Saturday, April 17, 2004

4/17/04 The Economy

Economist Robert Brusca: “The economy is still growing. The evidence of acceleration is waning.”

Fed Vice Chairman Roger Ferguson: “Nonetheless, one cannot definitely rule out the possibility that hiring will fall short of expectations over the next several months as it had up until the most recent report. In particular, the lackluster performance we have seen in the labor market, even as real GDP has been moving up strongly, raises the question of whether an unusually large portion of job cuts implemented by firms in recent years represent permanent layoffs that will only gradually be offset by job creation elsewhere in the economy.”

Non-farm unit labor costs fell 2.4% in 2002, 1.2% in 2003, and they continued to decline in the first quarter of 2004.

Apple Computer has closed its Elk Grove, Ca. iMac assembly plant, eliminating at least 235 jobs. Assembly will be moved to an unnamed s. California supplier. Alcoa Mill Products is closing a 350,000 aluminum plant in San Antonio due to “poor market conditions.” The number of workers to be impacted was not mentioned. Yesterday, Boeing distributed 60-day layoff notices to 102 union hourly workers in the Puget Sound area. Boeing does not disclose the number of layoff notices issued to non-union employees.

The U.S. government needs to borrow $2 billion a day in order to finance its record deficit. Any material increase in interest rates would necessitate more treasury borrowings and, therefore, greater debt service. The economy needs that like a kick where it hurts.

Alan Greenspan: “We should not be surprised then to see a re-emergence of the market value placed on trust and personal reputation in business practice.”

In March, the number of unemployed people in Pennsylvania increased by 15,000 to 333,000. Since March 2003, total jobs were down 21,900.

In India, exporters have been hit hard by the appreciating value of the rupee, and they have threatened to stop exports from May 1 and sought immediate remedial measures, such as, pegging of the dollar exchange value at Rs 45. Up until now, garment and textile exporters had been preparing for accelerated exports since the quota free environment was approaching next year. Now those plans may require change. Exporters have been experiencing intense competition from China and other Asean countries, and they have begun switching their businesses to other areas.

With this past week’s strength in the U.S. dollar, the price for gold and silver took a pretty hefty drop. If you have a strong belief that our economy is going to continue in a gangbuster’s fashion, then you might want to avoid purchases of gold and silver. On the other hand, should your feet be firmly planted on the ground, it would not be a stretch to realize that something has to give in our economy- like the ability to reduce debt and curtail spending. Administration officials may tell you everything is fine and dandy, but please remember they are simply attempting to snow you. I wouldn’t buy the dollar with your money.

Some recent polls indicate that over two-third of investors are bullish. If you’re a buyer, you get a lot of bull for your buck.

There are a million stories in the naked city. One of my friends mentioned his wife’s friend’s experience. For many years she was a programming contractor and earned $40 an hour. She never experienced a lull between jobs and was accomplished in her area of expertise. Thousands and thousands of software jobs disappeared in Silicon Valley. She could not get another IT job. With rising housing and healthcare costs, she needed to find work. Finally, she turned to house cleaning and earns $12 an hour. The Labor Department counts her as employed. I think you’ll find many more individuals with wages going from $40 to $12 per hour than the reverse. There are many more job seekers than jobs. I don’t see that changing any time soon. The under-employed, the discouraged, the part-time workers- they have paid the price, and continue to pay the price, for an economy filled with too many over-priced non-risk taking executives and managers.

Friday, April 16, 2004

4/16/04 We Have A Large Problem

General Accounting Office head David M. Walker made remarks yesterday about our government’s burgeoning debts and looming obligations. He stated “the public has no idea how big the problem is.” He was referring to the $43 trillion in unfunded Social Security, Medicare, and other retirement benefits, and stated that these obligations would make the government bankrupt by 2040. Walker observed “you get wide eyes and dropped jaws. They really don’t understand the magnitude of the problem. We have a large problem. We have to stop digging the hole deeper, then provide discipline.” Walker is the official auditor of the government’s financial books. He observed that Medicare and Social Security “are not trust funds. They are accounting devices.” He observed the money has already been spent. He stated “the tax system is a nightmare” and “the system is fundamentally broken.” Walker remarked that “escalating health costs, which have grown at double-digit rates in recent years, not only have become a big headache for the government, but they are a major reason that employers have been slow to hire new workers and are quick to outsource jobs to countries where health care costs are lower.” Yesterday, IBM’s CFO stated that his company’s quarterly results were hurt by the costs of pensions and retiree health insurance rising $187 million.

