11/8/03 Eclipsing The Headlines
Yesterday, I knew Turkey number 10 would be the Labor Department; however, I decided to wait for today to write about this reporting fiasco. Before I begin, let me point out that, at about 5pm early this evening, an eclipse of the moon shall begin. Unlike a solar eclipse, there isn’t any danger from the intensity of the sunlight that can burn one’s retina. The eclipsed moon shall be very low in the sky. Total eclipse starts at 5:06pm and lasts until 5:31pm. The partial eclipse concludes at 7:04pm. I bring this information to your attention in the hopes that everyone shall realize that an eclipse of the financial headlines will not in any way damage your eyes or your brain. That brings us to Turkey number 10. The headlines were terrific: payrolls surge, and rise for the third straight month. The Labor Department made large upward revisions to payrolls for August and September. Non-farm payrolls in October had their largest rise since January. The unemployment rate fell to 6%. It represents the fastest economic expansion in 19 years. Let’s bring out the champagne. It’s orgasm time! Then, a terrible thing happened. I remembered that these are government numbers, and just maybe, I should read below the headlines. The news was not quite the same: “the number of unemployed persons, 8.8 million, were essentially unchanged in October…in October, 2 million unemployed persons had been looking for work for 27 weeks or longer, about the same level as in September. They represented 23% of the total unemployed (3 years ago it was 14%)…in October the civilian labor force was little changed at 146.8 million…in October, 1.6 million persons were marginally attached to the labor force, 170,000 more than a year earlier. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. Of the 1.6 million, 462,000 were discouraged workers- persons who were not currently looking for work specifically because they believed no jobs were available for them. The number of discouraged workers was up by 103,000 from October 2002.” The news continues. The average weekly hours worked, the average weekly earnings, and weekly overtime were all essentially unchanged from September to October. In addition, it is always wise to analyze the numbers. For example, since the beginning of this year, temporary help has added 150,000 jobs and 113,000 restaurant workers have been placed on payrolls. Prior to September, an average of 53,000 factory jobs were cut monthly. Across the country, yesterday’s job cut announcements hit many different industries. The Bank of America eliminated 100 investment banking jobs. That leaves them with 6000. Siemens Energy & Automation plans to cut 121 jobs at its Tucker facility NEAR Alpharetta, Georgia. Their technologies range from circuit protection and energy management systems to process control, industrial software, and totally integrated automation productions. Everlast Worldwide Inc. will close its Bronx, NY plant and eliminate 100 jobs. Production of boxing trunks and speed bags will move to their plant in Missouri. They expect the move to save $2.8 million per year.
Turkey number 11 is the consumer. In September, consumer credit in the United States rose $15.2 billion, or at a 9.7% annual pace. It was the largest gain since January. Most of the increase was in auto loans that rose $12.1 billion and credit cards that increased $3 billion. For months, hourly wages have not risen nor have the weekly hours worked improved. A step plan needs to be devised to reduce consumer spending.
Turkey number 12 is the Administration, the Congress, and the media who blame China for our troubles. There is no question that we have a $100+ billion trade deficit with China. We live in a global economy. Trade is global. China’s imports have grown 40% in 2003, and the vast majority are with other countries in Asia. The net result is that China’s trade surplus with the entire world might only amount to $5 billion this year. It’s important to tell the whole story.
Turkey number 12 is pork. In this case, we are talking pork projects that have absolutely nothing to do with an energy bill being discussed. Iowa Senator Charles Grassley is the Republican chairman of the Senate Finance Committee. He wants to have a $225 million proposed rain forest and learning center attached to the energy bill. Due to the enormous cost, the project was rejected by Des Moines and Cedar Rapids. Grassley wants special tax credits be given to buyers of bonds, and these debt instruments would finance the project. Other proposed projects in the energy bill are Destiny USA for Syracuse, NY, a $2.2 billion entertainment and retail center; $180 million Louisiana Riverwalk in Shreveport-Bossier City; a $2 billion residential and commercial project in Atlanta; and a $750 million mixed-use project for a Denver suburb. These negotiations typify the running of our Congress. It’s time we elected people who don’t answer to their campaign contributors.
Turkey number 13 is the pricing of slaughter-bound cattle. I come from three generations of butchers. I understand the workings of the early morning wholesale meat markets. I know the slaughter houses. I know the feedlots. I know who controls the meat business. I know from meat hooks. Please do not tell me that the six-month ban on Canadian cattle has kept supplies tight. The ban, the result of mad cow disease, only removed 7% of the cattle supplies. In the past month, beef traded above $100 per hundred pounds. The beef plants say they can’t make money because their sales prices for beef do not cover the cost of cattle. Have you been to the supermarket lately? Have you noticed the price for beef? Feeder cattle supply is down. That’s true. Beef consumption is up. The alternative is to eat cheap pork, chicken, or turkey for protein. (I am not being disrespectful to Jews by mentioning pork. I also mentioned chicken and turkey). The December live cattle future rose to a life-of-contract high at 98 cents per pound. There will be a resumption of cattle imports from Canada, and more beef will come to market. The price will go down. No one is bigger than the market.
Turkey number 14 is the Administration’s attempt to dismantle green laws. For example, recent Bush appointees at the EPA have sided with the Pentagon in seeking exemption for military facilities from federal laws governing hazardous waste, air quality, and endangered species. Last week, 13 states and 20 cities sued the Bush Administration for its plan to adjust Clean Air Act regulations in a way critics say will increase the emission of harmful pollutants. The support for increased environmental protection is bipartisan. As an aside, Arnold promises to retrofit his Hummer to run on clean-burning hydrogen.
Turkey number 15 may be the last on today’s list, but certainly it is not the last in importance. Number 15 is our military’s underestimation of the Iraqi enemy. Two soldiers from the U.S. 82nd Airborne Division were killed and one was wounded today when a roadside bomb was detonated next to their convoy in Falluja. The attack raised to at least 149 the number of U.S. soldiers killed in action in Iraq since Washington declared major combat over on May 1. Since the beginning of November, the death toll for our soldiers in Iraq has climbed to 34. A recent study was prepared by a team of Army War College officers and civilian specialists. It asserts that the Iraqi military excel in intelligence, and shadow virtually every real-time movement of coalition troops. Marines captured “a detailed, accurate sand table of U.S. positions.” A sand table is a miniature model of the battlefield that assists commanders in plotting the next moves. Senator McClain’s assertions that we don’t have enough U.S. troops in Iraq is gaining daily validity.
