The Great Social Security and Medicare Panic – Time Magazine, May 2009

It is becoming increasingly clear that one can gauge the direction of the Obama White House by the crises of the day.  It’s the old ying and yang, the noisy wheel gets the grease model.

With this said, what’s the latest trend we need to focus on? Health care. According to the White House, the American way of health care is broken and must be fixed. We can no longer afford to have a health care system that leaves 46 million uninsured, others overcharged, and even others under served.

A deadline of July 31st has been given to the House to get a proposal ready. It should be noted that to date, this deadline has been solely a partisan one. Once the House measure is detailed, it can then move on to the Senate where it will be fine tuned and then returned for reconciliation and passage before years end.

Winners and losers (yes, there will be both.) The winners: big government, social architects, the largest health insurance carriers, and those wanting a socialized medical system in the U.S. By containing costs, we also limit choice. Only the very few of the largest and wealthiest insurance carriers will be able to compete. We’ll see many smaller carriers disappear.

A predication: the passage of this medical insurance reform legislation will be but the first of several reforms yet to come. The change won’t be complete until the Obama administration has in place a health care system aligned with those in Europe and Canada.The cost for this reform, beyond our freedom of choice, is estimated to be an additional 1.2 to 2.4 trillion dollars. A cost to be covered by new taxes.

Among the losers: you and me, drug companies, and many smaller insurance providers. As has been clearly demonstrated throughout the rest of the world, drug companies will no longer be able to afford the high cost of new drug research. Pharmaceuticals will not only have price fixing attached to them, but there will be little to no flexibility to conduct the research that has made U.S. drug companies the one resource for innovative drug treatment.

In spite of Obama’s promise of “no new taxes.” The costs related to socialized medicine have to come from somewhere. That somewhere? New taxes on a variety of items that today are untaxed: soft drinks, Snapple, and whatever else that government can get their fingers into.

In fact, it could be argued that this medical intuitive holds the answer to the pending Medicare deficit. Why not simply nationalize the entire health care system, thus including Medicare services within the larger health insurance coverage?

The door has been unlocked. It will soon open a crack, followed by a rush to get “affordable“ universal health care available to all. Big brother wants to be sure that you’re taken …umm, taken care of.

What exactly does a community organizer do? In broad terms, the community organizer engages with an identified group of people, facing specific issues, and who individually have no voice in the political/economic process.

While community organizing is a sub-section of the skills taught to social workers, most organizing efforts that are familiar to us have been led by ministers, lawyers, or other self-proclaimed leaders.Al Sharpton and Jesse Jackson come to mind when discussing contemporary organizers. Historically, the names of Susan Anthony and Martin Luther King are well known community organizers.

What makes the activities of community organizing different from most other social organizations is that community organizers generally assume that social change necessarily involves conflict and social struggle in order to generate collective power for the powerless. And it is the organizer who helps his or her community first recognize that there is an issue, that someone or something out there is responsible for the perceived injustice, and that collectively, the people can create change. All noble beliefs.

Often overlooked is the radical underpinnings of community organizing. The accepted premier mentor of community organizing is Saul Alinsky, who, interestingly enough was based in Obama’s own backyard: Chicago.

Alinsky’s influence on Obama is unmistakable. His commitment to the poor, radical action for change, a government that is responsive to the issues as being the solution and the appearance of transparency all become an ingrained view of the world. The role of being a community organizer is a heady job. He or she often find themselves being able to excerpt influence on the upper echelons of political power. Gaining favor and favors in return for blocks of votes.

But the main feature of a trained community organizer is the world view that any “… revolutionary change must be preceded by a passive, affirmative, non-challenging attitude toward change among the mass of our people. They must feel so frustrated, so defeated, so lost, so futureless in the prevailing system that they are willing to let go of the past and change the future. This acceptance is the reformation essential to any revolution.”

A close examination of the skills and tactics of Barak Obama seems to reflect that his roots as a community organizer remain a cornerstone of his approach to power and politics.

In fact, the number of people “downgrading” to Windows XP continues to grow. (This user, among them.) The Vista system, with its highly touted bells and whistles was marketed as an answer to the Apple operating system. Complete with snazzy graphics, ease of use, and intuitiveness, Vista never lived up to its claims.