Last week, nationally new claims for unemployment benefits increased by 30,000. We must remember that each week about 80,000 unemployed Americans lose their benefits and are no longer counted as unemployed. Yesterday, the Texas Workforce Commission released March figures that show the state’s seasonally adjusted unemployment rate increased to 6.2 percent from February’s 6.1 percent.

The government estimates it takes taxpayers 28 hours and 30 minutes to complete an average tax return with itemized deductions and income reported from interest, dividends, and capital gains. That’s 42 minutes longer than last year. In 1988, it took the average taxpayer 17 hours and 7 hours to complete the typical forms.

The IRS reported that the average tax refund increased 5 percent this year to $2,090. Bush was in Iowa yesterday telling the folks there how great his tax policies were working. Those listening were not impressed. Why? The fact is that 76% of Iowans received less than $100 from the 2003 tax cut. To make matters worse, last month alone Iowa lost approximately 1,200 jobs. Since Bush became president, Iowa has lost 32,000 jobs.

Edward Hudgins, the Washington Director of the Objectivist Center: “We should lament April 15- tax day- as the day that too many of us all too willingly surrender our liberty and opportunities in life. Politicians are pushers who want to addict us to government…April 15 is a day of moral shame.”

Since March 20, 2003, at least 680 U.S. troops have died from hostile fire in Iraq. At least 93 have died since March 31. We have 137,000 troops in Iraq. On daily average, almost two soldiers are killed.

Today, Nokia warned second-quarter earnings would fall and that sales would also decline. Yesterday, IBM reported that their revenue from services increased a mere 1% after adjusting for currency, and that pretax income rose less than 1% due to lower profit margins. Sun Microsystems reported another quarterly loss, the tenth in the last twelve quarters.

Net foreign capital flows into the U.S. fell to $83.4 billion in February from $92 billion in January. I anticipate this type of monthly decline to continue for some time.

Speculators pushed the price of aluminum to the highest level since December 1995. In the last several weeks, prices have risen about 10%. The reason for the jump has been attributed to Chinese speculative buying. Those same buyers get the credit for this year’s inflationary spike in the CRB. Those folks are everywhere. Last year you might recall, Goldman Sachs predicted that China and India could become the first and third largest economies within 30 years, respectively.

Thursday, April 15, 2004

4/15/04 Bush’s Exit Route Is Clear: November the 3rd

The IMF’s World Economic Outlook, to be released next week, expresses the viewpoint that “U.S. fiscal deficits threaten the world economy.”

In February 2003, General Tommy Franks told our troops “the road home goes right through Baghdad.”

The UAW membership peaked at 1.53 million members in 1969. Ten years later, the number had declined only slightly to 1.5 million. In 2003, the UAW lost 14,000 members, and total membership dropped to 624,585, the lowest number since 1942. Toyota and Wal-Mart have some things in common. Both are non-union shops, and both have a large number of applicants willing to work for wages well below union levels. In the case of Wal-Mart it’s about $8 per hour, and for Toyota about $10 or $12 per hour.

David Robinette’s son, Spc. Daniel Robinette, returned with the 82nd Airborne after a tour of duty in Iraq. In the last election, David voted for George W. Bush. He stated “It is clear that the president lied to us- to Americans and also to the world community of nations. Worst of all, he lied to our troops. I want to assure you that it is not un-American, and definitely not disrespectful of military members or families, to question the government’s decision to prosecute a war on foreign soil. In fact, it is your duty as a citizen to do exactly that. The citizens of this country are entitled to some answers about the war. The only thing the men and women who fight or support the fighters on the ground want is a clear, obtainable objective, and the tools needed to achieve it. If you give them those two things, they will win- every time. You can bet your life on it…If the members of the Congress could set aside politics for just one moment, and simply represent the people who elected them, they would impeach the president and remove him from office…For the first time, I will vote for the Democrat candidate for president of the United States. And if the current president is taking for granted the votes of the military community, he just may wake up on November 3 as a lame duck.”

