9/30/02 The US Consumer
With consumer sentiment down for 4 straight months it would be a mistake to depend on the consumer to bail out our economy. The consumer is barely maintaining a stable environment. That leaves the possibility of business capital investments as a buoy to the economy; however, that appears highly unlikely with growing layoffs, dwindling profit growth, and plant closures. Hopefully no one is looking to the Fed to inflate or for the government to increase spending, and with it, the deficits to mushroom from present levels.
We have had one week of the Fall season. One week doesn't make a season; hoowever, the horizon doesn't have much visibility.
Sunday, September 29, 2002
7/29/02 Keep An Eye On The Great Ones
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
Saturday, September 28, 2002
9/28/02 2.2 Ratio Of Negative 3rd Quarter Earnings Pre-Announcements To The Positive
Thru September the bear market is 40 months in duration.
September consumer sentiment still dropping.
Wyeth warns. Barrick Gold warns. Delta Airlines warns and announces job cuts.
Merrill Lynch lowers 4th quarter earnings projections for the S&P and cuts 2003 too.
GE's CFO: "2003 is looking more challenging than it was when we talked in May." He is saying that GE's growth rate in 2003 will be down about 50% in 2003 to about 8%.
Monday is the last day of the quarter. How many mutual funds will want to eliminate stocks from their portfolio and raise cash?
Thru September the bear market is 40 months in duration.
September consumer sentiment still dropping.
Wyeth warns. Barrick Gold warns. Delta Airlines warns and announces job cuts.
Merrill Lynch lowers 4th quarter earnings projections for the S&P and cuts 2003 too.
GE's CFO: "2003 is looking more challenging than it was when we talked in May." He is saying that GE's growth rate in 2003 will be down about 50% in 2003 to about 8%.
Monday is the last day of the quarter. How many mutual funds will want to eliminate stocks from their portfolio and raise cash?
Friday, September 27, 2002
9/27/02 More Layoffs And Earnings Disappointments
SBC Communications slashes 11,000 workers and its capital expenditures. Aetna to layoff 2750.
Philip Morris misses earnings projections by wide margin. Callaway Golf warns. Solectron has quarterly loss. Nortel warns-again.
Japan has its 3rd consecutive year of deflation. Our 30 year mortgage rates fall below 6%, the lowest ever. Is this a sign of deflation?
Unfortunately more Americans owned stocks at the beginning of 2002 than in 1999. Poor timing I'd say.
Underfunded pension funds a growing problem. The stock market is the culprit. The latter certainly has created havoc for 401K plans.
The question for the day: can mortgage refinancing save the Christmas season? If we have 0 percent auto financing, why can't we do the same for the homebuyer? How about 0 monthly payments on credit cards? Can life be a free lunch or is there a payment at some point?
SBC Communications slashes 11,000 workers and its capital expenditures. Aetna to layoff 2750.
Philip Morris misses earnings projections by wide margin. Callaway Golf warns. Solectron has quarterly loss. Nortel warns-again.
Japan has its 3rd consecutive year of deflation. Our 30 year mortgage rates fall below 6%, the lowest ever. Is this a sign of deflation?
Unfortunately more Americans owned stocks at the beginning of 2002 than in 1999. Poor timing I'd say.
Underfunded pension funds a growing problem. The stock market is the culprit. The latter certainly has created havoc for 401K plans.
The question for the day: can mortgage refinancing save the Christmas season? If we have 0 percent auto financing, why can't we do the same for the homebuyer? How about 0 monthly payments on credit cards? Can life be a free lunch or is there a payment at some point?
Thursday, September 26, 2002
9/26/02 Greenspan: "Our Ability To Forecast Is Limited"
Glenn Hubbard, Chairman of the White House Council of Economic Advisors: "On balance the economy's recovery looks pretty typical." Tell that to HP who are laying off another 1800 or Handspring who are laying off 20% of the workforce or Gucci that warned about results or....
If Knight Greenspan is having forecasting difficulty, then how would an investor expect individual companies to assess with accuracy expected results for the 4th quarter and 2003? With limited visibility p/e ratios should be reduced and with them stock prices. A smaller and smaller percentage of companies are making their earnings forecasts, and those forecasts in most cases have been reduced at least once.
Glenn Hubbard, Chairman of the White House Council of Economic Advisors: "On balance the economy's recovery looks pretty typical." Tell that to HP who are laying off another 1800 or Handspring who are laying off 20% of the workforce or Gucci that warned about results or....
If Knight Greenspan is having forecasting difficulty, then how would an investor expect individual companies to assess with accuracy expected results for the 4th quarter and 2003? With limited visibility p/e ratios should be reduced and with them stock prices. A smaller and smaller percentage of companies are making their earnings forecasts, and those forecasts in most cases have been reduced at least once.
Wednesday, September 25, 2002
9/25/02 Posting #2 "I Don't See A Spark"
As I write this blog, the Dow is up 200 points and the Nasdaq abouy 40. One of the reasons cited is GE reaffirming their third quarter numbers. Investors might have been better served to focus on Jeff Immelt's comments made in Boston today. He said that he doesn't see a spark generating a macroeconomic recovery and that CEO's should not expect a strong recovery for the 4th quarter or early 2003. I noticed that Immelt did not provide guidance going forward for GE.
Interestingly, the IMF lowered their estimates for growth going into the 4th quarter and for next year.
As I have often remarked, there are sharp rallies in bear markets; however, they occur at lower and lower levels, and this has been true for the last 2+ years. The idea is to lighten up on the losers during those rallies. I last made these comments when the Dow rallied to 9000 and the Nasdaq to 1400. Of course, this is my opinion and I am prone to making mistakes- just not the same one twice I hope.
As I write this blog, the Dow is up 200 points and the Nasdaq abouy 40. One of the reasons cited is GE reaffirming their third quarter numbers. Investors might have been better served to focus on Jeff Immelt's comments made in Boston today. He said that he doesn't see a spark generating a macroeconomic recovery and that CEO's should not expect a strong recovery for the 4th quarter or early 2003. I noticed that Immelt did not provide guidance going forward for GE.
Interestingly, the IMF lowered their estimates for growth going into the 4th quarter and for next year.
As I have often remarked, there are sharp rallies in bear markets; however, they occur at lower and lower levels, and this has been true for the last 2+ years. The idea is to lighten up on the losers during those rallies. I last made these comments when the Dow rallied to 9000 and the Nasdaq to 1400. Of course, this is my opinion and I am prone to making mistakes- just not the same one twice I hope.
9/25/02 Dow Had Its Lowest Close IN 4 Years
US consumer confidence declines for 4th consecutive month.
Fed says growing risk of war creates more economic uncertainty. Two Fed members vote to lower interest rates.
US oil supplies continue to shrink, and crude rises to 19 month high.
Several European Union states are experiencing trouble meeting budget goals- Germany may exceed deficit limits and may not balance its budget in 2003.
Japan's trade surplus continues to expand. Unfortunately, they are paying a big price for deflation.
US consumer confidence declines for 4th consecutive month.
Fed says growing risk of war creates more economic uncertainty. Two Fed members vote to lower interest rates.
US oil supplies continue to shrink, and crude rises to 19 month high.
Several European Union states are experiencing trouble meeting budget goals- Germany may exceed deficit limits and may not balance its budget in 2003.
Japan's trade surplus continues to expand. Unfortunately, they are paying a big price for deflation.
Tuesday, September 24, 2002
9/24/02 Cisco's Chambers: Customer Visibility Lessening
Earning warnings issued by Maytag, Target, Steelcase, Temple Inland, and Weyerhaeuser
Traditionally, customer visibility should increase as we move towards the holiday season. For Wall Street November, December, and January most often mean good times. With consumer confidence on the downslope, this holiday season maybe a different one, and things could get worse before they level off. It may be wise to play it close to the vest, and hopefully you will feel cozy in that vest. Don't be ashamed to consider shopping at a thrift store. The savings are real, and the money goes to a good cause.
Earning warnings issued by Maytag, Target, Steelcase, Temple Inland, and Weyerhaeuser
Traditionally, customer visibility should increase as we move towards the holiday season. For Wall Street November, December, and January most often mean good times. With consumer confidence on the downslope, this holiday season maybe a different one, and things could get worse before they level off. It may be wise to play it close to the vest, and hopefully you will feel cozy in that vest. Don't be ashamed to consider shopping at a thrift store. The savings are real, and the money goes to a good cause.
Monday, September 23, 2002
9/23/02 Patients To Have Less Access To Healthcare
The government is proposing sharp cuts in Medicare payments for many drugs, medical devices, and high-tech procedures. At the same time the government expressed "concern to us because of the potential impact on access to care."
According to a survey by AT Kearney, for the first time China is attracting more foreign direct investments than the US.
WalMart expects September sales growth at the low end of their forecast or about 4%. August was a similar experience.
JDS Uniphase lowered its quarterly sales forecast.
David Murdock, CEO of Dole, to take Dole private.
The airlines are considering asking for more government funds.
The government is proposing sharp cuts in Medicare payments for many drugs, medical devices, and high-tech procedures. At the same time the government expressed "concern to us because of the potential impact on access to care."
According to a survey by AT Kearney, for the first time China is attracting more foreign direct investments than the US.
WalMart expects September sales growth at the low end of their forecast or about 4%. August was a similar experience.
JDS Uniphase lowered its quarterly sales forecast.
David Murdock, CEO of Dole, to take Dole private.
The airlines are considering asking for more government funds.
Sunday, September 22, 2002
9/22/02 Half Empty
Robert McTeer, President of the Dallas Fed: "for a while now, when it comes to the economy, the glass has either been half full or half empty..I must say,however, that half full has become a bit of a stretch lately."
Of the earnings pre-announcements for the third quarter, 52% have been negative outlooks.
Japan's cabinet office: "the growth target for 2003-2004 will be extremely difficult to achieve- deflation to continue thru fiscal 2003-2004."
The Mexican peso at a 3 year low vs the dollar. The yen at a 3 year low vs the Euro.
If Japan continues in a deflationary cycle, then why is the 10 year yield spread between Japan and the US narrowing? Maybe because the US is entering a deflationary period. If the latter occurs, stock prices will erode further and house prices will be on a similar path.
NEC lowered its forecasts.
Robert McTeer, President of the Dallas Fed: "for a while now, when it comes to the economy, the glass has either been half full or half empty..I must say,however, that half full has become a bit of a stretch lately."
Of the earnings pre-announcements for the third quarter, 52% have been negative outlooks.
Japan's cabinet office: "the growth target for 2003-2004 will be extremely difficult to achieve- deflation to continue thru fiscal 2003-2004."
The Mexican peso at a 3 year low vs the dollar. The yen at a 3 year low vs the Euro.
If Japan continues in a deflationary cycle, then why is the 10 year yield spread between Japan and the US narrowing? Maybe because the US is entering a deflationary period. If the latter occurs, stock prices will erode further and house prices will be on a similar path.
NEC lowered its forecasts.
Saturday, September 21, 2002
9/21/02 "We Are At War"
This remark was uttered by George Tenet, head of the CIA, in December 1998! He wasn't referring to the West Nile virus. I know next to nothing about politics. Rationally, however, it would appear that Russia has plutonium and uranium. As such, why shouldn't the US buy that uranium and plutonium from Russia and place it in a "vault", so to speak? In order to open the vault it would require two keys. The US could hold one and Russia the other. This, I would think, could prevent the building of a nuclear weapon. Maybe a naiive thought.
