Friday, February 13, 2015

The Latest Merger... and the Big Lie of the Obama Recovery

Illinois Review ^ | February 13, 2015 A.D. | John F. Di Leo 

This week’s business news concerns yet another high profile corporate merger. Less than two years after office supply and computer retailers Office Depot and Office Max were forced into a merger, it now looks like Staples will be acquiring them. Where once there were three retailers, soon (or eventually, since such consolidations do take time), there will be only one.
The Resident of the White House, no doubt remembering that the success of Staples was an early credit to his rival Mitt Romney’s storied career as an investment wizard, lost no time in taking pot-shots against Staples for its employee compensation, typical work hours, and benefits… characteristically, getting every detail wrong in the process.
But the public in general reacted with the mixed feelings that one expects from any merger… because this isn’t really all that different from technology mergers, restaurant chain mergers, airline mergers, or the many other mergers and acquisitions that take place nowadays, as businesses struggle to find a way to survive in an ever-more hostile business climate.
To the question “is this merger good or bad?,” there is no absolute yes-or-no answer. But to the question “does this merger tell us anything?,” the answer is a resounding yes.
The Plus Side of the Balance Sheet
On the bright side, there are a lot of people who make money on a merger between competitors. The stockholders of both Staples and the office duo will likely do well, as several different key issues will happen as a result, with both immediate and long term benefits.
While there are no guarantees, it’s certainly likely that stock prices of each of the merging parties will rise, in anticipation of the many benefits to come. This will help both individual and industrial investors, as pensions and 401Ks, as well as all other classes of investment accounts, hold these stocks either directly or through mutual funds.
Management costs will fall. Where today, each company has a full suite of corporate officers, regional directors, and other upper executives, only one set will be needed in the future. The reductions don’t even have to be done immediately; it can be slow attrition or the quick axe, depending on how quickly the Street expects results, and how quickly current employees depart on their own, removing the need to be forcibly canned.
Real estate costs will fall. Where today, these businesses often have two or even three locations in the same mall, intersection or neighborhood, the combined firm will only need one. This takes time; if you can’t get out of a lease, you may as well keep two locations alive until you can, rather than paying for an empty space. But eventually, they’ll presumably save lots of money on locations.
Employee costs will fall. Those same neighborhoods that see real estate costs (and utilities, and property taxes too!) cut by half or two thirds will also see their headcount shrink. One day-manager rather than three, six clerks rather than eighteen. Save a mint on benefits too, as the bigger company is able to command better investment options for 401K plans, better insurance options for the employees who remain. It will definitely be a better place for those who remain after the consolidation.
Advertising costs will plummet. The same community that receives a mailing from Office Depot, another from Office Max, and a third from Staples will eventually receive only one from Staples. The same goes for the Sunday newspaper and its stack of ads. Today that paper includes three booklets, but eventually all they’ll sell is the one. So these three companies will save a lot of money pooling these weekday flyers and only printing and placing the one survivor’s. Again, this is a savings of half or even two thirds.
And before we leave this subject, think of the cost savings on the products they sell! When a company buys more, it can usually get a price break. So too, the fully merged entity will like have the power to cut a better deal from every vendor or supplier they resell, from the pens and paper in the office supply section to the laptops and monitors sold in the technology section. Lower costs on purchases means much better profitability than before.
So, yes, there are good reasons to cheer. If you hold stock in these companies (plural), soon to become this company (singular), you may indeed be a happy camper this week. The news will make that investment a stronger one than it was before. The prognosis is good, particularly in terms of market share, for the consolidation of a company in a challenged market.
But, all that being said, what about when one considers the bigger picture? What does this story mean to the economy at large?
The Minus Side of the Balance Sheet
When we pull back and widen the screen, we see a different view.
