Omni Hotels – GHA Giveaway

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Osama bin Laden is Dead

Now that Osama bin Laden is dead, we really have to think about what the means to us Americas. First, the world is no more safe than it was 48 hours ago. Bin Laden represented a ‘symbol’ for al Qaeda not an operational leader. Second, you must understand that killing bin Laden can have one of two effects (1) Cutting off the head can kill the snake or (2) Two more can grow in it’s place.

For years there has been numerous stories about several al Qaeda ‘leaders’ wanting to get away from the Osama bin Laden belief of living off the history of 9/11 and move towards the fear of new attacks. We could see al Qaeda implode as an organization or explode with new attacks, new recruits, and new energy.

Max Borders on Regulation (Response)

The general theme of Mr. Border’s video on the growth of a new “Regulatory State,” gives me reason for concern. Unfortunately, Mr. Border tries to tie his personal experience with selling barbeque sauce, with special interests who are working to increase regulation for their big corporate clients. I think that it is important to split these two streams of thought.

At the local level, there needs to be a standard level of regulation to protect citizens from people, companies, and/or products, especially food products, which do not have safety as their number one concern. I have not heard many complaints about health inspectors “blocking” entrepreneurs’ dreams by requiring that they have the minimum level of standards in place and documents signed. This would be similar to the home child care entrepreneur who complains about the state requiring that she be properly licensed before accepting kids into her home. There is a real-world example of this “failure of compliance” occurring in Houston right now where four kids were killed in a fire by a loosely regulated care giver. Should the state have given her more freedom to “create wealth” for her family? Should she be applauded for starting a business and not collecting a welfare check? Absolutely not.

On the national front, there is not a Fortune 500 CEO who has honestly and publically defended more regulation for regulation sake. Regardless of how it erects barriers to entry for the little guys, they do not support increased regulation of any industry in which they stand to make a profit in. The proof is in the millions of dollars spent on lobbyists by big corporations to shape bills (i.e. curb regulation) to their liking. When a CEO does appear to side with the Government on a particular piece of legislation, it is usually because they have found a loophole and they plan to exploit it. They have little concern about a guy making sauce in his kitchen and how they are going to thwart his plans to feed his family.

As far a “something big happening in the media” goes, increased regulation is a byproduct of private industry not policing themselves. Whether it’s financial CEOs who bilk the country for billions and walk away with golden parachutes; or a large volume OTC pain medicine that increases the risk of stroke and heart disease; when companies have not put in place adequate systems in place to protect consumers, the Government must step in.

In conclusion, while I agree that in some industries, the pendulum has swung too far in the area of regulation, we should not be so rash to confuse basic protection with excessive legislation. Regulation also protects the legitimate business who took the time to get licensed and inspected before selling a product to the consumer. Those that do not comply “in protest” are not only breaking the law they are turning their backs on everything that America stands for.

Goodwin on the Freedom to Fail (Response)

I think that Mr. Goodwin makes some good points, but he bases his whole argument on this notion of “Social Promotion” that he thinks is occurring in our primary schools around the country. What Mr. Goodwin fails to examine is the lack of resources (e.g. teachers, books, and computers) available to the districts that are passing students who have not “mastered” the material. The teachers that I know have never defended passing a student without merit. However, I have also been in countless discussions with them on how the student to teacher ratio has increased to the point that they are physically unable to teach each student to the level of mastery.

So who is to blame? Is it the teachers, parents, administrators, or even the students themselves who have failed? Mr. Goodwin seems to think that it is some social or political attitude that subjects our educational system. We as a society have accepted that our students are “dumber” than other countries so we collectively “boost the students’ self-esteem” by pushing them along to a high school diploma that they do not deserve. These are good talking points on cable television, but the fact is, to the extent that it is occurring, it probably affects less than two percent of high school graduates. I base this on the abysmally low graduation rates (68 percent, as low as 50 percent in some groups) and the high dropout rates (eight percent, as high as 16 percent in some groups) around the country. For graduation rates alone, the United States has experienced a ten percent decline in the past three decades. If “Social Promotion” is taking place in America and it is ruining our Country by not giving our children the “Freedom to Fail,” then how do you explain the figures I mentioned above?

Let us now look at the after graduation statistics: If we determine that a certain number of students are being allowed to graduate high school without merit, then their lack of basic math, science and reading skills will affect the way they behave in adulthood. Essentially, the United States workforce will be woefully under-educated in comparison to other countries. This does not translate in the real world. While it is true that some foreign students study more than Americans, America has more entrepreneurs and patents per capita than China and India combined. Even at this stage, Americans still have the freedom to fail, but it is not as bad as what is often reported. The SBA most recently said that roughly 70 percent of new businesses survive for more than two years and 50 percent last more than four years.

In conclusion, any criticisms levied against the United States educational system without an equal discussion of solutions for improvement, are not productive and should be taken with a grain of salt. Unless a concentrated effort is undertaken by all stakeholders, no progress will ever be achieved.

Has the Market Recovered

It appears to all involved that the U.S. stock market has made a miraculous recovery and we are never looking back. Should we be so overly optimistic? It’s one thing to stay positive and quite another to forget your history.

