Will You Listen Now, Cap'n Oblivious?

Back in September, I posted about Paul Otellini, CEO of Intel and his comments about investing in the US.  He ain't.

Well, OK, he is.  But most of their investment in new plants is happening overseas.  Note that the Vietnamese plant is expected to:  "...expected to create thousands of skilled jobs as the nation moves from low to hi-tech."


Vietnam is becoming hi-tech.  Viet-f'n-nam is becoming hi-tech.  


If O (and the rest of our governmental leaders) doesn't get it through his shellacked head that we compete globally for jobs, we are doomed.  Because our business leaders have figured it out.

One of the Giants Speaks

Bernie Marcus is one of the founders of Home Depot, one of the most remarkable businesses to spring to life in the last 30 years.  He and his co-founders, Arthur Blank and Ken Langone started from nothing back in the late ‘70’s and built a huge, successful business that redefined an entire industry.  In short, Marcus is the sort of man you would want to listen to about creating jobs, since he had a big hand in creating over 300,000 of them.

Being the evil rich man that he is (he’s worth somewhere in the neighborhood of $2 billion), a few years ago he single-handedly kicked in $200 million to the city of Atlanta to build what is now the world’s largest aquarium and has also signed on with Warren Buffett and Bill Gates at The Giving Pledge, (read his nasty letter at the link) where he has pledged to give most of his fortune to their foundation upon his death.

Mr. Marcus was on CNBC today and, well, he ain’t happy.  This is a little over 15 minutes long and worth every minute.  (I tried mightily with my puny HTML skilz to embed the video here, but it is apparently the video that will not be embedded.)

Are you listening up there in your Ivory Tower, Mr. President?

Why Isn’t Paul Otellini Being Listened to in the White House?

From CNN, via HotAir.

Paul Otellini is the current  Evil CEO of Intel, the largest computer chip maker in the world.  Intel is, by any definition, a raging American success story and is something that we have all too little of in America today.  Intel is an exporter.  As you will hear in the video at the link, 75% of their revenues are overseas.

Mr. Otellini has some strong, common-sense ideas on how to make the US a more hospitable place for companies to do business in in the long term and on how to get the damn thing back out of the ditch in the short term.  He says in the interview that he has had more meetings with Obama administration officials in the last two years than he had with anyone in the Bush administration in eight years.  The interviewer asks what more he would like to see from the administration and he answers that he would like to see them take action. 

And therein lies the problem.  The White House is full of ideologues and theorists who can talk beautifully about bullshit but don’t have the slightest idea of how to put those theories to work or even if they should be put to work.

I like the juxtaposition at HotAir of Alan Greenspan, one of the Smartest People in the World, talking out of his ass again just above Otellini making practical sense.

Waxie and Stupie

 

Henry Waxman and Bart Stupak have ordered Randall Stephenson, the Chairman, President and CEO of AT&T to appear before the House Committee on Energy and Commerce to explain why AT&T announced that they will take a $1 billion (that’s $1,000,000,000) charge against earnings to pay for their precious baby, Obamacare.

Now, whenever Waxman is involved, you can’t discount the likelihood that this is a veiled threat and an invitation for him to launch invective through his enormous, upturned nostrils at someone. 

 

But if you read the letter Waxie and Stupie sent, it almost reads like they are surprised at AT&T’s action.  Like they never thought this could happen.  It reads to me like they they never heard of the difference between static analysis and dynamic analysis; that is, static assumes that nothing else changes in the data set while dynamic attempts to account for all possibilities.  Or, as it is more commonly known, “The Law of Unintended Consequences”, a term that seems to have first occurred to these two dopes for the very first time in this letter.

Beginning with the third paragraph of this letter, let’s look at just how stupid these two are:

 

• That first sentence in the third paragraph is our first clue of their stupidity.  They talked themselves into believing this turd would lower costs for companies. 
• The second sentence is where they begin to question AT&T’s own analysis, disbelieving that AT&T knows its own numbers and how changes in the law will affect them.  Waxie and Stupie don’t name the independent analyses that they are referring to, but I’m betting none of those looked specifically at AT&T.  Probably just looked at a broad swath of fake numbers. 
• The third sentence points out that the CBO projects a 3% decrease in average premium costs by 2016, conveniently leaving out what will happen in the intervening five years and implying that AT&T should keep their costs artificially high in the interim while awaiting this earth-shattering savings that is headed their way.  I also would be willing to guess that, if the CBO projected a savings, they said that the decrease will be 3% less than it would have been without it.  That is, not 3% less than it is now but 3% less than the normally-expected increase would have been.  Waxie and Stupie aren’t thinking dynamically here, they are assuming that everything else stays the same, nor do they or the CBO have the slightest clue about what other business expenses AT&T anticipates coming their way.  For instance, AT&T is in a notoriously capital-intensive business, requiring a huge annual investment in upgrading their network to accommodate the Jesus Phone for the millions of hipsters who voted for Obama. 
• Finally, the last sentence in this paragraph points out that the Business Roundtable “asserted…that health care reform could reduce predicted health insurance cost trends…”.  Emphasis mine.  Woulda, coulda, shoulda, douchebags.  Ideology, meet the real world.  This statement also suggests that maybe the Business Roundtable was looking at the data dynamically when they used the c-word, but Waxie and Stupie chose to only take into account what they wanted to hear.  Had the Roundtable said that it would reduce costs, that would point to static analysis.  But they didn’t say that; they are business people and are well acquainted with the Law of Unintended Consequences.