No company is an island unto itself, and while this particular merger may indeed be the right thing to do for the companies in question, the news of this merger might be different from the perspective of someone other than the stockholder. Consider:
The greatest misconception in the American economy is the idea that the stock market is a measurement of the quality of the economy – the idea that high numbers in the stock market mean a strong economy, and low numbers in the stock market mean a weak economy. In fact, the stock market is a measurement only of the companies being traded, and even for that, it’s a measurement only against each other, or against other huge investments such as bonds. The best thing for a publicly traded conglomerate may in fact be a very bad thing for the rest of the economy.
As the members of the merger save money in management and employees, this is at the expense of the many who are being terminated as redundant. You don’t need two or three of everything; in the new world, the company is right to reduce staff to meet the number of outlets that the chain will soon be down to. But this does mean that lots of jobs – from entry level all the way up to senior management – are being eliminated; there will be less employment in general, and less advancement opportunity in particular, for America’s workforce after the merger than there was before. To handle an event like this, the nation needs to be encouraging the creation of new and different jobs so that those flung loose may have a place to land.
There’s another side to the real estate savings as well. While Office Depot, Office Max, and Staples will together pay far less in real estate costs, this does mean that the beneficiaries of those leases will suffer the loss of some large clients as a result. Hundreds more empty sites means that many real estate investments will suffer a drop in revenue over the coming years - these huge sites tend to sit vacant a very long time before finding a new tenant. And these are big spaces, not tiny offices or snack bars. They take up a lot of space, and are often the anchors in their respective strip malls. Their disappearances will not only deprive the landowners of profit, their absence may remove a stream of potential customers that the other stores and restaurants in the mall depended upon. Closures of large stores may make their competitors cheer, but they do hurt their other neighbors.
When brands disappear and advertising is consolidated, who loses? Billboard rentals and radio/tv ads may have had three streams of business until now; this merger means that number will shrink to one as well. One third the billboard rentals, one third the Sunday and holiday flyers in the newspaper, one third the mailings. Look for fear in the paper business, the printing business, the direct mail houses, the ad agencies. Yes, the new business will have bandwidth for a lot of advertising, but it won’t be as much as the three businesses used to buy on their own.
And what of the products they sell? Three stores could sell a lot of brands between them; there was business for plenty of competition between paper companies and pen manufacturers and envelope makers and computer assemblers. But will one final company offer to sell as many individual lines as the three used to sell on their own? The odds are that this merger will result in great trauma for some producers in the areas of computer equipment and office supplies.
In case it sounds like the truth is the opposite of what we first assumed, that’s not really correct either.
The fact is, all this can (or should) have a good side in a free market. Competition is a good thing; the challenges of a competitive market make everyone work harder and become more productive. Many of the employees cut in a merger were the ones who had stopped giving the job everything they had; many were burned out, just going through the motions. They’ll be more focused when they land in their next job, again thrilled by the newness of the environment and challenge. It might be the best thing that ever happened to them... as long as they have a place to go.
Same with the real estate, and the vendors and the customers. Maybe this shock to the system will spur a mall manager to redecorate, to the benefit of all his tenants. Maybe the vendors cut by the consolidation will launch new products and make the most of it.
But only if the rest of the economy is strong enough to create the conditions for such benefits. A merger in a good economy can refocus everyone affected by it; a merger in a bad economy might leave people and businesses struggling for their very existence. And if so, that’s not the fault of the companies being merged.
A Bellwether, Not the Weather Itself
The Staples merger, like every other merger and acquisition that hits the headlines, is a story of its own, not THE story of the economy itself. If two or three companies are so troubled by the economy that they find they must merge in order to survive, then the right thing to do is indeed to let them merge. Government has no business condemning them to a long slow death in an economy in which they find themselves uncompetitive, for whatever reason. Unless the merger creates an unfair monopoly, the government ought to let them go ahead with it.
