Saturday, May 22, 2004

5/22/04 Strategies

Prince Bandar bin Sultan: “Saudi Arabia will encourage OPEC to increase its production ceiling by more than 2 million barrels per day. We have determined, after reviewing updated projections for oil supply and demand, that this increase in oil production is necessary to maintain stability in the market and growth in the world economy. Saudi Arabia has already communicated to its customers that it will produce approximately 9 million barrels per day starting in June 2004.”

In its latest fiscal year, Mitsubishi Motors lost $1.9 billion while sales fell 35% to $22 billion. For the current fiscal year, the company forecasts a $2 billion loss on $20 billion in sales. They will close 2 plants and cut 11,000 jobs, nearly 25% of its global workforce.

David McCall, director of the United Steel Workers of America District 1 in Ohio: “ Timken’s closure announcement is premature, completely unnecessary and demonstrates the company’s profound disloyalty to Canton steelworkers and the community. Timken never even put a proposal on the table. Instead they ran to the media and cried wolf in the hope of terrifying thousands of families about the loss of their jobs., which is about the only thing their strategy has succeeded in doing. It takes more than talk about ‘flexibility’ and ‘restrictive work rules’ to create a globally competitive facility. It also requires the company’s commitment to eliminate inefficiency and waste at all levels, to maintain equipment and to invest in new technologies.”

On Friday, Pentagon officials revealed they have investigated the deaths of 37 prisoners held by U.S. forces in Iraq and Afghanistan since August 2002. The nine prisoner homicides are still under investigation. In a tenth case, a soldier was punished and dismissed from the Army for using excessive force after shooting to death a man in Iraq who was throwing rocks at him. The rest are attributed to natural causes or considered justifiable homicide. The latter would describe the use of deadly force against a dangerously violent prisoner.

It has often been stated that one can tell something about a person by the company that person keeps. I wonder what that indicates about Bush and the company he has shared with Kenny Boy Lay, Ahmad Chalabi, and Prince Bandar bin Sultan?

According to a survey by the Craft Yarn Council of America, nationwide more than 38 million people knit or crochet. Of those, the number under 45 has doubled to 18% since 1996. At least two knitting cafes have opened-- one in New York City and one in West Hollywood, CA.

Manmohan Sing, India’s new PM, coined the phrase “liberalization with a human face.” In a recent interview, he revealed his strategy for India: “Development will be the key priority. The aim of reforms would be to remove poverty and increase employment through relief to decentralized sectors…we are not pursuing the privatization process as a part of a ideological commitment to dismantle the public sector. India needs a strong public sector as well. Outside these strategic sectors , wherever public enterprises can compete on an equal footing with the private sector—domestic and foreign—there is no reason why they should not be allowed to go forward. If they cannot compete and end up becoming a drag on the exchequer, then privatization will help by all means. But the interest of the worker must be protected. Foreign direct investment will be more focused on key areas like manufacturing and technology.”


Thursday, May 20, 2004

5/21/04 The Pause That May Not Refresh

In the week ended May 8, 21 states and territories reported a decrease in new unemployment claims while 32 had an increase.

The Conference Board's LEI in April rose 0.1%; however, of the ten indicators comprising the index, 4 rose while 6 declined.

The Philly Fed manufacturing index in May fell to 23.8 from 32.5 in April. Economists were expecting 30.5. New orders fell to 18.3 from 26.1 in April. Shipments fell to 20.2 from 27.7. The lone bright spot was the employment index rising to 22.6 from 12.2.

According to Autodata, Ford Expedition sales fell about 34% in April from the prior year while Chevy Suburban models declined approximately 21% in this time period.

The Fed continues to print money. The money supply in April rose to $5.81 trillion from March's $5.78 trillion.

The figures are in from the IRS for the tax refunds. A total of $184.3 billion was received through April 30 compared with the prior year's $172.3 billion. The $12 billion differnce was less than expected.