In the April Money/ICR poll, 76% of Americans stated they would have preferred the government devote resources to job programs instead of tax cuts in 2003. Nearly two-thirds of Americans stated they did not benefit from 2003 tax cuts. Half of all Americans would have preferred cutting the deficit rather than last year’s tax cuts.

China’s economy grew at a 9.9% rate in the fourth quarter and barely slipped to a 9.7% rate in the first quarter of 2004. Beijing’s National Bureau of Statistics stated consumer prices rose 3% in March. When it comes to managing soft landings, the Chinese government is without any experience. Hyper-inflation, bad loans, excess fixed-asset investment, and booming production are a recipe for a train wreck.

According to the April Merrill Lynch Survey of Global Fund Managers, more than three-quarters of fund managers expect inflation to be higher one year from now. Merrill’s chief global investment strategist stated “for the first time in years, more fund managers believe higher selling prices, not lower costs, will drive corporate earnings. This survey has all the markings of a mid-cycle pause, with fund managers preparing for a more inflationary late-cycle phase.” A net 75% of equity fund managers now describe bonds as overvalued and 17% believe inflation-linked bonds will outperform conventional bonds. Japanese equities top the shopping lists of many global fund managers. Given that the Nikkei has risen about 4,500 points, that’s not surprising. Fund managers often arrive late to the train station.

In 2000, Terabeam raised $525 million in venture capital, 15% of the total raised in the state of Washington in that year. Of the $525 million, Lucent contributed $400 million. At one time, Terabeam had about 585 employees. Yesterday, the company agreed to be purchased by YDI Wireless for $64 million in stock. Of Terabeam’s current 130 employees, 84 will be laid off. Dan Hess, former AT&T Wireless chief executive, landed at Terabeam after the founder left. Hesse stated “I’ve been in telecom for 27 years and never seen anything like the last three…You have to look at it relative to industry, and we performed relatively well.”

According to the Mortgage Bankers Association, ARMs accounted for 29% of loan applications last week.
With interest rates having risen sharply in the last few weeks, refinancing applications have dropped off considerably.

In the first three months of 2004, petroleum-based energy costs increased at an 82.5 percent annual rate. In the first quarter, the index for grocery store food prices decreased at a 0.2% annual rate, reflecting declines in the indexes for meats, poultry, fish, and eggs. Fruits and vegetables declined at annual rates of 3.7% and 2.2%, respectively. I might need to become a vegan.

The Labor Department stated real average weekly earnings fell 0.7% in March and were essentially unchanged over the past 12 months. In other words, as productivity rose at record levels, workers had nothing to show for their added efforts. However, public companies, on average, were able to achieve double digit earnings increases through cost containment, lower weekly hours worked by employees, and higher productivity. When do the workers eat a bigger piece of the pie? New York Comptroller Alan Hevesi stated that, some large investment firms, such as, Merrill Lynch, provided a 25% increase in bonuses in 2003, and that investment industry bonuses amounted to $10.7 billion.

Yesterday, Ashcroft described the pre-Patriot Act “wall” that impeded intelligence sharing. I wonder whether the "Chinese wall” at investment firms is alive and well.

Wednesday, April 14, 2004

4/14/04 The Burden Exceeds The Iraqi Theatre

In my view, George W. Bush will be remembered in the record books. He will be remembered as the worst president in the history of the United States. In the face of making one poor decision after another, in the face of misrepresenting facts to the American people, he has apologized for nothing. His administration has frequently proven a disgrace to the citizenry. Scrutiny is not kind to Bush.

According to the latest AP-Ipsos poll of 1,001 adults, 61% of Americans would prefer a balanced budget to a cut in taxes. Forty nine percent stated their overall tax burden, including federal, state, and local taxes, had gone up over the past three years. Compare this with 13 percent who stated their overall taxes had gone down. As Tom Artley, a 52-year-old supervisor at a manufacturing plant in Williamsport, Pa. stated, “every time you turn around, there’s a new gasoline tax, more property taxes, a library tax- because they don’t have enough money.” Twenty five percent of those polled stated their federal taxes had gone up over the past three years., while forty three percent stated they had remained the same.

