First of all, I think it’s pretty funny when celebs start talking politics and think people should listen to them
because they are on TV or in the movies or whatever they are known for. That said, one of the beautiful things of
having a blog, is just that, it’s my blog. I can throw out there whatever it is that I think is important, worth
discussing, or just worth throwing out there to get people are stirred up and see how they respond.
Consider this blog entry my entry on politics, the business of politics, and ideas I have.
The goal is not to make you believe what I believe. Make your own choices and make up your own
mind. I’m sure some will disagree. Some will agree. Some won’t care what I have to say, they will agree or
disagree with me just because I wrote it. This is my opportunity to say it and read the feedback, which to me is fun.
This is a unique forum to get feedback that I know will take all sides of the issues, which in turn will hopefully
make me a more informed citizen. That’s never a bad thing.
I hate politics. I have a strong dislike for politicians when they are doing the business of
politics. My experiences in that world range from slimy to slimier. I could give a variety of stories, but my
favorites always come back to Senator Hatch. It startedthe time he suggestedIsell his music
CD on Broadcast.com and culminated withthe time he asked me to visit with him in Washington and the net of the
discussion was a request for money forthe Utah State Library. Just what a guy from Texas wants to fly to DC to
discuss (I had hoped to discuss the Senator’s massive confusion and ass kissing of the content industry). He politely
avoided the subject and guided me towards his request for money…slimy. So for the rare and random times when I
getasked to run for a political office, the answer is no.
I have zero political agenda. I don’t care who you vote for. I do have an opinion on things, so here goes.
1. Outsourcing.
This has become a flashpoint across all of America. I can understand both sides of the argument. On one side,
replacing an American worker with one from overseas means one of our own loses a job. That is terrible for those who
are displaced and their families. As an employer, I can also understand how the money saved from diverting that job
overseas can be used to do quite a bit. It can be applied to Research and Development, it can be a pay increase to
other workers, it can be used to hire workers who add new value to company.
If the money is redeployed and invested in the company, I don’t have a problem with it. I can see that although
some my feel the pain short term, that the capital redeployment will result in a net gain to the economy and the job
count in our country.
Where I have an issue, and where I think there needs to be controls put in place, is when corporate
insiders in essence put the money saved from outsourcing in their own pockets. If you go
through the list of companies that outsource and start looking at stock sales, bonuses and other incentives, you
quickly see that a material portion of the money saved is going into the pockets of insiders. That’s wrong. Or the
outsourcing is being used to hit a Wall Street expectation for quarterly earnings, maintaining stock prices and
enabling insider stock sales. That’s wrong.
If we want to make outsourcing the route of last resort and to make sure its only used when it makes absolute
business sense, Prevent insiders from selling stock or earning corporate bonuses in any year they outsource
jobs.
2. Expensing Stock Options
This could easily be the stupidest argument in corporate America right now. The argument from the technology
industry goes that they can’t recruit new employees unless they can grant stock options, and they can’t grant them if
they have to expense them. Say what?
The underlying issue of course is that if you expense options as a labor cost, your earnings will decrease. If
your reported earnings decrease, then your stock price will be lower. The greater issue in all of this is the
recognition of how stupid the typicalstock and fundbuyer is. Technology companies realize that
stock and mutual fund buyers are so inept and uninformed that although the actual business of the technology has not
changed with theexpensing of options, the “perceived” value will change. The company’s operating cash
flow won’t change.The company’ssales and gross margins won’t change. The only thing that will change is
the numberat the bottom of the financial statement. A number,because of understated labor
costs,didn’t accurately reflectthe cost of doing business in the first place!
Which leads to the question of how to value the options. It’s simple. Require the companies to buy them from
market makers in the open market. The company should be responsible for finding someone on an exchange to issue
options for their public stock. Theyare required to find someone to issue insurance on theirbusinesses.
Finding someone to issue options should be no different.
The company can then buy them like the rest of us investors do, and expense the actual cost.
If the company can’t find someone to issue the options, then the trading volume probably isn’t sufficient enough,
and the company shouldn’t be issuing options in the first place.
