Fathers Day; Shifting World; Europe

I had all good intentions of writing this blog on Fathers Day.  From time to time, I’ll hear an interviewer ask the question “if you could spend one hour with anyone from the past, who would it be?”  The answer ranges from George Washington to Thomas Edison to John F Kennedy. For myself, I don’t need even one second to supply the name:  My Dad, Stuart Nordstrom.

He died in 1983, four years after starting Creative Nail Design. That year we did $250K in sales. He shared with me in a private conversation shortly before his death that the family had started something special that would become a big success. So, in that hour I would share with him the amazing story of success that unfolded in the years after he departed us. The people I have met from all over the world.  The victories, trials and tribulations that we encountered along the way. How Creative served as a vehicle for my Mom to survive and move on after his departure.  How our company would touch the lives of so many People in so many good ways. It would be an hour for a lifetime. That is what I thought about on Fathers Day.

There is a major and subtle shift underway in the world economy that will have profound effects on all, but in particular, our USA. For many decades, the US Dollar has been the world “reserve currency”. In short, when you conduct trade around the world, the selling and buying countries price the good or service being traded in US Dollars. The foundation of this arrangement was Saudi Arabia’s agreement to price all of its oil sales in the US currency many decades ago. Fast forward to the year 2014 and the Dollar’s status is undergoing a quiet, but quite powerful shift towards losing that status. It is being driven by China and Russia with support from Iran, The Saudi’s and some South American countries.

The largest recent example was a $400 Billion deal between China and Russia where Russia will supply a large amount of natural gas to China. The size of the deal was a bit staggering.  However, the bigger headline to me is it was priced in Rubles and Yaun…no Dollars involved.  I believe very few Americans are aware of this trend.  Its implications are enormous though. Up until now, since we have been the undisputed reserve currency, we have created an unlimited amount of new currency units in the form of debt. As we are slowly removed from reserve status, our ability to repay that debt will come into greater scrutiny and higher interest rates will most likely follow. Joined to that, inflation could become a major plague on our economy. This will hit the average American the hardest in that it will cost far more to buy the same amount of lifestyle. The average household income has already been lagging in a low inflation environment. High inflation will be quite difficult. Sadly, the political elite along with the financial community will fare, as they have been, just fine. Educate yourself on this, it will help you survive a difficult transition that is under way.

I am so lucky to be writing this from the back terrace at Villa D’ Este…it is a sunny day and Lake Como looks even more magical, if that is possible. It has to be one of the top three most beautiful places I have ever been. We are here with the Kids and it’s a real blessing to be able to share it with them. Linda and I started our trip last weekend in Liverpool, England and attended The Open (or as we Americans call it The British Open). We stayed with some very special friends who hosted a non-stop fun zone that included walking a round of local golf on the day we arrived (the best jet lag remedy I have found yet!); two days at The Open (and we were in walking distance of the course) and a memorable dinner in Liverpool followed by visiting every dive bar on Mathews Street, where The Beetles begin their storied careers. We are forever indebted to our Liverpool buddies and look forward to returning the hospitality in Las Vegas!

Next was Vienna, Austria where the kids joined us. We really enjoyed it…it is a full but small city with tons of history, nice and happy people, who enjoy having a two or three hour coffee with friends. We were surprised at how quiet it was…everyone leaves the city for holidays in the beach areas during the summer months.  Everyone said winter is when Vienna is most alive. One of the highlights was a wine country tour outside of Vienna combined with a one hour ride on the Danube river, it was so fun and relaxing!

Before I sign off, I want to mention a new service that is being offered by a person I am proud to call a friend, Doug Schoon. More than anyone I know, he has contributed more good to our professional beauty industry. Most of it without compensation.  To say he embodies what our industry stands for is an understatement. His new Face to Face program details can be found at this link:  facetofacewithdougschoon.com   It is a bargain for a wealth of material and I hope you give it a try. Secondly, on behalf of Linda and myself, I want to thank all of the nail professionals who have tried and enthusiastically supported famous Names new IBX system and our international team of distributors, who have done a simply amazing job of educating and promoting IBX. We are overwhelmed and grateful…

Until the next time

jim

Posted in Famous Names, Investing/The Economy, Professional Nail Business | 6 Comments

Why IBX; Whitespots;

Thanks to all of you who have “welcomed” me back to writing this blog.  I truly do enjoy writing and sharing my thoughts.

