August 2007 Archives

David Packard's 11 Simple Rules

Bob Sutton:

Here is the list. I've found this on many places on the web. This version comes the HP website, here. It does caution that is is for internal use, but as these have been published so many places and they are such wonderful standards, and I found it on a public website, I can't imagine that putting here can do any harm -- only good

Patty Seybold:

In late July, our client work had me thinking about the fact that our organizational structures aren’t keeping pace with the speed with which all of our products, services and business processes are becoming Internet-enabled.

Our corporate marketing organizations are working hard to transition to “Web first” content creation, catalog maintenance, and marketing campaigns. They lead with well-tagged and granular e-content and then produce glossy brochures and catalogs, rather than the traditional approach of the other way around.

Our product development groups are incorporating “phone home” features into products for troubleshooting and diagnosis. Many products are now Internet-connectable, from your cell phone to your stock portfolio, from your tractor to your home or office energy management system, from your exercise bike to your blood test equipment. Some products now include Internet-based service updates (book a service appointment), replenishment (order more ink cartridges), and email alerts (your stock just hit a threshold) based on events or on triggers customers can set. Many products offer built-in subscription features (“do you want to download updated tax tables now?) as well as renewals (licenses, maintenance agreements, subscriptions, memberships). Some products now come with electronic dashboards. And many of today’s products and solutions are custom-configurable online.

Case-Shiller US National Home Price Index - 2nd Quarter


Standard & Poors [82K pdf]:

Data through June released today by Standard & Poor’s for its S&P/Case-Shiller® Home Price Indices, the leading measure of U.S. home prices, shows continued negative annual returns in the U.S. National Home Price Index, the 10-City Composite and the 20-City Composite, as well as 15 of the 20 metro area indices.

The chart above, depicting the annual returns of the U.S. National Home Price Index, the 10-City Composite, and the 20-City Composite shows all three still yielding negative returns as of June 2007. The quarterly S&P/Case-Shiller® U.S. National Home Price Index - which covers all nine U.S. census divisions - was down 0.9% from Q1 2007 and down 3.2% from Q2 2006.

“The pullback in the U.S. residential real estate market is showing no signs of slowing down,” says Robert J. Shiller, Chief Economist at MacroMarkets LLC. “The year-over-year decline reported in the 2nd quarter of 2007 for the National Home Price Index is the lowest point in its reported history, which dates back to January 1987. On a regional level 17 of the 20 metro areas are showing declines in their annual growth rate from what was reported in May.”

Much more on Case-Shiller at

Defaults on credit card bills in US rising

Saskia Scholtes:

US consumers are defaulting on credit card payments at a significantly higher rate than last year, raising the prospect of problems in the stricken US subprime mortgage market spreading to other types of consumer debt.

Credit card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose, and the quarterly payment rate - a measure of cardholders' willingness and ability to repay their debt - fell for the first time in more than four years.

Analysts at Moody's, the rating agency, said the trend could be related to the slowdown in the US property market and fewer borrowers rolling mortgage debt into new, cheaper home loans.

"The combination of higher interest rates and a softer real estate market diminished the attractiveness of mortgage refinancings in which many borrowers reduced their more expensive credit card debt by drawing on the equity in their home," Moody's said.

The iPhone after two months

Michael DeAgonia:

As I waited for a worthwhile phone to appear, it dawned on me that cell phones were adding more and more capabilities, while the physical design and user interface continued to rely on unwieldy physical buttons. That alone seemed to limit what you could reasonably expect a phone to do well, even as music and media player functions were being added.

The problem seemed obvious: They were trying to be everything to everyone using an outmoded design that relied on keypads. The software, in turn, had to work with the layout of the physical buttons. And for anyone looking to watch movies and video, the screens were almost always too small. The result: clumsy hardware married to lousy software, new features without a new form.

