the answer: there’s nothing wrong with America. There are some things that need to be changed. But our fundamental values and ideals are intact; we have god-fearing, hard working people, and still – in spite of some problems (notably too much unemployment) – the strongest economy on the planet. For over sixty years now we’ve been a model for the world, and we’re still the place that other countries want to emulate. Sure, there are some things that need to be fixed or reformed, like a broken immigration system and an unfair tax code. We need to close the income gap between rich and poor and make things fairer for everyone. But the main thing we need to do is put average, hard working Americans back to work in good high paying jobs.
Just in case there is some confusion, let me re-define “average working American” for the average working American. If you depend on the income from your job for basic food and shelter – when you infrequently travel, if you fly coach on a com-mercial jet, if your salary or compensation ( adjusted for inflation ) has essentially been flat for the last thirty years, if you can’t afford to pay your student debt or send your kid to college, if you lost your house or were foreclosed by the bank in the housing collapse, if you think you’re part of the one-percent, but you don’t own a two million dollar condo in Vail and you pay your taxes rather than hiding your money in an off-shore account in the Cayman Islands – then you are an “average working American.”
The problem with America is not the people who work down on the manufactur- ing line or the corporate cubicle, it’s the people up stairs in the executive suites, the privileged corporate elite with their over weaning sense of entitlement, the idea that they have been somehow anointed by God, granted some special dispensation. We hear epic stories of the long hours they work, their enormous and deep personal sacrifice. The idea that anyone of these guys is irreplaceable and worth 250 to 300 times the pay of their average worker, plus bonuses, is pure P.R and bullshit of the stinkiest kind. If you believe this crap there’s something wrong with your head.
Corporations today are sitting on record amounts of cash, and earning record profits – money that could be invested in new plant and equipment, the hiring of new workers to grow the real economy. Yet these inept corporate honchos, the truly vision less morons who run America today all complain that the Fed’s actions are creating too much uncertainty. There’s political gridlock in Washington, and too much regulation on business.These are all crappy and really lame excuses, and just a lot of whining. Get real for Christ’s sake. This is life, not some fuzzy, feel-good fairy tale. There is no perfect reality. And nothing comes with a guarantee. You have to take chances. That supposedly is the spirit, the essence of entrepren-eurial capitalism. And that’s what is sadly lacking in America today. If you’re a real free-market capitalist, a CEO who truly believes that the private sector can do better than the government in spurring employment, then get with it for Christ’s sake. What are you waiting for the second coming. Get some balls! Start hiring; invest in your business and invest in America, or give the money back to your long suffering shareholders. Corporate America needs to a part of the solution, and not just a continuing, on-going part of the problem.
American CEO’s need to get away from the notion that they can cut and out source their way to glory. That all you have to do is work out of the Jack Welch playbook, lay off as many people as you can and the numbers will somehow take care of themselves and you’ll be crowned by the Business Roundtable and assured your bonus. We have too many bonus prospectors in today’s economy and not enough real entrepreneurs. You can’t build this country up by tearing down the labor force and impoverishing the middle class. Since the early 80’s incomes for average working Americans ( adjusted for inflation ) have been flat. Between 2008 and today over 90 percent of the increase in national income has gone to the top two percent of wage earners. That’s what’s wrong with America.
If there’s a weakness in the system it’s the total lack of commitment and leadership coming from the limp dicks sitting in executive suites across corporate America. Instead of bold visionary leaders, risk takers and dynamic builders, we’re stuck with a lot of bungling, no talent corporate caretakers who drag down huge salaries and bonuses, a bunch of middling cost cutters – private equity stooges like Mitt Romney whose only skills are in downsizing and outsourcing jobs to Asia. These guys make me sick. There’s not a Henry Ford, an Edison or even a Steve Jobs among them.
