International Women's Day: March 8, 2012

Today's blog is dedicated to International Women's Day and answering the question: How can we, as a culture and as members of the global community, involve, educate, and inspire girls in a positive way?

Gender Equality Involves Both Genders
Too often the discussion of gender equality is a picture of women advocating for women's rights, but for every woman born there are two contributors to her DNA - a man and a woman.  It is the lack of presence or even the absence of men in the discussion for women's rights that sends a negative message to girls.  This is not an issue for women, it is an issue about women that both genders have equal responsibility to.  A girl should have the chance to see her father, grandfather, brother, uncle, cousin, male friend, boyfriend, and male stranger stand vocal in her value.  Any discussion about equality is essentially a discussion about value and not participating means that you are leaving the value of your mother, grandmother, wife, daughter, sister, aunt, cousin, female friend, girlfriend, and female stranger to someone else.

Early Leadership Opportunities are Critical
Regardless of whether you believe that leaders are born or made, all leaders need opportunities to lead.  Leadership opportunities begin in the family as it is the safest place to learn how to lead the most resistant of people - relatives.  Fostering this type of development means that parents find opportunities for girls to lead within the family by making decisions and being held accountable for recognizing the needs of the rest of family.  The term "parents or relatives" is loosely defined as those who care and are responsible for girls as genetics place an unnecessary definitional limit.  Girls should be allowed to fail because it acts as a change agent and learning catalyst.  And progression is also important as girls should encounter stretch opportunities.  It is succession planning for the family, which ensures the family progresses alongside the girl as she becomes a woman.

On a personal note, I hope that someday an "International Women's Day" will be unnecessary and regarded as a Hallmark holiday.  My faith lays in the overwhelming optimism that global citizens will recognize that a "rising tide lifts all ships" and by keeping one group subordinate, it effectively holds everyone back as we are inextricably linked in a world that is getting smaller and smaller each day.  America is not the leader it should be on this issue and as a citizen that means I am not doing enough so I guess the faith that I need is in myself to exact the change I want to see.  Blogging cannot be my only contribution. 

The GOP is not Rocky and Palin is no Adrian

At the recent Conservative Political Action Conference (CPAC), Palin commented on how the extended primary is going to strengthen the Republican party for the upcoming U.S. Presidential election.  It is not that Palin is outright in error for thinking this way, it is just that that is an overly optimistic perspective and against common sense.  The GOP is not Rocky and Palin is no Adrian.  This is not a Hollywood movie where the pain of training serves as intrinsic motivation for Rocky to overcome - well, most of his opponents.

The GOP primary candidates are not athletes and whatever mental training Palin sees as the intrinsic motivation, is more than likely only to create fatigue for the candidates.  The greater the fatigue, the greater the opportunity for GOP primary candidates to make mistakes.  Also, consider the use of resources because while President Obama is building his bank account, the GOP candidates are using theirs to fight against each other.  Even though, super PACs have large sums of money, the GOP primary is spending those bank accounts down like the individual campaigns.

Exhausting of monetary resources is one side of the story, the other side is the exhaustion of Republican voters, arguably the most important resource for the Republican party.  The velocity of the attacks ads in those States that have held a primary is fast and furious and citizens, Democratic and Republican, may have post traumatic stress disorder from the experience.  A negative experience is not the memory the GOP presidential candidate wants to flash before potential voters in the booth.  Voting is emotional while presidential campaigns tend to be executive mind fanfare ticking off the logical reasons why each presidential candidate should get the job.

So the reality that the GOP is not Rocky and Palin is no Adrian is likely the reason why President Obama will still have the word "President" before his name.  President Obama captured the Rocky emotion with his change campaign and though the change he got may not have been the change he intended, it is still tagged emotionally.  Only when change is forced on a voter by having no incumbent to vote for, will the GOP have a shot at the U.S. Presidency.   

Paying Corporate Taxes as a Prophylactic Measure Against U.S. Revenue Shrinkage

One cannot turn a TV channel or a newspaper page without hearing the rhetoric about taxes and how everyone including businesses is paying too much.  The Tea Party, Republican Party, and lobbyists are all on the same platform of lowering taxes.  The Democratic Party is on the teeter totter with raising taxes via the Bush tax cut sunsetting for the richest one tenth of 1 % while keeping it in place for those that earn $250,000 or less.  The reality is that either the U.S. citizens and businesses pay now when there are more people with greater taxable income or pay later when there are less people earning lower wages.

Levying taxes is an enumerated power for the Federal government granted by the U.S. Constitution.  State constitutions mirror the U.S. Constitution to varying degrees, but all grant the power to levy taxes.  Taxes on individuals and businesses are the greatest source of revenue for the Federal government accounting for almost 97% of monies raised - individual taxes account for 65% and corporate tax is 32%.  Taxes are shouldered by two parties and a change by one party such as lowering the tax rate necessarily shifts the responsibility to the other party.  The reality of unfunded liabilities for entitlement programs does not allow for the lowering of the size or cost of doing business for the Federal government while lowering taxes.  It is the "unfunded" descriptor that stymies said simplicity. 

The estimate for the medicare and social security unfunded liability is $107 trillion per the Social Security and Medicare trustees' report (2009).  The fiscal irresponsibility by the Federal government is at the minimum gross negligence, but more likely qualifies as pre-meditated because the Federal government knowingly used earmarked monies that carried a legal liability.  Even so, the problem cannot be avoided any longer or kicked down the road.  Just as student borrowers cannot reduce or discharge student loan debt unless severely disabled or dead, the Federal government cannot reduce the entitlements for the elderly at a point in their lives when alternatives and opportunities rarely exist.

Baby boomers, the tsunami of retirees, have not saved enough for retirement and those that did save are laboring under a loss of investment values.  That means shrinking disposable income to spend on consumer goods.  A shifting of the tax burden to individuals from businesses further shrinks disposable income.  The potential for greater reliance on government programs to fill gaps during retirement is a certainty.  Resource costs will continue to be driven higher with global demand increasing.  Retirees will move closer to city centers and live in smaller spaces to offset and manage higher resource costs.  Retirees will self impose austerity measures in order to keep a modest standard of living.  For those retirees that cannot bridge the gap, the burden then falls to the State or relatives so the depressed disposable income becomes generational and pernicious.

The U.S. offers businesses a qualified free market with strong intellectual property rights as evidenced by the rising patent infringement actions as the new corporate weaponry.  Federal and State governments rarely engage in direct competition with businesses unlike countries such as China.  Political grafting is more overt culturally and a condition of doing business in other countries unlike the U.S. where it is more connected to election campaigns and freebies or junkets.  The Foreign Corrupt Practices Act can be used as a competitive strategy by passing along evidence to the U.S. Justice Department.  So the U.S. market is ideal, albeit mature, and finding a substitute is highly unlikely, therefore contributing to Federal and State revenues via corporate tax rates is a strategy of ensuring that the disposable income of U.S. consumers is not overly burdened.

