George Bush and his cronies did an astonishing amount of damage to the United States during his eight years in office. The democrats failed in their duty to check him. The reason, I feared, was the democrats had no interest in changing anything, they were just biding their time until they could do the same. In his first 100 days, Obama has done as much damage as all of George Bush eight years. Obama unfairly inherited the damage done during the boom times, and the correction would have been painful.
Now the correction has been delayed by the stimulus, but it will be far worse. Ross Perot once said when a truck is coming down the sidewalk, step out of the way. Yes, a truck should not be coming down the sidewalk. Very true. But still, step out of the way. What is coming our way should not, nor should it hit where it will.
Between the democrats and republicans USA has been terribly disfigured. Those who seek change are terribly frustrated. There are people who foolishly think they can fix things proposing violence. They will lose against the government. And I hope they do if they try, because if they win they will be far worse than anything we have now. That is just plain history.
The government will accelerate process of confiscation through taxes and regulation. Expect fed taxes to reach 90%, because we were there before. All the talk of high taxes killing business is nonsense because business people like me will simply arrange matters so what material needs and desires we want we'll get through trade and arrange maters through different allocations. Employees will stand in line for lower quality goods and services.
Expect regulations that provoke class struggle. When the city of Seattle wasted astonishing amounts of money installing public toilets it inevitably had to remove them. The last social service you want to offer for free is toilets. Nothing is abused worse. Civilized countries have a brisk business in free market toilets which have attendants that keep them spic and span and orderly. And usually these people work strictly for tips. In places like Hong Kong, it's a point of pride for a hotel lobby to have toilets as sharp as the bar. But I speak of civilized places. Back to Seattle.
The governor just passed a law requiring businesses with three or more employees to make toilets available to the public "unless there is a security concern." Now the law got passed because some multi-millionaire has a condition that requires quick access to a head. So the government had to "do something!" and it seized private property, in the form of a regulation.
(Our lawyer/governor agreed to the "unless there is a security issue" clause, which is a "lawyer full employment" point.)
Where markets would make life better, the government will keep making things worse until the pendulum swings back. We are in for nasty weather, but as Orson Welles noted the 400 years of the Italian renaissance there was war, insurrection, plague, religious conflict, intellectual confusion, political unrest and so on. At the same time we had great advances in science of Galileo, Bellarmine, the art of Michaelangelo and Titian, rebirth in architecture, double entry bookkeeping countless innovations and advancements! IN the same 400 years the Swiss had peace and stability, but the only thing the Swiss came up with in those 400 years was the cuckoo clock.
Give me a renaissance any time.
Friday, May 15, 2009
Nasty Weather?
What Americans Buy
Here is Census info on what gets shipped in USA. Shipped? Yes! If you have it, a trucker handled it.
Thursday, May 14, 2009
Trade Data Summaries
You can always find a quick rundown and what we buy and sell from particular countries at this link.
Oil Huge USA Export
The Obama administration is fighting wars in the middle east to secure oil supplies, and fuel oil and petroleum products are by far our #1 Export. We export our North Slope oil to Asia and fight wars in the middle east to get it. Why don't we just.... O! Never mind...
It Costs Too Much To Be Poor
I have two teenaged daughters, the elder of the two has just crossed some $400 plus in bank fees cumulative. She has only a debit card, but it seems she is destined to make one of each possible mistake that generates a fee. The first one was the most obvious, a simple overdraft. The most recent was trickier, a Friday post 4pm deposit still had not shown up Monday at 5pm. Ding!
We make her pay these things but in the big scheme of things this house earns enough money for which these are mere annoyances. It is not so for most other people.
For a young struggling family a $35 ding can be a week's groceries. (Yes, it can!) The fees went up during the boom. When the busy-body do-gooder regulators "review" these fees they find the fees reasonable. Of course they are. What with the cost of employees, the physical plant of marble and granite offices, the management overhead, regulatory compliance, a $35 fee for a computer-noted $2 overdraft is reasonable.
There is no real good technological solution to this problem. There is cash, and there is self-control, either of which would solve the problem of overdraft fees.
But there is the other aspect, where people unfamiliar with the banking system, find it overwhelmingly unfair, relatively speaking and thus are alienated by banking.
To become banker, you have to get a charter and follow certain rules. The big boys can do it, cheat steal lie and still make money, if nothing else through bailouts. Small guys cannot. There are those who know how to make money a the small bank level, and could make money on $2 overdraft fees, if the costs of compliance were not so huge.
In a free market fees would always be going down not up. Banks' overhead would be lower so costs would not be so high. Alienation from the system would not be so widespread. Just because banks spend so much does not mean that it costs that much.
We need a free market in banking too.
