don-n-abq's blog

Maybe sports athletes who take steroids should get paid more than other players?

Maybe Bernard Madoff should be put in charge of CitiGroup?

Get the point?

How can we keep giving money to someone who can't manage the money he already had?

With that logic all pyromaniacs should be given flamethrowers and be put in charge of the fire department and we should set up all homicidal psychotics with gun stores and make them sheriff.

When are we going to step back and value: CHARACTER?

Why don't we take the financial institutions like (or what is left):

• AIG
• Bear Stearns
• CitiGroup
• Countrywide Financial
• Fannie Mae
• Freddie Mac
• Lehman Brothers
• Merrill Lynch
• Wachovia
• Washington Mutual
• etc.

And, take the worst portion (20%?, 30%?, 40%?) of what is left and nationalize that into 2009 Federal Assets Bank.

Then with the rest give it the bankers who have actually done a good job. Banks like:

• 1) United Ban of Alabama
• 2) First Financial (Indiana)
• 3) Citizens Holdings Co.
• 4) Arrow Financial
• 5) First of Long Island
• 6) Republic Bancorp
• 7) First Financial Bankshares
• 8) Glacier Bancorp
• 9) Financial Group
• 10) Bank of Hawaii Corp.

We give the good bankers the good deposits and good loans, and reward them for not buying into this derivative leverage game.

Then, we take a page from China, and send the executives from the first list of banks (the bad ones) to prison and take away ALL (REPEAT ALL!) of their assets (where ever they may be, overseas, Cayman's, Switzerland, etc).

The 2009 Federal Assets Bank is run by a committee of the good bankers for a period of 10 years, in 2019, and if anything is left it is sold in an IPO and the proceeds go to pay for the bailout.

What is the difference between what Bernard Madoff did and what:

• Angelo Mozilo
• Joe Cassano
• Dick Fuld
• Frank Raines
• Marion and Herb Sandler
• Stan O'Neal
• Lew Ranieri
• Fred Goodwin
• Sandy Weill
• Jimmy Cayne
• Kerry Killinger
• Chuck Prince
• Franklin Raines
• etc., did?

I think what the latter group did may have actually been worse. I would have never invested with a Bernie Madoff, but I did make WaMu my largest investment.

When I first bought WaMu in 1992, Killinger was a genius. Expanding the thrift from a northwest regional into the nations largest. But, he obviously got lazy, sloppy, and greedy (as did I for not pulling my money out).

I trusted this man to be honest and above reproach with my money. Now, it is wiped out.

So, it all goes back to CHARACTER.

Who is going to watch the watchers?

Let us say that President Obama does pass tighter regulations to watch the new CitiGroup. But then one of the top executives at CitiGroup takes the person who is in charge of watching the bank to the Turks and Caicos Islands and Abu Dhabi.

And, a year later the watchdog resigns his post, with the government, and takes the new vice-president of Caribbean Operations position at CitiGroup.

The big problem I am having is 1) I can't trust the top 30 executives of the top 30 banks (900), and 2) I can't trust the people in government either.

Everybody seems to be corruptible these days.

Where is John Adams and Harry S. Truman? Where are the guys with honor?

I am afraid that we have not sunk low enough yet to bring out the integrity and virtue that we need going forward.

I would trust Warren Buffett with the job, but he already has a better one.

Until we as a society, nation, and as individuals, start placing a much higher premium on honor and character the dog will continue to chase it's tail.

If I wanted to invest in CitiGroup I would buy the worthless stock myself!

If I would NOT take my own money (what is left of it) and buy CitiGroup at $1.50 a share, why should the federal government do it for me?

The fox is in the hen house the and dog that is chasing it's tail (instead of chasing the fox) has fleas. And the fleas our the former Wall Street guys like Hank Paulson, Tim Geithner, Larry Summers, etc., etc.

Labels: Big Government, Wall Street Credit Crisis‏

Back in the fall of 1980 I was a senior in high school. I was excited about Ronald Reagan being elected and taking over the White House in the January to come. I thought that Jimmy Carter was a nice man, but not an effective president. (For more about what I thought of Jimmy Carter read: "Letter to the next President of the United States," from August 24, 2007.) After Reagan was sworn in, I would read U.S. News & World Report (it was a weekly then) each week to learn about his policies and administration. I was very excited.

My dad owned a small businesses when I was a child and then during high school, sold the first one and bought another one. I had to start working at the first one when I was nine years old. (My dad was born in 1916, so there was no way around not going to work at an early age.) Every child in America should have to spend some time growing up in a small business and then spend time on a farm. The world would be a better and more understanding place.

I was in my senior English class when the news came that "Reagan had been shot," and my heart just sank. 'No!' I thought, there is just too much to do right now, this can't happen.

Inflation was at a high point; the yield on the U.S. 30-year Treasury Bond was around 20% (the last time long-term interest rates got close to hitting 20% was to finance the Civil War in the 1860s, somebody has to pay for wars, and not just with lives, but with money. Big money.). Smart people where selling their stocks, buying the 30-year and retiring. But, companies could not really "retire," they had to keep on trying, even with super high borrowing cost. The cost of capital almost killed this country in the late 1970s and early 1980s. Many a small businessperson or the average working joe does not take into account what capital will cost.

There is only three times that the 10-year treasury note yield went to 6.5% or higher in the past two hundred years: 1) after the war of 1812, 2) during the American Civil War, and 3) during the height of the Vietnam War (this took twenty years to unwind).

I was big Republican back then and thought Reagan could lead us out of the mess. Many people blamed Carter solely for the problem, but real students of fiscal history know that it started years before that. These things don't happen overnight, it takes time to head the economic super-tanker into new waters. Just like thinking that Bill Clinton had everything to do with the boom of the 1990s, or George W. Bush (#43) the problem with the late 2000s, they don't, things started long ago, in an administration far-far-away.

