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Job Security Is Not Coming Back

Job Security Is Not Coming BackShed a single tear, if you haven’t gone entirely dry, for America’s beleaguered, struggling, and anxiety-ridden law-firm partners.Sara Randazzo, writing in the Wall Street Journal, chronicles the lamentations of the lawyers: “Being named a partner once meant joining a band of lawyers who jointly tended to longtime clients and took home comfortable, and roughly equal, paychecks. Job security was virtually guaranteed and partners rarely jumped ship. That model, and the culture that grew up around it, is all but dead. Law firms are now often partnerships in name only.” Equity-owning partners still share in the profits of the firm, but the second-class “partners” — nominal partners — are unpropertied salarymen, taking home a mere few hundred thousand dollars a year or so in comparison to the millions paid out to the real partners.You can practically hear that awful Sarah McLachlan song wailing in the background, and one begins to glance around for Sally Struthers. I’ll give you a second to regain your composure.Law firms are not what they used to be. The markets in which they play have become more competitive and more efficient, and in many cases firms have grown more specialized. The days of long lunches and 3 p.m. tee times are long gone. That is true of many high-paying occupations whose practitioners once enjoyed remarkably leisurely work days. From Wall Street to the grocery business, the high-earning high-flyers are increasingly expected to keep up with the frantic pace of a Silicon Valley startup. It’s not that there are no easy jobs left — it’s just that you don’t really want one of them.As Randazzo reports, the newly demanding and data-driven model of the law firm has changed the culture of the business entirely. “Full-time chief executives, some without law degrees, have replaced the senior partner running human resources and accounting,” she writes. “Law firm names have trended toward the shorter and snappier, more befitting a tote bag than a law library.” No more Dewey, Cheatham, & Howe.These are frantic times. In the early 1960s, the average “life expectancy” of a corporation on the Fortune 500 was a little over 75 years; today, it is about 15 years — and falling. Many of our fathers and grandfathers worked for one or two companies over the whole of their working lives; the Bureau of Labor Statistics expects that today’s workers will have about 15 different employers over the course of a career — and ten different ones before age 40. Americans as a whole do not move as often for work today as they did a generation ago, but high-earning workers move relatively frequently and change employers more frequently than do lower-earning workers.It may be time to update “The Nature of the Firm.”That’s the name of the famous paper by Nobel laureate Ronald Coase, who, like a lot of geniuses, found himself obsessed by a question so obvious that nobody had ever thought about it: “Why do corporations exist at all?” Most businesses, he noted, have both employees and outside contractors. But if markets are efficient, why have full-time employees at all, when it is inevitable that a business ends up paying them for times when they are doing no real work? Why not outsource everything? The answer he came up with was “transaction costs.” A transaction cost is the price you pay in time and trouble in addition to the financial cost of any given exchange. For example, if you want to hire a lawyer, you don’t just order one from Amazon Prime. You do some research, ask around about who is the best specialist in the particular area you need at the moment, maybe interview three or four firms. And you pay somebody to do that. The same thing for hiring a receptionist: You don’t just take the first person to wander in off the street, and once you’ve hired one, it takes time and effort to train him, to show him where everything is, to get him used to your office procedures, etc. Once you have one you can count on, you don’t want to go to market the next day to see if you can get a better deal. Coase argued that transaction costs make it more efficient for a business to have regular employees and to maintain the other features of an ongoing enterprise because the inefficiencies inherent in that are less costly than the transaction costs involved in bidding out everything.But information technology and other innovations have lowered many transaction costs. Businesses that had once employed their own janitors and groundskeeping staff began outsourcing custodial and maintenance work, mostly to specialized firms that came into existence to meet that need. Many rote clerical and administrative positions were eliminated and those tasks jobbed out. In the 1980s, a region with twelve newspapers would probably have twelve printing presses, twelve press crews, twelve fully staffed composing rooms, etc. By the early 21st century, they were sending out their pages electronically to consolidated printing operations.In manager-speak, businesses have increasingly pared down operations to their “core competencies.” Understood from the Coasean point of view, a firm is only a temporary partnership between and among certain kinds of capital and labor turned toward a common end. It lasts for exactly as long as that is the more efficient arrangement. (In theory.) When that no longer is the case, the business dissolves, is acquired, or changes in some fundamental way. The corporate name may survive, but the underlying enterprise is essentially a new and different thing. As the world grows more connected, and as both markets and supply chains grow ever more globally integrated, the lifespan of any particular arrangement of capital and labor grows shorter. That means that the intelligence and energy of the people who work there become more valuable in some other configuration more quickly and more frequently. Hence the job-hopping among the highly skilled and most in-demand workers.