With the release date for Windows 7 moved up to August of 2009, Microsoft is hoping it can overcome the dismal sales of Vista. Microsoft has good reason to be wary of shipping Windows 7. Windows Vista, the company’s current OS, experienced a number of setbacks almost from the moment it debuted in January 2007. Among its many problems were: incompatible applications and device drivers, user complaints about Vista’s hefty hardware requirements, and intrusive security measures that sought manual approval for even the most routine tasks.

In an effort to make Vista more user friendly, Microsoft created a giga-byte monster that confused and angered the user.

Over in Cupertino, California, Microsoft’s rival- Apple, wasted no time in lampooning Vista’s foibles through a series of commercials, featuring the cool Mac guy and nerdy PC guy, that became instant classics in the ad and tech industries. Dissatisfaction with Vista also caused most major enterprises to shun the OS and hang onto predecessor Windows XP well past its intended shelf life.

As a result of these issues, Microsoft saw Windows sales fall 16% in the most recent quarter. Now, they are praying that Windows 7’s will receive early favorable reviews. They also hope that new features such as built-in touch screen support, will help it overcome the Vista debacle.

On a related front, Microsoft is readying itself to challenge Apple’s iPod with a June release date of the Zune player. In its advertising, Microsoft claims that it can cost upwards of $30,000 to fill the iPod’s memory with downloaded music, substantially more than the low cost fare for the Zune.

In addition, many reviewers claim that the Zune software is much easier to use. Can the Zune overcome the substantial marketing campaign of Apple’s iPod? Only time will tell. But for now, it would appear that the market strategy for the Zune is dead on. Easier to use, with less expensive music, perhaps the Zune can lend its marketing expertise to its big brother the Microsoft operating system.

Is Microsoft ready to shed itself of its stodgy image or is it so caught up in its old way of doing things that it can’t change? Time will tell and that time may be rapidly approaching.

Each manufacturer made additional money on car sales by offering car financing. Right or wrong, the system worked for the car makers, as well as the buying public.

This is all about to change. Big brother is about to take over not only the making of your next new car, but its financing as well. You and I are about to become major owners in the auto financing industry. GMAC LLC, the money-burning auto and mortgage lender, will likely join Fannie Mae (NYSE FNM), Freddie Mac (NYSE FRE), American International Group (NYSE AIG) and Citigroup (NYSE C) in your investment portfolio.

By the time all the checks have cleared, you may have sunk upward of $20 billion into this former ward of General Motors, an amount equivalent to $210,000 for each of the nation’s public schools. A central clearinghouse for auto financing added to your financial resume. Impressive.

One of the main tenants of capitalism is competition. When multiple products vie against each other in an open marketplace, we, the consumer, benefit. Prices are kept low, services often improve, and creative options become more common place.

With both General Motors and Chrysler products apparently on their way to being financed by the U.S. Government via GMAC, what does this mean to Ford Credit? As we know, Ford is the only member of the big three automakers to remain free of government intervention. Does this place Ford into an unfair position, having to compete with the force of the government to remain competitive?

Imagine this scenario: you’ve decided that you want to buy the latest fuel efficient Ford: the Fusion. You drive down to your Ford dealer, pick out a model, and negotiate a price. You’re all ready to take home the car of your dreams.

But wait, there’s a catch. Your financing through Ford Credit is going to be more than you thought. So you drive down to the Chevy dealer and try out their Cobalt. Nice car, same price. Everything being equal, you still like the Ford Fusion. Then your Chevy dealer presents you with the financing available through GMAC. $40 bucks less per month. “How can this be?” you ask. Your salesman tells you that with preferred rates offered through government financing, Chevrolet can beat any financing offered by Ford.

Can never happen?… I wouldn’t be so sure. The investment by the government can very well mean that this government-sanctioned company, GMAC, may well have an unfair funding advantage against Ford Motor’s Ford Motor Credit. Would it be willing to do the politically unpalatable work of cutting credit to certain car dealers? What happens if Congress decides to stimulate the automotive segment of the economy by mandating low-cost auto loans?

Pay attention, if not - your automotive choices may be substantially reduced…dictated by governmental agendas.

Too many marquees. Currently, GM has at least 7 different brands under their banner (depending on what you count as a brand.) Within each brand are several models, and then each model is further broken down, dependent upon options and other packages.

If you were to break down a count of all the different cars available from GM, you would end up with easily 1,000 or more unique cars. This is absurd. As Henry Ford remarked about Model T, “You can have any color, as long as it’s black.”  You end up with a high-end Chevrolet competing with Buick, or Buick competing with Cadillac. GM is overburdened with too many choices. Choices that often are competing with each other.

