Howzit Howard

Hawaii, D.C., and clean energy

So much news is self-announced by the principals these days -- candidacies for office, corporate earnings reports, protest demonstrations -- that reporters often function as editors, assessing the value of what comes in over the transom rather than going out looking for news. Worse, we can behave like hung-over art critics, complaining that what was handed to us on a silver platter didn't have much flavor and the portions were too small. I'm as bad as anyone else -- just this week I sent an email to a P.R. person asking questions about her news release which amounted to an indirect criticism of all the vague terms she used. (A computer security company wanted to say how good it was, but stuck to generalities about "solutions" rather than say what the heck they offer. Sorry, it's a pet peeve.) The Honolulu Advertiser editorialized this morning that this week's clean energy initiative, announced by Gov. Lingle and Andy Karsner, assistant secretary of energy for energy efficiency and renewable energy, was pretty thin gruel. By chance I had Karsner on "Sunrise" this morning so I told him what the editorial said and invited him to offer a specific example of what might happen as a result of the alliance. No specifics were forthcoming, so I guess the Advertiser makes a good point, but on the other hand I get the impression that the Bush administration really does see Hawaii as a useful test-bed for new energy ideas, and Karsner did give one specific reason for this that I hadn't thought of earlier. Solar power advocates tell me that Hawaii is the perfect place to show what solar can do because it's so often sunny here and because fossil fuel bills are so high here. "If it's gonna work anywhere, it's gonna work here," one guy said. How many places have not only loads of sun but also loads of wind, loads of waves, and loads of hot magma to heat steam? Now here's the extra reason to nurture alternative energies in Hawaii. Secretary Karsner says part of Hawaii's appeal is that people are always traveling through Hawaii who can see these technologies at work. An idea that works here gets seen by many, probably while they're in a good mood because they're at least partially on vacation. What better, what more beautiful place, to see swirling wind turbines or glistening solar panels? The federal government already has all kinds of programs to defray some economic costs of alternative energies. But Karsner figures we're past the experimental stage now, and it's time to do commercial projects and show people that these technologies work. Which is, of course, precisely what's happening. Wal-Mart this week let me view the solar panels Sun Edison installed on the roof of the Keeaumoku Sam's Club, cheek-by-jowl with the air conditioning units that use all that power. Costco then put out its own plaintive press release saying it already had solar panels on its Kona and Kauai stores, Hawaii's biggest, thankyouverymuch. Hoku Scientific plans to build the state's largest solar power farm near Campbell Industrial Park. An Ewa builder is offer rooftop solar panels as a new home option. A Hawaii roofing contractor is selling solar panels that ARE rooves, so the whole roof qualifies for alternative energy tax breaks. Alexander & Baldwin, Maui Land & Pineapple and other local companies with agriculture experience plan crops that can be made into ethanol. Maui Electric has a plan to test wave action power. New wind power turbines are up on Maui and the Big Island.

The four seasons -- of Hawaii

Somewhere there may be a place with four distinct seasons, each of them about a quarter of a year long, but I have never lived there. But all locales have seasons, and I like Hawaii's very much. Chesapeake Bay country and Washington, D.C., where I was spawned, has four distinct seasons, but of highly unequal lengths. Summer and winter are long and miserable. Spring lasts for about two weeks while the cherry blossoms are out. Fall comes around Oct. 15. In Chicago it is customary to say that there are two seasons -- winter and construction season. In New Hampshire there is a mud season. I have pondered how to parse Hawaii weather and come up with four seasons -- two that form a backdrop to the calendar, interrupted from time to time by two others. Spring begins on Easter and lasts until Thanksgiving, interrupted, sometimes more than once and sometimes for weeks at a time, by Kona Season, in which the trade winds die down and the entire state feels like the inside of your car after you parked on the Ala Moana sun desk with the windows up. Fall lasts from Thanksgiving until Easter, interrupted, sometimes more than once and sometimes for weeks, by Storm Season. Storm Season can be windy, rainy or both, but it feels a lot colder, especially if you never close your windows. Am I getting this right, or should Windy Season and Rainy Season be two separate interruptions of the prevailing cool season? And how can we get one of those construction seasons?

Did Jerome do this?