I want to discuss the need for a product like IBX today.  Linda and I are thrilled with the early response to IBX, maybe overwhelmed is the better word!  Most nail professionals immediately see the need for IBX. We are receiving daily testimonials on the results that IBX is delivering (Go to our Famous Names Facebook page to see more   https://www.facebook.com/famousnamesproducts)  As I shared last week, many of our fellow nail manufacturers have congratulated us for creating a product that will make our industry even more effective to the consumer base that relies on the Nail Professional as part of their personal care routine.

There was one company that suggested that if their gel polish is applied and removed properly, that there would be no need for IBX (since there would be no nail damage) and in fact, that adhesion could be adversely affected.  I must respectfully, but strongly disagree with this mis-statement  for two reasons.  Firstly, one can never assume the starting condition of the natural nail prior to application of a gel polish.  If you start with a damaged natural nail, no matter how skilled or how careful the Nail Professional is in the removal process, the nail will be prone to continued damage.  To suggest that any and all nail damage is the solely the fault of the Nail Professional and not of the product is both unfair and incorrect.  As any Nail Professional knows, every client is unique and different.  This is why a skilled technician knows how to assess and suggest the best course of action for each and every client.  We believe IBX is a valuable new tool to aid in that process.

Imagine being the BEST builder of  buildings in the world.  You know that if you follow your time tested methods and long trusted suppliers, that your buildings will continue to be considered the “best”.  Then one day, a new supplier discovers that if you use “re-bar” in the foundation, that it will bolster the strength and toughness of the foundation…what a fantastic breakthrough!  Even better, it’s use has NO effect on what is placed on top ofthe foundation.  Why on earth would you not want to immediately use this fantastic new method in your buildings?  Of course you would IF you want to continue creating the best end result.  Well, back to the Professional Nail Industry…IBX is like adding re-bar to the natural nail, making it tougher and stronger so that when you apply your gel polish over the top, it will provide a stronger foundation to withstand the removal and re-application process!  It will also begin to strengthen and repair any pre-existing damage as it’s used after each removal.  Talk about a win-win for you and your customer.  So, don’t be misled or discouraged from trying a new way or a new product that potentially will make you an even better professional AND make your customers happy and more loyal to you.

White spots…they are an often mentioned issue from the Nail Professionals we talk to on a daily basis.   The prevailing view is they are caused by de-hydration from the acetone being used to remove the gel polish coating.  This is incorrect, it if was true, the entire nail plate would appear white and not just appear in localized areas.  The white spots are actually a result of the gel polish removal process.  I came across this excellent article by Doug Schoon, a top expert for the Professional Nail Industry:  http://www.schoonscientific.com/eblast/eblast_2012-05-12_Dont-Let-This-Happen.htm   It does an excellent job of explaining white spots and has some amazing photos.  In short, these variables influence the occurrence of white spots during the removal process:

  • Using the incorrect lamp to cure your gel polish system (usually it is over curing that occurs)
  • Leaving the gel polish on too long…gel polishes actually increase their adhesion to the natural nail the longer they are left on
  • The soaking process is not long enough.  There is a tendency to follow the minimum suggested time rather than the longer end of the suggested range.  The key idea here is to soak long enough to remove without scraping.
  • The soaking process softens the natural nail…if you soak and scrape, you will likely create some level of nail damage.

Here is the good news:  IBX Repair acts as a “sealant”, sealing over the surface of the nail and reducing or even eliminating the white spots.  It also has adhesive properties, thus it’s ability to adhere nail damage such as delamination, peeling or splitting so the natural nail can grow out on it’s own.  Using IBX Repair along with IBX allows the “re-bar” into the nail and also repairs the surface damage.

If you have not tried the IBX System, we hope you do (more info at ibxnails.com).  If you have, we look forward to hearing about your experiences.

