5/10/03 The Snow Man, WER Part II, And Deflation
The Snow man (John Snow) said our economic recovery "is insufficient to create jobs for the people who need them." Since when is a jobless recovery a recovery? I can state without hesitation that, if a good percentage of the aforementioned people do not get a job because of the "wobbly" economy, then the Snow man will find himself out of a job come November, 2004. The Snow man went on to proclaim that "I don't think the U.S. has any risk of being in a significant deflationary period." Some consider him an expert on deflation. In mid-1997, CSX, the company the Snow man headed, traded around 63, and for the first three quarters of 2000, the stock sold at 20. Even today the stock is down 50% from mid-1997. The Snow man was CEO during this period, and during a six year span, CSX's 1995 profits of $1.1 billion on sales of $10.3 billion plunged to 2001's profits of $293 million on sales of $8.1 billion. He knows deflation! He helped write the book for the CSX shareowners.
With the money supply growing at an annual rate of 7.2% over the past 12 months, it is not surprising to see increased interest in gold and gold mining stocks. As more dollars get printed, the dollar begins to depreciate and people turn to the "hard currency" of gold. There is an additional point about the increased growth in the money supply. It must be puzzling to the Fed that prices are not rising and that GDP exhibits a lack of growth ex productivity. In fact, the Fed has experienced deflation worries during the same week the money supply grew at its fastest rate in about two decades. The stock market should give this some consideration. I can assure you of one thing. There will be a cap on export growth. Despite the dollar depreciating vs the euro, Swiss franc, the yen, the Canadian dollar, and other currencies the economies in the latter countries are weak and the demand side of the equation for foreign goods is limited. Earnings for our international companies can be assisted by the weak dollar, but not by a meaningful amount. Those extra earnings are negligible compared with the weakened state of our domestic economy. Look at WalMart. It's main growth at present is the international market; however, the bulk of their locations is still in the U.S.
Lara Rhame, U.S. economist at Brown Brothers Harriman: "Ever since the Bush Administration came into office, they've been giving their tacit acceptance of a weaker dollar."
Citigroup economist Joe Lo expects prices in Hong Kong to fall 2% this year. Deutsche Bank believes, if SARS lasts 9 months, it could result in prices falling 0.4% in China. The Asian Development Bank suggests Asian economies could suffer $28.4 billion in economic damage if SARS were to be present into the third quarter of this year. With only 7 weeks until the third quarter, it is highly unlikely SARS will be leaving China within that time period.
The Blue Chip Economic indicators newsletter said "the paring of consensus estimates of GDP growth over the remainder of this year reflects diminished expectations of growth in personal consumption expenditures, business inventories, capital spending, and industrial production." This was the fourth consecutive month their forecast has been cut.
I am having a difficult time undrstanding President Bush stating the Iraq War is over. If that were true, then how is it that two soldiers were shot and killed a few days ago and that yesterday three more soldiers were killed and one injured when an Army helicopter crashed? Rumsfeld says our troops will remain until Iraq is stabilized? Has Iraq ever been stabilized?
In spite of the fact that municipalities all over the U.S. are running large deficits, yields on municipal bonds declined to their lowest level since 1968.
In an SEC filing Halliburton's Kellogg Brown and Root subsidiary admitted committing a mult-million bribe. This is the same subsidiary which was awarded the no-bid U.S. government oil contract in Iraq in March. The illicit payments were made in 2001 and 2002. No mention was made of when the payments were authorized. Halliburton said none of its senior officers was involved in the bribe. VP Cheney was Halliburton's CEO from 1995 until August 2000. Interstingly, the company said its code of business conduct and internal control procedures were "essential" to the way it ran its business. Clearly, lack of disclosure is part of the way Halliburton runs its business. Not too long ago the U.S. Army Corps of Engineers said Halliburton had been given a contract covering oil well fighting in Iraq. A week ago we learned the contract also included "operation of facilities and distribution of products." There's an odor emanating from Halliburton and its not just from burning oil wells.
In the 12 months ending this June, Microsoft boosted planned research spending 21% to $5.2 billion and the CEO says that figure will go "maybe up 10%, 12%, something like that" in the next fiscal year beginning July 1.
Germany's industrial production, which accounts for 25% of their $2 trillion GDP, fell 1.1% in March from the levels recorded in the prior month. That decline was twice what economists had anticipated. Germany's April business confidence fell to a 16 month low.
Credit Suisse First Boston said yesterday the spread of SARS would cap Asia's economic growth at 5.7% this year, down from the forecast of 6.6% prior to the SARS outbreak.
Lack of demand is hitting the pizza business. A chain has a 2 for 1 offer on any large pizza.
2002 and 2003 have been marked by business cost cutting. Yet, two very successful privately-owned companies, SAS of North Carolina and Tom's of Maine, have not changed their ways. Both are recognized as wonderful places to work. Each offers family-friendly work and assistance programs, such as, flexible work schedules, teleconferencing, generous medical and dental benefits, four weeks parenting leave, long-term care insurance, child care benefits, and assistance for child/elder care, and other work/family issues. Very often caring companies are our most successful companies.
Friday, May 09, 2003
5/9/03 Wobbly Economic Recovery (WER)
The Snow man (John Snow) said "I think the economy is in recovery...but it's something of a wobbly recovery." You cannot blame him for being a cheerleader. He's our Secretary of the Treasury. By the way, I don't understand that description. How can someone head a department which cannot exist? A Treasury I thought should have assets and not just indebtedness. Now back to the WER. If the average number of weekly first-time claims for state unemployment over the past four weeks hitting a new one year high is wobbly, then Snow is correct. If more than 3.6 million Americans collecting state benefits over the past four weeks is wobbly, then Snow is correct. If disappointing April retail sales would reflect wobbly, then Snow is correct. Looking forward, WalMart sees their May same-store sales up only 1-3%. That is the lowest forecast in almost three years. That is really wobbly. I think the dollar may be a bit more than wobbly. It's hardly standing against the euro at 1.15, a four year low for the dollar and wobbly against the yen at a 10 month low. In sum, it has now been 12 consecutive weeks that there have been more than 400,000 weekly first-time claims for state unemployment, and it's the first time this has occurred since 1992. In the past three months 525,000 workers have lost their jobs. Last week GM closed two factories and temporarily idled 4000 workers while Ford shut one plant and put 1820 employees out of work for the week. I trust Snow will find a more suitable description for our economy than wobbly. I suggest deflated.
The Washington Post reports that GOP Senators have endorsed 30 tax increases in order to save Bush's tax plan. How is it possible for such people to get elected in the first place? The electorate needs to come off Prozac or its generic brand.
President Bush: "Fiscal discipline was high on my agenda, and therefore, anybody that works for me will place a premium on fiscal discipline." The CBO in April estimated that this year's deficit will reach $408 billion. In the first six months of this year deficits were running about double the amount of the prior year. I think the Administration's definition of fiscal restraint is holding down budget deficits to 100% increases. Gold bugs love Bush. Deficits increase, the dollar gets crushed, and gold rises to $348 per ounce. It's hog heaven. Keep the pork pograms rolling!
John F. Kennedy: "The Federal budget can and should be made an instrument of prosperity and stability, not a deterrent to recovery."
FDR:"True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made."
I must apologize to the Fed. I said they only now, this week, saw the risk of deflation. The minutes of the March 18 Federal Open Market Committee meeting stated "members saw further disinflation in core prices as a distinct possibilty over the next several quarters." We waited seven weeks to read that proclamation.
California counties would lose $2.7 billion in state and federal health care dollars if Davis' proposed Medi-Cal reductions become law. Davis truly is a wobbly Governor.
In order to buy a medium-priced home in California the family income needs to be $82,470 a year. Only 28% of California households fit that description. There are a growing number of homes on the market. Prices will come down. It's supply and demand. Just like the price of gasoline at the pump. In California it was $2.10 and two months later $1.77.
Rafael Palmiero is just one homer shy of the 500 mark.
Between March and April German wholesale prices dropped 1.1%. That's wobbly too.
Manufacturing accounts for 20% of U.K.'s GDP. Their March factory production fell at the fastest pace in five months. That's wobbly too.
Goldman Sachs says their mid-April IT survey declined to -3% and "perhaps the most troubling, those expecting spending acceleration in the second half of the year virtually evaporated, pushing their expectations into 2004 or after 2004." Wait till the Nasdaq catches up with this survey. Then we'll see wobbly.
Against the pound, the euro hit a record level of 71.87 pence. The U.S. dollar is not reeling by its little lonesome. Misery loves company.
The WHO raised the SARS mortality rate to 14-15%. An additional concern are the millions of migrant workers who have left Beijing and Guangzhou and are feared to be spreading SARS to outlining provinces in China like Henan.
Investors think they might have several recipes for success. In actuality, I have found that, over time, most investors cannot match the various indexes, and that includes professionals who receive a management and/or advisory fee. There are some successful day traders, some successful chartists, and so forth. In my view, quality management, quality of earnings and cash flow, consistent growth, buying during major market dips, and patience offer the best combination for on-going success. If you look at the great companies, WalMart, Microsoft, Colgate, Starbucks, Dell, Berkshire Hathaway, etc., they are not, in my opinion, at favorable buying points. They are valued too high in relation to their present and near-term rate of growth. Wait for their prices to come into favorable view. The same can be said for the overall market.
The Snow man (John Snow) said "I think the economy is in recovery...but it's something of a wobbly recovery." You cannot blame him for being a cheerleader. He's our Secretary of the Treasury. By the way, I don't understand that description. How can someone head a department which cannot exist? A Treasury I thought should have assets and not just indebtedness. Now back to the WER. If the average number of weekly first-time claims for state unemployment over the past four weeks hitting a new one year high is wobbly, then Snow is correct. If more than 3.6 million Americans collecting state benefits over the past four weeks is wobbly, then Snow is correct. If disappointing April retail sales would reflect wobbly, then Snow is correct. Looking forward, WalMart sees their May same-store sales up only 1-3%. That is the lowest forecast in almost three years. That is really wobbly. I think the dollar may be a bit more than wobbly. It's hardly standing against the euro at 1.15, a four year low for the dollar and wobbly against the yen at a 10 month low. In sum, it has now been 12 consecutive weeks that there have been more than 400,000 weekly first-time claims for state unemployment, and it's the first time this has occurred since 1992. In the past three months 525,000 workers have lost their jobs. Last week GM closed two factories and temporarily idled 4000 workers while Ford shut one plant and put 1820 employees out of work for the week. I trust Snow will find a more suitable description for our economy than wobbly. I suggest deflated.
The Washington Post reports that GOP Senators have endorsed 30 tax increases in order to save Bush's tax plan. How is it possible for such people to get elected in the first place? The electorate needs to come off Prozac or its generic brand.
President Bush: "Fiscal discipline was high on my agenda, and therefore, anybody that works for me will place a premium on fiscal discipline." The CBO in April estimated that this year's deficit will reach $408 billion. In the first six months of this year deficits were running about double the amount of the prior year. I think the Administration's definition of fiscal restraint is holding down budget deficits to 100% increases. Gold bugs love Bush. Deficits increase, the dollar gets crushed, and gold rises to $348 per ounce. It's hog heaven. Keep the pork pograms rolling!
John F. Kennedy: "The Federal budget can and should be made an instrument of prosperity and stability, not a deterrent to recovery."
FDR:"True individual freedom cannot exist without economic security and independence. People who are hungry and out of a job are the stuff of which dictatorships are made."
I must apologize to the Fed. I said they only now, this week, saw the risk of deflation. The minutes of the March 18 Federal Open Market Committee meeting stated "members saw further disinflation in core prices as a distinct possibilty over the next several quarters." We waited seven weeks to read that proclamation.
California counties would lose $2.7 billion in state and federal health care dollars if Davis' proposed Medi-Cal reductions become law. Davis truly is a wobbly Governor.
In order to buy a medium-priced home in California the family income needs to be $82,470 a year. Only 28% of California households fit that description. There are a growing number of homes on the market. Prices will come down. It's supply and demand. Just like the price of gasoline at the pump. In California it was $2.10 and two months later $1.77.
Rafael Palmiero is just one homer shy of the 500 mark.
Between March and April German wholesale prices dropped 1.1%. That's wobbly too.
Manufacturing accounts for 20% of U.K.'s GDP. Their March factory production fell at the fastest pace in five months. That's wobbly too.
Goldman Sachs says their mid-April IT survey declined to -3% and "perhaps the most troubling, those expecting spending acceleration in the second half of the year virtually evaporated, pushing their expectations into 2004 or after 2004." Wait till the Nasdaq catches up with this survey. Then we'll see wobbly.
Against the pound, the euro hit a record level of 71.87 pence. The U.S. dollar is not reeling by its little lonesome. Misery loves company.
The WHO raised the SARS mortality rate to 14-15%. An additional concern are the millions of migrant workers who have left Beijing and Guangzhou and are feared to be spreading SARS to outlining provinces in China like Henan.
Investors think they might have several recipes for success. In actuality, I have found that, over time, most investors cannot match the various indexes, and that includes professionals who receive a management and/or advisory fee. There are some successful day traders, some successful chartists, and so forth. In my view, quality management, quality of earnings and cash flow, consistent growth, buying during major market dips, and patience offer the best combination for on-going success. If you look at the great companies, WalMart, Microsoft, Colgate, Starbucks, Dell, Berkshire Hathaway, etc., they are not, in my opinion, at favorable buying points. They are valued too high in relation to their present and near-term rate of growth. Wait for their prices to come into favorable view. The same can be said for the overall market.
Thursday, May 08, 2003
5/8/03 Suicide And The Fed Printing Press
I have been thinking about these subjects for quite some time. They are serious matters. At the same time, I hope you will forgive my one opening remark which may border on humorous or not depending on what side of the market you reside. Towards the end of the third week of October last year I wrote how I believed the market decline, at least for the near term, had been overdone. I suggested exploring the risk/rewards in several situations- QQQ, C, JPM, MRK, MSFT, PFE, and a few others. Over the past month many pundits have turned bullish. Let me just say, for example, that QQQ is up about 50% from the aforementioned late October. I think a reason for this recent bullishness can be found in an astronomical event. Yesterday Mercury passed between Earth and the sun. This five hour transit occurs only a dozen times in a century. As far as Earth is concerned, this ride has been completed.
According to a Harris poll, 7% of U.S. adults say they have attempted to commit suicide and 21% of adults say they have thought seriously about committing suicide. Twenty five per cent of the population believes that "suicide is an acceptible solution in certain circumstances." It should be noted that this recent poll did not canvas children. Having, thank goodness, never considered suicide, I find these statistics of nightmare proportions. We are talking about 60 million Americans who have seriously thought about committing suicide. I am not a psychologist or a psychiatrist, and am not certain what I would suggest were I one. I would like to think that more can be done in addition to prescibed medications. Suicide is a serious problem facing this nation.
