Month: April 2016

Sanctimoniously Environmental “Honest Company Inc.” Is Dishonest

(p. A1) In less than four years, the Honest Company Inc. surged to a $1.7 billion private valuation thanks to its marketing of cleaning supplies, diapers and other consumer products that it says are safer and more ecologically friendly than other brands.
The company, co-founded by actress Jessica Alba, is challenging giants such as Procter & Gamble Co. and Clorox Co. with a guarantee that its offerings don’t contain what it says are harsh chemicals found in many mainstream products. One of the primary ingredients Honest tells consumers to avoid is a cleaning agent called sodium lauryl sulfate, or SLS, which can be found in everyday household items from Colgate toothpaste to Tide detergent and Honest says can irritate skin. The company lists SLS first in the “Honestly free of” label of verboten ingredients it puts on bottles of its laundry detergent, one of Honest’s first and most popular products.
But two independent lab tests commissioned by The Wall Street Journal determined Honest’s liquid laundry detergent contains SLS.

For the full story, see:
SERENA NG. “Trendy Detergent Caught in Spin Cycle.” The Wall Street Journal (Fri., March 11, 2016): A1 & A2.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 10, 2016, and has the title “Laundry Detergent From Jessica Alba’s Honest Co. Contains Ingredient It Pledged to Avoid.”)

A&P, Once Dominant Grocery Chain, Files for Bankruptcy Again

(p. B1) A&P, a former titan of the grocery industry, has filed for bankruptcy protection for the second time in five years and is trying to sell more than 100 of its stores.
The company, which owns Pathmark, Food Emporium and other food retailers clustered primarily in New York, New Jersey and Pennsylvania, said on Sunday that a restructuring in 2010 had failed to put it on secure enough financial footing to keep up with a shifting grocery landscape.
A&P, less commonly referred to as the Great Atlantic & Pacific Tea Company, has lost market share to competing stores like ShopRite and Stop & Shop Supermarket Company, as well Walmart and Target, retail giants that have spent the last few years expanding their offerings in the grocery aisles. A&P has debts of about $2.3 billion, court filings show, and assets of $1.6 billion.
. . .
Founded in 1859 as a mail-order tea business, A&P evolved into a discount food retailer that operated 16,000 stores by the mid-1930s and remained a dominant player in America’s grocery landscape into the second half of the century.
“It was truly a powerhouse,” said Marc Levinson, an independent historian and the author of “The Great A&P and the Struggle for Small Business in America.” “In those days, independent grocers were every bit as afraid of A&P as mom-and-pop retailers are today of Walmart.”
In 1912, A&P opened its first discount store in Jersey City. The idea of a retailer focused on low-cost groceries was novel at the time, and a reputation for rock-bottom prices helped the company flourish.
“They were opening stores literally more than one a day during World War I,” Mr. Levinson said.

For the full story, see:
RACHEL ABRAMS. “A&P Files for Bankruptcy and Aims to Sell 120 Stores.” The New York Times (Tues., JULY 21, 2015): B3.
(Note: ellipsis added.)
(Note: the online version of the story has the date JULY 20, 2015.)

Levinson’s excellent book on the economic history of A&P, mentioned above, is:
Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.

Rates to Insure Against Global Warming Catastrophes Are FALLING

The “super-cat” insurance referred to below by Warren Buffett is the part of the reinsurance business that insures other insurance companies against the occurrence of very large (super) catastrophes (cat).

(p. A9) Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely–though far from certain–effect on Berkshire’s insurance business would be to make it larger and more profitable.

As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.

Source of quote from Warren Buffett’s annual shareholder letter:
“Notable & Quotable: Warren Buffett on Climate.” The Wall Street Journal (Tues., March 1, 2016): A9.
(Note: the online version of the quotes from Buffett has the date Feb. 29, 2016.)

