Interest Rates At All Time Lows

QE3 Hits European Iceberg contains a historical chart on interest rates which covers the period from the 1870s to today. And what it reveals is that the rate on 10 year Treasuries has never been as low as today's rate. Not even close, in fact:

"A few months ago, investors might have thought that if Europe got decidedly worse, the U.S. Federal Reserve would launch another bond-buying program. Well, Europe sure is worse, but it has helped bring rates so low that further action would seem pointless.

  

The yield on the 10-year Treasury hit a record-low close of 1.63% on Wednesday. {NOTE: Down to 1.57% today} Data going back to 1798 show that there has never been a period when long-term government-bond yields have been even close to where they are now. . . .

The drop in Treasury yields is providing an important offset to any economic weakness stemming from Europe. First, they are dragging other borrowing costs lower. Conventional mortgage rates are at the lowest levels on record, and investment-grade corporate-bond yields are near the lowest levels since the 1960s. Second, the drop in yields is sending a message that the U.S. is a safe place to invest, bank and do business."

Summary

Even though most individual investors are doing just the opposite, we recommend that you stay away from buying bonds and other fixed assets, perhaps for as long as the next 30 years. That's what we're doing. But why mention 30 years?

No particular reason except it's a long time from now. And if you want some evidence for the 30 year guesstimate, just look at the chart and see how long it took from the ~1980 high of 15% to get to today's historic lows of ~1.5%.

So if it takes another 30 years to get even close to what rates were in 1980, then bonds won't prove to be good long term investments for a very long time. That's because in periods when rates are rising, bonds will do poorly.

On the flip side, when rates decline, as they did from 1980 until today, bonds appreciate in price. During those times, you receive both the interest and the increasing value of the bond. But as the chart so clearly reveals, today is the polar opposite of 1980 and the past 30 years. So plan and act accordingly.

We'll have lots of time to monitor future events, but let's expect rates to stay low for at least several more years as the world's economies, including ours, struggle to recover.

That said, look for the U.S. to be the "cleanest of the dirty shirts." And if we get some sensible behavior from our "public servants" in the next year, stocks could surprise on the upside. Wouldn't that be nice?

In any event, oil prices, commodities, interest rates and consumer prices should be very well behaved for the foreseeable future.

If you can stomach the volatility, that's not a bad time to own stocks of solid companies. And especially those strong U.S. firms that pay decent and growing dividends. It's not often that dividend yields are higher than interest rates, but that's the situation today. So take advantage of it the next several years at least.

Finally, we don't expect that inflation will rear its head anytime soon, but deflation needs to be monitored closely. So far, so good on that front, too.

We'll stay tuned.

Thanks. Bob.

Caterpillar and Wisconsin Employees ... Union Security and Check-Off Provisions

It's time for a brief tutorial on labor negotiations and what's most important to union officials.

The two most important contract provisions to union leaders revolve around taking money from employees and not getting money for employees.

Thus, the real interests of union members and the union leaders who represent them with the company are different from the get-go.

Employees seek better wages, benefits and working conditions, and unions seek money from the  dues paying employees, including an easy way of collecting those dues.

If you're like most people, you will definitely be surprised about what ranks first and second among equals when unions are negotiating contracts with employers on behalf of their members, aka the company employees. At least I was when I first came upon the 'real deal' early in my career as a labor negotiator.

It's important to remember that employees work for the company and not the union. They are members of the union. Kind of like joining a club and of course, club members pay dues to the club they join.

But in the case of unions, not everybody who is a dues payer wants to join the club. That's where the coercive union security clause and check-off provisions come into play.

These "involuntary" provisions to the employee are fundamental necessities to union leaders. In fact, to the union the following two clauses are the most important of all the contractual provisions of the negotiated labor agreement with employers.

(1) The union security clause requires the employee to join the union or at least pay dues as a condition of continuing employment. In addition to paying union dues, initiation fees are a condition of employment as well.

(2) The check-off provision requires the employer to withhold union dues from the employee's pay and send those dues directly to the union. Kind of like withholding tax and the IRS.

And that's exactly how unions get the money to pay union salaries, recruit new members, contribute to the Democratic Party and so forth.

Thus, what is happening in Wisconsin threatens the very existence of the public sector unions. "Club members" who don't want to pay club dues are no longer obligated by the state of Wisconsin to do so.

Let's look again at the relevant  portion of the article Wisconsin Unions See Ranks Drop Ahead of Recall Vote:

"Failure to oust Mr. Walker and overturn the Wisconsin law "spells doom," said Bryan Kennedy, the American Federation of Teachers' Wisconsin president.

Wisconsin membership in the American Federation of State, County and Municipal Employees—the state's second-largest public-sector union after the National Education Association, which represents teachers—fell to 28,745 in February from 62,818 in March 2011, according to a person who has viewed Afscme's figures. A spokesman for Afscme declined to comment.

Much of that decline came from Afscme Council 24, which represents Wisconsin state workers, whose membership plunged by two-thirds to 7,100 from 22,300 last year.

A provision of the Walker law that eliminated automatic dues collection hurt union membership. When a public-sector contract expires the state now stops collecting dues from the affected workers' paychecks unless they say they want the dues taken out, said Peter Davis, general counsel of the Wisconsin Employment Relations Commission.

In many cases, Afscme dropped members from its rolls after it failed to get them to affirm they want dues collected, said a labor official familiar with Afscme's figures. In a smaller number of cases, membership losses were due to worker layoffs. . . .

In the nearly 15 months since Mr. Walker signed the law, 6,000 of the AFT's Wisconsin 17,000 members quit, the union said. It blamed the drop on the law."

Summing Up

If employees want to join a union, that's their right, of course.

And if these same employees each want to pay hundreds of dollars to the union to have someone represent them when bargaining with the company, that's their right, too.

But wouldn't it be sensible, even if a union was desired, to select representatives from among the employees and have them do the union work voluntarily and in addition to their regular job? Kind of a player-coach situation. If the employees chose to do this, there would be no need for anybody to pay dues. And there would be no need to force anybody to "join the club."

It would be voluntary to join or not join the union. Let freedom of choice prevail, as it should.

And immediately as a result of no dues requirement, all workers would in effect receive an immediate several hundred dollar per year raise.

Thus, there would be no need for a union security or check-off clause in the labor agreement, and there would be no need for dues. That way workers could spend that "new found" money as they please.  Maybe even contribute some or all of it to their health care or retirement plan benefits. The taxpayers would appreciate all the help they can get.

And in negotiations the company and employee representatives would be able to sit down when they meet and talk about issues face to face. That would lead to better relations at work, better communications, fewer issues and a stronger company.

And a stronger company is very much in the best interest of all employees.

People who work for stronger companies enjoy greater job security and higher pay than those who work in loss ridden strife torn organizations. And stronger companies stay in business, thereby able to provide permanent jobs.

Finally, there is one huge difference between job security and union security.

Successful employers seek to provide job security for employees while union leaders seek union security for themselves.

It's all so simple. And at the same time, all so misunderstood.

Class dismissed.

Thanks. Bob.

Caterpillar, Wisconsin and the Blessings of Liberty

Yesterday we discussed Caterpillar's Joliet strike and why, at least in my view, it's unfair that we essentially coerce some employees into not working when others, even a majority of union members, vote to continue on strike. Doesn't seem very American to me. Whatever happened to freedom of choice?

