Lessons from a Financial Crisis

It is a little over a month since financial mayhem hit both Main Street and Wall Street. Many, if not most, are still not exactly sure "what happened." In fact, it still may be a little too early to attempt to assess the "lessons" from this crisis. However, I am going to take a shot at it.

You can't lose money in stock, unless you sell your stock. This is exactly why Jim Cramer of CNBC was very dangerous when he announced to millions of Americans to "sell, sell, sell" on the Today Show. The argument he made actually has added to the erosion of the market.

There are reasons why community banking has thrived, while major banks have largely suffered. National banks (such as WaMu and Wachovia) have found themselves as massive leviathans, with the left hand often not knowing what the right hand is doing. These national banks are typically publicly owned, which means they have enormous pressure to show higher profits. This made them tempted to jump into the sub-prime loan environment that has brought the economy down. Local banks could afford to be more steadfast in their growth and, as a result, have enjoyed a fifteen percent increase in their annual profits, on average. Because of national banks being "damaged goods", community banks will prosper even more.

Money doesn't disappear during a recession, it just some times requires more creativity in making sure it comes to you. You might have to make changes in the way you do business, but in most cases your company can still be successful.

We should pressure the government to lower taxes. Interest rates are certainly low enough, the big concern is taxation. Because the Congress didn't approve the continuation of the tax cuts that Bush pushed into law, Americans are looking at a tax increase in 2009. In fact, the Capital Gains tax alone is currently 0 percent for most Americans, but will rise to 20 percent in 2009. Are you still wondering why the market is gravitating so strongly towards selling?

The bailout package has done more harm than good. Things are fairly ominous when a senior Treasury official declares they asked for the enormous number of over $700 billion because they weren't sure what was needed. This plan, which prevented the market from finally capitulating and finding its true bottom, has raised fears of hyperinflation, have made people more alarmed because of the confusion that surrounds the situation ("it must be bad if it required such a huge amount of money"), and has created an unnatural buffer between the market and economic reality. Worse still, the banks that signed on to this rescue are going to be subject to a whole net set of rules because the government is in the process of converting the major banks into a utility.

The best advice when it comes to dealing with our current financial situation?

• Think more and feel less. Much of the damage on Wall Street is being driven by irrational fear.


• Focus on what you can do and not those things out of your control.


• Seriously consider diversifying (at least future investments if it is too costly to sell at this time). Remember, there are always opportunities for money to be made.
  

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Obama Calls for Black Reparations

Ever since the conversation between "Joe the Plumber" and Barack Obama, people have been up in arms over the Illinois' Senator and his socialist leanings. Obama declared he wanted to "spread the wealth" and do so with the earnings of those with higher incomes.



Now, John McCain and his allies are looking for examples of Obama's socialistic leanings at every opportunity they can find and, unfortunately, missing an equally alarming and dangerous story. Currently, McCain supporters are referring to a 2001 radio interview in which the then Illinois state senator was discussing the civil rights movement. During the interview he pointed out that: "The Supreme Court never ventured into the issues of redistribution of wealth, and of more basic issues such as political and economic justice in society… and one of the, I think, tragedies of the civil rights movement was, um, because the civil rights movement became so court focused I think there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalition of powers through which you bring about redistributive change. In some ways we still suffer from that."

The radio interview (click the image above) does make it clear that Obama supports the redistribution of wealth. He is a socialist. Socialism, unfortunately, has been a part of the liberal mantra for years. The list of Marxist sounding quotes by Obama's Democrat opponent, Hillary Clinton, is exhaustive in its own right. During her run for the Presidency, Clinton said:

• "We're going to take things away from you on behalf of the common good."
• "It's time for a new beginning, for an end to government of the few, by the few, and for the few..... And to replace it with shared responsibility for shared prosperity."
• "(We) ....can't just let business as usual go on, and that means something has to be taken away from some people."
• "We have to build a political consensus and that requires people to give up a little bit of their own turf in order to create this common ground."
• "I certainly think the free-market has failed."
• "I think it's time to send a clear message to what has become the most profitable sector in (the) entire economy that they are being watched."

Therefore, "socialism" has become a common Democrat agenda. Obama, in this interview, goes further. He is discussing the targeting of specific ethnic groups for payment to another ethnic group. He is a socialist that believes that the majority population today should be forced to pay for the treatment that black people received generations ago. This is ethnic and class warfare at its worst. In a culture that has become too comfortable with the redistribution of wealth, this largely missed story among the socialist rhetoric rampant today could actually make Americans think twice.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

How Much Will Barack Obama Pay for Your Vote?

Free meals and movies have long been illegal devices to get your vote, but Barack Obama has figured out how to persuade you to give him his vote -- his "unique" tax cut program. It is against the law for him to buy your vote, so in a stroke of genius he is going to use "OPM" -- other people's money -- the tax system. He is not even subtle about it, but his campaign has created a "calculator" for you to be able to see exactly how much you will get back from Barack Obama.

If you are in the top 5 percent, you are not going to see savings. In fact, these work horses who saddle the majority of the tax burden are going to be asked to give more. Much more. Herbert Hoover taught us that tax increases during a recession creates a depression. This doesn't appear to be a lesson candidate Obama hasn't learned.