Jim

Posted in Professional Nail Business | 5 Comments

IBX is Born; The Response; Systems and More from Vegas

Wow, my last post was in September of last year…it seems like just a couple of months ago!  We have been a bit busy at Famous Names bringing our new sensation to market: IBX.  Linda and I have been working on IBX for over two years and most weeks its been seven days a week.  We are really excited about it since it is a completely unique and original product (and is patent pending) that has great demand in the professional nail market.  In short, IBX is a curable, penetrating, monomer system that can grow your natural nails or act as a protective shield for the natural nail under all gel polishes.  It strengthens and toughens the natural nail and produces amazing results.  IBX was just released two weeks ago and the response from all over the world has been overwhelming!  We created a stand alone website for IBX at www.ibxnails.com   It contains a huge amount of information (including some amazing before and after pictures) and I hope you check it out.  We also created a 3D promotional video that can be used by the nail professional to educate their clients on what IBX offers them…here is the link:  http://youtu.be/kUhJnGKBn60

We unveiled IBX at the ISSE Long Beach show this last weekend and were gratified at the response…some industry heavy weights were calling it a “game changer”…we would humbly agree with that!  Nail Professionals immediately “get” what IBX will do for their clients and we look forward to hearing their experiences with the product.  It was also gratifying that many of our fellow nail companies came over to congratulate us on our breakthrough.  It reminds me of when I was CEO and Chairman of Creative Nail Design (now CND) from 1983 to 2000 …if a competitor came out with a product that was good for the Nail Professional, I was the first to congratulate them on their breakthrough (and then proceeded to beat myself up on why CREATIVE hadn’t come up with the idea :)).  Sadly, that same trait does not exist today at my old company.

Linda and I are proud to work with a small team of talented and motivated people who helped to bring IBX to reality.  There were less than 10 people who worked on this project (including Linda and I) from conception to launch into the marketplace.  We have a policy of not naming names, but they know who they are and we are deeply appreciative of their hard work, mega-talent and the sharing of our passion for the Professional Nail Business.  Linda and I have been in the industry our entire working lives. We love it and we hope to make contributions well into the future that enable Nail Professionals and their Clients enjoy our industry.

Which brings me to the concept of “Systems”.  During my tenure at Creative, I had the pleasure and honor of working with Doug Schoon, who reported to me as VP of Research and Development.  In those days, the liquid and powder systems dominated nail services in the salon.  We strongly urged the Nail Professional to use the entire “system” as designed (typically there were four components:  liquid monomer, powder, cleanser and primer) since there was mixing of chemically based products with each other. If a client had an adverse reaction and you were mixing product systems, who would you call?  How would you figure out what the source of the problem was?  So, in that sense, using the “system” made great sense.  The same applies to today’s Gel Polish Systems…you should use the base, color and top coats as designed by the manufacturer.  However, products like IBX, Dadi’ Oil, Lumos (all from Famous Names) are add-on or adjunct products that can be used with any professional nail service products and bring incremental performance and results for your clients.  As a professional, why would you not want to use the best?  My advice to those Nail Professionals reading my blog is to try and test new products that can bring you greater success…why would you NOT want to???  Don’t let the big guys scare you into using their “systems” (translation:  we don’t want you to try anyone else’s products…we want ALL of your hard-earned money).  DO stick to using those systems that were designed to be used together.  We field tested IBX for 15 months under all of the top gel polish systems with great success.  IBX is adhesion neutral, so has no impact on how  gel polish adheres.  What IBX DOES do is to create a stronger, tougher natural nail underneath the gel polish, allowing the nail to better withstand the removal process.

An update on Las Vegas:  We love it here!  Once you survive the months of July and August, the weather is fantastic to very good.  Unlike the coast where you can have long periods of coastal overcast, Las Vegas is nearly always sunny, so even if the temperature is on the cool side, if you are in the sun, it feels much warmer.  The cost of living is about 40-45% less on an apple to apple basis and then add in no state income tax, and July and August become quite bearable :)  We live 15 minutes from our home to a parking space in the airport…when you travel a lot, that is a big deal.  The drive to San Diego is 4 hours and 15 min on average, so very easy to do.  It’s amazing to watch plane after plan after plane on approach on Fridays.  It seems (not surprisingly) that people tend to use money as a measuring stick of success more than I saw in San Diego, but that is something we choose not to participate in.  The most common SOE (standard operating equipment) by far is the “boob job”…I don’t know how many cosmetic surgeons there are here, but they are all busy (haha).  The Strip is just 15-20 min away, so great dining and shows are easy!  So all in all, we are very happy.

Finally, I have been a Denver Bronco fan my entire life.  My father had season tickets when I was a kid in Denver and I remember him coming home after setting through cold weather and enduring many losing seasons.  So, GOOD LUCK to Denver tomorrow…I hope they can bring home #3!

