Saturday, March 29, 2003

3/29/03 Missing In Action Part Two

Marine Lance CPL. Mike Williams is no longer missing in action. I just received word that Mike is now a casualty of this war. When informed, I was totally stunned and immediately filled with grief. I am not a family member. In fact, I did not know Mike Williams. I know him now. I grieve for his family, and pray for our other soldiers to return home safely. I somehow feel I can do more.
3/29/03 Missing In Action

On Wednesday 31 year old Marine Lance CPL. Mike Williams of Phoenix was listed as missing in action during fighting near Nasiriyah. Marine officers went to his mother's home to notify her of the news, but they knew nothing more than her son was missing in action. Each day Americans read the newspapers, listen to the radio, watch television, and surf the web for the latest information on the war. We should always remember that often the day-to-day horror of this war does not change for those waiting on their missing in action love ones.

Yesterday was not a good day for chapter 11 and layoff announcements. Streambox, Olympic Pipe Line, and Antex all filed for Chapter 11. Fleming warned its status as an on-going entity is in doubt.
Manugistics plans on eliminating 130 jobs; Terayon Communication Systems 100 jobs; Midway Games West 113; Smith and Nephew 159; Space Systems/Loral 150; Emery Forwarding 104; and ElPaso Corp. 70 jobs.

Consumer spending in January and February was flat. However, when adjusted for inflation, consumer spending dropped 0.4%, the largest decrease since last September.

The University of Michigan's index of consumer sentiment fell in March to its lowest level since September 1993.

Japan's Finance Ministry sold a total of 1.2 trillion yen ($10 billion) in January and February. It is likely that March will show another round of yen sales.

Unless Monday produces large market losses, the Dow and the S&P 500 will post their first winning month since November, and it would mark the second winning month in a row for the Nasdaq.

Justice Louis D. Brandeis: "We can have democracy in this country or we can have great wealth concentrated in the hands of a few, but we can't have both."

"The book-to-bill ratio put out by SEMI is an illusion of growth, as there is none," stated Dr. Robert N. Castellano, President of the Information Network. "Bookings have been flat for six months. But due to 20,000 layoffs in the industry, companies don't have sufficient manpower to build processing tools so that the billings have essentially been dropping for the past six months, which raises the book-to-bill ratio," Castellano said.

Friday, March 28, 2003

3/28/03 Waiting For Supply Lines In Baghdad And On Wall Street

Our troops do not descend on Baghdad. They wait on supplies to catch up prior to completing their mission. Meanwhile, we drop two 4,700 pound bunker busters to soften up the enemy forces. Wall Street is not so fortunate. The buyers rushed in and pushed the Dow some 1000 points ahead only one week ago. There was a net inflow of $3.7 billion into U.S. stocks. The rally stalled. There aren't any supply lines for reinforcement. Corporate earnings are disappointing at best. Corporate spending is a misnomer. Consumer confidence drops month by month to decade lows. The employment arena offers no job security and little or no job opportunity. Companies are not hiring. They are laying off. Three months ago I warned of companies missing first quarter earnings estimates. You will be hearing about those misses day in and day out. This is the earnings quicksand season. It will be repeated in the June quarter. Wall Street bulls have once again run into an ambush. They are surrounded by lower than expected profits and cash flow. Hope springs eternal. Watching the blood spurt on money managers is never a pretty sight.

UK and German consumer confidence slumps to the lowest level since 1995. France lowers its estimate for economic growth to 0.3%. These three countries comprise 58% of the Economic Union's $9.5 trillion economy, which equates to the size of the GDP in the U.S. There is rising unemployment throughout the EU, spending remains weak, and the latter will be undermined further by the rise in oil prices. Quite conceivably, the EU had negative growth in the first quarter which ends in a few days. In other words, it is in the midst of a recession.

Unemployment hit a 3 1/2 year high in Denmark.

Auto sales will show a drop in March.

Total spending in the U.S. will show a decline for last month, and it will be the first back-to-back decline since December 1990-January 1991, when the economy was in a recession.

It is doubtful that our economy will show any growth in the first quarter after you remove government spending for the war effort.

