Thursday, April 29, 2010

The Frito Bandito Rides Again

"Aye, yii, yii, yiiii, I am dee Frito Bandito. I like Frito's Corn Chips. I love them, I do. I want Frito's corn chips. I'll take them, from you."

You remember the Frito Bandito (If not, click here). He went around stealing everyone’s Fritos Corn Chips. He was very happy doing it. When he was caught, he was totally unrepentant. There is no evidence that he was ever punished for his crimes and the stolen Fritos were never taken away from his possession.

What a disgusting role model for children!

Today’s parallel? No, we’re not heading to Arizona. We’re going to Wall Street. Wall Street, where some financial firms sold securities that were loaded with “toxic assets” as high quality products to unknowing investors. Knowingly doing this is a crime. It’s called fraud. This crime was committed thousands of times. So how many arrests have there been? Haven’t read about many. Some executives have lost their jobs, but overall accountability has been virtually non-existent.

Repentance? Very weak there also. The Goldman Sachs executives testifying this week offered many excuses, but no contriteness. They tried to say it was the investors fault for buying the securities. If you knew the securities were flawed (as internal e-mails indicate) and you marketed them deceitfully, you are guilty. If you didn’t know the securities were flawed, you needed to know because that’s your job. That’s your area of expertise. You are still guilty.

Not only are the guilty not being punished, some are being rewarded. Those risky securities deals didn’t work out so well? That’s okay, here’s a bailout. Oh, profits are down? Here’s a big bonus anyway. If there is no profit, there should be no bonus. That’s the way it works everywhere else. The argument that not paying a bonus would result in a significant pay cut is laughable. Don’t like taking a 30% pay cut? Hey buddy, try taking a 100% pay cut like 15 million people in the U.S. because the companies you worked for (bleeped) up the whole (bleeping) economy! And the argument that workers not receiving bonuses would then leave their companies for other jobs? That means they voluntarily get to seek other employment. Again, many people now wish they had that opportunity.

If a robber gets caught stealing $100 after breaking into your house, he goes to jail. Some people who are responsible for millions in fraud, drive by the jail on the way to the country club. You may have some compassion for a robber stealing to feed his family. It is more difficult to forgive someone stealing to obtain a bigger yacht.

And they get to keep the money! What a sweet deal. Wearing wingtips and cufflinks should not prevent you from being punished for your crimes. How have they evaded the government’s punishment? The people in the government wear wingtips and cufflinks also. They also get massive campaign contributions.

So the Frito Bandito was just ahead of his time. He would have made a great securities trader during the past decade. Still, I would advise him to stay away from Arizona. Better to steal your Fritos in some other place. Aye, yii, yii, yiiii, indeed.

Wednesday, April 21, 2010

California Dreaming

News Item: 78% of Americans say they can’t trust the federal government and do not believe in its ability to solve the nation’s problems (Pew Research).

What it means: 22% of Americans are not paying attention.

A few weeks ago I wrote about the structural unemployment problem the nation is facing and the challenge of government to create an environment in which many new jobs are created by the private sector. To accomplish this we would need congressmen who have practical business experience in the private sector.

So quick, name all the current congressmen you know who fit this description. There may be some, but I can’t name them. Okay so let’s lower the bar. Quick, name all the congressman you know who show any understanding of business or basic economic principles. I can name two.

I knew there was a problem in late 2008 after the credit crunch hit. As I watched my company’s orders fall off the cliff because our customers could not obtain credit, I thought that unless this problem was addressed quickly a major economic plunge would soon follow. At the time Congress was engaged in discussions about many things regarding the economy, but this was being ignored. Finally, Rep. Eric Cantor (R- Virginia) clearly stated the potential impact of the credit freeze on equipment spending. Yes, I thought. Someone gets it, maybe we can be saved! No, members of both parties seemed confused by Cantor’s statement and went on discussing possible actions that did not prevent or even slow down the recession.

Another defining moment happened recently during the “Healthcare Summit” which was supposed to be a discussion and debate about the proposed healthcare bill. You remember what a debate is supposed to be. You give your argument without name calling, or stupid sound bites and then the other person gives his argument and then you productively discuss the issue back and forth. The audience is educated by the discussion and then has ample knowledge on deciding for themselves which ideas they prefer. This is essential in a democracy and oh so lacking today.

