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It Was the Best of Times, the Worst of Times: The Economy

the economy: ups and downs

Economy: The Best Times, the Worst Times

I grew up in the volatile, exciting, and often strident 60s and 70s, finishing high school in the ‘spirit of ’76’ bicentennial year. During my formative years –

• John F. Kennedy, Martin Luther King, Jr., and Bobby Kennedy were assassinated
• The culture of divorce and promiscuity took root and blossomed
• Watts burned and riots rocked Chicago during the Democratic National Convention
• America surrendered in war for the first time when it pulled out of Viet Nam – unless you count Korea, which was at best a stalemate
• Muslim terrorists killed Jewish athletes at the Olympics
• There was an energy crisis
• Commercial airlines and cruise ships were hi-jacked (and yes, my future wife was a ‘stewardess’ on that 1978 Delta flight that got redirected to Havana)
• The American auto industry lost its preeminent role
• A president was impeached and removed from office
• Disco conquered the airwaves – yikes
• The U.S. Olympic basketball team lost its first ever international game to the U.S.S.R. in a highly controversial ending
• Oh, and ‘we’ landed on the moon

Whatever you think of Jimmy Carter ‘the President,’ he made a number of profound statements that summed up where America was a month before the end of my teens years in a speech he gave on July 15, 1979.

The erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.

The confidence that we have always had as a people is not simply some romantic dream or a proverb in a dusty book that we read just on the Fourth of July. It is the idea which founded our Nation and has guided our development as a people. Confidence in the future has supported everything else – public institutions and private enterprise, our own families, and the very Constitution of the United States. Confidence has defined our course and has served as a link between generations. We’ve always believed in something called progress. We’ve always had a faith that the days of our children would be better than our own.

Ironically, Carter’s greatest failing may have been the palpable sense of pessimism – a near doom? – that pervaded his demeanor and words throughout his presidency. And in case you are wondering, yes, this was part of his famous “malaise” speech. How was I going to argue with that? I didn’t feel very confident about the future myself.

It was Ronald Reagan who seemed to understand Carter’s words better than Carter himself and brought a positive buoyancy to the American psyche over much of the next decade. Some say he was just in the right place at the right time and got lucky that the business cycle turned around but even his most ardent critics have to admit his sense of optimism may have helped change some things.

In a Tale of Two Cities (1859) Charles Dickens penned the immortal phrase: it was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness … Set in London and Paris before and during the French Revolution, he showed how the peasants were oppressed and brutalized by the aristocracy and how in turn they were indiscriminately brutalized by the revolutionaries. (Brazilian author, educator, and reformer Paulo Freire described the psychological movement from oppressed to oppressor in his landmark book Pedagogy of the Oppressed [1968] that described freedom movements in South America.)

There is a lot of hand-wringing today. And for reason. There is a plethora of real and pervasive international, national, ethnic, economic, moral, social, personal, and spiritual problems. And yes, the American auto industry is reeling yet again.

Maybe it is the end of an era of prosperity and more importantly opportunity. But I suspect that the real reality is what Dickens described; we are living in the best of times and the worst of times. Even if consumer confidence was up and economic indicators were through the roof – the best of times for some – if there are oppressors and oppressed then it is still the worst of times … for somebody.

And yet a focus on such ‘realism’ simply doesn’t ignite passions and energize dreams. And what are dreams but what Carter called ‘confidence in the future’ … the belief – as unrealistic as it might seem – that my plans and actions can create a new reality. I can do something to build a better world.

Jesus said, ‘ the poor you will always have with you’ (Matthew 26:11) – very realistic – but men and women who have faith in Him have been at the forefront of compassionate ministry.

Even as companies fall there are people who still work to build new companies … and succeed.

Today is just like other days. The best of times. The worst of times. You may fall to one side of that equation personally. No matter. As a psychology professor said in a graduate class I took: I don’t care where you’ve been or even where you are … I want to know where you’re going!

So where are you going? What does the future look like to you?

Q: How Is the Publishing Industry Impacted By a Struggling Economy?

Q: How is the publishing industry impacted by a struggling economy?

A: I can only answer on the basis of today, and on November 25, 2008 (*), the answer is that the publishing industry has indeed been impacted negatively and at least in equal measure to the overall economy!

Does a bad economy hurt book publishing?

Is book publishing recession proof?

