My man for all seasons isn’t as likely canonization beyond the editing rooms of PBS.  His history is seasonal.  He was LBJ’s Press Secretary and he is reported to have been the guy to recommend that Kennedy take the top off for his Dallas motorcade.  His efforts at honest reporting seem consumed by perceived editorial responsibility needs.  Fits right in to the PBS view.

I watched his show last night on the secondary PBS channel run by Chicago City Colleges.  This wasn’t their usual fare.  Although, like all PBS stations, they can surprise all sides at times.  This was one of those nights.  The overlooking term is crony capitalism.  The show featured David Stockmen and Gretchen Morganson and with both appearing under the imprimatur of Mr. Moyers does make for strange bedfellows.

The first part of the show featuring Stockman on Cronyism :

Ms. Morganson’s portion on the “housing bubble”:

While Moyers sounds like some Tea Party bigots/terrorists,  he quickly moves to the Occupy side for comfort.  I’ve remarked that the two side are closer than they are apart and Moyers seems an interesting confirmation.  I’ve noted personally and here that I tend too much toward the negative.   In a Washington where all sides are pointing to the glass and discussing it fullness, Moyers goes beyond my feeble attempts at gloom and doom.

The thing you might take away from these presentations is that all sides are pointing at the current downturn as a feeble warmup to the big one.  In a way that reminds me of Fred Sanford’s oft-repeated warning about the big one.   We’ve always been a nation of pendulum swingers.  That may be a misplaced view on my part.  Things are more critical these days than I can recall in my years.  But, up to now, we’ve always seen that history repeats itself and halts our most egregious excesses in time.

I am keeping my fingers crossed

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The following is a one year chart for ADP.  It is a well run company that was growing in a troubled economy.  It provides payroll and HR resources to business.  With the loss of jobs from the mortgage crisis — jobs relating to its growth — it still exhibited the strength you associate with well run concerns.  The November to May chart exhibit that in a strong trend line that overcame our internal problems by making solid decisions.

If you click on the chart you’ll see a larger and clearer chart.  The moving averages are just what you wanted to see until June. Here is where a lot of EU news kicks in.   Things proceed to tank into August — giving back the profits.  (It is a stock that Amy recommended in the low 40 and suggested selling around 54.)   But now comes chaos and paranoia on a grand scale.  The stock yo-yos like a penny stock.   Volatility is atypical based on a well run company continuing to show decent profits.

What is supposed to  happen is that the markets should reflect the value of a stock.  Well run companies may not have growth like that shown but they will at least show lateral movement.  Poorly run companies with risky business plans are the stock that have regular gaps in price and exhibit the yo-yo patterning.  With success they turn into the more staid business with stability.

ADP has been successful since its inception. Ignoring the split adjusted pricing you see the steady success that well run companies exhibit.  But, the chart also reflect the political/economic disturbances like we are seeing today.  The down trends reflect the world around the company that it has no control over.  The worst decline represent halving the value.  But equally disturbing is the current situation.   Prices gap up and down leaving white space between days.  This is paranoia like we’ve seldom ever seen.

I’ve talked about both technical and fundamentals for the stock.  Fundamentals are the business’ ability to generate a profit and for the management to successfully react to the problems and opportunities presented.  Fundamentally, ADP is close to as good as it gets and has proved itself over decades.   The period since August reflects panic and paranoia  worse than a boiler-room hyped penny stock.   That is very scary to see in ADP.

In tough times a good company should “consolidate” — move laterally for an extended period.   But the current paranoia prevents that.  Looking at ADP is looking at ourselves and the world around us.  You have no idea what comes next.  That isn’t a good place or time.  This isn’t about Fat Cats and Occupy this-n-that.   It is letting that about a company or ones life be controlled by outside forces.  This isn’t about some guy getting Fat Cat status.  It is taking away basic building blocks to success. — your and my success and success for others tomorrow.

Look at the chart.  The last 10 years have basically been thrown away.  With inflation adjustments that is a net loss.  And tomorrow is a total question-mark.

ADDENDUM:

I recently spoke about freedom of speech and that includes hate speech.  That isn’t always a red/blue issue.  The big lie abounds.  I thought that evident in the reverse race card stupidity exhibited by two poster children for the supposed liberal agenda.  I really found it disgusting when it came to my attention.  I’m at best a partial fan of the man.  Frankly, I don’t see a candidate that I find particularly attractive.  That’s as sad and disturbing as the rest of the day’s post.