President Bush: “Everybody who pays taxes ought to get relief if we’re going to get relief.” The Hummer tax cut is not relief for everybody.

John McCain: “We are going to have to ask for more money after the election, and it’s going to increase the deficit.” Actually, that’s not correct. You are going to have to ask for more money in about 60 days, when the government will have reached its debt limit. Bush has spent and spent, and the deficits have wiped out the surpluses developed in the Clinton years. Our country’s finances have not been in this sorry shape since the Depression. You have Bush to thank for this. Last year, corporate taxes fell to 7.4% of government receipts, versus 20.3% 40 years ago. One reason for the decline has been the rise in “corporate inversions” in which a new foreign entity, typically located in a no- or low-tax country, replaces a U.S. company as the parent corporation of the business. As Joel Friedman, senior fellow at the Center on Budget and Policy Priorities noted, “no one likes to pay taxes, but it goes down easier if you know your neighbor and the man across town are paying.” Facts clearly show that the Bush tax-law changes have not worked well for those whose income is derived largely from wages and salaries. Rather, they have lessened the tax burden on capital by reducing taxes on dividends and capital gains. Bush maintains his tax policy has spurred job creation. After careful analysis and speaking with each and every state, I am confident that, of the 308,000 nonfarm payroll jobs created in March, a total of 296,000 represented part-time employment. Average weekly hours fell by 0.1% in March. Work hours are a leading indicator of future job growth or decline. Wall Street may cheer part-time jobs but Main Street does not look on them favorably.

As for job creation, most permanent jobs have been added overseas. Dell is an excellent example. A year ago, 54.2% of Dell’s workers were in the U.S. Dell’s workforce grew 17.6% in 2003. As of January 30, 2004, 48.3% of Dell’s employees are in the U.S. A Dell spokesperson stated “we have great opportunities outside the U.S., and as such we have built our employee base in areas that best reflect our strong sales growth.”

U.N Secretary Kofi Annan: “Given the deteriorating situation and the violence on the ground…for the foreseeable future, insecurity is going to be a major constraint for us. And so I cannot say right now that I am going to be sending in a large U.N. team.” At least 84 U.S. troops have been killed in action in Iraq this month and another 560 wounded and two soldiers have been declared missing. The number wounded so far in April exceeds the total for any other full month of the war in this theatre by more than 220. In the first 13 days after the March 20, 2003 invasion of Iraq, a total of 77 U.S. troops were killed in action. Lt. Gen. Richard Cody, the Army’s deputy chief of staff, remarked yesterday “combat is a dirty, nasty business.” So is the theatre of politics. It’s not a question of staying the course. It’s not a question of providing another 14,000 of our troops to this war effort. I don’t believe for one second that “Americans serving in that country are protecting their fellow citizens.” I don’t believe that “the defeat of violence and terror in Iraq…is vital, therefore, to the safety of the American people.” Iraq has not possessed WPM in over 10 years, and not one entity or individual has proven otherwise, including Bush. In my view, while flying a flag of misspeaking, a country cannot serve the cause of liberty. The issue is not testing the will of the civilized world. The issue is dedicating the country to a cause worth serving, and that is first and foremost walking and marching in the light of the truth. While violating the truth, one cannot further freedom. To do otherwise, is to create burdens for this and future generations. Our shores will be a better place on November 3. The voters do understand the stakes.

Plants in our country continue to close. Belden is in the process of selling its west-Phoenix plant. The merger will result in the plant closing with about 740 employees losing their jobs. The plant makes overhead and underground copper phone cables and has not been profitable due to the declining market caused by the growth in cell phones and high-speed Internet.

In the month of March, the federal deficit jumped to $72.70 billion. For the six months ended March, the federal deficit almost reached $300 billion, a staggering number.

According to the energy department, the average price of gasoline at the pump is $1.83 per gallon. According to research by Kathleen Bostjancic, a senior economist at Merrill Lynch, consumers may spend as much as three-quarters of this year’s increase in tax refunds to fill their gas tanks should fuel prices hold at their present levels through June.

Question: Mr. President, who will you be handing the Iraqi government over to on June 30th?

The President: We will find that out soon.

