I'm Hosting "Varney & Co." on the Fox Business Network today from 9:20- 11:00AM EST.

California might know how to party, but it doesn't know how to hold onto business. Now, what began as a trickle is a full-fledged gusher. Recent business defections include Adobe (ADBE) announcing it's going to build a $100.0 million campus facility in Utah that will create 1,000 new jobs over the next 20 years. Utah is just the latest state to pilfer business from California. Utah's governor has been very vocal and aggressive about snatching businesses from California and bringing them to the Beehive State. A string of major coups will only embolden the invasion, although he isn't the only chief executive of another state or nation that sees opportunity in the frayed business atmosphere in "The Golden State."

Of course, Utah isn't the only state poaching business from California. According to Joseph Vranich, the exodus is picking up a major head of steam. Apparently, this year alone $4.7 billion in capital has been allocated to activities related to out-of-state moves and shifts in investments. Mr. Vranich will be my guest this morning on "Varney & Co."

The mass exodus:

> 85 companies 1H10
> 44 companies 2009
> 36 companies 2006 to 2008

According to Vranich, there are ten reasons for the mass exodus out of California. We all know about the taxes, but there is an element of disdain that comes with such high taxes in the first place. Moreover, they play an even greater role in trying to achieve the American dream in the land that once exemplified the quest. The #2 reason businesses cite for leaving California is excessively adversarial, and #1 is unhappiness, the natural culmination of all the other reasons.

Source: http://thebusinessrelocationcoach.blogspot.com/2010/05/top-ten-reasons-why-california.html

According to the Tax Foundation, for FY 2010, California ranked the 48th best state to do business in. As a result, it has lost businesses to states ranked number 1 to number 39.

We can extrapolate this trend out further and see how the excessively adversarial attitude from the White House has already ruined business opportunities and blunted job creation.

Baby Bell

On Saturday I had Mike Robbins, former El Segundo city council member, on my radio show. Yesterday, he came on as a guest on "Varney & Co." He explained how El Segundo is on the verge of losing its fire department because of excessive pay and wild pension obligations. In a town of 16,000, more than 130 cleared $100,000 in 2009. At the top of the list was Police Chief David Cummings at $425,775. I'm pretty sure Police Commissioner Ray Kelly of NY only makes a couple hundred grand. Unlike Bell, California where city officials pulled the wool over a population where half didn't speak or understand much English, El Segundo is largely professionals that work in management.

Bell and El Segundo are probably just the tip of the iceberg; both cities have been taken by contracts that enrich government workers at the expense of the taxpayer. The sad thing is I don't know if this is actually happening in my town, is it happening in yours? Could your town officials be ripping you off even as you gag over the never-ending news about Bell California?

Bill Gross Says "Let's Party"

I'll say this for the White House, they know who to invite when throwing a summit. Yesterday, Bill Gross of Pimco fame endorsed massive government intervention in the mortgage market.

Mr. Gross says merging Fannie Mae and Freddie Mac into a single government entity would be the right thing to do (I thought that was a de facto done deal already), as would be allowing millions of homeowners to automatically refinance their loans to help stimulate the economy. According to Mr. Gross' math, this would trigger $50.0 billion to $60.0 billion in consumer spending, and lift home prices 10% or more. Without such help, the economy will move at a "snail's pace."

Consumers socked away $725.9 billion in June of this year. Do we really need to sell future generations down the road to generate $60.0 billion in consumer spending? In June 2008, Americans saved $539.9 billion (personal savings after personal outlays), and in November 2007 Americans only saved $205.3 billion. It seems to me Americans are sitting on the mother of all stimulus plans. I'm shocked Bill Gross is pushing for this kind of soft landing just to avoid a slow recovery. I think it's outrageous, and a damn shame. There is no doubt Mr. Gross' heirs will weather the economic storm that comes from the insurmountable debt he is advocating taxpayers endure to prop up a housing market that hasn't reached its natural point of inflection.

Currently household total household debt is back to 2Q07 levels, people will spend if they feel confident and that doesn't come by mortgaging our future.

Maybe the recovery will not come at a snail's pace if all parties involved didn't have to sit on the sideline and wait for more bailouts.
The Mark Hit or Missed?
By: Brian Sozzi, Equity Research Analyst

Initially, there will be differing viewpoints on the 2Q10 earnings release from cheap chic retailer Target (TGT). Following Wal-Mart's (WMT) limp performance in the spring/summer months, and a FY guidance raise that was more expense savings driven than confidence in the sales outlook, the market was expecting some love from Target. Could you blame Mr. Market, after all? Target, in spite of below plan sales during the quarter, appeared to have favorable sales trends in discretionary merchandise categories (apparel positive throughout quarter) and certainly had the customer traffic. However, in reviewing the 2Q10 numbers preliminarily, Target not only turned out to be the latest retailer to miss consensus on revenues, but the latest retailer to raise concerns regarding the second half earnings outlook.

In our view, pre-conference call, the 2Q10 report may go down as reasonable and supportive of a continuing bullish thesis on Target shares. Unlike the case at Wal-Mart, earnings estimates have run for Target, meaning the expectations bar is elevated. So, with softer than planned sales and high expectations, an in line earnings quarter may not be such a doom and gloom occurrence. Moreover, one must keep in mind the company is investing aggressively in P Fresh in its stores as well as the capabilities to support a fresh food/consumables operation.

At a P/E multiple of 11.5x consensus earnings for next year, and the stock down 12.1% from a 52-week high in late April, we believe the risk reward remains compelling. Target shares are trading near a P/E multiple comparable to the cycle low touched in January 2009, and on par with Wal-Mart; we view this as an overreaction to the consumer slowdown that began in the middle of this year. Target is gaining market share in food, and experiencing cross-selling in higher margin departments. As that story plays out, the company is enduring improved trends in its credit card business (13.4% of EBIT in 2Q10 versus 7.5% in 2Q09), and stands to receive a lift from its impending 5% reward program. Inventories are controlled (much better than Wal-Mart) and the leanness of the core operations is apparent to us within the 2Q10 data (slight expense de-leverage in retail in spite of investments and below plan sales).

Notes
* Gross margin miss versus consensus of 50 bps
* Selling price pressure (function of competition and mix)
* Credit business stable
* Inventories contained below sales growth
* Retail segment expense de-leverage
* An in line EPS quarter after strong prior quarter beats