(There are some exceptions to this rule: A few big technology firms such as Google and Facebook have in effect undergone a reverse corporate evolution, creating such gigantic streams of revenue from one core business that they can sustain all manner of sidelines and experiments without thinking too hard about the near-term profitability.)As I argue in The Smallest Minority, the thing that we call for lack of a better word “globalization” has helped to make us the richest, healthiest, longest-lived, best-provided-for people in the history of the human race. But like the early stirrings of primordial capitalism at the end of the Middle Ages, the developments that have made us richer and better off have also upset longstanding social arrangements and put longstanding status relationships up for renegotiation. Americans were a heck of a lot friendlier to China and India when those countries were starving. The Brits liked the Poles a lot better when they were languishing under Communism than now, when they are fixing British plumbing.Here is a thought experiment for you: What percentage of your current income would you give up in exchange for an irrevocable guarantee that your new salary would never go down? Do the math and you’ll have some idea of what “job security” is really worth to you.But some things money can’t buy, and the idea of job security increasingly is a thing of the past. Many highly skilled and high-earning workers are perfectly happy with that: They get to move on to something new and challenging more frequently, and they generally earn more in each new position than in the last one. Life is good at the top. It usually is.But not everybody is an entrepreneur, a dealmaker, or a mercenary tech geek happy to fly from one gig to the next. Many people would prefer a greater degree of predictability in their lives. For them, the thought of having to look for a new job is a nail-chewing, can’t-sleep-at-night proposition, not an occasion for daydreaming and excitement. They are not thinking to themselves, “I wonder what kind of apartment I’ll have in Abu Dhabi.” They are thinking, “How am I going to pay the mortgage?”The Tucker Carlson school of anti-capitalism gets this much right: An economy that rewards geographic mobility, professional flexibility, and financial risk-taking brings unintended social consequences with it, from undermining local relationships and civil society to encouraging norms of delayed marriage and parenthood. There is some reason to believe that these fall most heavily on economically middling males: They have neither the income and social status associated with high-flying careers nor the comforts of deep community ties nor those of being a husband and father. Even church congregations have a different character in communities in which people relocate constantly. Even those who claw their way up through the elite educational institutions into a partnership at a big law firm do not get the deal they might have been hoping for. (But that $800,000 a year isn’t too bad.) Those without that option may feel stuck, hopeless, and — perhaps worst of all — useless. Many of the traditional distinguishing male virtues such as physical strength and courage are passé from the point of view of the 21st century economy.(Nobody needs those virtues — until they do.)But information technology is not going away. Markets are probably going to continue to grow more integrated, more efficient, and more competitive. The quest for returns is not going to be brought to a halt by the desire for predictability. Partly that is a matter of pure economics, but partly it is also a result of the fact that policy decisions are dominated by the people who are most comfortable with a more entrepreneurial and less predictable model of work. That is a big part of what has populists of the Left and Right riled up at the moment, even though many of them cannot quite articulate their complaint. The critics have a point, but what they do not have is an alternative, at least one they are willing to publicly defend. (The actual alternative, which dare not speak its name, is: relatively predictable stagnation.) The Left demands a bigger and more generous welfare state in the mistaken belief that we can socially engineer and redistribute our way out of this particular pickle, while the populist Right has embraced a daffy form of neo-mercantilism in the mistaken belief that the fundamental problem is Americans’ feckless victimization at the hands of the scheming Chinese or job-stealing immigrants. Populists Left and Right implicitly share the belief that what’s really ailing us is a deficit of cleverness in Washington, even as they rail against the clever people in Washington as conspirators against the public interest. But there’s plenty of cleverness in Washington — a surplus of the stuff, in fact.The great songwriter Steve Earle, who involves himself in a lot of silly left-wing political activism, says that he is a “romantic,” that he is interested in “the way the world should be, not the way the world is.” That is a lovely and poetical sentiment, and, like most poetical sentiments, it offers a good reminder of why it is better that we are not governed by poets. Our policymakers must deal with the world as it is, and our schools and families should prepare children for the world as it is, not as we might wish it were. Imagination and creativity are necessarily to human flourishing, but neither of those excuses a mulish refusal to consider and deal with the world as we actually find it. And if a poetical cast of mind is no license for such a refusal, how much less an excuse is patriotism, “nationalism,” the desire for “economic justice,” or an unalterable commitment to one’s own particular corner of Oklahoma or Kentucky?“Idealism is fine,” a wise man once said, “but as it approaches reality, the costs become prohibitive.”