Take the S&P 500 for instance, you could take the CEO’s of all these companies out tomorrow morning, line them all up against a wall, and shoot the whole lot and American business wouldn’t miss a beat. Behind everyone one of these overcom-pensated idiots there are at least five more idiots who believe deep down that they could do a better job. Three of them could probably perform at least as well. One might be better. And another one worse. But that’s still a sixty percent chance that nothing would change. Only twenty percent that things would be worse. And an equal chance that prospects could actually improve. Most of these stumble bum corporate titans are simply place-holders who contribute nothing to the broader economy and couldn’t grab their own asses with both hands in two tries. And after they’ve screwed up, run a company into the ground, you can’t even get rid of these cockroaches without giving them tens of millions of dollars in severance just to go away. Discredited United Health CEO William McGuire, after being embroiled in an options scandal, left with 286 million. Home Depot’s Robert Nardelli, after a short and largely unsuccessful turn around attempt, received 223.3 million just to please leave. Any shareholder who acquiesces to this is kind of extortion is dumber than a box of rocks. And that goes as well for the mutual fund manager who is supposedly paid to be a fiduciary for other people’s money.
Commerce ( business ) is the real religion in America. People are never more reverent or pious than when they’re talking about their jobs or their money. It’s in this context that CEO’s became the patron saints of American capitalism, eulogized from the mid 90’s as if they’re living candidates for sainthood or deification. This is almost ludicrous when you think about it; but it happened, with all the fervor of a tent revival. Somehow we developed in this country the insane notion that the corporate executive suite is the principle incubator of excellence in our culture.
In the late eighties and especially the boom time of the nineties, the cult of the CEO developed and the business media elevated these priestly pretenders to Olympian heights. It was like Jamestown, and there was plenty of Kool-Aid to go around. This was silly back then, and it’s still silly today. In those heady days however, John Chambers ( the high flying CEO of then high-flying Cisco) achieved almost rock star status ( the Mick Jagger of Silicon Valley ). He would go on CNBC and sing the praises of high-tech and entrepeneurial capitalism, talk with messianic fervor about his company and the stock market like they were both a kind of Holy Grail, and walk on water to the cheers and hosannas of all the faithful. People like that Mad Money clown Jim Cramer. Just when it looked like all these tent evangelists were candidates for permanent establishment on the ceiling of the Sistine Chapel, the dot-com bubble burst, followed by the housing collapse and the 2008 financial crisis. None of this ( according to the free-market catechism ) was supposed to happen ( like the ’29 Crash ), and caused even the most prayerful to re-consider their faith. It was Babylon re-visited, and suddenly – horror of horrors – the whole American management clergy was defrocked. Well, sadly for America – if the truth can be told – these disciples of money and greed really can’t walk on water and, despite what their publicists would have you believe, they don’t perform miracles either. But you don’t have to just take my word for it.
Back in eighties and into the early nineties, Peter Lynch was a manger of the very successful Magellan Fund, one of the mutual fund industry’s premier performers. He was a bottom-up style manager and investor. He believed that you buy solid, well-run ( niche businesses ) and don’t worry about what the broader macro econ-omic economy is doing. His advice to the average investor: buy stock only in com-panies that a moron could run because more than likely one day there would be a moron running them. He obviously was not enthrall to the myth of the miracle working CEO. His advice is significant and, I think, worth heeding because he and his team of analysts took special pains to investigate thoroughly any company before they invested. He knew these bosses personally and, as one of their biggest investors, followed up and talked with them routinely on matters concerning their respective businesses. From this special perspective, his opinion is relevant and well worth considering. Also, he is a man of considerable honesty and integrity, and not given to hyperbole.
It’s good to remember, I think, that for the most part these are average people. There is nothing special about most of them. The notion that these guys all walk on water – that they’re indispensable to their companies and the broader prosperity of the U.S. economy is a complete myth and one of the biggest con jobs ever perpe-trated on the body public. This is just the sort of bull shit that you get from the U.S. Chamber of Commerce, that you hear on CNBC from the likes of that sniveling dwarf Larry Kudlow and the whole cavalcade of pundit dopes and analyst clowns that they parade through there every day. And if you take any of it as gospel -well, then God bless you and keep you.
