THE ENTERPRISE--COMMON SENSE ANYONE?

THE ENTERPRISE--COMMON SENSE ANYONE?

THE END OF BALANCED BUDGETS IN OUR ERA?
Is there anyone that can imagine such a rip-roaring recovery that the immense deficits being created now will ever be paid down?  I know some of the "bailouts" have warrants and equity positions that could, theoretically pay back handsomely.  However, this looks like we are in for a long haul of small recoveries followed by tough conditions.  Of course, no one really knows.  The current maelstrom was unprecedented and unpredicted, so the future is probably unpredictable too.  Worse yet, states are in as much deficit trouble as the Federal government.  I wonder how long before foreign countries start to question the solidity of the US and its dollar?

I HOPE SOMEONE IS KEEPING TRACK--BUT...
There are so many astronomical amounts of money being tossed around--no make that being handed out--that I hope someone is keeping accurate track of how much, went where and how we ever hope to get some of it back.  Theoretically that's the Treasury Dept. job, but when Geithner couldn't keep track of paying his own taxes, it worries me.  Maybe the NYTimes will keep track. Without Bush to kick around, it should have lots of spare time on its editorial desks.  It's already complaining that the stimulus package was too SMALL, and too SENSIBLE.

DOES THIS MAKE YOU FEEL ANY BETTER?
The value of the future deficit being run up by Medicare, entitlements and the irresponsible spending of the past is already $56 trillion--that's right--up from $53 trillion last year.  For those who have not reached for your calculator, that is "only" $483,000 for every man, woman and child alive in the US right now. So what the heck, what's another trillion here or there to fuel a recovery.  I'm not joking.   In this situation there are only two solutions:  try to tough it out and let the system repair itself and those who deserve the pain will get it.  Or, throw money at the problems and try to save even those who may not deserve it.  (More on that later)

Now, the question is--and NO ONE KNOWS THE ANSWER--will the money being spent and the actions being taken really "jump start" our economy.  OR, if left on its own, would it heal itself anyway?  And by the way, even if unemployment reaches 10%, that means that 90% of the people are still employed--which is pretty good IF you're not part of the 10%.  When the economy is down by 5 or 6% from the year ago figures, it means that it is still chugging along at 94-95% of what it was doing before. 

WHAT CAN PEOPLE DO?  WHAT CAN COMPANIES DO?  LOWER SPENDING!  (DUH?)
When income or revenue drops, the one sure action must be to lower spending.  Act responsibly.  Economize.  Cut unnecessary and frivolous spending (Like $65-140 per person for a live concert ticket to see Billy Joel and Elton John?). 
--After switching to Compact Fluorescent bulbs, start using mid-grade or regular gas instead of premium (all but high performance engines will run fine on regular). 
--Turn the thermostat down a few degrees in heating season, or up a few in A/C season and run the furnace fan all the time to reduce hot and cold spots--saves energy overall. 
--Renegotiate or revise plans for phone, cable, cell and internet packages. (digital answering machines built into many new phones saves the $8-9/mo. premium for voicemail from your phone company.
--Or get it in a bundle from the cable company.  Just remember that no cable, no electricity means no phone (use a cell, or keep one bare bones "wired" line).  There's always some new deal. 
--Eat at home more (it's good for conversation and saves on gas too). 
--Ask your doctor to prescribe pills that can be cut in half at twice the dosage and then just cut them in half--and the prescription will last twice as long. 
--Check the deductibles on all of your insurance and see if some are set too low.  Ask your agent for the premium differences to check this.
--Cancel some of those unread magazines you get and ask for a refund of the unused portion.
--Share cell phones (at $9.99) and pay each other the difference once a year.
--If you have XM/Sirius satellite radio plans, share in the family.  Example, the first XM subscriber pays $145/year, but adding others to your plan costs only $89/year.
--Buy house brands of items at the grocery store.  Wal-Mart's great value trash bags and zipper bags work just fine and a lower price.  Kroger's Private Selection and other house brands are guaranteed.  If you buy it and don't like it, you can take it back and they'll give you the brand name as a replacement.  So will OfficeMax on printer supplies.
--These are just the tip of the iceberg full of solutions.