Today we'll take a look at what happened in Wisconsin when public sector workers were free to pay or not pay union dues. It's a telling story that we all should heed.

That will also help us to always remember that union members are not the same as employees, and that the interests of unions are frequently at odds with the real interests of their dues paying members. In other words, as free Americans we should always be free from coercion and allowed to exercise our most basic freedoms. That in turn means that the government, union leaders or even a majority of our co-employees won't be able to force us to do things their way.

In a democracy, one thing we must always guard against is the "tyranny of the majority." And especially when we have views and opinions that may be in the minority. In other words, when it comes to individual rights such as free speech, freedom of religion and freedom to work or not work, rule by majority should not apply. We should be left alone to go our own way.

Now let's look at what public sector union members in Wisconsin have to teach about what happens when they're free to exercise their individual rights. It will help explain some very real things about unions and their coercive practices toward their membership.

The Wisconsin employees' tutorial will be instructive for all of us, whether private or public sector employees, or whether employed at all.  It's all about freedom of choice and the blessings of liberty.

Wisconsin Unions See Ranks Drop Ahead of Recall Vote provides the background:

"Public-employee unions in Wisconsin have experienced a dramatic drop in membership—by more than half for the second-biggest union—since a law championed by Republican Gov. Scott Walker sharply curtailed their ability to bargain over wages and working conditions.

Now with Mr. Walker facing a recall vote Tuesday, voters will decide whether his policies in the centrist state should continue—or whether they have gone too far.

The election could mark a pivot point for organized labor.

Mr. Walker's ouster would derail the political career of a rising Republican star and send a warning to other elected officials who are battling unions. But a victory for the governor, who has been leading his Democratic opponent in recent polls, would amount to an endorsement of an effort to curtail public-sector unions, which have been a pillar of strength for organized labor while private-sector membership has dwindled.

That could mean the sharp losses that some Wisconsin public-worker unions have experienced is a harbinger of similar unions' future nationwide, union leaders fear. Failure to oust Mr. Walker and overturn the Wisconsin law "spells doom," said Bryan Kennedy, the American Federation of Teachers' Wisconsin president.

Wisconsin membership in the American Federation of State, County and Municipal Employees—the state's second-largest public-sector union after the National Education Association, which represents teachers—fell to 28,745 in February from 62,818 in March 2011, according to a person who has viewed Afscme's figures. A spokesman for Afscme declined to comment.

Much of that decline came from Afscme Council 24, which represents Wisconsin state workers, whose membership plunged by two-thirds to 7,100 from 22,300 last year.

A provision of the Walker law that eliminated automatic dues collection hurt union membership. When a public-sector contract expires the state now stops collecting dues from the affected workers' paychecks unless they say they want the dues taken out, said Peter Davis, general counsel of the Wisconsin Employment Relations Commission. . . .

In the nearly 15 months since Mr. Walker signed the law, 6,000 of the AFT's Wisconsin 17,000 members quit, the union said. It blamed the drop on the law. . . .

A victory by Mr. Walker "will be a dramatic signal to local and state politicians they can, in the name of fiscal responsibility, tell unions…to come into parity with private-sector workers, especially on benefits," said Michael Lotito, a San Francisco attorney who represents management in labor disputes and has testified on labor issues before Congress. . . .

Unions have spent millions of dollars on TV ads campaigning against Mr. Walker. "Unions are putting a lot on the line and if they win, they win big, but if they lose, they lose even bigger," said Gary Chaison, a professor of industrial relations at Clark University. A loss "will be interpreted as a sign of weakness and a lack of public sympathy."

Organized labor's strength has been declining for 60 years, as unions failed to keep pace with globalization, an increasingly service-oriented economy and more aggressive opposition from employers. Today, just one in eight American workers is a union member compared with more than one in three in the mid-1950s.

But that decline has come almost entirely in the private sector, where only 7% of workers today are union members. Public-sector union membership rates have held steady at around 37% since 1979, and the number of members has increased, thanks to growth in government employment. In 2009, for the first time, there were more union members in government than in companies. . . .

Membership declines could be self-perpetuating, said Mr. Chaison of Clark University. With diminished dues, unions deliver fewer services, making membership less appealing and hampering recruiting. . . .

Meanwhile, collective-bargaining rights for public employees has receded as an issue, with far more people saying in recent polls that job creation is their top priority."

Summing Up

7% of private sector workers today are represented by unions, and 37% of public sector workers are so represented.  Those numbers have changed profoundly in the past several decades. In fact, the 1960s saw the arrival of public sector bargaining and the 1980s witnessed the beginning of a serious decline in the private sector. Pretty much a reversal has occurred between the two sectors.

We've gone in  total from 33% unionized to 12% unionized, but that doesn't tell the real story. The presence of unions in the private sector (companies like Caterpillar) has dropped like a rock, while the public sector's union presence (government workers, including teachers) has exploded.

Of course, global competition is a force in the private sector whereas monopoly rules in the public sector. And companies go broke in the private sector while taxes just go up in the public sector. {Unless they're UAW Motors, of course. Government didn't bail out GM; they bailed out the UAW.}

And expensive and unlimited liability pension plans are being replaced by less expensive and limited liability 401k plans in the private sector.  Meanwhile, taxpayers remain on the hook for underfunded and unlimited liability pension plans in most of the public sector.

Whereas ongoing productivity gains are absolutely essential for survival in the private sector, productivity is often called "mean old austerity" and therefore the enemy in the public sector. Let the taxpayers pay is the public sector's way. At least until now.

In the next post, we'll discuss freedom of choice and why unions are threatened existentially when individual employees have the freedom to choose--- also known as the blessings of liberty.

Stay tuned. Bob.

Is This Time Different? ... Tough Choices Ahead

Is This Time Different?

A serious debate between placing a heavier emphasis on either (1) individual responsibility or (2) collective responsibility is starting to heat up in American politics.

Although perhaps the four most overused words ever are "this time is different," the world, including us, has some very tough choices to make about what our future course will be.

Different or not, we're going to have to decide about taking on more debt or starting to pay it off, accepting more personal responsibility or choosing to rely more on others. All this means getting serious about living within our means, both personally and as a society.  As we make those decisions, we will have largely determined what kind of self governing society we'll be leaving behind for future generations.

And this fall's elections offer a great opportunity to make the views of We the People known to our fellow citizens, the politicians and the rest of the world, too.

You see, due to the worldwide debt bubble which has now burst and left us with a sick global economy, high unemployment, huge deficits and enormous bills to pay, we're facing some extremely difficult choices as a world. But choose we must.

And depending on what future road we Americans choose to take travel, the U.S. will either strengthen or weaken our position as a world leader, both with respect to national security and financially as well.

So maybe the phrase "this time is different" does apply.

Although most of the world's current attention is now focused on the possible futures of Greece, Spain and Europe as a whole, let's first shine the spotlight on the U.S.

In a few weeks, it will be election season in Greece, but this fall will be voting time in the U.S. as well. Thus, we'll begin here at home.

U.S.

The Bain Ads Are About Spending says this about the choices confronting We the People this autumn and beyond:

"In a presidential re-election race, the formula (telling the electorate that all's well and there's no need to face reality and make hard choices) is inconvenienced by the existence of a very public record of things done and said, of persistent joblessness and sluggish growth, and one big issue that threatens to dwarf the Obama allure altogether—the entire industrial world's rendezvous with insolvency.