The problems that Carter, and later Reagan, faced started with Franklin D. Roosevelt and the New Deal. After being masked by the economic boom of the Baby Boomers of the 1950s, the problems were added too and taken to new heights by John F. Kennedy and then Lyndon B. Johnson. The spending that the pair unleashed began the upward trend in interest rates that would nearly run the tanker aground twenty-years later. But, their spending alone might have been easily corrected had it not been for that little sliver of a country on the west side of the South China Sea.

Vietnam would derail the Great Society and two presidents. (Johnson and Richard M. Nixon). But just like economic booms and busts, people forget that it was Harry S. Truman (who is just about my favorite president) and then Dwight D. Eisenhower who started Vietnam. Truman was the first to send advisers (back when that was really what they were) to Vietnam in 1950, and then Eisenhower sent even more.

On May 8, 1950 (Truman's 66th birthday), Give'em money and troops Harry sent $15 million and some advisers, then he sent another 35 advisers on September 1st. But really $15 million and a few officers, big deal. Then Eisenhower sent even more, see "Role of the United States in the Vietnam War." Of course (once again) these seeds were sown years before.

As World War II was drawing to a close, Truman and Winston Churchill (meeting at Potsdam at the end of July and the first two days of August 1945) decided to split the county called Indochina at the 16th parallel, with China taking control of the northern half and the British taking control of the southern half. Sound familiar?

But, back from history class to economics. The point was, to understand what is happening today, we need to look at history and also look for the root causes and not think that things happened overnight.

If they were, they would always help the person in need, and they would not ignore their fellowman for their own gain.

I have often said, and for some time now, that "Pure Communism" and "Pure Capitalism" are both great theories sans one thing. In a perfect world, they would both work fine. But, in this world the one thing is: "Human Nature." As long as humans run things (and why would they give up control?), no matter how smart they become, the fallacies of human nature will always be ever present.

Since you will never be able to eliminate "greed," "love," "sex," "power," "pride," "lust," and the other feelings and emotions that us humans let into our lives "Pure Communism" and "Pure Capitalism" will never work. For both to work it requires that emotions be left out and everybody play on a fair and equal playing field.

But, there will always be the Joseph Stalin's, Fidel Castro's, Hugo Chávez's, Kenneth Lay's, Bernie Ebbers', Bernard Madoff's of the world. There is no getting around that a certain percentage of the population will never play by the rules, no matter what you do. They can not check themselves from trying to circumvent the norms for their own personal human nature. Men (and women) are not now, nor will ever be angels.

So, if "Pure Communism" and "Pure Capitalism" won't work, what should we do? Maybe there is a happy medium, a common ground somewhere in the middle? Now one of the best things about this country and United States Constitution is that two parties fight it out, but in the end reach a consensus, a spot near the middle that both sides can agree on. Neither side getting all that they wanted, but neither side getting nothing, and letting the other side get all.

I hear complaints everyday from hard line Republicans and staunch Democrats that the other side is "wrong," and should step aside and go away. 'Why can't we have all seats in the senate and house be 100% one party?' But, it is just the fact that we can have two sides come to a compromise that make it such a beautiful political system. Then add to the fact that three different branches (legislative, executive, and judicial) can pull against each other and the model is even more ideal.

Maybe it is time to take that same model and apply it to business and economics? I am about to propose something I thought back in 1980 that I would never have dreamed of. I have always been a big proponent of the small business and the people who run them (for more of my thoughts on that, again see: "Letter to the next President of the United States"). If you go back to 1776, and the people who signed the Declaration of Independence, there were no John D. Rockefellers, Andrew Carnegies, or Bill Gates. There were no ExxonMobils, General Motors, or Wal-Marts. Those people, and those "big" companies, where in England, and part of what we wanted to get away from.

Companies like the Dutch East India Company, the British East India Company, the Hudson's Bay Company, the Virginia Company, the Plymouth Company, etc. Those where the Fortune 100 of their day. Those were the companies that we wanted to get away from. Little guys like Paul Revere, a small independent silversmith, just wanted run his business on an even playing field and have his local taxes stay local.

Another side effect of these very large companies is that when one of them gets into trouble, they hurt the country as whole. When Enron, WorldCom, Lehman Brothers, and companies of this size finally collapse it ripples through the entire economy. I have a dumb question: If we took all the money spent on litigation and unemployment compensation for a company like Enron and spent it on regulation and/or policing before hand...?

So, here is my thought (sacrilegious?):

Nationalization

There, I said it. A 15-letter dirty word to Western Economics and American Republicans. Now, I don't mean for everything. But, maybe there are some industries that we should think about nationalizing? There are certain factors like global competition and changing U.S. demographics that are forcing us to take a long hard look at certain industries and change our attitudes toward.

For one, I have become convinced that the Health Care Insurance Industry should be nationalized. And maybe, just maybe, government intervention (or should I say RE-intervention) should be looked at for the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads, hence all internal-domestic-transportation), and for the Power Industry (or a portion of it). (The nations newspaper industry and the 10-largest banks might have to be nationalized too?)

The basic elements that mankind has required to survive, and more importantly thrive, are 1) air, 2) water, 3) food, and 4) shelter. Our government thought to add basic education (#5) some time back. Now, going forward, what if we added: 6) health care, and 7) low energy costs to the mix? And I have no problem with Barack Obama wanting to add higher education to the list of basic rights for all-Americans.

Adding basic higher education for all is an investment in the future. An investment that should pay dividends down the line.

But, lets look at my other two new ones:

What if we could take health care and basic energy costs off of the table for both employers and employees?

What if a small businessperson didn't have to worry about providing health care for their employees? What if General Motors for that matter didn't have to provide health care for their employees? There is good chance that if GM had not had to worry about health care costs for the -say the past five years- they wouldn't be about disappear from this world to the history pages.

Also, what if the average person's dwelling was net-grid positive (that is it had solar panels and wind turbines on the roof and added to the grid instead of drew off of it)? If you took the average workers basic power needs off the table, this would 1) ease pressure on their employers (as far as increasing pay to meet those needs), and 2) free up that capital to go to other needs.

