Saturday, April 10, 2004

4/10/04 The Truth Does Not Cease Firing

Former Army Chief of Staff Gen. Eric Shinseki in his last year’s farewell speech: “Beware the 12-division strategy for a 10-division Army. Our soldiers and families bear the risk and the hardship of carrying a mission load that exceeds what force capabilities we can sustain, so we must alleviate risk and hardship by our willingness to resource the mission requirements.” According to Defense Department statistics, two soldiers died yesterday in Iraq. More than 200 U.S. personnel have been injured in combat in the last 24 hours. This week 42 U.S. soldiers have been killed in this war called Iraqi Freedom. This week our fighting troops incurred the biggest losses in such a short time since our March 2003 invasion. British Foreign Secretary Jack Straw stated “there is no doubt that the current situation is very serious, and it is the most serious that we have faced.” Yesterday, U.S. Central Command chief Gen. John Abizaid requested more forces for Iraq. About 3,300 U.S. troops have been wounded in combat since the war began. It was ill-advised for our Commander-in-Chief to leave mid-week for Crawford, Texas for an Easter holiday. The last time I checked the White House lawn was large enough for an Easter egg hunt.

The labor force in Santa Clara County, heart of the Silicon Valley, has declined to its lowest level in more than 8 years, according to the figures released Friday by the California EDD. Since August 2000, the latest labor pool statistics for the county shows there are 145,300 fewer people in the work force. In March, the number of people unemployed in the state of California rose by 28,000 over February.

Yesterday, Boeing stated that it reduced employment in the state of Washington by 194 in March. As of April 1, they employ 53,0333 in the state. In June 1998, Boeing employed 104,000 in the state. For close to three years, Boeing has experienced monthly employment declines.

In the past three months, non-petroleum import prices have risen at close to a 6% annual rate. Over the past year the CRB has risen by 40%. Toyota stated they would raise prices by up to $500 on certain models. In March, the Economic Cycle Research Institute’s Future Inflation Gauge increased from –2.2% to 3.3%. The one bright spot is the minimal increase in unit labor cost.

Yesterday the U.S. markets were closed. Many might have missed the new AP-Ipsos Consumer Confidence Index. From a reading of 97.7 in early March, it dropped this week to 84.8. The reading was the lowest since October, and only slightly higher than the 83.8 reading one year ago. The “jobs gauge” dropped to 100.3 in early April from 95.2 in March. Consumers’ feelings about economic expectations over the next six months fell to 90.5 in early April from 95.2 in March. April’s index reading was based on interviews with 1,000 adults about the economy.

Friday, April 09, 2004

4/9/04 Downsizing In The Workplace

William Baumol, Alan Blinder, and Edward Wolff have written a new book entitled “Downsizing in America.” The authors make some important observations. They stated that, of the 100 million men and women with full-time jobs in 2001, more than half earned less than $35,000; 84% earned under $65,000; 10% made between $65,000 and $100,000; and only 5.7% made above $100,000. In addition, they note that, in two-thirds of households with wage earners, the workers hold two or more jobs. For families with children, two-thirds of the mothers work. However, fewer than half the households have adults with two full-time jobs. There are serious implications resulting from the trends towards less full-time jobs, the average weekly work hours declining, weekly paychecks declining, and benefits dwindling.

House Democratic Leader Nancy Pelosi: “The Republican leadership in the House refuses to schedule a vote on the bipartisan Crane-Rangel manufacturing bill, which would lower taxes for American manufacturers and keep good paying jobs in the United States. The Bush Administration needs to take concrete action to level the playing field with China, give our manufacturers the tax relief they deserve, and reward those companies that create jobs here in America, rather than sending them overseas.”

The United States Senate passed a bill that did not provide meaningful relief for all pension plans. They excluded multi-employer plans covering 10 million working Americans. Only twelve Democrats and seven Republicans voted against this legislation. Why should the retirement security of union workers covered by multi-employer plans be treated differently from others in the workplace? Is this a sign of compassionate conservatism? Maybe the failure to extend unemployment benefits for millions of Americans is a sign of compassionate conservatism on the part of the administration.