Yesterday I was wrong. Triple witching did not bring volatility upon expiration. It was a nice quiet day.
According to IDC Worldwide, spending on outsourcing services amounted to $712 billion in 2001 and will rise to $1.2 trillion in 2006.
Duke Energy warned for 2002 and 2003.
The president of Harvard said that he sees a rise of anti-semitism on the campus. That was in today's N.Y. Times.
This remark was uttered by George Tenet, head of the CIA, in December 1998! He wasn't referring to the West Nile virus. I know next to nothing about politics. Rationally, however, it would appear that Russia has plutonium and uranium. As such, why shouldn't the US buy that uranium and plutonium from Russia and place it in a "vault", so to speak? In order to open the vault it would require two keys. The US could hold one and Russia the other. This, I would think, could prevent the building of a nuclear weapon. Maybe a naiive thought.
Yesterday I was wrong. Triple witching did not bring volatility upon expiration. It was a nice quiet day.
According to IDC Worldwide, spending on outsourcing services amounted to $712 billion in 2001 and will rise to $1.2 trillion in 2006.
Duke Energy warned for 2002 and 2003.
The president of Harvard said that he sees a rise of anti-semitism on the campus. That was in today's N.Y. Times.
Friday, September 20, 2002
9/20/02 Futures And Options Expire Today. It Spells Increased Volatility
Government officials may not be worried in Japan; however, their $14.8 billion 10 year government bond auction was a bust. For the first time the bonds failed to receive enough buyers. Could that happen in the US? Land prices fell in Japan for the 11th straight year. Could that happen in the US?
Yesterday the Dow ended below 8000, and it was the first such close since July 23.
I feel so relieved! In the Journal of Science 19 prominent nuclear experts concluded that our nuclear plants could easily withstand a jetliner crash.
Alcatel to layoff 39,000 by the end of 2003.
Morgan Stanley reported its 8th consecutive quarterly decline in profits, and Knight Ridder reduced its earnings forecast.
The airline industry is getting a needed boost- the UN is sending weapons inspectors to Iraq on Oct 15. The last time I checked the US was getting 9% of its oil imports from Iraq.
Government officials may not be worried in Japan; however, their $14.8 billion 10 year government bond auction was a bust. For the first time the bonds failed to receive enough buyers. Could that happen in the US? Land prices fell in Japan for the 11th straight year. Could that happen in the US?
Yesterday the Dow ended below 8000, and it was the first such close since July 23.
I feel so relieved! In the Journal of Science 19 prominent nuclear experts concluded that our nuclear plants could easily withstand a jetliner crash.
Alcatel to layoff 39,000 by the end of 2003.
Morgan Stanley reported its 8th consecutive quarterly decline in profits, and Knight Ridder reduced its earnings forecast.
The airline industry is getting a needed boost- the UN is sending weapons inspectors to Iraq on Oct 15. The last time I checked the US was getting 9% of its oil imports from Iraq.
Thursday, September 19, 2002
9/19/02 Japan's Houdini
The Bank of Japan must have lost it. They believe hundreds of billions of dollars of bank undercapitalization can disappear by buying listed shares of stocks directly from the banks. I know the Nikkei has lost 30,000 points over the past 13 or so years but an individual would go to jail for stock manipulation. The Bank of Japan believes this action will reduce risk exposure for banks. Japan has billions of dollars of bad loans and a multitude of unprofitable companies. Houdini would make the Bank of Japan disappear.
What can you say about the management of EDS? A month ago they were upbeat and yesterday the earnings warning was so severe the stock dropped by one third. These guys were depending on business from US Airways. The stockholders need to deliver the tooth fairy to the boardroom.
Jobless claims have hit a 4 month high.
Single family home starts have fallen three months in a row, and had their sharpest drop since March.
Crude oil prices are up 40% this year. Hopefully heating oil prices will rise a lesser amount.
The Bank of Japan must have lost it. They believe hundreds of billions of dollars of bank undercapitalization can disappear by buying listed shares of stocks directly from the banks. I know the Nikkei has lost 30,000 points over the past 13 or so years but an individual would go to jail for stock manipulation. The Bank of Japan believes this action will reduce risk exposure for banks. Japan has billions of dollars of bad loans and a multitude of unprofitable companies. Houdini would make the Bank of Japan disappear.
What can you say about the management of EDS? A month ago they were upbeat and yesterday the earnings warning was so severe the stock dropped by one third. These guys were depending on business from US Airways. The stockholders need to deliver the tooth fairy to the boardroom.
Jobless claims have hit a 4 month high.
Single family home starts have fallen three months in a row, and had their sharpest drop since March.
Crude oil prices are up 40% this year. Hopefully heating oil prices will rise a lesser amount.
Wednesday, September 18, 2002
Tuesday, September 17, 2002
Posting for 9/18/02 You Thought The News Couldn't Get Worse? Forget About It!
If I were a shareholder in Hershey, I'd never eat another Reese's again. Ten of the 17 board members turned down an $89 offer or $12.5 billion from Wm Wrigley. The corporate governance world has gone completely nuts. Maybe they didn't like the proposed Wrigley Hershey name. To end the auction after a bid of that magnitude leaves me with one thought- I wouldn't want to be a stockholder in a public company incorporated in Pennsylvania. There aren't enough philly steak sandwiches to entice me.
Yesterday was a big day for profit warnings for the third quarter- McDonald's, JP Morgan, Charles Schwab, and Alcatel to name a few. These are leading companies in their respective industries. It's about time the earnings estimates got sharply reduced for the Dow and the S&P. The market will drop to reflect lower estimates. It's only a matter of time until a big down day occurs.
We had the first drop in industrial output since December 2001. Capacity utilization dropped to 76%. You still question whether we're in a recession?
It must of been an awful blow to Larry Ellison to be cautious about the outlook going forward. They're knocking their brains out at Oracle and still can't meet revenue numbers. He has plenty of company. Look at Seibel.
We're almost through the third quarter. Fall starts next week. Costco has all their Christmas merchandise out. Does that mean they have given up on Fall and are going straight to Christmas? Based on that, October and November should make for bleak reading. By the time Christmas comes around there should be great discounts on all the stale stocking stuffers, such as, Janet Reno crying towels.
If I were a shareholder in Hershey, I'd never eat another Reese's again. Ten of the 17 board members turned down an $89 offer or $12.5 billion from Wm Wrigley. The corporate governance world has gone completely nuts. Maybe they didn't like the proposed Wrigley Hershey name. To end the auction after a bid of that magnitude leaves me with one thought- I wouldn't want to be a stockholder in a public company incorporated in Pennsylvania. There aren't enough philly steak sandwiches to entice me.
Yesterday was a big day for profit warnings for the third quarter- McDonald's, JP Morgan, Charles Schwab, and Alcatel to name a few. These are leading companies in their respective industries. It's about time the earnings estimates got sharply reduced for the Dow and the S&P. The market will drop to reflect lower estimates. It's only a matter of time until a big down day occurs.
We had the first drop in industrial output since December 2001. Capacity utilization dropped to 76%. You still question whether we're in a recession?
It must of been an awful blow to Larry Ellison to be cautious about the outlook going forward. They're knocking their brains out at Oracle and still can't meet revenue numbers. He has plenty of company. Look at Seibel.
We're almost through the third quarter. Fall starts next week. Costco has all their Christmas merchandise out. Does that mean they have given up on Fall and are going straight to Christmas? Based on that, October and November should make for bleak reading. By the time Christmas comes around there should be great discounts on all the stale stocking stuffers, such as, Janet Reno crying towels.
9/17/02 Shift The Headlines
The headlines have now shifted from the jobless economy to changing the regime in Iraq. The weapon inspectors left in 1998. Four years later they are invited back. The reunion should keep the media busy. The markets will rally at the opening, oil will drop in price, bonds will drop in price along with gold. The theory put forth is the lack of justification for the Bush administration to initiate a war in Iraq. They just want a regime change. We have a good many politicians to send to Iraq to run against Saddam. If only we could get the voting booths to work.
It would be wise to keep one's eye on the ball- the economy. Earnings or the lack of move stocks day in and day out. Saddam was news a decade or so ago. Reruns hardly ever have legs at the box office.
The headlines have now shifted from the jobless economy to changing the regime in Iraq. The weapon inspectors left in 1998. Four years later they are invited back. The reunion should keep the media busy. The markets will rally at the opening, oil will drop in price, bonds will drop in price along with gold. The theory put forth is the lack of justification for the Bush administration to initiate a war in Iraq. They just want a regime change. We have a good many politicians to send to Iraq to run against Saddam. If only we could get the voting booths to work.
It would be wise to keep one's eye on the ball- the economy. Earnings or the lack of move stocks day in and day out. Saddam was news a decade or so ago. Reruns hardly ever have legs at the box office.
Monday, September 16, 2002
9/16/02 Dividend Yields
The average return on stocks is about 1.6%, and this is slighly above the inflation rate and slighly below the fed funds rate. The yield is extremely low and requires that one depend on a predictable and generous earning growth rate to buffer the downside on stocks. In other words, you are not currently getting paid much to hold on to stocks and the risks are great without earnings visibility. I again caution everyone to stay on the sidelines until the risks are lessened and the risk/reward ratio turns in your favor. Unless a miracle takes place, that could be quite some time in the future.
The average return on stocks is about 1.6%, and this is slighly above the inflation rate and slighly below the fed funds rate. The yield is extremely low and requires that one depend on a predictable and generous earning growth rate to buffer the downside on stocks. In other words, you are not currently getting paid much to hold on to stocks and the risks are great without earnings visibility. I again caution everyone to stay on the sidelines until the risks are lessened and the risk/reward ratio turns in your favor. Unless a miracle takes place, that could be quite some time in the future.
Sunday, September 15, 2002
9/15/02 Posting #2 Boeing
At 6:30 this morning I tried to post a blog on Boeing and a strike being averted; however, there was a message stating error 503 and that the problem was being worked on. At this time it still is not solved. Basically 62% of the 19,000 machinists voted to strike but it took a two thirds vote to initiate the strike. The machinists get pais $62,000 a year and if on strike only $100 per week. We will revisit this subject another day.
At 6:30 this morning I tried to post a blog on Boeing and a strike being averted; however, there was a message stating error 503 and that the problem was being worked on. At this time it still is not solved. Basically 62% of the 19,000 machinists voted to strike but it took a two thirds vote to initiate the strike. The machinists get pais $62,000 a year and if on strike only $100 per week. We will revisit this subject another day.
9/15/2002 6:33:52 AM | michael buchsbaum]
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
[9/15/2002 6:33:52 AM | michael buchsbaum]
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
Saturday, September 14, 2002
9/14/02 Posting #2 Hands Off The Economy
In Greenspan's speech last Thursday he was taking a page from the late Austrian economist Ludwig von Mises, who developed his theories in the 1910s and 1920s. Mises said that, once the depression (he didn't use the term recession) arrives, the government must cease inflating, cease bailing out unsound businesses, cease encouraging consumption spending, and must reduce the government budget.
