If You Don't Like The Numbers - Just Change Em'.

By MICHAEL J. BOSKIN

Politicians and scientists who don't like what their data show lately have simply taken to changing the numbers. They believe that their end—socialism, global climate regulation, health-care legislation, repudiating debt commitments, la gloire française—justifies throwing out even minimum standards of accuracy. It appears that no numbers are immune: not GDP, not inflation, not budget, not job or cost estimates, and certainly not temperature. A CEO or CFO issuing such massaged numbers would land in jail.

The late economist Paul Samuelson called the national income accounts that measure real GDP and inflation "one of the greatest achievements of the twentieth century." Yet politicians from Europe to South America are now clamoring for alternatives that make them look better.

A commission appointed by French President Nicolas Sarkozy suggests heavily weighting "stability" indicators such as "security" and "equality" when calculating GDP. And voilà!—France outperforms the U.S., despite the fact that its per capita income is 30% lower. Nobel laureate Ed Prescott called this disparity the difference between "prosperity and depression" in a 2002 paper—and attributed it entirely to France's higher taxes.

With Venezuela in recession by conventional GDP measures, President Hugo Chávez declared the GDP to be a capitalist plot. He wants a new, socialist-friendly way to measure the economy. Maybe East Germans were better off than their cousins in the West when the Berlin Wall fell; starving North Koreans are really better off than their relatives in South Korea; the 300 million Chinese lifted out of abject poverty in the last three decades were better off under Mao; and all those Cubans risking their lives fleeing to Florida on dinky boats are loco.

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Chad Crowe
There is historical precedent for a "socialist GDP." When President George H.W. Bush sent me to help Mikhail Gorbachev with economic reform, I found out that the Soviet statistics office kept two sets of books: those they published, and those they actually believed (plus another for Stalin when he was alive).

In Argentina, President Néstor Kirchner didn't like the political and budget hits from high inflation. After a politicized personnel purge in 2002, he changed the inflation measures. Conveniently, the new numbers showed lower inflation and therefore lower interest payments on the government's inflation-linked bonds. Investor and public confidence in the objectivity of the inflation statistics evaporated. His wife and successor Cristina Kirchner is now trying to grab the central bank's reserves to pay for the country's debt.

America has not been immune from this dangerous numbers game. Every president is guilty of spinning unpleasant statistics. President Richard Nixon even thought there was a conspiracy against him at the Bureau of Labor Statistics. But President Barack Obama has taken it to a new level. His laudable attempt at transparency in counting the number of jobs "created or saved" by the stimulus bill has degenerated into farce and was just junked this week.

The administration has introduced the new notion of "jobs saved" to take credit where none was ever taken before. It seems continually to confuse gross and net numbers. For example, it misses the jobs lost or diverted by the fiscal stimulus. And along with the congressional leadership it hypes the number of "green jobs" likely to be created from the explosion of spending, subsidies, loans and mandates, while ignoring the job losses caused by its taxes, debt, regulations and diktats.

The president and his advisers—their credibility already reeling from exaggeration (the stimulus bill will limit unemployment to 8%) and reneged campaign promises (we'll go through the budget "line-by-line")—consistently imply that their new proposed regulation is a free lunch. When the radical attempt to regulate energy and the environment with the deeply flawed cap-and-trade bill is confronted with economic reality, instead of honestly debating the trade-offs they confidently pronounce that it boosts the economy. They refuse to admit that it simply boosts favored sectors and firms at the expense of everyone else.

Rabid environmentalists have descended into a separate reality where only green counts. It's gotten so bad that the head of the California Air Resources Board, Mary Nichols, announced this past fall that costly new carbon regulations would boost the economy shortly after she was told by eight of the state's most respected economists that they were certain these new rules would damage the economy. The next day, her own economic consultant, Harvard's Robert Stavis, denounced her statement as a blatant distortion.

Scientists are expected to make sure their findings are replicable, to make the data available, and to encourage the search for new theories and data that may overturn the current consensus. This is what Galileo, Darwin and Einstein—among the most celebrated scientists of all time—did. But some climate researchers, most notably at the University of East Anglia, attempted to hide or delete temperature data when that data didn't show recent rapid warming. They quietly suppressed and replaced the numbers, and then attempted to squelch publication of studies coming to different conclusions.