It is in the best interests of U.S. businesses to pay the corporate tax rate and continue to lobby for a reduction in the size as well as the cost of doing business for Federal and State governments.  The goal is to grow the disposable income of U.S. consumers and shifting the tax burden is counter-productive to revenue growth.  Furthermore, brand image or corporate image is at stake as this is a "corporate social responsibility" issue and those businesses that espouse the business philosophy, yet seek to reduce its responsibility to societal welfare courts hypocrisy.  It is about businesses as a "going concern" and U.S. consumers as a "going concern" otherwise neither concern will be had.    
     

How Russia Got It So Wrong with Syria

Aside from Russia's self interest in selling weaponry to Assad's Syrian government, it is Russian Prime Minister Putin's need to play chess with the U.S.  And PM Putin is no Bobby Fischer.  Russia a la PM Putin is making geo-political decisions that are counter-productive to its clandestine mission of power blocking the U.S.  The issue of Syria is unpopular within the global community as well as the regional Arab League.  Even though China also vetoed the U.N. Security Council resolution on Syria, China is not taking advantage of photo-ops - Russia is by inserting itself as a mediator.  Usually, mediators are neutral parties or the least self interested parties.  Russia is neither.  Russia, now that it has taken a much publicized stand, has a personal stake in keeping the Assad regime in place and successful - not just a business one.

Russia is preoccupied with the U.S., but the U.S. is not preoccupied with Russia to the dismay of PM Putin because PM Putin wants Russia to be relevant.  Consider the shirtless photo-op of PM Putin on a mountainside.  At the time, it was interpreted as a response to President Obama being photographed shirtless on a beach in Hawaii.  If German Chancellor Angela Merkel responded with her own photo-op in a swimsuit enjoying the Danube, it would seem completely out of character for her, but because it was PM Putin the photo-op received more attention from comedians than politicians.  For all the meddling in sovereign affairs that the U.S. is responsible for, PM Putin asserts it is Russia that the U.S. is most active in, the latest being the alleged voter fraud, not a result of PM Putin's command and control ruling party.

Since the strategy of blaming the U.S. for all sorts of evil has not had the desired effect, PM Putin is moving in a different direction with Syria.  What is a little bloodshed, atrocities, oppression, and delusion when the real issue is the influence of the U.S. as a global power.  Often speculated about, the sunsetting provision on the empire that is the U.S. has not been written, even if there are precepts for it.  Backing the Assad regime in Syria will not hasten the end of the U.S. as a global power, it will however shine a bright light on those global players that stand as an affront to democracy or advocacy.  Not the pre-packaged U.S. sold democracy, but the kind that has its origins in the grass beneath the feet of the oppressed - a place where the U.S. and its citizens once stood. 

So PM Putin, the strategy and focus of Russia should not be the U.S. because it has led you down a garden path laced with thorns.  Fundamental to being a global leader, outside of Russia, is the consent of those that are to be led and said confidence cannot be found in a country for whom bloodshed, atrocities, oppression, and delusion are minor violations.  Such a position, immediately calls for marginalization and Russia really cannot afford to be marginalized more than it has, especially when it seeks more than anything else - legitimacy.  And so Russia and PM Putin have become the "look at me" child making a mess to get attention - Syria, of course, being the mess.  The days of Gorbachev seem ever more distant in light of recent events. 

Market Transparency for Whom

The FBI and U.S. Justice department have been very busy arresting and prosecuting insider trading cases.  Some of these insider trading cases are so called "expert networks" where a matchmaking process is used.  One example of a matchmaking tie up is between employees and investors at public companies.  Employees are compensated for passing along proprietary or insider company information to investors, just not to the degree that investors are.  Consider an insider tip on a potential mergers and acquisitions transaction where generally there is a premium paid to the target or acquired company, a premium that could be 20 - 30% above the current stock price before public disclosure.  That return beats the stock market everytime, which for the S&P 500 has been 11%  (CAGR) from 1950 - 2011.  Insider trading is a risk mitigation strategy. 

A more sophisticated form of "expert networks" is the matchmaking between investors and the U.S. Congress.  Lobbyists are an overt example.  Lobbyists are intelligence gatherers.  It is a misnomer to assume that lobbyists are only senders of communication.  Between 92 - 94% of communication is estimated to be non-verbal and if a lobbyist has any training in reading micro-expressions, then a U.S. Congressperson is giving a whole hell of a lot away.  Add in a travel junket or dinner meeting, paid for by lobbyists, and the reciprocity principle is triggered.  The reciprocity principle is a habit formed from a civilized upbringing where parents train children to be nicey, nicey when someone does something nice to you.  To call it quid pro quo is to give it an unnecessary edge because quid pro quo implies a choice or control, however the reciprocity principle is a habit and harder to control.

Now, switch the prey and the predator images - U.S. Congresspersons gleaning insider information from the intentions of lobbyists.  Then add in the specialized knowledge of U.S. Congresspersons on committees.  Investing is about finding the sweet spot and for U.S. Congresspersons the sweet spot is where regulation and business meet or deliberately do not meet.  That has equated to a 6% advantage for U.S. Representatives and a 10% advantage for U.S. Senators in the stock market.  The Executive Branch is restricted from trading in-person through the use of blind trusts, however it is a porous wall so a complete ban would be the only real solution to what is essentially a breach of fiduciary duty by both branches. 

Wall Street investors would like to be self regulated when it comes to enforcing rules on insider trading, yet the U.S. has decided that that is a bad idea.  And somehow the U.S. Congress has different standards.  The STOCK Act, introduced in 2006, was only recently revived by the U.S. Congress as a public relations strategy.  Since an outright ban on trading is not going to pass because of the self interested nature of the legislation, all blind trusts should be administered by a government entity with accountability and a strong firewall.  Allowing U.S. Congresspersons and the Executive Branch to have their blind trusts administered through existing relationships is akin to trying to hold water in one's hand.  Financial services companies are not a solution either as the client relationship focus ensures a firewall vulnerability.

It is unlikely that Preet Bahara, U.S. Attorney for the Southern District of New York (S.D.N.Y.), will be on the steps of Congress or in front of the White House speaking on the new arrests and prosecutions for insider trading because that is not where Wall Street is located .... or is it?  There is a reason why politicians spend millions of dollars on being elected to an office that only pays $170,000 or $400,000 a year. 