How to become a Fat Cat

In an application dated October 24, the unincorporated association “Occupy Wall Street” applied for the trademark to “Occupy Wall Street.” The trademark application says the group would like to use the phrase on merchandise such as clothing and bags, in periodicals and newsletters, and on a website featuring “photographic, audio, video and prose presentations” about the Occupy movement.

To quote a missing blogger: Laughter Ensued.

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The thing was that I saw some rough patches.  I’m a well-rusted member of the rust belt.  We’ve had our share of rough patches and I saw us climb back up.  They weren’t as bad as those my parents saw in the great one but I saw and stood in some lines that stretched outside the unemployment offices. I heard Jimmy Carter tell the nation that we needed to lower our expectations.  I sat in the first gas lines.  I saw stupid things like price controls.  And we came through it and things seemed even better than they had been.

Right now things suck.  It looks like the potential toward much worse keeps getting increased odds.  But, folks, that’s been there before and was overcome.   Yes, each time it has been a stiffer climb back.   Bonehead moves seem to grow instead of shrink.  There are serious reasons for lowering current outlook.  That seems always part of the cycle.

The problem isn’t the economy as much as collective expectations.  We’ve let government provide expectations and it is ill-suited to understanding solutions.   Politicians — even tea party folks — are marching in lock-step. We don’t do that well.  We are innovative solution finders.  Not necessarily as a particular person but certainly as Americans.  We have failures; that is expected.  What we can afford is the collective failure that is brought about by government based solutions.  It has repeatedly taken us time to again figure that out.

My history tells me we know how to do it.   But we do need to get started.  And that means rethinking everything that got us here.  I feel optimistic we can again do that.

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We don’t have troubles looking at finances base on our circumstances.  When we move beyond the thousands that make sense day-to-day, we don’t have a good frame of reference and are often at the mercy of those who play in such circles.

The income tax was instituted in 1913 as a wartime measure.  For the 137 years since 1776, there wasn’t an income tax.  Although, the first financial crisis happen just after as the states notes that financed things were  nearly worthless.  Hamilton consolidated that debt and prevented default.  As Washington’s Secretary of Treasure, he designed government economics.

At the start of government ran on just over 7% of the Gross Domestic Product.  This is not actual revenue.  It is what government takes from all the goods and services produced across the economy.  Money taken for government operation is not available for business growth or as profits to distribute.

Taxing for greater revenue is being disputed.  Reductions are disputed as bad and benefiting those it should not benefit.  Reduced taxes are supposed to prevent government from doing its duty.   Yet, when you see the reductions by JFK and Reagan you will see that government revenue quickly recovered. The graph doesn’t quite go back that far but the more recent version and projections based on current spending alarm.

Of course what is being spent isn’t just what is coming in.  Returning to the first graph gives us a look at past tax reductions and those don’t bare out that it is the cause for damage as the economy reacted, at least to a degree to what was referred to as Voodoo Economic promoted by the Laffer Curve which really goes back centuries.

War cost have spiked debt.  The worst remain the WW ones.  We had a couple of other in my lifetime — Korea and Vietnam.  Those aren’t serious spike because we had booming a economy.  The Roaring 20′s after WWI and the massive growth after WWII solved those problems.  All four were followed by economic growth as industry created much greater revenue.  This is the first time we must question growth.   As I pointed out the 60-minutes piece in this blog, the taxes being talked about aren’t our serious problem.

This article isn’t trying to tell you what is best.  I don’t think anybody has that answer.  The site I took these charts from has a lot more info in an easily viewed format.  It will really help you cut through rhetoric — mine and others.

ADDENDUM:

This post was inspired by Wolfie.  The post that inspired it was I think of as humor.  Humor can cuts to the chase.

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Last night Leslie Stahl  and her team seemed to come as close as one can to deserving the title of reporter.

I think she could have used a stronger comparison that is close to home.  It is an economy in far better shape. It has handed us our __ for several years. It sit on our northern border.  We liked to joke about it but the tables have turned and we’re becoming the punch line.

