Category: Economy

Campbell’s Soup is probably the second worst run organization in the country right now, CRA being #1.  However, Campbell’s situation is fixable, not so much for the CRA.

Some background first, Campbell’s Soup Company owns many brands including; the namesake soup line, Pepperidge Farm, Prego, Pace, V8, and Goldfish among others.  The problem is that these brands are all “center of the store” items that have been experiencing little to no growth over the last decade.  Consumer tastes have been changing. People are not reaching for canned soup much anymore since the economy has improved and we are not in a recession.  The fact that a can of soup might cost you $3 doesn’t help either. For not much more, I can get the Hungry Man dinner and be full after eating it.

As a result, Campbell’s CEO Denise Morrison, who is by far the most incompetent person leading any organization now except maybe ESPN, went on a buying spree to try to save face and earn goodwill with shareholders.

In a little over a decade Campbell bought; Plum Organics (2013), Bolthouse Farms a carrot growing company (2012), Kelsen Group baked goods (2013), Garden Fresh Gourmet salsa line (2015), and many other lesser known companies.  Here is the issue with all these acquisitions, Plum Organics is an organic line of baby food and salad dressing, and there is much competition in this space.  Bolthouse is a yogurt and Salad dressing line, again major competition, but also they own a carrot farm for producing baby carrots, my question here is why?  You’re a canned goods company not a carrot growing company!  Kelsen baked goods isn’t going to move the needle much sales wise and they are far more popular overseas than in the US.  Garden Fresh also made very little sense, you already own Pace salsa line, now you are adding a little known organic salsa line?  Again why?

Maybe Morrison should start by getting the carrots out of her ears. These acquisitions show a Board of Directors and Executive out of step with changing trends in a shrinking industry. However, this wasn’t the last acquisition this desperate company pulled off.  In a quest to ensure their bonuses and stock options vest, Denise Morrison pulled off the most idiotic acquisition in a long while buying Snyder’s-Lance for 6.1 billion (2017).  Synder’s is the maker of pretzels, potato chips, Emerald Nuts, and Pop Secret popcorn.  I call this a horrible acquisition because none of those brands except maybe Emerald are desirable.  As far as potato chips go; Kettle Brand, Cape Cod and Jay’s are ok, but Frito Lay owns the whole aisle!  Pop Secret?  I’m not sure how large the market is for popcorn, but I cannot see this being the answer to all that ails Campbell.  Basically, Campbell panicked and overpaid for a very average company whose brands are at best number 2 or 3 in their respective categories.  Basically what I am saying here is why grab a bag of Cape Cod when you can buy Ruffles or Tostitos?  The acquisition was completed, and the results were um… yeah.. just as most expected.

The company booked a $393 million-dollar loss one quarter after closing on the Synder’s-Lance deal,  and that wasn’t even the most disastrous thing that happened that day.  CEO Denise Morrison unexpectedly “retired.”  Give their earning, this was expected. These CEO types who are used to living a privileged life hate when things don’t go their way and as a result take the easy way out.  These thin-skinned types do not care much for adversity (much like Congressional Republican leadership). Golden Parachutes have their privileges as long as they’re used before the stuff really hits the fan.

Morrison was vicious as far as layoffs go, closing 2 plants during her tenure, one of which being in Blog Father’s backyard, Sacramento.  Morrison knew she couldn’t do anything more for the company short of euthanizing it and took the weasel way out; thus, leaving the chair of the board and her CFO Anthony DeSilvestro to take the heat on the quarterly conference call.  DiSilvestro I’m convinced is Dilbert from the comic strip in human form…not talking about the smartest person here.  Not to be undone, Morrison nominated herself for sainthood on the way out, saying her acquisitions are paving the way for a bright future at the company…of course what was she supposed to say?  By the way, the new interim CEO has essentially put the company up for sale and they are looking for either a buyer for parts of the company or the whole thing.

Here is the bottom line and the biggest issue, Campbell’s made a fatal mistake going on a buying spree trying to make their company something it was not.  Legacy Campbell’s is a preservative loaded canned soup, salsa, and sauces business. This type of business throws-off lots of free cash to be reinvested into the business, pay down debt, or be returned to shareholders.  There is nothing wrong with this type of business. Tastes may change over time but if you’re feeling ill, Campbell’s chicken noodle soup would usually do the trick.  However, instead of sticking with what they know, Campbell’s tried to become a trendy, fresh, farm to fork type company and failed badly.  They are a canned and packaged goods company. They tried to grow carrots, but this division has lost millions over the past 3 years.  The fresh salsa, salad dressings etc. have had the same fate.  Now the company finds itself in a pickle after yet another ill-fated acquisition.

