Category: Economy

By Chief

McClatchy Corporation, parent of our local rag the Sacramento Bee, is teetering on the brink of insolvency, so I figured I would explain to their employees and writers how this occurred. Basically, McClatchy is headquartered downtown and is, in a sense, a newspaper conglomerate. It grew over the years from a small family owned (McClatchy family) paper into a large publicly traded company.

Over the years, they bought a few other daily papers and in 2006 they purchased a company far larger than them; Knight-Ridder–owners of about 20 daily papers; thus, forming a company with 30 daily newspapers. McClatchy is now the second largest newspaper chain in the US. However, the deal was ill fated; so much so that many analysts called it akin to a dolphin swallowing a whale. We entered a large recession soon after the purchase and by 2008 the company had lost 98% of its value. McClatchy’s stock was trading for less than a dollar! The executives did some financial engineering, stock splits, private investment, and sold some assets (the headquarters building) and stemmed a little of the bleeding. The company had layoffs and buyouts offered to employees every year, they even tried to grow digital (currently $129.99 yearly), but it’s been a slow climb. Finally, these past couple weeks, the company has finally realized the fate lies in a Chapter 11 bankruptcy restructuring.

Suddenly, it seems, everyone is talking about McClatchy’s future. A week ago the Sacramento-based company, the nation’s second-largest newspaper chain, said it’s facing a potential cash shortage. The news touched off speculation about the publisher’s future, including a potential sale of the company.

And, for the first time since its finances began deteriorating more than a decade ago, the company is publicly contemplating the possibility of filing for Chapter 11 reorganization.

Sacramento sheriff attacks McClatchy, as company’s pension and debt burdens pile up

How bad did things get at McClatchy? They haven’t made a pension payment since 2009, and to remain compliant they must pay in 124 million by next year…more cash than the company has on hand. So, the answer is to foist this payment on the taxpayers!

… (McClatchy) has approached the federal Pension Benefit Guaranty Corp. about taking over its pension plan — a move that, if successful, would alleviate the need to contribute $124 million into the plan next year.

McClatchy said it approached the government about the pension plan after the Internal Revenue Service rejected McClatchy’s request for a three-year waiver on its required pension contributions. Without the waiver, McClatchy is due to pay $124 million into the plan next year, a sum that “greatly exceeds the company’s anticipated cash balances and cash flow,” McClatchy said in a prepared statement.

McClatchy also needs to work out a deal with their largest creditor Chatham Asset Management. McClatchy currently owes 708 million in debt and they have no means by which to even cover the interest anymore. Essentially, they need Trump impeached and Obama re-instated in the White House and to hope for an automaker-esque government bailout. Because as two Standard & Poor’s (S&P) analysts on Wall Street say, McClatchy will run out of cash by September next year. If you are wondering, the company will likely file Chapter 11 early next year after the Pension Guarantee Corporation declines the request to take over their pensions. To further their arrogance, McClatchy approached the Tribune, a larger company, about a merger to, in a sense, continue to delay the inevitable. Just adding more debt and more cash flow to service the debt into the future…sound familiar?

… a deal with Tribune would make a lot of sense for McClatchy because it could spread its debt over “a much larger cash flow. The (combined) company would be in much better shape than McClatchy is.”

Those talks fell apart.

This company is toast and they did it all to themselves.

Allow me to explain. They bought Knight-Ridder, which was a mistake. The family (McClatchy) owns 80% of the voting rights so what they want/say goes and no one can object. Currently, papers are dying and real journalism is going down with it. To say not a soul foresaw this should be criminal. To be fair Warren Buffett was buying papers and everyone likes to mimic the Oracle of Omaha. The debt pile was manageable for a while, but circulations decreased every year, the gig economy took away the need for classified ads, the wanted ads were replaced by Craigslist and the like. Worse yet, the papers decided to go on a war path criticizing any politician on the right, and openly rooting for any left-wing loon…hence the rise of Obama. This caused a huge readership decline, yet they doubled down on their arrogance. So, they helped push Obama over the finish line to a second term while denigrating Mitt Romney and his supporters. This caused another decline in readership. The rise of the smartphone and smart technology was never dealt with, people stopped needing a daily reader, as most updates on a third-party news app would make the paper pointless. None of this mattered. McClatchy continued doubling down on an ever-shrinking audience, Trump won, and the paper changed its tune, saying now they would hold all politicians accountable…. that’s laughable and everyone saw through it. Recently having pushed false narratives such as; Russian collusion, Ukraine quid pro quo, and a slew of other garbage not fit for print.

