Sunday, August 15, 2010

BP's Blemished Image

In 2000, BP hired one of the world's most esteemed PR firm, Ogilvy & Mather, to create a global brand transformation.  The slogan, "Beyond Petroleum" was created to show that BP transcended the oil sector by being innovative, progressive and environmentally responsible.

The company abandoned its 70-year old shield-style logo to a new cheerful, green sunburst.  To many, the new image and message was a huge contradiction since BP's investment in renewable energy paled in comparison to what BP spent in extractive oil.  So in a sense, many people felt that BP had changed its image but not its stance in being more environmentally friendly.



Social responsibility is an ethical ideology that both organizations and individuals should embrace and incorporate.
For example in my household, I am doing my best to conserve energy, water, to take public transportation when possible (I just signed up for a year-contract with Zip Car), and to even ride my bike to school.

BP's focus on social responsibility was a brilliant strategy ushered by a very shrewd PR firm.  Many would agree that  it was honorable and definitely fashionable for BP to accept global warming as a reality, while competitors like Exxon Mobil completely ignored this trend.

Thursday, May 13, 2010

How The Mighty Meltdown Could Have Been Averted










What caused the meltdown -- Simply stated, the housing bubble:

By Summer 2007, the housing market was in trouble: falling prices, inventories rising and foreclosures rising.

Early Signs:

Although a housing bubble is difficult to predict, there were early signs starting in 2004. Perhaps economists should have noticed that Freddie Mac was financing risk-laden loans as an early indicator. Many economists and government leaders simply failed to pay attention to the warnings or ignored it altogether -- all this happening under President Bush's watch.

Bear in Bankruptcy

Then two Bear Sterns (Global investment bank/securities trading brokerage) hedge funds are forced into bankruptcy. They had invested in AAA-rated mortgage backed securities. The prices of these securities had declined steeply.

Ironically as these investor losses mounted starting in 2006, Bear Sterns increased their exposure, thus resulting in more heavier losses.

Saving Bear

In early 2008, the Federal Bank of NY provided an emergency loan to try to avert the company from collapsing.

In March 2008, the Fed tried hard to find a buyer for Bear. Prohibited from lending money to Bear, the Fed decided to lend money to JPMorgan, which, in turn, provided the funding to Bear.


FREDDING AND FANNIE in Conservatorship


In September 2008, Secretary Paulson informed Fannie and Freddie that the government is taking an 80% ownership in each.

Treasury Secretary Henry Paulson (who previously served as the CEO of Goldman Sacks) stated that placing Fannie and Freddie conservatorship "was the only form in which I could commit taxpayer money to the Government Sponsored Enterprises (GSE)."

Who to Blame

9/11 occurred early in President Bush's watch. Since then he experienced a major hurricane that nearly wiped out New Orleans and got the US involved in two major wars that we are losing, resulting in many casualties and over a thousand wounded.

Sadly, while the administration was focusing on the war, their attention was diverted from the economy.

Many people judge the president's legacy mainly by the economic performance during the term. For Bush, the economy lost ground resulting in lower median household income, higher unemployment and the number of Americans without health insurance spiking (4).

So GW Bush began his term with the worst attack on American soil since Pearl Harbor and is ending it with the worst financial crisis since the Great Depression -- what does that tell you.
Did the terrorists get want they wanted after all? Perhaps it wasn't just bricks and mortar and innocent people they were after -- they were targeting capitalism, and perhaps the previous administration had fallen for the bait.

Bush Wanted to Transfer Oversight of Fannie and Freddie to HUD.  Barney Frank's Objection was Devastating

After the accounting scandals, this was a good idea. President Bush did not feel that Congress could do its job.  But Rep Barney Franks, the ranking Democrat in the Financial Services Committee, strongly opposed it. This turned out to be a big mistake, because reining in Fannie and Freddie could have significantly alleviated the housing crisis.



Belligerent Fuld


Lehman Brothers was next in the chopping block.

On Sept 2008, Lehman filed for Chapter 11 bankruptcy protection after many of its clients departed due to drastic stock losses. This filing was billed as the largest bankruptcy in U.S. history (1).

They had to sell Lehman, but CEO Richard Fuld (2) was brazen and he wanted a higher price. The last straw -- he was in Korea trying to work a deal. But Fuld wouldn't budge on the price.

On Oct 6, 2008 Fuld testified before the US House Commitee on Oversight and Government Reform on Capitol Hill regarding the bankruptcy of Lehman.

CNBC reported that Fuld was attacked and "knocked out cold" at the Lehman gym due to their declaration of bankruptcy. Fuld representatives denied this news report.


Nobody Wanted to Buy Lehman

Bank of American and Barclays were candidates but estimated that Lehman had approximately $ 30 million of bad loans on the books.Sadly, the government was not willing to guarantee a portion of it.

Regret letting Lehman Go

Secretary Paulson and other conservatives did not realize how interrelated Lehman was -- even more so than Bear. So the fall of Lehman deeply afflected the global markets, global credit and freezing the markets.

Why is AIG Affected?

If this is a housing/mortgage crisis, then why is an insurance company that specializes in home and life insurance affected -- there is no major natural disaster -- that is exactly the same question that I chewed on.


American International Group (AIG) takes a huge hit because they had put tons of money betting that firms like Lehman would never go bankrupt.

AIG experienced a liquidity crisis when its credit ratings were downgraded below "AA" in Sept 2008.