"Merger of Equals": Not Really

The latest mergers and acquisitions story is getting the "merger of equals" label.  Glencore International and Xstrata are in the mining industry and used to be one company before Xstrata went public in 2002.  The merger of equals label is simplistic and used erroneously usually based on market value.  Even twin children with the same DNA are not considered equals due to functional and personality differences.  The value in mergers and acquisitions transactions is that the combined company will be able to operate with a competitive advantage which necessitates that the mergers and acquisitions companies bring differences to the bargaining table.

Buried inside a merger of equals label is the idea that the greatest benefit of the merger or acquisition is its synergies because the companies are viewed as the same.  Not so fast.  The economies of scale become diseconomies of scale when the largess of the operations raises the combined company's cost of doing business.  Synergies are difficult and often based on a confluence of assumptions, more so than sales projections.  Downsizing the combined company's workforce seems to be the only reliable synergy unlike areas such as merging technology platforms where subsequent user adoption by the remaining workforce is vulnerable to subterfuge.  Synergies are useful in identifying areas for cost cutting, but should never be used as a reason for a merger or acquisition.

As difficult as synergies are to realize, the merging of company cultures including each company's respective leadership can be chaotic and demoralizing.  The merger of equals label is good for newspapers and magazines, however it is not a label that should be used by the companies in the merger or acquisition.  The implication is that all employees are on somewhat equal footing in the combined company and that is most often not the case.  High potentials are valued, but in a work culture where most of the employees are high potentials, the distinction is less useful to an employee's identity.  And for whatever intrinsic motivation that flows from being a high potential, this can be demoralizing.  There may also be learning curves for employees that can destroy an employee's sense of mastery.

Consider the CEO position.  Becoming a CEO is the culmination of ambition, leverage, and talent.  Rarely are companies led by two CEOs.  One only has to look to Research in Motion to understand the pitfalls of two leaders in a position meant for only one.  If two CEOs were better than one, it is likely the corporate organizational structure would have implemented co-leaders a long time ago.  The degree to which the companies are not recognized as equals is evident in the negotiations for whom will lead the combined company.  The choice of CEO sends a value message in a transaction being labeled as a merger of equals.  CEOs imprint company cultures with their own leadership style so choosing a CEO of one of the companies means some of the employees enjoy a natural advantage via experience in identifying with the CEO.  In the end, attrition will be the greatest indicator of what company was more important going forward to the combined company.

Based on historical evidence, mergers and acquisitions look and work better on paper than they do in reality.  Value creation can quickly turn into value destruction if it is not clear which company is dominant.  The first group that this should be spelled out to is the employees of each company so that expectations are set at the correct level and change management is aligned properly to the degree necessary.  There is no mergers and acquisitions transaction that is a merger of equals and failing to understand that further burdens an already difficult transaction. 

Indigent Burials: The Tip of the Spear for U.S. State Governments

Indigent is described as "needy, destitute, poor, lacking or deficient".  And indigent burials are on the rise, which is an issue for State and local governments as the cost is publicly funded.  In Portland, Oregon the rate of  indigent burials has almost doubled since 2007 for the medical examiner's office.  Colorado buried 32% more indigent people than in 2007.  Illinois spent $1.9 million on indigent burials from July 1st to September 1st in 2011.  (Nicas, 1/30/12)  What is not known is the degree to which abandoned or unclaimed bodies are included in the statistics.  It is an important distinction in order to understand how private or non-publicly funded burial costs are related to indigent burials.

The average funeral cost in the U.S. for 2009 was $6,560 not including cemetery costs.  That is an 827% increase from 1960.  Since the funeral industry is highly fragmented with the top four funeral home companies accounting for only 10% of the market, these prices could vary widely within local markets.  (NFDA)  The price is cost prohibitive for those with little to no assets or liquidity.  A secondary insight is as a wealth indicator within a person's family who was an indigent burial.  An indigent burial could be a person that has assets, but not enough to cover funeral costs or who has relatives that do not have enough assets to cover the funeral costs.  

On average, 1 out of 6 Americans will live until age 100 relying on a monthly social security payment of  $1,034 and retirement savings of $29,000.  The over, but not over U.S. recession has further deteriorated the situation facing retirees as investment values have decreased and businesses are cutting pension benefits either through bankruptcy or not delivering the promised rate of return.  It is not only domestic threats, but global threats such as an increased demand for resources - gasoline, natural gas, wheat, corn, beef, pig - among other commodities.  The index for food at home rose 6% for 2011 compared to 1.7% in 2010. (BLS, 1/19/12)

The effects are already being seen in the labor force participation rate.  For people 75 and older, the labor participation rate is the highest since 1966 at 7.5%.  Labor participation for this group in 2018 is forecasted to be 10% or 2 million workers.  (Greene, 1/21/11)  Because these are elderly workers and social security limits the amount of money beneficiaries can earn in addition to monthly social security benefits, the jobs are likely to be lower wage service jobs in the retail industry or something similar.  It could be argued that those working are the lucky ones.  The issue of living on a fixed income with rising consumer prices for food, housing, and energy affects many more than just 7.5% of people age 75 or older.

Other age groups are dealing with additional difficulties that impede finding a solution.  The over, but not over recession has left 3.9 million workers unemployed for a year or longer.  Research has shown that those unemployed for 6 months or more, earned 60% less than those unemployed for 3 months. (Murray, 1/18/12)  That is a significant loss of income and sets some people at a greater disadvantage than the age 75 and older group.  Indigent burials will continue to increase to keep pace with a higher death rate, however it can also be expected that the percentage of indigent burials will increase as Americans fall further and further behind economically.  The burden, then falls to the State and local governments and taxpayers so in one way or another the indigent as a taxpayer via sales tax, payroll tax, or property tax is on the indigent burial installment plan.

Sources:
Kelly Greene and Anne Tergesen, More Elderly Find They Can't Afford Not to Work, Wall Street Journal, January 21-22, 2012.

Sara Murray and Cameron McWhirter, Long Term Unemployment Ripples Through One Town, Wall Street Journal, January, 18, 2012.

National Funeral Director's Association, Media Center, Statistics, www.nfda.org

U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index 2011, January 19, 2012.

Private Label Goods - A High Wire Dance for Retailers

"Trading down" is when consumers change their purchasing behavior from brand names to private labels also known as generic labels.  Private labels are goods manufactured either by the retailer or by another company for the retailer.  Private labels can carry the name of the retailer or not. Usually, the change in purchasing behavior is due to price sensitivity so trading down is less proactive and more reactive.  In the past, this has meant that trading down is generally a temporary move until brand name goods are more affordable because price has an inherent duality, one of which is as an indicator of quality.  Private label goods were perceived to be of lesser value whereas brand name goods were aspirational.