Friday, November 07, 2003
11/7/03 Goosed By Turkeys
Turkey number 1: “A dwindling pool of possible efficiencies.” This is Alan Greenspan speaking yesterday. He might be talking about a leech field or possibly government employees. In this instance, he was attempting to explain that productivity gains had reached such heights that companies might be forced to hire additional workers. He failed to say whether they might be seasonal workers for the holiday season. I suggest he visit Iredell County in NC, and head towards Speedball Road. He’ll find the Hunt Corp. plant that makes Boston-brand office supplies and X-Acto knives. Yesterday they announced the plant will be closing, and 325 employees will lose their jobs. Actually, that’s not true. Maybe they’ll have an opportunity to relocate. Production at the plant is moving to Asia in an effort to cut costs. Bush will be in NC today. I’m sure the unemployed workers from the plant closings in textile, furniture, and office supply industries will give him a warm welcome. Getting back to Greenspan, possibly he is counting on expansion within the healthcare industry. I read yesterday where Seattle-based Corixa Corp. is laying off 18% of its workforce. There are long lead times in medical research programs, and the company, said its chairman and CEO, will be “focusing the scope of our pursuits on the greatest opportunities for near-term commercial success.” He meant that the company is down to $200 million in cash and needs to slow the burn rate in order to stay in business. Finally, Greenspan might consider the actions of voters in San Francisco. On Tuesday, San Francisco became the first city in California and the third in the nation to set its own hourly minimum wage. The city’s minimum wage was raised to $8.50, significantly higher than the state minimum of $6.75 and the federal minimum of $5.15. Santa Fe, NM set a minimum wage of $8.50 an hour for businesses with 25 or more employees. Madison, Wisconsin is considering raising the minimum wage to $7.75, and in Washington DC, businesses must pay workers $1 an hour more than the federal minimum wage.
Turkey number 2: the labor department announced “the average weekly number of seasonally adjusted new claims in the most recent week ending Nov.1 fell by 43,000 to 348,000. The average number of continuing claims for state unemployment benefits over the past four weeks fell by about 25,000 to 3.54 million, the lowest since April.” How would the public react had the headlines included “the continuing claims figures do not include some 825,000 workers receiving federal unemployment benefits, which are available to unemployed workers once they exhaust their state benefits, typically after six weeks?” How would the public react had the headlines included “the number of Americans who’ve been out of work longer than six months rose to 2.1 million in September, representing 23.2% of all unemployed workers?” Both figures are highs for the business cycle, and provide absolutely no evidence that businesses will begin hiring. In fact, the facts point to the opposite conclusion. The labor department said employers are able to get as much work out of 953 workers now than they got out of 1,000 a year ago. People are frightened to lose their job, and are working their buns off. J.T. Battenberg, CEO of Delphi Corp., the world’s largest maker of auto parts, stated “I don’t think we’re going to have a huge increase in employment. People are more productive now.”
Turkey number 3: government waste, fraud, and spending in the fiscal year ended 9/30/03. The Washington Times pointed out that the GAO found that the Pentagon “reported an estimated $22 billion in disbursements that it has been unable to match with corresponding obligations.” Did the money disappear? Is that a kissing cousin to the fiasco at Enron and Tyco? It gets worse. Medicare discovered the federal government made $12.5 billion in erroneous payments in fiscal 2001. It took them two years to make this discovery. It gets better. Improper food stamp payments cost more than $1 billion. How much more? It gets better. The Superfund is supposed to be spent on cleaning up waste, not creating more waste. The GAO estimated that $6 out of every $10 spent on Superfund is used for purposes other than toxic waste cleanup. According to OMB performance assessments of 230 programs, 5% of the agencies were rated ineffective and 50.4% of the programs were rated “results not demonstrated.” The Washington Times kindly provided a chart showing it took Congress 101 years to spend its first $500 billion. It took 10 years to send the next $500 billion, and now just 4 years to spend the last $500 billion. I think the next chart will show spending the next $500 billion in one year. The Institute for Policy Innovation report states “what we have in Washington today is a bipartisan fiscal cop-out. No one in the Congress or the executive branch has insisted that federal tax dollars be spent judiciously.”
Turkey number 4: the plans proposed by Congress and Bush to overhaul Medicare. It is flawed from the outset. Bush and the Congress are pushing to give the elderly $400 billion worth of assistance for prescription drugs; however, there are no plans for younger Americans who confront ever-rising health insurance costs. According to the CBO, the Medicare population is expected to spend $1.84 trillion over the next 10 years on prescription drugs. At the same time, Congress has capped a new drug benefit at $400 billion for the decade. There are further problems. The House proposal does not cover individual drug costs between $2,000 and $3.500. The Senate proposal exempts low-income seniors from this gap. Finally, the CBO estimates that passage of either the House or the Senate proposal of the Medicare bill would encourage employers to drop coverage for their retirees, and this would affect one-third of Medicare beneficiaries. Where is the backlash?”
Turkey number 5: the Administration’s policies in Iraq ignore the feelings expressed by the American voters. Rumsfeld and others parade their words describing that the lost lives and the number of wounded since March 20 are acceptable. According to a recent IBD/TIPP poll, 56% say casualties in Iraq are not within acceptable limits, and the poll indicates Americans are eager for out troops to leave Iraq. Today, an Army helicopter crashed near Tikrit, killing at least four U.S. soldiers and possibly all six on board. Another American was killed and nine were wounded in attacks in Mosul. It is safe to say that the Administration’s “plan” to gain the peace in Iraq is quite simply an abortion, and reflects a growing late-term problem for Bush. The voters have expressed this view in various polls. Some 60,00 of the 130,000 U.S. soldiers in Iraq are members of the National Guard or the reserves. An opinion poll last month in the Stars and Stripes newspaper showed 49% threatened not to re-enlist. On the Pentagon’s Defend America website, recruiting has begun to volunteer for local draft boards. The Congress ended the draft in 1973.
Turkey number 6: “In these circumstances, monetary policy is able to be more patient,” said Alan Greenspan in yesterday’s remarks to a securities conference in Boca Raton, Florida. He means that continued low inflation below 2% will enable the Fed to maintain short-term rates at a 45-year low of 1%. Inflation has been muted in Australia. The Reserve Bank of Australia has an inflation target of 2 to 3% per year. As noted yesterday, their Fed raised the rates in Australia by 25 basis points. Even though inflation is modest in Great Britain, yesterday the Bank of England raised their base rate by 25 basis points to 3.75%, sharply above our 1% level. The UK and Australia raised rates in light of the backdrop of a housing boom, rapid credit growth, and “gathering momentum” of the global economic recovery. According to the U.S. Fed Flow of Funds report, total credit outstanding rose at a 12% annualized rate in the second quarter. The federal government’s credit demand was up an astonishing 24.3% in this period, and borrowing by state and local governments rose 12% in the quarter. In sum, Greenspan talks patience and yet he states big government deficits results from excessive spending “could have notable, destabilizing effects on the economy.” He is telling the public to remain calm, and yet there is “a backdrop of growing longer-term concern in financial markets about our federal budget.” Some Wall Street firms such as Merrill Lynch have forecast the deficit may reach $600 billion.
