Posts Tagged ‘Harvard’

Jeremy Lin is the World’s Fastest-Growing Sports Brand

Tuesday, March 13th, 2012

Linsanity has infected New York City. The economic impact of Jeremy Lin, the 23-year-old basketball phenomenon for the New York Knicks in just one week is hard to grasp.

According to Times’ Brad Tuttle, “The phenomenon of undrafted Harvard grad and previous NBA benchwarmer Jeremy Lin is translating into serious money, as Knicks’ ticket prices soar and stores can’t keep up with demand for Lin jerseys and ‘Linsanity’ merchandise.  As is expected in today’s economy, though, when official methods come up short, entrepreneurs on the web fill in the gaps.  A ‘Jeremy Lin’ search at eBay yields 6,598 results, including signed playing cards, jerseys, and T-shirts.  At design-your-own merchandise site Café Press, there are currently 21 different designs, including Linsanity pajamas and Linsanity iPad cases, both with Chinese lettering.”

Consider these statistics:

  • His No. 17 jersey has been the NBA’s top online seller since February 4.
  • Knicks merchandise sales top the NBA since Lin’s breakthrough game.
  • Five of the NBA’s 10 most popular items are Knicks-related since Linsanity began.
  • A midtown Manhattan sporting goods store can’t keep Lin gear in stock; they sold out multiple shipments of jerseys and T-shirts In a single weekend.
  • The Knicks made the most of Linsanity, raising ticket prices by an average of 27 percent since Lin scored 25 points off the bench against New Jersey.
  • Madison Square Garden (MSG) stock has shot up 6.2 percent to $31.25 since the day before Lin started the Knicks on their recent five-game winning streak.

At present, Jeremy Lin’s trend is estimated to be worth $14 million and growing, making him the world’s fastest growing athlete brand.  Writing in Forbes, Mike Ozanian says that “The Knicks had $226 million of revenue during the 2010-11 season, roughly equating to 20 percent of MSG’s overall revenue.  Obviously, you cannot assign Lin one-fifth ($28 million) of MSG’s $139 million increase in market value since he began his magical run (in the past we have determined athlete brand values are the amount by which their endorsement income exceeds the average of the top peers in their sport, but that methodology can’t be applied to Lin, who was a no-name player until very recently).  But we can still get a reasonable estimate.  The New York Times reports that Lin has helped push up television ratings for the Knicks 66 percent over last season.  So if we give Lin credit for half of the $28 million, his brand weighs in at $14 million, which would place him tied with (Kobe) Bryant for sixth among the top athlete brands in the world.  I expect Lin’s endorsements to reach that mark in the near future if he can keep up his stellar play on the hardwood.”  By the 2012 – 2013 season, Forbes estimates that Lin’s brand has the potential be worth as much as $150 million a year.

Ray Ratto of CBS Sports, cautions that despite the Linsanity, all wins are essentially team efforts.  According to Ratto, “Jeremy Lin is not 4-0.  The New York Knicks are 4-0 with Jeremy Lin as their starting point guard.  There is an enormous difference between those two statements, and it is this:  We’ll link those two disparate ideas in a moment, but first, this fact: Wins and losses are not a basketball construct for purposes of evaluating players.  They never have been and never should be, because basketball is a game of tightly interlocking parts excelling for the group’s betterment.  Within that structure, there is great room for individuality and creativity, but it’s still a game of five.  Proof: How many wins does Kobe Bryant have?  How many wins does Steve Kerr have?  Or Satch Sanders?  You don’t know, and if it weren’t for, you wouldn’t be able to find it quickly, and nobody would ask you anyway.  It’s a meaningless stat, in other words.  The Knicks are playing better with Lin’s skill and energy, and that’s fine, but it doesn’t make him 4-0.  He wouldn’t be 4-0 with Golden State, Dallas or Houston, to name three other teams that didn’t get the benefit of Lin as a player.  He could, though, be part of a team that is 4-0, and given his playing style, that would statement would suit him better.”

A Lifeline for Underwater Homeowners?