Here is my solution.

Keep the soup business. This is your namesake and legacy product.  Sell the carrot farm and the fresh salsa and salad dressing business, this is not your core.  Keep Pace and Prego as they are also your legacy and very well known.  Dump Pepperidge Farms and most of the Synder’s-Lance business. Sadly, this is never going to pan out, way too much competition in that space.

This is where the problem lies with my solution, no one really wants those spare parts. The only answer is to call a company like Kraft-Heinz and see if they will buy you outright.

Could the struggling Campbell Soup Co. have a suitor?

The Kraft Heinz Co. (NASDAQ: KHC) is reportedly interested in buying Campbell Soup Co. (NYSE: CPB), according to the New York Post, citing sources familiar with the matter.

Report: Three months after Snyder’s-Lance purchase, troubled Campbell Soup may have suitor

Sadly, a debt laden dinosaur with no vision won’t attract many buyers.  Inept management does this to a great company.  I have a feeling the company won’t exist independently much longer.  Campbell’s too big to fail strategy and move to get hip and trendy has utterly imploded. As a show of good faith to shareholders, fire that Dilbert look alike. Oh, and lastly, if things get really bad and there’s anything worth salvaging, look for Uncle Pennybags to show-up at the fire sale to liquidate the carcass.

This is one of the funniest business stories that you will ever read. Now funny can be defined as humorous or occasionally as peculiar. This story has elements of both. Had this happened to some little backwater company it might even be viewed as tragic but when the company is one of the biggest multinational technology companies in the world then it’s funny.

This story happened in South Korea a few weeks ago. Samsung—the guys that make a galaxy of electronic devices including a certain line of smartphones—also happens to own a brokerage company. An employee at Samsung Securities was trying to key in a dividend payment of 1,000 won (the local currency used in South Korea) to a group of 2,018 employees. Now 1,000 won is about 94 cents in US dollars. Instead of keying-in this amount for a dividend payment for each share the employees owned, some Samsung employee issued 1,000 shares of Samsung stock for each share owned by the employee group.

The dividend was supposed to be 1,000 won ($0.94) per share. But the employee mistook the form of measurement, confusing won and shares. The error caused Samsung Securities to issue a dividend that was 1,000 times the value of each share held by the group of employees.

In all, the company deposited 2.8 billion shares worth more than 111.8 trillion won ($104.8 billion) into employee accounts—more than 30 times the company’s existing issued shares.

A Samsung Securities spokeswoman said the firm realized the mistake shortly after, but failed to take immediate action.

Sixteen staff members sold a collective five million shares worth about $186.9 million minutes shortly after receiving them. It took the brokerage 37 minutes to completely block employees from selling the accidental shares, according to South Korea’s Financial Supervisory Services, a financial watchdog.

Some of the 16 staffers sold stock despite receiving warnings from the company not to do so, the FSS said. Samsung Securities said employees who had done so—along with the employee who had made the initial calculation mistake—have been temporarily suspended from their duties.

A $105 Billion “Fat Finger” Accident Is Samsung’s Latest Headache

Ronald Reagan used to tell folks to “measure twice and cut once” looks like the principle still holds true in the digital age.

Unless you are a CRA member, living under a rock, voted for Hillary, or have any Park Family Genes in your DNA, you have likely heard Toys R Us is liquidating their business here in the United States and all over the globe.  What caused a giant big box that controlled 20% of the toy market to collapse you may ask?  Well a combination of things, but the internet, Amazon.com and high prices were none of them.

First some background on Toys R Us. The company was founded in 1948 by Charles Lazarus who interestingly died the same day the company decided to liquidate all stores.  The company had sustained success and was even referred to as a “category killer” which is similar to how people view Amazon.com today (a company that is almost impossible to compete with).

Editor’s note: As a child, the highlight of every Christmas was receiving the Sear’s Christmas catalog. In my youth this was Christmas. We only wanted to get toys from Sears because it was literally a one-stop shop for everything. From their catalog, our parents could order anything and have it waiting for us under the tree. Seemingly out on nowhere, along came Toys R Us and stole Christmas from the oldest and most well-known retailer in the country.

