The War on Business has been unrelenting during this administration, and with a little more than two years left (and the love affair of executive orders), the battles will become more intense. The issue is clear. Currently, the dream of a “fair” society is where people get paid for not working and those that dare excel are summarily punished.
Such a society will be doomed and by definition, has to blaze a trail of destruction in route to Armageddon….i.e. Think back to the breadlines in the USSR. Think about being so broke, a nation would consider selling a national treasure like the Acropolis. Think lost clout, lost dreams and being stuck in the 1950s like Cuba.
During the trip to such inevitable conclusions, fair societies eat up a lot of money. The architects must also make sure to keep allies well-funded – in this case, unions must gain more members and greater access to corporate profits. In all, the Obama Administration has used a variety of weapons to prick businesses.
In addition to the Lois Lerner scandal, the IRS has been wielded as a weapon against businesses since President Obama entered office. Coverage rate – number of audits as a percentage of total returns filed – soared from 2009 to 2011.
- +36% $200,000+
- +94% $1,000,000+
- +32% $10,000,000 to $50,000,000
The War on Coal has been well document and destructive, but the worst is yet to come. According to the US Chamber of Commerce, new EPA rules will have devastating consequences well beyond the coal industry.
- -$51 billion to GDP annually
- -224,000 Jobs annually
- -$586 billion in disposable household income through 2030
- +289 billion increase in household electricity costs through 2030
The Department of Justice is getting rich, taking the lion’s share of a series of fines against banks for their role in the housing bubble, even if the industry was nudged into riskier business by government rules and threats. Executive orders and czars have also played a massive role in usurping business rights and slowing growth and opportunities.
Unleashing NLRB & New Bulls Eye
For years, the left attacked Wal-Mart as the ultimate catch for unionization and Poster Company for the evils of capitalism. Their efforts have failed, so now there’s a new target: McDonald’s. The fast food restaurant chain is the real catch in the campaign about income inequality and higher minimum wages.
Union-backed protests and lots of media coverage have helped the cause, but the biggest blow may have come from the NLRB which ruled the company is a “joint employer” with franchisees.
This ruling opens McDonald’s up to an assortment of local legal issues of its 12,600 franchisees and of course, makes it easier to argue for higher wages, even $15.00 an hour.
We discussed this on my show last night: http://fxn.ws/1rLunq4
Birds of Prey
And I ran, I ran so far away
I just ran, I ran all night and day
I couldn't get away
Flock of Seagulls
The market is running from a flock of birds including a hornero (left), the unassuming national bird of Argentina which has defaulted on its debt again in its battle of wills versus a few American hedge fund managers. There should not be a contagion element to the news, but it is unnerving anytime sovereign debt obligations are ignored.
The story goes back to the 2001 default that saw Argentina give bondholders a choice of two exchanges that would have met 75% haircuts. Just about every holder took the offer, but about 7% of them held out and after years of legal wrangling they won the right to be fully compensated. Argentina balked, and that brings us to this morning when the default became official: the face amount of $1.5 billion is not a lot of money, but it’s an ugly showdown and to a certain degree, is weighing on the market this morning.
The tone of the Fed yesterday wasn’t hawkish, but there are cracks in the veneer that says the monetary policymakers can ignore the danger of their ways in perpetuity. In fact, one of their own said as much with a dissenting vote. On Wall Street, the Fed has major credibility, but that could slip if they persist in keeping rates at current levels much longer. The irony is that the Fed thinks it’s what Wall Street wants, but at this point, even the crybabies of Wall Street know it’s too much of a good thing.
So, this brings up talk about a black swan event and once again, I don’t see it with the things we know, but there is a bear that could become a greater risk. News from Russia has moved the needle of the market a couple times this week, and the high-stakes game of sanctions has entered a new phase. I guess the world and the market could use a dove right about now… or a couple of wise owls.
What a tough morning for companies that released earnings. There is mostly selling, and that’s for names that beat, those that missed are being dragged to the woodshed.