Coolidge's intervention helped to fuel the depression of 1929, which Mises correctly predicted. In 2002 we need not a new deal but rather a new government hand- Hands Off the economy, cut government spending, and reduce the budget deficit.
In Greenspan's speech last Thursday he was taking a page from the late Austrian economist Ludwig von Mises, who developed his theories in the 1910s and 1920s. Mises said that, once the depression (he didn't use the term recession) arrives, the government must cease inflating, cease bailing out unsound businesses, cease encouraging consumption spending, and must reduce the government budget.
Coolidge's intervention helped to fuel the depression of 1929, which Mises correctly predicted. In 2002 we need not a new deal but rather a new government hand- Hands Off the economy, cut government spending, and reduce the budget deficit.
9/14/02 The Bottomline Is Dwindling
Economists and analysts extol the recent retail sales numbers which grew .08% in August. Without autos the rise is 50% less. So the auto industry in August sold at a 17 million car rate. Ford is making $8 a car or possibly a ticket to see a movie. There isn't any inflation. Prices are coming down and so are profits- if there are any.
It's not just Lucent, Honeywell, and Hitachi having trouble. So far, of the S&P 500 companies pre-announcing earnings for the third quarter, 52% of them said they would not meet earnings projections, and many of those projections were modest in the first place. In other words, profits are trending down faster than anticipated.
You can go to the bank that Japan and China will continue to export into the US and lower prices as necessary to move merchandise. To the greatest extent business today is a matter of price. The consumer wants 0% financing and 70% off sales. With our current job malaise you can't blame the consumer for wanting a bargain. It's been a long time in coming, and that trend will be here for a very long time.
Fasten your seatbelts. Deflation is around the corner. The recession is here. The question is whether the big D is looming. We need to be making provisions for more soup kitchens. That's not a joke!
Economists and analysts extol the recent retail sales numbers which grew .08% in August. Without autos the rise is 50% less. So the auto industry in August sold at a 17 million car rate. Ford is making $8 a car or possibly a ticket to see a movie. There isn't any inflation. Prices are coming down and so are profits- if there are any.
It's not just Lucent, Honeywell, and Hitachi having trouble. So far, of the S&P 500 companies pre-announcing earnings for the third quarter, 52% of them said they would not meet earnings projections, and many of those projections were modest in the first place. In other words, profits are trending down faster than anticipated.
You can go to the bank that Japan and China will continue to export into the US and lower prices as necessary to move merchandise. To the greatest extent business today is a matter of price. The consumer wants 0% financing and 70% off sales. With our current job malaise you can't blame the consumer for wanting a bargain. It's been a long time in coming, and that trend will be here for a very long time.
Fasten your seatbelts. Deflation is around the corner. The recession is here. The question is whether the big D is looming. We need to be making provisions for more soup kitchens. That's not a joke!
Friday, September 13, 2002
9/13/02 Posting #2 The Clock Is Winding Down On Attracting Foreign Capital
Yesterday I touched on our record quarterly current account deficit of $130 billion. This deficit now has reached a 5% level of our GDP, a very dangerous position. Japan's account surplus is 36% of their GDP, Norway's is 14.7%, and Switzerland's is 9.9%. If I were a foreigner looking at alternative places for my money, Norway may be a good stopping off spot. They are large exporters of oil and their interest rates are attractive at 7%. There are alternatives for foreigners. We can no longer be nonchalant about attracting foreign capital in order to bridge our deficits.
Yesterday I touched on our record quarterly current account deficit of $130 billion. This deficit now has reached a 5% level of our GDP, a very dangerous position. Japan's account surplus is 36% of their GDP, Norway's is 14.7%, and Switzerland's is 9.9%. If I were a foreigner looking at alternative places for my money, Norway may be a good stopping off spot. They are large exporters of oil and their interest rates are attractive at 7%. There are alternatives for foreigners. We can no longer be nonchalant about attracting foreign capital in order to bridge our deficits.
9/13/02 Excerpts From Greenspan's Testimony To The House Budget Committee
I am providing these excerpts because the tone and subject matters of the speach were different from the past, and he touched on areas I have discussed in my past blogs, such as, gov't spending, the looming budget deficit, and the aging of our population. The following excerpts are Greenspan's personal views and not necessarily the views expressed by the entire Federal Reserve.
" A year ago, the Congressional Budget Office expected the unified budget to post large and mounting surpluses over the coming decade. As you know, CBO is currently forecasting that, if today's policies remain in place, the unified budget will post deficits through fiscal year 2005. For the fiscal year just ending, CBO now projects a budget balance that is more than $300 billion below the level it had projected a year ago.
To a degree, the return to budget deficits resulted from temporary factors, especially the falloff in revenues and the increase in outlays associated with the economic downturn. But some of the factors accounting for the weaker budget outlook will have longer-lasting effects. A large portion of this year's decline in individual income tax revenues is clearly related to the retrenchment in equity markets. The sharp decline in stock prices appears to have markedly reduced final settlements for the 2001 tax year, as well as receipts on 2002 income. This effect works directly through less tax revenue from capital gains realizations, and indirectly through less revenue collected from the exercise of stock options, from stock-price-related bonuses, and from withdrawals from IRAs and 401(k) plans that have been augmented by capital gains.
The budget enforcement rules are set to expire on September 30. Failing to preserve them would be a grave mistake. For without clear direction and constructive goals, the inbuilt political bias in favor of budget deficits likely will again become entrenched. We are all too aware that government spending programs and special tax benefits can be easy to initiate or expand but extraordinarily difficult to trim or shut down once constituencies develop that have a stake in maintaining the status quo. However, spending and tax-cutting restraint are not symmetrical. While there is no upside limit to spending, taxes cannot go below zero. In any case, the bottom line is that if we do not preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard effort could be squandered.
Besides the near-term budgetary shortfalls that we currently face, the aging of the population presents a daunting long-term fiscal challenge. Indeed, the extent of that challenge is not adequately reflected in conventional measures of the federal budget.
Scoring the budget on an accrual basis--the private sector norm and, I believe, a sensible direction for federal budget accounting--would better underscore the tradeoffs we face. Under accrual accounting, benefits would be counted as they are earned by workers rather than when they are paid out by the government. This method allows us to keep better track of the future obligations that the government has incurred. Under full accrual accounting, the social security program would have shown a substantial deficit last year, rather than the surplus measured under our current cash-accounting regimen.
Such accruals take account of still-growing contingent liabilities, which currently, under most reasonable sets of actuarial assumptions, amount to many trillions of dollars for social security benefits alone. The contingent liabilities implicit in the Medicare program are much more difficult to calculate--but they are also likely in the trillions of dollars. These liabilities are fast approaching their due date. With the baby boom generation beginning to retire in just six short years, cash benefits will soon begin to rise rapidly, exerting pressure on the unified budget.
Given the imminence of these demographic pressures, we need to begin deciding exactly how to reform our retirement programs to close the gap between unified budget outlays and revenues. In essence, we will have to decide how to allocate available resources. All possible policy solutions should be on the table.
More fundamentally, the way to prepare for the challenges ahead is to increase the real resources that will be available to meet those looming needs. The greater the resources available --that is, the greater the output of goods and services produced by our economy--the easier it will be to provide real benefits to retirees without unduly restraining the consumption of workers and without imposing large tax increases that would damp incentives and reduce economic growth.
Returning to a fiscal climate of continuous large deficits would risk returning to an era of high interest rates, low levels of investment, and slower growth of productivity. . But history suggests that an abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth, and force harder choices upon us in the future. "
.
I am providing these excerpts because the tone and subject matters of the speach were different from the past, and he touched on areas I have discussed in my past blogs, such as, gov't spending, the looming budget deficit, and the aging of our population. The following excerpts are Greenspan's personal views and not necessarily the views expressed by the entire Federal Reserve.
" A year ago, the Congressional Budget Office expected the unified budget to post large and mounting surpluses over the coming decade. As you know, CBO is currently forecasting that, if today's policies remain in place, the unified budget will post deficits through fiscal year 2005. For the fiscal year just ending, CBO now projects a budget balance that is more than $300 billion below the level it had projected a year ago.
To a degree, the return to budget deficits resulted from temporary factors, especially the falloff in revenues and the increase in outlays associated with the economic downturn. But some of the factors accounting for the weaker budget outlook will have longer-lasting effects. A large portion of this year's decline in individual income tax revenues is clearly related to the retrenchment in equity markets. The sharp decline in stock prices appears to have markedly reduced final settlements for the 2001 tax year, as well as receipts on 2002 income. This effect works directly through less tax revenue from capital gains realizations, and indirectly through less revenue collected from the exercise of stock options, from stock-price-related bonuses, and from withdrawals from IRAs and 401(k) plans that have been augmented by capital gains.
The budget enforcement rules are set to expire on September 30. Failing to preserve them would be a grave mistake. For without clear direction and constructive goals, the inbuilt political bias in favor of budget deficits likely will again become entrenched. We are all too aware that government spending programs and special tax benefits can be easy to initiate or expand but extraordinarily difficult to trim or shut down once constituencies develop that have a stake in maintaining the status quo. However, spending and tax-cutting restraint are not symmetrical. While there is no upside limit to spending, taxes cannot go below zero. In any case, the bottom line is that if we do not preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard effort could be squandered.
Besides the near-term budgetary shortfalls that we currently face, the aging of the population presents a daunting long-term fiscal challenge. Indeed, the extent of that challenge is not adequately reflected in conventional measures of the federal budget.
Scoring the budget on an accrual basis--the private sector norm and, I believe, a sensible direction for federal budget accounting--would better underscore the tradeoffs we face. Under accrual accounting, benefits would be counted as they are earned by workers rather than when they are paid out by the government. This method allows us to keep better track of the future obligations that the government has incurred. Under full accrual accounting, the social security program would have shown a substantial deficit last year, rather than the surplus measured under our current cash-accounting regimen.
Such accruals take account of still-growing contingent liabilities, which currently, under most reasonable sets of actuarial assumptions, amount to many trillions of dollars for social security benefits alone. The contingent liabilities implicit in the Medicare program are much more difficult to calculate--but they are also likely in the trillions of dollars. These liabilities are fast approaching their due date. With the baby boom generation beginning to retire in just six short years, cash benefits will soon begin to rise rapidly, exerting pressure on the unified budget.
Given the imminence of these demographic pressures, we need to begin deciding exactly how to reform our retirement programs to close the gap between unified budget outlays and revenues. In essence, we will have to decide how to allocate available resources. All possible policy solutions should be on the table.
More fundamentally, the way to prepare for the challenges ahead is to increase the real resources that will be available to meet those looming needs. The greater the resources available --that is, the greater the output of goods and services produced by our economy--the easier it will be to provide real benefits to retirees without unduly restraining the consumption of workers and without imposing large tax increases that would damp incentives and reduce economic growth.
Returning to a fiscal climate of continuous large deficits would risk returning to an era of high interest rates, low levels of investment, and slower growth of productivity. . But history suggests that an abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth, and force harder choices upon us in the future. "
.
Thursday, September 12, 2002
9/12/02 Posting #2 The Way It Really Is
US initial jobless claims for the week ended Sept 7 climbed by 19,000 to 426,000, and it was the highest level since April 20.
US account deficit widened to a record $130 billion in the second quarter. We're on a roll. I feel confident the number can get larger.