There is nothing subtle about Obama's calculator. You put in a few pieces of basic information and you find out both how much you will get from the Democrats if they win and how much you will get from McCain in his plan. Since approximately half of the population doesn't pay income taxes and McCain has deemed money going back to groups that fit this description as "welfare," you will not find much (if any) return from the Republican. Obama, on the other hand, wants the bulk of the "tax cut" to go to those who don't pay taxes. I know, it isn't easy to understand.

One of the most common concerns we have today is "influence peddling" by organizations trying to control public policy. But influence peddling is a two headed coin, in my opinion. The other side is made up of politicians like Barack Obama who want to spend money in order to buy votes. Barack Obama's "tax cut" seems to be an excellent example of such an approach.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Neither McCain Nor Obama Understand Taxes

Barack Obama has been on the campaign trail reminding voters that John McCain opposed the tax cuts of George Bush because it was an "irresponsible" policy. Furthermore, McCain is now only supporting the idea of cutting taxes because he is trying to get elected, Obama argues. Looking at the history of McCain's views, Obama is probably right.

Neither McCain nor Obama understand tax policy. You can see this in several areas:

• McCain opposed the Bush cuts because spending was out of control at that time. The reality is, the Bush tax cuts generated a massive amount of revenue (arguably far more than could have been garnered through increased taxes). The reason for this is simple and is seen every day at Walmart. Walmart makes less per product of virtually any company in the world. They shave their profit margins to extremely low level in order to make sure consumers buy as much as possible. In the same way, the lower the taxes on wealth creators (be it businesses or investors), the greater the stimulation on the economy, and the higher the revenue.



• Obama's opposition to the Bush tax cuts were based on ideology. Obama believes in class warfare. He could care less how beneficial tax cuts for the affluent can be on the poor (in the form of job creation), he just cannot stand the rich getting richer. Typical of a person who said he supports tax policies that "benefit work" but not "wealth." In free market countries, the two are inseparable.



• I wish both sides would understand that companies simply don't pay taxes. If politicians were serious about wanting to stop jobs from going to foreign countries, they would end the taxation of all businesses. Businesses collect taxes, they don't pay them. When a business is taxed, they pass the cost on to consumers in the form of lower quality products, higher prices, or both. If the taxes get too high where they are no longer competitive, they either go out of business or relocate to a more tax friendly environment. That is how we lose them to foreign countries. The US has the second highest tax rates of any industrialized country in the world. Raising taxes promises to make our situation worse. Furthermore, since businesses don't vote, cowardly politicians use taxation on business as a way to get companies to do their dirty work.
  

Daniel Webster said that “An unlimited power to tax involves, necessarily, a power to destroy." With that in mind, the government should be very selective in how it taxes and keep its destructive nature as limited as possible. A few possibilities include:

• Stop taxing corporations. For the obvious reasons above.



• Stop taxing wealth creation. Capital Gains taxes should be brought to a complete halt in this country as well as taxation on individuals.



• Tax consumption instead of wealth creation.



• If you insist on taxing individuals, make the tax flat (I don't like it, but it is better than the alternative). That would mean an equal percentage for all.

The bottom line is that we need to see taxation purely as a vehicle to effectively raise revenue. It isn't for social engineering, "spreading the wealth," or making up for past wrongs. It is about raising revenue. The best way of reaching that goal is by keeping taxes as low as possible, to generate the most economic activity, which generates the most revenue. We should stop punishing the engine of our prosperity.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Media Week Takes a Blow

Traditional media has been on a constant downward trend for over a decade. Particularly hard hit has been print media and in spite of efforts to bolster their presence through the Internet, most of these media are seen primarily as newspapers or magazines in the eyes of their audience. Furthermore, traditional media tries to market their online content in a manner very similar to their hard copy. If it didn't work in print, it most likely won't work online.

Media Week is an excellent case in point. Mediabistro.com reports "in what a tipster calls, 'a salary dump with older people making more money,' PRNewser reports that Mediaweek has laid off several high-level staffers: senior editor John Consoli, managing/interactive editor Lisa Granatstein, art director Paul Virga, and senior photo editor Kim Sullivan -- all of whom had been at the publication for more than 10 years. Brandweek also laid off executive editor Barry Janoff."

Media Week is also among those publications guilty of trying to sell online the type of information that many believe they can find elsewhere at little or no cost. According to their website, people pay $19.95 a month for an online subscription and $24.95 a month for online and print. The prices go up for International readers.

In describing the publication. MediaWeek.com states that its mission: "Mediaweek.com is the online extension of Mediaweek magazine. It is dedicated to serving the magazine's readership with the latest breaking media industry news and analysis, along with commentary that puts that news into perspective."

Regarding the company, "Mediaweek.com is a Nielsen eMedia production. Nielsen Business Publications, Inc. penetrates and enlightens the media industry with print, face-to-face, and online information. Nielsen eMedia enables Nielsen Business Publications, Inc. to publish in the fast-paced online market."

Traditional media thoroughly dragged its feet in response to the onslaught brought on by the Internet. The new media has won the war because it has been on the offensive. It had no vested interest in the old revenue models, but adapted new systems as it has grown and expanded. Traditional media, on the other hand, has been in a purely defensive mode trying to hold on to what revenues it has and largely ignoring the very large writing on the wall or, in this case, on the Web.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Jobs that Could Be in Trouble

The economy appears to be in trouble and everyone is wondering what industries will suffer the most from the up coming recession. When dollars get tight, people focus on cutting costs and buying necessities. So, anything that can be described as "waste" are most vulnerable. Currently, unemployment is now above 6 percent and some fear it could reach double digits.