Another serious problem facing this nation is the Fed. The problem does have something to do with potential suicide. But first, I must relate what Woodrow Wilson had to say. In 1913 he signed the Federal Reserve Act. Some years later he wrote that "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." Woodrow Wilson was not a Jew.(I am, as everyone knows, a Jew. I can make the following joke. We know this.) As such, he didn't feel guilty. Instead, he felt emotionally contorted by the decision he had made to sign the Federal Reserve Act. I understand and feel his pain. We have supposedly dominant men in an economic haze. Fortunately, we have the market to provide a buffer and keep us, hopefully, ahead of the curve. Coming to the realization that we face deflation in May, 2003 is a bit like turning bullish in April of this year. It's too late to come to those decisions. In the first instance the deflation spiral started at least 24 months ago and cannot be stopped unless China falls off the globe. In the second instance, uncommon and favorable risk/rewards are rarely found in today's market. Let me continue, please, while you all stop screaming. I am not being a know-it-all. Nothing would please me more for all parties to have their day in the sun. Mercury, however, left our space. It left us with a Fed no longer focusing on inflation but rather deflation. Therefore, they will turn to reflating the system and turning on the printing presses in addition to buying government bonds. If they do that, the dollar will commit suicide. Our dollars will be wallpaper. No wonder Woodrow Wilson felt as he did.
I love seeing capitalism at work. Jim Hensen's children repurchased the Muppets for $89 million. That's one-eigth the price the Muppets was sold for just three years ago. The Muppets could have been a dotcom stock.
When the U.S. was high and mighty (I know Rumsfeld and company think we still are), the EU never would have given an ultimatum to us. Now that our country is in a decline we have been given an autumn deadline to change disputed tax break laws which will end our trade differences. If nothing is done by autumn, then sanctions would be imposed on 1/1/04. These guys are right. International trade is not an even playing field. It never has been and never will be. The EU says their patience is not infinite. It sounds like the Administration with the Iraqi government. I wonder how our Administration will take to the ultimatum.
The global death toll from SARS passed 500 today after Shanghai reported its first death from the virus. The WHO extended their SARS travel warning to Inner Mongolia and Tianjin. I need to change my summer vacation plans to Outer Mongolia.
Costco's total comparable-store sales in April rose 6%. They continue to do just great.
Jean Rhys, "Good Morning, Midnight" :"Next week, or next month, or next year I will kill myself. But I might as well last out my month's rent, which has been paid up."
I wonder whether our government will award Halliburton a contract to fight the cholera breakout in the Iraqi city of Basra. The company must be familiar with contamination and poor sanitation.
I have been thinking about these subjects for quite some time. They are serious matters. At the same time, I hope you will forgive my one opening remark which may border on humorous or not depending on what side of the market you reside. Towards the end of the third week of October last year I wrote how I believed the market decline, at least for the near term, had been overdone. I suggested exploring the risk/rewards in several situations- QQQ, C, JPM, MRK, MSFT, PFE, and a few others. Over the past month many pundits have turned bullish. Let me just say, for example, that QQQ is up about 50% from the aforementioned late October. I think a reason for this recent bullishness can be found in an astronomical event. Yesterday Mercury passed between Earth and the sun. This five hour transit occurs only a dozen times in a century. As far as Earth is concerned, this ride has been completed.
According to a Harris poll, 7% of U.S. adults say they have attempted to commit suicide and 21% of adults say they have thought seriously about committing suicide. Twenty five per cent of the population believes that "suicide is an acceptible solution in certain circumstances." It should be noted that this recent poll did not canvas children. Having, thank goodness, never considered suicide, I find these statistics of nightmare proportions. We are talking about 60 million Americans who have seriously thought about committing suicide. I am not a psychologist or a psychiatrist, and am not certain what I would suggest were I one. I would like to think that more can be done in addition to prescibed medications. Suicide is a serious problem facing this nation.
Another serious problem facing this nation is the Fed. The problem does have something to do with potential suicide. But first, I must relate what Woodrow Wilson had to say. In 1913 he signed the Federal Reserve Act. Some years later he wrote that "I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men." Woodrow Wilson was not a Jew.(I am, as everyone knows, a Jew. I can make the following joke. We know this.) As such, he didn't feel guilty. Instead, he felt emotionally contorted by the decision he had made to sign the Federal Reserve Act. I understand and feel his pain. We have supposedly dominant men in an economic haze. Fortunately, we have the market to provide a buffer and keep us, hopefully, ahead of the curve. Coming to the realization that we face deflation in May, 2003 is a bit like turning bullish in April of this year. It's too late to come to those decisions. In the first instance the deflation spiral started at least 24 months ago and cannot be stopped unless China falls off the globe. In the second instance, uncommon and favorable risk/rewards are rarely found in today's market. Let me continue, please, while you all stop screaming. I am not being a know-it-all. Nothing would please me more for all parties to have their day in the sun. Mercury, however, left our space. It left us with a Fed no longer focusing on inflation but rather deflation. Therefore, they will turn to reflating the system and turning on the printing presses in addition to buying government bonds. If they do that, the dollar will commit suicide. Our dollars will be wallpaper. No wonder Woodrow Wilson felt as he did.
I love seeing capitalism at work. Jim Hensen's children repurchased the Muppets for $89 million. That's one-eigth the price the Muppets was sold for just three years ago. The Muppets could have been a dotcom stock.
When the U.S. was high and mighty (I know Rumsfeld and company think we still are), the EU never would have given an ultimatum to us. Now that our country is in a decline we have been given an autumn deadline to change disputed tax break laws which will end our trade differences. If nothing is done by autumn, then sanctions would be imposed on 1/1/04. These guys are right. International trade is not an even playing field. It never has been and never will be. The EU says their patience is not infinite. It sounds like the Administration with the Iraqi government. I wonder how our Administration will take to the ultimatum.
The global death toll from SARS passed 500 today after Shanghai reported its first death from the virus. The WHO extended their SARS travel warning to Inner Mongolia and Tianjin. I need to change my summer vacation plans to Outer Mongolia.
Costco's total comparable-store sales in April rose 6%. They continue to do just great.
Jean Rhys, "Good Morning, Midnight" :"Next week, or next month, or next year I will kill myself. But I might as well last out my month's rent, which has been paid up."
I wonder whether our government will award Halliburton a contract to fight the cholera breakout in the Iraqi city of Basra. The company must be familiar with contamination and poor sanitation.
Wednesday, May 07, 2003
5/7/03 A Roadmap Diffusing Confusion
Yesterday I received an email from a professional investor who said he didn't share my bearishness. This individual is a new reader of this blog, and therefore, is unfamiliar with my style of investing. I attempt to stay with the trend but still look for what I believe are uncommon values with limited risk. I have stated time and time again that selling at the high and buying at the low are a matter of luck. Buying right and selling right are a matter of skill and discipline. Once again, I mention that I have been negative on the overall market for three years; however, about one week after 9/11 I mentioned that the short-term risks in the market were limited, and gave several reasons for that analysis. I suggested several stocks for the readers to analyze. I do not make specific recommendations for others. I suggest various alternatives. I went so far as to mention, over the past year and a half, even eBay, Amazon, Yahoo, Juniper, Cisco, Microsoft, and Sun Micro. Only the latter sells close to the price mentioned in the blog at that time. It should be noted that I feel more comfortable with suggesting looking at Merck under 40 because I understand their business a good deal better and, as such, can sit as an investor a lot longer. The point is one can be negative on the Dow and still like McDonald's under 13 or be negative on airline stocks and still like Southwest Airlines in the low double digits. I may think Lowe's is a great company but too rich, and that Home Depot is not as well run but still find value in the latter in the low 20s. I am never just bearish or just bullish. My mind arbitrages moving valuations and relationships. When the euro was originally released, I was negative at 1.18 and then it got crushed to the middle 80s. It was time to change. Nevertheless, there are basic trends. We have oversupply almost everywhere we look; we overspend almost everywhere the eye can see; we are overburdened by debts in almost all walks of life and in all halls of federal, state, and local governments; too many Americans go without healthcare and jobs; corporate cost-cutting does not necessarily lead to top-line growth; and not surprisingly, in this environment, there is much depression and much economic anxiety. The country is in a decline with decreasing cash flow and deflation imported from global competition.
I have said over and over again that the Fed could not deal with the aforementioned problems. The market will, and it shall take time and there will be much heartache in the interim. Our Washington leaders do not have a clue either. It's not just the Federal Reserve. Rep. Thomas said " a $550 billion tax cut will create 750,000 jobs. Secretary Snow said "it costs $80,000 to create one job." The Administration in recent days said the aforementioned tax cut would create 1.4 million jobs. Numbers are just that. These folks don't know. They do know they don't want to cut spending. Lastly, just to make the point, Mitch Daniels, the OMB chief, said he was retiring in 30 days. He took the job originally because of Bush's priorities:"fiscal restraint, a balanced budget, and paying down the debt."
Swiss Re Chief Eeconomist: "Inflation is not a problem and unemployment is rising-classic signals for a Fed cut..The likelihood of a double-dip recession, though down slightly is still high-about 25%. Europe is currently economically weaker than the U.S. and the appreciation of the euro is not helping its fragile recovery.Hence the ECB is likely to lower interest rates again."
Cisco's sales were down 4% from a year ago and operating cash flow declined 20%. It's tough to put a positive spin on that combo.
The tax package released by Senate Finance Committee Chairman Charles Grassley contains no federal Medicaid assistance to help states prevent health care cuts. It should be noted that only a few months ago by a vote of 80-19 a "Sense of the Senate" resolution was passed to provide $15 billlion for Medicaid to assist the states in avoiding cuts to health care.
In 2002 foreign investors made direct investments of $52 billion into China and this was followed by $13 billion in the first quarter. Manufacturing comprises 54% of China's GDP, services 28%, agriculture 14%, and construction 4%. JP Morgan says China's electronic-goods sales could fall up to 10% this quarter. Acer, Taiwan's biggest computer vendor, is delaying production of notebook computers in China because of the SARS virus. Access to raw materials and cheap labor continue to be China's main attraction.
SARS death toll: China 214, Hong Kong 193, and Singapore 27. In Beijing 17,000 are quarantined. UN health chief Brundtland said "we have not seen a peak in China yet."
Foreclosures jumped 8.2% in the Silicon Valley in the first quarter of 2003 compared with one year ago.
I have often stated that I think Barry Diller has a nose for making money. On Monday his company announced an agreement to purchase Lending Tree, a company I suggested to readers of this blog two weeks ago. At that time I mentioned you can buy good growth in an internet company without paying an outlandish price like you do with eBay at present levels. Obviously, Barry Diller shares that viewpoint. Fortunately, Lending Tree was then at $14.
Over the past month the networking index is up about 30%. That's more than I can say for their order flow.
15% of our GDP is comprised of imports. With the dollar falling prices will go up. Fortunately, the opposite is true with our exports. The trouble is we import more than we export. As such, our account deficit is a mere $400+ billion.
The Small Business Survival Committee said "from 1992-2000 per capita total U.S. state spending increased by 40% while inflation registered just 16.4%" That spending has now produced huge deficits and we have begun to see the impact with rising state layoffs in April. I expect that trend to continue for some time and to be accompanied by similar layoffs at the local government levels. I have mentioned several times about the job cuts in education.
A new survey by TrueCareers shows that 61% say their financial situation has worsened in 2003.
Yesterday I received an email from a professional investor who said he didn't share my bearishness. This individual is a new reader of this blog, and therefore, is unfamiliar with my style of investing. I attempt to stay with the trend but still look for what I believe are uncommon values with limited risk. I have stated time and time again that selling at the high and buying at the low are a matter of luck. Buying right and selling right are a matter of skill and discipline. Once again, I mention that I have been negative on the overall market for three years; however, about one week after 9/11 I mentioned that the short-term risks in the market were limited, and gave several reasons for that analysis. I suggested several stocks for the readers to analyze. I do not make specific recommendations for others. I suggest various alternatives. I went so far as to mention, over the past year and a half, even eBay, Amazon, Yahoo, Juniper, Cisco, Microsoft, and Sun Micro. Only the latter sells close to the price mentioned in the blog at that time. It should be noted that I feel more comfortable with suggesting looking at Merck under 40 because I understand their business a good deal better and, as such, can sit as an investor a lot longer. The point is one can be negative on the Dow and still like McDonald's under 13 or be negative on airline stocks and still like Southwest Airlines in the low double digits. I may think Lowe's is a great company but too rich, and that Home Depot is not as well run but still find value in the latter in the low 20s. I am never just bearish or just bullish. My mind arbitrages moving valuations and relationships. When the euro was originally released, I was negative at 1.18 and then it got crushed to the middle 80s. It was time to change. Nevertheless, there are basic trends. We have oversupply almost everywhere we look; we overspend almost everywhere the eye can see; we are overburdened by debts in almost all walks of life and in all halls of federal, state, and local governments; too many Americans go without healthcare and jobs; corporate cost-cutting does not necessarily lead to top-line growth; and not surprisingly, in this environment, there is much depression and much economic anxiety. The country is in a decline with decreasing cash flow and deflation imported from global competition.
I have said over and over again that the Fed could not deal with the aforementioned problems. The market will, and it shall take time and there will be much heartache in the interim. Our Washington leaders do not have a clue either. It's not just the Federal Reserve. Rep. Thomas said " a $550 billion tax cut will create 750,000 jobs. Secretary Snow said "it costs $80,000 to create one job." The Administration in recent days said the aforementioned tax cut would create 1.4 million jobs. Numbers are just that. These folks don't know. They do know they don't want to cut spending. Lastly, just to make the point, Mitch Daniels, the OMB chief, said he was retiring in 30 days. He took the job originally because of Bush's priorities:"fiscal restraint, a balanced budget, and paying down the debt."
Swiss Re Chief Eeconomist: "Inflation is not a problem and unemployment is rising-classic signals for a Fed cut..The likelihood of a double-dip recession, though down slightly is still high-about 25%. Europe is currently economically weaker than the U.S. and the appreciation of the euro is not helping its fragile recovery.Hence the ECB is likely to lower interest rates again."
Cisco's sales were down 4% from a year ago and operating cash flow declined 20%. It's tough to put a positive spin on that combo.
The tax package released by Senate Finance Committee Chairman Charles Grassley contains no federal Medicaid assistance to help states prevent health care cuts. It should be noted that only a few months ago by a vote of 80-19 a "Sense of the Senate" resolution was passed to provide $15 billlion for Medicaid to assist the states in avoiding cuts to health care.
In 2002 foreign investors made direct investments of $52 billion into China and this was followed by $13 billion in the first quarter. Manufacturing comprises 54% of China's GDP, services 28%, agriculture 14%, and construction 4%. JP Morgan says China's electronic-goods sales could fall up to 10% this quarter. Acer, Taiwan's biggest computer vendor, is delaying production of notebook computers in China because of the SARS virus. Access to raw materials and cheap labor continue to be China's main attraction.