The old axiom was that publishing was recession proof – especially religious publishing. Why? In the overall scheme of the economy (and people’s pocketbooks) books are a relatively inexpensive form of entertainment, best partaken at home, which saves gas and eat-out money. In the case of religious publishing, the prevailing wisdom has been that when the economy is good “people play” but when it’s bad “people pray!”

But in this ongoing subprime-crisis-automaker-melt-down-government-bail-out-required economic downturn in America, sales are not good for retailers or publishers. The list of retail chains reporting same-store declines is as long as the list of … well, uh, retail chains. The only reliable statistics available on the health of independent retailers is the number that are closing on a weekly basis. Iconic flagship book retailer, Barnes & Noble, reports glum 3rd quarter results and 4th quarter projections:

B&N Sales Sink; Sees Gloomy Holiday

by Jim Milliot — Publishers Weekly, 11/20/2008 6:19:00 AM

The news was about as bad as it could be from Barnes & Noble. For the third quarter ended November 1, total sales fell 4.4%, to $1.1 billion, with sales through its bookstores down by the same 4.4%. Same store sales fell 7.4%. Sales at Barnes & Noble.com rose 2%, to $109 million. Moreover, the nation’s largest bookstore chain predicted that–based on the negative sales trend to date–same store sales in the fourth quarter will fall 6% to 9%. Earlier this month, B&N chairman Len Riggio warned employees in a memo that the company was bracing for a terrible holiday season.

Books-A-Million, which is strongest in the Bible Belt fared even worse.

BAM Comps Drop Nearly 10%

by Jim Milliot — Publishers Weekly, 11/21/2008 2:13:00 PM

The drumbeat of bad news from the nation’s bookstore chains continued Friday with Books-A-Million reporting that total revenue dropped 5.7% in the third quarter ended November 1, to $110.9 million. Comparable store sales tumbled 9.9%, the “weakest comparable store sales in many years,” said CEO Sandy Cochran. With the sales decline, BAM’s loss deepened to $2.2 million in the quarter compared to a loss of $555,000 in last year’s third period.

The sales decline was felt in most segments, Cochran said, with bargain books, gifts, and the teen categories among the few areas where business was up. A decline in customer traffic plus a cost conscious consumer where blamed for the poor results. BAM is focused on “controlling costs, managing inventory and preparing for the holiday season,” Cochran said.

While Cochran said the holiday publishing schedule is a good one, she sees few signs indicating that the difficult marketplace will shift anytime soon. For the first nine months of the year, revenue was down 4.8%, to $349.2 million, and the company had a loss of $635,000 compared to earnings of $4.6 million in the same period last year. Comp sales for the nine months were off 8.0%

Perhaps the most dramatic announcement came from the supply side of the industry with the news that literary giant Houghton Mifflin was putting a hold on acquisitions – akin to a fish saying that they might spend a year away from the water.

HMH Places “Temporary” Halt on Acquisitions

By Rachel Deahl — Publishers Weekly, 11/24/2008 12:54:00 PM

It’s been clear for months that it will be a not-so-merry holiday season for publishers, but at least one house has gone so far as to halt acquisitions. PW has learned that Houghton Mifflin Harcourt has asked its editors to stop buying books.

Josef Blumenfeld, v-p of communications for HMH, confirmed that the publisher has “temporarily stopped acquiring manuscripts” across its trade and reference divisions. The directive was given verbally to a handful of executives and, according to Blumenfeld, is “not a permanent change.” Blumenfeld, who hedged on when the ban might be lifted, said that the right project could still go to the editorial review board. He also maintained that the the decision is less about taking drastic measures than conducting good business.

“In this case, it’s a symbol of doing things smarter; it’s not an indicator of the end of literature,” he said. “We have turned off the spigot, but we have a very robust pipeline.” The action by the highly leveraged HMH may also be as much about the company’s need to cut costs in a tight credit market.as about the current economic slowdown.

What’s it mean for you as author or aspiring author?

If your heart is set on publishing with a traditional publishing house of note, the news isn’t great. My own company, Thomas Nelson, in anticipation of emerging economic woes, cut the number of titles being published almost in half as of March 2008. As a publisher I always find it more fun to do books than to not do books, but unquestionably, we were ahead of the curve.

If you are able to see publishing not just in terms of a paper and ink product with a particular logo or name on the spine – and are open to the array of self- and micro-publishing options available today – then this is just one more confirmation to go for it now rather than wait for your deal to sail in!

