Competition is Dying in America!

M&A is the acronym for Merger and Acquisitions. It’s going on all the time. The list compiled by CNN for just the last three days is astonishing. It’s worth hundreds of millions of dollars. This process is killing competition and raising prices for everything.

I will pick just two industries to demonstrate my point. They are super markets and drug stores in the San Fernando Valley (metropolitan Los Angeles). There are now 1.6 million people living in this area stretching from Burbank and Sylmar on the east to Calabasas and Chatsworth on the west.

THE SUPERMARKETS

Today there are only four major chains left in this area. The number of independent stores is so small that most people do not know of their existence unless they are in the immediate neighborhood. Most small markets do not have the resources to do the advertising of the chains. Specialty markets like Whole Foods and Trader Joe’s do not offer a complete array of products.

The chains currently are Albertson’s, Ralphs (owned by Kroger), Von’s (owned by Safeway), Vallarta (catering to Hispanics and doing quite well), and Jon’s. However 20 years ago the list included Albertson’s, Alpha Beta, Hughes, Lucky, Market Basket, Ralphs, Safeway, Thriftimart, and Von’s. In addition there were many stand alone super markets that were big enough to advertise in the major newspapers. They included the All American Market, Panorama, McDaniels, Alexander’s, and Gelson’s (now a chain in only the wealthiest neighborhoods).

There were others stores too but they were absorbed into the remaining chains thanks to Yucaipa Cos.

THE DRUG STORES

The list is not as long but the trend is obvious. In the past it was Rexall, Thrifty, Longs, and Sav-on chains and many independent stores. Today the list is Rite-Aid, CVS, and Walgreen’s. Both Sav-On and now Longs are part of CVS. Although Walmart, Costco, and Target have pharmacies they are usually not convenient and have limited variety.

There are other industries that have seen consolidations including banks, department stores, and airlines. Los Angeles used to be the home of many savings and loan associations (California Fed, Glendale Fed, Great Western, American) as well as many bank chains that have been absorbed by Bank of America or Wells Fargo (First Interstate, United California, Security First National).

The consequence of the reduced number of businesses in any industry ought to be obvious. Imagine if your company was the only one offering a particular commodity or service. You could charge what ever you wanted. If there were only a few competitors rather than many, your pricing would be less flexible. There are lots of house painters here in my neighborhood so pricing stays low. Gasoline is available from only five companies within three miles from my home. Remember when every major intersection had a gasoline station on all four corners?

So the loss of Longs Drugs, May Department Stores, and Linen and Things means that their competitors can earn more but all of us will pay more.

What’s Wrong with California?

Actually there really is very little that is wrong with California. I should know. My family moved here 60 years ago. I have traveled over most of the state’s highways. I can say that this state offers more opportunity for any endeavor that you might have.

Most Californians live within 50 miles of the Pacific coast. The temperatures are fairly moderate in most of those areas. The educational opportunities include some of America’s best universities including UCLA, USC, Stanford, and UC Berkeley. The arts and entertainment is second to none.

What’s not to like? The cost of housing is at least twice the prices of most other cities. Even the poorest neighborhoods are expensive. Los Angeles public transportation is very inadequate thus car ownership is almost mandatory. Street gangs have impacted city life by making evening walks impossible in some areas (mostly the poorer neighborhoods).

We just took a brunch cruise this past Sunday on Hornblower Cruises in Marina Del Rey in Los Angeles. The Marina Hornblower is not their most attractive

ship from the outside but inside they have dance floor and a fabulous buffet. The yacht toured around the bay giving us a view of the many beautiful ships and sail boats owned by the rich. The entire bay is surrounded by homes and condominiums that most of us cannot afford (all owned by people who will be pay higher taxes if Barack Obama becomes president).

Marina Del Rey is just one of many beautiful places in this state. San Diego has La Jolla and Mission Bay. Metropolitan Los Angeles has so many beautiful communities that are in and around it that they are too numerous to list here. Beverly Hills and Bel Air are the two most famous. Twin Peaks and Marina Park seem to be the choice areas of San Francisco. However there are many other less known communities through out the state that are really the choice places to live and work. My two favorite places are Mission Bay in San Diego and Ventura County just north of Los Angeles.