The Case for Returning the National Security Council to Its Original Role

The Case for Returning the National Security Council to Its Original RoleDespite a National Security Strategy that earned rare praise from a generally critical foreign-policy establishment, the Trump administration’s National Security Council (NSC) has been a chaotic institution acting outside its mandate. In this, according to John Gans’s new book, White House Warriors, it is like most other administrations’ NSCs throughout history.White House Warriors is a survey of how the NSC has operated in every administration since Kennedy. It charts the ways in which the NSC has strayed from its original purpose since its inception. This may sound like a dull project, but Gans succeeds in making it interesting by zeroing in on the human stories behind the headlines. Each chapter focuses on a different protagonist operating as the NSC mulls a major foreign-policy decision, and the results are often riveting.The NSC has been receiving a lot of attention in academic and policy circles lately. It was created to help the president arrive at answers to great strategic questions and coordinate between the various agencies of the country’s national-security apparatus, but has taken an increasing role in setting policy and strategy over the years. As it has stepped outside its mandate — policy and strategy are rightly the purview of the respective national-security agencies — the NSC, originally intended to include a few-dozen specialized staffers, has also grown bloated. During the Obama administration, it employed hundreds of policy staffers, to the point where Congress felt the need to cap its policy staff at 200 — a number that is still too high, according to Gans.George H.W. Bush’s NSC, in contrast, receives high marks from Gans. After the Iran–Contra scandal, President Reagan tasked the three-person Tower Commission with conducting “a comprehensive study of the future role and procedures of the National Security Council (N.S.C.) staff in the development, coordination, oversight and conduct of foreign and national security policy.” One of the Commission’s members was former and future national-security adviser Brent Scowcroft, and he took the lessons he learned to heart. Placed in charge of the NSC by Bush, he made it a small, yet assertive force coordinating between national-security agencies and their principals. Working in concert with a team of well-matched principals (Secretary of State James Baker, Secretary of Defense Dick Cheney, CIA director William Webster), Scowcroft’s NSC contributed to the quick, resounding success of the Persian Gulf War. In this it was helped greatly by Bush, who was more familiar with the world of national security than any of his predecessors and willing to rein in his underlings when necessary. (In one of the book’s most revealing episodes, he intervenes to overrule the chairman of the Joint Chiefs of Staff, General Colin Powell, who opposed military intervention, asserting civilian authority over the military.)Sadly, the NSC of George W. Bush’s second term — the one that successfully implemented the troop surge in Iraq — is the only other one not to receive a failing grade from Gans. (Gans attributes its success to the leadership of Steven Hadley, Scowcroft’s protégé and the chief author of the Tower Commission Report.) The rest of the book tells different tales of presidents unable to put together the same sort of well-oiled national-security machine as Bush. The NSC headed by Henry Kissinger under Presidents Nixon and Ford illegally wiretapped its members. President Reagan went through six national-security advisers in his two terms. None of them were able to referee the fierce disagreements between Secretary of State George Shultz and Secretary of Defense Caspar Weinberger, and the consequences were dire: an unfortunate conclusion to Lebanon’s civil war, the tragic deaths of American servicemen, and ultimately the Iran-Contra scandal. President Clinton’s NSC was a dysfunctional disaster throughout the 1993 crisis in Bosnia and Herzegovina, which ended well enough through sheer luck, according to Gans. Obama’s surge in Afghanistan, the episode through which Gans examines his NSC, was largely unsuccessful.A pattern eventually emerges from the chapters that recount failures (which is to say the non-Bush chapters): The NSC oversteps and micromanages, there is too much distrust between the principals and within the NSC, and the commander-in-chief and his national-security adviser fail to assert themselves to settle disputes. This explains why Obama’s much-ballyhooed “team of rivals” approach to cabinet-building ended up being such a disaster.The genius of White House Warriors is that it doesn’t have a partisan axe to grind. Gans doesn’t comment on the policies each president pursued, but