IT'S ALL ABOUT DEPRESSING WAGES. THE MEXICAN INVASION DEPRESSES WAGES FOR AMERICANS $200 TO $300 BILLION PER YEAR. AND PER YEAR, THOSE AMERICANS WITH DEPRESSED WAGES MUST PAY THE TAXES TO SUPPORT THE STAGGERING WELFARE AND CRIME WAVES THAT COME WITH THE MEXICAN INVASION AND OCCUPATION.
FORBES
Commentary
Wal-Mart And The Great Income Divide
Martin T. Sosnoff 01.26.07, 6:00 AM ET
Subwaying home on the No. 4 express, looked up and saw CharlesSchwabCharles Schwab's "Call Me Chuck" ad. So I’ll call him Chuck here, even if he is Nob Hill high society known to fight over iconic modernist art at the auction houses.
Chuck came out of retirement recently after The Charles Schwab Corp. lost its primacy in the discount brokerage sector. He's smart going for name recognition. It's what the late Sam Walton did while building Wal-Mart with big box Mr. Sam units. Walton drove a pickup with his bird dogs bouncing around in the truck bed. He called his sales people associates as if they owned a piece of Sam's business.
But Wal-Mart kept a good percentage of its employees as part-timers with no benefits to speak of. The Walton family fortune sat around 100 billion last time I looked. It took the country a decade longer than it should have to wise up to Wal-Mart's tight-fisted labor practices. Today, states like Vermont wall out Wal-Mart's big boxes. Mr. Sam must go elsewhere.
In Pictures: Wal-Mart Takes Over The World
I'm sure Wal-Mart launched its cut-rate prescription drug fulfillment service not to make money, but as a giant PR campaign to glaze over its tarnished image. I own prescription benefit managers like Caremark and Medco who aren't losing any sleep over Wal-Mart's entry. Neither am I.
The "Call Me Chuck" ad rubbed me the wrong way because it aims to insinuate itself into your psyche. This must be my buddy who is going to take care of me for life. With over 40 years under my belt, I've experienced every wretched way you can be taken. Mispriced quotes, front running, excessive fees and absurd interest rates on your debit balance. Interest earned on customer balances may be the only reason some discounters are in business. Commissions are incidental.
My quarrel with Goldman Sachs and Lehman Brothers is executive compensation, but I can't win. Executive compensation consultants, like actuaries, start with their client's desired outcome and then develop a lengthy justification using peer group comparisons rotten to the core. All I can do is open my window--third floor, facing the park--and shout "I ain't takin' it anymore!"
The backlash on wealth disparity in the country is a new running story. Wal-Mart lost its "just folks" image much later than I expected. Discount brokers could be next. For a century, Swiss bankers gouged their clients with double commissions. These guys wore bespoke tailored three-piece worsted suits but eventually clients wised up. Paul Volcker unmasked their ersatz integrity regarding retention of Holocaust victims' deposits. SteveJobsSteve Jobs at Apple should have risen above questionable option grants on a huge scale. He's rich enough.
Ironically, the New York Stock Exchange, once imperiously run by Richard Grasso as a private fiefdom, opened up a can of worms in executive compensation. Ken Langone, the formative investment banker for Home Depot, deserves his billions, but seemed stone deaf serving on the NYSE compensation committee. He then repeated comparable behavior on the separation "package" for the headman at Home Depot.
Ivan Boesky's "Greed is good" credo packed him straight off to jail protesting like he was Don Giovanni. Yet entrepreneurship is good for the country. Nobody ever said Warren Buffett didn't earn his wealth with an A in ethics.
The Congress is just waking up to the great divide. Holdouts on the minimum wage issue are seeing the ground cut out beneath them. Barbara Ehrenreich's book Nickel and Dimed got it right years ago. Unskilled single mothers need to hold down two jobs to make ends meet.
Like the environment and energy policy, globalization's impact can no longer be swept under the rug. If you’re a furloughed 50-year-old machinist in Detroit, it's a gut issue. Tell him that arbitraging labor in world markets keeps down the country's inflation rate as the Chinese land their goods here at everyday low prices.
Maybe we're going to have to subsidize corporations for carrying fuller labor rolls. It's at least better than plunging a trillion dollars down the Iraq sinkhole. Hank Paulson jawing the Chinese to firm up their currency won't happen overnight. Devaluing the dollar is what many economists believe is the elegant solution to our balance of trade deficit, but it's a last resort.
The Democrats' economists are going to write staff papers on corporate pretax profits reaching peak levels in this cycle. Worse, corporate profits are at a new high in terms of gross domestic product share. Labor, shortchanged the past five years, is just beginning to catch up.
All this can lead to changes in tax levels for individuals and corporations, particularly fat cats. Trade protectionist policies get a fresh look. These are the huge macro issues facing us, but preempted by Iraq. They'll be dealt with the next couple of years.
The market's not going to like public debate on raising corporate taxes or steeper graduated personal income tax schedules. Let's look on the bright side for now. Energy quotes are down 25%. I thought $55 oil was the right clearing price, but it's been lower in recent days. My airline stocks have taken off. All we need for another spike is a 3% to 4% surge in monthly traffic.
As a bigger picture, the crack in energy has reversed the outperformance of the value sector. In the first two weeks of January, the Russell Growth Index shot 200 basis points ahead of value. I keep saying it's going much further. Health care still gets more of my money as in Genentech and Roche, pharmacy benefits management and health maintenance organizations.
If I thought Iraq was solvable, I'd turn rabidly bullish. I served as an airborne rifle company commander in the Korean War. South Korean soldiers stood tall and held their sector of the front. In Iraq, it's hard to tell who's a soldier, an assassin or just a politician masquerading in uniform. Do you hear me, Joe Lieberman?
In Pictures: Wal-Mart Takes Over The World
Martin T. Sosnoff is chairman and founder of Atalanta/Sosnoff Capital, a private investment-management company with approximately $6 billion in assets under management. Sosnoff has published two books about his experiences on Wall Street, Humble on Wall Street and Silent Investor, Silent Loser . He had been a columnist for many years at Forbes magazine and for three years at the New York Post. Martin Sosnoff owns personally and Atalanta Sosnoff Capital owns for clients the following stocks cited in this commentary: Caremark, Medco, Goldman Sachs, Lehman, Apple, New York Stock Exchange, Genentech, Roche.
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