Expressed in a very non-partisan way. Just the facts of the matter.
This guy employs 70,000 people.
Interesting that his advisor gave him a 7%-35% range on the added costs under Obamacare. One of my clients (one of Tulsa's largest employers) is budgeting 8.5%-33% based on their consultant's recommendations.
They mentioned unions as being an uncertanty. Interesting.
You know its fine with me if these big corporations decide not to expand because they are too busy looking at graphs and scratching their heads. That just leaves more opportunity and makes it easier for us little guys to start new businesses or expand, yaaaaay! ;D Which is exactly what I have been working on these last few months.
Quote from: TheArtist on August 18, 2011, 08:38:51 AM
They mentioned unions as being an uncertanty. Interesting.
You know its fine with me if these big corporations decide not to expand because they are too busy looking at graphs and scratching their heads. That just leaves more opportunity and makes it easier for us little guys to start new businesses or expand, yaaaaay! ;D Which is exactly what I have been working on these last few months.
Good attitude. Small business makes up most of employment in America yet we fret over what soul-less, heartless, disloyal, number crunching corporates belch out about labor, regs and taxes as though they were invented by Obama. Non-partisan my butt. Everything nowadays is partisan.
I remember a professor who told me once that a lot of businesses spend an inordinate amount of time and resources on avoiding taxes, regs and labor, while their competitors concentrate on serving their markets. You are what you pursue. I am planning my retirement business now as I am not one of those corporates who will retire and play golf and the market the rest of my life. I'll work till I drop. Or in my case till I float. Face up. Smiling.
Quote from: TheArtist on August 18, 2011, 08:38:51 AM
They mentioned unions as being an uncertanty. Interesting.
You know its fine with me if these big corporations decide not to expand because they are too busy looking at graphs and scratching their heads. That just leaves more opportunity and makes it easier for us little guys to start new businesses or expand, yaaaaay! ;D Which is exactly what I have been working on these last few months.
You do have a point. I was looking at some of the statistics from Texas this morning, trying to figure out why they've grown so much when the rest of the country has faltered, and it was not what I expected. I figured it was growth in the energy sector, but most of their growth is in small upstart "mom & pops" businesses.
While the big companies hold back cash and brace for impact, many of the people they let go have take the opportunity to follow their dreams. This happened in other states too, but not to the degree that it did in Texas, and certainly not enough to have much of a positive impact on their economy.
There is nothing like the freedom of being your own boss, and building your own business. A small business enjoys the ability to fly under the radar.
Unfortunately some people aren't built for entrepreneurship. They value security over opportunity and don't feel that they have the freedom to take the risks associated with building a business. These are the people who suffer the most in this economy. Many of them look to leaders in business to provide security for them in the form of a job. The most unfortunate of these people look to government for security. It's a balance that will always be there. The problem arises when a majority begins to look at government as their sole means of security and regards private industry as nothing more that a teet to drink from.
I can't watch the vid at work but if it doesn't include the disintegrating Eurozone, the debt ceiling debacle and the intransigence of the Tea Party, and in general the inability to get past the GOP obstructionism, as well as the general fear that a slowing economy is causing amongst pretty well everybody, then it sure as shooting is partisan.
Quote from: we vs us on August 18, 2011, 09:34:07 AM
I can't watch the vid at work but if it doesn't include the disintegrating Eurozone, the debt ceiling debacle and the intransigence of the Tea Party, and in general the inability to get past the GOP obstructionism, as well as the general fear that a slowing economy is causing amongst pretty well everybody, then it sure as shooting is partisan.
No, but what is most important in Gapar's initial post is still a non-partisan fact and something I've stated repeatedly: Get rid of the uncertainty this administration has caused and I think you would see job growth. A 25 to 28% swing on the unknown costs of a new federal mandate on employers which is directly tied to payroll is a huge unknown. That's a frightening metric. If the CFO of a 70,000 employee company still has no idea what the additional costs are, that means there's probably no one in the federal government who can tell you either and that's just plain scary when it comes to job creation.
