Made in America

[steve.foote]

I got a question for you on that one Steve?

 

What did your Aunt do for Wal Mart? Was she a greeter or stock clerk? Or maybe a cashier?

 

What's your point? That some employee's of Walmart are not employee's of Walmart?

 

The exact answer I expected...

 

Ok, let's try this. Would you be alright with the fact that she retired from management if she started as a cashier?

[Pilgrim]

The new Honda plant just 60 miles from here received 60,000 applications for 2,000 jobs.

 

Well, so much for the argument that we have a labor shortage in this country, and need to import manual laborers from other countries.

In all likelihood, most were/are employed and looking to upgrade.

 

The answer is not that easy, John, but you might have a piece of correct in hand.

 

The magazine Chicago Business, on Jan. 25, 2006, said that when Wal-Mart posted ads for 325 positions at a new store in Oak Park, Illinois, that month twenty-five thousand applicants showed up.

 

Similarly, in Oakland, CA in August of '05 11,000 applicants showed up to apply for about 300 jobs. Wal-Mart's HR director told NPR (the source of the news story about Oakland) that they typically get three to four thousand applicants whenever a Wal-Mart opens.

 

The fact is, this country has had an oversupply of labor, caused largely by illegal aliens (who now number ???, but certainly over ten million). It has been in existence for twenty years and more, now, and because sweat is a commodity, as it becomes more available it becomes cheaper.

 

Furthermore, there has developed a self-perpetuating ethnic hold on many unskilled and semiskilled fields, particularly in certain geographic areas. Drywall in New Jersey is largely hung by illegal aliens from eastern Europe. Curb, sidewalk, and foundation crews in Dallas/Fort Worth are almost exclusively illegal Mexican aliens (that's actually true in most places, now). 90% of the unskilled and semiskilled residential construction work(when it was being done) in the Puget Sound area is done by illegal Mexican aliens. These two factors have depressed wages and working conditions in construction (now the largest employer of illegal aliens), agriculture, and service.

 

If you travel much in the U.S. you know that most hotel housekeeping is done by Latinas and most of them are illegally in the U.S. Their sheer numbers depress wages in that field.

 

So when you say that most applicants for Wal-Mart jobs "were/are employed and looking to upgrade" you may be right. They were employed, and then displaced from these other fields and Wal-Mart is, at least, indoor work.

 

The cause of our economic woes is certainly not the illegal alien, and his departure won't solve them all by any means. But it is the undereducated and unskilled workers in America who are hurt the worst by the phenomenon. While blacks and Latinos are the main victims now, as our educational standards degrade and dropout rates increase it's going to get worse regardless of ethnic factors. In a time when every job that can't be exported is precious, it is a national sin that we allow (and encourage) foreign workers of any sort, guest or illegal, to compete with our legal, domestic workforce.

 

Pilgrim

 

[John Ranalletta]

Your ken about the illegal alien issue is much deeper than mine, so, I'll yield the point.

 

Getting back on point, we heard from our clients in the area that their employees were applying for jobs at the new plant because Honda is perceived to be a good employer, i.e. good wages, no layoff policy, clean environment, team approach to the work, etc.

 

There may well be pressure from illegals at the entry level, but I'd offer the large number of applicants to Honda was the result of pull rather than push.

[VinnyR11]

When Walmart is the only company hiring in your small town, your options of work or starve become rather limited.

 

There's one other option Ken, people can and should MOVE to where the work is, not expect it to come to them.

 

As confuscious used to say, Man who stand on hill with mouth open waits long time for roast duck to fall in it.

 

If people want to work, they will work. If they have to move to work they will move to work.

 

It really is that simple.

 

Excellent point! This issue is not discussed enough. I think you can also substitute the word "change" for "move" in many cases.

 

So many people are excellent at complaining about their circumstances and do little if anything to change it. They'll bitch for years, and after those years they are still in the exact same place they were when they started.

 

If you don't like the work environment/wages/health benefits or whatever at Walmart or wherever, then change. If that is the only work you can find in that geographic area, then that's what your services are worth in that area. If you don't like that, and you don't want to move, or get more training, or get more education, or start your own business then stop bitchin' or better yet, be thankful you have that mode of employment.

 

I've known too many people who have complained about their jobs for years and have never even sent out a resume to try and get employment elsewhere. It's just nuts. People need to look at themselves first, because they are the only ones that can make meaningful change in their own lives. Far too many people are good at complaining, but they are most often getting paid exactly what they deserve.

[John Ranalletta]

So many people are excellent at complaining about their circumstances and do little if anything to change it. They'll bitch for years, and after those years they are still in the exact same place they were when they started.

Plus, government unemployment policies lock unemployed workers in place. Moving out of state generally leads to cessation of payments; and, no, I'm not arguing against UC payments, but they are not based upon enlightened policy. As they stand, they promote and reward inertia.

[Ken H.]

I propose it is possible to respect and insure the quality of life of a worker and reap the greater reward of profits as a result of workers who do better work because they know they are being respected and taken care of.

 

I expect that to happen just after poverty, war and hunger are eradicated from the earth. Sounds good, but besides platitudes and latitudes, I don't see a workable plan on the table.

It is possible, and workable, just not common. Study a bit on "3BL" a.k.a "TBL" designed/stuctured companies. Those are the ones that, IMHO, have their heads on the straightest.

[Ken H.]

When Walmart is the only company hiring in your small town, your options of work or starve become rather limited.

There's one other option Ken, people can and should MOVE to where the work is, not expect it to come to them.

 

As confuscious used to say, Man who stand on hill with mouth open waits long time for roast duck to fall in it.

 

If people want to work, they will work. If they have to move to work they will move to work.

 

It really is that simple.

Well that’s a point. I too think sometimes people are too reluctant to move. But there are often extenuating circumstances involved also. Family, sometimes dependent family, property owned, friends, other interest, responsiblites, in the community. Other desirable attributes of it. Life Balance issues in other words.

[KDeline]

When Walmart is the only company hiring in your small town, your options of work or starve become rather limited.

There's one other option Ken, people can and should MOVE to where the work is, not expect it to come to them.

 

As confuscious used to say, Man who stand on hill with mouth open waits long time for roast duck to fall in it.

 

If people want to work, they will work. If they have to move to work they will move to work.

 

It really is that simple.

Well that’s a point. I too think sometimes people are too reluctant to move. But there are often extenuating circumstances involved also. Family, sometimes dependent family, property owned, friends, other interest, responsiblites, in the community. Other desirable attributes of it. Life Balance issues in other words.

 

 

And maybe they don't have the money or means to move. Just our move from Chicago to Davenport cost $1785.00 in gas, and for a very small truck rental.

