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4/18/2012 7:56 AM
Herding Us in Mega Metropolis – The Game Plan
By Charles Payne, CEO & Principal Analyst
Question of the Day
The Omaha Oracle told the world about his cancer, unlike the way Steve Jobs handled his condition. Buffett vs. Jobs: how much CEO info do shareholders deserve?
Post your answer below.
I get a lot of grief for bringing up Voltaire or more obscure figures from the European Enlightenment movement like Robert Owens and Malthus, but there is no doubt we are being ushered into an existence that was crafted by these dreamers of a modern day utopia. They espoused the shared sacrifice and collectivism theme that is being sold to the American public. Yes, this will be the most important election in our lifetime, because it could usher in an experiment that can only end in disaster. The masses may cheer the notion of wealth redistribution and the comeuppance of the rich (and not so rich) until they live in a world where jobs fade, incomes atrophy, and quality of life deteriorates.
After a rip roaring adventure that saw love and heartbreak, war and death, and wealth beyond imagination, the characters in Candide decided life was so much sweeter in a commune existence where everyone pulled together their strengths to live the perfect life.
Final Paragraphs of Candide
The little society, one and all, entered into this laudable design and set themselves to exert their different talents. The little piece of ground yielded them a plentiful crop. Cunegund indeed was very ugly, but she became an excellent hand at pastrywork: Pacquette embroidered; the old woman had the care of the linen. There was none, down to Brother Giroflee, but did some service; he was a very good carpenter, and became an honest man. Pangloss used to, now and then, say to Candide:
"There is a concatenation of all events in the best of possible worlds; for, in short, had you not been kicked out of a fine castle for the love of Miss Cunegund; had you not been put into the Inquisition; had you not traveled over America on foot; had you not run the Baron through the body; and had you not lost all your sheep, which you brought from the good country of El Dorado, you would not have been here to eat preserved citrons and pistachio nuts."
"Excellently observed," answered Candide; "but let us cultivate our garden."
The campaign against wealth has several components including the clean/green approach. There is the idea that economic policy should be based on a farfetched notion of fairness that attacks hard workers while dissuading others through transfer payments, earned income tax credit, food stamps, welfare, free medical care, free shelter and even more goodies, from even considering the risk and sacrifice that go into earning more than $200,000 a year. The plan is in full effect, using government agencies, Hollywood, and fresh interpretation of laws.
There is one area in this nation that has been changing in plain sight. The change eschews ownership and promotes the collective good. The change is literally occurring right in our backyard. It's the decline of ownership of detached homes as we cram everyone into mega cities where we are easier to control while allowing nature more space to grow. The implosion of the economy has provided the smokescreen needed to promote this agenda without actually advertising its existence.
Living for the City
Yesterday, we got the latest on housing starts and building permits data and the trend is speeding along. Overall starts dipped to a five month low with an annual rate of 654,000, well below consensus of 705,000. Permits, on the other hand, surged to an annual pace of 747,000, well above consensus of 710,000. Driving the move in permits:
Multifamily units +21%
Single family units -3.5%
While one might say this is just a natural pullback from homeownership, it is being nudged along through legislation. California is setting the pace where areas of Los Angeles County and five other Southern California counties have ordered new housing to be built 20 to 30 per acre. According to Infowar.com, these rules emanate from a group of laws including the 2006 Global Warming Solutions Act and 2008 Sustainable Communities and Climate Protection Act. In other words, we are doomed to be a nation of apartment dwellers so that we cut car uses and limit CO2 emissions.
I think it's deeper than just saving the planet. It's about control. It's about mitigated desires for wealth and material items that could be provided through central government planning. It would be a benevolent central government whose guidance and power would be worshiped. This kind of stuff has always worked best in California where the inflection point between takers of tax revenue and payers of tax revenue has become so skewed that the former will continue to vote in goodies even if it they also vote in high living expenses and less fortune.
The homebuilding trend in California says it all. In just four years, single family residences, once built at a ratio of three to one to apartments and condos, will actually grow at a slower rate this year.
