Randomly Noted

Bill Ford, executive chairman of Ford Motor Co., worries about traffic gridlock on a global basis.

Zhengrong Shi, chairman and chief executive of China’s Suntech Power Holdings, one of the world’s largest solar panel companies, wonders whether “perhaps there’s too much democracy” in the U.S., making it difficult for the nation to adopt a coherent and consistent industrial policy.

“There are no decisions being made,” he said. “It’s like in a company. Sometimes you hear all the voices. The CEO knows what the right decision is and sometimes they just want to bang the table and say, ‘Let’s do it.’”

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There’s no reason yet for the Federal Reserve to accelerate unconventional measures to spur U.S. economic growth.

Indeed, to soon adopt what The Wall Street Journal today called a “modest but symbolically important change” in its quantitative easing might be counter-productive in that it spooks the market into thinking The Fed has lost all confidence in the recovery.

The correlated fear to that is to enlarge in investors’ minds the possibility of deflation.

And the maneuver itself, using money from maturing Fed-owned mortgage-backed securities to buy new securities, probably U.S. Treasurys, has no guarantee of making any measurable difference in the minimalist recovery under way.

Indeed, if the Fed winds up ‘pushing on a string’ with any sort of near-term additional quantitative easing measures, meaning they just won’t work because credit liquidity is not the problem, it could damage the Fed’s credibility.

The Journal’s Jon Hilsenrath reported today  that Fed policymakers are considering the move, not that it has already been adopted. A debate about what if anything to do likely will be continued at the Fed’s regularly scheduled monetary policy meeting later this month.

It’s also a bad idea to ease further when there’s still some debate about how strong the economy is right now. Though he has political reasons to want a rosy view, Treasury Secretary Timothy Geithner today laid out the pluses of the recovery that can’t fully be dismissed.

“Business investment and consumption – the two keys to private demand – are gettings tronger, better than last year and better than last quarter,” Geithner wrote in an op-ed piece in today’s New York Times. 

A more subtle argument also urges against further imminent action by the Fed. Call it fix-it fatigue. We’ve now lived through a couple of years of extraordinary actions by the government and central bank to end a credit crisis and cushion the impact of severe recession.

The great middle would agree that it was necessary, did some real good and kept things from being much worse. On the fiscal side, perhaps it even winds up costing the taxpayers a lot less than originally feared.

Still, that same middle group hasn’t given up on capitalism and realizes that too many short-cuts to avoid any economic downturn might well have helped get us into this mess.

That view argues that minimalist growth is all you can expect in the slow, painful process of deleveraging needed to clear the overextended decks for healthier, more sustainable economic growth.

In short, things need to be worse than they are for the Fed to decide it has to try anew to make things better.

If you are looking for unusual economic indicators to give you a view of what’s happening in the ‘real’ U.S. economy, try this one: Starbucks Corp. just reported traffic growth in U.S. stores.

So what, you say? So it’s the first time that has happened in three-and-a-quarter years, The Wall Street Journal just reported.

The company has all sorts of internal reasons for this positive news, the Journal reported. Better customer service and a customer loyalty program and more.

But I think there’s maybe a bit of macroeconomy in there too. If people are feeling a tad more secure about their financial status and future (the stock market’s helped, too) they might be more willing to make the regular trip to Starbucks.

I know some coffee addicts might not consider Starbucks or no Stabucks an economic-dependent decision, but surely it is somewhat discretionary at least to much of the Starbucks faithful.

Encouraging economic news seems to be popping up all over.

Consider these headlines from today’s Wall Street Journal: “Evidence Mounts of Strong Recovery,” that’s about the U.S. Also, “Bernanke Sees Little Inflation Threat.” Also, “Economic Recovery Picks Up Steam Across Asia.”

(Yes, to be balanced, there’s also a column by David Wessel headlined “Europe is Failing to Keep Up.”)

But Spring is in the air and one can consider notions of a “Goldilocks” economic enivornment rising in the U.S. from the ashes of deep recession and credit crisis. Goldilocks in ‘not too hot, not too cold.’

 Quote of the day in support of all this comes from the Journal story on the surprising strength in U.S. retail sales. “There’s a growing risk that we’re underestimating the strength of the economy,” Stephen Stanley, chief economist of Pierpont Securities, told the Journal.

Sure, the sobering stats are still with us. Nearly 10% unemployment by official measure in the U.S. Housing prices that have far to go to recover.

But, still….