Why would you hire new people if there's a new, unknown cost getting ready to hit your business in the next year or two? It matters not to me that a Democrat President and Congress passed this, I'd say the same thing if Republicans had. I simply don't understand how anyone can be the least bit miffed or confused as to why more jobs are slowly bleeding off out of the country. A business has got to be competitive to continue to sell their goods and stay in business. If labor costs are going to necessarily increase the COGS as much as 25%, it's time to start looking for a less expensive labor pool.
FMC and I are considering a business opportunity, but the problem is, we have no idea what additional costs to expect in the coming years as far as payroll costs, so we might as well keep doing what we are. So much for entrepreneurship! Or at least if we do this opportunity, we may elect to take a far more active role in the business to help contain costs, but it might mean there's at least two NEW jobs we wouldn't create.
Quote from: we vs us on August 18, 2011, 09:34:07 AM
I can't watch the vid at work but if it doesn't include the disintegrating Eurozone, the debt ceiling debacle and the intransigence of the Tea Party, and in general the inability to get past the GOP obstructionism, as well as the general fear that a slowing economy is causing amongst pretty well everybody, then it sure as shooting is partisan.
No, he's just coming at it from a strict numbers standpoint. He's not assigning blame, simply stating how his company has to make decisions based on a 5 year plan and the advice. In fact, economic issues related to the above are not the primary uncertainty he is siting. He did cite some of the new regulations related to carbon emissions and EPA standards that will affect his budgeting for transportation, heating & cooling, but that is relatively easy to forecast and not a major concern.
His primary concern is that currently he is spending $ 90 Million a year on health insurance and his consultants say that he can expect that to increase between 7.3% and 35.1% over the next 5 years. The inability for consultants to render an accurate forecast is the primary source of caution.
This is exactly what we hear from our clients, and the primary reason they are willing to invest money in process improvement over labor or expansion.
Business is uncertainty. You make a 5 year plan because you need some framework to operate within. But to think that plan is anything more than a guess, an educated guess, is not correct. You must have some insights when forming the plan but the assumptions are like a weatherman making a long term prediction. They are based on voodoo as much as facts. I never thought IBM, Sears, etc. would fade, neither did they.
Has anyone considered that a lot of the uncertainty is based on every Republican's pledge that the first thing they will do is repeal just about everything the Obama administration has enacted?
That they will totally eviscerate labor and return a lot of responsibilities for social programs to the states? That they will steadfastly refuse to balance off debt reduction with any increase in revenue? Those are huge uncertainties because no one really knows if the T-Party and the current wave of Republican's are capable of winning the next elections. You guys should be livid over their intransigence and threatening of those assumptions.
Conan, you are correct in your assessment of going in to business for yourself. If you cannot fathom yourself dealing with such uncertainties it may not be for you. And I don't mean that in a disrespectful way. You obviously are smart enough and have the spirit. I agree with Gaspar that a lot of folks like being part of a team with security and structure. I see the small businessman as analagous to the lead goose in a V-formation heading south. He's the leader because he's too stupid to know that the air is smoother towards the back! He's also probably the one the hunter aims at. But nature gave him the best homing system to make up for it. (Red knows more about birds than anyone around here so correct me if that's myth ;)
Quote from: AquaMan on August 18, 2011, 11:00:53 AM
Has anyone considered that a lot of the uncertainty is based on every Republican's pledge that the first thing they will do is repeal just about everything the Obama administration has enacted? That they will totally eviscerate labor and return a lot of responsibilities for social programs to the states? [/color] That they will steadfastly refuse to balance off debt reduction with any increase in revenue? Those are huge uncertainties because no one really knows if the T-Party and the current wave of Republican's are capable of winning the next elections. You guys should be livid over their intransigence and threatening of those assumptions.
Where are you hearing that uncertainty over a potential repeal of Obamacare and other initiatives is killing job creation right now?
And I don't believe going after organized labor is a Republican initiative. It's unfortunate that the realities of state budgets, which cannot operate at a deficit, are being painted as an organized run at the unions. It's not. It's requisite belt-tightening but it's more salacious if it's put in a political context. It's a matter of states being able to stay afloat or not. They can't print money and issue debt on a whim like the feds appear to be able to.