A dealer network that is too large. If you travel the main roads of any major city in America, you are likely to find almost as many different GM dealers as you do McDonalds (NYSE MCD) restaurants. GM’s approach to dealerships is nothing short of competitive suicide.

There is no greater area of problem for GM than the actual manufacturing of their vehicles. Within the burden of high paying union jobs and even more expensive fringe benefit packages, you can find the core of the expense nightmare.

The one bright spot on the horizon for GM is that its business in China is growing exponentially, and is making money. Sales in China are up by 31%. They are designing cars that meet the demand of the Chinese market. The next logical step is to build cars in China. A place where labor and benefit packages are more favorable.

The Detroit-based car maker said on April 9th that it expects to double annual sales in China to more than 2 million vehicles over the next five years, with more than 30 new and upgraded models being introduced in that span.

GM makes vehicles in China through two ventures, both of which are backed by SAIC Motor Corp. (SHA 600104) of China. There is some talk of the possibility of Chinese automakers buying GM brands. In addition to China ,GM is also making inroads into the Indian marketplace. It also enjoys success with the Holden brand in Australia. The handwriting is on the wall, GM is gearing up for the outsourcing overseas of its manufacturing of cars.

It will definitely be interesting to monitor the strategy that GM implements. It seems that it is a safe bet that we will see a shift away from the making of some brands of GM cars in the U.S. to their being made in China. GM will also downsize by spinning off several of its current brands such as Pontiac and Saturn.

All in all, we will see a much slimmer GM, with an international business model. Is this too little too late, or will it mark the emergence of a leaner, meaner GM? More importantly, is the American car-buyer ready to purchase a car made in China?

In the sports world, when a coach or player receives the thumbs up from management, it often bodes poorly for that person. For some reason, the management types feel a need to hide behind “unfailing support” for the person, when in fact they are on their way out.

No one does this better than Al Davis, the owner-manager of the Oakland Raiders football team. Davis has gone through more coaches than Paris Hilton has boyfriends. The beginning of the end for each coach is Davis’ “complete support” of the man. Or, what I like to call their “kiss of death.”

Now, this is not unique to any one sport, in fact it’s safe to say it’s not even unique to sports. The world of politics exercises this same approach from time to time. The latest “kiss of death” may well be the congressional court jester Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee support of Kenneth Lewis, the troubled head of Bank of America. (NYSE BAC)

To bring everyone up to speed, it was Lewis who brought the mortgage giant CountryWide and financial king, Merrill Lynch under the wing of Bank of America.

As reported by CNN Money: “…that Lewis should have borne responsibility for B of A’s failings is unquestionable. He paid too much for Merrill and conducted too little due diligence. And when pressured by the government to complete the deal after belatedly learning of Merrill’s woes, he did not do enough to alert his shareholders to the impending doom.”

Of concern with the Merrill Lynch purchase, was the large payouts of bonuses for an under-productive company. This, coupled with the absorption of bad debt with the acquisition of CountryWide led many to believe that Lewis’ tenure as CEO and chairman of the board was coming to an end. The stockholders meeting this week slapped his hand by removing him as chairman of the board while retaining him as the CEO.

Of course, Barney Frank felt it was important that he contribute his opinion. Now, remember this is the same man who assured us that investing in Fannie Mae and Freddie Mac was a safe bet. That these two entities were as solid as the Rock of Gibraltar.

In spite of investigations by the New York Attorney General’s office and what may kindly be called the collusion between Bank of America and certain government officials to purchase Merrill lynch, Old Barney had this to say about Lewis: “People say ‘What’s the matter with these financial executives? Why are they only thinking of their own narrow interest? What about the public interest?’ Frank said. “That’s what Ken did. It ought to be acknowledged.”

As usual, Frank is out of step with the facts, reported news, and the wisdom of the Bank of America stock holders. Kenneth Lewis has clearly demonstrated arrogance and selfishness in his actions. To say that these were acts of a benevolent corporate head is simply wrong.

Whether Kenneth Lewis will survive long term remains to be seen. But if I were him, I’d want to distance myself from the endorsement of Barney Frank. The endorsement of Barney Frank is an endorsement that has all of the ingredients of someone saying “he’s got my full support,” while all the while a search for a replacement is already under way.

