Where has Talent Gone?

Prior to WWII, many talented and educated people went to work on Wall Street trading stocks, or running divisions of large companies of the day, steel, rail, textiles, canning, and manufacturing. At the beginning of WWII the US Navy had a large problem on their hands trying to figure out how to disperse throughout the Pacific and maintain control of distributing men, material, food, aircraft, and all the other supplies required for such large operations. They did not have the personnel in place so they found the brightest and most entrepreneurial minded people of the day on Wall Street.

After WWII and the industrial expansion of the times, military personnel returned home to new jobs, new opportunities, and of course they returned to Wall Street as well. Throughout the following decades the military still utilized the brightest of our citizens when possible and needed, but other opportunities such as technology, engineering, aircraft, space, and more, absorbed much of our talented citizens. In the ’90s Wall Street became a large attraction again.

Here we are in the 2010s and much has changed including Financial Services have become very automated and the creative entrepreneur of the past seems to be few and far between with most positions being filled by clerks instead. So where has all the Talent gone, and if we follow the current trend, is this were opportunity exists?

The Entrepreneur of today, is more dispersed than in the past. Some stay home and build their business online, others have developed new versions of services for home or business, and still others have continued to run divisions of larger business and technology. The military still gets their share too. Yet there does seems to be a downturn in new technology companies, financial business opportunity, and high growth for new corporate divisions. At least it feels like these are less robust. Most likely it feels that way because of the incredible number of things developing around us all the time, changing rapidly, and we are no longer stunned by the newness of things. A computer is no longer a mystery, flat screens are everywhere, and who can ever try all the apps developed for our cell phones? Why pick a stock when the computer or manager can do it?

But there may be a place where nobody expects to look for innovative, talented entrepreneurs of today. It may be the mundane in which opportunity has hidden. Could it be that Talent has found a place where it can flourish without being the headline of Wall Street, the news of the day on TV, the political argument of the moment? Could it be in a place which rewards hard work, critical thinking, experience, and the ability to take a meaningful risk?

One industry the talent pool seems to have poured into is Hospitality. Hotel owners, investors, and managers are flourishing with very little fanfare, all for the sake of providing a meaningful service for a fair price. The talented leaders of this niche have been developing new models, adding technology, and using creative financing to produce a very rewarding space for themselves in our modern times. They are fully taking advantage of our new age of technology and I would say they have advanced far beyond most industries. Seriously.

If you have taken a vacation and stayed in a nice resort or hotel, you also know these are not mundane at all. They are excellent places to visit, they have the latest in technology and services, and the people are incredibly nice since hospitality is… nice.

Good Politics are Most Important to Business Owners

Business and practice owners need to consider the most important thing for the continuing development of their business.  Customer service, sales and marketing, product and service development, and productivity

Fill the Chair
Fill the Chair

are all a constant but their effectiveness is not.  In the wrong political environment these constants are negatively impacted by slow growth, reduced number of customers or patients, low productivity, and worst of all, reduced customer service.  We are all front-line witnesses to this.

The most devastating feature of a negative political environment is ‘Trickle-Down Negativity’.  We may or may not want to believe in trickle-down economics but the effect becomes very real when our own business venture is impacted by increased regulation, increased taxes, and customers and patients who are less willing or unable to pay.  The environment is difficult and requires more time and effort, thus expense, to overcome the downdraft of a poorly run government.

Economic cycles come and go but political impact can be long lasting and indeed reduce the merits of small business for an extended period of time.  As business owners we must be cognizant of a situation in which this extended impact could be in the heart of our development and earning years, and its impact on our own families and livelihood, not just the success of our business.

We currently operate our businesses in an environment of increasing over-regulation, increasing taxes, withdrawn customer base, and dramatically reduced opportunity in venture.  Our own customer base is eroding, not because we are poor at business, but because the opportunity is poor at best.  When our best customers cannot afford us anymore, there is something wrong.  It isn’t our prices, since we actually feel the need to raise them in order to survive.  It isn’t service if we already feel we are giving away all we can afford.

The politics of our situation, this poor business environment, are not about party or personal feelings toward elements of the platform.  Our situation is about ideology.  We are currently under the thumb of anti-business ideology and an executive branch which seemingly wages war against our potential for prosperity.  Fix the current ideology, return to the belief that business owners and entrepreneurs are the fuel of our existence and opportunity, then we can worry about the platform issues later.

In short, the cost of our current political ideology is very expensive.  When this same ship had to be turned in the past it took 20 years to overcome in one case and 10 years in the last.  We have no way of knowing if the next leadership will be effective enough to keep that time at the low end of the scale.  Can we afford to wait 4 more years to see if the current failed ideology will change course?  If the impact deepens it will take even longer to turn back around.  Are you willing to wait 15 to 25 years for your prosperity to return to reasonable levels?  Start the change now.

