Saturday, November 26, 2016

Obama's Legacy - The Good, The Bad & The Ugly

President Obama is a likeable guy, which is probably the reason his approval rating is around 50% or more at the same time when nearly 70% of the country believes that the United States is going in the wrong direction.   Obama sold himself as a change agent out to transform our country presumably into a European style Socialist democracy.  The only problem is that the United States is a center right country, which is probably the reason why during Obama's tenure, the American people have elected 33 Republican Governors out of 50, two thirds of state legislatures are now controlled by Republicans along with both Houses of Congress and the Presidency.  All of this is a complete repudiation of Obama's politically correct policies. 

As Obama leaves office, he is leaving the Democrat Party in shambles with no real bench for the future; though Trump proves that someone can come out of no where and run for the Presidency.  Rather than embrace Free Market Principles that are best at growing the economy, business and jobs, Obama supported Crony Capitalism rewarding big donors, raised taxes and added hundreds of job killing regulations that resulted in minimal GDP growth, nearly 50 million Americans on Welfare and Food Stamps, up 20 million since Obama was first elected and the highest poverty rate and the lowest labor participation rate in three decades.


In addition, Obama's weak foreign policy that began with his apology tour and the Russian reset has resulted in the spread of Terrorism around the world, the Middle East on fire, a resurgent Russia and an assertive China and North Korea.  The United States is not safer today than when Obama first took office. 

And, perhaps most important because Obama and the Democrats have used identity politics to win whatever elections they have won, the United States has never been so divided since the Civil War.  While Obama as the nation's first Black President could have been a unifying force for good, at every turn Obama and Hillary Clinton in the recent election have played to left wing interest groups and in the process not only turned off half the country; but created a genuine schism that could take years to heal.  

The result was the election of Donald Trump to the surprise of the Establishment of both political parties and the left wing media.  Every action has a reaction.   Trump is just the reaction to the politically correct world advocated by President Obama and other Democrats. 

While it will take many years for historians to analyze the Obama Presidency related to his rating in history, it is not looking too good today.  Of course, left wing historians will blame others for Obama's failures.  Obama had the makings of a great President.  However, Obama was probably too inexperienced and ideological to achieve his real potential.  Too bad, the Obama Presidency was a real lost opportunity to go down in history as one of our greatest Presidents.  Instead, the best that will be said of Obama is that he was our nation's first Black President.

Friday, September 23, 2016

Big Corporations In The US - Concentrations of Power

As a result of many mergers and acquisitions in the US, today the top 100 companies control of the economy has grown from 33% of Gross Domestic Product in 1994 to 46%.  The five largest banks account for 45% of banking assets up from 25% in 2000.   All of this is not good for America.   Mergers and Acquisitions to gain efficiencies, when consolidations occur has resulted in the loss of millions of good paying jobs.  And though these companies are very profitable, Middle Class incomes have not risen in the process, in real terms in the last twenty years, while benefits have been cut.   The fat cats have done very well in these deals; but it has not translated into wide spread benefit for the US economy. 

Though this CEO Blogger is a staunch supporter of Free Market Capitalism, I do not support Crony Capitalism where very large companies with thousands of paid lobbyists collude with Big Government to game the system making it almost impossible for new entrants in an industry to compete because they don't have paid lobbyists and have to play by the rules related to taxes and regulations.   Big companies buy exceptions by supporting corrupt politicians that will do their bidding in Congress.  We then see all sorts of actions that in some cases look and smell like fraud.  While the government goes through the motions to charge big companies fines, no one is ever convicted of a crime.  All of this ultimately erodes support for Free Market Capitalism, which we clearly see coming from the left in the United States and other countries and that is not good. 

While many of these huge companies are very diversified into lots of different industries, their market position in a particular industry may still be the largest in that industry because they continue to acquire smaller competitors to get even bigger.  This results in a lack of competition, which is not good for the American consumer because it always leads to higher prices and poorer service.   Just as in the early 1900's government had to deal with monopolies, it may be time again for government to scrutinize more closely many of these mergers and acquisitions to determine the longer term impact of these consolidations.   While generally this CEO Blogger supports a Free Market Economy,  there is a role for government to play when and if we what we end up with is less competition. 

