It’s an old cliché that we all seek to be understood . . . accurately and completely, too, we hope. In some instances, at least, leaders are particularly poor and communicating, even where the message is brutally important to the direction and success of the firm.

“Implicit” communication includes body language; gestures; a smile; a frown; tears; a hug; clenched teeth; clenched fists; nail biting; sweaty brow; crossed arms; hunched shoulders, volume and pace of voice. etc.

“Explicit” communication might include a telephone conversation (particularly one where the parties to the conversation are not viewable); letters; email, radio; TV; DVD; newsletter; newspaper, email, and the like.

There are obvious gray areas and crossovers, because while a phone conversation is mostly explicit, one’s tone of voice, choice of words, and pace of speech are important elements of the entire conversation.

That said, multiple valid scientific studies has shown that the messages people receive come more from body language, facial expressions and tone of voice than the actual words and objective message content.

We have used the following measurements, which are understood by many communication consultants as “standard”:

One of our more cynical clients asked, “You mean I can tell my staff s - - t, and if I do that with the right words, calmly, with appropriate body language, I’m okay?” Not exactly, but perhaps directionally correct.
Albert Mehrabian, a professor emeritus of psychology at UCLA is an expert on verbal and non-verbal communication. Mehrabian defines the three basic elements of communication as: words; tone of voice; and “non verbal behavior”, for example, facial expressions.

Mehrabian has also postulated that while non-verbal elements are particularly important for communicating feelings and attitude, the proposition takes on heightened importance when there is “incongruity”, that is, when the words themselves do not appropriately or adequately align with non-verbal behavior, such as tone and attitude. It’s Mehrabian’s theory that where there is disagreement between specific words on the one hand, and tone of voice and non-verbal behavior on the other, that people will tend to believe the tonality and nonverbal behavior.

Consider an instance in which an individual clenches his or her teeth, folds the arms, frowns and screams, “I love you . . . you are a sweet precious person.”

Not only do the mix of degree and intensity of each of the elements of communications bear relevance to the understanding of the message, they also contribute significantly to whether or not the message receiver . . . the listener, as it were . . . likes the person who is speaking. This turns out to be an important factor in being properly understood. If you speak something that is profound and true, but your audience does not like you, you are less likely to be understood and believed. Indeed, a scarier situation might be where the speaker is very well liked and lies and obfuscates. No one can think of any example of that, can they?

Professor Mehrabian’s studies have shown that words account for only 7% of how much we like the person who is delivering the message; tone of voice accounts for 38%; and body language accounts for 55%. (These are sometimes shortened to “3 Vs” for Verbal, Vocal and Visual.)

Therefore, for a business to communicate effectively, he/she must consciously consider the parts of the message; the delivery medium or media; and the congruence among and between the three key parts of message delivery, remembering that incongruence is a major enemy of effectively being understood and believed.

We cited above the “I love you” example. Another analyst proposes the verbal expression, “I do not have any problem with you!” together with avoiding eye-contact, looking and acting anxiously, closed body, etc. In this case, under the “7%-38%-55% Rule”, 93% of the communication is incongruent and the verbal message will not be understood or believed.

Back to Fido. There is a humorous list, Your Dog’s Ten Commandments, which might bring the above comments into better focus. When you read these, try to put a valued, valuable, key employee in the place of the dog’s words, and see if you, as the leaders of an enterprise or team of people, are able to consider transcending to a different, better form of communication.

1. My life is likely to last 10-15 years. Any separation from you is likely to be painful.
2. Give me time to understand what you want of me.
3. Place your trust in me. It is crucial for my well-being.
4. Don’t be angry with me for long and don’t lock me up as punishment. You have your work, your friends, your entertainment, but I have only you.
5. Talk to me. Even if I don’t understand your words, I do understand your voice when speaking to me.
6. Be aware that however you treat me, I will never forget it.
7. Before you hit me, before you strike me, remember that I could hurt you, and yet, I choose not to bite you.
8. Before you scold me for being lazy or uncooperative, ask yourself if something might be bothering me. Perhaps I’m not getting the right food, I have been in the sun too long, or my heart might be getting old or weak.
9. Please take care of me when I grow old. You too, will grow old.
10. On the ultimate difficult journey, go with me please. Never say you can’t bear to watch. Don’t make me face this alone. Everything is easier for me if you are there, because I love you so.

The planning activity is a discrete part of overall strategic management. Therefore, planning is a part or a subset – albeit an important one- of the entire process and scope of management.

Strategic management is the planning, making finite decisions for continuing or changing certain of the firm’s activities; implementation and execution of those plans . . . all of this defining the long-run direction and determining the long-run performance of a corporation.

You should think of the planning phase as only a part of a comprehensive set of activities which drive the corporation today and tomorrow. These activities include, of course, planning and analysis, but proceed to the establishment of high level, more abstract objectives; the setting of measurable goals; implementation and execution of plans; measurement; ongoing and period assessment; and course alteration. All of this is wrapped in a set of understandings about the relation of time to those required activities and the relative importance and urgency of what the corporation as an entity intends to do . . . intends to accomplish.

Ultimately, the cumulative collective and comprehensive activities of a firm, company or corporation should deliver value to various “constituencies” . . . the most important of these in the end being the shareholder.

Lest you missed it in an interview a couple of weeks ago on CBS’ 60 Minutes, President Barack Obama made a subtle, but very telling, remark about the nation’s unemployment and business hiring, and his personal economic assessment of it. The apparently innocent remark might be regarded as either naïve, scary or droll, but it has profound implications: “People who have jobs see their incomes go up. Businesses make big profits. But they’ve learned to do more with less. And so they don’t hire. And as a consequence, we keep on seeing growth that is just too slow to bring back the 8 million jobs that were lost.”

Historically high and perhaps structurally-embedded unemployment is a frightening thing, and no one really savors a “new normal”, in the President’s words, of a recovered economy with refractory unemployment. (Indeed, it’s arguable whether that is even possible and whether the continued “uncertainty” would defy a strong recovery.) Obama’s simple remark was less threatening from the standpoint of its economic consequences, and more of a concern from the perspective that economists, politicians and businesspeople might raise new concerns about our President’s fundamental understanding of “how things work”, in his efforts to bring our country back to economic greatness and leadership. In this sense, Obama’s insight was more revealing, than it was frightening. Or maybe both.

So, to Obama, this stubborn unemployment thing is terrible because the longer these big corporations go without hiring people and running at such low worker levels, they are going to learn how to do the same things - and do even more - with fewer people. So when the economy does come back, according to the President, they are going to be able to rebound with a smaller workforce.

That is, Obama is desperately worried that under the bludgeoning of the economy past two or three years, U.S. corporations will, in essence, re-invent themselves, re-engineer their processes, structurally reduce costs, strategically re-think services and returns, and narrowly reconsider the value of every activity which they engage. That’s right . . . this economy is so bad that corporations are going to have to start doing what they should have been doing for decades anyway.

Obama apparently fears those strange phenomena called “productivity” and “efficiency.” Heaven forbid that at the whip of a new trainer, U.S. corporations learn to perform a new dance: producing the same or greater output with fewer resources.

If my company produces 100 widgets a day with 100 people and then my costs increase (materials, wages, healthcare, insurance, transportation, taxes), I can - and economists argue will - try to make a 100 widgets a day with 85 people; move my business to a lower cost country; reduce wages and benefits; or close the business. Adam Smith’s “invisible hand” does not discriminate, nor does it ever take time off. The forces of competition, subtly forcing change and improvement, are never far from a company’s doorstep.

Obama’s concern is in fact the very thing that corporations should be doing: implementing activities and making changes they should be attempting even in absence of a recession, but must be doing in the midst of one. Our recent economic woes force a depth and speed of corporate change that we’d not otherwise see, of course. One metaphor for a weakening economy is that falling water levels expose the most dangerous rocks as they become closer to the surface. A deep recession has the same effect on businesses. Rocks that could once be glided over are now life-threatening and consequently the course of the corporation changes. Like individuals face with dire circumstances, behavioral changes ensue or businesses – and people – hit the proverbial rocks.

Essentially, from corner stores to huge corporations, people – families and businesses alike – learn to do more with less. And despite the President’s claim that during good times, “businesses make big profits”, the better informed among us know that during good times, small businesses make money and during bad times corner stores, entrepreneurs, and small employers suffer. The argument should be not about the size of a business or business in general, but about long-term efficiency and productivity.

One would hardly wish a recession on Corporate America just to achieve fundamental behavioral change: the re-definition of jobs and responsibilities, new processes, elimination of excess staff and overhead, renewed focus on executing those things that touch the customer or improve the product or service . . . not just lower costs, but new ways of doing business. Some in Washington don’t understand that companies are – or should be - organic entities, responsive to external changes to their environments, malleable in the face of change, adapting to new landscapes. That is the very nature of what spawned General Motors, IBM, Kodak, Microsoft and Google in the first place. And, indeed, the collective histories of those companies might be seen as a proxy for why corporations must continually change and evolve.

Despite the President’s concerns, corporations – large and small – are going to learn how to do more with less. President Obama apparently does not understand that change, improvement and adaptation are part of a company’s ongoing business . . . everyday, day after day. A recession accelerates the process of productivity improvement; recessions are “externalities”, forcing fast and profound changes in what previously have been considered acceptable, even sound, business practices.

President Obama’s view is a fundamentally pessimistic one. Don’t buy into it. Much good will come from this recession and our nation’s current economic plight. And when the economy is righted, our small and large companies will have had to do more with less, will have learned adaptation - or had it forced upon them – and will be leaner and stronger and better able to roar back to world leadership through doing ever more with ever less.

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Michael Terry is the author of the Washington, D.C.-based murder mystery So Shine Before Men, about the first African-American candidate for president and written long before Barack Obama came on the national scene. He also authored the non-fiction humor book A Bad Duck Hunt and in January 2010 published a book of poetry, Writing In Form.

Further to our research regarding the profitability of various industry segments and sectors, Terry & Company took a hard look at the profitability of various businesses. We spent a lot of time analyzing various industries, markets, sectors, segments, lines of business, etc.

Some define “sectors” as distinct subsets of a market, industry, or economy, whose components have similar characteristics. Analyzing businesses from a more “macro” standpoint requires breaking industries into smaller sectors depending upon the company’s line or lines of business.

One analytical company divides the U.., economy (and stock markets) into eleven “sectors”, of which two are called “defensive” (utilities and consumer staples) because these businesses areas, allegedly at least, tend to suffer less during economic downturns, though there seem to be few places to hide in this economy. Other sectors may be described and categorized as “growth” or “cyclical”. One way of making a gross categorization of industries is to divide them among areas such as transportation, technology, health care, financial, energy, consumer cyclicals, basic materials, capital goods, and communications services. Other analytical companies divide the market into different sector categorizations, and sometimes break them down further into sub-sectors.

One can easily see how the Energy business might be divided among oil exploration, distribution, refining, retailing, natural gas vs. oil vs. solar, etc. Metals can be divided among exploration, mining, services, fabrication, vertically integrated production, distribution and so forth.

The complications – or at least variations - in categorizing industries, markets and segments, by the way, can be understood just by the fact that “health care insurance” can be considered under the larger group of insurance, along with property / casualty, life, annuities (which themselves are categorized, too, under financial services), high-risk insurance, auto, etc. In fact, “high risk” is really considered a sub-segment under each particular type of insurance, so there is a “high-risk” component of auto, aircraft, property, etc.

There are plenty of myths about the profitability of health care in general and perhaps the Big Myth, some refer to it as the Big Lie, is the profitability of the Health Insurance Industry or sector. Terry & Company and valueletter.org have reviewed and analyzed copious information on industry profitability from many sources and compiled a good picture of the profitability of selected markets or sectors, twenty-six of them in all.

While the incumbent administration, congressional leadership and many others - including the man on the street - work hard to demonize the health care insurance industry, it’s really a perpetuation of a Big Myth, or as they try to euphemistically put it in the South . . . “those people are just telling you tales.”

And by the way, Terry & Company, who is responsible for putting together this analysis, has no clients in the health insurance business and does not seek such business. We took what one might consider an intellectual interest or curiosity in the “real truth” or “true facts”, as many like to redundantly say, and we set out to find out what was the record as far as various companies’ profitability. We weren’t shocked, we must admit. It was no surprise that, in terms of core profitability, the Health Care Insurance industry ranks 17th out of the 26 industries we looked at. After many years as an executive in several industries and with a Wharton MBA, Michael Terry has had a good sense about the relative profitability of different industries for many years.

We might note that pure “profitability” as measured by profit margin percentages is not the whole story either. It’s really a first glace at understanding industries, stock the economy and in current affairs, the politics of health care legislation. Various industries have different risks, government regulation, investment in research and development, capital structures (debt and equity levels), levels of inventories. All of these have an impact on rates of return, investment, and profitability. One way to put it might be that just because networking, natural resources and ’big pharma” have the highest profit margins doesn’t mean that these stocks of these companies are necessarily any better investments than those of lower margin business, such as beverages or food production.

What’s important about our analysis is that it shows empirically . . . proves . . . that pharmaceuticals are hugely more profitable than health insurance. Then why, you ask, would those want health care legislation want to vilify health care insurance companies and joint venture with big pharmaceutical companies in an effort to get legislation passed. The reasons are simple and complicated at the same time. One might say “follow the money” and look the deal done between the administration and Big Pharma. Also, it’s easier, simpler to deal anecdotally with Mary, or Jim, or Joe or Peter who has had a bad experience with his or her health care insurance company than it is to deal with the facts.