The Obama administration claims a dubious "Keynesian" multiplier of 1.5 to feed the Democrats' thirst for big spending. The administration's idea is that virtually all their spending creates jobs for unemployed people and that additional rounds of spending create still more—raising income by $1.50 for each dollar of government spending. Economists differ on such multipliers, with many leading figures pegging them at well under 1.0 as the government spending in part replaces private spending and jobs. But all agree that every dollar of spending requires a present value of a dollar of future taxes, which distorts decisions to work, save, and invest and raises the cost of the dollar of spending to well over a dollar. Thus, only spending with large societal benefits is justified, a criterion unlikely to be met by much current spending (perusing the projects on recovery.gov doesn't inspire confidence).

Even more blatant is the numbers game being used to justify health-insurance reform legislation, which claims to greatly expand coverage, decrease health-insurance costs, and reduce the deficit. That magic flows easily from counting 10 years of dubious Medicare "savings" and tax hikes, but only six years of spending; assuming large cuts in doctor reimbursements that later will be cancelled; and making the states (other than Sen. Ben Nelson's Nebraska) pay a big share of the cost by expanding Medicaid eligibility. The Medicare "savings" and payroll tax hikes are counted twice—first to help pay for expanded coverage, and then to claim to extend the life of Medicare.

One piece of good news: The public isn't believing much of this out-of-control spin. Large majorities believe the health-care legislation will raise their insurance costs and increase the budget deficit. Most Americans are highly skeptical of the claims of climate extremists. And they have a more realistic reaction to the extraordinary deterioration in our public finances than do the president and Congress.

As a society and as individuals, we need to make difficult, even wrenching choices, often with grave consequences. To base those decisions on highly misleading, biased, and even manufactured numbers is not just wrong, but dangerous.

Squandering their credibility with these numbers games will only make it more difficult for our elected leaders to enlist support for difficult decisions from a public increasingly inclined to disbelieve them.

Mr. Boskin is a professor of economics at Stanford University and a senior fellow at the Hoover Institution. He chaired the Council of Economic Advisers under President George H.W. Bush.

UBS advisors finally get "retained"....still no WF.

By Matt Townsend

Dec. 10 (Bloomberg) -- UBS AG, Switzerland’s largest bank, will award bonuses to veteran financial advisers in the lender’s Americas wealth-management unit as it tries to retain brokers, according to a financial recruiter.

Advisers at the firm at least five years and with more than $500,000 in revenue next year are eligible for a year-end bonus of 65 percent of their prospective production in 2011, according to Mindy Diamond, president of Chester, New Jersey-based Diamond Consultants LLC, who said she spoke with UBS advisers. The bonus would be in the form of a loan that would be forgiven if the employee stays with the firm for seven years, she said.

The Zurich-based lender hired Robert McCann, the former president of global wealth management of Merrill Lynch & Co., in October as head of wealth management in the Americas to revive a business unit that posted a 41 percent drop in earnings in the third quarter.

“It’s a noble sentiment,” Diamond said. “They’ve recognized they need to do something to stave off attrition, but it’s a little too little, too late.”

Brand-name brokerages are under pressure to retain and attract financial advisers following upheaval in the industry as the global credit crisis caused brokers to move to independent and smaller firms.

Morgan Stanley Smith Barney and Bank of America Corp.’s Merrill Lynch wealth-management unit both responded by offering as much as 330 percent of a broker’s revenue in the past year to switch firms. UBS hasn’t announced a new recruiting deal since McCann’s arrival.

‘Perfect Storm’

“It’s the perfect storm for people to move,” Diamond said. “If you can get 330 percent from Morgan Stanley and you are only being paid 65 percent and you have to wait 13 months to get it with UBS and still take seven years to vest, why would you stay?”

“This new paradigm for compensation is aligned with our renewal efforts and our vision of becoming the best wealth- management firm in the Americas,” UBS said in response to an e- mail message seeking comment.

The Financial Times reported the UBS plan earlier today on its Web site.