Overheard and Observed in China: Part 1: The Economy

I just returned from a way-too-short and rapid trip to China. There are so many angles and facets to explore but for a Part 1, I thought I’d focus on some interesting economic dynamics in China that are highly interrelated with some equally interesting dynamics in the U.S. economy.

As context, note that the overarching paradox of trading with China from a U.S. standpoint is (a) we like China’s cheap costs but (b) we don’t like the trade gap. The burgeoning trade gap is particularly bothersome as the U.S. dollar continues to free fall in the international currency markets, which should make buying U.S. products more attractive than ever. But the trade deficet is going to be a side light and what U.S. businesses and consumers are really going to notice in the near and foreseeable future is that costs in China are on the raise and may increase at a more rapid pace. Here’s why:

1. We’re not the only ones that dislike a huge trade gap; for China’s economy to mature, more of its output needs to be consumed internally, not just by the export market. Toward that end, in the last ninety days Beijing has rescinded a substantial tax rebate (think subsidy) for factories and business that export their goods. That will no longer be part of the formula for quoting costs to U.S. companies that outsource to China.

2. The RMB (China’s currency) is up 20% against the U.S. dollar in the last 18 months. The renmimbi (“people’s currency”) is stronger across against many currencies on the international board, but with the ongoing storyline of a still declining U.S. dollar and its spending power, the bottom line result is higher costs.

3. New labor laws in China include new increases to the minimum wage and a sweeping worker reform act–no company can fire a worker once they sign a third employment contract–equals raising labor costs. On the second element, the reform act, one wonders if most Chinese laborers will now end up working for a new company every four years as many labor contracts are two year deals. Not even an almost limitless labor pool can hold back the simple reality that conditions for workers–from wages to safe working conditions to better factory-owned dormitories or private housing options–have improved and must continue to improve. Some have argued that with the reported 750 million unemployed workers this need not be the case. But what has changed is that people living a subsistance lifestyle in the great rural expanses of China are no longer willing to trade an open air work day for a factory work day that is still based on mere subsistance worker benefits.

4. Rising materials costs are happening across most industry categories, led by rocketing oil prices, but in my world, publishing, it comes as no surprise that the cost of paper keeps marching upward at a particularly steep grade. U.S. standards of “green” are much less stringent than those defined in Europe, but as that gap closes, costs will only continue to climb. Related but off topic: Bill Gates said that we tend to overestimate the impact of new technology over the next two years but underestimate its impact over the next five years (see Business at the Speed of Thought). I wonder: will there be a stampede to ebook readers in the next half decade?

5. When you add up nos. 1-4, not surprising but largely unnoticed in the business community, hundreds of Chinese factories are closing every month. Profit margins and Return on Investment (ROI) are so slim that the Chinese entrepreneurial class is looking for new and greener opportunities. Marching alongside the issue of ROI , the first true generation of entrepreneurs in China is hitting retirement age and the heirs don’t want to run factories–or in some cases can’t afford to run existing operations–so they’re selling off equipment and boarding up buildings. Some argue that this is simple Economic Darwinism and is a positive case of natural selection with inefficient operations falling by the wayside. Perhaps; but it should not come as a shock that as once or emerging third world economies develop, they no longer take on environmentally toxic projects with no questions asked.

Two questions that I predict will become more acute for U.S. (and world) companies that do manufacturing in China in the days ahead will be: are we anticipating and ready for continued rising costs? and are the vendors we are currently relying on going to be in business for the foreseeable future?
Stay tuned for Part 2 of things I observed and overheard in China …

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Taxes, Entitlements, and Unemployment

I love to discuss and comment on everything – including religion and politics. That means I end up talking to myself a lot. Today I thought I would post three graphs with no comment. They reflect three snapshots of the dynamics impacting our economy. You can draw your own conclusions. Okay – I’ll offer three very quick, terse comments at the end of the graphs!

The three takeaways for me are:

  • Even governments need to spend less than they bring in.
  • Be careful about making promises you can’t keep – at some point you have to pay up.

Attitudes or Actions? Which Comes First?

Actions precede attitudes.

Attitudes or Actions? Which Comes First?

Next time you’re in a group setting take a vote by show of hands. Ask who thinks attitudes precede actions and who thinks actions precede attitudes. A number of people will grumble if you lay down the law and insist that they can only vote for one; nothing in the middle.

But my informal polling through the years indicates most people think attitudes precede actions, by significant margin. And why not? It just makes sense that our outer lives will be an expression of what’s inside us. I couldn’t agree more – other than when I disagree.