Canada’s corporate tax rate history and future:

• 21% before January 1, 2008
• 19.5% effective January 1, 2008
• 19% effective January 1, 2009
• 18% effective January 1, 2010
• 16.5% effective January 1, 2011
• 15% effective January 1, 2012

Our corporate tax rate is 35%.   Government recently put  almost a trillion dollars into the economy to try create jobs.  The success was more on political talking points than good jobs.  Our tax rate has placed more than that in oversea  holding.  It was reported to be almost twice the amount.  They can’t repatriate the money without the tax being applied.

Business — especially successful one — make a lot of money.  That creates a problem.  It is a nice problem but it is still a problem.  They need to either invest it or pay it in dividends.  That process creates new jobs and industries.   In the past we were very good at that and our economy grew. Employee success shared the ride.

Today, the approach being promoted is to tax those fat cats even more.  The corporate tax is abusive.  But, most folks are actually employed by small, successful business.   Those are the fat cats they want to tax.  We are seeing from Ms. Stahl’s report how excessive taxation has destroyed jobs here for decades.

When you listen to the rhetoric of the coming campaign,  keep all this in mind.   It a populist view that doesn’t produce American wealth or jobs.

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Dan wrote that he was opposed to poker and it was illegal.  Points for honesty, I guess.  Dan was very emphatic.  Too bad poker isn’t what he says.   Poker is not illegal; neither is it legal; poker is ambiguous.  It isn’t cover by the wire act and there isn’t much around that is useable in prosecuting gambling over other business.

I shouldn’t just pick on Dan.  Both houses and all sides embrace lying biased interpretation.  We just watched that jump to ludicrous speed in the great crisis.  Biden called elected members of the congress terrorists.  Obama can solve it by taxing the rich — that’d fund government overspending for less than one day.  The fiscal conservatives by-and-large believe in big government.

The problem with the Dan Coats of this world is they think their power makes them difference makers.  Long ago the congress abrogated making good laws.  Laws these days aren’t written by elected officials; they are implemented by turf protecting bureaucracies.

The congress authorized 2-trillion increase in our debt.  Obama insisted on it because he wants it to last beyond next years election.  All the teeth gnashing was over supposedly saving 1.4 trillion in 10 years.   Next years saving are projected at 20 to 50 billion.  Lets all remember there are a thousand billion in a trillion.  You do the math on the huge saving that got every beltway guru up in arms.

The hue and cry is that it doesn’t create jobs.  It might even destroy a few.  But, all-in-all it looks fairly neutral.  Obama has his 2-trillion and how much more does he need to put everybody to work.  Hell, he can almost hire all of them with that kind of cash.

There is a quick and easy way to get jobs rolling.  Send all those three letter agencies on a years sabbatical.  We’re better off paying them to not work than we are when they do work.  I watched the news last night and they had a guy from Massachusetts.  He builds cabinets and would like to hire. But, he isn’t hiring.  Why?  He is afraid of health costs and new taxes.   It doesn’t take 2-trillion to get him to change his mind.  All it takes is a government guarantee to get off his back.

People are pretty lame.  We miss the forest for all those damn trees.  Government protects us from the unprotectable and in the process screws up business flexibility.  Lets face it, as individuals we can’t even keep crab grass out of our yard. God forbid the government show up with a crab grass bill.   I’d have to figure crab grass would be the next endangered specie before the bureaucrats got done.  Hey, that’ll works for me.  Gets the neighbors off my back.  Well, a couple less neighbors after the foreclosure.

ADDENDUM:

I did get an email from Dan.  He bragged about voting against the debt increase.   He is good a meaningless gestures.  And, he is  protecting me from playing a bit of poker online to boot.  Attaboy, Dan!

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Steel had helped win the war and then provided girders, sheets, tubes and so on for auto, oil, consumer goods and the rest of the list.  It was dirty work but paid fairly well.   In this growth, the mills made lots of money and in the late 50′s a strike cut the workers in.  The mills thought the money wouldn’t stop and everybody got greedy.  That lasted for a long while until it didn’t.  The entitlements that the union negotiated broke their back when times got tougher.   That brought about a depression as workforces tanked and mills went belly up.

In the booming landscape, the side streets were filled with companies dependent on the mills — machine shops, electrical one, and a variety of contract specialties.  When the mills went down, so did most of them.  The area got a new title that wasn’t welcomed — Rust Belt.