Jerome Kerviel, the trader for Societe Generale who ran up $7.2 billion in losses, is now being blamed, or credited, with singlehandedly causing the Federal Reserve Board to undertake its biggest cut in interest rates ever, an emergency action that will make houses more affordable in Hawaii and calm down the affluent mainlanders we rely on to take expensive vacations here. Societe Generale, the second biggest bank in France and not the one that owns First Hawaiian Bank (the biggest, BNP Paribas, owns First Hawaiian parent BancWest), denies that Kerviel's trades moved markets that much. But Societe Generale has already misled us about Kerviel, whom it initially portrayed as some kind of criminal mastermind but who now turns out to be an inept nebbish who happened to know from a previous assignment in the audit department how to cover his mistakes by faking paperwork for opposite trades from the ones he was actually making. The New York Times over the weekend had no trouble finding stock market analysts who felt that the markets were indeed much affected by the bank's frantic efforts on Martin Luther King Day to get out of the positions Kerviel took. I'm just reporter and explainer, no expert on the stock market, and even I said in a blog post last week that European and Asian markets tanked Monday without any new bad economic news. Fed Chairman Ben Bernanke, who went into the office to work that day even though it was a federal holiday, canceled a trip and set up an emergency meeting with the other Fed governors. The result was the three quarter percent cut in both the federal funds rate, which the Fed has used in recent years to push other rates, and the discount rate, its former favorite mechanism for doing the same thing, the latter underlining the message sent by the former. Societe Generale, which had recently been hailed by financial analysts as being well-run, based on performance figures that we now know were skewed by Kerviel's shenanigans, says it is conducting an internal inquiry to learn how Kerviel managed to fake trades for so long without anyone noticing. It's quite an embarrassment. The whole idea of giving your money to others to invest is that they're more careful with it, or more able, than you are. Like the subprime mortgage default crisis, this undermines confidence in the whole system by conveying the impression that a lot of people in the financial world behaved in a slapdash way and, when big trouble arose, threw up their hands like it couldn't be helped. For me, the issue isn't whether Jerome caused the stock market panic last week that led to interest rates being cut. It's whether investigations will identify any particular Jacques-ass at Societe Generale who should be held accountable for insufficient oversite and perhaps be cut loose, sans "parachute d'or."

Wall Street: the apotheosis of the mob

About a week ago, an economist appeared on NPR and said no economic stimulus would halt the U.S. economic downturn because no stimulus is big enough to move a $12 trillion economy one way or another. He was persuasive, and I bought it, initially. So, apparently, did President Bush, who soon after proposed massive stimulus and specified that it needed to be massive or it wasn't worth doing. But every time I think I understand something, I learn something new that shows it to be more complicated, and sometimes utterly different, from what I initially thought. So I'm always thinking, could this be wrong? Thursday morning I figured out how the economist in this instance was wrong. He was thinking of the arithmetic. He should have been thinking of the psychology. Our economy is the world's largest mood ring. Two of the most important drivers of our economy depend heavily on subjective considerations: consumer spending, which accounts for 70% of all U.S. economic activity, and the stock market, where most of what happens is the direct result of guesswork about what other people are feeling. The Federal Reserve Bank of San Francisco, whose jurisdiction includes Hawaii, issued a report last year on research that found that economic downturns "behave" differently and can last longer when there is a lot of general press coverage of it. After years of prosperity, most of us have a lot of books, DVDs, music, games and other amusements. If we "feel" less affluent or more inclined to be frugal, we can easily dispense with a lot of entertainment spending for awhile. We can spend less on vacations -- very few people ever choose to skip a vacation altogether, but passing up Italy for Vegas is quite common in perceived lean times. We may go ahead with plans for a new car, but buy a cheaper vehicle than the one we originally planned on. We can cancel plans to trade up to a bigger house and stay where we are. This is key: We may do these things, not because our income is down, but because we have heard a lot of press reports of a slowing economy and we have general worries about the future, none of which are yet reflected in our own finances. Our own job -- O.K., it's Hawaii: jobs -- may be secure, but we've seen New York economists on television saying that Fed head Ben Bernanke has acted too slowly. With such a dunderhead running the economy, we think, maybe we'd better put off that cruise. Psychology plays an even greater role in the stock market, where traders are forced to consider, reconsider and again reconsider, not how they feel about things, but how they feel most others will feel. If you're buying stocks for yourself, and for the longer term, and you disagree with the general assessment that a certain company is tanking, a plunge in its stock should not scare you: you can snap up shares at a bargain rate. But what drives the markets isn't buyers acting sensibly on their own behalf. They are driven by traders who have programmed themselves (and their computers) to sell that stock when the price reaches a certain range. Their objective is not to execute trades based on their own best judgment but on their assessment of what the mob is thinking, the better to avoid getting "behind the curve." On Monday and Tuesday, Asia stock markets jumped out the window over bad economic news from the United States, impelling the Fed governors to vote for an emergency cut in interest rates. But there wasn't any important new economic news Monday and Tuesday. They were reacting to developments that U.S. traders had already digested on Friday. Those developments, which did not greatly add to our knowledge of the cooling economy, did not bother U.S. markets as much as they bothered Asia markets three days later. It was as if the story had become exaggerated in the retelling. It is unnerving to realize how little markets and the economy have to do with mathematics. But precisely for that reason, economic stimulus that should be too small to move the economy may be plenty big enough. It doesn't have to move the economy directly. It only has to move consumers to resume their normal spending patterns and they will move it. A vague announcement of a tentative stimulus agreement Wednesday night between Congressional leaders and the White House was enough to halt the Dow's dive, even though it's nowhere close to being passed and will almost certainly be in somewhat different form when it does. Traders think, or they think other traders will think, that this means those people in Washington, D.C., aren't dunderheads after all. What are cruises going for these days, anyway?