Posted in Famous Names, Professional Nail Business | Tagged , , , , | 13 Comments

Syria

I feel compelled to make a post on the Syrian situation. From the beginning, it has not added up for me…at all. Thus, it keeps piercing my thoughts.  I also welcome any reader’s thoughts and will share them in my next note if you send them to me.
Briefly, I think we are making a big mistake, the consequences of which may be far beyond what anyone can imagine. Evidently, the vast portion of America agree with me:  As of this morning 63% are against and 28%  for attacking Syria.  The law of unintended consequences could kick into gear big time if we follow the current course of action.

In no particular order, some thoughts:

  • Over 100,000 Syrians have been murdered by Assad in the last few years, so what is it about the 1400 who were recently killed is now prompting world attention?  It just does not add up and I don’t think for a minute that it’s about the children and women…it has to be something else.  I read an article that suggests it’s about the supply of energy to Europe…a Russia vs.  US play.  Could be, who knows, but there is something going on that has not been shared with the  people.
  • It has been stated by the Obama administration that this situation represents a national security threat towards the US.  Really, our country’s security is at risk from Syria?  Sorry, doesn’t work for me…don’t buy it.  I will say this:  IF we attack Syria, our national security could be at risk.
  • Putin of Russia has stated if the US attacks Syria without UN approval (which will never happen since he has veto power), that Russia will significantly increase its military support to Syria.  So, in essence this could/will turn into an US vs Russia conflict.  Did you know that Russia has had a naval base in Syria (Tartus) since 1970.  They are currently increasing their presence in the area just as we are.  Yet, we have been told that this will just be a quick, concise and focused “action” with no boots on the ground.
  • The complete incompetence of our Congress has been highlighted from the Syrian situation.  Here is a link to Congresswoman Ileana Ros-Lehtinen from Florida stating that the recent vote of the Senate panel (10-7) was not designed to stop Assad from killing his people, just that he could not use gas….I am not making this up (it’s around the six-minute mark):  http://video.foxnews.com/v/2650044329001/senate-panel-votes-in-favor-of-military-force-against-syria/.  There is also the photo of John McCain playing video poker during the Syrian related hearings.  I did not know whether to laugh or cry when Susan Rice appeared today with “evidence” that is was the Assad regime and not the rebels who used the gas…this is the same politician, oops, I mean “spokes person” who blamed the Benghazi attack on an amateur video during five Sunday morning talk shows.  There’s a good chunk of credibility there!
  • The Red Line, that darn Red Line…Yes, it was drawn by President Obama, it’s on the public record.  That Red Line has painted President Obama into a very uncomfortable corner.  So much so, that we now hear that the “world” painted the Red Line.  How sad, this is the time to stand up for what you believe in (and say) and make your case…doesn’t look like that’s going to happen.  How scary that a verbal Red Line could take us into an ill-advised war (this is war, not an “action”)
  • Then there is Al-Qaeda, that bunch that has been responsible for US deaths all over the world.  They are members of the rebels we will support to bring Assad down…let’s make sure we have this correct:  We will be supporting a group of thugs that have been trying to kill us, anywhere they can in the world.

Is doing nothing an option?  I think so.  I hope sanity prevails here…however you view this situation, make sure to share it with your elected officials in Washington.

Let’s hope for the best-

Jim

Posted in Professional Nail Business | 2 Comments

The Move, The Move Two, The World

It’s hard to believe my last post was on January 1st of this year! It’s been a busy, busy year…so I’ll jump right in.

The Move: On June 23rd, we moved to Las Vegas, Nevada. One week after the last election (November), Linda and I decided to put our house up for sale and it closed in late May. San Diego is considered one the nicest places in the world to live, why would we leave it? In very simple terms, we believe California has completely disconnected from the free market system. The amount of regulation, control and bizarre legislation coming from the “Golden State”, is increasing and it’s all adding up to something we don’t understand and we choose not to participate in. One of the results of this disaster is the top marginal tax rate went from 10 to 13%. We are fortunate in that nearly all of our income comes from outside the state and by the end of the year, none will. So, we can basically live anywhere as long as we have an internet connection and are close to an airport. Nevada has no state income tax, is friendly to business, and has a lot to offer in quality of life.