The company prospered for many decades but in the late 1990’s Toys R Us started having issues competing with Target, Wal-Mart, and Amazon.com. In 1998 it fell behind Wal-Mart in market share. This is when the chain’s issues started. They tried Kids R Us, a clothing discount chain, and it failed badly and was liquidated after 5 short years.  They began growing their Babies R Us chain, to essentially focus on commodities like diapers and bottles, this was also a bad decision.  Even more costly was the expensive remodeling of all stores in 2000 by former FAO Schwartz CEO John Eyler.  This predictably didn’t change the competitive landscape so in 2005 with the stock struggling on Wall Street, it was sold in a leveraged buyout to 3 private equity firms.  This further exasperated the problems facing Toys R Us.  The buyout to take Toys private was 6.6 billion dollars, led by Bain Capital (After Mitt Romney had left) Vornado Realty Trust, and Kohlberg Kravis & Roberts.

Leveraged buyouts are not always bad things, there are benefits to being private and you do not have to answer to public investors on Wall Street and can work out corporate and company issues behind closed doors.  In N Out and Chick-fil-A are both private and the lines are out the door, down the street, and in most cases backed up to the freeway!  Michael Dell—yes that Dell—took the company he founded, Dell Computer, private. Dell Computer had been struggling for many years but taking it private has allowed it to turn around.  Typically, after these types of buyouts, private equity firms wind up taking the company public again (more on this later).

So how do these buyouts work?  When a public company has a major drop in stock price and has fundamental issues like Toys did, then in come the White Knights saying they can fix everything and will offer to buy the shares of the entire company.  In the case of Toys, the private equity guys offered a price 67% higher than what the shares were trading for on Wall Street; banks are happy, stockholders are typically happy, everyone gets paid and then the company is private.  In the case of Toys, it was 6.6 billion. So, did the private equity guys have to pay 6.6 billion for Toys?  No, they borrowed the money from investment banks—think Goldman Sachs, Morgan Stanley, etc.—and used the company’s cash flow as collateral.  Truth be told, the private equity guys in this case likely put up only about 10% of that 6.6 billion.

So, from the start, Toys had a debt load of 6 billion to pay back, at interest rates likely in the 8-9% range!  Banks extract large fees from these loans and add it to the debt load—think the housing crisis circa 2008. The banks just rolled the expenses into the loan then sold it to an unsuspecting group of investors.  In this case Toys was now controlled by 3 large companies that didn’t know how to run the toy business at all.  However, one thing these 3 companies know a lot about is how to extract money from their investment, (more on this later as well).

So after the dust settled, Toys was saddled with 400 million in annual interest payments to satisfy the terms of their loan.   Think about that, 400 million in annual revenue goes first to paying off debt interest, not keeping the lights on or paying salary, just debt.  Then the private equity companies charge a “management fee” of usually 2-3% of revenue every year, further straining cash flow to pay bills.  Then they pay themselves a dividend every year of around 5-8% on their “investment” once again straining cash flow even further.

With sales falling, Toys began to run low on cash. As a result, cuts had to happen across the company because no way would the private equity companies take a cut in fees.  In such circumstances, the research and development department gets cuts first, then other sales, general and administrative expenses are slashed next, followed by a hiring freeze, then changes to the accounts payable department.  What used to be 30 or 45 day terms are changed to 60 or 90 day terms.  After that benefits are cut/eliminated and salaries for new hires are slashed to minimum wage.  This is all being done to pay interest and dividends to private equity companies.

The result of this ultimately led to the death of the company.  Because of financial constraints, Toys can’t innovate much. For example, toys are only made by a couple different companies—Hasbro and Mattel being the big ones—so in a sense you are limited by their innovation in that space.  On price, Toys only had about 800 stores in the United States compared to Wal-Mart and Target which have 800 in the western U.S. alone. This hurt the negotiation power Toys had with suppliers. For example, Toys wants to buy one million GI Joe toys from Hasbro, and Hasbro sells them to Toys for $10 a unit.  Wal-Mart orders three million GI Joe toys and Hasbro cuts them a volume discount based on $7 a unit.  As a result Toys sold GI Joe for $14 and Wal-Mart could sell for $10.  Toys then agreed to price match the competition, so now on that same GI Joe instead of making $4 per unit, they were breaking even; such a business model is not sustainable.