[John_Hendriksen]

..another story

 

As usual with this group, a spirited discussion. It’s hard to argue dispassionately about a subject like this and rather than give just my opinion, I thought I’d recount my companies experience with sourcing overseas and selling to the “big boxes” and see what sticks. This is the short version, many details left out.

 

I have a small manufacturing/distribution company, started some 20 years ago by a couple of bums in a garage. It grew steadily and slowly over the first few years until we landed the Home Depot account. This was about 17 years ago (if i recall correctly- memory fuzzy in my old age) when they were considerably smaller – at the time the Northeast division had only 8 stores – and we grew with them. (BTW, I was so impressed by the people at HD then, I bought the stock and it’s paying for my kid’s education.) As we grew, we invested in the infrastructure needed to serve HD, landed Lowes, True Value, etc. and at our peak (personnel wise) employed 120 people – about 90 or so in the plant. We then wanted to expand our line – needed too really, to stave off competition.

 

Unfortunately, we could not source the quality we wanted domestically. We tried, yet could find no one in the US that could produce the product and off to China we went. Eventually, these imported products rose to about 45% of our sales. All going swimmingly…..still employing lots of folks, products from China doing well…until the dot.com era.

 

Soon, I can’t find employee’s, I lose twenty people over six months, wages and benefits increase, and production drops and I’m falling behind, customers are pissed. One day, I’m moaning about this to our Chinese counterpart and he mentions, “we could do want you want”. I’m intrigued and agree to have samples made and pricing worked out. Meanwhile, we invest in new machinery to take up the slack of our personnel losses. (Interestingly enough, German machinery, try finding an American made 4 headed moulder at any price) I’m still falling behind, we’re going through employee’s like never before – we’re hiring drunks and idiot's, training costs soar as most can’t read a tape measure – BTW, our starting wage ( non-union ) was, at that time, $10.50/hr, 100% medical benefits, profit sharing plan, etc.- Frankly, it was a most difficult time, sales are soaring, but so are costs and production and quality is dropping.

 

China? We AGONIZED over this, probably for too long. Have we looked at every possibility? Is there anyway we can compete/invest and keep production here? This was the product that I had built with my hands when we started…it was heart wrenching. As you might guess, after much discussion and consultation…we went overseas. We now export raw materials ( milled oak, cherry, maple, etc. ) to China where it’s assembled, packaged and sent back to us. We still employ 30 highly skilled workers in the plant for our custom work and have distribution workers on both coasts.

 

Certainly there are a lot more details about a decision to source overseas that a small company needs to make than can be stated in this forum. Am I a schmuck for doing it?

 

Maybe.

 

I visit the factories in China at least two times a year, no prison labor, no exploited kids. These are small businessmen who want to get ahead, make a better life and can see it for the first time. I eat with them, know them, laugh with them and yes, trade with them.

 

Lastly, a word about the “big boxes” Yep, their tough, but they don’t hold a gun to your head. They pay on time and, for the most part, are fair. We don’t sell to Walmart, pitched them, the deal wasn’t right and we walked – no harm, no foul. I actually kinda admire the Sam Walton story. Interestingly enough, we don't sell HD or Lowes anymore either. When metal costs took a jump a few ago, we found we could not absorb the cost increases. When we attempted to raise prices to HD...they declined and are now doing business with one of my competitors. Tough? Sure. Unfair? Not on your life.

 

Just thought I’d throw a little different perspective into the discussion….flame away!

[Ken H.]

Look for solutions, not excuses. I'm so tired of hearing, "Here's why we can't", instead of, "Here's how we will."

For once, Ken, I'd like to hear you say, "Here's how I will."

Well you know my answer even before I type this. I have no answers either. I think the US is fundamentally and permanently broken IMHO. By-and-large personal self-interest over true patriotism, that of sacrificing personally for the benefit of the masses/many/nation, has become “The US Motto.” There are exceptions of course (military deaths come to mind), there are exceptions to any generalization, but overall; obscene personal greed has won. As a result; it is a nation in decline, and will continue to be one. The only ‘answer’, ala the USSR, is a collapse and eventually a new nation/structure will rise out of the ashes. I’ve given up on the USA. It is becoming increasingly irrelevant in the world. At least in any positive contributory sense. A tough pill to swallow to be sure for a nation of people who have been living under the illusion (that was admittedly, at least in part, true for awhile) that it/they are the greatest in the world.

 

For Donna and I the answer was to leave. Which we did.

 

[Ken H.]

But yet, people still flock there to work. It can't be all that bad then can it?

 

I mean, it's like those folks that say the US is the worst country on the face of the earth (or something similar) but we still have them doing everything they can to get here and live, legally or otherwise.

 

Curiouser and curiouser...

That ship may have sailed too. At least on the most commonly discussed front – from Mexico. A joint study between the University of Texas and the College of Mexico released in March indicates immigration from Mexico to the USA may have peaked and has actually declined for the first time ever on an annual basis, 2006 vs. 2007. And for the first ¼ 2008 72,000 more Mexican immigrants returned to Mexico than came to the USA.

[chrisolson]

But yet, people still flock there to work. It can't be all that bad then can it?

 

I mean, it's like those folks that say the US is the worst country on the face of the earth (or something similar) but we still have them doing everything they can to get here and live, legally or otherwise.

 

Curiouser and curiouser...

That ship may have sailed too. At least on the most commonly discussed front from Mexico. A joint study between the University of Texas and the College of Mexico released in March indicates immigration from Mexico to the USA may have peaked and has actually declined for the first time ever on an annual basis, 2006 vs. 2007. And for the first ¼ 2008 72,000 more Mexican immigrants returned to Mexico than came to the USA.

The reduction has more to do with shriking employment opportunities through new laws or greater enformement of existing laws than what you think.

[Mike]

I'm a firm believer in the proposition that, generally speaking, the market should be permitted to determine the winners and losers in business. I've always been unpersuaded by the notion that I should buy American when some dude in Germany, Japan, or Indonesia is doing a better job of producing what I want for the price I want to pay. In my mind, he's being more loyal to me than the guy in the States who's building a lower quality product that doesn't meet my needs.

 

As with our overall financial meltdown, the causes of the failures of American businesses are almost too numerous to list, but I attribute much of it to the pressure to generate short-term numbers that satisfy investors whose attention span is measured in weeks or months, rather than in years. As an example, one discrete aspect of the auto industry's woes--the emphasis on trucks and SUVs--seems to bear that out. For several years, up until maybe a year or two ago, the U.S. carmakers emphasized the sales of these behemoths, but never seemed to pay much heed to the inevitable ramp-up of fuel prices. I have to assume that the individuals running the Big Three are at least of average intelligence, so the obvious question that comes to mind is, why were they not planning for the inevitable shift away from large, gas-hungry vehicles? The only answer that comes to mind is not that they could not have predicted that shift, but that the incentives to focus on short-term profits overwhelmed the incentives to plan for the long-term welfare of those companies, their workers, and their shareholders.