When it comes to those on the Bush team, it's either their way or the highway. The latest example is House Speaker Dennis Hastert, R-Ill, who asked reporters if Sen. John McCain, R-Ariz., was a Republican. McCain, Olympia Snowe, Susan Collins, and Lincoln Chafee- all Republicans- are blocking the approval of Bush's budget plan and the Senate vote on the budget has been delayed due to insufficent votes for it. It appears that McCain and the other dissenting Republicans want any tax cuts and/or benefit increases to be offset by tax increases and/or spending cuts. The basic problem is that, during the past 3 1/2 Bush years, his budget has simply been a spending plan. It has combined with the Fed's printing press to produce irrational fiscal stimulus. I salute McCain and the three other Republican senators. Not all politicians have their heads where the sun doesn't shine.

Novartis' Sandoz division opened its third generic drug plant in India, and stated "it most likely will be the best cost competitive plant we will have worldwide."
5/20/04 A Mid-Week Special

There are two types of court martials-- a special and a general. There is a big difference and one large similarity. The big difference is that in a special the maximum penalty is one year while a general carries no limitation. In both, anyone who knew of the crime, and did not act to undo that crime, is subject to a court martial. I only know what I have read and heard in the media about Spc. Jeremy Sivits. Even though Sivits received a felony conviction with a one year term, the fact that this was not a general court martial leads me to believe our government could be pursuing a whitewashing of this matter. If so, the world is watching and it won't work.

It's been 21 years since there has been a strike at SBC Communications. Approximately 100,000 union workers in 13 states will go on strike at 12:01 AM Friday and return to work at 12:01 AM May 25. The main grievances surround wages, healthcare benefits, and outsourcing. The latter has cost 29,000 SBC workers their jobs in the last three years.

In a recent informal survey, 9 out of 10 Iraqis see U.S. troops as occupiers. Muqtada al-Sadr is now seen as the second most popuklar Iraqi politician after al-Sistani.

Brocade Communications will cut 9% of its workforce.

India's Prime Minister-elect Manmohan Singh: "The time has come for India to emerge as an economic power...we are not pursuing privatization as part of our ideological commitment. India needs a srong private sector as also a public sector. We will not do anything which will throw large pools of workers jobless."

In the most recent week U.S. jobless claims rose 12,000 to 345,000 versus expectations of a decline to 328,000. The four week moving average did fall 2,750 to 333,500.

Wednesday, May 19, 2004

5/19/04 Someone Has To Pay

Continental Airlines Chairman and CEO Bethune: "None of us can afford to operate with these high fuel costs. If we are not successful in passing along these exorbitant fuel costs through higher fares, we will ultimately be forced to seek significant wage and benefit concessions and furloughs." It is the first time Continental has raised the possibility of cutting wages. The proposed wage increase is $10 eachway for flights up to 100 miles, and $20 each way for flights of more than 1,000 miles.

According to AAA, the average statewide cost of regular unleaded gasoline in California is $2.31 per gallon, up 44 cents from a year ago. California requires cleaner-burning fuel than other states, and this is one reason for the higher price.

Edmunds.com reported that the average manufacturer incentive per vehicle sold in the U.S. was $2,367 in April 2004, up $80 from April 2003, and down $12 from March 2004. In April 2004 Chrysler cut incentives by $659 to $2,944 per vehicle. GM increased incentives by $226 to $3,620 per vehicle, and Ford increased incentives by $107 to $2,914 per vehicle. This morning all three announced greater incentives for SUVs and other high gas consumption vehicles.

Keebler will move its cookie and cracker business to Battle Creek from its Elmhurst, Ill. location and cut 300 jobs.

According to a new study by the Center for Labor Market Studies at Norhteastern University, since November 2001, "almost none of the productivity gains ended up in wages and salaries. Combine that with the fact that firms didn't add new workers to their payrolls, and that's what made this recovery so unique." The study indicated that, for the first time in any economic recovery since the end of World War II, corporate profits received a larger share of the growth than labor did." Unfortunately, when inflation mounts in gasoline, natural gas, eggs, milk, meat, and other foodstuffs,something has to give. The average wage earner, those on Main Street, cannot live on love alone. Bethune needs to consider that his team of workers is facing some of the same problems Continental is. There is only one pie. There has to be enough food to go around for everyone. Mr. and Mrs. Public can't pass along the gas price increases. They have to absorb them. They're screwed. Forty four cents a gallon in one year hurts when wages and benefits don't keep up with productivity gains and/or the rise in inflation.