Thursday, September 22, 2016

Many Politicians Do Not Understand The Workings Of Business

The CEO Blogger recently watched a hearing by a Congressional Committee of the House of Representatives where in which both Republican and Democrat Congressmen lambasted Heather Bresch, the CEO of Mylan, maker of the EpiPen injection device to deal with allergic reactions, for raising prices 548% in 9 years.  Prices were raised to $608 for a set of EpiPens.   This Blogger is not defending this price increase, nor opposing it because only Mylan understands its cost basis.

However, Mylan's CEO's tried to explain essentially the difference between a wholesale price and a retail price, which these Congressmen just could not seem to understand.   She stated that Mylan earned about $249 on the sale of a set of EpiPen's and that their gross profit was about $50.  The other monies of the $608 were essentially paid to hospitals and or other distributors in the process.   Bresch also went on to say that the consumer usually ended up paying around $50 - $100 for a set of EpiPens because of insurance coverage. 
 
Further, because people are scared to death to say anything under oath before Congress for fear of prosecution, Bresch should have defended this pricing, if it is valid, by saying that only 4 million EpiPens are sold each year because unlike insulin, which Diabetics take daily probably resulting in the sale of billions of doses around the world each year, the EpiPen is an emergency drug only used if a patient has an allergic reaction.  So, lower volume naturally results in higher prices. Even so, Mylan is coming out with a generic version, which will cut the cost in half. 

The point to all of this is that various Congressmen of both parties, some of whom have been in Congress for decades, were absolutely clueless as to the workings of business because they have never had their names at the bottom of a paycheck as a business owner.   They clearly do not understand things like direct costs, indirect costs, profit and loss.  Watching this foolish exercise, just proved to me once again how important term limits are for members of Congress.  Those making our laws should have to live under them. 

As it is now, we have a complete disconnect with business reality.   This is just another reason that Congress has a 76% Disapproval Rating.  Term Limits would result in more elected representatives with real life business experience, which might at least help them better understand the impact of their legislative actions that are often job killers. 

Many Politicians Do Not Understand The Workings Of Business

The CEO Blogger recently watched a hearing by a Congressional Committee of the House of Representatives where in which both Republican and Democrat Congressmen lambasted Heather Bresch, the CEO of Mylan, maker of the EpiPen injection device to deal with allergic reactions, for raising prices 548% in 9 years.  Prices were raised to $608 for a set of EpiPens.   This Blogger is not defending this price increase, nor opposing it because only Mylan understands its cost basis.

However, Mylan's CEO's tried to explain essentially the difference between a wholesale price and a retail price, which these Congressmen just could not seem to understand.   She stated that Mylan earned about $249 on the sale of a set of EpiPen's and that their gross profit was about $50.  The other monies of the $608 were essentially paid to hospitals and or other distributors in the process.   Bresch also went on to say that the consumer usually ended up paying around $50 - $100 for a set of EpiPens because of insurance coverage. 
 
Further, because people are scared to death to say anything under oath before Congress for fear of prosecution, Bresch should have defended this pricing, if it is valid, by saying that only 4 million EpiPens are sold each year because unlike insulin, which Diabetics take daily probably resulting in the sale of billions of doses around the world each year, the EpiPen is an emergency drug only used if a patient has an allergic reaction.  So, lower volume naturally results in higher prices. Even so, Mylan is coming out with a generic version, which will cut the cost in half. 

The point to all of this is that various Congressmen of both parties, some of whom have been in Congress for decades, were absolutely clueless as to the workings of business because they have never had their names at the bottom of paycheck as a business owner.   They clearly do not understand things like direct costs, indirect costs, profit and loss.  Watching this foolish exercise, just proved to me once again how important term limits are for members of Congress.  Those making our laws should have to live under them. 

As it is now, we have a complete disconnect with business reality.   This is just another reason that Congress has a 76% Disapproval Rating.  Term Limits would result in more elected representatives with real life business experience, which might at least help them better understand the impact of their legislative actions that are often job killers. 

Wednesday, September 21, 2016

The Shrinking Middle Class In The United States

The Middle Class in the United States has been declining for about twenty years.  Middle Class families are earning about the same money they earned years ago.   This has happened for a variety of reasons.   Mergers and Acquisitions have resulted in the elimination of good paying jobs as companies consolidated their operations.   Global competition, which can be brutal has made it impossible to raise prices, which has resulted in little or no wage increases in real terms.  And, what little wage increases have occurred in the last twenty years has often gone to pay for the increased cost of medical insurance and services resulting in little additional disposable family income. 