Sen. Don Nickles, a Republican from Oklahoma, chairs the Senate Budget Committee. As previously discussed, Brian Roseboro, acting under secretary for domestic finance, stated in February that the nation’s debt limit of $7.384 trillion would need to be raised sometime around June or so. Nickles and his committee have been discussing a plan for a limited debate in which the debt limit would be increased by $664 billion. In other words, we can downsize the quality and the amount of jobs in the workplace while we upsize governmental spending and the nation’s debts. That sounds like a great recipe for disaster. I hope the voters have an intelligent exit strategy.

According to a new report from the business intelligence firm Cutting Edge Information, only one out of every 1,000 drug candidates that make it to pre-clinical development is deemed promising enough to advance to human clinical trials. On average, commercial spending for pre-clinical drugs reaches $1.5 million. Cutting Edge stated “marketing spending from pre-clinical through Phase IIIa comprises 21% of total commercial spending. Launch, Phase IIIb, and Phase IV account for 79% of all marketing dollars.”

According to the Association of Hispanic Advertising Agencies (AHAA), the Hispanic advertising industry grew almost 10% in 2003 and is expected to grow further in 2004. While Hispanics represent 13% of the U.S. population, the Hispanic market receives only about 3.2% of total advertising spending. However, Hispanics have a buying power estimated at more than $630 billion.

The Travel Industry Association of America’s study found that Hispanic travel increased by 20% from 200-2002 and is growing 10 times the overall rate for the traveling population as a whole. The TIAA study indicated that 33% of all Hispanic trips included three or more people from the same household. Hispanics are significantly more likely to use bus and rail transportation for travel. Approximately 15% of Hispanic households spends $1,000 or more on trips, over and beyond transportation to their destination. In addition, 34% state shopping is the favored activity for Hispanic travelers.

Microsoft CEO Steve Ballmer: “I think that as long as there are a handful or less of operating systems that are popular, hackers will figure out how to attack each and every one of them, because there will be a profit to be made, national security interests to be pursued, and mischief to be done.”

The U.S. military announced that six troops died Wednesday and yesterday, bringing to at least 36 the number killed in combat since Sunday in Iraq.

Bush received a classified briefing from the CIA on Aug. 6, 2001 entitled “Bin Laden determined to attack inside the United States.” Rice stated she was not briefed prior to 9/11 about terrorists’ plans to use airplanes as missiles before 9/11. In fact, there were 12 previous intelligence reports and one explicitly stated “Islamic terrorists might attempt to kill world leaders by crashing an airliner.” In January 2004, Rice told the 9/11 Commission she “regretted” her earlier denials and did “misspeak.” However, on March 22, Rice wrote in the Washington Post “we received no intelligence that terrorists were preparing to attack the homeland using airplanes as missiles.” Misspeaking must be a virus within administration inner circles.

Due to the upcoming merger of Giant Food and Stop & Shop Supermarket, 650 employees at Giant’s Landover headquarters will be either cut or relocated. The cuts will be completed by the end of May.

Infosys Technologies of Bangalore, a large Indian outsourcing firm, will invest $20 million to create Infosys Consulting . They plan to hire 500 workers at its Fremont, California headquarters and other locations over the next three years.

Boeing is considering selling its fuselage and cockpit assembly plant in Wichita and facilities in Tulsa and McAlaster, Oklahoma. The company employs 12,400 in this region. Boeing continues in its efforts to downsize.

Thursday, April 08, 2004

4/8/04 Back To The Future And The Present

This year the budget deficit of $521 billion will exceed 4% of the GDP. In 1988, the budget deficit was 3.1% of our GDP. In 1988, the Business Roundtable stated the budget deficit “posed a major threat to sustained economic growth.”

In the last 24 months, freight rates for the Asia-U.S.A. route have jumped 29% and rates between Asia and Europe have climbed 54% during this period.

Penny de Valk, a director of Ceridian in the UK: “Employers need to include the eldercare needs of employees in their work/life strategies now or risk a generation of workers who will cost their businesses billions in lost productivity and stress.”