That was then, this is now.  The value line between private label and brand name goods is blurring.  Economists using economic indicators declared the recession over, however consumers disagree.  The over, but not over recession is exposing consumers to private labels for a longer amount of time.  Time that is allowing consumers to build brand loyalty to private labels.  These are not the private labels of yesteryear, these are private labels that are evocative of brand names - in packaging and messaging.  In general, private labels realize a 10 - 40% price advantage compared to brand name goods. (Agnese, 7/21/11)  So private labels can compete on price if retailers so choose or it can tuck that margin away as profits.

Private labels are now a competitive threat to brand name goods and for retailers that is a high wire dance because brand name goods are necessary for revenue generation.  Retailers do not have enough private labels goods to fill a store or enough brand awareness.  Moreover, private labels like Target's Archer Farms are only sold in Target stores unlike brand name goods such as Dawn dish soap, which is sold in most, if not all retailers.  The advantage of exclusivity is its resistance to price comparisons as the price is controlled throughout the distribution channel.  A more serious issue for retailers is managing cannibalization when floor or shelf space serves two masters.

The question is - to what degree will retailers become protectionistic towards brand name goods when private labels are clearly a lucrative venture and in the best interests of the retailer.  Retailers need brand name goods and brand name goods need retailers so until that is discretionary instead of necessary, retailers must be comfortable with heights.

Sources:
Joseph Agnese, Standard & Poor's Industry Surveys: Supermarkets & Drugstores, July 21, 2011.

A Nagging Issue for the Euro-zone

"Nagging - the interaction in which one person repeatedly makes a request, the other person repeatedly ignores it and both become increasingly annoyed ..." Personality differences create fertile ground for nagging such as organized personalities conflicting with relaxed personalities.  One assessment tool, Kolbe Assessment, identifies problem solving strategies related to personality traits.  Aside from an assessment tool, the first step in addressing a nagging issue is to "admit you are stuck in a bad pattern".  (Bernstein, WSJ 1/25/12)

Even though this article was focused on nagging as a marriage killer, it is not a leap to see its implications for the Euro-zone crisis and recent fiscal pact negotiations.  France and Germany has repeatedly demanded that Italy, Ireland, Spain and Greece pass austerity measures and bring their respective governments in line with the EU Treaty.  France and Germany have, arguably, the greatest to lose if these governments fail to correct because French and German banks have invested a lot of money during the bubble in these countries.  It is widely believed in Greece that Germany is indirectly bailing out its own banks using Greece as the smoke screen.

It is not that Italy, Ireland, Spain, and Greece are purposefully ignoring France and Germany, but that these countries - being the ones that have to endure the fiscal pain - are taking their time moving the measures through their governments.  France and Germany are acting with urgency and Italy, Ireland, Spain and Greece are acting cautious.  The cautiousness is a reaction to the urgency by Germany and France.  The harder the push and the harsher the rhetoric, the greater the likelihood that the austerity measures will be window dressing and short lived.  These are fundamental cultural differences that cannot be overcome with a treaty.

Germany is the steam engine for the European Union and treasure chest for the Euro-zone.  France is strong with its financial sector, but weak as it is overly regulated with laws protecting workers.  Spain has very high unemployment as does Italy, Ireland and Greece alongside over regulation like France.  Those infrastructure projects funded with cheap European Union capital investments propped up rotten labor markets and stopped when the bubble burst.

The progressive nature of entitled workers is deeply woven in the culture of Italy, Ireland, Spain, and Greece.  France is less so as it has better governance over its citizens and can strongarm them.  It does not take a Kolbe Assessment to understand problem solving strategies differ greatly between Euro-zone countries.  There is evidence that Spain believes residential building will save its economy - buyers for the residential properties seem to be a detail left for later.  Although, Spain's strategy is ludicrous based on recent lessons learned from the U.S. housing market bubble, it is in line with a culture for whom ignorance is habitual.

The first step for the Euro-zone's recovery is admitting it is stuck in a bad pattern.  The second step is identifying, building, and supporting commonalities.  The third step is "rinse and repeat" as it takes, on average, 21 times doing an action to create a habit.

Sources:
Elizabeth Bernstein, Meet the Marriage Killer: It's More Common than Adultery and Potentially as Toxic, So Why is it so Hard to Stop Nagging? Wall Street Journal, Personal Journal D1-D2, January 25, 2012.

Like Most Food Diets, the U.S. Consumer Debt Diet is Failing Too

U.S. consumers are on the march, again, of consuming debt.  It is not that the deleveraging of U.S. consumers has ended because the household debt service ratio is still decreasing, but that the appetite for credit is increasing.  And the demand for credit does not necessarily indicate a positive for the U.S. economy, especially when U.S. consumers are in a less advantageous position.  The top two occupations in the U.S. for 2010 were - Retail Salespersons and Cashiers.  These two occupations employed 4.2 million (Retail Salespersons) and 3.4 million (Cashiers).  The hourly mean wage for Retail Salespersons is under $15.00 with Cashiers under $10.00.  Cashiers are not alone in earning a low wage because the hourly mean wage for eight of the top ten occupations are under $10.00, including Cashiers.

The resumption of debt consumption by U.S. consumers was inevitable, however the rate is at a minimum concerning.  Overall, U.S. consumer credit increased by an annualized rate of 9.9% for November 2011.  If the 9.9% holds, it would be the largest percentage change of the reporting period 2006 - 2011.  The largess of the 9.9% is inline with a revolving credit increase of 8.5% and a non revolving increase of 10.75%.  The statistics do not include loans secured by real estate.  The most common type of revolving credit is credit cards whereas non revolving credit includes the likes of education and automobile loans that have fixed payments.  Even though, the Federal Reserve did not include loans secured by real estate, home equity lines of credit (HELOC) provide important insight into asset leveraging by homeowners.  A HELOC is revolving credit.

The opening of a HELOC is less interesting than the actual use of the HELOC.  Opening a line of credit backed by the equity in real property indicates preparation or planning, but the HELOC may never be used.  The use of a HELOC generally indicates a downward trend in personal finances, especially during the current economic conditions thus the HELOC becomes a sort of bridge loan until conditions improve.  Using a HELOC to remove the equity from real property during uncertain times to just pad a savings account seems unlikely because the HELOC is tied to the property and becomes a debt obligation of the homeowner unless, of course, it is a non-recourse loan.  The Federal Reserve Bank of New York reported an increase in HELOC balances of $14 billion or 2.3% for the third quarter in 2011.  More interesting, is the upward trend since the first quarter of 2009 for HELOC balances versus HELOC credit limits.