Huhu at Hale Honu

The move to have the state buy Turtle Bay is a brilliant strategy, because it will advance the goals of North Shore preservationists whether the state buys Turtle Bay or not. Hawaii readers of this blog will know that Gov. Linda Lingle, in her State of the State address this week, stunned lawmakers and the public alike with a proposal, not previously disclosed to anyone including the current Turtle Bay owners, to prevent rampant development of Oahu's North Shore by simply acquiring the resort. The purchase would be expensive, but the state could afford it more easily than most buyers, and in any case the governor says she has a bunch of ideas for various ways to raise the money. It is not merely feasible, it is sensible, since blocking Turtle Bay's owners from building several more hotels will take off a lot of pressure to add roads and other infrastructure that will cost even more than the resort. But that's not the inspiration for the idea. Gov. Lingle made it plain that it's a quality of life issue. She cited not merely the desire of North Shore residents to keep the country country, but asserted that the North Shore is an escape valve for southern Oahu residents, for whom the availability of a pleasant ride to the North Shore is an important part of their happiness in Honolulu even if they only undertake the journey once in awhile. The current owners of Turtle Bay kindly made the issue stark by proposing that the northeast corner of Oahu should have five hotels, asserting at the same time that the effect on traffic would be negligible. They could not have spurred more community opposition if they had called a press conference dressed like Snidley Whiplash. They would always have been opposed by people with bumper stickers for brains; by taking such a nanocephalic view of things, they drew reasonable people into the opposition as well. Public sentiment matters most when it is broad as well as heartfelt, as when development of Sandy Beach was blocked. Hawaii Superferry provides an example of how even passionate opposition is not enough to block a project if opponents' views are not widely held by the majority of the public. The owners of Turtle Bay so mishandled their own situation, however, that even Starwood Hotels & Resorts Worldwide backed out of a plan to acquire the resort. What makes Gov. Lingle's announcement brilliant is that it will deter other mainland investors from even looking at acquiring Turtle Bay. Deep-pocketed but shallow-brained investment firms, who are moving a little more carefully these days anyhow, will now know that the main selling point of Turtle Bay at the price the owners want, the well-ripened and utterly outdated approvals for more development, not only have passionate opposition from North Shore residents but also determined opposition from government, whose chief executive saw so much breadth in the opposition that she knew she could get headlines merely by suggesting that the state buy the resort. Two weekends ago I drove to the North Shore to view the big waves from the air conditioned comfort of my T-bird (I have my quality of life issues, too) and got a reminder of how gridlocked the North Shore can get with only one hotel at Turtle Bay. The day the owners of the resort said with a straight face that more hotels would not seriously impact traffic was, I suspect, the day a lot of people -- including state officials -- decided the owners were either too evil or too stupid to be allowed to tamper with the North Shore.  Postscript: Since writing this, I have seen some local commentators whom I respect, and whose commentaries and editorials I enjoy reading, take contrary views. One line of thinking is that Ko Olina looks nice, so maybe Turtle Bay could be developed and still look nice. This isn't persuasive and after pondering it over the weekend I think I can explain why. Northeast Oahu is still fairly rural and scenic. More hotels will make it less so, period. Ko Olina, on the other hand, has a power plant on one side, Campbell Industrial Park with two oil refineries on the other, and, inland, the island's only dump. Compared to all that, Ko Olina is indeed an improvement. It even improves the drive to the scenic Leeward Coast, but only in relation to these other things. The governor's point about the important of the North Shore to people who live in the city is, I think, as one who lives in Waikiki, a valid one, and one that can be extended to include the drive around Makapu'u Point, the Upper Windward Coast, and the Leeward Coast. The quality of life here depends on limiting growth in the areas that are still scenic. Some Democrats in the legislature feel the same way, but everyone is struggling with land use law because the only way to slow growth is to tell some landowners they cannot consider their holdings as an entitlement to degrade the scenery, after so many other landowners got to do just that.