But the US government would not let AIG fail. Letting AIG fail would not only affect the U.S. economy, it would be disastrous to the world economy.

Bailout -- Famous quote: "We May not have an Economy Monday."


The emergency plan asks for $700 billion to buy up toxic mortgage sercurities from the banks without an oversight mechanism from Congress.


Both Lehman Brothers and Bear Sterns were major players in the sub-prime mortage business. They loaned money, in the form of credit, to non-bank lenders.

Lehman brothers knew what they were getting into, and they should have realized the risk and possiblity for disaster.

AIG Backlash

in March 09, AIG executives faced public outlash for providing retention benefits of $165 million after the government bailout of $182.5 billion was approved (3).

Final Analysis

The mortgage crisis which started in 2007 was spurred by a sharp rise in mortgage delinquencies and foreclosures in the US.

About 80% of the mortgages issued from around 2005--2007 were adjustable-rate mortgages (I know, I was issued a couple of them from refinances on a few homes in SE DC which I used mainlh for repairs and renovation.


Some may argue that the American public should have been on its toes and applied some pressure on these companies to stop such risky investment. But lets face it, middle class America was able to purchase homes that they would have never dreamed of buying in the past, and the average person would assume that these large banking and investment firms would have been reasonable and not have invested more money than they could risk in investments that were very risky.The books should have all balanced out. Liabilities should never have been greater than assets.

Paulson let Lehman fail:


References:

(1) "Lehman folds with Record $613 Billion Debt", Marketwatch Sept 15, 2008



(4) "Closing the Book on The Bush Legacy", The Atlantic, Sept 11, 2009


Wednesday, February 24, 2010

Monday, February 15, 2010

How Twitter Can Make Money



As a public affairs officer in the US Navy, I am fully acquainted to the power and pull of Twitter. Twitter has been an effective tool to communicate with media as well as to track the pulse and viability of a story long after it is written.


Last summer, the US State Department was keenly interested in the service and reliability of Twitter.  A mini revolution occurred in Iran after the Presidential election of Mahmoud Ahmadinejad took place in June.   Meanwhile, the Iranian government virtually choked off the flow of news from Tehran.  Many Iranians who protested that the election was rigged did so via Twitter. Twitter was the ideal medium because it was fast, could be employed and leveraged by almost anyone with a computer or cell phone and was difficult for the government to track or block.

During a revolution, crisis or emergency, Twitter really showed its astounding strength and amazing news delivery ability. I would like to see this medium continue to grow and expand as a communications and news medium and to continue to serve the public to make an impact in people’s lives, especially during times of emergency or distress.   

       Twitter is a pretty simple concept that uses API that gives RESTful access to the Twitter database and does not have a lot of components or moving parts.  The simplicity of the user interface has resulted in the development of several hundred applications that has further fueled its growth.  Although these applications have boosted Twitter’s demand and exposure, Twitter does not see revenue from any of these applications.  Many of these applications are popular with users because of ease of use and their ability to provide a very specific but valuable function for free. My goal is to focus on Twitter’s Revenue Stream.  That is because Twitter needs to find a long-term way of making money in order to stay viable. Although advertising is the primary way for other social media companies like Google and Facebook to make money, this technique may not be ideal for a micro blogging company like Twitter. Eliminate Problem Areas: Twitter unlike other social media sites like Facebook and websites like Google face challenges leveraging on advertising.  That’s because a tweet is limited to 140 characters and there is not much space to employ ads and to charge companies for them.  Twitter has recently (Oct 2009) worked a deal with Google and Bing to open up their tweets to these search engines. Data mining is critical because no other tool provides the depth and breadth of information that Twitter can.  Twitter is not only good for marketers and advertisers, governments and analysts can use them to get a pulse on sentiment and behavior even before it is noticed or confirmed.Twitter can provide publishers and developers a way to plug into their data feeds to extract data and patterns. The advantage is that roughly 20% of tweets include branding.  The potential drawback is that you cannot verify the accuracy of tweets or even verify who the sender is.  Governments and large organizations can go on Twitter to send propaganda (such as Iran)

Since Twitter maintains and owns the tweets made by their members and they receive several million tweets a day all over the world, Twitter can really capitalize on their unique but value-added data flow and trend analysis obtained by data mining their information.  In November 2009, www.royal.pingdom.com conducted a study to measure how many tweets were sent per hour.  The highest number of tweets measured was 1,841,289 per hour on Oct 27, 2009.  At this rate, Twitter will process almost 10 billion tweets per year. 

Some of the data mining can be conducted simply by using the search function within Twitter. The vast majority of the data mining can be conducted using several hundred of the different applications that have been developed for Twitter.

How can we the consumer use data mining to extract useful data?
Search for someone at a particular place: Use with Foursquare or Gowalla to find an eyewitness in a particular location at the time news occurred. 
See what topics are trending nationally and locally: Your home page on Twitter will show you what’s trending right now either network wide or by your location. Also check out Trendsmap (using data from another great site, What The Trend). For instance, check out this local trendsmap data to see what topics keep coming to the top of Twitter in the DC area right now.
See tweets on a map: Check out Bing’s Twitter and Foursquare maps to see searchable tweets and check-ins on a map. For a new map, go to bing.com/maps/explore and select the map app you want.
From ZombieJournalism.com

RUNIN OUT