Wednesday, October 26th, 2011

Federal officials and some of the nation’s largest banks are collaborating on a plan that would make refinancing available to some borrowers whose houses are worth less than their loans, with the caveat that they must be up-to-date on mortgage payments.  Typically, these borrowers can’t refinance because they don’t have enough equity in their homes.  The plan would apply only to bank-owned mortgages.

Federal officials have been trying to negotiate a deal with the five largest mortgage servicers – Ally Financial, Inc, Bank of America, Citigroup Inc, J.P. Morgan Chase and Wells Fargo & Co.  Officials favor a plan that would break a legal impasse with big banks over alleged foreclosure abuses such as robo signing and ease problems in the housing market.  Discussions are still underway and the final outcome is not yet known.

Pressure is building in Washington, D.C., to help underwater homeowners with a generous refinance plan.  President Barack Obama told Congress that he wants to help “responsible homeowners” refinance, saying it would “give a lift to an economy still burdened by the drop in housing prices.”  A bipartisan coalition of 16 senators wrote to the administration urging swift action on a refinance plan.

“A huge floodgate would open up” if underwater refinancing were broadly available, said Fif Ghobadian, a broker at Guarantee Mortgage in San Francisco.  “It would provide the help that lowering interest rates cannot do alone.  Someone who’s been making payments at 7.5 percent religiously but cannot qualify to refi – boy, would that four percent make a huge difference in their life.”

A program has existed for some time that provides guidelines to lenders for refinancing some Fannie Mae- and Freddie Mac-backed underwater mortgages.  The program is called HARP (Home Affordable Refinance Program), it’s two years old and has resulted in approximately 800,000 refinances, far short of the five million originally envisioned.  Only a fraction of those homeowners were deeply underwater.  HARP’s main impediment has been the lenders themselves.  Concerns about issues such as being forced to take responsibility for refinances that default (known in the industry as “buybacks”) has made lenders reluctant to issue HARP mortgages.  The proposed new plan would likely expand HARP to make it more acceptable to lenders and more usable by a broader swath of homeowners.  “Changes (being contemplated) would address several HARP obstacles,” said Erin Lantz, director of the mortgage marketplace for Zillow.  “The industry now makes it hard for people to qualify.  The process would be more streamlined.”

According to a recent Harvard study, approximately 11 million homeowners with mortgages are underwater.  This accounts for roughly one-fourth of all homes with mortgages in the nation.  An additional five percent have near-negative equity (<five percent home equity).

Writing for Reuters, Felix Salmon doesn’t think much of the potential mortgage plan.  “It’s pretty weak tea: under the terms of the deal, if (a) you’re underwater on your mortgage, and (b) you’re current on your mortgage payments, and (c) your mortgage is owned by the bank outright, rather than having been securitized, then you would be given the opportunity to refinance your mortgage at prevailing market rates.  It’s worth remembering, at this point, that mortgages are by their nature pre-payable.  When you write a fixed-rate mortgage, you make a general assumption that if mortgage rates fall substantially, the borrower is going to pay you off and refinance.  The underwater questions we’re talking about here were written during the housing boom, when banks simply assumed that house prices always went up; those banks cared massively about prepayment risk at the time, and spent huge amounts of money and effort trying to hedge it.  As it happened, mortgage rates did fall substantially — with the result that the banks’ hedges paid off.  But then the banks realized that they could make money on both legs of the deal — that they could collect on their mortgage-rate hedges, without having to worry about prepayment.  Because now the borrowers are underwater, they’re not allowed to refinance. So the banks continue to cash above-market mortgage payments every month — something they never expected that they would be able to do.

“It’s not inconceivable at all.  In fact, wholesale mortgage refinance for underwater borrowers is a major part of Barack Obama’s jobs bill, and the Congressional Budget Office (CBO) has been costing it in various ways.  At heart, it’s a way of rectifying a market failure, and thus makes perfect sense.  But that’s precisely why I don’t think that this plan deserves a place in the mortgage-settlement talks.  For one thing, it’s downright unfair and invidious to allow 20 percent of underwater homeowners to refinance while ignoring the other 80 percent.  More to the point, giving homeowners the ability to refinance their mortgages is what you do, if you’re a bank.  It’s not some kind of gruesome punishment.”