In California, private business is viewed as a target for regulation, endless regulation that drives costs up. It is also viewed as an endless source of funding for government activities. The recipient of those funds, the State, is on the constant quest for catching business doing something wrong so that on top of the long list of fees, taxes and levies, penalty funds also add to the take. In Nevada, business is viewed as a positive. They actually want to help you succeed. We have already met with the head of business development for the State of Nevada and he made it clear the State will do anything they can do help our small business, Famous Names LLC, grow into a large one. We are looking forward to conducting business in Nevada and are quite happy to be out of California.

In addition to zero state income tax, by my calculation, the apples to apples cost of living here is about 40-45% lower. Real Estate is about 40-50% lower for similar size/type properties. Home insurance is far lower (think 75%). I could go on and on, but the bottom line is the cost of living is far lower here. Combine that with no state income tax and it presents a very favorable picture. We live in a beautiful neighborhood, its hard to believe we are in the desert. We are two minutes away from the fitness center/spa and four minutes from the club house (we can leave at 6:45am and tee off by 7:00am!) The airport is nine minutes away and has a far more extensive choice of flights than San Diego and usually lower fares. Of course, the selection of dining and entertainment is one of the best in world…The Strip of Las Vegas is about 15 minutes away, so when we decide to head down to “sin city”, it’s an easy drive, much easier than going from North County to Downtown San Diego and it feels a lot safer. The infrastructure here is FAR better than San Diego, there is actually no comparison.

What is the downside? Yes, that famous “summer heat”. There is no denying it. July of this year was the hottest in the last 30 years..it was called a “30 year heat event” and started the day before Linda and the girls headed out. Yikes! It was over 115 degrees for 15 straight days. Thankfully, going into mid-August, the temperatures have started heading down. When I walk our Bull-Mastiff, Chester in the morning (usually around 7:30am) it’s about 78-80 out, very pleasant. As we get into the fall months, we are told the weather is spectacular. So, hot, hot summers are a downside. The biggest downside for me is not being near our friends. We were so spoiled to live on Wiegand St, where the neighbors actually know each other and have a lot of fun together. I will really miss my brother Tommy…how lucky we were less than 10 minutes away. We will make new friends, but are going to work hard to continue to enjoy good times with our special friends in San Diego. We are lucky to live about 3 minutes from the 15 Freeway and if traffic cooperates, are about four hours to north San Diego county. We hope our friends will come and visit us here, we know you will like it!

A couple of moving related notes:
Our real estate agents were absolutely fantastic. It a mother/daughter team: Jenn and Mary. They are simply the best…they worked hard, stayed on top of the details, caught some material mistakes in the closing statement and were fun to work with. I can’t more highly recommend someone: call Jenn at (760) 519-9911 to learn more.
The moving company based in San Diego, Sullivan Moving and Storage (858-874-2600) are first-rate and professional.
The moving company on the Las Vegas end, Puliz Moving and Storage, are to be completely avoided.
Our agent in Las Vegas, Ike Prinsloo, great to work with: 702.374.4353
The Sellers agent in Las Vegas, Anthony Ypil of Pathmark Realty is to be avoided.
So, we are making it through the adjustments: Making sure to look for Las Vegas instead of San Diego when checking flight info on the way home :); Learning a new set of Freeways and Roads…thank goodness for navigation! Learning a tough new golf course. We are really liking it here so far, I will keep you updated.

The Move Two: Our 18-year-old daughter Niki, moved today to Santa Monica where she will attend the Vidal Sassoon Academy. Linda and I are thrilled and proud that she has made the Professional Beauty Industry her career choice. Linda will spend most of this week helping her get moved in and acclimated. We will miss our family “spark plug” a lot. As a parent there are those sad/proud days…this was one of those. Sad and Proud, I guess that says it all.

The World: Just a quick word on the situation in Syria. I hope we don’t go in…the implications of the unexpected are huge. In difference to years past, China and Russia are both large (China the largest) holders of US debt and both are strong allies of Syria. What the Assad regime has done is terrible, but I am struggling to understand what the purpose of a strike is: can the US go around “punishing” countries that have done things we don’t like and disagree with? Other than “sending a message”, what is the end goal here? If we send a message, what is the message? We need to be careful here….

Okay, that it for this edition…

Jim

Posted in Investing/The Economy | 10 Comments

Stunning: California Imposes 5-Year Retroactive Tax Bill on Startup Investors

Stunning: California Imposes 5-Year Retroactive Tax Bill on Startup Investors.