Apparently, famed magician David Copperfield is now on the B of A payroll, because the financials for the first quarter of 2009 for the banking giant are nothing short of magic. Come on David, you can tell us, was it sleight of hand, a great escape, or disappearing debt that resulted in B of A’s turnaround, to report a 2 + billion dollar “profit?”

According to the New York Times’ Sydney Finkelstein, the Steven Roth professor of management at the Tuck School of Business at Dartmouth College, Bank of America booked a $2.2 billion gain by increasing the value of Merrill Lynch’s assets it acquired last quarter to prices that were higher than Merrill kept them.

“Although perfectly legal, this move is also perfectly delusional, because someday soon these assets will be written down to their fair value, and it won’t be pretty,” he said.

Investors reacted by throwing tomatoes. Bank of America’s stock plunged 24 percent, as did other bank stocks. They’ve had enough. Ah yes, it is slieght of hand it seems.

This latest trick, is on the heels of many other B of A problems. The investigation by the New York Attorney General’s office into a financial conspiracy, and the ongoing questions around how forthcoming B of A president Kenneth Lewis was when he signed off on bonuses to Merrill Lynch executives, just to name a few.

Here’s a financial institution that went from receiving an exorbitant amount of federal bail-out funds to reporting a profit of billions, before the ink of the signing of the loans was even dry.

Why did Bank of America adjust its figures to reflect this amazing turnaround? It may simply be more of Lewis’ arrogance, an effort of the B of A board of directors to put on a “happy face,” or an effort to redirect public and stockholders attention away from their own internal strife. Or just maybe it is some other type of leverage approach. All that i know for certain, (based on the history of B of A in recent times) is that the manipulation of their financial figures has an ulterior motive.

Whatever the reason or reasons may be, it stinks. You’re either broke or your not, and any paper manipulations only serve to raise both the ire and the suspicion of people like you and me.

Then again, maybe it’s all simply black magic. Whatever it is, those of us affected by these shenanigans can rest easy. Whatever the motive of B of A is will come to light under the intense scrutiny of transparency, right? …..Yea, right!

There was a certain feeling, having my very own barista custom blending each delightful cup of coffee to my order. Latte’ mocha, iced coffee, each one a delight to the nose and the taste buds.

Turn to today, and we are running the risk of losing our very own piece of the coffee world. If the trend continues, soon we will be relegated to buying coffee from one of those fast food joints.

I never thought that I’d ever see the day when my alter to the coffee god’s teetered on the edge of the crevice. But this may be the beginning of the end. Starbuck’s recorded a drop of 77% in income, when compared to last year.Starbuck’s continues to try and put a halt to its losses. It has closed stores, cut back on hours, reduced costs, and tried to improve customer service. Seemingly all to no avail.

So what happened to Starbuck’s? Chief among the issues facing the one-time coffee giant can be summed up by this evaluation by CEO Howard Schultz, who said Starbucks has become the “poster child for excess”… and he wants to shake that image.

Add to this the big push by McDonald’s (NYSE MCD) to cut directly into the Starbuck’s business plan. They rolled out the Starbuck’s look alike, with both fanfare and success. Now you had an option at half the cost. While other fast food outlets haven’t gone the route of McDonalds, both Burger King (NYSE BKC) and Wendy’s (NYSE WEN) are highlighting their early morning fare. Add to the mix the aggressive marketing of Dunkin’ Donuts offering their own special blend of coffee. Each one of these company’s cutting into the customer base of Starbuck’s.

Another challenge faced by Starbuck’s is location. As one of the kings of marketeering said “location, location, location.” The Starbuck’s plan was to place its coffee houses off the main thorough fares. Unlike its competitor, who has a store on almost every corner. Certainly the recent downturn in the economy has taken its toll as well. It simply seems extravagant to spend $3.95 or more for a cup of coffee.

In an effort to turn its financial woes around in fiscal 2009, Starbuck’s said it plans to add 20 net new stores to its global store base. It will close 425 company-operated stores in the U.S. and add 60 new international stores. It will open 65 new licensed stores in the U.S. and about 320 stores internationally.

Rest easy…Starbuck’s should be able to recover its past glories in the world of coffee. Will it be the king once again? Probably not, but it can remain a strong player in its niche.

Many of us were justifiably angry. Here we are, facing a major economic slump with individuals and businesses both in a world of hurt. Yet, somehow and from somewhere, large companies found the resources to pay out bonuses. Maybe from our bailout funds, you think?

Our emotions ebbed and flowed. Some even took tour bus rides to see where and how the AIG bonus-receiving folks lived.

