Saturday, November 23, 2002

11/23/02 Getting In Touch With Their Unsold Side

Only the auto industry could run plants overtime in an economy with "soft spots". After a weak October Chrysler has a 97 day supply of inventory and Ford 81 days. The winter consistently brings with it the lowest prices for used cars, and there is a glut of used cars on lots. It won't be long before the auto companies will be parking their inventory in the Mojave desert next to all the mothballed jet planes. We should remember that new cars account for 15% of consumer retail spending. Maybe the solution is to sell them wholesale to consumers, or better yet, no money down with no interest and with no monthly payments for 5 years. The bottomline is you can expect auto production cutbacks.

Economists for the Philadelphia Fed reduced their growth forecasts for the 4th quarter and for 2003. They still expect growth to exceed 2%.

Prices in Hong Kong have fallen for 48 consecutive months. Their continued deflation, along with Japan's, will place a ceiling on prices in the U.S.

Brocade announced a 12% cutback of its workforce and revised its 1st quarter forecast downward. The stock certainly got slammed. Tax selling could place additional pressure on Brocade shares.

Friday, November 22, 2002

11/22/02 Out Of The Woods Perception Has Generated A Big Rally

The Dow and the S&P closed Thursday more than 20% above the Oct. 9 lows. Yesterday the Nasdaq hit its highest level in 5 months.

GE cut its earnings forecast for the 4th quarter and 2003.

Morgan Stanley to cut 2000 jobs.

Over the past year the state of Georgia has shed 2.2% of its jobs-86,500 positions.

Revise this!!!! U.S. leading economic indicators for September were revised lower to a negative 0.4% from negative o.2%. That is a 100% negative revision. For October those leading economic indicators were reported as unchanged. What will they be revised to in December? Creating a false perception can be very damaging. Proceed at your own risk tolerance.

Thursday, November 21, 2002

11/21/02 Believe In The Facts Not What You'd Wish To Be True

More than half of BellSouth's workforce has agreed to take time off without pay this year to help the company cut costs. It is among corporate America's largest voluntary furloughs. You can expect to read more of this.

Lucent retirees worry that they will lose retirement medical coverage as the company struggles to avoid filing for bankruptcy protection.

Boeing to cut 5000 more jobs.

Immune Response may file for bankruptcy in a few days.

The gov't originally reported jobless claims for the Nov. 9 week at 388,000. Today that figure was revised upward to 401,000. In addition, the gov't stated that jobless claims for last week dropped 25,000 from the 401,000 revised level. I hope no rational person believes these numbers. They are a figment of someone's imagination and creation.

HP increases job cuts for 2003 by 1100 to 17,900. The original figure was 15,000, then 16,800, and now 17,900. It's nice to know their management has a feel for the business. It must be a joy to work there.

I have this annoying habit of reading cash flow statements. For 2002 HP had a $900 million negative cash flow from operations. So much for making money. HP management said they "are not banking on an improved economy to hit our profitability targets." With only their printer business cash flow positive, you can expect more job cuts in their PC and server divisions. Cost cutting can go just so far. Oracle discovered that.

Wednesday, November 20, 2002

11/20/02 Malpractice Premiums and Medicare Payments

Doctors and hospitals have reported alarming spikes in malpractice premiums as insurers have withdrawn from the market. Many physicians choose to quit practicing.

Medicare payments to doctors were cut 5.4% this year and will be reduced 4.4% next year. More and more doctors will stop accepting Medicare payments for service. Instead they bill Medicare payments in larger amounts, and leave it up to the patients to seek reimbursement.

Home Depot said it expects same store sales in the 4th quarter to drop 3 to 5 %. Home Depot's CFO said the company had cannilbalized 22% of its stores in the 3rd quarter. So much for store clustering.

Agilent, the HP spinoff, is going to layoff another 2500 workers.

October housing starts fell 11%. The percentage drop was the largest in 9 years. We must keep in mind that September was a record for starts. For the past year housing and home construction has been the star in the economy. I thought housing starts would have fallen many months ago. The timing of predictions can often make one look stupid.

If the stock market is to rise from this level, it will need to adeptly climb a daunting wall of worry. Uncertainty offers opportunities and risks. Currently, are the risks outweighed by the rewards? In my view, possibly if one is on mind-altering drugs. I like my reality straight up.

Tuesday, November 19, 2002

11/19/02 Investment Grade Quality Is Never Static

Never be lulled by the pundits. They almost always have an agenda, and the latter is hardly investment grade. Look at Japan. Fifteen years ago this country was held as the role model for management and economic excellence. Now Japan is in the soup, and that's not chicken soup. The Nikkei just made a 19 year low. Fears of bad loans continue to weigh on bank stocks. Deflation casts an economic pall. Talk of nationalizing banks frightens investors. Japan is in need of a savior. Where are the heroes when they are needed?

The WSJ reports today that GE may announce a large charge in order to build reserves at their Employers Re unit. I find that interesting because I had noted about a week ago that Warren Buffett was in talks to buy that unit. Obviously talks broke down, and possibly over insufficent reserves. That is speculation on my part. Maybe Buffett will now turn his attention to Burger King. Hamburgers go well with Coke.

It is an understatement to say I am distressed to learn that Iraq has been making "dusty" VX for 8 years and that last month they imported 25 metric tons of Aerosil to make "dusty" biological weapons. What are the weapons inspectors going to tell us? I never did understand politics.

Monday, November 18, 2002

11/18/02 Day 1039

You thought I was not counting? Over the past six weeks the market has risen, and will most likely open higher this morning; however, it is day day 1039 since the Dow closed at its all-time high. That is also the timeframe for the longest bear market on record- up to this point- Sept. 3, 1929 to July 8, 1932. During the latter period the Dow plunged 89%. The most the Dow has fallen in this bear market is 38%.

The market is focusing this morning on better than expected earnings for Lowe's Companies. I find much more significant WalMart stating that they see their November same store sales at the low end of their 2-4% growth outlook. For the past several months that growth has not slipped below 3 1/2%. In addition, Federated Dep't Stores said their 2nd week of November sales were disappointing.

An interesting quote comes from Jared Bernstein, an economist with the Economic Policy Institute. He states that "the unemployment rate presents too rosy a picture of labor market conditions now. It leaves out significant groups of people who are unemployed or underemployed." I have been making this same statement for months.

Tokyo's Nikkei close to a 19 year low.

Sunday, November 17, 2002

11/17/02 Please Remain Standing During The Entire Performance

I was not surprised to read that 84% of Americans have access to a computer either at home or at work. Nearly 3 out of 4 computer users polled are planning to buy some of their holiday gifts online. Most polled were going to buy books, videos, and CDs.

The past year has had more than its share of grim moments. As such, I thought a humorous gift would be most appropriate. Early this morning an idea was sent along to me- talking toilet paper. You record your message in the holder which is provided, and when the toilet paper is pulled for use, your message comes out loud and clear, such as, please remain standing during the entire performance. To receive such a gift idea I must be on a list of those still in their anal period.

Enjoy the day, and as Dale Evans and Roy Rogers would sing, happy trails to you.