During the summit, Rep. Paul Ryan (R-Wisconsin) brought up some economic issues of the plan for discussion. The problem was that no one on the other side felt qualified or comfortable to engage him in debate. This was sad and embarrassing. President Obama was left hanging with no help. It wasn’t really his place to debate the details of these issues, so he made some meaningless comments and quickly changed the subject.

So we need many more people in Congress who have business and practical economic knowledge for the new challenges we face. We need small business owners who have experience building things, making payrolls and managing workers. We need people who have gotten their “hands dirty” and understand how the economy works at the ground level. We need these people in cabinet level positions also. We have plenty of buttoned down geeks who understand high finance, what we really need are people who understand low finance.

There must be a change soon. We send trillions of dollars of taxes to be spent by people who have no practical economic sense of how to spend it. Most are lawyers and career politicians. Again, would you give your investment money to a financial advisor who had no financial experience? Would you set up a trust with an executor who had no idea how to manage it? If you don’t understand business and practical economics, I don’t want you anywhere near my tax dollars and it doesn’t matter what party you belong to. And they are my tax dollars because originally they came out of my paycheck. Some politicians are so dense that they oppose the Tea Party movement not on principle, but because they really do not understand why these people are so angry.

But things may already be changing. In two house district primary elections near where I live, there are candidates with strong business experience. One has no political experience but owns several car dealerships. Would I vote for him (I don’t live in his district) in November over the political hacks who vote as the party tells them to and then read the talking points to explain their actions? I think I would.

Also it is interesting to see what is happening in California this year since this is where many trends originate. Two of the strong contenders in the primary elections are Meg Whitman former CEO of eBay (governor) and Carly Fiorina former CEO of Hewlett- Packard (Senate). While you can’t consider them “small” business people, these woman know how to balance a budget, manage people and make a payroll. I almost wish that I lived in California so I could vote for both of them.

Wednesday, April 14, 2010

Beware the Devil Woman

This is the story of one man’s attempt at the pursuit of happiness and how it contributed to the Great Recession.

I won’t forget the first time I saw her. Bleached blond hair, heaving breasts, tight jeans, packaged all so right. You couldn’t miss her. I just stared at her from a distance, instantly realizing that she was oh so attractive and oh so out of my league.

I quickly passed by for a closer look when suddenly she spun around and said “Like what you see?”

I stood mesmerized, unable to speak a single word.

“Shy, I like that”, she cooed as she winked and bit down seductively on her puffy lower lip.

I still just stood there staring into her big blue eyes.

“My name’s Becky, Becky Housing, and I can make all your dreams come true”, she said.

“But I don’t think I can afford you”, I replied. “I mean I don’t think my assets are big enough to satisfy your requirements.”

“Oh don’t worry about that”, she said. “We will try a position I call “subprime”. It will give me all the pleasure I need and will be absolutely tantric for you.” 
She's a brick ---- house!

Then she slowly slid her hand down my body and squeezed my most private part ---my wallet.

Wow! She was a prime piece of real estate and I wanted in.

It felt so good being with Becky and my net worth continued to increase all because of her. There seemed to be no limit to the heights she could take me and it appeared to me that her assets actually grew more attractive every time that I saw her.

My friends marveled at my new found love. I was so in love with Becky and she had told me the truth: She was making all my dreams come true.

And she was so sexy and mysterious. When we had relations, the lights were always turned off. Becky said it was better for her if I was kept in the dark. I didn’t care, it was the best stuff I ever had.

I knew I had found true love and financial bliss and she kept taking my portfolio to higher and higher climaxes. I was determined to ride Becky wherever she wanted to take me.

But I was at work when I heard the news. There was a report that something very bad had happened to Becky. Some sort of “crash” that was related to this subprime method.

I rushed home and there was Becky lying motionless on the floor. Her fake breasts had ruptured and fluid was pouring out of her body and steaming out the door. Likewise liquid flowed from her fake lips. The beautiful hair was really a wig that was now lying on the floor beside her. I now realized that everything about Becky had been false. And incredibly, she wasn’t even a woman.