If you break down the basic needs of the American worker, and the needs that are putting the greatest pressure on American businesses (both small and large), they are the same factors:

• 1) Health care
• 2) Energy
• 3) Retirement Funds (and/or pension funds; and later on Social Security [my ideas from 2005])
  

If the government looked at taking the first two of these off of the table, the worker could then have capital freed-up to go to the last one, and all three would be lifted off of the employer.

So, my idea, nationalize health care insurance for all, and invest in making the average dwelling net-grid positive.

Now, I only want to give the average person their "basic" energy needs, lets say the government paid for the first $50.00 (individual) or $100.00 (family) a month. After that, the energy pigs would pay dearly. Those people, like the ones who have acres of grass to water in the desert, should be punished. The energy hogs can pay for the other people who are living by the rules.

So, the government installs enough solar and wind devices to give the average house $100.00 worth of electricity generation (or so) a month, and then it is up to the occupant to live with it. Some people, especially in the low-income and really green groups, will stay in net-grid positives. The money that they now pay for basic energy needs will then shift to food, over-the-counter medical needs, and other basics. If there is any money left over they might just put it in their IRA or other retirement accounts. A large group of other people will simply use more power, what they are using now and what they get from the program, and the their power suppliers will be out little to no revenue from retail consumers.

I also wouldn't object if the program required that the government installed the panels and turbines, and then half the savings (say $50 of a $100 in savings) were to be paid back to the government to pay for the purchase and installation of said equipment.

If health care insurance and basic energy costs were taken care of by the government, then several benefits would occur:

• 1) It would spur the economy in the manufacture and installation of net-grid positive industries
• 2) It would relieve a massive burden on both employer and employee
• 3) It would help with global warming, greenhouse gases, and the like
• 4) It would bring American's basic needs into the Twenty-First Century
• 5) It would promote a huge amount of goodwill with this administration and the government as a whole
• 6) It would make America more competitive in the global economy
• And, get this folks;
• 7) It would take pressure off the American tax payer in such a manner that you would not need to lower taxes to help the Americans in need. The amount of savings to the economy and gross domestic product (GDP) could be recycled into some taxes to pay for said benefits. (Basically you are raising taxes by lower costs, imagine that.)
  

The amount of costs savings that could be rung out of the health care industry if insurance was leveled, and homes where net grid positive, would relieve such a pressure value on the nation as a whole. Most people have know idea at all how large these fixed costs are, and a great number could not 1) get their head around it, 2) nor believe it. Many don't even want to take the time to think about it.

By nationalizing the health care insurance industry, you also go a long way to solving the problem with Medicare and Medicaid. Eventually these all get folded in together, one program.

Now I am sorry for you health care insurance industry investors, but you must be a lamb sacrificed for the good of the entire herd. You can try and invest your capital in Brazil, Russia, India, and China. But, your loss will be an honest answer for the greater benefit of the greater good.

Ronald Reagan was my hero in 1980, but maybe, just maybe he sacrificed a generation far down the road to correct the ship from sinking. Before you judge him too harshly, there was a chance that the country would have gone done the tubes with 25% borrowing costs that were peering on the horizon. There is a critical flash point near that 25% mark that would have meant utter devastation for the United States. All you have to do is look at Argentina for that model.

There are no easy answers, Reagan got the short term right to avoid the iceberg then. It is time we turned the ship from the path of next iceberg. But, while we are doing it, we could change both the short-term and long-term paths at the same time. And if we are going to do this right, we need an "INVESTMENT PLAN," not a "STIMULUS PLAN."

Investing in the smart power grid is a good idea. Investing in education is a good idea. I want to see long term investments, not short term simulations. Long term investments, if done right, can both stimulate the short term, and fix some long term problems.

The average joe-schmoes on the street never understood the Superconducting Super Collider, and what it might have done to energy costs down the road. It should have been marketed as "The Program that Will Cut Your Electric Bill in Half Collider." Then maybe it would still be here. But, if we could invest in, and achieve the holy grail of ZERO (or almost immeasurable/indistinguishable amounts) energy loss during transmission, oh what a benefit it would be. People didn't understand how if that one thing happened it would have reverberated around the world.

The butterfly effect that it would have (or could have) on world GDP was enormous. Like the effects of the 1960s space program, it would pay dividends for mankind for as long as we are here. The benefit to the green cause of global warming would have also been tremendous. But people saw none of that, they only saw the short term tax dollars headed to the program.

If we just spend or stimulate, and don't invest instead, this country will be over by 2056. We can not have another "New Deal" unless it invests in the future and takes out some of the largest factors of fixed costs facing businesses and individuals today. The reason it will not work this time: No massive baby boom to spur the largest economic boom ever. This is not going to happen.

So, maybe for the good of this nation (and side-benefit to the planet) we should nationalize the health care insurance industry and also provide basic energy to it's citizens. Just byte the bullet and get it over with. A little pain now for a healthy country down the road.

I am not really advocating nationalizing the power industry, just tweaking it a little to benefit of 1) the average American, 2) American companies, and 3) the nation as a whole in the future.

Now I need to talk about the Domestic Transportation Industry (the airline industry, the trucking industry, the railroads). We have some major things to think about: 1) the price of oil will no doubt go back up when the economy does, 2) the demographics of truck drivers and pilots.

I felt that when the price got over $100.00 price per-barrel (PPB) in 2008, and was certain that when it got over $117.00 that this was emotional speculation. So, every dollar from $117.00 to $143.00 was done by the traders. But, this does not change the fact that it went from $50.00 to $100.00 in a hurry. This was due to supply-and-demand factors, mainly from Brazil, Russia, India, and China (BRIC).

So, when the economy does recover, and then these BRIC and other countries raise their standard of living the price will return to $100.00. China alone could take the price to $100.00 and the rest of the world (excluding the 13 Western developed countries) could easily take the price to $200.00, and it will.