US initial jobless claims for the week ended Sept 7 climbed by 19,000 to 426,000, and it was the highest level since April 20.
US account deficit widened to a record $130 billion in the second quarter. We're on a roll. I feel confident the number can get larger.
9/12/02 16B
This is not a typo describing a bra size. It's an SEC regulation covering stock options, and, is in my opinion the root of much trouble. The regulation states that a stock option purchase occurs when the option is granted rather than exercised. This is significant because risk for holding the stock can be avoided. For example, an option could be granted(that does not mean it's vested then) on Jan 2, 2002 but not exercised until July 2, 2002 at 9:30am EST and then sold 10 seconds later on the same day. Hundreds of millions of gains were realized via this method during the 1998-2000 period. The rest of the stockholders, who did not have options granted to them, were at risk the moment they purchased stock, and this problem continues to exist. I believe this inequality is a more important matter than the expensing of stock options.
There was a 10.8% increase in credit card debt in July.
Fifty five percent of 50 economists just surveyed believe there is only a 25% chance of a double-dip recession. At the same time two thirds of those polled believe the unemployment rate hasn't peaked. For some reason the two statements don't appear to go hand in hand.
The beige book expressed "widespread concern about the effect that rising health care costs might have on labor costs." They didn't address my concern about 40 million Americans not having health care coverage, and this number rises daily.
This is not a typo describing a bra size. It's an SEC regulation covering stock options, and, is in my opinion the root of much trouble. The regulation states that a stock option purchase occurs when the option is granted rather than exercised. This is significant because risk for holding the stock can be avoided. For example, an option could be granted(that does not mean it's vested then) on Jan 2, 2002 but not exercised until July 2, 2002 at 9:30am EST and then sold 10 seconds later on the same day. Hundreds of millions of gains were realized via this method during the 1998-2000 period. The rest of the stockholders, who did not have options granted to them, were at risk the moment they purchased stock, and this problem continues to exist. I believe this inequality is a more important matter than the expensing of stock options.
There was a 10.8% increase in credit card debt in July.
Fifty five percent of 50 economists just surveyed believe there is only a 25% chance of a double-dip recession. At the same time two thirds of those polled believe the unemployment rate hasn't peaked. For some reason the two statements don't appear to go hand in hand.
The beige book expressed "widespread concern about the effect that rising health care costs might have on labor costs." They didn't address my concern about 40 million Americans not having health care coverage, and this number rises daily.
Wednesday, September 11, 2002
9/11/02 Proverbs 3:25 Do Not Fear Sudden Terror, Nor The Destruction Of The Wicked When It Comes.
Psalm 29: The Lord will give strength to His people. The Lord will bless His people with peace.
Josephus stated that free-will is granted to every man. If he desires to incline towards the good way, and be righteous, he has the power to do so; and if he desires to incline towards the unrighteous way, and be a wicked man, he has the power to do so. Additionally, we see in Exodus that God has given the reins of man's conduct altogether into his hands.
Bruce Lee, Enter the Dragon: " We need emotional content- not anger."
Psalm 29: The Lord will give strength to His people. The Lord will bless His people with peace.
Josephus stated that free-will is granted to every man. If he desires to incline towards the good way, and be righteous, he has the power to do so; and if he desires to incline towards the unrighteous way, and be a wicked man, he has the power to do so. Additionally, we see in Exodus that God has given the reins of man's conduct altogether into his hands.
Bruce Lee, Enter the Dragon: " We need emotional content- not anger."
Tuesday, September 10, 2002
9/10/02 Quotes For Tuesday
Bank for International Settlements: "The recent decline in share values might forshadow some downward pressure on house prices...that to a greater extent than before, share prices indicated a loss of confidence in the financial sector... every previous recession has been accompanied by at least a slowdown in housing price increases."
Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over Time? : "Average first day gain in IPOs was 7% during the 1980s, 15% during 1990-98, but 65% during 1999-2000."
Sir Edward George, chairman of G10 central bankers: "It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip...the wages developments in the eurozone plus very slow productivity growth in this more modest growth environment could have an upward effect, not a huge upward effect, on inflation."
Rand Institute: "Asbestos lawsuits affect 85% of the US economy... the longest-runing mass tort litigation in US history."
Bank for International Settlements: "The recent decline in share values might forshadow some downward pressure on house prices...that to a greater extent than before, share prices indicated a loss of confidence in the financial sector... every previous recession has been accompanied by at least a slowdown in housing price increases."
Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over Time? : "Average first day gain in IPOs was 7% during the 1980s, 15% during 1990-98, but 65% during 1999-2000."
Sir Edward George, chairman of G10 central bankers: "It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip...the wages developments in the eurozone plus very slow productivity growth in this more modest growth environment could have an upward effect, not a huge upward effect, on inflation."
Rand Institute: "Asbestos lawsuits affect 85% of the US economy... the longest-runing mass tort litigation in US history."
Monday, September 09, 2002
9/9/02 The Colors On Our Flag Do Not Run. They Fly.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
Sunday, September 08, 2002
9/8/02 Sunday's Thoughts
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Friday, September 06, 2002
9/6/02 Posting #3 Voodoo Unemployment Rate
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
9/6/02 Posting #2 Spur Consumer Spending
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
9/6/06 The Employer Of Last Resort
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Thursday, September 05, 2002
9/5/02 Posting #2 The United States
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
9/5/02 Germany
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Wednesday, September 04, 2002
9/4/02 Posting #2 Thoughts For The Afternoon
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
9/4/02 The Nikkei 225
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
Tuesday, September 03, 2002
9/3/02 Posting #3 It's Just Business
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
9/3/02 Winning Creates Believers
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
Monday, September 02, 2002
9/2/02 Labor Day
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
Sunday, September 01, 2002
Facts For A Sunday
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Saturday, August 31, 2002
8/31/02 "It Was Very Difficult To Definitely Identify A Bubble Until After The Fact"
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
Friday, August 30, 2002
8/30/02 Housing
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
Thursday, August 29, 2002
8/29/02 The GDP Report
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Wednesday, August 28, 2002
8/28/02 September
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
Tuesday, August 27, 2002
8/27/02 Posting #2 Congressional Budget Office
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
Monday, August 26, 2002
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
Sunday, August 25, 2002
Saturday, August 24, 2002
8/24/02 Quotes For Saturday
In memory of Peter Martin, Senior Business Editor Financial Times: Lessons from the dotcom bubble-
"much internet technology does not work...most new business models do not work...nothing destroys
value like underpriced capital...financing start-ups in the public markets is a terrible idea...the web era has just begun...
there is at least as much interesting innovation ahead as that which lies behind."
Winston Churchill: "You may take the most gallant sailor, the most intrepid airman, or the most audacious
soldier, put them at a table together- what do you get? The sum total of their fears."
Kofi Annan, secretary-general of the United Nations: "Attempts to promote human development and reverse
environmental degradation have not, in general, been effective over the last decade."
Bob Semple, Deutsche Bank, "we have to concede that recent economic and corporate developments have been more
disappointing than we anticipated, with little prospect for improvement over the next month...at best, we believe
equities are likely to consolidate rather than make further progress in the short term."
In memory of Peter Martin, Senior Business Editor Financial Times: Lessons from the dotcom bubble-
"much internet technology does not work...most new business models do not work...nothing destroys
value like underpriced capital...financing start-ups in the public markets is a terrible idea...the web era has just begun...
there is at least as much interesting innovation ahead as that which lies behind."
Winston Churchill: "You may take the most gallant sailor, the most intrepid airman, or the most audacious
soldier, put them at a table together- what do you get? The sum total of their fears."
Kofi Annan, secretary-general of the United Nations: "Attempts to promote human development and reverse
environmental degradation have not, in general, been effective over the last decade."
Bob Semple, Deutsche Bank, "we have to concede that recent economic and corporate developments have been more
disappointing than we anticipated, with little prospect for improvement over the next month...at best, we believe
equities are likely to consolidate rather than make further progress in the short term."
Friday, August 23, 2002
8/23/02 Posting #2 Republicans and Democrats
In one of my blogs last month I mentioned that the White House budget office predicted a $444 billion budget surplus between 2002 and 2011. I provided commentary on this estimate. Now we have another voice from the peanut gallery, the Senate Budget Committee, who yesterday predicted a $475 billion budget deficit for the same period. They predicted deficits would continue thru 2008. They must believe George W. will be elected for a second term! The White House predicts a surplus in 2005. They must believe George W. will get elected for a second term!
For my money I want to see the revised numbers. Don't cheat me. I want revised monthly budget deficit numbers. The government revises most numbers. Let's set up a new committee just for revising government numbers. That would help the employment numbers.
In one of my blogs last month I mentioned that the White House budget office predicted a $444 billion budget surplus between 2002 and 2011. I provided commentary on this estimate. Now we have another voice from the peanut gallery, the Senate Budget Committee, who yesterday predicted a $475 billion budget deficit for the same period. They predicted deficits would continue thru 2008. They must believe George W. will be elected for a second term! The White House predicts a surplus in 2005. They must believe George W. will get elected for a second term!
For my money I want to see the revised numbers. Don't cheat me. I want revised monthly budget deficit numbers. The government revises most numbers. Let's set up a new committee just for revising government numbers. That would help the employment numbers.
8/23/02 The Nation's Secret Intelligence Court
The court said the F.B.I. and the Justice Department had made "erroneous statements" in eavesdropping applications about "the separation of the overlapping intelligence and criminal investigators and the unauthorized sharing of FISA information with F.B.I. criminal investigators and assistant U.S. attorneys."
It was also mentioned that an "alarming number of instances" of misleading justifications for electronic surveillance and wiretaps occurred during the Clinton administration. As citizens we each "own" a piece of the federal debt and we are each asked to work 4 1/2 months each year for free so that the monies earned during that time can go to pay taxes. It's fair to say the citizens own this country and not the federal beaurocracies. Isn't it time federal employees recognize who pays their salaries and that they should be held to a high standard of ethics- just like at Enron, Global Crossing, WorldCom and the like?
The people responsible for "erroneous statements" in these 75 cases cited by the Secret Intelligence Court should be prosecuted to the fullest extent.
The court said the F.B.I. and the Justice Department had made "erroneous statements" in eavesdropping applications about "the separation of the overlapping intelligence and criminal investigators and the unauthorized sharing of FISA information with F.B.I. criminal investigators and assistant U.S. attorneys."
It was also mentioned that an "alarming number of instances" of misleading justifications for electronic surveillance and wiretaps occurred during the Clinton administration. As citizens we each "own" a piece of the federal debt and we are each asked to work 4 1/2 months each year for free so that the monies earned during that time can go to pay taxes. It's fair to say the citizens own this country and not the federal beaurocracies. Isn't it time federal employees recognize who pays their salaries and that they should be held to a high standard of ethics- just like at Enron, Global Crossing, WorldCom and the like?
The people responsible for "erroneous statements" in these 75 cases cited by the Secret Intelligence Court should be prosecuted to the fullest extent.
Thursday, August 22, 2002
8/22/02 Government Statistics
Once again the government has provided "moving target" numbers. This time it was the labor department, and they have just revised preliminary estimates for the latest weekly jobless claims and raised the number to 391,000. These are weekly not quarterly numbers. How difficult can it be to get a weekly number correct? GE is a massive company and gets daily numbers. I ran a company with a 1000 employees, not massive, and got daily numbers.