Here's the real message of the Bain ads. The ads may invoke classic private-equity slurs like looter and stripper, but the real message is that private equity is exactly what it says it is: a bringer of efficiency and rationalization. Mr. Romney, the ads say, wants to take things away from you that he claims no longer are affordable; Mr. Obama, the ads say, will fight whoever tries to take things away.

To the less sophisticated voter, the Obama message is a soothing "nothing has to change." To the more sophisticated, President Obama proposes himself as the defender of every spending interest, never favoring a cut, always pushing for higher taxes.

Look at Europe. Look at California. This strategy can work electorally. As policy, it may be unbelievable, irrational and misleading—like Gov. Jerry Brown clinging to his bullet train. But it makes a kind of political sense.

Mr. Brown's politics in fact are worth studying. His state is flirting with fiscal collapse. Businesses and workers are fleeing its high taxes. Yet he defends a perfectly senseless plan to build a $68 billion high-speed rail to nowhere. His message to his state's spending interests: "I'm your guy. No compromise." As in Greece, where austerity has meant the private sector shrinks but the government doesn't, so in California, if Mr. Brown has anything to say about it.

Politicians who work this vein are careful not to be heard actually saying "everything is affordable."

But voters get the message "the rich will pay." If the proceeds of the Buffett tax were proportional to the noise Mr. Obama has made promoting it, the Buffett tax alone would solve our fiscal problems (in fact, it's impact would be negligible).

The . . . campaign, then, is not about the legitimacy of capitalism, which isn't really in question. It's about Scott Walker in Wisconsin; it's about Chris Christie in New Jersey. The symbolic victims in Obama's Bain ads are steelworkers only because a 50-year-old retiree living on a government pension doesn't make a compelling victim. The villains are rich bankers because the average taxpayer doesn't make a good villain. The Bain ads are about the spending wars, and those who benefit from government largess and those who foot the bill.

Mr. Romney should be happy to fight on these grounds. A lot of voters—known as taxpayers—worry about the economic future. Mr. Obama's stance of "let's preserve and expand the handouts and to hell with tomorrow" frightens them. Quite possibly some decipher the Obama ads exactly as Team Obama intends, but like the ring of Mr. Romney's private-equity history. It has nothing to do with putting profits above people—and everything to do with stopping the rot."


Greece

In Europe, a Dispute Over Facts and Fairness hits the nail on the head as well.  It all sounds pretty much like the discussion in America:

"Part of Europe’s problem is that Europeans can’t agree on some basic facts about the continent’s financial crisis. Consider the striking results of a recent poll by the Pew Research Center:

Pew Research Center

In most large European countries, a plurality of people say Germans are the hardest-working Europeans, with a substantial share also saying that Greeks are the least hard-working. Greeks, on the other hand, say Italians are the least hard-working — and view themselves as the hardest working.

Pew explains:

The crisis has exposed sharp differences between some Europeans. Germany is the most admired nation in the E.U. and its leader the most respected. The Germans are judged to be Europe’s most hard-working people. And the Germans are the strongest supporters of both European economic integration and the European Union.
Greece is the polar opposite. None of its fellow E.U. members surveyed see it in a positive light. In turn, Greeks are among the most disparaging of European economic integration and the harshest critics of the European Union. And they see themselves as Europe’s most hard-working people.

James Surowiecki’s column in this week’s edition of The New Yorker touches on similar themes:

Europe isn’t arguing just about what the most sensible economic policy is. It’s arguing about what is fair. German voters and politicians think it’s unfair to ask Germany to continue to foot the bill for countries that lived beyond their means and piled up huge debts they can’t repay. They think it’s unfair to expect Germany to make an open-ended commitment to support these countries in the absence of meaningful reform. But Greek voters are equally certain that it’s unfair for them to suffer years of slim government budgets and high unemployment in order to repay foreign banks and richer northern neighbors, which have reaped outsized benefits from closer European integration. The grievances aren’t unreasonable, on either side, but the focus on fairness, by making it harder to reach any kind of agreement at all, could prove disastrous.

 Discussion and Analysis

The first article points to the reality of "the entire industrial world's rendezvous with insolvency."  Europe is the prime front burner story, and the leading examples within Europe today are Greece and Spain, respectively.

The second article suggests that the European focus on perceived "fairness" may prove "disastrous" and make it impossible to reach any continent wide agreement at all. Especially revealing is the  belief by Greeks that they are the hardest working people in Europe. For obvious reasons, nobody else agrees with the Greeks' point of view about themselves.

Summing Up

The most difficult part of resolving any argument or disagreement is to first arrive at a consensus on what are the REAL FACTS. Before later getting to a better reality than the existing one, we must initially come to terms with what is the current reality. And that's tough to do all by ourselves, let alone with others involved.

Some obstacles to getting to a shared reality in the U.S. are the following. They're intended to be illustrative only.

The public sector takers versus the private sector makers.

The public sector unions against the taxpayers, aka the Democrats against the Republicans.

The haves versus the have-nots, however defined.

The private sector unions against the private sector companies, such as the Caterpillar example. (See " yesterday's post "Caterpillar Strike and its Larger Story ... Some Questions I have")

The young against the old.  And so on.

But we do have to arrive at a consensus as to where we are.  Time's a wasting.

To repeat, we simply can't ignore getting to an agreement on our reality much longer.

Our debts will soon be coming due and interest charges on that debt won't remain at historically low rates forever. The creditors will see to that.

But we can fix our problems and move forward to a better future for all Americans if we can come to grips with a shared reality.

But first, let's all start talking honestly and openly about both where we are and where we want to go.

Thanks. Bob.

Offending Poland ... Words Can Hurt

The law of unintended consequences was in play again. This time it occurred at yesterday's White House ceremony honoring recipients of the Presidential Medal of Freedom.

Now we've needlessly and carelessly offended the good people of Poland, our long time friends.

Gafa Obamy' is subtitled "A presidential faux pas mangles World War II history and insults Poland."

Read it and weep: "Sometimes the best-intentioned gesture can backfire on the unwitting politician. This is the story of President Obama and the Poles.

Among this year's 13 recipients of the Presidential Medal of Freedom, Mr. Obama posthumously honored Jan Karski. As a member of the Polish underground during World War II, Karski was the first to provide eyewitness evidence of the Nazi extermination of Jews in occupied Europe. In 1942, he sneaked into the Warsaw ghetto and a German death camp, then made it out to London and Washington—no easy task at the time—to call on Western leaders to save the Jews. This effort included a meeting with President Roosevelt. But Karski was ignored. "No one did enough," Karski said later. But he did more than anyone at the time.

Important constituencies were satisfied with the award. Poles and Polish-Americans (a key voting bloc in Pennsylvania, Illinois and Wisconsin) were delighted. The Jewish Week newspaper called the medal "well-deserved."

The mood soured a bit before Tuesday's award ceremony. The Poles wanted Lech Walesa to receive the medal on Karski's behalf, but the White House nixed the choice. Last year, during Mr. Obama's visit to Poland, the hero of Solidarity refused to attend a large gathering to meet the younger leader.

Mr. Walesa felt entitled to a tete-a-tete. Administration officials told Polish journalists Mr. Walesa's presence was too "political" for this week's occasion. Poles read something else into it: Mr. Obama holds grudges. The counter snub was the talk of Poland last week.