In fact, you’ll see by reviewing our research below that Health Care Insurance is only about a third as profitable as pharmaceutical industry and only about three-quarters as profitable as the average American company. That is, health care insurance is less profitable than the average company in America . So the next time you good looking for the “bad guy” or trying to find out who your enemy is, make sure you do the hard spade work, do the analytical analyses that will bring out the truth. If you need to shed a tear for anyone it’s not our huge pharmaceutical companies or medical equipment and products makers. Shed a tear – or maybe not! – for homebuilders, diversified financial companies, and auto parts an auto supply firms. But don’t forget that all these dogs had their day, too! Just remember, don’t go assuming that somehow your health care insurance company is making a fortune on you or your neighbor, or that the proposed health care legislation is going to make your health care any more affordable or improve access.

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[1] copyright Michael Terry, Terry & Company, valueletter.org

According to a 2008 ranking by the Organization for Economic Co-operation and Development, South Koreans work the longest hours per year – 2,357 hours per year on average. I have previously noted the huge success of Kia and Hyundai in the U.S. market. I have gotten them from Hertz on occasion and have enjoyed all their sizes, shapes, models and iterations.

A couple of months ago, by the way, Toyota passed GM as the largest car company in the world. No surprise there. But now the South Koreans are starting to give Detroit fits. Kias and Hyundais are actually really good cars . . . and now we know that they are designed and constructed by very hard-working people.

Parenthetically, if you ever needed an easily encapsulation of the difference between some sort of fascist / dictatorial communist system and a capitalist republic, take a very quick look at North and South Korea . Only Large-scale international food aid deliveries have allowed the people of North Korea to escape widespread starvation since famine in 1995, and the population continues to suffer – for no damned reason at all other than government isolation, arrogance and insular policies - from prolonged malnutrition and poor living conditions.

GDP per capita in North Korea is $1,800. Thirty-seven percent of the people work in agriculture and there is a ratio of one telephone for every twenty people. GDP per capita in South Korea is $27,100 and it has a real national economic growth rate of over 4% per annum, while North Korea actually has a negative economic growth rate and, folks, believe me, that is very hard to do without outright civil unrest and criminal behavior of the kind we see, more or less continually, out of sub-Saharan Africa. South Korea has 1.5 telephones for every citizen in the country (versus the previously cited 1-to-20 for N.K.) and, while I admire farmers very much and know that they render a valuable service, more advanced nations rely less upon farming for jobs and economic vitality. Versus N.K’s 37% of people employed in agriculture, S.K. has 3% of its people engaged in agriculture.

Okay, as far as the hardest working nations is concerned, I was surprised that Greece comes second, with 2,052 hours worked on average each year, and just behind are the Czech Republic, Hungary and Poland. If you have traveled Western Europe , you’ve seen Czechs, Hungarians and Poles working all over, taking the lowest skilled, entry-level jobs.

Particularly in Great Britain , since the economic turndown, there has been much resistance and resentment against all of the Poles taking the service jobs, waiters, waitresses, janitorial positions, while nationals are out of work. More evidence that as time passes, labor becomes a more and more fungible commodity. That’s why some economist believe that wage pressure in on Americans basically forever.

In the study of hardest working nations, the U.S. came in at Number Nine out of thirty-two nations studied. The U.S. had an average of 1,797 hours worked on average each year. Taken on a 365 day year, that is 4.9 hours per day. If you worked five days a week for fifty weeks per year, taking two weeks out for holidays, vacation, sickness and “personal days” (whatever the heck those are . . . why don’t they just call them “vacation”), that’s 250 days of work per year, amounting to 7.2 hours of work per day for Americans. That’s a pretty good effort, actually, certainly as far as the rest of the world is concerned. But we still have and cherish quite a bit of free time.

Out of the 32 nations studied, the Dutch are, relatively speaking, the “laziest”, coming in at 1,391 hours of work per year and the United Kingdom is #20 on the list of hardest working countries. Italy might be another surprise, in that they measure at #8 on the list, just above Americans.

In the U.S. we average 10 days of vacation per year. How ‘bout the U.K. at twenty days of vacation and the French at an average of five weeks of annual vacation? I’m still not surprised that if it weren’t for us and the Brits, the French would be saying Guten Morgen and Guten Nacht at the opening and close of each day.

Greece, Italy and Mexico come in on the list of hard-working countries at #2, #8, and #7, respectively, apparently because of the large numbers of self-employed in those countries. The International Labor Organization reports that under half of the world’s workers get a regular salary. That encourages the long hours that are worked in much of the world. What a surprise: you get paid according to the hours you work, your effort, your personal productivity.

Another reason for the difference between “hard working” countries and “lazy” countries is taxation, in particular tax rates. It has been empirically proven time and time again that increases in marginal tax rates actually depress total hours worked. That is, the higher the tax rate at the margin, the less people want to work. I am not 100% an Arthur Laffer apostle, but considering these numbers, he makes some sense.

Lots of my contemporaries and younger folks consider Europeans lazier than Americans, but that’s not always been so. Until the mid-1980s, Europeans worked harder than Americans. But, as European tax rates increased, the will to work apparently decreased accordingly. Until the Maggie Thatchers of the world emerged - and became respected - countries like England , Ireland , France and Portugal worked less and less, arguably in response to higher and higher tax rates. Small wonder that every member of the Rolling Stones moved his legal residence out of the U.K. The old confiscatory 90%+ marginal tax rate on U.K. income does not work well for a rock star . . . or an industrialist.

One commentator wrote about South Korea , “This is an authoritarian corporate culture . . . it’s very bad form to leave the office before the boss does, so people will stay in the office and not leave until the boss leaves.” Deja vu all over again! The identical story was told to me a few years back by a Goldman Sachs partner, who noted, “Here, the highest ranking person leaves first and if he is working until midnight, everyone works until midnight. Lower ranking employees might work until midnight anyway, but you can be sure that no one EVER leaves until all of his higher ranking officers have all left the office.”

By the way, the U.S. GDP per capita is $45,800. Sub-Saharan Africa nations, by comparison: Sierra Leone $675; Rwanda, $870; Mozambique, $800; Liberia, $500; Eritrea, $540; Burundi, $340; Niger, $630; Uganda, $940.

Are you not thankful for your blessings?

Make a joyful noise unto the Lord, all ye lands. Serve the Lord with gladness: come before his presence with singing. Know ye that the Lord he is God: it is he that hath made us, and not we ourselves; we are his people, and the sheep of his pasture. Enter into his gates with thanksgiving, and into his courts with praise: be thankful unto him, and bless his name. For the Lord is good; his mercy is everlasting; and his truth endureth to all generations. — Psalms 100.1-5 (1042 BC)

In Harvard’s defense, the administration says that much of that money is restricted, perhaps even most of it. Plus, lots belongs to folks at the specialty schools, like law, business, education, architecture, etc. So, it’s not like Harvard President Larry Summers can spend that money like he wants, say, like Citibank tried to last week . . . on a 45 million dollar jet. Does John Thain run Citi? I guess not. Well, at least he could offer decorate the plane.

Anyway, as a lot of you already knew, Summers isn’t at Harvard, as he got canned from Harvard’s top job for lack of political correctness. A Clinton-administration re-tread, Larry’s landed on his ample feet as chief economic advisor to President Obama.

But anyway, Harvard is trailed by Yale who’s only got $23 billion in its coffers. Texas, floating from a brief fling with high oil prices, is the fifth best endowed school in the nation, with $16 billion. Texas schools’ endowments always surge with oil prices, as they sit on so much oil company stock and assorted other less marketable oil assets, like leasehold interests. Texas A&M is #10 in endowment with $6.7 billion.

Out of the top 50 best endowed colleges in the nation, only five are in the South: University of Virginia, Emory, Duke, Vanderbilt and the University of North Carolina.

The entire concept of VALUE, however, is based on relationships, what is RELATIVE. Thus, one might argue, the best measure of endowment is how much money a university has for each student that it must “support”. Viewed in that way, the numbers change. Here are the best endowed colleges and universities in the country, based on the funds that they have per student. Obviously, a smaller endowment in support of a small student body will change the rank of a college.

1. Princeton
2. Bryn Athyn
3. Yale
4. Rice
5. Harvard
6. Olin Engineering
7. Grinnell
8. Stanford
9. Pomona
10. Swarthmore
11. MIT
12. Amherst

Princeton’s got $2 million for each student!

And high schools, you ask? The Kamehameha Schools in, where else, Hawaii, boast over $7 billion of endowment and the Milton Hershey School has nearly $8 billion. MHS was founded in 1909 to care for “white orphan boys”, and now is non-discriminatory, caring for 1,700 kids, kindergarten through 12th grade.

Wanna help kids? Go buy a Hershey bar. Plus, over the past 12 months, Hershey stock is up 5%, while the Dow is down 34%+. The kids are doing okay.

Less well-heeled are the five next richest schools: Exeter, Andover, St. Paul’s, Hotchkiss and Deerfield, all New England boarding schools. Those five average $600 million in endowment and average 770 students each, resulting in a per student endowment among these five stars of $780,000.

Harvard, with nearly 30,000 students total undergraduate and graduate, has nearly $1.2 million of endowment for each student; and, although in terms of room, board, tuition etc. it costs about $47,000 to attend, that seems not to diminish the world’s enthusiasm for the place, as the Cambridge, Massachusetts university gets around 25,000 undergrad applications each year for its 2,000 places.

We, the United States of America , are a very prosperous nation, despite the current headlines, layoffs, bank failures and mortgage failures and associated home foreclosures. We have a lot to be thankful for.

Some wake-up facts:

º Of the world’s 6 billion people, more than 1.2 billion live on less than $1 a day.

º Another two billion more people are only marginally better off than that.

º About 60 percent of the people living on less than $1 a day live in South Asia and Sub-Saharan Africa.

º In high-income countries, farmers—men and women—make up less than 6 percent of the workforce

º In low- and middle-income countries combined, farmers represent nearly 60 percent of all workers.

º Developing countries account for almost $1 out of every $4 that industrial countries earn from their exports.

Plus, at least by world standards, we are, or used to be rich, and while the numbers available are a couple of years old, they still give an indication of relative worth. In terms of Gross National Product Per Capita, the U.S. is the 6th richest nation in the world, behind Luxembourg , Norway , Switzerland , Denmark and Iceland . And, if you’ve followed the fortunes – or lack thereof, of Icelanders, you might guess that we actually moved up over the past couple of years. Familiar national names like Great Britain , Germany , Canada and Australia are 12th, 18th, 19th and 20th, respectively.

Some more astute observers might hold that any measure of worth and well-being should include some analysis of leverage, national debt per person, or interest coverage. That is, it’s less a worry about the absolute amount of dollars that one owes; more important is some relative measure of one’s ability to pay back one’s debt. A good proxy for that is National Debt as a Percentage of Gross Domestic Product, arguably a good measure of how much load each individual citizen (and immigrant, I suppose) has to carry.

Post WWII, Debt per as % of GDP bottomed out in 1980 33%. During the Clinton Years, our “national leverage” fell steadily from about 65% of GPD to about 58%. Then, during the Bush Presidency, this percentage rose from the high-seventies to nearly 80%, as measured by, again, our Gross Debt as a Percentage of GDP, the latter figure representing the country’s most heavily leveraged situation since the years immediately following WWII and the lingering war debt of that period.

As most folks know, running a deficit per se, is not an inherently risky practice, because debt only becomes risky when it challenges one’s ability to repay it. Unfortunately, right now, we have a lot of national debt and our ability to service that debt is, shall we say, compromised.

Chinese Premier Wen said in March of this year, “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.” It takes quite a bit of doing to get our country to a point where it is being lectured by China on fiscal irresponsibility. And it does not appear as though the spending habits of the last eight years are in for any substantial change any time soon.

China surpassed Japan last year as the largest foreign holder of Treasury bonds, hopefully not any indication that it intends to curtail those purchases - or, worse, stage a sell-off. Even a deliberate, measured sale of Treasuries would undoubtedly drive up the cost of borrowing for the U.S. government, as well as send money rates up across the board, including variable mortgage rates for millions of Americans. The heavy borrowing position of the U.S. vis a vis China and Japan has foreign policy implications, too. Lenders don’t like to be lectured to by borrowers on any subject, but perhaps particularly human rights and the environment.

Lots of Chinese officials have expressed concern about the future of Beijing’s holdings of U.S. debt. American officials, seeking to ease those concerns, have effectively acknowledged the importance of China’s role as “Washington’s banker”. Recently, Secretary of State Hillary Rodham Clinton urged the Chinese to keep buying U.S. bonds. Asked about the increasingly jittery reaction in China to the rising U.S. debt, White House economic adviser Lawrence Summers on Friday defended the expensive policies that will force the U.S. to borrow a record $2.5 trillion this year, by White House estimates.

For the record, by the end of the nation’s fiscal year, we’ll owe China nearly $800 billion and owe Japan about $700 billion. Debt to China will have grown by nearly 40% in the last 18 months alone. Inflation hawks think that the only way out of the situation for the U.S., and indeed they claim it is not only necessary but inevitable, is a health dose of inflation. That will not only give a nice boost to housing prices, but allow us to pay off our creditors with discounted dollars. Inflation versus national fiscal responsibility does not seem like that hard a choice, but apparently it is.

That equates to about 62 percent of U.S. gross domestic product, which will come in around $14 trillion, according to economists. This bailout amount to twice the size of Japan ’s annual GDP, in fact, more than the annual GDP of every national economy in the world except the U.S. , European Union (as a total) and China .