Investors at UBS’s wealth-management units withdrew a net 26.6 billion francs ($25.9 billion) in the third quarter, up from 23.3 billion francs in the second quarter, after UBS agreed in August to disclose information on accounts to settle a U.S. lawsuit related to tax evasion.

UBS amassed more than $50 billion in writedowns and losses during the financial crisis, the most of any European bank, and had to turn to the Swiss government a year ago for a 6 billion- franc injection. The bank last year reported a net loss of 21.3 billion francs, a record in Swiss corporate history.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

Count me as a.....BELIEVER!!!!

Apple’s Game Changer, Downloading Now

By JENNA WORTHAM
IAN LYNCH SMITH, a shaggy-haired ball of energy in his late 30s, beams as he ticks off some of the games that Freeverse, his little Brooklyn software company, has landed on the iPhone App Store’s coveted (and ever-changing) list of best-selling downloads: Moto Chaser, Flick Fishing, Flick Bowling and Skee-ball.

Skee-ball, Mr. Smith says, took about two months to develop and deploy and then raked in $181,000 for Freeverse in one month. The company’s latest bid for App Store fame? A game featuring a Jane Austen character in a lacy dress who karate-chops her way through hordes of advancing zombies.

“There’s never been anything like this experience for mobile software,” Mr. Smith says of the App Store boom. “This is the future of digital distribution for everything: software, games, entertainment, all kinds of content.”

As the App Store evolves from a kitschy catalog of novelty applications into what analysts and aficionados describe as a platform that is rapidly transforming mobile computing and telephony, it is changing the goals and testing the patience of developers, bolstering sales of the Apple motherships the applications ride upon — the iPhone and iPod Touch — and causing Apple’s competitors to overhaul their product lines and business models. It even threatens to open chinks in Apple’s own corporate armor.

Thanks in large part to the iPhone, introduced in 2007, and the App Store, which opened its doors last year, smartphones have become the Swiss Army knives of the digital age.

They provide a staggering arsenal of functions and tools at the swipe of a finger: e-mail and text messaging, video and photography, maps and turn-by-turn navigation, media and books, music and games, mobile shopping, and even wireless keys that remotely unlock cars.

“Apple changed the view of what you can do with that small phone in your back pocket,” says Katy Huberty, a Morgan Stanley analyst. “Applications make the smartphone trend a revolutionary trend — one we haven’t seen in consumer technology for many years.”

Ms. Huberty likens the advent of the App Store and the iPhone to AOL’s pioneering role in driving broad-based consumer adoption of the Internet in the 1990s. She also draws comparisons to ways in which laptops have upended industry assumptions about consumer preferences and desktop computing. But, she notes, something even more profound may now be afoot.

“The iPhone is something different. It’s changing our behavior,” she says. “The game that Apple is playing is to become the Microsoft of the smartphone market.”

The popularity of Apple’s app model has reached a fever pitch. Tens of thousands of independent developers are clamoring to write programs for it, and the App Store’s virtual shelves are stocked with more than 100,000 applications. Apple recently said that consumers had downloaded more than two billion applications from its store.

Major players like Research in Motion (maker of the BlackBerry), Palm (maker of the Pre), Google (maker of the Android mobile operating system) and Microsoft (maker of Windows Mobile) are taking note and scrambling to replicate the App Store frenzy.

App fever has even prompted cities like New York and San Francisco to open reservoirs of city data to the public to spur software developers to create hyperlocal applications for computers and phones.

One need not look further than the lobby of Apple’s headquarters in Cupertino, Calif., to see that the iPhone and applications that run on it are centerpieces of the company’s mobile strategy. Planted squarely in the lobby of the main office, at 1 Infinite Loop, is an impressive, 24-foot-wide array built out of 20 LED screens populated with 20,000 tiny, brightly colored icons.

As Philip W. Schiller, head of worldwide product marketing at Apple, describes how the wall works — each time an application is purchased, the corresponding icon on the electronic billboard jiggles, causing its neighbors to ripple in unison — he, too, becomes animated.

Normally reserved and on message, Mr. Schiller waves his hands back and forth and allows his voice to ascend into giddy registers as he speaks about the potential unleashed by the App Store.

