There is a new (rich) sucker born every minute…

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For those fortunate few out there who travel to London regularly, I envy you. What I don’t envy are the hotel rates you pay, which are averaging over $600 a night in the city. We have seen hotel rates go up a great deal in the U.S., as well, over the last few years. New York is a particular example of that phenomenon. The hotel companies have finally run out of the excess capacity they had from 2000 until 2005. Occupancy rates are high and room rates are even higher. Just the time to invest…

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Debt Crisis: Worse Than Some Commentators Tell Us

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I ran into a neighbor today. He is an attorney who, for many years, has run a successful practice specializing in working for creditors to recover defaulted debt payments. We began talking about the economy and I, half jokingly, said “at least your business should be up in this credit crisis.” He quickly corrected me. “My business is really getting squeezed now because of this credit crisis.” The credit squeeze affects him at both ends of the market. First, in the demand for his services. His credit-extending clients have drastically reduced their lending because of…

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Patterns of Cost Reduction

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I was fortunate to work for some years with McKinsey and Company. As an alumnus of that organization, I receive regularly the McKinsey Quarterly. Every once in awhile, the McKinsey Quarterly emails a feature called Chart Focus. A couple of weeks ago, I received one of these Chart Focus emails where McKinsey was talking about making field teams more productive. The firm has apparently done a good deal of work with large field service teams, such as technicians who install telephone lines or cable T.V. boxes, for example. The chart described the differences in productivity…

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Southwest: Joining the legacy airlines?

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A recent San Francisco Chronicle article on Southwest Airlines revealed some interesting information: Southwest is the largest air carrier in the United States, measured by domestic boardings. I believe American Airlines is bigger when it comes to revenue. Southwest would have lost money in 2007, and perhaps in other years, had it not been for its fuel hedging. The company has made forward purchases of fuel for a number of years, perhaps going back to 1991. These fuel hedges reduced operating costs by enough for the company to make a profit. In fact, Southwest has…

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Sprint Nextel’s Stumble

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Sprint Nextel appears to be in real trouble. A recent Wall Street Journal article offered a long analysis of the company and its current challenges. Sprint Nextel is illustrating the way market share is lost in most markets. In short, Sprint Nextel is losing the most profitable customers (post paid contract subscribers) to the top two carriers, AT&T and Verizon, as well as to the fourth ranked competitor, T-Mobile USA. Sprint Nextel’s losses in customers may be as much as 2% of these valuable customers in a quarter. These are the best customers so the…

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GM and Sears…slip sliding away

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Over the last few weeks, both GM and Sears, while leaders in their markets, have announced a new round of lay-offs. This is a sad development to watch, especially since these lay-offs are unlikely to be the last. I have watched these two great companies stumble toward oblivion throughout my entire working life. I have been fortunate to have nearly forty years in a professional life. In my earliest years, I consulted for a company who wanted to sell to Sears. In those days, the early 70s, Sears was then what Wal-Mart is today. They…

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