THE ENTERPRISE
THE ECONOMY & STOCK MARKET--FREIGHT CARRIER WEAKNESS, PRODUCTIVITY GROWTH
I have no idea where the stock market is going. Probably up, because the weak dollar is generating solid foreign income for US companies, offsetting a lukewarm domestic performance. Foreign Direct Investment in the US continues to set new records, so the foreigners must be more optimistic about our country as an investment than we are. Warning signs are popping up, and bear watching. Productivity has slowed, but that is to be expected at this stage of an economic cycle, and it is another of those misleading government statistics that might be revised dramatically in coming months--another "OOPs." A more concerning one is the weakness predicted by major freight carriers including UPS. That one is usually a more accurate predictor of an impending slowdown in the economy.
A GOVERNMENT IN CHAOS-IMMIGRATION, IRAQ, ENTITLEMENTS, DEFICITS, AND MORE
It is discouraging that our bifurcated government can't seem to agree on anything except their disagreement on almost everything. Our system of checks and balances has become a formula for gridlock, paralyzing the country. It will take a new bunch of smart, wise and courageous leaders to break this logjam. Consider that need as you weigh current Presidential candidates, because change must start at the top.
ITALY'S RETIREMENT AGE...AND OURS
Just an FYI: Everyone seems to think that raising our retirement age for Social Security is a radical idea. How about setting it like it was originally intended to be set: about the same as life expectancy? That would create chaos, but that was the original plan. When Social Security was created in the 1930s, the retirement age was set at 65 because average life expectancy for a working male (then most of the work force) was only 63. Now it is 77! It's not too radical to get the retirement age up to 70 in the next 4 years...one year increase each year. Oh, yes, if you wonder why European countries are facing some economic and demographic crises, the debate in Italy is whether to raise the retirement age from 57 to 58.
WORLD BANK--MINDLESS GIVEAWAYS & CORRUPTION--UN = NOT MUCH BETTER
Paul Wolfowitz is just a little piece of the problem. He should be removed, but the institution of the World Bank should be eliminated. Like the UN, it was conceived in the 1940's with a purpose that was ill-conceived (fight poverty by collecting money from the rich and distributing it among the needy), and executed with the typical waste and corruption most such institutions inevitably fall into. It's time to get rid of it and quit wasting US dollars funding the mess it has become. The same goes for the UN. If the US wants to balance its budget it would help to reallocate the $XX billions (it's incredibly difficult to find ALL the money that flows to these two organization in the budget--I tried--it is "billions") IF we would CUT ALL FUNDING TO THE WORLD BANK & THE UNITED NATIONS. Both would collapse--and I say--"good riddance." (FYI--We even "loaned" the UN $1.2 Billion in 2006 to renovate its NYC HQ--UGH!)
INFRASTRUCTURE: CHINA, INDIA AND USA
Pundits love to point to how China's great growth and success have been enabled by its massive investments in new infrastructure. Yet, China pales when compared to the USA. Those same analysts and writers explain why India will be hampered by its inadequate, crude and/or non-existent infrastructure (roads, public utilities, water, sewer, etc.) There is one place being overlooked that will come to the forefront. Since the US created its Interstate highway system almost a half-century ago, spending on infrastructure has lagged--badly. Private enterprise keeps the energy utilities going in most cases. As our population continues to grow and more cars than ever are clogging our freeways, it seems that no one is paying attention to the Interstates, to bridges and much, much more. The result--another huge tax drain as we fight to deal with energy independence and runaway entitlements. Maybe we will all start driving on "blue highways" (the old roads) because the new ones have become glorified parking lots.
CHINA'S NEGLIGENCE--PET FOOD IS JUST THE TIP OF THE ICEBERG
We get almost everything from China these days, including, it now appears, food that is tainted with supplements unacceptable even for the tough digestive systems of dogs. This is just the first of many such incidents in which an undisciplined, rapidly growing economy creates global havoc by its negligence. It is already poisoning its own people with polluted air and water. Now it's our turn. Beware.
TOYOTA--NOT INVINCIBLE
Recent earnings reports by the world's number one auto maker prove that even the vaunted Toyota is not immune to problems caused by rapid growth and proliferating complexity. It has incurred more recalls, more quality problems and related "service programs" recently than ever before. It even announced that it would slow down new model introductions to get them right.
GM, FORD, CHRYSLER AND THE UAW
These groups, particularly the UAW are loading their guns and aiming for their feet again. If the UAW doesn't start getting a lot smarter about how it behaves vis-a-vis it's members' big US auto maker employers, it will go the way of the buggy whip--obsolete except for creating trouble. Worsening this problem is the continued entry into the US of plants owned and operated by Japanese, Korean and a few European auto companies. A lot of Americans will still be employed making cars, they just won't have a big, dumb, greedy union taking money from them for killing their jobs/employers. This would be a fitting fate except for the hundreds of thousands of lives affected--some blameless, and some who are (and have been ) very much to blame for wanting more "than the market would bear" for their services.
AUTO INDUSTRY--WAY TOO MANY MODELS VYING FOR SALES--COMPLEXITY STRIKES!
The automobile industry is cruising for a crash--and a big one. In case you haven't noticed, the number of new auto badges and models is growing like crazy. There were too many just a few years ago, and number continues to climb. In 2006 the CONSUMER REPORTS Auto Issue needed 38 pages to show its "thumbnail comments" on each auto model (and this didn't include model variants). In 2007, the magazine changed to a two-column layout allocating half the space to each model and still took 29 pages If it had been done in the old format it would have been 58 pages, a whopping 50% increase in models listed in one year.
While this may be a crude way of measuring model proliferation, run any test you want. The number of models is growing much, much faster than the market, and that spells trouble. A big shakeout is coming, and it is coming soon--in the next 2-4 years. The sheer complexity added by these many models will continue to destroy profits, until "nature takes its course" and the fittest survive, the weakest cease to exist. You read it here. Watch it happen over the next few years. First unnecessary and weak selling models start to fail and are "closed out," then companies that made them fail and are simply "closed." By 2010, the auto industry will start to look very different. Complexity takes its toll--insidiously but insistently.
Best, John
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