Now a closer examination of the leftist rag in McClatchy’s own backyard the Sacramento Bee. This paper hasn’t been worth anything in years, several scandals involving Democrat elected officials in our capital (literally blocks from the paper) went unreported (by the way they have an entire Capital Bureau mind you). Hard news became unchecked opinion pushed as fact. They no longer have a beat writer for the NBA team (again they play just down the street) and all the columns are now Associated Press as opposed to local journalists. They attack our elected sheriff yet ignore our Legislature and District Attorney when they decline to prosecute criminals or release them early . They criticize a super minority of Republicans in the Legislature, yet they have ignored the rampant malfeasance of Democrats in the Legislature and elected office such as our Insurance Commissioner’s scandalous pay-to-play policy. They employ Marcos Breton and allow local sewer rat, Bruce Maimon, to spew their stink daily; yet told Dan Walters, their last good reporter, to take a hike. Rumor has it, Walters does a periodic column, but he is happily retired, and I am happy for him! The local section disappeared; the food critic changes over more frequently than The Troll stalks Hope Hicks. Memo to the Bee, there is an app called Yelp; look it up. Your food critic is dead weight, and no one cares. Your sports section stinks, very little local coverage, not many people care about high school football. Recently the Bee announced that the Saturday paper will cease and be replaced with an expanded Friday and Sunday editions.

To support these shifts, starting on Feb. 22, we will no longer produce a printed newspaper on Saturday and will launch with a Weekend Edition that includes expanded newspapers on Fridays and Sundays. Many of the features that you enjoy on Saturday such as comics, puzzles, TV listings, real estate, home and garden and local sports coverage will now appear in expanded editions in print on Friday and Sunday. On Saturdays, we will continue to publish breaking local news to our website and social media platforms and we invite you to visit our website or eEdition, which replicates the experience of a printed newspaper online.

The Sacramento Bee is replacing Saturday print edition with expanded Friday, Sunday papers

The Friday edition no one reads and the Sunday version you finish after your 8th cup of coffee all while ignoring the Saturday folks who read the comics or the puzzles, I’m sure the circulation won’t drop farther. When you get a papercut, chopping off entire limbs is not how I learned how to take care of myself.

Folks I feel compelled to make this point as well, McClatchy has been cooking the books on their circulation numbers for years. Papers like the Bee have two numbers that they use in order to sell advertising; namely, weekly circulation and the Sunday paper. Did you know that as a loss leader, the Sunday paper is given out to subscribers of other newspapers not owner by McClatchy? For the better part of a decade, here in Elk Grove, subscribers to the Laguna and Elk Grove Citizen are given the Sunday Bee for free? Its not just the paper that’s free but McClatchy pays for deliver to these homes too. As mentioned in the delivery article, AB-5 affects newspaper carriers too.

We also have an additional challenge in California. With the recent passage of AB 5, delivery costs for the printed newspaper will increase dramatically by 2021.

Fear not, leader of the slugs who operate and work for this corporation, Gary Wortel, had this to say after Sheriff Scott Jones lit into McClatchy, “What Sheriff Jones and the Deputy Sheriff’s Association say about our watchdog journalism is wrong. The Bee has been a leading independent local news organization and credible news source since 1857 and will continue to serve this community for decades to come.” Ah yes, Gary, “independent” is not a word I would use to describe your paper. The only chance you have of being around for a decade is if bankruptcy buys you more time.