You’re familiar with some of the $9 trillion, as it includes the $700 billion bank and Wall Street bailout; federal takeovers of Fannie Mae and Freddie Mac; individualized bailouts for Citigroup and American International Group; and a collection of Fed cash infusions into financial and lending markets. The $700 billion also includes federal equity buys into Bank of America Corp., JP Morgan Chase & Co., Goldman Sachs Group Inc. and other financial institutions.

What’s harder to fathom, as if the above is not infathomable enough, is “How do we get out and when?” Traditional prisoners, criminal, that is, know the answers to these questions. A prisoner, hopefully Bernie Madoff soon among them, know they either never get out; get out on parole; escape; or serve their full sentence. And, if you or your family are strong political donors, there is always the pardon-door to the outside.

The exits for this current economic discombobulatory debacle are slightly more vague and complex. Think Theseus, Minotaur, Crete , King Minios, Labyrinth . . . that sort of stuff. However, in this case, we’ve got the mystery of American Myth at stake. Greek myth seems suddenly mild by comparison.

First, the good news. Although the $9 trillion has been authorized, it will actually take a couple, perhaps a few, years to get the money spent. Indeed, the fact that that is “good” news is a matter of that side of the aisle upon which one sits. Some analysts think it may take as much as five years to get the money spent. Those in a hurry to get the money out and presumably “at work” are looking for projects – folks to whom they can write a check - that are, in the current vernacular – “shovel ready.” “Shovel-ready” as in how many people seem to feel about Governor, oops, ex-Governor Blagojevich.

First, it probably advisable that one realizes that it will take decades to pay this off, meaning many, many years of government borrowing and deficits. Basically, not only are all Americans’ assets going to be written down – in fact, already are – but the world’s assets, every tangible thing on the globe – will be “marked to market”. The result of this “correction” washing through every economy in the world should be that housing will be worth less, stocks will be worth less, and bonds arguably will be worth less, as they become riskier (because their collateral will have declined and the creditworthiness of the borrowers will have waned.) For example, virtually every state in the country is or soon will be in dire financial straits. States are in deficit at current tax levels and assuredly sales tax, income tax and fee revenues are going to fall. And too, predictably, not-for-profit organizations are going to jump on the layoff bandwagon, and lots of non-profits will disappear, as some already have.

But, you ask, how big is $9 trillion? Well, if Bill Gates and Warren Buffet put their aggregate fortunes together and threw in all their foundations assets as well, we’d be only one one-hundredth of the way there. That is, those guys together could cover only 1% of the problem. So, then, the rest of us are going to have to help out.

Since, the $9 trillion can’t all be spent immediately, for the sake of simplicity, let’s call the stake $8.5 trillion in present value terms. There are 135 million taxpayers in the country, 110 million households and 306 million people. These people are going to have to take on the task of paying off this debt.

In some ways the problem is more malignant and diabolical that it might first appear. Some analysts postulate that the insidiousness of the problem is shown by the fact that an individual might end up with a house that is twenty-percent lower in value, he will have the same real mortgage debt, but he will have his relative proportionate share of state and federal debt burden. Thus, the average taxpayer / homeowner is sort of double or triple-whacked.

The potential, though still somewhat theoretical, burden is staggering. By my calculations – though rough and preliminary, to be sure - every household in the country is going to have to take on the equivalent of paying $437 per month for thirty years. I used thirty years because this is the same term as a long-term fixed rate mortgage, presumably the funding limit on hard long-term assets. I also used a conservative cost of money, 5% per annum.

Basically, I figure that every household in the nation has signed up for $5,200 of additional annual expense to get us out of this mess. Hunker down and hunker down well, because the ramifications of this are going to linger for a generation. We just had a generation of great growth, fun and expansion. Get ready to pay for it. The invoice just arrived.

I’ve not seen “American Gangster”, but read that it has as a great line: “Getting out at the top ain’t the same as quitting,” as the advice given to a drug lord by a friend. The drug lord – or his buddy, rather, shoulda been in the investment biz.

The New York Times’ Paul Krugman cited Gramlich: “Increased subprime lending has been associated with high levels of delinquencies, foreclosure and, in some cases, abusive lending practices.” If anybody listened, nobody heard.

Hard to remember a year ago Fed Chairman Ben Bernanke and Treasury Secretary Hank Paulson saying the subprime problem was “contained.” Right. There are $1 trillion worth of subprimes, all “basically garbage loans”, according to one industry insider, who adds, “We’ve only begun to see the pain.” Economist Gary Shilling said: “Housing is not the only area of heavy risk-taking, but just the most vulnerable. A ‘Great Disconnect’ between the real economy and the speculative financial world has existed since the late 1990s … a bear market and recession lie ahead.” I remained surprised that credit-card lending has not imploded, at least more than it has already. After all, over the last decade, lots of people bought big houses with their Visa and Master cards.

Any good news? First, there is a record rush on for mortgage financings, actually RE-financings, so thousands of folks with good credit are slowly lowering their monthly outflow by sometimes more than a thousand dollars a month. Also, the strength of the dollar is mostly good news. Dinner in Paris now, for the first time in a few years, costs less than the equity in your house.

There is a certain psychopathology associated with individuals who get enjoyment from the suffering of others. My old Russian history professor, Nicholas Riasanovsky, an inveterate pessimist on Russian culture, used to claim that the fundamental difference between Americans and Russians was that in the U.S. , if one sees his neighbor doing well, he wants to work harder to match that guy, to get what he’s got. Russians on the other hand, when they see a neighbor put in a swimming pool or buy a new car, well, they want for the neighbor not to have the pool and car.

Well, let’s not then take any gratification from the hundreds of thousands of layoffs in China , at their highest level since the Chinese Purchasing Managers’ Index was created. Some fear that the massive “under” employment will mean social instability in China , though the government has been through this before without major social unrest. If things get too bad, the government can always start some sort of Mao-pogrom program or just shoot the demonstrators.

Anyway, the primary reason not to delight in any of the emerging nations’ current difficulties is that they’re suffering only because we are. When we stop buying consumer disposables and durables, it’s probably a worker in China that’s going to feel the pain before we do. Another shared problem: China has six million new graduates coming onto the job market each year.

Fun fact: Yum Brands (KFC, Pizza Hut) has operating profits of nearly $400 million from its China operations, earnings from over 3,000 restaurants. Sam Su, president of Yum’s China division, called China “the ultimate marketplace”, predicting that China will soon pass the number of KFC restaurants in the U.S. with 6,000 stand-alone locations and 1,500 multibrand outlets featuring other Yum brands. Maybe that is our secret weapon: fried food and cigarettes.

Not-so-fun-fact: The Chinese smoke 2 trillion cigarettes, still a lot fewer than the number of dollars that state and federal governments will spend to get us out of the current economic mess. One out of every three cigarettes in world is smoked by a Chinese person. It is pretty perverse . . . disgusting, in fact . . . that companies like Alrtia tout their growth plans for selling cancer and emphysema abroad. At the turn of the 20th century, tobacco baron James Duke thumbed through a world atlas, stopping at the population figure of 430 million, announcing, “That is where we are going to sell cigarettes.” A century later, Duke’s prophesy has been fulfilled.

Cigarette production in China increased seven-fold between 1960 and 2003, from 225 billion a year to 1.8 trillion - and 97 out of every 100 of those cigarettes are smoked within China . More than 300 million men in China are smokers – that’s the population of the U.S. Out of every 100 Chinese men, 67 smoke, a higher percentage than anywhere else in the world apart from Yemen and Djibouti . The smoking scourge and increasing fatty diets in China , as we know from the U.S. , is a form of slow-motion suicide. With no disrespect to the Susan Komen Foundation, it’s time that people realized that lung cancer kills a lot more women than breast cancer; it’s the leading cause of cancer death among women in the United States and the third most common cause of death for women overall. About 40,000 women die each year from breast cancer, versus nearly 75,000 from lung cancer. And those death statistics don’t include other smoking-related deaths from heart disease, emphysema, stroke, etc. among women.

Back to the economy, okay? Unlike the U.S. , thousands of manufacturing-sector workers in China are basically immigrant workers who are rather itinerant, not unlike Mexico . When things get tough, they head back to the farms in rural Western and Central China . When our economy hits the skids, there are no farms to go to. And the truly marginal worker is engaged in what some refer to as “voluntary deportation” or “elective emigration”. When the construction business gets as bad as it is right now, there is a line at the San Ysidro crossing, but nowadays the line is comprised of folks heading the other direction. On the other hand, immigrants – legal and illegal – still crowd the slaughterhouses of the Midwest and poultry plants of the Southeast, really nasty job sites.

Anyway, which is a word that indicates that the writer has thought a new thought, Vanguard-founder Jack Bogle writes in his book, The Battle for the Soul of Capitalism, that a “pathological mutation” has taken over America’s capitalism, shifting power and money away from the masses to a powerful elite. “Over the past century, a gradual move from owners’ capitalism - providing the lion’s share of the rewards of investment to those who put up the money and risk their own capital - has culminated in an extreme version of managers’ capitalism — providing vastly disproportionate rewards to those whom we have trusted to manage our enterprises in the interest of their owners.” He offers as evidence that executive compensation has risen rapidly from 42 times the average worker’s income in 1980 to over 530 times in 2000, while workers’ income has declined in constant dollars.

Bogle is more than skeptical about the ability of Adam Smith’s “invisible hand” to push American capitalism in a positive direction, instead he sees a “happy conspiracy” of myopic leaders driven by self-interested greed repeating the same old mistakes: “The financial markets of the late 1990s seemed to accept the thesis that the bull market could not end. From the start of 1997 to its high point in March 2000, the stock market doubled, valued in stratospheric multiples of earnings, dividends and book values literally never seen before. The Great Bull Market fed on itself, a mania driven by an idea that we were in a New Era.”

Bogle is one of my personal heroes. Even I wish I’d listened to him more attentively.

Reminds me of the flight going down with three people – a pilot and two passengers on board - and only two parachutes. Fed-head Alan Greenspan jumped out of his seat and yelled, “Give me a parachute . . . I’m the smartest man in the world, at which point the pilot strapped a parachute on Greenspan and saw his passenger leap from the plane. The other passenger asked the pilot, “What the hell do we do now? We’ve only got one parachute and there’s two of us!” The pilot calmly replied, as he pulled two parachutes out from under the seats, “Don’t fear . . . the smartest man in the world just jumped out with my backpack on.”

Bad guys abound, just when you thought that no one could outdo Enron’s Jeffrey Skilling and Kenneth Lay, Worldcom’s Bernie Ebbers (Lay, a preacher’s son and trustee of his Methodist church; Ebbers, a deacon of his Baptist church). HealthSouth’s Richard Schrushy (no word on his religious endeavors), Illinois presents one more of its finest, “Blago”, Mr. Everything’s for Sale Especially Me.

Don’t you, retrospectively at least, love the old time politicians like Chicago’s Richard Joseph Daley (current mayor’s daddy) who knew how to run the political machine, dole out jobs, keep the streets clean and safe and is a (likely) crook that everyone loved and who never was convicted - I don’t think even indicted - not once?

And what about Bernie Madoff – remember him? – oh, you forgot . . . yeah, that was three weeks ago! Each successive crook it seems is trying to push the last one off the front page.

And now we get a man that is presumably not criminal, but is a undeniable and certifiable idiot, Merrill Lynch former head John Thain . . . rhymes with “brain”. Here’s what he told CNBC’s Maria Bartiromo:

About paying $4 billion in bonuses, which by the way if you are paying to 15,000 people, still works out to $300,000 per person: “If you don’t pay your best people, you will destroy your franchise and they’ll go elsewhere.” He forgot that the great Merrill franchise is dead, gone, kaput. And where exactly are they going to go? Bear Stearns or Lehman Brothers?

Why did Thain spend $1.2 million to redecorate his office? “Well (my predecessor’s) his office was very different . . . than . . . the . . . the general décor of . . . Merrill’s offices. It really would have been . . . very difficult . . . for . . . me to use it in the form that it was in.” Right.

Note: Bank of America paid $45 billion for Thain’s Merrill and that is less than what the combined B of A and Merrill Lynch are now worth together. This is known in the mergers and acquisitions business as 2+2 = 3. It is not a viable business practice over the long term as, over the decades, a number of airlines have proven.

As we discussed, (and I am supposed to be writing about value), perhaps the crucial . . . seminal . . . some big word ….event of the campaign was Colin Powell’s recent endorsement for Obama last weekend. General Powell is the model for Rec Calvin in my novel, so Shine Before Men, as you many remember. I am told that General Powell is a careful guy, he thinks before he speaks . . . and he listens before he thinks.

Remember that order:
1. listen.
2. think.
3. ask clarifying questions.
4. think some more.
5. render your opinion.

(I reject the amendments of my friends who add “4.5 . . . put your finger in the wind and then tell people what they want to hear.”)

I suppose - not suppose - duh! - it had to be a major blow to McCain when Powell supported Obama. For a decorated war hero, as it were, light-skinned black, a man who (nearly) mostly avoids politics, Secretary of State under Bush, to support Obama was a shock for many. You know that both parties have been pesteing Powell for more than a year – indeed longer - to join their teams. It would have been easy for him to stay quiet. General Powell’s public declaration of support for Obama must have been the proverbial dagger in the heart of McCain. If it was not over before that, it was over at that moment.

