The most recent "news" coming out of Washington D.C.'s cadre of new-age economic experts is that the recession is certainly over as corporate profits are up!
Wonderful...and even believable if you know nothing about corporate financials and how they work. Most people don't of course, and shouldn't be expected to ...it's not how they make a living. But economic advisors to the administration should understand exactly what is happening...their ignorance is both shocking and disturbing.
Corporate financials and tax returns are normally filed quarterly, unlike we normal folk who file after the year's over, so corporate financials give us a more up-to-date look at what is happening. But they're not too up-to-date.
Let me explain that contradiction. Most companies have what we call an operating cycle...an ongoing time period between taking in resources and raw materials, combining them with labor and machinery, then stocking finished goods, selling the goods, and eventually collecting for the goods.
This operating cycle might be a matter of days in length...like a restaurant for example...but manufacturers and distributors have to struggle with cycles that are months, or even years, in length.
What this means is that the company buys raw materials and pays for the stuff...racking up huge expenses...then uses labor to transform the stuff...again racking up expenses...yet doesn't show revenue from sales until long after the expenses have been paid out.
Ah-ha...some of you are already saying to yourselves...and you're right. When a company writes off expenses in their 1st quarter, then is forced to lay people off in the 2nd quarter, suddenly expenses go down dramatically. They are no longer buying raw materials and paying for labor...but now the revenues are coming in and the 3rd and 4th quarters look "great" on paper.
Voila! Suddenly profits grow...Not! When you understand business cycles and how they affect the financial statements in the first year or two of a recession, it all makes sense. And you suddenly realize that this "growth" in profits is simply a book keeping anomaly...and the reduction of raw materials and labor expenses indicates a future decline in revenue and profits. This "growth" is not growth...it's a one-time shot...and it's really just on paper! The company's bank accounts could very well be empty as most of the "profits" were pre-spent in quarters one and two and the remainder in quarter three. Very deceptive if you don't know what's happening.
Another question you might be asking...why wouldn't the business try to smooth out the expenses and this one-time profit for tax purposes? Why declare it now?
Firstly, they really can't of course. Generally Accepted Accounting Procedures, or GAAP, really don't allow this and the IRS doesn't care for it either. There is another reason to take the hit this year however...tax rates on business have been increased seriously but don't take full affect until 2010. A company can afford the hit now more easily.
Of course, politicians are drooling...big surprise. "Profits" they exclaim..."why, we must tax those immediately and declare emergency windfall taxes or something to get at that money." Being somewhat ignorant on business financials they don't realize the business cycle and that losses will follow the quarters of profit (or perhaps don't care). Companies cannot afford to spend these paper profits because they really don't exist as we normally think of profits, and they will be soaked up by losses in the following quarters.
"Nonsense," say the politicos...why we're experts in everything. That's simply pro-evil-business propaganda from a highly-paid special interest spokesperson."
Uh....I'm still waiting for the check...haven't received a dime yet.
Unfortunately; some of these businesses, despite these "profits" will be unable to stay afloat. Remember that much of this "profit" has already been spent and the remainder is waiting to be collected by the firm's creditors. Now that the firm is not producing revenue as it did, it may be in long term trouble at this point. If they cannot reduce expenses enough, or come up with enough sales revenue, they may very possibly end up closing their doors and laying off all remaining employees.
Not quite as exciting a picture as the pundits in WA D.C. have been painting...is it? Let's hope future administrations actually bring some business people on board...social workers and community organizers don't seem to get this reality stuff.
The Professor
Exciting news from the Physics Department
Goodness...the Professor just had to get off politics and economics today because the campus is all abuzz about the Physics Department. It seems they have discovered new sub-atomic particles which could hold some of the answers about the very nature of the universe.
Now, I'm no physicist, so I'll put this exciting news in layman's terms.
As you probably know, molecules consisting of protons and neutrons were once considered the very building blocks of nature, but then scientists began to discover smaller, sub-atomic, particles. The newest, smallest, and most dense of all of these were recently discovered by physicists in California.
They were named "morons" and were not only discovered, but found to be plentiful in the natural world. At our University, physicists have just found and named a new element consisting mostly of morons. It has been named Obermannium, and is the most dense element yet known to man.
Findings at our school's particle accelerator tell us that morons, unlike neutrons or protons which are evenly distributed through all matter, seem to be geographically clustered. For example, the Berkely area of California seems to have an extremely high clustering of morons. More areas of clustering seem to exist around major metropolitan areas, such as Detroit and Boston, but also seem to be common near coastal areas.
Scientists have also decided on a new measure of density, as Obermannium is so much more dense than other matter, which they have simply named the Obermann. The density of a cluster of morons can be labeled using the new term. For example; a large cluster might weigh a killaobermann while a small cluster might be a decaobermann.