I'm not sure how we get a recovery in housing when detached homes are going to be demonized along with other trappings of success in yesteryear. I'm not shocked the street overlooked yet another raggedy housing report, but I am disappointed so many people are letting this noose tighten more and more.
If you get a chance, buy land in the Midwest, maybe Wyoming, and avoid being herded.
|If it requires hospitalization, a clear announcement should be made. Otherwise, the rumor mills will hurt the stock even more. In Buffett's case, this is fairly good news. Prostate cancer is generally very manageable and he can still live for a long time. Dementia will probably get him first.|
Dennis Howard on 4/18/2012 10:25:36 AM
|The CEO should be transparent on this matter. Disclose the problem and anticipated severity, with a reasonable degree of optimism regarding the prognosis.|
PS Everytime I read your anti-spam question I think of the Harry Chapin song "Flowers are Red".
Rick Hathaway on 4/18/2012 11:13:45 AM
|Reveal serious problems like Buffett.|
W.B. Gauert on 4/18/2012 1:11:54 PM
|That we've gotten confused over what's personal became apparent to me when my department head decided it was perfectly appropriate for the employee working next to me to floss her teeth at her desk. Now, we've got that bizarre crotch-groping ritual to perform before getting on an airplane. No wonder even the judgment of people like CEOs who are paid to have some is eroding.|
Patricia Flynn on 4/18/2012 2:42:26 PM
|Following some bad experiences I'm generally wary of communal living. Voltaire notes the reason as a passing note in the paragraphs you quote - "There was none, down to Brother Giroflee, but did some service..." My experience has been that many people are long on talking and short on doing, and I got tired of such folks telling me what to do while they did little or nothing to help. If everyone is pulling in the same direction things can be great. In the mass herd of people you get many that will not pull so hard, or will not pull, or - worse yet - will stop pulling so they can "do the work" of telling others how to pull better. |
Keep up the good work Charles!
Mike on 4/18/2012 3:57:10 PM
|I think the answer to your question is related to what role the CEO plays.|
In really great companies, the CEO is no longer a key figure, and losing him (her) will have no immediate effect. He has shared the vision and implanted it in the staff. He has chosen the staff well and trained them to do the job. He does very little other than a nudge here or there to keep the ship on course and preserve the long term vision. Unfortunately, this is very rare and often not well recognized by somewhat ignorant Wall Street denizens (if they knew what made good management, they would be managing a company instead of trading stocks). Such a manager once headed GE - we all know him. Mr. Welch created a great training program for senior executives, and he left the company in superb condition for many profitable years. For such a great manager, all should be revealed as soon as real facts, a medical prognosis, and a plan for the future of the company are well planned. There is no urgency, so get the facts right.
Then there are the visionary CEOs who are not great managers. They are key to the future of the business, because they have not put in place a strong staff that knows how to run things alone. I say immediate revelation is appropriate since the company is materially affected. It should be well worded, honest, and include a plan for when the prognosis will be complete. And ongoing info should be released as soon as it is available.
Then there are the majority of big company CEOs. They are overpaid, non-visionary, self-serving, and marginally competent. (Except the pay, does that remind you of a CEO who rules from a white house?) They have marginal success because they sit in the bully pulpit where they can get a little success just from the effect of forcing their will on the business, and a lot of pseudo-success because they can twist or omit the truth from the reports to the board and the stockholders. They get tens of millions annually in pay and have a net impact on the company revenues in lost billions and the net profits in lost hundreds of millions due to their obsession with cutting costs and their lack of a vision for success. (I used to be in the semiconductor industry, this applies to most of the so-called leaders there). Since these leaders contribute little good to the company, who really cares whether they remain healthy enough to continue holding back the company? They have replaced every honest board member with a lacky and their successor will likely be just as bad because there is nobody left in upper management with both a vision and a backbone. So let their health problems be kept private.
I would say Mr. Buffet fits best in the first group. Except for one former bad choice among his top staff, he has done everything very well.
Bob G on 4/19/2012 10:26:29 AM
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