Powell (this is a beautifully crafted statement, actually, though it does ring heavily of having come directly from the Obama playbook): “Sen. McCain, as gifted as he is, is essentially going to execute the Republican agenda, the orthodoxy of the Republican agenda with a new face and with a maverick approach to it. And he’d be quite good at it. But I think we need more than that. I think we need a generational change. And I think Sen. Obama has captured the feelings of the young people of America and is reaching out in a more diverse, inclusive way across our society.”

Powell : “The Iraq war is the Iraq war. We now see that things are a lot better in Iraq. Maybe if we had put a surge in at the beginning, it would have been a lot better years ago, but it’s a lot better now, and we can see ahead to where U.S. forces will start to come out. And so, my concern was not my past or what happened in Iraq, but where we’re going in the future. My sole concern was where are we going after January 20 of 2009, not what happened in 2003.” (He should probably explain why he let Cheney, Wolfowitz and Rumsfeld treat him like a lackey for several years.)

Powell: ” . . . when the president made the decision, I supported that decision. And I’ve never blinked from that. I’ve never said I didn’t support a decision to go to war.” (Try to find that kind of honesty from the two-faced, “I mis-spoke” gang on Capitol Hill!)

Powell: “it’s starting to turn around through the work of Gen. Petraeus and the troops, through the work of the Iraqi government, through our diplomatic efforts, and I hope now that this war will be brought to an end, at least as far as American involvement is concerned, and the Iraqis are going to have to be responsible for their own security and for their own political future. …” (My vote is no longer for sale, I am writing in Petraeus!)

Powell: “Taxes are always a redistribution of money. Most of the taxes that are redistributed go back to those who paid them, in roads and airports and hospitals and schools. And taxes are necessary for the common good. And there is nothing wrong with examining what our tax structure is or who should be paying more, who should be paying less. And for us to say that that makes you a socialist, I think is an unfortunate characterization that isn’t accurate. I don’t want my taxes raised. I don’t want anybody else’s taxes raised. But I also want to see our infrastructure fixed. I don’t want to have a $12 trillion national debt, and I don’t want to see an annual deficit that’s over $500 billion heading toward a trillion. So, how do we deal with all of this?”

This is an essential problem of not only democracy, but civilization . . . any nation, any group of people, a tribe, a clan, etc. . . .how much can we afford to do for whom . . . what particular part of society pays the bill for helping others. . . and should we even help others . . . if a member of the tribe either cannot or will not hold up his part of the societal effort for survival and prosperity, what the hell do we do with that individual or sub-group? Ignore them, ostracize the, kill them . . punish them? This is not a small question. This is a HUGE question. It defines who we are.

It continues to be a shock to me how many people abstract the application of funds from the source of those funds of which they are the beneficiary. As the government grows larger, funding, money, etc, becomes more and more abstract.

If your brother or your father, or sister or neighbor gives you $1,000, the link is real and tangible. When the government gives you $1,000, well, accountability, personal linkage, personal responsibility, vanishes, or at least becomes diffuse and vague.

So, do not rich people, in a very real sense, have the right to say to disadvantaged . . . hey, that money came from me? Rich people have a right to question government – as intermediary - and recipients, as to the use of the money that comes from the taxed. ‘Hey, you took $25,000 from me this year and you spent it on x and y, and z and I want to say, write, vote, shout that I do not want my 25 grand spent on some of that stuff.’ That’s not an overly harsh rendering. That is the right of the taxed to render a voice to the velocity, trajectory and direction of money that they earned.

People – recipients of the largesse of others - should know what is the major source of their funding, and be appreciative for it. This is not just poor people . . . it’s crazy people in California whose houses slide into a canyon, are burned by a forest fire . . . to expect the government to lend them money at 2% for 30 years, or put them in free or discounted housing . . . crazy Westerners who don’t recognize that the government (federal, local, state) spend $3 to $5 billion per year fighting western forest fires . . . hey, perhaps we should say, “to hell with those people in Rancho Santa Fe and Montecito who have $10 million houses . . . they should have built a concrete house or not built there at all . . .it’s not the job of a carpenter or truck driver from the Bronx or Rahway to put out the fire that threatening your house . . . I don’t want my federal taxes going to putout your stupid fire . . . you are worth millions and you never should have built there in the first place . . . I have people on my block who have jobs at minimum wage and can’t get decent healthcare.”

Consider: Corporations thank their employees and customers; non-profits thank their donors; recipients of government aid thank no one . . . they have no one to thank. They thank, if anyone, their congressman, and how horrible is that ? And many times the recipients of government aid (whether corporations, farmers, inner city folks, truckers, coal mines, whatever) don’t respect the extent to which they have are enjoying the grace of government and the grace of God.

The acknowledged, conscious link between the source of the money and they expenditure MUST BE PRESERVED. That is why I am not mad about the amount of taxes I pay . . . I want to pay my taxes to different people. I want my federal taxes lower, my state taxes lower and my community and local and city and county taxes raised. My out-of-pocket stays the same . . . I don’t claim to be over-taxes, just mis-taxed . . . but I can more closely follow where the money goes.

Yes, Leo, it is true that because of common interest and economic scale, things like national defense and healthcare are neutral areas of collective national benefit and best subject to federal funding.

I have used a difficult metaphor for this linkage, but consider the pilot of a jet bomber flying many miles above the earth, loosing horrible death and carnage from his bombs and flying on back home . . . compare that guy to the solider who must see his enemy and shoot him dead and watch him die. We want the effects of both the jet bomber and the individual soldier, but that individual soldier knows himself, knows his enemy, understands the intensity and reality of price and the benefit relationship of which he is a part . . . . he is linked terrible to the act and the outcome.

Bad analogy, I admit, but sending money to Washington is like the jet pilot bomber who is totally abstracted from the experience that his bombs render. Of all the things that concern me about Democrats, it is that people’s expectations and entitlements for benefits unearned, that concerns me. I am happy to provide health care for lots of folks, but the people that get that healthcare should understand that I . . . I, personally . . .out of my pocket, paid for that. I will not deny them the health care, nor will I hold it over their heads, but come on guys, let’s be realistic that there are providers and consumers and that government is a huge and inefficient intermediary . . .that’s all . . . washing, churning, funneling the money, for lack of a better words, through paid intermediaries . . . then re-disbursing it according to a master societal plan . . . and we pray that it works and it often does NOT work and it takes decades . . . generations . . . to get it right again . . . to fix a fundamental flaw in a complex system of collecting, massaging, and sending back out $$$$$.)

I might add my favorite Colin Powelll quotation which I will paraphrase here, “I agree with the people that say that poor people should just pull themselves up by their bootstraps . . . but we also have to remember that there are people who don’t even have bootstraps.”

Love,

Dad

“The generous retirement arrangement for members of Congress is meant to respond to the job insecurity that comes with elected office”, according to Barbara Bovbjerg, director of education, work force and income security issues at the Government Accountability Office.

Damn right they have job insecurity! They should have MORE job insecurity! Are you kidding me? Do we get VALUE from our elected leaders? What about the job insecurity that the rest of the country has to endure? Did you know that in the Senate and House Office Buildings, they still have elevator operators . . . even thirty years after they installed “push-button” elevators? And these elevator operators are on very generous pensions. The elevator operators are not for safety or security purposes . . . unarmed and old . . . just on the dole and working so your Congressman will not have to use the end of his index finger for anything other than pointing at his opponent. Why can’t Congress live just a little bit like the rest of us?

Answer: Since 1929, with the deepest and the most prolonged coming in the late 1920s to early 1930s and the early/mid 1970s. So here we are again, eh? ( I personally have predicted eleven of the last three recessions!)

In one very real way, yes, here we are again. In the late 1920s and 1930s there was a very high (relatively, in historical terms) percentage of American’s wealth held by the wealthiest. Amid all this talk from the candidates about who gets taxed and about wealth re-distribution, you should find this more than a little interesting.

As measured by the share of total income accruing to the one-percent of wealthiest Americans, we are – or were – at an historical peak in the past couple of years. The wealth of individual Americans has, over the years, become more and more concentrated in the hands of fewer and fewer people. In the late 1920s, the wealthiest one-percent of Americans earned just about 24% of the country’s income.

That percentage actually fell for fifty years . . . from 1929 to 1979. By 1979, the wealthiest one-percent of the country earned only 8% to 9% of the nation’s income.

Query: Did the rich get richer? Absolutely, as measured by the amount of the nation’s income accruing to those at the top. From around 9% of the nation’s income in 1978, the wealthiest one-percent’s income grew over the next thirty years - that is, from 1978 to 2008 – from 9% to about 23% of total national income.

That is, over the eighty years to 2007/2008, the income earned by the wealthiest Americans had returned to levels not seen since 1929.

Is this good or bad? I don’t know. What I know particularly is that facts are honest on their bright, clean, shining faces. When you are listening to someone’s position, focus on fact, not emotion, and ask what are the facts that support another’s position.

Honesty is the best policy . . . .when there is money in it. – Mark Twain

It is hard to believe that a man is telling the truth when you know that you would lie if you were in his place. - H. L. Mencken

The most dangerous untruths are truths moderately distorted. -Georg Christoph Lichtenberg

Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence. – John Adams

Where facts are few, experts are many. – Donald R. Gannon

Facts are stupid things. – Ronald Reagan

GM and Chrylser must inspire in people an image of something more like a combination of the Titanic and the Lusitania . . . two plus two equals zilch.

This is like an old Judy Garland – Mickey Rooney movie: “Hey, guys, I’ve got an idea . . . let’s put on a play!” Except this time, it’s “Hey, guys, I’ve got an idea, let’s take two of the worst managed companies in the world, each of them in a secular downspin for more than two decades, still amazingly bureaucratic, unresponsive to consumers, burdened with debt and union contracts, staggering under the echoes of massively generous employee and retiree health care . . . then we’ll put them together and have a single distribution system, efficient product line, and LOWER FIXED COSTS. After that, we’ll sit around and toast marshmallows, sing KumBaYa, drink grape Koolaid, and learn either Japanese or Mandarin.

Chrysler and GM, are you kiddin’ me?

The really serious part of this is that Toyota is struggling in the U.S. and when Toyota gets the sniffles, GM gets MRSA; Chrylser gets double pneumonia; and Ford incurs a little bout of pancreatic cancer. There is no way the American auto companies will survive this mess. (I want to refer to it as a holocaust, but I think that would demean that term and disrespect the folks who themselves and whose friends and relatives suffered in a real Holocaust.)

On a “lighter” note, did you know that the greatest disaster in U.S. maritime history was the sinking of the Sultana? Never heard of it? In 1865, just after Appomattox and the assassination of Lincoln, events which tragically overshadowed the Sulatana’s sinking, 1,800 of the 2,400 passengers aboard the Sultana died from drowning and exposure and burning, when one of the ship’s four boilers exploded and the ship sank in the Mississippi River just north of my home town of Memphis, Tennessee. Yankee soldiers, recently released from Confederate prisons and consequently weak and malnourished, were plunged into the Mississippi river’s darkness. It is an incredible tale of organized government corruption, failed leadership and gross human tragedy that you can read about in Jerry Potter’s great book, The Sultana Tragedy: America’s Greatest Maritime Disaster. Jerry is a friend and a Memphis attorney, which are not mutually exclusive, but they oughta be. He spent five years researching and writing this book, correcting mistaken history, and setting forth a truly harrowing tale.

Reading Jerry’s book will take your mind off the possible combination of a lead life preserver (GM) hooking up with an anvil (Chrylser) in the stormy sea of American economic meltdown.

Michael –

The US is in one of the worst recessions in living memory, not as bad as 1929, but still extremely severe. Personally, I liquidated all of my positions nine months ago (that would have been around July 2007), and I am sitting on cash until we can see where the hell we are heading.

LE (Lehman Brothers), AIG, FRE (Freddie Mac), FNM (Fannie Mae), and WaMu (Washington Mutual) are all going to go under. It is not a stretch at all to see Ford, GM, and Chrysler, perhaps Merrill Lynch, Morgan and others in Chapter 11 in the next 9 - 12 months. The quality of management in some of these firms is absolutely criminal, they get huge amounts of money and some of these guys have zero idea what is going on in their own firms. AIG management is totally out of it, while their investment bank writes billions of shaky paper and gets paid millions to piss away shareholder money.

If Obama gets elected President, his position on most of these issues will be from a mistaken macro-standpoint . . . that he can spend his way out of these problems. This means much higher taxes, especially for the middle class . . . and that is not even discussing his approach to national health care, other existing and proposed “entitlements”.

If McCain gets elected, Ford, GM et al, still go Chapter 11, the government will try and bail them out, we will continue to aggressively pursue foreign ventures, and our taxes will still go up.

Given all of this, I cannot see how the economy will be much stronger next year, or even the year after that. Hunker down and plan in staying in your current job and house for five to seven years.

Regards,

• Paid its regular cash dividend on August 25, 2008?
• Announced on September 10, 2008 that it would slash its dividend from 68 cents to 5 cents. (It did not have a nickel even on September 10th.)
• Paid dividends on September 10th of $500,000 to former Chief Operating Officer Joseph Gregory?
• Three top officers (Fuld, CEO; Russo, EVP, Chief Legal Officer, Vice Chairman; and Gregory, COO) sold $241 million of st ock in the past 12 months?
• Had a value of $47 BILLION a year ago?
• Is worth $93 million today?
• Was worth more than twice the value of Federal Express?
• Is today worth less than 0.3% of the value of FedEx?

White House spokesman Tony Fratto said, “It’s clear that the long period of strong economic growth we were in had a positive impact for most Americans.”