By 2020, I see $200.00 oil (PPB). Now couple this fact with problem facing the trucking industry in finding drivers going forward, you have a major problem (two actually). If you don't know by now, the experts are certain that there will be a major shortage of truck drivers in this country as the baby boomers retire.

So, what can we do? 1) We could hire people from third-world counties to come in and drive trucks and pay $10.00 a gallon for fuel. Or, we could take another approach that would also have the side benefit of lowering carbon emissions.

Now I grew up in the trucking business. My father had driven a truck during World War II, and benefited from the Eisenhower program of wanting better roads to move the military around this nation. The side effect of this was near-death to the railroad industry. I spent at least one-quarter of my childhood at my father's truck parts, sales, and repair business. I enjoy the smell of diesel in the morning.

But, as I see it, we need to try and kill the long-haul trucking business in favor of a huge modernizing program for the nations railroads. (Isn't there something more romantic about railroads anyway?) This would be a major investment to take the nations railroads into this century.

Sorry, dad, but there it is. Fuel costs will be to high, carbon emissions to high, and the benefit of allowing all those foreign drivers in, will not help offset the costs (and other problems) to the people here now. I am all for allowing foreigners in, but if I have to choose between an electrical engineer or a mathematician and a cab or truck driver, sorry I am going with the former.

There is also a problem with too many airlines in the United States; and because they can't make enough money, a side effect of attracting good qualified and competent pilots going forward. Pilots are taking pay cuts to stay at the controls. What kind of business model is this for employees? Down the road this will spill over into air safety.

So, here is what I want:

1) De-coupling the companies who move rail freight from the companies who own the track.

You break off BNSF and Union Pacific into four companies, two that own engines and cars, and two that own track, and charge like a toll road per-car traveled. Imagine if the railroads could just take their trains on any tracks they liked, and just paid a fee to do so. Kind of like trucking companies and their trucks on the highway now.

A side benefit to this would be that other companies like CSX and Norfolk Southern, as well as potential smaller players and new companies, would be able to use the same tracks, thus driving down costs for both, the amount rail companies paid to the track company per-car, and for goods transported in those cars. This would also allow UP and BNSF to run on tracks in the east, more competition for all.

2) A major infrastructure program to take four of the major east-west routes and three north-south routes in the western two-thirds of this country and level grades, straighten curves, make it four lanes for the entire route.

The routes:

• 1) San Diego to San Antonio to New Orleans to the East Coast
• 2) Los Angeles to Albuquerque to a) Memphis and b) Kansas City to Saint Louis
• 3) Bay Area to Omaha to a) Chicago and b) Indianapolis
• 4) Seattle (and/or Portland) to Minneapolis to Chicago
• 5) San Diego to Seattle
• 6) Brownsville to Minneapolis
• 7) New Orleans to Milwaukee via Chicago
  

Four Lanes: For each of these routes you make four lanes 1) freight one direction 2), high-speed freight and passenger same direction, 3) high-speed freight and passenger the other direction, and 4) freight the other direction. You have four dedicated lanes on the road, no waiting behind a slow freight, or worrying about a on coming train.

Next you change the trains themselves:

• PHASE 1: 100 mile per hour (MPH) minimum for freight and 200-MPH for passenger and high-speed freight. You make them energy efficient state-of-the-art energy efficient. (What about filling the roofs of rail cars with solar panels and small wind turbines in tubes on each side? We have nuclear submarines; can we get a nuclear locomotive?)
• PHASE 2: 150-MPH minimum for freight and 300-MPH for passenger and high-speed freight.
• PHASE 3: 200-MPH minimum for some freight hauling certain products and 400-MPH for passenger and high-speed freight.

Additionally we need to work with the trucking companies and airlines, maybe even nationalizing some of the airlines (or simply let them die on the vine), to change the way they interact with both the American consumer and the rail industry. This will have to be government dictated policies. Trucks will be used for short-haul and specialized long-haul. Airlines will be for long-distance and special travel only. Los Angeles to New York City by air makes sense, but Pittsburgh or Buffalo to NYC, we need to change. With trucks just the opposite is true, we flip that around, Pittsburgh to NYC yes, but LA to NYC, nope.

As these high-speed trains start operate in the western two-thirds of the U.S., the legacy equipment could be shifted to the eastern one-third and for short line use.

What would we accomplish?

• 1) A massive work program to create jobs NOW (and would last a decade, most likely two, and maybe even three)
• 2) Lower freight costs and passenger travel from 2020 until 3020 at least
• 3) Lower carbon emissions (all those long-haul trucks off the road)
• 4) Fix problem of lack of truck drivers
• 5) Safer highways with less trucks?
• 6) Investing in the future with something that will pay dividends for years, not endorse the failed policies of the past
• 7) Oil and gas and diesel being used for other things like short-haul trucking at lower costs
• 8) Help alter our Middle-East policy by lowering the oil component
• 9) Take a good number of passenger vehicles off the road
• 10) Sort to medium trips are now done by rail and not airlines, changing the dynamics with pilots and safety
• 11) Switch carbon unfriendly jobs to "green" jobs
  

This is an "Investment Plan," not just a "Stimulus Plan" in our nations future.

Now for all of you out there who say, "boo-hoo, but what about the auto industry?" Stick it somewhere else. I am tired of hearing it.

It no longer matter if man caused global warming or it is just a cyclical occurrence that happens every 10,000 years. If we don't try to change things 80% of crop production could be wiped out, which in turn would wipe out 80% of the population. Is that what you want?

I am tired of hearing about the short-term, shortsighted ideas of "I need my pickup."

Listen, in 1910 there was no auto industry. There were no production lines, no chain of filling stations with cigarettes and beer. No auto-body shops and dishonest mechanics to take your hard-earned money. From 1850 until 1950 the railroads ruled the nation. They did the heavy lifting for freight and passenger transport.

Maybe it is time to move forward by moving back?