on how they were implemented in a crisis. He is critical of most Republican and Democratic administrations’ NSCs, and his evenhandedness lends the recommendations for reform at the end of the book more weight. He advocates a smaller NSC that focuses on big-picture strategic challenges and manages the president’s day-to-day and administrative needs, leaving the various national-security agencies to make strategy. This approach would require a responsible staff that doesn’t overstep the NSC’s original mandate, assertive and disciplined national-security advisers and presidents, and stronger agency bureaucracies with more empowered and responsive staffs that respond to challenges before the NSC has to step in.The late Charles Krauthammer once observed that decline is a choice. The United States is the most successful hegemon in history, and still has a better hand to play than any of its competitors today. Given that hand, there should by rights be no reason to forecast a triumph of autocracies over the liberal-democratic order we’ve championed to such great effect since World War II. But a good hand can only carry you so far if you don’t play it properly. In an era that’s seen the return of great-power competition, the United States must rethink how it strategizes and makes policy.




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3 Safe Haven Defense and Aerospace Stocks to Buy

3 Safe Haven Defense and Aerospace Stocks to BuyOn August 8, J.P. Morgan released a report that presented opportunities for investors despite heightened tensions regarding the trade war. Top analyst, Seth Seifman, writes, “Defense is a haven again. Defense stocks have outperformed recently due in part to their relative immunity to macroeconomic risks, including China trade, falling interest rates and currency fluctuation.” Amid all the economic uncertainty, defense and aerospace stocks have generally held up. For example, Raytheon Company (RTN) gained 4% in the last five days and Leidos Holdings, Inc. (LDOS) is up 1.5% over the same time period. Using TipRanks, we found 3 stocks in the defense and aerospace sector that analysts believe represent compelling investment opportunities. Huntington Ingalls Industries (HII)The first stock on our list is military shipbuilding company, Huntington Ingalls. Despite its underperformance at the beginning of 2019, Seifman believes HII has pulled off a turnaround. “The stock has recovered from other earnings disappointments this year, and with the long-term outlook little changed, risk-reward looks attractive,” he wrote in the report. HII has a backlog of contracts worth $40 billion, assuming all the contracts are executed. The company is also expecting to get a boost from the Navy’s increased need for unmanned undersea vehicles. “Overall, we think unmanned space is going to fundamentally change the Navy going forward. The intent to try to make ships more lethal, from the Navy standpoint, is something we’re paying closer attention to,” CEO Mike Petters said on August 1. Investors got good news that same day when HII announced that its John F. Kennedy aircraft carrier would launch later this year, several months ahead of schedule. Alembic Global analyst, Peter Skibitski, agrees that despite a lackluster performance in Q2, HII represents a compelling investment opportunity. On August 5, he upgraded the stock to a Buy stating, “The stock's pullback following the company's Q2 report an opportunity for investors.” Skibitski boasts an 82% success rate and gets an average return of 19% per rating. Five-star analyst, Robert Spingarn, thinks that HII’s long-term growth narrative remains unchanged. On August 2, he reiterated his Buy rating and lowered the price target from $252 to $241. Despite the price target cut, Spingarn believes share prices could surge by 15% over the next twelve months. The Credit Suisse analyst has a 70% success rate and a 17% average return per rating. The rest of the Street is bullish on this defense stock. HII has a ‘Strong Buy’ analyst consensus and a $246 average price target, suggesting 17% upside potential. Boeing Company (BA)While Boeing is widely known for its commercial airplanes, a substantial portion of its revenue is generated from the defense and space segments of the business. On July 23, the company reported that its defense and space programs reached $6.6 billion, up 8% year-over-year. Management pointed to higher volume across derivative aircraft, satellites and weapons as the reason for the gain. An increase on sale of property and lower cost growth on the KC-46 Tanker program drove the operating margin expansion of 850 basis points or 15% year-over-year. BA’s legacy fighter jets such as the F/A-18 and F-15 are still in production and are constantly being updated. It’s building the MQ-25 Stingray aerial-refueling drone as well as the P-8 