Former Foreign Minister Adam Rotfeld, a Polish Jew, stood in at the White House celebration. The Walesa episode was fading into memory when President Obama made his opening remarks. Karski was "smuggled into . . . a Polish death camp to see for himself," he read off the teleprompter, that Jews were being murdered. On second reference, Mr. Obama noted it was a Nazi camp. Too late.

The damage was done.

"Gafa Obamy," declared Gazeta Wyborcza, Poland's leading daily newspaper, in a story about "Obama's gaffe" on its website. The linguistic faux pas went viral. In another day this would have been ridiculed as a "Bushism," before America got a president with a Harvard Law degree who claimed to practice "smart diplomacy."

Poles are, to say the least, prickly on this score. When their nation was stuck behind the Iron Curtain for four decades, they were in no position to defend themselves against charges of complicity in the mass murder of Jews. Yet unlike Vichy France, the Poles didn't collaborate with the Nazis in running the country, much less in the Holocaust. The Polish underground was the only organized group that tried to help Jews during the war, smuggling arms into the Warsaw Ghetto during the 1943 uprising.

Christian Poles sheltered thousands of Jewish children and faced certain death if found by the Nazis.
Mr. Rotfeld, who was one of those kids, several years ago said that, "The thoughtless or intentional use of the phrase 'Polish death camp' is insulting and shameful. Not only does it blur responsibility for those crimes—it slanders our nation, which was the first victim of the criminal practices of Hitler's Germany." The Karski award was, in part, supposed to straighten this historical record.

As outrage grew, White House spokesman Tommy Vietor said "We regret this misstatement." Poland's prime minister, Donald Tusk, wasn't satisfied. "I am convinced that our American friends can today allow themselves a stronger reaction . . . a reaction more inclined to eliminate once and for all these kinds of errors," he told reporters in Warsaw on Wednesday. Obama's words had "hurt all Poles."

So much for good will."

Summing Up

The story speaks for itself.

Accordingly, I have nothing to add.

Thanks. Bob.

UPDATE ... No Surprise At Caterpillar ... Union Rejects Offer

As expected, the Joliet IAM union membership rejected Caterpillar's offer today.

My guess is this strike could be a really long one unless the union finds a way to give in gracefully.  And someday they will attempt to do just that.

Caterpillar Strikers Reject Revised Contract Offer has the updated story about the vote to stay on strike:

"JOLIET, Ill.—Strikers at a Caterpillar plant here, preparing for a long fight, overwhelmingly voted to reject a slightly revised contract offer from the world's largest maker of construction and mining equipment.

About 81% of the 620 people who voted at a meeting of the local branch of the International Association of Machinists and Aerospace Workers, known as the IAM, rejected the offer, following the advice of IAM leaders. That was down from a 94% rejection rate at a vote in late April, just before the union went on strike.

Caterpillar tweaked its offer last week after mediators tried to find a compromise, but strikers said the changes were minimal. Several strikers said after the vote that they expected a long struggle.
Steve Jones, an IAM district official, said after the vote that the union had told Caterpillar it was ready to resume negotiations. He said the company told him it saw no reason for a meeting. A Caterpillar spokesman said the company would release a statement later Wednesday."

Summing Up

I've often wondered why unions encourage their members to do dumb things. But they do.

I've also wondered why members do dumb things even though their union leaders encourage them to do so.

In any event, the Joliet Cat strikers will continue to lose pay unless and until they accept an offer from the company.

Meanwhile, I'll be willing to bet the ranch that the offer the union and employees eventually accept, whenever it occurs, will be a huge net loser for employees who take the time to compare (1) total lost pay from the time of the strike's inception until the employees return to work to (2) the total money differential in pay granted by the company between the first offer that was rejected and the eventual one that's accepted.

It always happens that way. Always.

Then the union leadership either declares victory anyway or talks about how hard they tried and how badly the employees were screwed by Caterpillar. Still, the employees lose.

What a strange world where high pay and high unemployment only cause union officials to mislead their membership into taking and then staying on the wrong road economically.

But even more strange is the fact that the membership follows.

Oh well, it's a free country except for the Caterpillar union members who would like to return to work instead of getting $150 weekly to picket and take charity from the church to feed their families.

But neither the union nor the Illinois labor laws permit or even encourage such reasonable behavior.

And for those who would like to return to work, their fellow union members would threaten their safety if they started to cross the picket line.

How sad.

Thanks. Bob.

Caterpillar Strike and Its Larger Story ... Some Questions I Have

Background

The city of Joliet, Illinois, Caterpillar and labor relations are three things with which I'm quite familiar. I'll explain why.

When working long ago as a flagman on a truck, we'd deliver Caterpillar equipment from the East Peoria or Decatur facility to Joliet before returning to our home base in Chillicothe, my home town. The next day we'd do it again. It was a great summer job.  I was just pretty much along for the ride.

Later a childhood friend, now deceased, worked at the Caterpillar facility in Joliet.  He was a member of the IAM union, which is the same one involved in the current strike at Caterpillar's Joliet plant. We both lived in nearby Kankakee. Jerry Ginger liked his job and its high pay, too.

I grew up in a union household, worked in union facilities, interned for a union labor lawyer while in law school and began my work career representing the company in labor relations.  I've negotiated with the UAW, Teamsters, IAM, USW and many others. As individuals, most union leaders were great people. Just like the fine people I knew while growing up in Chillicothe.

The Current Strike at Caterpillar's Joliet Facility

Union Urges Caterpillar Rebuff is subtitled "Bonus-Payments Contract Sweetener Fails to Sway Striking Machinists' Leaders." Since it's not long but is quite revealing, we'll quote the article in its entirety

"JOLIET, Ill.—Union leaders at a Caterpillar plant here say they will urge striking workers to reject a slightly revised contract offer from the maker of construction and mining equipment.

"It is still a terrible contract," Tim O'Brien, president of the local branch of the International Association of Machinists and Aerospace Workers, or IAM, said in an interview on Tuesday. The workers, who have been on strike for a month, are due to meet Wednesday to vote on the latest Caterpillar contract offer. Mr. O'Brien said about 780 workers at the factory are out on strike.

The strike is a rare test of U.S. workers' willingness to fight at a time when the nation's manufacturers generally are succeeding in holding down wages and benefits. Caterpillar, based in Peoria, Ill., has long been known for grinding down union resistance.

"They're trying to see how desperate we are," said David Downs, a machinist who was picketing with more than a dozen other Caterpillar workers outside the plant before dawn on Tuesday. When asked whether he was getting desperate, Mr. Downs replied: "Not even close." He and others on the picket line said they planned to vote against the revised offer.

A Caterpillar spokesman declined to comment on the union statement.

The basic pay and benefit elements of the Caterpillar offer are unchanged. The six-year contract would allow Caterpillar to freeze wages for workers hired before May 2005. For those hired since then, the company could adjust wages based on its assessment of the labor market. Workers would pay more for health insurance and transition from a defined-benefit pension plan to a standard 401(k) retirement-savings program. Caterpillar would have more flexibility to require workers to switch to different shifts.

Workers in the plant, which makes hydraulic pumps for Caterpillar machinery, generally earn between $13 and $25 an hour. Those hired before May 2005 are on a higher wage scale. Caterpillar has been making increased use of "supplemental" workers who can be laid off at any time without severance pay, the union says.