Japan, Germany, and France have been kicking our butts in railroad technology for forty years. South Korea now has a high-speed train. We need to have massive government program to build cutting edge rail cars and locomotives and then sell those products to the BRIC counties. Why let the Chinese sells the newest technology rail-tech to Russia and Brazil?

And what if the low-income and low-middle-income person in this country didn't have a car? How much money would they save in auto-insurance, repairs, and payments and interest on car loans each year? It should be a LUXURY to own and drive a car, not a necessity. If you don't want one you should not be made to feel by both Madison Avenue and by the current infrastructure of this nation that you must own one just to get to work, the store, and the doctor.

There was no auto industry 100 years ago, there doesn't have to be as big of one going forward. Pickups should be used by commercial companies, not every billy-bob with a .38 and chrome rims. You should have a pickup because you want to not because you need to.

I don't want to see all of the workers in the auto industry to lost their jobs, but maybe they can just change jobs? Maybe they go from the factory line, repair shop, and fuel station to a new job in the railroad or some other moving-forward technology?

We need a big, broad, stroke here. We need another man-to-the-moon or Louisiana Purchase. Something so big it shakes jobs up short-term and our nation long-term. It is time to look forward and not cater to the Big-3 in Detroit and existing automotive-centric society and their court jesters.

Just as Truman did at Potsdam with Vietnam, Eisenhower did to the rail and auto industries with the signing of the Federal Aid Highway Act of 1956. One stoke of the pen having lasting impacts to this day. The economic effects of both events (as well as the other effects, like emotional or environmental) are still coming back to us in waves.

A paper signed in 1950 helped shape the federal budget in 1970 and helped push things to the Reagan Administration, which, a portion of we are dealing with now in 2009. Another paper signed in 1956 almost killed one industry and spring-boarded another to the point it effected diplomatic policy in sending young men and women to die in a country half-a-world away fifty years later. Paying for the Vietnam War and the Great Society pushed interest rates to 20%. The interstate highway system helped send people to Iraq (twice).

There were other side effects to these policies. They also altered the personality and societal fabric of this nation. They reinforced a separating a mobility and distance between citizens. You could jump in your car and drive to the suburbs and not talk to anyone. While this was seen as a benefit for the self, it damaged long term ideas of family and community. Just like television, the promotion of the auto industry has changed the way people think, act, and interact. Other countries have a better sense of community, family, and cooperation than does the U.S. Part of that is because of how old this country is, how it was formed, and who came here to settle it.

In 1700, or 1800, or even 1900 there was land and more land. People came here to get away from somewhere else, make a better life. The people had to have great courage to break off from what they knew to put themselves in motion and at risk. So, moving once you where here was no big deal, motion and individuality was part of what made America and Americans.

But, news flash: They don't make land anymore! Because we have already moved from sea to shinning sea, and filled in the spaces in between, we need to re-think are mobilization policies.

Things that we do now, will have an effect in 2056, I guarantee it.

President Obama can have his administration draft and then he can sign the "Federal Transportation Act of 2009."

The waves of such an act would be felt soon with jobs, and later with carbon emissions and savings in Americans GDP later. 50 years, or more like 25 years, from now the average American will not spend as much of his tax dollars to maintain roads, for fuel-taxes, and other costs in the federal, state, and local governments to maintain this huge automobile supporting program. Additionally, about 10 to 20% of each American's take home pay could go else where than to car payments, auto insurance premiums, repair bills, parking fees, etc.

We could actually lower taxes and raise both disposable income and savings rates in this country if we were to follow the ideas that I have laid out in this essay.

It would take some major political fortitude to pass my programs, the lobbyist of both health insurance and auto industry would have to be ignored. I have had these ideas for some time now, but with the economy is decent shape, I knew they would be easily rejected. But, now with environmental concerns and the economy both reaching crisis points, maybe somebody will 1) listen, and 2) act.

Bottom line:

• 1) Pass the "Nationalization of Health Care Insurance Act of 2009"
• 2) Pass the "Net-Grid Positive Energy Act of 2009"
• 3) Pass the "Federal Transportation Act of 2009"
• &
• 4) 30, 40, 50 years from now reap the INVESTMENT of the average American having very-low health care, energy, and transportation costs.
  

These three ideas would dramatically alter the tax structure in the United States down the road. Although short term mass transit build out costs more, long term, tax expenditures for maintenance are less. We need to promote a better sense of community than we have in the past. Riding on public transportation helps achieve this. Put a bunch of truck drivers on a long train ride, and run some videos and by the end of the trip they will vote as one group.

Can you imagine going to a company and telling them that their health costs will be gone, that their employees will need less money going forward for basic energy and transportation costs, that commercial road and fuel taxes will be less? (I can.)

Capital is not destroyed or created, just moves from one place to another. Do we really need to move more of it to Palm Islands? If so, we need to have a choice of wanting to do it, not having to do it.

My ideas give us that choice, not force us to live with ones that we might not want. My ideas are the strength of the future, not trying to fix the broken policies of the past. It is not that big government can't spend big money, but they need to "INVEST" it, not just stimulate or spend it. Know the difference.

(NEW RULE: No companies in the Fortune 200 company can pay for direct or indirect lobbyists.)
---------------------------
A few more thoughts about CHARACTER.

1) Louisiana Purchase - (1803)
2) Erie Canal - (1817 to 1825)
3) Land-grant universities - (Morrill Acts of 1862 and 1890)
4) Homestead Act - (May 20, 1862)
5) Purchase of Alaska - (1867)
6) Transcontinental Railroad - (1860s; 1869)
7) Panama Canal - (1904-1914)
8) Reconstruction Finance Act - (REA/WPA/CCC/etc.; 1932-1940s)
9) Servicemen's Readjustment Act of 1944 - (aka: G.I. Bill)
10) Federal Aid Highway Act of 1956 - (1950s & 1960s)
11) Apollo Program - (1960s)

Labels: Big Government, Business, National Engery Plan, Renewables, Small Businesses

America may soon be involved in a new war, with another country.

Pakistan? No.

North Korea? Nope.