So I have to admit, the non-commits are probably right. Sometimes attitudes precede actions, but often actions precede attitudes.

Want to help a teen feel compassion? You can teach all the principles of generosity until you are blue in the face with little result, but take that same young person on a mission trip and he or she will come home feeling compassionate. Want to get excited about losing weight? Don’t read another diet article. Just lose a few pounds and you’ll tell everyone you know more than they ever wanted to know – and maybe more than you’ve actually figured out yourself – about your eating and exercise habits. Yep. No question. Action precedes attitude.

But there are too many exceptions to make a hard and fast rule on the topic. In 1968 Robert Rosenthal of Harvard published Pygmalion in the Classroom, the legendary study that showed how teacher expectations positively or negatively impacted student achievement – the law of self-fulfilling prophecy where attitude goes before action.

So what comes first in the state of the US economy today? Do fundamental metrics change, causing investor, business, and consumer confidence to lift and turn into a self-fulfilling prophecy that drives growth? Or does the negative news cycle spin, which many are complaining is compounding problems, have to change before investors, businesses, and consumers break free from the current inertia? Will attitude or action come first in turning our economy around?

These questions can apply to morality … patriotism … service … marriage relationships … happiness … and the list can go on and on.

I’d ask for a show of hands but I’m not sure how I’ll vote myself. And your vote my change my attitude for me!

Color Blind Criticism Is Not Racism

Colin Powell was considered by many to be the front-runner for the Republican presidential nomination in 1996 until withdrawing after his wife, Alma, publicly voiced her fear on 60 Minutes that he would be assassinated on the basis of his race.

Hillary Clinton, in a major campaign faux pas, brought the subject back to the forefront when, on May 23, 2008, in response to the question of why she had not bowed out of the Democratic primary race despite Barack Obama’s clear status as the presumptive nominee said, “We all remember Bobby Kennedy was assassinated in June in California.”

Oops.

Barack Obama has not steered clear of the idea that race will be used against him. Just a few days ago in a speech in Jacksonville, Florida, he said:

It is going to be very difficult for Republicans to run on their stewardship of the economy or their outstanding foreign policy. We know what kind of campaign they’re going to run. They’re going to try to make you afraid. They’re going to try to make you afraid of me. He’s young and inexperienced and he’s got a funny name. And did I mention he’s black?

Ouch.

I hope that Obama is wrong. And I think he is, though maybe I’m being naive.

Here’s what I hope and pray is true of America at this moment in our history; I hope and pray we are color blind enough to …

■ vote for or against a man – or woman – no matter what his or her race;
■ affirm or criticize a candidate no matter what his or her race; and
■ when a person so follows his or her conscience in voting, affirming or criticizing, we not accuse them of racism.

If Obama wants to woo the hearts of swing voters in the face of real or perceived prejudice, he could take a page from Ronald Reagan’s game plan to turn a negative into a positive. When asked (again and again) if it was legitimate to make age an election issue, in a debate with Walter Mondale, he used his non-abrasive brand of humor to neutralize the power of the question to divide:

I will not make age an issue of this campaign. I am not going to exploit for political purposes my opponent’s youth and inexperience.

Charles Darwin Discusses the Housing Bailout

Charles Darwin turned 200 years old on Feb. 12. Happy belated birthday.

I’m not going to touch his evolutionary theory in relation to biology and the origin of humans with a ten-foot pole – and I’m going to avoid cheap and gratuitous humor, like, “Charles you don’t need a match to light your birthday candles where he went,” or anything else juvenile.

No way am I getting anyone from any side of that debate mad at me. What I thought I’d do is get people mad at me for other things, like imagining what Darwin might have to say about Bailout Fever in Washington, D.C., applying aspects of his theory of evolution like natural selection, adaptability, and fitness.

Note: The views expressed may or may not be the views of the blogger in whole or in part. The character named Charles R. Darwin did in fact exist (Feb. 12, 1809 – April 19, 1882) but he probably did not state nor even think any of the following thoughts. This blogger is also not positing any theories of whether dead philosophers would agree to be interviewed. This is intended for entertainment only!

MG: Charles, what do you think of all the money the U.S. Government is spending to save companies and industries?

CD: They are simply rearranging chairs on the Titanic. The ship is sinking. And so will the whole fleet called Western Civilization if they keep pursuing such poppycock.