Warren Buffett’s annual letter to Berkshire Hathaway stockholders can be found at:
http://www.berkshirehathaway.com/2015ar/2015ar.pdf

Owner Wants to Give Up Business Due to Regulations

(p. A11) D. Joy Riley, 59, of Brentwood, Tenn., who went to hear Mr. Rubio speak last weekend in the affluent Nashville suburb of Franklin, said that his story struck a chord with her personally. Her father was a coal miner. She is now a physician with a master’s degree in bioethics. “We’re all one or two generations away from some story like that,” she said, repeating a line Mr. Rubio often uses in his speeches.
. . .
Mr. Rubio’s story is intended to pull at the heartstrings. At his rally in Franklin, he spoke of his mother’s struggles growing up in poverty in rural Cuba.
“My mother was one of seven girls raised by a disabled father,” he said as he looked out on a horde of gingham shirts, khaki, fine Sunday dresses and derby hats.
He recalled how she left him with a strong understanding of selflessness and sacrifice. “My mother says her and her sisters never went to bed hungry,” he continued. “But she’s sure her parents did many nights.”
As he tells these personal stories, Mr. Rubio weaves in the policy prescriptions he would act on as president, making his case for a smaller, more conservative government.
When he talks of the need for lower taxes, he cites the work his parents found in hospitality. The only reason the hotel where his father worked could exist, he insists, was because the business climate in Miami Beach was friendly enough that someone wanted to invest. And had it not been for taxes that were low enough to allow people the disposable income to vacation in Las Vegas, he says, his mother would not have had any hotel rooms to clean.
. . .
Nancy Conklin, 52, a business owner from North Hampton, N.H., was nodding along as Mr. Rubio spoke near Portsmouth last month. “You get older, have a family, employ people, and you start to realize how difficult all these regulations are,” she said. “You don’t want to have a business because you can’t afford it.”

For the full story, see:
JEREMY W. PETERS. “Rubio’s Bootstraps Entice a Receptive Constituency: The Well-to-Do.” The New York Times (Sat., FEB. 27, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the story has the date FEB. 26, 2016, and has the title “Marco Rubio Entices a Receptive Constituency: The Well-to-Do.”)

Arbitrary Regulatory Waivers Undermine Rule of Law

(p. A11) Who cares about the swelling power of bureaucratic discretion in Washington over big business, since it doesn’t threaten your personal freedom and prosperity. Or does it? That question lurked in the background of a Hoover Institution discussion on June 25, hosted by economist and podcaster extraordinaire Russ Roberts. The occasion was the 800th anniversary of Britain’s Magna Carta, a landmark in the struggle for a rule of law.
One of the participants, Hoover economist John Cochrane, spoke of fears that America is drifting toward a “corporatist system” with diminished political freedom. Are rules knowable in advance so businesses can avoid becoming targets of enforcement actions? Is there meaningful appeal? Are permissions received in a timely fashion or can bureaucrats arbitrarily decide your case simply by sitting on it?
The answer to these questions increasingly is “no.” Whatever the merits of 1,231 individual waivers issued under ObamaCare, a law implemented largely through waivers and exemptions is not law-like. In such a system, where even hairdressers and tour guides are subjected to arbitrary licensing requirements, all the advantages accrue to established, politically-connected businesses.
Another participant, Lee Ohanian, a UCLA economist affiliated with Hoover, drew the connection between the regulatory state and today’s depressed growth in labor productivity. From a long-term average of 2.5% a year, the rate has dropped to 0.7% in the current recovery. Labor productivity is what allows rising incomes. A related factor is a decline in business start-ups. New businesses are the ones that bring new techniques to bear and create new jobs. Big, established companies, in contrast, tend to be net job-shrinkers over time.

For the full commentary, see:
HOLMAN W. JENKINS, JR. “BUSINESS WORLD; The New Slow-Growth Normal and Where It Leads; On the 800th anniversary of the Magna Carta, an unhinged regulatory state is our doomsday machine.” The Wall Street Journal (Sat., Aug. 1, 2015): A11.
(Note: the online version of the commentary has the date July 31, 2015.)

New Libertarian Consensus?

