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February, 2009:

A is A

As we are propping up the non-productive businesses on the backs of the productive ones, and as we are calling for less freedom than more freedom, should it be any surprise that Ayn Rand’s Atlas Shrugged is seeing renewed interest?

It’s truly a book worth your time. Dagny Taggart is the heroine, and you’ll find out the answer to who John Galt is. Hint: Galt is not a government commission or an Obama-appointed czar.

As long as it is, it’s shorter — and more pertinent to solving our economic woes — than the famed Stimulus Bill!

Dark Days

I love newspapers. I always have. As a precocious kid, I’d beat my father to the morning’s Chicago Tribune and read about Neill Armstrong’s Bears, the post-Bruce Sutter Cubs, the Jerry Sloan-coached Bulls. The sports page was loaded with stars, like Bob Verdi, Bill Jauss, Bob Markus, Jerome Holtzman, Bernie Lincicome, Sam Smith and Fred Mitchell. Only Fred Mitchell, the Cubs beat writer in 1984, remains. Today, the Tribune is a shell of its old self. I question whether the next subscription renewal will be my last.

Markus is retired, and he checks in once a week on his blog, a recommended read. Tuesday, he wrote a bit about the state of the industry.

The paper I once wrote for, the Chicago Tribune, once a Colossus of the industry, has gone into bankruptcy. I haven’t seen it for awhile, but friends tell me it has become a hybrid, a traditional broadsheet for home delivery, but a tabloid at the news stands. The paper I read now, The South Florida Sun-Sentinel, is owned by Tribune Company. It is no better and probably not much worse than most newspapers today. Of course, it’s op-ed page, the one with the syndicted columnists, has been cut in half and now offers just two opinion pieces a day. Then, too, like most other newspapers, it has surrendered unconditionally to its eventual murderer, the internet.

This morning the Sun-Sentinel sports section almost jolted me out of my chair and onto the floor. Not for anything it had, but for what it didn’t have. Not a paragraph, not a line, not a single word about the most anticipated sports story in years–the return of Tiger Woods. True, the world’s greatest golfer does not tee it up until tomorrow at the Accenture Match Play championships. But what ever happened to the concept of advancing a big story? And they don’t come much bigger than this. With Woods making his first tournament appearance since willing his way on tortured legs to the U.S.Open title last June, this story has the potential of becoming huge.

True, Tiger was sent home Thursday, but the magnitude of his return wasn’t lost on even the greatest of cynics, Bernie Lincicome. Lincicome, one of the stars of the Tribune about whom I reminisced, checked in earlier this week:

The return of a single athlete to his sport has never been as pregnant as this one, not Ben Hogan coming back from his car accident, not John McEnroe returning from adulthood nor Joe DiMaggio back from the war, not Muhammad Ali from political exile.

This ran in the Thursday edition of the Rocky Mountain News.

Friday’s Lincicome column was a farewell column, both to the newspaper that closed, and possibly to Lincicome’s career. When Lincicome bode farewell to Chicago nearly nine years ago, he thanked his readers “for not shooting.” This time, he invoked images of Jack Nicklaus saying goodbye at St. Andrews and Muhammad Ali saying goodbye after his last fight.

Back to the death of newspapers. Scripps Howard told the staff at the Rocky that the business model was simply not working, that new media is taking over. Jay Mariotti claimed this when he abruptly left the Sun-Times in August. What does he do? He goes to the dinosaur of the web, America Online.

Laugh if you will, but Bob Markus gets it better than Mariotti. The secret is not necessarily the cool widgets on the page, but rather the pertinence of the content. News judgment always wins.

How ironic that perhaps the last production by the Rocky Mountain News was this beautiful, 21-minute documentary that took its own owners to task and articulated well what the loss of the newspaper would mean to Denver. Scroll to the end, where a staff reporter explains her disappointment that this story she was working on would never run; it was scheduled for Saturday. I hope she runs it somewhere.

Final Edition from Matthew Roberts on Vimeo.

No one wants to buy this paper? Really?