Turkey number 7: The Republican efforts to create an energy bill are an insult to the American people. Rep. Henry Waxman of California described the “arrogance” of Republican negotiators to want to write the bill themselves with no input from Democrats was “outrageous.” U.S. oil reserves represent less than four years of current U.S. oil consumption. A new energy bill must successfully balance incentives for alternative fuels, conservation, clean air laws, measure to promote clean water supplies, and electric transmission grid expansion. Bipartisan cooperation can produce a more effective bill.
Turkey number 8: U.S. auto companies continue with their high incentives while Japanese car makers offer much less in incentives and reduce their inventory levels. In October, the incentives per vehicle for GM, Ford, and Chrysler were $3,980, $3,054, and $3,768, respectively. On the other hand, incentives for Toyota, Honda, and Nissan were $808, $531, and $1,502, respectively per vehicle. U.S. auto companies expand production, give incentives, close plants, and create thousands of unemployed workers.
Turkey number 9: investors with blinders fail to appreciate the relationship between a country’s currency and the equity markets in that country. A strong currency reflects an economy that is strong. Our currency has been strong for a good portion of the last decade. This year the dollar has fallen 10% or more in trade-weighted terms, and yet our equity markets are trading at their highest levels in many months. With rising trade and federal deficit budgets forecast for 2004, the dollar is likely to experience additional declines. This country needs to avoid a financial shock. Investing prudence is a contributor to economic stability over the long run.
Turkey number 1: “A dwindling pool of possible efficiencies.” This is Alan Greenspan speaking yesterday. He might be talking about a leech field or possibly government employees. In this instance, he was attempting to explain that productivity gains had reached such heights that companies might be forced to hire additional workers. He failed to say whether they might be seasonal workers for the holiday season. I suggest he visit Iredell County in NC, and head towards Speedball Road. He’ll find the Hunt Corp. plant that makes Boston-brand office supplies and X-Acto knives. Yesterday they announced the plant will be closing, and 325 employees will lose their jobs. Actually, that’s not true. Maybe they’ll have an opportunity to relocate. Production at the plant is moving to Asia in an effort to cut costs. Bush will be in NC today. I’m sure the unemployed workers from the plant closings in textile, furniture, and office supply industries will give him a warm welcome. Getting back to Greenspan, possibly he is counting on expansion within the healthcare industry. I read yesterday where Seattle-based Corixa Corp. is laying off 18% of its workforce. There are long lead times in medical research programs, and the company, said its chairman and CEO, will be “focusing the scope of our pursuits on the greatest opportunities for near-term commercial success.” He meant that the company is down to $200 million in cash and needs to slow the burn rate in order to stay in business. Finally, Greenspan might consider the actions of voters in San Francisco. On Tuesday, San Francisco became the first city in California and the third in the nation to set its own hourly minimum wage. The city’s minimum wage was raised to $8.50, significantly higher than the state minimum of $6.75 and the federal minimum of $5.15. Santa Fe, NM set a minimum wage of $8.50 an hour for businesses with 25 or more employees. Madison, Wisconsin is considering raising the minimum wage to $7.75, and in Washington DC, businesses must pay workers $1 an hour more than the federal minimum wage.
Turkey number 2: the labor department announced “the average weekly number of seasonally adjusted new claims in the most recent week ending Nov.1 fell by 43,000 to 348,000. The average number of continuing claims for state unemployment benefits over the past four weeks fell by about 25,000 to 3.54 million, the lowest since April.” How would the public react had the headlines included “the continuing claims figures do not include some 825,000 workers receiving federal unemployment benefits, which are available to unemployed workers once they exhaust their state benefits, typically after six weeks?” How would the public react had the headlines included “the number of Americans who’ve been out of work longer than six months rose to 2.1 million in September, representing 23.2% of all unemployed workers?” Both figures are highs for the business cycle, and provide absolutely no evidence that businesses will begin hiring. In fact, the facts point to the opposite conclusion. The labor department said employers are able to get as much work out of 953 workers now than they got out of 1,000 a year ago. People are frightened to lose their job, and are working their buns off. J.T. Battenberg, CEO of Delphi Corp., the world’s largest maker of auto parts, stated “I don’t think we’re going to have a huge increase in employment. People are more productive now.”
Turkey number 3: government waste, fraud, and spending in the fiscal year ended 9/30/03. The Washington Times pointed out that the GAO found that the Pentagon “reported an estimated $22 billion in disbursements that it has been unable to match with corresponding obligations.” Did the money disappear? Is that a kissing cousin to the fiasco at Enron and Tyco? It gets worse. Medicare discovered the federal government made $12.5 billion in erroneous payments in fiscal 2001. It took them two years to make this discovery. It gets better. Improper food stamp payments cost more than $1 billion. How much more? It gets better. The Superfund is supposed to be spent on cleaning up waste, not creating more waste. The GAO estimated that $6 out of every $10 spent on Superfund is used for purposes other than toxic waste cleanup. According to OMB performance assessments of 230 programs, 5% of the agencies were rated ineffective and 50.4% of the programs were rated “results not demonstrated.” The Washington Times kindly provided a chart showing it took Congress 101 years to spend its first $500 billion. It took 10 years to send the next $500 billion, and now just 4 years to spend the last $500 billion. I think the next chart will show spending the next $500 billion in one year. The Institute for Policy Innovation report states “what we have in Washington today is a bipartisan fiscal cop-out. No one in the Congress or the executive branch has insisted that federal tax dollars be spent judiciously.”
Turkey number 4: the plans proposed by Congress and Bush to overhaul Medicare. It is flawed from the outset. Bush and the Congress are pushing to give the elderly $400 billion worth of assistance for prescription drugs; however, there are no plans for younger Americans who confront ever-rising health insurance costs. According to the CBO, the Medicare population is expected to spend $1.84 trillion over the next 10 years on prescription drugs. At the same time, Congress has capped a new drug benefit at $400 billion for the decade. There are further problems. The House proposal does not cover individual drug costs between $2,000 and $3.500. The Senate proposal exempts low-income seniors from this gap. Finally, the CBO estimates that passage of either the House or the Senate proposal of the Medicare bill would encourage employers to drop coverage for their retirees, and this would affect one-third of Medicare beneficiaries. Where is the backlash?”