The following are a few examples of industries that could be hardest hit:

• Supermarkets and fast food establishments could be the first to see a negative impact. The latter is for obvious reasons, because people will simply refrain from eating out as often. Supermarkets, on the other hand, will find themselves in a battle over pricing that we hadn't seen in years. The large volume leaders -- Walmart, Costco, and Sam's -- will be the likely winners of that battle. AOL Money & Finance points out that "Aside from Supervalu, which has already said it is struggling, Kroger and Safeway could be affected as well. These three largest chains have more than 750,000 workers. If same store sales drop sharply and a large number of outlets are closed watch for as many as 50,000 people being out of work.This does not take into account the scores of smaller chains and tens of thousands of individual food retailers around the country." On the fast food front, 10,000 jobs have already departed from Starbucks. That will only be the beginning.



• An industry that has been perceived as some what recession proof -- the Internet and E Commerce -- could be falling on hard times. The way these industries will be hit is if the damage is widespread throughout the business market place and it has a ripple effect on these areas. To some companies, E commerce and web businesses are an option, not a necessity. If that is the case, they too could suffer.



• E companies could find themselves in pain. My company's own web platform of over 90 websites has seen a slight decline in pay per click advertising revenue (fortunately we have seen a rise of other advertisiers). People are getting their ads for less because there are fewer competing to place them. What type of business are vulnerable? Google, Yahoo, eBay, and Amazon, just to name a few. Combined, these four employ over 75,000 employees. Yahoo seems the most vulnerable and could easily layoff 20 percent of its 15,000 employees.



• Software firms are also very vulnerable and I am sure that Bill Gates and his friends at Microsoft are among the most concerned. The largest of these companies employ over 600,000 combined. If these firms start laying off, it will have a trickle effect through out the entire economy since so many businesses are dependent on them.



• The hot industry in my neighborhood is energy and even it is vulnerable to cut backs. The price per barrel has dropped from a high of nearly $150 to around $70. Those prices are still high, historically, but the days of the fatted calf may be fading. Some are projecting a cut of as many as 5 percent of the labor force in these industries.



• Not surprisingly, media companies are taking a significant hit at this time. Everyone seems to be trying to lower expectations, including Viacom and CBS. The six largest media companies -- including Time Warner, Disney, and GE -- employ over 400,000 employees. If they start laying off the ripple effect could be huge.

What over shadows these dire concerns is the fact that thing Wall Street loves to see it that, when a business hits a hard time, the decision makers are tough and willing to make unpopular decisions. This is often best demonstrated in layoffs. In fact, the Stock Market has a history of rewarding companies with higher returns as they let employees go.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

When It Comes to Voting, It is Quality and not Quantity

We hold the right to vote in such high regard that we now allow anyone, even Mickey Mouse, to vote in our elections. The attraction of voting is so powerful that untold numbers of dead people suspend their resting in peace to show up and make their choice for President. Yes, elections are very important.

I don't know about you, but the above references to scandals related to ACORN actually shows that voting is becoming a sham. It is not revered, but a vehicle to purely promote political agendas and not preserve our freedoms. Yet virtually everyone extols the beauty of the vote and the more voters the merrier. I think it is time to defend the quality of the vote.

Every state has limits on the campaigning that can be done during elections. For example, there is a distance that has to be maintained between where people vote and signs promoting specific candidates. You have seen this when you pulled up at your neighborhood elementary school with signs being displayed for virtually every candidate all the way up to the magical line where no more campaigning is allowed. After that, voters are protected from further external political influence. Or are they?

The reality is, the single most important political information is in the room where they vote. Not, it isn't on the wall or in fliers handed out on the instructions used for the machines. The most important political information is on the ballot itself. Every office has the party affiliation clearly labeled on each candidate. Furthermore, you can typically press one button and vote straight party ticket.

Removing party affiliation would be a very significant step that the government could take to reduce voter fraud and abuse. With the elimination of straight ticket voting, there is no longer "press seven and go to heaven" or "press nine and all is fine." People would actually have to know who they are voting for before casting a vote. What a novel idea!

This idea will have any of its proponents seen as elitists and anti-democratic by the media, I am sure. The truth is, there is nothing about it that should make voters feel disenfranchised. Are there those who are saying that voters are casting ballots, but they do not know for whom? Are those the ones that will be punished by a system that requires a little knowledge and accountability before they actually cast a vote? In my view, if they don't know a candidate by anything but party affiliation, they are not qualified to vote.

A few candidates for major offices will not be affected by this simple reform, but the quality of voting in general would be much higher in a system such as this and would lead to a decided increase in the quality of voting. That is exactly what our country needs.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

"Joe the Plumber" to Become a Trademark?

In an effort to try to locate "Joe the Plumber" in the Toledo, OH area in order to do an interview, I spent some time visiting with some of the people from the Toledo Regional Chamber of Commerce. They had no idea on how to reach Joe Wurzelbacher, but did tell me that the aspiring plumber (he isn't one yet, but works for one and intends to be one some day) did contact the Chamber through his father. The reason for the call? He wanted to know how to trademark the name, "Joe the Plumber." It appears that Joe is trying to make his fifteen minutes of fame last several hours.