Wednesday, May 13, 2009
What Goes Around Comes Around
One of the problems of a criminal invasion of another country is that what we inflict on others becomes OK to inflict on ourselves. Here is a young baptist minister getting his for questioning his arrest for questioning his arrest.
Here is his witness after the fact.
It will be interesting as to what the court has to say on Friday.
All of this is bad for business.
Bail Then Change
It was critical we rush to bail out the system that failed. Trillions now gone. We will now change the system. Why did we bail it out then? Why did we not just change it? There is an internal contradiction no one is noticing.
Art Imitates Life
Warning... bad language: But this scene from the movie Goodfellas always struck me as exactly how governments work... a fellow having trouble with his restaurant asks the powers that be for help... and he gets the help, good and hard. you see the restaurant owner in the mid ten seconds of this 40 second clip... he is in a white shirt with his tie undone...
Tax Breaks For Failures
Ronald Reagan noted govt policy is "if it moves, tax it; if it keeps moving, regulate it; if is stops moving, subsidize it." So it is in Washington state where the state just gave 40% tax cuts to newspapers, "as they did with Boeing and WEyerhauser...
Taxes are only for the rest of us. Get big, accept faxes from the government and place bylines on them an call it "reporting.." and then get bailed out.
I love tax cuts, but everyone should get them.
At the same time the state passed a law any business with 3 or more people must share its bathroom with anyone off the street who requests, except if there are security concerns. Well it is always a security concern, but this will be a money maker for the lawyers who will be suing. Of course it begs the question since when did private property bathrooms become state property?
Duncan Winnows Down To Best Supplier
On May 7, 2009, at 4:02 AM, Duncan wrote:
Hi John,
I'm receiving a lot of responses from suppliers that they are not allowed to provide trade references per their agreement with the brand, including one I spoke to on the phone. Would you say these suppliers probably don't work with the brands they say they do? Some have sent me pictures of branded luggage from their factory, and one sent me a 'Samsonite inspection report' of their factory.
*** As a practical matter would you ever get an answer as to an inquiry from Samsonite anyway? Your competition is not so much samsonite as Tumi and other high end bags, right?***
The references I have actually received are 'authorization agreements' to use the brand's trademarks. Only 2 of about 40 have sent references. Interestingly a lot of companies say they are not allowed by Carlton and Samsonite to send their information but I have received an authorization agreement from two factories for those - why would the terms of the agreement be any different for a different factory?
***Right... authorization to use the name is just a royalty agreement... and even then it could be bogus... I bet it is big busines in china to sell rights to use logos when you have no interest in the IP in the first place... a funny thought...***
Basically, the factories are very convincing that they have worked with these brands, because they send pictures of the products, and are convincing on the phone about what they make. They're mostly consistent that they're not allowed to give the information. A couple of factories I called who seem very professional were actually unsure why I'd even need a trade reference, but I told them it was to judge the quality level of their products. It seemed like an unusual request. Could it be that they don't trust me, or I'm not big enough for them to share that info? i.e. big risk in giving it to me in case of repercussions from their big name brands, but little potential payoff because I'm small fry? One company said they get most of their customers through referrals, hence why they might not need to send references. One other company said they can't send it until they know my company better.
***All plausible scenarios... it brings an idea to mind... how big are the minimum orders? Who are your customers? Open account trumps references. If their minimum is small enough for them to risk sending you the shipments on open account, and you can demonstrate you have orders form first rate stores with whom you cannot afford anything less than first quality, will they forgo the references in lieu of open account? Does this make sense?***
Should I get samples made by the companies that seem legit and judge based on the samples, or only stick to factories I can get references from? Actually I have received references from a factory working with all the big names and they're making samples. So really the only reason I'm asking is just in case there's a problem with that factory, and to know for another time.. our next product.
***Well yes... but you see, of all the ones you'd like to work with, which better than the one happy to provide references and make samples...? ***
Also, should I be asking for contact info of their customers or is a brand name good enough? Is it common practice to just call up a factory's customer, ask for the supply chain manager and ask do they work with so and so factory?
***You'll need actual contact info...you do follow up on the references... don't let it be know you can be fobbed off with just names...***
John
Tuesday, May 12, 2009
I am rested, tanned and back at it. Things are rough all over, but for every problem there is an opportunity. I think this stock market rally is a sucker's rally, but soon I'll be completely out of investments so "who cares!?"
I am realigning my investments into self-employment productive capacity because the opportunities are so open and the threat to savings and investments is overwhelming given the government policies, in my view.
As I look for industrial space I find prices where they were back in 1977. Prime office warehouse space in Seattle for 50 cents a foot! It was $1.33 last August. Should I wait until it is 25 cents a foot? Naw, I'll just cut a month to month rent deal and let rents fall.