Just when you thought it was safe to get back in the water…here we go again. This time, it’s Fannie Mae (NYSE FNM) and Freddie Mack (NYSE FRE) who have produced the death defying deed of … hold on to your hat now …bonuses!!! That’s right, these two stalwarts of the home mortgage landscape are as we speak writing $210 million dollars worth of bonus checks.

Crazy? Yes, but it’s happening right before our very eyes. Thank God for transparency. But what good are glasses to a blind man? The reason given for the bonuses: to retain key employees to insure the continued success of Fannie Mae and Freddie Mac. Give me a break. It seems to me that the last thing these two blood sucking entities would want is to keep the very people who created the 108 billion dollar loss that required a major federal bailout.

In a statement Friday, Iowa Republican Sen. Charles Grassley said: “It’s hard to see any common sense in management decisions that award hundreds of millions in bonuses when their organizations lost more than $100 billion in a year. And, it’s an insult that the bonuses were made with an infusion of cash from taxpayers.” Can we have a big AMEN for the senator?

I know, I know, we folks out in the belt land of America once again feel impotent to do anything about these shenanigans. There is a sense that our world is spinning out of control. We end up doing exactly what those folks in Washington want us to do: tend to our own business.

Well, maybe we can do something. Just as people like you and I gathered for the symbolic tea parties held around the nation on April 15th, it’s time for more of us to join in expressing our outrage at how it seems to be business as usual on Wall Street and in Washington.

Tell us again Barney Frank, how secure and well run are Fannie May and Freddie Mac? How did these two firms amass billions in debt by loaning millions of dollars to people who simply weren’t able to pay it back?

If you’re angry, (and I think you should be) talk about it with others. While your at it, write a letter to your representative in Washington, outlining your anger and have you and your friends all sign it. Find out who organized the tea party in your area and get in touch with them. Do something! Together, we can reclaim our country!

Chrysler is truly an international traveler, having its ownership moved from the United States, to Germany with Daimler-Benz (NYSE DAI), back to America, and now on to Italy, via Fiat. (OTC FIATY)

The business world is touting the appointment of Sergio Marchionne, the current maestro of Fiat, to head up the troubled U.S. car maker. Only time will tell.

While the possible bankruptcy of General Motors (NYSE GM) seems inevitable, little is reported on the fiasco over at Chrysler. Chrysler has had a rough time of late. Its best seller is a gas guzzling line of trucks. Their car lineup has little to attract attention to the dealer showrooms except for an occasional niche model.

Initially touted as an opportunity to merge German precision with American marketing, the Daimler-Benz partnership turned out to be a bust . At a time when the U.S. auto buyer was looking for improved durability, greater gas mileage, and greener technology, the best Chrysler could come up with was the same old models with the caveat of implied German technology. A business model that never caught the imagination of America.

The demise of the German/American partnership brought ownership of Chrysler back to the good old U.S. of A., but under the management of an investment company with no ties to the auto industry. Chrysler became a rudderless ship and remains one till this day.

Enter Fiat! An Italian auto maker with a long history of car design. Fiat has become the king of Italian automakers, owning such marquees as Ferrari, Alfa Romeo, and of course- Fiat. With a list of automobiles ranging in price from more than a quarter of a million dollars down to under $15,000, Fiat has expertise in a very broad range of auto technology and marketing.

What’s in it for Fiat? Well, you need look no further than one of the high cost of establishing a network of dealers to sell and service their cars. This can prove to be a deal breaker because of costs and logistics.

The main focus of Fiat is the international expansion of its current market share. Fiat has expanded its market throughout Europe and into Asia but has, until now, been locked out of North America. By joining forces with an American based company like Chrysler, a door opens for Fiat to access a dealer network through Chrysler that is up and running. It also allows Fiat to import both its prestigious but high priced Alfa Romeo line of cars as well as its more economic Fiat lineup. In return, Chrysler gains the immediate addition of the line-up of Fiat’s, which includes several models that are in-step with the current trends among U.S. car buyers.

What’s the downside, you ask? Well, those of us who have strong roots in the American love affair with the automobile, best be prepared for the demise of many of the Chrysler marquees. Imperial, Plymouth, and DeSoto left the list of favorites decades ago. All that’s left is: Jeep, Chrysler, and Dodge. When the showrooms begin to fill with Fiat and Alfa’s, will there be any room for our traditional favorites? Once again, only time will tell.