Telling It Like It Is

THE ENTERPRISE-What works and what doesn't

THE ENTERPRISE-What works and what doesn't

A LEGEND PASSES--JOHN MCCONNELL
John McConnell was a "bowling ball" of a man; short, stocky, and for a lot of years, bald.  He was a legend here in Columbus where he built Worthington Steel into a world class company.  He also brought big-league hockey to Columbus, (although the Blue Jackets are still struggling to make the Stanley Cup Playoffs).  I first became aware of McConnell years ago at a University of Dayton Conference where he spoke to one of the breakout sessions.

I'll never forget his messages.  Worthington Steel didn't need a big policy manual, he said, because what we believe fits on a credit card size laminated card.   I'll paraphrase what I recall, because I don't have one of the cards, but it was pretty simple: Take care of customers and give them a good value for their money; Treat each other with dignity and respect; and Give a good day's work for a good day's pay.

A member of the audience (who clearly worked at a large, bureaucratic company) asked what Worthington did with people who either misbehaved, treating customers or others poorly or didn't "give a good day's work for a good day's pay." McConnell answer was straight from the heart and true.   "We have a pretty simple answer for that too; we warn them a couple of times and then, if they don't get with our culture, we move them out."  The questioner, still seeking some "bureaucrat-ese" pursued the question further, asking how do you "move them out?"  McConnell's voice raised a couple of notches as he glared at the man and said, "We fire them, that's how.  We own the company; we can do that."  That's the kind of down to earth common sense and directness that builds great companies.

UPS LOWERS FULL YEAR OUTLOOK
That headline is a better indicator of the economic slowdown than a room full  of economists because this one works, and the economists' forecasts don't.  Last month FedEx reached the same conclusion. These global transportation leaders have their finger on the pulse of business--the movement of goods--and that pulse is slowing right now.  Part of the earnings decline is due to fuel costs and the other part is due to a slowdown in the movement of goods.   Whether we ever agree if this is technically a recession, these two reports are good enough for me--and should be for you.  "Batten down the hatches" because this year will be a stormy one, and only those who accept that fact, simplify their businesses (driving out complexity) and manage well, will come out OK.  I've devoted other issues of THE ENTERPRISE to what this means, so I'll refer readers who missed them to the archives at http://mariotti.blogs.com/my_weblog/

MACY'S FORMULA--CAN IT REALLY WORK?
When Macy's gobbled up regional department store chains, there where a couple of big questions:  First, how would they deal with brand loyalty; Second: could the department center model work, or was this just an aggregation of stores that was destined to fail.  School is still out--on both scores.  One thing is certain. Brand loyalty, such as Chicago's affection for the venerable Marshall Field department stores, is very strong.  Macy's lost business at almost all the converted stores--nowhere more than Chicago.  It has now decided that a "localization" strategy, in which the merchandise (10% of it actually) is varied by local preferences.  That sounds like something Macy's Terry Lundgren might have thought about a lot sooner--like when he acquired the other stores.

The really staggering fact (according to a recent WSJ article) is that a single Macy's store, depending on its size, stocks 1.5 million to 4 million different items, which means that "localization" will affect 150,000 to 400,000 items in each "localized" store AND addup to create yet more complexity for the store chain to manage.  There are instances where a company can charge a premium for the value of variety.  The question is: Is this level of variety "over the top?"  Being a Macy's shopper, and observing the huge sale racks, markdowns, etc. I'd say the answer is that Macy's can charge a premium, but it cannot a large enough premium.  Maybe I should send Lundgren a copy of THE COMPLEXITY CRISIS, just in case he needs some new ideas.  Prediction:  Macy's unique position and sheer size will carry them just like inertia carries a car forward even if it has engine trouble.  But, Macy's complexity will bring them down eventually, unless and until Lundgren, et. al., can find a way to make its structure and processes more amenable to that mind-boggling variety--AND command a suitable price premium for it.

DELTA + NORTHWEST--A BIGGER, BAD-SERVICE AIRLINE
In case anyone thinks this merger will make their air travel cheaper, more convenient or more pleasant--dream on.  This is purely about "rearranging the deck chairs on the Titanic."  Just imagine this complexity issue:  1000+ airplanes distributed among 19 different models from 10 aircraft families, and several manufacturers, ranging in size from 44 seats to over 400 seats.  How would you like to manage maintenance, and the systems that allocate aircraft to routes, seating charts, and on and on in that kind of complexity?  I wouldn't.

Industry insiders used the terms "goulash" and "mishmash" to describe these two fleets.  Not only are there way too many kinds of planes, but they are OLD, too.  That means even more costly maintenance, that is very complex to manage.  And this is a good idea?   For Delta and NW, maybe; for travelers, no!   I only hope Southwest sticks to its simpler, better methods , and American (arguably the best of the remaining large airlines) learns and improves on the fleet simplification it started a few years back. We may still have at least one large hub & spoke and one good point-to-point airline left.