 

In sharp contrast, though I am not a huge fan of hybrids, one has to acknowledge that companies like Toyota and Honda had a pretty viable strategy for innovative product development that would place them in a strong competitive position, in contrast to Ford, GM, and Chrysler. Again, this is but one aspect of the Big Three's woes (albeit a very important one), but it does seem to illustrate a short-sighted perspective that is reflected throughout a wide range of business decisions undertaken by those companies over at least the past decade.

 

I'm fully prepared to buy American any time an American company builds a quality product that offers equal or better value than a foreign-made product. But I'm not willing to compromise my standards in what I buy, something I would view as cheating myself.

[John Ranalletta]

By-and-large personal self-interest over true patriotism, that of sacrificing personally for the benefit of the masses/many/nation, has become “The US Motto.”

Yeah, but...

 

The discussion goes no where until you can put a limit on what the contribution should be. You have refused to define the ideal. Like the lion who says, "just give me an arm", you won't be satisfied with that because equity has always been a moving target. The have nots of the world have insatiable appetites.

 

I dealt with this in labor negotiations. Bargaining teams always expected me to come to the table with a list of what I was willing to give. I never did. I did offer two lists: what I was willing to give and what I wanted in exchange and they were never, never separated.

 

I've never heard anyone on your side of the "one for all" argument posit what you're willing to give to get. It's just, "give me xxx because it's the right thing to do".

[Ken H.]

But yet, people still flock there to work. It can't be all that bad then can it?

 

I mean, it's like those folks that say the US is the worst country on the face of the earth (or something similar) but we still have them doing everything they can to get here and live, legally or otherwise.

 

Curiouser and curiouser...

That ship may have sailed too. At least on the most commonly discussed front from Mexico. A joint study between the University of Texas and the College of Mexico released in March indicates immigration from Mexico to the USA may have peaked and has actually declined for the first time ever on an annual basis, 2006 vs. 2007. And for the first ¼ 2008 72,000 more Mexican immigrants returned to Mexico than came to the USA.

The reduction has more to do with shriking employment opportunities through new laws or greater enformement of existing laws than what you think.

Oh I agree. My point was that the shine may becoming off of the, "But everyone wants to come here!" argument too.

[Matts_12GS]

Ken,

 

I want to thank you for making this more of a positive than I thought. Fewer illegals here? Sweet!

 

 

By-and-large personal self-interest over true patriotism, that of sacrificing personally for the benefit of the masses/many/nation, has become “The US Motto.”

 

So Ken,

You're an IT guy like many of us here, and we all know what happened during the boom. Did you take any increased earnings during that time frame? Or, were you still the paragon of virtue blasting American greed? I'm curious.

 

... I’ve given up on the USA. It is becoming increasingly irrelevant in the world. At least in any positive contributory sense. A tough pill to swallow to be sure for a nation of people who have been living under the illusion (that was admittedly, at least in part, true for awhile) that it/they are the greatest in the world.

 

For Donna and I the answer was to leave. Which we did.

 

I suppose this place is that rotten, I suppose that there's not much sense in people coming to visit here on vacation then is there? Too bad, I was hoping to meet you at the UN.

C'est la vie

 

[VinnyR11]

I’ve given up on the USA. It is becoming increasingly irrelevant in the world. (snip)

 

For Donna and I the answer was to leave. Which we did.

 

I guess it's kind of odd that I received so many mails from friends in Italy, France, and Taiwan who were keenly interested in our past election. They certainly didn't seem to be phased with anything going on in the regions way up north, but hey, it must be me.

 

I spent most of my working life traveling through Europe and Asia, and living 4 years in Europe. I'm basing my opinion on hundreds of discussions with regular hard working people in many countries, of both developing and well established economies. I think your "irrelevant USA" comment is primarily wishful thinking on your part. I'm not preaching that we're the King of the World, but "irrelevant'? That's pure nonsense.

 

Then again, opinions make the world go 'round I guess.

 

[yabadabapal]

Ill tell you why America is a great country.

Because we have done our best to follow the the constitution and declaration of Independence and despite being misled from time to time by government servants who are in bed with business, we always find our way back home to our roots, written ever so wisely in our countrys' founding documents. We are little more than 200 years old, and yet when any country in the world needs our help, we usually do something whether on a small or grand scale, all be it not always without selfish motives, but we try to make it work for everyone involved. This country has a great foundation to thrive and prosper from, but only if we all take a good look at ourselves and ask, other than what I have done for myself, my family, what have I done for my country. Have I given 10% of my income to help the less fortunate. Was I honest in reporting my taxes. The list goes on. Any fool can make alot of money, but only a strong, good and decent man knows the true value of money. The true value of hard work. I believe America will once again through the reengineering and revitalization of our educational institutions and other similar facilities, become

a world leader in the industries of tomorrow. The dream of tomorrow starts today. Made in America, one dream at at time, all the time.

[Ken H.]

Ken,

 

I want to thank you for making this more of a positive than I thought. Fewer illegals here? Sweet!

Never said anything about illegals. As a matter of fact the study / article was strictly about legal Mexico to USA immigration trends and statistics.

 

I suppose this place is that rotten, I suppose that there's not much sense in people coming to visit here on vacation then is there? Too bad, I was hoping to meet you at the UN.

C'est la vie

Naw, I’ll still come and spend my Canadian dollars at the UN, you (the USA) needs all the trade imbalance help you can get!

[Ken H.]

Ill tell you why America is a great country.

Because we have done our best to follow the the constitution and declaration of Independence and despite being misled from time to time by government servants who are in bed with business, we always find our way back home to our roots, written ever so wisely in our countrys' founding documents. We are little more than 200 years old, and yet when any country in the world needs our help, we usually do something whether on a small or grand scale, all be it not always without selfish motives, but we try to make it work for everyone involved. This country has a great foundation to thrive and prosper from, but only if we all take a good look at ourselves and ask, other than what I have done for myself, my family, what have I done for my country. Have I given 10% of my income to help the less fortunate. Was I honest in reporting my taxes. The list goes on. Any fool can make alot of money, but only a strong, good and decent man knows the true value of money. The true value of hard work. I believe America will once again through the reengineering and revitalization of our educational institutions and other similar facilities, become

a world leader in the industries of tomorrow. The dream of tomorrow starts today. Made in America, one dream at at time, all the time.

