Last week, Investor’s Business Daily ran a piece on the 5.4 million Americans that have joined disability rolls under President Obama. It was a thoughtful piece, but it missed the point of the amount of abuse of this system that allows millions of young American men to drop out of the workforce and get paid to cool their heels.
It’s an epidemic nobody talks about because it could bleed into the sensitivity associated with legitimate recipients of social security disability insurance payments. The program provides money to people too young to get social security and unable to work.
The problem is that so many young people, especially men, are claiming they are nuts. Yes, this is the biggest scam since the welfare queens of the 1980s, and it’s getting worse. They call it “the crazy check” and there are wide swathes of men playing the system for these checks.
They feel like they’re getting over on the system except they are digging a hole that means dependency of some form. They are not victims by any means. It’s a national tragedy. When so many brave young men and women have been permanently injured fighting wars for this nation others can shuffle to their mail boxes and get paid.
This is seen by many as a form of social justice, and it’s the tip of the iceberg. It’s amazing and it’s suicidal for our nation. Perhaps the saddest part is that there is no shame to this game, and in fact, those perpetrating are seen as slick, cool, and smart. I guess they’re playing by the rules the same way Wall Street played by the rules. In both cases, the rules were wrong and must be adjusted. For Wall Street, they simply have to be able to go out of business and take their losses with them. For those young men willing to sit on their ass and rip off the nation they should be thrown into some kind of public service like cleaning roads.
This is a national outrage. In addition, it’s beginning to take a heavy toll. New data out yesterday points to the fact social security will run out of money even sooner than the last time the numbers were ran.
Social Security Retirement Funds will be depleted by 2035
Social Security Disability Funds will be depleted by 2016 (previous estimate was 2018)
As a result, the entire program will be broke three years sooner than previously thought, and there is no doubt once they sharpen the pencil and run the numbers a year from now, it will move up a few more years on death row. It is very easy to go to the Social Security office and say the recession is making you depressed and begin collecting a monthly check of $1,111.
For a man trying to feed his family, this is a paltry amount, but for a bum with no rent, mortgage, car note, educational loans, electric bills, and living with his mother or grandmother, this is a lot of dough.
This is a huge scam and must be fleshed out even more, but I don’t think the government will do that since these same dropouts are not counted in employment data, making the unemployment rate look better than it really is. That’s how social justice works.
Nestlé and the Industrial Revolution Nobody Else Sees
The market’s negative reaction to a bevy of disappointing news out of Europe reflected Wall Street’s near-sightedness because when you really connect all the dots, it’s hard to see how investors could buy the continent. Long term trends from demographics, to education, to lack of financial discipline point to a disaster at some point that makes the Greek crisis drama look like a walk in the park. The big news yesterday backing up this contention was that huge deal for Nestle to purchase the baby food division of Pfizer. The all-cash deal for $11.85 billion had several narratives.
Narrative Number One: The World is Hungry
The world is on fire and they are not only coming after what America has through greater educational standards, lower tax rates, non-existing promises that require massive spending cuts and possibly higher taxes, they also are birthing armies. Since the beginning of time, civilizations adapted to survival conditions by adjusting their birthrates higher or lower based on infant mortality and the ability to propagate their clan forward.
Developed nations have put it in park with respect to increasing their broods. I’m not sure if that’s just a natural move that comes with peace and prosperity. If it is a natural thing, it’s also being aided by superior notions of man’s place and role on the planet. After all, slower birth has been engineered in Europe resulting in a need to open its floodgates to immigration and the same is happening in Japan.
Just as European nations are grappling to get immigrants to assimilate, the Japanese have to bring in workers they’ve shown disdain, hatred and cruelty towards for years. China has had its one-child policy in place too long according to many experts and that will ultimately derail their amazing growth. But they are also trying to engineer a society dominated by males.
The world is hungry in more ways than one. Nestle is the world’s largest food company, and it understands the need to be able to be where growth is. While there are nations that are still serious third world basket cases, I remain impressed by nations that seem to have great economic traction and understand the need to supply the most important component of that growth-manpower. That food division Pfizer sold derives 85% of its revenue from emerging market nations. Those nations will get richer and demand even better food for their babies. In the meantime, Kellogg’s lowered its earnings forecast largely as a result of slower growth in Europe and weaker volume in certain US segments.
There is a large correlation to hot economies and high birthrates, and you must take this into consideration as a long term investor. So there will be times when Europe is oversold and worth a trade, but it’s estimated that the population, currently 730 million people, will decrease to possibly 630 million by 2050 with the workforce 25% smaller than that of 2000. That is a disaster.
Narrative Number One: War on Businesses Moving to Next Level
If there is a second term for President Obama, it’s going to mean war on businesses. Such a war is necessary if people are to be dissuaded from success and to fund the Greater Society. The rhetoric has been harsh, but empowered to attack the constitution and mitigate the powers of the judicial and legislative branches. This administration would begin to punish multinational companies with domestic and taxing tools. If that’s not enough to make them cry “Uncle,” look for efforts to stretch the long arm of the tax collector into overseas bank accounts. Why else would Pfizer sell a business that has amazing upside?
You might say Pfizer wants to focus on its roots and core competency, but in this environment, why would anyone simply want to be a drug company. There was a hefty premium for the division so that makes the deal more palatable to management, but the time will come when Pfizer will miss this cash cow. What good is a cash cow when someone else is milking it. or in this case when the government is taxing your milk. Make no mistake, corporate America is afraid. They have fought back only as much as opinion editorials with only the gutsiest like Apple (AAPL) saying they will not bring home all that cash.
Tomorrow, before the open, Caterpillar will report its earnings, and I’m looking for a nice number but even better guidance. I’m also looking for the company’s CEO to send yet another message to the White House. The last time the company reported, this statement was pointed and focused at one person.
“The 2011 increase in sales and revenues was the largest percentage increase in any year since 1947, and much of it was driven by demand for Caterpillar products and services outside the United States. As a result, 2011 was a record-breaking year for U.S. exports at nearly $20 billion, which supported thousands of jobs in the United States and around the world.”
Doug Oberhelman Chairman and CEO Caterpillar
Signs of Life
There are several companies that have been amazing recession investments including pawn shops, same day lenders, and self-service automobile maintenance. One such company is Rent-a-Center whose shares are up 125% since the beginning of the recession. After the bell, Rent-a Center (RCII) posted record earnings results, and while the news was good enough to send the shares higher, I saw a line that was a ray of hope for the overall economy.
“Total revenue and same store sales benefited in the quarter from more customers than expected exercising their early purchase option”
Mark E. Speese
Chairman and CEO Rent-a-Center
Then there’s Texas Instruments (TXN) which hasn’t been a bellwether name for decades but beat the street and offered guidance that could been seen positively for the entire industry.
“As we expected, our business cycle bottomed in the first quarter, and early signs of growth began to emerge”
Chairman and CEO Texas Instruments
Mr. Templeton went on to say in the statement that orders were up 13% and backlog is growing as a result of “breadth” of orders across geographic regions and markets including the industrial sector.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 22nd, 2014 | John Ransom
In Other News: Bi-Partisan Agreement that Debbie Wasserman Schultz is a Horrible Person | Michael Schaus