Tuesday, August 11, 2009

Let Congress Fly With the Riff-Raff

Lawmakers on Recess Take Wing for Distant Shores
By Brody Mullins and T.W. Farnam
—The Wall Street Journal

Rep. Nick Rahall (D., W.Va.) is island-hopping this week in the Pacific. Rep. Keith Ellison (D., Minn.) is tweeting from Kenya. Sen. Richard Shelby (R., Ala.) is preparing for a three-week trip to Europe with his wife.

These are among more than a dozen taxpayer-funded trips by lawmakers during Congress's monthlong summer recess. Financial reports on lawmaker travel expenses aren't due for 30 days. Even then, details on hotels and meals don't have to be disclosed….

Ah, the hypocrisy of Congress in the morning!

After abusing the CEOs of three then near-bankrupt auto companies for their appalling lack of propriety in taking private jets to Washington to ask for a bailout, Congresspersons of all political denominations jet across the globe on military jets…their wives and who knows what significant others in tow.

And they don’t even have to tell us where they stayed and how much they paid for that great bottle of wine.

But it is not the amoung of time that Congresspersons spend outside Washington to which we here at NMTU object.

In fact, we think Congresspersons should spend as much time as possible outside of Washington D.C. in order to actually understand what happens when they decide to pass a law.

Anybody in the investing business—at least, anybody who makes a living as an investor rather than as a trader—knows that the way you find great investments is not sitting in an office staring at a screen talking to other people sitting in offices staring at screens.

It’s getting out and seeing the world.

Back in day, for example, it was hard to see why Wal-Mart at 30-times earnings was a better investment than Sears at 10-times earnings—unless you met Sam Walton and his crew of wildly enthusiastic and unabashedly penny-pinching managers, and then spent time with the buttoned down bureaucracy that was Sears...and for good measure visited a few stores, compared prices and watched the traffic.

After that, you got it.

Today, for example, so low are their approval ratings that certain Congresspersons are calling for another stimulus plan—even though the last stimulus plan hasn't done much of anything to date except pave a few roads.

Yet they might not be so worried if they got out of town more frequently, or at least paid attention to some of the conference calls from the recent batch of quarterly earnings—such as Packaging Corporation of America.

What Packaging Corp does is make, well, packaging—most especially corrugated boxes. Your order from Amazon or eBay or Sears or Williams-Sonoma comes in a corrugated box, as does nearly everything shipped anywhere in this country.

Thus PKG, the stock ticker it goes by, is about as good a proxy for the economy as any company in America.

And here’s what CEO Paul Stecko had to say a few weeks ago:

As we reported on our first quarter earnings call, our corrugated products volume had increased significantly during the first half of April over our first quarter shipments. The question at that point was, would this pick-up in volume be sustained? Well, it was sustained, not only in April, but also through the entire quarter.

Our corrugated products volume was up 10% or 40,000 tons over the first quarter, which was much higher than our normal seasonal demand pickup of 2.5 to 3% over these two quarters. This pickup in demand has carried into July….

Not one given to hyperbole or fancy language, Mr. Stecko elaborated later in the call when pressed to identify the source of the demand pickup:

The overwhelming majority of our increase in volume is more business from existing customers. They have had more business, they need more boxes, we sell them more boxes.

Of course, Congresspersons have no time to listen to earnings calls—they’re too busy holding hearings about things that happened two years ago.

Still, we think they should be encouraged to travel outside Washington as much as possible.

But they should do it the same way their constituents do it: schlepping to Reagan National or Dulles, going through security and getting asked to step out of line once in a while for a bag search, then buying their own food to eat instead of the free bag of potato chips on the flight before waiting on the runway for five hours...and—when they finally get to the hotel—finding stuff was stolen out of their luggage at the airport.

And then, just maybe, the next time somebody decides to create a Department of Homeland Security, for example, somebody in Congress will raise their hand and say, “How will this make what we do any better?”

Let the military fly military. And let Congress fly with the riff-raff.

Jeff Matthews
I Am Not Making This Up

© 2009 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews.
Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. The content herein is intended solely for the entertainment of the reader, and the author.


dividendsrus said...