To sweeten the terms, Caterpillar is offering a $1,000 bonus to each employee if workers ratify the contract on or before June 10. Workers also would get eight hours of extra pay if they ratify the contract by Wednesday and return promptly to work, and as much as $2,100 in bonus payments if the plant meets certain performance goals in the second quarter. The IAM's Mr. O'Brien said those performance goals are unrealistically high.

Caterpillar has continued to operate the plant by using managerial employees to run machinery.

The strikers hope those white-collar workers will find the work too difficult and dangerous. "These are office guys," said Mr. Downs. "They've got them out there doing our work. So-called doing our work. They want to get home to their families."

The strikers are getting about $150 a week in strike pay from the union. Groceries donated by charities and other unions are helping sustain them.

With unemployment high, U.S. workers generally have felt compelled to accept employers' efforts to cap pay for veteran workers and reduce wages for new hires. The U.S. government's inflation-adjusted Employment Cost Index, which includes benefits, shows that manufacturers' labor costs were 2.7% lower in the first quarter of 2012 than in 2005."

Some Thoughts and Questions I Have

Even though I predict that the union leaders and most IAM members will vote to reject Cat's offer, why can't others as free Americans choose to accept the offer and return to work under the proposed terms?  Isn't liberty all about being free to choose for ourselves without being in any way coerced by others?

In other words,  assume I'm an hourly worker who is willing to work for $13 to $25 per hour and accept the $1,000 to $2,100 bonus payment, as well as transition to a 401k retirement plan. Even though I'm not "desperate," I do want the income, and I don't think Cat's proposal is a "terrible contract" offer. Besides, I've explored my options and this looks like the best deal I'll be able to find. So why keep striking?

And why do U.S. labor laws and union threats prevent me from exercising my rights as a free American to go back to work? Better yet, why did I have to stop working anyway when the strike began? Don't I have a choice?

Now don't get me wrong.  If others don't want to work for what Cat's offering, they shouldn't be forced to do so. But neither should people who think as I do be forced not to work just because others choose not to work?  I don't get it. Not in America.

And why do I have to pay union dues to the IAM for representation that I don't want? So they can take part of the dues I pay them and give me back $150 weekly to stay fed  while out on strike? I'd let them keep their dues if they'd allow me to quit the union and stop paying dues.

And why do I have to rely on donations from churches to stay afloat during the time I'm out of work? If I returned to work, the churches could use that money for people really in need as well as for those without jobs.

And if my fellow IAM members want not to work for Cat, why can't others have their jobs?  In a free country, we should all be free to work or not work as circumstances permit.

Of course, union leaders should be free to "urge" me to strike, but I should be free to refuse to follow their lead. Why can't I decide for myself?

That said, my fellow workers should certainly be free not to work for Cat under the terms offered, but I should be free to accept their offer to return to work. Seems only fair.

And in the future, why can't I just make my own deal with the company about pay and such, and allow the IAM to represent those who choose to be represented by the union?

Oh and by the way, who pays the union leaders their salaries and my $150 weekly pittance of a strike subsidy? How much are the union leaders paid anyway?

And if the source of the union's money, the dues paid and the strike fund is Caterpillar, why are we trying to make things so difficult for the company? Aren't things pretty tough out there already?

Last I heard, good jobs were hard to find, so I want keep mine at least until something better comes along. But the Cat job is a good job, so something better probably won't come along anytime soon.

I want to help Caterpillar survive and even thrive in this economy. They're doing well, and we need to keep it that way.  I call that job protection.

I call this strike crazy, but that's just my view.

Summing Up

Individual freedom of choice is lacking in U.S. labor relations. The unions have monopolistic powers. Individual workers have minimal rights. It's all a collective thing as opposed to an individual thing.

That's not good, because it makes union leaders too powerful. And frequently they don't even work at the struck facility.

The UAW has brought the American auto industry to its knees. Most foreign based transplant auto companies are non-union and located in the south.

The USW brought the old line American steel companies to their knees. Nucor, Steel Dynamics and other successful U.S. steel companies today are largely non-union.

And why can't the Joliet "office guys" do the work previously done by the union members?

With technology today, maybe we could combine the job of the office guy with the job of the union guy and go from there. Guess who would be best qualified to do the combined job?

Then we'd pick the best and give him a raise. That would increase productivity and make one current employee happier while allowing one currently unhappy employee to seek employment elsewhere.

We need to understand why unions aren't good for workers or American competitiveness today. The ostrich approach to competitiveness and labor relations simply isn't workable.

Finally, we must stop emulating the European socialist collectivist model and adopt a free to choose capitalist individualist approach to create meaningful employment for all who want it.

But compete we must!

At least that's my vote.

Thanks. Bob.

Another Pogoism ... "Free" Lunches Not "Sold" Here

No such thing as a free lunch has a simple and straightforward Pogo inspired message for all Americans:

"When it comes to assigning blame for Washington’s humongous debt, we need only look in the mirror. . . .

To determine why Washington’s debt grew to today’s proportions, you need to recall the immortal words of that great philosopher, Pogo, who said “We have met the enemy and he is us.”

You see, over the years, we have blamed whoever is in office for spending more than the government receives in the form of tax revenues. This has been the case no matter which party controlled the White House and/or the Congress.

In reality, the blame falls on we the people. We constantly demand more from the government than we are willing to pay for in the form of taxes.

If the average voter gives this any thought at all, he or she usually concludes that such overspending is all right, since someone else is paying the bill. The problem is, that person thinks the other person is picking up the tab. In other words, we are all saddled with the bill, which, of course, is the reason why budget deficits are big and ubiquitous.

As for the pols, they are only too anxious to perpetuate this myth. After all, who among them is brave enough to tell the electorate “vote for me, I will raise your taxes and cut government spending on your pet programs.” Why this is a surefire way to defeat.

Elections are not won by nattering nabobs of negativism — they are won by those who accentuate the positive. . . .

Show me the politician who tells it like it is and I’ll show you one who is not likely to get elected or re-elected.

In this “me first” environment, how can we cut the government’s budget deficit and reduce its overall debt? Whose belt do we tighten? After all, one person’s program or tax loophole is another’s necessity or cherished incentive."

Discussion

Stop the Government Work or Improve How It's Done

Government needs to spend wisely and efficiently, too. And it needs to stop doing what doesn't need doing.

If we can eliminate the work being done, we should. If we can't eliminate it, we must improve the way it's done.

In other words, either stop it forever or improve it continuously.

Funding the Government Work Being Done

Spending wisely requires that We the People in concert with our elected "public servants" decide what programs will be offered by government and that these programs are always funded properly. 

Of course, this funding gets us directly into who will pay for what we receive and who will receive but won't pay, as well as who won't receive.

Things We Should Do

For a few brief examples of what should happen, people with adequate means shouldn't receive social security or medicare benefits. Means testing, in other words, needs to become a reality and soon.

People who are able to work should work, including low wage jobs. We can supplement their income if necessary with government payments, but all who can work should work. There's plenty to do.

And those able to work but not working should not receive unemployment benefits for staying home.

And parents should be free to send their kids to the schools they choose instead of to the schools picked for them by government officials. Vouchers are an example of free choice.  Free choice needs to come to government schools and education.

 How Government Must Do Those Things It Does

 Also of huge importance is the efficiency of the work to be done by government.

Since government is a monopoly, customers aren't able to choose whether they will buy or not buy at a certain price whatever the government is "selling."