MOTOROLA---ANOTHER ICON IN TROUBLE
I've been using Motorola's cell phones for a long time.  A few years back, it seemed that Motorola was really getting it right.  First it simplified its cell phones and drove out a lot of complexity.  Then it introduced the popular RAZR family.  Somehow, it loses its way about every 7-10 years.  Could be top management issues, maybe?  Now the CEO wants to split off the money losing cell phone business and give it to shareholders, while he stays with the other part of the business--that makes money.  Isn't it nice to have a CEO who looks out for himself while the shareholders get screwed?  He says it will "unlock value" which is just so much gobbledygook for saying we don't know how to run it profitably, so maybe someone else will.  And that CEO, like the prior failed ones, will no doubt get a nice, handsome compensation package for "unlocking the value."  B---S---.

LAST ITEM--THE CROOKS HAVE FOUND ANOTHER HIDING PLACE
The latest ruse in accounting practices, is borne of the huge financial write-offs taken by such vaunted institutions as Citigroup and Merrill Lynch.  The new hiding place is for money that doesn't seem to be fit to be called "losses", "bad debts" and similar names for bad management mistakes.  It is an innocuous line on the balance sheet under "shareholder's equity," and it is labeled "other comprehensive income."  The problem is that this income is negative--in other words--losses. Now we'll have to watch yet another place that mistakes get buried.  So far it's only about $80 billion of these kicking around, muddying the financial statements, after the accounting and finance folks did such a nice job of tidying them up.

These are the same accountants who didn't even want to even discuss Complexity accounting with me when I asked 3 different "senior partners/experts" (one from KPMG, one from PWC and a former FASB member) about it in NYC last winter.   Oh, yes, there is one neat little detail too.  There is no hard and fast rule defining when companies have to deem these losses to be "more permanent" and take a hit to profit.  No wonder we have reams and reams of SEC and FASB regulations rolling out every year.  Even those aren't stopping the lying.  The manipulators are ahead of the regulators once again.

WHAT WORKS AND WHAT DOESN'T
Now that I've cited an couple of examples of what works, and a couple of what doesn't, I guess it's time to stop this rant for now.  It's a tough world out there, perhaps the toughest in 25 years.   Stay frugal, Sell hard.  Conserve cash, because new loans are impossible to get.  And while you are driving out complexity, use some of the time you free up to work on innovation.  The frugal, smart innovators will lead the way out of this downturn.

Best, John.

THE ENTERPRISE-To Make You Think

THE ENTERPRISE-To Make You Think

MOSTLY SECONDARY MATERIAL, BUT GOOD STUFF
This has been a busy week, preparing for travel, speaking and consulting engagements.  I am using three pieces of material I gathered from widely divergent sources to get you thinking....about things we know...things we might suspect... and how we might look at life and its challenges.  I hope you find them stimulating.

IRAQ IS A MESS, RIGHT?  HOW DO WE KNOW WHAT IRAQ IS REALLY LIKE?
I got this via a friend, on the Internet, and it contained many things I certainly didn't know.  I didn't take the time to check all the facts on the DOD web site, so I cannot vouch for the absolute accuracy.   (I doubt that the author of this would have cited the reference if it wouldn't support the facts stated.)  I did check a couple of them, and found them to be accurate or understated--see NOTES.

How Could We Know?
I didn't know! You didn't know! How could we know? Did you know?
...That 47 countries' have reestablished their embassies in Iraq?
NOTE: http://www.whitehouse.gov/ask/20051118.html  says there are really 52 embassies or foreign organization's "missions" there now.
...That the Iraqi government currently employs 1.2 million Iraqi people?
...That 3100 schools have been renovated, 364 schools are under rehabilitation, 263 new schools are now under construction and 38 new schools have been completed in Iraq?
...That Iraq's higher educational structure consists of 20 Universities, 46 Institutes or colleges and 4 research centers, all currently operating?
...That 25 Iraq students departed for the United States in January 2005 for the re-established Fulbright program?
...That the Iraqi Navy is operational? They have 5 - 100-foot patrol craft, 34 smaller vessels and a naval infantry regiment.
NOTE: The DOD site indicates that more craft are being added right now.
...That Iraq's Air Force consists of three operational squadrons, which includes 9 reconnaissance and 3 US C-130 transport aircraft (under Iraqi operational control), which operate day and night, and will soon add 16 UH-1 helicopters and 4 Bell Jet Rangers?
NOTE: http://www.defenselink.mil/news/newsarticle.aspx?id=46950  says there are 45 aircraft in the Iraqi Air Force.
...That Iraq has a counter-terrorist unit and a Commando Battalion?
...That the Iraqi Police Service has over 55,000 fully trained and equipped police officers?
...That there are 5 Police Academies in Iraq that produce over 3500 new officers each 8 weeks?
...There are more than 1100 building projects going on in Iraq? They include 364 schools, 67 public clinics, 15 hospitals, 83 railroad stations, 22 oil facilities, 93 water facilities and 69 electrical facilities.
...That 96% of Iraqi children under the age of 5 have received the first 2 series of polio vaccinations?
...That 4.3 million Iraqi children were enrolled in primary school by mid October?
...That there are 1,192,000 cell phone subscribers in Iraq and phone use has gone up 158%?
...That Iraq has an independent media that consists of 75 radio stations, 180 newspapers and 10 television stations?
...That the Baghdad Stock Exchange opened in June of 2004?
...That 2 candidates in the Iraqi presidential election had a televised debate recently?
 
