Stay Tuned/Why Follow the Money

Tip O'Neill, one of Cambridge's patron saints, reportedly said that "all politics is local." I sometimes have to stop and repeat that sentence a few times to assure myself that it's grammatically correct, but never mind that. I'd like to state a closely related idea: All finance is personal.

I'd like to encourage you to read some business and financial news every now and then. No, you don't have to become a fiscal polyglot - I don't expect you to understand the world currency market or how futures trading works or other hard things like that. But you should probably know who has a strong currency right now and who doesn't; who's buying whom; where the stock market is; what the hot investment trend is. Things like that.

You may not be particularly interested to hear that the yen is collapsing or that Canada's currency is at a historic low against the dollar. But if you're planning on making a visit to Canada soon, this is really useful information to have - and the decline of Japanese money is a shockwave which everyone will feel sooner or later. The plummeting yen, for example, was one of the primary causes of that little stock market "correction" last week. (No one likes to say "plunge" or "crash" or any of those nasty words any more. It's a "correction.")

In short, pay attention now because it will usually affect you in some subtle way later.

All right, you might say, but so what? So I know the yen is taking a nosedive and it affects me. I can't do much about it, short of planning an unscheduled vacation to Japan (where 140 yen = 1 dollar as I write this). Why should I care?

Well ... you can't always do anything about it, true, but in cases closer to home it's often helpful to know anyway.

On Tuesday last I picked up the Business Day section of The New York Times. In it I see that various financial analysts and so forth are laying pressure on the Gods of Bookkeeping to get Coca-Cola to change its financial reporting.

Coca-Cola, you see, doesn't bottle its own beverages. It removed the bottling companies from its books in the 1980s and set them up as independent companies. Or at least Coca-Cola insists they're independent, but they have unusually chummy and exclusive agreements with each other which usually result in the bottling companies taking on more than their fair share of the Coca-Cola debt and not enough of the profits - in short, that the separation of the businesses is a ruse to make Coca-Cola's books look better.

Does this affect you? Not directly. But Coca-Cola is held up as a model company for investors - it's a classic blue-chip. Its return to investors has been phenomenal; it is regarded by the stockmarket as a reliable money machine. Whether you consider its bookkeeping fraudulent or not, you should now take that reputation with a grain of salt.

Similarly, you should stop listening to the rosy picture painted about the Saturn assembly lines. The Saturn workers gave notice to their bosses that they're thinking seriously about striking; the cheery facade has cracked. They're claiming that General Motors cheated them out of the full bonus amount last year, and with GM's small-car sales so horrid, the bonus wouldn't be too great even if it were the full disputed amount. Saturn workers need that bonus - they make twelve percent less than other GM workers.

Meanwhile, GM, a company which should just admit that it has no idea what it's doing and let itself go bust, has decided to spin off its parts division, an idea which will probably rekindle the huge worker's strike it just managed to settle. Does this affect you? It does if you're a GM worker or if you know someone who is.

What else? IBM backed out of Olympic sponsorship, saying that they weren't getting enough of a return for their money. OK, maybe that's not of interest to you. It's of interest to me. Given how I already feel about the Olympics, I'm thrilled. Pity they'll find someone to replace IBM - I'd like it if the word spread that the Olympics weren't worth sinking tens of millions of dollars into. But I suppose that's just me - I'd like it to become a money-poor, untelevised, amateur event again.

Let's see. Mobil bringing the flying horse logo back? I don't guess that affects you much one way or another, but it's interesting. How about the fact that Albertsons is buying American Stores, the company that runs Acme, Jewel, and Lucky supermarkets, as well as Osco and Sav-On drugstores? This makes Albertsons bigger than Kroger, the nation's largest grocery chain (2500 stores to 1400), and gives serious competition to chain purchasers like Royal Ahold who are trying to buy their way to national chaindom.

That one will affect you, if you shop at Jewel. But don't worry; I shopped at Albertsons for years. They're good people. And Osco can't possibly help but improve from the deal ... assuming Albertsons doesn't turn around and sell them off again.

Oh, well. Never mind, I retract the idea. I can't think of a good reason for you to care what the big money is doing. I'll just keep reading these business sections now, and you can ignore me. Let me know if you want to know who's doing what in high finance, and I'll see if I can't fill you in.

[March 2007:] GM spinoff Delphi filed for bankruptcy in 2005 and is still a mess, as is GM - many people guessed they would file for bankruptcy themselves in 2006, and it's sort of a miracle they didn't.

Most of the Albertsons purchases mentioned probably belong to Supervalu now (see the Backstory comments in the June 21 column). As I write this, the Supermarket News Top 75 list has just been updated for 2007, and Supervalu is the fifth-largest food retailer in North America (the list doesn't say "US" because it includes Canadian chains like Loblaw). Kroger is still larger - number two. The number one slot belongs to Wal-Mart, whom I bet most grocery chains think should be banned from selling groceries at all. I can't say I disagree entirely. Ahold, who basically control all the grocery stores in my area that Supervalu does not, is number six.

and now back to our program

The material on these pages is copyright © 1997-2007. All rights reserved.

It is assumed that every brand name, slogan, corporate name, symbol, design element, et cetera mentioned in these articles is a protected/trademarked entity, the sole property of its owner(s), and acknowledgement of this status is implied. When advertising materials are excerpted here it is for express purposes of commentary and criticism, and thereby protected under the Fair Use provisions of U.S. copyright law.