Robert Mondavi said it would post a loss in the current quarter and they are laying off 10% of the workforce.

The IMF warned of "the potential for sizable losses" from significant unhedged fixed-income positions as a result of the very steep yield curve.

The Federal Reserve Bank of Chicago said its National Activity Index for February was -0.62, the 6th negative reading in the last 7 months.

AMR may file for bankruptcy next week. It's a good thing the Mojave can accomodate the growing number of unused airplanes.

Gold bullion will start trading in Australia. Investors can own a specific portion of a gold bar. I'll take the hindquarter.

Bad weather has resulted in the Ukraine losing half its winter crops.

Rudy Tomjanovich, the Houston Rockets coach, is taking an indefinite leave to receive treatment for bladder cancer.

Thirty marines were injured in a terrible friendly fire accident around Nassiriya.

Thursday, March 27, 2003

3/27/03 Boob Bait For Bubbas

Yesterday our country lost a man who rose from poverty to be a shoeshine boy, a dockworker, and a bartender. Those job skills were honed sufficiently to enable him to become a UN ambassador (that organization could use him now), a Harvard professor (he must be forgiven), an author of 19 books (George Will said he wrote more books than most senators read), and a distinguished U.S. Senator from N.Y. for a quarter of a century (the Senate Finance Committee of which he was chairman certainly does miss him). He was married for 47 years. It is seldom that I have a good word for a politician, and even rarer that I praise a politician. Daniel Patrick Moynihan graced New York, the Senate, and our United States. As George Will said, "Daniel Patrick Moynihan is the finest Senator ever."

Senator Daniel Patrick Moynihan: "Citizen participation is a device whereby public officials induce nonpublic individuals to act in a way the officials desire."
"Everyone is entitled to his own opinion but not his own facts."
Talking about the proposed Clinton healthcare plan, he said it was "boob bait for bubbas."

U.S. new home sales fell 8.1% in February. New homes for sale at the end of the month rose to 352,000, the most since June 1996.

According to a recent Salomon Smith Barney survey, 60% of portfolio managers are bullish and only 2% are bearish. That's just one more reason for the market to continue its downward trend.

Sony Music will issue 400 pink slips today.

President Abraham Lincoln: "Politicians are a set of men who have interests aside from the interests of the people, and who, to say the most of them, are, taken as a mass, at least one long step removed from honest men."

Credit card delinquencies in the final quarter of 2002 rose to the highest level since the record highs of 1990.

Albert Schweitzer: "The tragedy of life is what dies inside a man when he lives."

Anheuser-Busch has nearly completed a 100 million share repurchase program authorized two years ago. As such, directors approved another 100 million share repurchase program, and the latter approximates 12% of the outstanding common shares. The company's objective for 2003 is to increase earnings by 12% and to achieve double digit growth over the long term.

Will Rogers: "I don't make jokes- I just watch the government and report the facts."

France's March business confidence index dipped to 94 from 97, and was much weaker than anticipated. Maybe they should concentrate less on their flawed Iraqi policy and more on their economy, which is headed into a recession. Now we'll see how smart that country really thinks they are. France and Germany are in for rough economic times, and that will not be for just another quarter.

Emmitt Smith signed a two year contract with the Arizona Cardinals.

The war in Iraq has cost the U.S. airline industry 10,000 jobs.

The war in Iraq has cost the lives of 24 soldiers. We have 7 POWs-unless they have been killed by the Iraqis. Ten soldiers are missing in action. Supposedly 28 soldiers have been wounded, but that number sounds low. As the sun rises and sets each day, the price of war increases. Let's pray the battle soon ends. Maybe a decapitated Hussein would speed things along, and return our troops to their homes.

Wednesday, March 26, 2003

3/26/03 At Risk

The next government officials who discuss the rebuilding of Iraq should find their jobs at risk. We have soldiers in body bags, prisoners of war, and many wounded and there are idiots giving out contracts for the rebuilding of Iraq. That type of behavior is a great deal more than insensitive, non-feeling, and uncaring. It reflects the stupity of some of our governmental working force. Clearly they are not an elite corps. Talking about elite, what makes the 76,000 soldiers comprising the republican guard elite? These people torture, terrorize, rape, and destroy.