A not-much-discussed fact in the news is the amount of uncompensated medical care provided in America . Millions upon millions of people get in-patient care and do not or cannot afford to pay their bills. Similarly, many millions of people walk (or perhaps another verb might be more appropriate) into hospitals and clinics across the nation and receive what some regard as the best medical care in the world, and then, again, do not or cannot pay.

Is uncompensated care a big deal for America ’s hospitals? Well, in 2007, it amounted to close to $40 billion.

In this day of large numbers where it becomes difficult to even comprehend the scope of some financial expenses, consider it this way: It ultimately comes to somewhere between $450 and $550 for every tax-paying family in American.

What this represents is a huge hidden tax that most Americans don’t even know exists. After all, some government – federal, state, county, city – has to eventually pay for this cost.

Of course hospitals do go bankrupt, but generally the outcome is a dropping standard of care for many of the weakest hospitals. And obviously, certain hospitals are hit worse than others. Hardest hit are Inner-city hospitals in cities and city locations where they serve a lower economic base.

“Uncompensated care” is an accepted health care industry analogue for tracking provision of care for the medically indigent. One expert holds that one cannot have a meaningful conversation about “Americans without health insurance” unless one includes uncompensated care, which most agree is a form of health care insurance, albeit delivered indirectly and often unwillingly.

To cover uncompensated care, hospitals either need to 1.) raise prices on insurance companies and private payors; 2.) accept lower profit margins or 3.) raise the cost of the uncompensated care they delivered from other sources, such as foundations, or some form of government.

The highest levels of uncompensated care are in New Jersey and Florida and the lowest are Connecticut and Washington State .

Uncompensated care – as a percentage of total hospital billings - ranges from 4.5% to as high as 10%, on a state by state basis. Could you run your business if 5% or 10% of your customers never paid anything, year after year. Assuredly, you’d have a vastly different financial model, as do hospitals.

Remember also that if an indigent mother who is also an illegal immigrant, say a Mexican citizen who has just crossed the border and is staying in San Diego , if that person is injured, accidentally or otherwise, and walks into a hospital, that person will be treated.

This is note to readers is not so much about ethical standards or the right-and-wrong of the situation, it is to increase your awareness that, according to most public health policy experts, there is a huge safety net out there across America in terms of this thing known as uncompensated care. I think most would agree, however, that as an important element in our national health care delivery system, it’s hardly ideal. In fact, it is a sort of unwilling cost foisted on our hospitals for which they continually seek some kind of compensation, coverage, make up or another method of gaining funds to cover the costs that they incur.

Yes, by the way, I indeed do understand the difference between re-hab and punitive measures and deterrence. Nevertheless, I suggest perhaps that we’ve got too many people in jail, yes, including murderers, arsonists, rapists, etc., who could today safely be let out.

I have previously proposed a “75 and out” measure which says if the sum of your age and your time is seventy-five, you are automatically released, i.e.

• If you went into prison when you were 20 and you have served 55 years (and have an otherwise clean record during those years since Adlai Stevenson and Estes Keafauver were the Democrats’ candidates) you are automatically out, regardless of how heinous were your crimes.
• If you went in when you were 50 years old and you have served 25 years, you also are automatically released.

Do I realize how controversial this proposal is? Of course. Plus, any one of you could come up quickly with a number of examples that would make me look as ridiculous as I sometimes am. Yup, you got it; Charles Milles Manson went to prison at age 36 and has been in prison for 38 years. That means at a total of 74 years and, under my system, Charlie will be out next year. Scary stuff!

In Manson’s case, perhaps my system argues, at least implicitly, for more death penalty cases, but that takes us eventually to Illinois, Governor Ryan and The Innocence Project, who have – an understatement – made a mockery of the sentencing and application of the death penalty in that state, a mockery which could likely be easily be extrapolated to a number of other states.

Also, Sirhan Bishara Sirhan went into prison when he was 24 and has been incarcerated for 40 years. He is now 64 and would be out in 11 years under the Terry Parole System. Unlike Monsieur Manson, I’m in favor of releasing Sirhan now. He was a painfully – criminally painfully – misguided twenty-four year old when he robbed the Kennedy family of its greatest light (yeah, greatest!).

These reflections originally arose when a friend commented that by offering for sale my presidential vote (and presumably accepting cash in exchange for my agreement to vote for the payer’s candidate . . . I (un) fortunately am pledged to the silence of a Cathusian monk!) I am risking federal charges and prison time. If I get the slammer for selling my federal presidential vote (remember, state and local races were not included in the price . . . those were extra), maybe I can get the three of us - me and Rhashia’s nephews - to be roommates.

Better yet, I could buddy up with Jeff Skilling (Harvard MBA, large Republican donor, former Enron deal guy), Jack Abramhoff (Republican string puller), Dickie Scruggs (Mississippi class action litigator), U.S. Rep. Randy Cunningham (another Republican from California), or Tom Delay (Republican crook from Texas) and see if I could get my golf handicap down or finally learn to ride a polo pony.

I am not, by the way, suggesting that it is Republicans that dominate the shady side of either life or politics. We all remember Teapot Dome, don’t we? Well . . . don’t we? Oops, anyway, those were Republicans. My bad.

Meanwhile, it is disgusting to think of what those guys from Fannie Mae and Freddie Mac made in bonuses, then consider the cost with which the taxpayers are stuck – reportedly about $25 billion at a minimum - and both Obama and McCain are in favor of the bailout - and my art professor friend (he is married to a professional dancer) in California is buying electric bulbs, toilet paper and art supplies for his employer, a public state university, because of budget shortages. Left-wing though he is, I’ll betcha he’s favoring a little offshore drilling right now.

I am not sure if we should not let the housing market crater - though it might take perhaps a generation – okay, half a generation - for it to recover and might bring down a bevy of banks of various sizes - it may be time to pay the piper. A housing market debacle - I mean a debacle deeper and longer than the one we are actually in now - would greatly damage me personally and radically change my lifestyle, but the nation might need some strong medicine.

Speaking of drilling, at $4 / gallon, people were finally starting to climb down (with the help of those little ladders) from their Expeditions and Suburbans. But, adjusted for inflation, the price of gas is today back about where it was - maybe a little lower - than it was in 1980. I would favor an increase in an energy usage tax before I would want a higher income tax or capital gains tax. (Yes, I wear a Kevlar vest at all times, and yes, it is very hot at night.)

Incidentally, with Memphis, Tennessee boasting the highest diabetes rate in the developed world and everyone talking about a national health care plan, I am finally getting tired of seeing grossly overweight people eating corn dogs, ding dongs, Vienna sausages out of the can, getting a quintuple (one slice of meat and cheese for every coronary artery you will eventually get by-passed) cheeseburger for 24 cents at a fast-food emporium, then relaxing with a cigarette. This diatribe, by the way, initiates the formal kick-off of my PTFD Campaign for America’s Health. “PTFD”, of course, stands for “Put The Fork Down”.

(A suggested TV campaign shows the Health Police (appropriately dressed like
Heinirich Himmler’s thugs) busting a (pick one - Church’s, Arby’s, Popeye’s, Krispy Kreme, Bo Jangle’s or Sonic . . . each picked for a region of the country where they’re popular), weapons drawn, screaming “Put down the fork . . . right now . . . I repeat . . . Put down the fork!” Then the enforcement crew steps from the back and tazer-guns an overweight couple and their three small fleshy children who, only moments before were sitting (peacefully?) at a Formica-topped table dipping Freedom Fries™ in a liquid, orange, cheese-like polyethylene / urethane / silicone-type substance – and the Health Care Gestapo hand-cuffing the entire family and, while they are still twitching, reading them their rights: “You have the right to a consultation with your choice of Paula Deen or Maury Povitch”.)

How about HCSWY (”Health Care Starts With YOU!) or HCSAH (”Health Care Starts At Home!)?

Back to oil and gas, the latter of which in gallon increments in my neighborhood is down below $3.50, convincing all those soccer moms with Jeep Grand Cherokees (worst gas mileage of any U.S.-made vehicle with annual fuel cost of around $5,200 . . . what the hell is Chrysler thinking?) that $200 barrel oil and $5.00 per gallon gas were just some of those nasty scares that one encounters – like kids with mumps, sniffles and colic – that will go away shortly with professional medical (insured, of course) attention.

Suggestions? Value recommendations you can act on? Okay,

1. Presidential candidates should answer – or at least ASK – the question / issue of self-inflicted poor health. I am not referring to people who are uneducated, ignorant of the facts, and have not been told about the consequences of practicing poor health habits, mostly the rural poor, but also a lot of urban poor, too, of course. Rather, I am talking about people whose daily life-styles threaten themselves and you: no seat belt, drinking while driving, poor diet, smoking, riding on a motorcycle with no helmet (referred to in the medical community as “organ donors”) . . . avoidable, preventable practices for which I do not want my tax dollars to cover the consequential cost of health care
2. Never, ever, buy a new car or a car with less than 25,000 miles on it, or a car that gets less that 18 mpg average. Exactly four-point-two zillion studies have proven that it is by far the best economic move to let someone else enjoy the first two years – or more – of depreciation.
When you buy a new (used, of course) car, know in advance the place, the business, the company and individual who are going to be responsible for its maintenance.
3. Take your money away from your advisor and broker and put 100% of it into no-load, low-fee, low-turnover, low-tax equity index funds . . . no bonds, please . . . and then spend your time worrying about something else. (You might want to add a little health care, energy and/or international investments as a hedge). Like Jack Bogle says, “The problem is that the stock market gets in the way of investing.” By the way, do you really think you understand the total return on your investments on an after-tax, after-expenses, after-all fees basis? No you don’t!
4. Remember that if you and your friend each invest $100,000 today and you pay zero fees and expenses and your friend pays 2% per year, you will end up after thirty years with $739,000 more than him! And if he pays a 5% load on the front end, you’ll end up with $784,000 more.
5. Like my California friends . . . he is a professional painter and now, logically, teaches art . . . she is a professional dancer and now, logically, teaches dance. Dance and paint as long as you can. Then, when you get older, teach others to dance and paint. All the while, in moderation, drink the best wine you can afford.
6. My dancer friend (above) saves cats. I do not recommend this, except for snow leopards, tigers. the Liberian lynx, caracal, Barbary serval, clouded leopard, jaguar, marbled cat, and ocelots. They are threatened. There are plenty of the house-type feral cats around to feed every one of Timmy Treadwell’s ursine “friends”, and a few million more to go around.
7. Vote. (Early and often)
8. Pay your mortgage on time and accelerate principal payments if your interest rate is 6% or over.
9. Buy a car that is three years old; don’t buy a new car except every three years (yours will be six years old at that point, of course); save 5 mpg versus what you are getting now; drop your investing cost by one-percentage point per year; eliminate Starbuck’s and three dinners-out per month; invest the savings in a tax-deferred vehicle: at the end of ten years you will have an extra $202,198.
10. Read (or re-read Ecclesiastes). I’m going to help out here . . . okay some of the lessons seem to be downers, but read the entire book, and then reflect:
    

    Because sentence against an evil work is not executed speedily, therefore the heart of the sons of men is fully set in them to do evil.

    Though a sinner do evil a hundred times, and his days be prolonged, yet surely I know that it shall be well with them that fear God, which fear before him.

    There is a vanity which is done upon the earth; that there be just men, unto whom it happeneth according to the work of the wicked; again, there be wicked men, to whom it happeneth according to the work of the righteous.

    Then I commended mirth, because a man hath no better thing under the sun, than to eat, and to drink, and to be merry: for that shall abide with him of his labor the days of his life, which God giveth him under the sun.

    When I applied mine heart to know wisdom, then I beheld all the work of God, that a man cannot find out the work that is done under the sun: because though a man labor to seek it out, yet he shall not find it; yea further; though a wise man think to know it, yet shall he not be able to find it.

    The righteous, and the wise, and their works, are in the hand of God: no man knoweth either love or hatred by all that is before them.

    All things come alike to all: there is one event to the righteous, and to the wicked; to the good and to the clean, and to the unclean; to him that sacrificeth, and to him that sacrificeth not: as is the good, so is the sinner; and he that sweareth, as he that feareth an oath.

    This is an evil among all things that are done under the sun, that there is one event unto all: yea, also the heart of the sons of men is full of evil, and madness is in their heart while they live, and after that they go to the dead.

    For to him that is joined to all the living there is hope: for a living dog is better than a dead lion.

    Go thy way, eat thy bread with joy, and drink thy wine with a merry heart; for God now accepteth thy works.

    Let thy garments be always white; and let thy head lack no ointment.

    Live joyfully with the woman whom thou lovest all the days of the life of thy vanity, which he hath given thee under the sun, all the days of thy vanity: for that is thy portion in this life, and in thy labor which thou takest under the sun.

    Whatsoever thy hand findeth to do, do it with thy might; for there is no work, nor device, nor knowledge, nor wisdom, in the grave, whither thou goest.

    I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.

    For man also knoweth not his time: as the fishes that are taken in an evil net, and as the birds that are caught in the snare; so are the sons of men snared in an evil time, when it falleth suddenly upon them.

    There was a little city, and few men within it; and there came a great king against it, and besieged it, and built great bulwarks against it. Now there was found in it a poor wise man, and he by his wisdom delivered the city; yet no man remembered that same poor man.

    Then said I, Wisdom is better than strength: nevertheless the poor man’s wisdom is despised, and his words are not heard.

    The words of wise men are heard in quiet more than the cry of him that ruleth among fools.