The Fed vs Banks, Gold Grab DejaVu!

It’s the 1930’s gold grab all over again, maybe.  Sure feels like it, looks like it, walks and talks like it.

Today the Fed is suing banks over mortgage drivel.  Drivel because the Fed helped cause it, and drivel because their only remaining point of first bailing them out and then suing them is to force a sea change in currency for the Fed’s own benefit.  And of course congress can “window-dress” and make themselves look good in the media.  That’s all it is.  The Banks did what the Government designed the banking business to do, and in support of the Government’s creations called Freddie and Fannie.  Everyone should care.  They are trying to force banks to release deposits back into the Fed.  Didn’t we read in the news that the banks had paid back the bailout money?

Like the late 1920’s and early 1930’s, there’s been a lot of cash hoarding going on in corporate America, as well as asset realignment.  In the days of the Great Depression there were not enough dollars circulating because of hoarding.  Those who had lots of currency wanted to control more of the government as well as the people they employed.  In the 1930’s the Federal Government of the United States of America virtually outlawed the ownership of Gold and forced the banks to move all gold into the Federal Reserve Deposit in consideration of the Fed’s full faith and credit to guarantee cash.  Nobody seems to have seen the famous Fort Knox gold ever since.  But that’s not the point.

The reason they did that, back in the 1930’s, was to flush cash out of hoarding accounts and back into public distribution.  What good is cash if it isn’t trading hands?  Velocity at which money moves is very important to the economy.   The method the U.S. used is highly questionable, taking everyone’s gold and giving them dollars instead.  Sounds okay to you?  Well, right after the Fed confiscated the gold, through an act of congress creating a law to do so they reset the price of Gold to double what it was and effectively increased the value of the Federal deposit while cutting the value of the dollar in half.  Snap!  The rest of the depression years were spent trying to overcome the negative effect of doubling the cost of living overnight.

So here we are, this many years later, and maybe this action against the largest banks is very similar.  They can’t force banks to deposit gold again, since they don’t have gold on deposit like they did long ago.  This may not have the full effect and fury of resetting the Gold and Dollar price, but it may be one of several steps to cause much of the same effect over time.  It’s a bit early to tell because we have to see what happens with the dollar.  One thing is obvious, through fines levied on banks, quite a few billions of dollars could end up in the Fed’s account very soon and then some other action to cut the value of the dollar in half could take place.  If this happens it could be very hard on the citizens of the country.

Why would the Fed do this today?  Several reasons come to mind:

1. Increasing the deposits through payments of billions of dollars in fines can allow the government to circulate more currency without printing it.

2. The Fed can then afford to issue more debt which can then be leveraged by banks and other institutions.  Feds get cash, then they sell bonds, the banks leverage the bonds.  That’s like you using a credit card to secure another credit card; chasing debt with debt.

3. If they find a way to reset the value of the dollar, they can effectively lower the cost of  Federal debt.

4.  Causes the value of the dollar to sink low enough that those who hold dollars in large hoarded amounts will want to free them up, thus creating higher circulation.

5.  They can afford more bailouts with cheaper dollars and that means more regulation and therefore more control.

6. Increases the net power of the U.S. Fed in terms of currency control.  Imagine a King who circulates his own money with his image stamped on it.

7. Citizens become even more dependent since they cannot afford the new cost of living.

8. It’s a way to bankrupt the system quietly.  At that point they may also have the option of replacing the currency with a completely new one.

Maybe this is the only way to manage the currency, debt, and productivity crisis when we come to this point in the economic cycle.  Maybe there is no better way.  Reducing hoarding is a positive but maybe there is a better way to cause the dollar to be more valuable in circulation.  When investment in business, employment, and other things can give a higher return than the simple yield/risk model in a bank account, then people will put their money to work.  When fear is high, risk is out of control, there are few options, and it is normal to hold cash.

There is a possibility that over-regulation, over taxation, and the high cost of fees, fines, and employment overhead such as employment tax, insurance, and other benefits, actually add up to cause a reduction in productivity of investment.  Because of this firms and those who hold cash must choose to avoid the risk of new business.

This is how our system of freedom and opportunity depends on less government.  This is how it works.  The more value government takes out of the system of free enterprise, the less opportunity its citizens will feel they can afford.

Now you must ask the question of how to prepare for the dollar to collapse, if it does.

No Volume in the Dow

Volume in the Dow and other indexes has been falling for some time. For over a year I’ve been trying to get top economists to comment or discuss this issue and it remains ignored. Last week CNN finally produced an article on this.

