Saturday night was not the farewell to the home field of America’s Team.  It was the effort of one man to exploit a once great franchise for his own purposes.

So many great men! So many great moments! So many opportunities for Jerry Jones to grandstand!

If Jerry were the promoter he thinks he is, he would have done a much better job Saturday night. As I flipped back and forth from Channel 33 to the NFL Network, I could not believe that this was happening. The sound was bad, the videos were stale and the entire production was second rate.

Has Jerry Jones lost it?

A few weeks ago I noticed that the Cowboys had hired an auction company to sell Texas Stadium Memorabilia. They sold $245,000 worth of memories. http://www.dallasnews.com/sharedcontent/dws/news/localnews/stories/DN-stadiumsale_23met.ART.State.Edition2.4a86522.html

I wish we could see what Jerry spent on his ticket and box seat promotion via the Cowboy Hall of Famers.

For all his success, Jerry Jones fails at one of the major tests of leadership: he doesn’t know what he doesn’t know.  Someone on his staff should have told him that commemorating Texas Stadium should not have been transformed into a commercial for buying season tickets at the new stadium.  There will be plenty of time for that.  But Saturday night should have been about remembering the past, not selling the future.

Randy Hill

Last week I predicted we would eventually reach $20 a barrel for oil.  Yesterday, we got more proof that we are well on our way:
http://apnews.myway.com/article/20081221/D957BHRG0.html

Gas prices fell nine cents nationwide in the last two weeks.  Crude prices are down also from a record high of $147 a barrel in July to $41.07 a barrel today. The result?  We now have the lowest gas prices in five years. What explains this dramatic drop from where we were last summer?

For starters, less driving is driving it.  In other words, people don’t drive as much in the winter as they do in the summer (when families traditionally load up for vacations or other long distance trips).  Since demand has gone down, so has the price.  Also, the troubles of the domestic car inudstry are impacting demand.  Fewer people are buying fewer cars and that’s helping put downward pressure on gas prices.  All of this leads me to continue believing that we are heading to $20 a barrel.

But let’s not lose sight of the big picture.  Low gas prices give us time to think about our future energy needs.  We need to work today to create tomorrow’e energy.  Our country, our economy and our future demand on it.

-Randy Hill

Today, President Bush decided to go ahead with a $17.4 million bailout package for the auto industry.  The money will come from the pot of cash approved by the Congress a few weeks ago to help rescue the financial markets.
http://online..wsj.com/article/SB122969367595121563.html

In announcing the decision, the president said the loans available to the automakers will have two conditions:

“First, they will give automakers three months to put in place plans to restructure into viable companies — which we believe they are capable of doing. Second, if restructuring cannot be accomplished outside of bankruptcy, the loans will provide time for companies to make the legal and financial preparations necessary for an orderly Chapter 11 process that offers a better prospect of long-term success — and gives consumers confidence that they can continue to buy American cars.”

In other words, the automakers get the money now.  They just have to get back to us later on how they will re-structure.  In negotiating, this is called losing your leverage.  The time to ask for concessions is before the money is offered, not after. This plan has too much carrot and too little stick.

While I believe America needs a viable domestic car industry, I believe it we can only achieve this if we have major reforms of both management and labor.  Unfortunately, today’s bailout does neither.

- Randy

Our current economic crisis started on Sept 11th 2001.

The Bush administration, along with Congress and a host of others,
made great efforts to prop up the economy. The straw that broke
the camel’s back was coated with oil. The surge in oil prices broke
the economic dam of America. All the efforts to prop up our economy
that continued until mid 2007 seemed a success until the economy
slipped in the rising price of oil and continues to fall. Today,
the dollar’s decline and OPEC’s plans to reduce daily output by 2.2
million barrels had no effect other than a close below $40.

When the dam of a lake breaks and the water rushes out, its level
drops. Stopping the out flow does not fix the dam and you can’t
expect the lake to return to the past level until you stop the
decline and repair the break. In July we broke the dam of our
economy and simply believing that it will shortly return to recent
levels is foolish. It’s like thinking the lake will just fill back
up once it hits the low level and again begins to rise…….the dam
is broke and the lake will not hold water until the dam is repaired
and it rains enough to fill the body of water.

