Posts tagged ‘Government’

Debt Control: Turn Off Costly Sprinklers When Raining

By living in Southern California, I am acutely aware of the water shortage issues we face in this region of the country. We all have our pet peeves, and one that eats at me repeatedly occurs when I drive by a neighbor’s house and notice they are blasting the sprinklers in the pouring rain. I get the same sensation when I read about out-of control government spending confronting our current and future generations in light of the massive debt loads we presently carry.

I, like most people, love free stuff, whether it comes in the form of tooth-pick skewered, teriyaki meatball samples at Costco Wholesale Corp. (COST), or free government education from our school systems. But in times of torrential downpours, at a minimum, we need to be a little more cost conscious of our surroundings and turn off the spending sprinklers.

Certainly, when it comes to government spending, there’s no getting around the entitlement elephant in the room, which accounts for the majority of our non-discretionary government spending (see D-E-B-T: New Four Letter Word article). Unfortunately, layering on new entitlements on top of already unsustainable promises is not aiding our cause. For example, showering our Americans with free drugs as part of Medicare Part D program, and paying for tens of millions into a fantasy-based universal healthcare package (purported to save money…good luck) only serves to fatten up the elephant squeezed into our room.

Reform is absolutely necessary and affordable healthcare should be made available to all, but it is important to cut spending first. Then, subsequently, we will be in a better position to serve the needy with the associated savings. Instead, what we chose appears to have been a jamming of a massive, complex, divisive bill through Congress. 

Slome’s Spending Rules

In an effort to guide ourselves back onto a path of sensibility, I urge our government legislators to follow these basic rules as a first step:

Rule #1Don’t Pay Dead People: I know we have an innate maternal/paternal instinct to help out others, but perhaps our government could stop doling out taxpayer dollars to buried individuals underground or those people incarcerated in jail? Over the last three years the government sent $180 million in benefit checks to 20,000 corpses, and also delivered $230 million to 14,000 convicted felons (read more).

Rule #2Pay for Our Own First: Before we start spending money on others outside our borders, I propose we tend to our flock first. For starters, our immigration policies are a disaster. As I wrote earlier (read Our Nation’s Keys to Success), I am a big proponent of legal immigration for productive, higher-educated individuals – not elitist, just practical. If you don’t believe me, just count the jobs created by the braniac immigrant founders at the likes of Google Inc. (GOOG), Intel Corp. (INTC), and Yahoo! Inc. (YHOO). These are the people who will create jobs and out-battle scrappy, resourceful international competitors that want to steal our jobs and our economic leadership position in the world. What I don’t support is illegal immigration – paying for the healthcare and education of foreign criminals with our country’s maxed-out credit cards. This is the equivalent of someone breaking into my house, and me making their bed and feeding them breakfast…ridiculous. I do not support the immigration law passed in Arizona, but this unfortunate chain of events thankfully puts a spotlight on the issue.

Rule #2a. – Stop Being the Globe’s Free Police: If we are going to comb the caves of Tora Bora  as part of funding two wars and chasing terrorists all over the world, then we not only should be spending our defense budget more efficiently (non-Cold War mentality), but also charging freeloaders for our services (directly or indirectly). We are spending a whopping 20 cents of each federal tax dollar on defense, so let’s spend it wisely and charge those outside our borders benefiting from our monetary and physical sacrifices. And, oh by the way, sending $400 million to the territory controlled by Hamas (read more) doesn’t sound like the brightest decision given our fiscal and human challenges at home. I sure hope there are some tangible, accountable benefits accruing to the right people when we have 25 million people here in the U.S. unemployed, underemployed, or discouraged from finding a job.

Rule #3: Put the Obese Elephant on a Diet – As I alluded to above, our government doesn’t need to serve our overweight, entitlement-fed elephant more chocolate, pizza, and ice cream in the form of more entitlements we are not capable of funding. Let’s cut our spending first before we buy off the voters with new spending.

