The Exchange

  • Washington policymakers have spent a lot of time lately trying to figure out how to handle banks so critical to the U.S. economy they’re “too big to fail.”

    Yet they’ve ignored the biggest financial institution of all: the U.S. government.

    If counted as such, the U.S. government would dwarf every other bank on the planet. Its present-day obligations total more than $18 trillion, according to Deborah Lucas, an economist who worked recently at the Congressional Budget Office and is now a professor at MIT’s Sloan School of Management. Her tally includes federally backed deposit insurance, mortgage, pension and student-loan guarantees, and hundreds of other government credit programs. It does not, however, include the $17 trillion national debt or future liabilities for entitlement programs such as Social Security.

    As a financial institution, the government is a weird hybrid of bank and insurance company that’s roughly seven times larger than Bank of America (BAC) or J.P. Morgan Chase (JPM

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  • Big Data Won’t Eliminate $200 Million CEO Hiring Mistakes

    By Yahoo! Finance | The Exchange – Tue, Jun 4, 2013 3:22 PM EDT

    By Bob Damon

    Let me start with a fact. A blown executive hire can cost a company hundreds of millions of dollars. Beyond business disruption, there is another cost that was aptly identified by Wharton Professor Luke Taylor as “entrenchment costs.”

    "Entrenchment" costs are intangible costs. In the case of a board, the entrenchment cost is the board’s inability to fire an underperforming CEO. The board is “entrenched” in very close personal ties to the CEO.

    Taylor's model found that the entrenchment cost per firing was, on average, $1 billion -- far more than the hundreds of millions in direct costs. It is why we have witnessed CEO tenure shrinking from eight years on average to four years. Boards know the waiting game is costly.

    Yet, Taylor noted, “2% of Fortune 500 CEOs on average are fired every year.” He wrote in The Journal of Finance in 2010, “Why Are CEOs Rarely Fired? Evidence from Structural Estimation.”

    In that article, Taylor used the assumption that replacing the CEO costs

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  • The cost of a single day pass for the Magic Kingdom at Walt Disney World Resort will surpass $100 this year after its entertainment giant owner implemented new, higher rates for its flagship properties.

    Walt Disney Co. (DIS), the operator of the park, is raising admission prices at its theme parks, including the Orlando, Fla., location that's one of its best known. The list price on a single ticket for a visitor age 10 or above will go to $95 for the Magic Kingdom, and once $6.18 in tax is added in, the total comes to $101.18. The pretax rate is up 6.7% from $89 in 2012 and six times the rate of inflation measured by the CPI.

    Other Disney park prices have increased, as well, though not as much. At Epcot, Animal Kingdom and Hollywood Studies, also in Orlando, a ticket for one day will cost $90 before tax and $95.85 after. All three were $89 last year, the same as the Magic Kingdom, so the increase there is $1. Tickets covering multiple days save you some money the longer they run, with

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  • Where the U.S. Economy Is Still No. 1

    By | The Exchange – Tue, Jun 4, 2013 1:02 PM EDT

    There’s a familiar litany of problems with the American economy: Our schools stink. Our tax system is labyrinthine and wasteful. College grads can’t find decent jobs. And too many of our politicians are mouthy hypocrites who get nothing done.

    But America still excels at a few things, which are evident in the details of the “better life index” released recently by the Organization for Economic Cooperation and Development. In the OECD’s 2013 rankings, Switzerland came in first in overall life satisfaction, followed by the Scandinavian countries that frequently top such surveys. Australia ranked highest when all 11 categories were weighted equally, prompting some media outlets to call the land down under the world’s “happiest” country. By that standard, the United States ranked sixth.

    But declinists shouldn’t say “I told you so” just yet, because the U.S. is still No. 1 in two important categories—income and housing. On income, the U.S. has the highest average level of household wealth,

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(783 Stories)
 
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