    Wisdom is better than weapons of war: but one sinner destroyeth much good.

Housing

• As far as housing goes, we are in “very, very unchartered territory”. We have to go back as far as the Great Depression to find a period of decline in housing prices as great as we have now.
• We are in a situation where as prices decline, supply increases, rather than historically the other way around. Our current situation generates supply inceases through increases in foreclosures and no one has good estimates of the impact of this.
• We’ve already had a 15% decline in housing process.
• There are more than 10 million homes in the U.S. where the value is less than the mortgage amount. The overall economic impact depends much on how these particular homeowners respond.
• People are “invested” in their homes and do not typically monitor the value of their homes versus the amounts owed. And people are invested in their jobs and neighborhoods.
• Getting shot term interest rates down substantially has helped minimize the danger of re-setting higher rates and creating a downward spiral.
• The number of people who are going to be thrown out of their homes is going to be much smaller than we fear.
• Remember that homeowners that bought their houses as little as five years ago are still in the black.
• It is very hard to separate imprudent borrowers from borrowers who were defrauded, and there is understandable resistance to taxing people who behaved prudently to help people who behaved imprudently.
• Housing prices really had gotten too high relative to historical standards, so a large portion of the population was simply priced out of the market.
• It’s a little misleading to generalize about the housing market, since it’s really a series of independent markets loosely liked by migration (migration of money) flows.
• The problems related to housing price declines are spreading.

Macroeconomics

• The risk of another Great Depression is virtually zero. Today the Fed is standing behind the banks; and the Great Depression was due to the Federal Reserve’s failure to stand behind the banks.
• Some sort of rescue of Bear Stearns was necessary. While one might argue with the process, a rescue package had to take place.
• The Fed has been very creative about injecting liquidity into the economy in various ways.
• Banks now need to replace huge amounts of lost capital, stockpile additional capital as a precaution against loss of access to funding, and add new capital to bring at least part of the massive off-balance sheet banking system back onto the balance sheet.
• The 2001 recession was one of the mildest in history, and this one is shaping up to be mild as well.
• Over the past 50 years, stock markets have done better under Democrats than Republicans.
• If the Democrats win the White House, they can’t just do whatever they want. They’ll need 60 votes to end a filibuster in the Senate, and they’re not likely to get that.
• It takes a long time for housing to get out of control, but it also takes a lot longer for it (the housing problems) to unwind.
• There’s a psychological factor to housing. Being under water on your house - which you come home to everyday - is more salient that a decline in the value of your 401(k). You don’t sleep in your 401(k).

Employment

• It is impossible to say how many jobs have gone abroad. The total number of jobs that have been “outsourced” seems quite modest. Estimates are in the hundreds of thousands, not millions. But the number of jobs that have gone abroad because employers have lost market share to foreign competitors is huge.
• No one has long-term job security because so many variables can change that make current strategies and current competencies obsolete.
• What is valued in today’s workforce is the ability to market oneself, to stand out in a crowd of competitors, to network. These are useful skills because they can help individuals change employers.
• Generally, it helps to be close to the “core” or central competency of the organization. Most everything else can be outsourced. Do something reasonable hard to replicate and your actions and activities are directed at some products or mission that are hard for the company to abandon.

Retailing

• At first, it seemed like this might last for six months, but now it seems it might go on longer than that. All you have to do is walk outside and say, “Do you think there’s enough retail?” to see the excess.
• Retail, being a growth game, causes people to expand retail capacity. Now retailers have to hunker down and wail out the economic malaise.
• One result is that consumers have shifted down in terms of quality, so earlier performance by Nordstrom, Neiman-Marcus and other luxury stores couldn’t be sustained.
• Really rich people are buying at Costco and other warehouse clubs. These retailers have put up better numbers than people thought they’d see.
• It’s time for the consumer to take a deep breath and figure out, “Do I really need that extra thing, or can I make do with what I’ve got?”
• Remember that food is still incredibly cheap in the United States, compared with Europe.

As far as we are concerned, no retailer EVER closes a store or outlet too soon. Generally, retailers allow laggard performance to linger for years, before taking action, even in matters like changing store management. Who knows what’ll happen to the above chains? Not us, and anyway, in trying to pick turnaround winners, very often the turnaround is already priced in the stock by the time the news is widely known.

What I see in this pandemic spate of store closing is rationalization and alignment. I see further a strong economy, with retailing coming back strong, better, cheaper, faster. Maybe some will have to alter or discard basic business models, but all for the better. The kind of lists like the one above makes me very sanguine about the future of the American economy and retailing, specifically. This kind of re-structuring is what makes for lean, mean, responsive companies coming out of the pain. Maybe 2009, maybe 2010 . . . but in economic terms, we’ll surely see the economy come racing back.

- Ralph Waldo Emerson

The art of growing rich is not only quite distinct from that of doing good, but the practice of the one does not at all train a man for practicing the other. It is a mere illusion that above a certain income, the personal desires will be satisfied and leave a wider margin for the generous impulse. It is as difficult to be generous, or anything else – except as a Member of Parliament – on thirty thousand as on two thousand a year.

- Robert Louis Stevenson

His brow is wet with honest sweat,
He earns whate’er he can,
And looks the whole world in the face,
For he owes not any man.
- Henry Wadsworth Longfellow from The Village Blacksmith.

When I meet a laborer on the edge of a field, I stop and look at the man born amid the grain where he will be reaped, and turning up with his plow the ground of his tomb, mixing his burning sweat with the icy rain of Autumn. The furrow he has just turned is a monument that will outlive him. I have seen the pyramids of Egypt , and the forgotten furrows of our heather: both alike bear witness to the work of man and the shortness of his days.

-Francois-Rene, Vicomte de Chateaubria

One way to look at the above stats: The chap who invested in the general market (DJIA), at the end or ten years, would have nearly 5 times as much money as the chap that invested in Media General stock.

Excerpts from an Article Written 13 (!) years ago by Philip Meyer, appearing in the American Journalism Review
Today’s newspaper culture is a victim of a history of easy money. For perspective, consider the following comparison: In most lines of business there is a relationship between the size of the profit margin — the proportion of revenue that trickles to the bottom line — and the speed of product turnover. A business whose product has high turnover and consequently huge revenue can do nicely with a low margin. A low turnover product needs a high margin.

Supermarkets can prosper with a margin of 1 to 2 percent because their buyers consume the products continually and have to keep coming back. Sellers of diamonds or yachts or luxury sedans build much higher margins into their prices to compensate for low turnover. Across the whole range of retail products, the average profit margin is in the neighborhood of 6 to 7 percent.

In turnover, newspapers are more like supermarkets than yacht dealers. Their product has a one-day shelf life. Consumers and advertisers alike have to pay for a new version every day if they want to stay current. Absent a monopoly, newspaper margins would be at the low end. But because they own the bottleneck, the opposite is true. Before technology began to create alternate toll routes, a monopoly newspaper in a medium-size market could command a margin of 20 to 40 percent.

That easy-money culture has led to some bad habits that still haunt the industry. If the money is going to come in no matter what kind of product you turn out, you are motivated to turn it out as cheaply as possible. If newspapers are under pressure, you can cheapen the product and raise prices at the same time. And, most important, innovation is not rewarded.

Before newspapers were controlled by publicly held companies, their economic condition was not well known. Some retailers may have noticed that the publisher’s family was going to Europe while they took theirs to the mountains or the beach, but publishers were usually careful not to flaunt their wealth so as not to arouse resentment from their less favored clientele.

When newspaper companies began going public in the late 1960s, the books were opened, and Wall Street was delighted with what it saw. The only drawback was the cyclical nature of the business. Because it is tied to retail sales plus real estate and help wanted ads, the newspaper business is sensitive to the vagaries of the business cycle. The financial analysts who advise institutional investors make their reputations on their ability to predict the near future. So they prefer companies whose growth patterns are steady year in and year out.

Gannett’s Al Neuharth presumably found a solution to this problem. Gannett concentrated on acquiring monopoly newspapers in medium-size markets where the threat of competition was remote, motivating his publishers to practice earnings management, which simply meant holding earnings down during the cyclical upswings by making capital investment, refurbishing the plant and filling holes in the staff while boosting them in the down cycles by postponing investment, shrinking the news hole and reducing staff.

Gannett papers did this aggressively enough to produce a long period of steady quarter-to-quarter growth that satisfied the analysts’ lust for predictability. The long-term costs to these behind-the-scenes contortions that smoothed the bumps in the trend line did not bother them. Neither, for that matter, did the fact that some of the growth was unreal, because analysts and accountants alike are accustomed to looking at nominal dollar values rather than inflation-adjusted dollars. Neuharth’s glory days were also a period of high inflation, and that helped to mask some of the cyclical twists and turns.

The price of Gannett stock soared, putting pressure on the managers of the other public companies to practice earnings management. One of the devices was the contingency budget, a budget more like a decision tree than a planning tool. An editor is told how much he or she can spend on the news product in a given year provided that revenues remain at a certain level. If revenue falls below expectations, leaner budget plans are triggered at specified points on the downward slope.

It worked just long enough to raise everyone’s expectations about the value of newspapers. Today, despite some heroic efforts, not even Gannett can match Neuharth’s record of “never a down quarter.” Inflation is no longer high enough to mask the fluctuations in real return, readers are drifting away, and advertisers are finding other routes for their messages.

The readership decline was first taken seriously in the late 1960s, when new information sources began to compete successfully for the time of the traditional newspaper reader. Competition spawned by technology began long before talk of the electronic information highway. Cheap computer typesetting and offset printing led to the explosive growth of specialized print products that could target desired audiences for advertisers. Low postal rates combined with cheap printing and computerized mailing lists spurred the growth of direct mail advertising. In short, the owners of the traditional toll road have been in trouble for some time now, and they know it.
Some observers draw a line on the chart of newspaper decline, use a straight edge to extend it into the future, and foresee the death of newspapers. The reality could be quite different. There is room for newspapers in the non-monopoly environment of the newspaper future. They will not be as profitable, and that is a problem for their owners — whether they be private or public shareholders — but it is not a problem for society.

Imagine an economic environment in which newspapers earn the normal retail margin of 6 or 7 percent of revenues. As long as there are entrepreneurs willing to produce a socially useful product at that margin — and trust me, there will be — society will be served as well as it is now. Perhaps they will not be the same entrepreneurs who are serving us now, and that is not necessarily a concern to customers — except for one problem.

The problem is that there is no smooth, non-chaotic way to get from a newspaper industry used to 20 to 40 percent margins to one that is content with 6 or 7 percent. The present owners have those margins built into their expected return on investment, which is to say their standard of living.

It is return on investment that keeps supermarket owners content with 2 percent margins. And it is return on investment that makes newspaper owners, whether they be families, sole proprietors or public shareholders, want to preserve their 20 to 40 percent. If I sell you a goose that lays a golden egg every day, the price you pay me will be based on your expectation that the goose will continue to produce at the same rate. If under your roof the goose drops its production to one golden egg a week, you will be a major loser.

But it will still be a pretty good goose, and somebody will be proud to own and house and feed it. And that new owner can, of course, get comparable return on investment by paying one seventh of the price you paid. What happened to the rest of the goose’s value? I captured it when I sold it to you on the basis of the seven-day production schedule. Neither I nor the third owner of the goose loses. Neither does society. Only you.
Avoiding the fate of the second owner of the goose is the central problem facing newspaper owners today. They know they have to adjust to the reduced expectations that technology-driven change has brought them. They just don’t know how. To understand the range of possible adjustments, consider two extreme scenarios:
Scenario 1: The present owners squeeze the goose to maintain profitability in the near term at the risk of killing it in the long term.

The owners raise prices, simultaneously trying to save their way to profitability with the usual techniques: cutting news holes, reducing staff, peeling back circulation in remote or low-income areas of less interest to advertisers, postponing maintenance and capital improvement, holding salaries down. A good newspaper is like a fine garden: takes years of hard work to build and years of neglect to destroy. The advantage of the squeeze scenario for present-day managers is that it might preserve their accustomed standard of living for their career lifetimes. Both advertisers and readers are creatures of habit. They will keep paying their money and using the product for a long time after the original reasons for doing so have faded.

Scenario 2: Present owners — or their successors — accept the realities of new competition and invest in product improvements that fully exploit the power of print and make newspaper companies major players in an information marketplace that includes electronic delivery.

Under this scenario, they will build, not degrade, their editorial products. As Tufts University political scientist Russell Neuman says in “The Future of the Mass Audience,” there is a way to preserve at least some of the monopoly aspect enjoyed by newspapers. He calls it the “upstream strategy.” Find another bottleneck further back in the production process.

Historically, the natural newspaper monopoly has been based on the heavy capital cost of starting a hot-type, letterpress newspaper operation. That high market entry cost discouraged competitors from entering the market (barrier to entry). Computers and cold type made entry cost low, but the tendency toward one daily umbrella paper per market has continued unabated. That is because the source of the monopoly involves psychological as well as direct economic concerns. In their efforts to find one another, advertisers and their customers tend to gravitate toward the dominant medium in a market. One meeting place is enough. Neither wants to waste the time or the money exploring multiple information sources.

This is why the winner in a competitive market can be decided by something as basic as the amount of classified advertising. One paper becomes the marketplace for real estate or used cars. Display advertisers follow in what, from the viewpoint of the losing publisher, seems a vicious cycle. From the viewpoint of the winner, of course, it is a virtuous cycle.