Well that’s a fine and admirable patriotic statement, but to which I ask - where and how?

 

In what definable, measurable category / statistic is the USA still, “great?”

 

Heck, I’ll even start the list – Medical research. Beyond that and a (darn short) list, the US trails in innumerable measures.

 

How is the USA again going to rise to lead the world in “the industries of tomorrow” when it trails the world in all the core attributes needed to do so? In particular education and health care. When the mantra isn’t “reinvent”, it’s, “bail out?”

 

[VinnyR11]

Well that’s a fine and admirable patriotic statement, but to which I ask - where and how?

 

In what definable, measurable category / statistic is the USA still, “great?”

 

 

Let me preface this by saying I applaud you for leaving the USA. It had to be a difficult decision, and it goes hand in hand with my earlier post. I can't stand people who complain and don't do anything about it.

 

Having said that, there's no reason I or anyone should have to defend America to someone who fled, but I can't resist.

 

Some things that make America "America" and make it great are:

* Having a very diverse population living together relatively peacefully.

* Changing our government every 4 years via a peaceful election process, even when the vast majority of the population were against the present gov't.

* The largest economic engine in the world impacting economies of virtually every nation. You don't believe this, but to paraphrase a quote about string theory, you're so off on that you're not even wrong.

* One of the leading nations regarding the introduction and implementation of new technologies. (I'd say THE leading but that's debatable).

* etc, etc, etc, etc

 

I also have some important questions for you that will allow me to better understand where you're coming from. As I mentioned earlier, I spent about 20 years traveling, working, and living throughout the world. You have very strong opinions about how the US relates to the world at large. I'm hoping that's based upon a direct relations to many others in a large number of their home countries. How much international travel do you do now and have done? How much international business have you been directly involved in? Are you basing your statements on talking to hundreds of people and working with businesses in other countries, or just Googling the internet and reading other people's opinions in articles, books, or looking through stats? If you do travel, how often and where? I don't like spending lots of time debating people who really don't have a base of understanding. They have nothing more than an opinion, and a weak one at that.

 

Case in point, if you're going to throw out education stats, you have to include the entire society that surrounds it. I hate it when someone points to Japan or Germany or whatever and says (based solely on some type of survey) their kids are better educated in science, math, or whatever and "we should be more like them". Easy right? Well, no actually, it's far from easy. You have to understand the entire culture and how it relates to education. This is a far too lengthy discussion for an e-mail, but suffice it to say that you have to go there and go there often to get even the simplest understanding of what is involved.

 

[SweetP]

 

I guess it's kind of odd that I received so many mails from friends in Italy, France, and Taiwan who were keenly interested in our past election.

 

How true. At least in France, there was front page coverage nearly every day down the stretch. And interviews of people in the less affluent neighborhoods who actually believed that they were going to benefit directly from 'O' being elected.

 

Just read an interesting piece in a newspaper, can't recall if it was the NY Times or my usual French paper, saying that Iran is suffering from a brain drain. Seems many of their brightest are clammering to go to US universities and in many cases they never go back to Iran. The proposition that the US is on a downward slide may or may not be accurate, but if so it still has a long way to go and there is certainly no guarantee that it won't reverse itself. To suggest that the US is becoming irrelevant is somewhere between sour grapes and fantasy.

 

 

[Matts_12GS]

To suggest that the US is becoming irrelevant is somewhere between sour grapes and fantasy.

 

what a great sentiment.

thank you!

[steve.foote]

Have I given 10% of my income to help the less fortunate.

 

Somehow, I missed that part of the Constitution.

[VinnyR11]

Have I given 10% of my income to help the less fortunate.

 

Somehow, I missed that part of the Constitution.

 

It's not there directly, but, even though it doesn't allude to 10% of anything, the preamble's "promote the general welfare" fits the theme.

[Esku]

Some things that make America "America" and make it great are:

* Having a very diverse population living together relatively peacefully.

* Changing our government every 4 years via a peaceful election process, even when the vast majority of the population were against the present gov't.

* The largest economic engine in the world impacting economies of virtually every nation. You don't believe this, but to paraphrase a quote about string theory, you're so off on that you're not even wrong.

* One of the leading nations regarding the introduction and implementation of new technologies. (I'd say THE leading but that's debatable).

* etc, etc, etc, etc

 

Sure, US politics dominates the media, US Financial Markets (AKA - MESS!) screws up the global market place and agree that US economy is huge (even in a recession) and probably conceed your point about technology uptake but China is (or is about to be) a more dominant in the world. Take a close look at who is buying up all the failing/under-valued resource stocks around the world.

[Ken H.]

I also have some important questions for you that will allow me to better understand where you're coming from. How much international travel do you do now and have done? How much international business have you been directly involved in? Are you basing your statements on talking to hundreds of people and working with businesses in other countries, or just Googling the internet and reading other people's opinions in articles, books, or looking through stats? If you do travel, how often and where?

Over the years I have worked in USA, Canada, Australia, France, Italy, Germany, the UK, Taiwan and Hong Kong.

 

But, and it’s a big but that seems to be missing in a lot of these conversations, it was +/- 15 years ago (with the exception of Australia). The USA’s position and standings in various measurements has changed significantly in the last couple of decades. I don’t think arguments based on what the USA was are, for the most part, any longer valid. Some people consistently point to what the US has done in the past, sometimes distance past, as evidence to what a great country it is. To which I say, "...great country it was."

 

Case in point, if you're going to throw out education stats, you have to include the entire society that surrounds it. I hate it when someone points to Japan or Germany or whatever and says (based solely on some type of survey) their kids are better educated in science, math, or whatever and "we should be more like them". Easy right? Well, no actually, it's far from easy. You have to understand the entire culture and how it relates to education.

When you are struggling to be globally competitive, how you rank on various measurements globally, is important. Mandatory even. Local cultural differences aside. The world doesn’t care what the local differences are, it only cares if country ABC can provide a better ________ than country XYZ. Saying ‘...but, but our culture/society is different / is the reason’ is only more excuse making IMHO. Excuses the populous looking for the best _________ brushes aside without a second thought.

 

 

[Matts_12GS]

When you are struggling to be globally competitive, how you rank on various measurements globally, is important. Mandatory even. Local cultural differences aside. The world doesn’t care what the local differences are, it only cares if country ABC can provide a better ________ than country XYZ. Saying ‘...but, but our culture/society is different / is the reason’ is only more excuse making IMHO. Excuses the populous looking for the best _________ brushes aside without a second thought.

 

 

 

You're right Ken, so many children are not getting the education they need to be globally competitive... Schools are festering crap holes, students unengaged, parents unconcerned... Especially in the inner cities, urban cores... Areas purportedly left behind by the flight to the suburbs...