OF COURSE WE DIDN'T KNOW!  WHY DIDN'T WE KNOW?  BECAUSE OUR MAJOR NEWS MEDIA FAILS TO TELL US!

Instead of reflecting our love for our country, we get photos of flag burning incidents at Abu Ghraib and people throwing snowballs at the presidential motorcades. Tragically, the lack of accentuating the positive in Iraq serves three major purposes of the extreme liberal news media in the USA:
 
1. It is intended to undermine the world's perception of the United States thus minimizing consequent support from our allies, and:
2. It is intended to discourage American citizens and erode their support for our efforts in Iraq.
3. It is intended to help the Democratic Party gain more power in the next elections.
 
All the above facts are verifiable on the Department of Defense web site, and other related resources.
http://www.defenselink.mil/>http://www.defenselink.mil

Isn't it tragic that news media in a free country with a “free press” can be totally selective with the type of news that is printed or air and, at the same time, the same free press can suppress news that the public needs to see and hear?

CONGRATULATIONS TO CHARLIE GIBSON AND ABC NEWS ON THE DEMOCRATIC "DEBATE"
Finally, the news moderators: Charlie Gibson and George Stephanopolous asked some of the questions that needed to be asked, and fired back follow-up questions that were not "softballs."  Of course the huge body of the liberal mass media vilified them for pursuing such "unimportant issues" as whether the candidates promises were lies, pandering, misguided or merely evasive.  Despite a couple of direct questions to Obama about  how he could keep his commitment that he would not raise taxes on anyone earning less than $250,000/year, and then plan to raise the capital gains tax rate   from 15% to 28%.  Over half of those filing tax returns with capital gains on them earn less than $100,000.  Isn't that a tax increase?

And when Gibson twice pursued the issue further, pointing out that every study shows that lowering capital gains tax rates results in increased Federal tax revenue to pay for other programs, Obama first commented that it depends on conditions on Wall Street, and then shifted the topic to an attack on McCain over housing programs and problems.  Hiillary only fared marginally better, in trying to explain her sniper fire statements and her contradictory pledges to not raise taxes and then maybe only raise the capital gains tax rate to 20% (the level her husband lowered it to when he was in office.  Both swore that they'd get out of Iraq in the first 12-18 mo., even if it meant over-riding the advice of the Military command officers, a statement that commentator David Gergen opined was foolish since it completely foreclosed their options in the face of a rapidly changing global situation. (Gergen is a pretty smart guy, who has served in several White Houses under Presidents of both parties.)

A BLACK MAN--AND A VERY SMART ONE--WEIGHS IN ON OBAMA

Barack Obama, The Big Talker, Is A Living Lie
By THOMAS SOWELL | EXCERPTS FROM IBD© Posted Tuesday, April 15, 2008 4:30 PM PT

An e-mail from a reader said that, while Hillary Clinton tells lies, Barack Obama is himself a lie. That is becoming painfully apparent with each new revelation of how drastically his carefully crafted image this election year contrasts with what he has actually been saying and doing for many years. Sen. Obama's election-year image is that of a man who can bring the country together, overcoming differences of party or race, as well as solving our international problems by talking with Iran and other countries with which we are at odds, and performing other miscellaneous miracles as needed.

There is, of course, not a speck of evidence that Obama has ever transcended party differences in the United States Senate. Voting records analyzed by the National Journal show him to be the farthest left of anyone in the Senate. Nor has he sponsored any significant bipartisan legislation — or any other significant legislation, for that matter.

Obama is all talk — glib talk, exciting talk, confident talk, but still just talk. Some of his recent talk has stirred up controversy because it revealed yet another blatant contradiction between Obama's public image and his reality. Speaking privately to supporters in heavily left-liberal San Francisco, Obama let down his hair and described working class people in Pennsylvania as so "bitter" that they "cling to guns or religion or antipathy to people who aren't like them."

Like so much that Obama has said and done over the years, this is standard stuff on the far left, where guns and religion are regarded as signs of psychological dysfunction — and where opinions different from those of the left are ascribed to emotions ("bitter" in this case), rather than to arguments that need to be answered. Like so many others on the left, Obama rejects "stereotypes" when they are stereotypes he doesn't like but blithely throws around his own stereotypes about "a typical white person" or "bitter" gun-toting, religious and racist working-class people.

In politics, the clearer a statement is, the more certain it is to be followed by a "clarification," when people react adversely to what was plainly said. Obama and his supporters were still busy "clarifying" Jeremiah Wright's very plain statements when it suddenly became necessary to "clarify" Obama's own statements in San Francisco.  People who have been cheering whistle-blowers for years have suddenly denounced the person who blew the whistle on what Obama said in private that is so contradictory to what he has been saying in public.

However inconsistent Obama's words, his behavior has been remarkably consistent over the years. He has sought out and joined with the radical, anti-Western left, whether Jeremiah Wright, William Ayers of the terrorist Weatherman underground or pro-Palestinian and anti-Israeli Rashid Khalidi.  Obama is also part of a long tradition on the left of being for the working class in the abstract, or as people potentially useful for the purposes of the left, but having disdain or contempt for them as human beings.

"The working class," said Karl Marx, "is revolutionary or it is nothing." That is, they mattered only insofar as they were willing to carry out the Marxist agenda. ...