The fact is that it takes fewer people today to produce work because of technology.  When this CEO Blogger began my career in business as a young manager, nearly all managers had personal secretaries.  And, though those jobs may have been a secondary family income, they often came with great benefits that contributed to family well being.  That all changed by 1990 with the advent of the desk top computer and word processing at all employee's finger tips.  And, companies have continued to cut benefits to reduce costs.

Today, in the United States, there are about 95 million Americans out of the work force.  About half of them are on Welfare and Food Stamps.   The other half are people who can't find jobs because they often do not have marketable job skills and that could include young college graduates that simply have no work experience.  Further, millions of manufacturing jobs and even back office knowledge jobs have been off-shored to achieve lower costs, in some cases as the only means of maintaining profitability.  Those jobs used to result in a Middle Class life style.   Unless, the United States significantly reduces corporate income taxes, eliminates burdensome regulations and unleashes our energy sector to make the US energy independent, which is feasible given our natural resources, those jobs are gone forever.

This is not about income inequality.   The poor are not poor because the rich are rich.  The poor are poor because they are often poorly educated and lack marketable job skills.  The Middle Class is shrinking as much because of government actions as the other forces herein described. 

Tuesday, September 20, 2016

Terrorism & Business - The Old New Normal

We hear commentators speak of Terrorism as the New Normal not only impacting daily life; but presumably business.  The fact is that acts of Terrorism that have resulted in the deaths of thousands of Muslims, Christians, Jews, Hindus and non-believers have been going on for decades.  The state of Israel has been dealing with Terrorism, since is was founded at a Jewish state in 1948.  Yet, the Israeli people have built a beautiful first world nation, while being surrounded by Arab Countries, including land in the West Bank and the Gaza Strip, controlled by the Palestinian Authority, where people live with pervasive corruption, poverty and misery. 

Other Western countries too have been dealing with Terrorism of one kind or another going back to the 1970's when airplanes were being hijacked and or the case of the Lockerbie 747 destroyed by Libyan Terrorists, which resulted in the deaths of several hundred people over Scotland.  In fact, this CEO Blogger was working in London for Merrill Lynch, two weeks after President Reagan ordered the bombing of Libya in retaliation.  Just before I arrived,  Terrorists blew up the American Express office in London just down the street from our office. 

So to be sure, Terrorism is not new, so calling it the New Normal ignores the fact that Islamic Radicals have been at war with the West for many decades culminating in 9/11 that changed the world.  And, with the exception of 9/11, which did cause a mild Recession lasting about a year,  business has continued as usual responding to economic fundamentals more than acts of Terrorism.  Again, with the exception of 9/11, the boom and bust cycles we have experienced in the last 35 years, including major Recessions and stock market gyrations have had little to do with specific acts of Terrorism and more to do with supply and demand, financial mismanagement and cyclical market forces.   Sadly, Terrorism may be a fact of life; but it is not new. 

Terrorism & Business - The Old New Normal

We hear commentators speak of Terrorism as the New Normal not only impacting daily life; but presumably business.  The fact is that acts of Terrorism that have resulted in the deaths of thousands of Muslims, Christians, Jews, Hindus and non-believers have been going on for decades.  The state of Israel has been dealing with Terrorism, since is was founded at a Jewish state in 1948.  Yet, the Israeli people have built a beautiful first world nation, while being surrounded by Arab Countries, including land in the West Bank and the Gaza Strip, controlled by the Palestinian Authority, where people live with pervasive corruption, poverty and misery. 

Other Western countries too have been dealing with Terrorism of one kind or another going back to the 1970's when airplanes were being hijacked and or the case of the Lockerbie 747 destroyed by Libyan Terrorists, which resulted in the deaths of several hundred people over Scotland.  In fact, this CEO Blogger was working in London for Merrill Lynch, two weeks after President Reagan ordered the bombing of Libya in retaliation.  Just before I arrived,  Terrorists blew up the American Express office in London just down the street from our office. 

So to be sure, Terrorism is not new, so calling it the New Normal ignores the fact that Islamic Radicals have been at war with the West for many decades culminating in 9/11 that changed the world.  And, with the exception of 9/11, which did cause a mild Recession lasting about a year,  business has continued as usual responding to economic fundamentals more than acts of Terrorism.  Again, with the exception of 9/11, the boom and bust cycles we have experienced in the last 35 years, including major Recessions and stock market gyrations have had little to do with specific acts of Terrorism and more to do with supply and demand, financial mismanagement and cyclical market forces.   Sadly, Terrorism may be a fact of life; but it is not new.