Archive for July, 2009

Small Businesses are not so small if the depression forces them to close

Wednesday, July 29th, 2009

The small and medium business community has been largely ignored by Congress and the Obama administration.

Perhaps as individual entities, they don’t have the clout of an AIG or G M , or Chrysler, but as an aggregate, they are an extremely vital component of American economic health.

A large number of smaller, independent and usually well educated business entrepreneurs are difficult to control and are usually resistant to government intervention,

Hence, in this left wing socialist leaning environment, their eradication  through inaction is a political statement that has been largely ignored by public discussion.

The lack of stimulus funding is a deafening silence in the current “bail out” economy.

CIT Financial a funding company whose primary customers are smaller businesses, was allowed to fend for themselves when credit support became critical.

The misinformation and deliberate misinterpretation of statistics is an attempt to talk away the recession, or at least hold the terrible reality at bay until the Health Care, and Cap and Trade bills are passed.

The government appears to be more interested in an agenda, than in bringing real relief and helpful stimulus to the small businessman.

As a small business CEO, the reality is becoming more painful every day.The American economy and government pundits are pushing for quick passage of their agendas before the harsh reality of the Holiday season shows the depth of our problems.

From many discussions with my customers and my fellow CEO’s in various industries, this upcoming holiday season will be the worst in a very long time.

Gift giving and joy to children is part of the  American psyche, but this year has changed the spend and credit card mentality of the past 30 years.

Gifts will tend to be more practical and less ostentatious.

Employee bonus’s  will be modest if they exist at all.

Once the reality of our economic depression becomes apparent, the push to pass big new social engineering bills will become a  huge drag on the popularity of the Democratic party, and while Obama’s popularity and approval ratings continue to dive, the practical world of US politics will see Blue Dog Democrats strike a more moderate and fiscally conservative stance.

Sadly this will be a case of too little too late.

The damage to our economy has already been perpetrated, and our children and grandchildren will be paying the price for decades to come.

The life line of public bail outs is having  the effect of delaying the inevitable rather that curing the problem.

We need to finish our rebooting of the economy so new can begin to grow.

Ragnor the Hunter, Warrior Chief of the Michenga Nation, 9000BC

Tuesday, July 28th, 2009








Small business, a struggle for survival in a prolonged recession

Tuesday, July 28th, 2009

Washington has worked hard to keep big business afloat.

We have heard the term” too big to be allowed to fail”, used in conjunction with G M , Goldman Sachs, AIG, et al.

How about small but too numerous to be allowed to fail.

The medium to small business community is the  heart beat of the economy.  This deepening recession/ depression has put many of these vital employers into near  cardiac arrest.

The entrepreneurial spirit of the United States and the creation of new jobs and new ideas is a vital contribution of the Small Business community(SBC).

A trip to many industrial parks shows a depressing number of Available, For Sale, or For Rent signs.

Small businesses have been failing in clusters, and the struggle for the remaining to survive is difficult, with no help in sight.

With the Obama administration focused on a larger agenda, it appears that they have deliberately ignored or possibly overlooked the smaller business community.

Perhaps because they are too numerous and too small to be controlled.

Perhaps the courage and intelligence to start something new makes the entrepreneur a poor candidate to economic socialism. 

In order to survive, the SBC has attempted to keep afloat by drastic cost cutting and layoffs, selling off inventory without restocking, and often being forced into skipping rent or mortgage payments or negotiating drastic reductions as a move of practical desperation.

This is a troubling  move that portends problems going forward for the commercial real estate markets.

The upcoming Holiday season could possible be the final blow to many of the Nations small businesses.

Normally the economy gets a major boost during the Thanksgiving to New Years holiday shopping season. Economists are quick to allocate 70% of our economy to consumer spending, and Black Friday is a term dedicated to the day after Thanksgiving as the launch of Christmas shopping season, and the day when many retailers go from red to black, signaling their profitability

The deepening recession, which is sliding into a serious Depression is reinventing consumer spending habits, and I believe that excessive spending and impulse lavish gift giving is not part of our national psyche this year.

Those businesses that are holding on, hoping for that holiday breath of life, may be seriously disappointed this year.

The useless stimulus only stimulates controversy

Monday, July 27th, 2009

Last week, The Wall Street Journal had a headline ” recovery likely in 2nd half”.

