THE ENTERPRISE--PAYBACK TIME?
WHAT'S IT LIKE IN CHINA? THIS FROM A CORRESPONDENT'S FRIEND (NOT WHAT YOU THINK!):
The terrible thing is that the wealthy communist party leaders and their families have a separate food supply from their fellow Chinese. The craziest thing is that the Chinese government have said that all the poisoned food in Japan was poisoned by the Japanese people, after it was sent to Japan. They hate the Japanese so much, they will never forgive them for the nasty things they did during the occupation. Business is getting harder and harder to do, the factories are getting dumber and more desperate so are ripping everyone off. It's time for me to get out of this part of the world."
It's interesting how our perspective back here varies from a report made by someone who's over there. Perspective is everything--as you will see in the rest of this edition.
MOST READERS LIKE IT WHEN I COVER BUSINESS TOPICS
Here's a business topic of great importance.
==When things go wrong, it is important to get to the root cause of the problems and to identify who was in charge of (responsible for) the problem as it unfolded.
==Conflicts of interest are bad business. (Large payments in support of politicians from governmental bodies over whom they have oversight are called "bribes" in business settings.)
==People get fired (at least) for taking bribes--when they get caught. People also get fired when root cause analysis reveals that they either mismanaged, or misrepresented (lied about) the facts of situation. Somehow, these principles escape our elected officials in Washington--except for "hearings" to (misplace) blame.
Here's another set of business principles:
==Play to your strengths, don't cover for your weaknesses.
==Attack, don't defend. Get the opponent to react to your moves.
==Make sure you are true to the promises, the ones conveyed by your brand.
Imagine how these apply to the political candidates, and you'll see that in business, and in politics--some principles apply equally.
A DOUBLE WHAMMY
Andy Rooney question of the day: WHY WON'T THESE GUYS ADMIT THAT THEY SCREWED UP?
There is little doubt that Congressional leaders had a huge role in the fall of Fannie Mae and Freddie Mac (watch the youtube video link below). The problem is that if John McCain hangs them out to dry for their obviously irresponsible behavior, they will hang out members of his campaign staff who were also had their "hand in the cookie jar." That leaves "Wall Street" to be blamed for greed and corruption. Not that Wall Street doesn't deserve a lot of the blame, but a "non-specific piece of NYC asphalt" isn't the culprit. People--human beings--made the decisions to make bad loans, bad investments, take irresponsible risks and then hide them in confusing bundles and pass them off onto others. It is criminal to do that at work, and then to take home millions of dollars in compensation. That's who really deserves to be punished--and it goes far, far deeper than just CEOs--deeper and broader--including the ratings agencies who said these bundles were AAA rated.
http://www.youtube.com/watch?v=3QBRIsCkGQ0
ANOTHER BUSINESS PRINCIPLE: HIT THEM WHERE IT HURTS--IN THE WALLET
2ND Andy Rooney question of the day: WHAT HAPPENS WHEN SOMEONE TAKES SOMETHING THAT ISN'T THEIRS? GIVE IT BACK AND/OR GO TO JAIL!
This time, the punishment should hit where it really hurts--in the pocket book. The Government needs to impose "claw back" provisions (that exist in many equity fund agreements and require a return of investors funds where those funds should not have been earned by the fund partners). This time the "claw back" should have a longer reach--like preferences do in a bankruptcy--going back retroactive, for a period of time preceding the actual discovery of the depth of the insolvency. Officers of the failed companies that earned large bonuses or benefited from large stock awards based on the performance prior to finding the faults, should have to pay it back. Putting them in jail would just be icing on the cake. Take away their mansions, planes, boats and vacation homes. Make them pay back investors at least some of the money--it won't come close to covering the huge losses--but it will send a message, loud and clear.
The corporate records of these public companies show who the culprits were and how big the rewards they received for taking irresponsible and sometimes criminal risks with investors money. The amount of all those receiving high compensation should be dramatically "clawed back" since (theoretically at least), their compensation was commensurate with their role in the management of the firm. It's time to get those records and take back the ill-gotten rewards. The last such debacle (Enron, WorldCom, etc.) resulted in passing of the Sarbanes-Oxley Bill, a huge piece of new regulation which created a similarly huge amount of extra work--to stop CEOs and CFOs from fraudulently reporting corporate earnings. God only knows what kind of creative regulations will come out of this one. Hopefully, they will be more effective and less than oppressive.
AND--It's time for some of our recalcitrant Congressional members to admit their role in the mess and resign too--Barney Franks and Chris Dodd are good ones to start with.
NOTE: In case any readers want to watch the Bill O"Reilly--Barney Franks shouting match, posted below is the link to that one. O'Reilly's ranting was out of line. BUT, It is clear from any number of sources that Franks is essentially "guilty as charged"... of encouraging sub-prime loans and defending Fannie and Freddie on their way into a disaster which took millions of Americans--and billions of dollars--with them. Remember, not everybody CAN afford a home! THOSE ARE FACTUAL PIECES OF INFORMATION YOU WILL NEVER HEAR FROM BARACK OBAMA... OR JOE BIDEN.
http://www.youtube.com/watch?v=yrfPMa3lONU
AS USUAL OBAMA STAYS ABOVE THE FRAY--SOMEHOW?