... It is understandable that young people are so strongly attracted to Obama. Youth is another name for inexperience — and experience is what is most needed when dealing with skillful and charismatic demagogues.  Those of us old enough to have seen the type again and again over the years can no longer find them exciting. Instead, they are as tedious as they are dangerous.

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THIS ALSO CAME FROM A FRIEND, AND IT IS WONDERFUL--I HOPE YOU ENJOY IT AND PASS IT ALONG
I encourage you to share this one with your entire family, and with friends.  We need inspiration in these trying times.

The Daffodil Principle

Several times my daughter had telephoned to say, 'Mother, you must come to see the daffodils before they are over.' I wanted to go, but it was a two-hour drive from Laguna to Lake Arrowhead 'I will come next Tuesday', I promised a little reluctantly on her third call.  Next Tuesday dawned cold and rainy. Still, I had promised, and reluctantly I drove there. When I finally walked into Carolyn's house I was welcomed by the joyful sounds of happy children. I delightedly hugged and greeted my grandchildren.

'Forget the d daffodils, Carolyn! The road is invisible in these clouds and fog, and there is nothing in the world except you and these children that I want to see badly enough to drive another inch!'

My daughter smiled calmly and said, 'We drive in this all the time, Mother.' 'Well, you won't get me back on the road until it clears, and then I'm heading for home!'

I assured her. 'But first we're going to see the daffodils. It's just a few blocks,' Carolyn said. 'I'll drive. I'm used to this.'

'Carolyn,' I said sternly, 'please turn around.' 'It's all right, Mother, I promise. You will never forgive yourself if you miss this experience.'

After about twenty minutes, we turned onto a small gravel road and I saw a small church. On the far side of the church, I saw a hand lettered sign with an arrow that read, ' Daffodil Garden.' We got out of the car, each took a child's hand, and I followed Carolyn down the path. Then, as we turned a corner, I looked up and gasped. Before me lay the most glorious sight.

It looked as though someone had taken a great vat of gold and poured it over the mountain peak and its surrounding slopes. The flowers were planted in majestic, swirling patterns, great ribbons and swaths of deep orange, creamy white, lemon yellow, salmon pink, and saffron and butter yellow. Each different-colored variety was planted in large groups so that it swirled and flowed like its own river with its own unique hue. There were five acres of flowers.

'Who did this?' I asked Carolyn. 'Just one woman,' Carolyn answered. 'She lives on the property. That's her home.' Carolyn pointed to a well-kept A-frame house, small and modestly sitting in the midst of all that glory. We walked up to the house.

On the patio, we saw a poster. 'Answers to the Questions I Know You Are Asking', was the headline. The first answer was a simple one. '50,000 bulbs,' it read. The second answer was, 'One at a time, by one woman. Two hands, two feet, and one brain.' The third answer was, 'Began in 1958.'

For me, that moment was a life-changing experience. I thought of this woman whom I had never met, who, more than forty years before, had begun, one bulb at a time, to bring her vision of beauty and joy to an obscure mountaintop. Planting one bulb at a time, year after year, this unknown woman had forever changed the world in which she lived. One day at a time, she had created something of extraordinary magnificence, beauty, and inspiration. The principle her daffodil garden taught is one of the greatest principles of celebration.

 

That is, learning to move toward our goals and desires one step at a time--often just one baby-step at time--and learning to love the doing, learning to use the accumulation of time. When we multiply tiny pieces of time with small increments of daily effort, we too will find we can accomplish magnificent things. We can change the world...

'It makes me sad in a way,' I admitted to Carolyn. 'What might I have accomplished if I had thought of a wonderful goal thirty-five or forty years ago and had worked away at it 'one bulb at a time' through all those years? Just think what I might have been able to achieve!'

My daughter summed up the message of the day in her usual direct way. 'Start tomorrow,' she said. She was right. It's so pointless to think of the lost hours of yesterdays. The way to make learning a lesson of celebration instead of a cause for regret is to only ask, 'How can I put this to use today?'

Use the Daffodil Principle. Stop waiting....

Until your car or home is paid off
Until you get a new car or home
Until your kids leave the house
Until you go back to school
Until you finish school
Until you clean the house
Until you organize the garage
Until you clean off your desk
Until you lose 10 lbs.
Until you gain 10 lbs.
Until you get married
Until you get a divorce
Until you have kids
Until the kids go to school
Until you retire
Until summer
Until spring
Until winter
Until fall
Until you die...

There is no better time than right now to be happy.
Happiness is a journey, not a destination.
So work like you don't need money.
Love like you've never been hurt, and, Dance like no one's watching.
If you want to brighten someone's day, pass this on to someone special.

I just did!  Wishing you a beautiful, daffodil day!

Don't be afraid that your life will end, be afraid that it will never begin.

~Anonymous

THERE'S NOT MUCH I CAN SAY AFTER THAT
I hope you will think hard about all of the pieces in this week's edition, and share them--especially with younger people you know, those of voting age, especially.  They all make excellent points, far better than I could have made them.

As spring comes in to your life again this year, I hope you have many "daffodil days."

Best, John

THE ENTERPRISE--FROM THE INFORMATIONAL TO THE OUTRAGEOUS

THE ENTERPRISE--FROM THE INFORMATIONAL TO THE OUTRAGEOUS
There will be some sections of this edition designed to get readers upset.  Let's see if it works.

