Archive for December 4th, 2009

Help Wanted, No Private Sector Experience Required

December 4, 2009

This analysis — reported by AEI and sourced to JP Morgan researchers — examines the prior private sector experience of the cabinet officials since 1900 that one might expect a president to turn to in seeking advice about helping the economy.

It includes secretaries of State, Commerce, Treasury, Agriculture, Interior, Labor, Transportation, Energy, and Housing & Urban Development, and excludes Postmaster General, Navy, War, Health, Education & Welfare, Veterans Affairs, and Homeland Security—432 cabinet members in all.

obamacabinet
AEI, Help Wanted, No Private Sector Experience Required, November 25, 2009
http://blog.american.com/?p=7572

In the Obama administration over 90 percent of the players’ prior experience was in the public sector, academia, or law practices. Virtually no “business experience” per se.

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Ken’s Take:

(1) Quibble with the numbers, but directionally the conclusion fits — which is why the Faux Stimulus didn’t work, why the spending is out of control, why there’s sloppy implementation (think Cash for Clunkers), and why businesses refuse to rebuild their payrolls.

(2) Note that the analysis was sourced to JP Morgan. I’ve heard from my sources that off-the-record boardroom commentaries re: the Obama administration has turned very, very negative.  But, public commentary is constrained by fear of vindictive government retribution (think pay caps, voiding of contracts, etc.).  Surprised me that JPM is associated with the analysis.

(3) Liberal blogs have marshalled to debunk the 10% number for Obama’s advisers.  Their rebuttals are laughable — largely claiming that private sector experience includes having had a parent who had a real job. having been a lawyer with at least one private sector client, having run a campaign, or having been a university administrator.  For example, here are a couple of my favorites:

Vice President Joe Biden – Private experience:  Yes.   Biden’s father worked in the private sector his entire life — unsuccessfully for a critical period.  Biden attended a private university’s law school (Syracuse), and operated a successful-because-of-property-management law practice for three years before winning election to the U.S. Senate.   Running a campaign is a private business, too — and Biden’s first campaign was masterful entrepreneurship.

Secretary of Interior Kenneth L. Salazar – Private sector experience: Yes. Besides a distinguished career in government, as advisor and Cabinet Member with Colorado Gov. Roy Romer, Salazar was a successful private-practice attorney from 1981 to 1985, and then again from 1994 to 1998 when he won election as Colorado’s Attorney General.    Salazar’s family is in ranching, and he is usually listed as a “rancher from Colorado.”

Secretary of Labor Hilda L. Solis – Private sector experience:  Yes.   Solis’s father was a Teamster and union organizer who contracted lead poisoning on the job; her mother was an assembly line worker for Mattel Toys.  She overachieved in high school and ignored her counselor’s advice to avoid college, and earned degrees from Cal Poly-Pomona and USC.  She held a variety of posts in federal government before returning to California to work for education and win election to the California House and California Senate, and then to Congress.

Secretary of Education Arne Duncan – Private sector experience:  Yes.  Duncan earned Academic All-American honors in basketball at Harvard.  His private sector is among the more unusual of any cabinet member’s, and more competitive.  Duncan played professional basketball: “From 1987 to 1991, Duncan played professional basketball in Australia with the Eastside Spectres of the [Australian] National Basketball League, and while there, worked with children who were wards of the state. He also played with the Rhode Island Gulls and tried out for the New Jersey Jammers.”  Since leaving basketball he’s worked in education, about four years in a private company aiming to improve education.

To verify the above examples — and for a few more chuckles — check out
http://timpanogos.wordpress.com/2009/11/26/obamas-well-qualified-cabinet-conservatives-hoaxed-by-j-p-morgan-chart-that-verifies-prejudices/

Freakin’omics: What Spitzer can teach Tiger …

December 4, 2009

Eliott Spitzer (a.k.a. “Client–9”) raised eyebrows when it was leaked that he paid a pro $4,500 for a night of transgression(s). 

At the time, $4,500 a pop sounded like a lot of money to most folks.

Well, Tiger Woods, has taken the game to a new level.

The Daily Beast reports that the beleaguered golfer is negotiating an immediate $5 million “sorry” payment to his wife — and revising her prenup to give her a “retention bonus” of $55 million more to stay with him two more years.

Let’s see.  The tramp that went public says she and Tiger “got together” about 20 times.  There’s speculation that there were at least 2 other Tiger-pleasers  in play. Let’s assume that Tiger teed off 20 times with each of them, too.

OK, $60 million  divided by 60 “dates” …

Holy smoke … $1 million a shot !!!!

Now, that’s  freakin’omics.