Now we’ll take a look at some of the more hilarious examples of recent CEO flubs and foibles, corporate mismanagement and buffoonery. Remember, these big corporate honchos are all hard-core free-marketeers, “get the government off our back” hypocrites like Jeff Immelt: that is , until their firms get in trouble and something goes wrong with their business. Then they polish up their American flag lapel pin and hop the nearest corporate jet to Washington looking for a handout – or a bailout.
At the bottom of the 2008 financial panic, just following the collapse of Lehman Brothers, Jeff Immelt – CEO of General Electric Corp. – called his friend Hank Paulson ( then treasury secretary ) and went hat in hand to the U.S. treasury to get 30 billion of TARP bail-out funds, money it really didn’t need, to protect his bonus – and most probably his job. At this point in his celebrated career, Mr. Immelt had apparently not yet learned the time-honored, elementary lesson of the perils of bor-rowing short and lending long. At the peak of the crisis, rates in the commercial paper market spiked, causing a sharp increase in the cost of rolling over or re-funding these short-term loans. In the panic of the time, word was filtering through the media that the frozen commercial paper market was threatening to take down mighty GE. GE was never in any danger of being bankrupted, or anything even close. This was all media hype and hysteria. But if it couldn’t role over its matur-ing commercial paper then the company would probably have been forced to sell-off assets in a panicked market or raise additional long-term capital either in the form of equity or debt, either of which would have caused a dilution of earnings, and most certainly have put Mr. Immelt’s bonus in jeopardy – not to mention his job. In any event the shareholders and bondholders should have taken the hit. But instead the taxpayers in the country were called upon to step into the breach. This is not how real, honest capitalism is suppose to work.
At the same time on Wall Street the old-line banking firm of Morgan Stanley was under a very real threat of going away. Technically the firm was bankrupt. But just following the demise of Lehman, John Mack – the then CEO of Morgan Stanley – used the force of his formidable personality to brow-beat a confused and belea-guered Hank Paulson to get the government to step in and loan Morgan Stanley funds against a pool of deeply discounted stock, junk debt and what otherwise should have been wholly unacceptable collateral, also to pressure the SEC to issue a short-selling ban on Morgan Stanley stock and that of other banks and financial institutions. AIG the big insurer needed 180 billion to make good on its CDS ( Credit Default Swap ) commitments to Goldman Sachs and other big Wall Street banks and brokers. Not long after taking down the 180 billion of taxpayer money, company executives were caught trying to pay out bonuses to the very idiots who had caused the crisis in the first place. This actually happened.
After the 700 billion in TARP money, the Fed doubled down with another 700 billion. Almost a trillion and a half dollars of government ( taxpayer ) money went into resuscitating the big Wall Street banks, protecting their stock prices and shoring up the capital markets. Again the share-holders, bond-holders, hedge funds and speculators should have taken the hit. Again though the public ( tax payers ) had to step in and stand the gaff. Also be mindful, 90% of the wealth in this country is held by less than 20% of the population. So who’s really being helped the most – Wall Street or Main Street?
In the years leading up to the 2008 financial crisis, there was rampant fraud,mis-representation and outright double-dealing by the big banks in the selling and marketing of the mortgage-backed derivative products that caused the crisis in the first place. There were later civil actions and some penalties, but no executive from any of the firms involved ever went to jail, nobody even lost a job. And today it’s just business as usual on Wall Street. These so called “Masters of the Universe” are shameless, just a bunch of coddled and privileged primadonnas, like the feudal lords of medieval times. These guys should where ski masks to work every day. They’re accountable to no one, a gang of self-serving crooks who’s first reaction is never to do what’s right or most helpful to the country and the economy, but whatever will protect their bonuses and stock prices. This people is what’s wrong with America.
Tragically, this is what working Americans have come to expect from these vain and arrogant ( phony?) champions of the free market. If all of these “to big to fail” banks had been left to go away, it would have been the best thing that could have happened to this country.