The Elizabeth Warren Quote That Has Everyone Talking

Monday, October 17th, 2011

Elizabeth Warren, who is running for the Senate in Massachusetts as a progressive Democrat, has caused controversy between the right and left with the following statement: “There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you. “But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers that the rest of us paid to educate. Part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

Speaking at a small gathering at a supporter’s house, Warren also said “My favorite part of looking at this hole, we got in this hole, one billion dollars, uh, one trillion dollars, on tax cuts for the rich under George Bush. We got into this hole two trillion dollars on two wars that were put on a credit card for our children and grandchildren to pay off. And we got into this hole one trillion on a Medicare drug program that was not paid for and was 40 percent more expensive than its needs to be because it was a giveaway to the drug companies. That’s just four trillion right there. So part of the way you fix this problem is don’t do those things! I hear all this, oh this is class warfare, no! You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory. Now look.”

Warren, a Harvard law professor, is leading in polls in Massachusetts. Brown showed no interest in discussing politics on the day when the Democratic-leaning Public Policy Polling survey showed him behind Warren for the first time in a general election match-up. “There’s going to be plenty of polls. I don’t think about polls. Never been a big poll guy,” Brown said.

The website Behind Blue Lines takes an opposite approach. It notes that “Ah, Professor, have you ever heard of property taxes, excise taxes, income taxes, fuel taxes – and on and on? The entrepreneur pays them too, I can assure you. They pay for the roads, schools, firemen and police – often several times over. And who’s this ‘we’, anyway? Would that be ‘we’ as in know-betters like you? Or would it be ‘we’ in the sense of all the people who pay taxes, including the miscreant who ‘builds a factory’ (and creates valuable products and services benefiting all) and ‘hired workers’ (and paid them taxable wages and benefits). The ‘work the rest of us did’, indeed. What stinks the most about her tirade, however, is the arrogant assumption that we are all state property. That everything we are, including our very selves, belongs to government. I feel obliged to point out that her campaign was forced to admit that she was paid $192,722 for her ‘services’ on the TARP panel.

Economists Say U.S. Economy Is on the Road to Recovery

Wednesday, April 27th, 2011

The American recovery is on the road to recovery, unless the mounting federal deficit slows its momentum.

A recent survey by Smart Brief and the international market research firm Ipsos of 841 financial professionals found that 67 percent think that stock prices will rise this year and that the country’s economic output will increase by 65 percent; another 59 percent said they expect unemployment to decrease slightly in the next 12 months.  The survey found that even such modest optimism is tempered by expectations of rising health care costs (88 percent); higher fuel prices (85 percent); rising prices for durable goods such as appliances, automobiles and consumer electronics (72 percent); and slightly higher interest rates (59 percent).  Additionally, 43 percent expect home prices to continue declining, while only 21 percent expect them to rebound; 34 percent expect no change.  By a margin of 70 percent – 30percent, respondents oppose allowing states to declare bankruptcy; 77 percent expect the nuclear disaster in Japan to drive greater investment and funding into renewable energy.

“Financial professionals are cautiously optimistic about economic prospects in the near term; indeed, they think that the overall scenario will improve, and they’re making business decisions on that basis, such as increased investment and hiring,” said Ipsos Managing Director Cliff Young.  “That being said, there are still concerns in the short to medium term about the increased costs of inputs such as fuel and durable goods.”

Larry Summers, former president of Harvard and architect of the Obama administration’s stimulus plan agrees, noting that “An economy in economic freefall has now recovered for 18 months,” he said.  “Make no mistake, the American economy has a feeling of normalcy that was completely absent in 2009 and that is a substantial achievement.”  Summers warned that the nation faces new challenges, including reducing the 8.9 percent unemployment rate, which he said is “far, far too high.”  He said it will be important for the US — and Massachusetts, in particular — to keep the life sciences industry strong.

To keep the recovery on track, the International Monetary Fund urged the United States to speed up efforts to slash the budget deficit.  “It is important the United States undertakes fiscal adjustment sooner rather than later,” said Carlo Cottarelli, director of the IMF Fiscal Affairs Department, the U.S. is projected to have a fiscal debt balance as a percentage of GDP of 10.8 percent in 2011, the biggest percentage among advanced countries. “Market concerns about sustainability remain subdued in the United States, but a further delay in action could be fiscally costly,” the IMF said.