Although I agree with the sentiment, I should mention that the concept of Congress flying military is (at least in concept) to save money. The idea is that they hitch a ride on a military flight already needed for military purposes. Of course today that approach may just be a distant memory...

Anonymous said...

Unless members of Congress are flying to Afghanistan or Iraq, where military flights are necessary, they should be required to take commercial aircraft. Members of Congress believe that it is wrong for business people to attend a conference, but it is okay for themselves to go to the Homestead or the Greenbrier for a meeting. It is hard not to believe that all 535 Congressmen and Senators, Democrats and Republicans, are at best hypocrites and most probably thieves using taxpayers' money to benefit themselves.

Dirk said...

No need to approve this comment - I just don't have an email address for you :-)

These are the posts that made me love NMTU a couple of years ago. Glad they are back.

You filter the stuff from the calls that actually matters - the stuff (about the economy - see?) that the media and "WSt's Finest" miss. Like the PKG earnings report.

On Congress' travel... power corrupts. It's the people who aren't corrupted by power whom we should admire and look up to. Whether it's CEOs or Congress Members that abuse their status for personal gain - it's all the same to me.

Anonymous said...

from packaging corp's recent earnings release--"Containerboard volume sold to domestic and export customers was 23.2% lower for the three months ended June 30, 2009 compared to the three months ended June 30, 2008" page 19

Jeff Matthews said...

Anonymous points out that containerboard volume is still down year over year...and that is quite true.

But what matters is the trend, and the trend is now up.

Here's the relevant commentary from the conference call:

"With this improvement in demand, industry containerboard inventories fell by 180,000 tons during the quarter, and ended the quarter at 2,246,000 tons, and this is the lowest June-ending inventory in almost 30 years. Industry operating grades also improved each month during the quarter, with April at 79%, May at 83%, and June at 91%. We see these industry results, as well as our results, as positive indications that containerboard supply and demand remains in very good balance, and demand continues to pick up, although still down year-over-year."


Anonymous said...

Can't really blame the congresspeople - if you had the chance to do whatever you wanted to and spend half the year flying around the world with your family, have dinner out with exciting and attractive young people who'll later do things none of your wives every thought about with you and have other people pick up the bill (my, that was an expensive dinner!), wouldn't you?

It's nice to talk about what the people in power ought to do - but nobody is doing anything to reign in the excess and, frankly, once you allow them to get away with pretty much anything, that horse is out of the barn.

Anyone have any ideas about how to effectively reduce the free ride? Any PIs volunteering to track the life and expenses of their chosen political opponents and publicize the results in the hope the public humiliation will do the trick? (I am not even sure it would anymore - politics has become a shameless game of "I can take them for more than you can")

120wallace said...

Anonymous I think you are referring to Charlie Rangel

Lyon Jewett said...

Again, a great post.


John said...

Whats new . Look at their health insurance and listen to the debate . Congress using military flights ? Maybe that explains why, after billions and billions of dollars and years of peace , we needed to bring up the reverses to fight in Iraq and why we needed to outsource so much of the fighting . No one looks at that but someone should. Its a big story. Almost as big a story as our refusal to look at the deaths we caused in Iraq on false pretext. I'm starting to understand why Fox TV has become so popular. It doesn't bring up hard truths or disturbing truths. .. And Jeff complains about the NY Times.

Pavement Trauma said...

The H1 results for another containerboard company, Smurfit Kappa, are out: revenue is down 18%, profits down 73%.
'While there is growing evidence that the rate of demand decline levelled off in quarter two, as yet tangible signs of economic recovery are limited despite the improvement in confidence indicators,' commented group CEO Gary McGann.

Anonymous said...

I am not quite sure what Pavement Trauma is trying to say, but he either misunderstands what numbers to compare or misleading on purpose.

The comparison is between H12008 and H12009 and hopefully there are not many people that need an explanation that this year has been worse than last year. Looking at sequential data, just about all the numbers are flat, with revenue squeaking up. So not much different than PKG.

And of course, a factor that's being ignored: Smurfit has a large European exposure. Europe had a down quarter for quite a few industries, so having a flat revenue for this quarter under these conditions is quite impressive.