Yesterday, the the Federal Reserve Open Market Committee surprsied nobody with their 12th consecutive 1/4 point increase. The WSJ noted that further "increases appears unlikely to cease anytime soon," and that the Fed "restated its long-running view that "policy accommodation can be removed at a pace that is likely to be measured." (See Parsing the FOMC Statement)
This must be conusing as all hell to the No Inflation crowd. After all, if its only the core, why raise rates? Especially after the Fed’s policy on bubbles is that its easier to clean them up afterwards than to identify and unwind them in real time.
Bernanke, if confirmed, will face a decided tightrope act starting immediately. Will he earn his inflation-fighting stripes and continue down the path Greenspan started? Or will he bow to the concerns of the consumer and take a pause at his first official meeting? If the core inflation data remains as benign as it has been AND we get some mediocre holiday numbers, we think Bernanke would be wise to reevaluate the situation, and be leery of risking ‘inverting the yield curve’ in the 1Q of 2006.
– John B. Norris, Morgan Asset Management
* * * * * * *
It seems clear that policymakers are not looking to send any new signals at this point. With the markets only recently having come around to pricing in a reasonable Fed path, the last thing the FOMC wants is to trigger a whipsaw in sentiment. No doubt, there was further discussion at this meeting regarding the appropriateness of providing forward looking guidance as the fed funds rate approaches the neutral zone. We suspect that the official statement will undergo significant change in the not too distant future, but the Fed is justifiably wary about implementing such a shift at this point due to a fear that it could be misinterpreted.
– David Greenlaw, Morgan Stanley
* * * * * * *
This statement suggests that Greenspan’s JEC testimony on Thursday is unlikely to contain any significant new message on monetary policy. We continue to look for quarter-point hikes at the December 13th and January 31st FOMC meetings and we expect that Bernanke will continue with further rate hikes in the Spring.
– John Ryding, Conrad DeQuadros, Elena Volovelsky, of Bear Stearns
* * * * * * *
There is a small change in the language relating to inflation from Sep 20: The Fed remains concerned that the "cumulative rise in energy and other costs have the potential to add to inflation pressures." "Cumulative" is new, and presumably is intended to mean that the dip in energy prices over the past couple of months is not enough to assuage inflation fears.
– Ian Shepherdson, High Frequency Economics
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"The cumulative rise…" sounds like an acknowledgement that what we have experienced so far is not a one-off event and not something that can be ignored. I am guessing that this word was very carefully chosen to give the right tone to the message. It’s as if they are saying that now is not the right time to let our guard down. It does, after all, take time for these changes to work through the economy. If pressure is building now, it may be a few months before it affects the headline CPI in a big way. The heating season is ahead. The rate hikes are not over.
– William Polley, Western Illinois University
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Recent indicators point to a rebound in manufacturing output from a temporary hurricane-induced setback in the month of September. Consumers — who have been "shell-shocked" by higher gasoline prices and utility costs — pulled in their horns on consumption in September and October. This sets the stage for a modest expenditure growth slowdown in the fourth quarter, providing support for the Federal Reserve’s very gradual approach to adjusting rates.
– Brian Bethune, Global Insight
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The message from the FOMC continues to be that their central case scenario remains one where the tightening process will continue. Going forward, should Fed officials start to feel that the current pace of tightening needs to be altered, we would expect them to prepare markets for that event through public comments. Therefore, unless steered otherwise by Fed-speak, it seems sensible to expect further 25bp tightening moves at upcoming meetings.
– Joshua Shapiro, MFR Inc.
November 1, 2005 3:47 p.m.
DOWN THE RABBIT HOLE: Ever come across something that only gets stranger and stranger the deeper you delve into it? That was my experience when I almost purchased a new CD — a DRM crippled CD — this weekend.