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P.S.  Since we’re talking incentive pay and retention bonuses, shouldn’t the Fed pay czar have a crack at the deal?
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Source article:
http://www.thedailybeast.com/blogs-and-stories/2009-12-03/new-details-on-tigers-prenup/?cid=hp:mainpromo1
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PROMISE: This is my last Tiger post …

Kraft and Cadbury … a bittersweet mix.

December 4, 2009

Takeaway: On a day where Advanced Marketing Strategy students were asked to come up with the appropriate bid for Dewey the Cat, it is fitting to revisit the seemingly sweet Kraft hostile bid for Cadbury that quickly turned sour.

While this deal makes business sense, as Kraft will be able to more easily penetrate emerging markets and take advantage of scale economies, the inability of both sides to agree on the proper value of Cadbury struck this deal down.

A falling Kraft share price makes the deal even less attractive to Cadbury shareholders today. Who knows, maybe if Kraft had utilized discovery driven planning to determine the value of the acquisition, it could have induced shareholders to bite the cheese…

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Excerpted from BusinessWeek, “Kraft: Is Cadbury the Missing Global Ingredient?” by Ben Steverman, November 9, 2009

If you boil down the motivations behind Kraft Foods’ (KFT) hostile bid for Cadbury (CBY), you reach an undeniable fact: People all over the world love candy, gum, and chocolate.

Because confections have little store-brand competition and sales stay steady even during downturns, food companies such as Kraft envy Cadbury’s profit margins. A further factor makes them envy its growth prospects: Candy travels well.

Cadbury: access to emerging economies

Kraft macaroni-and-cheese may be an American favorite, but it won’t necessarily catch on in China or India. Sweets are different. Around the world, “candy seems to attract consumers who want to try new things,” Van Horn says.

Cadbury has built a global business with access to the emerging economies that Kraft wants to penetrate.

The question, however, is how much Kraft is willing to pay for all this. On Nov. 9, Kraft submitted a hostile bid for Cadbury on the same terms as a September offer that was rejected. The offer valued Cadbury at £9.8 billion, or $16.4 billion in cash and stock. But because the value of Kraft’s shares has been falling, the offer of 717 British pence per share was worth about 4% less than it was two months ago.

Shareholder Buffett: Don’t overpay

On the one hand, a Cadbury acquisition would bring benefits to Kraft. But Kraft has said it doesn’t want to pay so much that it risks its credit rating or dividend. On Nov. 9, Standard & Poor’s said that Kraft’s credit rating remains on “creditwatch with negative implications,” due to the bid.

Kraft’s bid has encountered resistance in Britain from those who don’t want to see a U.S. buyer for a treasured company. One Cadbury heir has called Kraft “an American plastic cheese company.”

By combining her company with Cadbury, Kraft Chairman and Chief Executive Irene Rosenfeld would achieve the size and global reach to compete with such rivals as Nestlé (NESN). She says the new company could find $625 million in savings and synergies and would help Kraft better access markets in India, South Africa, and Mexico.

Economies of scale in food businesses

“Purchasing Cadbury would fast-forward Kraft’s bid to build a larger emerging-market presence and would no doubt offer an infrastructure [in key countries] that would take years to build and perfect on its own,” wrote Stifel Nicolaus (SF) analyst Christopher Growe on Nov. 9.

Size is an advantage in the food business, where economies of scale can be significant, says Steven Rogé, portfolio manager at R.W. Rogé & Co. Size also helps a company negotiate with giant retailers and suppliers. “In an age when you’re trying to sell to the Wal-Marts (WMT) of the world, you need size and scale,” Rogé says.

The dealmaking will test the future of Kraft’s growth strategy as it determines the value of Cadbury’s global reach and lucrative confection brands. Meanwhile, Cadbury shareholders must decide if they’re willing to risk a loss in stock price to keep the company independent.

Edit by JMZ

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Full Article:
http://www.businessweek.com/investor/content/nov2009/pi2009119_839315.htm

A sharp stick in the "I" …

December 4, 2009

Sports coaches refrain that there’s no “I” in “Team” … every management communications coach cautions against the arrogant and isolating effect of using “I” instead of “we”.

Appears somebody missed that class …

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Excerpted from WSJ: Obama Redeclares, Peggy Noonan, Dec. 3, 2009

There was too much “I” in Obama’s speech at West Point.

George H.W. Bush famously took the word “I” out of his speeches—we called them “I-ectomies” — because of a horror of appearing to be calling attention to himself.

Mr. Obama is plagued with no such fears.

“When I took office . . . I approved a long-standing request . . . After consultations with our allies I then . . . I set a goal.”

That’s all from one paragraph.

Further down he used the word “I” in three paragraphs an impressive 15 times.

“I believe I know” “I have signed” “I have read” “I have visited.”

I, I—ay yi yi. This is a man badly in need of an I-ectomy.

Full article:
http://online.wsj.com/article/SB10001424052748704007804574574311658007036.html