With 2 ½ months to the June 30th transfer of sovereignty, and troops dying every day, Bush should know the answer to the aforementioned question.

The President was asked what the biggest mistake he has made in his life. He couldn’t answer or wouldn’t answer the question. I might have suggested drinking too much. Speaking from watching other drinkers, and very close-up, I have always believed drinking too much has been a reflection of certain character flaws that remain through life- even after the drinking has stopped.


Tuesday, April 13, 2004

4/13/04 Curbing Growth

Yesterday China grabbed the headlines. The People’s Bank of China continued in its effort to limit credit growth and to reduce financial credit risks. They increased the reserve requirement for financial institutions at the central bank from 7% to 7.5%. In sum, they reduced the amount of money available for lending. Last September the reserve ratio was raised from 6 to 7%. Unfortunately, the rise to 7% was ineffective. China’s M2 rose 19.4% in February, and this exceeded the central bank’s target of 17% for 2004. In my view, 17% is an invitation to economic dislocation. It leads to hyper-inflation, accentuated risks, and growth rates that are not sustainable. China’s oil imports rose by 35.7% during the first quarter. China’s copper imports more than doubled in February. Over-all fixed asset investment in China had a 27% rate of growth in 2003. With domestic capital spending accounting for 50% of China’s GDP in 2004, shortages in electricity and other infrastructure items will make the daily news. Other countries will pay the price for China’s overnight rush to convert from an agrarian to an industrial society. It is impossible to find jobs for hundreds of millions of farmers in their burgeoning cities. The infrastructure is not there to support the onslaught. Japan’s exports have found a home in China. GM’s cars have been received well and profits from China are heavy contributors to their auto division profits. Make no mistake. One way or another, the Chinese economy will slow down and domestic demand will be reduced. This will impact a Japan, a GM, and many other exporters into China. Much of the recent growth in the U.S. has been fueled by demand in the Asian countries, and China has been the greatest contributor.

Yesterday, Singapore shifted its currency policy to one “of modest and gradual appreciation.” It is the latest Asian central bank after the Bank of Korea to signal it will allow a stronger currency as the region’s economies expand. This follows anti-inflation currency measures in Australia, New Zealand, and Britain. In the fourth quarter, Singapore’s GDP expanded 4.9% from the year earlier period. In this year’s first quarter, their GDP expanded 7.3%. Even though inflation is presently muted in Singapore, they want to stay ahead of the curve and see that it remains muted. Maybe they learned from the difficulty China is having in the inflation department.

According to Deloitte Research’s Leading Index of Consumer Spending, the growth in U.S. consumer spending will likely continue in the summer, and be followed by a slow down in the fall. The expected decline in growth signifies the first deceleration in consumer spending since the spring 2003, and is largely a result of fewer tax deductions.

John Byrne, editor of Fast Company: “It may be that competitive organizations have no choice but to play the labor arbitrage game to survive. It may be that a new wave of innovation and creativity will lead to new industries and new jobs. But in the meantime, millions of smart, talented, diligent people are losing something, and that will change them and their families forever. Their loss should never be discounted, dismissed, or ignored.”

Dean Baker, co-director of the Center for Economic and Policy Research: “When people know that their jobs could go to India, they are in a difficult position pressing for higher wages.”

Water supplies are dwindling in parts of California, Idaho, Montana, New Mexico, Arizona, Colorado, Utah, and Nevada. Arizona is facing its worst drought on record. Two huge reservoirs on the Colorado River are but half full. This summer has the potential for terrible forest fires. There is no way at this time to adequately determine the impact on crops.

For the sixth consecutive month the International Energy Agency raised its forecast for global oil demand this year. With China’s oil imports surging, it’s tough to get a handle on world demand. Something has to give, and so far that something is price. The supply has barely kept up with daily world usage of 80 million barrels. We haven’t reached the peak summer demand. I underestimated the extent of China’s daily demand for oil. The world is paying the price. I will repeat myself. The American public needs to reduce their discretionary driving and to reduce the importation of Chinese goods.

One senior British officer, speaking on condition of anonymity: “The U.S. will have to abandon the sledgehammer-to-crack-a-nut approach- it has failed. They need to stop viewing every Iraqi, every Arab as the enemy and attempt to win the hearts and minds of the people.”