I've also been thinking about architecture, and how the stuff built during the boom just will not do in the bust era. Stuff built in the 1930s, 40s and 50s seems better suited to current events.
I have to stop being so cheap and buying such discount airline tix. I flew RT to NYC to meet with an Indian Services exporter on a joint venture on Monday Tuesday for $250, then Wednesday SEA SFO HKG for about $800. My back was killing me in Hong Kong! I thought I was going to die, had to be cancer, was going to check into a hospital, when I showered and the pain went away. Showers don't cure cancer. So between aspirin and hot baths I controlled the pain, but exacerbated things with athletic pursuits in hong kong on top of the sleep -deprived competitive hustle that is de riguer in Hong Kong.
After the flight back home I taught a seminar in Marin and then took a leisurely drive up through the wine country with my wife on my way home to Seattle. Very nice, but it added about 15 hours of driving time... ooh the pain in the back.
Taxes and interest rates will go up, high. When biz tax gets to 90%, and I think it must given the policies implemented and actions taken, should I pay 7 times as much for business class and write it off, since the profits of the business are going to be confiscated to pay off the bankers and the failed enterprises anyway?
So if now I pay $800 for a seat in steerage, and instead I pay $4000 for a business class with a sleeper seat. $3200 difference. At 90% taxes (soon to come) I can either give 90% of $3200 of any $3200 profit ($2880) to Uncle Sam to pay off failed socialist policies, or I can ride business class for gross $320 more RT than the lowest cost ticket. (Do I have this right?) My back says go business class.
Republicans say if taxes are raised business will cut back. I wonder if that is true. I know all I would do is change spending patterns.
GMAC GEts Another $20B, Govt Takeover Inevitable
One reason the bailout of Chrysler failed 25 years ago is because of the intellectual property monopoly the US auto industry maintains. To build a car in USA, you have to pay into a consortium of auto makers who pay no royalties on auto patents. This is how it works: for engines, brakes, turn signals, windshield wipers, and very many other things, long ago the big automakers agred to pool their patents among themselves, and let each other enjoy them royalty free. Anyone else would have to pay royalties to use common equipment, often government required, in order to build cars in USA. Of course this killed off smaller car makers in USA at the time and pretty much assured there would be no new competitors..
The democrats were looking to raise duties on Japanese cars to protect USA automakers and the Chrysler bailout when the Republicans were swept into power in 1980. These "free market" republicans instituted voluntary restraints instead of duties to suppress the importation of Japanese cars. The Japanese loved the idea. When there are less cars on the market than demand requires, the price of each car goes up So the Japanese make the same amount of money they just ship us fewer cars. Chrysler, Ford, GM and at the time American Motors loved the idea because as Japanese cars prices increased after 1980, the US automakers could raise their price too. US automakers profits rose. The pro-bailout set keeps referring to the "success" of the Chrysler bailout 25 years ago, when in fact is was a disaster for the consumer and only put off a worst disaster today for a light matter of yesteryear. We are told the taxpayer turned a profit. What nonsense! Under the democrats, the government would have gotten the increase... under the republican plan, the Japanese businesses got the increase, under either plan the consumer is screwed, but in government work that constitutes success.
GM got $20 billion more today, and these commentators are astonished no one mentioned it. Well, the game is up... the government will now own the big three automakers, and when government and business is one, the system is called fascism.
There was a fellow who challenged the status quo back at the time of the Chrysler bailout. A hotshot executive who had saved various automakers, John De Lorean, went on his own and developed a new car called the De Lorean. It was of course financially a challenge, but he pulled it off. At the same time Federal agents were busy stringing him along on a complicated financing scheme at which it became clear over time the heart of the deal would be drug smuggling. Federal agents suggested they would bash his daughter's head in if he defended himself, and the jury saw this on tape. In any event De Lorean was acquitted of any charges, but his finances and business was in ruins. This story is widely known and reported, so you can see why business executives go along with whatever a president says when say a Bush or an Obama threatens an executive.
One way to restore the auto industry in the United States would be to open source all of the patents on automobiles. We, the government, now own all of the auto makers, so there is no reason to maintain these patents. Once open sourced, then no one entering the auto business will be at a disadvantage vis a vis the patent protections. And since these businesses are moribund anyway, there is no reason for federal agents to destroy the lives of our best and brightest through entrapment to suppress competition.
Small Biz Export Development
Over the years I've done of bit of export development in products, agriculture and services, and devote a chapter on it in my book. As I mentioned, my wife has tasked me with helping her develop wine export business in Hong Kong, and we have a plan to make customers in China for USA wineries, more later on that. At the same time, I've been conferring with Hong Kong academics on the topic of China-based small business export development, a perspective I would normally not take (my perspective is USA based, small business import export).