Turkey number 5: the Administration’s policies in Iraq ignore the feelings expressed by the American voters. Rumsfeld and others parade their words describing that the lost lives and the number of wounded since March 20 are acceptable. According to a recent IBD/TIPP poll, 56% say casualties in Iraq are not within acceptable limits, and the poll indicates Americans are eager for out troops to leave Iraq. Today, an Army helicopter crashed near Tikrit, killing at least four U.S. soldiers and possibly all six on board. Another American was killed and nine were wounded in attacks in Mosul. It is safe to say that the Administration’s “plan” to gain the peace in Iraq is quite simply an abortion, and reflects a growing late-term problem for Bush. The voters have expressed this view in various polls. Some 60,00 of the 130,000 U.S. soldiers in Iraq are members of the National Guard or the reserves. An opinion poll last month in the Stars and Stripes newspaper showed 49% threatened not to re-enlist. On the Pentagon’s Defend America website, recruiting has begun to volunteer for local draft boards. The Congress ended the draft in 1973.
Turkey number 6: “In these circumstances, monetary policy is able to be more patient,” said Alan Greenspan in yesterday’s remarks to a securities conference in Boca Raton, Florida. He means that continued low inflation below 2% will enable the Fed to maintain short-term rates at a 45-year low of 1%. Inflation has been muted in Australia. The Reserve Bank of Australia has an inflation target of 2 to 3% per year. As noted yesterday, their Fed raised the rates in Australia by 25 basis points. Even though inflation is modest in Great Britain, yesterday the Bank of England raised their base rate by 25 basis points to 3.75%, sharply above our 1% level. The UK and Australia raised rates in light of the backdrop of a housing boom, rapid credit growth, and “gathering momentum” of the global economic recovery. According to the U.S. Fed Flow of Funds report, total credit outstanding rose at a 12% annualized rate in the second quarter. The federal government’s credit demand was up an astonishing 24.3% in this period, and borrowing by state and local governments rose 12% in the quarter. In sum, Greenspan talks patience and yet he states big government deficits results from excessive spending “could have notable, destabilizing effects on the economy.” He is telling the public to remain calm, and yet there is “a backdrop of growing longer-term concern in financial markets about our federal budget.” Some Wall Street firms such as Merrill Lynch have forecast the deficit may reach $600 billion.
Turkey number 7: The Republican efforts to create an energy bill are an insult to the American people. Rep. Henry Waxman of California described the “arrogance” of Republican negotiators to want to write the bill themselves with no input from Democrats was “outrageous.” U.S. oil reserves represent less than four years of current U.S. oil consumption. A new energy bill must successfully balance incentives for alternative fuels, conservation, clean air laws, measure to promote clean water supplies, and electric transmission grid expansion. Bipartisan cooperation can produce a more effective bill.
Turkey number 8: U.S. auto companies continue with their high incentives while Japanese car makers offer much less in incentives and reduce their inventory levels. In October, the incentives per vehicle for GM, Ford, and Chrysler were $3,980, $3,054, and $3,768, respectively. On the other hand, incentives for Toyota, Honda, and Nissan were $808, $531, and $1,502, respectively per vehicle. U.S. auto companies expand production, give incentives, close plants, and create thousands of unemployed workers.
Turkey number 9: investors with blinders fail to appreciate the relationship between a country’s currency and the equity markets in that country. A strong currency reflects an economy that is strong. Our currency has been strong for a good portion of the last decade. This year the dollar has fallen 10% or more in trade-weighted terms, and yet our equity markets are trading at their highest levels in many months. With rising trade and federal deficit budgets forecast for 2004, the dollar is likely to experience additional declines. This country needs to avoid a financial shock. Investing prudence is a contributor to economic stability over the long run.
Thursday, November 06, 2003
11/6/03 Government Workers Feel The Pain
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Two American soldiers were killed in separate attacks near Baghdad today. Their deaths brought to 140 the number of U.S. soldiers killed in Iraq by hostile fire since Bush declared an end to major combat May 1. A total of 114 U.S. soldiers were killed in the active combat phase that began March 20.
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Two American soldiers were killed in separate attacks near Baghdad today. Their deaths brought to 140 the number of U.S. soldiers killed in Iraq by hostile fire since Bush declared an end to major combat May 1. A total of 114 U.S. soldiers were killed in the active combat phase that began March 20.
11/6/03 Government Workers Feel The Pain
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Wednesday, November 05, 2003
11/5/03 Tough Decisions And Productivity
You don’t read too often about a company that is growing, making good money, and is out of space for expansion at its present site. I thought we’d take a little visit to the heartland. Let’s visit a company that is on the move, no pun intended. Have you been to Le Mars, Iowa? Have you heard of Le Mars, Iowa? Have you eaten Blue Bunny ice cream? Have you heard of Wells Dairy? Enough with the questions! The company employs 2400 workers (over 90% of their workforce) spread among seven buildings in Le Mars, a city of 9200 people. The company is family owned, was started close to 100 years ago, sells 550 Blue Bunny products in all 50 states and in 20 other countries, and has sales of $800 million a year. It’s my kind of company. Over the next five years they plan on adding 100 employees, but they don’t have a place to put them at their present location. Iowa’s corporate tax rate is fairly reasonable in that the state taxes only profits made from sales in the state. Next door, so to speak, is South Dakota. That state does not have a state income tax, and that fact is a big carrot for relocation. Wells Dairy will decide by next summer where to build its new headquarters building, which is estimated to cost $30 million. Le Mars recognizes the importance of Wells Dairy, the city’s largest employer. Wells contributes to many community projects, and that includes helping to buy new fire equipment. Wells is a company on the move, but residents of Le Mars will do everything possible to keep this company in their town. It’s been there for over 90 years.
The nation’s productivity numbers will be released today. They should be record figures. Over the past three years it has reflected job cuts and overall cost reductions. Productivity does not necessarily equate with efficiency. That correlation is not always accurate. Let me explain. GM, for example, has over the past five or six years, been reducing the man hours needed to produce a vehicle. That’s a positive. At the same time, plants have been closed and workers have been eliminated. These workers were earning , on average, at least $60,000 a year. A good many of these former employees went on unemployment for a period of time. Some found work at substantially lower salaries. There are costs associated with unemployment, and they exist in the individual company with the layoff, the local communities, and the state in which the company is located. Some employees could not find a job. (A columnist wrote yesterday that “throw in a couple of percentage points for frictional employment(joblessness that results from people looking for a new job, changing jobs or relocating), and the U.S. economy isn’t far away from full employment.” Maybe she has that opinion because she has a job. In my opinion, she is severely employment reality challenged.)
Many former employees stop looking for a job after 20 months. The search becomes debilitating. Some require relocation, and move in with other family members. Meanwhile, GM has tried their best to become competitive in the marketplace. Companies like Toyota can manufacture their autos using less hours of labor. In order to “sell” their autos, GM provides an average incentive of $4200 per vehicle. Essentially, they make their corporate money through GMAC and their mortgage division. Did they become more productive? In labor per auto produced they did. Are they more efficient? No. If they were more efficient, prices for the vehicles would drop. An example of efficiency would be the price for PCs. They drop in price every year. Demand for the product has risen as the price has dropped.