MG: Wow. How did you know that? The Titanic sunk in 1912 and you had already been dead almost 30 years.

CD: I have my sources.

MG: Like?

CD: Unnamed.

MG: I’ll leave it at that … but don’t you think it’s compassionate for a government to step in and relieve millions of people of the misery caused by such dramatic failures?

CD: Compassion? What does that have to do with survival? In fact, I’d say that rewarding weak and bumbling practices is the opposite of compassion. It hurts everybody.

MG: But it worked in the 1930s when FDR saved our nation from the Great Depression. Oh, I forgot you were already dead when that happened.

CD: I know the whole story.

MG: That’s right, you have sources.

CD: Exactly. In fact, I blame FDR and his adopted son LBJ for creating the conditions that will eventually lead the American economy into a death spiral.

MG: That’s rather dramatic. So are you saying that government assistance and intervention is always bad?

CD: First of all, I think government has an important role in economic evolution. I think Teddy Roosevelt got it right when he kept the Rockefellers from taking over the country and building an oligarchy that would have made Medieval feudal lords roll over in their graves with envy. You could argue that Teddy, not FDR, set the economy in motion. This opened up many more entrepreneurial opportunities. As a believer in letting natural selection take its course in a free market it doesn’t mean I don’t believe that there should be no accountability of corporations. For example, I believe they should pay for defrauding consumers. Nature has laws. Business should too. The business culture thrives when it adheres to good laws.

What FDR did may have helped America in the short term. But the course correction would have happened naturally, even if slower. And the companies that would have survived would have been much stronger for their resilience in face of adversity. But don’t be fooled. America is paying for FDR’s largesse with a populous that has screamed ever since, WHY AREN’T YOU SAVING ME? Maybe things are better for what he did and any argument about how history might have unfolded otherwise is pure speculation, either direction. I won’t say whether the payback is reasonable or not. But ask the Romans. Once the masses are promised that government will be the great problem solver, do they ever stop asking for their due? As a society you are constantly looking for money to fund the kinds of programs rolled out by FDR and accelerated by LBJ with his Great Society. Kennedy may have been from Boston but he would never put up with that kind of ethos. His dad taught him to exploit opportunities with the best of them. I digress. I’d just say again, the expectation and demand for more help, even after a crisis ends, never ends. People will ask for more and more government and more and more funding, which rewards ineptitude and punishes success. As glum as it looks in America right now, check out the economies of the more progressive social democracies. They won’t admit it but they would love to have your problems.

And ultimately natural selection finds a way anyway. When you crash and burn under the burden of compensating for a lack of fitness, you‘ll be singing a new tune, WHY COULDN’T YOU JUST LET US BE FREE?

MG: What about things like universal health care? Surely you can’t be so cold-hearted as to withhold that as a basic responsibility of the government?

CD: Again, I can’t think of a single country in the world that doesn’t envy your health care system. But I believe that when you move to socialized medicine America will absolutely love it. For a while. That is until services devolve and the governmental bureaucracy demonstrates it can no longer manage it. Then typical of America, you all will cry, UNFAIR!

MG: But it isn’t fair is it?

CD: Uh, who said anything about fair? I didn’t prescribe a theory of adaptation and fundamental fitness, I just described it. You all can do whatever you want.

MG: You seem awfully negative when it comes to government. Government gets a lot of things right.

CD: Sure they do. Other than eternal potholes around Chicago, Eisenhower’s interstate highway system was great. But when priorities and plans come from above, what happens to productivity? There ceases to be the kind of entrepreneurial spirit that feeds new design and development. There is no motivation to adapt to changing circumstances. So what you see is the eventual collapse of a healthy, breathing, growing economy. Capitalism does have to clean house in a big way every once and a while and incrementally on a daily basis, and yes people are hurt financially in the process. But you Americans worry too much about setbacks and love your histrionics. It sells newspapers! You take a snapshot and declare it is moving picture that will endure for 10 years! Almost as long as that Titanic film that came out a while back. I remember your end-of-the-world-as-we-know-it handwringing of 1987, which lasted about a month – and yes, I was already dead, but I do have my sources, so don’t ask how I remember. But in a fit and adaptable society, there are enough opportunities for people to get back on their feet. And don’t fool yourself. In a government-sponsored economic system, cataclysm comes as well. When the government can’t feed and clothe its wards the result is often violent and ugly in ways Americans can barely imagine.