This tale is part of a larger struggle within the recording and digital download industry — not of P2P or piracy — but one of innovation and competition. As you follow this odd story (broken into 4 increasingly strange parts), you will note that as it gets weirder, Artists and Consumers are the collateral damage. It makes one wonder just what the hell the Recording Industry is thinking about these days:
A friend with whom I frequently swap Music and Film suggestions (as well as mixed CDs) asks me if I have ever heard of the band "My Morning Jacket." I have not. She suggests checking out the album Z. The album is very well reviewed. So I fire up iTunes, go to the music store. The band is rather interesting, not your typical pop fare. Sounds like a cross between Morcheeba and The White Stripes. (Rolling Stone heard elements of Radiohead, The Who and Lynyrd Skynyrd). Lush, ethereal, offbeat music, mixed with some electronica, but mostly straightforward fuzzbox-driven rock-n-roll. My kind of stuff.
The reviewers note that Sony has crippled the disc with Sunncomm’s latest DRM software. (You may remember Sunncomm’s infamous shift key incident). The key restriction of this particular DRM is that it renders a disc nontransferable to the iPod.
Nor can you make a backup copy, or travel discs, or a copy for the
weekend house, or use any of the songs on a mixed disc. Oh, and it won’t
work with my iTunes Music software (and that also means no shuffle
Since the CD is incompatible with Apple iTunes, and the music cannot be transferred to an iPod, it eliminates about half of my legal uses for it. So I don’t buy the CD, ’cause it won’t do what I need it to do. Chalk up a lost sale to DRM.
Here’s where our tale takes a turn for the bizarre: According to the Band/Label’s website, these DRM restrictions were put on the CD without their knowledge or permission:
Information Regarding Our Artists’ Music, Copy-Protected CDs and your iPod
We at ATO Records are aware of the problems being experienced by certain fans due to the copy-protection of our distributor. Neither we nor our artists ever gave permission for the use of this technology, nor is it our distributor’s opinion that they need our permission. Wherever it is our decision, we will forego use of copy-protection, just as we have in the past.
That’s simply a stunner.
The loss of good will and fan support must be significant to the band. That’s a very real monetary damage to the band. (I wonder what their legal options are). It becomes even more absurd when you consider that "ATO Records permits audiotaping at our artists’ performance." So this is a very forward looking, copyright-friendly bunch of folk.
I would hope that in the future, music agents and attorneys remember to address this in label contracts on the band’s behalf.
As odd as the story is so far, its about to get a whole lot weirder: It turns out that all Engadget (quoting Variety) notes that this DRM is not at all about making the CD immune to piracy. Instead, its part of a pissing contest between Sony and Apple: Variety writes that "the new copy protection scheme — which makes it difficult
to rip CDs and listen to them with an iPod — is designed to put
pressure on Apple to open the iPod to other music services, rather than
making it dependent on the iTunes Music Store for downloads."
You mean to tell me that this isn’t even about P2P and unauthorized downloading? How annoying is that? Sony has their panties in a bunch cause Apple has been kicking their arses all over the innovation and digital music schoolyard? So the mature response from a major global conmsumer electronics corporation is to take their ball and go home?
DRM is now being used as a competitive economic weapon — not as an anti-piracy tool.
As a music consumer, I find this ridiculous. Why I cannot use a
legally purchased CD — because Sony is miffed at Apple for creating the
2000′s version of their Walkman — is beyond absurd. I am very, very annoyed at this.
So far, Sony’s lost business with me is now one CD ($10.99), one flat panel TV ($3,499) and one laptop ($3,199). That’s lost sales of approximately $6,710. If you are a Sony shareholder, you should be as annoyed as I am.
I saved the absolutely weirdest part for last.
I write Suncomm to complain about this DRM. Their website encourages people to write Apple and request them to "Open up their proprietary technology."
Yeah, spare me your lectures. Just because your client failed to create a digital music player and legal downloading store, doesn’t mean that I have to get conscripted in your lobbying ploy.
Just tell me where CD purchasers should send this crippled disc back for a refund, I ask them.
UPON RECEIPT, THEY SEND ME AN EMAIL TELLING ME HOW TO WORK AROUND THE DRM:
"If you have a PC place the CD into your computer and allow the CD to automatically start. If the CD does not automatically start, open your Windows Explorer, locate the drive letter for your CD drive and double-click on the LaunchCD.exe file located on your CD.