“I absolutely think this is the future of great software development and distribution,” Mr. Schiller says. “The idea that anyone, all the way from an individual to a large company, can create software that is innovative and be carried around in a customer’s pocket is just exploding. It’s a breakthrough, and that is the future, and every software developer sees it.”

APPLE cloaks most of its inner workings in a shroud of secrecy — a tactic that has helped preserve the company’s mystique and generate intense interest in its product rollouts.

But the App Store relies on vast cadres of outside developers to populate its virtual shelves with products, leaving Apple in the unfamiliar and at times uncomfortable position of having to collaborate with folks who haven’t drunk the company’s corporate Kool-Aid.

This has led Apple to be deeply supportive of developers once shunned by big telecommunications companies, while also frustrating many of them more recently with what developers see as the company’s inscrutable and arbitrary process for accepting programs into the App Store.

Apple frames the issue differently.

“I think, by and large, we do a very good job there,” Mr. Schiller said. “Sometimes we make a judgment call both ways, that people give us feedback on, either rejecting something that perhaps on second consideration shouldn’t be, or accepting something that on second consideration shouldn’t be.”

For Apple, the review process is a necessary evil. The company places high value on what it describes as “customer trust,” or the idea that users have faith that an application distributed on the iPhone won’t crash the platform, steal personal information or contain illegal content.

Mr. Schiller says the majority of applications sail through the review with no difficulty, and those that do require greater scrutiny are largely those that are slowed down by bugs or glitches in the coding.

“We care deeply about the feedback, both good and bad,” he says. “While there are some complaints, they are just a small fraction of what happens in the process.”

Apple says it receives more than 10,000 application submissions each week. Most become available in the App Store within two weeks (creating yet another problem: the difficulty consumers have in efficiently and effectively trolling through 100,000 apps to find hidden gems they hadn’t known about).

Still, the App Store is markedly better than the alternative, says Peter Farago, a marketing executive at Flurry, a mobile analytics company in San Francisco. Gone are the days when mobile developers had to negotiate with major telecommunications companies if they had any hopes of publishing their applications on a mobile phone.

“It took six to nine months to build a relationship with a carrier, maybe a quarter-million to get the infrastructure built, and the company took 50 percent or more from each dollar,” Mr. Farago says, a process that limited access to mobile platforms. “Apple has helped create a much healthier middle class of developers and expanded the pie for everyone.”

Apple pockets 30 percent of the revenue earned by any App Store program, with developers keeping the balance. Although barriers to entry for software developers have dropped considerably, Mr. Farago acknowledges that “friction points have changed.”

Developers now cite instances in which applications have been held in approval limbo, neither accepted nor rejected for months. And as bigger companies begin churning out programs, the smaller, garage-size outfits worry that they will be squeezed out.

FreedomVoice Systems, a company in San Diego, couldn’t wait to roll out a mobile version of its telephone software for the iPhone. The company submitted an application to the App Store last year and excitedly waited. And waited. And kept waiting.

“We’re facing 396 days with no contact from Apple,” says Eric Thomas, chief executive of FreedomVoice. “The app has been ‘pending’ in the App Store for a year.”

Mr. Thomas says he understands that it is Apple’s decision whether to accept his app. “But the idea they wouldn’t tell us it was a no — or even why — so we could try to do something about it,” he said, “is a very strange and unneighborly approach.”

Freeverse, which Mr. Smith founded in 1994, also creates games and desktop programs for computers. But like legions of other software developers, the company shifted its focus to the iPhone as the popularity of the device skyrocketed. But that doesn’t mean it’s been an easy road to riches.

“For our size and seriousness, we are still treated like a college freshman who is doing this as a side project,” Mr. Smith says. “The trade-off being that there is a much lower barrier to entry for developers. Anyone can have a shot.”

No one knows that better than Cerulean Studios, a software firm in Brookfield, Conn. After e-mail generated only automated responses from Apple for three months, Cerulean got a call in November from an Apple employee.

“He didn’t say much, just that our app would be going live in the App Store that afternoon,” recalls Scott Werndorfer, a co-founder of Cerulean. “We knew what we were getting into with Apple. They want everything to be pixel perfect, and you have to play ball by their rules.”