Joe will face challenges, of course. There are numerous companies that describe themselves as "Joe the Plumber." Just check it out in a Google search.

Other observations about Joe the Plumber:

* His presence reminds me of the impact Sarah Palin had on the McCain campaign. Those "every day values" so absent from politicians today. You would think one of these campaigns would continuously surround themselves with such people, let them speak to the media about the issues of the day, and get away from the slick individuals who drive politics.

* Typical of Obama and his colleagues, they are now attacking Joe in the media. "He doesn't make $250,000 a year" we are told, "he had an ugly divorce" (and liberal bloggers are writing about it online), and "he has a tax lien against him" (which may prove his point that taxes are too high). This type of ugly attack is going to be perceived by millions of Americans as an attack on them. It is very elitist, which has killed many Democrats' campaigns before. Interestingly, as they attack Joe, McCain's numbers are going up nation wide to where he is well within the margin of error nationwide at this time.

* Joe reminds those who are not in the "top five percent" why they should worry about redistribution. Joe doesn't make $250,000, but wanted to know how it impacted people like that. Obama's supporters scoff as if he had no business asking the question. But Joe is like most Americans who aspire to make more some day. He wants to be in a higher income bracket and not pay those who haven't achieved such. The politics of envy has its limits. Obama has yet to learn that.

* Obama should learn a lesson from both Joe and George McGovern. Joe showed the sentiment of million of Americans. George McGovern learned the same thing the hard way. In the early part of 1972 McGovern was doing very well in his race against Richard Nixon, until he placed on his platform the redistribution of $1,000 to individuals who made less than $5,000 a year. That described a majority of Americans at the time. But the vast majority of them believed they would make more than that some day. It sunk McGovern in the polls.

The big question for McCain is will Joe have "staying power"? McCain needs to surround himself with average Joes and Janes who want to harness the American Dream and are suspicious of politicians who "want to take care of them." After all, they are a better reflection of a majority of Americans than the elitist that tend to surround most political campaigns.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Are Democrats Declaring Capitalism Dead?

This is one of those posts that are very hard to write. It is the kind of thing that I would prefer to "rant" about rather than approach with calm, because the situation really is quite upsetting. Things that is so important to our culture, our history, and our affluence is being declared dead by members of the Democratic Party. Free enterprise, limited government, and private property are being treated like old and dead ideas. Democrats see them as concepts that didn't work and should be swept away.

In the early 1990s I traveled several times to Eastern Europe and the former Soviet Union conducting seminars on how to convert their economies to free markets while I was a Fellow with the American Economic Foundation. Today, all of the economies in the countries I addressed with the exception of Belarus have lower tax rates than the United States today. It appears our universities and political leaders need similar seminars in our country.

Governor David Paterson of New York told Fox News today that it is time to begin the public works programs similar to what we had under Franklin Roosevelt. He joins numerous Congressional Democrats making similar proclamations. In a candid encounter with a man on the streets, Presidential candidate Barack Obama said that he believes that "spreading the wealth" is a "good thing."

Historically, the purpose for taxes is to pay for those programs that were designed to be beneficial to all and provided special privileges for none. During the Great Depression, the idea of helping those due to extraordinary circumstances came into practice after early attempts by the Supreme Court to stop such policies, failed (Roosevelt out lived enough members of the Court and appointed those with a similar worldview to take their place and the majority). This was soon followed in the 1960s by a "War on Poverty" that became more like an assault on the poor that led to an increase of economic despair annually until the policies began to be reversed in the 1990s (which has led to a reduction in poverty). We are right back at the point of going back to the government creating a paternal relationship with its citizens. Are we like sheep? You bet!

Irresponsible organizations like ACORN fund individuals that include Sen. Barack Obama, who in turn "organized" his "community" to pressure local banks to back loans that lead to our subprime crisis. As a result of the efforts of people like Obama, the unaccountable banks gave more money to his campaigns than any member in the history of the Senate with the exception of the Banking Committee Chairman, Chris Dodd. Obama leads the effort to undermine the fundamentals of our financial system and he will be rewarded with the highest office in the land. People are "entitled" to home loans we are told, let the standards that keep banks operating healthy be disregarded. Now we are being told to bailout the banks that have taken such a route.

This massive push towards socialism isn't entirely the Democrats fault. In fact, John McCain has done an excellent Democrat impersonation by saying he wants some of the $800 billion to go directly to home builders who are struggling so they can pay off their loans. Let's reward those who bit off more than they can chew, he argues, but there will be no benefit to those who had adjustable rate mortgages and figured out how to maintain their obligations. Talk about moral hazard!

Republicans aren't losing the election today because voters have denounced free enterprise, it is because they can't find a serious candidate that is promoting such. Republicans have done a terrible job of defending economic freedom since Ronald Reagan and voters are lost as to where they can find those who will support economic liberties. I have said for a long time that if Republicans are going to act like Democrats, you might as well vote for the genuine article. Republicans need to get prepared for that probability as we approach the election.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at PriceofBusiness.com. Visit the archive of past shows here.

Job Creators Cast Their Votes

CEO Magazine, a leading publication of the nation's business leaders, has recently done a survey of the nation's Chief Executive Officers about the up coming race for the White House. The survey did an assessment of their view of how Barack Obama and John McCain would help the country's economy and support job creation.