TO THOSE WHO WONDER HOW CURRENT EVENTS AND POLITICS RELATE TO BUSINESS
Just look around at all the government agencies, laws and regulations you have to comply with.  Then look at how current events affect consumers, the economy, our outlook, etc.  It is all inter-related.  The challenge is to understand how.

CBS NEWS & KATIE COURIC ARE LIKELY TO PART WAYS—HOORAY
Or at least that is what the WSJ headline said.  One possible job being mentioned for the "perky" Ms. Couric is to replace the avuncular Larry King (age 74) when his contract expires in 2009.  All I can say, is goodbye, good riddance to another "pretender" journalist.

DONOR MAKES READING  "ATLAS SHRUGGED"  A CONDITION OF LARGESSE—HOORAY
A large donor (17 universities, $1 million) made the gift with strings attached:  That Ayn Rand's book "Atlas Shrugged" be required reading in a class on capitalism from a moral perspective.

SEVERAL SOURCES PREDICT COMMODITY PRICES SOFTENING--BUT NOT QUITE YET.
Gas was just under $3.50/gal. when I went to fill up today.  Steel is outa sight.  Copper is too--you can tell that when the thieves start stripping wiring out of houses to sell the copper.  Wheat is way up, and so are many other food products, because out pandering politicians want to subsidize making Ethanol from corn (which doesn't use less energy, or pollute less than gasoline) so they can pound their chest with their farm constituents when they are up for reelection.  Oil shouldn't be as high as it is.  Neither should gold, platinum, etc.  But all cycles overshoot before they settle back.   Late this year, assuming this soggy demand continues, there will be less needed, and then prices will sag back to a lower (but probably not the previous level.)  CONCLUSION: Put off taking price increases as long as possible and get yours through as fast as possible.  It will be tough in the meanwhile.

STATE TAX REVENUES WILL DROP LIKE A ROCK--AND THAT AIN'T GOOD
This recession--if that is what we are in--will knock down state tax revenues by a bunch.
Real estate taxes will plummet--those many foreclosed homeowners, won't have any money left to pay their taxes either.  Many states were reeling after the 2001 dip, and the same ones will go right back into deficits again.   The solution, of course, is either raise taxes or cut services or both.  Seventeen states are already working on this, and the others should be, if they're not.  One notable example, "Ahnold's" state, "Culifornia", has a $16 billion budget shortfall and "Culifornians" are noted to dislike tax increases (don't we all?).  There is no quick easy fix for this one, either--just like Social Security and Medicare--either pay more taxes or collect less benefits.

INDIA, CHINA AND RUSSIA ARE POISONING THEIR WATER—AND THEIR PEOPLE's FOOD
There is a huge rice shortage in India because many areas that were once rice paddies are now contaminated with pollution.  Vietnam and Cambodia are affected too.  Several of Russia's major rivers are "nearly dead" with little hope of recovery. China's water table is being drawn down at an alarming rate.  While weather has been a factor, there seems to be agreement that pollution is the primary cause.  Draw your own conclusions about what this says about these "low-cost-labor" societies--but it doesn't say anything good--and if you go there, "don't drink the water!"

MUSLIMS OUTNUMBER CATHOLICS NOW--WHAT NEXT?
The latest estimate from the Vatican is that Catholics now number about 17.4% of the world's population and that figure is dropping due to very low birth rates in heavily Catholic countries (like most of southern Europe).   Muslim birth rates are high, and Muslims now number 19.2% of the earth's population.  Mohammed is already the most popular boy's name for babies in several European countries, too. Once again, form your own conclusions, but I can assure you, the world we have known in our lifetime is not going to be the same in our children and grandchildren's lifetime.

HANGINGS, BEHEADINGS, ATROCITIES VS. ABU GHRAIB--ARE YOU KIDDING ME?
I guess I still can't get the relationship of how wrong some things are compared to others.  Iraqi insurgents (or whatever you want to call them) can brutally behead prisoners on video, even if those prisoners did as little as report on what was going on over there (Like Daniel Pearl!).  Contractors and soldiers can be murdered and hung from bridges or have their bodies dragged through the streets as a demonstration by the insurgents.  But if the good old USA "abuses" some of the prisoners captured and involved in these atrocities--oh, my--is that awful--at least according to some BHL's (see below for def.).

IT'S HARD TO KEEP YOUR PERSPECTIVE AFTER WATCHING BEHEADINGS ON TV AND IEDS BLOWING UP YOUR FELLOW SOLDIERS.
Why those awful soldiers taunted them, stripped and embarrassed them, and even threatened to torture them.  How awful--NOT.  I am not sure how prisoners captured in the process of mass murder and atrocities should be treated.  Perhaps we should feed them 3 meals a day, let them watch all the al Jazeera TV they want and bring in the local Iraqi newspapers so they have something to read with their coffee and breakfast. Are you kidding me?

American soldiers didn't behead or dismember any of them--at least not that I know about--and if they had, the (BHLs) bleeding heart liberals who are wringing their hands over the Abu Grhaib atrocities would surely have fed it to Keith Olberman's ridiculous rant on CNN.  The soldiers may have been a bit too rough with prisoners, but when people are trying to blow you up, behead and/or dismember you, I think you have a right to get upset about it--and maybe even lose perspective for a little while.  Read one of Vince Flynn's novels and then ask "What would Mitch Rapp do?"