Unemployment statistics are vital numbers. They have a bearing on many aspects of our way of life. The U.S. citizens are up in arms about Enron and Global Crossing and Worldcom and rightly so. Providing accurate and timely government statistics should be treated with at least the same seriousness. Should it come out that the statistics are being "manipulated", then proper actions should be taken and that too should be front page news.
Revising weekly numbers is akin to 3 card monte.
Once again the government has provided "moving target" numbers. This time it was the labor department, and they have just revised preliminary estimates for the latest weekly jobless claims and raised the number to 391,000. These are weekly not quarterly numbers. How difficult can it be to get a weekly number correct? GE is a massive company and gets daily numbers. I ran a company with a 1000 employees, not massive, and got daily numbers.
Unemployment statistics are vital numbers. They have a bearing on many aspects of our way of life. The U.S. citizens are up in arms about Enron and Global Crossing and Worldcom and rightly so. Providing accurate and timely government statistics should be treated with at least the same seriousness. Should it come out that the statistics are being "manipulated", then proper actions should be taken and that too should be front page news.
Revising weekly numbers is akin to 3 card monte.
Wednesday, August 21, 2002
8/21/02 Management Lessons
Lesson Number One
>
> A crow was sitting in a tree, doing nothing all day. A small
rabbit saw
the > crow, and asked him, "Can I also sit like you and do nothing all
day
long?"
> The crow answered: "Sure, why not." So, the rabbit sat on the
ground
below
> the crow, and rested. All of a sudden, a fox appeared, jumped on
the
rabbit > and ate it.
>
> Management Lesson? To be sitting and doing nothing, you must be
sitting
> very, very high up.
>
> Lesson Number Two
>
> A turkey was chatting with a bull. "I would love to be able to get
to
the
> top of that tree," sighed the turkey, "but I haven't got the
energy."
"Well, > why don't you nibble on some of my droppings?" replied the
bull.
"They're > packed with nutrients." The turkey pecked at a lump of dung
and
found that > it actually gave him enough strength to reach the lowest
branch
of the tree.
> The next day, after eating some more dung, he reached the second
branch.
> Finally after a fourth night, there he was proudly
> perched at the top of the tree. Soon he was spotted by a farmer,
who
shot > the turkey out of the tree.
>
> Management Lesson? BullShit might get you to the top, but it won't
keep
you > there.
>
> Lesson Number Three
>
> A little bird was flying south for the winter. It was so cold the
bird
froze > and fell to the ground in a large field. While it was lying
there, a
cow > came by and dropped some dung on it. As the frozen bird lay there
in
the > pile of cow dung, it began to realize how warm it was. The dung
was
actually > thawing him out! He lay there all warm and happy, and soon
began
to sing for > joy. A passing cat heard the bird singing and came to
investigate.
Following > the sound, the cat discovered the bird under the pile of
cow
dung, promptly > dug him out and ate him.
>
> Management Lesson?
>
> 1) Not everyone who shits on you is your enemy.
> 2) Not everyone who gets you out of shit is your friend.
> 3) And when you're in deep shit, it's best to keep your mouth
shut!
Lesson Number One
>
> A crow was sitting in a tree, doing nothing all day. A small
rabbit saw
the > crow, and asked him, "Can I also sit like you and do nothing all
day
long?"
> The crow answered: "Sure, why not." So, the rabbit sat on the
ground
below
> the crow, and rested. All of a sudden, a fox appeared, jumped on
the
rabbit > and ate it.
>
> Management Lesson? To be sitting and doing nothing, you must be
sitting
> very, very high up.
>
> Lesson Number Two
>
> A turkey was chatting with a bull. "I would love to be able to get
to
the
> top of that tree," sighed the turkey, "but I haven't got the
energy."
"Well, > why don't you nibble on some of my droppings?" replied the
bull.
"They're > packed with nutrients." The turkey pecked at a lump of dung
and
found that > it actually gave him enough strength to reach the lowest
branch
of the tree.
> The next day, after eating some more dung, he reached the second
branch.
> Finally after a fourth night, there he was proudly
> perched at the top of the tree. Soon he was spotted by a farmer,
who
shot > the turkey out of the tree.
>
> Management Lesson? BullShit might get you to the top, but it won't
keep
you > there.
>
> Lesson Number Three
>
> A little bird was flying south for the winter. It was so cold the
bird
froze > and fell to the ground in a large field. While it was lying
there, a
cow > came by and dropped some dung on it. As the frozen bird lay there
in
the > pile of cow dung, it began to realize how warm it was. The dung
was
actually > thawing him out! He lay there all warm and happy, and soon
began
to sing for > joy. A passing cat heard the bird singing and came to
investigate.
Following > the sound, the cat discovered the bird under the pile of
cow
dung, promptly > dug him out and ate him.
>
> Management Lesson?
>
> 1) Not everyone who shits on you is your enemy.
> 2) Not everyone who gets you out of shit is your friend.
> 3) And when you're in deep shit, it's best to keep your mouth
shut!
Tuesday, August 20, 2002
8/20/02 The Trade Deficit
For the second month in a row our monthly trade deficit exceeded 37 billion dollars. On an annualized basis this approaches 450 billion dollars. With the budget deficit projected at 165 billion dollars this makes a total budget deficit exceeding 600 billion dollars. Such large deficits undermine the stability of the economy, the stability of the dollar and our independence. This course must be reversed before we hit a stonewall and crash out of control.
For the second month in a row our monthly trade deficit exceeded 37 billion dollars. On an annualized basis this approaches 450 billion dollars. With the budget deficit projected at 165 billion dollars this makes a total budget deficit exceeding 600 billion dollars. Such large deficits undermine the stability of the economy, the stability of the dollar and our independence. This course must be reversed before we hit a stonewall and crash out of control.
Monday, August 19, 2002
8/19/02 Posting #2 V Shaped
The Dow is now approaching 9000 and the Nasdaq 1400. At the same time the Index of Leading Economic Indicators came in at the lowest point since last September. The stock market reflects future profits and, in my view, the economic environment does not appear
poised to get rosy. Those buying on dips will regret their purchases. The recent bounce will not be V shaped as it was in December 1974. Even then, there was another significant buying opportunity in 1982.
In the past two years we have witnessed several dead cat bounces, and from declining price levels. Look at the charts. They tell me to body surf on a warm beach. I won't forget my sunscreen. For buyers of stocks maybe you can find some "price screen".
The Dow is now approaching 9000 and the Nasdaq 1400. At the same time the Index of Leading Economic Indicators came in at the lowest point since last September. The stock market reflects future profits and, in my view, the economic environment does not appear
poised to get rosy. Those buying on dips will regret their purchases. The recent bounce will not be V shaped as it was in December 1974. Even then, there was another significant buying opportunity in 1982.
In the past two years we have witnessed several dead cat bounces, and from declining price levels. Look at the charts. They tell me to body surf on a warm beach. I won't forget my sunscreen. For buyers of stocks maybe you can find some "price screen".
8/19/02 Continuous Replenishment
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
8/19/02 Continuous Replenishment
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sam Walton in 1987: "The way we do things is way too complicated. You (P&G) should automatically send me Pampers, and I should send you a check once a month. We ought to get rid of all the negotiation and invoicing." Sam Walton was ahead of his time, and one could argue that he made WalMart into the most successful business in the U.S. if not the world.
Invest in and with winners. Stay with the winners. Warren Buffet buys winning companies and lets the managements stay on and run the operations. You can do the same with your investments. It means buying a piece of the business. Keep it simple.
Sunday, August 18, 2002
8/18/02 Certain Givens
Our population is aging, and along with that trend, healthcare will continue to become a larger portion of our GDP.
Too many people are out of work. There aren't enough good jobs for educated Americans.
Too many Americans work in low-paying service jobs.
Taxes are too high at all levels of gov't.
Congress spends too much money. For Congress economic stimulus means overspending. We have a coin operated gov't.
Tough decisions require a willingness to be vilified.
There is too much inner turmoil in families.
The U.S. consumer has good reasons not to be confident at this time.
Our forefathers never envisioned regulations strangling every day life.
Too many cooks spoil the broth, and gov't bloat is akin to botulism.
Random acts of kindness make the world a better place.
Our population is aging, and along with that trend, healthcare will continue to become a larger portion of our GDP.
Too many people are out of work. There aren't enough good jobs for educated Americans.
Too many Americans work in low-paying service jobs.
Taxes are too high at all levels of gov't.
Congress spends too much money. For Congress economic stimulus means overspending. We have a coin operated gov't.
Tough decisions require a willingness to be vilified.
There is too much inner turmoil in families.
The U.S. consumer has good reasons not to be confident at this time.
Our forefathers never envisioned regulations strangling every day life.
Too many cooks spoil the broth, and gov't bloat is akin to botulism.
Random acts of kindness make the world a better place.
Saturday, August 17, 2002
8/17/02 Posting #3 Unsustainable
From mid-1999 to mid-2000 stock price gains were frequently outpacing household incomes for the 50% of the population owning stocks. It reached a point where stocks became unaffordable, as it were. The value wasn't there and the prices unsustainable.
From mid-2001 to mid-2002 house price gains were, for many of the 75% of the population owning homes, outpacing their household
incomes. Clearly the home prices are unsustainable. To accomplish ownership the Mortgage Bankers Association anticipates about $1 trillion in mortages will be placed this year. That is on top of the $873 billion in mortages taken down in 2001.
A significant worry is the mortage debt level relative to the disposable income of the homeowner. In my view, this is an accident waiting to happen. The debris will have far-flung ramifications.
From mid-1999 to mid-2000 stock price gains were frequently outpacing household incomes for the 50% of the population owning stocks. It reached a point where stocks became unaffordable, as it were. The value wasn't there and the prices unsustainable.
From mid-2001 to mid-2002 house price gains were, for many of the 75% of the population owning homes, outpacing their household
incomes. Clearly the home prices are unsustainable. To accomplish ownership the Mortgage Bankers Association anticipates about $1 trillion in mortages will be placed this year. That is on top of the $873 billion in mortages taken down in 2001.
A significant worry is the mortage debt level relative to the disposable income of the homeowner. In my view, this is an accident waiting to happen. The debris will have far-flung ramifications.
8/17/02 Posting #2 A Proxy Fight
Lawrence Lindsey: ``We need tax simplification and we need lower taxation of capital on all fronts.'' If the gov't wants to encourage investing and promote savings, incentives would clearly be helpful. For the most part, our federal, state, and local governments have clogged our citizenry's cash flow pipeline thru a myriad of taxation roadblocks, and the culprits should be ousted by each eligible American's proxy- VOTING.
Lawrence Lindsey: ``We need tax simplification and we need lower taxation of capital on all fronts.'' If the gov't wants to encourage investing and promote savings, incentives would clearly be helpful. For the most part, our federal, state, and local governments have clogged our citizenry's cash flow pipeline thru a myriad of taxation roadblocks, and the culprits should be ousted by each eligible American's proxy- VOTING.
8/17/02 What Comes Around Goes Around
One day a poor boy who was selling goods from door to door to pay his way through school found he had only one thin dime left, and he was hungry. He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door. Instead of a meal he asked for a drink of water.