If you go back in time, that story repeats.  It is disruptive.  It changes the game.  Steam killed some industry while creating new.  Edison came along and changed it to electricity with similar change.  Railroads went boom and bust.  When they were rich, they didn’t care what they paid because greater riches showed up every day.   It is the way we think and that won’t stop.  It shouldn’t.  While it is a force, it gives us progress.  And, that comes at a cost that we pay as we morph the economy into the next big thing.

You can see that the nation has done that time and time again, steam, electricty, rail, auto, energy, dot com and so on.  This assumes that the opportunities are there and the capital can make the investments required.  That has happened. Many got rich and kept it.  Other lost it.  But, we always built on the past wreckage.

The thing that has changed is regulation.   Three letter bureaucracies abound.  The EPA can strike terror in business.  Like the unions of the 50′s they can get a chunk of the pie for the assumed common good.  Today the regulations are so complex that congress enacts and then lets the bureaucracy implement.  This is a game breaker.  The union and its members or the industry that progress replaced got hurt.  Progress happens on the backs of the past.  And that past loses big in the process. It destroyed the weak and created greater strength from the compost.   Bureaucracy doesn’t compost.  It takes and never gives back.

Government, to function, destroys wealth.  Business, even rapacious robber baron types, create wealth that they have to share.  When government spends money for ‘jobs’ or ecology or whatever, they always destroy more than they can create with their largess. Unlike the works or business, they never see the handwriting on the wall.  They can’t change to the new paradigm.   In poker we call it -EV.

I am afraid that everything that brought us to the present has far less impact on the future.   Only reducing government will put the ball back in our court.  That won’t happen without upheaval.  It can happen.  It must happen.  But, the needed change makers haven’t manifested as a viable candidates.  To many special interest drive the dialog and prevent their ascent.  You can’t allow single issue politics to blind you to that needed change.   To do so plays into the hands of the status quo.  We need change makers and we need them fairly fast.

I fear a very difficult transition but hope that we can avoid the worst.  We’ve done it time and again.  That’s on our side, if we are willing to pay the cost.

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Here is a short blurb from Bloomberg:  (3-min 32-sec)

Bloomberg is a financial reporting company that is fairly agnostic in reporting.  It doesn’t support the Whitehouse plan.  According to Bloomberg reporting, it would have a negative impact on jobs and growth.  That isn’t the moral high ground.

What will happen if drop dead Tuesday passes without extending borrowing?

• government spends about 11 billion a day (315 billion or so for the month)
• revenue projection for next month is about 178 billion
• covering our debt will take 30 billion and that can easily occur — no debt default
• two area are responsible for substantial amounts (Military pay and Medicare/Social Security

Without extending anything we can make it close to the Social Security checks later in the month.  All this is serious and needs  addressing.  But, August 2nd isn’t really the drop dead date being made out.

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I am sure every reader has had an incident.  With several email accounts, I’d occasional write them with a problem that would set them off on a huge deal.  I would correct it by sending it with the correct email.  Once they established who we were and gave us an incident report.  That did two things.  It identified that we had a valid relationship. It provide a chain that could be used to walk the the process and place the next support person at the right point with the right detail that need filling in.  While security and staff function get very involved in the setup, it is really a cut and dried or cut and paste situation

Comcast completely ignores all this.  I got a couple of incident reports and gave the details to validate them.  But, every individual — including ComcastSteve, who should have know better — required me to repeat all the validation when I was providing them with the incident number.   I thought for a while that it was just some lazy asses sending out a form letter hoping that I’d forget about it or some other drone ended up doing the work.   I am comfortable saying that isn’t true.  It is too pervasive to be individual choice.   The one that doesn’t want to be bothered and hopes you’ll dry up and blow away is the company — Comcast.

How petty can it get?  Well, the problem I had is close to the bottom of the barrel. I overpaid by EFT.  The account information showed the credit.  $500 to Comcast is insignificant.  Given interest rates and the period they could postpone payment makes it even stupider. Their benefit is as close to zero as it gets.  They’ve invested multiple support interactions. Their failure to resolve the issue brought in much higher level personal.  Multiply that across their millions of users is the only way it impacts their bottom line and they seem happy allowing that to happen.