Concerning the 20,000 people currently drawing a pension from McClatchy, Eliane Lintecum, the CFO and another leader of the slug brigade is banking on a Federal bailout of the pension plan. She had this to say about the company’s pension plans “we don’t believe their … pension benefits will be adversely affected” … if they get the bailout. Folks, would such a hope make you feel more secure in your retirement? What slugs!!!

Lastly chew on this trash which is conveniently listed atop each article of the Bee online:

Local news is more important than ever. Reporters are out in our communities each day, bringing you the latest news and holding leaders accountable. Subscribe — and encourage others to support local journalists with a digital subscription to The Sacramento Bee by using this link.

Thank you. And #ReadLocal

Hey McClatchy, you have hardly any reporters, you write very little about the local community, you hold no one accountable, and what the hell is the hash tag read local about? I guess it makes sense when you see a photo of McClatchy CEO Craig Forman, who may need a thicker pair of glasses to see through the mess he created.

The company is toast. The readers have either assumed room temperature, can no longer eat solid foods, live in assisted living, or don’t know which pro-noun to refer to themselves as. You were too late to digital, advertising is dropping, and the end is in sight. The best hope you have is that many still major in state sponsored journalism at the local university and don’t know any better. The last part being key, you control a group of slugs, they keep doing as told unaware they are trudging through a field of salt, watching their friends lose jobs and hoping for a turnaround…. No chance!

Hence the reason we here at Really Right refer to these journalists as “those with an IQ of a piece of meat” …as you leave them out too long, they spoil.

Chief

We speak about the perils of debt quite often on this blog and when I try to share my concerns with people it falls on deaf ears. Or in other cases I’m told “don’t worry about the national, state or county level debt everything will be fine” and “the creditors aren’t coming to take back our municipalities, possessions, and the like”. We are always told to take off the tinfoil hat, stop being alarmist…we don’t know what we are talking about…fine!

I want to share a story of an acquaintance of mine who lives his life with this same attitude about his own debt!

This guy is married with 2 kids; both of whom have hereditary health issues…first question is why have another kid if you know the issues are hereditary? Any who. They own a house near a golf course and own two new very nice cars; one a pickup truck and the other a Mercedes.

They also are the proud owners of $75k in credit card debt. Combined they bring in $7,500 a month, which is a very solid middle class income and should support such a lifestyle. However they have been doing nothing but keeping up with the “Joneses,” more on this later.

Sensing that he was in trouble, he asked for help from an organization for which I volunteer. I was tasked to visit him and evaluate whether a onetime gift of $2,000 would make a difference. I rolled my sleeves up and put my finance background and degree to work.

What I found was shocking. This guy took keeping up with the Joneses to a whole new level. In fact, I think the Joneses would have a hard time keeping up with this family! His house is pristine with every upgrade possible; granite counter tops, marble floors, top notch security system, I was in awe! I actually thought I was at the wrong house at first. I went over his expenses with him and the picture finally came into focus. Their expenses–mortgage, car payments and incidentals–totaled almost $6,200k a month. Keep in mind this is making only a minimum payment on the credit cards, so in essence the balance was growing each month. This guy and his family are on a debt treadmill and sadly they were about to fall off.

First recommendation, let’s sell the house. This guy and his wife both commute almost an hour each direction for work! Easy solution right? However, they are upside down by over $100k–even in today’s environment where housing prices are sky high. (I think there is/was a consolidation loan here). As a result, they are stuck in a house way above there means, but ok…moving on.

Let’s sell those cars. Who needs $900 a month in payments? You don’t need a brand new truck or a Mercedes just to get to work. But he can’t do that either because both loans are 7 years and the cars have nil value as far as a trade in goes…high mileage. What they need is an economical vehicle, one where they can forgo the expensive full coverage insurance. (As an agent by trade, I estimate economy vehicles run about $300 a month to insure).

Next, I brought up food expenses…$1K a month, that’s a lot of eating out, regardless of whether it’s a chain restaurant or fast food that is a lot of money. He didn’t want to make changes here either. So I looked next at the incidentals and said ditch the cable and security system, again resistance. I said you live near a golf course, you don’t need a security system, and this one was top of the line, think all remote controlled by your Alexa device, and every square inch of the place covered by cameras, almost as if it was an illegal marijuana grow. The cable thing I do not get one bit, it’s actually becoming a thing to cut the cord…oh well.