Nowhere! And it should be. That's what I'm trying to say. Uncertainty is not a political thing in business. It is a HUGE uncertainty if you don't really know what is going to happen 14 months from now should one of the Republican's be elected and follow through with their agenda.[/color
Republicans have always opposed organized labor and will not lift a finger to stop anything that weakens them. They will gladly frame a state budget crisis with labor costs as the problem if it will work to weaken them. I don't recall any Democratic governors or legislators following Wisconsin's lead. Talk about poor planners. States are incompetent with budgets. Oklahoma is a pretty good example don't you think? Even more uncertainty to think that they will increasingly be expected to fulfill historically federal roles.
Quote from: AquaMan on August 18, 2011, 11:00:53 AM
I see the small businessman as analagous to the lead goose in a V-formation heading south. He's the leader because he's too stupid to know that the air is smoother towards the back! He's also probably the one the hunter aims at. But nature gave him the best homing system to make up for it. (Red knows more about birds than anyone around here so correct me if that's myth ;)
The way I understand it is that the lead goose plows the way and the followers have it easier. It's kind of like drafting in NASCAR but I don't think the lead goose gets as much benefit as the car in front. The geese also change postion occasionally. Watch them for a while and you will see them change formation positions. They are probably not as stupid as people think.
Draw whatever other conclusions you want.
I don't know if I am the ultimate feathered bird authority here but I have seen the information above about the geese.
Yeah, it's uncertainty, not a lack of demand. That's why companies are spending so much on infrastructure upgrades, mergers, and the like. Because they're uncertain.
AquaMan,
When you make a 5 year plan, it's not voodoo. It needs to be able to satisfy your creditors who, in many cases, you rely on for cash-flow. It also must satisfy investors who rely on you to make good decisions with their money.
You control for every variable that you can.
Quote from: nathanm on August 18, 2011, 01:43:19 PM
Commie. ;D
Ok, that time I really did LOL! Didn't think of it that way. Thanks. :D
They spend 90,000,000 on 70,000 employees? Equals approximately 1300 per employee per year, which would lead me to believe his employees are footing a huge portion of the bill; they have crappy insurance; or they do not provide insurance to a good portion of their employees... or a combination thereof.
Quote from: JCnOwasso on August 18, 2011, 02:17:11 PM
They spend 90,000,000 on 70,000 employees? Equals approximately 1300 per employee per year, which would lead me to believe his employees are footing a huge portion of the bill; they have crappy insurance; or they do not provide insurance to a good portion of their employees... or a combination thereof.
Uh. . or most of their employees are minimum wage or part time burger flippers.
Or that.
You know, one of the things that is not mentioned is the fact that the federal reserve is still paying the bigger banks not to lend money. This of course is not going to be much of a hit to monster employers like Carl's Jr. but it is a hit to the smaller companies trying to get a loan or cash-flow line of credit. That with the unknown 5 year business expenses has got to be a double whammy on small to midsize companies.
Quote from: Gaspar on August 18, 2011, 02:31:43 PM
You know, one of the things that is not mentioned is the fact that the federal reserve is still paying the bigger banks not to lend money.
How's that? By driving down interest rates? By buying their debt?
Quote from: nathanm on August 18, 2011, 02:56:56 PM
How's that? By driving down interest rates? By buying their debt?
Uh, no.
The Fed is still paying banks 0.25% interest on reserves, which is more than the banks are paying out in interest to most account holders.
It was part of the big bank bailout that should have been lifted by now.
Quote from: Gaspar on August 18, 2011, 02:18:47 PM
Uh. . or most of their employees are minimum wage or part time burger flippers.
Which, if you think about it, is the reason why HCR will increase their costs. If his workforce consists of low and minimum wage earners, then yeah he's going to face some cost hikes when they're all offered insurance that they used to not have. Though to be fair, not all of his min wage earners are required to be offered insurance.