Challenger, Gray and Christmas announced that layoffs from U.S. companies more than doubled in October to 171,874, the highest in a year. In October, the auto industry cut 28,363 workers. So far in 2003, over 1 million job cuts have been announced by U.S. companies. Those job cuts are not moving us in the direction of full employment.
Registered professional nurses comprise the largest segment of all health professionals. Phyllis Hansell, dean of Seton Hall University’s College of Nursing, stated that “currently, there are 2.6 million nurses in the U.S. and it is forecast that by 2010 an additional 1 million will be needed. Nurses will be required in all health care settings.” Where might we get these nurses? No problem. In the Philippines, government hospitals are the country’s largest health care employer. The government typically has only 1,000 new positions available each year for the 10,000 nurses that graduate. Nurses earn an average of $108 a month. Thousands of Filipino nurses are recruited every year to offset the shortage of nurses in the U.S. They apply for a U.S. immigrant visa that allows them to live permanently in the U.S. Alternatively, they come to the U.S. on a 3-year labor contract and then try to change their visa status after coming here. In sum, this is in-sourcing.
You don’t read too often about a company that is growing, making good money, and is out of space for expansion at its present site. I thought we’d take a little visit to the heartland. Let’s visit a company that is on the move, no pun intended. Have you been to Le Mars, Iowa? Have you heard of Le Mars, Iowa? Have you eaten Blue Bunny ice cream? Have you heard of Wells Dairy? Enough with the questions! The company employs 2400 workers (over 90% of their workforce) spread among seven buildings in Le Mars, a city of 9200 people. The company is family owned, was started close to 100 years ago, sells 550 Blue Bunny products in all 50 states and in 20 other countries, and has sales of $800 million a year. It’s my kind of company. Over the next five years they plan on adding 100 employees, but they don’t have a place to put them at their present location. Iowa’s corporate tax rate is fairly reasonable in that the state taxes only profits made from sales in the state. Next door, so to speak, is South Dakota. That state does not have a state income tax, and that fact is a big carrot for relocation. Wells Dairy will decide by next summer where to build its new headquarters building, which is estimated to cost $30 million. Le Mars recognizes the importance of Wells Dairy, the city’s largest employer. Wells contributes to many community projects, and that includes helping to buy new fire equipment. Wells is a company on the move, but residents of Le Mars will do everything possible to keep this company in their town. It’s been there for over 90 years.
The nation’s productivity numbers will be released today. They should be record figures. Over the past three years it has reflected job cuts and overall cost reductions. Productivity does not necessarily equate with efficiency. That correlation is not always accurate. Let me explain. GM, for example, has over the past five or six years, been reducing the man hours needed to produce a vehicle. That’s a positive. At the same time, plants have been closed and workers have been eliminated. These workers were earning , on average, at least $60,000 a year. A good many of these former employees went on unemployment for a period of time. Some found work at substantially lower salaries. There are costs associated with unemployment, and they exist in the individual company with the layoff, the local communities, and the state in which the company is located. Some employees could not find a job. (A columnist wrote yesterday that “throw in a couple of percentage points for frictional employment(joblessness that results from people looking for a new job, changing jobs or relocating), and the U.S. economy isn’t far away from full employment.” Maybe she has that opinion because she has a job. In my opinion, she is severely employment reality challenged.)
Many former employees stop looking for a job after 20 months. The search becomes debilitating. Some require relocation, and move in with other family members. Meanwhile, GM has tried their best to become competitive in the marketplace. Companies like Toyota can manufacture their autos using less hours of labor. In order to “sell” their autos, GM provides an average incentive of $4200 per vehicle. Essentially, they make their corporate money through GMAC and their mortgage division. Did they become more productive? In labor per auto produced they did. Are they more efficient? No. If they were more efficient, prices for the vehicles would drop. An example of efficiency would be the price for PCs. They drop in price every year. Demand for the product has risen as the price has dropped.
Challenger, Gray and Christmas announced that layoffs from U.S. companies more than doubled in October to 171,874, the highest in a year. In October, the auto industry cut 28,363 workers. So far in 2003, over 1 million job cuts have been announced by U.S. companies. Those job cuts are not moving us in the direction of full employment.
Registered professional nurses comprise the largest segment of all health professionals. Phyllis Hansell, dean of Seton Hall University’s College of Nursing, stated that “currently, there are 2.6 million nurses in the U.S. and it is forecast that by 2010 an additional 1 million will be needed. Nurses will be required in all health care settings.” Where might we get these nurses? No problem. In the Philippines, government hospitals are the country’s largest health care employer. The government typically has only 1,000 new positions available each year for the 10,000 nurses that graduate. Nurses earn an average of $108 a month. Thousands of Filipino nurses are recruited every year to offset the shortage of nurses in the U.S. They apply for a U.S. immigrant visa that allows them to live permanently in the U.S. Alternatively, they come to the U.S. on a 3-year labor contract and then try to change their visa status after coming here. In sum, this is in-sourcing.
Tuesday, November 04, 2003
11/4/03 GDP Growth And More Job Losses
By now, everyone has told you that the GDP grew at an annual rate of 7.2% in the third quarter. Did those same people tell you that the average monthly payroll employment in the third quarter was 146,000 less than in the second quarter or that employment measured by the government’s household survey was down 79,000? Beginning with 1947, there have been 38 quarters when economic growth was 7.2% or more. In all of those 38 quarters except one, the number of payrolls rose. For one million dollars, when was the lone exception? You are right! The lone exception was the third quarter of 2003. Norbert Ore, head of the ISM manufacturing business survey committee, said “this is not a typical recovery by any means.” The latest ISM employment index was 47.7, the 37th consecutive month the index has remained below 50%. As Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein in New York stated, “the fact that the employment component is still below 50 means that the rise in orders hasn’t yet translated into jobs.” After four straight months of manufacturing expansion, factory jobs normally would be created. Mr. Ore made a very important observation. He said the ISM factory index reading of 57 is consistent with GDP growth of 5.7% and not the 7.2% that was reported. The rate of liquidation of manufacturers’ inventories decelerated slightly in October as the Inventories Index registered 44.5%, and it has been under 50% for 45 consecutive months. Please note that the Customers’ Inventories Index is at 39%, a decrease of 5.5% from September’s level. This is the 29th consecutive month that this index has registered below 50%. The October reading was at the lowest level since this index was initiated in December 1996; however, it did equal the level reached in May 2002. There was one more trouble spot. The ISM Price Index indicated that manufacturers continued to pay higher prices in October. It was the 20th consecutive month the index has registered higher prices. It would be one thing if the manufacturers were successful in passing along these increased prices; however, with little pricing power, they have not be able to accomplish this task. As such, a major focus has been on cost cutting, and jobs are the first item on the agenda to be reduced. If one really cares enough to dig, the answers are available. It’s a matter of dedication. With an increased knowledge base, one is able to better assess the true economic landscape, and to make rational investment decisions.