WHOOPS, I FORGOT--EVERYTHING THAT HAPPENS IS SOMEHOW GEORGE BUSH'S FAULT
I wonder what the people who blame everything on Bush will do once he's out of office.  I guess they can still blame him until his successor either makes things better--or worse--or until the miscreants in control of Congress screw it up so bad, that it doesn't matter who's in the White House.  Wait, here's one case of a business  screw-up that is probably not Bush's fault, or the fault of Congress either.

HOW PROMOTIONS BACKFIRE--CREATE COMPLEXITY--AND DISINCENTIVES
I just received, on consecutive days, two pieces of mail from Discover Card.  Here's how they added complexity to my life.  This happens to be one of my older credit cards, and I have used the number so often, that I recall it by memory--thus I use it even more often (no need to look in my wallet.)  I also use it on Internet purchases, because I "know it by memory."  One small problem:  as Discover reissued by card (the old one was expiring), the number was changed.  The net effect will be that I will have to update not only the expiration date, but the entire credit card number on many Internet accounts.  That's probably good for security, but it's bad for Discover Card, and here's why.  I won't use it as my "default" credit card any more, because I no longer know the number by memory.

The other piece of mail boldly announced 5% Cashback bonus--but with one of those asterisks that means I'd better read the fine print.  The fine print says that the 5% only applies until I spend $400--but on what?  Well, that is another bit of complexity.  From April to the end of June it is only in Home Improvements, Lawn & Garden, Department Stores and Clothing Stores.  If you've been shopping lately, you know that $400 will go fast--IF I can recall which stores it accrues in and which ones it doesn't--and in which months.  Then from July to Sept., which is vacation season, it applies to Gas and Hotels.  IF I can recall that, the first couple of nights at a mid-level hotel in most American cities will also use up the $400.

But who is going to remember all that.  Grab this card and use it in this time frame, at these kind of stores, but only up to this amount of purchases.  ARE YOU KIDDING ME?  Even a penny-pinching, detail hog like me won't remember all that.  That means those creative marketing types will get a bunch of the headline readers who take the flyers at face value and many will never know that they got screwed because they didn't read the fine print.  So what?

HERE'S WHAT!
AMERICANS ARE SICK AND TIRED OF BEING LIED TO...BY PROMOTERS OR BY POLITICIANS...
Lots of people already hate Bush, and call him a liar.   Maybe he is, maybe not.  But Hillary Clinton is certainly a blatant liar--see if on YouTube.  There is no other way to say it.  "She didn't "misspoke, or made a misstatement."  That's so much B.S.  She made up stories--not one, but lots of them--and they were lies.  Now some readers may still favor her, but I have to ask why.  They may retort that Bush lied about Iraq and WMD, but even that doesn't wash.  First, he may or may not have lied--even if the CIA, Tenet,  Cheney and/or Rumsfeld lied to him.  But that doesn't matter either.  The fact that one person is a liar does not justify that another should be able to lie too.

OBAMA REMAINS "UNAPPREHENDED"...SO FAR, ANYWAY
There is also an article circulating on the Internet claiming that Obama lied in a Selma speech, talking about something "Kennedy" did that influenced his parents, when the dates make that impossible.   That so called "say what?" article about Obama is not so clearly a lie, as Hillary's "sniper fire" story and some of her claimed "peace initiatives."  Bottom line, Hillary lies.  Obama carefully manages the truth to serve his purpose (IF you believe his statement that he never heard any of those inflammatory sermons by his Pastor Wright.)

SOONER OR LATER, THEY ALL SCREW UP
Let's be honest.  Any politician that stumps for years is going to occasionally say something that they "got wrong."  I don't care which party, or for which office.  Before Nov. they'll find something McCain said too, that wasn't right or true, etc.--they probably already have.  However, like Al Gore in his 2000 campaign, Hillary seems to prefer making up stories that place her in the most heroic and favorable light.  She just needs to make sure there were no witnesses with video cameras in the future.

"Does a tree falling in the forest  make a sound if there is no one to hear it?"  "Does a lie being told when there are no witnesses to contradict it become the truth?"  I don't think so (in either case); the tree makes a sound, and a lie is a lie--not a "misspoke" or a "misstatement."

I'M SORRY--I JUST HAVE TO GET THIS STUFF OUT OF MY CRAW ONCE IN A WHILE.
I'll go back to being (more) civil next week.  Meanwhile, if you feel the same way, email me and tell me so.  If you don't, just delete this edition ... and keep on believing whatever you want to believe--I will.

Best, John

THE ENTERPRISE-Of Dysfunction & Devastation

THE ENTERPRISE

LOOK & LIFE ARE LONG GONE—NEWSWEEK & TIME NEXT?
Economist envy and celebrity mania of People dominate the old style weekly news magazines.  LOOK and LIFE magazines were pictorials, and were killed by TV.  Time and Newsweek are dinosaurs of another kind, dying slowly due to the Internet, which is both faster and more diverse.  Less people read these days, and those who do, want real content (The Economist, Wall Street Journal, The Week, IBD, etc.) and those who don't want fluff--People, Us, and all the shiny "hot cover" magazines you see on the newsstand.  A new magazine, Portfolio, (from Conde' Nast) which covers mostly business, but not only business, has had some good features in its early issues.  Let's see if it has "legs."