The Army is "considering incorporating blogging into its secure network where troops communicate with each other and their families." If done right, it would be a great idea.

According to a Merrill Lynch survey, "about 17% of large U.S. and European companies said they would slow their information technology spending because of the war." The rate of spending was slow before the war began.

The Congressional Budget Office concluded Pres. Bush's $726 billion tax-plan would virtually add little or nothing to the country's economic growth. 'The proposals, on net would probably increase labor supply but decrease investment and the stock of capital." You don't need the CBO to make this proclamation. Government is not an economic growth engine. They are a tax and spend engine, a lethal weapon that does a great deal more harm than Iraq's republican guard. Others in government must agree with the CBO because Senate Finance Committee Chairman Chuck Grassley says the dividend tax cut may be "out the window" and the Senate yesterday cut the tax plan by more than half. By the time they're thru fiddling with the tax cut plan, taxes will be increased.

If families that mourn their fallen soldiers wear red, white, and blue instead of black, then maybe other Americans should consider their lead and dress in the same fashion. This makes an impressive statement of support for our troops.

McDonald's plans a shake-up. Several hundred jobs are at risk. Maybe the hamburgers should be at risk.

Durable goods orders from U.S. manufacturers declined 1.2% in February. The drop in March should be even steeper.

The UK says the war will last many months. Wall Street, and more importantly, Main Street are not prepared for a long war.

Sears may leave the credit card business after boosting reserves on unpaid accounts. They hope to receive $6 billion for this unit. Maybe there is a company out there ready to pay for a can of worms.

Starbucks expects earnings per share growth of 20 to 25% over the next three to five years. The great ones just keep rolling along in good and bad times. We see the same with WalMart, Colgate, Dell, Lowe's, Pfizer, P&G, Sysco, J&J, Pepsico, and Harley-Davidson. Customer loyalty is at the core with each one of theses companies.

Tuesday, March 25, 2003

3/25/03 Anxiety Of The Consumer

The Administration sought to achieve peace in Iraq. That did not happen. The consumer seeks peace of mind, and that too, does not take place. There is anxiety here at home and amidst the Iraqi sandstorms. Prior to the war starting, consumer confidence continued to fall. In mid-March it fell to 62.5 from 64.8 in the prior month. As of yesterday, we had 27 dead soldiers and 7 prisoners of war. The fallen and those inhumanely held will, and should, weigh heavily on the psyches of all Americans. I would be very surprised to see families rushing out to buy a new car or a new home or to make any major purchase. Sales of existing homes fell in February prior to the war's start and new home construction fell sharply too. I expect this trend to continue. Despite what some believe, war is not good for this staggering economy and the unrest in the Muslim world can only bring greater uncertainty to Wall Street. Uncertainty will delay any chance of business investment picking up. In other words, the legs holding up the economy are buckling and anxiety reigns supreme.

Sears will cut another 300-400 jobs at its headquarters. About 5300 are employed there. Hardest hit will be the IT department.

The little town of Schwaebisch Hall in Germany is replacing Microsoft software on all city computers with open-source Linux software. There will be a one-time savings of $121,000. With world-wide economies struggling, I would expect the shift to Linux to become more commonplace.

Monday, March 24, 2003

3/24/03 Booby-traps In Iraq And On Wall Street

I am certain that soldiers are trained in all matters of war, but faked surrender is something which is difficult to comprehend and retain. It cost 9 Marines their lives yesterday. In addition, we witnessed the atrocity surrounding the handling of our POWs. In all, yesterday over 50 soldiers were injured. War is bloody and brutal and de-humanizing. On the other hand, booby-traps are of a different nature on Wall Street- they are manufactured out of greed and the on-going need to perform in a hostile environment. Many were gloating over the huge market rally during the past week. Many proclaimed the end to the bear market. Soldiers get their heads handed to them, and so do traders on Wall Street. I said traders and not investors. The latter are a different dying breed. Warren Buffett is one of the few successful and still remaining.