Hence, there is no price market mechanism to cause the government to attempt to reduce, let alone eliminate, waste. And waste elimination or work improvement is a totally different thing than austerity.

It's simply doing what we're doing better, aka the habit of improvement. The process of continuous improvement can be a powerful one indeed.  But first it has to be tried, measured and reported upon in the bright sunshine. Productivity is a good thing. It's what makes us prosper.

Public Sector Unions Are an Impediment to Productivity and Waste Minimization

Public sector union officials often actively work against efficient and taxpayer friendly government. They cause taxpayers to waste money on inefficient government practices by bargaining for pay and benefits which are higher than those received for comparable work performed in the competitive private sector.

It's not that government employees are intentionally wasteful but rather that they usually aren't mindful of waste at all. For the union leadership, the more employees on the payroll, the more dues for the unions.

As a result, unions have zero interest in running government efficiently. Yet they stand between the taxpayer representative public official and the public employee charged with actually doing the work.

Summing Up

Pogo says we can easily fix these problems if we have the willingness to face them squarely and put the MOM principle to work. But face them squarely and employ MOM we must.

Change is not bad. It's good. And change is necessary if we want to improve the way we're doing things. Maybe the first day we're doing the best we can, but the second day gives us an opportunity to improve upon what we're doing.

And after years of no change to how things are done---well, that's an enormous opportunity just waiting. Common sense teaches that the longer we've been doing something the same way, the greater the opportunity of accomplishing that same result (output) with dramatically less effort (input). That's called productivity.

Thus, change is good, and change must come to the status quo government way of doing things.

So how does this change thing work anyway? Well, we try to do the work the best way we know how, make mistakes and then learn from those mistakes.

We call that learning by doing process experience. If we allow ourselves to change our minds and work to create a better future, continuous improvement in government operations will become a reality.

And the more people we engage in bringing about a continuous improvement mindset to government at all levels, the more and faster those productivity improvements will occur.

We'll call that "taxpayer friendly government" at work. Sounds good to me.

So in Pogo-land we don't need any additional government "investment" or "stimulus" spending to bring about huge improvements in how government works.

We just need for our government to work effectively and efficiently as well.

Thus, all we need are a few clean sheets of paper, open minds, a willingness to face facts, the determination to recognize and fix those things that need fixing, and the desire to eliminate work that doesn't need doing.

We the People deserve nothing less from our elected representative and public sector employees.

Pogo knows the foregoing is just common sense.

So do We the People.

Thanks. Bob.

Lessons to be Learned From the Facebook Stock Price Fiasco

When Investing, Buy Low, Hang On and Sell High

The hourly, daily, monthly, annual or other price for which a share of stock sells only matters two times to an individual investor: (1) how much it costs per share when he buys it; and (2) how much he receives per share when he sells it.

Thus, Will Rogers accurately advised to buy low and sell high when investing. Makes sense to me.

Buying Facebook Shares

The first step, of course, is the buying. We'll use the current Facebook sorry saga as an example of that simple Will Rogers strategy at work--- buy low and sell high. Will wouldn't have touched Facebook shares with a ten foot pole.

Facebook sold its shares to the public recently at $38 per share and the price per share immediately rose to $43. Those few who bought it at the opening price of $38 and sold a few hours later at up to $43 did well. They weren't investors; they were professional traders.

However, those many people who bought at $38 and didn't immediately bail out have done poorly.  And for those who bought and are still holding on, the worst may be yet to come. It's selling at less than $29 per share today, down almost another 10%.

And those who are buying Facebook today may be trying to "catch a falling knife" by buying at the "low," which is always a dangerous game.

But those who bought previously and are not selling are perhaps playing an even more dangerous game, while telling themselves that they're waiting to sell until they're back to break even. That day may or may not arrive anytime soon, if ever. In fact, some analysts value Facebook shares as low as $13.80.

Now I have no idea what the stock is worth, and I have had absolutely zero interest in buying its shares---whether at the price today, yesterday or tomorrow. But I do know this--people who buy have a hard time selling shares that decline in value, even though that's no reason to continue to own them. A mistake is a mistake.

Thus, don't buy what you're not prepared to own for a long time and don't buy what you can't value at the time you buy. And please don't buy what doesn't represent a great value at the time you buy. That buy-at-a-great-value-price allows you to hold on patiently while the shares are slumping due to general market volatility, a bear market, world chaos or otherwise.

So the first rule of buying is to not overpay, as the Will Rogers school of investing says. Wait instead for either that stock's price  to come down to your "wait 'til price" or buy another stock that has already reached your "wait 'til price."

It's really this simple. Buy and hold works well for those who buy well. Buying well requires patience and effort, which lead to "prior-to-purchase-knowledge" and the ability to hang-in-there-later-when-it's-tough confidence.

Facebook the Company

To repeat, I don't own Facebook stock and never intend to own any. That doesn't mean it's not a great company with a great future. It may well be. But there's a difference between owning a great company at a great price and owning a great company at the wrong price. And we're talking long term investing here. Not short term trading.

You see, long term buyers know that share prices will fluctuate, and sometimes violently, but they also realize that time will be on their side, so they pick the time to buy carefully. Even if they buy periodically, they don't want to overpay for their long term investments.

And with the often severe volatility of the market prices, share prices of good companies sometimes get much cheaper when markets do down. {We'll not take the time to go into why this happens today, but there are very good reasons therefor. Thus, long term investors expect the shares of good companies to go both up and down right along with the bad, and sometimes they go down much faster than the shares of the bad companies when volatile markets move up and down. As market moving professional traders use borrowed money to buy and sell in enormous volumes, that in turn gives us individual investors the opportunity to wait for our pitch to hit. But more on that another time.}

Long Term Investments

Accordingly, my investments are in companies with proven and solid track records, and share purchases are made, albeit infrequently, when the longer term future performance of the company, albeit always somewhat uncertain, appears much better than its current share price reflects.

Accordingly, IPOs (initial public offerings) like Facebook are a no-no investment for boring long term owners like me. These share offerings are often priced in accordance with the greater fool theory of individual investing, meaning simply that there's always a greater fool waiting to buy the stock of the sophisticated trader who is selling. Thus, the seller will make a quick profit and move on to the next trade.

And when trading is the game being played, it doesn't matter how much the "intrinsic value" of the company may be. That means no-no to me.

Other examples of greater fool individual investing are the recent bursting of the housing price bubble and the dot.com internet share price bubble in the last decade of the 20th century.

Updating Facebook Saga

Facebook Shares Tumble to Fresh IPO Lows tells the sad story of Facebook's share price development:

"Facebook shares are down more than 5% this morning (now it's closer to 10% down), hitting new lows in the social network’s short history as a publicly traded company. More than an hour into trading, shares are at $30.17 (now at $28.88). . . .

Much has been written about the trading glitches and technical issues that plagued Facebook when it first started trading earlier this month. But as the IPO mania dies down and the stock keeps falling, it’s clear the hype surrounding the stock prior to the IPO has radically shifted from euphoric to bleak.

Walter Zimmerman, senior technical analyst at United-ICAP, points to some of the behavioral finance elements that may be behind the stock’s troubles during its first week and a half of trading.