She thought he looked hungry so brought him a large glass of milk. He drank it slowly, and then asked, "How much do I owe you?"
"You don't owe me anything," she replied. "Mother has taught us never to accept pay for a kindness."
He replied, "Then I thank you from my heart." As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Years later that young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease. Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes. Immediately he rose and went down the hall of the hospital to her room.
Dressed in his doctor's gown he went in to see her. He recognized her at once. He went back to the consultation room determined to do his best to save her life. From that day he gave special attention to the case.
After a long struggle, the battle was won. Dr. Kelly requested the business office to pass the final bill to him for approval.
He looked at it, then wrote something on the edge and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all. Finally she looked, and something caught her attention on the side of the bill.
She read these words...
"Paid in full with one glass of milk"
(Signed) Dr. Howard Kelly.
Tears of joy flooded her eyes as her happy heart prayed: "Thank You, God, that Your love has spread abroad through human hearts and hands."
Life is as simple or as difficult as we make it. Investing is no different. How one manages every day life or how a CEO manages a company will go a long way towards determining the end results.
One day a poor boy who was selling goods from door to door to pay his way through school found he had only one thin dime left, and he was hungry. He decided he would ask for a meal at the next house. However, he lost his nerve when a lovely young woman opened the door. Instead of a meal he asked for a drink of water.
She thought he looked hungry so brought him a large glass of milk. He drank it slowly, and then asked, "How much do I owe you?"
"You don't owe me anything," she replied. "Mother has taught us never to accept pay for a kindness."
He replied, "Then I thank you from my heart." As Howard Kelly left that house, he not only felt stronger physically, but his faith in God and man was strong also. He had been ready to give up and quit.
Years later that young woman became critically ill. The local doctors were baffled. They finally sent her to the big city, where they called in specialists to study her rare disease. Dr. Howard Kelly was called in for the consultation. When he heard the name of the town she came from, a strange light filled his eyes. Immediately he rose and went down the hall of the hospital to her room.
Dressed in his doctor's gown he went in to see her. He recognized her at once. He went back to the consultation room determined to do his best to save her life. From that day he gave special attention to the case.
After a long struggle, the battle was won. Dr. Kelly requested the business office to pass the final bill to him for approval.
He looked at it, then wrote something on the edge and the bill was sent to her room. She feared to open it, for she was sure it would take the rest of her life to pay for it all. Finally she looked, and something caught her attention on the side of the bill.
She read these words...
"Paid in full with one glass of milk"
(Signed) Dr. Howard Kelly.
Tears of joy flooded her eyes as her happy heart prayed: "Thank You, God, that Your love has spread abroad through human hearts and hands."
Life is as simple or as difficult as we make it. Investing is no different. How one manages every day life or how a CEO manages a company will go a long way towards determining the end results.
Friday, August 16, 2002
8/16/02 The King And The Market
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
8/16/02 The King And The Market
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
We remember Elvis and the former bull market with fondness. It's been 25 years since Elvis left us, and he performed brilliantly for so many years. The bull market began in December 1974 and lasted almost 26 years, and for most of those years performed brilliantly and created trillions in wealth. We mourn for both. The King's songs still give us immense pleasure but the former bull market leaves us with lessons and mixed emotions. At some point it will return. It always stops raining but they don't ring a bell in advance.
Thursday, August 15, 2002
8/15/02 Restoring Confidence
You thought I might be writing about the CEOs signing off on their financial statements. What restored my confidence was Kmart. They requested to have their loan covenants changed and that change would provide for Kmart to report a larger than anticipated loss- $400 million instead of $100 million. The reason given said their CFO:
"I don't need people to worry. I need their confidence." The larger loss sure made me feel better.
You thought I might be writing about the CEOs signing off on their financial statements. What restored my confidence was Kmart. They requested to have their loan covenants changed and that change would provide for Kmart to report a larger than anticipated loss- $400 million instead of $100 million. The reason given said their CFO:
"I don't need people to worry. I need their confidence." The larger loss sure made me feel better.
Wednesday, August 14, 2002
Tuesday, August 13, 2002
8/13/02 The Parking Lot
We might have a money maker. With all of the planes being mothballed the idea is to open a very large parking lot for the planes. We might need a bit of security but other than that this should be a cash machine. We need to lease some space in the Mojave desert and then place ads. We should get a great deal of repeat business and I feel the business has excellent growth potential. There are too many airlines and too many planes. I will look for additional space in other locations. I shall keep you posted on developments.
We might have a money maker. With all of the planes being mothballed the idea is to open a very large parking lot for the planes. We might need a bit of security but other than that this should be a cash machine. We need to lease some space in the Mojave desert and then place ads. We should get a great deal of repeat business and I feel the business has excellent growth potential. There are too many airlines and too many planes. I will look for additional space in other locations. I shall keep you posted on developments.
Monday, August 12, 2002
8/12/02 Posting #2
Morgan Stanley lowered its 2002 real gross domestic product forecast for the U.S. to 2.3 percent from 2.9 percent, and its 2003 forecast to 3.1 percent from 3.8 percent, with further risks to the downside. Maybe they'll be proven correct; however, their reading of the tea leaves looks rosy to me. I wonder whether Morgan Stanley would put their money where their mouth is.
Morgan Stanley lowered its 2002 real gross domestic product forecast for the U.S. to 2.3 percent from 2.9 percent, and its 2003 forecast to 3.1 percent from 3.8 percent, with further risks to the downside. Maybe they'll be proven correct; however, their reading of the tea leaves looks rosy to me. I wonder whether Morgan Stanley would put their money where their mouth is.
8/12/02 US Airways
Yesterday they filed for Chapter 11, and at the same time, their pilots voted to accept a proposal that will reduce their wages and benefits by an average of 26 percent through 2008, helping the financially strapped airline dramatically reduce its costs. In exchange the pilots will receive a 19.3 percent stake in the company. Another 38% ownership stake will go to Texas Pacific, a group that will buy $200 million worth of stock when the airline emerges from bankruptcy.
Texas Pacific invested in two other airlines which had filed for bankruptcy- Continental and American West. Hopefully, for all concerned, US Airways will be another successful rescue effort.
Yesterday they filed for Chapter 11, and at the same time, their pilots voted to accept a proposal that will reduce their wages and benefits by an average of 26 percent through 2008, helping the financially strapped airline dramatically reduce its costs. In exchange the pilots will receive a 19.3 percent stake in the company. Another 38% ownership stake will go to Texas Pacific, a group that will buy $200 million worth of stock when the airline emerges from bankruptcy.
Texas Pacific invested in two other airlines which had filed for bankruptcy- Continental and American West. Hopefully, for all concerned, US Airways will be another successful rescue effort.
Sunday, August 11, 2002
8/11/01 Next Week's Non-Event Fed Meeting
Out of 21 dealers recently polled by Reuters, 17 expect no change in rates for the rest of the year. The chances of an Aug. 13 easing are less than one in five, according to federal funds futures.
As for me, I have often said I don't spend time listening to economists; however, I have pointed out the importance of tracking fed funds futures. Based on the latter, the Fed meeting will be a non-event. Let's continue to monitor the fed funds futures after the meeting has been completed. It will provide an indication of future interest rate direction.
Out of 21 dealers recently polled by Reuters, 17 expect no change in rates for the rest of the year. The chances of an Aug. 13 easing are less than one in five, according to federal funds futures.
As for me, I have often said I don't spend time listening to economists; however, I have pointed out the importance of tracking fed funds futures. Based on the latter, the Fed meeting will be a non-event. Let's continue to monitor the fed funds futures after the meeting has been completed. It will provide an indication of future interest rate direction.
Saturday, August 10, 2002
8/10/02 A Chuckle For Saturday
WHY WE LOVE CHILDREN
A kindergarten pupil told his teacher he'd found a cat. She asked him
if it
was dead or alive. "Dead." She was informed. "How do you know?" she
asked
her pupil. "Because I pissed in its ear and it didn't move," answered
the
child innocently. "You did WHAT?!?" The teacher exclaimed in
surprise.
"You know," explained the boy, "I leaned over and went 'Psssst!' and it
didn't move."
_________________________________________________
A small boy is sent to bed by his father. Five minutes later.
"Daaa-ad...." "What? "I'm thirsty. Can you bring drink of water?"
"No.
You had your chance. Lights out." Five minutes later: "Da-aaaad....."
"WHAT?" "I'm THIRSTY. Can I have a drink of water??" "I told you NO!"
If
you ask again, I'll have to spank you!!" Five minutes later......
"Daaaa-aaaad....." "WHAT!" "When you come in to spank me, can you
bring a
drink of water?"
________________________________________________
An exasperated mother, whose son was always getting into mischief,
finally
asked him, "How do you expect to get into Heaven?" The boy thought it
over
and said, "Well, I'll run in and out and in and out and keep slamming
the
door until St. Peter says, 'For Heaven's sake, Dylan, come in or stay
out!"
_________________________________________________
One summer evening during a violent thunderstorm a mother was tucking
her
son into bed. She was about to turn off the light when he asked with a
tremor in his voice, "Mommy, will you sleep with me tonight?" The
mother
smiled and gave him a reassuring hug. "I can't dear," she said. "I
have to
sleep in Daddy's room." A long silence was broken at last by his shaky
little voice: "The big sissy."
_________________________________________________
It was that time, during the Sunday morning service, for the children's
sermon. All the children were invited to come forward. One little
girl was
wearing a particularly pretty dress and, as she sat down, the pastor
leaned
over and said, "That is a very pretty dress. Is it your Easter Dress?"
The
little girl replied, directly into the pastor's clip-on microphone,
"Yes and
my Mom say it's a bitch to iron."
_________________________________________________
When I was six months pregnant with my third child, my three year old
came
into the room when I was just getting ready to get into the shower.
She
said," Mommy, you are getting fat!" I replied, "Yes, honey, remember
Mommy
has a baby growing in her tummy" "I know," she replied, but what's
growing
in your butt?"
_________________________________________________
A little boy was doing his math homework. He said to himself, "Two
plus
five, that son of a bitch is seven. Three plus six, that son of a
bitch is
nine...." His mother heard what he was saying and gasped, "What are
you
doing?" The little boy answered, "I'm doing my math homework, Mom."
"And
this is how your teacher taught you to do it?" the mother asked.
"Yes," he
answered. Infuriated, the mother asked the teacher the next day, "What
are
you teaching my son in math?" The teacher replied, "Right now, we are
learning addition." The mother asked, "And are you teaching them to
say two
plus two, that son of a bitch is four?" After the teacher stopped
laughing,
she answered, "What I taught them was, two plus two, THE SUM OF WHICH,
is
four."
_________________________________________________
One day the first grade teacher was reading the story of Chicken Little
to
her class. She came to the part of the story where Chicken Little
tried to
warn the farmer. She read, ".... and so Chicken Little went up to the
farmer and said, "The sky is falling, the sky is falling!" The teacher
paused then asked the class, "And what do you think that farmer said?"
One
little girl raised her hand and said, "I think he said: 'Holy Shit! A
talking chicken!'" The teacher was unable to teach for the next 10
minutes.