What about the rest of the state? We have Mt. Shasta in the North. There is Lake Tahoe in the middle along with Yosemite and Sequoia National Parks. In the south there is Palm Springs where it rarely rains.

Then there is our population diversity. California is the diversity capital of the nation. We have all races colors and creeds. From the Gay and Lesbian communities to Scientology everyone is part of this state. If you are unable to accept diversity this is not the place to be. My problem is I just can’t afford the cost of living on Balboa Island.

Financial Literacy Is Not a Government Responsibility

It’s hard to be a social liberal and still be in favor of a government that does not intrude in the private lives of individuals. How does a government help its population without intruding like a parent that keeps telling its children, “No, no, no. You’re doing this all wrong. Let me show you how. If you do fail I will be there to help pick up the pieces.”

I have been briefed by a few people who have teaser rate, adjustable rate home loans. Every one of them knew that they had acquired loans that could be financially devastating. I know that many people have claimed that they were misled about the low interest rate loans that enabled them to buy a home. How could they not know they were in for trouble when the payments were so low and the down payments were either nothing or near nothing?

Now a California assemblyman wants to add another bureaucratic layer to help people with their financial literacy. This proposed law is AB 2123, California Financial Literacy Initiative, is for the training of the public in financial literacy. This proposed law is supported by the AARP. The AARP brought the law to my attention.

The money to provide the education would come from donations from nonprofit entities into an educational fund. However, there would be a cost to the state in the form of a Financial Literacy Advisory Committee. There is no explanation how the committee would be funded. I foresee another government mandated activity that could cost all Californians more tax dollars.

I am sympathetic to everyone’s plight as I had a near bankruptcy experience about 25 years ago. It was not the result of an adjustable rate loan. It was the result of a job loss.

California government is in financial difficulty. This is not the time to enact any new laws. Has anyone heard of the library? Those are marvelous places where the books on all subjects are free to read.

Need Health Care? Vote for Barack Obama

There is no guarantee that any proposed legislation will ever be passed by Congress. I am sure that many good ideas have never been enacted into law. The reasons are probably more than I know. However, I do know that politics, religion and lobbyists do impact which laws are passed and which never get beyond a hearing committee.

The current fight over oil drilling off the coast of the United States is a good example of politics impacting the granting of those rights. When Nancy Peolsi, Speaker of the House, proposes that the government should release oil from the Strategic Petroleum Reserve to lower gasoline prices, you know she is playing a political card. Those reserves will only last for two months of American demand. This action is no more likely to reduce gasoline prices than John McCain’s proposal to grant oil drilling rights that will take 10 years until there is delivered results.

Many religious groups oppose gay marriage. It’s not just conservative Christians who oppose these marriages. On the Reform Jewish web site “Traditional Judaism has seen – and continues to see – homosexuality as an abomination.” We all know that Islam does not accept homosexuality. These same groups have positions on many other topics too. The Republican Party is swayed by those religious conservatives in their voting patterns. John McCain thinks about the religious right quite a bite. Just recall his refusal to take a position on birth control pills when asked about the use of Viagra vs. those pills .

Lobbyists are everywhere. Those hired mouth pieces that attempt to sway the vote on everything from farm subsidies to support for national public radio. Big pharma, big oil, auto manufacturers, etc. all have their hired lobbyists. Those lobbyists would not have those high paying jobs if they were not successful. Just enter “K Street Lobbyists” in your search engine and you find all kinds of interesting things.

Will there be universal health care in this country? Honestly, I doubt it. Hospitals, doctors, and insurance companies will send a legion of lobbyists to fight the idea. The scare tactic will be the words “socialized medicine.” Still, Barack Obama does support the idea of universal health care <http://www.barackobama.com/issues/healthcare/#coverage-for-all>. John McCain is opposed to universal health care <http://www.johnmccain.com/Informing/Issues/19ba2f1c-c03f-4ac2-8cd5-5cf2edb527cf.htm>. Check their web sites and you will see their positions.

This highlights the difference between Barack Obama and John McCain. Barack Obama says he will fight for change. This is just one of many issues where Americans need this fight.