(p. A17) In “Shattered Consensus: The Rise and Decline of America’s Postwar Political Order,” Mr. Piereson argues that America has undergone three earthquakes in its history: the Jeffersonian revolution, which ushered in a long period of dominance of a new anti-Federalist party; the Civil War, which vanquished slavery and set off the ascendancy of northern Republicanism; and the New Deal, which dramatically expanded the size and intrusiveness of the federal government in Americans’ lives. “In each period, an old order collapsed and a new one emerged . . . the resolution of the crisis opened up new possibilities for growth and reform,” he writes. Looking out at our paralyzed and polarized polity, he argues that we are on the brink of yet another collapse–but this one might not have a happy ending.
Mr. Piereson, a hero of philanthropy who faithfully spent the Olin Foundation out of business after supporting the work of think tanks, small magazines and groundbreaking scholars like Allan Bloom and Charles Murray, views the Obama presidency as the beginning of the collapse of an 80-year consensus, forged in the post-World War II years. That consensus “assigned the national government responsibility for maintaining full employment and for policing the world in the interests of democracy, trade, and national security.” Such a consensus, which “is required in order for a polity to meet its major challenges,” Mr. Piereson argues, “. . . no longer exists in the United States. That being so, the problems will mount to a point where either they will be addressed through a ‘fourth revolution’ or the polity will begin to disintegrate for lack of fundamental agreement.”
. . .
A system failure is only a matter of time. At some point, what Democrat Erskine Bowles has aptly labeled “the most predictable crisis in American history” will be upon us, as the federal government defaults by one means or another on its unpayable promises. A revolt of the betrayed elderly, or of the plundered young, could be the catalyst for Mr. Piereson’s revolution. Perhaps even sooner, one state rendered destitute by reckless government spending and public pensions will attempt to dump its hopeless debt problem on the rest of the union. Which of these scenarios is most likely? Which most dangerous? Could the fourth revolution manifest itself in a separatist movement by states where majorities feel culturally estranged and disinclined to pick up the tab for the extravagance of less responsible states? Could the growing number of citizens professing economic conservatism coupled with libertarian social views be the front edge of a new consensus?

For the full review, see:
MITCH DANIELS. “BOOKSHELF; America’s Next Revolution; The U.S. has experienced three earthquakes: the Jeffersonian revolution, the Civil War and the New Deal. Are we on the brink of another?” The Wall Street Journal (Weds., July 15, 2015): A17.
(Note: ellipses within paragraphs, in original; ellipsis between paragraphs, added.)
(Note: the online version of the review has the date July 14, 2015,)

The book discussed in the review, is:
Piereson, James. Shattered Consensus: The Rise and Decline of America’s Postwar Political Order. New York: Encounter Books, 2015.

Electricity from Cow Manure Failing Despite Administration Support

(p. B1) Wisconsin dairy farmer Art Thelen was full of optimism a decade ago when he joined a growing group of U.S. farmers investing in technology that turns livestock manure into electricity.
The systems promised to curb air pollution from agriculture, generate extra revenue and–in no small feat–curtail odors that waft for miles in much of farm country.
“It was a great idea, and when it worked well, it was wonderful,” Mr. Thelen said.
Now the 61-year-old is among a group of farmers who recently have shut down their manure-to-energy systems–known as anaerobic digesters–or scrapped plans to build them because of the prolonged slump in natural-gas prices and higher-than-expected maintenance costs that made the systems less economical.

For the full story, see:
DAVID KESMODEL. “Energy Prices Steer Farmers Away From Manure Power.” The Wall Street Journal (Fri., Feb. 19, 2016): B1-B2.
(Note: the online version of the story has the date Feb. 18, 2016, and has the title “F.D.A. Regulator, Widowed by Cancer, Helps Speed Drug Approval.”)

Obama Says Stimulus Worked at Battery Plant Where CEO Remains “Frustrated” at Losses

(p. A12) JACKSONVILLE, Fla. — President Obama on Friday [February 26, 2016] used a visit to a high-technology battery plant in Florida to argue that the hundreds of billions of dollars in federal subsidies he signed into law during his first days in office had bolstered the economy, transformed the nation’s energy sector, and positioned the United States for a strong rebound.
But Mr. Obama’s trip to the Saft America factory here, opened in 2011 with a $95.5 million investment from the Department of Energy, also highlighted the challenges that have tempered the economic recovery and the difficulty that the president has had in claiming credit for it.
. . .
After touring the facility and watching a large robot named Wall-E assembling one of the batteries, the president called the factory “tangible evidence” that his stimulus package had worked and said that the economy was better off for it. “We took an empty swamp and turned it into an engine of innovation,” he said.
That engine, though, has sputtered as it has struggled to start here. Saft, based in Paris, announced last week that it was reducing the factory’s value because it had still not gained profitability in the competitive lithium-ion battery market. Saying he was “frustrated,” the company’s chief executive projected the plant might not be profitable for a few more years.

For the full story, see:
JULIE HIRSCHFELD DAVIS. “Obama Praises Stimulus at Battery Plant.” The New York Times (Sat., FEB. 27, 2016): A12.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date FEB. 26, 2016, and has the title “Obama Points to Florida Factory as Evidence That Stimulus Worked.”)