Speak Truth to Power
Research for Online Investors

by John Dalt

9/3/10

Intel Corp (INTC) is one of our holdings in the Long-Term portfolio.  CEO Paul Otellini is one of the great leaders in America.  Intel continues to innovate, providing the chips that high-tech devices require.  Long ago, I started demanding Intel chips in computers we bought for business or home use.

Mr. Otellini was at the Technology Policy Institute’s Aspen Forum last week.  The Forum is a magnet for other technology firms and assorted hangers on.  This last category includes administration officials and their aides.  After all, what better place to go than Aspen in August?  Mr. Otellini spoke to the gathering at dinner on Monday night.

Sure looks like a nice guy!

He probably caused a few gasps in the audience.  He told them the truth.  “Unless government policies are altered, the next big thing will not be invented here.  Jobs will not be created here.”  This is not the sort of direct talk bureaucrats are used to hearing, but wait…it got better.

He told them the U.S. legal environment is so hostile to business, it was beginning to lead to a shift in wealth, “much like we’re seeing today in Europe.”  Otellini lamented that it had not always been this way.  Not long ago, he said U.S. research centers were without peer.  No country was more attractive for start-up capital.  Now he says, “That simply is no longer the case.”

Mr. Otellini reminded the audience that Microsoft’s Bill Gates warned Washington in 2005 that the government needed to allow guest worker visas and fix immigration for engineering students studying in this country.  Nothing was done.  The U.S. kicks engineers out of the country when their student visa expires.  They have graduated from our schools, and go back to China and India to boost their research institutions.

Ortellini smacked the Democrats in control of Washington with, "I think this group does not understand what it takes to create jobs. And I think they're flummoxed by their experiment in Keynesian economics not working.  They are in a ‘Do’ loop right now trying to figure out what the answer is.”

Otellini expressed exasperation at the cost of doing business in the U.S., with government regulations, taxes and other compliance costs adding over $1 billion to a $4 billion factory that would employ a thousand blue collar workers.  These are costs other governments do not impose, because they want the jobs.

Carli Fiorina spoke the day before Otellini about the difficulty of doing business in the U.S.; she said it is time to “acknowledge the reality that companies go where they are welcome.”  A portfolio manager from Gamco Investors said Tuesday "Capital is agnostic. It doesn't have a religion. It doesn't have a philosophy. It goes where it finds the highest returns." The problem is that many other "countries have a more friendly regulatory regime than we do."

These criticisms of ‘big’ government are rarely heard in Aspen.  We need more high profile business leaders speaking truth to the power in Washington.  You may want to read the complete story on Aspen and Mr. Otellini.

This morning, the Labor Department released the Nonfarm payroll report.  Jobs decreased by 54,000 in August -- the third consecutive decline. Today's chart shows the latest data for the current recession (red line) against job losses in the last recession (dashed gold line) and the average recession from 1950-1999 (dashed blue line).  The current job market has suffered losses that are more than triple as much as what occurs at the lows of the average recession/job loss cycle. Also, today's decline in jobs provides further evidence that the current 'economic recovery' remains sluggish.  As CNBC’s headline said yesterday “It’s NOT the Economy, Stupid: It’s the Mess in Washington.”

To the mailbag:
Is there anything China does not control?  Do you think the Fed is buying equities?----paid up subscriber T.M.

John’s reply:  Their action in ‘Rare Earth Elements” has been repeated in other areas.  Destroy the competition then raise prices.  Creating a giant monopoly.  I don’t understand the rally over the last three days.  The market feels weird.  It only takes a spark to get the market started then let the shorts covering pick up the volume.

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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