Poseidon maritime surveillance aircraft for the Navy and the KC-46 refueling tanker for the Air Force. The company has also made significant investments in its space programs with its Crew Space Transportation-100 Starliner that will ferry astronauts to the International Space Station. Its Space Launch System is expected to be the most powerful rocket in history. Top analyst, Andrew Gollan, believes that the noise from past controversies is fading into the background. On August 6, he reiterated his Buy rating and lowered his price target from $415 to $400. Even with the price drop, Gollan thinks share prices could jump 19% over the next twelve months. Another analyst, Robert Stallard, reiterated his Buy rating and $413 price target on BA after the better than expected Q2 results. The Vertical Research analyst believes share prices could gain 22% over the next twelve months. “The 777X news is not wholly unexpected given the reported issues with the GE9X, but we think getting the plane certified for delivery less than one year after first flight is very optimistic,” he added on July 24. Stallard has a 68% success rate and gets an average return of 10% per rating. The Street is also bullish on BA. It has a ‘Strong Buy’ analyst consensus and a $432 average price target, suggesting 28% upside. TransDigm Group Inc. (TDG)The last stock on our list takes on more of a background role, producing less exciting aerospace components such as valves, actuators and pumps. However, analysts tell investors not to underestimate TDG. It’s up 60% year-to-date, with more growth expected to come. Over the last four quarters, TDG has surpassed consensus estimates for EPS. On August 6, the company was able beat expectations for both EPS and revenue. EPS was $4.95, exceeding the $4.31 estimate and up from $4.01 in the prior-year quarter. Quarterly revenue reached $1.7 billion, beating the consensus estimate by 5%. Management attributes this growth to its $4 billion acquisition of Esterline Technologies, a specialized components maker. Esterline produces parts for much of the commercial sector and for the Lockheed Martin (LMT) F-35. Investors got more good news when the company stated there would be a special cash dividend of $30 per share. UBS analyst, Myles Walton, thinks the aerospace stock is ready to soar. “We like TransDigm after its earnings beat and organic revenue growth in Q3, along with the expansion of its Esterline margins coming 2 years ahead of pace. TDG still has a strong liquidity profile even after the payout of a special dividend,” he said. On August 7, he reiterated his Buy rating and raised the price target from $565 to $605, suggesting 11% upside. The five-star analyst has a 71% success rate and a 15% average return per rating. Spingarn, who also covers TDG, agrees that the stock offers investors a unique opportunity as ESL integration has been better than expected. On August 7, he reiterated a Buy rating while raising his price target from $539 to $617. The analyst believes share prices could increase by 13% over the next twelve months. TDG has a ‘Strong Buy’ analyst consensus and a $579 average price target, implying 6% upside potential. Discover the Analysts’ Top-Rated Stocks right now




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3 Tech Stocks With Very Bullish Social Media SentimentSocial media sentiment provides valuable insights for investors. Indeed, hedge funds and asset managers have long used “sentiment analysis” to trade on consumer feelings toward a company or asset. These computer-driven readings of the social media mood can analyze huge numbers of posts while sifting out unreliable information.Here we take a closer look at three top tech stocks which all show Very Positive social media sentiment right now. And as we will see analysts also share this optimistic take on these three names. All three stock picks show a ‘Strong Buy’ Street consensus, based on all the ratings published on each stock over the last three months. Let’s take a closer look at what’s driving this sentiment now: Salesforce (CRM)Salesforce is buzzing on social media right now. We can see that sentiment over the last 7 days is extremely positive compared to the sector average. That’s not surprising given the company’s deal making bonanza. On August 1 CRM completed its massive $15.7 billion Tableau acquisition. And now the company has surprised investors by revealing that it has also snapped up field service software company ClickSoftware for a cool $1.35 billion. “Our acquisition of ClickSoftware will not only accelerate the growth of Service Cloud, but drive further innovation with Field Service Lightning to better meet the needs of our customers,” explained EVP Bill Patterson in a statement. Indeed, the company’s fast-growing Service Cloud segment has just crossed the $1 billion revenue mark- and