I don't know if I admire or abhor his brilliance at doing this ... (Or is he just the latest incarnation of "Slick Willy Clinton?") Sarah Palin got one line dead righ the other night. These guys all thrive on "I was for it before I was against it."--or vice versa? Somehow, Barack Obama stays out of any issue that can put him in an unfavorable light (he has all of his life)--and then weighs in with his views about those who were involved--but only when its over and the outcome is known. He made only perfunctory appearances during this entire financial crisis, and only then because President Bush put him on the spot, inviting him to Washington. He says he made numerous phone calls to the various government figures involved. Perhaps he did, but it certainly didn't infringe on his campaign time. He stayed aloof as usual; so still, Pontious Pilate has nothing on him.
THIS IS INTERESTING BEHAVIOR FOR HIM, OBAMA WAS ANOTHER MEMBER OF CONGRESS WHO WAS NEAR THE TOP OF LIST FOR "CONTRIBUTIONS" FROM FREDDIE AND FANNIE--BUT NOBODY HEARS ABOUT THIS. WONDER WHY?
Simple answer. Massive media bias.
NOW THE "BAILOUT"--IS DONE--NOT! THERE ARE STILL HUGE QUESTIONS ABOUT WHAT WILL BE DONE.
One thing is sure, The bill was laden with other crap--only one other word fits as well as CRAP. HANDOUTS (BRIBES?). WASTED MONEY all added by the Senate Democrats because they knew the second round of the bill was a sure thing. What politician, a few weeks from an election, is willing to stand up and say "NO" to a bailout. A few did. Most did not. Obama commented that when he's elected, he will do even more. McCain railed against the mismanagement that caused the mess in the first place, but that's just "old cranky John."
WHAT'S THE OUTLOOK NOW? WHETHER A TECHNICAL RECESSION OR NOT, THE REST OF 2008 WILL BE TOUGH, AND SO WILL MOST OF 2009
BUSINESSES NEED TO WATCH SPENDING AND CASH LIKE NEVER BEFORE
Here's the latest situation.
October 3, 2008 Economic Week in Review: The markets' roller-coaster ride
Turbulence in financial markets continued, as investors closely monitored economic data, banking, and congressional efforts to pass a financial rescue package. The week started with a drop of –8.8% by the S&P 500 on Monday, the largest single-day drop since 1987. The unemployment rate held steady at 6.1% for September, even though employers made larger job cuts than expected. Manufacturing and factory orders were well below expectations; consumer demand continued to dwindle. For the week, the S&P 500 dropped 9.4% to 1,099 (for a year-to-date of –25.2%).
Employers cut 159,000 jobs in September—the highest monthly cut in over five years and the ninth straight month of cuts. This raised the year-to-date job losses to 760,000. The service industry, including retailers and financial institutions, made the most job cuts, but the country’s unemployment rate remained unchanged at 6.1%.
The Conference Board’s Consumer Confidence Index registered a better-than-expected 59.8 for September, attributed to lower prices at the gas pump. It’s important to note, however, that the index reading was taken prior to last week’s market crisis. The report also showed that, despite the higher index reading, consumers remain particularly concerned about the labor and housing markets, as well as the lack of available credit. Manufacturing, according to the Institute for Supply Management’s (ISM) index, was down well below expectations for September, at 43.5, its lowest level since October 2001. Readings below 50 indicate the manufacturing economy is contracting. The drop is due to weakener consumer demand brought on by the rise in unemployment and the lack of available credit. The nonmanufacturing ISM report showed a 0.4 drop from August, to 50.2, indicating the service sector remains narrowly in growth mode.
The nation’s factory orders fell 4.0% for the month of August, making it the worst month for orders in nearly two years. Transportation equipment, especially automobiles and aircrafts, experienced the biggest decline, dropping 9.1%. Overall construction spending saw no change from July to August; however, spending was still down 5.9% from August 2007, despite private residential construction being up 1.3% for the month (the first increase in 13 months) but still down 28.4% from a year ago.
Personal income was actually up 0.5% in August. Most of the gains were attributed to unemployment benefits and other government payouts. Consumers feeling pressure from the ailing economy led spending to reach its weakest point since February, flat from July to August, disappointing those that had anticipated a small (0.2%) increase.
----Some contents © The Vanguard Group
I BETTER QUIT NOW. IT'S TOO CLOSE TO THE ELECTION AND THE IMPACT OF THIS ON BUSINESS IS SO POLITICALLY CONVOLUTED THAT CLEAR CONCLUSIONS ARE HARD TO REACH.
In a month, the outcome will be clear and then planning for a whole new administration can start anew.
Best, John.
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