After looking at different options, it hit me that he had no intention of righting the ship. However, my appointed task was completed. I now needed to sign paperwork which determined if he could apply for a one-time grant of $2,000 to help with his situation.

As I contemplated this man’s situation, I was reminded of a quote from Dean Warner from Animal House “Being fat, drunk, and stupid is no way to go through life son.” In this man’s case, drunk refers to his debts. He is drunk on debt and the worst part; his wife and kids are unaware that there’s even a problem. Yes you read that right! He is on his second marriage and this one looks all but lost.

He claims that he is 100% reliant on this one-time grant to “help with his payments.” This is false. This money is just enough to kick the can past Christmas and hope in the future that a miracle happens. This guy doesn’t want help. He, like a growing number of voters in this country, want their debts wiped out…a clean start…a new slate. A fresh new start so he can spend again…but he doesn’t want bankruptcy or the consequences that come with it.

This is part of a larger problem in America today, we run our lives just like our Government. We spend money we do not have and make a minimum payment every month. By doing that we lie to ourselves, saying we paid our bills this month. We live in the moment without a plan for the future. In this family’s case, I hate to say it but a diet is not going to help. This family needs a significant lifestyle change. Their debt needs to be handled and living outside of their means must cease ASAP.

How would I handle this issue if it was me? Easy. Ditch the cable, security system, and other unnecessary add-ons. This will free up about $900, at least in my estimation. The $1,000 on food…cut that in half at least, decide you like ramen noodles and quit going out to eat. Start brown bagging it at lunch and cut out the fast food. That should amount to about $1,400 or so in extra cash. Use this money to start immediately paying down that credit card debt. Trade in both cars and get a couple economical rides that have higher mileage. You need to unload the car payments and high insurance bill. As far as your house goes, look at it as most people view an economy hotel, a place to lay your head and serve as a dwelling, not a place to entertain people. Frankly no one cares about your marble, granite, or anything else, it’s not medieval times and you don’t live in a castle. Learn how to do yard work so you can ditch the gardener, ditto for the housekeeper. Take a look at the Cadillac cell phone plan and get something cheaper. Oh, I bet that’s under long-term contract too.

Most importantly you need to sit down and have a review with your wife, she needs to know the situation. Be honest and have a plan that will work, more on that in a second. The short term disappointment she has in you will be ok in the long run because she has to know you were living a lie. Truth be told, you can’t afford a divorce so there is that. As far as attacking the debt goes, start with the lowest amount owed and pay that down first, then move to the next one. Try calling the lenders and try to negotiate a lower interest rate or something. Burn the phones finding anyway to cut your expenses, however stick to your plan, as credit card/cable/security companies love to try to talk you out of it, actually they have entire departments of commissioned associates dedicated to it. Put about $1K in a savings account for emergencies.

Cut up your credit cards. Do not put them away for “emergencies.” With your track record, you need to get rid of them, they got you into this mess. Oh, FYI birthdays and Christmas are not “emergencies.” Then find a non-profit debt consultant or watch some Dave Ramsey and Suze Orman videos on YouTube. Find somebody to hold you accountable. The biggest problem is you both have champagne taste on a beer budget. The climb out of this is not easy and will not be fun but it’s doable. Need vs Want?!?!?!?!?!?! Know/learn the difference.

Final point: as far as keeping up with the Joneses goes, remember this, the Joneses are most likely in the same shoes as you; spending money they do not have, trying to impress people they probably do not like, on stuff they don’t need. Stop treating your life like your fantasy football team. No one cares about your possessions just like they don’t care about your team.

I think you know my decision on giving him the $2K.

Johnnie Does

Editor’s note: Johnnie Does is spot-on with this article. My wife and I attended Dave Ramsey’s Financial Peace University five years ago. Since then we’ve paid over $100K in debt (not including our mortgage). This only works if both people in the marriage are committed to getting debt free but it is really worth it.