Some Apple developers are willing to go to greater lengths — underground — to avoid dealing with Apple’s policies and to get their software out quickly and on their own terms. To do that, they create programs for “jailbroken” iPhones and iPod Touches. Such devices are modified to allow anyone to upload a program onto them, which Apple says is illegal.

“Developers are just tired of the review process and navigating opaque hurdles,” says Mario Ciabarra, who operates Rock Your Phone, an online storefront containing a small catalog of applications for jailbroken iPhones. “They’ve been defecting to the jailbroken community or other platforms, such as Android. That demand has created the marketplace for our products and attracted developers.”

Mr. Ciabarra says about 1.5 million iPhones have visited his storefront, an impressive figure though still a small fraction of the 50 million iPhones and iPod Touches that Apple says it has sold.

As the App Store has matured, so has the need to come up with more sophisticated ways to profit from it. Simply having a great application is not enough. Bart Decrem, chief executive of Tapulous, a start-up company that publishes musical rhythm games, recalls the early days when it was enough to develop a shiny application that used the iPhone.

The company’s first game, Tap Tap Revenge, was available in the App Store when it opened in 2008. It quickly climbed the store’s charts, and Apple eventually ranked it as the most popular free iPhone game that year.

These days, Mr. Decrem says, that kind of instant and relatively easy success is much rarer because more companies are competing in the App Store. They include giant game publishers like Electronic Arts, which recently released a version of its popular video game Rock Band for the iPhone.

“It’s still the Wild West, but the stakes are higher,” Mr. Decrem says.

Tapulous has begun working with record labels and musicians to introduce paid special editions of Tap Tap Revenge featuring big-name artists. “Simply selling applications is ultimately not a scalable model,” he says.

IT’S unclear how concerned Apple is about some of the tensions swirling around the App Store. The company’s App Store policies have faced criticism — and even prompted a Federal Communications Commission investigation of Apple’s decision to reject an iPhone application developed by Google, which is still under way. Critics say they wonder whether the company can be trusted to maintain a fair marketplace, especially when developers release products that could compete with Apple’s current or future line of products.

Apple runs the App Store under the aegis of its iTunes unit (the operation that, wedded to the iPod, transformed music downloading in a way that analysts say the App Store, wedded to the iPhone, is now transforming mobile computing).

“A rocket ship is even too small of an analogy,” says Eddy Cue, Apple’s vice president for iTunes, of the App Store’s popularity. “We’ve been able to leverage a lot of our iTunes technology for the App Store. But it’s completely different. We’re reviewing all of those apps. We really don’t have to review each and every song.”

Apple executives are quick to point out the importance of ensuring that third-party applications run smoothly and provide a high-quality experience for users.

“Our goal is very simple: We want to have the best platform for applications that there has ever been on any product,” notes Mr. Schiller, the marketing executive. “We know we’re not perfect, but we know we’re better than anything else that has been and we want to keep improving it.”

Apple says it has increased the number of product reviewers working on the App Store and has tried to improve and streamline the way it communicates with developers.

The App Store’s success — as much a surprise to Apple as it has been to competitors — has given rise to a new digital ecosystem. Today, hundreds of software aspirants, from individuals tinkering in their bedrooms late at night to established companies looking for lucrative new revenue streams, are jumping into the App Store fray.

And smartphone manufacturers across the board are trying to make their platforms more attractive and lucrative to bring in the kind of creativity and enthusiasm that Apple has.

It’s easy to see why: Although Apple doesn’t release specific financial figures for the App Store, analysts estimate that it generates as much as a billion dollars a year in revenue for Apple and its developers.

At a recent conference in San Francisco organized by Research in Motion for BlackBerry developers, the company said it would make several changes to its mobile operating system to increase the kinds of applications developers can create for its devices, including allowing advertising and e-commerce within applications. Jim Balsillie, a co-chief executive of Research in Motion, says he isn’t focusing on the sheer number of apps available on a BlackBerry (3,000) but on their utility.

“Is it about 20,000 apps or 200,000 apps or is it about changing those 20,000 apps and their deep integration and how they interrelate to one another?” asks Mr. Balsillie. “We’re much more interested in changing the applications and changing the user experience and really unlocking the promise and the money and revenue opportunity for the ecosystem.”