MG: But owning a home has always been the American dream. Are you willing to kill that dream?

CD: You can manipulate the housing market with government rebates and incentives but it’s not going to solve the problem. Actually, if everyday Americans want to solve the housing crisis they can do so right now. Joe Homebuyer can go out and start a trend of buying and that will effect comparable sales and begin the process of price stabilization and even appreciation. But Americans aren’t doing that. Why? Not because of greed or corruption. It simply doesn’t make sense right now to buy. It’s not the investment it once was. The market was artificially inflated with government mandated lending policies and it’s still undergoing correction. Once it nears rock bottom people will buy again. Lenders will create new affordable lending practices to accommodate the demand. This will perpetuate appreciation. It will happen naturally. Just leave it alone.

MG: Where’s the compassion?

CD: Who said anything against a neighborliness that isn’t federally enacted?

Again, do what you want. Just make sure you have counted the cost of asking government to be the great financial problem solver. Does the make you more or less of a free nation? Does that fuel innovation and productivity or hinder it? Are you personally more responsible or less?

Having a government define and deliver what is good for the collective sounds compassionate and just might solve some short terms problems. But will government pull back from such a mandate? I’ve not seen such a tendency. One of my contemporaries, Karl, made a lot of utopian promises in an economic environment that was much more dire than it is today. Make sure the promises that have your heart thump thumping so excitedly today aren’t as empty!

A World Without Borders

I remember back in the late 90s and early 2000s when Borders outperformed Barnes & Nobel (B&N) on sales per square foot on a per store basis. B&N is doing fine. Borders is tottering on the edge of bankruptcy. What in the world happened over the past decade?

Borders canceled today’s auction to keep a smaller but still significant retail concern going. (It’s hard to have an auction when there are no bidders.) That means the 399 stores on the “short list” for a leaner and meaner Borders will be liquidated. Landlords and other creditors first protested plans to save the company but are now protesting the plan to close the company’s doors, so there may be some death throes – but sadly, it looks like the end is here.

Company President Mike Edwards said “We were all working hard towards a different outcome, but the headwinds we have been facing for quite some time, including the rapidly changing book industry, eReader revolution, and turbulent economy, have brought us to where we are now.”

If B&N is doing great – or at least holding their own in the same turbulent conditions – what happened to Borders?

A few quick and far from authoritative conjectures on my part include:

1. inventory management – every retailer has to carefully management open-to-buy dollars and inventory turns (how often a particular item sells out and has to be re-ordered) but from the publisher side of the table I thought Borders got too tight on order policies and left money on the table. A lot of people who are smarter than me will disagree with this. But I’m simple-minded enough to believe that if your business is book sales, you better make sure you have books on hand. Manage, yes. But don’t squeeze the life out of your product.

2. too much emphasis on “new” – publishers and book retailers have to (and love to) create new titles, but the most successful companies don’t forget about previous successes and find new ways to promote and re-introduce perennial sellers. This is the biggest advantage Amazon has – a catalog of 8 million titles, many nearly forgotten. B&N has had a much more robust in-house publishing program built around classics – and carried both more front and backlist titles per store. Even signage has indicated Border’s over emphasis on the new. I once spent a couple hours studying the signs the chain had placed in it’s “power corridor” in the front of their stores. Of 22 signs, 18 had the word “new” on it. I know “new” is a powerful word and I’m all for new titles. I LOVE new titles. I’m simply stating that in my opinion Borders didn’t emphasize backlist enough.

3. the electronic revolution – Amazon introduced the Kindle, Apple the iPad, and Barnes & Nobel the Nook. Borders did a great job with email specials and coupons (there’s that emphasis primarily on what’s new again) – but never established itself as a destination for online sales of physical books or electronic books.

4. coffee – I think Borders coffee is fine but their cafes have never seemed to pack the punch of the “Starbucks branding” that B&N built their cafes around. Many people still don’t know that the Barnes & Nobel Cafe is not a Starbucks!

It’s easy for me to throw out ideas while good friends and a valuable publishing partner has fought for its life. Anything I’ve noted is not intended to be a casting of the “first stone.” Retail in all categories is a tough and tumultuous world. Who knows what the future holds for Barnes & Nobel.

And bottom line, I feel rather sad about a world without Borders …

Big Government: Pendulum or Runaway Train?

Ever since FDR “saved” the economy – either through his welfare and public works programs if you like his fiscal model or by entering World War II if you believe the country was going to turn around on the basis of a business cycle anyway – despite his inept handling of the Depression – the size and role of the federal government in the business life of America has continued to grow.