Tuesday, May 18, 2004

5/18/04 The Hummer Economy

When the history books are opened by the next generation, they will read how the Bush policies transformed a combat vehicle into a family car. Who better to accomplish this feat other than a wartime president? Through the passage of new tax legislation for farm vehicles weighing at least 6,000 pounds, demand for the Hummer was generated. This vehicle qualified in that "weight class." As such, by purchasing the Hummer, the buyer was eligible to receive a tax deduction of $100,000. The purchase had to be accomplished through a business enterprise and for such business. That was a lay-up. Sales for the Hummer moved along briskly thru December 2003. Of course, now came the question of whether the tax breaks would be extended. Hummer sales hit a brick wall. The demand was never truly real. Inventory is building on the dealer lots for this gas-devouring family off-the-road vehicle. It has poor ratings from every testing service. GM has no idea what to do with the inventory. They are bringing out new models. Hopefully, there is space out in the Mojave next to all the mothballed jets.

What is real? According to the Federal Reserve, household debt climbed at twice the pace of household incomes from the beginning of 2000 through the end of 2003. During this period, new mortgage debt increased about 50% or $2.3 trillion while consumer debt rose by 33% to $2 trillion during this period.

OPEC President Prnomo Yusgiantoro: "High oil prices can cause recession. We are not happy with high oil prices." U.S. crude settled at $41.55 per barrel and gas at the pump exceeds $2 per gallon on average.

Timkin on June 1 will raise prices on high speed steel products by 5%.

Descartes to cut 35% of its workforce or 130 employees.

According to economist Allen Smith, every penny of the $1.5 trillion generated by the 1983 Social Security tax increase is gone. Smith stated "this is the greatest fraud ever perpetuated on the American people."

According to Forrester Research, the number of U.S. business service and software jobs moving offshore will rise to 588,000 in 2004 from 315,000 in 2003. The loss of software programming, customer call-center and even legal paperwork positions should increase 40% in 2005 to 830,000 jobs over the number reached this year. They expect the 1 million mark to be eclipsed in 2006.

In the upcoming Illinois U.S. Senate race, Democrat Obama leads Republic Ryan 48 to 40 in the latest polls. The survey indicates that Obama is gaining more support from Republicans than Ryan is with Democrats. Could this be something to watch for in the November presidential election?

Monday, May 17, 2004

5/17/04 Careful

As an investor, there are times when you can get impacted by an event which appears to come out of the blue. This just took place in India. The economy has been moving along smartly at a brisk pace. One of the mutual funds that invests in India companies was up 117% in the year that ended in Feb. 2004. The rupee has been gaining in value. Outsourcing continues in strong fashion. Foreign investment is gaining traction in India. The election came into focus. The change to Ms. Gandhi has unnerved the investment community. India's Bombay Stock 30 dropped 15% overnight. The rupee got trampled versus the U.S. dollar. It was a very expensive election. Hardly anyone saw the reaction coming. It had been up, up, and away for the economy, profits, stock prices, and the currency. There are times when one cannot be careful enough. There was no place to hide. As I have stated in the past, when they raid the whorehouse, they take all the girls.

The Nikkei is beginning to run into some headwinds. It is still up 50% from the lows; however, there is increasing concern about how a potentially-slowing economy in China could harm Japan's exports. I would be more worried about China having a hard landing rather than simply putting a soft brake pedal to its economy.

I have written many times how China's goods have created deflated pricing in the U.S. China has begun the export of autos and SUVs into our country. Some critics will quickly dismiss them as the next coming of the Jugo. The vehicles are made in brand new high-tech factories. The costs average about $7,000 per vehicle. Do you remember the first VW bug? Most everyone laughed at it. I still see them on the road. If I were GM, I wouldn't laugh too hard. GM might try avoiding recalls rather than laughing.