The results weren't even close. Eighty percent of all participants voted for John McCain over Barack Obama. This shouldn't be a surprise to anyone. Barack Obama keeps talking about "tax cuts" for 95% of the economy and only the top 5 percent will be saddled with a tax increase. CEOs know, however, that half of that 95 percent don't pay any taxes and that five percent group pays far more than any other sector. In fact, the Wall Street Journal reports "As it happens, the top fifth of earners currently pay 67% of all federal taxes -- including not just income taxes, but payroll taxes, corporate taxes and death taxes. The top 1% of earners pay 26% of all federal taxes." In other words, the economics simply does not add up.

But the issues covered by the survey are not limited to taxes. The publication's report card breaks down policies to include energy, economic and fiscal policy, foreign policy, defense, environmental, education, tax, and health care. The over all grade for Obama was C- and the grade for McCain was B-. Neither candidate scored an A, but Obama scored Ds while McCain's lowest grade was a C.

Obama's biggest weaknesses according to the survey are economic and fiscal policy, foreign policy, defense, and (as seen before) taxes. CEOs believe that Obama's policies would put significant upward pressure on spending, his lack of experience will find the US in conflicts that could undermine economic stability, there are similar concerns about defense policy, and we have already seen the business view of Obama's tax policies.

McCain's lowest grades were in energy, the environment, education, and health care. McCain is very new to being serious about pursuing domestic drilling (which is the fastes way towards lowering prices), furthermore he is one of the most ardent supporters of extreme environmentalism (which make businesses concerned about the economic impact). Furthermore, most business leaders have long felt that policy makers don't understand the educational demands of America. This includes McCain. Finally, business has been rightly concerned about the impact of proposed health care policies on the economy. In this, McCain's policies raise many questions (especially the taxing of benefits).

So what about the 20 percent that would vote for Obama over McCain? I would assume they are part of the group of leaders representing mega businesses that have consistently supported Democrats because their companies can afford to do so and often see government as a means of regulating their competitors out of business.

What is most interesting about the article is that the focus is on job creation more than any other area. People can talk about helping the middle class all they want, but there is no better benefit to anyone than opportunity created through job creation.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Understanding the Stock Market Following the Bailout

Today it appears that the market has capitulated. Investors believe that the market has hit bottom and it is time to rebuild and to buy and is in the 9,000 points area and moving upwards. But people want to know, does this relate to the bank bailout? Why did the market perform so poorly immediately after the bill passed in Congress? Are we about to see the light at the end of the tunnel?

I suggested on my radio show that the market would probably stop its free fall in the low 8,000s and that appears to be the case. But, I have also suggested that this event wouldn't necessarily signify anything more than Wall Street catching its breath. Yes, it could mean it begins its mending process (as seen with the market up around 500 points at this writing), but it could be a short term euphoria from European and Asian markets that responded more favorably than expected over night or just a strong desire to give itself a break from the drama. In other words, the market is being driven by emotions at this time more than anything else and interpreting what is happening is no small task.

Here are a few observations about the current market landscape:

• Members of Congress supported the spending of more than $800 billion to bailout financial institutions with much of the specifics of how it would be spent to be determined later (Obama and McCain each have very different approaches). This approach raises as many concerns as it placates.


• The amount proposed, $800 billion plus, was pulled completely out of the year. A high level Department of Treasury official said that this figure was chosen because it "needed to be real high." They had no idea how much was needed, because they weren't sure how it would be fully implemented. Again, this has raised more market concerns.
  
• Much of the drama surrounding this event -- most recently seen in the emergency meeting of members of the G7 -- is a mixed bag that could end up heightening fears rather than calming them. On the other hand, because of the interdependence of the international financial markets, some are seeing such an approach is crucial in getting back to normal.

In addition to the financial issues, there are the political aspects. Many in the media are treating Presidential candidate John McCain as if he were among the "walking dead." Wall Street believes that the economic future of this country is in better hands under McCain than Obama. Is McCain's chances begin to decline, I project a continued drop in the stock market.

So are we on the rebound? I certainly hope so, but smart investors are going to find themselves taking a "one day at a time" approach to their investing.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

How to Determine Gas Prices in a Year

I don't want to mislead with my title. I don't own a crystal ball and can't predict exactly what fuel will cost at certain times. However, we have all been studying fuel prices rather closely the last few years and have begun to be able to see linkage between certain events and gas prices.

For example, as prices hit an all time high and hovering around $4.00 a gallon in the early part of the summer, House Republicans declared they were have a "staycation" like many other Americans and taking care of business by focusing on energy. The theme of the ad hoc Congress was "drill here, drill now" and the public and media took notice of the action. So did the oil speculators who lowered the price of oil per barrel, which showed up in our gas prices.

Another example was Senator John McCain declaring that he was changing his historic position of being opposed to domestic drilling and stating that everything should be brought to the table for consideration (biodesel, coal, etc.), including exploiting oil in the United States. He placed particular emphasis on the latter because of how that view stood in contrast to the Democrats position of avoiding all domestic drilling. The results was the further lowering of gas prices.

So, oil futures are based on projected consumption (demand) and projected supplies. The lack of oil in this country is not based on scarcity (which is created by nature), but because of shortages (which is based on government policies). With that, the single biggest factor about future supplies and prices of oil is the government. Oil speculators are convinced that the Democrats are hostile to domestic production (just look at their voting record and stated postions) and that the Republicans seem to take the pursuit seriously. With that, here is a quick breakdown of the future of prices:

• If the Democrats win both the Congress and the White House, expect gas prices to grow exponentially. I project them to more than double the current $3.00 a gallon level by the elections of 2010. That $6.00 a gallon rate could be rather conservative.