All we have seen so far is our economic dam has broken and the
level continues to drop to new lows. You never can repair a dam (economy)
as long as it is loosing water and eroding (oil prices and stock
market dropping). You must first let it fall or empty to a level
able to be repaired. Then you must repair it so it once again
will hold back the water and pray for rain (business, economic growth)
to refill the body.

We are nowhere close to the bottom of the market. I am adjusting
my comments from Sept that oil will go below $40 barrel. I think we
will soon see oil well below $20. We have not seen anything yet.

But then, like always, the price will go back up. Boone Pickens recently
said as much: http://www.oregonlive.com/business/index.ssf/2008/11/pickens_oil_prices_heading_bac.html

So oil will go down and then up again…and so will our economy.

- Randy Hill

For years, the American car industry has been on the road to failure. It now appears the industry has reached its destination.
http://apnews.myway.com/article/20081212/D95106M80.html

With the collapse of the goverment bailout negotiations, it seems unlikely that the Big Three will be rescued from their collapse any time soon.  That leads to two questions: Who is to blame?  And what can be done now?

Who destroyed this once mighty American industry?  Politicians in Washington are debating this with Democrats blaming management and Republicans blaming labor.  I take a different view: I blame both management and labor.

Want proof that management is out of touch?  What other industry flies its executives in private jets to Washington so that the executives can beg for a handout from the government?  This symbolizes the misjudgment and mismanagement that have defined the reign of these car executives.

But the union bosses are equally to blame. In the 1950s, General Motors signed the first union agreement that guaranteed cost-of-living increases.  This was the beginning of the American auto industry’s self-destructive path as its labor costs grew to unsustainable levels.  Today, workers at American car companies get paid $71 an hour, while their competitors at foreign car companies make $42 an hour. Is it any wonder that our domestic car industry can’t compete?

Now we find that the president might intervene with previously authorized money.
http://www.politico.com/news/stories/1208/16523.html

If he does, he should insist on changes from the top floor to the shop floor.  Management and labor got us in this mess together.  They must both sacrifice to get us out.

- Randy Hill

What if we have finally broken the back of the Middle East?

What if we have finally hit the top of oil?  What if the auto manufacturers finally realize they are on the slope of destruction because they haven’t been innovative enough in their industries.  Looking back at the history of oil over the past 100 years, we have seen large spikes and massive declines.  Typically, every time we have a spike in price, it is followed by a huge fall to a level lower than what it started at when the rise began earlier.  We’ve seen this pattern over that past 100 years.

There are two words I want to talk:  ingenuity and innovation.

INGENUITY – when someone takes something already existing and does something with it – using existing technology or existing manufacturing capabilities.  When our auto manufacturers decided to start putting DVD players in vehicles, Bluetooth capabilities, GPS navigation . . . this was ingenious but not innovative.  Our auto manufacturers have used ingenuity, but they have not been innovative.  They have implemented other people’s products into their vehicles.  They have not been innovative enough – and have gotten caught with their pants down..  The gadgets have made our vehicles pretty high-tech, but, the vehicles themselves, like the big SUVs, were getting 20 mpg or less!

INNOVATION – this is not typically something that the marketing is craving, yet it is something that is practical and can be used immediately.  It is being AHEAD of the demand.  Innovation thought about putting a computer inside a cell phone.  We weren’t needing it, but it has transformed the way we live.  Innovation rises when you hit the bottom and you start seeing things from a different perspective.  Not to just get out of the hole to repeat it all over again.

Have we finally understood it?  I think that we may have reached the point that we realize we must be innovative in our energy industries!  Have we finally felt the need to employ innovation in our homes, where we start installing a small wind turbine in our backyard to capture wind energy.  So when it’s windy, like it was in West Texas the other day, we basically get free power.  Power that is generated with free energy!

The blow to the economy has penetrated so deep that we may have finally discovered the need for innovation.  What if never see oil go to $150/barrel ever again?  What if the auto manufacturers have finally understood that consumers are wanting 30 foot long SUV that gets 65 mpg?  What if they made the decision to put to work the same innovative geniuses  that created the amazing technoligies of communication, microchips and computers? What if they could help us to truly become more energy independent?

I have a motor home.  It has a Onan diesel generator that can fire up enough electricity to power 3 AC units, 2 TVs, and a microwave all at one time driving down the highway!  It burns only 1/2 gallon per hour!  This is innovation!  I RECENTLY saw on CNN recently that on the space station, we have spent $40 million on a machine to purify urine into potable drinking water!  That’s innovation! If we can do this, why can’t we use the same innovation to make a combustible engine using the most modern technology?

