Saturday, June 26, 2004

6/26/04 Revisions

For the most part, government employees are a figment of their own imagination, and that includes government statistics. Yesterday was another example. It now appears that GDP growth was overstated and inflation understated in the first quarter of 2004. It took the government, all tens of thousands of them toiling away, almost three months to "adjust" the numbers. What makes you believe the new numbers are correct? If the WMD can be created, why can't growth be altered? The Commerce Department revised downward the U.S. GDP growth for the first quarter from 4.4% to 3.9%. How did this happen? The explanation was the huge trade deficit subtracted 0.71 percentage point from growth. It should be noted out that almost the entire amount was offset by the rise in inventories which added 0.65 percentage point to the growth.

The news got worse as the personal consumption expenditure price index rose at a 3.2% annualized rate in the first quarter up from the previous estimate of 3%. The core rate, ex food and energy, rose 2% and not the 1.7% previously stated. The price deflator used to adjust the figures rose at a 2.9% annual rate.

Timothy Geithner, president of the N.Y Fed: "Good times are also good times to reflect on the capacity of the system to withstand further stress." With all those low-paying jobs, there must be a lot of stress.

MCI cuts 2000 more positions.

Red Hat currently has three Linux global support centers-- in Brisbane, Surrey, and their Raleigh headquarters. They plan on opening a fourth in Pune or Bangalore in India. Red Hat India is putting in place a 250-member software engineering team in that country.

Friday, June 25, 2004

6/25/04 Clinical Trials

According to Rabo India Research, the cost of conducting all four phases of clinical trials is more than 50% lower than in the U.S. According to a McKinsey study, 85% of days lost in clinical trials in the west is due to failure to get enough patients. That is not a problem in India. Presently, the clinical trials industry amounts to $70 million a year in revenue in India, and is projected to climb to $1 billion in 2009. India has 162 medical colleges and 15,000 hospitals. In Japan, per capita spending on medicines is $412 and in India only $3!

According to the BLS, employer costs for employee compensation averaged $24.95 per hour worked in March 2004. Wages and salaries averaged $17.71 while benefits averaged $7.23. With fewer than 100 workers, total compensation was only $19.47 per hour.

Campbell Soup is cutting 300 jobs.

Non-defense ex-aircraft durable goods for May declined 3%.

U.S. housing starts fell 0.7% in May, less than expected. Permits rose to a 30-year high, and sales of new homes surged 14.8% to a record high.

Nike is one of the great companies. They earned $3.51 per share on revenues exceeding $12 billion while worldwide future orders increased 10.7%.

More than 65,000 poor and disabled Mississippi residents will lose government-funded health coverage through Medicaid on July 1. Mediacid consumes more than 20% of state budgets.
6/25/04 Clinical Trials

According to Rabo India Research, the cost of conducting all four phases of clinical trials in India is more than 50% lower than in the U.S. According to a McKinsey study, 85% of days lost in clinical trials in the west is due to a failure to get enough patients. That is not a problem in India. Conducting clinical trials is presently a $70 million a year industry in India and is projected to climb to $1 billion in 2009. India has 162 medical colleges and 15,000 hospitals. In Japan, $412 a year is spent per capita on medicines. By comparison, in India the number is $3!

According to the BLS, employer costs for employee compensation averaged $24.95 per hour worked in March 2004. Wages and salaries averaged $17.71 while benefits averaged $7.23. With fewer than 100 workers, total compensation dropped to $19.47 and, with less than 50 workers, it was $19.32 according to the BLS.

Campbell Soup is cutting 300 jobs.

Non-defense ex-aircraft durable goods orders for May declined 3%.

U.S. housing starts fell 0.7% in May, less than expected. Permits rose to a 30-year high. Sales of new homes surged 14.8% in May to a record high. For one year I have been predicting the bubble to burst, and each month the numbers make me look like a putz.

Nike is one of the great companies. They earned $3.51 per share on revenues exceeding $12 billion and then stated future orders increased 10.7%.

More than 65,000 poor and disabled Mississippi residents will lose government-funded health coverage through Medicaid on July 1. Medicaid consumes more than 20% of state budgets.