• If the Republicans win both the Congress and the White House, expect a rather significant drop in gas prices as long as the Legislative Branch makes domestic drilling a top priority. If they do that, you could see prices back around $2.00 or even less within two years.
  
• If you have divided government where different parties dominate the Legislative and Executive branches, you will likely see prices remain about the same with a continued upward trend.
  

Don't be fooled by arguments that passing legislation that encourages domestic drilling won't immediately lower prices. We know that serious discussion alone can achieve that. If Americans are concerned about lowering gas prices, they should be very deliberate about the way they vote.

A few weeks ago gas prices began to rise at a rapid rate. This was about the time the media began to declare that it was unlikely McCain would win. It is largely based on futures.

So what about the recent drop in gas prices? Everyone is thrilled with them going below $3.00 a gallon in many parts of the country. Why this is happening is the "bad news" to this otherwise exciting news. The current financial crisis is now having a direct impact on gas prices. Oil futures project that we are going to have people driving less, companies transporting fewer goods less often, and factories demanding less energy because of projected manufacturing declines. The good news of lower fuel costs is actually an omen of bigger economic problems.

Watch the headlines and observe gas prices. You will see the link. Think carefully how you vote, because it could profoundly impact your financial future.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

McCain Advocates "Trickle Up" Economics

As John McCain's chances for reelection appear to be dwindling, his desperation becomes more obvious in his policy proposals. During the second debate with Barack Obama, McCain argued how he hopes to see the $700 billion bailout be implemented. After all, it will be the next President who implements the vast majority of this program with only a few months left in the Bush Administration.

McCain proposed something that is far more likely to come from the mouth of a Democrat -- a very liberal Democrat at that -- than a Republican stalwart. McCain proclaimed that he wants a significant amount of the money to go to bailout those in foreclosure directly. If you are about to lose your home and are months behind, the government should step in and rescue you. This is certainly better than helping the Wall Street fat cats, right?

The problems that come from such a policy are numerous. Such a plan will spread the moral hazard so rampant today to the general consumers. You will find them falling into the false sense of security that, no matter how bad the decision one makes you will get bailed out.

Worse still, what type of message does it send to the vast majority of Americans that figured out how to pay their mortgage even with the sub prime problem? I am sure the government, with all of its brilliance, will create a window for which people who prove they have had late payments will be able to participate as well. I have said all along that this $700 billion is a down payment. We are looking at $1.5 trillion by the time we are through.

What about those who already lost their homes? Tough luck. This bill is all about timing, not fairness. Those poor souls will simply have to lament their loses.

This bailout is fundamentally wrong and very dangerous to the long term prospects of this economy. It has done little to positively effect the markets and does far more at raising questions instead of answering them. It has essentially led to the socializing of our banking system and has damaged the respect for risk that is necessary in maintaining a free market economy. Members of the House and Senate who voted for this bill will find themselves haunted by it.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

2008 Elections as a Referendum for Democrats

Thanks largely to the media, Senator Barack Obama and his fellow Democrats have succeeded at making the 2008 election a referendum on George Bush and (by party affiliation) Senator John McCain. We are told that the current economic challenges we face are directly related to the policies of George W. Bush. However, to do such, would be to presume we live in some monarchy without checks and balances. Congress is, in our Constitution, the first branch of government and the President cannot do anything without that legislative body.

In 2007, the members of the Legislative Branch, in both Houses, went from a majority of Republicans to a majority of Democrats. Interestingly, those were not the only changes that transpired.

In 2006, with Republicans in the White House and in both Houses of Congress...

• Consumer confidence stood at a 2 1/2 year high. People were buying more and feeling better about their economic future.


• Regular gasoline sold for $2.19 a gallon. This price is far too high, but would be a dream price compared to current levels.


• The unemployment rate was 4.5%. Economists define this as "full employment." This economy was extremely hot and the demand for quality employees was at an all time high.


• The Dow Jones hit a record high. 14,000 and higher. Americans were optimistic about the future on both Wall Street and Main Street.

In 2008, with Democrats now in the majority of both Houses of Congress...

• Consumer confidence has reached a low that it hasn't seen in years


• Gasoline is hovering around $3.50 a gallon


• Unemployment is up to 6 percent -- a significant jump.


• Americans have seen their home equity drop by over $10 trillion nationwide


• Approximately one percent of American homes are in foreclosure.


• The Dow Jones has dropped to below 10,000 points for the first time in four years.

I do not want to overly simplify. I know there are plenty of guilty parties in both parties. However, the United States was clearly better off with Republican majorities in both Houses of Congress and in the White House. My vote in this race will be every bit as much a referendum on the Congress as it will be on the White House.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Top Ten Magazines Has Economist on Top

One of my favorite magazines is The Economist. It is the most thorough (without slipping into the less engaging "academic journal" genre) and strikes me as a publication without an agenda. The publication is often deemed "conservative" (especially by European standards), but it doesn't present its views in any way one could consider biased in tone. If anything, its views are expressed in a matter of fact manner. It provides a very thorough understanding of the unique perspectives that different countries and cultures have towards today's problems.