SARS death toll: China 214, Hong Kong 193, and Singapore 27. In Beijing 17,000 are quarantined. UN health chief Brundtland said "we have not seen a peak in China yet."
Foreclosures jumped 8.2% in the Silicon Valley in the first quarter of 2003 compared with one year ago.
I have often stated that I think Barry Diller has a nose for making money. On Monday his company announced an agreement to purchase Lending Tree, a company I suggested to readers of this blog two weeks ago. At that time I mentioned you can buy good growth in an internet company without paying an outlandish price like you do with eBay at present levels. Obviously, Barry Diller shares that viewpoint. Fortunately, Lending Tree was then at $14.
Over the past month the networking index is up about 30%. That's more than I can say for their order flow.
15% of our GDP is comprised of imports. With the dollar falling prices will go up. Fortunately, the opposite is true with our exports. The trouble is we import more than we export. As such, our account deficit is a mere $400+ billion.
The Small Business Survival Committee said "from 1992-2000 per capita total U.S. state spending increased by 40% while inflation registered just 16.4%" That spending has now produced huge deficits and we have begun to see the impact with rising state layoffs in April. I expect that trend to continue for some time and to be accompanied by similar layoffs at the local government levels. I have mentioned several times about the job cuts in education.
A new survey by TrueCareers shows that 61% say their financial situation has worsened in 2003.
Tuesday, May 06, 2003
5/6/03 Buying Right Is A Stepping Stone To Making A Profit
I appreciate the difficulties in starting a company from scratch. I've done it. What eBay and Amazon have accomplished are truly fantastic. What price do you pay for fantastic? Should Ebay have a market capitlaization which exceeds that of General Motors or McDonald's or even Boeing? I can see Boeing. Kroger is a pretty good company. Should Amazon's market cap exceed Kroger's. I could continue with Yahoo and make comparisons. I wrote a piece like this in the Spring of 2000. I don't want to be repetitive. Let's not make the same mistakes from the late 1990s. There are enough losses on the books. Every time losses mount, market liquidity drops. To fuel investment we need liquidity.
Maybe being a libertarian, I am a bit more out-spoken than most. I was watching Sander Levin, a Democrat on the Ways and Means Committee. He said "I would target a tax cut to those who would spend the money." Anyone who votes for him should be committed. I think it is highly likely that a good proportion of the tax cuts will go towards reducing credit card debt. Credit card delinquencies are at a 13 year high. While I'm on the subject, auto delinquencies are on the rise and homes in foreclosure are at record highs.
I thought there was a significant point in the ISM non-manufacturing business survey. There was a drop in backlog orders, and that is a forward-looking indicator, and so is the stock market.
President Bush said yesterday "the best way to stimulate demand is to let people keep more of their money." I would hope everyone would agree with that statement. He is well-intentioned. These are special times. Millions of Americans really have negative net worths. Millions are out of a job. A the end of May millions will have their federal unemployment benefits expire. About 45% of unemployed workers are still without a near-term job prospect when those benefits run out. The extension of unemployment benefits lasted 29 months in the early 1990s. If they end on the 31st of this month, their extension would have been limited to 15 months. It is not surprising, therefore, that, in the most recent Newsweek poll, 62% of those surveyed said they'd vote on issues of jobs and the economy.
Do not liken the recent market fastbreak to the ones captained by Jason Kidd. The latter doesn't run out of gas. He can go the distance.
Rent-controlled N.Y.C. apartments will be hiked by a maximum 5.5% for a one-year lease and 8.5% for a two-year lease. Inflation is hitting N.Y.C. during a bleak economic period for the city. Homeowners across the nation are also getting hurt- by rising insurance rates and increased property taxes. The squeeze is on most everyone.
Australian retail sales dropped in the first quarter.
Motorola closed its Beijing office after an employee contracted SARS. Twenty seven workers had been in close contact with that employee. For the next week 1000 employees will toil from their homes. Motorola's China business amounted to $5.7 billion in 2002, and the company is one of the three largest foreign investors in China.
The Transportation Security Administration plans to cut 103 screener jobs at Ronald Reagan Washington National Airport.
Spiegel will lay off 635.workers.
UC Berkeley will not be accepting students from China, Hong Kong, Taiwan, and Singapore for summer classes.
3Com Corp. will move its headquarters from the Silicon VALLEY TO mARLBOROUGH, mass. where their networking division is located.
With the implied yield on the July Fed funds contract at 1.10%, does it matter whether there is an interest rate reduction at today's Fed meeting or on June 25th? If business investment were about to pick up and economic growth were on the verge of spurting, interest rates would adjust upward and the price of gold would not be moving higher. The geopolitical risk is no longer in the air. Oil has declined sharply in price. Inflation is not an immediate concern. In recent weeks, as the markets surged higher, gold moved from a recent low of $320 per ounce to $342 per ounce. That may be a long way from the year's high of about $380, but it's a respectable rally.
Over the past several days villagers in Xiandie and Zhejiang have violently protested against quarantining suspected SARS cases. It was only a matter of time until the virus hit the countryside where 70% of China's 1.3 billion people live. Their death toll has risen to 206, and there are about 4300 announced cases.
April air travel is down 60% in Hong Kong, 40% in Singapore and Seoul, and slightly less in Bangkok and Kuala Lumpur. April tourist arrivals are down 20% in Australia, and the drop is expected to worsen. In Australia there are 550,000 workers in the tourism sector, and the country expects to lose close to $1 billion in revenues from the visitor drop.
With the dollar trading at 1.1341 per euro, it is now down about 8% on the year vs the euro and about 20% in the past 12 months. The trend speaks for itself.
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I appreciate the difficulties in starting a company from scratch. I've done it. What eBay and Amazon have accomplished are truly fantastic. What price do you pay for fantastic? Should Ebay have a market capitlaization which exceeds that of General Motors or McDonald's or even Boeing? I can see Boeing. Kroger is a pretty good company. Should Amazon's market cap exceed Kroger's. I could continue with Yahoo and make comparisons. I wrote a piece like this in the Spring of 2000. I don't want to be repetitive. Let's not make the same mistakes from the late 1990s. There are enough losses on the books. Every time losses mount, market liquidity drops. To fuel investment we need liquidity.
Maybe being a libertarian, I am a bit more out-spoken than most. I was watching Sander Levin, a Democrat on the Ways and Means Committee. He said "I would target a tax cut to those who would spend the money." Anyone who votes for him should be committed. I think it is highly likely that a good proportion of the tax cuts will go towards reducing credit card debt. Credit card delinquencies are at a 13 year high. While I'm on the subject, auto delinquencies are on the rise and homes in foreclosure are at record highs.
I thought there was a significant point in the ISM non-manufacturing business survey. There was a drop in backlog orders, and that is a forward-looking indicator, and so is the stock market.
President Bush said yesterday "the best way to stimulate demand is to let people keep more of their money." I would hope everyone would agree with that statement. He is well-intentioned. These are special times. Millions of Americans really have negative net worths. Millions are out of a job. A the end of May millions will have their federal unemployment benefits expire. About 45% of unemployed workers are still without a near-term job prospect when those benefits run out. The extension of unemployment benefits lasted 29 months in the early 1990s. If they end on the 31st of this month, their extension would have been limited to 15 months. It is not surprising, therefore, that, in the most recent Newsweek poll, 62% of those surveyed said they'd vote on issues of jobs and the economy.
Do not liken the recent market fastbreak to the ones captained by Jason Kidd. The latter doesn't run out of gas. He can go the distance.
Rent-controlled N.Y.C. apartments will be hiked by a maximum 5.5% for a one-year lease and 8.5% for a two-year lease. Inflation is hitting N.Y.C. during a bleak economic period for the city. Homeowners across the nation are also getting hurt- by rising insurance rates and increased property taxes. The squeeze is on most everyone.
Australian retail sales dropped in the first quarter.
Motorola closed its Beijing office after an employee contracted SARS. Twenty seven workers had been in close contact with that employee. For the next week 1000 employees will toil from their homes. Motorola's China business amounted to $5.7 billion in 2002, and the company is one of the three largest foreign investors in China.
The Transportation Security Administration plans to cut 103 screener jobs at Ronald Reagan Washington National Airport.
Spiegel will lay off 635.workers.
UC Berkeley will not be accepting students from China, Hong Kong, Taiwan, and Singapore for summer classes.
3Com Corp. will move its headquarters from the Silicon VALLEY TO mARLBOROUGH, mass. where their networking division is located.
With the implied yield on the July Fed funds contract at 1.10%, does it matter whether there is an interest rate reduction at today's Fed meeting or on June 25th? If business investment were about to pick up and economic growth were on the verge of spurting, interest rates would adjust upward and the price of gold would not be moving higher. The geopolitical risk is no longer in the air. Oil has declined sharply in price. Inflation is not an immediate concern. In recent weeks, as the markets surged higher, gold moved from a recent low of $320 per ounce to $342 per ounce. That may be a long way from the year's high of about $380, but it's a respectable rally.
Over the past several days villagers in Xiandie and Zhejiang have violently protested against quarantining suspected SARS cases. It was only a matter of time until the virus hit the countryside where 70% of China's 1.3 billion people live. Their death toll has risen to 206, and there are about 4300 announced cases.
April air travel is down 60% in Hong Kong, 40% in Singapore and Seoul, and slightly less in Bangkok and Kuala Lumpur. April tourist arrivals are down 20% in Australia, and the drop is expected to worsen. In Australia there are 550,000 workers in the tourism sector, and the country expects to lose close to $1 billion in revenues from the visitor drop.
With the dollar trading at 1.1341 per euro, it is now down about 8% on the year vs the euro and about 20% in the past 12 months. The trend speaks for itself.
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Monday, May 05, 2003
5/5/03 Insiders: Will They Contain The Bulls?
After the Iraq war ended, the bulls ambushed the bears. While their fighting continues, the insiders have gone on a buyer's strike and, in fact, have been selling. According to the Washington Service, U.S. executives and directors purchased only $90.8 million of their companies' shares in April, and this was the smallest amount since April 1995. In my view, insiders may not walk on water but they have a better view of their company's prospects than an analyst or any other independent investor. If it had been only a few insiders standing on the sidelines, then I would have placed less importance on the data. However, clearly that was not the case. This is a warning sign. At the very least one should be circling the investment track with a yellow flag. In addition, for the eight weeks ended April 30, Vickers Weekly Insiders Report said there were 1.84 sales for each one share purchased.
The Trustees for Social Security stated that the true liabilities of Social Security are $7 trillion larger than reported. Benefit payments, they stated, will exceed tax revenues by 2018. The 75-year deficit represents about 2% of payroll. I feel comfortable in saying that Social Security will be insolvent closer to 2010 than to 2020. It should be noted that the obligations of the U.S. Treasury amount to about $6.5 trillion, and of that figure, about $1.4 trillion is said to be in the Social Security Trust fund. I hope this gives a warm fuzzy feeling to the bulls. When the market crashes, and I feel confident it will, you'll be left with nothing to keep you warm.
Cathay Pacific will cut its dividend by 50% due to the impact SARS has had on air travel. SARS has killed 184 people in Hong Kong, and 1629 have been infected with the virus.
Yesterday Paul Silas was fired as head coach of the New Orleans Hornets. In 5 years he had set the franchise record for most wins. On Friday night his team was eliminated in the first round of the playoffs by the Philadelphia 76ers. In each of the past four years the Hornets made it to the playoffs but never past the second round. Silas earned a yearly salary of $1.5 million. The players wanted the coach to return. I can comfortably state that Paul Silas performed a great deal better as coach than at least 75% of mutual fund managers over the past three+ years. The lack of performance warrants their firing.
On Friday the Commerce Department said factory orders had risen 2.2% in March. Most of the increase was the 1.9% rise in computer and electronic orders. Maybe the increase was Homeland Security getting their house in order. Frankly, the reason doesn't matter to me. What is important is Dell's COO stating that he doesn't see a pick-up in demand in his industry. I would rather trust Dell than data released from a government agency. Understating the Social Security liabilities by $7 trillion makes me a bit uneasy.
Yesterday I wrote about Compuware's new Detroit HQ building. Today is the MTA's $430 million HQ building at 2 Broadway in N.Y.C. Only a government agency could come in at about $300 million(that's not a misprint) over budget. N.Y.C. governance is a disgrace. The citizens should fire everyone connected with 2 Broadway.
The Kentucky Derby took its toll, and not just on the betting public. Buddy Gil has bone chips. Ten Most Wanted has a virus. Bobby Frankel is still trying to figure out the condition of Empire Maker. It maybe mental. Jerry Bailey said his horse didn't handle the track well. "Ever run on the beach where the water has run on it and its packed tight and then go three feet over and its nice and loose?" he said. "It's a lot harder to go through that." It may be harder, but Funny Cide ran on the same beach.
Rumsfeld said he "never believed we'd just stumble over weapons of mass destruction." He might have said the Administration stumbled on their words by stating they knew where they were located prior to the war starting. I had hoped Rumsfeld was too smart a guy to avoid being forthright. After the war had begun, Richard Meyers stood in front of the cameras bragging that he and his crew had a very very good idea as to where the weapons were located, and that finding them was not a problem. We know this. Rumsfeld talks to Meyers and Meyers talks to Rumsfeld. Often they could be found standing next to one another.
The biggest crowd over the weekend was not at the Kentucky Derby. It took place in Madrid where 1 million Spaniards came out to see Pope John Paul II canonize two priests and three nuns. In his quarter-century papacy the Pope has proclaimed 469 Saints. The Pope is a lucky man. I have yet to know a Saint. There's still hope. The Pope is considerably older than I am.
I have just learned of a new exciting experience. Dr. Klaus Stohr, the WHO's chief SARS scientist, said discovery that the virus can survive in feces at room temperature for as long as four days was "the most exciting, or perhaps disturbing, finding." Personally, I am considerably more excited by the finding that diarrhea provides a more favorable environment for the virus. Now I am closer to discovering what moves markets- diarrhea of the mouth.
At the Berkshire Hathaway annual meeting, Warren Buffett said of the proposed Bush tax proposals "the idea that it creates all kinds of jobs and everything else, that's what sort of turns me off. That's like a manager saying we're going to grow our earnings 20% per year. They don't have the faintest idea, in my view, of how many jobs this is going to create. How could they? Economics is not that precise."
According to a 396 page report from the Institute of Medicine, every hour 1500 people world-wide die of an old or new infectious disease, and more than half of those are children younger than five years old. Howard Markel, a professor of infectious diseases at the University of Michigan, is author of the forthcoming book "When Germs Travel."
Markel suggests "we don't conquer germs. We wrestle them to a draw." That sounds like an easier task than mutual fund managers have been having trying to fight the market to a draw.