Jim O’Conn, group vice president, North American Marketing, Sales and Service for Ford, remarked sales year-date were down 4%, and then stated “the economy is sprinting and consumer fundamentals remain favorable, and we believe auto sales will be strong in 2003 and we look for another good year in 2004.” If sprinting means car sales for Ford in October being down 9%, then sprinting is taking place. GM’s October U.S. sales fell 7% from a year ago, and truck sales declined 8%. Chrysler Group’s October sales rose 11% but that was only because of the 17% increased truck sales. Their car sales declined by 11%. A spokesperson for Cap Gemini Ernst &Young said of the auto industry that “in the past you could just build more and you would sell more. Those days are gone.” It’s only a matter of time until capacity reductions occur except possibly in China where GM is upping capacity by 50%.
With the rising federal budget deficit, the Treasury announced it would need to borrow a record $117 billion this quarter. Borrowing estimates for the next quarter are a whopping $160 billion.
It was about 2 ½ years ago that Kellogg purchased Keebler Foods for $4 billion. Many analysts thought it was an excellent acquisition. Of course, most analysts have never run a business. Since the purchase, cookies have proven to be among Kellogg’s lowest-margin products. Kellogg CEO Carlos Gutierrez said he was disappointed with the sales decline in cookies at Keebler, and that plant closings might be necessary in the fourth quarter and in 2004 to further reduce the cookie-production capacity.
South Florida has received some closure and layoff news. Elizabeth Arden is closing its Miami Lakes distribution center , moving its corporate offices, and laying off 190 people. Appliance maker Applica has 158,000 square feet of space in Miami Lakes. They will move to smaller offices for headquarters in Broward County, and 50 of the 300 jobs will be lost. In addition, Applica is laying off about 4,000, nearly all at its factory in China! Cordis Corp., the Johnson & Johnson stent maker, will terminate 200 people.
The Federal Reserve Bank of San Francisco stated the Bay Area’s employment level now languishes at its early 1998 level after 350,000 jobs, or nearly one in ten, were lost since the employment peak in 2000.
The U.S. Department of Labor calculates that about 500,000 jobs have been lost to Canada or Mexico since the enactment of NAFTA on Jan. 1, 1994. Robert Scott at the Economic Policy Institute in Washington figures it at 766,000. Russell Roberts, a professor of economics at George Mason University in Fairfax, Va, remarked “the bottom line is this: NAFTA has caused hardships for some Americans in certain sectors, but it’s made for a more stable and integrated Mexican political system, and that’s a good thing.” I can hear President Bush using similar phrases in describing the war in Iraq and the ensuing occupation period.
By now, everyone has told you that the GDP grew at an annual rate of 7.2% in the third quarter. Did those same people tell you that the average monthly payroll employment in the third quarter was 146,000 less than in the second quarter or that employment measured by the government’s household survey was down 79,000? Beginning with 1947, there have been 38 quarters when economic growth was 7.2% or more. In all of those 38 quarters except one, the number of payrolls rose. For one million dollars, when was the lone exception? You are right! The lone exception was the third quarter of 2003. Norbert Ore, head of the ISM manufacturing business survey committee, said “this is not a typical recovery by any means.” The latest ISM employment index was 47.7, the 37th consecutive month the index has remained below 50%. As Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein in New York stated, “the fact that the employment component is still below 50 means that the rise in orders hasn’t yet translated into jobs.” After four straight months of manufacturing expansion, factory jobs normally would be created. Mr. Ore made a very important observation. He said the ISM factory index reading of 57 is consistent with GDP growth of 5.7% and not the 7.2% that was reported. The rate of liquidation of manufacturers’ inventories decelerated slightly in October as the Inventories Index registered 44.5%, and it has been under 50% for 45 consecutive months. Please note that the Customers’ Inventories Index is at 39%, a decrease of 5.5% from September’s level. This is the 29th consecutive month that this index has registered below 50%. The October reading was at the lowest level since this index was initiated in December 1996; however, it did equal the level reached in May 2002. There was one more trouble spot. The ISM Price Index indicated that manufacturers continued to pay higher prices in October. It was the 20th consecutive month the index has registered higher prices. It would be one thing if the manufacturers were successful in passing along these increased prices; however, with little pricing power, they have not be able to accomplish this task. As such, a major focus has been on cost cutting, and jobs are the first item on the agenda to be reduced. If one really cares enough to dig, the answers are available. It’s a matter of dedication. With an increased knowledge base, one is able to better assess the true economic landscape, and to make rational investment decisions.
Jim O’Conn, group vice president, North American Marketing, Sales and Service for Ford, remarked sales year-date were down 4%, and then stated “the economy is sprinting and consumer fundamentals remain favorable, and we believe auto sales will be strong in 2003 and we look for another good year in 2004.” If sprinting means car sales for Ford in October being down 9%, then sprinting is taking place. GM’s October U.S. sales fell 7% from a year ago, and truck sales declined 8%. Chrysler Group’s October sales rose 11% but that was only because of the 17% increased truck sales. Their car sales declined by 11%. A spokesperson for Cap Gemini Ernst &Young said of the auto industry that “in the past you could just build more and you would sell more. Those days are gone.” It’s only a matter of time until capacity reductions occur except possibly in China where GM is upping capacity by 50%.
With the rising federal budget deficit, the Treasury announced it would need to borrow a record $117 billion this quarter. Borrowing estimates for the next quarter are a whopping $160 billion.
It was about 2 ½ years ago that Kellogg purchased Keebler Foods for $4 billion. Many analysts thought it was an excellent acquisition. Of course, most analysts have never run a business. Since the purchase, cookies have proven to be among Kellogg’s lowest-margin products. Kellogg CEO Carlos Gutierrez said he was disappointed with the sales decline in cookies at Keebler, and that plant closings might be necessary in the fourth quarter and in 2004 to further reduce the cookie-production capacity.
South Florida has received some closure and layoff news. Elizabeth Arden is closing its Miami Lakes distribution center , moving its corporate offices, and laying off 190 people. Appliance maker Applica has 158,000 square feet of space in Miami Lakes. They will move to smaller offices for headquarters in Broward County, and 50 of the 300 jobs will be lost. In addition, Applica is laying off about 4,000, nearly all at its factory in China! Cordis Corp., the Johnson & Johnson stent maker, will terminate 200 people.
The Federal Reserve Bank of San Francisco stated the Bay Area’s employment level now languishes at its early 1998 level after 350,000 jobs, or nearly one in ten, were lost since the employment peak in 2000.