Mexico. That's right, I said it. Mexico.

SCENARIO:

The economy continues to spiral downward; round of layoffs one leads to round of government layoffs one, leads to round of layoffs two, leads to round of ....you get the idea. Unemployment gets to 10, and then 15, and then maybe even 20%. The effect in Mexico is even higher, riots, massive drug lord killings of government officials, crime so out of control that the police who can't cope now throw up their hands and walk away. Or worse, they join the other side.

All of this leads to people who are hurting from the economy rushing to the border towns of Tijuana, Mexicali, San Luis Río Colorado, Nogales, Agua Prieta, Puerto Palomas, Juárez, Ojinaga, Ciudad Acuña, Piedras Negras, Nuevo Laredo, and Matamoros.

An American millionaire's daughter is kidnapped, raped, and killed in Cancun. Another wealthy American family is slain in Acapulco.

Next these cities turn in to war zones, just like Beirut in the 1980s or Sarajevo of the 1990s. Maybe the people find a racial divide, maybe they don't, but they do find other divides: economic and which side of the drug trade you side with.

But as the economy grows worse, more and more people will cross the criminal line in order just to eat or feed their families.

Of course all this leads to the violence spilling over into the companion cities across the border: San Diego, Calexico, San Luis, Nogales, Douglas, Columbus, El Paso, Presidio, Del Rio, Eagle Pass, Laredo, and Brownsville.

The government of Mexico disintegrates and the ones left alive flee the country with their families. A component just as important, the wealthy families of Mexico also flee, taking their money with them.

Next, while Carlos Slim Helú relaxes in Dubai, the governors of the four border states send their national guard units to the border to help local law enforcement officials who can't handle the escalating crime. Then an event analogous to "remember the Maine" occurs. And we are at war with Mexico.

Is it such a stretch with headlines like these:

• Armed response
• Lawmakers: US must enforce assault-gun import ban
• Mexicans block US border bridges in protest against antidrug troops
• Marchers block Mexico-US border
• Drug gangs drive off cops, terrorise Mexican town
• Mexican army repels drug gang attack, killing 3
• Mexico urged to withdraw soldiers involved in crackdown on cartels
• Opinion Briefing: Mexico’s War on Drug Traffickers
• Gunmen shot 12 in Mexico, including children
• Violence in Mexican Border Towns
• Drug cartels widening reach
• Mexican army hopes to tighten grip in town plagued by drug-related violence
• Mexico police chief shot
• Texas Officials Preparing for Rising Mexico Violence
• America can't afford to ignore drug violence

Labels: Mexican-American War, Mexico crime

I just put up a new business model for newspapers.

This is another option of what might be down the road.

The Corporation for Public Print Journalism.
or The Corporation for Public News Reporting

That's right:

PRS - Public Reporting System
or PPNS - Public Print News System
or PNS - Public News System
or PJS - Public Journalism System

Pick one.

Getting the idea? You take the PBS model and apply in to local print journalism. Made possible by Readers Like You.

Of course, with a fund drive in a newspaper, you can just turn the page.

William Randolph Hearst just rolled over. And a little glass globe fell out of his hand. 'Rosebud...'

Unless the current newspapers find a way to survive, this is what lies on the far horizon.

There will be the Frontline section of the paper. There will be the American Experience section. Antiques Roadshow? This Old House? This Old Newspaper more likely.

I have no idea what will happen. If you read my first model, and get guys like Warren Buffett in there, there won't be a problem. But this may very well be what happens if those other ideas fall apart.

Labels: Newspapers, The Newspaper Business

Back in May 2008 I blogged ("Newspaper Obituary") a little about the dying newspaper business.

Well, I want to revisit the topic and flush out a business model or two that just might let newspapers continue in business.

Here is what I think needs to happen:

1) The Printing Presses:

• A) Disconnect the content side of the business from the printing side of the business. Let's take one city for example: Albuquerque (how convenient for me). You separate the printing portion of the paper (AJPCo.) from the content portion of the paper (Albuquerque Journal). You have your content company contract to have their paper printed with an outside contract printer. This allows you to bid out the printing (if possible and your city can support it), to lower costs. You also separate the costs from the content side externally (which is done now internally). This allows the printing company to go out and get new business (see also my segment on "Distribution" in a minute).
  

• B) Small state-of-the art digital print-on-demand presses. In small outlying communities, like Farmington, Clovis, Roswell, Deming, and Las Vegas, New Mexico, you have small digital presses that only print has needed. Stop over printing and shipping them by truck around the state. For example in Clovis you need more papers, you just go to the local press and ask for 100 more copies, please.

2) Distribution:

• There is not doubt that fuel costs will go up again at some point in the future. Fuel costs are going to be right up there with employee salaries and heath care as huge fixed costs. So, change the distribution model:

• A) Now that we have AJPCo. set up, instead of flying in papers via FedEx, or UPS, or whomever. You print all of those national papers printed elsewhere here instead. The content is emailed to the local printing company and then printed by one (or two) local printers. The Wall Street Journal, The Washington Post, Los Angeles Times, Investor's Business Daily, USA Today, etc., all have their papers printed by the local printer, no flying papers around the country. This makes the printing company a viable self-sustaining enterprise on its own, not tied to the life (or death) on the writers/editors/and other people in the content business.
  

• B) From "The Printing Presses: B" above. (In small outlying communities, like Farmington, Clovis, Roswell, Deming, and Las Vegas, New Mexico, you have small digital presses that only print has needed. Stop over printing and shipping them by truck around the state. So, say in Clovis you need more papers, you just go to the local press and ask for 100 more copies, please.)

• C) In the local market, you get one distributor for multiple papers. You can't have four different cars driving around the same neighborhoods delivering four different papers. Let's say you take a one-square mile of area: you have the Albuquerque Journal, The Wall Street Journal, USA Today, Investor's Business Daily, all being delivered in the same one-square mile area by FOUR different gas-guzzling rat-traps. You MUST change this model. You get ONE guy who delivers all of those publications in that area. That lowers costs, and that guy can now afford to buy a new muffler.
  