Job creation in the U.S. is underpinned by low wage jobs, the majority (8 of 10 top occupations) of which earn under $10.00 an hour.  Consumer credit is increasing at its highest level during the report's timeframe of 2006 - 2011.  Homeowners are increasing their use of HELOCs as balances are greater than the available credit since the first quarter of 2009.  If the U.S. consumer was a corporation, it would have a decreasing or static revenue stream with decaying assets and a greater reliance on short term debt in order to keep the day to day operations running.  The corporation could sell off assets to raise capital, but that is dependent upon demand because a lack of demand could lead to a fire sale.  The corporation could max out borrowing to invest in research and development to increase market share or enter into a new line of business.  A difficult and costly move with the current capital market.  So bankruptcy.
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Sources:
The Federal Reserve Board, What You Should Know About Home Equity Lines of Credit, April 6, 2011. Available at: http://www.federalreserve.gov/pubs/equity/equity_english.htm last visited January 20, 2012.

The Federal Reserve Board, Household Debt Service and Financial Obligations Ratios, December 13, 2011. Available at: http://www.federalreserve.gov/releases/housedebt/ last visited January 20, 2012.

Board of Governors of the Federal Reserve System, Consumer Credit G.19, November 2011. Available at: http://www.federalreserve.gov/releases/g19/Current/#fn3a last visited January 20, 2012.

Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit, November 2011. Available at: http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q32011.pdf last visited January 20, 2012.

U.S. Department of Labor, Bureau of Labor Statistics, Occupational Employment and Wages - May 2010, May 17, 2011.

   

The Brand Issue for Paula Deen is not Diabetes, but Deception

So Paula Deen has had type 2 diabetes for three years.  And for the past three years, Paula Deen continued to promote her products, specifically her cookbooks which are a culinary journey of indulgence - southern style.  Southern style cooking has a reputation for being high in calories as a result of being high in fat.  One of those recipes is Paula's "The Lady's Brunch Burger".  The Lady's Brunch Burger is a hamburger patty between two glazed donuts.  On PaulaDeen.com, the recipe is available without any nutritional information.  Similar to how Paula has kept her fans in the dark regarding her health, Paula keeps them in the dark regarding their own health.

This was Paula's differentiation strategy when other television cooking shows were about calories and cost consciousness, Paula was not.  Paula cast herself as the sweet lovable southern woman, dripping like molasses with her southern accent or drawl.  This role is embedded with trustworthiness as most people have favorable opinions of their grandmothers.  Grandmothers, generally, hold an honorary position in people's lives.  Paula knew what she was doing when she chose this brand framework.  It is a rather insulated image because anyone who calls Paula out would look like they are in favor of abusing the elderly.  It took someone like Anthony Bourdain, who cares little about popular opinion, to push the issue of Paula's unhealthy cooking.  Only after Paula admitted she had diabetes for the past three years was Anthony Bourdain redeemed.

Paula is deceptive, but she is not stupid.  Although, at this point, stupid would have been a better position to attempt a comeback from.  Paula and her sons are on an all out public relations campaign to remind people of the sweet lovable image, except Paula keeps saying that she never said people should eat like this all the time.  It seems as though, Paula is listening more to her lawyers than to her public relations manager.  Cooking is an everyday activity, for most people, so the likelihood that Paula's cookbooks would be used more than 4 times a year is high.  Paula's got options, though.  Paula is also promoting her sons' shows because they are now responsible for saving Paula's brand with low fat, low calorie recipe variations.  Paula is making the most of this publicity promoting her new role as a diabetes drug spokesperson while at the same time denying culpability and cross promoting her sons.

If Paula is astute enough to work the business angles now, then she was astute enough three years ago when she decided not to disclose her diabetes diagnosis.  It was a calculated decision to hide the diagnosis and it is a calculated decision to disclose - a necessity when a person becomes a diabetes drug spokesperson.  Diabetes is not the issue, the deception is the issue.  Mea Culpa, Paula Deen.  

Curation of Online Sources: A Rebirth for the Formality of Libraries

The internet needs the formal organization of libraries in order to be a relevant source of information.  Google's search engine displays results based on an algorithm hierarchy such as how much time searchers spend on a site.  Apparently, the more time spent on a page, the more relevant it is to what a person is searching for.  Another perspective is that the more confusing a site is the more time a person may take navigating its page(s).  The tens of millions of search results indicates that Google is not in the business of winnowing thus not in the business of relevance.  Relevance is not millions of sources.  Relevance requires narrowing.  There is not enough time in a person's lifetime to go through tens of millions of sources.

Based on:

• Age Range 16 - 90
• 365 days a year
• 16 hours a day searching sources
• 5 minutes a source
• 5,185,920 

That is the number of sources capable of being looked at in a lifetime.  Obviously, this calculation is built on an abundant of assumptions, but the point is that search engine users have a finite time to spend on looking for sources.  Internet users are overwhelmed by the shear volume of results so the tendency is to choose the top search engine results  because we are taught that placement is equal to quality - first place is better than second place etc.  In essence, it is fatigue that underpins the Google search results because the selection of sources on the first page in the top position is what keeps that source on the first page in the top position.  Not relevance, but convenience.  Because the behavioral trend lacks a solution on a large scale, sources have sought to manipulate the results through search engine optimization (SEO).

Curation in the hands of companies such as the Huffington Post are self interested transactions.  The Huffington Post is a business in the business of people moving from source to source.  The click through fee is motivation to continue offering sources that pay the most money per click through.  The solution is to create a library system or library like options as aggregators.  Libraries work on relevance not popularity.  The library is organized by subject matter and obscure sources have as much right to discovery as does a so called popular source.  The Library of Congress is one such template.  Censorship is not a threat to the internet from a library aggregator because censorship already exists based on search engine algorithms.  A library catalog provides a level of parity between sources - parity that cannot be bought.  Libraries, at its essence, is about knowledge transfer.  Libraries facilitate the accessibility of knowledge.  

The internet is not about accessibility, but about popularity and if history has taught people anything it is about the danger of popular or dominant voices and/or positions.  Libraries are not without fault on some censorship issues in the past because of local citizenry, but libraries are also the one group that has done the most for First Amendment rights and discourse.  By creating a trusted online curator using the library template, people have a greater opportunity of being exposed to alternative perspectives and/or information.  Funding must be public via non-profits or government funds as it benefits the community be it local, national, or global.  It is time for the internet to grow up and become its full potential.  And a librarian is the best tool.

Companies and CEO Compensation: Fairy Tales are not Just for Children Anymore

It is an issue of agency and moral hazard.  A CEO is an agent for the company's owners - shareholders.  For the purposes of this post, publicly traded companies are the focus as closely held companies complicate issues of agency.  The CEO is supposed to act in a manner that is in the best interests of the company's owners.  To ensure that the CEO acts in this manner, companies seek to align the interests of the company and CEO.  A common method for interest alignment is compensating a CEO with stock options.  By tapping into the natural tendency of a CEO to act in his or her own best interests, a company can benefit alongside a CEO pursuing personal wealth creation.  The tie up of company interests with CEO interests is also meant to keep at bay the issue of moral hazard.  Moral hazard is related to risk.  The less personal risk a CEO has when making company decisions, the less likely a CEO will act in a conservative, careful or thorough manner.