 

Score one for the social progressives and the NEA...

 

But, I'd wager that our teenagers have higher self esteem than all those damn kids overseas who can do all that higher math and science and crap!

 

We got that going for us, which is nice!

[tallman]

Recent study show American 4th and 8th graders doing better than public believes.

 

"The findings contradict a persistent view in the United States that its children are lagging behind the rest of the developed world. An AP poll in June found that nearly two in five people believe American students do worse on math and science tests than those in most of the developed countries"

 

http://www.enquirerherald.com/368/story/446570.html

 

Still much improvement is needed, but in many places of our country the perormance is quite good.

Perhaps another example of media bias.

 

The US was the target for many countries.

They wanted to do as well as we were, at that time.

They set out to reach a goal, and many, particularly some Asian countries, have done so, and more.

The need for improvement in our system is evident, but change is afoot.

Time will tell if it works or if it doesn't.

Perhaps the current economic situation will produce another "greatest generation".

Just as the Soviet Union couldn't continue to compete w/us and collapsed, causing a major shift in their society, we too may find that "competing" w/the rest of the world economically isn't good for business and we may need to enter into a different business model.

If that happens, I see no reason we can't continue to be a very successful force in the world economy.

We may however need to reassess our global militry expenditures and our global foreign aid policies.

In the short term a reallocation of monies into our society rather than globally, as we do now, may jumpstart the machine and lead to brighter days.

If other countries don't like us now, despite the billions of dollars we give away every day, then maybe we need to change the rules.

[Whip]

Sorry I'm late to this. I've enjoyed reading the thread and all the interesting thoughts and comments. I have a question going back to the OP. Who is gonna do these "manufacturing jobs"???? We have a 7% unemployment rate. Not all those peeps are employable. The others are not trained or experienced in manufacturing and prolly an even greater number don't want to do that kinda job.

 

Could it be our country has changed so much that we just pay other countries and peeps to do the work we don't want to do. Or maybe "Big Brother" has just made it too hard to compete with confiscatory corporate taxes and assorted well intentioned laws that have too many unintended consequences??????

 

We prolly have done it too ourselves, but I don't think we can blame it all on the "Evil Profiteers".

 

 

BTW.......I fear no Chinamen.......we can live longer not buyin from them than they can not sellin to us. They can dump their dollars, but then what would their products be worth and how would they feed all those peeps.

 

 

I'm gonna have to start bringin my laptop on road trips.......I hate missing all this fun.

 

Whip

[Francois_Dumas]

I was already wondering what kept you from it... until I read Uncle Tom's Ride Tale !

[VinnyR11]

 

Case in point, if you're going to throw out education stats, you have to include the entire society that surrounds it. I hate it when someone points to Japan or Germany or whatever and says (based solely on some type of survey) their kids are better educated in science, math, or whatever and "we should be more like them". Easy right? Well, no actually, it's far from easy. You have to understand the entire culture and how it relates to education.

When you are struggling to be globally competitive, how you rank on various measurements globally, is important. Mandatory even. Local cultural differences aside. The world doesn’t care what the local differences are, it only cares if country ABC can provide a better ________ than country XYZ. Saying ‘...but, but our culture/society is different / is the reason’ is only more excuse making IMHO. Excuses the populous looking for the best _________ brushes aside without a second thought.

 

 

I agree with you that how you rank within education worldwide is important. That wasn't my point, and reading my post again, maybe I wasn't clear. What I am saying is that education stats absolutely cannot be isolated from the culture in general. One can't say by fixing JUST the education system you are going to get similar results from another country. Most people in the US who are after improved education appear to believe that it all lies with the schools alone. There are varied cultural pieces that all tie in to form a total "education system", and many of these people are equally important to the schools themselves.

Having said that, you have to look at the sum total effect of the education system WITHIN your culture. Perhaps (and that's my argument) the total system may bring about slightly lower science test scores, but the overall culture develops more innovative and risk taking people. The scores are important but they ain't the whole deal by a long shot.

[Ken H.]

http://www.enquirerherald.com/368/story/446570.html

That article makes no sense what-so-ever.

 

In one paragraph it says, “The findings contradict a persistent view in the United States that its children are lagging behind the rest of the developed world. Not true, the authors of the report said.” And then in the next paragraph it says, “The Asian countries are way ahead of the rest of developed countries,” and, “The United States has a long way to go to lead the world in math. The study reported dramatically higher math scores in five Asian countries - Hong Kong, Singapore, Taiwan, Japan and Korea - than other countries participating in the study.”

 

Then it further contradicts itself with, “For the U.S., the news in another area isn't as good: Kids still do slightly better in science than math and are well above average,” and then, “other countries, including Singapore and Hong Kong, have made significant gains and surpassed the U.S.”

 

WTF?

 

So we’re (the USA) better than ourselves when competing against ourselves, but worse than ourselves when competing against the rest of the world???

 

Man, talk about a double-speak, white-washing article!

 

[Ken H.]

You're right Ken, so many children are not getting the education they need to be globally competitive... Schools are festering crap holes, students unengaged, parents unconcerned... Especially in the inner cities, urban cores... Areas purportedly left behind by the flight to the suburbs...

 

Score one for the social progressives and the NEA...

Well there’s a whole laundry list of reasons while the educational system has failed us that could be aired, but that’s probably a different thread.

 

I think it can be generally summed up though by a belief anymore (and a valid one to some extent) that the road to riches does not pass through (pause in) the classroom. Or to put it another way, you don’t have to be smart to get rich if you’re one of the chosen few. And everyone, at least at first, thinks they have a shot at being one of the chosen ones.

 

[Ken H.]

Perhaps (and that's my argument) the total system may bring about slightly lower science test scores, but the overall culture develops more innovative and risk taking people. The scores are important but they ain't the whole deal by a long shot.

I don’t disagree with that. There are a lot of aspects to what makes a person, society, culture, country competitive or not. Quality of education is only one of them. But I do think it’s one of the core ones. If you’re lacking a foundation in the basics, to say nothing with the advanced disciplines, it’s hard as a whole to make up for it in other ways.

[Matts_12GS]

Well there’s a whole laundry list of reasons while the educational system has failed us that could be aired, but that’s probably a different thread.

Perhaps, but I thoroughly believe that "laundry list" is full of problems created as a result of the silly, humanist policy decisions (a la the law of unintended consequences) that have taken the schools away from teaching fundamentals. I'll stand by my previous statement about the so called progressives.

 

What amazes me more and more is just how invidious that train of thought has become. The more and more I see and learn about the current state of affairs, I think that we're seeing the perfect storm of a failed ideology finally bearing it's horrendous fruit.

