Junk Food for Babies?

Gerber has a line of junk food for babies.

The label says that by 12 months babies are ready for a wider variety of foods. Called Lil Crunchies in the Graduates line, the baby junk food includes cheese puffs, vegetable puffs and fruit puffs.

To add insult to injury, it's really expensive.

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It's a Good Time to Buy a Toyota

For the last few weeks we've been flooded with stories of out-of-control Toyotas that zoomed up to 140 km/hour without driver intent.

I'm no auto expert, but the stories don't seem credible. Braking systems are more powerful than engines so functioning brakes can stop an accelerating car; if the stories are true, then the accelerator and brakes failed at the same time - and then miraculously went back to normal. That seems impossible even with the computer malfunction explanation.

The most plausible explanation is that the drivers panicked and hit the accelerator when they thought they were braking. The more they tried to brake, the faster they went - because they were pressing the accelerator, not the brake. The panic explanation is reinforced by other things in their stories: they always seem to keep accelerating without thinking to put the car in neutral and turn it off.

This is is what I think happened: there was a problem with Toyota floor mats (the original issue) affecting the gas pedal, after which Toyota drivers with this sort of driving mistake in their past started re-remembering their mistake as a fault of the car. That whipped up a mass hysteria. And perhaps Americans who fear for their domestic car industry were happy to feed the scandal.

People who believe that Toyota has a zillion defective cars should take a look at the runaway Audi scandal of 1986. This sort of faux scandal has happened before.

Me, I drive a 13 year old Corolla that has cost me virtually nothing in repairs, and when it gives up the ghost I plan to get a Yaris. There might be some good bargains on used ones...

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Retail in Canada

I sometimes like to think that it's not so much that Canada has a lousier retail environment than the United States; it's that the US has the best in the world, and Canada is not as good but is better than the rest - with the scale continuing to western Europe, eastern Europe, and so on.

But that doesn't change the fact that choices are better in the States; prices can be far better; and the customer interface (shops, web sites, sales reps and customer support) are more enjoyable to work with and more efficient.

Case in point: I need a new ceiling fan. After checking some local stores and not finding what I wanted I looked online and found two models I liked. I called some lighting stores in town and only one had the sort of thing I was looking for. I went to the store and found they couldn't get my first choice but they could get my second, this one from Fanimation:


The price they quoted was $2400 plus tax.

In an online store in the US, the exact same fan was $1143 ($681 for the fan and $462 for the curvey blades; no tax). There's a $55 shipping charge to Canada and 11% import duty (which is handled by the courier so the fan is delivered to your door), but the dollars are nearly at parity, so the total cost is still nearly half of the store's price.

You might say that's a typical store mark-up, but they don't stock any ceiling fans: they were going to order it from a catalog.

Plus, the price differential isn't even the biggest problem. The lighting store chain's web site is uninformative (it has a lot of pages but no details of the products; the only real info is the address). They don't have any fans on display (just catalogs), yet they only carry parts of three lines of fan - and this was the only fan that was different from your typical Home Depot selection. The staff seemed uninterested verging on surly. I had to stand at a cluttered counter to look at the catalogs. The staff couldn't answer any questions about the products and didn't even give me an exact price (the guy said it would be "around $2400").

In contrast, the US online store had both an 800 number and an online chat service (both of which I used to ask questions about the fans). The guy at the store said it would take six weeks to get the fan, while the customer rep at the US web site said 7-10 days. The US outfit has a tracking page where I can follow my order. At the local store, I have to go to the store to pick up the fan.

I didn't order that fan. I bought my first choice, which was much cheaper, is about the most efficient (in terms of moving the most air) and quietest fan on the market, and has a Calderesque look I like:


My fan is in the Minka Aire line, which doesn't even have a distributor in Canada. In my town, if you want an artistic ceiling fan - with the exception of waiting six weeks for that $2400 one - you don't have much choice but to import directly from elsewhere.