Regardless, says Mr. Balsillie, apps and smartphones have created a new playing field.

“It’s inevitable that all cellphones will be smartphones,” he says. “There will be more services and new ways to monetize and more consumption. Growth is a given; it’s just a question of who is going to innovate in the right way to drive that value proposition to capture that growth.”

ALTHOUGH Palm is still rolling out the e-commerce portion of its own app store, called the App Catalog, the company hopes to draw developers to write for Palm devices like the Pre because Palm’s operating system, called webOS, is based largely on the same programming languages used to create Web sites — meaning developers are already familiar with the tools they will need to create mobile apps.

So far, however, Palm offers 500 applications, a relatively slim selection compared with the iPhone, and many analysts believe that this has made the device less attractive to consumers. Palm, like Research in Motion, says it doesn’t need an avalanche of applications to compete.

“Two years ago, the iPhone blew away expectations for what mobile devices are capable of. And mobile devices and applications are the future of the computing industry,” says Ben Galbraith, co-director of Palm’s developer relations team. “But the market is becoming saturated with a large volume of applications. When you’re number 50,000 out of 200,000, how do you survive?”

Palm says it is offering a breezier review process to developers — including allowing them the option of submitting their programs as candidates for Palm’s App Catalog or immediately publishing their applications in a third-party, online storefront — which may help it avoid some of the conflicts plaguing Apple’s relationship with developers.

Meanwhile, Microsoft, which analysts have criticized for its sluggish approach to the smartphone market, also says it is emphasizing quality for the application store it introduced in October, Windows Marketplace for Mobile.

“Our strategy is to look holistically at how we can provide the best all-around user experience,” says Victoria Grady, director of mobile strategy at Microsoft. The Marketplace now has more than 800 apps.

Many developers and analysts think Google’s mobile operating system, most recently placed in the Motorola Droid, may evolve into the fiercest competitor to the iPhone. Unlike Apple, Google has eschewed a review process, allowing any developer to publish an application to the Android Marketplace, its version of the App Store, instantly. About 14,000 applications are available for Android-powered smartphones.

“We’re doing everything we can to open the device to both developers and consumers,” says Eric Chu, group manager of the Android platform at Google. “That is a critical part of what we think makes Android unique: applications are no longer limited to a single device.”

Mr. Chu said the growing number of Android-powered phones available on multiple wireless carriers increases the financial opportunity for developers. “Last year at this time, we only had one device,” he says. “The volume is going up at a tremendous pace, and the developer ecosystem is seeing that.”

Besides being a business opportunity for all of these companies, apps offerings may also be a matter of survival in a make-or-break market. Apple has another strong advantage: the iPhone offers developers a uniform, standard platform.

“When we create an application for the iPhone, you know it’s going to run exactly as you tested it on every single model,” says David Lieb, co-founder of Bump Technologies, which creates software that lets users share contact information by tapping two phones together. “The same isn’t true for the rest of the smartphones, which have varying screen sizes, processor speeds and form factors.”

HOWEVER the competitive landscape shapes up, the App Store phenomenon shows no signs of slowing. IDC, a technology research firm, predicts that the number of iPhone apps will triple next year, fueled by the growing popularity of smartphones and other mobile devices. Along the way, analysts say, the App Store will continue to upend the architecture of the smartphone business and threaten competitors that don’t have vibrant and extensive offerings.

The way the industry once operated, “Each handset company would come up with its latest iterations and maybe have the hottest device of the season or not,” says Ms. Huberty, the Morgan Stanley analyst. “Enter apps into the equation, and that changes. It goes from being a product cycle game to a platform game.”

“People will look back on the iPhone as a turning point in the industry,” says Craig Moffett, a telecom analyst with Sanford C. Bernstein. “The iPhone will be remembered as the first true handheld computer.”

McCann vs. Merrill

Take a look at this video from CNBC and Mr. Gasparino.


http://www.cnbc.com/id/15840232?video=1325726767&play=1

Interesting dynamic.

McCann and UBS.....should be interesting.