San Francisco Reserve Bank President Robert Parry stated Fed funds have the potential to rise to 3.%% if inflation averages 1 to 2%, and he believes inflation will probably run in the 1 to 1.5% range by next year. Prices on the supermarket shelves look a good deal differently than a rise of only 1 to 2%.

Northern Arizona University announced plans to eliminate 5 schools and cut staffing. The schools to be eliminated include the nationally known School of Hotel and Restaurant Management, The School of Forestry, and the College of Health Professions. The plan is to streamline the university and to save $1.4 million over the next four years and a larger amount after that.

According to the Commerce Department, from the fourth quarter of 2001 onward, companies have paid out only 20% of their profits in taxes. For the prior 10 years, the rate was around 30%. With our current deficits, do you think a 20% tax rate is sustainable? I don’t. Do you think government spending will be reduced before corporate tax rates rise?


Monday, April 12, 2004

4/12/04 Navigating Tricky Waters

When Wall Street’s opening bell rings this morning, Detroit Mayor Kwame Kilpatrick will be delivering his fiscal 2004-2005 budget address to the City Council. It’s not a pretty picture, and navigating the tricky waters flowing with a projected $263 million budget gap without cutting city workers, will require a magician’s slight of hand. On Friday, Sean Werdlow, Detroit’s chief financial officer, met with reporters to discuss a large drop in city revenues and the city’s precarious financial situation. In recent years, there has been a 14% decrease in the amount of income taxes the city has collected. Property taxes, the primary source of funds for most municipalities, account for only 11% of Detroit’s revenues. Two bond rating services have recently downgraded Detroit’s general obligation bonds. Kilpatrick has vowed not to layoff police and firefighters. Others will not be so lucky. I strongly suggest investors pay attention to Detroit’s woes and the woes in other cities. A National League of Cities survey of 328 cities found that 30% are laying off employees to help balance their budgets. You think this is business as usual? Rising pension and health care costs can only exacerbate the situation in the future. We are not looking at a one-time problem in our cities.

DuPont will cut 3,5000 jobs or 6% of its workforce.

Yesterday, Sen. John McCain suggested that, to pay for the war in Iraq, the Pentagon may have to scrap a $71 billion program to acquire F/A-22 fighter jets built by Lockheed Martin Corp. as part of a wider overhaul of U.S. spending priorities. McCain is an important member of the Armed Services Committee. He stated “we may have to cancel this airplane that’s going to cost between $250 million and $300 million a copy. We’ve got to change the way we do business and put the priority where it belongs. And that is making sure that we succeed in Iraq.” McCain believes the U.S. must increase the number of troops in Iraq as well as the size of the U.S. Army and Marine Corps. Overall to face up to the challenges in Iraq.

Lockheed Martin is the biggest U.S. defense contractor. The Pentagon inspector general stated this morning that the company delivered 50 C-130J transport aircraft to the U.S. Air Force with deficiencies. The planes, delivered at a cost of $2.6 billion, do not meet “operational requirements.” The C-130J can carry 128 combat troops, almost 40% more than the older model and can fly 21% faster. In February, the C-130J was criticized by the Pentagon’s department of weapons testing.

Corus Pharma is a 3-year-old company located in Seattle. They are developing drugs for cystic fibrosis and severe asthma. Their CEO Bruce Montgomery announced the receipt of $60 million in venture funding to further their work in developing aerosol formulations to combat the two aforementioned afflictions.

Sunday, April 11, 2004

4/11/04 Tax Freedom Day and The Morass

Today has finally arrived. It’s when the average American has finally paid off their combined federal, state, and local taxes. It took 101 days in 2004 to achieve this end. We spent 36 days for income taxes, primarily at the federal level. Then there was 28 days for Social Security and Medicare. Another 16 days was spent towards sales and excise taxes. There were 11 days for local property taxes. We cannot forget the nine days for business taxes, and another two days for miscellaneous taxes. With rounding, the number exceeded 101. We need to make some changes. We spend more time working to pay taxes than working towards housing (66 days) and more than for health/medical care (51 days) or food and transportation (31 days each) or recreation (22 days). On average, we devote just five days to fund savings and investment accounts. We need to get real. We are funding the salaries of do-nothing politicians before we care for our own present and future well being. We are taxed for pork while we toil 101 days for nothing. It’s tough enough to get a job. It’s tough enough to get a full-time job. For 101 days our productivity goes for naught. I take that back. Let me give you some examples of what you are receiving for your tax dollars.