There are obviously a wide ranging set of economic, political, and even religious perspectives on the best ways of managing our hefty debt and deficits. I do not pretend to have all the answers, but what I do know is it is not wise to blast the sprinklers when it is pouring rain outside.

Wade W. Slome, CFA, CFP®  

Plan. Invest. Prosper.  

www.Sidoxia.com 

*DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own certain exchange traded funds, and GOOG, but at the time of publishing SCM had no direct positions in COST, YHOO, INTC, or any other security referenced in this article. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

June 21, 2010 at 12:30 am 1 comment

Google vs. China: Running Away from 660 Million Eyeballs?

Wait, let me get this straight. Google, the $185 billion behemoth that wants to take over the world is seriously considering turning its back on a rapidly growing cluster of 660 million eyeballs (330 million Chinese internet users according to BusinessWeek)? After hitting their head on an obscenely high market share in the U.S. (67% search share based on Nielsen data) and looking for new geographies to expand, I’m supposed to believe Google will walk away from the third largest economy on this planet (see China: Trade of the Century)? The explanation given for Google’s capitulation is discontent related to unknown hackers and censorship concerns. If that’s not enough, this alleged saint-like posturing comes after Google sold its censorship soul for years, before seeing the free speech light. Although the company’s mission is to “do no evil,” Google had no qualms aggressively poaching Microsoft (MSFT) miracle maker, Kai-Fu Lee, to kick-start their Chinese presence. If free speech is truly at the root of the Google’s unease, then why wait four whole years and a hack-attack before laying down an ultimatum on the Chinese government?

I Smell a Rat

In a blog post written by Google’s Chief Legal Officer, David Drummond, the company explains how their iron curtain digital defense was bent but not broken:

“We have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists. Based on our investigation to date we believe their attack did not achieve that objective. Only two Gmail accounts appear to have been accessed, and that activity was limited to account information (such as the date the account was created) and subject line, rather than the content of emails themselves.”

 

I’m no exterminator, but I smell a rat. All this feels a lot more like politics and business tactics then it does an altruistic display of free-speech martyrdom. The Chinese government and Google executives know what is at risk, as they both play a high stakes game of “chicken.”

Google goes onto say:

“As part of our investigation we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted.”

 

I’m confused. These unknown hackers attacked 20 different companies and only unsuccessfully cracked two Gmail accounts. The evidence sounds pretty harmless on the surface, if this language is representative of reality. Maybe I’m wrong, and a foiled cyber-attack is reason enough to cease operations in a country inhabiting a potential 1.3 billion customers.  

Sure China represents a relatively small portion of Google’s revenues (estimated at less than $1 billion and a single digit percentage of revenues), but Google would be insane to walk away from this massive long-term growth market, even if Baidu (BIDU) is currently eating their lunch. Although Google has a smaller #2 position in China, it still has a respectable 35.6% search market share (according to BusinessWeek).

Not Just About Search – Cell Phones Too

Even if they claimed they were throwing in the white towel on their Chinese search business, I don’t think they really want to flush their newly minted cell phone prospects down the toilet. Even if 275 million or so cell phone users in the U.S. is fertile ground for Google to target their new Android-based phones, I’m guessing they have penciled out the gigantic mobile potential of the rapidly expanding 700 million+ Chinese mobile phone user market.

While I can’t take the scenario of Google ceasing China operations off the table, I consider the chance of Google shutting its doors in China significantly less than 50%. While the bold Google statement of feasibility review regarding their Chinese business existence has gained a lot of attention, I think calmer heads will eventually prevail and Google will resume their targeting of 660 million Chinese eyeballs. Who knows, the high stake game of “chicken” may even benefit their bottom-line as they win the hearts and minds of more future free-speech users.

DISCLOSURE: Sidoxia Capital Management (SCM) and some of its clients own GOOG shares and China based exchange traded funds at the time of this article’s publishing, but did not have a direct position in MSFT and BIDU shares. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

January 14, 2010 at 12:31 am 2 comments


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