Historically there is only one other time when volume diminished and of course that was in the 1930s. This is an ominous trend which took decades to overcome the last time.

I feel that so long as volume is tending lower it will be difficult to expect positive returns in “buy and hold” portfolios for at least an intermediate time period.

Who Decides Your Next Phone Call?

What if your wireless provider decided your next call?  Since they have the information available to know exactly when to make a call and what time of day is the cheapest, and potentially when someone on your contact list might be available, then maybe they should be making your calls for you?  Sound stupid?  Of course it does, but what if it became like that?

Really, you could give full access and decision-making power to your phone company and let them decide when it’s best for you to talk to the next person.  They could keep track of your calls, how often you like to talk to someone, how often someone likes to be talked to, and much more.  They could use the tracking information to decide when you should contact someone because you happen to be in the same town, so hey, let the phone ring.

I know, it starts to get a little complex.  What if the person your carrier decides to call is your ex-boyfriend or ex-girlfriend?  What if you recently broke up and now you are on a date with the next person who you had really been hoping to go out with for some time?  There are many ways this can get messed up, become uncomfortable, or be a deal breaker.  How much information would the carrier need to know about you just to avoid making mistakes on your behalf?

What if you are driving?  Wouldn’t the carrier need to know if you are driving or in the middle of some other important activity, like brain surgery, so you are not distracted and have an accident?  They would really need to know much more information in order to maintain safety.  Maybe it would be important to know if you are eating, feeding the baby, taking a shower… because, after all, wouldn’t they need to know if the timing is right for a phone call?  Certainly!  And the more effective you want the carrier to be in managing this, the more you need to be willing to turn over as much information as possible.

What if you are sick but your carrier insists you make or take a call because the timing is right for your computerized communication schedule?  What if you are in the bathroom?  What if you are already on a call?  It seems that if you fail to comply, fail to answer when the system thinks you should, you may somehow be penalized and the next thing you know, some important person on your list is no longer called because the system now believes you won’t answer.  Possibly this level of service will incite you to turn the phone off, since the more people you know, the more it will ring, the more failures to answer will occur, and drive you nuts!  In the theatre, while flying, at your kid’s recital… what if you are a trapeze artist or human fly?  Okay, by now you get the picture.

But the real picture is of socialism in government.  How much are you willing to allow the government to do the same thing through social programs like healthcare?  How much should the government know about you in order to interfere in your life and ability to make decisions?  How much should the government “ring your phone” and decide when you should do certain things because of convenience based on expense, failure of others, and even mortality?  How much socialism do you really want in place, since the more socialism controls the more it needs to know in order to make decisions for you?  How much of your money, land, and freedom should the government take in order to manage your life, even on behalof of others?  It’s just as stupid as the phone carrier making your next call.  Ironically, the government seems to be gathering the data to make your next call… already.

Job Report Statistically Irrelevant

The job report today came in at +117,000, creating an unemployment number of 9.1% vs. last reported 9.2%. The error margin is +/- 100,000. This means that the number is statistically irrelevant. Yet our news media and low-level talking heads in the financial industry choose to play it up as if it’s the beginning of economic recovery.  This won’t last long since the markets are already giving up the plus side.

In order for the number to be statistically relevant, new jobs created would need to be 4 times greater or more. To have any meaning at all we would need to see a monthly increase in the 300K plus range over an extended period of time. As it is, it would take decades for the current number to have any impact at all!

Other irrelevant numbers are the S&P 500 and DOW indexes, which have barely moved this year, yet the media has continued to hang on every 100 point move in either direction. They love to squeal about the VIX volatility index; why anyone would follow this redundant number which tells you only what is currently happening is beyond me.  I remember when 100 DOW points meant a 10% move, but today it’s just 1% or less and yet receives even more attention. There really must be no real news to report these days or they would completely ignore these things (um, sure).

All of this implies two important things: 1) you can’t invest according to the news headlines, and 2) this truly is a trader’s market, maybe the best ever. The first item is not a shocker, and if you have been watching the markets for any length of time you’ve even heard the culprits themselves (reporters) state that you can’t just follow the headlines. The second is the real revelation which any savvy investor should be taking note of.

Primerica, Dumbing Down

Primerica claims they cannot get to middle-class and minority customers because the state insurance exams make it too hard for new agents.  The test is easy, very easy.  If anyone needs a smart agent, isn’t it the middle-class and minority groups?