The Economist is a more intellectually oriented publication and I was surprised to see it on the top of Advertising Age's list of the best magazines. Mediabistro wrote about the honor noting: that the magazine's "editor-in-chief Jonah Bloom announced his publication's "A-List" awards earlier tonight and The Economist won Magazine of the Year, beating out No. 2 Women's Health and No. 3 Elle."

Advertising Age than provided the rest of the "A-list"

No. 10 — Conde Nast Traveler

No. 9 — House Beautiful

No. 8 — People Stylewatch

No. 7 — New York ("A perennial award winner, I'm afraid.")

No. 6 — Fast Company ("They love to steal Ad Age stories.")

No. 5 — National Geographic

No. 4 — Every Day With Rachael Ray

No. 3 — Elle

No. 2 — Women's Health ("Perhaps the most intuitive spin-off in magazines. Also known as the 'Duh' magazine.")

No. 1 — The Economist

Six of the magazines are lifestyle oriented, with Women's Health topping the list and Elle not far behind. Two are informational (New York and National Geographic), but of very different styles. The last two (Fast Company and The Economist) are business and financial oriented.

The above seems to be a very eclectic list and without any particular trend other than they all are visually attractive. That would be a significant part of the "bottom line" to a publication like Advertising Age.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Obama: Incrimination by Association?

With around 30 days left in the 2008 Presidential race, John McCain is seeing the possibility of a solid defeat unless something changes and changes quickly. For months McCain has focused entirely on the issues with very little mention of personalities and organizations that could raise red flags in the minds of many. That is starting to change for arguably good reasons.

Over the years I have been invited to serve in leadership positions of organizations and one of the first questions I asked is "who else is on it?" From there I would do background checks of my own. The Washington Post notes that "both Obama and (Bill) Ayers were members of the board of an anti-poverty group, the Woods Fund of Chicago, between 1999 and 2002. In addition, Ayers contributed $200 to Obama's re-election fund to the Illinois State Senate in April 2001, as reported here. They lived within a few blocks of each other in the trendy Hyde Park section of Chicago, and moved in the same liberal-progressive circles."

Who is Bill Ayers? The Chicago Sun Times reports that "Ayers, 63, spent 10 years as a fugitive in the 1970s when he was part of the "Weather Underground," an anti-Vietnam War group that protested U.S. policies by bombing the Pentagon, U.S. Capitol and a string of other government buildings." He has since stated (back in 2000) that he wish he had done both more bombings and had created more damage. So much for remorse.

It doesn't end with Ayers. Barack Obama proudly discusses his years as a "community organizer" and during much of that time the organizations he worked with received funding from the radical organization, ACORN (Association of Community Organizations for Reform Now). ACORN is noted for questionable voter registration techniques (including the policy in Ohio where people can register and vote on the same day), but was also a major player in the sub prime debacle that is devastating the economy today.

Many of the liberal Members of Congress who are acting like heroes today for passing the massive Wall Street bailout bill had pressured lending institutions (particularly Fannie Mae and Freddie Mac) into reducing the requirements for getting loans earlier this decade. On the front lines, ACORN and one of its Chicago affiliates, The Woods Fund (on which Obama was on the Board) practiced intimidation and other techniques to make banks provide the bad loans that led to the crash of our financial institutions today.

Stanley Kurtz wrote in the New York Post that "The Woods Fund report makes it clear Obama was fully aware of the intimidation tactics used by ACORN's Madeline Talbott in her pioneering efforts to force banks to suspend their usual credit standards. Yet he supported Talbott in every conceivable way. He trained her personal staff and other aspiring ACORN leaders, he consulted with her extensively, and he arranged a major boost in foundation funding for her efforts." Meanwhile, Sen. John McCain warned fellow Members of the Senate of potential financial ruin if the sub prime loans were to continue.

Another friend that could come back to haunt Obama is the good old Rev. Wright. You will likely hear much more about him in the final days of this campaign. There is no question that the McCain is in trouble, but Obama's associations makes the Illinois Senator's own future very doubtful and he could very well be his own worst enemy by the friends he has made.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Questioning the Constitutionality of the Senate Bailout Bill

I hate to bore the Congress with details, but there is a little passage in the US Constitution that could very well haunt the Legislative Branch if the House of Representatives passes the Senate bailout bill. Article I, Section 7 of the United States Constitution states that "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other Bills. " Simply put, the bailout package had to come from the House and the one that Congress is now considering is therefore, unconstitutional.

Modern practitioners of political science are dismissive of requirements such as this. They argue that, "this is a formality" or "a mere question of protocol," but has nothing to do with the substance of the Constitution. Reality? It has everything to do with the substance.

When the Founding Fathers developed our Constitution, they wanted the Legislative Branch to be broken into two Houses for reasons in addition to making sure large states and small states had fair representation. They also wanted to make sure that the government would be extremely deliberative about making changes in law. The US House of Representatives are up for reelection every two years and typically represent smaller populations than the Senate. They are closer to the people than the US Senate which faces reelection in six year cycles (and only approximately one-third at a time). This means the Senate can afford to take risks that the US House cannot usually take.