Goldman Sachs has reported obscene profits for the 2nd quarter, and has declared for a major stock market rally similar in intensity to the ” Jimmy Carter is gone” rally of the early 1980’s.

Is it really that easy? Is the worst over?

Should we all get out our cut up credit cards and glue them back together, so we can ” shop till we drop”?

I don’t think so, unless you have a hidden money tree growing in your basement. If you do, don’t forget your friend Charlie.

The recession is officially 19 months long as of July 09. This represents the longest recession since the early 1930’s, which evolved into the Great Depression.

Are the Journal and Goldman right ? Has the government porkbarrell stimulus fiasco really saved the day?

Is Joe Bidenright ” we have to spend money to keep from going broke?” What ever that means!!!

No! No! and Double No!

What I have been telling you for almost 2 years now, is “we broke the machine”. This is not a simple case of throwing money at the problem to create a new bubble, The system has derailed and you can only fix  a broken system by letting it die, and creating a new and stronger one.

The fabric and structure of our society is realigning. Society’s priorities are changing, and fundamental change takes a long time.

This protracted change is what they call a Depression, and clearing a depression takes time.

Time to heal and recover, Time to use up inventory and develop new demand where it no longer exists. A basic change in the format and the foundation that society builds upon.

Debt reduction.

New industry.

New demands.

The death of old habits and a return to basics.

Something major has occurred, and stimulating it won’t work. Over stimulation is what caused it  to break.

The shakeout is just beginning, The cure is a bitter pill to swallow, and includes, bankruptcies, business liquidations, deflation, defaults, and eventually a possible hyper inflation.

Stimulating a depressed economy is having the effect of delaying the inevitable.  A new auto industry based upon reduced labor costs and new innovative designs would have been the best of free enterprise born out of a G M  chapter 11. It would have allowed for the elimination of oppressive union contracts and make American ingenuity competitive with the World once again.

Instead a government bailout will result in a micro managed mis managed auto company kept alive by government funding to save the unions.

Those are not green shoots, they are just garden variety weeds

Tuesday, July 21st, 2009

The green shoots that the Administration was trumpeting as the beginning of an economic renaissance,  ended up succumbing to too many weeds, too much watering, and way too much fertilizer.

The government is displaying a stiff upper lip, and has enlisted the aid of Wall Street in an attempt to put a positive spin upon a deteriorating market.

Companies are exceeding  lowered  expectations, with shrinking numbers of employees, reducing  overhead to make “less gross sales” look like more profits.

The stark reality is that the government  Bureau of Labor Statistics is cooking the books on unemployment and the state of the economy.

If you count unemployment as is used to be calculated, the picture that they paint as 9.5% unemployment is vastly different and much more ominous.

The real number of unemployed Americans is close to  30 million people, or nearly 20% of the work force. When you compare this statistic to the unemployment figure of approximately  25% during the Great Depression which occurred 3 or 4 years after the 1929 market crash, you can see more rough times ahead.

The bleak statistics are ominous because we are just at the beginning  of the spreading recession/depression.

The disparity between government statistics and reality are created by the following deceptive reporting methods.

#1. People who have used up their unemployment benefits and are no longer collecting, are not counted.

#2. The people who receive the extended emergency unemployment benefits granted by congress are not counted.

#3. They are taking small business job creation estimates and have projected them as actual jobs. In reality, the small businesses are getting taxed and squeezed out of business, or have been forced to contract, not expand .There is easily a large net loss not increase in small business hiring.

#4. People forced to take part time jobs to survive, are counted as employed by the government.

Any trip to shopping malls, Main Street America, and most commercial and industrial areas of any city will show dramatic and massive closing of small businesses.

AVAILABLE  and FOR Rent signs are everywhere and the numbers are growing. This is causing the beginning of another real estate mortgage crisis. The commercial property default,

And the slide continues.

More on the Prime Adjustable Rate Mortgage(PARM) later.

CIT Group You Must Have Contributed to the Wrong Party

Friday, July 17th, 2009

In a 12 month whirlwind of corporate and  social extremism, we have witnessed  a cacophony echo of partisan changes and bailouts unprecedented in the history of the United States.