Market tanks, but some give thanks

Low unemployment isn't good news for you if you're out of work. The story isn't your story. You don't even have an excuse to give your family, like you would if things were rough all over. All financial news is like that. Take puts and calls. Those are financial investments the way Vegas would make them. A put is a contract to put shares of a certain stock into someone else's hands before a certain date at a certain price. A call is a contract to buy shares that way. In each case, you are betting the other person that the stock will go the opposite way from what he thinks. If you're an airline and you do fuel hedging, you contract for jet fuel delivery later in the year for a certain price. You're betting that this price is lower than what jet fuel will actually cost by then. The company that agrees to such a contract is betting that you're wrong. If you're a bankruptcy attorney, the last thing your business needs is prosperity. Those are the three counterintuitive things about financial news:

1. Within any broad trend are specific instances that can be all over the map.
2. Many financial transactions are created so that one side will "win" and the other will "lose."
3. Some things are countercyclical, doing well when everything else is doing badly.

Take what happened today. After two days of stocks tanking in Asia (Monday and Tuesday, equivalent to Sunday and Monday in America), European markets began following suit, so the Federal Reserve Board took emergency action, cutting interest rates three-quarters of a percent, the biggest cut since October 1984. Wall Street opened badly, as backed-up sell orders sent the Dow plunging more than 400 points, but two hours later it was down only about 100 points as bargainhunters entered the market. Bargainhunters benefits from stock market plunges, assuming they're any good. Some perfectly good stocks were selling at a 10% discount for awhile Tuesday. Healthy businesses could benefit from the plunging share prices, because it induced the Fed to slash interest rates and now they can borrow money more cheaply. Hawaii will suffer if an economic slowdown (whether it is or becomes an outright recession or not) slows tourism. We get more visitors from California than anywhere else and California's economy has the vapors, especially its so-called "Inland Empire." If Californians feel insufficiently affluent to take a Hawaii vacation, we're going to get the vapors, too. But unless that happens, Hawaii could actually benefit from what's going on. The dollar is weakening a lot because of the interest rate cuts. This puts Hawaii on sale for the Japanese, as you have read here before. It also makes Europe really expensive for U.S. mainlanders, some of whom might decide they would rather see Hawaii than Italy. Uncertainty means lower mortgage rates and anything that makes housing more affordable is good for Hawaii. Stay tuned.

