Ding Dong The Hostess is Dead!

Long live the Hostess! The Wall Street Pirates who bought Hostess Twinkies and Wonder Bread have killed it off.  And now we can say with confidence, Long Live Hostess.

Mustn't blame the unions.  Management, by definition calls the shots.

 “Despite Greg Rayburn’s insulting and disingenuous statements of the last several months, the truth is that Hostess workers and the union have absolutely no responsibility for the failure of this company. That responsibility rests squarely on the shoulders of the company’s decision makers.”

Just so.

We cannot have economic recovery without price reduction.  With a brand as valuable as Hostess and Wonder Bread, the name alone is worth hundreds of millions, and with no union contracts associated with the brand, they just got more valuable.

luux.com

Not only do Twinkies, Wonder Bread and Ho Hos have a shelf life of 33 million years, the brand will live on forever because the delicacies will be made under contract probably at the same plants by people who will buy up individual plants and continue the business of selling cupcakes to minimarts


May I tempt madam with a SnoBall?

I tell you, I recall eating these in my youth, but my stomach is turning just looking at these.

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Big Business Customers

The great Ludwig Von Mises participated in Austria's brilliant flare before the match went out, and escaped the Nazis to end up teaching as a privatdozent at NYU. He elucidated the field of economics and took apart socialism, the reigning economic system worldwide in his time.

I believe there is a symbiotic relationship between small and big business, following Drucker that is, innovators and conservators.  The innovators introduce the new, and ever improve it iteration after iteration, until it gets to a point where the conservators spot it as a candidate for commodification.  It is at this point, one way or another, the conservators apply their economies of scale to the formerly specialty item, and bring the cost and price down to where virtually everyone has access to that material benefit or service.

This is how the free market works, and it is the only system that offers progress and justice. The instance the state or some other entity has the power to interfere, the system then gets distorted to some degree, usually a matter of zero-sum gaming, to benefit one group and harm another.

The Mises quote below is risible today.  Big business today depends entirely on the state.  If their subsidies were withdrawn, their entire operations would disappear faster than Hostess Twinkies did.  The days of big business depending on patronage of customers are long gone, and it will be a problem apres deluge if people do not understand the proper role of big business.  Big business grows organically, and cannot be "protected."

McDonald's has an astonishing array of beneficial regulations and subsidies, and is doing fine in USA, as well as the the other anglophone welfare states.  But in the growing but less regulated (no coincidence there) economies, McDonalds cannot keep up.

Asia/Pacific, Middle East and Africa (APMEA) turned in a 9.5 percent decline, despite strength inAustralia - steeper than the 5.8 percent analysts had anticipated. McDonald's cited continued weakness in Japan and the shift in the timing of the Chinese New Year.

At the same time, the founder of Subway says he could not have begun today.

FRED DELUCA: It’s continuously gotten worse, because there’s more and more regulations. It’s tougher for people to get into business. Especially a small business. I tell you, if I started Subway today, Subway would not exist, because I had an easy time of it in the ’60s when I started. I just see a continuous increase in regulation. - See more at: http://freebeacon.com/subway-founder-subway-would-not-exist-if-started-today-due-to-government-regulations/#sthash.Rha3Q8kp.dpuf

Regulations are killing the USA economy.  But who cares, the game is on tonight and the EBT card has just been reloaded.

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"Big business depends entirely on the patronage of those who buy its products: the biggest enterprises loses its power and its influence when it loses its customers."

— Ludwig von Mises, in Economic Policy

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Undocumented Aliens Take Twinkie Jobs?

With the shut-down of Hostess Twinkie-dom, there have been empty shelves at AMPM Minimarts. Yes, eBay has plenty for sale, but not the Minimarts. Now that has changed. I went into Minimart for a caffeine fix and I noticed the shelves once laden with Hostess products are now groaning with sponge and cup cakes treats.  I took a second look!  Aye Caramba!