But government should dig into the question and examine WHY these companies found it necessary to merge. WHY did they determine that they could not long make it on their own? Why wasn’t there enough business in a growing economy for all of them to prosper?
Why indeed.
This is the core of it all: we are told that the nation is in recovery; that the recession hit bottom at the beginning of the Obama years, that it was all “Bush’s fault,” and the Obama presidency has turned it all around. We are told that the growth has been frustratingly low, but at least it IS growth, so we ARE in a recovery. We just need to understand that the booms of the old days aren’t possible now, that this – whatever this is – is the new normal. And we should like it.
What a lot of hogwash.
If the economy had indeed been growing for the past four or five years, there would be enough new businesses – enough new private consultants, enough startups setting up offices and enough existing businesses expanding into new locations and growing the offices they already have – to keep Staples and Office Max and Office Depot and lots of others as busy as we can imagine.
If the economy were strong, as a doubling of the Dow Jones average is said to mean, then there would be so much activity that office supply stores and computer retailers would be the biggest boom business in the country, not a weak industry struggling to stay afloat. If this economy were strong, we would see new office supply stores popping up everywhere.
When a new factory, or hospital, or office building goes up, there’s a boom in restaurants and shops and bars; the new clientele have money to spend. But how much of this has the current economy produced? Precious little indeed.
Instead, hospitals are closing, factories are moving abroad, and hotels close as business travel contracts. Oh, there are always some new ones coming up, so you will see some construction as you travel the land… but the net result is 93 million Americans outside the labor force. You don’t get a 93 million non-participation rate in a growth economy.
A nation bleeding manufacturing, bleeding offices, bleeding services, bleeding retail, cannot support a booming office supply business; that’s the reason why these office supply companies find that they must consolidate to survive.
So now we have our answer: The merger may be the right thing for those parties to do, but only because the economy is so bad. The news of this merger tells the tale of the American economy far better than any other statistic, certainly far better than the Dow Jones Industrial Average at the end of a trading day.
People spun free after a merger can have a soft landing; they can even prosper in the right economy.
But the American economy today is so over-regulated, so over-taxed, so crippled by the burdens of federal, state, and local regulators, that it can no longer produce the broad variety of startups and expansions that a nation needs, especially when there are suddenly unemployed workers and vendors to put to work.
We know what needs to be done. The historical record is full of examples. We lowered tax rates in the Kennedy tax cuts of the Jack Kennedy administration; we lowered tax rates again and cut regulations in the Kemp-Roth tax cuts and Grace Commission of the Ronald Reagan administration.
Both events caused economic booms; the Reagan boom, in fact, is the very recovery that created the conditions for the founding of all of the three office supply chains under discussion today, back in 1986 and 1988!
So, in the final analysis, what key lesson can we learn from this merger?
All we need to know is in this one statistic: These three companies were all born when Ronald Reagan lived in the White House... and then they were forced to consolidate – just to stay alive – during Barack Obama’s residency there.
The Resident really doesn’t have much to show for himself, does he? When your “recovery” is one that leaves people out of work for so long they drop out of the labor force, that’s not much of a recovery in ANYONE’S book.
2017 cannot come too soon.
Copyright 2015 John F. Di Leo
John F. Di Leo is a Chicago-based Customs broker and trade compliance lecturer. He was an officer of local chapters of the Illinois Right to Work Committee, Young Americans for Freedom, and the Illinois Small Business Men’s Association in the 1980s, and has now been a recovering politician for some 17 years. His columns are found regularly in Illinois Review.
Permission is hereby granted to forward freely, provided it is uncut and the IR URL and byline are included. Follow John F Di Leo at LinkedIn or Facebook, or on Twitter at @johnfdileo, or find archived columns on his own page at www.johnfdileo.com.