Tis the seasonal adjustment

Hawaii unemployment rose from 2.9% in November to 3.2% in December, the first time in years the rate has topped 3%. But unemployment actually fell. How can unemployment fall and yet rise? Easily. It fell in reality. It rose in the seasonally adjusted numbers that the Labor Department uses. So I thought I would explain that in this post. Economists try to track uptrends and downtrends in the employment picture, but know that some changes are not trends at all. They're just seasonal fluctuations. Retailers hire extra help for the Christmas holidays. Other employers take on summer help to cover the vacations of their regular workers. Unemployment goes down from November to December every year as stores recruit part-timers to help rake in the sales on their busiest month. We could use nothing but real numbers, and simply explain every year that December's increase is an annual phenomenon rather than a permanent uptrend.  Instead, the Labor Department made up formulas to account for seasonal fluctuations, to dial them out. What's left, in a perfect world, is the actual longer term trend. We don't live in a perfect world. The seasonal adjustment is never totally right. So instead of giving the number and then explaining the seasonal factor, we give the seasonally adjusted number and they try to explain what factors made the seasonal adjustment too great or too small. From my point of view as an explainer, the inventors of the seasonal adjustment have cleverly concocted a way to make the number even more erroneous, requiring an even more complicated explanation, than if they had left the numbers alone in the first place. What happened in December is that there was less seasonal hiring that the seasonal adjustment tries to compensate for. So it overcompensated. The unadjusted unemployment rate was 3% in November and fell to 2.8% in December. Two islands saw actual increases -- Kauai and Lanai -- ironically both rose to 3.2%, the same number as the seasonally adjusted statewide jobless rate. But the Big Island fell one tenth to 3.6%, Molokai fell six tenths to 6.2%, the island of Maui fell one tenth to 3.3%, and Oahu, home to three quarters of the state population, fell two tenths to 2.5%. Hawaii economists uniformly predict higher joblessness this year. But it hasn't actually begun in any major way yet.

You say Nevada, and I say Nevada

You may have heard about it by now, but one of the network news anchors -- not Katie Couric, a talented second generation journalist who anchors on CBS, but one of those miscreants on a good for nothing Brand X network -- had the temerity to pronounce "Nevada" as if it rhymed with "Prada" and got inundated with one or two complaints from people with time on their hands in Nevada, a desolate place, mostly unsurveyed, which actually pronounces its name to rhyme with "data." Unless, of course, you pronounce data with a "day". It's a funny thing, but I find that readers, listeners and viewers can be very forgiving about serious mistakes, but mega-persnickety about stuff like this. Of course the reason is, it's not the same readers, listeners and viewers. Different people are motivated to break radio silence by different issues. Helpful, kind people want to help; others like to scold. The persnicks are correct, however: the correct pronunciation is precisely what they say. The "ah" version of a Nevada is a regionalism, and the state itself isn't in that region. Regional pronunciations can be muy tricky. The Arkansas River is pronounced like Arkansas in Arkansas but is pronounced like Arkansas in Kansas. (It flows through both states.) Missouri is a special case. Many Missourians turn the trailing "i" into "uh," and in my youth I tried to emulate that, but most people who say it that way will still tell you that the "correct" pronunciation is "ee". New Madrid, Mo., and the infamous New Madrid earthquake fault are pronounced "MAD-rid," nothing like the capital of Spain. A much misunderstood case is the Appalachians, the eastern U.S. mountain range. In the South it's pronounced with "latch" in the middle, and Southerners love to insist that this is the only correct way to say it. But the prevailing pronunciation from Maryland north is "laysh," and when Aaron Copland composed Appalachian Spring that is how he said it. Which is correct? It depends on where you are. Sometimes pronunciations change. The Washington, D.C., suburb of Vienna was pronounced with "vie" at the beginning when I was a kid, but as more people moved into the area from elsewhere, it gradually came into conformity with the capital of Austria (or rather, the capital of Austria as pronounced by the British, since the Viennese say something else and even spell it differently, "Wien.")  Moscow, Idaho, has not always been pronounced the same as Moscow, Russia (which the Russians spell "Moskva" when they're using our alphabet, but let that pass) and Montivideo, Md., has "video" at the end instead of "vih-DAY-oh," as is the case in Uruguay. The British have different pronunciations and spellings from Americans, though we do not always realize it. During the Falklands War between Britain and Argentina, the mostly British reporters covering the conflict referred to the Argentine government, pronouncing "Argentine" with the tine of a fork at the end. In American English it would be said "teen" or even changed to Argentinian, but for a couple years after the war over the Malvinas (what Argentinians call the Falklands) it seemed everyone tried to say it the British way. This is part of the American love of British accents and British sentence construction, never mind the fact that the British have a long history of bungling the pronunciation of almost everything, even their own words ("Featherstonehaugh" is pronounced "Fanshaw," to give one infamous example.) Linguistic civilians like to believe there is one right way to pronounce every word, but often this is not true, and even dictionaries can disagree. If I mispronounce something I am happy to hear from you, but we can profitably keep the conversation light, I suspect. P.S. Ryan Ozawa says this brings up the pronunciation of Honolulu now. So I guess I'll weigh in one that. I think we should try to pronounce Hawaiian words properly as much as possible, though very common non-standard pronunciations are so common everywhere in the world that we can afford to be gentle about correcting people. I also think there is, and perhaps ought to be, a double standard. I had an auntie who lived in Moiliili who pronounced it "Moi-Lilly," because that was once common. I would never have dared correct her, but it doesn't mean I should say it that way. Even Hawaiian words can be tricky. I live on Ena Road and some very respectable Hawaiian language experts say it should be said like "Enna." However, to my mind this is not correct. John Ena's family name was Hawaiianized from "Ing." I pronounce it "Eena." I say the problem is not that it is mispronounced, but that it is misspelled. But that is a very, very unusual case where I actually understand the background of a word. On most words I need all the help I can get (including the ones in English).