Also, there was no money being re-invested back into the business. Toys used to be known as a huge demonstration and interactive place for children to visit, try out the toys, and then scream and cry until mom or dad bought it for them. Those demo areas disappeared.  Toys became a big box store and worse yet couldn’t compete on price with other big box stores like Wal-Mart.  In a world where price is now everything, Toys had an advantage at one time. The child could play with and decide they want the product and unfortunately for the parents, they couldn’t wait two days for Amazon Prime because little Mike wanted it NOW.

Even as the business declined, Toys still controlled 20% of the market. Finally, the private equity guys turned to turnaround artist David Brandon, you may recognize the name, he turned Domino’s Pizza into the company it is today and brought it back from the dead.  The problem for Toys was that it was too late. Toys remodeled several hundred stores, brought back the demo areas, improved their website, but the damage from private equity had been done. The flow of money away from operations led to customers opting for other big box stores or internet websites.  They couldn’t attract top talent anymore and began to close stores several tranches at a time.

This spooked suppliers and as a result; Hasbro, LEGO, and Mattel changed the terms under which they would sell products to Toys. The result, Toys ran out of inventory during the Christmas shopping season!   With unsustainable debt, the company could not pay its bills and as a result the only option left was bankruptcy protection. A big store like Toys—similar to Sports Authority and Sport Chalet—no way the creditors would allow them to go through a restructure, they would need to liquidate.  Thus, the end of Toys R Us. But don’t feel bad for the private equity groups. They collected fees and dividends for over 15 years and then during bankruptcy sold the inventory and everything else to liquidation firms.  Additionally the lack of profitability also gives tax advantages to these groups since they tend to own many companies.  The employees?  They got nothing, except a pink slip of course.

Could Toys have been saved…I think so; there is room for a toy store chain in the United States.  This is what I would have done. I would have run the stores similarly to Best Buy or a grocery store. I would have found a tenant or two to sublease floor space, so they could demo their own products.  I would have set up an area to host children’s birthday parties, and maybe reached out to LEGO to see if they wanted to create a LEGO Land in the stores.  This would give predictable cash flow every month and given you a way to spruce up your business to make it more appealing to customers.  Have you been to a Best Buy lately?  I don’t even think Best Buy owns much of its own leased stores; Pacific Sales, Sprint, T-Mobile, Magnolia, Google, and HP/Apple lease a ton of floor space from them.  As far as price match goes, that’s a battle big box stores win by attrition. I would have focused on making the stores into a place both parent and child want to go to because I don’t think anyone admits publicly to wanting to go to Wal-Mart.  But alas, a large part of most people’s childhood is gone with the wind.

“X”

A headline caught my eyes this week and I knew I had to do more in depth research, “JM Smucker Company announces global pet food recall.”  Ummm, why is a jam and peanut butter company recalling pet food I wondered aloud?  I’ll get into this a little more later.  As I continued reading the article I figured the dog food may not have been heated/mixed/prepared correctly…wrong, they added pentobarbital….yeah as in the lethal injection death penalty drug.  For those of you in Soviet California, other states use lethal injection to wipe clean the earth of scum, you guys just let them out of jail with a slap on the wrist.  But back to my point, how in the world does pentobarbital get introduced into the food supply of a huge company?  I mean I thought the point of buying dog food was to keep Fido alive not kill him/her or if you’re in California your gender neutral dog.  The brands recalled were; Ole Roy, Kibbles n’ Bits, and Gravy Train, all wet dog food products only.  Besides the fact that wet dog food is basically processed diarrhea I still honestly wonder how in the world pentobarbital was introduced to the supply chain.  What was it even doing in the factory?  I will explain below.

The FDA has this to say regarding ingesting pentobarbital “Consuming high levels of pentobarbital can cause coma and death. However, pentobarbital present in the withdrawn products is at a low level unlikely to pose a health risk to pets.”  You should feel much more assured now, it was just a low dose so likely nothing would happen to your dog.  What a line of crap.

Editor’s Note: Our readers in the Orient should understand that this FDA pronouncement does not consider the cumulative effect of consuming dogs or canine products over a long period of time. Participants in the recent Winter Olympics were unlikely to have been exposed to enough canine products during their time in South Korea since each athlete was issued 37 condoms by the International Olympic Committee and thus are presumed to have been too occupied doing other things to suffer ill effects of canine exposure.