Seems awfully silly doesn’t it.  But, there may be a profitable component.  Those who operate with franchise or license can base increases on their cost of doing business plus a reasonable profit.  Like utilities they go before commissions with cost a factor.   If they are allowed a percentage above their cost then the higher the cost the higher their profits.  Such entities have a disincentive to control cost.

The most egregious recollection I have of such practices was with a local utility.   They hired a CEO who didn’t want to move to the area.   He was accommodated by their renting an expensive home in an exclusive community.  Each weekend they provided a private jet rental to fly him back and forth to his real home.  All this was an expense that over time could actually increase their profits.  And things like this nicely conform to standard accounting practices.

It’d be nice if this only happened with franchised entities having a monopoly.  But, the plethora of laws regulating all business has grown and grown.  The hoops that American companies must jump through keep expanding.  It can take months or years to establish a going concern — especially if there are actual environmental factors.   Those should be operating companies that are taking on new employees.  The laws stay; business suffers; congress throws money away.

When you see things happening that you might gloss over, don’t!  People are being protected out of their job and business is rewarded beyond their worth in the process.   This seems bigger than the entitlement issues because it limits the marketplace.  And the trend is to protect even less inefficient business.  That’s the real advantage international competitors have over our businesses.  More can be made gaming our business but it leaves us with a serious competitive disadvantage.   Jumping through hoops isn’t productive but it can be lucrative to the wrong folks.

All this from my $550 mistake.  Sorry.

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Mergers and acquisitions are the normal path to consolidation.  Right now AT&T proposed merging with T-Mobile. That would leave it with one solid competitor and one smaller one.   This is likely to reduce competition.  AT&T is cooking the facts and their PR and Lobbyists are working overtime.  That an aspect of vertical consolidation.  It will have a very negative impact on jobs and growth.  The cellular business takes great investment and that translates to a lot of related goods and services.  A good third of that growth will be done away with before jobs even consolidate internally.

Banking has gone through consolidation.  The congress really opened up a lot of opportunity and got a lot of contributions for it.  To do that they gutted much of the laws enacted to control past abuse during the more recent robber baron and great depression times. Its most recent results is being “TOO BIG TO FAIL” as we’ve observed.  Banking consolidation was both horizontal and vertical.

Doublemint gum said it’d double our pleasure and double our fun. In banking the first consolidation crippled local and small regional banking.  It put it in the hands of a handful of giant banks.  That had a negative effect on the economy.  Local bankers were the funding source for local business.  Their knowledge went beyond a computer printout.  They were run by bankers who’s idea of living on the wild side was wearing a vest that didn’t match their suit.  Even so, they could see potential and that translated to small business success that still is the bulk of the economy.

The horizontal consolidation is more recent and took place after gutting landmark legislation.  It involved two kinds of banks.  We had the traditional banks that while giant size had to still work under strong guidelines promulgated by a number of past banking crisis times.  They started just after the Constitution and popped up on a regular basis with controls added each time.

The congress allowing the merger of investment banking and traditional banks open a can of worms.  Investment banks were for the big investors but they were never funded to excess.  They are the gamblers who had risk:reward hopefully pegged.  If they failed they suck money from the high rollers for the most part.  Average investors were often affected but things still managed to go on.  Regular banks had lot of money and limits on how they could invest it.  Besides the two mentioned entities it also managed to include insurance companies that were more traditional types of investors in the race toward more riches.

The merger eliminated  historic problems.   The investment bankers got access to huge assets while the traditional banks and insurers got access to increased revenue.  Sounds good when thing go right.  We all know what happens when things go wrong.  We are living in those times.

Greed is always in the picture.  Gordon Gekko gives us the Wall Street side with, “Greed is Good!”  Greed does carry a lot of negative connotations that need interpreting. What isn’t acknowledge is that greed usually carries more risk.  With Washington on a very different tack these days, all sides are sweeping the excess greed that is there aside to focus on important issues that became important because things like those discussed happened.  For politicians to roll back their changes would be to admit error.  So they look for tangential solutions that don’t have an established track record.

They have too much on the table and hopes for a quick solution get more and more remote.  Consolidation, as it has been and is being practiced, is an unaddressed issue.  Yet it is a big part of the economic issues that government remains unwilling to discuss in full.  That is a real problem!

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