Is Canadian taste so stodgy that there's no point carrying Minka Aire fans? (The guy in the store said, "I think I've heard other people asking about Minka.") If markets are so efficient, why isn't Canadian retail improving to match the US?

Canada is a great untapped retail market, yet sometimes it seems that US retailers lower their quality when they sell here. For example, a couple of years ago Target (US) and Zellers (Canada) sold the same brand of clothing, but at Target the clothes were well-designed, well-made and 100% cotton, while at Zellers the clothes tended to be chintzy and synthetic. I find it hard to believe that Canadians prefer ugly clothes. A big part of the success of Walmart is that they carry simple, cheap, well-made cotton clothing - even in Canada.

For a short while I ordered books from Indigo rather than Amazon - the Amazon search engine is so much better that I would have to look up the book on Amazon, get the ISBN and then use that to find it on Indigo. I gave up and now order everything from Amazon. Heck, I was at the Information Desk at the library once and the librarian used Amazon to find information about a book. Why exactly is it a scandal that our government might let Amazon expand here?

Is the real problem that Canadians are willing to put up with lousy selection, quality, service and prices, while Americans demand better?

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Sub-Prime

The crash of the sub-prime lending market (due to loan defaults that by definition should have been expected) is being spun in the US as just another case of greedy people wanting to live above their means and rapacious lenders who dangled the carrot and enticed them into financial ruin.

The Globe & Mail presented a rather different case history last week in its front-page article about an American widow who lives on Social Security. When she got sick and needed $50,000 for medical bills, her only choice (besides dying) was to take out a sub-prime mortgage on her house. Now she has defaulted.

Of course sub-prime mortgages have been around for a long time, and exist in Canada (to a much smaller extent), but the sub-prime crisis going on now is brought on by a new kind of mortgage that was introduced (or at least took off) in the US in 2004, and might more accurately be called "predatory sub-prime mortgages." This new type of mortgage is not just targeted at low-income borrowers, but also has a gimmick to get people to sign up: an initial period in which the borrower makes reduced payments. (This might be caused by a temporarily reduced interest rate or by not having to pay towards the principal for the first few years.) Unless their income rises by the time Part 2 of their repayment kicks in, borrowers are going to be in trouble.

As long as the housing bubble grew there was a certain logic to predatory mortgages. If I rent in an unregulated market and housing prices continue to rise, my rent will probably rise. If I buy a house I can stabilize my housing costs. My mortgage might be large, but if the value of my house continues to rise my debt-to-asset ratio declines. That sort of logic may be part of why so many people in the US (an estimated 20% of mortgage holders) took out predatory mortgages.

But when housing prices stop rising, when the insidious Part 2 of the predatory mortgage kicks in and your mortgage payments shoot up, when you've been making payments for a couple of years and now owe more than you did at the start - when the future is here and the extra money isn't in your pocket, then things don't work out so well.

It's all a lot like those late-night furniture ads that promise "No down payment! No interest until 2009!" It always struck me as ludicrous that someone would think that was actually a good deal, and yet those places are very popular. But in a world of high annual inflation (such as the housing market has been the last few years), buying now and paying later makes more sense.

This crisis brings back the farm crashes in the 1980s. If I recall correctly, farmers across North America had been courted by lenders to borrow money to buy expensive farm machinery. They were convinced by banks that small family farms couldn't be competitive unless they mechanized. Then interest rates went up and commodity prices fell, resulting in foreclosures. Agribusiness moved in and farming has changed forever.

It also brings to mind the burst of the high tech bubble a few years ago, which bit a lot of people badly. Before the crash, I remember reading in the business news that you were losing money if you didn't invest in high tech - the calculation went something like: a regular investment is paying 5% and investment in high tech is paying 30%, so if you put your money in regular investments you're losing 25%. We were led by the nose into losses.