This is just a "starter list."  Add your own and share them, and I'll add to the list in future editions.  Bottom line:  Return to an old set of principles:  "Live within your means."  Perhaps if enough people start paying attention to these principles, we might find some of them to elect to positions in Washington where they will act responsibly there.

iF YOU KNOW COMPANIES THAT ARE STRUGGLING TO FIND COST SAVINGS, REFER THEM TO ME.  BY USING VARIATIONS ON THE CONTENT OF THE COMPLEXITY CRISIS--I call it Complexity Optimization--WE WILL HELP THEM FIND MORE SAVINGS THAT THEY THOUGHT POSSIBLE, MOST OF THEM, RIGHT UNDER THEIR NOSES.   TRY IT AND SEE!  Here's the email: [email protected]

TYPICAL GM PLAN--TOO SLOW, TOO LITTLE, TOO LATE--UNACCEPTABLE
2012. That's 3 years from now.  By 2012 GM will have dumped the Hummer, Saab, Saturn and Pontiac brands that should have been gone 3-4 years ago.  Typical.  Just leave us alone and give us billions and we'll (finally) do what you suggested--sort of, maybe, eventually.  But the UAW gives little or nothing--UNACCEPTABLE.  We'll keep our 30 and out retirement package that puts workers on the street in their early 50's, with lifetime golden health care benefits, while others pay for COBRA or get by on Medicare.  Somebody needs to take a 2 x 4 to the heads of these delusional auto executives--or better yet--throw them out.

CHRYSLER--WELL, THEY DON'T REALLY HAVE A PLAN
I can suggest one.  A funeral.  Sell what pieces are salable, maybe Fiat will buy some of them.  Wind down the losing models and keep selling the Jeeps, the Minivans, the Dodge Ram trucks and the 300 as long as demand holds up.  Close down dealerships, combine the few that aren't combined but might be needed.  This legendary car company is in its last farewell.  Don't put any more good money--billions--after the bad.  Let Cerberus fund its way out of this one.  It couldn't happen to a nicer bunch of guys.

DO WE NEED A "CAR CZAR"  OR IS A COMMITTEE BETTER? (PEOPLE WITH NO CAR EXPERIENCE AND LOTS OF POLITICAL PULL?)
One person isn't smart enough--and unfortunately--a council, like a committee, is a place where everyone--and no one--is really responsible.  And since they'd have little relevant auto experience, they wouldn't be constrained in their decision making by experience.  That's just great.  Even then, the council needs a "Chairman" to act as if  s/he were a CZAR.  This sounds like a politically correct, but practically ineffective idea.

I hope the "Czar" doesn't mess up Ford, which is gaining share due to its image of being "more competent" --and more likely to survive--but also due to the fact that it has been making better vehicles.  As I said earlier, Chrysler is all but dead,  Salvage the remains and bury the rest.  GM can be saved--translation:  Chevy and Cadillac (and Corvette) can be saved.  Roll all the others into 1-2 remaining brands--I'm OK with two--Buick & GMC for trucks--then clean out all the others--and eliminate all the duplicated models—and excess dealers—and the UAW contractual crap, and tell GM to proceed with half the requested money and 1/2 the time—and cut down about 1/2 its current bureaucracy.  Do the "plan" 18 months, not 3 years.

NOW FOR THE REAL RANT!  JUST THIS ONE TIME.

LET ME GET THIS RIGHT?
As things are shaping up:
--First, There are a lot of people who bought houses they (knew they) never could afford, through either their own stupidity, naivete or fraud. 
--Second, They bought them, often, from speculators who were "flipping them" at prices far too high; more than there were really worth.
--Third, The irresponsible bank-backed lending institutions loaned them money with little or no regard for the credit-worthiness of the borrower,  often knowingly ignoring or falsifying qualifications of borrowers.
--Fourth, Fannie Mae and Freddie Mac endorsed and backed billions of dollars of these loans,
--Fifth, they were encouraged to do so by the Congressional Committee who had oversight, which was staffed by Barney Frank, Chris Dodd and a few other Democratic Senators, including (now President) Barack Obama.
--Sixth, The bankers bundled them into packets, and their accomplices, the ratings agencies, rated garbage as good investments so they could sell them over and over again.

Now those people are going to have their home loans "foreclosed," so they will need to be evicted, and have nowhere to live. The plan is to slow  the foreclosures, but, do the people live there indefinitely?  People in a house they never should have "owned," and forgive the irresponsibly granted, fraudulently acquired loans, leaving destitute people in houses they can't afford to own.  Many of them are unable to even pay the taxes  on these houses.  In his Wed. speech, Pres. Obama said that was NOT going to happen—he specifically commented on the points I noted above.  Do I believe him?  I'm not sure.  I hope he meant it.  But, who's going to decide where to draw the line on "responsible homeowners?"