VINCE FLYNN NOVELS TO BECOME MOVIES
CBS Films bought options on the best-selling counter-terrorism author's books to be made into movies.  Can't wait to see who is cast as Mitch Rapp.  These should be good ones, if they are anything like the books. A real replacement for James Bond.

DYSFUNCTIONAL PUBLISHING-BOOKSELLING INDUSTRY STRUGGLES TO CHANGE
Any industry that expects 30-40% of its products to be returned unsold has a problem.  On-line booksellers gain as the traditional bookstores struggle.  Prime placement in front of bookstores, like in slotting fees in supermarkets, costs a fortune.  Publishers pay for proven name authors and celebrity fluff.  Too many new books flood the market each year--185,000 last year.  Borders is experimenting with the way books are displayed on the shelves.  Barnes & Noble is not sure what to do.  Both are drowning in complexity--self-induced overload of titles that move at glacial pace.  It's a mess.  Amazon is the winner.

SPEAKING OF DYSFUNCTIONAL: THE TWO-PART MORTGAGE-SUBPRIME COLLAPSE
Greedy lenders and irresponsible home buyers combined with speculators flipping homes to create the first part.  Private equity lenders and hedge funds became entranced with the amount of leverage they could finance for deals, and that led to the second part.  Deals are dead in the water, because financing is just not there.  Housing is a mess, as we might have expected.  When both the lender and borrower are irresponsible, what else would you expect. but a bunch of  insanely irresponsible loans   It's like tossing your 16 yr. old the keys to the new Corvette and telling him to go see how fast it will go, but not to get any tickets.  DUH.

COMMODITIES HAVE TO COME DOWN--DEMAND IS NOT THAT HIGH
Oil is irrationally high.  So are metals.  Demand is not that strong, and sooner or later, the speculators who drove them so high will have to cave in and move.  Watch for some meaningful declines in the next 4-6 mo., which could help contain inflationary pressures.  Negotiate hard and hold off on purchase commitments as long as possible.  China costs, which are really up, will still drive up inflation, but perhaps the commodities coming back to reality will temper the amount.  I hope so.

HOW UNIONS ARE SEEKING TO CRIPPLE AMERICAN BUSINESS
I want to wrap up this edition with the scariest news of the week.  It has to do with Unions.  First a little history.  Unions were formed in the early part of the 20th century to protect workers from abusive employers and to give them a voice in their own "collective bargaining" to get better pay, benefits, working conditions and work rules.  Now Unions have become what they were formed to overcome—power-hungry, bureaucratic, political organizations whose function is to grow like parasites "on the backs" of American workers—with a near total disregard for the impact on American competitiveness.

THE SOCIALISTS (WHOOPS, I MEANT DEMOCRATS) WILL HELP THEM
The two current Democratic candidates are both echoing frightening "pro-Union" and anti-trade propaganda that could devastate America for decades to come.  How?  The President gets to select who sits on the National Labor Relations Board, which is the body that rules on what are and are not unfair labor practices.  From there, you can imagine the drill if that board is stacked with Union sympathizers.  Employers won't have a chance.  The President also has a heavy say in trade policies.  Ironically, the party that "cries wolf" about sending US jobs overseas may be the ones who are doing it--and it matters little which of the two Democrats are the candidate, because both are "bought and paid for" by Union funding. (But they complain loudly about big business funding the GOP--isn't that ironic?

The latest ruse of the Union movement is to simply '"count 'interest' cards" signed at an employer and certify the union.  No secret ballot election at all.  This allows union organizers to use whatever pressure and coercion tactics they want to get employees to sign those cards.  Believe me, I've had my plant in the middle of that kind of campaign and it isn't pretty what goes on.  Read on.

WHAT DO THE AMERICAN PEOPLE THINK ABOUT TAKING AWAY SECRET BALLOT UNION VOTES?

New Research Data on Secret Ballot Union Elections from American Solutions
The right to a secret ballot is at the core of American democracy.  But as millions of Americans privately cast their votes for the next president, privacy in the workplace is under attack.

Last year, Congress introduced a bill (H.R. 800) that would strip workers of their secret ballot rights when deciding whether or not to join a union. The bill, known as the Employee Free Choice Act (EFCA), would replace the secret ballot with a card-check system that would make workers' votes public and subject to intimidation by union organizers.

The EFCA is the top legislative priority for union bosses, so we <http://www.americansolutions.com/General/?Page=ca1e5e83-21dc-4c98-9357-9f6cbfd09835>decided to ask the American people their opinion.  In our new poll, we discovered that 79% of the American people support a worker's right to a federally supervised secret ballot election when deciding whether or not to join a union.

The tri-partisan agreement to defend this right is overwhelming, as 77% of Republicans, 82% of Democrats, and 79% of independents believe in protecting private ballots.  Support for private ballots was so broad it also spanned every subgroup examined, including majorities of every age, race, geographic group and both genders.

WHAT DOES ANOTHER SOURCE SAY?  HERE'S KIPLINGER FORECASTS TAKE ON IT.