Robert J. McCann reported for work at UBS Tuesday in Weehawken, N.J. After weeks of rumors about his appointment, the firm announced it had hired him as CEO of its wealth management operations for the Americas early Tuesday morning. McCann was freed to go back to work several weeks ago, following a legal settlement with former employer Bank of America over a non-compete agreement. The announcement of McCann’s hire was delayed until today, however, because he was only approved by the firm’s board Monday night.

In an interview with Registered Rep., McCann said the wealth management division would not be put on the block, despite rumors that UBS is dressing it up for sale to boost its capital position. He also vowed to cut costs for the unit, and raise pre-tax profit margins to 15 percent over the course of “the economic cycle.” The Americas division posted a pretax loss for the second quarter of CHF221 million, and has lagged behind other divisions of the bank in profitability. The firm also posted net client asset outflows of 5.8 billion francs for the quarter, which is down from the prior quarter. The firm is expected to post a loss for the third quarter next week.

McCann carefully skirted the question of whether he would recruit financial advisors or other talent from Merrill Lynch. “Here is what I am not interested in doing. I am not interested in creating Merrill 2.0,” said McCann. “What worked for us at Merrill and other businesses over the past 25 years or so was great for that time, and it was great for that company. But what I want to do here is build a culture and a business for this present time, and our position today in the marketplace.”

McCann said for the time being his focus would be on the financial advisors already at UBS, where employee morale and client trust are at a low following the firm’s trouble over Swiss accounts with the IRS. “Will I, in time, look across the industry for other talented people, to make them part of this company?” asked McCann. “Yes, I sure will. I sure will. So, it will be a combination of people who are here today, and people from across the industry—this will be the leadership team and the production team here at UBS.”

In the Registered Rep. interview, McCann said he will spend the next 30 to 60 days immersing himself in details of the firm, putting together a transition team, which will include executives from the ranks of UBS, and defining the best strategy and organizational structure for the division. McCann also plans to visit UBS advisors around the country to get to know them. He enjoys interacting with people, he said, and these visits should help him gather information about the firm and build a strong company culture.

McCann takes the helms at UBS wealth management with mostly positive reviews from his past career at Merrill. Dick Bove, an analyst at Rochdale Securities, said in a people business like brokerage, leadership can make a significant difference in the overall success of a company like UBS. “Not everyone is equal and not everyone has the same drive and the same ability to communicate, to innovate and to be creative,” he said.

McCann settled with his former employer Bank of America, parent company of Merrill Lynch, just a few weeks ago over a non-compete agreement that would have prevented him from returning to work until 2010. Before his departure in January of last year, McCann had worked at Merrill for 26 years. The UBS wealth management unit employs close to 8,000 financial advisors, roughly half the size of the thundering herd McCann once led at Merrill Lynch.

McCann comes aboard following a tax lawsuit UBS settled this year between the U.S. and Switzerland, involving 52,000 secret Swiss accounts, as well as controversy over products, including a blow-up in auction rate securities. Then there is the morale of advisors and employees, which took a hit like at other firms, and must be restored too at UBS for McCann to push through his growth agenda.

Art Cashin......gotta love the ole workhorse!

The stock rally could have legs after a line of better-than-expected third-quarter earnings reports, but Art Cashin, head of floor operations at UBS, said he isn't yet convinced.

"The banquet looks stupendous, I hear the wine is great," he said. "You guys can party on, but some of us are going to sit on the sideline like wallflowers."

Cashin said he doesn't think the economy is moving as much as data shows, and he's worried there are billions of dollars in excess reserves from people not borrowing.

He added that although it's difficult to compare today's environment with any other time in history, it reminds him of the dot-com bubble, when people refused to believe the markets would go anywhere but up.

More Market Intelligence:

• JPMorgan Banking Peers Look Good Now: Equity Pro
• Use VIX to Protect Gains — Don't Trust Rally: Strategist

"I said, 'I've never heard of a tree growing straight to Heaven except in Jack in the Beanstalk and that was a fairy tale,'" he said. "And unfortunately [the bubble] turned out to be that way."

Cashin said he is beginning to see a pattern of component makers such asIntel [INTC 20.82 0.33 (+1.61%) ] performing well, while end-use makers like Johnson & Johnson [JNJ 60.49 -0.52 (-0.85%) ] struggle.