Insidiously, many of the moves have been motivated by an agenda of punishment and reward for political affiliations rather than for the good of our beautiful America as a nation and unified people.

At a watershed time in history, the near collapse of our economic system has seen bailouts in the $ hundreds of billions, to pay off the labor unions (see UAW, Teachers, et al) , the cronies at Wall Street Banking firms (namely Goldman Sacks) where most of our treasury and finance leaders have  apprenticed, and various insurance and banking entities.

The $Trillions that have been spent to prop up and stimulate appeared to be very focused towards  ideologically friendly companies.

Fannie and Freddie got into trouble by lending to subprime minority borrowers. The have been bailed.

The Car dealerships forced out of business while the Auto manufacturers were being nationalized, were predominantly Republican contributors.

The money has flowed and continues to flow as quickly as the printing presses can churn out the paper, but the recipients have been suspiciously partisan.

This is why it is so troubling that the Obama administration has taken such a tough stance directed towards CIT Group.

The White House has chosen this struggling lending Institution as the focus test “line in the sand”. Cutting off the lifeline offered to so many others.

This primary lender to small and medium sized businesses, is being left to fend for itself as it struggles to stay afloat, while the Administration has continued to catered to the banks that service major corporations and investors have been bailed out.

Letting them fail is a major blow to small businesses that depend upon CIT to fund their inventory and weekly payrolls.

The administration has also squashed a bipartisan effort to rescue come of the car dealerships set adrift by the GM and Chrysler bailouts. 

Partisan politics is understandable, but not at the expense of the innocent American public.


Saturday, July 11th, 2009












Why do they insist on calling this Depression a recession

Wednesday, July 8th, 2009

Despite our government intelligentsia insisting that we are in a recession, they are wrong. We are at the beginning of one whopper of a Depression.

In a recession, the economy gets a nose bleed, and possibly a mild fever.

Traditionally Dr Fed will tell us to take a few aspirins, get a good night’s sleep, and get back to business as usual , in the morning.

In a Depression, the economy is in the process of dropping dead, with a cure beyond the miracles of modern economic medicine.

Businesses have failed, with hundreds of thousands still in a death throe.

People have lost their savings, their jobs, and their homes.

New waves of loan defaults are on the way:

1. Prime Adjustable Rate Mortgages(PARM’s) Credit worth people who bought bigger and more expensive than necessary, by using the leverage of clever mortgages, which ballooned in 5 or 6 years(2010-2012) so they could refinance their much move valuable homes, or sell them at a profit prior to the adjusting.

2.Commercial Real Estate mortgages. A. The flood of retail store closings and mall bankrupcies has just begun as consumer spending continues to shrink.

                                                                            B. There are hundreds of thousands of small and medium commercial companies in construction supply, or commercial maintenance or manufacturing or any other commercial industry, who are literally holding on by their finger nails. I see it every day, and I hear it in the frightened voices of my customers and suppliers.Many of them are failing, and will take the commercial/ industrial real estate market down with them.

3. Home equity loans- Their time is due. Too many people pulled equity out of their homes and now there is less and less collateral in their homes to cover their loans.

4. Credit Card defaults.The banks are squeezing the card holders with shrinking limits and rising interest and penalties. To many who lost their jobs and their savings, credit cards represented a very expensive way to keep afloat. But not for long.

The final death of our economy is being delayed by the misguided attemps by the government to prop up  the “old economy” by pumping $ trillions into the dying economy to keep business functioning at artificial OLD levels.

All of this money is not creating anything new except for a massive government funded bubble. And we sadly know what inevitably  happens to bubbles. Coupled with the oncoming depression, the bubble burst is appalling to imagine. 

Prop up the banks, even though their mismanagement and duplicity helped cause this final mess(We should have let the weak ones fail)

Bail out the auto industry. They are too important and their labor unions deliver a lot of votes.(The unions were the yolk that made US auto makers non competitive. Let them go chapter 11, reorganize, and get rid of the grandfathered union benefits)

Now its insurance companies, then health care companies and widget manufacturers and energy producers. The government will run everything, and bankrupt us all, meanwhile new resources are diverted from new entrepreneurs to prop up the old dinosaurs.

Have I bummed you out yet?

I need a break.

Much more later.