Your tax dollars standing around idle

I got a couple emails from people asking about a story in the Star Bulletin about HMSA jacking up its large employer premiums more than 9% this year. Yeah, I can explain that. Two things are going on. One is normal and understandable, but the other one should anger you. The normal and understandable thing is that HMSA regularly, but not annually, negotiates with doctors and hospitals on what it will pay them for specific services. As you might guess, these fees go the same direction as everything else -- up. The higher fees represent, to put it simply, however much inflation there has been since the last negotiation. But that's not all they represent. The second thing that is going on would come under the heading of your tax dollars standing about smoking cigarettes instead of helping keep the nation healthy. The federal government determines how much Medicare-Medicaid pays for the services that doctors and hospitals provide. But instead of negotiating a fair rate like private sector insurers do, it just announces what it will pay. Years ago it began to pay less than the actual cost. At first it wasn't that big a deal. Doctors and hospitals easily made up the difference by slightly overcharging private sector insurers. There was some squawking but everything worked out in the end. Over the years, however, the gap has steadily widened. Now private sector insurers like HMSA are heavily subsidizing Medicare-Medicaid. It's like a hidden tax on businesses. It represents incompetence and sloth on the part of federal bureaucrats and members of Congress. And the bigger the gap gets, the harder it becomes for Congress or any administration of any political stripe to suck it up and fix what's broken.

Comedy of fares

Hawaiian Airlines, Aloha Airlines and Mesa Air's Go are archrivals seeking your interisland business. But today they have this in common: they're scratching their heads over what happened to their fares Wednesday evening. To understand what happened, you need to know that there is a single computer network for air fares and all the airlines plug in new fares all the time. They also study the fares in the system to see if their competitors do anything that they need to react to. Unless your rival makes an announcement or you have a spy working there, you don't know what Brand X is up to until the new fare appears in the system. Now, as you know, there has been an interisland fare war since the launch of Go turned the Honolulu routes to Lihue, Kahului, Kona and Hilo into a three-way market in the spring of 2006. Nearly all the time, it has been Go that announces cheaper fares, and the others who match. The thinking is that it's cheaper to match than to lose customers. So they fly at a loss, hoping something will happen to change the situation. The situation did change slightly this month when Go, struggling with soaring jet fuel costs, raised its minimum fares to Kona and Hilo to $49, the only time I can recall that Go has led the way on a price increase. Aloha matched and also applied the $10 increase to its other interisland routes. Go and Hawaiian then fell in line. An outside observer could easily have inferred from this that all three were ready to call a temporary ceasefire in the fare war to cover more of their growing costs. Fast forward to Wednesday. Aloha Airlines, facing the same soaring jet fuel bills that Go is, raises its Kona and Hilo minimum fares to $59. Still not enough to make a full-fledged profit but enough to cover the most important bills. But while Aloha was doing this -- and explaining the need for it in a press release -- Go was posting a $42 fare. At this point there are some conflicting accounts of what happened, but after talking to friends in low places at the airlines I believe it went like this. Go, seeing the Aloha increase, rescinded its increase and said it had been posted in error. It meant to stick with its $49 fare. But by the time it did this, Hawaiian Airlines had already matched the $42 fare. So by Thursday morning, Aloha was hanging out to dry at $59, still hoping the others would go along; Go was at $49, despite having posted another number entirely the day before; and Hawaiian was at $42 despite having initiated nothing at all. You can decide which one is rocks, which one is paper and which one is scissors. Update, around 9 a.m. Thursday: Hawaiian has rescinded its $42 fare and returned to $49.