Truman was too busy fighting wars and dealing with new international realities with our Soviet allies to leave a huge mark on America Inc., but conservative president, DDE, built the interstate highway system with a heavy dose of liberal spending, a symbolic and tangible symbol of a more federally driven America economy.

JFK we hardly knew you. We’ll never know his spending agenda based on his short tenure, though his activism in other areas might lead us to believe he would have been big government in all ways.

Inspired by political activists like author John Steinbeck – and in a well-documented strategy to secure minority votes, LBJ attempted to build a ‘Great Society’ – a phrase he borrowed from Steinbeck – to further expand the government’s role and responsibility as the provider and protector of the people’s welfare.

Let’s break from this historical free for all for just a second. Everyone, including politicians of all stripes, is concerned with the welfare of “the people” and individual persons. Whether one cares is not what is being debated, though in the political world it is posited by big government proponents that if you don’t want government to take responsibility for people’s welfare you don’t care about people’s welfare. The fiscal conservative or political libertarian will argue that he or she cares just as much about the welfare of individuals, he or she just does not think government does a very good job of supplying it. They want an old school model that limits the role of government to good laws and national defense – and leaves individual welfare up to individual effort, which will be much more productive and efficacious in a free enterprise system the thinking goes.

But what happens when that doesn’t work, big government proponents ask? Some free enterprise advocates agree with having clearly defined and limited temporary aid measures in place – others argue for the “family and friends” need to save you program. But based on what we’ve seen so far in our historical foray, there really haven’t been too may free enterprisers in control, no matter what we might assume from party affiliation.

RMN actually toyed with price controls, which would made him a hero among Marxist ideologues and an enigma to his independent, puritanical forebears, but ultimately, he poured his attention on foreign policy and then shifted his focus to another set of problems that were a little more personal in nature.

JC. We hardly knew you. Stagnation and malaise were the order of the day. The result of bad business or too much government intervention? Carter wasn’t sure there was a possible solution from the government or private sector and suspected we might be headed for leaner days. He spoke about those suspicions a little too forthrightly and the electorate lost as much confidence in JC as in the country’s future.

That ushered in the reign of RWR, who was sure it was the latter, too much government intervention, that was the problem. No one in the media and not even his vice president believed in his “voodoo” economics, but he get elected. He cut capital gains taxes, eliminated and simplified regulations to doing business, and cut income taxes for the middle and upper middle classes. (He would have done the same for the lower and wealthiest classes but it is impossible to cut anything from nothing.) It can be argued that he restored America’s business star, setting the stage for the largest capital growth campaign in history and the rise of Bill Gates. What he didn’t do, however, was cut government spending. And it wasn’t just because he built up the military. Liberals and columnists – I would have said Liberal columnists but why be redundant? – bemoaned all the benefits he cut from the poor. Not true. He did occasionally cut government program increases but never spending.

GHB (W’s dad). We hardly knew you, either. I do recall H was kinder and gentler than Reagan – at least he said he was – and raised taxes to prove it despite the protests of lip readers to the contrary.

WJC got his butt kicked on socialized medicine early in his first term. His solution? Keep Hillary away from Congressional hearings and enjoy Reagan’s promised ‘peace dividend.’ Then he started experiencing the joy of balancing the budget and reducing the federal deficit so much he went out and tweaked some welfare policies so that they became workfare policies. For the first time in 60 years people were involuntarily cut from welfare rolls. Bill might be the last and the only fiscal conservative of the past 100 years. Deep down, I suspect that still bothers him.

GWB. Or just W. A man of principle, faith, and profligate spending habits. He and the man who followed him, BHO, are architects and builders of an expanded role for government through TARP(s) that might have made FDR’s head spin. Even the German socialists are confused. When they throw money at economic problems it is at least to save unnecessary jobs. In America’s iteration of corporate welfare, it is to eliminate jobs and save companies.

The latest Obama move has been to appoint a ‘Special Master for Compensation’ to oversee executive and employee pay at companies that accepted government bailout money. Any wonder so many are fighting like crazy to give this ‘free’ money back? Any wonder Hugo Chavez, left-wing socialist president of Venezuela, claims he is more right wing than Obama?

So is the size and scope of the federal government cyclical – a pendulum that is simply on a high note of growth? Or is it a runaway train navigating hair-pin turns as adroitly as possible?