While at a trade show in Hong Kong, a past student living in China also approached me on the topic of China-based small business export development. I reviewed the process a USA buyer goes through to find the best place in the world to have a product made, and of course in the case of China that would send people to the HKTDC.Com. Given that, a small buziness exporter should get on the HKTDC.com supplier lists.
The past students makes the observation that the top supplier of a given product may not be interested in working with a newbie USA buyer, at which point the best supplier in the world refers the newbie USA buyer to a small associate company that can serve the USA potential customer well. Let's in this instance call the best place in the world "Big Brother" and the associate company "little brother."
Every industry is a village, and there is a wide range of relationships among the players at any given time. It is not unusual for people in a given industry to refer people around when capabilities match better or there is unused capacity. A world class supplier may have contracted with a small unknown player for some specific project and been pleased with the result. However these relationships form, there are countless permutations as to why they form. I recall when developing glass items, factories constantly referred me on to others who were working in specific areas of expertise. If you went to Paramount Pictures looking for a specific special effects, it is likely they would decline the offer to work with you, but just as likely they would give you the names of two or three small hungry talented special effects maestros.
This is all so common, but I have as yet avoided lecturing on it essentially because it is so natural it will happen as one progresses anyway; on the other hand to present it in class, in my experience, proves to be information overload for the student. Finding the best place in the world as a process is challenging enough without adding the detail of "and you may get referred on..." Why spend 30 minutes more on a topic that people will figure out quick enough on their own anyway?
So if the world is rife with these "little brother/big brother" business relationships, then perhaps I should dwell on them a bit, to lay out some possibilities in small business export development from overseas to USA.
Looking at the problem of say a start-up exporter in Hong Kong, a problem with the HKTDC.com which I like, and alibaba.com, which I do not, is the new company may just be a drop of water in a fire hose flow of information. How do you get noticed? Maybe the trick is to get to an "elder brother biz" that can spin off the little deals to you... the little ideas of the USA start-up importer.
The advice to the small business export start-up overseas is pick your field, and then importune the top players, looking to provide some service, taking on projects too small or unusual for the Big Brother to handle. This is not much different than what I say in the book on chapter eight anyway, but it approaches from another angle which may be illuminating.
I asked my tailor how she got started 40 years ago, and it was a complicated "time and place" sort of thing, where one day she got a call from a tour operator after which she took care of a group of retirees visiting Hong Kong. How she took care of the group pleased the operator, and from there came Flying Tigers pilots, then Naval Officers and referrals and the rest is history She does not even recall how come she got the original call. The lesson there is the most important point is to get started, get in the game. As another fellow suggested, make domestic business first, just so you are in the game when you go calling on "elder brothers."
Why Is It?
it seems only people outside of government know what is going on, and the people inside have no idea, or figure it out way too late. Timothy Geithner now realizes the Fed is at the heart of the boom and bust. Well, that is a step in the right direction.
So between the fundmental system and the highly regulated players, it all got out of hand. For this we pay taxes?
From the war to the economy to everything else, people in the government haven't a clue. Those who understand, it seems, also know government has not role to play in making the world a better place, so they do not enter government "service."
Busted: Inexpensive Entertainment
Should you be busted, then you'll have time for very inexpensive entertainment. You can travel to south Idaho and view a remarkable phenomenon, these pix courtesy of your tax dollars from NOAA.
Int'l Trade Data
According to Census reports, it looks like the steep decline in imports and exports is levelling off...
Monday, May 11, 2009
WE Subsidize Drug Exports?
Mish Shedlock says:
***The US has problems with prescription drug costs (we subsidize the rest or the world), extraordinary high administrative costs, an incentive to over-prescribe drugs and tests for incentive reasons as described above and also for legal reasons (malpractice). Finally, the amount of healthcare expenses spent in the last year or so of people's lives (often against their will), is staggering.***
We do not really subsidize the rest of the world... we still make money charging less overseas that we charge in USA. M&Ms candy are cheap and plentiful and profitable in USA and China, and the price is the same. It could be for medicine too. The difference is in USA there are patents which allow businesses to charge monopoly prices.
You say it costs so much more to develop medicine than candy. Certainly much more is charged off to the process of making medicine than candy, but most of the costs are accounting fraud or featherbedding, something extremely common in USA big business. Just because expenses show up on the books does not mean they are legitimate or necessary.
Sunday, May 10, 2009
Good Advice
Here is a fellow who has already made one fortune, and is on the way to a second, sounding like he took my class. He did not (I don't think so) but sometimes as you here it from more sources, it will sink in. There is a part two!