Thursday, June 24, 2004

6/24/04 Where The Action Is

After years of falling attendees and vendors, Comdex 2004 has been canceled.

Gartner reported that worldwide spending on IT services rose 6.2% in 2003 to $569 billion, and stated that "through 2004, outsourcing will continue to drive the growth in IT services, with IT management and process management growing faster than consulting services and development and integration services." Gardtner observed that the revenue of vendors based in India grew 29% or 1.4% of the total market.

In the book titled "Imperial Hubris," the author states "Bin Laden saw the invasion of Iraq as a Christmas gift he never thought he'd get."

The Travel Industry Association of America's Travel Price Index rose 5.6% in May 2004 compared to May 2003, the largest year-over-year increase since September 2000. Even though the price of air travel declined, the rise in the price of gasoline generated the sharp increase in May.

According to a report by the California Healthcare Institute and PriceWaterhouseCoopers, California's biomedical industry employs more than 230,000 people in the state, and that outranks other high-tech industries in the number of jobs in California.

U.S. May durable goods orders declined 1.6%, and that represented the second consecutive month of falling orders. Initial weekly jobless claims rose by 13,000 to 349,000. Those unemployed and drawing benefits for more than one week climbed 75,000 to 2.97 million. The uninsured jobless rate rose to 2.4% in the Jue 12 week from 2.3%. The spinmeisters are busy at work and putting a happy face on the numbers. The bond market has it right. It has rallied nicely and long-term interest rates are declining. The stage is set perfectly. The Fed will raise rates while the economy has topped out. There is joy in Mudville.

Wednesday, June 23, 2004

6/23/04 Wal-Mart

As a potential sex-discrimination lawsuit against the company moves forward, one must recognize the inequities that occur within the workplace. I have pointed out over the years that there is rarely equal pay for equal work. As a generalization, women earn 75 cents on the dollar for the same work performed by men. At the same time, no company should be required to make any specific group a manager or a member of management. If Wal-Mart simply wanted to save money on salaries, they would make all managers and members of management women. A savings of 25 cents on the dollar can turn into real money and increase the earnings per share. One might give the present management a bit more credit for fairness. The problem is thta most jobs at the company are lower-paying jobs. On the other hand, there are about 1.5 million of them and tens of thousands get created every year. The next largest employer is laying off workers and is down to a payroll of about 300,000. Wal-Mart is far from perfect but I suggest workers appreciate the efforts put forth for each and every community in which the company is situated. Wal-Mart is not the enemy. They are the major private sector force for job creation. If that is a crime, so be it.

Tuesday, June 22, 2004

6/22/04 Quality Of Jobs

According to the CIBC World Markets’ U.S. Employment Quality Index, the past three years have seen an 8 point drop in the quality of U.S. jobs. The recent trend has been towards lower-paying, less stable, self-employed and part-time jobs at the expense of higher-quality jobs in sectors such as transportation, utilities, natural resources, and manufacturing industries. In sum, the report states that “the vast majority of jobs that evaporated during the job-loss recovery were high-quality jobs.” The report indicates that the number of part-timers rose more than 5% since early 2002, while the number of self-employed Americans rose by just under 5%-- much faster than the 1.7% growth observed among regular employees. More importantly, since the economic expansion got underway in late 2001, the number of jobs in high-paying industries fell by more than 2% while the number of jobs in low-paying industries rose by 1.2%. The authors of the report conclude that “given that swap of good for bad jobs and the current employment distribution, it will take 20% more jobs than in the last extension to generate the same salary gain.” In sum, the labor market will need to close both the employment gap and the quality gap.

Through June 15, Colorado residents and companies filed nearly 13,000 bankruptcy cases, up from 11,535 a year ago. For all of 2003, Colorado bankruptcy filings reached a record high of 25,776, a 23% increase from 2002. Currently, there is one individual filing for every 70 households in Colorado. This ranks Colorado 28th in the U.S. Utah heads the list with one per 37 households.

Wal-Mart announced its June same-store sales were tracking “around” the low end of its 4 to 6% increase. Target expects its results at the low end of its 5 to 7% sales increase forecast for June.