SnoBalls and Twinkies

Since these seem to be not properly labelled, or so to speak, undocumented, then do they not labor on the shelves illegally?  They look even nastier than Hostess products, if that is possible, but perhaps that is why they are selling well. De gustibus non disputandem est.  Perhaps we'll see joint FDA/Immigration raids on the Minimarts, and Jesuit Peace and Justice committees holding candlelight vigils in protest.

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Hostess Twinkies and Your Pension

Forbes has the "untold story" of how Hostess Twinkie was resurrected:

Twinkie's Miracle Comeback: The Untold, Inside Story of a $2 Billion Feast

Really?  Exactly what would happen was widely predicted, even I got it right.  And your pension is at risk the same way if circumstances are similar. Today:

But the liquidation had washed away everything. Yes, the company was gone, but so were the pension costs, the union contracts and the debt. It also unbundled the brands, allowing investors to carve out the best businesses. “We didn’t have to take on the factories or the routes,” says Metropoulos. “We didn’t have to take all the historical drags on the company.”

Yes, We all saw that coming.  Bust the unions, repudiate the unfunded pension liabilities, pawn off the unemployed to the welfare rolls, socialize the loss, pocket $2 billion. The earlier vulture funds bought Hostess to loot it, and when when the company was bankrupt, another set came in to "save" the company.

Moreover, the new business plan called for the same output using a fraction of the labor. The old Hostess dessert division required 9,000 employees and 14 factories to pump out just under $1 billion worth of cakes a year. The new plan called for 1,000 people and five plants (that number was soon cut to three as one was sold, another shuttered). William Toler, a veteran of Metropoulos turnarounds, was brought in as CEO.

8000 on the public dole, at least for a while.  Industrial bakers, replaced by robots. As long as usury is legally enforced, then all of this is absolutely legit.  Hostess would probably not exist except for usury, so the out-of-work employees ought not complain, but without usury we'd have a different allocation and investment pattern, one more stable.

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Twinkies, Unions & Pensions

There was never a chance Hostess would have survived.  Romney lost the the election, but the Bain way continues.  Anyone who thought there would be any change under Obama is delusional.  18,000 union folks lost their jobs and pensions, just like if Romney had been president.

The point is pensions, and always has been.  When Fedex bought Flying Tigers, the merger was about getting Flying Tigers's fully funded pension and matching it with Fedex's under funded pension.

Company pensions are treasury money, meaning the company can do what it wants with the cash.  Corp raiders come in and distribute money as they wish and shut it down.  they pay themselves as the assets sell off.  No pension liability makes the net price higher when selling assets.

Now they mention Hostess products might be made overseas.  Why not?  They could survive re-entry from outer space, what's a boat ride?

What this means is factories will go idle, and those bakers will not get jobs, even at a lower wage.

This will result in cries for protectionism, to "keep jobs here."  That would be a mistake.  What we need is to have unions that protect their assets.  When some leaders agreed to let the companies run the pensions, and agreed to let pension funds be corporate treasury money, they sold the rank and file down the river.

When the government has a monetary policy that allows big business to avoid tax and launder money by going overseas then we'll get that.

Free trade is crucial to a free country.  What is going on with Hostess is not free trade.  It is another government policy failure.

What we need is a New Union Movement.  And a elimination of government interference in money.

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China and Currency

Re: [spiers] China and Currency


On Mon, 13 Feb 2006 19:24:20 -0800 (PST), M A Granich wrote
:

> Could driving the deficit up to astronomical levels be
> the big mistake? I'm far from an expert, and I don't
> like paying taxes anymore than the next guy, but my
> naive view says we should pay the bills.

Deficit levels don't really matter, what matters is the kind of deficit. I run
a deficit with my
grocer for food... if it is cheese and bread and fruits and wine and veggies and
fish, that is
good, assuming I live within my budget and am buying sensibly. If it is
twinkies and potato
chips and Red Bull, that is bad, and worse if i bust the budget with my
purchases. On the
other hand I sell things to people from whom I rarely buy anything, if at all.
Taxes are just
forced purchases, which take precedence over all other family needs.