If these economic days are tough on your personal welfare and you see a bright shining light ahead, it might mean there is hope at the end of the tunnel for you. Or it might mean you better jump off the track in a hurry if you don’t want to get hit!

The Subprime Crisis and Your Future

For most, the American dream has included owning ones own home. One of the most important reasons is that it has traditionally been a key component in ones retirement portfolio.

The thinking goes like this: buy a starter house, fix it up, leverage the improvements and appreciation that have increased your equity stake, sell it, and then sew the proceeds into buying a bigger and better house; repeat those same steps with your new house to secure your next upgrade; repeat until sometime in your mid-thirties to late-forties at the oldest, buy your dream house with terms that insure it will be paid off no later than the day you retire, thus eliminating and in essence “fixing” one of the biggest variable expenses at retirement age, when odds are your income will go down or be eroded by cost of living adjustments.

Even as America got mobile and people cris-crossed the country with moves, the above scenario worked because of a persistent and unrelenting appreciation of home values. A transitional lifestyle might create a few lateral side trails, but the assumed destination has been the same: a home owned free and clear to live in — or to sell in order to pay cash for a downsized home (while pocketing the proceeds) or in a more desired retirement location.

Something quietly shifted in the equation that is a direct corollary to the boom in the use of consumer credit as a way of life. Home prices continued to rise well beyond the inflation rate, thus increasing equity, which is another way of saying, “wealth.” But rather than letting the home nest egg grow, we turned this windfall into a new revenue stream for living expenses, usually by refinancing an entire mortgage with debt added in or by taking a second mortgage(s) to pay off credit debt rather than to do home improvements, another traditional way to increase equity.

It’s been said that retirement should not mean no more work — idleness is bad for your health — but rather it should lead to the ability to do whatever work you want, ranging from volunteerism to a second career.

A few of the potential impacts on our future in light of the subprime crisis and ensuing loss of home values include:

* we may have to work more years full or part-time than we planned because part
of our retirement package has been damaged;

* it’s tougher to move — unless a company is guaranteeing the sell of your home (and a lot of companies have been forced to eliminate this program) — and watch your home sit on the market; even if there are great deals where we want to move, most of us can’t afford to buy without first selling;

* with less “wealth” we don’t have as much credit available to spend on those goods and services outside our normal income stream — which will hurt the easy-credit-fueled economy;

* you might not be able to move where you want to at retirement age — not all regions are equally impacted by the subprime crisis in relation to home values; there’s a reason small “ghost towns” in areas of the country that have experienced
population loss for decades are filling back up — cheap mortgages.

Will home values bounce back? I believe the answer is yes. But I think it’s going to take a few years. There seems to be too much inventory with so many people insisting on building new homes. But new house starts are finally going to slow down, which will be one more stressor on an already stressed economy, but which is required to tighten the housing supply and raise prices. How can I be so sure? Simple. If it costs $130 per square foot to build a new home and it costs $90 per square foot to buy an existing home less than 10 years old, home buyers are going to figure ways to freshen up and personalize the existing inventory. The per square foot cost gap is at its highest ever on a national aggregate.

As someone who has benefited tremendously from the appreciation model — and then taken an “equity beating” during a recent move (that included building a new home) — I am realistic but optimistic that owning a home still needs to be a key strategy in securing your best financial future. Obviously, our future, financial and otherwise, is not just up to us, but I’ll throw out a couple modest suggestions:

1. Get on a schedule to pay off your house before retirement. If you aren’t familiar with the simple little secret of making double principal payments, which will allow you to cut your 30-year mortgage in half, visit any reputable financial website to learn how — it’s not nearly as daunting as it sounds. If you’ve elected one of the dreaded interest-only loans, put a principal payment into your monthly automatic payment schedule and start paying down — yesterday.

2. Don’t treat appreciation as a revenue stream but rather a long term investment — retirement. Second mortgages and refinancing as an ongoing strategy to eliminate debt needs to be eliminated.

3. Don’t put your eggs in one basket — your retirement nest egg should be a diversified program with IRAs, 401ks, Social Security, personal savings and investments, company retirement plans, ideas for post-retirement income, AND a home that is paid for!

4. Get bad spending habits under control. Enough said.

5. Outgrow your problems. To have more, you have to become more. Don’t float along in life, make a plan and build disciplines in your life for growing emotionally, socially, mentally, and most of all, spiritually.