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Yoking the Beast

|Includes:ACV-OLD, LUV, LUV, Unilever Plc (UL), WMT
"I'll never be your beast of burden
My back is broad but it's a hurting
All I want is for you to make love to me
I'll never be your beast of burden"
- Rolling Stones

In his weekend radio address, President Obama talked about the Republicans leaving the middle class to fend for themselves. I think that is the point in a country that used to pride itself on individual achievement. The middle class doesn't need to be in a joint partnership with the government. The middle class doesn't need the government to punish more successful Americans to prove a point, because that's all it is beyond disastrous economic policy, a symbolism that might make the most envious among us feel better.

Perhaps the idea is to saw the ladder of success in half so those in the middle are all of a sudden at the top. That will not work, either, because they then become the new targets. There is no doubt the middle class has been trapped in a rut, but they need to be propelled higher, not bathed in bitterness and disdain.

As for the notion of punishing the rich, I find the excuses almost amusing. None of the reasons for hiking taxes on the rich are phonier than the idea they don't spend their money. That's right, we must take it from them if they don't spend it. How dare they make money and save it! Yes, it's right to retort the rich are indeed spending money, leaving tips, and making investments. Yes, it's right to talk about the stupidity of taxing small businesses, the essence of our economy and the largest creators of jobs. But, I find it offensive that somehow people must spend their money or the government will take it from them. I realize the Administration calculates that poorer Americans should be conduits of redistributed money, which makes all their bragging about caring seem so phony. But, the idea of painting the rich as beasts and somehow converting them into semi-domesticated animals isn't going to work.

The government can take more from the rich and that means less to spend, less as tips and less to invest. The net is a loss for the free markets, while the government gets more money to pump into schemes that don't work. These schemes have never worked. They've won elections, but they've never built nations.

Despite the mass exodus of the economic team, a clear sign of frustration and failure, the message from the White House is the same; money generated in this country is theirs, much as King George once believed. They feel transactions by private parties must be regulated and taxed by the government, which still lusts for more of those funds if some private party happens to be real good at those transactions. The thing is people don't get rich by being dumb. They will retrench and figure it out, and part of the solution means higher prices for the public, but mostly fewer opportunities.

I guess everyone feels like a beast of burden from time to time. From the mother that gets no credit for keeping a great home, to the father whose daily struggles nobody at home knows or understands. The rich, as defined by the Administration, are people that toiled, skipped a lot of parties, blew a couple of marriages and still haven't reached their goals. Very few people in this nation make more than $200,000 by only working nine to five.

And virtually all of them have some kind of coattails, create or enable products and services that employ others.

Merger Monday

  • Unilever's (NYSE:UL) deal to buy Alberto Culver (NYSE:ACV) for $3.7 billion in cash, announced this morning, is chiefly about gaining global shelf space at retailers, which keep editing assortments and introducing private label products to boost their margins. Moreover, names such as VO5 and TRESemee have strong brand equity, benefiting years of investment in cultivating the names in the minds of consumers.
  • Wal-Mart's (NYSE:WMT) proposed purchase of South African retailer MassMart for $4.76 billion is not a great move, according to our retail sector equity research analyst Brian Sozzi. MassMart's portfolio of retail assets is very diverse (includes home improvement) and the chains operate at very low margins. Brian thinks the purchase reflects Wal-Mart's acknowledgement that the U.S. is slow growth going forward and that operating issues remain.
  • Last and certainly not least is Southwest's (NYSE:LUV) deal to buy Airtran (AAI) for a whopping 69% premium to the September 24 closing price. Airtran would give Southwest access to Atlanta, and expanded presences in New York and Boston, and also give Southwest the exposure to international flights it has coveted for so long (the Caribbean).