AND WHO'S GOING PAY FOR ALL THIS LARGESS?
The responsible Americans who lived within their means, bought houses they could afford, and took mortgages for which they were qualified properly.  These responsible citizens will be taxed (now or later) to subsidize the irresponsibility and fraud of others.
Where are we?  COMMUNIST RUSSIA?  NO WAY SHOULD RESPONSIBLE AMERICANS PAY (as the country incurs trillions of dollars of debt) FOR THE IRRESPONSIBILITY OF FRAUDULENT  (or just stupid) LENDERS AND BORROWERS.

BUT THAT'S WHAT'S HAPPENING RIGHT NOW.  WATCH. This is a rerun of Hurricane Katrina where people and officials in New Orleans were too slow, too stubborn or too stupid to run from a Cat. 5 Hurricane bearing down on them.  But they then insisted on not just being rescued, but but once in a safer place, filled the screens of CNN with angry pleas about whey "they weren't being taken care of."

OK, BLEEDING HEARTS, COME ON DOWN...
All of the few liberal readers left will tell me that it is our responsibility to take care of our poor, our needy (and I guess, even our fraudulent and stupid) fellow Americans.  But do we also need to take care of the 700 Merrill Lynch people who got $1 million each in bonuses?  Do we need to take care of the CEOs who got $25 million packages when they were fired?  

IT'S TIME TO IMPOSE CRIMINAL PENALTIES FOR THESE CRIMES
Sarbanes-Oxley imposed CRIMINAL PENALTIES for misreporting earnings, etc.
--Take back the ill-gotten gains.  They'll still have their homes in the Hamptons and Condos on the Upper East Side of NYC.
--Put the "ringleaders" (look for them with titles like CEO, CFO, Sr. or Exec. VP, etc.) in prison.  Try and convict them of fraudulent activities under the RICO act.  It was "Organized Crime" to do what they, and Bernie Madoff did.  They deserve to spend time in a real prison, not in their luxury homes with an ankle bracelet.  That's the only penalty that will frighten them enough to stop this nonsense.

IS THIS TOO EXTREME?
I don't think so.  Nothing so far has sufficiently frightened or punished the primary perpetrators of this huge THEFT.  Companies care little about penalties.  They file bankruptcy, retire to their luxury homes for a while and resurface again to do it all over.  They need JAIL time--and not in a "country club" prison, either.

HOW MANY PEOPLE ARE WE TALKING ABOUT?  A FEW THOUSAND, MAYBE LESS?
What to do at the boundaries?  Suspended sentences; revoking all licenses, disbarring all lawyers involved.  Black balling them from any employment that has any government sponsorship, funding, contracts, etc.  If any of them are illegal immigrants, immediate deportation.

WILL THIS FIX THINGS?
NO.  Nothing can turn back the clock.  All it will do is set such a large and frightening precedent to make it less likely to happen this way again.  What I fear will happen is that the government will bail out far too many, with far too much and then tax responsible Americans to pay for it all.

HERE'S THE RUB IN ALL OF THIS
Large, important entities, like big corporations, and especially financial institutions need leadership and management that is competent and decisive--and honest.  Those kind of leaders might be reluctant to sign up for jobs where their compensation is limited and there are criminal penalties for wrong-doing.  However, the kind of leaders that we want don't participate in "wrongdoing" which is why Sarbanes-Oxley has actually put very few people in prison since its inception.  The honest ones didn't need it; the crooked ones were either scared-straight or exposed in other ways.  So there you are.  The penalties are tolerable; the cap on compensation needs some reworking.  For a big job, with big risks, there need to be big rewards IF successful.  President Obama--PLEASE RETHINK THAT WHOLE SALARY CAP DEAL AGAIN.

THE END--NOT QUITE
Well, that's it.  A few chunks of common sense, some hard facts and some harsh remedies.  These are tough times, but that is no excuse for giving up or just wringing your hands and saying "woe is me."  Get out there and "fight" for the remaining business.  Stop spending.  Pretend you don't have any money--or soon you won't.  Cast off all the frills and fat of the "good times" and hunker down.  Remember, "When the going gets tough, the tough get going."  We actually used to live without cable TV, touch screen cell phones, satellite radio, iPods, and navigation systems in our vehicles. And we did OK.

All the best, John