After the Iraq war ended, the bulls ambushed the bears. While their fighting continues, the insiders have gone on a buyer's strike and, in fact, have been selling. According to the Washington Service, U.S. executives and directors purchased only $90.8 million of their companies' shares in April, and this was the smallest amount since April 1995. In my view, insiders may not walk on water but they have a better view of their company's prospects than an analyst or any other independent investor. If it had been only a few insiders standing on the sidelines, then I would have placed less importance on the data. However, clearly that was not the case. This is a warning sign. At the very least one should be circling the investment track with a yellow flag. In addition, for the eight weeks ended April 30, Vickers Weekly Insiders Report said there were 1.84 sales for each one share purchased.
The Trustees for Social Security stated that the true liabilities of Social Security are $7 trillion larger than reported. Benefit payments, they stated, will exceed tax revenues by 2018. The 75-year deficit represents about 2% of payroll. I feel comfortable in saying that Social Security will be insolvent closer to 2010 than to 2020. It should be noted that the obligations of the U.S. Treasury amount to about $6.5 trillion, and of that figure, about $1.4 trillion is said to be in the Social Security Trust fund. I hope this gives a warm fuzzy feeling to the bulls. When the market crashes, and I feel confident it will, you'll be left with nothing to keep you warm.
Cathay Pacific will cut its dividend by 50% due to the impact SARS has had on air travel. SARS has killed 184 people in Hong Kong, and 1629 have been infected with the virus.
Yesterday Paul Silas was fired as head coach of the New Orleans Hornets. In 5 years he had set the franchise record for most wins. On Friday night his team was eliminated in the first round of the playoffs by the Philadelphia 76ers. In each of the past four years the Hornets made it to the playoffs but never past the second round. Silas earned a yearly salary of $1.5 million. The players wanted the coach to return. I can comfortably state that Paul Silas performed a great deal better as coach than at least 75% of mutual fund managers over the past three+ years. The lack of performance warrants their firing.
On Friday the Commerce Department said factory orders had risen 2.2% in March. Most of the increase was the 1.9% rise in computer and electronic orders. Maybe the increase was Homeland Security getting their house in order. Frankly, the reason doesn't matter to me. What is important is Dell's COO stating that he doesn't see a pick-up in demand in his industry. I would rather trust Dell than data released from a government agency. Understating the Social Security liabilities by $7 trillion makes me a bit uneasy.
Yesterday I wrote about Compuware's new Detroit HQ building. Today is the MTA's $430 million HQ building at 2 Broadway in N.Y.C. Only a government agency could come in at about $300 million(that's not a misprint) over budget. N.Y.C. governance is a disgrace. The citizens should fire everyone connected with 2 Broadway.
The Kentucky Derby took its toll, and not just on the betting public. Buddy Gil has bone chips. Ten Most Wanted has a virus. Bobby Frankel is still trying to figure out the condition of Empire Maker. It maybe mental. Jerry Bailey said his horse didn't handle the track well. "Ever run on the beach where the water has run on it and its packed tight and then go three feet over and its nice and loose?" he said. "It's a lot harder to go through that." It may be harder, but Funny Cide ran on the same beach.
Rumsfeld said he "never believed we'd just stumble over weapons of mass destruction." He might have said the Administration stumbled on their words by stating they knew where they were located prior to the war starting. I had hoped Rumsfeld was too smart a guy to avoid being forthright. After the war had begun, Richard Meyers stood in front of the cameras bragging that he and his crew had a very very good idea as to where the weapons were located, and that finding them was not a problem. We know this. Rumsfeld talks to Meyers and Meyers talks to Rumsfeld. Often they could be found standing next to one another.
The biggest crowd over the weekend was not at the Kentucky Derby. It took place in Madrid where 1 million Spaniards came out to see Pope John Paul II canonize two priests and three nuns. In his quarter-century papacy the Pope has proclaimed 469 Saints. The Pope is a lucky man. I have yet to know a Saint. There's still hope. The Pope is considerably older than I am.
I have just learned of a new exciting experience. Dr. Klaus Stohr, the WHO's chief SARS scientist, said discovery that the virus can survive in feces at room temperature for as long as four days was "the most exciting, or perhaps disturbing, finding." Personally, I am considerably more excited by the finding that diarrhea provides a more favorable environment for the virus. Now I am closer to discovering what moves markets- diarrhea of the mouth.
At the Berkshire Hathaway annual meeting, Warren Buffett said of the proposed Bush tax proposals "the idea that it creates all kinds of jobs and everything else, that's what sort of turns me off. That's like a manager saying we're going to grow our earnings 20% per year. They don't have the faintest idea, in my view, of how many jobs this is going to create. How could they? Economics is not that precise."
According to a 396 page report from the Institute of Medicine, every hour 1500 people world-wide die of an old or new infectious disease, and more than half of those are children younger than five years old. Howard Markel, a professor of infectious diseases at the University of Michigan, is author of the forthcoming book "When Germs Travel."
Markel suggests "we don't conquer germs. We wrestle them to a draw." That sounds like an easier task than mutual fund managers have been having trying to fight the market to a draw.
Sunday, May 04, 2003
5/4/03 Competing Perspectives
A funny thing happened on the way to the finish line at Churchill Downs. The wrong horse won. It should not have happened. No New York-bred had ever won the Kentucky Derby. The last gelding won in 1929. I know what you're thinking about 1929. Funny Cide had finished second to Empire Maker in the Wood Memorial and third to Peace Rules in the Louisiana Derby, his last two starts. His trainer is a steeplechase trainer and it was his first Derby. It was the first Derby win for the jockey. The horse sold as a yearling for $22,000 and then to the Sackatoga Stable, which is owned by six friends, for $75,000. There are all of three horses in this Stable. Funny Cide has mediocre breeding, and was only brought to Churchill Downs a few days prior to the race. He hardly had time to get to know the track. The Talmud says the burden is equal to the horse's strength, but there were stronger horses in the field. Tesio says "a horse gallops with his lungs, perseveres with his heart, and wins with his character." Maybe the Talmud was referring to inner strength. There is no question that Funny Cide had the inner strength yesterday to win by 1 3/4 lengths. He may not have been the best horse in the field but he was yesterday. Stranger things have happened on Derby Day. I watched Native Dancer lose to Dark Star in the Derby. Native Dancer won 21 out of 22 races. It should be noted that all 16 horses in yesterday's Derby came from the Native Dancer line. The morals of the story from yesterday's Derby are three-fold. First, character counts for plenty- even in horse racing. The crowd of 148,530 could confirm that.Two, don't be parked a little bit too wide on the first turn. It requires making up that little ground, and the latter can be the difference. To win you must be positioned properly. Three, there may come a time when even the best comes in second. It hurts. It hurts plenty but you can't let it spoil the next race.
So what does all the above have to do with the stock market? Plenty. There are no sure things. Something can go wrong. It does not pay to get over-confident. The trainer of Empire Maker really thought he had the race run prior to the running of the race. He had the best horse. He had the best jockey. He should have won. I thought he would too. I picked Funny Cide to come in third. I have often said that management is the difference when it comes to making smart investments in the market. The guys who continually have delivered winning results stick to their knitting, have inner strength, and character that does not skip a beat- Warren Buffett, Andy Grove, Bill Gates, Michael Dell, just to name a few. It's no accident that Berkshire Hathaway, Intel, Microsoft, and Dell have been huge winners over the years. Their founders
are first-class individuals who are smart, determined, and have a nose for money as well as finishing in the money, and they are realistic about the economic returns to expect. Yesterday was Berkshire Hathaway's annual meeting. Warren Buffett said "investors in U.S. stocks should expect a return of about 6% to 7% a year, and people who are looking for double those gains are dreaming."
In China the government attempted to appear confident that the worst of SARS was over. In Hong Kong the Director of Health, Margaret Chan, was more realistic and said SARS "is like a moving target so we have to be very careful...there is a chance that the number of deaths will continue to rise." We are much more likely to believe the descriptions of SARS coming from Hong Kong, Singapore, and Taiwan rather than China. The latter are a bit like the managements who constantly revise their company's earnings estimates downward but in China's case it's revising the suspected SARS cases and deaths upward. The similarity is the lack of character. It's best to avoid both.
Due to SARS, the Women's World Soccer cup will no longer be played this year in China. Schools in Beijing will stay closed for another two weeks, and this impacts a million children. Taiwan imposed a mandatory 14 day quarantine on all travelers from China, Hong Kong, Singapore, Macau, and Toronto. Taiwan has 204 reported SARS cases and eight people have died. In Singapore where there have been 25 SARS deaths, 3154 people are now quarantined. Lastly, scientists find SARS can live on objects for hours or even days.
Even though ABC sponsored last night's debate in S.C. among the 9 Democratic candidates, the network opted to air the movie, Gladiator, instead. No Democrat has carried S.C. in a presidential race since Jimmy Carter in 1976. In a month's time Hillary Clinton's book called Living History will be released. It has a first printing of one million copies. I have a feeling it will get more coverage than last night's debate.
It's official today. The N.Y.C. subway ride is now $2, and the 50 cent hike is the first increase in 7 years. At the same time, the sales tax was increased, there will be a surcharge on those earning $150,000 and over, and 3000 pink slips were handed out to city workers. N.Y. State can be ashamed as well. They have a $90.8 billion budget plan but the legislature approved a $93 billion budget. That is not a misprint. That would leave a $13 billion budget gap over the next two years. Maybe they can catch up to California's deficit.
Finally, we come to the ultimate perspective on non-reality. Maybe you have heard of the company called Compuware. Consider what the odds of this company being a winner were they a racehorse. In 2000 they earned $1.02 per share; in 2001 44 cents; in 2002 42 cents; and 2003 is estimated at 30 cents per share. They would probably be placed in a claiming race at a low valuation. The market cap is $1.7 billion and sales for the latest twelve months are about $1.5 billion. At the beginning of 2000 the stock sold at $40 and it's now about $4.50. Compuware is in the process of moving into a new Detroit headquarters building which cost $350 million. It has a 14 story glass atrium with a water sculpture under the glass skylight and it sends water into 15 upside-down glass pyramids. The 4400 workers will occupy 12 floors which will comprise one million square feet. The top floor, not surprisingly, is the executive level with an outside balcony which extends around the building. It's too bad that $350 million was not delivered to the stockholders as a return of capital. It might have helped to offset the 90% decline in the price of the stock over the past three years.
A funny thing happened on the way to the finish line at Churchill Downs. The wrong horse won. It should not have happened. No New York-bred had ever won the Kentucky Derby. The last gelding won in 1929. I know what you're thinking about 1929. Funny Cide had finished second to Empire Maker in the Wood Memorial and third to Peace Rules in the Louisiana Derby, his last two starts. His trainer is a steeplechase trainer and it was his first Derby. It was the first Derby win for the jockey. The horse sold as a yearling for $22,000 and then to the Sackatoga Stable, which is owned by six friends, for $75,000. There are all of three horses in this Stable. Funny Cide has mediocre breeding, and was only brought to Churchill Downs a few days prior to the race. He hardly had time to get to know the track. The Talmud says the burden is equal to the horse's strength, but there were stronger horses in the field. Tesio says "a horse gallops with his lungs, perseveres with his heart, and wins with his character." Maybe the Talmud was referring to inner strength. There is no question that Funny Cide had the inner strength yesterday to win by 1 3/4 lengths. He may not have been the best horse in the field but he was yesterday. Stranger things have happened on Derby Day. I watched Native Dancer lose to Dark Star in the Derby. Native Dancer won 21 out of 22 races. It should be noted that all 16 horses in yesterday's Derby came from the Native Dancer line. The morals of the story from yesterday's Derby are three-fold. First, character counts for plenty- even in horse racing. The crowd of 148,530 could confirm that.Two, don't be parked a little bit too wide on the first turn. It requires making up that little ground, and the latter can be the difference. To win you must be positioned properly. Three, there may come a time when even the best comes in second. It hurts. It hurts plenty but you can't let it spoil the next race.
So what does all the above have to do with the stock market? Plenty. There are no sure things. Something can go wrong. It does not pay to get over-confident. The trainer of Empire Maker really thought he had the race run prior to the running of the race. He had the best horse. He had the best jockey. He should have won. I thought he would too. I picked Funny Cide to come in third. I have often said that management is the difference when it comes to making smart investments in the market. The guys who continually have delivered winning results stick to their knitting, have inner strength, and character that does not skip a beat- Warren Buffett, Andy Grove, Bill Gates, Michael Dell, just to name a few. It's no accident that Berkshire Hathaway, Intel, Microsoft, and Dell have been huge winners over the years. Their founders
are first-class individuals who are smart, determined, and have a nose for money as well as finishing in the money, and they are realistic about the economic returns to expect. Yesterday was Berkshire Hathaway's annual meeting. Warren Buffett said "investors in U.S. stocks should expect a return of about 6% to 7% a year, and people who are looking for double those gains are dreaming."
In China the government attempted to appear confident that the worst of SARS was over. In Hong Kong the Director of Health, Margaret Chan, was more realistic and said SARS "is like a moving target so we have to be very careful...there is a chance that the number of deaths will continue to rise." We are much more likely to believe the descriptions of SARS coming from Hong Kong, Singapore, and Taiwan rather than China. The latter are a bit like the managements who constantly revise their company's earnings estimates downward but in China's case it's revising the suspected SARS cases and deaths upward. The similarity is the lack of character. It's best to avoid both.
Due to SARS, the Women's World Soccer cup will no longer be played this year in China. Schools in Beijing will stay closed for another two weeks, and this impacts a million children. Taiwan imposed a mandatory 14 day quarantine on all travelers from China, Hong Kong, Singapore, Macau, and Toronto. Taiwan has 204 reported SARS cases and eight people have died. In Singapore where there have been 25 SARS deaths, 3154 people are now quarantined. Lastly, scientists find SARS can live on objects for hours or even days.
Even though ABC sponsored last night's debate in S.C. among the 9 Democratic candidates, the network opted to air the movie, Gladiator, instead. No Democrat has carried S.C. in a presidential race since Jimmy Carter in 1976. In a month's time Hillary Clinton's book called Living History will be released. It has a first printing of one million copies. I have a feeling it will get more coverage than last night's debate.
It's official today. The N.Y.C. subway ride is now $2, and the 50 cent hike is the first increase in 7 years. At the same time, the sales tax was increased, there will be a surcharge on those earning $150,000 and over, and 3000 pink slips were handed out to city workers. N.Y. State can be ashamed as well. They have a $90.8 billion budget plan but the legislature approved a $93 billion budget. That is not a misprint. That would leave a $13 billion budget gap over the next two years. Maybe they can catch up to California's deficit.