Posted in Professional Nail Business | 2 Comments

Reflection; Land of Unintended Consequences; Travel Observations

What makes New Years different from other holidays? Going to parties to celebrate with friends and family, eating tasty food with a great bottle of wine, having a good laugh are all part of any special celebration, but reflection is what differentiates New Years for me. It could be any day of the year, but there is something retrospective and prospective about December 31st in combination with January 1st…its a powerful combination. Linda, the Kids and I spent Christmas in Rhode Island with her Mom. In a moment of Christmas magic, it started to snow at 11pm on Christmas Eve…for a clan from Southern California, it was a true thrill. Staying with Linda’s Mom is like living in a high-end bakery, nothing “store-bought” in sight and all wonderful. Combine that with her famous Mac & Cheese (anybody who has had it will completely validate the “famous” moniker!), visits with friends and family and it was truly the perfect way to celebrate Christmas. We then headed to New York City, where my three girls shopped until I dropped (I was lovingly referred to as the “bagman” and believe me, I lived up to the designation). While the entire trip was fantastic, I had three highlights that will be top of mind for quite some time. At the top of the list was the one hour walk that I took everyday while in Rhode Island. Beyond the obvious (the aforementioned bakery), our oldest daughter Niki joined Linda and I everyday. Niki is 17 going on (fill in the blank) and we just don’t get much time with her. Between her passion for horse riding and her boyfriend, just having a simple conversation is rare…so Linda and I had that one hour walk to talk, laugh, reflect (that word again) with her and it was totally special to us and I believe Niki too. She graduates this year and will be heading to Los Angeles and then London for beauty school. We are going to miss our family spark plug and having some special time with her was a Christmas gift you can never ask for but treasure when it happens. Chris Botti at the Blue Note Jazz Club was simply amazing. I go to the Blue Note every time I go to New York and this was probably the best show we have seen yet. Finally, a bucket list item was crossed off the list: Dinner at the Four Seasons Restaurants. It was everything I hoped for and more…it doesnt get any better than being all zuited up with your girls and having a wonderful dining experience!

I had two very different perspectives on the economy while travelling. Simple observation suggested the economy is booming. In New York everywhere we went it was PACKED. We walked through Times Square a few times and the only way to describe it was an ocean of humanity…it was simply amazing. Lots of shopping bags, full to capacity dining and sell outs at the Blue Note and the play Wicked. The buzz was palpable. One of the joys of having kids is you can actually stay in touch with what is “new” and in my daughter Carli’s case that would be the UK band sensation called One Direction. They had a temporary store at Madison Square Garden and to say it was busy doesn’t begin to explain the phenomenon that was taking place. The first attempt we made to visit, there was about a 300 yard line waiting to get inside and the temperature outside was a windy 25 degrees (give or take, but mostly take in my opinion). We got there first thing the next morning and only had to wait about 30 minutes. So all in all, New York looked very busy. Rhode Island was not quite as frenetic, but it seemed to be doing okay. Where the other perspective came in was talking to actual business people…they were not quite as optimistic and more on the cautious side than the optimistic one. So if you blend to the two together, I would say we are somewhere in the middle…it’s not great out there, but its not terrible either. Speaking for myself, I am cautiously optimistic on the next year, but not in any frame of mind to push the “risk” part of the equation further than I already have (having started a business in the middle of the Great Recession is quite enough).

So, as we enter 2013, what can we take from 2012 and project forward? The election and the “fiscal cliff” combine into a powerful prism in my opinion. As I shared in my last piece, the central message from the election is the citizens of the US want more government. You can agree or disagree on if that is a good thing or a bad thing, but I don’t think there is much debate to be had on the increasing role expected from both the Federal and State governments (By the way, if you see it differently, please send me your thoughts). Combine this with fiscal cliff negotiations and the deal that will be reached supports more (and more, and more) government. The Senate voted last night on a package and the House is debating as I type. Based on what I have read, at this moment taxes will go up 600 billion and expenses will be cut by 12 billion. The rhetoric goes something like this: The “rich” will pay the bill, the middle class will be saved and the poor can continue to count on federal and state support. The average citizen will have no problem with this because from their viewpoint, someone else is paying the bill and it wont directly affect them. This could not be less true. The misconception is lifestyle versus available capital for the private sector. It is true that if you are one of the “super rich” (I wont try to put a number on it, but you know it when you see it), higher taxes will not change your lifestyle. So what is the big deal? The pool of capital that can be invested into our economy is shifted from the private sector to the public one. I have had the benefit of observing this first hand: If you are super wealthy, once your living expenses are provided for, what is left over is capital in an endless search for investment opportunity. Very few, if anyone just let’s their money sit and do nothing, especially in our zero interest rate enviroment. Contrary to what our politicians claim (and its all of them), America was built on private enterprize, not the government. As I stated in my last note, one hundred years ago the Federal government absorbed a bit less than 5% of our economy (GDP for you economist out there). Today, it’s over 25% and with the “resolution” of the fiscal cliff, it will go higher.