Consider the rental car versus the driver owned car scenario.  A rental car requires less care or concern because the renter does not have long term consequences or replacement responsibility (unless negligence /recklessness).  A renter is generally going to be harder on the rental car than one in which the renter owns.  The hardship is a matter of degrees - higher speeds or harder turns otherwise opportunities for culpability increases.  And culpability indicates responsibility so the risks are taken in such a way as to be disguised by continued use not an individual renter's use.  The matter of degrees also applies to how a CEO directs the day to day operations of a company.  Consequences of takings risks that can be assigned to externalities - stock market forces, competitive threats - effectively covers one's tracks and blur issues of moral hazard.

 Risk temperance and the aligning of interests fail to control for intrinsic motivation.  Wealth creation is an external representation of success.  Intrinsic motivation is sourced internally and functions off psychological needs and desires.  Extrinsic motivation is limited in its effectiveness and experiences diminishing returns, however it can be argued that intrinsic motivation never experiences that.  The drive and ambition that created a CEO does not diminish once the CEO attains the position.  It is channeled into a surrogate - the company.  The company then takes on the personality of the CEO and depending upon how much self awareness a CEO possesses, the result could be devastating to the company.  MF Global and its CEO Jon Corzine is a current example of how a risk seeking personality without a strong counterbalance is dangerous.

Jon Corzine was motivated by the potential reputation capital (mastery) had he pulled off the European sovereign bond gamble a la George Soros.  George Soros' reputation or persona was created by shorting the pound in September 1992.  The billion or so dollars that was made on the gamble is impressive, but not what people remember - it is that George Soros was innately aware of something that others were not - timing.  This elevated the mystique of George Soros.  Jon Corzine has, in the end, made a name for himself just not the name he intended.  By focusing on the money as the overriding or sole motivation, companies will labor under the impression that Jon Corzine could have been more effectively managed had his compensation package not been what it was.  Pure fairy tale.  The management of Jon Corzine required strong gatekeepers capable of challenging his intrinsic motivation.

Instead, like many companies, MF Global relied on extrinsic motivation without understanding the diminishing returns of CEO compensation thereby making MF Global vulnerable to unmitigated risk.  As long as companies believe in fairy tales, CEOs will continue to make risky decisions with greater and greater consequences as the global market becomes smaller and smaller.  The ending, however will not be a Disney movie

Federalism: The Leavening Agent Missing from the European Union

The European Union can never fulfill its moniker of the "United States of Europe" because the United States of America was formed early - before distinct and irreversible identities of the States were formed - with a powerful federal government.  Federalism is what makes the association of 50 States successful.  It is its function of paternalism.  The Supreme Court understood this when it carved out the commerce clause power so the federal government would have power over and intertwined with States' powers.  The States require a "heavy" in the form of a federal government to keep individual rights from being impeded by protectionistic tendencies of the States.  The sharing of power between the States and the federal government is not a settled issue as both the States and federal government seek more power, however the tension between the two is healthy for the U.S. as it provides a checks and balances on federalism.

It is the European Union's lack of federalism at the core of its issues.  There are 27 members in the European Union, all of which to varying degrees were functioning sovereign countries without oversight.  That is how the 27 members entered the European Union and that is how the members currently function in the European Union as evidenced by the economic crisis in Europe.  The European Union treaty in its various incarnations is nothing more than a super charged gentlemen's agreement.  Enforcement left up to an anemic central government body in Brussels whose structure or organization panders to a parity in direct confrontation of a singular identity.  It is confused by design because a confused European Union central government is in the best interests of the 27 member states.

Article 126 (1) states "Member States shall avoid excessive government deficits."  Recourse for the European Union central government is a series of reports and recommendations by commission, council, and parliament with sanctions or embarrassment via public notifications if non-compliance by a member state.  It is akin to asking prisoners how they would like to have the prison run - a self interested transaction.  It is why the European Union has a treaty and not a constitution.  A member state operating in direct violation of the European Union treaty should have required an intrusion by the European Union's central government in the financial/budgetary affairs of the offending member state with a loss of sovereignty.  A parolee member state warrants a loss of rights to some degree until the terms of the parole are fulfilled.  A parolee member state that violates the terms of parole gives up its right to control its financial/budgetary affairs to the European Central Bank.

Such ideas are better suited for a fiction novel than the European Union.  Because a single market purpose is not enough to create a single identity, the European Union should be called the "United Nations of Europe".  A simpler designation with lower expectations.

European Union Treaty available at: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2010:083:0047:0200:en:PDF

China is Acting like the Newly Industrialized Country it is

The U.S. was there in the not so distant past.  The days of child labor, currency manipulation, corruption, lawlessness, intellectual property law violations, pollution, and human rights violations are eerily similar to the what China is being accused of.  Granted, the world has changed considerably since the U.S. committed much of those acts so there is some validity to holding China to a different standard.  The issue is that the U.S. stopped many of those practices because it did not serve a function or produce value anymore.  For example, one of the main reasons for the Fair Labor Standards Act that set child labor rules was to encourage the employment of adults instead of children.  Child labor was cheaper, which contributed to high unemployment for adults - men.

The single greatest resource for a country is its population - human capital.  The value of a country rises and falls based on the quality of its population.  A lack of education or intellectual capacity requires a reliance on physical labor because repetitive movement needs only basic intelligence.  Prosperity depends on the movement from physical labor to intellectual labor or knowledge labor.  The resource cost of migrating a physical labor worker to a knowledge worker is large.  As such, the knowledge worker can demand higher wages or the business can demand a higher price for its services.  Prosperity is the gap between the cost of living and the wages earned.

China is capitalizing on its cheap labor because it is the one resource in abundance, now.  Part of China's capitalizing is managing it currency to ensure that the labor remains cheaper relative to other currencies.  It makes sense that China would try to extend its cheap labor dominance until it can transform its economy.  China has to move to a more self sufficient model - creating products in country for its population - relying less on exports.  An artificially low currency also makes imports more costly for the Chinese.  By producing products and services cheaper than what it can import it for, means that China will see an increase in prosperity that is domestically generated rather than dependent on foreign businesses.

China has learned how to do this because of outsourcing.  The downside of outsourcing by developed or industrialized countries to China is the knowledge transfer.  It is evident in the counterfeit shadow market in China.  An export so large and pervasive that it is almost incapable of being solved because the resource cost for global enforcement is likely not worth it - at least not on a large scale.  Shadow markets or black markets necessitate a criminal element because the activity by design operates outside of the law.  There is no amount of contracting between multinational corporations and labor providers in China to prevent the theft of intellectual property.  It is laughable that a piece of paper was the barrier decided upon by businesses.  All it takes is an initial knowledge transfer and a little reverse engineering to create a better mouse trap.