Cheney on March 16, 2003: “We will, in fact, be greeted as liberators.”

Rice: “We had a structural problem in the United States, and that structural problem was that we did not share domestic and foreign intelligence in a way to make a product for policy makers, for good reasons- for legal weapons, for cultural reasons- a product that people could depend upon.”

Adnan Pachachi sits on the 25-member Iraq Governing Council. He accompanied Laura Bush to this year’s State of the Union address in January. He has harshly criticized U.S. actions and stated “we consider the action carried out by U.S. forces illegal and totally unacceptable.”

Hachim Hassani represents the Iraqi Islamic Part on the Council. He stated “the coalition has opened too many fronts in Iraq, alienating a large swath of the population. The Iraqi people now equate democracy with bloodshed.”

Yesterday, Bush signed into law a bill providing about $80 billion in pension accounting relief through the end of 2005 for some 31,000 companies with traditional “defined benefit” pension plans covering about 35 million workers. The present formula for calculating pension contributions will be replaced, thus providing extra time to keep these plans afloat. In addition, another $1.6 billion in extra relief through waivers of payments for some steel companies and major U.S. commercial airlines, such as, UAL, was provided. Meanwhile, plans sponsored by more than one employer, such as those covering union workers (construction and trucking for example) were not assisted by the new legislation. There are 1,600 multi-employer plans covering 9 million workers. Once again, big business won out over the union worker. If the playing field is not made level, there will be trouble in this country.

According to WorkTrends 2004, a growing number of employees are looking to leave their present job. In fact, their recent report indicates “there is a weariness of it all from the survivors of the layoffs.” More workers are eyeing the door than at any point in the last 4 years. According to a Towers Perrin survey of 1,000 working Americans, less than half think they are receiving truthful information about their company’s financial status and business strategy. Just because businesses have stated they had to do more with less, doesn’t mean white-collar professionals will continue to work longer hours and receive the short end of the stick. In the fourth quarter of 2003, workers’ wages and benefits grew 0.7%, the smallest quarterly increase in a year. Meanwhile, corporate profits jumped in double digits. The party is over. The wake-up call has arrived. Top talent will jump ship to the highest bidder. Research has found that nearly one in three employees are job hunting, and nearly two out of three stated they would seriously consider another job offer. Dennis Ahlburg, associate dean of the Carlson School of Management at the University of Minnesota, stated “companies that have manipulated workers’ fear of losing their jobs are going to see much more turnover. Workers will say ‘this company screwed me in the downturn so I’m going to get out of here and find a company that will treat me right in good times and bad.’ It’s the best people who will be out the door if they have a sense of not being fairly treated in the last couple of years.”

America’s trade deficit hit a record monthly high of $43.1 billion in January. For all of 2003, the trade deficit stood at an all-time high of $489.9 billion. Exports fell to $89 billion in January, a 1.2% decrease from December. I guess the Bush administration weak dollar policy proved ineffective once again. Our exports to Japan, valued at $4 billion, were at the lowest level in a year. Our January trade deficit with China expanded to $11.5 billion, up from December’s $9.9 billion.

Steven Hess, lead U.S. analyst at Moody’s in New York: “Because the United States has the dollar and its role in the market, it can run a large account deficit for much longer than a Third World country could…we have huge problems over the long term, and will have to face them some day. If not, the United States will find itself in an unsustainable fiscal problem.” The morass looks pretty significant to me. Then again, why should I worry about our $4.1 trillion debt. We’re toiling for 101 days in 2004 so that we can run up a federal deficit of $520 billion. Are we schmucks or are we schmucks?

Ted Darnell. President, Starwood Real Estate Group: “In our world, it’s not about the acquisition. It’s about the exit. The opportunity funds are getting into it now and selling to the REITs two years from now. The exit is critical.” One could say that about the exit in stocks and bonds too.