The U.S. Department of Labor calculates that about 500,000 jobs have been lost to Canada or Mexico since the enactment of NAFTA on Jan. 1, 1994. Robert Scott at the Economic Policy Institute in Washington figures it at 766,000. Russell Roberts, a professor of economics at George Mason University in Fairfax, Va, remarked “the bottom line is this: NAFTA has caused hardships for some Americans in certain sectors, but it’s made for a more stable and integrated Mexican political system, and that’s a good thing.” I can hear President Bush using similar phrases in describing the war in Iraq and the ensuing occupation period.
Monday, November 03, 2003
11/3/03 Just In Time Employment
The biggest issue facing Americans is the job market. I will do my best to cover all the bases. Since becoming President in 1999, Bush has just received the lowest mark, only 40% approve of how “he understands the problems of people like you.” Let’s get to work on this subject- you and me.
Let’s get some housekeeping out of the way. Tomorrow, Challenger, Gray, and Christmas will release their employment numbers for October. Later in the week the government will release October job numbers. The two reports will not mesh. They never have in the past, and my analysis indicates a small rise in the number of unemployed workers. That too will not jibe with the government numbers. Please keep in mind that, sometime in December, the government will issue a report that they have been underestimating the unemployment number. I am certain that this report will be issued, and the underestimation will be in the range of 200,000 or more out of work Americans.
The workplace situation is simple to explain. Employers have embraced just in time inventory as well as just in time employment. If business picks up, companies will add a temporary worker, a part-time worker, or provide overtime to existing staff rather than hire a full-time worker. Sometimes the employer might hire the temp, part-time, and add overtime to staff- all at the same time. Companies pay less in wages and benefits through this employment practice. In addition, they avoid a layoff and do not have to pay additional unemployment expenses. There are about 130 million people in the workforce. Over the past 30 years temporary employment has risen from 0.3% of total employment to more than 3 million jobs or 800%. Yet, the chairman and CEO of Manpower has stated that, over the past four years, the number of their temporary workers has declined from 1.1 million to 650,000. Over the past 35 years the number of people working part-time jobs has grown from 14% of the workforce to 18%, and this is understated because the category does not include people working more than one job for a total of more than 35 hours.
When business is slow, employers might cut the workweek to 4 days, cut a half-day from the workweek, or even have employees take vacation days.
Overtime has also contributed to less job creation. Among production workers, overtime is up from 2.4 hours a week in 1960 to 4.1 hours, a 71% increase. The occasional overtime pay can provide a needed and welcome boost to income. On the other hand, overtime can generate additional stress in the workplace. Many employees are making a conscious decision to reduce hours worked, and that means less pay. October 24 was celebrated by many as “Take Back Your Time Day.” Many workers express that “they’re so stressed they’re not pausing at all, and you have to pause if you want to define who you want to be.” Many have turned to visiting the Web site, www.newdream.org, which offers tips on lowering consumption and exploring non-material ways for enjoyment. More Americans are seeking leisure over luxuries. Less pay also means focusing on obligatory expenses and cutting down on discretionary items. Lifestyles are changing. The workplace is changing. Main Street is taking on a different look. New saving methods are evolving, and with them, changes in Americans’ long-term investment programs.
James B. Cichanski, Flex HR Inc.’s president and CEO, remarked “every dollar costs, and you think about it in the economic climate today.”
The biggest issue facing Americans is the job market. I will do my best to cover all the bases. Since becoming President in 1999, Bush has just received the lowest mark, only 40% approve of how “he understands the problems of people like you.” Let’s get to work on this subject- you and me.
Let’s get some housekeeping out of the way. Tomorrow, Challenger, Gray, and Christmas will release their employment numbers for October. Later in the week the government will release October job numbers. The two reports will not mesh. They never have in the past, and my analysis indicates a small rise in the number of unemployed workers. That too will not jibe with the government numbers. Please keep in mind that, sometime in December, the government will issue a report that they have been underestimating the unemployment number. I am certain that this report will be issued, and the underestimation will be in the range of 200,000 or more out of work Americans.
The workplace situation is simple to explain. Employers have embraced just in time inventory as well as just in time employment. If business picks up, companies will add a temporary worker, a part-time worker, or provide overtime to existing staff rather than hire a full-time worker. Sometimes the employer might hire the temp, part-time, and add overtime to staff- all at the same time. Companies pay less in wages and benefits through this employment practice. In addition, they avoid a layoff and do not have to pay additional unemployment expenses. There are about 130 million people in the workforce. Over the past 30 years temporary employment has risen from 0.3% of total employment to more than 3 million jobs or 800%. Yet, the chairman and CEO of Manpower has stated that, over the past four years, the number of their temporary workers has declined from 1.1 million to 650,000. Over the past 35 years the number of people working part-time jobs has grown from 14% of the workforce to 18%, and this is understated because the category does not include people working more than one job for a total of more than 35 hours.
When business is slow, employers might cut the workweek to 4 days, cut a half-day from the workweek, or even have employees take vacation days.
Overtime has also contributed to less job creation. Among production workers, overtime is up from 2.4 hours a week in 1960 to 4.1 hours, a 71% increase. The occasional overtime pay can provide a needed and welcome boost to income. On the other hand, overtime can generate additional stress in the workplace. Many employees are making a conscious decision to reduce hours worked, and that means less pay. October 24 was celebrated by many as “Take Back Your Time Day.” Many workers express that “they’re so stressed they’re not pausing at all, and you have to pause if you want to define who you want to be.” Many have turned to visiting the Web site, www.newdream.org, which offers tips on lowering consumption and exploring non-material ways for enjoyment. More Americans are seeking leisure over luxuries. Less pay also means focusing on obligatory expenses and cutting down on discretionary items. Lifestyles are changing. The workplace is changing. Main Street is taking on a different look. New saving methods are evolving, and with them, changes in Americans’ long-term investment programs.
James B. Cichanski, Flex HR Inc.’s president and CEO, remarked “every dollar costs, and you think about it in the economic climate today.”
Sunday, November 02, 2003
11/2/03 Don’t Worry! Be Happy!!
The terror card is not working in Illinois. The Illinois Voter Worry Index is a yearly measure of how worried the citizens in that state are about everything. The index started 14 years ago, and this is the highest level of worry since the index began. Less than 1% of those polled chose terrorism as the biggest worry. In fact, in looking at the results of the poll, terrorism was a non-event. The two biggest jumps in the index were for losing health insurance (17.9%) and ability to pay taxes (14.4%). The results of this poll reflect the daily worries on Main Street: “A lot of people out there feel they are in a dire financial situation, or could be very soon. It should be a wake-up call for lawmakers who think quick cosmetic solutions are enough. Every night the cosmetics come off, and one has to look in the mirror. The voters seem to know this. And they are watching…the intensification seems to be clustering around financial insecurity. Economic worries really seem to be troubling people- and not just for the lower incomes or younger people, not just for certain groups, but for everyone.” These findings are consistent with what I have been saying for the last several years- it’s living paycheck to paycheck, worrying about losing your job, and worries about health insurance and having a bigger co-payment, having less coverage, and/or no coverage. When you have trouble paying bills, the worry is not Osama bin Laden or Saddam Hussein. Bush and his Administration still don’t get it. They’ve never walked the streets of Main Street. They participate in photo shoots while giving fund raising speeches and stumping for Republican candidates.