 

I think it can be generally summed up though by a belief anymore (and a valid one to some extent) that the road to riches does not pass through (pause in) the classroom. Or to put it another way, you don’t have to be smart to get rich if you’re one of the chosen few. And everyone, at least at first, thinks they have a shot at being one of the chosen ones.

 

That's the difference between you and I Ken, I am of the opinion that I am the one who determines whether I get "rich" or not. My ingenuity, my knowledge, my determination and my effort. Not some mystical, malevolent "they" who dole out favor.

 

One more thing, since you turned and walked away from the USA, isn't it more than a bit hypocritical for you to refer to yourself as part of the "We" in the USA above?

[Wooster]

I purchased a made in America acoustic guitar yeasterday (Martin D16-GT) and am thoroughly satisfied with this Nazareth, PA product. While it's a bit spendy (for frugal retired educator me), its great sound will remain long after the cost concern fades away. Really a great guitar.

 

Wooster w/six 'tars

[tallman]

Ken, not really.

They are saying that first, there is a perception, a negative one., and that perception is not accurate.

There is a difference between "falling behind, performong worse than" etc and doing as well as.

The 5 countries mentioned in one part and the two (of 5) in the other part show test scores above the rest.

We are in that group, the rest of the developed countries, and the study showed that some areas of the USA have students performing higher than that.

For one or two countries to do better on a test is not the same as

"lagging behind the rest of the developed world".

Seems pretty obvious to me, perhaps there is a bias to your interpretation, or mine.

Now test data can be a reflection of many factors. I would submit that our children are capable of exceeding theri current performance, but only if a change in emphasis and direction takes place.

BTW, prior to WWII less tha 50% of our students graduated from high school. They ended up doing fairly well in the real world.

The current crop of "leadership" has had more education and higher test scores and look where that has brought us...

[Ken H.]

The more and more I see and learn about the current state of affairs, I think that we're seeing the perfect storm of a failed ideology finally bearing it's horrendous fruit.

Oh no doubt. Now as to which ideologies, on that there is a slight disagreement.

 

That's the difference between you and I Ken, I am of the opinion that I am the one who determines whether I get "rich" or not. My ingenuity, my knowledge, my determination and my effort. Not some mystical, malevolent "they" who dole out favor.

Ah, but what if you didn’t have that (necessary) knowledge? The education system failed you so badly that you didn’t know / were ever taught what you need to know to do what you do? The “mystical, malevolent they” are the mechanisms of a successful society that are charged with providing quality education.

 

Now one could take it to an extreme and say in effect, ‘Everyone is responsible for educating themselves’ but that also IMHO would be recipe for failure. Leading back to my favorite theory that humans are incapable of doing much of anything singularly.

 

One more thing, since you turned and walked away from the USA, isn't it more than a bit hypocritical for you to refer to yourself as part of the "We" in the USA above?

Well I actually do try to be cognizant of that when I’m typing here. Trying often to qualify “we” with “the USA.” But despite the fact that Donna and I left, I do have deep roots in and concern for the future of the USA. And I find the conversations here about it quite interesting.

 

[Matts_12GS]

Oh no doubt. Now as to which ideologies, on that there is a slight disagreement.

 

That's an understatement. Seeing how the new cabinet is coming together gives me no hope, but then again, this nation has withstood greater storms than the junior senator from IL.

 

Ah, but what if you didn’t have that (necessary) knowledge? The education system failed you so badly that you didn’t know / were ever taught what you need to know to do what you do? The “mystical, malevolent they” are the mechanisms of a successful society that are charged with providing quality education.

Seems that may well have been their intent all along. I'll date myself here, but I honestly believe that many of those same 60's leftists that did their part to disrupt and destroy America then have managed to work themselves into the educational system and created the means to leave themselves protected from the responsibility and reality of actually producing anything.

 

I am not a conspiracy theorist, but it certainly seems like those that harbor such ill will against this particular society have used "good intentions" to do things "for the children" that have left a huge gulf in what children are indeed capable of. Add to that the fractured family and it's no wonder that there's so little education really going on in so many segments of population today.

 

Now one could take it to an extreme and say in effect, ‘Everyone is responsible for educating themselves’ but that also IMHO would be recipe for failure. Leading back to my favorite theory that humans are incapable of doing much of anything singularly.

 

Ken, have you really got that little faith in human kind? I'm finally shocked by what you've said.

 

But despite the fact that Donna and I left, I do have deep roots in and concern for the future of the USA.

 

Could of fooled me....

[yabadabapal]

Ok, Ive been following the posts and Much of it all be it interesting is a bit out of my league of grasp.

What i like about Made in America is that many of our great ideas that have affected the world were originally made in America. Im simply saying that with a little bit of concern for our country and the stats that seem to paint the current picture, that we can all as individuals try to give made in america a shot in the arm. Of the aforementioned 7% unemployment, that represents about 21,000,000. We can start local industry and educate many of those people to participate and succeed in manufacturing etc within the USA.

If you have everything outsourced,including manufacturing, (China), what happens when one day we get into a near collision with China. Walmart goes Under, along with Home Depot and many other companies that Mnfct in China and Asia. If we are outsourcing, then, arent we in fact paying welfare and social service dollars to the millions of people who might have been able to eventually work the jobs we are outsourcing, and furthermore by outsourcing, arent we in fact killing off a substantial USA consumer customer base because we are giving their jobs away and along with the jobs, a chance for those potential USA workers to also be consumers. I have no problem with limited outsourcing, on a termporary basis, but the people in this country are plenty capable of being educated for a specific job. The question is are we capable of seeing the big picture and the inevitable damage we are doing to ourselves and our economy in the process of chasing a fictitiously created bottom line. There is a balance in everything. From time to time, the balance rests between what is best for a few or what is right for the many. Someone asked what is great about America. Its the people, the dreams and the ability to make mistakes and try, try again.

[steve.foote]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them. Companies either make money, or they don't. Business people have a responsbility to produce a positive bottom line in whatever environment they find themselves.

 

As a professional musician, I'm sure you can appreciate the difference between a successful effort vs. an unsuccessful one. While an unsuccessful attempt may mean well, and may even feel good, it doesn't put beans in the jar.

 

The thing which is great about America (or at least was, the jury is still out on that one) is the freedom to achieve. Not everyone will become an astronaut, but anybody can. Freedom is the key ingredient.