If USA is buying from overseas machinery and equipment, raw materials and iems
we cannot
make, then the deficit does not matter, regardless of the size. In fact, USA ran
large deficits
out first 80 years or so, very large, but they were good deficits. If we are
buying things we
can make, something is wrong, and if we are paying for it through refinanced
houses, then
something is very wrong. You'd have to follow the money, but the problem would
get back to
how much currency is issued in USA and at what rate interest was set.

(The solution would be to forbid the govt to touch currency or interest rates).

Exports can be good or bad too... do we export things we made or raw
materials... of the
things we made, are the consumer goods or are they machinery and equipment?
Exporting
shoes is good, excporting a shoe-making machine is bad becuase its value, the
ability to
make shoes, is exported. Exporting subsidized goods is very bad indeed.
Subsidies,
currency and interest rate manipulation generate the bad kind of exports.

John

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Bank Reserve Ratio

I was reading the inimitably calm Frank Shostak on USA bank supervision when I came across this.

On Tuesday July 2, US central bank policy makers voted in favour of the US version of the global bank rules known as the Basel 3 accord. The cornerstone of the new rules is a requirement that banks maintain high quality capital, such as stock or retained earnings, equal to 7% of their loans and assets.
The bigger banks may be required to hold more than 9%. The Fed was also drafting new rules to limit how much banks can borrow to fund their business known as the leverage ratio.

7%?  9% I thought it was 10%.  High quality capital?  Bank stock?  Retained earnings?

That 7% reserve requirement is no favor to small banks.  It just means in a downturn they are the first to go out of business, leaving the "too big to fail" sopping up these losers, and making it convenient for the few bigger banks to be bailed out.  And if the banks go bust, stock does too.  So bank stock is high quality capital?  And retained earnings is an accounting entry.    So essentially there is zero reserve banking in USA.

People always say busts "happened so fast!"  No, only the end is fast, like death.  We are way beyond fixing the dead economy, it is just a matter of when people realize.

The end of Hostess Twinkies seemed a surprise, except it took a long time.  First, the pensions need to be looted and the unions need to be busted.    These things take time.  Then the new, lower cost factory can make even more profits than before.

Hostess Brands acknowledged for the first time in a news report Monday that the company diverted workers' pension money for other company uses.

The bankrupt baker told The Wall Street Journal that money taken out of workers' paychecks, intended for their retirement funds, was used for company operations instead. Hostess, which was under different management at the time the diversions began in August 2011, said it does not know how much money it took.
.....
Hostess Brands, which filed for bankruptcy for a second time in January, started liquidating its operations in November after the bakers' union refused to take another pay cut and went on strike. The liquidation will leave about 18,000 workers without jobs.
In November, a judge approved Hostess' plan to pay $1.8 million in bonuses to 19 executives, according to CNBC. Rayburn declined to take a bonus but also avoided a company-wide pay cut that he imposed, Hostess told HuffPost.

Pension fund money is often company treasury capital so the company can spend it any way it wants, as long as it accounts for it.  But in bankruptcy... oooops... all gone! (Social Security is even worse, but that is something else.)

Now, you can say "this is wrong, we need stronger regulations!"  But the regulations in place were to cover the last set of abuses.  You cannot regulate fairness.  You can only foment good in freedom.

You all recall the Twinkie Riots.  No?  The Trucker riots of the 80s?  Longshoremen riots of the 90s?  The Pilot riots this of the 00s?  No.  Of course not.  They all experienced the same thing.  But since we have a "safety net" of freebies people do not object too much.  There will be no changes, except the major change coming after the system crashes.

Whatever business you have will go up in value tremendously as so much else unravels.

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