Yesterday, Moody’s raised its rating on non-yen government bonds. Last month, Japan’s foreign exchange reserves rose by about $50 billion to a record $827 billion.

For the last week, the Labor Department stated 31 states and territories reported a decrease in new unemployment claims and that 22 reported an increase. It should be noted that, last week about 80,000 previously counted as unemployed, were dropped from those unemployment rolls due to the loss of benefits.

When jobs are outsourced and jobs leave our country, there are less employee tax contributions to Social Security, Medicare, workers’ compensation, and other payroll-deduction funds. Some argue that the net impact is to harm tax coffers. It should be noted, for example, that corporate profits do not make their way into Social Security. It might be wise to understand the pluses and minuses of outsourcing and offshoring.

The Citizens Against Government Waste released their annual “Pig Book” yesterday. The organization stated that 10,656 pork projects were included in the 13 appropriations bills outlining federal spending for 2004, a 13% increase over 2003. There is a record $22.9 billion spending on so-called earmarks for members. I suggest we dismember the members earmarking pork projects. The voters need to act responsibly in the voting booth.

According to an annual AAA study, the average cost of driving a new passenger car in 2004 is 56.2 cents per mile or $8,431 per year. The largest component of the vehicle cost is depreciation estimated at $3,782 per year of ownership for an average new car. The IRS tax allowance for business mileage is currently 37.5 cents per mile.

According to the Cambridge Credit Index, nearly seven out of ten Americans who already have received or anticipate receiving a tax refund this tax season plan to spend it on everyday items or pay bills, up from 59% in 2003. Only 23% plan to save their refunds in their bank accounts, down from 27% in the prior year. Only 4% plan to invest the refund in stocks, bonds, or mutual funds, the same percentage as in 2003.

There is an increasing number of workers having to settle for part-time employment. This has implications for the average weekly paycheck, the average weekly hours worked, the lack of benefits, and other critical matters. When the workplace cannot accommodate the number of workers entering the labor force, it would behoove us to re-think our structural make-up. While we make war in Iraq, Mexico is creating a trade accord with Japan, India is creating business alliances with China, and other global unions are being formed. This administration lacks business- negotiating skills and our exports are suffering. U.S. plants are constructed outside of our borders. Plants are closing within our borders. Change is required, and it must happen quickly.

Wednesday, April 07, 2004

4/7/04 A Portfolio Addition

I often lose track of time. It’s been about two years since turning bearish on the U.S dollar and adding New Zealand dollars to the portfolio. Several months ago, we added an initial position in the rupee. I am suggesting we take a significant long-term holding in the rupee. Yesterday, some of our thoughts were reinforced by Moody’s Investors Service stating that India’s economy is likely to grow at a 6.5% rate in the coming years. Just three months ago, the credit service gave India an investment-grade rating for the first time. Their report remarked “even at ‘just’ 6.5%, India is likely to attract much more capital going forward than has been the case historically.” India’s foreign reserves topped $112 billion U.S., nearly twice the amount the country spends on funding its annual imports, according to the latest estimates from the central bank. However, a word of caution is necessary. The consolidated gross debt of India’s federal and state governments has increased to around 85% of GDP, Moody’s stated. It should also be noted that S&P, which had revised the outlook for foreign currency rating of India from “negative” to “stable” due to the country’s improved macro-economic fundamentals, however, continued to accord India only a “sub-investment” grade status.

Mumbai-based State Bank of India, the country’s largest bank, is looking to take a major step. The bank is in the process of acquiring a bank in the U.S. It would be a first for an Indian financial institution.

IBM signed a deal late last night to acquire Daksh e-services Pvt Ltd, India’s third-largest business outsourcing firm. Delhi-based Daksh employs more than 6,000 people and offers call centers. They have more than 10 clients, including Amazon.

According to a new AARP study, 40% of all people in business for themselves are older than 50. Among self-employed workers age 51 and older, 34% have employer-provided health insurance compared with 67% of wage and salary workers of the same age.