[Dave McReynolds]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

[VinnyR11]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

 

I don't want to put words in Steve's mouth, but I took what he was saying as "looked at over time" business financials are black and white. Yes, there are many ways to hide stuff within income and balance sheet statements, but you can sort through a lot of it. In any case, over the long term it becomes black and white. You either make money or you don't. Stocks and the value of private companies are very unpredictable over short periods, but in the end they will reach their discounted cash flow valuation and the truth will show itself.

[Lets_Play_Two]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

 

I don't want to put words in Steve's mouth, but I took what he was saying as "looked at over time" business financials are black and white. Yes, there are many ways to hide stuff within income and balance sheet statements, but you can sort through a lot of it. In any case, over the long term it becomes black and white. You either make money or you don't. Stocks and the value of private companies are very unpredictable over short periods, but in the end they will reach their discounted cash flow valuation and the truth will show itself.

 

I'm with Dave on this. There are lots of "rules" with which financials have to conform to be in accordance with "generally accepted accounting principles". First we had ARBs (accounting research bulletins), then we had APBs (Accounting Principles Board opinions), then came FASB (Financial Accounting Standards Board opinions), then I got out of the business! Many of these "rules" were written after the horse was out of the barn and made little economic sense.

 

It depends on what you call long-term. And in the end lots of people lose money in the short-term because financial markets fluctuate on the short-term. Revenue recognition rules, mark-to-market vs cost basis just to name a few really cloud up what financial statements say (or more importantly don't say). As for eventually being able to sort it out. Lots of smart people couldn't "sort out" the financial transactions related to mortgaged-backed and other securities until it was WAY too late. Lots of bogus financial statements right up until "poof". Even after the fact they don't know how to sort it out.

 

I think that is why Warren Buffett likes companies that made things. You make a product and you sell it or you don't...pretty easy to watch.

 

Now all of a sudden I start to buy and sell futures contracts on the raw materials and I give buyers liberal return privileges on the products I sell them. I just made the "cycle" longer before you can figure out if I am profitable. Then I set up less than majority-owned subsidiaries as distributors and load them up with product.......on and on and on.

[Dave McReynolds]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

 

I don't want to put words in Steve's mouth, but I took what he was saying as "looked at over time" business financials are black and white. Yes, there are many ways to hide stuff within income and balance sheet statements, but you can sort through a lot of it. In any case, over the long term it becomes black and white. You either make money or you don't. Stocks and the value of private companies are very unpredictable over short periods, but in the end they will reach their discounted cash flow valuation and the truth will show itself.

 

Accounting rules under generally accepted accounting principles (GAAP) have become so arcane that studies are ongoing to determine whether it would be feasible to have "Big GAAP" for public companies, and "Little GAAP" for privately-held companies. From the study: "In recent months the FASB has issued several extremely controversial FASB statements and interpretations that will be costly and difficult for non-public entities to implement and not meaningful to the third parties they serve."

 

Opening a CPE course I took to renew my CPA license to a random page provides this example of what the study might have been talking about:

 

"The change in the fair value of an embedded conversion option resulting from an exchange of debt instruments or a modification in the terms of an existing debt instrument should not be included in the cash flow test of whether the terms of the new debt instrument are substantially different from the terms of the original debt instrument under Issue 96-19.

 

However, a separate analysis must be performed if the cash flow test under Issue 96-19 does not result in a conclusion that a substantial modification or an exchange has occurred.

 

A substantial modification or an exchange has occurred and the issuer should apply extinguishments accounting if the change in the fair value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is at least 10% of the carrying value of the original debt instrument immediately prior to the modification or exchange. Further, a modification or an exchange of debt instruments that adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange would always be considered substantial, and debt extinguishments accounting would be required in those circumstances."

 

Somewhere in there, I think, is the answer to a question I had to answer to pass the CPE course. I didn't understand the question or the answer, but I passed the course, so I was able to renew my CPA certificate. I really hadn't intended to get into this stuff, but the course was entitled "GAAP for Industry Update," and I signed up for it thinking that maybe I could learn how GAAP applied to farmers, or some such. This is an example of why most accountants in private practice, including me, won't issue GAAP financial statements. There's just too much we might miss, or misinterpret, and we don't need the liability. So instead, we issue financial statements on the income tax basis, or the cash basis, which are not supposed to be as meaningful as GAAP financial statements, but at least tie to something concrete, or "black and white" if you will.

 

It's really not good enough for accounting to provide truth over the long-term, although it would be very accurate: "In 2001, investors invested $1 million in XYZ company, which declared bankruptcy in 2008, leaving the investors with -0-." If accounting statements are to be of any value, they have to communicate useful financial information on a periodic basis. When I entered the profession in 1970, the emphasis was on objectively verifiable information, using historical costs, and GAAP didn't contain anything like my example above. 1970's accounting information was not considered to be very useful. So the emphasis shifted to include fair market values and judgement calls by the accountant, which might potentially be more useful, but are things that accountants are really not very good at, and are susceptable to manipulation. In order to reduce manipulation, the FASB shifted away from broad statements of accounting theory to very precise directions, such as my example. The problem with that, beyond being too complicated to understand, is that ironically, the more precise the directions are, the easier they are to manipulate. It seems contradictory, but it's true; heck, I could have told them that as an old tax guy.

 

So I give current financial statements an amount of credibility somewhere between a ritual dance and advice from my stockbroker.

[ltljohn]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

 

I don't want to put words in Steve's mouth, but I took what he was saying as "looked at over time" business financials are black and white. Yes, there are many ways to hide stuff within income and balance sheet statements, but you can sort through a lot of it. In any case, over the long term it becomes black and white. You either make money or you don't. Stocks and the value of private companies are very unpredictable over short periods, but in the end they will reach their discounted cash flow valuation and the truth will show itself.

 

Accounting rules under generally accepted accounting principles (GAAP) have become so arcane that studies are ongoing to determine whether it would be feasible to have "Big GAAP" for public companies, and "Little GAAP" for privately-held companies. From the study: "In recent months the FASB has issued several extremely controversial FASB statements and interpretations that will be costly and difficult for non-public entities to implement and not meaningful to the third parties they serve."

 

Opening a CPE course I took to renew my CPA license to a random page provides this example of what the study might have been talking about:

 

"The change in the fair value of an embedded conversion option resulting from an exchange of debt instruments or a modification in the terms of an existing debt instrument should not be included in the cash flow test of whether the terms of the new debt instrument are substantially different from the terms of the original debt instrument under Issue 96-19.

 

However, a separate analysis must be performed if the cash flow test under Issue 96-19 does not result in a conclusion that a substantial modification or an exchange has occurred.

 

A substantial modification or an exchange has occurred and the issuer should apply extinguishments accounting if the change in the fair value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is at least 10% of the carrying value of the original debt instrument immediately prior to the modification or exchange. Further, a modification or an exchange of debt instruments that adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange would always be considered substantial, and debt extinguishments accounting would be required in those circumstances."