With the economy down, with everything in the tank, could a different outlook and different effort rise from these ashes?  Every time we make a little advance in efficiency, it makes an advancement in independence.

- Randy Hill, Texas Entrepreneur

Randy Hill BLOG:

This is the last of this 3-part series including thoughts about T. Boone Pickens, the economy, and President-Elect Obama.

PART 1: T. Boone or Boondoggle?

PART 2: Is our economy fixed?

I am a conservative Republican and did not vote for Obama. However, I am seeing some interesting things in the new cabinet which will be good for America and the economy.  Even with Bush still in office, we are seeing some positive effects.  When Bush was elected 8 years ago, the price of oil was increasing and fuel prices were going up drastically and there were signs of a slowing economy.  But now we see the price of oil going down.

President Bush is a fantastic man.  He has been a great President and he’s been faced with some very tough obstacles and he’s been tested numerous times.  And I think that the President has done a great job.  However, we all know that the President is not graded on how well a job he does fighting terror, protecting us or making decisions that agree with our individual beliefs.  So often, Americans grade Presidents on how strong the economy is and how things are for people.  And because of the price of oil for the past 8 years and because of the terrorist activity that changed our lives on September 11th, it is unfortunate for President Bush that his tenure has covered such a period of time, with the extraordinary events that we have seen over the past 8 years.

The economy is already correcting itself. The outlook is much brighter now that fuel and oil have gone down.  I am of the belief that oil is the core piece of our economy, the core asset in America that affects every individual piece of our entire economy.  Whether it’s from the products we buy in the grocery stores, the fuel we put in our automobiles, the cost of energy for our houses – everything we do and everything buy is related in one way or another to fuel, thus being oil.  It is the centerpiece of our economy.

However, we have seen a period of time where our economy has been devastated because of these oil prices.  But I’m excited that there is change going on now that we are seeing decreases in prices.  I believe that oil will go below $40/barrel.  I think it will drop into the $30s and could possibly go lower than that.

If you look at the historical chart of oil over the past 100 years, we have seen spikes in demand, but then a large fall from the historical highs.  It’s typical that when we have a surge in prices, it hits a point and then it plummets.  And historically, once it drops, it’ll stay at a low level for a number of years.

Commerce Secretary-designate New Mexico Gov. Bill Richardson

Back to President-elect Obama, I am very excited about his appointment about New Mexico’s Governor Bill Richardson as Commerce Secretary. Governor Richardson has a strong history and background in renewable energy, something I believe is crucial to our independence from foreign oil.  Once we become independent from foreign oil, that will protect us from these surges in fuel and oil prices.

But I do believe that we’re gonna see a better economy.  President-elect Obama is lucky.  Bush was unlucky when he got into office, because the economy was not strong.  There were rising fuel prices and plenty of signs of a sputtering economy.  In addition, the house debacle that we have recently seen, this was a direct but long-term result of a decision of the Clinton administration to lower the standards for qualifying for American home ownership. That worked great until many Americans owned multiple homes.  But the interest rates went up and people bought adjustable mortgages.  And thus we are seeing the effects that WE all created.  All of us participated in it and we all knew what was going on.  It wasn’t the fault of one entity – we cannot lay full blame on the finance companies, Congress or even the various Presidents.

Unfortunately as a Republican, we are now going to put a liberal Democrat in the White House at a time when the economy is in the tank, but there is light on the horizon.  I’m disappointed that we were not able to do this two or three years ago.  But having somebody fresh, Obama’s youth, his enthusiasm and his leadership will be good for our country. Like I said, I did not vote for him.  But I think change is good.  It is an exciting time for America and for our economy as well.

I believe that President-elect Obama will implement some major change that could work very well.  I think he will implement some government programs that will attempt to put more Americans to work.  I’ve heard talk of a highway and bridge program similar to what was done by President Truman after the Depression .  I think our unemployment is at a concerning rate.  I think about our automobile manufacturers – this will be a tough blow to our economy if we lose a good percentage of the 2 million + jobs tied to the automobile industry in the U.S.  The problem is that there is more supply than there is demand.  We’re not going to fix the problem by Obama giving them a 100 million dollar loan without tying it to some restructuring.