From the vantage point of behavioral finance the unfolding Facebook IPO fiasco was neither an order flow glitch nor a technical error by the Nasdaq. Nor was the problem a simple share value miscalculation by analysts. All attempts to grasp the Facebook IPO face-plant in these terms is to deal the surface symptoms and to miss the underlying cause.
The Facebook debacle is a textbook case of the collision between human needs and the nature of the financial markets. What went so wrong with this IPO can only be appreciated in terms of the intersection of collective human behavior and finance. The mass psychology of this IPO was that of a classic mania. And that meant a multitude of problems were rendered invisible. We are referring here to two critical and related issues – the timing and the valuation assumptions.

Many Facebook skeptics have gotten a lot of attention in recent days, with the bears biggest point of contention being the hefty valuation. With shares trading at 52 times projected earnings for the next 12 months, according to FactSet Research, the stock is still trading at a higher multiple than many of its peers.

“What happened to the Facebook IPO? Human nature happened,” Zimmerman says. “Crowd behavior can be ugly and dangerous…I would like to suggest that Facebook may be a great signpost, but not a great stock to own.”

Summing Up

Facebook is a great example of both human greed and the greater fool theory of individual investing at work. Following the crowd, especially when buying, can be most dangerous to an individual investor's financial health and well being.

We'll deal with properly valuing stocks in future posts, but for now suffice it to say that emotion is not a good way to determine when to buy and sell--anything. Earnings, cash generation, market position and other factors in relation to share price and overall market valuation are all important factors to consider.

And merely doing what others are doing or recommending that we do is not an important factor. It's not even an unimportant factor. What's in it, if anything, for those urging the buying should always be an important question to ask ourselves before deciding to buy or not buy what's being offered for sale.

Over Time, Stocks are Worthwhile Inflation Hedges and Increase in Real Value.

That's why we own them.

Because we want to keep our buying power intact over time, and that's not going to happen with today's low interest rates, we can't rely on fixed asset investing, including bonds and CDs.

Thus, we have to own stocks and take some well considered risks if we are to maintain and increase the real purchasing power of our money over time.

But those stock ownership risks we do take should be known risks, and we need to do our best to match them with the potential rewards of ownership.

Accordingly, and consistent with preserving and enhancing our dollar's real purchasing power, we want our stocks to provide us with periodic cash dividends and the legitimate potential for ongoing real asset appreciation as well.

That means the first step is to buy low.

Stay tuned. We'll sort this all out over time.

Thanks. Bob.

Tough Economy Continues ... Long Term Optimism Does As Well

Generalities

In thinking about our economy and its future prospects, it's easy to still be quite optimistic about the longer term despite the current FUD factors in evidence (FUD = fear, uncertainty and doubt).

And with respect to the uncertain future we're facing as individuals and as a nation as well, it's worthwhile to remember that the future is always an uncertain one.  It's just that when things are going well, we humans tend to ignore that omnipresent certainty about the uncertainty of the future. But when things are difficult, FUD arrives and gets our attention in a hurry.

Got it?  If so, let's continue.

So while we should remain quite optimistic, albeit uncertain, about the longer run, we also need to remind ourselves of what John Maynard Keynes once said, "In the long run, we're all dead."

And despite that certainty, it's important to know how we can justify being so optimistic today in the presence of so much doom and gloom throughout the world.

This fall's U.S. election will be an important one for sure, but it won't alter our freedom loving entrepreneurial leaning self governing society of We the People over time, however we may choose to vote this fall.

Getting Specific

Home prices are low and consumer confidence remains in the dumpster as confirmed by two reports out this morning.

Home Prices Stuck at Low levels describes the current situation and near term outlook as follows:

"U.S. home prices ended the first quarter at the lowest levels since the housing crisis began in mid-2006, according to Standard & Poor's Case-Shiller home-price indexes.

Separately, U.S. consumers in May were less confident as their views on labor conditions deteriorated, according to a report released Tuesday.

Home Prices

 

During the first quarter, home prices reached new lows, falling 2% sequentially and 1.9% year-to-year. Prices are down roughly 35% from their peak in the second quarter of 2006.

The Case-Shiller index of 10 major metropolitan areas was down 2.8% in March from a year earlier.

The 20-city index was off 2.6%. Month to month, the declines were 0.1% for the 10-city index, while the 20-city prices were basically unchanged.

As of March, average home prices were at levels reached in late 2002 for the 20-city measure and early 2003 levels for the 10-city composite.

Demand for homes has been showing some signs of stabilization, as low-mortgage rates, some loosening of credit conditions and improved job growth have pulled some buyers back to the market.

However, "while there has been improvement in some regions, housing prices have not turned" said David Blitzer, chairman of S&P's index committee. Despite some better numbers in the latest period, "since we are entering a seasonal buying period, it becomes very important to look at both monthly and annual rates of change in home prices in order to understand the broader trend.""

Consumer Confidence Drops

The Conference Board, a private research group, said its index of consumer confidence dropped to 64.9 this month from a revised 68.7 in April, first reported as 69.2.

Confidence has fallen for three consecutive months. . . .

Within the Conference Board's report, the present situation index, a gauge of consumers' assessment of current economic conditions, dropped sharply to 45.9 from a revised 51.2 first reported as 51.4.

The May present situation index was the lowest reading since January.

Consumer expectations for economic activity over the next six months fell to 77.6 from a revised 80.4, originally reported as 81.1.

"Consumers were less positive about current business and labor market conditions," said Lynn Franco, director of the Conference Board Consumer Research Center. But she noted income prospects improved, "which should help sustain spending."

Views on the labor markets deteriorated this month. The board's survey showed 7.9% of respondents think jobs now are "plentiful," down from 8.4% thinking that in April. Another 41.0% think jobs are "hard to get," up from 38.1% last month.

Consumers are also concerned about the job situation over the next six months. The report shows only 15.8% think there will be more jobs, down from 16.9% thinking that in April, while 21.0% think there will be fewer jobs, up from 18.4%."

Summing Up

The problem with decreasing home prices is an easy one to explain.

Home prices essentially doubled between 1996 and 2005.  Now they're reverting to their long term price level. When the bottoming process is completed, home prices will resume their long term trend of staying up with but not ahead of inflation. We may have seen the last housing pricing bubble of our lifetimes.

The problem with low consumer confidence is also an easy one to explain.

Consumer confidence is low because good jobs are hard to find, unemployment is high, home prices are declining and consumer debt remains elevated. Too much debt and too little income certainty, in other words.

Of course, debt, confidence, unemployment and home prices are all contributing factors to the lack of consumer confidence.

Thus, we have a ways to go to clean up our financial act. Until that's headed in the right direction, things will stay tough for far too many of our fellow Americans. And for people throughout much of the rest of the world, too.

But bad brings good.

Slow economies often bring low interest rates, low oil prices and reduced food prices as well. These consumer aids are all part of the economic healing process at work.

That said, the hole we dug for ourselves over the past several decades is a deep one indeed, so it will us take some considerable time to escape from it.

To begin to do that, of course, we must first realize that we need to stop digging. That we know now.

So that's a big part of the reason why I'm optimistic about the longer term. When we finally stop digging, we'll have begun escape mode.

And stop digging we will.  I just don't know exactly when that will occur. But it will because it has to eventually.

That's because of another truism---if something can't go on forever it won't.

This continuous hole digging can't so it won't.

Thanks. Bob.

Nation of Immigrants

Today's discussion topic is the importance of immigration to our future American society. In simple terms, our history of being a "nation of immigrants" has been and will remain one of America's primary strengths.

The immigration story needs to be better understood by each and all of us, even though we're each and all very much a part of that wonderful history.