Quote from: Gaspar on August 18, 2011, 01:40:53 PM
AquaMan,
When you make a 5 year plan, it's not voodoo. It needs to be able to satisfy your creditors who, in many cases, you rely on for cash-flow. It also must satisfy investors who rely on you to make good decisions with their money.
You control for every variable that you can.
You took one word out of the post and blew it out of proportion. The 5yr plan is a necessity, as well as 2 and 10 year plans. Its naive to believe that they have to be bulletproof to satisfy creditors and investors. They have to be defensible, well researched and well presented. You do the best you can with the info available. Truth is many times you simply don't know, what you don't know. Even smart, Rhodes Scholars and Harvard MBA's just plain miss the obvious. Lots of examples over the years.
Just like the long range weather reports. If any of the farmers in Texas, Oklahoma and Kansas had predicted drought conditions in their business plans 4-5 years ago why did they plant this year? Why did the bankers loan them money?
Investors and creditors need to know you are capable, competent and have a plan.
When you guys do that, cherry pick a word or two and ignore the thrust of the post, I become suspicious of your motives. There is more uncertainty in what the Republicans and Tea Partiers are proposing and whether or not they may have the power to succeed in their plans than there is from the Health care plan, yet they get a pass.
That is why his range of cost was from 5% to 34%. 5% if the Republicans win and follow through, Up to 34% over a 5 year period if they don't.
Quote from: Gaspar on August 18, 2011, 03:03:45 PM
The Fed is still paying banks 0.25% interest on reserves, which is more than the banks are paying out in interest to most account holders.
Ah, yes, that. I saw a nice video explaining why in a zero interest rate environment it is absolutely necessary that the central bank pay interest on reserves. I may be misremembering, as it's been a couple of months, but I recall it had to do with being so far away from the point where they could possibly force interest rates higher through market operations (thanks to all the QE) that the interest paid on reserves is the only way they can keep control over inflation.
I'm not quite sure what it has to do with depositors, though. Banks don't make money paying you interest; they make money from other people paying them interest. Say, on a loan, which will definitely makes them more than 25 bp if they're lending to a good credit risk.
Once again here, the real problem is demand. People aren't exactly clamoring for loans. The big companies that want money are easily able to get it.
Quote from: nathanm on August 19, 2011, 08:54:22 AM
Ah, yes, that. I saw a nice video explaining why in a zero interest rate environment it is absolutely necessary that the central bank pay interest on reserves. I may be misremembering, as it's been a couple of months, but I recall it had to do with being so far away from the point where they could possibly force interest rates higher through market operations (thanks to all the QE) that the interest paid on reserves is the only way they can keep control over inflation.
I'm not quite sure what it has to do with depositors, though. Banks don't make money paying you interest; they make money from other people paying them interest. Say, on a loan, which will definitely makes them more than 25 bp if they're lending to a good credit risk.
Once again here, the real problem is demand. People aren't exactly clamoring for loans. The big companies that want money are easily able to get it.
That was not the purpose of the .25 program. It was initially designed to help bail-out banks "secretly" (within the power of the fed) without raising too many eyebrows and signaling the impending economic meltdown. It was actually one of the more successful measures because it "slowed the wheel" by encouraging banks to reserve more money and be rewarded with tens of billions of totally risk-free cash.
According to the St. Louis Federal Reserve Bank, this program has brought private bank reserves up to $1.6 Trillion in untouched cash. Do the math, and you find that a risk free return like that is hard to beat. Figuring that more small businesses are failing in this economy than ever before, your incentive to loan this money as opposed to guaranteed profit, is minimal.
And where is this money coming from? Hot off the presses. . .directly into the bank's pockets. Tick, Tick, Tick. Do you hear the timebomb?
Quote from: Gaspar on August 19, 2011, 09:14:37 AM
That was not the purpose of the .25 program. It was initially designed to help bail-out banks "secretly" (within the power of the fed) without raising too many eyebrows and signaling the impending economic meltdown. It was actually one of the more successful measures because it "slowed the wheel" by encouraging banks to reserve more money and be rewarded with tens of billions of totally risk-free cash.