 

Somewhere in there, I think, is the answer to a question I had to answer to pass the CPE course. I didn't understand the question or the answer, but I passed the course, so I was able to renew my CPA certificate. I really hadn't intended to get into this stuff, but the course was entitled "GAAP for Industry Update," and I signed up for it thinking that maybe I could learn how GAAP applied to farmers, or some such. This is an example of why most accountants in private practice, including me, won't issue GAAP financial statements. There's just too much we might miss, or misinterpret, and we don't need the liability. So instead, we issue financial statements on the income tax basis, or the cash basis, which are not supposed to be as meaningful as GAAP financial statements, but at least tie to something concrete, or "black and white" if you will.

 

It's really not good enough for accounting to provide truth over the long-term, although it would be very accurate: "In 2001, investors invested $1 million in XYZ company, which declared bankruptcy in 2008, leaving the investors with -0-." If accounting statements are to be of any value, they have to communicate useful financial information on a periodic basis. When I entered the profession in 1970, the emphasis was on objectively verifiable information, using historical costs, and GAAP didn't contain anything like my example above. 1970's accounting information was not considered to be very useful. So the emphasis shifted to include fair market values and judgement calls by the accountant, which might potentially be more useful, but are things that accountants are really not very good at, and are susceptable to manipulation. In order to reduce manipulation, the FASB shifted away from broad statements of accounting theory to very precise directions, such as my example. The problem with that, beyond being too complicated to understand, is that ironically, the more precise the directions are, the easier they are to manipulate. It seems contradictory, but it's true; heck, I could have told them that as an old tax guy.

 

So I give current financial statements an amount of credibility somewhere between a ritual dance and advice from my stockbroker.

 

My eyes are now glazed over, my head hurts and I am sick to my stomach. A federal beaucrat wrote that, right?

[Dave McReynolds]

A federal beaucrat wrote that, right?

 

No, I've never seen anything in the tax code to compare with that. That language is the result of good ol' private enterprise at its best.

[SAAB93driver]

I don't really want to get on a soap box and be long winded about buying American, especially on a BMW oriented board but as far as Made in USA goes the site below is a good resource for everyday items.

 

http://www.stillmadeinusa.com/index.html

 

 

[VinnyR11]

For starters, business financials are black and white. There are no gray's. Bottom lines are tangible and there is nothing fictious about them.

 

???? Unfortunately, they're not. That's one of the many financial problems we have to deal with.

 

I don't want to put words in Steve's mouth, but I took what he was saying as "looked at over time" business financials are black and white. Yes, there are many ways to hide stuff within income and balance sheet statements, but you can sort through a lot of it. In any case, over the long term it becomes black and white. You either make money or you don't. Stocks and the value of private companies are very unpredictable over short periods, but in the end they will reach their discounted cash flow valuation and the truth will show itself.

 

Accounting rules under generally accepted accounting principles (GAAP) have become so arcane that studies are ongoing to determine whether it would be feasible to have "Big GAAP" for public companies, and "Little GAAP" for privately-held companies. From the study: "In recent months the FASB has issued several extremely controversial FASB statements and interpretations that will be costly and difficult for non-public entities to implement and not meaningful to the third parties they serve."

 

Opening a CPE course I took to renew my CPA license to a random page provides this example of what the study might have been talking about:

 

"The change in the fair value of an embedded conversion option resulting from an exchange of debt instruments or a modification in the terms of an existing debt instrument should not be included in the cash flow test of whether the terms of the new debt instrument are substantially different from the terms of the original debt instrument under Issue 96-19.

 

However, a separate analysis must be performed if the cash flow test under Issue 96-19 does not result in a conclusion that a substantial modification or an exchange has occurred.

 

A substantial modification or an exchange has occurred and the issuer should apply extinguishments accounting if the change in the fair value of the embedded conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and after the modification or exchange) is at least 10% of the carrying value of the original debt instrument immediately prior to the modification or exchange. Further, a modification or an exchange of debt instruments that adds a substantive conversion option or eliminates a conversion option that was substantive at the date of the modification or exchange would always be considered substantial, and debt extinguishments accounting would be required in those circumstances."

 

Somewhere in there, I think, is the answer to a question I had to answer to pass the CPE course. I didn't understand the question or the answer, but I passed the course, so I was able to renew my CPA certificate. I really hadn't intended to get into this stuff, but the course was entitled "GAAP for Industry Update," and I signed up for it thinking that maybe I could learn how GAAP applied to farmers, or some such. This is an example of why most accountants in private practice, including me, won't issue GAAP financial statements. There's just too much we might miss, or misinterpret, and we don't need the liability. So instead, we issue financial statements on the income tax basis, or the cash basis, which are not supposed to be as meaningful as GAAP financial statements, but at least tie to something concrete, or "black and white" if you will.

 

It's really not good enough for accounting to provide truth over the long-term, although it would be very accurate: "In 2001, investors invested $1 million in XYZ company, which declared bankruptcy in 2008, leaving the investors with -0-." If accounting statements are to be of any value, they have to communicate useful financial information on a periodic basis. When I entered the profession in 1970, the emphasis was on objectively verifiable information, using historical costs, and GAAP didn't contain anything like my example above. 1970's accounting information was not considered to be very useful. So the emphasis shifted to include fair market values and judgement calls by the accountant, which might potentially be more useful, but are things that accountants are really not very good at, and are susceptable to manipulation. In order to reduce manipulation, the FASB shifted away from broad statements of accounting theory to very precise directions, such as my example. The problem with that, beyond being too complicated to understand, is that ironically, the more precise the directions are, the easier they are to manipulate. It seems contradictory, but it's true; heck, I could have told them that as an old tax guy.

 

So I give current financial statements an amount of credibility somewhere between a ritual dance and advice from my stockbroker.

 

You'll get no argument from me that tax codes, GAAP regulations and the like are a quagmire to get through. My point is that "in the end" it is black and white, because a company can only hide behind the bullshi# for so long. Eventually those companies making real money are those that succeed for the long haul.

 

It's also why I believe you can never time the market because some companies can and do hide behind this cloud, but only for so long.

 

I also think there is a huge difference between the financial markets and the capital markets. My "black and white" statement is for the capital markets only. IMHO, the financial markets and the incredible games they play are the biggest reason by far for this fiasco we're going through. The vast majority of the derivatives market has little or not bearing to capitalism. By definition these markets are a net loss (yes, some will make money, but more will lose) to investors and only the fund managers make money...in bucket loads. That's another topic, and it gets my hair burning, so I'll stop here.