A recent CIBC World Markets report stated “not only are better quality jobs being lost, but those without them are finding it harder to get back to work.” The result, the report observed, is that U.S. workers are either turning to self-employment options or are settling for whatever they can get in terms of paid employment.

The IBD and TechnoMetrica Market Intelligence survey stated their optimism index fell to 52.8 in April from 54.5 in March, the third straight monthly drop. The president of TIPP stated “most Americans continue to be very optimistic, but in about 30% of households, someone has either lost a job in the past 12 months or fears they might lose a job in the next 12 months.” The six-month economic outlook lost 3.1 points to 50.5.

Challenger, Gray & Christmas stated planned job cuts decreased to 68,034 in March compared with 77,250 in February. John Challenger remarked “the heavy job cutting we have seen over the past three years appears to be trending down. However, the job market seems to be in a state of limbo, where companies are eager to hold on to the people they have, but many are reluctant to create any jobs. Employers know they are far better off with a seasoned, senior staff versus the cost of acquiring and training replacements in a period when the customer is king.”

Blockbuster introduced the prepaid gift card in 1996. According to TowerGroup Research, over 92% of consumers are aware of the product. In the past year, gift card dollar volume grew 50% to $45 billion in sales. TowerGroup projects significant growth for gift cards to more than $90 billion in sales in 2007.

Gasoline at the pump reached a new all-time high of $1.77 per gallon.

Nokia warned that first quarter sales would decline 2% and that earnings would come in at the low point of the previously forecast range. With Nokia the cell phone leader, their projected sales decline should create some doubt about current valuations in the industry.

Yesterday, 18 of our soldiers were killed in Iraq. The administration has dubbed our effort Iraqi Freedom. If we close down a newspaper, do we further the cause of freedom? It is not surprising to see the reactions of the insurgents. Ted Kennedy spoke at the Brookings Institution, and stated Iraq has become “George Bush’s Vietnam” and that “this president has now created the largest credibility gap since Richard Nixon. He has broken the basic bond of trust with the American people…in this administration, truth is the first casualty of policy.” We should not forget the 18 casualties from Tuesday and the 610 before them.

Hans Blix told a Danish newspaper that the costs of the Iraq war outweighed the benefits of removing Saddam Hussein and “it’s positive that Saddam and his bloody regime is gone, but when one weighs the costs, it’s clearly the negative aspects that dominate.” I concur.

The EU warned that Germany, France, Italy, the Netherlands, Portugal, and Greece, representing 80% of the $8.5 trillion euro economy, will exceed the debt limit of 3% of GDP. In the U.S. our debt has a limit but not as a percentage of GDP. As stated yesterday, our debt limit will be reached shortly. Hopefully, the Congress will vote not to raise the current level of debt. Our president does not have married children and does not have grandchildren. As such, he may not fully appreciate current debts handed to the next generation.

Tuesday, April 06, 2004

4/6/04 Micro and Macro

Almost on a daily basis, I receive emails describing my macro views and their applicability for long-term investing; however, I’m told, since I avoid micro analysis, my musings are not particularly helpful for day-to-day and hour-to-hour and minute-to-minute traders. There is probably some truth to that theory. I am not a trader. I am an investor. The problem is most money managers manage other people’s money and not their own. They feel the pressure to perform each day. I have an intense desire to perform each day to the best of my abilities. I know my daily performance. I also attempt to position myself for the long term by anticipating future happenings and trends. I try to focus on my strengths and avoid the pitfalls. There are some who are excellent at minute-to-minute trading. However, few are successful at that endeavor. Investing for the long-term generally produces more satisfying results. This discussion is timely and brings into view today’s article in the Financial Times by Francis Bator, professor emeritus of political economy at Harvard’s Kennedy School. Entitled “Tax cuts will not rescue America,” he discussed Bush’s desire to make his tax cuts permanent. Bator states “the planned future tax cuts also pose a danger in the shorter term. The tax cuts unmatched by cuts in government consumption, together with high interest rates to prevent inflation, may not be a sustainable policy combination. Because high U.S. interest rates tend to cause the dollar to appreciate, they are likely to make an already large trade deficit larger. If borrowing to pay for the resulting excess of imports over exports means that our foreign debt keeps increasing faster than gross domestic product, our creditors are likely to get nervous. Should they try to reduce their holdings of dollar debt, or even to cut back on new lending, they might inadvertently set in motion a speculative run from the dollar.” Bator makes a point I share with great enthusiasm. He observes “barring a supply-side miracle, the president’s future tax cuts will shift the composition of spending in favor of consumption and against national investment. As a result, the economy’s capacity to produce output for our own use will grow more slowly.”