• (I know, you think that these ideas are not going to work because those publications are competing against each other. NEWS FLASH: The competition is not other newspapers; it is television, radio, magazines, the Internet, and fuel costs. Those are your real competitors.)

3) Vertical market approach:

• A) You have a content company (Albuquerque Journal) that owns a newspaper, a website, a radio station, and maybe a television station (or partners with one). In large cities paper A can partner with, or own, station A; and paper B can..., and so on. You have a radio station and TV station "push" people to the paper. You get someone interested in a one minute sound-byte and then get him or her wanting to know more. Something for Madison Avenue to help you with. (By the way sex sells.) You might even buy a billboard company and drive eyeballs that way? (You can't own a TV station in another city, that does not work, if you are going to do that, you might as well have two separate companies. They assets have to be together. The future will be ONE newsroom with multiple distribution channels: paper, magazine, TV, radio, billboard, Internet, mobile device, whatever. You can't afford to have multiple newsrooms, sorry.)
  

• B) The website, three-tier approach: You give the reader a 50 to 100-word story for free. You then give them two options: A 500 to 1000-word story for a dime (that is right, I said a ten cents; PayPal might be the answer here). No charging stupid rates like $4.99 for an article of 1000 words, this is not going to fly. But, you give the reader a third option, a 5000 to 10,000 word story (or a bundle of stories) for a $1.00. (These amounts can be tinkered with, but $5, or $4, or even $3, is too much money, we have to drive costs down to compete with other outlets here folks. I can go buy a good book off of eBay for $5.00, or to the library for free, why do I want to pay $5 for a newspaper article. Oh, I don't!)
  

• The vertical market approach could also have a side benefit: TRUST. Who do you trust? Going forward there will be a trust issue that will need to be resolved. How can you trust what a guy like me, sitting in his house, is saying? Well, for one thing it depends on what is being said. I am not saying anything that would lead you to distrust my message. But, some stories will, and some bloggers will be found out for who they really are. (That is another thing that credible newspapers can help to flush out; find suspect bloggers and flush them from the bushes.) So, if you have local anchor (TV or radio) that you really trust, and they tell you to find out more by going to tomorrow's paper or the newspaper website, you are more likely to trust that source. Let's use an example on a national scale: Let's say Tom Brokaw was doing a news story and then concluded by saying 'I'll have an in depth story in tomorrow's Wall Street Journal', you are more likely to have a "trust" factor to read that story (if it is a topic that you also find interesting), and you'll seek it out with more vigor than you would otherwise.
  

4) Revenue Model:

• You can't rely on one single revenue stream to stay in the newspaper business. You can't be "all advertising" revenue; you can't be "all subscription" revenue. You have use a multi-approach.
  

• A) Try to breakup your revenue stream with all three, roughly four components each (1/4 print readers, 1/4 print advertising, 1/4 Internet advertising, and 1/4 Internet readers). Additionally, try to give the advertiser a multi-bundle deal. Let's say you get Wal-Mart to run an ad, you want to sell them advertising for 1) the print newspaper, 2) the radio station, 3) the Internet, and 4) the television station. (If you don't own the TV station, you sell the bundle to the customer and then go to your partner station and give them a portion of your fee received to run the ad.
  

• B) You match a story with an advertiser. Let's say you are running a story on the high cost of clothing. Next to that story (whether in the paper or on TV, radio, or Internet) you have a ad for a discount clothing store. Additionally, let us use this example, the story runs on the radio; "costs for clothing going up...." After that you follow with an ad for the discount store, and you say: "For a coupon pick up a copy of Thursday's paper or go the newspapers website." Newspaper must find a way to tie all of these elements together. The consumer sees the short story on TV or hears it on the radio, wanting to know more you instruct them to go to either the paper or the Internet, you "drive" their eyes to your content.
  

• Working with advertisers, a user profile could be setup (users at The Wall Street Journal and many other papers have already created their account), and then certain advertisers could send netmoney, say $1.00 each, to that user that is most likely to like that product or service. Let's say you are the Albuquerque Journal: You try to get users to go to your website, and then through your website to purchase books, music, DVDs, whatever. So via their site you went to Hastings Entertainment website and bought a Arturo Sandoval CD. Columbia Records now puts a dollar in your netpay account that you can use at the Albuquerque Journal's website to buy expanded, in-depth, stories. Hastings can chip in another 25-cents. If you are on the Journal's site and you click on an ad for Pepsi, Pepsi can put $0.50 in your account. Now the advertisers don't pay dollar-for-dollar, but can buy for a discount. (There is an opportunity here for a company like VeriSign to really come in and put this together.)
  

• Classifieds: Classifieds used to be a good little niche revenue stream to newspapers before Craiglist came along. The newspapers need to ban together to form a consortium to either buyout Craiglist, or replace them as the top online classified stop. Once this is done, the consortium can split revenues of online advertising geographically and clean up the problems with Craiglist (or their version of said same), and tie the classifieds back into the local newspaper site, the user and their profile, and their credits. Let's say a user looks at an ad in the (free to leave an ad) classifieds for a home stereo: Columbia Records once again steps in and credits the users Journal account for 25-cents. Plus, if a seller creates an classified for a bedroom suite, then you put an ad in that listing for something that compliments the suite, say for sheets and pillows. So Wal-Mart has an ad for sheets, and if the user clicks on it, 25-cents into their Journal account. Additionally, you could have an ad in the classified for a Journal story about furniture movers, or how to clean furniture, or whatever.
  