Three years ago Michael O'Higgins, a Miami money manager, had sold all stocks and had moved into zero-coupon Treasury bonds. A year ago he moved into gold and Newmont Mining. Otherwise he owns no stocks. The reason is he too is looking for a depression to begin soon- not a recession. O'Higgins is best known for his Dogs of the Dow theory. He has been an astute investor for twenty years. I am not mentioning O'Higgins because I agree with him. The reason is simple. I believe we are both correct, and have acted accordingly as investors, and not out of greed. If you want to be a casualty on Wall Street, then follow the crowd. There is a burial ground only a block from the New York Stock Exchange. You' ll need to take a number. Currently, there is a waiting list.

Wrigley supplied the gum during WW II, and it was placed in the GI's MREs (Meals Ready-To-Eat). The gum had a shelf life of one year. Today the government requires the latter to be three years. Wrigley's gum doesn't meet such specifications, and thus, Ford Gum and Machine Co. of Akron, N.Y. supplies the defense department with $600,000 in gum each year.

N.Korea is, in my view, a proxy for China. There has been increasing provocation with the testing of Tepodong 2 missiles. More disturbing is the N. Korean production of sarin gas which can kill more people than a nuclear bomb. For example, 500 tons of sarin gas can kill one trillion people. Just 0.5 milligrams can kill a person. N.Korea has eight plants capable of producing chemical weapons and six places to store them. This information comes directly from the South Korean Defense Institute. Japan is particularly concerned about an attack from N. Korea.

Prime Minister Junichiro Koizumi: "The U.S. is the only ally providing Tokyo with deterrent power against any foreign country that could threaten regional security, such as N. Korea, and the Japanese people should never forget it."

Lastly, in discussing chemical and biological weapons, I should hasten to mention the chemical facility found some eighty miles from Baghdad. Overseeing this plant were two Iraqi generals. I doubt it is a chewing gum factory- not because it rests on 100 acres but because it is surrounded by an electric fence and is adjacent to a military barracks. It must have been so well-camouflaged that the weapons inspectors missed it for the past dozen years. You get what you pay for.

Sunday, March 23, 2003

3/23/03 Goodwill Industries And The Iraqi War

Goodwill Industries is a non-profit social-services organization which provides employment to over 3000 people with disabilities. Goodwill is also a major military contractor, and is a significant supplier of camouflage fatigue trousers, military fleece jackets and coveralls, and internment flags for the armed forces. General Tommy Franks directs the U.S. Army invasion of Iraq wearing a flak jacket made by the workers at Goodwill.

The International Air Transport Association said the war in Iraq could easily add $10 billion to world airline losses. Airlines have lost a combined $18 billion since 9/11.

Outstanding mortgage debt for single family homes stood at record highs of $6.5 trillion at 12/31/2002. In my view mortgage rates have bottomed out and rates have already begun to rise in the last two weeks. Such an increase in rates will undermine the ability to purchase a new home. Construction will slow, and more homes will come on to the market. Prices will fall. In addition, consumer spending will greatly suffer as the excess cash from refinancing at lower rates comes to a halt. This will result in another nail in the coffin for the economy, and it shall shove the economy over the cliff.

With 800 sorties in one night, it is not surprising that human error will occur. As such, a U.S. Patriot missile downed an RAF plane. Additionally, other accidents have killed at least five American soldiers while three have been killed at the hands of Iraqi forces. The war may not be on American soil but the deaths of our soldiers places their blood on all of our souls.

Pat Gelsinger, CTO of Intel: "Maybe our downsizing in the U.S. tech industry is permanent downsizing, and we are headed toward being a second-class industrial citizen of the world."

Rob Glaser, CEO of RealNetworks: "The tech industry is in danger of looking like Japan; it's down and out for a long time."

If Gelsinger and Glaser are just partially correct, tech stocks are overpriced, and they will remain an unattractive avenue for investment for some time to come.

The largest anti-war protest on Saturday took place in NYC where 200,000 marched on Broadway. I'm glad I wasn't in NYC to witness that as it must have made the families of the fallen American soldiers puke.

Larry Brilliant: "The irrational exuberance of the 1990s has been replaced by an irrational lethargy."