Finally, we come to the ultimate perspective on non-reality. Maybe you have heard of the company called Compuware. Consider what the odds of this company being a winner were they a racehorse. In 2000 they earned $1.02 per share; in 2001 44 cents; in 2002 42 cents; and 2003 is estimated at 30 cents per share. They would probably be placed in a claiming race at a low valuation. The market cap is $1.7 billion and sales for the latest twelve months are about $1.5 billion. At the beginning of 2000 the stock sold at $40 and it's now about $4.50. Compuware is in the process of moving into a new Detroit headquarters building which cost $350 million. It has a 14 story glass atrium with a water sculpture under the glass skylight and it sends water into 15 upside-down glass pyramids. The 4400 workers will occupy 12 floors which will comprise one million square feet. The top floor, not surprisingly, is the executive level with an outside balcony which extends around the building. It's too bad that $350 million was not delivered to the stockholders as a return of capital. It might have helped to offset the 90% decline in the price of the stock over the past three years.
Saturday, May 03, 2003
5/03/03 Horse Racing And The Stock Market
The Kentucky Oaks is the Kentucky Derby for fillies. It was won in record time yesterday by Bird Town before a crowd of 100,000. She went off at 19-1, stumbled out of the gate.The trainer,Nick Zito, thought bad luck had again ruined his day. The three favorites were evenly stretched across the track coming into the home turn. Down the stretch run no one saw the winner coming. They were too busy looking at each other. It would not have mattered. Bird Town blistered the closing field and won by about four lengths. It was more than convincing. It was a win by knockout. My pick, Yell, came in third after getting roughed up twice on the first turn. Horses and jockeys need to be tough. Yell was tough but not fast enough. The favorite came in fourth.
Only one favorite has won the Kentucky Derby in the past 23 years. Easy Goer, went off at 4-5 in 1989, and finished second. That was some kind of colt, and couldn't get the job done at Churchill Downs. Today Empire Maker and Ten Most Wanted will be the favorites. The former was sired by Unbridled, the 1990 Kentucky Derby winner. Maybe this run for the roses will be another surprise. Possibly the winner could be Peace Rules, Funny Cide, or another colt. If it's an off track, maybe Brancusi will surprise. Maybe the winner will stumble out of the gate or be roughed up around the first turn. That's what makes horse racing.
With 15 minutes going into yesterday's market opening, few had a conviction about where the market would close on the week. That's what makes the stock market so exciting every day. It's more than a challenge. The bulls were there to say the trend in unemployment was bullish. In February, 357,000 jobs were lost; in March another 124,000; and yesterday it was reported that only 48,000 jobs were lost in April. The figure of 53,000 had been expected. It is true that 32,000 gov't jobs were added but that number was offset by the number of reservists called up. The bears said the unemployment rate rose to an 8 year high of 6%; only once since WW II has the economy lost jobs in 3 consecutive quarters and not been in a recession, and that was during the steel strike of 1952; the average weekly April wages fell by about $4 from March's level;
the work week fell to 34; aggregate weekly hours slid 0.7%; manufacturing hours declined; and overtime hours declined. Overall, it meant that almost 2 million Americans have been unemployed for 27 weeks or more.
The market did not explode out of the gate. There was stumbling and some roughing up as well. But, as the market started to pick up, the Dow Theorists took over. They said the magic number of Dow 8521 was key, and the market roared thru that number like Bird Town coming down the stretch for home. The action was helped by the rumor that IBM would buy Sun Microsystems. It was Friday, and rumors make the rounds on fridays. The Nasdaq closed above 1500 for the first time in a year. Treasuries had their worst decline in a month. The Dow powered forward throughout the afternoon. Few would have predicted this happening- especially with gold at $341 and the indexes for metals acting well. The crowning glory was Merrill Lynch saying the worst was over for the airlines, and the leaders in this group rose between 10 and 20 per cent on the day.
So where does that leave us? The chief economist for Goldman Sachs said "repeated payroll declines are usually an indication of serious trouble." The trouble is we are not living in usual times. Ralph Waldo Emerson would say that "the primary wisdom is intuition." Others might argue to follow the money but Thomas Jefferson said "I sincerely believe that banking establishments are more dangerous than standing armies." So what's the reason investors were buying yesterday? JP Morgan said "a man always has two reasons for doing anything- a good reason and the real reason." Now we just have to wait and see whether the reason proves to be borne in brilliance or stupidity.
SARS is mutating rapidly in Hong Kong. Eight more deaths were reported and the mortality rate is near 11%. Four different strains of SARS have been discovered- all with different genomic sequencing. Don't bet on a vaccine any time soon. You might have better luck betting on the Kentucky Derby today.
The Kentucky Oaks is the Kentucky Derby for fillies. It was won in record time yesterday by Bird Town before a crowd of 100,000. She went off at 19-1, stumbled out of the gate.The trainer,Nick Zito, thought bad luck had again ruined his day. The three favorites were evenly stretched across the track coming into the home turn. Down the stretch run no one saw the winner coming. They were too busy looking at each other. It would not have mattered. Bird Town blistered the closing field and won by about four lengths. It was more than convincing. It was a win by knockout. My pick, Yell, came in third after getting roughed up twice on the first turn. Horses and jockeys need to be tough. Yell was tough but not fast enough. The favorite came in fourth.
Only one favorite has won the Kentucky Derby in the past 23 years. Easy Goer, went off at 4-5 in 1989, and finished second. That was some kind of colt, and couldn't get the job done at Churchill Downs. Today Empire Maker and Ten Most Wanted will be the favorites. The former was sired by Unbridled, the 1990 Kentucky Derby winner. Maybe this run for the roses will be another surprise. Possibly the winner could be Peace Rules, Funny Cide, or another colt. If it's an off track, maybe Brancusi will surprise. Maybe the winner will stumble out of the gate or be roughed up around the first turn. That's what makes horse racing.
With 15 minutes going into yesterday's market opening, few had a conviction about where the market would close on the week. That's what makes the stock market so exciting every day. It's more than a challenge. The bulls were there to say the trend in unemployment was bullish. In February, 357,000 jobs were lost; in March another 124,000; and yesterday it was reported that only 48,000 jobs were lost in April. The figure of 53,000 had been expected. It is true that 32,000 gov't jobs were added but that number was offset by the number of reservists called up. The bears said the unemployment rate rose to an 8 year high of 6%; only once since WW II has the economy lost jobs in 3 consecutive quarters and not been in a recession, and that was during the steel strike of 1952; the average weekly April wages fell by about $4 from March's level;
the work week fell to 34; aggregate weekly hours slid 0.7%; manufacturing hours declined; and overtime hours declined. Overall, it meant that almost 2 million Americans have been unemployed for 27 weeks or more.
The market did not explode out of the gate. There was stumbling and some roughing up as well. But, as the market started to pick up, the Dow Theorists took over. They said the magic number of Dow 8521 was key, and the market roared thru that number like Bird Town coming down the stretch for home. The action was helped by the rumor that IBM would buy Sun Microsystems. It was Friday, and rumors make the rounds on fridays. The Nasdaq closed above 1500 for the first time in a year. Treasuries had their worst decline in a month. The Dow powered forward throughout the afternoon. Few would have predicted this happening- especially with gold at $341 and the indexes for metals acting well. The crowning glory was Merrill Lynch saying the worst was over for the airlines, and the leaders in this group rose between 10 and 20 per cent on the day.
So where does that leave us? The chief economist for Goldman Sachs said "repeated payroll declines are usually an indication of serious trouble." The trouble is we are not living in usual times. Ralph Waldo Emerson would say that "the primary wisdom is intuition." Others might argue to follow the money but Thomas Jefferson said "I sincerely believe that banking establishments are more dangerous than standing armies." So what's the reason investors were buying yesterday? JP Morgan said "a man always has two reasons for doing anything- a good reason and the real reason." Now we just have to wait and see whether the reason proves to be borne in brilliance or stupidity.
SARS is mutating rapidly in Hong Kong. Eight more deaths were reported and the mortality rate is near 11%. Four different strains of SARS have been discovered- all with different genomic sequencing. Don't bet on a vaccine any time soon. You might have better luck betting on the Kentucky Derby today.
Friday, May 02, 2003
5/2/03 Being Right In The Market Requires Patience
In the Fall of 1998 the dotcom boom was beginning to percolate. I could smell the air, and my stomach told me it was about to take off. I was not comfortable in that arena. I'm not a tech guru. I did, however, believe we were going into a housing boom era. I analyzed and studied and thought the stocks were being given away. The multiples were ridiculously low, and the main risks in my mind were timing and patience. In October, 1998 I bought a basket of the top housing companies, an approach Peter Lynch used successfully over the years. As the internet stocks started to zoom, my housing stocks couldn't get out of the front door. As the months went on, I added to my positions. I thought the stocks were even cheaper than before. The internet stocks zoomed higher. My friends thought I was crazy. We know this. It's nothing new. By the Spring of 2000, I felt like I owned a lot of houses. The stocks never moved though. By May/June 2000, I was telling my friends that they had better sell their dotcom stocks. The party was over in my view. I thought the only place to make money was in the housing sector. My friends were tired of hearing this from me. I couldn't blame them. Then a funny thing happened on the way to the bank. The housing sector started to look better in July/August 2000. Then zoom. It was off to the races. I sold out in the Spring of 2002. I had made a ham sandwich or as Peter Lynch would say a three or four bagger. It took me a bit over 3 1/2 years and lots of patience. I almost bit a hole in my tongue. But I didn't. Being right in the market requires patience. Now we turn to today. Yesterday made me laugh. It reminded me of early 2000. The dotcom stocks could be down for all but the last 30 minutes of trading, and then buying came in. It happened so often in those crazy years. That took place yesterday. I recognized the smell. It has happened a few times in the last few weeks. The bulls say it means stocks were able to rally in the face of bad news. I call it strategic market buying at a strategic time of the day. This is nothing new. I have seen it time and time again over 37 years. Maybe you will be fooled. I won't be.
In a recent blog I said the market will crash. I believe it will happen soon. As I reflected in the paragraph above, market timing is difficult, and the market makes everyone humble. I may be right or maybe wrong on timing, but it will happen. Just like the housing boom occurred after very few saw it coming. We are in deep deep muck. You can look at the 20 point uptick in consumer sentiment after the war ended and some of the profit results for the first quarter. Sentiment does not buy food. A paying job buys food. Google maybe hiring 800 people this year and getting 1000 resumes a day. That's great. In the meantime, Gulfstream, the business jet maker, just closed its Savannah, Ga. plant for a month and well over a thousand workers will be furloughed. This is just one such story in the naked city, so to speak.
I don't like Hillary Clinton but she's not stupid. Do you know why she likened George Bush to Herbert Hoover in a speech she gave in Conneticut a few days ago? As it stands now, Bush will be the first president since Hoover to preside over a four year term in which the U.S. economy lost jobs. That's right. Since the enactment of his tax cuts in June, 2001, we've lost 1 3/4 million jobs. The Bush economic team said that the new proposed tax cuts would add between 1 million and 1.4 million jobs in the next 18 months. During this time frame 2 million jobs would need to be added for Bush not to be mentioned with Hoover. We may lose another 2 million jobs, but we sure aren't going to add them. Since 1900, the only incumbent Republic presidents to lose bids for a second term have been Hoover and Bush senior. By the way, in a Washington Post-ABC News poll taken 2 days ago, those responding gave Bush a 52% approval on the economy and 45% disapproved; on the cost, availability, and coverage of health insurance 57% disapproved and 34% approved; and on the federal budget 50% disapproved and 43% approved. I wonder how many approve of giving $20 cash payments to 1 million citizens in Iraq while so many Americans are homeless and stand in breadlines.
U.S. average jobless claims rose to a new yearly high to 442,000, and the average number of Americans receiving state unemployment checks over the past four weeks rose to their highest level since November.
It was announced the other day that the first quarter GDP rose 1.6%. The worker productivity rate during that time rose 1.6%. In other words, without the productivity gain GDP would have had no growth. If you take out government spending, there would have been a 1% decline in GDP. The cost for that labor production rose 1.9% in the first quarter. By my simple math, we are going backwards along with the euro economies and Japan. We could form a jazz group and call ourselves The Trio In Decline. Kind of catchy.
The U.S. may try to cut tax breaks for those citizens working overseas. Isn't a job a job?
The manufacturing sector is really in the doldrums. It's at the lowest level in about a year and one half or more. Less and less people are getting employed in that sector. That will continue as new manufacturing orders fell once again.
A gain had been expected for construction spending in March. It fell 1%.
What does Sir Jonathan Pruitt have against Tony Blair? He said "I don't think the war would have happened if Iraq didn't have the second largest oil reserves in the world." I thought the war was fought over terrorism and WMD.
April auto sales for the Big Three declined. No surprise.
German retail sales plunged again. No surprise.
In the last few days SARS has exploded in Taiwan. Just this week there have been about 50 new cases and two people died yesterday. This comes as a surprise to many in Taiwan.
The U.S manufacturing index dropped to a dismal 41.4. There have been 31 straight months of layoffs. This is catastrophic.
European manufacturing contracted in April. The euro has gained 6 1/2% vs the dollar this year, and this rise has severely impacted exports.
The Canadian dollar rose above 70 cents vs the U.S. dollar for the first time in 5 years. Our dollar is in a world-wide bear market.
Dell's COO: "We haven't seen any change in the marketplace that would suggest we are out of the slowness." Talking about Dell, they have been in the Layer 2 switch business for a short time. Network switches are 40% of Cisco's business. Dell is "committed to this market." Dell will enter the most profitable part of the business, Layer 3, by year end. I say prices will come down and profit margins will follow.
A school in Hong Kong will suspend classes for a week after a 13 year old student was suspected to have contracted SARS. Some 1600 others have been infected in Hong Kong and 162 have died.
Beijing has 21 hospitals set aside for SARS patients. Beijing has experienced 100 or more SARS cases per day, and 170 have died. Now 11,000 are under quarantine.
Normally at least 85 million people in China hit the raod for the big May Day holiday. The government has cut the holiday back to only 3 days and is asking people not to travel. It usually generates $4 billion in tourist revenues.
In the Fall of 1998 the dotcom boom was beginning to percolate. I could smell the air, and my stomach told me it was about to take off. I was not comfortable in that arena. I'm not a tech guru. I did, however, believe we were going into a housing boom era. I analyzed and studied and thought the stocks were being given away. The multiples were ridiculously low, and the main risks in my mind were timing and patience. In October, 1998 I bought a basket of the top housing companies, an approach Peter Lynch used successfully over the years. As the internet stocks started to zoom, my housing stocks couldn't get out of the front door. As the months went on, I added to my positions. I thought the stocks were even cheaper than before. The internet stocks zoomed higher. My friends thought I was crazy. We know this. It's nothing new. By the Spring of 2000, I felt like I owned a lot of houses. The stocks never moved though. By May/June 2000, I was telling my friends that they had better sell their dotcom stocks. The party was over in my view. I thought the only place to make money was in the housing sector. My friends were tired of hearing this from me. I couldn't blame them. Then a funny thing happened on the way to the bank. The housing sector started to look better in July/August 2000. Then zoom. It was off to the races. I sold out in the Spring of 2002. I had made a ham sandwich or as Peter Lynch would say a three or four bagger. It took me a bit over 3 1/2 years and lots of patience. I almost bit a hole in my tongue. But I didn't. Being right in the market requires patience. Now we turn to today. Yesterday made me laugh. It reminded me of early 2000. The dotcom stocks could be down for all but the last 30 minutes of trading, and then buying came in. It happened so often in those crazy years. That took place yesterday. I recognized the smell. It has happened a few times in the last few weeks. The bulls say it means stocks were able to rally in the face of bad news. I call it strategic market buying at a strategic time of the day. This is nothing new. I have seen it time and time again over 37 years. Maybe you will be fooled. I won't be.