Neuman’s thesis is that the competitive battle across a wide variety of media and delivery systems will make content the new bottleneck. “What is scarce,” he says, “is not the technical means of communication, but rather public attention.” Getting that attention depends on content. He cites the victory of VHS over Betamax for home video players. Betamax had superior technology, but the makers of VHS made sure that the video stores had their tapes.

How would that principle apply to newspapers? The most effective advertising medium is one that is trusted. Thus the newspaper’s product is not information so much as influence, a concept promoted by Hal Jurgensmeyer during his years at Knight-Ridder. The quickest way to gain influence, however, is by becoming a trusted and reliable provider of information.

Trust, in a busy marketplace, lends itself to monopoly. If you find a doctor or a used car dealer that you trust, you’ll keep going back without expending the effort or the risk to seek out alternatives. If Walter Cronkite is the most trusted man in America, there can be only one of him. Cathleen Black, head of the Newspaper Association of America, was getting at the same idea when she exhorted her members to capitalize on the existing “brand name” standing of newspapers. Brand identity is a way of capturing trust.

And newspapers are in a good position to win that role of most trusted medium based on their historic roles in their communities. Under Scenario 2, they would define themselves not by the physical nature of the medium, but by the trust that they have built up. And they would expand that trust by improving services to readers, hiring more skilled writers and reporters, taking leadership roles in fostering democratic debate.

Which scenario are we moving toward — squeezing the goose or nurturing it? While the signals are mixed, most of the decisions making business page headlines point to the squeeze scenario. Layoffs, closing bureaus, shrinking news holes are the order of the day. On the other hand, the public journalism movement represents an effort to build civic spirit in a way that will emotionally bind citizens to the newspaper. Whether very many newspapers will spend the money to wholeheartedly practice genuine public journalism remains to be seen. The short-term economic pressures are against them. The first scenario produces visible and immediate rewards while the costs are hidden and distant. The second yields immediate costs and distant benefits.

The dilemma cuts across all forms of newspaper ownership, but publicly held companies bear a special burden because of Wall Street’s habit of basing value on short term return. Take the case of a long term-oriented, nurturing company like Knight-Ridder. With total average daily circulation of 3.6 million, its newspapers would bring a total of $6.5 billion if sold separately at an average value of $1,800 per paying reader. (McClatchy paid the Daniels family more than $2,400 per unit of circulation for Raleigh’s News & Observer, but Raleigh is a better than average market). With 52.9 million shares outstanding at the 1994-95 high price of $61 per share, the entire company, including its non-newspaper properties, is valued by its investors at only $3.2 billion or around half the break-up value.

How would a successful takeover bidder tap that other $3.3 billion? By selling the papers to squeeze-oriented publishers who would slash costs and build the bottom line by putting out a bare-bones product. And how can public companies avoid such takeovers? By slashing and squeezing themselves in the same manner.

That’s in the near term. Now stretch your time horizon beyond anything seen by Wall Street and imagine the final stages of the squeeze scenario. A newspaper that depends on customer habit to keep the dollars flowing while it raises prices and gives back progressively less in return has made a decision to liquidate. It is a slow liquidation and is not immediately visible because the asset that is being converted to cash is intangible — what the bean counters call “good will.”

Good will is the organization’s standing in its community. More specifically, it is the habit that members of the community have of giving it money. In accounting terms, it is the value of the company over and above its tangible assets like printing presses, cameras, buildings, trucks and inventories of paper and ink. I asked two people who appraise newspapers for a living, John Morton of Washington, D.C., and Lee Dirks of Santa Fe, to estimate the proportion of a typical newspaper’s value represented by good will. Both gave the same answer: 80 percent. That leaves only 20 percent for the physical assets.

This is vital intelligence for an entrepreneur interested in entering a market to challenge a fading newspaper. As an existing paper cuts back on its product and its standing in the community falls, there must come an inevitable magic moment when a competitor can move in, start a paper and build new good will from scratch, and end up owning a paper at only 20 percent of the cost of buying one.

Such a scenario is overly simplified, of course. The entry of competition could be just what it takes to get the existing paper to switch to a Scenario 2 strategy. But the newcomer would have a tremendous advantage, and that is its lower capitalization. Because its investment outlay is only one-fifth that of the existing paper, the challenger can get the same return at a 6 percent margin as the old paper gets with a 30 percent margin. Voila! A happy publisher with a 6 percent margin! Here is a publisher who can cheerfully pour money into the editorial product, expand circulation, create new bureaus, heavy up the news hole and do the polling and special public interest investigations that define public journalism.

Precedent exists for this wild dream. Remember Al Neuharth. One of the factors that propelled him to the top at Gannett was his astuteness in recognizing a parallel situation in east central Florida. Rapid population growth stimulated by space exploration had created a community that needed a new newspaper. He founded Florida Today for significantly less than the cost of buying an existing paper. The only obstacle is finding the right time and place — plus an opposition that is greedy and either shortsighted or slow-footed enough to continue squeezing out the old margins in the face of a challenge.

To old newspaper hands, the prospect of battles between the newspaper squeezers and the newspaper nurturers has a definite charm. Some of us old enough to remember the fun of working in competitive markets would line up to work for the nurturer against the squeezer. But the threat to companies that are liquidating their good will might come from another direction. It might not come from other newspaper companies at all.

The race to be the entity that becomes the institutional Walter Cronkite in any given market will not be confined to the suppliers of a particular delivery technology. How the information is moved — copper wire, cable, fiberglass, microwave, a boy on a bicycle — will not be nearly as important as the reputation of the creators of the content. Earning that reputation may require the creativity and the courage to try radical new techniques in the gathering, analysis and presentation of news. It might require a radically different definition of the news provider’s relationship to the community, as well as to First Amendment responsibilities.

These possibilities do not bode well for existing newspaper organizations. Their inherent conservatism, a consequence of their easy-money history, places them at a disadvantage in attempts at innovation. The pressures to keep squeezing out historic margins in the short term will make them inflexible. But sooner or later some business entity will find the formula, and the castle that it builds on its rock will shelter the best and the brightest creators of content.

Wow, lots of people will respond. It’s DOUBLED in the past twenty years! Actually, a doubling in twenty years is equal to a compound growth rate (what business folks call CAGR) of 3.53% per year. If the article had said, “Airport volume has grown at a rate of only about 3.5% per annum, so fliers should be rightfully infuriated at the airlines’ and airports’ inability to manage this marginal growth rate,” you’d have had a totally different reaction . . . although the FACTS are just the same.

When you read articles that are full of presumably profound numbers, ask yourself, “So what?” or “What do these number really mean?” The book Freakonomics was particularly good at pointing out anecdotal stories and cause/effect relationships that are both misconstrued and misunderstood.

One side of my, by the way, says we must forgive the airlines. They are like crack addicts, except with the now possibly dubious exceptions of JetBlue and Southwest, the airlines are addicted to seats, not bottoms. As long as you and I can remember, airlines have increased capacity with a psychotic/paranoid mind on top line revenue, market share and fixed cost absorption. And the cycle continues. Consider these excerpts from an article on airline woes. This article was written three years ago. For Pete’s sake, EVERY YEAR is an annus horribilus for the airlines! And it ain’t getting better . . . for you or them:

• “Continuing price spikes in jet fuel have triggered a wave of contractions in U.S. domestic air service—called “temporary,” but more likely to intensify and spread and inflationary shocks buffet the airlines and other transportation industries.”
• “Newly busted airlines and industry analysts made clear that they will shrink dramatically, shedding aircraft, routes and destinations, and employees.”
• “The industry’s major carriers have already eliminated 6% of their route capacity, measured by available seat-miles, from 2000-2003, from 957 billion down to 893 billion seat-miles. Further shrinkage since is indicated by the 16% drop in daily flight departures by US Airways during its second period of bankruptcy via a merger with America West Airlines. Delta and Northwest are headed for the same, further shrinkage, whether they merge or not.”
• “With railroad passenger and freight routes also steadily disappearing, America’s failing transportation systems - already shown grossly decayed and inadequate by the shocks of Hurricanes Katrina and Rita - threaten to cause the dis-integration of the United States, as a nation from sea to sea.”
• “The price of jet fuel has zoomed this year even relative to the inflating price of crude oil. Jet fuel reached the equivalent of over $100/barrel, reaching 150% of the price of a barrel of oil, due to hedge fund-driven speculation (previously, the barrel-equivalent prices of refined fuels had stayed for years at about 110% of the price of a barrel of oil.”
• “Air Transport Association said, “No airline can survive sustained $90-100 per barrel cost of jet fuel.” The previous day, a gallon of jet fuel had hit $2.49, the equivalent of a 42-gallon barrel costing $105; a year earlier, jet fuel had cost $1.51/gallon, or $63/barrel-equivalent. The rise means airlines paying an extra $15 billion a year.”
• From January 2004 through the middle of 2005, USAir eliminated:
  
  • 16% of its daily departures; six of its 190 airports served; 39 of its 302 jet aircraft;
  • 5.36 million of its 54 million passengers boarded annually (a 10% shrinkage, and a reduction of 20% from its passengers boarded in the airlines’ annus horribilus of 2002);
  • 3,000 employees.
  • abandoned its pension plans - a bankruptcy court cheerfully allowed it to emerge from bankruptcy leaving those plans in the dustbin. “
• “US Airways returned 25 more leased planes to GE Commercial Aviation Services. It had announced its intention to give back 46 planes.”
• “Hyperinflation in fuel prices is a proximate cause for the shrivelling; the underlying root of the decay is the insane airline deregulation policy in place since the 1980s, which has caused nearly all the carriers to lose the revenue to operate efficiently.”

(Note: It is typical pro-business b.s. that blames unions or the lack of regulation for its problems. It takes two parties to sign a union contract. And, as for deregulation, the telephone, airline and trucking deregulations have caused hell with government protected businesses, but our nation is tremendously more competitive because of the deregulation and the consumer has benefited mightily. Who’d have thought that in today’s dollars we’d have been able to pay a half cent per minute for a long-sdistance call or fly across the country for 250 bucks? Thanks, Alfred Kahn.)

• “Northwest Airlines announced it hopes to eliminate more than 100 aircraft in its fleet of 699 planes, or 14%. Northwest projected a 5-6% reduction in its flights in coming months. As well as U.S. reductions. It will eliminate New York-Tokyo flights, cut its Detroit-to-Paris flights, reduce frequency of flights from Minneapolis to Paris, and to London.”
• “Dis-integration shown by USAir and Northwest is spreading throughout the industry, as it is now hammered by growing losses from fuel hyperinflation.” (My emphasis . . . remember, this article was written three years ago.)
• “Delta announced plans to cancel up to 20% of domestic flights.”
• “ATA chief economist John Heimlich, ‘I would expect cutbacks to continue as long as fuel is this high.’ “
• “The Pension Benefit Guaranty Corporation (PBGC) had an end-2004 deficit of $23.3 billion, due largely to bankruptcies of steel sector, United Airlines, U.S. Airways. PBGC spokesman Jeffrey Speicher told this news service that it could not, by law, disclose whether Delta’s and Northwest’s combined $11.2 billion additional pension underfunding, for which the PBGC would be responsible, is already included in the agency’s deficit. (huh?)
• Delta sent letters to 3,500 retired pilots announcing it will not pay their pensions in October.

• 40 percent of passenger ticket cost is just to cover the fuel.
• The average cost of jet fuel a decade ago was 33 cents a gallon - this year: $3.21 a gallon and heading higher.
• Jet fuel has increase at an annual rate of 21% over the past ten years.
• Airline traffic delays may now have become self-regulating from the standpoint that $130 a barrel oil will surely get a lot of people out of the sky and off the road.

A third consistent characteristic in CEOs – and most important to the journey to great strategy – is the ability to recover from adversity.

Donald Michael, in “Planning – And Learning from It”, cites the most prevalent characteristics of successful CEOs:

• Dealing with uncertainty: Successful CEOs eagerly acknowledge that they do not have all the answers, and that the asking and answering of questions is the job of the organization, not the CEO personally. Under good leaders, employees understand that uncertainty is a common and lasting condition, one that should be approached as any other organizational challenge, but one that need not be a cause for discomfort or anxiety.
• Acceptance of and recovery from failure, mistakes, and error: Strategic management is a quest for measurable excellence and victory, but not perfection. Those who seek perfection in others or themselves will continue to be disappointed. Personal and institutional failure are logical outcomes of forward momentum and the taking of reasoned risk. Recovery from set-backs is a not optional for success, it’s mandatory. Learn, and move on.
• Self-growth: You must keep learning and improving. The sands of time create a treacherous foundation that must be continually reinforced and renewed, else it crumble into the sea. Your personal learning and growth establishes a template for the organization to learn and grow, too.
• Interpersonal skills and competence: Successful CEOs possess strong interpersonal skills, including listening, coaching, and possessing a high tolerance for ambiguity in organizational issues and conflicts.

We have something in this industry calls the 10-3-1 ratio. This means that for every ten calls a salesperson makes, he will only get to make a presentation to three, and if he’s got a good success rate, he’ll make one sale. We need people who won’t shrink from that kind of rejection.
Dennis Tamcsin
Northwestern Mutual Life

“Recovery” is no more corporate than personal. Effective CEOs do not get down when they make strategic mistakes or fail. They get back to the task.

