Business Gives Up on Obama

The Orange County Register has an interesting piece about business leaders blasting Obama. Of course. Most Business leaders have given up on Obama. They are poised to discreetly fund a Republican challenger. Oh, not all business people have given up on the Chosen Won. Significant portions of Silicon Valley still love the guy, even if IPOs are close to half a decade away (and thus cash-out points for Venture Capitalists are ever more distant). Hollywood loves Obama too, no one in Hollywood cares if films make money or not, they get paid up front regardless (because they expect cheating on the residual/profit sharing to be so rampant they don't bother or care). But most business leaders have given up on Obama. Because he's made them significantly less wealthy.


Charlie Munger, Warren Buffett's Vice-Chairman, has said that:

"I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it," Warren Buffett's business partner, Charlie Munger, once said. "And never a year passes but I get some surprise that pushes my limit a little farther."

Machiavelli said it more succinctly in the Prince: that a man will sooner forgive the murder of his parents than being made poor. Obama has made the wealthy corporate leaders of America, well most of them, significantly less wealthy. Not poor, but not what they expected.

The first to be affected were property moguls. Guys like Donald Trump. Shopping malls, luxury condos, office towers, were all hit hard by the recession, and Obama piling on investment choking regulations, uncertainties, and costs. Cheap interest costs did not combat people not shopping (and closing of anchor stores like say, Borders) at malls, or not buying luxury condos (at expected prices) or cutbacks in office space. These folks were sunk-cost trapped, they could not just dump and run. So you had considerable push-back from these types, and Trump flirted with running against Obama.

The next to be affected were those CEOs with significant stock in their companies, or compensated with options. Which is most of the big company CEOs. As long as cheap money from "Helicopter Ben" Bernanke and Turbo-Tax Tim Geithner pumped up risky assets like stocks and bonds, all was well. Even if their companies long-term growth prospects in the US were about zero. They didn't care -- they were making money. China was going to grow forever! And reality set in. Even before the stock market turbulence, earnings were sliding, in internal reports these guys were reading, and they knew enough that stock prices would slide too. Making many if not most of their options utterly useless. And reducing their paper wealth in stocks significantly. Often at 30% or more haircuts.

So if you want to know (Brian Calle of the OC Register is correct, this is very unusual) why Steve Wynn of Wynn Resorts, or Bernie Marcus of Home Depot, or Andy Puzder of CKE are blasting Obama, it is because he made them significantly less rich. He lost them money. And they in turn will do their best to fire him.

No, it is not a "done deal." Obama has many cards to play. Republicans could select someone unelectable (Michelle Bachman, who while admirably Tea Party conservative, is hated by most White Professional women who in my view hold the key to victory). Romney could prove weak and McCain like in confronting Obama (a likely bet). Rick Perry could be painted as George Bush Returns. But very likely, Obama will not be raising huge amounts of money from Corporate America. Sure, Hollywood will kick in. So will Silicon Valley. But that's about it.

Meaning, Obama's likely to play big, some Gotterdammerung attempt, to change everything. Failing the usual Chicago method of digging up dirt or phony court challenges, expect lots of riots and race-baiting. It is the Chicago way.