The Obama Economy: Cash-out and Cover for Many Businesses

“The Happiest Place on Earth” is not, apparently, the most optimistic place on earth. Last week Disney dumped Miramax for $660-million. A few weeks before, Disney abandoned its own prohibition against residential community development on adjacent-to-parks property in order to convert hundreds of acres into cash. Not long before that, CEO Iger proclaimed a moratorium on one-and-done movies, a reduction in total films per year, and focus only on movies well connected to existent characters and brands.

What do you call all this? A pulling back – conversion of assets to cash and conservation of cash. If Disney hasn’t deliberately put its capital on strike, it’s at least strategically taken it out of active play and is hoarding it.

This same week, a client of mine in the health care industry was all set for a multi-million dollar acquisition of his company. But the buyer, at the last minute, called a halt, admitting cold feet entirely due to the massive uncertainty created by Obama’s health care “takeover” – his word, not mine. The buyer offered to pay nominally for a multi-year option.

A financial services industry client of mine with thousands of clients of his own not only froze all investment and expansion, but scheduled a consulting day with me to brainstorm exit from the industry and what new, different business he might develop for the hordes of financial advisors and insurance agents that he expects to flee the industry as Obama proceeds with the “conversion of SEC to Gestapo” – his words not mine – entailed in his financial reforms. But he made it clear any new initiative would be “if” and “slow” on his part. Given the big new tax increases he faces next year, he’s seriously contemplating slashing his income to near nothing and vacationing on his boat and at his vacation home all the way through 2012.

Also recently, one airline announced plans to replace gate agents with do-it-yourself bar-code scanning and self-boarding. Only a week or so after that news of the convenience store industry’s plans to replace clerks with self-checkout devices appeared in mainstream news. I was just in a casino; that industry has totally eliminated coins in slot machines, thus countless on-floor employees making change and emptying machines of or filling machines with change. The owner of top-flight restaurants told me of eliminating his costly multi-week training for new hires and settling for poor quality wait-staff on the floor. This is all sacrifice of customer service in favor of cash that can be hoarded, now occurring at dramatically accelerating pace.

First, fueled by the ill-conceived NAFTA, industrial jobs left America in stampede. Now, the service jobs are being erased as fast as businesses can erase them. Where will all these orphaned workers go, given no horizontal opportunities? Permanent unemployment will create a new, enormous under-class explosively growing at President Obama’s engineering, soon to be lump quantity inflated by illegal immigrant amnesty and open borders, perhaps done by presidential pen stroke if Congress refuses. Get ready for 20 percent lifetime unemployment and 60 percent+ dependent on federal life-support one way or another, the Obama Plan for Permanent Power.

The time required to get a delinquent borrower who won’t or can’t pay his mortgage out of the home he is squatting in has gone from eight months to 16 months largely thanks to Obama’s meddling with the mortgage industry and banks and ever-rising inventory, this masking the size and scope of the continuing foreclosure crisis. The problem is no longer with sub-prime mortgages but with prime loans. Including bazabillions made or guaranteed by the bottomless pit of bankrupt institutions, Fanne+Freddie. The mortgage meltdown to come threatens to far exceed the one recently endured.

The public may be ignorant of the size of the time bomb and the media are confused about it and deliberately not revealing it. But those of us who run companies large or small, and those who provide significant investment capital, are not so easily fooled. We are starving the system all we can.” Create a job or hoard capital?” It isn’t even a question.

If this continues though, at some point, as Ayn Rand fictionalized, Obama must much more blatantly, maybe even violently and inarguably unconstitutionally confiscate corporations if not entire industries as well as individuals’ 401K’s and other “lock-boxes” in order to rip the hoarded capital from owners’ hands. He can then spend it in futile attempt to stimulate blood flow in the zombie economy of his making. Confiscation from a tiny number of uber-rich can’t get the monster-made-by-Obama through breakfast. Confiscation of everything will be needed to feed his beast. Even the Mouse in Orlando needs worry about his cheese.

Dan Kennedy is a serial entrepreneur, adviser to business owners, sought-after speaker and author of 14 books. His latest, “ [1]Make ‘Em Laugh & Take Their Money: A Few Thoughts on Using Humor as a Speaker or Writer or Sales Professional for Purposes of Persuasion,”  contains a selection of his BMI essays. More information about Dan can be found at [2]www.NoBSBooks.com, and a free collection of his business resources including newsletters and webinars at [3]www.DanKennedy.com.

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