Saturday, December 07, 2002

12/7/02 There Are Times For Cheer And Times To Cheer From The Sidelines

The jobless rate for November rose to 6% as non-farm payrolls declined by 40,000 workers. I have written often on this subject and shown statistically how the jobless number is understated. Only 62% of the U.S. population hold jobs. Total manufacturing employment is lower than any time since November 1961.

Even though Americans are paying off debt rather than taking on more debt, the ratio of household debt to the GDP is 77%.

November sales for retailers declined for the first time since 1970. Retailers are faced with deflation.

In Chicago's Cook County visits to food pantries over the past 11 months are up 18.6% over the same period a year ago and total 2 1/4 million visits to food-providing agencies.

Mexico has 100 million people, and more than half are considered impoverished. Only 15% can qualify for credit cards, car loans, and home loans.

Cessna to layoff 1500 workers.

McDonald's Japan expects over a 60% drop in pre-tax profits for 2002.

Paul O'Neill and Larry Lindsey resigned. They didn't create the current economic malaise.

Traditionally the holiday season is a cheery one for the market. Since Oct 9 we have had a terrific rally. That's the present for the holidays. Unfortunately, the times for cheer have ended, and now is the time to cheer from the sidelines. I suggest once again to lighten up on stock positions, and thereby reduce your risk exposure. With limited business investment, consumer spending being harnessed, the jobless rate increasing, a murky economic horizon, and declining prices for goods, it is rational to expect an economy with few bright spots. As investors, the risk reward ratio is not in your favor.

Friday, December 06, 2002

12/6/02 Soft Retail Results And More Holiday Layoffs

Target's November same-store sales down 6.7%; Kohl's drops 3.4%; and Sears plummets 10.9%.

Humana to cut 2300 jobs. Convergys to layoff 950. Investment Technology Group to reduce workforce by 10%. We are still waiting for AOL to say what their layoff number shall be.

Gateway Computer said weaker than expected holiday season results puts the 4th quarter expectations at risk.

GM is increasing discounts on SUVs and trucks in an attempt to get rid of excess inventory. Cutting production would help.

In the third quarter household debt increased at a 9.6% rate and was the fastest since the 4th quarter of 1989. This is one of the reasons I have stated consumer spending will slow down from an unsustainable level.

The ECB cut rates by a 1/2 point to 2 3/4%. It was the first cut in one year. Within the 12 countries comprising the EU, unemployment hovers around 8 1/2% and retail sales remain on a downward slope. Business investment remains weak. Consumer conffidence is at a 5 year low. Bankruptcies are on the rise. It sounds similar to conditions in the U.S.

Thursday, December 05, 2002

12/5/02 The Market Is Long On Soot And Short On Growth

Cisco to continue job cuts. The company is expected to report flat or slightly lower revenue for the quarter ending in January and possibly a further drop in the April quarter.

AOL will announce job cuts and says their rebound not likely until 2004.

Bankruptcy looms for UAL and American Air cuts 1100 flight attendants.

Federated Dept Stores November same-store sales fell 7.4% and December now looks down about 2%.

RJ Reynolds to reduce its workforce by 8% and earnings to be below estimates.

Full-time jobs in private businesses are down 279,000 so far this year. Since January 2001 corporations have slashed about 3 1/2 million jobs. Payroll cuts this year have averaged 121,000 per month. Job openings are down about 7 1/2% from one year ago. Businesses remain reluctant to hire permanent workers.

The ECB will cut rates today. Everyone in Europe is excited and downing a brew at the local pub. Before anyone gets too drunk with joy they might consider that the jobless rate in Germany rose in November to 10%, and that's the highest rate in more than 4 years. There are almost 4 1/4 million Germans out of work.

A further reality check reveals that the EU says the GDP of European economies may fall in the first quarter. The only other contraction since the 1993 recession was in the last quarter of 2001. In addition, it was stated that 2002 would end negatively. The 12 countries making up the EU have a combined GDP of $7 trillion.

Life is a compilation of choices, and that goes for investing. I feel strongly that during this holiday season my readers would be best served by having an eggnog latte and laying off stocks. The big sucking noise you hear is not the foam from the expresso machine. It's the followers buying stocks who are about to be sucked down the chimney. Those individuals will be long on soot and short on capital.

Wednesday, December 04, 2002

12/4/02 Posting #2 Closing The Crown Jewel, A Personal Blog

As readers of this daily blog, you aware that I successfully ran the Holly Sugar Company from December, 1981 until its sale in the Spring of 1988 to the Imperial Sugar Company. During that timeframe our stockholders received the 7th largest annual return of all the thousands of publically traded stocks in the U.S. Today it was announced that Imperial Sugar will be shutting down its crown jewel Houston sugar refinery and laying off 326 people. The plant has been running continuously since 1843, and has been the oldest continuing business in the Houston area and possibly the entire state of Texas. Pointing fingers will not make the company profitable and will not reopen all the plants which have been closed. Jobs have been lost forever and farmers have turned to other crops or sold their land. Only winners provide progress.
12/4/02 Corporate Bad News

Ford's U.S. vehicle sales fell 20% in November, and they announced production cuts (which my blog predicted 2 weeks ago). HP trimmed their revenue forecast for next year and said technology spending remains tepid (like we needed them to tell us that). Walt Disney issued another profit warning. Tenet Healthcare issued a profit warning for the next two years. Bridgestone cut their profit forecast by a mere 43%.

Now for the good news. Home prices in the UK rose 24% and 25 1/2% on an annualized basis for October and November respectively. As in the U.S., their inflated housing prices have provided a foundation for consumer spending.

Ann Abraham, the Bbritish parliamentary ombudsman, ruled the ministry had "withheld three documents related to reported sightings of unexplained areial phenomena in 1980- the Rendlesham Forest UFO incident." Ms Abraham didn't reveal that the UFO's ultimate goal was the delivery of double digit inflation and 20% interest rates to the U.S. during Carter's presidency.

Tuesday, December 03, 2002

12/3/02 Merrill Lynch Suggests Investors Reduce Their Equity Exposure

Merrill Lynch believes "the market still appears speculative...such speculation is typically indicative of the end of a market cycle, and not the beginning of a major bull market." They go on to say that it is extremely difficult to forecast corporate growth, and therefore, equities should have lower valuations. These comments should certainly be familiar to anyone who has been reading this blog.

Retailers must make up in volume what they lose in smaller profit margins. Consumers respond to advertised promotions. Talking about promotions, why not do away with rebates and just lower the price? A real sale should not have strings attached to it. When you go bargain hunting, it's wise to feel certain that you are receiving value. With stocks the idea is to buy a dollar of value for no more than 50 cents. Please avoid the fool's gold.

Monday, December 02, 2002

12/2/02 The ISM Manufacturing Index At 49.2 Disappointing

U.S. manufacturing shrank for the third consecutive month. Output continues to shrink. This should put to rest the thoughts that the economy has bottomed.

Sunday, December 01, 2002

12/1/02 Download This

Originally the main function of the internet was to share and disseminate information. That still remains true but with an added feature- the downloading of shareware and/or freeware. The latter has had a significant impact on cash flow for many industries. Consider the music industry with CDs and other entertainment arenas. Recently, I learned of download.com and its freeware for games, such as, a game named drugwars. The point is simple. More and more revenue avenues are being closed via free access on the internet. This will, in my view, grow in importance over the years and impact profits.