Enter Apple Inc. On stage for his January keynote at MacWorld San Francisco, Apple CEO Steve Jobs unveiled his answer to the problem, touting the iPhone as the ultimate phone, the ultimate iPod and the ultimate Internet experience. It looked like the iPhone might really be the first useful and user-friendly convergence device and, more importantly, might actually be worth my $600. But I had to wait six months -- until it went on sale June 29 -- to find out.

Best. Phone. Ever.

Now I know. The iPhone is the first phone I've liked in well over six years. To call the iPhone the best phone I've ever used is the biggest understatement of the decade. It's like saying Jupiter is big, or infinity a long time. From the moment you pick it up, you can feel the weight and sturdiness of the phone, inspiring the sort of confidence you get from a quality build. The display is gorgeously integrated, the streamlined face covered by glass. Finally -- a design worthy of being called a design!

I agree. The iPhone, at a 1.0 release has set a new bar for mobile devices. I've also been pleasantly surprised at the quality of AT&T's customer service. My expectations in that respect could not have been lower.

Realogy's Debt Sales

Bryan Keogh (Bloomberg):

For all the hysteria about a global credit crisis that created the biggest run on Treasury bills in two decades, high-yield, high-risk bonds may prove to be the best investment in the debt market.

That, at least, is what James Swanson, chief investment strategist at MFS Investment Management, Matthew Eagan, portfolio manager at Loomis Sayles & Co., and Nuveen Investment Management's Manny Labrinos are telling their customers.

Some high-yield bond premiums rose so high that they implied a default rate of as much as 20 percent, said Swanson of MFS.

``That's sort of draconian,'' he said. ``There's a lot of strength in the corporate system that suggests we're not going to go through a heavy default rate.''

Realogy Corp., the biggest residential real estate broker in the U.S., sold $875 million of 12.375 percent, eight-year notes in April to help finance the Parsippany, New Jersey-based company's takeover by private equity firm Apollo Management LP.

The extra yield, or spread, investors demand to own the debt instead of Treasuries has doubled since then, reaching a high of 16 percentage points this month, data compiled by Bloomberg show. Bonds that trade at a spread of 10 percentage points or more are considered ``distressed,'' indicating investors expect a default.

Realogy has been added to CDS IndexCo's high yield index.

How Ads Affect Our Memory

Andrew Schrock:

A new study suggests that marketers shouldn't fixate on the number of people who click on ads. According to the research, just seeing an ad on a Web page can impact memory. The findings could have a significant impact on the way online advertising is made and metered.

Typically, to be considered effective, an online advertisement has to elicit a response--usually a click of the mouse--from a potential customer. But Chan Yun Yoo, an assistant professor at the University of Kentucky's School of Journalism and Telecommunications, found that when people view Web advertisements, they store information in two different types of memory: explicit and implicit.

Explicit memory involves facts learned through conscious interaction, while implicit memory involves unconscious retention. Explicitly remembered information includes ad slogans, product benefits, and website addresses. In contrast, implicit memory might only come into play when external stimuli trigger concepts. For instance, a consumer might only recall a brand of toothpaste from a television ad when he or she discovers it while browsing in a store. Or the consumer might develop an unconscious affinity for a certain brand despite not knowing specific facts about it.

Subjects who paid attention to a banner advertisement were more likely than those who didn't to recall whole words and facts from the ad--facts stored in explicit memory. All ads had the same level of impact in the unconscious explicit memory, however, whether or not they'd been clicked. Yoo's findings are relevant because they challenge the assumption that online advertising is only effective when it gets a direct response from the viewer. His study was published in the spring 2007 edition of Journalism and Mass Communication Quarterly.

James Grant:

THE subprime mortgage crisis of 2007 is, in fact, a credit crisis — a worldwide disruption in lending and borrowing. It is only the latest in a long succession of such disturbances. Who’s to blame? The human race, first and foremost. Well-intended public policy, second. And Wall Street, third — if only for taking what generations of policy makers have so unwisely handed it.