The second page of the letter is where the threat is issued.  “Give us a data dump for our accountants to dive into and then send us everybody with a title above Vice President for all of your subsidiaries.”  This, too, displays the idiocy of these two morons.  AT&T has 281,000 employees and who knows how many subsidiaries.  I hope AT&T rounds up the hundreds of VPs that they must have and sends them all to this hearing.  It would be a great display of just how big the economy is and how little Waxie and Stupie understand about what they and the Dems are screwing around with.  But the business cost of doing that would be prohibitive, especially with the Dems yanking cash out of their company as fast as they can.

Powerline speculates that companies didn’t mention these repercussions sooner for fear of being retaliated against.  But companies are thinking dynamically, knowing that whatever Congress does they can adjust.  To a point.  It’s the dumbasses like the Dems who think that whatever they do doesn’t otherwise affect the economy.  When companies unload people over this, the CEOs will be vilified by the Left, but all they are doing is responding rationally, something the Left is entirely unable to do. 

My own opinion?  We will all soon be independent contractors and off the payroll.

The Problem with Familiarity

 

Remember this?  (From the NY Times)

 

 

Now look at this headline from Bloomberg:

 

 

Now look at these two, from The Raleigh News & Observer and the Charlotte Observer, respectively:

 

 

 

In the first two stories, we have a glaring example of lack of consistency and an arrogant display of subjective bias.  He takes the “fat cats” to task on a regular basis and that is the part that people will remember.  The rabble cheers him when he does this.  But these two guys over here, the ones that he knows personally?  Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JP Morgan?  Hey, they make less than A-Rod, so it’s cool.  He has given a tacit approval to their clear attempts to avoid controversy by taking stock instead of large cash bonuses.  Blankfein clearly reined himself in by taking only $9 million, while Dimon unapologetically took $16 million.  Dimon should have taken double that; JP Morgan is a very profitable company and he has served his shareholders and employees well.  Blankfein took $62 million in 2007 and Goldman is the undisputed king of Wall Street.  He should have taken another $62 million.  The problem with this is that Obama is giving a pass to two CEOs merely because he knows them personally while essentially meddling with the relationship between these two guys and their company and shareholders.  When Obama is calling out the fat cats, he is really saying, “We want our money back from the fat cats…….uh, except for my golfing buddies Lloyd and Jamie.  But all the rest of you are evil and greedy.”  This is arrogant.  This is subjective bias, with the pardon granted merely because he knows these two guys and thinks they are “savvy”.  It shows a lack of rigor in his thought processes in allowing him to grant leniency merely because of personal familiarity.

Then you look at the headlines from the Raleigh and Charlotte papers (they are both McClatchy papers, hence the identical photos) and it adds further to the recognition that Obama doesn’t know the effect his “fat cat” comments or his ongoing disdain for Las Vegas have on the economy.  Charlotte is the 2nd biggest banking center in the country, after New York.  Bank bonuses are important to the economy there and always have been.  My daughter attends a college near Charlotte that has long had a relationship with Wachovia and the donations that came from Wachovia and one of its executives in particular were vital to the school.  That Wachovia fat cat is no longer able to help out as he had done in the past.  New York Mayor Bloomberg is on record as wanting the state of New York and President Obama to soften their stances with regard to the wealthy over taxing the bonuses they receive.  He recognizes that when taxes on the rich become confiscatory, it hurts the New York City’s and Charlotte’s of the world.

Obama has absolutely no understanding of how the economy works in this country.  He wants to punish business and confiscate money from the business world to redistribute according to his whims, hence the healthcare bill and the increased taxes that he is contemplating, not to mention the cap and trade bullshit bill.  That this is done on a whim is the real problem.  He is attempting to reshape the country according to his personal vision.  This is a country of laws and individuals, not the United States of Obama.  Companies aren’t hiring or moving forward right now because Obama’s governance by fiat makes them uneasy and who could blame them? 

A suggestion to all Fortune 500 CEOs; try to get a tee time with Barry some time this year.  Maybe that will settle things down once and for all.

“Extend and Pretend”

 

That is the phrase that bankers are using to describe how they will handle the coming commercial real estate collapse.

I saw my uncle over the holidays and he has been in and out of commercial real estate since the ‘70’s.  He was recently working with some bankers on a deal and he asked how they would handle the round of refinancing that is coming.  “Extend and pretend” was the answer.

A little explanation will help you to understand what this means.  When a new construction project is built, it is frequently done on a 5 year note (and, though I am not positive on this, maybe interest-only).  At that end of those 5 years, the borrower is supposed to retire the note and refinance into a longer term loan.  So, what was going on 5 years ago when those loans were being made?  That’s right, a lot of loans were being made on everything from shopping malls to hotels to office buildings.  Many of which are empty right now.  And therein lies the problem.  The project was originally funded based on a higher value.  Clearly, that value is gone now.  So if you are a bank and are holding a note with a face value of $10 million on a piece of property that is now worth only maybe $6 million, what do you do?

You extend and pretend.

The good news is that, according to Evil CEO Jamie Dimon at J.P. Morgan, the worst may be over.