 I had no idea a simple yes or no poll would illicit such passion, but the
replies I received yesterday underscore what I knew was happening. But, I didn't realize just how steadfast and furious the investor class has become.
Very successful people, that have pulled themselves up from their bootstraps, feel they are watching it all be dismantled. The Greatest Generation and
their children are seeing the beneficiaries of their single-minded determination and sacrifices flush it all down the toilet.
Here are
examples:
"What do I care what corporate CEOs make if the value of my shares are giving me a satisfactory return. I think that Americans
are fearful of what their financial situation is going to be in the next couple of years. We have no idea how Obamacare and Fin-Reg are going to hit
our pocketbooks, so I'd better have some reserves built up. I also feel like no private company is safe under this Administration, so maybe I should
just bury my money in the back yard for the time being...?
-Suzan
b) "NO, I would hope their pay was incentive-based, but the real
killer of today's market is the small media bites spreading fear and doubt without any analysis. It is only due to the efforts of operations such as
yours that any of us can hope to cut through rumors and get to the heart of the matter. For any company to succeed, there must incentives, the very
basic foundation of free enterprise. As far as the media machine, someone is going to have to address it at some point."
-Annette
I
don't think I'm being silly or overly optimistic to believe the nation's going to turn it around. It's not naive or wishful thinking, although there
is a dollop of wishful thinking. The people most afraid are the ones that have to take a stand. It is a serious moment in time, and things must
change.
Chicken and the Egg
In July 2009, the FDA was granted oversight over the production of eggs. At the time, the
agency said it would help prevent 79,000 yearly cases of food borne illness and the 30 associated deaths. The law was passed a full ten years after
the initial push, and there were cheers that there was finally oversight over the mean, old egg industry. Moreover, the new regulation was a
collaboration between the Food and Drug Administration and USDA Food Safety & Inspection Service.
* Buy chicks and young hens only from
suppliers who monitor for Salmonella bacteria.
* Establish rodent, pest control, and bio-security measures to prevent spread of bacteria throughout
the farm by people and equipment.
* Conduct testing in the poultry house for Salmonella Enteritidis. If the tests find the bacterium, a
representative sample of the eggs must be tested over an 8 week time period (4 tests at 2 week intervals). If any of the four egg tests is positive,
the producer must further process the eggs to destroy the bacteria, or divert the eggs to a non-food use.
* Clean and disinfect poultry houses that
have tested positive for Salmonella Enteritidis.
* Refrigerate eggs at 45 degrees Fahrenheit temperature during storage and transportation no later
than 36 hours after the eggs are laid.
The rules went into effect on July 12, 2010. Some believe the current case of salmonella began before
then, but it is curious the FDA now says it needs even greater oversight. Authors of the new rules say it would only cost the industry $81.0 million,
while saving the overall economy $1.4 billion. I'm sure there are cost savings, but I wonder how much another round of regulations would actually cost
consumers? Egg prices have been coming down nicely since peaking in early 2008. What I really think is going on are forces that would like to change
the entire egg industry to employ an exclusive non-cage system.
Such a system would be prohibitively expensive, as currently, non-cage non-organic
chicken eggs are 20% to 25% more expensive. Yet, California has already passed a law (Prop 2) that will ban caged chicken eggs beginning 2015, and
it's going to crush the pocketbooks of regular people. I don't get the self-loathing in California that results in sadistic measures that have
resulted in a harsh business environment and sky high prices for important things, like gasoline.
In the end, it's really stupid. If you drive
a car with gas that's 15% corn you are burning food in a world where millions starve to death each year. If you drive a hybrid you still use gasoline,
and maybe more than the next guy since you have cleansed your soul to the point you drive more than most Then, there is the notion of eating eggs and
chickens. No, I can't look at cooped up chickens without feeling awful, but I also know cooped up or not I will probably eat them. This need to make
daily life more expensive to falsely assuage our guilt is killing the economy.
Even without forcing the entire industry to a non-cage system the FDA whining
about the need for more power is scary. There is the typical government confusion where the USDA controls the grading of eggs via thickness of shells,
but the FDA gives eggs the health stamp of approval. But, the real deal is this is another government agency with a lot of power that simply muffed
the job. The SEC had a better excuse for missing Bernard Madoff.
This massive egg recall makes for the kind of emotional headlines that have
been used as a smokescreen for bigger government. It is also a smokescreen for the fact that the FDA let us down, again. For the most part, the recall
involves just two farms with long rap sheets of past violations. This isn't new; I remember the spinach fiasco a couple years ago where the FDA let
down the American public. At the time a widespread salmonella breakout was occurring it was reported facilities that were supposed to be inspected
once a year were in fact being inspected on average every 2.4 years. At the time, half the facilities had failed inspection over sanitary issues in
the preceding seven years.
In many ways, the American public has become a caged chicken that lays an egg every time the powers that be rattle
that cage. Talk about domestication, we are descending quickly to satisfaction with crumbs tossed on the floor. Once we dreamed of flying high, now
we're okay with getting off the ground a few feet high...and years down the road. Just as we want a fair stock market, and the best equipment securing
oil rigs, we want our food to be safe, too. I just worry we are being hoodwinked again, and this is yet another headline event the Administration
doesn't want to waste. The FDA isn't a powerless eunuch that needs to bulk up, it just needs to enforce its mission.
Just as healthcare reform
will result in higher costs (already has), diminished quality of care, and rationing, and financial regulatory reform means millions fewer people with
bank accounts and credit cards. A big headline yesterday was credit card rates reach a nine-year high near 15%. This doesn't help the economy, and
it's not fair to consumers.
If we super-size the FDA look for food prices to ratchet higher.
Food prices have trended lower since
topping in early 2008, but I think those highs could be tested fast if the FDA is given more power to do a job it should be doing anyway. That would
mean eggs back around $2.17 a dozen, milk at $3.70 a gallon, and tomatoes back to $1.70 a pound.
Tidbits
At a screening of Spike Lee's "If God Is Willing
and Da Creek Don't Rise" Brad Pitt said he was never for the death penalty before, but when it comes to executives at BP he is "willing to look at it
again." So, murderers and rapists are too good for the death penalty but the guys that find the stuff that fuels Pitt's private jet should be put to
death? Yesterday, three drug smugglers were put to death (murder and other crimes are punished by death) in Iran, and I'm thinking one of the most
backward and evil persons on the planet is smarter than Benjamin Button.
The Market
Ho-hum doesn't do yesterday's
session justice. It was lackluster to be sure, but early strength failed to seduce any buyers off the sidelines. The market has entered a phase that
isn't unusual toward the end of summer...wait and see. It's amazing how much money is on the sidelines and for how long it has been on the sidelines.
Once again, that knot in the stomach of investors is getting tighter and tighter.
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