Unintended Consequences: If you run a business, you know very well what this means. Every decision you make will have a material impact on your results. You learn that you can never anticipate the full impact of a decision until it has flowed through into your customer, supplier and employee base. A real world example was shared by a long time friend of mine who I called yesterday. The company he works with is fighting hard to stay profitable. Around Thanksgiving, the CEO announced that there would be zero bonuses for anyone in the company for 2012. So what do you think the sales people have been doing? Nothing…they are keeping their powder dry for 2013. Not good for business. In the beauty industry, those companies that are run with short-term perspective will offer sizeable discounts for orders placed prior to the end of the year. Oooops, first quarter isn’t going to be so good. Oh, and our profit margin for the 4th quarter just wasnt what we thought it would be.

Well, welcome to the land of perpetual short-term thinking: Washington DC. Our elected representatives have a very identifiable time frame for the actions they take: The time between now and their next election. Further, if they make bad decisions, they can just move back into the private sector, collect their lifetime pensions and custom healthcare plan. Oh, and if they really mess up, guess what they can do? Print money…lots of it. After all, they must give those who elected them what was promised: More. More government, more taxes, more regulations and more social support programs. Besides, in addition to creating more money, you can also ask the “wealthy” to do more of their fair share. Imagine you walk into work tomorrow morning and in scanning your emails, you see an important notice from the CEO (His name is Sam, Uncle Sam) letting you know that there was an employee vote and it was decided your take home pay will be lowered as it was just not fair you earn more than the average employee, never mind your results are far above average. Now, in making this decision, Sam wants you to continue putting out the same effort and the same good results you have in the past. What is your reaction? Well, you cant quit this company and look for a new job (actually, you can, but for most not an option). Are you going to work as hard? With same passion? Will your creative drive be as great? Where will you cut back on your expenses if you are not “super wealthy” (which is about one in a hundred). All variables that live in the land of unintended consequences. Yet, those brilliant minds in DC actually think they can predict how these thought processes will play out (or even worse, they really don’t care…if they are wrong, they can rely on the printing presses and the “rich” to do even more of their fair share). I have news for you: They cant. We will all react and act based on what we believe is best for us and our families.

So, where will all of this lead to? We live in a very competitive world…if I am correct that our pool of investable capital for the private sector will be reduced (again, if you disagree I want to hear your thinking), it will be more difficult for us to compete and stay ahead. The lifestyle that will be affected the most will be that of the middle class…less capital, more competition, fewer good paying jobs. Oh, and more government… My hope is that the private sector can somehow come through once again and take over leadership of our country. It is possible…the US has the opportunity to be completely energy independent in less than ten years. Lets hope we do it without the obstruction of the DC bunch. From that, opportunity will abound. We can only hope….

Okay, I am just about done, but need to do a “shameless plug” for my brother Tom Nordstrom. Tom is my best friend (other than Linda of course!) and a MASTER woodworker…its a bit like Mom’s Mac & Cheese. If you have seen his work, you will be astounded at the craftsmanship, the detail and the absolute beauty of what he does. If you or anyone you know is looking to have a piece of woodworking done that also is art, Tom is your man. Even you aren’t looking, check his work out at http://nordstromwoodworking.com/, you wont be disappointed! Also, I would like to thank all of you who have supported Famous Names in 2012. Starting a new company in a labor of love (and the check book)…trust me when I say we appreciate EVERY customer we had the pleasure to service this past year. Great companies are not built without great people, and Linda and I would like to give special acknowledgement to our partners Lisa and Ken Cooper. There would be no Famous Names without my wife and partner Linda Nordstrom…she brings a smile to all she touches. If you don’t know what Famous Names is, here is our link: http://www.famousnamesproducts.com Finally, I would like to wish all those who read this some great reflections on the year ahead, perfect health and the creation of some great memories…

Until next time….

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