Once the application has been launched and the End User License Agreement has been accepted, you can click the Copy Songs button on the top menu.
Follow the instructions to copy the secure Windows Media Files (WMA) to your PC. Make a note of where you are copying the songs to, you will need to get to these secure Windows Media Files in the next steps.
Once the WMA files are on your PC you can open and listen to the songs with Windows Media Player 9.0 or higher. You may also play them in any compatible player that can play secure Windows Media files, such as MusicMatch, RealPlayer, and Winamp, but it will require that you obtain a license to do so. To obtain this license, from the Welcome Screen of the user interface, click on the link below the album art that says If your music does not play in your preferred player, click here. Follow the instructions to download the alternate license. PLEASE NOTE: This license is only necessary for playing the copied songs in a media player other than iTunes or Windows Media Player. If you are just trying to use iTunes, simply continue with these instructions.
Using Windows Media Player only, you can then burn the songs to a CD. Please note that in order to burn the files, you need to upgrade to or already have Windows Media Player 9 or greater.
Once the CD has been burned, place the copied CD back into your computer and open iTunes. iTunes can now rip the songs as you would a normal CD."
So this entire rigamarole won’t even protect the CD contents — its merely a very annoying interference with my ability to enjoy the legal uses of a product I actually wanted to purchase.
But wait, there’s more! As if that’s not absurd enough, they remind me that none of this is necessary at all. As noted above, its nothing more than a swipe at Apple:
"Please note an easier and more acceptable solution (to who?) requires cooperation from Apple, who we have already reached out to in hopes of addressing this issue. To help speed this effort, we ask that you use the following link to contact Apple and ask them to provide a solution that would easily allow you to move content from protected CDs into iTunes or onto your iPod rather than having to go through the additional steps above."
If you think that this cannot get any dumber, you would be wrong. The coup de grace of this exercise in corporate stupidity is this:
"If you have a Mac computer you can copy the songs using your iTunes Player as you would normally do."
Words simply fail me . . .
POSTSCRIPT: October 31, 2005 6:08am
I am a buyer of CDs, and only rarelydo I download tracks from Apple’s iTunes Music Store due to sound quality.
I didn’t spend an obscene amount of money on a home audio system to
listen to the mediocre audio quality of MP3s. The
not-even-remotely-as-lossless-as-advertised-compression algorithms are
hardly any better. MP3s and iPod quality music is fine for the beach or
my commute on a train, but its something else entirely in my living
My fair use: When I get a new CD, I rip it to iTunes,
then transfer the music to my iPods; I make a backup copy (in case of
loss). If I really like a disc, I make a copy for the car or the
weekend house. If the disc is "youth-friendly," I’ll make a copy for my
wife’s classroom. She teaches art, and I refuse to let her take any
more original discs to school — they have all gotten destroyed.
Incidentally, I am what the marketing people like to call an "influencer"
(i.e., think of Netflix, TiVo or Macintosh). I do not copy entire CDs for people,
but I like to expose frinds to news music — I will give them a song or two, with the recommendation that if they like
it, they purchase the artist’s disc. I use P2P to check out stuff not available
elsewhere, or to see if I want to purchase a full CD. I also like
to make mixed playlists, which get burned for the car or for
friends who are looking to hear new music, now that radio is dead.
I believe all of the above is well within my rights as a consumer of the
CDs that I legally purchased; If someone wants to try to convince me otherwise, please take your best shot.
UPDATE: October 31, 2005 7:02 am
This morning, I did a Google News search on "My Morning Jacket: Z," and I found 147 mainstream news articles from the past 30 days.
One — only one — mentions the DRM issue:
MUSIC: Burning the Faithful
New copy-protected CDs screw over the only honest customers the music industry has left.
Wednesday, October 19, 2005
There is a large and potentially fascinating story here that you folks in the tech press/music media are overlooking . . .
UPDATE: November 10, 2005 1:38 pm
Here’s the biggest joke of all: I actually got the disc, and ripped it to iTunes and the iPod — on my G5 iMac . . .
The Amazon reviewers DRM comments are below . . .