China's one child policy is another reason, probably the greatest reason, why it has to move to a more self sufficient economy.  Less people to sustain its export dominance.  The preference for male children is expected to manifest itself in a much greater male to female ratio in the next 20 years.  Artificially limiting the birth rate is creating a natural limitation because there is expected to be a lot less females giving birth in China.  A high demand for females will encourage higher expectations for males to create an equilibrium, which is going to create social issues in China and for the global community.  Human trafficking, prostitution, kidnappings, rapes, commoditizing of females are just some social issues that may result.  And time is incapable of manipulation when it comes to the aging of a human beings.  Aging cannot be sped up or slowed down so any solution is dependent on time.  China has no choice, but to transform.

Just as the U.S. found itself with policies that were not conducive to being a global leader, China is slowly coming to the same realization of necessity.  The pace, however, is not the domain of the U.S. government.

Broken Trust: A Man-made Disaster Affecting American Citizens

Americans are suffering from post traumatic stress disorder (PTSD) because government and business leaders have failed their mandate.  A mandate to be ethical and moral in decision making.  A failure of this mandate breaks the trust that Americans have in American leadership.  Trust is built on faith and without faith in American leadership, Americans are less and less secure with their position individually as well as their position as an American citizen in the global marketplace.

Using the terms morals and ethics can create a lightening rod effect, especially when religion is pulled into the mix.  That is not the purpose of this writing.  Morals and ethics are not the sole property of religious groups.  Morals and ethics are the property of all people regardless of religious persuasion.  Religion has been used as a divisive tool to create differences in an effort to indicate superiority.  Atheists have the same potential to have moral and ethical behavior as a Christian, Jew, or Muslim.  Thus, the ultimate determination of what is moral and ethical behavior is one of an individual decision making process.

And that is what makes the broken trust of Americans such a devastating man-made disaster.  There is no law against breaking the trust of Americans.  The U.S. has criminal law and contract law that make some inroads for Americans to vindicate their rights, but that is not what is being discussed here.  President Obama promised "change".  Banks promised "security".  Financial services promised "safety".  U.S. Congress promised "advocacy".  By no means is this an exhaustive list, however it does provide a big picture for what Americans are dealing with.  The government affects the daily life of Americans.  Businesses affect the daily life of Americans.  It is pervasive because there is not an aspect of life that the government or businesses do not touch.  Americans are dependent on both thereby creating a captive audience, which is losing more and more control.

Losing control feeds into victimhood.  The control Americans have lost is the ability to be factored into the decision making of government and business leaders.  The short term vision for the government is reelection.  The short term vision for businesses is profit.  Unfortunately, trust is a long term process that is destroyed by short term actions.  It is not too aggressive to say that the trust of Americans has been destroyed.  That is the current state of affairs for Americans and the reason why there is no easy solution to what seems to be an individual problem.  The government and businesses have violated their "duty of care" and "duty of loyalty" to Americans.  The class action suit would include all Americans and standing would be found.

Alas, there is no such action for Americans, therefore Americans will turn to voting in an attempt to pull back some control only to be disappointed again because it is illusory.

Insourcing as the Opposite of Outsourcing is Overly Simplistic

Because the economy is the biggest concern for voters in the upcoming U.S. presidential election, it would not be too long before the outsourcing enemy of American jobs was pulled out of the closet.  The newest dance partner for outsourcing is insourcing - once could say the ying and the yang of job discussions.  Outsourcing, as a result of being a topic of much discussion, is the most well known.  Insourcing is new to the American discussion, but it is not a new concept for businesses.  President Obama is expected to discuss the role of insourcing in job creation, meaning that U.S. businesses should bring back jobs that have been outsourced.  There is another type of insourcing, which is when a company takes advantage of wage gaps in the labor market to move jobs - labor arbitrage - and that happens in country from State to State.

Labor arbitrage is the main reason for outsourcing because companies are able to take advantage of the low wages paid to foreign workers in foreign countries.  The purpose of a business is to provide a return to shareholders or owners of the business.  Higher returns requires lower costs.  Too often, the outsourcing takes on moral and ethical perspectives that blurs the understanding of "why" businesses use this practice.  Labor arbitrage is a cost cutting mechanism that is directly correlated to the consumer cost of goods and services.  Higher labor costs mean a higher consumer cost.  Outsourcing also gives businesses a greater talent pool.  The United States is not a global leader where education intersects with the needs of businesses.  That is why engineering or computer work is sent overseas among other areas.

Outsourcing is difficult to manage and often entails a lot of paternalism to ensure that the same work is being done overseas that would have been done here.  The cultural differences alone can create public relations nightmares for businesses - child workers or sweatshop conditions.  Businesses engage in outsourcing to remain competitive and profitable.  The same applies to insourcing by businesses in the U.S. from State to State to take advantage of wage gaps.  In states like California and New York, there are knowledge centers like San Francisco and New York City that have high costs of living, which then require higher wages.  Those higher wages are then passed along to consumers.  A business in San Francisco or New York can locate to a labor market with same or similar skill sets in another State and reduce its labor costs immediately.

Labor arbitrage is the main reason for insourcing - same as outsourcing.  This is where the "Right to Work" campaigns come into play.  Labor unions increase labor costs thus the cost of goods manufactured in one State can vary widely from another State.  Labor arbitrage could result in a widening of the have and have nots in the sense that the U.S. will create little Mexicos, little Indias, or little Chinas in the U.S.  Although, unlikely to happen to such an extreme, the degree is dependent on whether supply exceeds or is equal to demand in lower wage States.  Not every State is a viable candidate for labor arbitrage so the higher the demand for lower wage workers combined with a lesser supply results in driving up labor wages.  Williston, North Dakota is a perfect example of the scarcity principle - low unemployment, high demand for labor, and a commodity subject to trading volatility.

Where quality of life and living standards begin to erode is when the labor demand and supply are equal or supply exceeds demand.  Americans can freely move between States and U.S. territories - jobs are a reason to move.  Jobs attract workers and workers increase the demand for everything from housing to food to consumer goods and services.  The potential is little money left over for retirement or educational ambitions.  If a business leaves, then the local workers are vulnerable because "getting by" is not "getting forward".  Insourcing and outsourcing is nothing if not a discussion about divergent interests.  It is too simplistic to frame the argument on an "in" versus "out" basis.  There is a downside to outsourcing that American workers need to understand in order to capitalize and benefit permanently rather than temporarily because of some tax credit morsel tossed out by U.S. politicians.