Our economy is producing output for our own use more slowly. Other nations produce for us. Our imports have swelled with the rise in our consumption, and with it, our debt levels have surged. It doesn’t matter whether one believes this is a macro or a micro view. It will have short and long-term implications. Why? The nation’s growing shift to consumption has created the rise in service sector jobs. Of the 308,000 net jobs created in March, 230,000 were in the service sector. Those are jobs at Wal-Mart, Starbucks, Walgreens, McDonald’s, Marriott, Krispy Kreme, and the like. These are not jobs at GM or IBM. I am not putting down the 1.4 million associates at Wal-Mart. However, service sector jobs, in general, pay lower wages, provide less benefits, contain less weekly hours worked, and often are characterized by greater turnover. Service sector jobs comprise 75 to 80 percent of our nation’s employment. Does this fact have an impact on micro investing? Think about it. How does it create pressures to perform? It leads to cost cutting. It leads to lower levels of investment. Wal-Mart invests heavily in IT but not in store infrastructure. They are described as big box stores. Let’s look at Arkansas in March. The state’s manufacturing base continued to decline; however, overall, the number of unemployed was down 700 from February. Of the net jobs created, food services accounted for 65% of that jump. Leisure and hospitality were also strong.

I often talk about the lack of pricing power. You have a bad situation in the auto industry. The automakers reported a March surge in buying by consumers. The companies need to rid themselves of inflated inventories. So far this year, incentives are up 35% while sales are up 4%. Would you want to own a business like that? If you invest in GM, Ford, or Chrysler, you are an owner. According to Autodata Corp., GM’s average incentives rose 42% to $4,226 per vehicle. In the first three months of 2002, GM’s market share was 28.3%. Today it is 26.8%. Toyota offers much less incentives and their market share has consistently been rising.

I write often of the budget gaps experienced by our states. California has the largest budget gap at $14 billion. I write about teacher layoffs. Today we have something a bit different. The 45-year-old School of Engineering program at SF State University has grown by nearly 50% since fall 2001 to 700 students with 17 faculty members. The University has a $14 million budget gap. Nothing has been decided, but there is a proposal by administrators to close the engineering program. The School of Business is also facing cuts. As one of the school officials stated, “we are going through unprecedented times…it is very painful. We are not used to cutting programs. We are used to adding programs.” Do unprecedented times have an impact on minute-to-minute trading? If we graduate less engineers and business professionals, will that impact the S&P futures? Why should a Wall Street broker worry when they earn $150,000 a year from commissions? Why should a mutual fund manager worry? It won’t impact his or her continued lack of performance. They rarely get replaced.

Drugstores control 46% of the pharmacy industry. Walgreens and CVS are the two giants. If you look at the record for Walgreens over the past 25 years, you would think they are a growth tech stock. With uninterrupted multi-decade growth, the company is one of the under appreciated investment vehicles. Wal-Mart has learned to appreciate the value of its pharmacy operations and the profitability of generics. With the aging of the population, this sector has a promising future. Will it impact today’s trading? That’s another story.

As an investor, should you care that unemployment in Germany rose by 44,000 in March, and that it was the third consecutive monthly rise? One of the Chancellor’s advisors stated “I don’t see any reason why companies should feel inclined to resume hiring.” I don’t see any reason why manufacturers in the U.S. should resume hiring. It’s been almost four years since that happened. On the other hand, we produced a great many service sector jobs in March. I call them paycheck to paycheck jobs. It beats the unemployment rolls.