Here are 10 more reasons I’m sooo glad I didn’t vote for Obama

The complete list can be found at https://danfromsquirrelhill.wordpress.com/2013/08/15/obama-252/
Here are the new entries:

971) The “most transparent administration in history” said it won’t let the public see its 332 page net neutrality plan until after the FCC voted on its implementation
In February 2015, the Obama administration said that it would not let the public see its 332 page proposal for net neutrality until after the FCC voted on its implementation.
972) Obama’s 332 page net neutrality plan contained excessive levels of taxation and regulation
Republican FCC Commissioner Ajit Paisaid said that Obama’s net neutrality plan was 332 pages long, and that
“It gives the FCC the power to micromanage virtually every aspect of how the Internet works…”
“The plan explicitly opens the door to billions of dollars in new taxes on broadband… These new taxes will mean higher prices for consumers and more hidden fees that they have to pay.”
“The plan saddles small, independent businesses and entrepreneurs with heavy-handed regulations that will push them out of the market… As a result, Americans will have fewer broadband choices. This is no accident. Title II was designed to regulate a monopoly. If we impose that model on a vibrant broadband marketplace, a highly regulated monopoly is what we’ll get.”
The Daily Caller reported:
In his initial cursory overview of the plan, the commissioner said it would hinder broadband investment, slow network speed and expansion, limit outgrowth to rural areas of the country and reduce Internet service provider (ISP) competition.
973) “President Obama’s 2016 budget targets retirement accounts”
In February 2015, MSN published this article titled “President Obama’s 2016 budget targets retirement accounts.”
974) Tax Policy Center, a liberal think tank, said Obama’s proposed “middle class” tax cut was actually an increase in taxes for the middle class
In January 2015, Tax Policy Center, a liberal think tank, said that Obama’s proposed “middle class” tax cut was actually an increase in taxes for the middle class. Specifically, it said Obama’s policy would result in a seven dollar tax increase for the middle quintile.
975) Bill Maher said Obama “… is perhaps the worst president we’ve had on clamping down on the press”
In January 2015, Bill Maher said Obama…
“… is perhaps the worst president we’ve had on clamping down on the press.”
976) George Washington University Law School professor Jonathan Turley said of Obama, “… many of his actions… are violations of his oath of office”
In January 2015, George Washington University Law School professor Jonathan Turley said of Obama:
“The effort to establish unilateral authority presents an existential threat to our system of government. Although the President has insisted that he is merely exercising executive discretion, any such discretion by definition can only occur within the scope of granted authority and only to the extent that it is not curtailed by the language of the Constitution. This includes his obligation to faithfully execute the law. U.S. Const. art. II, § 3, cl. 4. Some of the President’s actions can be viewed as within permissible lines of discretion. However, many of his actions cannot and are violations of his oath of office. That oath is not merely an affirmative pledge to defend the Constitution but to yield to its limitations on his own authority. To put it simply, that was the deal struck on January 20, 2013.”
977) Julie Moreno borrowed $14,000 to pay for cataract surgery because her Obamacare policy refused to pay for it
In February 2015, it was reported that Julie Moreno of Mountain View, California, borrowed $14,000 to pay for cataract surgery because her Obamacare policy refused to pay for it.
978) Lied about the unemployment rate
In February 2015, Gallup CEO Jim Clifton wrote:
The Big Lie: 5.6% Unemployment
Here’s something that many Americans — including some of the smartest and most educated among us — don’t know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.
Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.
None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.
There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.
Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this.
There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.
979) Instead of deporting illegal aliens, the Obama administration spent taxpayers’ money to give them hormone therapy
In January 2015, it was reported that instead of deporting illegal aliens, the Obama administration spent taxpayers’ money to give them hormone therapy.
980) Illegally gave 982,000 work permits to illegal aliens and other foreign nationals who were not legally qualified for admission
During Obama’s first six years as President, he illegally gave 982,000 work permits to illegal aliens and other foreign nationals who were not legally qualified for admission.

Colossal Liar

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Measels

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On the plus side!

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The truth about the crusades

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Imagine...if you will

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MSM who never vetted Obama begins anal probe of Wisconsin Gov. Scott Walker!

Fellowship Of The Minds ^ | 2/13/2015 | Dr. Eowyn 


The liberal mainstream media, from the 2008 presidential campaign season to this day, refuse to look into and vet Obama’s background.

More than that, the media took their lesson from Satanist Saul Alinsky’s Rules for Radicals , especially No. 5 (Ridicule is man’s most potent weapon), mocking Americans who question The Anointed One’s birth eligibility to be president by giving them the derisive label of “birthers.”
Now that Wisconsin Governor Scott Walker is polling at the top of likely 2016 GOP presidential candidates nationwide and even in California, lo and behold, the MSM are giving him the anal probe, with the Washington Post’s David A. Fahrenthold leading the way.

Below are excerpts from Fahrenthold’s article for the Washington Post, Feb. 11, 2015, “As Scott Walker mulls White House bid, questions linger over college exit."

Scott Walker was gone. Dropped out. And in the spring of his senior year.
In 1990, that news stunned his friends at Marquette University. Walker, the campus’s suit-wearing, Reagan-loving politico — who enjoyed the place so much that he had run for student body president — had left without graduating.
To most of the Class of 1990 — and, later, to Wisconsin’s political establishment — Walker’s decision to quit college has been a lingering mystery. […]
Walker clearly liked college politics more than college itself. He had managed to line up 47 campaign endorsements, including ones from the ski team and the varsity chorus, but he had trouble showing up on time for French.
And, after four years, he had faltered on both fronts. He’d lost an ugly race for president. And he apparently had far too few credits to graduate.
[…] Walker’s own explanation has been short and simple. He got a job. He meant to go back. But he just never found the time.
Today, Walker, 47, is the governor of Wisconsin and a strong contender for the GOP’s 2016 presidential nomination. He is known for an astounding political hot streak: Since 1993, he has run 11 races for state legislature, county executive and governor — including a highly unusual recall election in 2012 — and he has won them all.
But before that streak came a string of defeats: the campus election, his failure to finish college and his first campaign for state office.
[…] Walker was not available to comment for this article, according to a spokeswoman for his new political committee, Our American Revival. He is visiting London this week, conducting a trade mission and bolstering his foreign policy credentials.
Blah, blah, blah.