Hostile to Business, Even Harsher to Charities

The first thing that jumped out at me with Obama’s latest tax scheme was its impact on my business. We’re a manufacturing and distribution company that keeps thousands of parts in inventory. Many years ago, we implemented LIFO to account for our inventory.
LIFO literally means “Last in, First out,” and its advantage is in increasing the cost of goods sold, which lowers EBITDA. Why would you want to do that? Lower profit equals lower taxes, of course. LIFO is a useful hedge in times of inflation, when your suppliers prices are constantly on the rise. If you sold an item for $10 after the most recent shipment cost $8 each, you would recognize a $2 gross profit on the item. In FIFO (first in, first out), maybe the item cost $7.50. Thus, you would have to recognize a $2.50 profit. Assuming a 35% tax rate, you would pay 70 cents in taxes in the first scenario, and 87.5 cents in the second scenario.
I’m sure no one is wowed by a difference of 17.5 cents. If only all businesses only had revnues of $10! Imagine a small manufacturing company of $10 million annual sales and a 6 percent increase of costs. All of a sudden, your cash flow decreases by $175,000 per year, or 1.75%. This is also three $60,000 a year jobs. “Big Oil” (yes, one of the causes of great evil in the world; also one of the causes of the great technological advances of the past century) is to blame. Their accounting types have had them on LIFO since the 1970s oil shocks. It benefited them when oil was trading at $100-plus a barrel. These days, LIFO has done little but help keep retail prices down.
The President expects to raise $18 Billion in revenue from this change. That is, of course, assuming that manufacturing doesn’t just fold up its tent and go home.
Obama is trying to slap business into shape. Meanwhile, he has decided to make sure charities get put back into their place too. Obama has proposed that charitable deductions be reduced from 35 percent to 28 percent for those making $250,000 or more.
Now, the New York Times quotes Eli Broad as saying his charitable gifts will remain unchanged. That’s nice. Broad is worth $1 Billion and makes hundreds of million per year. Should his income sit at $100 million, that would put his income at only 400 times that of a $250,000 a year earner. Among those who make $250,000 per year would that extra 7 percent make a difference? Absolutely.
Ah, the taxpayers have a lot of money. Screw ‘em.

Godspeed, Rex


Yes, he had a lot to do with the Bears winning the NFC title in 2006.

In better days...

As David Haugh explains in Thursday’s Tribune, the Rex Grossman era ends tomorrow as he enters free agency.

Plenty of Bears fans will cheer Grossman’s exit from the Bears. I am not one of them.  Grossman did not turn into the next Sid Luckman, but he was cursed by bad luck, a lack of stability and no patience from the fans. Put aside three forgettable games in 2006: a stinker in Arizona, an awful game against Miami, and the meaningless Monday Night game with the Packers, Grossman’s run in 2005 and 2006 was quite good.

Pop quiz: In the playoffs following the 2006 season, who had the better QB efficiency rating – Grossman or Peyton Manning? If you said Peyton Manning, you were wrong.

As Haugh puts it:

Nothing about Grossman’s tortured six-year tenure with the Bears ever was fair, from the rash of injuries that wrecked his progress to his treatment outside Halas Hall.


About Rick Santelli…

Yesterday’s rant has made him the household name du jour.

I have a secret for you: he’s right. I’ve made money on investments. I’ve lost money on investments — big investments, too.  Some of my losses weren’t because I made uninformed decisions. Chance played a big role in it. But I played, and I knew the rules of the game, and I took on the risk I was comfortable with. Maybe the floor of CME group’s Board of Trade isn’t a statistical cross-section of America, but Santelli’s correct. Let bad mortgages go into foreclosure, or let the banks broker their own deals with their borrowers, but let them figure it out for themselves. If the asset is truly worthless, it’ll go to zero in value. Problem is, somebody will take a flyer on just about anything so long as they feel it’s at the right price. The market is simply nature.  Government can try to play God, but not even God attempts to do the things government troes to do. We cried for the government to do something about oil and gas prices. Get those fat cat speculators and Big Oil execs bringing in big bucks last summer when oil was $145/barrel.  We did nothing. What did it give us? $33/barrel oil and $1.80/gallon gas. Now we’re supposed to do something so we don’t grow more dependent on oil. (I don’t know; I think doing nothing did a good job of weaning us off gas guzzlers, and it also helped bring oil down.) The left hasn’t hesitated to skewer Rick. I could bore you with links to Democratic Underground, or Huffington Post or Wonkette, but if you want to go there, do it on your own time.  The White House is on board. Robert Gibbs even got personal with Santelli. How dare a derivatives trader (cue evil music) question the benign law professor? It is fun when the official spokesman of the President takes aim at a private citizen for daring express his opinion.

(By the way, nice softball from that reporter: “Calm the unwashed masses. Let them know how our Lord and Savior President is going to deliver us all from evil.” Santelli responds quite simply: Contract law must be sacred. Chris “I want to run as a Democrat from Pennsylvania, but I HAVE CREDIBILITY DAMMIT AS A JOURNALIST IGNORE THE FACT I WAS ON TIP O’NEIL’S PAYROLL AND JIMMY CARTER’S PAYROLL BUT SCREW RICK SANTELLI WHOSE CREDIBILITY IS IMPEACHED BY A VOTE FOR JOHN MCCAIN IN NOVEMBER” Matthews equates Rick Santelli to Ebeneezer Scrooge.

One point the Leftist blogs have made is that Santelli is a hack. He cheerleaded for TARP and bank bailouts last year, and now he’s bitching about the homeowner’s bailout. Very good point. Santelli’s sarcasm is obviously very subtle.

Now if only we can get him to run for the U.S. Senate, the Governor’s office, or Mark Kirk’s seat.