I hope everyone cares that 5 more American soldiers were killed today in the Anbar province of Iraq. The killing is escalating. Does this impact the Nasdaq futures? Does anyone care that, in the next few days, there will be $50 to $100 million in budget cuts in the metro Atlanta school system? Atlanta does not have an approved budget for their new fiscal year beginning July 1. By the way, in another 30 to 60 days our government will need to raise the debt limit for the third year in succession. Wouldn’t it be great if the government offices ground to a halt. It probably wouldn’t impact the S&P.

Monday, April 05, 2004

4/5/04 A Multimedia Super Corridor

The world’s largest twin towers, Petronas, are located in Kuala Lumpur in Malaysia. The government hopes to create 60,000 jobs in Malaysia’s Multimedia Super Corridor by 2008. Shell Information Technology International chose this location over eight other alternative sites, including Singapore and Hong Kong. Shell has moved 600 IT services personnel here. HSBC has made this one of five worldwide back-office data-processing centers, and in 2004, the bank plans to add another 2,500 staff members to service clients in the U.K., Australia, and New Zealand. Within the Multimedia Super Corridor we can find Ericcson, Fujitsu, NTT, DHL, BAT, Prudential, EDS, IBM, Nokia, Western Union, HP, Intel, Standard Chartered Bank, BMW, Microsoft, Sun, Oracle, and a long list of world-class companies who see this as an emerging regional hi-tech outsourcing center. Motorola arrived here in 1999, and employs more than 250 software engineers, of which over 98% are Malaysians. Their focus includes solutions in 2G, 2.5G, and 3G as well as embedded test software applications for portable wireless devices. Employee turnover is less than 10%. Japan’s NTT employs 75 engineers, of which 90% are Malaysians. They are developing software and content for third-generation mobile phones. The average cost of employing a software engineer in Malaysia is one-fifth of that in the United States. The operating costs of companies in Malaysia are lower than in New Delhi or Mumbai. The President and CEO of NTT Malaysia stated “the quality of engineers available in Malaysia is very good. When we wanted to set up operations outside Japan, we found that Malaysia was the best market to offer our services within the ASEAN Region.” This region is forecast to have one of the strongest long-term growth trends in the coming decades. Between now and 2008, the twin towers of Kuala Lumpur will become more crowded with sophisticated software and embedded engineers. I am not certain the same statement would hold true for the Silicon Valley.

Tony Crescenzi, chief bond market strategist at Miller Tabak: “The current divergence between beans and bonds suggests that any future gain in the bond market could be limited.”

A study by the National Employment Law Institute and the EPI found that the number of college graduates without a job for six months or longer increased in the past twelve months by 32% to 369,115. Among professionals the rise was 38%. Overall, in 2003, only 76% of college-educated workers had jobs, the lowest level in 25 years. So much for the emphasis on education and landing a job. It’s right up there with no child left behind as teacher layoffs increase.

Kroger is beginning to remind me of Toys R Us. Kroger has offered workers in Houston higher wages and improved health care as the workers’ union contract is set to expire on Saturday. The contract covers 10,800 workers in the Texas market. Kroger stated health care costs in the region have risen 67% in the past four years. Presently, the company picks up full cost for employees covered under labor contracts. Kroger stated a number of major contracts are scheduled to expire in 2004, in Cincinnati, Seattle, Louisville, Nashville, Detroit, Denver, and Las Vegas. Kroger’s vice chairman stated the company “is committed to achieving a cost structure that enables us to grow our business while providing competitive wages and benefits to our associates.” I think that’s a great commitment; however, with rising employee and healthcare cost hurdles, how will the company compete with Wal-Mart?

Yesterday, there were riots in four Iraqi cities, and 8 American soldiers died and many were injured. Since the war began last March, the death toll has risen to at least 610. Mark LeVine writes from Baghdad and Amman that “Iraq is sliding toward chaos; a state that many Iraqis increasingly believe is exactly where the U.S. wants them to be. A prominent Iraqi psychiatrist who has worked with the Coalition Provisional Authority and the U.S. military explained to me that ‘there is no way the United States can be this incompetent. The chaos here has to be at least partly deliberate.’ The main question on most people’s minds is not if his assertion is true, but why?” I don’t know the answer to the question, but I would tell the psychiatrist that our government is clearly capable of being this incompetent.