It’s worth giving some credit to the stock market, or, one should say, the bullish investors whose cumulative buying since March 2009 has created the rally that’s taken the Dow Jones Industrial Average above 11,000.

Those prices climbed a real wall of worry, naysayers and pessimists, double-dip recession theorists and the like.

Stock prices, of course, could go down tomorrow. And go down the next day and the day after that. But in their assumed role as forward-looking predictor of corporate earnings and economic activity, stock prices and the indexes they form look good right now.

Let’s hear at least one cheer for the corrective power of market forces, the power of public opinion, government pressure or more likley a combination of the three. Maybe even much maligned boards of directors deserve a little credit.

The cause for this at least tentative cheer: the front page article in today’s Wall Street Journal that reports compensation for U.S. chief executives edged lower in 2009, marking the first time in some 20 years that CEO pay declined for two consecutive years.

In 2009, the Journal’s Joann Lublin reported today, the median compensation for CEOs at 200 major U.S. companies fell 0.9% to $6.95 million. In 2008, pay fell 3.4%. This despite the fact that many of these companies’ stock prices, at least, and admittedly starting low, did pretty well in 2009.

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If you are looking for reasons to be optimistic about prospects for the American economy, and that search these days requires real effort, spend some time with the proponents and practitioners of clean technology.

For a layman, it’s a bit like going to the world’s fairs of yesteryear, filled with whizbang and excitable notions of how different technological advances, now at various stages of development, will dramatically alter our future daily lives.

From electric cars to the possible creation of synthetic organisms that would eat carbon dioxide to ‘clean coal,’ to wind and sun power and oilman T. Boone Pickens’ nationalist campaign to use U.S.-drilled natural gas in trucks to replace some imported crude oil, it was on display at The Wall Street Journal’s ECO:nomics conference in Santa Barbrara, Calif.

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“This is not Bolivia,” U.S. Treasury Secretary Timothy Geithner is quoted by The Wall Street Journal as having said when pushed by others to not honor contractually mandated bonuses to certain employees of American International Group.

It’s a good quote and a better policy. Give Geithner credit for a willingness not to bend to populist demands. In the end, upholding contracts and reinforcing that the U.S. is  a place where legal agreements are honored even when they become wildly unpopular and perhaps even grossly unfair is much more important than scoring an immediate political point or two.

The profile today of Geithner in The Wall Street Journal by Deborah Solomon is well worth reading. One interesting point: despite the criticism he’s endured in the role, largely on Capitol Hill, a significant part of the U.S. population doesn’t know who Geithner is.

In the ongoing furor about top banker pay the main combatants have been politicians, regulators, the bankers themselves and the amorphous public, the individual compenents of which care about such matters in varying degrees.

Largely forgotten have been the shareholders of these publicly traded investment and commercial banks. Surely, sky high compensation is a bigue for shareholders. When a high percentage of annual revenue goes to pay people, it’s money that otherwise belongs to the company’s owners, the shareholders. It’s a pretty direct relationship.

Now, the shareholders are starting to make noise. Maybe their representatives, the corporate boards of directors, will listen.

Aaron Lucchetti reports in today’s Wall Street Journal that the statement by the new chief executive of Morgan Stanley, James Gorman, about reducing the percentage of revenue that goes to compensation “followed prodding by some large shareholders.”

“Company officials acknowledge being questioned by investors since Morgan Stanley reported three weks ago that compensation and benefits were equal to 62% of net revenue at the New York company,” Lucchetti reported.

Good for the shareholders. Other company holders should pay attention.

News that Goldman Sachs Group Inc. is meeting with big investors in an effort to win approval, or at least staunch disapproval, of its generous compensation practices is a nice show piece for corporate democracy.

Hey, this is the way it is supposed to work. No government-appointed pay czar  needed. Wall Street Journal reporter Susanne Craig gets to the heart of the hub-bub around Goldman’s pay – especially after it received government aid and more broadly benefited from government interventions in financial markets. Click here to see her article.

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The heat continues to grow under U.S. boards of directors.

Just today, the U.S. Supreme Court heard oral arguments in an important mutual fund case. It revolves significantly around the question of whether  boards of mutual funds reasonably represent investors when they agree to the fees investors pay that fuel the salaries of mutual fund managers.

Meanwhile, between the federal pay “czar” who holds sway over the companies receiving substantial government relief and the Federal Reserve’s pay guidelines, corporate boards in financial services are being squeezed.

The connecting theme is executive pay and the widespread notion that most boards have not been anywhere near as vigilant as they should be in their responsibilities.

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