3. Protecting Drug Company Profits.
One of the great lies of all time is that we have to protect drug company profits. That is, it’s the job of the US
Government to prevent us from going to Canada and other countries where drugs are far less expensive. That if it
doesn’t, then the drug companies won’t invest money in new drugs, and as a result we won’t have the miracle cures,
particularly those miracle cures that don’t ever offer a complete payback on the cost of developing them.
Bullshit. Bullshit. Bullshit.
Let’s get real here. The dayI believe that argument is the day that CEOs of public drug companies don’t pay
themselves, don’t have bonuses and don’t own stock in their companies.
Theydon’t run their companies to make a profit. They run their companies to make Wall Street happy, to push
their stock prices up, and if they are lucky, tohit the jackpot personally.
They know thatin order for their stock prices to go up, they have to sell the future. If all they have to
sell is the cash flow fromtheir existing base of drug patents, they have a problem. Could you imagine the
CEO of a major drug company saying, “Well, we can’t come up with any new products, and our R&D isn’t really
working, so we will just play out the patents on our drugs and pay out the cash to shareholders.” Yeah Right.
They will do just what they are doing now keep on investing in their own R&D hoping they can hit a home run
with newdrugs, and when that doesn’t work, they will use their stock and cash to buy other companies that have
better prospects. In all cases, they hope the resultswill propel their stock and their own net worth.
They aren’t going to change how they do business at all. Won’t happen. CEOs are a competitive bunch. You don’t get
to run a major corporation by not being motivated to succeed. A measure of that success is personal wealth.
As long as CEOs and those around them want to be rich, we can change the laws regarding drug pricing and nothing
at all will change…Nothing.
If you believe that we are being overcharged for drugs in this country, the first thing you should do is sell any
drug stocks that you own. Then sell or swap out of your mutual funds that own drug stocks. I can assure you
that if the government isn’t smart enough to force change, a falling stock price is.
The 2nd thing you should do is call your congressperson and senator and let them know that you believe that US
citizens should be allowed to buy drugs from Canada.
4. “Opt out” Social Security Option
There are two certainties we as citizens face when it comes to Social Security. The first is that our elected
officials will find ways to use the money that is supposed to be waiting for our future, and thesecond is that
they will try to hide both the fact they are using the money and how they are using the money.
Social Security is at risk for those who will need it the most. We as a country are aging. The number of jobs that
offer future security, through pensions and other savings programs are not keeping the pace. The reality is,
that no matter what politicians spew to us about how to fix Social Security, they have no idea how to fix
it.
Here is a simple way to understand the impossibility of believing what our politicians tell us regarding Social
Security and our economy in general, and how incredible it is that some of them even believe what they say
themselves.
Companiesthat have been in the same business for years and years have a difficult time forecasting what
their sales are going to be in the next quarter. Most won’t even begin to forecast for more than 12 months, and the
smartest companies have stopped giving guidance to Wall Street about their future earnings. If a company, with
a couple billion or so in sales, that focuses on the same businesses on a day in and day out basis can’t forecast
accurately beyond 12 months, and doesn’t feel comfortable committing to numbers for the future, how in the world can
our politicians make commitments and forecasts for our country that go out for years?
Our country’s economy is so big, and impacted by so many variables that there is no one who can get their arms
around it and accurately forecast its future.
So take it as fact, that there is complete uncertainty regarding the money you have contributed to Social
Security.
With that in mind, I would like to suggest an action, that although it is the equivalent of a pimple on an
elephants behind, and nowhere near a complete solution, it is a least a step that allows each of us as individuals to
at least feel like we are part of the solution and not part of the problem.
My suggestion is to allow individuals to “take early retirement” from Social Security. Offer a tax credit to each
of us in exchange for opting out of Social Security. We can’t offer a deal like this today, but enact the law so that
the rule comes into effect the next time (if ever), we have a government surplus.
How much should the tax credit be? Probably the equivalent of 3 years of the average being paid annually in SS
retirement benefits at the time of the surplus. Let’s use the money to give something to the economy, and
reduce our obligation for the future. It won’t cure the problem of a Social Security shortfall, but it certainly will
help.
So there you have it. Just my 2 cents.
Whatever you do, don’t make any decisions on what I have written. Do your own homework. I don’t think I know
anymore than anyone else on these subjects, these are justMY opinions and I knew I would feel better if I wrote
them out in the blog.
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