In an almost hilarious example of executive “feet of clay,” the financial world was stunned just over a year ago to learn that J P Morgan had sustained a two billion dollar proprietary trading loss in what would come to be known as the London Whale Trade. Jamie Dimon, chairman and CEO, first claimed that it was a legiti-mate hedge and characterized the whole thing as a tempest in a “Tea Pot.” A true hedge – by definition – should produce a compensating gain for any loss. That, however, is not exactly how it all worked. The loss eventually expanded to over eight billion dollars, and there was no compensating gain. If you’re a J P Morgan shareholder you probably should be asking yourself (why?). Mr. Dimon is lauded as the best “risk manager” on Wall Street. That was before he demonstrated that he apparently doesn’t know the real difference between a hedge and an outright net position. If Jamie Dimon is indeed the best “risk manager” on Wall Street, then – given all the financial weapons of mass destruction still loose there ( a time bomb still ticking in the very heart of the financial markets ), the frenetic trading in highly leveraged OTC ( over the counter ) derivatives that still goes on – this country is really in deep trouble because there will be another financial crisis. It’s just a question of when?
More recently, Ron Johnson was fired from his job as CEO of J C Penney. He was supposedly the genius, much bally-hoed retailer brought over from Apple to turn around the struggling retailer. This is a good example of the old cliche’ trading aphorism “… never confuse brains with a bull market”.
At Apple Mr. Johnson was selling a unique and some would say revolutionary, highly differentiated electronic consumer device that young people, between the ages of 15 and 35 considered absolutely essential to their life style, enough so that they would stand on line for hours – overnight if necessary – just to be first in the door. This is a lot different than selling a pair of ordinary every day jeans to a budget conscious mom.
This subtle but salient fact was however apparently lost on the Penney board of directors. Sometimes these corporate boards are even dumber and more incom-petent than the CEO’s they hire – if that’s even possible. A good example of a totally dysfunctional board is H P ( Hewlett Packard ).
J C Penney spent 170 million dollars ( this is no shit ) just to “install” Mr. Johnson and his team of top three executives. Is this a joke or what? If you’re a Penney shareholder you have to hope so. Any corporate board that would countenance this kind of extraordinary expense should be sued for malfeasance. This is a disgrace, but this shit goes on all the time. Shareholders wake up for God’s sake. This is your money these dopes are giving away.
No matter though, it seems that Mr. Johnson’s particular genius at Apple did not transfer to selling jeans. Really? Anyway, less than a year and a half later, after burning through all the corporate cash, impairing the company’s balance sheet, and alienating half of the remaining Penney customer base with his new pricing strategy, the board finally decided – probably reluctantly – to let this turkey go. This is remarkable in itself. Usually you can’t get rid of these chuckle heads. They’re like a bad case of herpes. Mr. Johnson though has the dubious, almost singular dis-tinction in corporate America of actually being fired
It should come as no surprise that the American economy is under performing. The big banks are sitting on their capital and over leveraging their balance sheets to trade in the speculative, high risk derivatives market, holding onto reserves and not lending to the productive Maim Street economy. And corporations are sitting on their cash and not investing, not hiring. Again this is what’s wrong with America.
Business in this country works — only because the average American works. This has nothing to do with CEO prescience and infallibility, or the highly leveraged high jinks going on on Wall street. The next time there is a round of big pay increases, perhaps the money should go to the average hard working American down on the factory floor or in the office cubicle.
I’ve tried to illustrate here in a few high profile examples some of the grossest and most egregious cases of corporate ineptitude and malfeasance. But be assured, these are not rare and isolated examples. Everyday across the length and breath of this great nation this same kind of shit is going on in companies big and small that don’t regularly garner the attention of a sometimes myopic and spellbound financial media.
Not all CEO’s are incompetent, and not all boards are stupid. But the eighties and nineties notion that these jug heads are Marvel comic book super heroes is totally bogus. There are no caped crusaders in America’s executive suites – no Iron Men out there. These limp dicks go home on the weekends – their wife and kids won’t talk to them – and have the same trouble starting their lawn mower just like the rest of us.
I’ve had occasion, in my time, to observe some of these guys close-up; and they’re not that impressive, mentally or physically. You know there’s something wrong when they’re walking around in $2,000 Armani suits and still look like they just crawled out of the bottom of some kid’s toy box. And they’re not that great to be around. Believe me, most of the time you can have more fun alone in your room training your pet squirrel to do double back flips.
. . .The Money Trader