We're not going to talk about legal or illegal immigration today. Instead we'll address why immigration and its effects will continue to make us the greatest nation on earth. The American melting pot is alive and well.

America's 21st-Century Population Edge  says this about the many reasons for optimism about America's future:

"Look around you. For most nations of the world, birth and fertility rates have never fallen so far, so fast, so long, so surprisingly, all across the globe. Except for America. . . . The ramifications are enormous economically, geopolitically, culturally and personally. For one, the United States will become stronger than ever in the games nations play.

Every other major modern nation and every developing country has low or falling birth rates. Japan and Poland see 1.3 children per woman, Brazil and China 1.9, Pakistan 3.6 (down from 6.6 three decades ago). American fertility rates are relatively high, at nearly 2.1. . . .

Then there's the effect of immigration. According to the United Nations and the U.S. Census Bureau, the U.S. takes in more immigrants than the rest of the world combined. Think Albert Einstein, Madeleine Albright, Andy Grove, Albert Pujols, Sergei Brin, I.M. Pei or David Hockney. . . .

All this and more yields an America that is projected to have 400 million people in 2050, up from 310 million today and possibly on the way to 500 million by 2100. This may not quite play out—immigration from Mexico will likely fall as Mexican fertility drops off—but the trend lines are far stronger in the U.S. than elsewhere. . . .

Why is this so important to America? A hefty and growing population can yield power and influence. It's been a long time since a nation with a small population influenced how the world works—think the 16th-century Dutch and Portuguese.

Size also yields vast economies of scale. As population grows, through fertility and immigration, a healthy housing market is inevitable. It's either that or tens of millions of Americans sleeping on the streets. Bet on the boom.

There's corporate growth too, across industries. Imagine an American corporation, XYZ, that wants to start doing business in Thailand. Only in a polyglot nation like America can XYZ search out and find the adult children of Thai immigrants who know America inside and out but also know Thai customs and language.

Few if any nations have all these advantages. The demography in play guarantees that the 21st century, like the 20th, will be an "American Century.""

Summing Up

Yes, we truly have been, are and will stay a nation of freedom loving "immigrants."

The 20th century was correctly labeled the American Century and we're destined to earn that designation again this century as well.

In America, the blessings of liberty are there for each and all of us.

And those shared values that have made our country strong in the past will make us even stronger  in the future.

And with a solidly growing population as well, which in turn will serve to make the U.S. an even more dominant force for good in the world.

In addition, that growth will help enable our domestic economy to grow more robustly as well by creating a larger work force.

And thereby allow us to deal with the demographics of getting older, including paying benefits for retirees.

In future writings, we'll try to expand on all the good things these things will bring to our future America, including our nation's security and economic strength.

But for now let's just say that the more people from various corners of the world who share our basic American values decide to come to the U.S., the better off we'll all be.

Being a magnet remains our biggest source of strength and a source of stability and prosperity for the rest of the world as well.

All that said, we need economic growth to bring the needed jobs. The free market of a free America will provide that growth, assuming it's appropriately structured and entrepreneurs are properly incentivized to make that happen.

Thanks. Bob.

Happy Memorial Day

Today's Memorial Day holiday should be both fun and a special day of remembrance.

So be sure to have fun.

But more important, let's take time to remember all those who came before us, and especially those who gave their lives so we could remain free, and have made the U.S. the greatest nation on earth.

Memorial Day and the American Bible, subtitled 'Americans disagree, but we share a collection of core texts that 'we the people' regard as authoritative,' has this to say about the U.S. and US--aka We the People:

"At the beginning of the American experiment, foreign visitors noted a key difference between the United States and its European kin. The United States was not held together by blood or custom. Its citizens spoke different languages and worshipped in different ways.

"If there is a country in the world where concord, according to common calculation, would be least expected, it is America," wrote Thomas Paine. "Made up as it is of people from different nations, accustomed to different forms and habits of government, speaking different languages, and more different in their modes of worship, it would appear that the union of such a people was impracticable."

Today many U.S. citizens imagine that our unity is creedal, resting on some political analog to Christianity's Nicene Creed. "America is an idea," Bill Clinton told a Georgetown audience in 1995. "To be an American is not to be someone, but to believe in something," adds colonial historian Gordon Wood in his new book "The American Idea."

But there is no one American idea. To be sure, Americans have long championed "liberty" and "equality." But they disagree fiercely about what each of these words means and how to weigh their competing claims.

Americans do share, however, a collection of core texts that "we the people" regard as authoritative and a long-standing tradition of debating what these texts have to tell us about the meaning of "America." To be an American is to debate whether the business of America really is business. It is to ask about budget deficits or public Christmas displays, "What would Jefferson do?" Whereas Catholics come together to participate in the Mass, Americans come together to argue about the speeches, songs and sayings that compose the "American Bible."

This unofficial canon includes founding documents such as the Declaration of Independence and the Constitution as well as songs such as "God Bless America" and speeches by Washington, Lincoln, FDR and Reagan. It also includes novels from "Uncle Tom's Cabin" to "Atlas Shrugged."

What makes these texts American scripture is not so much that Americans call them sacred or treat them like sacred objects (though in many cases we do both). What makes them scripture is the fact that Americans use these texts like Christians use the Bible. These are the speeches and songs, novels and letters we invest with authority. These are the voices that generate criticism and controversy.

Like the Jewish scriptures, the books in the "American Bible" live through commentaries, which are as much a part of our national conversation as the primary texts themselves. Whenever we call something "un-American" or say "That's what America's all about," we are declaring allegiance to our republic. And whenever our fellow citizens disagree with us, they are doing the same.

Scholars of religion have long distinguished between orthodoxy (right belief) and orthopraxy (right practice), observing that certain religious traditions (Christianity, for example) unite around shared beliefs while others (such as Judaism) unite more around shared practices. The United States is a Jewish nation in this regard, knit together not so much by a common creed as by a common practice—the practice of arguing about our not-so-common creed.

This practice only works to bind our nation together if it is civil and informed. And nowadays these desiderata are in short supply. But what ails us is not just a matter of the words we choose or the tone we adopt. There is also the matter of our collective amnesia. The chain of memory linking us to the great voices of our past has been broken. So when we think of political debate we do not think of Lincoln and Douglas. We think Limbaugh and Maher.

Memorial Day is a day to remember our fallen soldiers. It is also a day to work to repair the chain of memory that links us to our shared past—a day to revisit both Lincoln's "Gettysburg Address" and the great tradition of conciliation he exemplified. "We are not enemies, but friends," he said in his First Inaugural Address. "We must not be enemies."

That doesn't mean we must agree. There is nothing un-American about criticizing a book in the "American Bible." Look Lincoln in the eye and tell him that liberty, not equality, is America's founding proposition. Tell King you have a different dream. But as you criticize these men, know what you are doing. You are not opting out of America; you are opting in."

Summing Up

So today let's pledge ourselves to do right by future Americans.  To pass it on, in other words.

To me, being an American means to be given an exceptional gift---unlimited opportunity and the freedom to say and do what I choose to say and do. We live in a wonderful country.

And by coming together as We the People, we will fix what's broken, repair what needs repairing and strengthen what needs to become stronger. And make an even better America by so doing.

And because of the selfless actions of those generations of Americans who came before us, we're free and capable of doing just that.

So in "Nikespeak," let's do it.

Thanks. Bob.