The National Oceanic and Atmospheric Administration stated that the recent March through May period was the third warmest spring on record for the United States. Going back 1895, it was 2.9 degrees warmer than average for those three months. For Oklahoma and Kansas it was the warmest spring on record. Sixty- seven percent of the western U.S. was in moderate to extreme drought at the end of the spring. As an example, the Bureau of Reclamation projects that the water level at Lake Mead in Nevada will finish the year at its lowest point in 39 years. The National Weather Service’s Colorado Basin River Forecast Center is predicting that Lake Powell, and the Colorado River as a whole, will receive barely half its normal inflow of water this year.

Today ends the three-day annual meeting in Santa Fe of the Western Governors Association. The agenda included the drought, energy resources, and the grounding of fire fighting air tankers. In addition to the drought impacting crops, water usage in communities, wildlife and vegetation destroyed by fires, there is also the effect on tourism in states that depend on whitewater rafters, anglers, campers, and hikers.

With yesterday’s five casualties, the Defense Department reported there have been 837 U.S. service member deaths since the beginning of military operations in Iraq.

Vivendi Universal Games announced the layoff of 350 employees, nearly 30% of its workforce in North America.

Monday, June 21, 2004

6/21/04 It’s Solstice Time

It’s the first day of summer and the longest day of the year. It marks the time for dull trading days, low volume, and frequent low volatility. Gather up the beach gear and take off for the coast. Bring along all those books you’ve been eager to read. The headlines will remain pretty much the same. They’ll be Greenspan and raising interest rates while the Fed fights inflation (the 12 stooges); the price of gas at the pump; the terror card; the mess in Iraq; and the fine tuning of revenue and earnings estimates.

We got a dose of the latter this morning. J.P. Morgan Securities filled the pipeline with bullshit. They raised their calendar 2004 revenue estimates to $34.7 billion from $34.6 billion and the EPS from $1.22 to $1.23. At the same time they maintained their 2005 estimates of $37.6 billion in revenues and EPS of $1.31. I guarantee that the CEO and the CFO of Intel could not comfortably fine tune estimates like that. There are many too many variables in a business doing about $35 billion a year in business. Stuff like this can be avoided by going to the beach.

DeAnne Julius and Stephen Green of the Royal Institute of International Affairs in London: “China’s boom threatens inflationary resurgence in the short term and a costly misallocation of resources in the long term.”

Bill Fish, head of loan syndication at Dresdner Kleinwort Wasserstein: “There is a tremendous amount of liquidity in the bank market. This has led to reduced prices and longer maturities.”

Sunday, June 20, 2004

6/20/04 The Venus Transit

Two weeks ago I discussed the Venus Transit that took place on June 8 where Venus crossed the face of the Sun. Geng Guoqing, a researcher on Natural Calamities Forecasting spearheaded by the China Geophysics Society, studied the occurrences of Venus Transit and major floods in the middle and lower reaches of the Yellow River over the past 2,187 years. He comes to the conclusion that there is an interrelationship between the two phenomena. Normally, he relates, the Sun transmits one 2.2 billionth of its radiation to the face of the Earth. When Venus Transit occurs, it bites off part of the radiation that should have been transmitted to the face of the Earth, thus brining a “stir” to the facial system of the Earth. Venus Transit may cause abnormal climatic activities on the Earth. Geng supports his viewpoints by numerous figures and sketch maps.

In the early 1990s China was a net exporter of oil. Presently, China consumes about 6 million bpd and imports about half of this amount.

Asphalt and roofing materials are impacted by the rising price of oil.

China is a major cement producer. As construction in that country took off, it ceased to export cement. Ed Sullivan, chief economist for the Portland Cement Association, stated “to the extent you have a cement shortage, you potentially hinder construction growth.’

The Noble Group observes that the cost of shipping commodities often has recently exceeded the cost of the commodities themselves. Fortunately, a significant softening in worldwide commodity and freight costs has produced some relief in shipping rates.

Jason Feer of London-based energy pricing firm Argus remarked “China is beginning to have serious problems handling the soaring demand for commodities of all types.”