Bear Market Rally or Dead Cat Bounce

Watching “The Kudlow Report” last night was almost surreal.  It seems that everyone has forgotten about the last 18 months of economic destruction that has taken place in the Country behind a one-day “bounce” in the stock market.  People are now talking that the bottom has been reached; we are on the way out of the recession; and these are not Govt officials or CNBC talking heads, but supposedly legitimate investment professionals who have many years of experience.

 

Let me give you four reasons why the stock market will continue its march to 5000 over the next 8 months:

 

1)      All the ARM and other adjustable mortgages have not yet went into default.  Experts estimate another $200B-$400B worth of mortgages are trending towards default and ultimately foreclosure.  This means the underlying problem – housing – has not been fixed so why the optimism?

 

2)      People still cannot get credit so the auto and real estate industry will continue the steady decline into the abyss.

 

3)      Over 600,000 jobs were lost LAST MONTH!  And the pace is increasing not decreasing.  If people are till losing their jobs then how can they contribute to the economy?  If people don’t contribute (i.e. spend) then how will the economy recover?  It won’t.

 

4)      Commercial defaults and bankruptcies are starting to rise.  Businesses with no “business” go bankrupt.  When they have no money to pay their employees or keep the lights on then they also have no money to repay their loans and credit lines.  Experts predict a possible $1 trillion in defaults from the commercial sector in the next 18 months.

 

My question to the investment “professionals” who failed to see the recession coming, does this sound like a recovery to you???

Where the Hell is Paul Krugman?

As much as I admire the President, it seems that he is not filling key positions with the right people for the job. Paul Krugman should have been Treasury Secretary because Tim Geithner sat as head of the New York Fed since 2003 and did nothing to prevent the crisis. Krugman might be an opinonated SOB, but that makes it more worthwhile to put him in the hot-seat and let him figure this out. Or forever shut him up.

Oh yeah, Krugman also won the Nobel in Economics and wrote the book on Depression Economics in 1999. (updated in 2008) So he must know something about the topic.

Besides it looks like ol’ Tim is up to Hank Paulson’s tricks again by helping his friends on Wall Street and backhanding the U.S. taxpayers.

House Passes Stimulus Bill; Again

And no Republicans voted for it; again.  It seems that the  Republicans want President Obama to fail so bad that they are willing to let the country sink into an even deeper recession.  Or are they?  All Republicans know that their votes are not needed to pass the bill in the House.  So voting “nay” does not mean anything in the short term.  What they are hoping for is that the stimulus would not do much to uplift the economy over the next year and half — which would give them plenty of ammunition to shoot at thier Democratic opponents in the mid-term elections.  The Senate vote is more critical.

Dems need at least three Republicans to join them before the bill can pass.  This should not be a problem because they go the three votes when the bill was $838 billion.  Stay tuned.

To Infinity And Beyond (or Obama’s Stimulus Package)

It seems that the magic number for Presidnet Obama’s stimulus package keeps growing as each day passes.  It started at $500B, then $675, and now the media claims that Obama told Nancy Pelosi that $775B is the lucky number.  I think that he should take the $300B in tax cuts and tack them on-top of the stimulus plan and then round the whole thing up to $1 trillion.  This would eliminate the need to come back and forth to Congress for more cash.  Paulson asked for (and recevied) $750B last year from Congress.  Should not the President of the United States be allowed to ask for more?

Job Creation 2.0

When talk of jobs is mentioned, rarely do we hear President-elect Obama break down the different segments of his 2.5m (recently updated 3m) plan.  There are in fact three distinct segments that make up any jobs “creation” statement:

 

Jobs Retained: (my estimate through 2011 = 2.5 million)

This might be the most important segment and must take priority over the others.  With 2.7m+ jobs lost during the past year and 533k lost last month, there must be actions taken to stop the bleeding.  This is where tax policy will have its strongest effect.  Positive change to payroll/corporate and capital gains taxes will enable corporations and entrepreneurs keep the good people they have on board.  The situation in Chicago shows that an owner wants to pay his workers but is unable to thus they resulted in a lock-in.  Sometimes people are caught empty-handed by pure market factors and not by corporate malfeasance.

 

Jobs Filled: (my estimate through 2011 = 2 million)

There a millions of open requisitions at thousands of companies in America.  The problem is that there is no efficient and effective way to match the job seeker with the positions that match their skills.  Even the U.S. Govt has tens of thousands of job postings on Usajobs.com that have been open for months.  Hotjobs.com, careerbuilder.com, jobs.com and many others do not live up to their names for 80% of job seekers.  The Govt must first fine tune its own jobs postings, fill them, and then reach out to other databases and sources.

 

Jobs Created (new): (my estimate through 2011 = 1 million)

This is the trickiest segment of the three.  Even if billions of dollars are poured into highway infrastructure, will there really be new jobs created or will existing contractors use this “new” contract money to retain people?  It could depend on the size of the new contracts.  It could also depend on the contract language and terms that must be included.  I suggest new contracts be written with a clause that requires contractors to hire 1 employee per $200K of contract value.  This could be the silent hand that forces job creation.

 

Given those points, I expect a job target of 5-5.5m is necessary to restore economic confidence in America.  With 2.7m+ lost in the past 12 months, a 3m increase in the next 2 years will have a minimal effect.  I think that HBS Professor Jim Haskett is right in calling for “stretch” management to be instituted at American companies.  In this sense the Govt would be the beneficiary of this GE concept.

 

Your thoughts?