But I think what we’ll see with Obama are some BIG handouts in the coming months.  But I do think that some of these handouts will be very beneficial to America and to our economy.  The one thing that I strongly believe and I feel will be the major portion of Obama’s policies is that there’ll be an indefinite renewal toward the renewable energy tax credits (also known as the production tax credits).  I think that that is one of the key components of Obama’s comments that he will produce a large number of jobs in the United States and I think that they will come from renewables.  I think he’s going to invest very soon a serious amount of time and funds into those production tax credits and that’s where many of the new jobs will come from.  And I believe this will be a front-liner for Obama because of his selection of Governor Richardson.

I’m excited and I think we’re on the right track.  While I don’t believe in everything that Obama says (it’s likely he wouldn’t agree with me 100% either), I believe President-elect Obama will do some great things for our country.  I think we’re on a path to some good correction.  But I do want our congressmen and senators to be very cautious in bailing out everybody.  Because there comes when you have to put the shovel down and quick digging deeper.

- Randy W. Hill, Texas Entrepreneur

Good question, huh?

No, it’s not fixed but it’s in a lot better than now than it was a year or 2 ago. In my opinion, the core driving force to the economy is the price of oil.

When oil prices are high, we have less money to spend which deeply impacts the economy.  Right now we are on the verge of oil going down to a level that will make the economy surge again rather quickly.  I don’t see oil going up anytime soon.  I think oil will dip down into the $30’s at some point.  It’s been in the $40’s at times during trading even though it’s never settled there.   What we see in oil and gas production are spikes in demand.  And then prices increase to a level that breaks the back of the consumer.  We saw this in the 70’s with Carter.  We were fortunate throughout the Clinton administration, our gas prices were very, very low because of the low price of oil.

This poor economy that we are in started before the Bush administration came into office. There’s no reason to believe the Bush administration caused this.  We had some factors in our global economy that have affected this over the past 8 years.  Before Bush was even elected, oil prices February 2000 started increasing.  Anytime oil prices surge, it puts restraints on our economy.

What’s happened has woke us up and put in an awareness.  All these problems started (housing crunch/financing) is a complete reflection of the price of oil.

American’s economy was humming along in the mid to late 90’s.  Historically the price of oil was very low.  Americans have a strong cash flow because oil and fuel are such an important part of our culture and lifestyle.  Our cars and utilities are some way tied to oil.   When oil prices go up, it puts a crimp in our spending.  From the trucking industry that brings us all of our products to the automotive industry (which is the largest employers in the U.S.), because people stop buying big cars and start buying more efficient cars.  Look, the automotive manufactures don’t have a crystal ball.  They could not predict that oil was going to spike like it did and cause gas to go to $3 and $4 a gallon.  In turn, they built what we as consumers wanted. And for the past 20 years, consumers have wanted large SUVs.  With oil skyrocketing over the last 8-9 months (excluding the last 3 months), the consumer shifted their demand and it impacts the entire economy.

Then you have some who went and bought houses that maxed out their budget and left no room for the increase in oil and gas prices.  Thus started the housing crunch and the demise of the financial institutions that we’ve been seeing lately.  Americans knew what we were doing.  They were buying homes that they could not normally afford because of historically low interest rates and ended up extending themselves far beyond what they could afford.

I do believe we are in the process of a correcting economy.   To me, I think you have to “flush the toilet” on some industries every few years.  Right now we have way too many SUVs in the marketplace.  There are too many products being built by too many factories.  I’m very concerned about this bailout talk of the auto makers (GM, Ford and Chrysler).   Providing them with funding that is not contingent on restructuring is very dangerous.  There is very little chance we would ever get that money back.   Let’s look at GM.  Just 8 months ago GM said they would run out of 2009.  Well here we are at the end of 2008, and they’ve already run out of cash!  The industry has burned through $100 billion this year.  So providing them with another $25 billion is going to help keep them afloat?  I don’t think so.  I think there are some circumstances where you’ve got to let the market correct itself or in other words, you’ve got to flush the economic toilet.

As entrepreneurs we don’t have the luxury of living off of 2-3 years of cash reserves like these major corporations.  We have to make our decisions much quicker.   We just can’t let everyone come to Congress to ask for a handout.  The government is broke.  They are just writing these unlimited checks.  The government is the only company in the world that can write hot checks and just keep writing them!  There’s no accountability.