Determined to get their way in the general election in Nov... Big Labor and business groups are girding for battle with large war chests and sophisticated voter outreach efforts.
 
Labor plans to spend well over $100 million in coming months in a bid to elect pro-worker candidates to the White House, Congress and state and local offices. The two big labor federations, the AFL-CIO and Change to Win, plan to give particular priority to getting out the vote in five swing states...Pa., Ohio, Mich., Wis. and Minn...in which union households make up over 25% of the vote.

The top priority: Passing the Employee Free Choice Act, which would require a business to recognize a union if a majority of its workers sign pro-union cards. Union organizers stress that putting a Democrat in the White House and increasing the clout of Democrats on Capitol Hill would greatly improve the bill’s chances.

Among other union concerns: Health care, jobs and retirement security. Note a slight uptick in union membership, prompted in part by companies cutting back on health care and retirement benefits.

BOTTOM LINE--IF DEMOCRATS CONTROL BOTH CONGRESS AND THE WHITE HOUSE--LOOK OUT
The American economy will take a decade to recover--if it ever does--from their misguided actions.  Want a real nightmare:  Obama in the White House and Hillary as Senate Majority Leader.  There's talk about it right now.  It's time to bring the youthful idealists back to earth from the Obama orbit they are in.  "THERE IS NO SUCH THING AS A FREE LUNCH!"  He can't deliver on his dreamy promises, and Hillary just lies her way around the facts. 

Talk to your kids, and any younger people (who'll listen) that you can help educate about the truth about policies, politics, economics and reality.  Their future is the one that is at risk.  McCain can't "charm them," he's too old and too "stodgy"—but he knows what to do, and he will try to do the right things (as much as any Pres. can with a Congress that is controlled by the opposition party.)

FINALLY--RECESSION OR NOT--IT'S GOING TO BE A LONG SLOW YEAR--OR MORE
I brought back the Economic Week in Review section since there is so much talk about and concern about the economy.  Whether we have a technical recession is less important than how soft, for how long, the US economy remains.  It's slow out there now, but tax refunds, stimulus checks, mortgage relief, and Fed interest rates and financing help are going to have some effect.  How much, nobody knows.  Don't bet against another dose of government giveaways--after all, it is an election year. 

Meanwhile, stay frugal and sell hard.  Those are the only prudent things to do.

Best, John
---------------------------
Economic Week in Review: Second quarter begins with a bounce

Investors ushered in the second quarter with a stock market rally, even though financial markets remain unsettled by fears of more sub-prime mortgage-related write downs. Most economic news pointed to continued weakness and recessionary concerns, as the employment situation deteriorated and construction spending and new orders for manufactured goods fell again. However, a few rays of sunshine in the form of better-than-expected numbers brought hope that April showers might yield some May flowers.

Nonfarm payrolls continued to shrink in March, losing 80,000 jobs—bringing the total job loss to 232,000 for the first quarter. The worse-than-expected report from the Department of Labor was viewed as another possible recession indicator. Construction and manufacturing led the decline, losing a combined 99,000 jobs, partly offset by gains in education and health services. The unemployment rate rose in March to 5.1% from 4.8% in February and first-time filings for unemployment in the week ended March 29 jumped to 407,000, the highest level in more than two years.

Total construction spending in February decreased 0.3%—less than expected and less than the drop in the previous two months. Spending in the troubled homebuilding sector slid for a record 24th consecutive month, down 0.9%, contributing to the 0.5% drop in total private construction activity. The Commerce Department also reported that construction in the considerably smaller public sector continued to buck the trend, increasing 0.4%.

The Institute of Supply Management (ISM) Index of factory activity improved slightly in March to 48.6 (from 48.3 in February). (A reading below 50 in this closely watched gauge indicates that manufacturing activity is generally contracting). New orders declined to 46.5, the lowest level since the last recession, and the production index fell below 50 for the first time this year. Although new export orders remained solid (at 56.5), overseas may be vulnerable to spreading recessionary pressures. Fueled by rising prices for oil and other commodities, the ISM price index jumped to 83.5 (from 75.5), the highest level since Hurricane Katrina. The combination of rising prices and weak U.S. demand is squeezing manufacturers.

Another measure of manufacturing activity showed further signs of a slowdown. The Commerce Department reported that new orders for all manufactured goods—a barometer of capital spending plans—fell 1.3% in February, the second consecutive monthly decrease. Orders for new durable goods (products with an expected life of more than three years) slipped 1.1%. Weakness included machinery orders (especially for construction) and demand for iron and steel. Aircraft and parts orders (civilian and defense) rose, however, after falling in January. Rounding out the orders picture, nondurable goods orders fell 1.5%. Inventories of durable goods increased to the highest level since this data series began in 1992. Combined with a drop in shipments, this drove the inventory-to-shipment ratio to a one-year high.

The ISM Non-Manufacturing Index improved modestly to 49.6 in March. Similar to its manufacturing index counterpart, a reading below 50 indicates contraction in the services sector. Within the survey, the business activity index is considered one of the more important indicators: It rose to 52.2 from 50.8 in February but remains below 2007 levels. As in the manufacturing sector, the price index rose (for the 58th consecutive month), to 70.8 in March from 67.9 in February.