Walmart and Public Shame

Walmart has officially taken to engaging in state-sponsored public shaming for shoplifters:

Earlier this year, Lisa King Fithian entered the self-checkout lane at the Wal-Mart store in her hometown of Attalla, Ala., with a lava lamp and a pet playpen. According to court documents, she then failed to scan the two items, worth $26.97, to add them to her bill and tried to leave the store. Fithian, 46, later pleaded guilty to theft in court, although she maintained the entire incident was a misunderstanding.

Fithian's sentence was unusual. The local judge, Kenneth Robertson, had been thinking about shoplifting penalties that would be different from the fines and brief jail terms, which tend to be ineffective. He talked with the local Wal-Mart Stores manager about having Fithian go out in public with a sign around her neck declaring her crime. The manager, Neil Hawkins, gave the green light. So one Saturday Fithian wore two sandwich-board signs that declared, "I am a thief; I stole from Wal-Mart."

Since then, this town of 6,859 has become a real-life experiment in whether shaming can reduce shoplifting. More than 20 people have endured the modern-day version of The Scarlet Letter in recent months…

Wal-Mart executives have been debating the optimal shoplifting policies for its stores…But earlier this month, it decided to get more aggressive.

The article is an interesting read. Two things to pay attention to:

1) If you are a taxpayer you should be very pissed. Cops, Lawyers and Judges have to be mobilized to do nonsense work for Wal-Mart when it should be doing things like dealing with domestic abuse, murderers and drunk drivers. All to deal with the menance of some 13-year dipshit stealing a Linkin Park CD, whose bulked margins are insured against.

2) As anyone who has worked in, or around, low-wage jobs, can tell you, most theft is from a company's own employees. And the industry certainly believes this – 50% of theft is from employees (and 20% from vendor fraud or general errors). And Why shouldn't they? Poor wages, shitty benefits, 70% turnover, low prospects of advacement – it is the ideal situation for employee theft. Costco offers a higher wage rate, has a tenth of the employee turnover and (surprise) has almost zero (~.2%) loss rate here. (Of course it is harder to steal [the bulk] items from Costco, bit its loss ratio is ~10% of walmart; shop-lifting can't explain all of that).

Shaming in the public sphere is a great way to distract attention, and distracting from their scorched-earth employee relations tactics is exactly what Wal-mart is in the business of doing. And it does it well.

Subprime meltdown.

This entry may be boring for many of you, but I'll teach you how people can lie with statistics and graphs near the end.
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So the housing market is in free-fall; Countrywide Financial, the largest mortgage underwriter, just announced to analysts that "Home price depreciation at levels not seen since the Great Depression" and the market will be hurting till 2009. (This effects spreads across the whole market). And that is the optimistic picture. Speaking of optimism, the Fed just released a neat graph in its recent report:


So 12% of subprime (risky, to low-income people with bad credit) loans are currently being foreclosed or are 90 days without a payment. Think about that for a second. 20% of loans sold in the past two years are subprime.
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However the primes looks fine.

Here's the rub. Say, you have a mortgages in 2005. You get laid off (your job goes to India) and your kid needs surgery shortly after you lose your health insurance. You find a new job that doesn't pay as much, and now you have a medical payment each month. You call your bank and say you are worried about defaulting on your (prime) loan. Your agent says: "No problem, let's refinance you with a variable-rate subprime loan with great terms the first two years." You can make the payments until, of course, you can't, and you default two years later. This story is completely consistent with this graph – there's a shift of all loans away from the prime ones. For the past two years it has been impossible to default on a prime loan; you are just moved into the subprime category. Hence this skyrocketing of the default in subprime may actually reflect a collapse of prime loans.

Mutual Funds do this all the time. They collapse out their bad funds, and discontinue them, and move the money into the good funds – and just report their great returns on the good funds.

And in case you are wondering where all the foreclosures are going on, from the Big Picture (a great source for market news):

It is going to be a bumpy time.