And it was even worse than that. There was this awful stench. It turns out her assets were toxic. I ran out the front door to warn my neighbors, but it was too late. To my horror I found out that other guys on the block had been secretly involved with some of Becky’s many sisters. One poor guy was involved in a threesome with Cindy Housing and Fannie Mae. He didn’t even realize that Fannie Mae would give it up cheap to just about anybody.

Now there was such a stream of toxic assets flowing down the street that it even destroyed the houses of people that never were involved with Becky and her sisters. It caused a chain reaction of pandemonium. Many people lost their homes. Many people lost their jobs. Some people lost both.

If only I could have resisted the allure of Becky Housing, my life and the lives of other would be so much better now.

Tuesday, April 6, 2010

Very Important Mini-Micro Economic News

(Cue Elton John)

You could never know what it's like
Your blood like winter freezes just like ice
And there's a cold lonely light that shines from you
You'll wind up like the wreck you hide
behind that mask you use

I have important economic news to report: the number of unemployed people in the U.S. just decreased by one. One out of 15 million does not seem that significant except this report is very personal. I have found a job. I am back at work.

The nine long months of my job search have been filled with many contradictions. Last June I was preparing to speak as an expert at an upcoming industry conference. Industry experts are not supposed to lose their jobs. I cut short my vacation to come into the office on a Friday to pick up some reports so I could work at home over the week- long July 4 break. That was my last day. Loyal, hard-working, employees are not supposed to lose their jobs.

Don't you know I'm still standing better than I ever did
Looking like a true survivor, feeling like a little kid

And thus began the battle. You’ve heard the saying “What doesn’t kill you, only makes you stronger.” That is true, but “What nearly kills you, still hurts like hell.” And what a battle it was. I have stared down the devil, blinked many times, but never retreated. I have literally sweated blood (yes, really). I started off this journey weak, but I got stronger as it got tougher.

This was a battle of endurance. You get knocked down many times, but you learn how to get up and keep on fighting. That is the only way to win it. But winning is not so much the thrill of victory as it is survival. But survival is underrated; there is a deep satisfaction that comes from slaying the dragon and living to tell about it.

And did you think this fool could never win
Well look at me, I'm coming back again

Another contradiction is that out of negative circumstances come positive things. Through this trial I have emerged with a renewed faith in myself and a renewed faith in God. Through being helped by others in my time of need, I have learned how to give of myself in a deeper way. I have also met some outstanding people, most of them fellow jobseekers who should have never been put into this situation. And finally, I have rediscovered my ability to write. Writing this blog weekly greatly sharpened my skills and I am now writing better than I have in my entire life. Which leads naturally to the question you have right now…..

Are You Going to Continue To Write the Blog?

I never expected to continue the blog after I found a job. But I never expected to have this many readers. I knew I had a real issue a few weeks ago when people started telling me, “I hope you find a job, but I hope you continue to blog.” My friend Bob, who isn’t easily impressed, told me I have to keep writing the blog. So I will.

The blog will have to change some. Due to time constraints I will probably include more opinion and less statistics. I may not be able to post every week depending on my circumstances. The month of May will be especially tough since I am teaching two night classes. Please be patient during this transition. Also, please give me feedback on the new format and post comments to the blog when you think I am off base.

I would like to take this opportunity to thank everyone that helped me in my job search. Whether it was a job lead, an encouraging e-mail, a prayer, a suggestion, a kind word, whatever. It did make a difference.

I'm still standing yeah, yeah, yeah
I'm still standing yeah, yeah, yeah

Thursday, April 1, 2010

Don’t Be Messin’ With the Law

After all the political spitting, yelling, and backbiting (and that was among people in the same political party) over the healthcare bill, I thought a more objective, economic-based, review is needed. Because the Law of Economics doesn’t care if you are Republican or Democrat. It doesn’t care how many votes you have in the Senate or what deals were made in the House. It doesn’t care about your race or gender. It doesn’t care how eloquent you are and it doesn’t read opinion polls. The law is the law and it cannot be violated.