According to the IMF, although most advanced economies have taken steps to tighten budget gaps, two of world’s largest economies — Japan and the United States — had delayed action to maintain their recoveries.  “Countries delaying adjustment in 2011 will face more significant challenges to meet their medium-term objectives,” the IMF warned in its updated “Fiscal Monitor” report.

Elizabeth Warren Tapped to Create Consumer Financial Protection Bureau

Monday, September 27th, 2010

President Obama slips Elizabeth Warren in without Senate confirmation process.President Barack Obama’s decision to name Wall Street’s archenemy Elizabeth Warren as his special advisor to direct the creation of the Consumer Financial Protection Bureau bypasses the often confrontational Senate confirmation process.  The Harvard law professor is now tasked with building a new government agency that will crack down on abusive financial practices such as mortgages and credit cards from the ground up.  President Obama – who has known Warren since his law school days – has named her “assistant to the president” — a desirable title in inner White House circles.  Warren will report directly to both the president and to Treasury Secretary Timothy Geithner.  Importantly, Warren will have direct access to the president, making her, in effect, the Secretary of the Treasury overseeing all consumer lending.

By naming Warren an adviser rather than as the agency head, President Obama avoided the congressional confirmation process, which Republicans likely would have used to derail the nomination. “Clearly putting her in this role cements her imprint on the agency, whether she ultimately leads it or not.  It also implies there’s going to be a transfer of power from the other regulators sooner rather than later.  I think it would be better, though, for the agency to have a Senate-confirmed agency head, if that’s even possible,” said Ed Mills, an analyst with FBR Capital Markets.

Wall Street’s reaction was predictable, given Warren’s unpopularity there.  “It’s a thumb in the eye to people trying to address real issues,” said Matt McCormick, a portfolio manager and banking analyst with Bahl & Gaynor.  “It is obviously more political than focused on correcting ills of what happened in the financial industry.  I really doubt she will have the ability to bring people together considering the political nature of her appointment. It is troubling.”

“The Consumer Financial Protection Bureau will empower all Americans with the clear and concise information they all need,” President Obama said at the Rose Garden announcement.  “Never again will folks be confused or misled by the pages of barely understandable fine print that you find in agreements for credit cards or mortgages or student loans.”

Elizabeth Warren Ideal Head for the Bureau of Consumer Financial Protection

Thursday, August 19th, 2010

Elizabeth Warren to be our new consumer protection czar.  A leading candidate to head the new Bureau of Consumer Financial Protection is Elizabeth Warren, although her potential nomination is not without controversy.  Writing on CNN, Katie Benner says “Detractors say that Warren lacks experience, that she’s not impartial, and that she could make it so expensive to extend credit that only the richest Americans and biggest businesses could get a mortgage, a credit card or a loan.  But these knocks against Warren obscure the likely impact that she would have on the bureau.  And mostly, they are straw men.”

Warren is a Beltway outsider and a Harvard law professor.  She did take leave in 2008 to head the Congressional Oversight Panel (COP), which evaluates TARP and oversees the Treasury Department.  Since its inception, the COP has published 22 detailed reports with little dissent, despite multiple differences of opinion regarding economics and politics among the staff members.  Ken Trotske, an economist who serves on the panel, describes Warren as a consensus builder.  “I’m in awe of the work they turn in to meet that schedule, because it’s a demanding schedule.”

In its two years of existence, COP has become an intellectual hub in Washington, D.C.’s efforts to understand the relationship between the federal government and Wall Street.  According to Benner, “The outcry over Warren’s impartiality is a through-the-looking-glass twist on the current state of our regulatory affairs.  It bears repeating that it’s a good thing for the head of an agency designed to protect consumers to actually put the interests of consumers first.  For the last few years, as was made imminently clear by the implosion of 2008, Wall Street regulators were doing anything but regulating.”

In Benner’s words, “Someone like Warren is a shock to that system.  She unabashedly sides with consumers.  She hates fine print and contracts with ‘gotcha’ clauses.  She wants to eliminate predatory loans.  And she thinks that it’s okay for bank profits to be crimped in service of a level playing field between borrowers and their lenders.