I almost hate to write anything about this since so many Primerica agents might not be able to read this.  As a potential customer, shouldn’t you worry that Primerica wants to hire people who can’t pass the current test?  The state exam is designed to test minimum standards and a lot of people make it through the process, for good or bad.  If anything the exam needs to be much more difficult.  It’s truly an easy test and only takes about two days of focused study to pass. Don’t forget, many of these “agents” end up with the title “financial advisor”.

If you haven’t seen this story you can find it in the Wall Street Journal today.  Maybe we should also lower the exam requirements for airline pilots, navy captains, and astronauts.  What if we lower the exam requirements for attorneys and doctors? I would love to be able to hire a dumb attorney or go to an ignorant doctor!

I know this is merely Life Insurance but isn’t it bad enough already?  And, can you imagine the first question you need to then ask each agent who solicits your business, whether they are either middle-class or a minority?

Surely they don’t mean the test needs to be in a different language, since almost everything I see is double thick to print in more languages.

Remember, Primerica is wanting to dumb it all down… Primerica.

The #JPQuake Week Ahead

Reality.  The reactors in Japan seem to be at low risk of full meltdown.  Barring another huge quake and tsunami the impact on the markets in Japan and around the world is likely to be very small.  Japan’s economy can easily handle the cost and it hasn’t taken long for the financial news companies to begin reporting on the potential positives of a spending spree to rebuild.

As far as the US is concerned, we had already seen a top and according to Investors Business Daily, had already moved into a full correction.  Based on normal activity we may even be halfway through.  Except for the sharp downturn in the Japanese markets based on fear of melting nuclear power plants, there has been little effect so far.  It’s amazing how much the human population can absorb.


New York Stock Exchange Sold To German Boerse

The NYSE was sold out yesterday to the German Boerse exchange in a merger deal.  A major icon of our American ingenuity and capitalist structure has truly been sold out to a foreign entity.  Even if they try to say Americans still have an interest in it, it’s like you owning one share of Walmart and thinking you can control the company; not enough votes.

We may as well take all the stuff out of the Smithsonian and put it all on Ebay.  How about if we give a patent and copyright to China for the American Flag?  The amazing thing is the press isn’t reporting that we’ve been sold out and it’s just being treated like the sale of a bank branch.  Much of the world’s economy, the real and free part, was exchanged through the NYSE.  The name will even disappear soon.  The NYSE was created in 1792.

Being a member of the NYSE was prestigious.  I really don’t know what it will mean now that descendants of Prussia will be in control.   The amazing thing is the sale price was only $10 Billion.  Shall we sell our bridges and canals to India or how about give them as a gift to Iran?

We have such an incredibly failed government…

Read more here:  http://bit.ly/ghrmkQ

Is Goldman Sachs Window Dressing?

Today’s news from Goldman Sachs ($GS) is interesting in more ways than just the negatives they predict for the economy.  I can’t help but wonder about the timing of their statements.

We just had a pretty good run from near Dow 10,000 to near 10,900.  Year to date Goldman Sachs had probably outperformed most of their peers and has had plenty of trading opportunity.  Not knowing what their current portfolios look like in their eyes, it does seem odd that in the midst of all the news and portfolio managers who have said “No double-dip recession”, that here comes Goldman with a big negative.  Who does this serve?

If we follow the money a little bit maybe it serves Goldman more than investors.  Many investors have only recently added exposure to their portfolios.  If Goldman made enough in trading so that their portfolio return is somewhat irrelevant, then maybe helping the markets prepare for a harsh economy also helps Goldman window dress some accounts and funds prior to year end, and also can help them move to better positions for the coming year, and an eventual positive market.  How should we take this?

As business owners we must take it with a grain of salt, maybe a whole pound of salt!  I don’t think investing in private accounts is necessarily effected by this, but should we view it as a short term negative and in reality a buy signal?  To me it almost seems like they are saying the poker players at the table all hold bad hands except Goldman, and now they are waiting for everyone to fold.  They may have a full house or they may be bluffing but if everyone else is holding a bad hand it doesn’t matter.  So how do we follow this lead?  Don’t be the last one out and don’t be the first one out!  This hand may be played over the next 2-3 quarters but it is going to end way before the night is over.

In other words, keep playing, don’t bet to high for now, but realize the next hand may deal you some good cards, as long as you still have something left to bet.  Is business investing a poker game?  Only some of the time.  In the short term it really can look like gambling more than investing.

So when should we be willing to deploy new ventures, take risks in marketing, and put hedge money back to work?  If you have long term goals you must continue to work forward toward them, at the same time you may want to adjust your timing for anything that increases overhead.  To me it seems like the best time may be after the first of the year.

Today’s article on Goldman Sachs from Bloomberg: http://bit.ly/c0XgJx