The Union Pacific has a rail system covering 33,000 miles or roughly twice the size of the National Railways of Mexico. Frequently, we kid about fiestas taken south of border and business being transacted on a tomorrow basis. The Union Pacific can hold its own. They are unable to handle the volume of freight business in the LA area and on many of the routes to the Southwest. Consequently, they are asking some customers to cool it and reduce their level of business with the railroad. Is this any way to run a railroad?

Sunday, April 04, 2004

4/4/04 Some Statistics Cannot Be Manipulated

At the beginning of each quarter I like to check my list of items I believe hold true for the present and the future. At the top is the aging of the population and its impact on the ability to fund Social Security, Medicare, Medicaid, escalating medical expenses, and budget gaps as well as coping with the growing disparity between the haves and havenots. At times I will get an idea from this list. One such thought is the surging medical construction industry. As Tim Hess, director of preconstruction services for Hensel Phelps Construction observed, “not only is it hot now. It will be hot for a long period of time, with aging baby boomers and new technology advances coming.” The graying of the population and new technology form a unique platform for the medical construction business, including hospitals, cancer centers, and managed care facilities. According to U.S. census data, construction spending at hospitals increased to nearly $14 billion in 2003, up 10.7% from the previous year.

Laurence Kotlikoff, chairman of Boston University’s economics department, in discussing government accounting, stated “We hide our bills the way Enron did.”

The U.S. Conference of Mayors expects family requests from emergency food will increase in 91% of the nation’s cities this year, and that last year 56% of these cities turned away hungry families because resources ran out. A recent survey of 25 cities showed requests for emergency food increased 19% from 2001 to 2002.

Iowa is first in the nation in the production of pork, corn, and eggs; second in soybeans and red meat production; and third in total agricultural exports. The Des Moines Area Religious Council’s Emergency Food Pantry sites served a record 34,264 central Iowans in 2003. The number of Iowans receiving emergency food assistance from pantries and soup kitchens increased from 721,869 in 2000 to 934,382 in 2002. The final figures in 2003 will show a further increase. The U.S. Department of Agriculture stated that one in eleven Iowans or 260,000 lack the money to adequately feed themselves or their families. The agency describes this situation as “food insecure.” Last year, about 154,000 Iowans participated in the food stamp program. In 2003, the cost of feeding low-income Americans keeps climbing, and reached $45 billion.

Rev. Chris Rohwer of the Des Moines St. Mary’s Family Center stated “we’re seeing bigger families, families that haven’t had to use the food pantry system before. The cost of living keeps going up. If they are employed, which most of them are, it’s part time and they just can’t make ends meet. Maybe half get food stamps.”

Gertrude Cloutier is an 82-year-old volunteer who lives in Des Moines. She observed “you learn from people who have to struggle in life.” How many politicians have had to suffer? Maybe that’s why they rarely learn about life on Main Street. As Paul Kolikoff remarked, “politicians are lower life forms.”

California represents over 12% of this nation’s population. They have a $14 billion budget gap. Last year they had to layoff 9,300 government workers. This year the news is much better. The firings will be reduced to about 2,000.

In Illinois, it was reported this weekend that 80% of the school districts are in a budget crunch. The state has 2.2 million school children. While no child will be left behind, many teachers will be. There is a legal requirement to warn teachers of layoffs in advance. Those warning notices were just sent by certified mail. With the near doubling of school districts on the state’s financial watch list, the size of the layoffs can be expected to increase. Chicago officials have recently announced plans to close about 1,000 school-based positions.

Colin Powell, in describing the intelligence on Iraq’s biological and chemical weaponry capability prior to the invasion of that country: “It appears not to be the case that it was that solid.” In other words, the multi-sourced intelligence sucked. As Powell stated, “now, if the sources fell apart we need to find out how we’ve gotten ourselves in that position.” If there is a will, there is a way. I feel confident not much will be forthcoming prior to the November election. In Washington, few feel the urgency to unearth the truth.