In a recent blog I said the market will crash. I believe it will happen soon. As I reflected in the paragraph above, market timing is difficult, and the market makes everyone humble. I may be right or maybe wrong on timing, but it will happen. Just like the housing boom occurred after very few saw it coming. We are in deep deep muck. You can look at the 20 point uptick in consumer sentiment after the war ended and some of the profit results for the first quarter. Sentiment does not buy food. A paying job buys food. Google maybe hiring 800 people this year and getting 1000 resumes a day. That's great. In the meantime, Gulfstream, the business jet maker, just closed its Savannah, Ga. plant for a month and well over a thousand workers will be furloughed. This is just one such story in the naked city, so to speak.
I don't like Hillary Clinton but she's not stupid. Do you know why she likened George Bush to Herbert Hoover in a speech she gave in Conneticut a few days ago? As it stands now, Bush will be the first president since Hoover to preside over a four year term in which the U.S. economy lost jobs. That's right. Since the enactment of his tax cuts in June, 2001, we've lost 1 3/4 million jobs. The Bush economic team said that the new proposed tax cuts would add between 1 million and 1.4 million jobs in the next 18 months. During this time frame 2 million jobs would need to be added for Bush not to be mentioned with Hoover. We may lose another 2 million jobs, but we sure aren't going to add them. Since 1900, the only incumbent Republic presidents to lose bids for a second term have been Hoover and Bush senior. By the way, in a Washington Post-ABC News poll taken 2 days ago, those responding gave Bush a 52% approval on the economy and 45% disapproved; on the cost, availability, and coverage of health insurance 57% disapproved and 34% approved; and on the federal budget 50% disapproved and 43% approved. I wonder how many approve of giving $20 cash payments to 1 million citizens in Iraq while so many Americans are homeless and stand in breadlines.
U.S. average jobless claims rose to a new yearly high to 442,000, and the average number of Americans receiving state unemployment checks over the past four weeks rose to their highest level since November.
It was announced the other day that the first quarter GDP rose 1.6%. The worker productivity rate during that time rose 1.6%. In other words, without the productivity gain GDP would have had no growth. If you take out government spending, there would have been a 1% decline in GDP. The cost for that labor production rose 1.9% in the first quarter. By my simple math, we are going backwards along with the euro economies and Japan. We could form a jazz group and call ourselves The Trio In Decline. Kind of catchy.
The U.S. may try to cut tax breaks for those citizens working overseas. Isn't a job a job?
The manufacturing sector is really in the doldrums. It's at the lowest level in about a year and one half or more. Less and less people are getting employed in that sector. That will continue as new manufacturing orders fell once again.
A gain had been expected for construction spending in March. It fell 1%.
What does Sir Jonathan Pruitt have against Tony Blair? He said "I don't think the war would have happened if Iraq didn't have the second largest oil reserves in the world." I thought the war was fought over terrorism and WMD.
April auto sales for the Big Three declined. No surprise.
German retail sales plunged again. No surprise.
In the last few days SARS has exploded in Taiwan. Just this week there have been about 50 new cases and two people died yesterday. This comes as a surprise to many in Taiwan.
The U.S manufacturing index dropped to a dismal 41.4. There have been 31 straight months of layoffs. This is catastrophic.
European manufacturing contracted in April. The euro has gained 6 1/2% vs the dollar this year, and this rise has severely impacted exports.
The Canadian dollar rose above 70 cents vs the U.S. dollar for the first time in 5 years. Our dollar is in a world-wide bear market.
Dell's COO: "We haven't seen any change in the marketplace that would suggest we are out of the slowness." Talking about Dell, they have been in the Layer 2 switch business for a short time. Network switches are 40% of Cisco's business. Dell is "committed to this market." Dell will enter the most profitable part of the business, Layer 3, by year end. I say prices will come down and profit margins will follow.
A school in Hong Kong will suspend classes for a week after a 13 year old student was suspected to have contracted SARS. Some 1600 others have been infected in Hong Kong and 162 have died.
Beijing has 21 hospitals set aside for SARS patients. Beijing has experienced 100 or more SARS cases per day, and 170 have died. Now 11,000 are under quarantine.
Normally at least 85 million people in China hit the raod for the big May Day holiday. The government has cut the holiday back to only 3 days and is asking people not to travel. It usually generates $4 billion in tourist revenues.
Thursday, May 01, 2003
5/1/03 Greenspan Put On His Game Face
Half the battle is just showing up. Give the man credit. He is recovering from a medical procedure, and I wish him the best. I will not criticize anyone who does their absolute best. What was he to say? That business conditions are lame? That the Treasury is running out of money again? That business spending is a misnomer? Give the man credit. He said there would be an uptick for the economy. He just didn't know when and how strong the upturn would be or how lengthy it would be. He said tax cuts are fine as long as you offset them with spending cuts and/or tax increases (the latter I wish he hadn't said. The Congress doesn't need impetus in that area). Give the man credit. He was honest. Lingering business caution could be an impediment to improved economic performance. He said the Fed has a hard time figuring out which way the immediate trends are pointing. It's not easy out there. The man is ok.
Richard Clarida, the U.S. treasury's chief economist is leaving that post next month. The deputy secretary of the U.S. Treasury left in February, and there have been other departures. You can't blame them for leaving a sinking ship.
Berkshire Hathaway has purchased 13.35% of PetroChina, which is selling for about 6 times earnings. I sure would rather invest in that stock at that valuation rather than let's say a Cisco. Talking about Cisco, the latter's CEO said jobs might be shifted overseas if tech companies are forced to account for stock options as a business expense. Maybe someone should tell Chambers that outsourcing to India will continue whether he likes expensing stock options or not. If he wants to make idle threats, he should threaten to improve his own performance.
The U.S. will cut 6000 airport screening jobs. They were just getting the hang of it. Does this mean there will be less future airline travel in the U.S.?
The WHO says SARS is here to stay. As I have been stating, SARS and AIDS have a good deal in common.
The death toll from SARS in Canada rose to 23. SARS patients in Hong Kong have had relapses. There are about 9000 people quarantined in China.
Singapore Airlines asked 6000 employees to take leave.
Asyst Technologies, a semiconductor company in Fremont, fired 30% of their workforce.
April was the best month for the Dow and the S&P 500 since October. The UK's FTSE had its best monthly gain in 5 years in April. It's too bad every month is not like April, 2003.
The WSJ reports that the Bush Administration has a broad plan for Iraq's economy. I hope it's better than the plan they've had for the U.S. economy.
The Chicago PMI was 47.6 in April vs 48.4 in March. The index was poor for New York too. Talking about N.Y., the City is facing a $3.8 billion budget deficit, and will raise the sales tax to 8.75%, and there will be an income tax surcharge on those earning at least $150,000 per year. If they keep fining those on Wall Street, like Ron Baron just yesterday, they'll be no one earning at least $150,000. Those in Chinatown and those in the Mafia are strictly on a cash basis and not on a reporting basis.
South Korea reported its first suspected SARS case.
Pfizer will close 4 Pharmacia Corp. facilities in the Chicago area that employ 1500 people.
St. Anthony's Dining Room in San Francisco opened in 1950 and just served its 30 millionth meal. They serve 2000 lunches each day, and have found that, since 1995, the percent of homeless diners who are seniors grew from 6 to 32% and families dining increased from none to 40% in 2002. More than 70% of those eating lunch have been doing so for more than a year. Just another indication of why the Administration economic plan is not working. Too many people are not working.
The 15 largest defined-benefit corporate pension funds covering workers in Washington, Oregon, and Idaho had a shortfall of $9.5 billion. A year before they had a billion dollar surplus.
The Nasdaq is up 10% year to date. That's like a $1 stock going to $1.10. In the past 5 or 6 weeks the semiconductor index is up over 30% and the networking index is up about 20%. There have been these kind of rallies over the past three years. It gives everyone hope- just like Greenspan did yesterday.
Half the battle is just showing up. Give the man credit. He is recovering from a medical procedure, and I wish him the best. I will not criticize anyone who does their absolute best. What was he to say? That business conditions are lame? That the Treasury is running out of money again? That business spending is a misnomer? Give the man credit. He said there would be an uptick for the economy. He just didn't know when and how strong the upturn would be or how lengthy it would be. He said tax cuts are fine as long as you offset them with spending cuts and/or tax increases (the latter I wish he hadn't said. The Congress doesn't need impetus in that area). Give the man credit. He was honest. Lingering business caution could be an impediment to improved economic performance. He said the Fed has a hard time figuring out which way the immediate trends are pointing. It's not easy out there. The man is ok.
Richard Clarida, the U.S. treasury's chief economist is leaving that post next month. The deputy secretary of the U.S. Treasury left in February, and there have been other departures. You can't blame them for leaving a sinking ship.
Berkshire Hathaway has purchased 13.35% of PetroChina, which is selling for about 6 times earnings. I sure would rather invest in that stock at that valuation rather than let's say a Cisco. Talking about Cisco, the latter's CEO said jobs might be shifted overseas if tech companies are forced to account for stock options as a business expense. Maybe someone should tell Chambers that outsourcing to India will continue whether he likes expensing stock options or not. If he wants to make idle threats, he should threaten to improve his own performance.
The U.S. will cut 6000 airport screening jobs. They were just getting the hang of it. Does this mean there will be less future airline travel in the U.S.?
The WHO says SARS is here to stay. As I have been stating, SARS and AIDS have a good deal in common.
The death toll from SARS in Canada rose to 23. SARS patients in Hong Kong have had relapses. There are about 9000 people quarantined in China.
Singapore Airlines asked 6000 employees to take leave.
Asyst Technologies, a semiconductor company in Fremont, fired 30% of their workforce.
April was the best month for the Dow and the S&P 500 since October. The UK's FTSE had its best monthly gain in 5 years in April. It's too bad every month is not like April, 2003.
The WSJ reports that the Bush Administration has a broad plan for Iraq's economy. I hope it's better than the plan they've had for the U.S. economy.
The Chicago PMI was 47.6 in April vs 48.4 in March. The index was poor for New York too. Talking about N.Y., the City is facing a $3.8 billion budget deficit, and will raise the sales tax to 8.75%, and there will be an income tax surcharge on those earning at least $150,000 per year. If they keep fining those on Wall Street, like Ron Baron just yesterday, they'll be no one earning at least $150,000. Those in Chinatown and those in the Mafia are strictly on a cash basis and not on a reporting basis.
South Korea reported its first suspected SARS case.
Pfizer will close 4 Pharmacia Corp. facilities in the Chicago area that employ 1500 people.
St. Anthony's Dining Room in San Francisco opened in 1950 and just served its 30 millionth meal. They serve 2000 lunches each day, and have found that, since 1995, the percent of homeless diners who are seniors grew from 6 to 32% and families dining increased from none to 40% in 2002. More than 70% of those eating lunch have been doing so for more than a year. Just another indication of why the Administration economic plan is not working. Too many people are not working.
The 15 largest defined-benefit corporate pension funds covering workers in Washington, Oregon, and Idaho had a shortfall of $9.5 billion. A year before they had a billion dollar surplus.
The Nasdaq is up 10% year to date. That's like a $1 stock going to $1.10. In the past 5 or 6 weeks the semiconductor index is up over 30% and the networking index is up about 20%. There have been these kind of rallies over the past three years. It gives everyone hope- just like Greenspan did yesterday.
Wednesday, April 30, 2003
4/30/03 The New Color Of Money
For the first time in almost 100 years there will be a new color design for the $20 bill. There is a small problem. It will be crafted with disappearing ink. The reason is simple. On February 20th the Treasury announced they had reached the debt ceiling limit. Then with some juggling they stated they could see their way thru to about mid-July. I never believed that statement. Our "budgeteers" were banking on a larger amount of income tax receipts come April 15 than I did. In addition, I was correct in assessing that the economy was much weaker than those in DC had projected. As such, in a few weeks the Treasury will have hit the $6.4 trillion debt ceiling, and they maintain there is no more room to pay bills and/or debts coming due. Reducing government salaries and other expenses do not seem to be a serious alternative. It should be noted that the debt ceiling was raised by $450 billion in June, 2002. The fixes are coming with greater alacrity and in larger amounts. Don't worry your Congress is coming to the rescue with a trillion dollar increase in the debt ceiling by the end of May. Prior to June, 2002, Congress had last raised the debt limit to $5.95 trillion in the Balanced Budget Act of 1997. The CBO had projected in January 2001 that the $5.95 trillion would not be reached before fiscal year 2009. In other words, the CBO's projections are not worth the paper on which they are printed. For my money, the entire work of the CBO should be outsourced to India.
Some opponents of raising the debt limit argue that it is one way of trying to control or at least protest the level of government spending and as a method of constraining future spending. Obviously, the protests have been meek, to say the least. I can barely hear a gasp. These guys can't even talk a good game. Why? It's OPM. It's ours and not theirs. In addition, the government rarely has a layoff and they continue to cash salary checks.
Prior to 1917, Congress approved each issuance of debt, including its interest rate and term. The basis for our current debt-limit law is the Second Liberty Bond Act of 1917. That is not related to the Patriot Act. The initial debt limit was $11.5 billion. Between January, 1980 and September, 1997 the debt limit was increased or extended by Congress 37 times. The last time the debt ceiling was increased about $1 trillion in one year was between 1990 and 1991. The senior Mr. Bush was then President.
All of the above makes it sound like business is usual. It's not. The budget deficit this fiscal year is projected by Morgan Stanley at $370 billion; by Goldman Sachs at $425 billion; by Citicorp at $500 billion; and by me at $465 billion. Depending on the consumer, SARS, the West Nile virus, and other possible happenings all of these estimates may be low. They won't be very high. That's for certain. The CBO is still forecasting a budget deficit of $300 billion. Either they don't have a clue or they are afraid to tell the truth. Both could be the case.