According to the St. Louis Federal Reserve Bank, this program has brought private bank reserves up to $1.6 Trillion in untouched cash. Do the math, and you find that a risk free return like that is hard to beat. Figuring that more small businesses are failing in this economy than ever before, your incentive to loan this money as opposed to guaranteed profit, is minimal.
And where is this money coming from? Hot off the presses. . .directly into the bank's pockets. Tick, Tick, Tick. Do you hear the timebomb?
Supposedly, part of a potential QE3 package from the Fed would include surcharges for banks that are holding any amount of cash with the FRBs. So, not only would they erase the .25% (or whatever) rate that's being earned now, they would be charged a fee for the FRBs to hold the money. This is one way of encouraging the banks to lend rather than hold their capital.
FYI: this is one of the major downfalls of Greenspan's extended low interest rate policy in the 2000's . . . it doesn't allow savings to make money and instead encourages the money to search for a higher return. In a controlled environment and in short bursts I can see it being good for the economy. But if it's sustained, it pushes capital into weirder and weirder places -- like commodities, and like houses! -- and incents it to create weirder and weirder investment vehicles -- like derivatives, MBSs, etc.
Quote from: we vs us on August 19, 2011, 09:34:32 AM
Supposedly, part of a potential QE3 package from the Fed would include surcharges for banks that are holding any amount of cash with the FRBs. So, not only would they erase the .25% (or whatever) rate that's being earned now, they would be charged a fee for the FRBs to hold the money. This is one way of encouraging the banks to lend rather than hold their capital.
or, you could just phase out the .25% (should have been done long ago). The problem now is that if you impose a penalty or eliminate the risk-free income, the banks would immediately shift $1.6 trillion in new wet money into the market. The dollar would drop and inflation would spike. I respect Mr. Bernanke, but he tends to have tunnel vision, and cannot see the obvious scenarios that sprout from his policies.
Quote from: Gaspar on August 19, 2011, 09:45:20 AM
or, you could just phase out the .25% (should have been done long ago). The problem now is that if you impose a penalty or eliminate the risk-free income, the banks would immediately shift $1.6 trillion in new wet money into the market. The dollar would drop and inflation would spike. I respect Mr. Bernanke, but he tends to have tunnel vision, and cannot see the obvious scenarios that sprout from his policies.
Not necessarily true. It would depend on how steep a penalty, and quickly it was phased in. If banks can actually plan for it, the drop of cash into the market might be much more orderly and much constructive.
Of course, the Fed is still perceived as the best port in a very stormy sea, and I could very easily see banks choosing to take the penalty and keep their money safe, if only because it's a predictable erosion of their capital, rather than a wild and bumpy ride out in the markets and where the potential losses could be much bigger.
Quote from: we vs us on August 19, 2011, 09:48:53 AM
Not necessarily true. It would depend on how steep a penalty, and quickly it was phased in. If banks can actually plan for it, the drop of cash into the market might be much more orderly and much constructive.
Of course, the Fed is still perceived as the best port in a very stormy sea, and I could very easily see banks choosing to take the penalty and keep their money safe, if only because it's a predictable erosion of their capital, rather than a wild and bumpy ride out in the markets and where the potential losses could be much bigger.
That's reasonable. I'm just still amazed at the "no one at the wheel" impression I get from both the Fed and the White House. Not only do they not have a plan, but their concern is less than urgent.
Quote from: Gaspar on August 19, 2011, 09:45:20 AM
or, you could just phase out the .25% (should have been done long ago). The problem now is that if you impose a penalty or eliminate the risk-free income, the banks would immediately shift $1.6 trillion in new wet money into the market. The dollar would drop and inflation would spike. I respect Mr. Bernanke, but he tends to have tunnel vision, and cannot see the obvious scenarios that sprout from his policies.
Without a greater demand for dollars, that money isn't going to do a thing. Maybe if they can find another bubble to bet big on, but a $1.6T bubble isn't all that big by modern standards. Besides, the fed has already dumped in around 3 trillion, and there's been no inflation to speak of.
Even in oil, one of the most speculative commodities, demand is a strong driver of price. It's often drowned out, but you'll note that the really big swings come when expectations of future demand change.