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January 23, 2014

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OOPS--what is going on now? Google missed on earnings. Amazon, the nation's great on line retailer who makes zero profit, missed on both top line sales and bottom line earnings. Was that due to cold weather? So where is the great move to on line retailing that were causing the weak numbers from brick and mortar stores? GDP has gone from 4.1% in Q3 to 3.2% in Q4 and is now estimated to be around 2.6% in Q1. Is that an economy "roaring " forward? Motorola's mobile lost $384M for Google and now Google has sold it to China--pending approval buy the National Security committee. So, I guess Google is out of the mobile handset business leaving it to the new CEO of Microsoft to take on Apple and Samsung. At least Google is smart enough to know what they can't do. Third world problems should be a canary in the coal mine as to the state of the US economy. If we don't buy then they can't sell. Three major factors drive this problem in consumer buying: healthcare costs, tax increases and retirement of the baby boomers. Let's see job numbers down, durable goods down, new housing purchases down 8%, GDP slowing and retail sales down---but as he waves good bye having printed more than $4T dollars to get us here Bernanke says all is well. I hope so.

MARKETING and POLITICS--Nice article, Bill. Last go around we saw the problem with Republicans nominating a winner. In order to win the general election it is true we have to find and nominate someone who appeals to a wide range of independents as well as energizing the conservative base of the GOP. Last time we had Romney who started out the primaries looking pretty much like that candidate. Then, along came Gingrich and Perry favorites of the far right and their attacks and Gingrich's early success forced Romney to take far right stands that made him look far more conservative than he actually is and set him up for the old "change of position" attacks by the media. By the time he marched to the nomination he was damaged goods looking nothing like he did as Governor. He was forced by Tea Party members to take a repeal it rather than improve it stand on Obamacare. He flubbed women's rights in the workplace. He no longer had credibility in immigration reform. The man who Jack Welch openly declared the best candidate to be President of our lifetime looked like a flip flopper and lost dramatically to the smoke and mirrors "I" man who is now openly declared a poor president by nearly 70% of the population.
So, the tough part for Republicans is not to win, it is to find a way to nominate a candidate that can appeal to independents, women and Hispanics without destroying him/her in the primaries trying to appeal to the far right.

WEAK: Last night was perhaps the weakest State of the Union message I have ever witnessed. This was a clearly deflated President whose only ability to garner strong applause was to tell the story of a seriously wounded soldier who has made a remarkable recovery. No idea how to encourage the creation of jobs. How can anyone think that extending unemployment and raising minimum wage is a job creation program. Many of his claims were false or misleading especially on the healthcare enrolls. His statement on global warming was misleading in that he said it is a FACT that global warming is occurring. Yes it is but it is not established that humans are the primary cause. It is more likely that the sun cycle and ocean current rotations are the biggest contributors. His claim that his energy policy has created the “natural gas” boom—note that he did not use the word oil—is counter to the truth. Natural gas has been championed by Harry Reid and T Boone Pickens for the past 15 years and the President has opposed the use of it preferring solar,wind. His energy policy has slowed the energy independence of America. His reference to $3B in subsidies to the oil companies is very misleading. The oil companies likely pay the largest contribution to corporate taxes of any industry segment in the country. What were the total subsidies paid for electric and hybrid cars? Solar and wind energy modifications? HVAC rebates? Insolation tax credits? His claim to do anything positive for small businesses is misleading. 75% of small businesses are taxed at individual rates far above the corporate rates. Most small businesses employ people who are going to be subject to the individual mandate and the minimum wage. The arguments over the inequality in America are for the most part irrelevant. The top 85 richest people in the US have more wealth than the bottom 3.5 Billion people in the world. Only about 5% of the people in the US earn over $100k a year. The average family income in the US has fallen from $55k to $51k under Obama. Compare that to the minimum wage of $10.10 he is proposing for a family of two: $42,000. Is that a huge disparity? What is he doing to help get the $51k rising? All this talk of opportunity in America only for the few: BS. All Americans, no matter where they live or who they were born to, are entitled to a FREE education through K12. The problem is mostly social: teenage mothers, kids not going to school, schools that do not focus on the education skills kids need to get a job (writing,math, IT,mechanics,speaking, etc.), no interface between the Fortune 1000 and the undergrad schools, . I swear they should never allow a kid to use a calculator until they are in 7th grade. 1 out of 7 people in America make their living selling. Has anyone ever seen a school offer a sales curriculum in either high school or even college? (Marketing is not sales). And, then there was the subtle skating on international policy. Note his skimming over of the fact he ahs stopped drone attacks. Something I asked Congress about several months ago. Drone attacks got him reelected—now they are not needed. Wasn’t that a terrorist attack in Boston last year? Wasn’t it terrorists that killed our Ambassador to Libya last year? In order to get talks in Syria and Iran I guess we have to stop defending ourselves. Did you notice there was not one moment of applause by either side of the aisle during his 5 minutes on foreign policy? I could write way more than you want to read.

CAREFUL--Mr. President. What can one say about the economy after this morning's durable goods orders? November numbers revised down dramatically. Decembers very weak reflecting the retail sales figures for the retail season. When you look around the world and see China, India, South America, etc. all slowing down you can be pretty sure that the USA and EU are not booming. When you see the prices of raw materials declining you can be pretty sure the world economy is not booming. The good news? The Fed appears committed to slow the paper printing. Let's look at Wall Street: companies everywhere missing on top line revenues and still making their EPS numbers, How? Cutting jobs, cutting purchases, and using their cash to buy back shares rather than capital investments. So where will the President head after tonight's speech? To visit 5 more Fortune 1000 companies and showcase his economic gains.

So, what about the growth engine of America, the small business where 76% of the people work? Small business owners just went through a year of a payroll tax increase and a personal tax increase which is now due (Jan-April). They faced a 4th quarter of Obamacare uncertainty and costs. They have no ability to borrow capital. They are now being threatened with a minimum wage increase. So, how can they hire? This is the reason this is a JOBLESS anemic recovery.

And, we all forget the purchasing power lost in the retirement of 10,000 baby boomers each DAY. It is this retirement onslaught that allows the Fortune 1000 to reduce employment without the public alarm of layoffs. This will continue for another 10 years. Retired people spend very little compared to employed middle class WORKING PEOPLE. And, what do the retired people get? They get entitlements that increase the government expenditures. Anyone see the Congress or the President addressing entitlements?

So, as you watch the President tonight think about what he says versus the people who work in the employment business. I'm told he will have Toyota as one of his guests. Toyota announced today that they are closing plants in Japan because of recent tax increases. Could it be they are actually moving their production factories to America. And, we have Argentina moving toward a socialist form of government. Hmmmmm

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