It is quite plain to see that our United States is on the verge of an economic calamity. We have robbed Peter to pay Paul for the last time. Everett Dirksen said it better than I ever could. He said "I know how easy it is to say 'Oh, it is only $20,000,000,' or 'it is only $80,000,000' or it is only $240,000,000 a year that will be taken out of the pockets of the taxpayer.' But where will it finally stop? I do not know. An old man once taught me what a million is. He said 'look at your watch, and watch the second hand. You can see it every second, every minute, every day, every night, every week, every month, every year- and in 3 years it would go around 1,000,000 times." Well, time has run out on our Treasury and on our $20 dollar bill with the disappearing ink and even on the nickel with the new design. Without any substance the designs mean diddly. Foreigners are not going to fund our deficits. We are no longer a safe haven. The smart money started to lessen their U.S. assets in 2002. The dollar is depreciating. The euro is not. The Swiss franc is not. The currencies in New Zealand and Norway are not. There are plenty of alternatives. We may have superiority in weaponry but we also stand head and shoulders above all other nations in spending and lack of fiscal restraint. The euro countries are restricted to where the budget deficit cannot exceed 3% of their GDP. We couldn't even qualify for entry into the euro countries. That's pathetic.
Twenty nine states face the worst budget crisis in a century. If the President's proposed tax cuts are enacted without corresponding spending cuts, most states will lose millions of dollars in funding for education and job training; health care; security; transportation; support for low-income families; environmental programs; and agriculture. Many states are in dire shape. In Pennsylvania, since January 2001, 85,000 jobs have been lost; 1.2 million individuals haven't health care coverage; 1,158,000 of their citizens are poor; there are oversized classes and other educational deficiencies; 37% of the roads are rated poor and 42% of the bridges have structural deficiencies; and Pennsylvania has a total budget shortfall of $2.4 billion.
Everett Dirksen stood, in my view, head and shoulders above those in Congress today. Maybe we can learn from his wisdom from 1959 when he said "with respect to authorization bills, I do not want the Congress or the country to commit fiscal suicide on the installment plan. I never think of the fiscal situation without being reminded of a Government project out home many years ago. It was a make-work project. There was a huge hole in the street. When the work had been finished and the hole filled, there was a great mound of earth which constituted a traffic hazard. The gentlemen wielding the shovels did not know what to do. Finally they held a conference on the curb. Someone said I will tell you how to get rid of the mound of earth. We will just dig a hole deeper."
Yesterday it was reported that consumer confidence in April jumped 20 points. The last time that happened was after the Gulf War in 1991, the same year the debt ceiling limit was raised by $1 trillion. This improved reading may not be telling the true spending story. With Easter in April this year, retailers had expected a gangbusters month. Now it looks like April retail sales may only be up a bit over 2%. Profit forecasts will need to be reduced. Northern Trust Corp. said in a note to clients that "we think that the dire outlook for jobs is an underlying factor in restraining the consumer from more robust spending."
The Texas Business Leaders Confidence Index dropped to 52, down six points from the prior quarter. Only 38% of those polled expect the state's economy to strengthen in the second quarter.
State and local government compensation increased about 1% in the first quarter, and that, in the face of soaring deficits.
Japan's industrial output fell unexpectedly in March and the Bank of Japan has decided to ease monetary policy further and to inject more money into the economy.
The Bank of Japan said there is "considerable uncertainty" about the outlook for the recovery of the U.S. and European economies.
Asia accounts for 40% of Japan's exports and SARS will diminish those exports.
The SARS virus is threatening to overwhelm hospitals in Beijing. About 10,000 people have been quarantined.
China's Prime Minister said "there is a need for us to recognize the fact that the SARS epidemic is going to be a long-term, a complex and relapsing epidemic."
Singapore warned of higher unemployment as visitor arrivals plunged and regional airline SILKAIR laid off staff.
On Tuesday Hong Kong reported another 12 SARS deaths and 15 fresh cases.
Health experts suspect China has had more than the 148 reported SARS deaths and more than their 3000 SARS cases.
The dollar reached a new four-year low vs the euro.
In June,1965 Everett Dirksen said "if some people get any cheer out of a $328 billion debt ceiling, I do not find very much to cheer about concerning it." Well, at this time, it is about 20 times larger than it was in 1965. I wonder whether today's GDP is 20 times larger than it was in 1965. By the end of May, the debt ceiling will be 22 1/2 times the size it was in 1965. How many in Congress will be cheering? For me, it will be like watching Rome burn as the unemployment ranks increase along with the bread lines. When the stock market crashes, we can look in the mirror and congratulate ourselves for a job well done at the voting booths.
For the first time in almost 100 years there will be a new color design for the $20 bill. There is a small problem. It will be crafted with disappearing ink. The reason is simple. On February 20th the Treasury announced they had reached the debt ceiling limit. Then with some juggling they stated they could see their way thru to about mid-July. I never believed that statement. Our "budgeteers" were banking on a larger amount of income tax receipts come April 15 than I did. In addition, I was correct in assessing that the economy was much weaker than those in DC had projected. As such, in a few weeks the Treasury will have hit the $6.4 trillion debt ceiling, and they maintain there is no more room to pay bills and/or debts coming due. Reducing government salaries and other expenses do not seem to be a serious alternative. It should be noted that the debt ceiling was raised by $450 billion in June, 2002. The fixes are coming with greater alacrity and in larger amounts. Don't worry your Congress is coming to the rescue with a trillion dollar increase in the debt ceiling by the end of May. Prior to June, 2002, Congress had last raised the debt limit to $5.95 trillion in the Balanced Budget Act of 1997. The CBO had projected in January 2001 that the $5.95 trillion would not be reached before fiscal year 2009. In other words, the CBO's projections are not worth the paper on which they are printed. For my money, the entire work of the CBO should be outsourced to India.
Some opponents of raising the debt limit argue that it is one way of trying to control or at least protest the level of government spending and as a method of constraining future spending. Obviously, the protests have been meek, to say the least. I can barely hear a gasp. These guys can't even talk a good game. Why? It's OPM. It's ours and not theirs. In addition, the government rarely has a layoff and they continue to cash salary checks.
Prior to 1917, Congress approved each issuance of debt, including its interest rate and term. The basis for our current debt-limit law is the Second Liberty Bond Act of 1917. That is not related to the Patriot Act. The initial debt limit was $11.5 billion. Between January, 1980 and September, 1997 the debt limit was increased or extended by Congress 37 times. The last time the debt ceiling was increased about $1 trillion in one year was between 1990 and 1991. The senior Mr. Bush was then President.
All of the above makes it sound like business is usual. It's not. The budget deficit this fiscal year is projected by Morgan Stanley at $370 billion; by Goldman Sachs at $425 billion; by Citicorp at $500 billion; and by me at $465 billion. Depending on the consumer, SARS, the West Nile virus, and other possible happenings all of these estimates may be low. They won't be very high. That's for certain. The CBO is still forecasting a budget deficit of $300 billion. Either they don't have a clue or they are afraid to tell the truth. Both could be the case.
It is quite plain to see that our United States is on the verge of an economic calamity. We have robbed Peter to pay Paul for the last time. Everett Dirksen said it better than I ever could. He said "I know how easy it is to say 'Oh, it is only $20,000,000,' or 'it is only $80,000,000' or it is only $240,000,000 a year that will be taken out of the pockets of the taxpayer.' But where will it finally stop? I do not know. An old man once taught me what a million is. He said 'look at your watch, and watch the second hand. You can see it every second, every minute, every day, every night, every week, every month, every year- and in 3 years it would go around 1,000,000 times." Well, time has run out on our Treasury and on our $20 dollar bill with the disappearing ink and even on the nickel with the new design. Without any substance the designs mean diddly. Foreigners are not going to fund our deficits. We are no longer a safe haven. The smart money started to lessen their U.S. assets in 2002. The dollar is depreciating. The euro is not. The Swiss franc is not. The currencies in New Zealand and Norway are not. There are plenty of alternatives. We may have superiority in weaponry but we also stand head and shoulders above all other nations in spending and lack of fiscal restraint. The euro countries are restricted to where the budget deficit cannot exceed 3% of their GDP. We couldn't even qualify for entry into the euro countries. That's pathetic.
Twenty nine states face the worst budget crisis in a century. If the President's proposed tax cuts are enacted without corresponding spending cuts, most states will lose millions of dollars in funding for education and job training; health care; security; transportation; support for low-income families; environmental programs; and agriculture. Many states are in dire shape. In Pennsylvania, since January 2001, 85,000 jobs have been lost; 1.2 million individuals haven't health care coverage; 1,158,000 of their citizens are poor; there are oversized classes and other educational deficiencies; 37% of the roads are rated poor and 42% of the bridges have structural deficiencies; and Pennsylvania has a total budget shortfall of $2.4 billion.
Everett Dirksen stood, in my view, head and shoulders above those in Congress today. Maybe we can learn from his wisdom from 1959 when he said "with respect to authorization bills, I do not want the Congress or the country to commit fiscal suicide on the installment plan. I never think of the fiscal situation without being reminded of a Government project out home many years ago. It was a make-work project. There was a huge hole in the street. When the work had been finished and the hole filled, there was a great mound of earth which constituted a traffic hazard. The gentlemen wielding the shovels did not know what to do. Finally they held a conference on the curb. Someone said I will tell you how to get rid of the mound of earth. We will just dig a hole deeper."
Yesterday it was reported that consumer confidence in April jumped 20 points. The last time that happened was after the Gulf War in 1991, the same year the debt ceiling limit was raised by $1 trillion. This improved reading may not be telling the true spending story. With Easter in April this year, retailers had expected a gangbusters month. Now it looks like April retail sales may only be up a bit over 2%. Profit forecasts will need to be reduced. Northern Trust Corp. said in a note to clients that "we think that the dire outlook for jobs is an underlying factor in restraining the consumer from more robust spending."
The Texas Business Leaders Confidence Index dropped to 52, down six points from the prior quarter. Only 38% of those polled expect the state's economy to strengthen in the second quarter.
State and local government compensation increased about 1% in the first quarter, and that, in the face of soaring deficits.
Japan's industrial output fell unexpectedly in March and the Bank of Japan has decided to ease monetary policy further and to inject more money into the economy.
The Bank of Japan said there is "considerable uncertainty" about the outlook for the recovery of the U.S. and European economies.
Asia accounts for 40% of Japan's exports and SARS will diminish those exports.
The SARS virus is threatening to overwhelm hospitals in Beijing. About 10,000 people have been quarantined.
China's Prime Minister said "there is a need for us to recognize the fact that the SARS epidemic is going to be a long-term, a complex and relapsing epidemic."
Singapore warned of higher unemployment as visitor arrivals plunged and regional airline SILKAIR laid off staff.
On Tuesday Hong Kong reported another 12 SARS deaths and 15 fresh cases.
Health experts suspect China has had more than the 148 reported SARS deaths and more than their 3000 SARS cases.
The dollar reached a new four-year low vs the euro.
In June,1965 Everett Dirksen said "if some people get any cheer out of a $328 billion debt ceiling, I do not find very much to cheer about concerning it." Well, at this time, it is about 20 times larger than it was in 1965. I wonder whether today's GDP is 20 times larger than it was in 1965. By the end of May, the debt ceiling will be 22 1/2 times the size it was in 1965. How many in Congress will be cheering? For me, it will be like watching Rome burn as the unemployment ranks increase along with the bread lines. When the stock market crashes, we can look in the mirror and congratulate ourselves for a job well done at the voting booths.
Tuesday, April 29, 2003
4/29/03 The Tale Of Two Viruses
The U.S. government will borrow a net $79 billion for the April-June quarter, a new record. This is a fiscal disgrace. So is the pending $450 billion budget deficit, which is the direct result of the spending virus in Washington, DC. If any elected person in the halls of Congress votes to cut taxes without imposing concurrent sharp spending reductions, then they should not be re-elected. Only your vote can rid this country of the spending virus. There are no vaccines. When you go to the voting booth, please remember that discretionary government spending is up 33% over the last five years.
In the 1980's Wall Street had Michael Millken and Ivan Boesky. They were fined $500 million and $100 million respectively and were imprisioned. They were a great deal smarter than Jack Grubman and Henry Blodgett, who paid fines of $15 million and $4 million respectively and admitted to no wrongdoing. Meanwhile hundreds and hundreds of millions of dollars, and probably billions, were lost because of Grubman and Blodgett. That was not the case with Millken and Boesky. Grubman and Blodgett and others like them should be imprisoned. The fact that they go free makes the scum virus more likely to spread to further corners of Wall Street. The issue is not that they are banned from Wall Street for life. That's meaningless. They shouldn't have been hired in the first place. Their bosses should also not pass go. They too should go directly to jail.
China will shut its stock exchanges from May 1 thru May 9. If the SARS virus can close their exchanges, then the scum virus should do the same in the U.S. Either run an honest business or close it down. If Warren Buffett and others like him can do without analysts and perform brilliantly, then so can the rest of America. I don't know about you, but I never listened to a word Grubman or Blodgett had to say. When they came on CNBC and were treated like gods, I turned on the mute button.
Ericsson to cut 13,940 workers, Corus another 1150, Goodrich 1700, 60 Eddie Bauer stores to close, and Regal Cruises goes out of business.
One of the reasons for the bullish stance on Wall Street is that the S&P 500 Index currently around 915 was at 800 in March and the Index has been over the 200 day moving average for one week. As such, many are putting money in the market thinking the trend has changed. This is simply a rally in a bear market brought to you by over valuation, over capacity, joblessness, too much debt, too much spending, poor revenue growth, and a scarcity of free cash flow. The Iraq war and SARS have only made future results look bleaker. The worst is not over.
I found an incident rather interesting yesterday. Piper Jaffray, one of the Wall Street firms fined, has an analyst who said that orders for Cisco were above expectations and said that quarterly sales and net income could exceed expectations. He said that information came out of his discussions with management. I thought that companies were suppose to provide guidance to the investing public at one time thru a public release.
China accounts for 10% of PC demand and 15% of cell phone demand. Recent handset sales were down sharply in the past week.
Nearly 75% of Californians say the state is in bad economic times. This is the worst assessment of California's economy in nearly a decade.
If P&G is so optimistic, why have their capital expenditures this year dropped $257 million from 2002?
Gold is at $335 per ounce.
Indonesia is the world's fourth most populated country. Their first SARS death was announced.
Asked if he were confident that the worldwide spread of SARS could be stopped, WHO's Heymann said " No we are not."
Hong Kong is having its first major trade show since the SARS breakout. They expected 4700 exhibitors at the three-day Gifts and Houseware Fare. Only 460 exhibitors showed up. At the Guangzhou Trade Fair in China they took in only $2.2. billion from the 12-day event, and that was down 90% from one year ago.
I don't know whether there is any connection with SARS, the spending virus, or the scum virus but a leading research firm says that 70 million people world-wide are affected by IBS, the irritable bowel syndrome.
In Beijing another nine people died from SARS and 202 newly infected were reported.
Chicago Fed President Moskow: "Data for February and March raise the concern that the veil of uncertainty has masked a more fundamental source of weakness in the business sector."