Smucker had an even better one, get a load of this “We take this very seriously and are extremely disappointed that pentobarbital was introduced to our supply chain,” Barry Dunaway, President of Pet Food and Pet Snacks said in a statement.  “We will continue to work closely with our suppliers and veterinarians to ensure the ingredients used in our products meet or exceed regulatory safety standards and our high-quality standards,” Dunaway continued.  “Above all, we are a company that loves pets and understand the responsibility we have in providing high quality food for the pets our consumers love.”

Literally this Dunaway has admitted nothing other than they are embarrassed; yeah like a child sorry they got caught, not sorry for what they did. Then he goes on, but don’t worry we will work closely with our suppliers (sounds like you should terminate the contract), veterinarians (But notice not the Vet you will be taking your sick dog too) and they still love your dog (they love your $$$ and hope their ignorance doesn’t kill it).  Clearly Smucker’s legal team wrote the press release and Dunaway signed his name. The kicker is this waste of human flesh is a president of the pet food division, like he actually has major responsibilities.  Apparently, there is no brain cell requirement to hold a high-ranking position at JM Smucker Co.

The over laying issue here is about 10 companies control 90% of the market on most food and other essential products we use in our lives.  Best examples; you hate Pepsi because they are evil and their soda causes diabetes, so you reach for Aquafina or Quaker Oats instead…PepsiCo makes those products.  Gatorade, Tropicana, or Lays….yup all owned PepsiCo.  Coca-Cola makes Coke, but did you know they make Dasani bottled water?  Or Fairlife milk?  Campbell’s Soup tastes awful, so I will grab a V8 instead…both owned by Campbell’s.  MARS, the maker of M&M’s also owns Banfield Pet Hospital…yeah.  I am attaching a graphic to show the depth of this.  The point I’m trying to make isn’t about a monopoly or anything it’s that the Stock Market/Wall St. are so demanding that companies have no choice but to buy other brands.  As William has said, it’s a 90 day cycle you need to beat last quarters numbers, or the same quarter from last year’s numbers and if you don’t there are consequences.  These consequences sometimes result in buying of other brands, most often though layoffs occur.

Click here for full-sized infographic

You may remember the old Campbell Soup plant in Sacramento, its closing had nothing to do with productivity, it was closed because it was old and the County wouldn’t pony up major tax breaks so they left. Mondelez International moving Oreo production from Oregon to Mexico had nothing to do with streamlining of the company it had to do with the input costs are less in Mexico then the USA.  These are done to appease Wall Street investors and big banks and investment firms.  Uncle Pennybags and his brethren want their quarterly divided or there will be hell to pay.

Back to my point, when one of these conglomerates buys a brand, they destroy it in the name of saving a few dollars.  Look at Annie’s, it’s an organic line of food designed for children, it was bought by General Mills, they stripped out the natural ingredients and now the product is trash.  Look at McDonalds, what used to be an all-beef patty, is now a frozen hockey puck of mystery meat, and a bad tasting one at that.  These examples underscore that when you live in a 90 day cycle and anything necessary to drive profits can and will be done.  Look at what Coke did years ago, replaced cane sugar with corn syrup, the effect has been great, it was more addictive and tasted the same, and sales soared.

Enough rambling, back to Smucker; the problem now is companies used to actually make their products now they just mix ingredients together and package them.  A good example is Campbell Soup, I used to know an employee there, and he told me the ingredients were all locally sourced (within 5 hour drive) and were mixed and cooked at the plant.  That practice ended a decade ago.  I’m sure it is the same at Smucker, their ground meat is from one country, the gravy from another, the bits from another, they show up on a flatbed truck, in unlabeled boxes, you throw them into a mixer and voila!  Ole Roy wet dog food is created, can it, label it and it’s off to the local market.  Not sure where the pentobarbital gets mixed in but it’s in there somewhere.  The bigger issue is corporations like this have numerous suppliers for the same product so there could be 5 that supply the gravy mix, and it all comes in unmarked boxes making it impossible to know what supplier/country of origin it came from.

The point of this article isn’t to scare you, most all corporations make food that is completely healthy and safe to eat, but “hitting the numbers” causes corporations to use lower quality ingredients or layoff the food safety inspectors, and this is where these problems lie.  Conagra Foods, maker of Chef Boyardee, laid off most of their food safety inspectors, and hmmm 2 months later issued a global recall of 100k cans of pasta, just saying.