Job Creation 101.....Do they get it???

The White House is finally coming to realize that taxes affect job creation. Terrific. Its solution seems to be to bribe employers for hiring new workers, albeit only for a couple of years. Less than terrific.

Alarmed by the rising jobless rate, Democrats are scrambling to "do something" to create jobs. You may have thought that was supposed to be the point of February's $780 billion stimulus plan, and indeed it was. White House economists Christina Romer and Jared Bernstein estimated at the time that the spending blowout would keep the jobless rate below 8%.

The nearby chart compares the job estimates the two economists used to help sell the stimulus to the American public to the actual jobless rate so far this year. The current rate is 9.8% and is expected to rise or stay high well into the election year of 2010. Rarely in politics do we get such a clear and rapid illustration of a policy failure.

This explains why political panic is beginning to set in, and various panicky ideas to create more jobs are suddenly in play. The New York Times reports that one plan would grant a $3,000 tax credit to employers for each new hire in 2010. Under another, two-year plan, employers would receive a credit in the first year equal to 15.3% of the cost of adding a new worker, an amount that would be reduced to 10.2% in the second year and then phased out entirely. Why 15.3%? Presumably because that's roughly the cost of the payroll tax burden to hire a new worker.

The irony of this is remarkable, considering the costs that Democrats are busy imposing on job creation. Congress raised the minimum wage again in July, a direct slam at low-skilled and young workers. The black teen jobless rate has since climbed to 50.4% from 39.2% in two months. Congress is also moving ahead with a mountain of new mandates, from mandatory paid leave to the House's health-care payroll surtax of 5.4%. All of these policy changes give pause to employers as they contemplate the cost of new hires—a reality that Democrats are tacitly admitting as they now plot to find ways to offset those higher costs.

Alas, their new ideas are little more than political gimmicks that aren't likely to result in many new jobs. Congress doesn't want to give up revenue for very long, so it would make the tax credits temporary. Thus anyone who is hired would have to be productive enough to justify the wage or salary after the tax-credit expires—or else the job is likely to end. An employer would be better off hiring a temp worker and saving on the benefits for the same couple of years.

The tax credit would also inevitably go to some employers already planning to hire, or reward companies that lay off some workers only to hire others to take advantage of the tax credit. And it would reward parts of the country that are growing, such as Texas, at the expense of those that aren't, such as Michigan. In other words, it is a very inefficient business subsidy.

We know all this because a new jobs tax credit has already been tried—in the Carter Administration. In 1977 as he entered the White House, Jimmy Carter proposed a jobs credit and a Democratic Congress passed it. Its unfortunate history was recounted in 1980 by then-Treasury official Emil Sunley in a chapter of "The Economics of Taxation," a book edited by Henry Aaron and Michael Boskin for the Brookings Institution.

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Associated Press

A job fair sponsored by the National Urban League in Louisville, Ky., Tuesday, Sept. 15, 2009.

As Mr. Sunley summarized: "The impact of the credit on jobs was slight. In many firms those who make hiring decisions did not understand the firm's tax status." He added that, "Because the capital stock is fixed in the short run, to increase employment significantly, demand for output must increase. An incremental tax cut tied to employment will not by itself generate that increase in demand. Moreover, a temporary incremental credit is unlikely to affect significantly the long-run substitution of labor for capital." Call this Job Creation 101.

President Obama first floated the hiring credit in January, but it died after opposition from Democrats who seemed to get the joke. "If you have a company and you're selling fewer shingles, $3,000 isn't going to get you to hire somebody when your sales are shrinking," said Senator Chuck Schumer. Yet now even some Republicans, such as House GOP whip Eric Cantor, are saying they're receptive to the idea. Mr. Cantor ought to know better.

The lack of U.S. job creation is a big problem, but the quickest way Washington could help would be to stop imposing more financial burdens on hiring. And if Democrats really want to reduce taxes on labor, the cleanest way would be to reduce the payroll tax rate. They could finance a permanent payroll cut by using the $300-$400 billion or more in unspent stimulus money, rather than continuing with the transfer payments and pork barrel spending that have failed so miserably to create jobs.