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Why the Occupy Wall Street platform of "We are the 99%" is not relevant to the U.S. presidential race.

Yes, there is a growing separation between the have and have nots.  A disparity that is relevant to legislative and regulatory reforms.  That is not the U.S. presidential race.

The U.S. presidential race is about leadership, experience, and education.  Historically, Americans have elected a person in the 1% so to limit the 1% category to wealth is counterproductive.  The 1% category also applies to the leadership, experience and education of our presidential candidates.  There a correlation between leadership, experience, and education to wealth.  Statistically, the more education a person has the greater likelihood that he or she will earn a higher salary - not a certainty, but definitely a greater likelihood.  Thus, the 1% wealth disparity targeted by Occupy Wall Street has the potential to muddy the waters.

The U.S. president is often referred to as the CEO of America.  This reference point for voters is critical to understanding the 2012 presidential race.  The presidential race is overwhelmingly about the economy.  Americans understand that the world is dangerous, it is a background issue, because like the European Union's impetus of tying European markets together to prevent war, globalization has had the same or similar effect.  There is little to no land to be fought over for expansion and injuring countries is rarely isolated to that injured party.  The difference between the European Union and the global market is that the European Union was explicit with its intentions whereas globalization has produced a beneficial unintended consequence.  The WTO is more about fair trade than preventing war.

As such, war is a less interesting subject than the economy.  The economy affects more individuals directly.  The same cannot be said for war, although the war machine encompassing military contractors does lurk in the shadows.  Since the economy is about business and businesses have leaders, the CEO image is in the forefront of a voter's mind.  Generally, CEOs cannot become CEOs if they lack leadership, experience and education so becoming a CEO implies qualifications.  Of the Fortune 50, 100, 500, or 1000 lists - the CEOs are roughly 90% or more male and of that majority, there is a classic image of what a CEO looks like - Mitt Romney.  Not only is this a classic image for CEOs, but also news reporters - national and local.

This classic image resides in the American psyche and when in the voter booth under pressure to make a decision, a voter will use this classic image whether it is a conscious or unconscious choice.  The older or more experienced the voter, the greater likelihood that this classic image will be entrenched.  The younger generation has the same archetype - Mark Zuckerberg (Facebook), Mark Pincus (Zynga), Jack Dorsey (Twitter), but with lesser leadership experience due to their age.  President Obama was elected on a "Change" platform capitalizing on the hyperism of social media.  The flash mob mentality of social media users was managed perfectly because it was enough to overcome his minor deviation from the classic image - namely his race.  President Obama 2.0 has yet to be tested and social media users are fickle, herd bound, and flight oriented.

In the end, American voters do not want a "We are the 99%" U.S. president.  American voters want exceptionalism because the U.S. president is a reflection of America and its citizens - even if that is the greatest deception of all.

In the red shorts - Netflix - weighing in at $4.57b and in the blue shorts - HBO (Time Warner) weighing in at $36.55b.

Time Warner, parent company, of HBO has decided to not continue selling its DVDs to Netflix, which means that Netflix would have to purchase the DVDs from another source and pay retail prices. HBO is also getting into the streaming game with its HBO Go format.  Apparently, two can play the "me too" game because Netflix is producing original programming for its service.

Generally, choice is always good for the consumer, however the same cannot be said for the business.  Time Warner has a market capitalization of $36.55b and is more diverse than Netflix.  Even though, Time Warner Cable was spun off in 2009 that does not impede Time Warner's continued ownership of national cable channels such as TNT, TBS, CNN, and CW among others.  Time Warner is in a great position to push its Time Magazine content through its CNN channel or Warner Bros. movies through its other channels.  These are tie ups that Netflix does not have, but based on the move into original programming - would like to have.

Netflix is a threat in that it is an alternative to ever increasing cable bills, which during the current negative economic climate seems more discretionary than necessary.  The problem for Netflix is the throttling of the streaming business, especially when the streaming business segment is the one that Netflix is promoting as its future.  One really large externality for Netflix is consumer access to high speed internet at a reasonable price.  Not every consumer lives in a metropolitan area with access to high speed internet.

TV is still largely consumed in the home (university dorms not included) so mobile devices are less influential.  HughesNet provides satellite internet service for those that do not have a cable option.  The HughesNet option is not cheap - average $56 monthly for the second from the bottom package.  This package cannot support Skype or Netflix.  The point is that Netflix is not just $7.99 a month - it is $7.99 plus any cost that is required to support the underlying internet connection.

It is not all roses for consumers that have a reasonable price for high speed internet because as the internet traffic increases so does the stalling of the Netflix streaming.  This is an underlying resource limitation that Netflix must consider.  Additionally, the Xbox Netflix option is much less user friendly than the one consumers find using their laptop or desktop.  Netflix has been a darling stock on the S&P 500 only faltering with its public relations nightmare and subsequent subscriber exodus in September.

Time Warner is arguably better positioned to withstand any competition from Netflix due to its rather secure position with its national cable channels that are conduits for its other businesses.  The national cable channels that Time Warner does own are mainstay channels not like the OWN channel (oprah winfrey network).  Unless weather related, satellite cable does not stall the more users that "log on".  Time Warner does not have to invest in branding like Netflix will with its foray into original programming.

Netflix is akin to the post office - passing along someone or something else's work.  Netflix has blindspots and with Reed Hastings at the helm there is likely to be more missteps or fumbles.  Time Warner can take down Netflix if it exploits the temperamental myopic leadership of Reed Hastings.  Netflix can withstand the assault if it acts more like a cable or satellite provider.  Delivering less than expected is not a sound differentiation strategy.

Republican Party's New Year's Resolution - Lose Weight

And so the field is thinner.

The Republican party's presidential candidate musical chairs is a painful process to watch.  It cannot be the strategy of the Republican party to choose to rotate candidates in and out of the front runner status.  Granted, the media has some responsibility as the music box, but it seems as though the candidates are ignorant or possibly do not care about the collateral damage.  No one candidate appears to be capable of galvanizing the Republican party thus indicating there is more that is dividing the party than there is uniting the party.

The Republican party is fractured, which is evident in the range of candidates vying for the nomination.  These factions are akin to special interest lobbying groups - pushing narrow agendas at the expense of a focused holistic one.  By the time a candidate is chosen, the long drawn out war is going to create sour feelings between the factions and managing those feelings is easier said than done.  The reason is that the each candidate's supporters likely identify more closely with the candidate than the Republican party.

That is a real issue because the "Defeat President Obama" platform is far too simplistic even factoring in the negative stereotypes of the Republican base.  If the Republican party does not figure out its identity, then it is highly probable that President Obama will see a second term because he at least is a singular message.  That matters.  Agree or disagree, like or dislike, President Obama is a known commodity capable of being grasped onto by the Democratic base.