Til next time,

X

PS Mark Cuban had a bad week…….maybe time to dance on his grave!

One of the most frustrating things for Conservatives is the lack of concern that the elected folks and those in government have concerning underfunded promises made by government. This is especially true when we look at government funded pensions and Social Security. California’s State Treasurer admits that California governments (state, county, and local) are 1.5 trillion dollars in debt (Link: Treasurer Debt Watch) and this does not include the estimated 1.4 trillion in underfunded pension liabilities for the State (state, county, and local). From our perspective, the government officials are behaving much like Mad Magazine’s Alfred E Newman who is best known for saying, “What, me worry?”

Finally, I have an explanation; mind you it’s not one I like or agree with but I would like to share it with you.

This fall, I took a class on government accounting that was sponsored by the California Department of Finance. Much of the class focused on the way California does things. Please understand that the Dept. of Finance is the government agency that assembles the budget presented each year by the Governor to the Legislature for approval. When the Dept. of Finance speaks, powerful people listen. (Think Moody’s, Standard and Poor’s, etc.)

I could get into much vocabulary on things such as GAAP (Generally Accepted Accounting Principles) and GASB (Governmental Accounting Standards Board) but it’s not necessary for this discussion; instead you only need to know one term, measurement focus. When this term is applied to governmental accounting, it looks like this:

Governmental fund financial statements are prepared using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized in the accounting period in which they become available and measurable, and expenditures are recognized in the period in which the fund liability is incurred…

Link

The key phrases in the quote above are “current financial resources” and “modified accrual”.

This is radically different from what people do in the private sector. Normally, businesses use accrual accounting. Under accrual; assets and liabilities are recognized when they happen. For example, in a private business when you bill a customer, an accounts receivable is created. The A/R is treated as an asset at that point, you don’t wait until the customer’s payment is in your bank account.

Government doesn’t do that. Instead they purposely ignore certain things because under current financial resources, government only cares about the current fiscal year. In the example above, government only recognizes the receipt of cash as an asset when it is deposited in the bank, except at year end. Assets and long-term liabilities are purposely ignored except on a few special year end reports.

So practically speaking, this is how government treats pensions:
• Employee money withheld from paychecks for retirement are sent to the federal government for Social Security and state retirement is sent to CalPERS. Assets are done.
• Retirees in the system are sent their retirement checks. Liabilities are done.
• Conclusion, pension system is ok.

Seriously, their view is really that simplistic. Why? Because the current fiscal year was taken care of.

Oh, just so you know, they treat bonds this way also. As long as they can cover interest payments for the current year then per government accounting, everything is wonderful.

I realize that from a practical point of view this makes no sense but that is how it is. It goes back to GAAP. Specifically, the Generally Accepted part. If governments agree that things should be done a certain way, then that is the way they will do them. It’s not a matter of what is right or more technically correct or responsible to the next generation, if it is generally accepted not to worry about long term obligations then they don’t have to.

Don’t just take my word for it, here’s straight from the textbook:

The employees earn the right  to the benefits during the periods that they work but don’t receive the cash (or whatever form the benefit may take) until after they retire. The employer, however, receives the full value of the employment exchange during the periods the employees work; therefore, the employer’s obligation for paying both salaries and benefits arises during those working periods.

But what if the government budgets for those benefits on a purely cash basis; that is, by not budgeting for the benefits until the years the actual payments are due, after the employees retire? Is the budget “balanced” if the government fails to set aside money for the benefits in the years the benefits are earned? We suggest such budgets are balanced in form—on a cash flow basis—but not in economic substance.

In fact, some governments consistently do not budget in the current year for the full amount of pension benefits earned by employees in the current year, and virtually every government budgets for retiree health care benefits in the year they are paid, not when the employees earn the benefit.

Introduction to Governments and Not-for-Profit Accounting  Seventh Edition page 24.
Emphasis added by author in red .

And there you have it ladies and gentlemen of the jury. The fix is in and they are all in on it. It is clear that the authors of the textbook are just as indignant as we are about it but as they say, “Such is life”.

So next time you hear someone claiming the California budget is balanced remember the unspoken weasel words they are omitting, “Budgets are balanced in form…but not economic substance”.