Discovery of the moron has also led to the discovery of a rare mineral that appears in very trace amounts. It has been named Oprahzite and seems to attract morons. Oprahzite is unique in its ability to change its mass and weight on a regular basis...growing larger, then smaller, in succession.
Physicists are extremelely excited by the initial disovery of the moron, and be the continued findings to which they have been led by studying this sub-atomic particle. They don't know where this research may take them, but they do know that understanding morons, and that morons exist and always will, should help in understanding the world around us and how it functions.
Glad I could help in my own small way...
The Professor
Now, I'm no physicist, so I'll put this exciting news in layman's terms.
As you probably know, molecules consisting of protons and neutrons were once considered the very building blocks of nature, but then scientists began to discover smaller, sub-atomic, particles. The newest, smallest, and most dense of all of these were recently discovered by physicists in California.
They were named "morons" and were not only discovered, but found to be plentiful in the natural world. At our University, physicists have just found and named a new element consisting mostly of morons. It has been named Obermannium, and is the most dense element yet known to man.
Findings at our school's particle accelerator tell us that morons, unlike neutrons or protons which are evenly distributed through all matter, seem to be geographically clustered. For example, the Berkely area of California seems to have an extremely high clustering of morons. More areas of clustering seem to exist around major metropolitan areas, such as Detroit and Boston, but also seem to be common near coastal areas.
Scientists have also decided on a new measure of density, as Obermannium is so much more dense than other matter, which they have simply named the Obermann. The density of a cluster of morons can be labeled using the new term. For example; a large cluster might weigh a killaobermann while a small cluster might be a decaobermann.
Discovery of the moron has also led to the discovery of a rare mineral that appears in very trace amounts. It has been named Oprahzite and seems to attract morons. Oprahzite is unique in its ability to change its mass and weight on a regular basis...growing larger, then smaller, in succession.
Physicists are extremelely excited by the initial disovery of the moron, and be the continued findings to which they have been led by studying this sub-atomic particle. They don't know where this research may take them, but they do know that understanding morons, and that morons exist and always will, should help in understanding the world around us and how it functions.
Glad I could help in my own small way...
The Professor
Nobel Peace Prize a Surprise?
"Shock" waves were registered on the seismograph of public opinion the other day when the Nobel Peace Prize committee announced Barack Obama was the 2009 winner. I'm not sure why?
It didn't surprise me at all. After all, it follows historical precedent...and history pretty much tells us everything about the present and the future.
If you look back at the prizes awarded over the last century you will find the accolades and "job descriptions" of most recipients were simply stated at "Pacifist."
The vast majority of the winners were also total unknowns...never to be heard from again. There were some notable individuals of course; Mother Theresa, Ghandi, Albert Schweitzer, and a few others who actually dared to challenge convention and put themselves in harm's way. But the majority were simply considered important for their vision of a perfect world without conflict...visions they could do nothing to make come about of course...but gushy and warm visions nonetheless.
Three American presidents have received the award; Theodore Roosevelt, Woodrow Wilson, and Jimmy Carter.
Roosevelt actually threatened to send the Marines into any nation that disturbed the peace...and he did it once or twice...scaring the bad guys into taking on more peaceful demeanors. He actually won the award for this behavior. It was obviously a different committee in 1906.
Wilson won for helping to establish the League of Nations. This was a good indicator where the committee was going...results no longer mattered...only vision. Wilson also dragged America kicking and screaming into a European war that historians are still trying to figure out where our national interest came in. And he threw a couple of hundred thousand Americans into prison for protesting that war...the new progressivism at work.
That's real Peace Prize stuff!
Jimmy Carter was the only presidential winner who took part in something that is still tangible and intact...the Sinai Peace Accords. Good for him, good for everyone for that matter, and he won the award for it. Recently he doesn't seem pleased by this feat however, and appears to wish Israel no longer existed...maybe it's old age.
Underneath the surface desire for peace at any price, the little group of Swedish left wingers who choose the winners seem also intent on rewarding those who help bring down the evil and imperialist American economy...which they probably view as a "war machine." Wilson put us onto the road of Corporatism and wage and price controls which brought us the great depression...sometimes referred to as America's Golden Age by left wing nut jobs world wide.
Carter brought us 25% intereste mortgage rates, 12% inflation, and the greatest unemployment since the depression. Americans found his one term to be more than enough. For some strange reason they did not desire another "Golden Age." But it made him a leftie icon.
Now we see the weird, offwordly, economic theories of Obama's close friends being attempted on a federal level. Not surprisingly the Nobel committee actually commends them for their attacks on the free market...perhaps part of the reason Obama was nominated as a prize recipient only two weeks into his lackluster presidency. Perhaps a huge part.