I heard an anchor on CNN this week say that the collapse of the sub-prime market was completely unexpected. Of course this is completely false. In the last year there have been numerous media stories about the dangers of predatory loans. I saw one show last year that detailed exactly how the loans work, including predicting when the Part 2s would start to kick in (causing payments to rise). Pundits estimated exactly when the sub-prime market would collapse and their estimates turned out to be correct. (And for heaven's sake, Paul Krugman has been railing about the housing bubble for years.)

The reason we have a world-wide problem is that the sub-prime lenders sold the debt around the world. Why would anyone buy this dodgy sub-prime debt? Apparently part of the problem was that they didn't always know it was sub-prime. Mortgage lending is generally relatively low-risk, and hedge funds (which are notoriously untransparent) didn't spell out the details. But part of it must have been pure speculation: call it irresponsible investing or just plain gambling - with other people's money.

Should central banks have bailed out the speculators by lowering interest rates? On the one hand, I think of course they should, because a global financial crash will hurt all of us. On the other hand they keep bailing out the speculators (think 1998 when dodgy Russian debt collapsed) and the speculators know it.

Where are we now? Not at the end of the crisis, certainly. There will be more defaults (2 million are predicted) and this may cause a decline in housing prices. The impact on financial markets will continue, resulting in who-knows-what losses. And once the financial crisis has passed, there will be repercussions - possibly softer stock prices due to reduced trust in the markets, probably other things. If US consumer confidence falls too far, we could be in for another recession.

This is happening in a world in which fewer and fewer people have company pensions. We rely on the financial markets to invest for our retirement. (President Bush even tried to totally scrap Social Security and move all retirement funds into private self-directed investments.) We need credible and safe financial markets.

Governments need to act to devise far, far stronger financial regulations: on hedge funds, credit-rating agencies, banks, advertising, and a host of other areas. We need a financial press that does more investigative journalism. We need a public commitment on the part of central banks and financial market regulators to protect small-time investors. And the US should look at alternative ways to help the poor afford their own homes, such as a government mortgage corporation. (Bush has boasted that home ownership grew to 70% under his watch. He should put his money where his mouth is and help keep millions from being repossessed.)


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On Dealing With Frustration

(I was going to call this post "Dell - The Worst Company in the World" but thought better of it.)

I have a new approach to my Dell debacle - slow breathing, Happy Thoughts. I think my extreme frustration last week was bad for my health.

My hero and the person I would most like to resemble is someone I have never met. I saw him in a documentary about Chechen rebels kidnapping a theater audience in Moscow a few years ago. When gun-toting masked men stormed the stage and told the audience that they were all being held hostage, this man turned to his neighbor and said, "I may as well have a nap. Please don't disturb me." He put his hat over his face and went to sleep. Women with bombs wrapped around their stomachs moved into the audience; the kidnappers threatened and made demands; after a few hours the authorities sent an anesthetic through the air vents that knocked out everyone in the theater (accidentally killing half of them) and then stormed the building and shot all the kidnappers; the now-unconscious man was carried out of the building by medics and laid on the sidewalk with the rest; he apparently woke up and wandered off, and nobody knows who he was. That's the way to conduct yourself during a kidnapping.

So in that vein, I'm trying not to get my blood pressure up as Dell continues their campaign of terror against me.

My first computer, as you may remember, had a defective hard drive. It also didn't contain an element I ordered and didn't do some of the things the sales rep said it would do. Also Dell sent my credit card number to an ISP and authorized them to bill me, although I had not agreed to that. They also charged me more than they said they would. Oh, and talked me into buying an expensive component I didn't need. But that's all water under the bridge... I sent back the defective computer. The replacement came yesterday.

...And it had a corrupted operating system and has to be returned. And I hauled it down two flghts of stairs to my car but now it looks like the waybill to return it won't be coming till Monday so I'll have to haul it back up again. It's only the fifth time I have hauled a similar box in the last two weeks. So I should think of it like free weight training (hauling boxes)... an interesting way to meet new people (at the UPS office)... a chance to work on my telephone skills (talking to Dell support)...

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