United-US Airways consolidation effort called off

CHICAGO (AP) — United Airlines scrapped its latest attempt to combine with US Airways and create the world's largest carrier, formally backing away Friday from a deal that likely would have meant fewer routes and higher ticket prices for consumers.

Now the question for those and other U.S. airlines is how to get by and make money with oil prices near $130 a barrel.

The decision came against the backdrop of the latest rise in oil prices over $127 a barrel Friday after a recent drop.

"The failure of United to find a merger partner is not surprising given the fact that no airline, Southwest included, can survive at $130-per-barrel oil," said Harlan Platt, a finance professor at the business school at Northeastern University who follows the airline industry closely. "Either prices must rise by $50 a ticket or massive layoffs and cutbacks are needed."

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Landing profits with lobster traps

Maine's annual lobster catch was down 15 percent last year. But a pair of lobster-catching brothers came up with a plan to beat the economic odds -- they rent their traps to their customers and FedEx them the catch.
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Tess Vigeland: A lot of small businesses are feeling the pinch of the sour economy. Rising fuel and food prices make it tough to eke out profits when the margin is small in the first place. Lobstermen --and women -- are on the list of jobs in deep water. The annual catch is down. And market prices are stagnant. Reporter Lenora Chu found two brothers who are clawing back by inviting customers to adopt-a-lobster-trap.

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Impact of Presidential Elections on stock market

I thought you might be interested in a new research which looks at the impact of presidential elections on the US stock market. Presidential Election Uncertainty and Common Stock Returns in the United States, written by Jeffrey Born, a professor of finance at Northeastern University’s business school, provides evidence that the most important factor in an election’s impact is the certainty of the outcome. In other words, the tighter the race, the more volatile the market.

Below is an abstract of the research piece. You can find Prof. Born’s bio here: http://cba.neu.edu/faculty/directory_detail.cfm?e=138. Please let me know if you’d like to read a draft of the entire report, or if you’d like to speak to Prof. Born.

There is substantial evidence on the existence of a political business cycle. Studies demonstrate marked differences in the policy choices of the two major political parties in the United States. These policy differences are associated with significant differences in macro-economic outcomes and performance. The influence of macro-economic forces on common stock returns is well documented in the finance literature. This suggests the following linkage: political change produces policy change, which produces different macroeconomic outcomes, which should impact the distribution of common stock returns.

In an efficient market, the expectation of, or uncertainty about, political change should be incorporated into share prices. Prior research into the influence of political change has frequently been flawed by the assumption that the outcome of the election is known a priori. Furthermore, prior studies failed to control for the possibility of serial correlation in daily common stock returns, which has the potential to bias test statistics. We incorporate the uncertainty of a presidential election's outcome into our analysis of pre-election returns in the United States through the use of candidate preference (i.e., polling) data. Standardizing the difference in the two leading candidate's preference percentage by the sampling error of the poll produces a measure of electoral outcome uncertainty. We find that political uncertainty does impact aggregated common stock returns during the presidential election cycle.

If the candidate of the incumbent political party (who could be standing for re-election) does not enjoy a significant lead in the polls, stock market volatility rises. Not surprisingly, as total risk rises, mean returns rise. However, if the candidate of the incumbent political party moves to (or opens with) a commanding lead in the polls, the possibility of political change diminishes, as does volatility and mean daily returns.

Mishkin: Asset Bubbles Not a Fed Problem

Asset bubbles like the real estate crisis rocking the economy are a policy concern for the government but not necessarily the Federal Reserve, says Federal Reserve Board Governor Frederic S. Mishkin.

Mishkin, who recently announced he would step down from the Fed, was apparently responding to calls for the Fed to increase regulation of financial institutions in the wake of the credit crunch and mortgage market meltdown.

Other economic observers were somewhat taken aback by Mishkin’s comments.

“He seems to say that monetary policy is simply the setting of short-term, overnight interest rates,” Timothy A. Canova, an international monetary policy expert at the Chapman University School of Law, tells Moneynews.

“Free market ideology gets in the way of sensible regulation.”

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Chapman Lures Top Legal Scholar

SANTA ANA - Well-known legal ethics and constitutional law expert Ronald D. Rotunda will join the law school faculty at Chapman University on Aug. 1.

Rotunda is the second nationally prominent law professor to come to Chapman from George Mason University in recent years and the fourth academic overall.

Nobel economics prize winner Vernon L. Smith joined Chapman's law and business schools inJanuary along with several other economics and law professors from Mason.

Earlier this month, Chapman announced that a team of physicists and computational scientists would be coming on board from Mason, including frequent Nobel Prize nominee Yakir Aharonov, the co-discoverer of a important phenomenon in quantum physics describing how distant forces act on local particles.

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