Proof is in the pudding. The US House took on this bailout bill earlier this week and voted against it. That bill was dead and a new bill needed to be created. According to the US Constitution, that begins in the US House. Instead the Congress is being driven by expediency instead of rule of law and they started from scratch (adding $100 billion more in the process) in the Senate where it passed in a body where many of the members have four years before they face reelection. That bill is now in the House and those members are now being told by the upper body to "jump in, the water is great."

Senators should have voted against the bill because of its unconstitutionality. US House members should now do the same, regardless of the merits of the bill itself (which are few, considering the costs). Unfortunately, discussions about constitutionality are relegated to law schools and not where laws are created. However, this cloud could follow these members to their reelection efforts or maybe all the way to the US Supreme Court.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

The Senate Bailout Plan: "That's Not All..."

The bailout bill the US Senate passed reminded me of one of those late night infomercials. You know the ones where the company isn't convinced that you are going to buy something so they throw in "that's not all, oh no, that's not all." You see a very similar approach to selling this bailout in the final legislation passed by the Senate.

The original proposal that came from Treasury Secretary Paulson and President Bush was a mere two pages long. The US House got its hands on it and it became a little more than 100 pages long. There is no reason to worry, however, because Harry Reid (D-NV) has announced that the Senate has made it better by bringing it up to 451 pages and by adding over $100 billion to the final bill. If more is better, we certainly got that from this bill that passed by a very wide margin.

Fiscally Conservative Republicans put the breaks on the bailout bill that came to the US House because they thought it was too wasteful and transferred to much power to the federal government. So adding more pork and power to the government will make it more likely to pass? We will have to see.

So what will you find in this multi-layered package:

- Tax Breaks for Wooden Arrows designed for use by children (Sec. 503)

- Tax Breaks for Film and Television Productions (Sec. 502)

- 6 page package of earmarks for litigants in the 1989 Exxon Valdez incident, Alaska (Sec. 504)
- Tax earmark “extenders” in the bailout bill.- Virgin Island and Puerto Rican Rum (Section 308)

- American Samoa (Sec. 309)

- Mine Rescue Teams (Sec. 310)

- Mine Safety Equipment (Sec. 311)

- Domestic Production Activities in Puerto Rico (Sec. 312)

- Indian Tribes (Sec. 314, 315)

- Railroads (Sec. 316)

- Auto Racing Tracks (317)

- District of Columbia (Sec. 322)

- Wool Research (Sec. 325)

Who knew that Indians were about to go bankrupt? Considering they have their growing gaming interests, I thought we might be able to borrow money from them. The above are just a few of the examples that were added. I encourage you to read the bill in its entirety, if you have a few days to spare. I think it would make sense also to find out how your Senator voted on this bill.

In the end, however, I see this bill passing in the US House. There are specific tax breaks for small to medium size businesses to help encourage their recovery, tax relief for those hit by the recent natural disasters (hurricanes in the South and tornadoes in the Midwest), and there is an increase in the requirements on the Federal Deposit Insurance Corporation (up to $250,000 from $100,000), putting more responsibilities on the banks.

In spite of such assurances, I have to question whether the trade offs of our freedoms and the potential socializing of our financial systems is worth the short term "stabilization."

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.

Sarah Palin's Recent Interviews Lead to "Buyer's Remorse"

According to the New York Times, GOP Vice President nominee Sarah Palin's recent interview with Katie Couric on CBS had only a modest effect on the ratings. Unfortunately, that is the good news for Palin and her supporters. The fewer who watched it, the better. The New York times notes: "Still, the “CBS Evening News” gained only about 10 percent in audience from the previous week — and it was actually down from the same week the year before. The newscast averaged just under 6 million viewers for the week, up from 5.44 million the previous week. A year ago Ms. Couric’s program drew about 6.2 million viewers. (CBS was also a distant third last week behind ABC, which won with 8.07 million viewers, and NBC, with 7.98 million.)"

I have not seen the interview in its entirety, but what I have seen has not been pretty. Palin cannot specifically point out examples of McCain as a reformer? She does not know what the "Bush Doctrine" is? She can't name specific magazines that she likes to read? Not a single one? Early on the criticism towards Palin was darn right unfair and ugly. But when it comes to policy and how she prepares for governing, anything is fair game in my opinion. The questions Couric asked are fair game.

I have been one of the most enthusiastic supporters of Sarah Palin out there and still believe she brings the values and convictions that many Americans are looking for in a leader. She is charismatic and as a woman, excites voters in a way the GOP greatly needs. But Palin is going to be a heart beat away from the Presidency and will be serving under a man who is the oldest to be elected to that position in his first term. I believe many Americans, not just the critics in journalism, need to see Palin take it up a notch when it comes to her performance in interviews. She is an excellent speech maker, but has been less than impressive "on her feet."

In many respects, she is like Sen. Barack Obama. She is less experienced than any of us would prefer, she has a difficult time in impromptu situations, and she lacks significant foreign policy knowledge. Since Obama is running for the number one job and Palin the VP post, that makes the Alaska governor a safer bet since she will have time to grow. Obama's inexperience running for President makes him a complete disaster, in my opinion. But I, too, am beginning to be a little concerned about this historic choice for VP.

Kevin Price articles frequently appear at ChicagoSunTimes.com, Reuters.com, USAToday.com, and other national media.

Kevin Price is Host of the Price of Business (M-F at 11 AM on CNN 650) and Publisher of the Houston Business Review. Hear the show live and online at HoustonBusinessShow.com. Visit the archive of past shows here.