• LOGIN: Why do sites not make the user login? Does it discourage so many people that it is not worth it? If that is so, that is going to really stand in the way of charging for content. But, let us say that you do get a user to login. Now, the user is viewing the free 100-word article. And there is an ad for Coke on the right. The ads themselves have to get smarter. I ignore most ads. But, if I could click on an ad to get free credits in my netpay account, to view richer content then I would. Let's try this: On the ad on the right for Coke, there is box that says, "Enter UPC code here for free netpay credits." That tells the advertiser that you are already a customer (unless you shoplifted it like Walter Isaacson's friend Thomas did with the ice on there way to go fishing) of their product. And if they took it a step further, like have each individual bottler put an additional code on the can. You know how some retailers ask you for that little extra three or four digit code on your credit card when you call to place an order? It would be like that, take a can, have UPC, then stamp a local code on the can near the UPC. Now the retailer knows where the can was distributed. So, they know you drink Coke and they know you live in Albuquerque. Now they can tailor their pitch for a local retailer who sells that product. Now we are getting smarter, marrying the advertising closer to the end user.
  

• Are there any newspapers making money right now? If so, what is their business model? Are there certain items that should ALWAYS be free? Charging to view obituaries seems cheesy to me. Charging to view employment ads should be free? If a guy needs a job he can't afford much? Certain notices about health, product recalls, child safety, criminals on the lose. Once again, give the reader 50-to-100 word free story, then if they feel they need more, they can share the costs.
  

5) Exclusive Content:

• Newspapers must continue to have exclusive content. Television and for the most part radio, and even most sites on the Internet only give one minute, or at the most 1000 words to a story. You must have that Woodward and Bernstein on your paper that goes the extra mile. Heck, hire someone to follow around political figures for the heck of it. (I have a feeling about the local weatherman...)
  

6) Multi-Correspondent:

• You can't afford to hire a correspondent in some far off place, like Sydney, Australia, and in every other major city in the world. So, you get someone already there, doing one thing, to work for you a part-time, on-the-side, job. Not their entire livelihood. Let's say you are the Albuquerque Journal. You contact a television reporter in Sydney, and say, 'submit us local stories and get paid by the word.' If you are a reporter in Sydney, you get a newspaper in the U.S., another one in Canada, the U.K., South Africa, a magazine. Get the idea. The same story can be sold by one reporter to half-a-dozen different outlets around the world (as long as they don't overlap), low costs for the newspaper, decent revenue stream for the reporter. This can tie in to the television station model. For instance you have a television anchor or reporter, they do a 100 or 200 word story for the TV, then have them flush it out and do a 1000 to 2000 word story for the paper. "If you want to know more, see my extended story in tomorrow's Times."

7) New Platforms:

• The newspapers in this country, or maybe even around the world, just get together now and find, help develop, and endorse a new platform of distribution. Whether that be Amazon's Kindle or some other device, they need to pick one, form a consortium and get behind it. A good number of customers are going to make the switch for environmental and convenience reasons, so get out in front of them. Bill Gates is still kicking himself over the Internet business model developed at Microsoft in the mid 1990s (not that the Justice Department would have let him develop anything better). But, because the newspaper industry is so disparate, antitrust issues will not be a problem.
  

Now, that is not to say that some newspapers shouldn't be allowed to wither and die on the vine, they should. A market like Albuquerque lost the The Albuquerque Tribune, and probably can't support two major papers. So, some should go away, no doubt about it.

Now I personally don't take any newspapers, 1) I don't like the black ink, 2) it makes me sneeze, allergic, and 3) I hate the waste, the landfills, and all those trees. I just can't stand them to pile up. I personally can not see me subscribing to any newspaper in the future, unless I win the lottery.

That being said, I don't want the newspaper business to go away. There is something so Americana about the paper. I really liked movies like His Girl Friday, All the President's Men, Absence of Malice, Penny Serenade, etc. There is something that I have really identified with since I was a kid, with the newspaper and the newspaper business. I even really liked that TV show, Lou Grant, too. There is a romance to the newspaper business that radio and television just don't have (or maybe they have their own romance, but it is different). There is something about that tactile feel of having a newspaper or book in your hand that you will never get off of the Internet. Just carrying the newspaper (not necessarily reading it) gives you a certain sensation you'll find nowhere else.

I can remember one of my favorite movies as a kid, The Man Who Shot Liberty Valance, and one of the things that I liked most was Dutton Peabody, esquire, of The Shinbone Star. Newspapers in America in the 1800s helped shape the nation and how it grew. There was no television, radio, or Internet then. To a small town popping up out in the West, a newspaper was as essential as a mercantile, a feed store, a bank, and a jail.

Newspapers are part of the interwoven fabric that is America. I can still remember on trips long ago, going to the hotel room and getting a newspaper from a city I had never been to before, and just having it with me, just carrying it around, it altered how I perceived being in a new and strange place. It is like now, when you go to a new city and see a restaurant that you recognize, you feel a little at home (although I go out of my way to look for unique local haunts that I can't find at home). Newspapers can help make the traveler feel that way.

What about all those books, stories, and films that would not have happened without the newspaper business? We probably wouldn't have Marley & Me (just as one example) if John Grogan had not written a column that included the active Labrador for over ten years.

Just like those old dusty towns like Shinbone, if newspapers mis-manage or don't adapt, they will just be a legend. And you know how that goes; "when the legend becomes...." But, they won't print the legend, they'll have to beam it, transmit it, and blog it.

So, let’s not the let the newspapers die away. Let find a business model that works.

(But, be warned: I will not pay a lot for content. The price points will be critical.)

Labels: Business, Newspapers, The Newspaper Business

On Mon Feb 9, 2009 Reuters ran this story by Tomás Sarmiento:

"Mexico to fingerprint phone users in crime fight"

Here is what I see happening because of this law:

A group will kidnap someone, then stash him, then drive down the street until they see someone talking on a cell phone, walk up to the person, shot them, take their phone, make the call, throw the phone in the trash.

Rinse, lather, repeat.

They will just keep repeating the cycle.

Unfortunately, this law will actually increase crime and murder in Mexico.

Once again the Mexican government is too far behind the question to come up with the right answer.

They need to declare martial law and lock down the country, one section at a time. The problem is so bad that only a slash-and-burn approach will work.

Labels: Mexico crime