The original problem is that healthcare costs (and prices) have been steadily increasing overtime. This increase means that many people cannot afford healthcare services or the price of insurance. Healthcare costs also consume an increasing percentage of most people’s incomes, leaving less discretionary income for other things.

So let’s look at the economics of the healthcare bill:


There is already a shortage of primary care doctors in some regions and now there will be an estimated 32 million more people with health insurance in 2014. This will lead to an estimated (industry report) shortage of 40,000 doctors by the end of the decade.
It doesn’t appear that the bill did anything to increase supply. It may have even decreased supply since more government control (perhaps more price controls) makes practicing medicine a less attractive career.

One major factor that impacts supply is the high cost of medical school. The medical school political lobby must be one of the strongest ever because I never heard a word from anyone, regardless of party, about this issue during the debate. Medical schools limit the number of students and charge outrageous tuition. They make millions of dollars, but the number of graduates is restricted and doctors start practicing with huge student loan balances. This results in higher fees for services.

If you allow more medical schools, you increase the competition for students, driving down tuition costs and increasing the number of doctors. Another strategy would be to give nurse practitioners more authority. Both these moves would increase supply, but the quality of healthcare would decrease. This is a fair trade off. If we want to provide healthcare for everybody, then something has to give. People wanting to see a real doctor who graduated from a top medical school can pay more for that privilege.


Demand greatly increases under the new bill. As stated before, 32 million new customers in 2014. And these are likely to be active customers. If you give people access to inexpensive healthcare, they are going to consume it in mass quantities (although probably not as bad as the Coneheads).


Demand is expected to greatly increase. Supply is expected to remain the same or decrease slightly. Prices therefore are going up, way up. Since few things in the bill adequately address the cost issues, healthcare costs should continue to increase for the next few years and then really take off starting in 2014.

The Result:

The original problem is that healthcare prices are out of control. The “solution” will only make this situation worse. Sure if you like your doctor and current health insurance plan you can keep it, but only if you and your company can still afford it. If you think prices are high now, just wait. The healthcare bill did provide some needed benefits, but at what cost?

Because the government is more involved, there will be more waste and fraud which serves to drive up both prices and demand. I know there are supposed to be provisions in the plan to reduce waste and fraud, but it is ridiculous to believe the government will actually cut waste and fraud. The government is waste and fraud. It is comparable to hiring an obese dietician.

You: “Can I eat a doughnut?”

Obese Dietician: “Yum, doughnuts taste good. I like doughnuts. You can eat one and be sure to bring me one with sprinkles!”

Government involvement will also mean that people will figure out how to exploit the system. There are many people making millions of dollars legally “gaming” the Medicare system. It is incredible the amount of tests and products that are ordered simply because Medicare “will pay for it”.

The worst example is the scooters you see advertised from the Scooter Store. Who needs a scooter to go from the front room to the kitchen? But the commercial shows grandma on a geriatric joy ride. You wonder how much the scooter gets used after the thrill is gone and granny knocks over the big-screen television and runs over the cat. I bet the old guys even race their scooters down the main drag of the retirement village on Saturday evenings (because even the older chicks dig it!).

Don’t Ignore This

One of the best solutions is tort reform (limiting the amount and nature of malpractice lawsuits). The reason tort reform is important is that it is beneficial in several ways. It lowers the cost of production (malpractice insurance decreases in price) for the doctor. This means there will be more doctors and they can charge less for their services. Because doctors would not have to order so many tests to protect them from lawsuits, demand for those tests and thus the prices for the tests would go down. In addition, the system becomes more efficient since the money saved from not doing the tests could be redirected to someone in greater need of healthcare. Unfortunately, tort reform was only given “lip service” in the healthcare bill.

What I Don’t Know

I admit there could be errors in this analysis because I did not read the 2,400+ pages of the bill. But if you really want me to understand and then support a proposal, could you please give me something simple in 100 pages or less? Think about it. If a financial advisor presented you with a 200-page proposal that you didn’t understand, would you give him all your money to invest? If so, I have some shares of the Bernie Madoff Stock Option Fund to sell you.

Next Week: A Big Announcement