now with ClickSoftware on board, CRM is hoping to keep these numbers rising. Meanwhile Tableau will bring to CRM an intuitive platform that enables customers to bring data to life by visualizing it- even if they don’t have specific data skills. Bear in mind, it’s not so long ago that CRM also splashed out billions of dollars on MuleSoft to get at backend data sources.It’s not just the social sentiment that’s bullish on CRM and its acquisition strategy. The Street also has a very positive outlook on the stock right now, with a Strong Buy analyst consensus. In the last three months, 23 out of 24 analysts have rated Salesforce a buy. That’s with an average price target of $183 (27% upside potential). “We would note the market for field service management software is estimated to be approximately $3.5bn in CY19, growing at ~17%” cheers five-star Evercore ISI analyst Kirk Materne. He notes Salesforce will provide updated guidance during its upcoming earnings call (August 22nd). “In the near-term, investors will likely need to remain patient as the full weight of the Tableau, and ClickSoftware transactions are fully integrated into our/Street estimates. As we have stated in the past when it comes to Salesforce’s M&A history, deal-related pullbacks have generally represented good entry points, and while the deal will create some ‘noise in the numbers,’ the long-term risk/reward remains favorable” he concludes. LivePerson (LPSN)LivePerson is all about using technology to help businesses communicate with customers. It has created an AI-powered conversational platform to enable consumers to buy products and get answers to questions via everything from WhatsApp to Facebook Messenger. Year-to-date the stock has put on a tremendous performance- more than doubling since the start of the year thanks to consistently strong revenue growth. And social media reflects this with many investors singing the stock’s praises. Luckily the Street believes LivePerson has what it takes for continued growth. In the last three months LPSN has received no less than 10 consecutive buy ratings. So no hold or sell ratings here. “Raising target to $37 from $33 as LPSN posted nine 7-figure deals in 2Q, and increased deal count 50%” enthused Northland Securities’ analyst Michael Latimore following the company’s stellar earnings report. Highlights included expanding pipelines, healthy big deal momentum and overall deal volume. As a result, Latimore writes “Pipeline and demand is clearly there, and LPSN is accelerating investments to capture it. Demand is for more channels, use cases and AI/automation; and for sales in addition to customer service.” Similarly Oppenheimer’s Koji Ikeda boosted his price target from $35 to $41 citing the company’s higher growth guidance for 2019. “We believe management's reputation as good operators is increasing, and the business is positioned to continue the accelerating growth trend, which should help catalyze a rerating of LPSN's multiple higher to coincide with the improving growth profile” enthused Ikeda. Q2 Holdings Inc (QTWO)Texas-based Q2 Holdings is a leading provider of secure, cloud-based virtual banking solutions. After the close on August 7, QTWO released a 2Q19 report featuring top- and bottom-line beats while boosting its FY19 revenue forecast. What’s more, QTWO also revealed that during 2Q19 it signed three Tier 1 banks (including a $26bn bank holding company), as well as digital lending contracts with two current clients. The news sparked a wave of positive social media sentiment for the stock, which is now trading up 75% year-to-date. Following earnings, SunTrust Robinson analyst Terry Tillman reiterated his bullish call on QTWO. Most tellingly, he also ramped up his price target from $84 to $100 (15% upside potential) citing ‘strong execution.’ Encouragingly, this Top 10 analyst has a very strong track record with his QTWO recommendations (86% success rate and 28% average return per rating).Meanwhile RBC Capital’s Matthew Hedberg also significantly boosted his price target on the stock from $79 to $94. “We believe the company is in the early innings of penetrating a multi-billion-dollar market that includes fragmented competition” explained the analyst.“Through an acquire-retain-and-expand strategy, we believe Q2 has the opportunity to generate strong financial growth for several years while continuing to innovate new technologies that leverage its core platform.” In addition, he also sees the company as an attractive acquisition target for larger vendors seeking exposure to innovative solutions.Overall this ‘Strong Buy’ stock has racked up 5 buy ratings in the last three months vs just 1 hold rating. The average analyst price target currently works out at $91. Discover the Street's best-rated Trending Stocks right now




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