However, there are times when you have to support an industry to keep them afloat because if you don’t, you will deeply penetrate the economy.  I think the mortgage and financial institutions were key to our economy but they’ve got to get back to loaning money.  If all those foreclosed homes are priced cheaply enough, they should sell immediately.  I just don’t see them doing that with the auto industry.  Look, if you want to sell some cars, try lowering the price 50-60% off the sticker or MSRP!  I realize you might be losing money but you or your dealers sure aren’t making any cash letting them sit on the lot.

Bottom line is I think you will see a much better economy because of these fuel prices.  The pieces are in place because of this recession to keep oil and fuel prices low and they will continue to go down.  The worst thing we could do is have our economy come back without having corrected any of these problems like we’ve seen in the housing or financial industries.  We can’t go back to those practices of loaning money on 10 houses to one individual.   We can’t allow oil to surge on speculation and fear.  Several months ago there was a fear that oil was going to surge to $300 a barrel.   Well, that’s not the case – demand was not there.

Finally, with respect to the energy industries, we have to continue to move forward with renewables.   We cannot let the low oil prices make us forget where we were just 3 months ago.  We have got to encourage and offer incentives to get more into renewable energy.  We also need a plan for renewable electricity.  We have to explore more about natural gas cars.  We have to do that.  If we do that, we won’t have those peaks in demand that impact our economy.

If we don’t let these corrections happen and move forward to looking at renewable energy, then we aren’t putting the shovel down, we just keep digging the hole deeper and deeper.

In a few days, I’ll have the last of this 3-part series including thoughts about President-Elect Obama so stay tuned.  If you missed the first part of this series about T. Boone Pickens, click here.

- Randy W. Hill, Texas Entrepreneur

(This is the first of a 3-part series)

I want to start off by saying that T. Boone Pickens is one of our great American entrepreneurs with a heritage of great success.  Over his extensive career, he has shown great leadership. He is an example of true entrepreneurial achievement.

What we have seen over the past 2 years with T. Boone is a fantastic pursuit of a great dream – which is what every entrepreneur has in one way or another. What T. Boone has done with the Pickens Plan and his larger-than-life wind project idea has been very exciting.

As entrepreneurs, we all take risks.  The risk is that we have to get our idea and our concept across to the public so that we can present our idea.  When we do this, we are putting a thought out there for raising support, raising capital, or raising attention to our project.

T. Boone had a multi-level plan to where he was going to build a wind farm, he was going to carry his own power into Dallas-Fort Worth through those transmission lines, and using the same corridor, he was going to carry water from the Panhandle back to the Metroplex.

As an entrepreneur, when you’re putting these ideas out there, you’re taking a risk, very similar to Kenneth Musgrave, one of our great entrepreneurs from Abilene.  Kenneth did the same thing with the Hendrick ranch.  Kenneth was attempting to purchase a large-scale ranch and he was using the media as his promotion.  All of us the media in this way:  to raise capital or attention for our project, to promote our idea.  What Kenneth Musgrave was doing was promoting that he had struck this deal and his intentions were to cut up the property and sell it off – but with the current economic conditions, he was forced to back out of the deal.

On both of these fronts, you have an entrepreneur putting ideas out there but problems came up.  With T. Boone, the credit markets are simply not in a condition to support a large-scale project like he was promoting.  WIth Musgrave, he put his project out there, and he had the interested buyers who wanted a piece of what he had put together, however the financial crisis has put that plan on hold.

The problem with these two projects is not the idea – their ideas are good, but at this time, they are just not going to go forward.  It’s the risk they take.   They put their ideas out there in a very public way.  The risk they take is that their idea is either a great success or it fails, or it just doesn’t work out to the level they had hoped.

It’s the same thing for the entrepreneur wanting to start a donut shop.  He puts some significant money into the equipment needed to make donuts. Then he puts an ad in the paper saying that he’ll be selling donuts on Monday morning.  He is taking a huge risk by doing that – is it going to succeed, fail or just not measure up simply because of negative market conditions?

Such entrepreneurs are great men and are to be commended.  We need more people who are willing to take a risk and put great ideas out there.  The measurement of a great entrepreneur is not the accomplishment itself, but the risk he is willing to take to accomplish great things.  As well, you can always measure success by how an entrepreneur picks himself up when he fails.

Next in this series, we’ll talk more specifically about the economy.

- Randy W. Hill, Texas Entrepreneur