WHY WE LOVE CHILDREN
A kindergarten pupil told his teacher he'd found a cat. She asked him
if it
was dead or alive. "Dead." She was informed. "How do you know?" she
asked
her pupil. "Because I pissed in its ear and it didn't move," answered
the
child innocently. "You did WHAT?!?" The teacher exclaimed in
surprise.
"You know," explained the boy, "I leaned over and went 'Psssst!' and it
didn't move."
_________________________________________________
A small boy is sent to bed by his father. Five minutes later.
"Daaa-ad...." "What? "I'm thirsty. Can you bring drink of water?"
"No.
You had your chance. Lights out." Five minutes later: "Da-aaaad....."
"WHAT?" "I'm THIRSTY. Can I have a drink of water??" "I told you NO!"
If
you ask again, I'll have to spank you!!" Five minutes later......
"Daaaa-aaaad....." "WHAT!" "When you come in to spank me, can you
bring a
drink of water?"
________________________________________________
An exasperated mother, whose son was always getting into mischief,
finally
asked him, "How do you expect to get into Heaven?" The boy thought it
over
and said, "Well, I'll run in and out and in and out and keep slamming
the
door until St. Peter says, 'For Heaven's sake, Dylan, come in or stay
out!"
_________________________________________________
One summer evening during a violent thunderstorm a mother was tucking
her
son into bed. She was about to turn off the light when he asked with a
tremor in his voice, "Mommy, will you sleep with me tonight?" The
mother
smiled and gave him a reassuring hug. "I can't dear," she said. "I
have to
sleep in Daddy's room." A long silence was broken at last by his shaky
little voice: "The big sissy."
_________________________________________________
It was that time, during the Sunday morning service, for the children's
sermon. All the children were invited to come forward. One little
girl was
wearing a particularly pretty dress and, as she sat down, the pastor
leaned
over and said, "That is a very pretty dress. Is it your Easter Dress?"
The
little girl replied, directly into the pastor's clip-on microphone,
"Yes and
my Mom say it's a bitch to iron."
_________________________________________________
When I was six months pregnant with my third child, my three year old
came
into the room when I was just getting ready to get into the shower.
She
said," Mommy, you are getting fat!" I replied, "Yes, honey, remember
Mommy
has a baby growing in her tummy" "I know," she replied, but what's
growing
in your butt?"
_________________________________________________
A little boy was doing his math homework. He said to himself, "Two
plus
five, that son of a bitch is seven. Three plus six, that son of a
bitch is
nine...." His mother heard what he was saying and gasped, "What are
you
doing?" The little boy answered, "I'm doing my math homework, Mom."
"And
this is how your teacher taught you to do it?" the mother asked.
"Yes," he
answered. Infuriated, the mother asked the teacher the next day, "What
are
you teaching my son in math?" The teacher replied, "Right now, we are
learning addition." The mother asked, "And are you teaching them to
say two
plus two, that son of a bitch is four?" After the teacher stopped
laughing,
she answered, "What I taught them was, two plus two, THE SUM OF WHICH,
is
four."
_________________________________________________
One day the first grade teacher was reading the story of Chicken Little
to
her class. She came to the part of the story where Chicken Little
tried to
warn the farmer. She read, ".... and so Chicken Little went up to the
farmer and said, "The sky is falling, the sky is falling!" The teacher
paused then asked the class, "And what do you think that farmer said?"
One
little girl raised her hand and said, "I think he said: 'Holy Shit! A
talking chicken!'" The teacher was unable to teach for the next 10
minutes.
Friday, August 09, 2002
8/9/02 Gov't Revised Numbers
On Aug.14 company officials will need to validate their reported numbers. That's a wonderful idea. If Paul O'Neil were still running Alcoa, he'd be doing just that; however, he is ONLY Sec. of the Treasury, and therefore, GDP numbers can continue to be revised. When initially released, the press makes a big deal about the GDP number. Then a month later a revised GDP number is provided. This is absolute crap. What's good for the goose is good for the gander. Find someone who can provide the real number in a timely manner, and clear the deck with the others. It's time the public demanded the best from gov't officials. It's a privilege to vote and a privilege to be an American citizen. Many have died so we can have these privileges.
On Aug.14 company officials will need to validate their reported numbers. That's a wonderful idea. If Paul O'Neil were still running Alcoa, he'd be doing just that; however, he is ONLY Sec. of the Treasury, and therefore, GDP numbers can continue to be revised. When initially released, the press makes a big deal about the GDP number. Then a month later a revised GDP number is provided. This is absolute crap. What's good for the goose is good for the gander. Find someone who can provide the real number in a timely manner, and clear the deck with the others. It's time the public demanded the best from gov't officials. It's a privilege to vote and a privilege to be an American citizen. Many have died so we can have these privileges.
Thursday, August 08, 2002
8/8/02 Posting #3
The Scoreboard
Since starting this blog, some have commented that I appear overly negative. Everyone is entitled to their opinion and that includes me. Often I have stated that I do not make recommendations on individual stocks. Rather I try to mention potential opportunities which each person might investigate.
Over the past few weeks I have mentioned the following stocks: Pfizer, Merck, Microsoft, GE, JP Morgan, and Citigroup. In order of mention they have risen from 26 to 33; from 39 1/2 to 50 1/2; 42 to 49; 26 to 32; 20 to 26; and 25 1/2 to 33 1/2. There have been opportunities in this market as there are in every market. Searching them out requires a good deal of work and study.
The market makes us humble and I shall look stupid and out of synch many times in the future. The idea, however, is not to be too proud, and therefore, admit mistakes and cut one's losses. Let the winners ride until proven otherwise. Give yourself a chance to hit a tape measure homerun. Maybe you won't hit 600 out of the park but you'll hit a few- that's more than most can probably say.
The Scoreboard
Since starting this blog, some have commented that I appear overly negative. Everyone is entitled to their opinion and that includes me. Often I have stated that I do not make recommendations on individual stocks. Rather I try to mention potential opportunities which each person might investigate.
Over the past few weeks I have mentioned the following stocks: Pfizer, Merck, Microsoft, GE, JP Morgan, and Citigroup. In order of mention they have risen from 26 to 33; from 39 1/2 to 50 1/2; 42 to 49; 26 to 32; 20 to 26; and 25 1/2 to 33 1/2. There have been opportunities in this market as there are in every market. Searching them out requires a good deal of work and study.
The market makes us humble and I shall look stupid and out of synch many times in the future. The idea, however, is not to be too proud, and therefore, admit mistakes and cut one's losses. Let the winners ride until proven otherwise. Give yourself a chance to hit a tape measure homerun. Maybe you won't hit 600 out of the park but you'll hit a few- that's more than most can probably say.
8/8/02 Posting #2
Deflation Is Not Tame Inflation
In July the PPI fell 0.2% and over the past 12 months 1.1%. This is the first year over year decline in the PPI since 1998.
One can expect profit margins to be continually squeezed at the producer level, and one result will be increased layoffs.
Someone reading this will state that the jobless numbers released today were quite positive. My answer is relative to what. The number of people out of work remains high, and in my view, will increase in the future.
The second result of the PPI falling will be the lowering of inventories being carried on the books. You are starting to see this at the retail level. If inventories are kept exceptionally lean, then economic activity will be reduced- especially at the manufacturing level. Retail same store sales were lower than expected for July and that was true even for WalMart and Target. I feel this weakness will carry forth into the near future. As I have pointed out previously, the common stocks for both companies topped out several months ago. In other words, the market was able to once again forecast accurately.
Deflation Is Not Tame Inflation
In July the PPI fell 0.2% and over the past 12 months 1.1%. This is the first year over year decline in the PPI since 1998.
One can expect profit margins to be continually squeezed at the producer level, and one result will be increased layoffs.
Someone reading this will state that the jobless numbers released today were quite positive. My answer is relative to what. The number of people out of work remains high, and in my view, will increase in the future.
The second result of the PPI falling will be the lowering of inventories being carried on the books. You are starting to see this at the retail level. If inventories are kept exceptionally lean, then economic activity will be reduced- especially at the manufacturing level. Retail same store sales were lower than expected for July and that was true even for WalMart and Target. I feel this weakness will carry forth into the near future. As I have pointed out previously, the common stocks for both companies topped out several months ago. In other words, the market was able to once again forecast accurately.
8/8/02 Gold
From 1981 gold was in a 20 year bear market, and then it reached $250 per ounce and just stopped going down in price. There wasn't any big news, and slowly it has risen to well over $300 an ounce. Given the size of the decline over the 20 years this rise is minimal at best. Recently, gold hit a 5 month low at $300 per ounce and bounced up from that level.
There are some good reasons for the rise in gold. Production of gold will be declining for the next several years. Secondly, some of the big producers, such as, Barrick have been hedging their production year in and year out and have now decided to go into the market and buy back some of those hedges. That appears to be a smart policy with gold in the early stages of a bull market.
In the end, supply and demand as well as psychology will determine the future price for gold. India is the largest purchaser of gold, and India's economy is very strong at the moment. That should provide a floor under the demand for gold.
From 1981 gold was in a 20 year bear market, and then it reached $250 per ounce and just stopped going down in price. There wasn't any big news, and slowly it has risen to well over $300 an ounce. Given the size of the decline over the 20 years this rise is minimal at best. Recently, gold hit a 5 month low at $300 per ounce and bounced up from that level.
There are some good reasons for the rise in gold. Production of gold will be declining for the next several years. Secondly, some of the big producers, such as, Barrick have been hedging their production year in and year out and have now decided to go into the market and buy back some of those hedges. That appears to be a smart policy with gold in the early stages of a bull market.
In the end, supply and demand as well as psychology will determine the future price for gold. India is the largest purchaser of gold, and India's economy is very strong at the moment. That should provide a floor under the demand for gold.
Wednesday, August 07, 2002
8/7/02 Posting #3
Nat'l Bureau of Economic Research
Reuter's reports The National Bureau of Economic Research said on Wednesday it was not yet ready to make a formal call that the U.S. recession has ended, saying it will first need to rule out the possibility of a ``hypothetical'' second leg to the economic downturn.
Nat'l Bureau of Economic Research
Reuter's reports The National Bureau of Economic Research said on Wednesday it was not yet ready to make a formal call that the U.S. recession has ended, saying it will first need to rule out the possibility of a ``hypothetical'' second leg to the economic downturn.
8/7/02 Posting #2
The West Nile Virus and Containing "The Enron"
The West Nile was first detected in the U.S. in 1999. No one knows for certain when Enron's wrongdoings were first uncovered. The West Nile has spread to 34 states, and hundreds have been impacted and close to two dozen have died. Many more have been touched by Enron; however, it is diffficult to attach a specific death to Enron. Heartache and financial ruin are much easier to delineate.
There is a vaccine for the West Nile but immunization to this point is only for horses and not for humans. Humans cannot contract the West Nile from horses. My suggestion is that we stay in close proximity to horse's asses, and that should alleviate some of our concerns. As for Enron, the jury is still out. It is doubtful that an inoculation program can assist those already "infected". The good news is there is an abundance of horses asses. Just stay upwind and away from the hot air.
The West Nile Virus and Containing "The Enron"
The West Nile was first detected in the U.S. in 1999. No one knows for certain when Enron's wrongdoings were first uncovered. The West Nile has spread to 34 states, and hundreds have been impacted and close to two dozen have died. Many more have been touched by Enron; however, it is diffficult to attach a specific death to Enron. Heartache and financial ruin are much easier to delineate.