They've done stranger things. Al Gore shared the prize with the UN's commission on climate change. But he saved the world from turning into a massive oven and exploding messily all over the solar system...and just in time. And Al did it by simply making a video and millions of dollars off feeble-minded celebrities by selling them "carbon credits."
Now most of that UN commission have quit the group in disgust. The group's new motto is "We thought it was Global Warming...but now it's Global Cooling...but it's still Climate Change...and we know you peasants are to blame."
Catchy, eh? But how many carbon credits will it sell?
So should anyone be "shocked" that an American politician with a fuzzy grasp of world history, no understanding of geo-strategy or conflict resolution, who degrades the evil West, with a vision of a weapons-free world full of bunny rabbits and butterflies and no realistic concept of how to get there, should win a Noble Peace prize?
Duuuuhhhhhh...of course not. I actually predicted it would happen at some point. I didn't think it would be so soon...but maybe they wanted to do it before his administration did something so stupid that even the media would notice. And with decisions having to be made in regards to the war on terror and Islamic Fascism...that could be any day now.
The bunnies and butterflies were a nice idea...but I think the Taliban would have gassed the butterflies, then shot and eaten the bunnies. What can you do? Next year you give the Taliban the prize.
The Professor
It didn't surprise me at all. After all, it follows historical precedent...and history pretty much tells us everything about the present and the future.
If you look back at the prizes awarded over the last century you will find the accolades and "job descriptions" of most recipients were simply stated at "Pacifist."
The vast majority of the winners were also total unknowns...never to be heard from again. There were some notable individuals of course; Mother Theresa, Ghandi, Albert Schweitzer, and a few others who actually dared to challenge convention and put themselves in harm's way. But the majority were simply considered important for their vision of a perfect world without conflict...visions they could do nothing to make come about of course...but gushy and warm visions nonetheless.
Three American presidents have received the award; Theodore Roosevelt, Woodrow Wilson, and Jimmy Carter.
Roosevelt actually threatened to send the Marines into any nation that disturbed the peace...and he did it once or twice...scaring the bad guys into taking on more peaceful demeanors. He actually won the award for this behavior. It was obviously a different committee in 1906.
Wilson won for helping to establish the League of Nations. This was a good indicator where the committee was going...results no longer mattered...only vision. Wilson also dragged America kicking and screaming into a European war that historians are still trying to figure out where our national interest came in. And he threw a couple of hundred thousand Americans into prison for protesting that war...the new progressivism at work.
That's real Peace Prize stuff!
Jimmy Carter was the only presidential winner who took part in something that is still tangible and intact...the Sinai Peace Accords. Good for him, good for everyone for that matter, and he won the award for it. Recently he doesn't seem pleased by this feat however, and appears to wish Israel no longer existed...maybe it's old age.
Underneath the surface desire for peace at any price, the little group of Swedish left wingers who choose the winners seem also intent on rewarding those who help bring down the evil and imperialist American economy...which they probably view as a "war machine." Wilson put us onto the road of Corporatism and wage and price controls which brought us the great depression...sometimes referred to as America's Golden Age by left wing nut jobs world wide.
Carter brought us 25% intereste mortgage rates, 12% inflation, and the greatest unemployment since the depression. Americans found his one term to be more than enough. For some strange reason they did not desire another "Golden Age." But it made him a leftie icon.
Now we see the weird, offwordly, economic theories of Obama's close friends being attempted on a federal level. Not surprisingly the Nobel committee actually commends them for their attacks on the free market...perhaps part of the reason Obama was nominated as a prize recipient only two weeks into his lackluster presidency. Perhaps a huge part.
They've done stranger things. Al Gore shared the prize with the UN's commission on climate change. But he saved the world from turning into a massive oven and exploding messily all over the solar system...and just in time. And Al did it by simply making a video and millions of dollars off feeble-minded celebrities by selling them "carbon credits."
Now most of that UN commission have quit the group in disgust. The group's new motto is "We thought it was Global Warming...but now it's Global Cooling...but it's still Climate Change...and we know you peasants are to blame."
Catchy, eh? But how many carbon credits will it sell?
So should anyone be "shocked" that an American politician with a fuzzy grasp of world history, no understanding of geo-strategy or conflict resolution, who degrades the evil West, with a vision of a weapons-free world full of bunny rabbits and butterflies and no realistic concept of how to get there, should win a Noble Peace prize?
Duuuuhhhhhh...of course not. I actually predicted it would happen at some point. I didn't think it would be so soon...but maybe they wanted to do it before his administration did something so stupid that even the media would notice. And with decisions having to be made in regards to the war on terror and Islamic Fascism...that could be any day now.
The bunnies and butterflies were a nice idea...but I think the Taliban would have gassed the butterflies, then shot and eaten the bunnies. What can you do? Next year you give the Taliban the prize.
The Professor
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