Possibly, one lender and one borrower could do business together without harm to themselves or to the economy around them. But masses of lenders and borrowers invariably seem to come to grief, as they have today — not only in mortgages but also in a variety of other debt instruments. First, they overdo it until the signs of excess become too obvious to ignore. Then, with contrite and fearful hearts, they proceed to underdo it. Such is the “credit cycle,” the eternal migration of lenders and borrowers between the extreme points of accommodation and stringency.

Significantly, such cycles have occurred in every institutional, monetary and regulatory setting. No need for a central bank, or for newfangled mortgage securities, or for the proliferation of hedge funds to foment a panic — there have been plenty of dislocations without any of the modern-day improvements.

Late in the 1880s, long before the institution of the Federal Reserve, Eastern savers and Western borrowers teamed up to inflate the value of cropland in the Great Plains. Gimmicky mortgages — pay interest and only interest for the first two years! — and loose talk of a new era in rainfall beguiled the borrowers. High yields on Western mortgages enticed the lenders. But the climate of Kansas and Nebraska reverted to parched, and the drought-stricken debtors trudged back East or to the West Coast in wagons emblazoned, “In God we trusted, in Kansas we busted.” To the creditors went the farms.

Grant writes the excellent "Grant's Interest Rate Observer".

Propping Up Declining Traditional Media Businesses

Scott Karp:

Two reports out today illustrate how the traditional media industry is working hard to prop up their declining business. First, as evidence of the decline, IBM released a study that says that the Internet is about to overtake TV as the principal medium in most households (via MediaPost):
TIME SPENT ON THE INTERNET is set to surpass time spent watching TV in the average American household, according to the results of an IBM survey released Wednesday.

Overall, 19% of respondents said they spend six or more hours a day on the Internet, versus 9% for TV. More telling, 60% reported that they spend one to four hours using the Internet, versus 66% who spend the time watching TV.

Of course, the time spent on the Internet includes growing consumption of online video, according to the global survey of about 2,000 respondents (including 885 Americans) conducted in April-June of this year. Globally, 67% of consumers say they watch video on the Internet, or would like to do so.

Ground Zero of the Real Estate Bust

Barbarai Kiviat:

First come the billboards. As you head north, away from downtown Denver, they flip by like flash cards, advertising houses by Lennar, KB Home and Richmond American, from the $100s, the $170s, the low $300s. What they don't tell you is that should you wander into one of the new subdivisions popping up from the prairie, you're likely to be offered tens of thousands of dollars in incentives to buy, and to buy now. At a recent conference of Colorado builders and real estate agents, one speaker counseled salespeople to stop acting so desperate. "It sends the signal that the market is bad," he said, "and to wait for the bottom."

Foreclosure Radar / California Housing Forecast

Notes on Leverage and the Sub-Prime Mortgage Market

Tyler Cowen:

We used to see only virtues in having loans packaged and resold to third parties, but now there are critiques:

1. It is harder (impossible?) to renegotiate loan terms if something goes wrong (this is from Brad DeLong, and Paul Krugman today).

2. The loan holder no longer has market-stabilizing, special information about the value of the loan (see Avinash Persaud in yesterday's FT). This decreases the likelihood of anyone "supporting the market" and holding or buying up the assets in hard times.

America's Fastest Growing Suburbs

Matt Woolsey:

Los Angeles is sometimes called the "Sultan of Sprawl." But you wouldn't know it by looking at the country's fastest-growing suburbs. Not a single one falls in the L.A. metropolitan area.

Instead, Angelenos are packing their bags and heading 60 miles east to San Bernardino, where twelve of the country's 100 fastest-growing suburbs are located. Leading the pack? Beaumont. It has experienced 130% growth since 2000.

It's easy to understand why. Home prices in the Riverside-San Bernardino metropolitan area are 30% less expensive than in L.A. Add comparable household incomes to the mix, and the move from the basin to the valley makes sense.

Ten Years After

Dori Molitor:

It’s been ten years since Tom Peters declared women’s economic clout, but most marketers are still in the dark.
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