There is a vaccine for the West Nile but immunization to this point is only for horses and not for humans. Humans cannot contract the West Nile from horses. My suggestion is that we stay in close proximity to horse's asses, and that should alleviate some of our concerns. As for Enron, the jury is still out. It is doubtful that an inoculation program can assist those already "infected". The good news is there is an abundance of horses asses. Just stay upwind and away from the hot air.
8/7/02 Cisco's Quarterly Reporting
Cisco went public in 1990, and the company and the stock for many years produced a tape measure home run- we're talking out of the park and into the next county. The last few years have proven to be difficult for Cisco, and another side is peeking through the infrastructure carnage.
Each quarter Cisco steers the analysts to earnings estimates which the company is able to beat. Last evening the stock rallied a point after the release. They beat expectations thru cost cutting. Nothing wrong with that except the revenue figures did not meet expectations. Management discussed extending the stock repurchase program. The stock has dropped over 85% from its highs. How about management buying stock for their own account, and not using the $21 billion in cash in the corporate till for the repurchase.
Management discussed making acquisitions when the economy turns around. Warren Buffett buys companies in bad times, and in reality, bad economies should bring bargains to the fore.
What's really hurting the bottomline at Cisco? The bear market is the culprit. The company can no longer sell naked puts on Cisco stock, have the puts go unexercised, and take the premium money on the puts into income. The heavy cream has disappeared. How many hundreds and hundreds of millions went into net income over the decade of the 90s? It's not just Cisco but also the majority of the large tech so-called growth companies. It sure beat new product introductions. Just pocket the premium money and go to the bank. It's 100% legal from an operating standpoint. From a disclosure point of view did the stockholders get an accurate reading? So now Cisco must resort to cost cutting instead of naked put selling. While it lasted, the latter was a joy ride.
Cisco went public in 1990, and the company and the stock for many years produced a tape measure home run- we're talking out of the park and into the next county. The last few years have proven to be difficult for Cisco, and another side is peeking through the infrastructure carnage.
Each quarter Cisco steers the analysts to earnings estimates which the company is able to beat. Last evening the stock rallied a point after the release. They beat expectations thru cost cutting. Nothing wrong with that except the revenue figures did not meet expectations. Management discussed extending the stock repurchase program. The stock has dropped over 85% from its highs. How about management buying stock for their own account, and not using the $21 billion in cash in the corporate till for the repurchase.
Management discussed making acquisitions when the economy turns around. Warren Buffett buys companies in bad times, and in reality, bad economies should bring bargains to the fore.
What's really hurting the bottomline at Cisco? The bear market is the culprit. The company can no longer sell naked puts on Cisco stock, have the puts go unexercised, and take the premium money on the puts into income. The heavy cream has disappeared. How many hundreds and hundreds of millions went into net income over the decade of the 90s? It's not just Cisco but also the majority of the large tech so-called growth companies. It sure beat new product introductions. Just pocket the premium money and go to the bank. It's 100% legal from an operating standpoint. From a disclosure point of view did the stockholders get an accurate reading? So now Cisco must resort to cost cutting instead of naked put selling. While it lasted, the latter was a joy ride.
Tuesday, August 06, 2002
8/6/02 Posting #2
The Fed Revisited
We have touched on this subject in prior postings; however, given today's rally, let's discuss it again. The reason given for the rally is the opinion that the Fed will lower interest rates. The market has already lowered interest rates. Short term treasury bills yield less than Fed Funds. The Fed may discuss policy and provide liquidity in the marketplace but the latter sets the yields in real time. Economists at Lehman, Deutsche Bank, and Dresdner Bank today predicted the Fed would lower rates between now and the end of the year. It's a little late for this prediction. Rates have been coming down sharply- especially recently - as stocks have declined to new lows.
I have previously indicated the need to watch the Fed Funds futures and the directions of their sentiment. This is a very good indicator. The sentiment has been strongly leaning towards lower interest rates.
The question one might pose is why the lowering of rates. The answer lies in the weak economy and the lack of demand, and it should provide a clue as to the direction of corporate profits. If profits continue to be weak, then stocks should mirror profits. Low interest rates do not ensure higher stock prices. Look at Japan for the past dozen years or so. In addition, low interest rates do not ensure higher corporate profits. Demand must improve before cash flow starts to perk up. At this point demand looks flat at best.
We don't get paid to be investing superpeople. Rationality will provide a better foundation for your portfolio to grow.
The Fed Revisited
We have touched on this subject in prior postings; however, given today's rally, let's discuss it again. The reason given for the rally is the opinion that the Fed will lower interest rates. The market has already lowered interest rates. Short term treasury bills yield less than Fed Funds. The Fed may discuss policy and provide liquidity in the marketplace but the latter sets the yields in real time. Economists at Lehman, Deutsche Bank, and Dresdner Bank today predicted the Fed would lower rates between now and the end of the year. It's a little late for this prediction. Rates have been coming down sharply- especially recently - as stocks have declined to new lows.
I have previously indicated the need to watch the Fed Funds futures and the directions of their sentiment. This is a very good indicator. The sentiment has been strongly leaning towards lower interest rates.
The question one might pose is why the lowering of rates. The answer lies in the weak economy and the lack of demand, and it should provide a clue as to the direction of corporate profits. If profits continue to be weak, then stocks should mirror profits. Low interest rates do not ensure higher stock prices. Look at Japan for the past dozen years or so. In addition, low interest rates do not ensure higher corporate profits. Demand must improve before cash flow starts to perk up. At this point demand looks flat at best.
We don't get paid to be investing superpeople. Rationality will provide a better foundation for your portfolio to grow.
8/6/02 The Prices For A Safe Haven
With the backdrop of the Fed Funds rate at 1.75% the Treasury's auction began yesterday when $16 billion in three month treasury bills sold at a discount rate of 1.6% and a similar amount of six month treasury bills sold at roughly the same yield. Today $22 billion in four week bills will be sold as well as $22 billion in 5 year notes at an approximate yield of 3.1%.
It is significant to mention that 2 year treasuries now yield 1.9%, and this is a clear indication that bond investors believe the Fed may lower interest rates in the near future.
On Wednesday the Treasury will sell $18 billion in 10 year notes at an approximate yield of 4.2%.
Poor economic data may undermine the stock market but it sure provides a bull market for treasuries. The two year notes were first issued in 1972, and this is their lowest yield in 40 years. Considering the size of the U.S. deficit, one could argue the yields represent irrational exuberance for a safe haven.
With the backdrop of the Fed Funds rate at 1.75% the Treasury's auction began yesterday when $16 billion in three month treasury bills sold at a discount rate of 1.6% and a similar amount of six month treasury bills sold at roughly the same yield. Today $22 billion in four week bills will be sold as well as $22 billion in 5 year notes at an approximate yield of 3.1%.
It is significant to mention that 2 year treasuries now yield 1.9%, and this is a clear indication that bond investors believe the Fed may lower interest rates in the near future.
On Wednesday the Treasury will sell $18 billion in 10 year notes at an approximate yield of 4.2%.
Poor economic data may undermine the stock market but it sure provides a bull market for treasuries. The two year notes were first issued in 1972, and this is their lowest yield in 40 years. Considering the size of the U.S. deficit, one could argue the yields represent irrational exuberance for a safe haven.
Monday, August 05, 2002
8/5/02 Posting #3
Down Volume
With about 30 minutes left in the trading day it is clear that at least 1 billion shares will trade on both the New York Stock Exchange and the Nasdaq on down volume. The down/up volume ratio has expanded to between 6 and 7 to one on the downside.
We are seeing more comments about a double dip in profits and a double dip economy. Had you blinked it's possible you might have missed the upticks in profits and/or the economy.
Down Volume
With about 30 minutes left in the trading day it is clear that at least 1 billion shares will trade on both the New York Stock Exchange and the Nasdaq on down volume. The down/up volume ratio has expanded to between 6 and 7 to one on the downside.
We are seeing more comments about a double dip in profits and a double dip economy. Had you blinked it's possible you might have missed the upticks in profits and/or the economy.
8/5/02 Posting #2
Advance/Decline Volume
With 3 1/2 hours left in today's trading session there are twice as many stocks moving down as up; however, a closer look reveals that 5 times as much down volume has taken place as up volume. That ratio is obviously negative, and once again indicates the lack of buyers.
There are many pundits who continue to state that it is too late to sell. Clearly many investors don't agree.
Advance/Decline Volume
With 3 1/2 hours left in today's trading session there are twice as many stocks moving down as up; however, a closer look reveals that 5 times as much down volume has taken place as up volume. That ratio is obviously negative, and once again indicates the lack of buyers.
There are many pundits who continue to state that it is too late to sell. Clearly many investors don't agree.
8/05/02 The Fed
As always, the following represents my view, and in this case, many may disagree. Next Tuesday the Fed has their meeting relating to the economy and interest rates. Most believe that the Fed moves the markets. Rather, I feel the markets anticipate events and the Fed therefore is a follower. As such, I prefer to watch fed funds contracts and see what thew market in real time is telling us. I believe you have an advantage in doing so and I urge everyone to become familiar with these contracts.
As always, the following represents my view, and in this case, many may disagree. Next Tuesday the Fed has their meeting relating to the economy and interest rates. Most believe that the Fed moves the markets. Rather, I feel the markets anticipate events and the Fed therefore is a follower. As such, I prefer to watch fed funds contracts and see what thew market in real time is telling us. I believe you have an advantage in doing so and I urge everyone to become familiar with these contracts.
Sunday, August 04, 2002
8/04/02 The Market Decline
CNN recently took a poll concerning the 2 year market decline, and 46% responding said that this bear market would impact their ability to retire and the same 46% stated they would need to stay longer in their jobs prior to retiring. The poll did not inquire as to whether the 2 year decline had impacted their views on investing.
I would hope that this decline has made a change in people's investing behavior. Many Americans had never been thru a bear market. They hadn't invested in 1974 or 1981-82. I think this period has taught the vast majority of the investing public that they really didn't know the companies in which they had invested. A successful approach is to study a company prior to investing with the same view as if you were purchasing the whole company. This exercise will sharply reduce your errors in investing judgment and provide for more successful results.
Few people have the ability to look out 10 years and forecast cash flow over that period of time; however, it is wise to try to look down the "field" with a 2 to 3 year time horizon. That is doable with hard analysis, and to make money consistently in the stock market requires that discipline.
CNN recently took a poll concerning the 2 year market decline, and 46% responding said that this bear market would impact their ability to retire and the same 46% stated they would need to stay longer in their jobs prior to retiring. The poll did not inquire as to whether the 2 year decline had impacted their views on investing.
I would hope that this decline has made a change in people's investing behavior. Many Americans had never been thru a bear market. They hadn't invested in 1974 or 1981-82. I think this period has taught the vast majority of the investing public that they really didn't know the companies in which they had invested. A successful approach is to study a company prior to investing with the same view as if you were purchasing the whole company. This exercise will sharply reduce your errors in investing judgment and provide for more successful results.
Few people have the ability to look out 10 years and forecast cash flow over that period of time; however, it is wise to try to look down the "field" with a 2 to 3 year time horizon. That is doable with hard analysis, and to make money consistently in the stock market requires that discipline.
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