• When Michael Dell’s eponymous company saw its growth outstrip his ability to manage, its stock fell from about $50 to $16 per share in less than six months. Dell readily acknowledges his mistakes and advises, “Correct your mistakes fast … and try not to make the same ones twice.”
• Sam Walton refers to his getting thrown out of his first retail store in Newport, Arkansas, before he resettled in Bentonville, Arkansas and founded Wal-Mart:

  It was the low point of my business life. I felt sick to my stomach. I couldn’t believe it was happening to me. It was really like a nightmare. I had worked hard - done everything right. I’ve never been one to dwell on reverses, and I didn’t do so then. I’d always thought of problems as challenges, and this one wasn’t any different.

David Glass, who succeeded Walton as Chairman and CEO, added:

Sam Walton is less afraid of being wrong than anyone I’ve ever known. And once he sees he’s wrong, he just shakes it off and heads in another direction

In winning strategically, the leader and the enterprise must be fully aligned. In losing strategically, personal and corporate recovery must be one.
- Michael Terry

One of the most effective ways – many would say the only effective way – to get to a place of peace and be able to move on is to establish a personal relationship with God. I’ve had many occasions to sift through the Word to seek aphorisms, quotations, truths that could allow me the recovery I needed and give me the strength and positive inner force and direction to put the past behind, using negative experiences as lessons, guideposts, symbols of purpose.

I was a chain smoker and quit – after repeated unsuccessful attempts – cold-turkey over 25 years ago. When people ask me about the relative difficulty of that achievement, I tell them that it’s one of the toughest things I have ever done. There is no sake in sugar-coating it for people. If you are hooked on nicotine, breaking the hold is the challenge of a lifetime. Similarly, for many – or most – people, forgetting wrongs, slights, injuries is extremely difficult. So, if you’re trying to get over a bad boss, a spouse or a friend who hurt you, a fellow employee whom you think stabbed you in the back . . . well, it ain’t gonna be easy, but get over it. I hope these quotations below will help you enhance the personal and professional leadership to which you aspire.
________________

Matthew 5:44 Our forgiving only those who seek our forgiveness is akin to our love only for those who love us: “for if ye love (forgive) them which love you (ask for forgiveness), what reward have ye? Do not even the publicans do the same?”

Romans 12:17 Recompense to no man evil for evil.

James 4:12 Speak not evil of one another. He that speaks evil of his brother, judges his brother, and speaks evil of the law and the judges. And if you judge the law, you are not a doer of the law, but a judge.”

James 1:20 The wrath of man works not the righteousness of God.

Romans 12:19 Avenge not yourselves, rather give place unto wrath: for it is written, Vengeance is mine and it belongs to me, says the Lord, and I repay.

12:19 Avenge not yourselves, beloved, but give place unto the wrath of God: for it is written, Vengeance belongeth unto me; I

Proverbs 9:7 “He who corrects an arrogant individual himself gets dishonored. And he who corrects a wicked person gets insults for himself.”

Isaiah 53:7 “He was afflicted, yet He did not open His mouth; Like a lamb that is led to slaughter, And like a sheep that is silent before its shearers, so He did not open His mouth.”

Matthew 5:22 Whoever is angry with his brother – without cause – is himself liable to judgment.

Luke 6:27-28 Love your enemies, do good to those who hate you, bless those who curse you, pray for those who have caused you harm”

Acts 7:59 He cried out with a loud voice, “Lord, do not hold this sin against them!” This while in the middle of being stoned.

Proverbs 12:22 Lying lips are an abomination to the Lord. The truthful word endures, but lying tongues are but for a moment. Fools and liars proclaim their folly.

Proverbs 10 He who walks with integrity walks securely, but he who perverts his ways will be found out.

Romans 12:14 Bless them that persecute you; do not curse them.

Proverbs 11 Riches do not profit in the day of wrath. He who belittles his neighbor lacks sense, but a man of understanding remains silent.

Matthew 5:44 Love your enemies, bless them that curse you, do good to them that hate you, and pray for them which despitefully use you, and persecute you.

Proverbs 26 Answer not a fool according to his folly, lest he be wise in his own eyes. He who hates, lies with his lips and harbors deceit in his heart. A lying tongue hates its victims and works ruin.

Ephesians 4:25 Do not let the sun go down on your anger. Put away falsehood and speak the truth. Let bitterness, wrath and anger be put away from you and be kind to others as God in Christ was kind to you.

Romans 12:14 Bless those who persecute you; bless and do not curse.”
___________________________
We have the power, not only to forgive, but to bless others who have harmed us. Blessing those who have harmed you is a proactive step, while some might consider forgiveness more passive. (Though, fundamentally, forgiveness is hardly a passive act.( Through blessing and the positive, conscious act of not cursing, we can hope that the result could be a repentant heart. Blessing a person who has harmed us could save both of you.

• The essence of the Terry Family is that we are a “parent-centered” family, not child-centered, male-centered, or female-centered. At the appropriate time, which in their sole judgment the parents shall determine, we will give consideration to becoming a “family-centered” household.
• Mom and Dad were here before there were children and Mom and Dad were in love with each other before there were children. The children should respect Mom and Dad for the previously existing and current relationship they have with each other.
• One of the fundamentals of our family is that we love each other for who we are, not what we do. We appreciate and value achievements, but you do not have to get straight As in school, be the President, or win a Marathon to be loved and appreciated.
• We do not tolerate anyone outside our family criticizing or hurting our family in any way. We stick up for each other.
• No one is perfect, and that goes for parents as well as children. Parents have a tough job, but it’s one of the most wonderful jobs on earth. Parents make mistakes. Children, don’t be too hard on your parents, as they are doing the best that they can and doing what they feel is right.
• Also, parents make rules and discipline children for breaking rules that the parents sometimes themselves break. Examples include leaving dirty dishes around, having a messy room, cussing or impatience, and being in a bad mood. We’re still the parents, however, so deal with it.

Family Values:

There are many values and beliefs that we hold. These include:

• Honesty. Always telling the truth even when we have done something that is thoughtless or wrong.
• Integrity. Knowing the difference between right and wrong and acting on that knowledge. Being able to say “no thanks” and walking away. Being able to say, “I’m sorry, I made a mistake.”
• Self-awareness. An understanding of who we are as a person and how others perceive us.
• Hard work and perseverance.
• Self-love and self-esteem. Treating yourself with respect and dignity and expect others to treat you that way. Never running yourself down.
• Faith in God and Jesus as our Savior and confession of our sin on a regular basis.
• Personality responsibility is a hallmark of what we stand for. You are not only responsible for your own happiness, but for your thoughts and deeds. Take ownership of what you say and do and do not look to blame others or be a victim.
• A sense of humor so we can laugh at anything, including ourselves.
• Accepting feedback and criticism offered by others in an attempt to help us correct our ways or give us insights into ourselves.

Meals:

• Mealtimes are an important time for the family to be together. With different schedules and snacking and without a set time for dinner, we realize that it is difficult to all be on exactly the same schedule. However, everyone regardless of the amount of work, homework, etc. they have, must sit with the family during meals.
• Eating well is important for current and future health, to be strong, well-adjusted and healthy when you are an adult.

Rules:

• Bedtime on school nights means at 10:00 p.m. children are I bed with the lights out. There is to be no more lights on, homework, brushing teeth, etc. No exceptions.
• Talking with respect to parents and siblings.
• Phone: Phone is to be used sparingly when homework is not complete.
• No phone calls are to be made or received after 9:00 p.m. on school nights.

Things for Kids to Think About:

• Children should not use drugs or alcohol ever. No exceptions. You should expect to be asked to try it by a friend or acquaintances or have someone offer to sell you some. Say, “No thanks”, It is inevitable that you will be asked by a peer, friend or acquaintance to participate in something that is outright wrong or just isn’t right or proper. It is very difficult for children to find a way to stay out of these situations, but they are the ultimate test of character.
• Others will judge you by the company you keep. Friends are a precious commodity, choose them wisely.
• Whether it is right not, people will also judge you by the way you talk, stand and dress. Dress and act the way you want to be thought of by others.
• The best way to be treated with respect, dignity and fairness is to treat others that way. You will reap what you sow in terms of attitude, caring and fairness.
• Keep faith in yourself. The greatest men and women of history all failed at one point or another: Churchill, Disney, Lincoln. Take a deep breath, forget the mistake or failure, and keep on coming back.
• You will find throughout life that rewards (not just money, but help, promotion, etc.) go to those who cooperate with others and work as a team. School does not emphasize that success in life has much more to do with how you treat yourself and others and your ability to cooperate and work in a team, rather than how much you know.

Homework:

• Homework is important and grades are important. Do your best.
• Ask for help when you need it. It is not necessarily a strength to refuse help or not ask for help when you need it. This will be true throughout your life.
• Home work should be complete before the absolute lights-out time of 10:00 p.m.

Money and Allowance:

• Children’s allowance is to provide a small amount of spending money. Allowance is not a gift, it is earned for doing chores, keeping your room clean, helping when asked, and generally maintaining a good attitude.
• You may be asked from time to time to perform various chores, duties, etc. around the house for which there is no payment or compensation, for example, setting the table for dinner, straitening up the house, doing the dishes, feeding or watering Katy or the chickens, watering the garden. That is part of your life here and your contribution to the family . . . everyone pitches in and helps.
• Money is important in life, but it does not bring happiness. As a family, we judge people by their character and personality, not by how much money they have.

Your Room:

We understand and respect that your room represents the only place in the house that is truly ‘yours”. That, however, does not mean that you can leave it a mess all the time or keep parents out. We have a duty and a right to enter and be in your room and ask you to keep it straight and clean and take care of you clothes.

Music:

Music should be kept at a volume consistent wit the time of day, considerations for others and the activity at the time, such as homework, reading, play, etc. You are expected not to listen to dirty lyrics or disrespectful language in your choice of music.

Regular Chores:

To be posted and subject to change from time to time.

Expectations:

Our expectations of you are simple:

• Respect yourself, your parents, your family and others.
• Keep faith in God.
• Be responsive, proactive and helping . . . not just as children, but throughout life.
• Cheer up! It’s really a great life full of wonderful places to see, great people to meet, and fantastic things to learn . . . right up until the day that the Lord calls you.

Parental Responsibility:

Parents’ two biggest responsibilities, in comparison with which everything else pales, are:

• To raise you in such a way that you know that you are loved and appreciated and that you go through life with a high level of self-esteem and self-worth, in possession of many worthy gifts.
• To keep you healthy and safe: This includes keeping you from alcohol and drugs; making sure that you are safe from others; safe driving; keeping reasonable hours and getting good sleep; eating well; developing a good attitude to take you through life; getting exercise; wearing bike helmets; generally avoiding unsafe behavior by yourself or others.

____________________________

Note to readers: The original of this Code of Conduct bears some hand-written marginal notes, including:

A.

1. We will provide against the possible failure of local and state agencies,
   and create an emergency relief fund to be loaned temporarily to any state showing of actual need and temporary failure of its financial resources.
2. We urge drastic reduction of public expenditures and resistance to every appropriation not demonstrably necessary to performance of the essential functions of government.
3. The conservation of oil is a major problem to industry and the nation. Natural resources must be used wisely and free from monopolistic control.
4. Welfare work in all its phases must have the support of the federal government.
5. The time has come for a reconsideration of our tax systems, Federal, State and local with a view to developing a better coordination, reducing duplication and reliving unjust burdens.
6. No pretext can justify the surrender of the greatest and richest market in the world to such competition as would destroy our farms, mines and factories and lower the standard of living established for our workers.
7. We must continue to bestow relief on those who have faithfully served our flag . . . increased hospital facilities . . . increased compensation for veterans . . . and sympathetic consideration of the many problems of the veteran. Every veteran incapacitated in any degree by reason of injuries attributable to defense of his country should be cared for and compensated.
8. We ask no special favors in commerce in the world, and protest discrimination wherever it arises . . . and will steadily cement this by reciprocal treaties guaranteeing equality for trade and residence.
9. The size of our national defense is relative and, therefore, must be flexible and subject to change as necessity demands. In time of war every material resource in the nation should bear its proportionate share of the burdens occasioned by public need.
10. We believe in the principle of high wages and favor a shorter work week and shorter work day.
11. We favor enactment of rigid penalties that will aid the States in stamping out crime. We pledge ourselves to continue relentless warfare against the illicit narcotic traffic and the spread of drug addiction.
12. We favor legislation designed to stimulate, encourage and assist in home building.
13. With courage and confidence in ultimate success, we will strive against the forces that strike at our social and economic ideals, our political institutions.

A. Write your answer here: _________________________

_______________________________________________________________

B.

1. We advocate the removal of government from all fields of private enterprise except where necessary to develop public works and natural resources in the common interest.
2. We advocate a military adequate for national defense, based on all facts affecting existing establishments. People in a time of peace should not be burdened by massive national defense expenditures.
3. We advocate competitive tariffs, free from executive interference, reciprocal tariff agreements with other nations and an international conference designed to restore our international trade and facilitate exchange between nations.
4. We advocate an immediate and drastic reduction of governmental expenditures.
5. We condemn paid lobbies of special interest to influence members of Congress and other public servants by personal contact. We condemn the resistance of the administration to Congressional efforts to curtail extravagant expenditures and to revoke subsidies granted to special interests.
6. We advocate strengthening of the Corrupt Practices Act and severe penalties for misappropriation of campaign funds.
7. We advocate the full measure of justice and generosity for all war veterans who have suffered disability resulting from service in time of war and for their dependents.
8. Equal rights to all special privileges to none.

B. Write your answer here: ______________________________________

One of the above is from the Republican Party Platform adopted in June 1932. The other is from the Democratic Party Platform adopted in July 1932. Do you know which is which? A. is the Republican and B. is the Democratic.