Yesterday Bush campaigned for two Republican gubernatorial candidates in Mississippi and Kentucky. Thirteen soldiers were killed and more than 20 wounded when their U.S. Chinook helicopter was shot down near Fallujah, about 40 miles west of Baghdad. Fallujah is a center of Sunni Muslim resistance to the U.S. occupation. This was the third time guerrillas had brought down a U.S. military helicopter since Bush declared major combat over in Iraq on May 1. A bomb in Baghdad killed two more U.S. soldiers. During the past week, on average there have been thirty- three daily attacks on our troops in Iraq. The death toll in Iraq is mounting. Since May 1, 137 of our troops have been killed in hostile combat.
PA Consulting Group said 66% of companies surveyed were disappointed with their outsourcing contracts. The survey reveals that only 39% of the companies would renew contracts with their existing outsourcing suppliers, and 15% planned to bring services back in-house. Dave Lakhani, president of business consulting firm Bold Approach Inc., stated only 40% of the outsourcing projects are successful, and that most companies “don’t understand the potential problems. They feel whatever problems may arise, they will be easily offset by the savings. That's really not true.” Problems most often mentioned are security, cultural differences, and logistics.
A new Washington Post-ABC News poll showed Sunday that 48% of those surveyed would vote for Bush if the election were held today while 47% said they would vote for the Democratic Party’s nominee. Five per cent said they did not know.
An interesting dichotomy is revealed with two privately owned companies. Cold Stone Creamery recently opened its 500th store. A new Curves opens about every four hours, and has more than 6,000 low-impact exercise clubs with 2 million members.
Japan has been spending money on bridges, roads, dams, and several other public works projects. Since 1991, Japan’s national debt has risen to 685 trillion yen or about 140% of annual GDP. The market capitalization of all the public companies trading in the United States presently exceeds 100% of our annual GDP. Over the last eight decades the average ratio has been about one-half of that.
China’s economy grew over 9% in the third quarter as compared with the prior year’s third quarter. During the first nine months of 2003, China’s imports increased more than 40% from the year earlier period. A good portion of that import growth came from Southeast Asia as well as South Korea.
Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., was recently interviewed in Barron’s. He stated “ the simple story is the market is overpriced and will go to a trendline P/E, which we now believe is 16 times based on research that shows earnings tend to be overstated over time because assets tend to be underdepreciated during times of technological progress. Currently, the market is around 24 times trailing earnings, on a fairly generous earnings estimate. This is not just a bear market rally but the greatest sucker rally in history." I have never talked with or met Jeremy Grantham. He has had a successful money management record for 35 years. Not too many folks can say that.
The terror card is not working in Illinois. The Illinois Voter Worry Index is a yearly measure of how worried the citizens in that state are about everything. The index started 14 years ago, and this is the highest level of worry since the index began. Less than 1% of those polled chose terrorism as the biggest worry. In fact, in looking at the results of the poll, terrorism was a non-event. The two biggest jumps in the index were for losing health insurance (17.9%) and ability to pay taxes (14.4%). The results of this poll reflect the daily worries on Main Street: “A lot of people out there feel they are in a dire financial situation, or could be very soon. It should be a wake-up call for lawmakers who think quick cosmetic solutions are enough. Every night the cosmetics come off, and one has to look in the mirror. The voters seem to know this. And they are watching…the intensification seems to be clustering around financial insecurity. Economic worries really seem to be troubling people- and not just for the lower incomes or younger people, not just for certain groups, but for everyone.” These findings are consistent with what I have been saying for the last several years- it’s living paycheck to paycheck, worrying about losing your job, and worries about health insurance and having a bigger co-payment, having less coverage, and/or no coverage. When you have trouble paying bills, the worry is not Osama bin Laden or Saddam Hussein. Bush and his Administration still don’t get it. They’ve never walked the streets of Main Street. They participate in photo shoots while giving fund raising speeches and stumping for Republican candidates.
Yesterday Bush campaigned for two Republican gubernatorial candidates in Mississippi and Kentucky. Thirteen soldiers were killed and more than 20 wounded when their U.S. Chinook helicopter was shot down near Fallujah, about 40 miles west of Baghdad. Fallujah is a center of Sunni Muslim resistance to the U.S. occupation. This was the third time guerrillas had brought down a U.S. military helicopter since Bush declared major combat over in Iraq on May 1. A bomb in Baghdad killed two more U.S. soldiers. During the past week, on average there have been thirty- three daily attacks on our troops in Iraq. The death toll in Iraq is mounting. Since May 1, 137 of our troops have been killed in hostile combat.
PA Consulting Group said 66% of companies surveyed were disappointed with their outsourcing contracts. The survey reveals that only 39% of the companies would renew contracts with their existing outsourcing suppliers, and 15% planned to bring services back in-house. Dave Lakhani, president of business consulting firm Bold Approach Inc., stated only 40% of the outsourcing projects are successful, and that most companies “don’t understand the potential problems. They feel whatever problems may arise, they will be easily offset by the savings. That's really not true.” Problems most often mentioned are security, cultural differences, and logistics.
A new Washington Post-ABC News poll showed Sunday that 48% of those surveyed would vote for Bush if the election were held today while 47% said they would vote for the Democratic Party’s nominee. Five per cent said they did not know.
An interesting dichotomy is revealed with two privately owned companies. Cold Stone Creamery recently opened its 500th store. A new Curves opens about every four hours, and has more than 6,000 low-impact exercise clubs with 2 million members.
Japan has been spending money on bridges, roads, dams, and several other public works projects. Since 1991, Japan’s national debt has risen to 685 trillion yen or about 140% of annual GDP. The market capitalization of all the public companies trading in the United States presently exceeds 100% of our annual GDP. Over the last eight decades the average ratio has been about one-half of that.
China’s economy grew over 9% in the third quarter as compared with the prior year’s third quarter. During the first nine months of 2003, China’s imports increased more than 40% from the year earlier period. A good portion of that import growth came from Southeast Asia as well as South Korea.
Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., was recently interviewed in Barron’s. He stated “ the simple story is the market is overpriced and will go to a trendline P/E, which we now believe is 16 times based on research that shows earnings tend to be overstated over time because assets tend to be underdepreciated during times of technological progress. Currently, the market is around 24 times trailing earnings, on a fairly generous earnings estimate. This is not just a bear market rally but the greatest sucker rally in history." I have never talked with or met Jeremy Grantham. He has had a successful money management record for 35 years. Not too many folks can say that.
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