That's up from 75% in 1992, after the last recession ended. Even if consumers are willing to take on more debt, lenders -- and more important, the investors who buy many of the loans they securitize -- may soon decide that enough is enough. If the credit crunch now squeezing business starts to hit consumers, whose spending accounts for two-thirds of gross domestic product [GDP], the U.S. economy could wind up in a world of trouble."

Worldcom Files Chapter 11 Bankruptcy. "WorldCom Inc. filed the largest U.S. bankruptcy on Sunday after the long-distance telephone and data services company buckled under a $3.85 billion accounting scandal and a mountain of junk-rated debt. [...] WorldCom's bankruptcy filing listed J.P. Morgan Trust Co. National Association as the largest unsecured creditor, with bond debt of $17.2 billion. It said Mellon Bank N.A. holds $6.6 billion of WorldCom debt, while Citibank N.A. owns $3.29 billion." Oops.

CNET News: Report: FDIC not protecting data. "The report from the General Accounting Office identified "new weaknesses" in the FDIC's information systems controls that affect its ability to safeguard electronic access to sensitive data. "These weaknesses place critical FDIC financial and sensitive personnel and bank examination information at risk of unauthorized disclosure, critical financial operations at risk of disruption, and assets at risk of loss," the report says."

One more story well worth reading from Bruce Tognazzini: Good Grisp: Usability before Branding. "The best branding starts with a good quality product that stands out from the pack. [...] Look at your company's recent work with a new eye and see whether you've been branding, instead of building a product people actually want to use. Then change it."

MarketWatch: Jobless rate, stock market don't signal recovery. "The major averages so far are falling for the third year in a row. The last time that happened was 60 years ago. And if the umpire does decide that the recession ended last December, this would mark the first time since the 1920s that the stock market has failed to rise during the first six months of an economic recovery."

CNET: Billpoint failure a lesson for eBay? "Analysts say Billpoint failed because of a poor business plan, aggressive competition from PayPal, and hostility from eBay sellers."

SFGate: EBay grabs PayPal $1.5 billion deal a marriage of local Web titans. "The marriage, rumored to be in the works for several months, brings together two of only a handful of profitable public Internet companies. But it also underscores EBay's failure with its own competing billing service, EBay Payments, formerly known as Billpoint, which will now be eliminated."

CRM Success Starts at the Top. "Survey of Fortune 1000 execs attributes CRM failure to inadequate support from top management." [Line56: B2B News]

The Homebuyer Bill of Rights. "Americans spend $50 billion a year on settlement costs. And that's too much." [The Motley Fool]

Fast Company: What's the Matter With Microsoft? "A more conservative gauge of Passport's acceptance comes from Gartner's Litan. She counts 14 million active Passport accounts these days, up from 7 million last fall. By "brute force," she says, Microsoft has been able to double its Passport user base in less than a year. Yet it hasn't been able to convince consumers that they really are better off for it. In her latest survey, Litan found that just 8% of Passport users said that they signed up for the service primarily because it let them avoid reentering credit-card data. All of 2% said that they signed up for Passport primarily because it eliminates the need to have multiple IDs and passwords. "Is this really the killer app?" she asks wryly. If Microsoft hasn't yet won our loyalty, do people want someone else to manage their online identities? When Litan asks consumers that question, she finds that banks get the highest endorsement, with support from 47% of the public. In contrast, Microsoft gets a mere 12% of the vote. Yet that's still ahead of the ratings for AOL, Yahoo, and telephone-service providers, all of which are at 6% or less."

Enron. WorldCom. Who is next? Microsoft? "This situation is not about stock valuation, product quality or whether or not Microsoft has monopoly power in its markets. Nor is it part of a pro or anti-Microsoft movement. This situation is instead a shining example of financial fraud and corruption enabled by bad government policy. If not quickly and aggressively addressed, we will all be losers as credibility in our financial markets is destroyed." November 1999

Fortune: Why Companies Fail. "Why do companies fail? Their CEOs offer every excuse in the book: a bad economy, market turbulence, a weak yen, hundred-year floods, perfect storms, competitive subterfuge--forces, that is, very much outside their control. In a few cases, such as the airlines' post-Sept. 11 problems, the excuses even ring true. But a close study of corporate failure suggests that, acts of God aside, most companies founder for one simple reason: managerial error."

Jokes about economists and economics. "Economics is the only field in which two people can share a Nobel Prize for saying opposing things."

E-Commerce Times: Who's Making Money from Online Community? "The companies most likely to profit from online communities are those that already have strong intelligence absorption and dispersal systems in place. Without that, the community might as well exist on a desert island."

Bank Technology News: Straight-Through Processing (STP): In Pursuit of Greased Lightning. "The payoff is expected to be worth both the dollars and the headaches, as STP ultimately will lead to substantially lower operating costs and dramatic improvements on the risk-management side of the business, particularly where settlement risk is concerned."

Bank Systems & Technology: Electronic Payment Future Bright In North America. "... the shift to electronic payments won't necessarily result in lower expenses for North American banks. While industry spending on paper processing is projected to remain relatively flat over the next three years, spending on this electronic payments processing will hit $2.3 billion this year, and will grow 6 percent annually."

Banking online: STP & Payments: Loud buzz, low volume in the U.S. "... a lack of payment and accounting system integration and insufficient information are the two greatest barriers to electronic payments."

MarketWatch: 10 myths that enrich Wall Street ... and bankrupt America.