Argus' Yamarone: "I don't see demand anywhere, domestic or global, being strong enough to turn on existing factories, let alone invest in new ones. I don't want to be pessimistic, but it's real."
Avon's CEO: "I think our heads would be in the sand if we said there's not going to be any impact in the second quarter from SARS."
WHO's head of communicable diseases said China is the key to containing SARS. Premier Wen said "I have come to face reality and the world bravely." That statement and a buck will get him on the bus.
BMC Software's CEO: "Unless SARS gets better soon, I do expect it will have an impact on everybody that does business in Asia Pacific and maybe other parts of the world."
China is Kodak's second-biggest film market after the U.S.
McDonald's said SARS would impact comparable sales at least in the near term.
French business confidence fell in April.
U.S. venture capital spending fell 41% to a six year low in the first quarter.
SARS will hinder travel to Disney's theme parks. They weren't doing too well prior to SARS.
Later this week Alan Greenspan will be giving a speech. I wonder whether he will be able to answer this question- why should there be a boost in investment spending with capacity at 75%? The object of his talk will be to instill confidence in people and to provide hope. The last time I looked at a U.S. dollar it did not say in hope we trust.
CEO pay stands currently at roughly 240 times the pay of the average worker. Scott Klinger studied CEO pay over a 10 year span. Using $10,000 invested in the company of the top-paid CEO, held for one year, then investing the proceeds in the company of the next year's pay leader, and so on, by 2002 that $10,000 was worth $2899 while $10,000 invested in the S&P 500 Index over that 10-year period was worth $22,170.
We hear that worker productivity is at record levels. I suggest that part of the reason is fear of losing the job and the need for the day's pay. Doctors say that the average adult catches two to four colds per year and takes about a week to recover from each. According to the Bureau of Labor Statistics, (I apologize for relying on a government agency) the number of people taking sick or personal days off dropped last year by 200,000 a week nationally as compared with two years earlier. Full-time employees across the country were granted an average of 7.6 sick days last year, and that was down from 8.4 days in 2001. Workplace-productivity experts have coined a term for those employees coming to work sick: "presenteeism."
The U.S. government will borrow a net $79 billion for the April-June quarter, a new record. This is a fiscal disgrace. So is the pending $450 billion budget deficit, which is the direct result of the spending virus in Washington, DC. If any elected person in the halls of Congress votes to cut taxes without imposing concurrent sharp spending reductions, then they should not be re-elected. Only your vote can rid this country of the spending virus. There are no vaccines. When you go to the voting booth, please remember that discretionary government spending is up 33% over the last five years.
In the 1980's Wall Street had Michael Millken and Ivan Boesky. They were fined $500 million and $100 million respectively and were imprisioned. They were a great deal smarter than Jack Grubman and Henry Blodgett, who paid fines of $15 million and $4 million respectively and admitted to no wrongdoing. Meanwhile hundreds and hundreds of millions of dollars, and probably billions, were lost because of Grubman and Blodgett. That was not the case with Millken and Boesky. Grubman and Blodgett and others like them should be imprisoned. The fact that they go free makes the scum virus more likely to spread to further corners of Wall Street. The issue is not that they are banned from Wall Street for life. That's meaningless. They shouldn't have been hired in the first place. Their bosses should also not pass go. They too should go directly to jail.
China will shut its stock exchanges from May 1 thru May 9. If the SARS virus can close their exchanges, then the scum virus should do the same in the U.S. Either run an honest business or close it down. If Warren Buffett and others like him can do without analysts and perform brilliantly, then so can the rest of America. I don't know about you, but I never listened to a word Grubman or Blodgett had to say. When they came on CNBC and were treated like gods, I turned on the mute button.
Ericsson to cut 13,940 workers, Corus another 1150, Goodrich 1700, 60 Eddie Bauer stores to close, and Regal Cruises goes out of business.
One of the reasons for the bullish stance on Wall Street is that the S&P 500 Index currently around 915 was at 800 in March and the Index has been over the 200 day moving average for one week. As such, many are putting money in the market thinking the trend has changed. This is simply a rally in a bear market brought to you by over valuation, over capacity, joblessness, too much debt, too much spending, poor revenue growth, and a scarcity of free cash flow. The Iraq war and SARS have only made future results look bleaker. The worst is not over.
I found an incident rather interesting yesterday. Piper Jaffray, one of the Wall Street firms fined, has an analyst who said that orders for Cisco were above expectations and said that quarterly sales and net income could exceed expectations. He said that information came out of his discussions with management. I thought that companies were suppose to provide guidance to the investing public at one time thru a public release.
China accounts for 10% of PC demand and 15% of cell phone demand. Recent handset sales were down sharply in the past week.
Nearly 75% of Californians say the state is in bad economic times. This is the worst assessment of California's economy in nearly a decade.
If P&G is so optimistic, why have their capital expenditures this year dropped $257 million from 2002?
Gold is at $335 per ounce.
Indonesia is the world's fourth most populated country. Their first SARS death was announced.
Asked if he were confident that the worldwide spread of SARS could be stopped, WHO's Heymann said " No we are not."
Hong Kong is having its first major trade show since the SARS breakout. They expected 4700 exhibitors at the three-day Gifts and Houseware Fare. Only 460 exhibitors showed up. At the Guangzhou Trade Fair in China they took in only $2.2. billion from the 12-day event, and that was down 90% from one year ago.
I don't know whether there is any connection with SARS, the spending virus, or the scum virus but a leading research firm says that 70 million people world-wide are affected by IBS, the irritable bowel syndrome.
In Beijing another nine people died from SARS and 202 newly infected were reported.
Chicago Fed President Moskow: "Data for February and March raise the concern that the veil of uncertainty has masked a more fundamental source of weakness in the business sector."
Argus' Yamarone: "I don't see demand anywhere, domestic or global, being strong enough to turn on existing factories, let alone invest in new ones. I don't want to be pessimistic, but it's real."
Avon's CEO: "I think our heads would be in the sand if we said there's not going to be any impact in the second quarter from SARS."
WHO's head of communicable diseases said China is the key to containing SARS. Premier Wen said "I have come to face reality and the world bravely." That statement and a buck will get him on the bus.
BMC Software's CEO: "Unless SARS gets better soon, I do expect it will have an impact on everybody that does business in Asia Pacific and maybe other parts of the world."
China is Kodak's second-biggest film market after the U.S.
McDonald's said SARS would impact comparable sales at least in the near term.
French business confidence fell in April.
U.S. venture capital spending fell 41% to a six year low in the first quarter.
SARS will hinder travel to Disney's theme parks. They weren't doing too well prior to SARS.
Later this week Alan Greenspan will be giving a speech. I wonder whether he will be able to answer this question- why should there be a boost in investment spending with capacity at 75%? The object of his talk will be to instill confidence in people and to provide hope. The last time I looked at a U.S. dollar it did not say in hope we trust.
CEO pay stands currently at roughly 240 times the pay of the average worker. Scott Klinger studied CEO pay over a 10 year span. Using $10,000 invested in the company of the top-paid CEO, held for one year, then investing the proceeds in the company of the next year's pay leader, and so on, by 2002 that $10,000 was worth $2899 while $10,000 invested in the S&P 500 Index over that 10-year period was worth $22,170.
We hear that worker productivity is at record levels. I suggest that part of the reason is fear of losing the job and the need for the day's pay. Doctors say that the average adult catches two to four colds per year and takes about a week to recover from each. According to the Bureau of Labor Statistics, (I apologize for relying on a government agency) the number of people taking sick or personal days off dropped last year by 200,000 a week nationally as compared with two years earlier. Full-time employees across the country were granted an average of 7.6 sick days last year, and that was down from 8.4 days in 2001. Workplace-productivity experts have coined a term for those employees coming to work sick: "presenteeism."
Monday, April 28, 2003
4/28/03 The Worst Is Over
The WHO said SARS has peaked in Canada, Singapore, Vietnam, and Hong Kong but not in China. I believe we will look back on this statement and say it would have been more accurate to say it peaked for now in those countries. At the moment, the death count from SARS tops 300. Counting non-military casualties, SARS is getting to sound like another Iraq war. Some of the main diffeences appear that SARS does not have the same reconstuction costs, it is a democratic virus, and it will in all likelihood re-appear when the weather gets colder, for example, Hong Kong.
The exodus from Beijing exceeds that of the Jews from Egypt. There are between 100,000 and 200,000 leaving each day. People are rushing out before the authorities seal off the city. Now the virus will be spread into outlying areas where the health resources are truly limited.
Economists have said the global financial fallout from SARS up to this point has reached $30 billion. That sounds low to me.
Canada had another death on Sunday and four others are critically ill in Toronto, and they could soon die.
Japan's latest retail sales declined 1.2%.
Taiwan shares dropped 4% as the SARS virus threatens their economy.
Sony is trading at a 7 1/2 year low, and the Nikkei made a new 20 year low.
Even after the end of the Iraq war, business confidence in Germany fell to the lowest level in 16 months. The euro hit a 4 year high vs the yen.
U.S. oil prices fell once again to their lowest level of the year.
I received numerous emails questioning why I thought President Bush was wrong to say the income for Americans is rising. The latest IRS numbers available are for 2001. There were 130 million individual income-tax returns filed for 2001. According to the IRS, taxable income declined 5.2%. Total income tax decreased 6.8%. Going one step further, we know that the jobless rate has been rising, and that unemployment has been rising, and that the amount of time it takes to find another job is rising, and that taken all together, the jobless, the underemployed, and those having given up trying to find a job after looking for about two years, has created less taxable income and less total income tax for 2002- even though the final IRS numbers are not available. I guarantee that is an accurate statement and so is the one I made stating incomes for Americans are not rising. I bet the President would not bet his re-election on proving me wrong.
Mississippi has a $90 million deficit in Medicaid. In Ohio Medicaid covers one in eight residents. Medicaid covers 36 million disabled and low-income Americans, and it is the second largest expense after education for most of the 50 states.
Global semiconductor sales in the first quarter declined 3.2% from year-earlier levels.
Dr. Isadore Rosenfeld, head cardiologist at Cornell University Medical, said the tests tried so far on the SARS virus has some real problems. Many who have tested negative may still have SARS. In addition, people who lick SARS may get the virus again. He said the mortality rate for people 75 and over is 30%, 65 and over 19%, and for others about 10%. One explanation for differing research on the virus is the possible multiple SARS strains. It is thought there is a spectrum of genetic variation, and it is believed by some researchers that SARS, which is a RNA virus, is prone to mutations. The top scientist for the WHO said different varieties of the virus could explain the disparities in the disease.
The average American spends at least $5000 per year on health care. Inasmuch as the U.S. does not have universal coverage for health care and government-regulated costs, the problems of getting sick has become a national epidemic and potentially much worse than SARS in China. Many businesses are either dropping coverage or asking employees to pay more. It is becoming more unaffordable for those with insurance and for the almost 45 million Americans without insurance. The average person in the U.S. sees a doctor 6 times a year, and we spend well over $1000 each year to see the doctors. In Japan they see doctors 16 times a year. We pay close to $1700 a year per person for hospital services, and that is growing almost monthly. The French and the Germans spend 50% less per person in this area. The average person in Cuba has the same lifespan as in the U.S. but the annual healthcare is only $170 per person. I am well aware of the differences in our health care services from those in Cuba, but are we getting real value? I don't think so, and I think malpractice insurance rates have a good deal to do with the question posed.
The WHO said SARS has peaked in Canada, Singapore, Vietnam, and Hong Kong but not in China. I believe we will look back on this statement and say it would have been more accurate to say it peaked for now in those countries. At the moment, the death count from SARS tops 300. Counting non-military casualties, SARS is getting to sound like another Iraq war. Some of the main diffeences appear that SARS does not have the same reconstuction costs, it is a democratic virus, and it will in all likelihood re-appear when the weather gets colder, for example, Hong Kong.
The exodus from Beijing exceeds that of the Jews from Egypt. There are between 100,000 and 200,000 leaving each day. People are rushing out before the authorities seal off the city. Now the virus will be spread into outlying areas where the health resources are truly limited.
Economists have said the global financial fallout from SARS up to this point has reached $30 billion. That sounds low to me.
Canada had another death on Sunday and four others are critically ill in Toronto, and they could soon die.
Japan's latest retail sales declined 1.2%.
Taiwan shares dropped 4% as the SARS virus threatens their economy.
Sony is trading at a 7 1/2 year low, and the Nikkei made a new 20 year low.
Even after the end of the Iraq war, business confidence in Germany fell to the lowest level in 16 months. The euro hit a 4 year high vs the yen.
U.S. oil prices fell once again to their lowest level of the year.
I received numerous emails questioning why I thought President Bush was wrong to say the income for Americans is rising. The latest IRS numbers available are for 2001. There were 130 million individual income-tax returns filed for 2001. According to the IRS, taxable income declined 5.2%. Total income tax decreased 6.8%. Going one step further, we know that the jobless rate has been rising, and that unemployment has been rising, and that the amount of time it takes to find another job is rising, and that taken all together, the jobless, the underemployed, and those having given up trying to find a job after looking for about two years, has created less taxable income and less total income tax for 2002- even though the final IRS numbers are not available. I guarantee that is an accurate statement and so is the one I made stating incomes for Americans are not rising. I bet the President would not bet his re-election on proving me wrong.
Mississippi has a $90 million deficit in Medicaid. In Ohio Medicaid covers one in eight residents. Medicaid covers 36 million disabled and low-income Americans, and it is the second largest expense after education for most of the 50 states.
Global semiconductor sales in the first quarter declined 3.2% from year-earlier levels.
Dr. Isadore Rosenfeld, head cardiologist at Cornell University Medical, said the tests tried so far on the SARS virus has some real problems. Many who have tested negative may still have SARS. In addition, people who lick SARS may get the virus again. He said the mortality rate for people 75 and over is 30%, 65 and over 19%, and for others about 10%. One explanation for differing research on the virus is the possible multiple SARS strains. It is thought there is a spectrum of genetic variation, and it is believed by some researchers that SARS, which is a RNA virus, is prone to mutations. The top scientist for the WHO said different varieties of the virus could explain the disparities in the disease.
The average American spends at least $5000 per year on health care. Inasmuch as the U.S. does not have universal coverage for health care and government-regulated costs, the problems of getting sick has become a national epidemic and potentially much worse than SARS in China. Many businesses are either dropping coverage or asking employees to pay more. It is becoming more unaffordable for those with insurance and for the almost 45 million Americans without insurance. The average person in the U.S. sees a doctor 6 times a year, and we spend well over $1000 each year to see the doctors. In Japan they see doctors 16 times a year. We pay close to $1700 a year per person for hospital services, and that is growing almost monthly. The French and the Germans spend 50% less per person in this area. The average person in Cuba has the same lifespan as in the U.S. but the annual healthcare is only $170 per person. I am well aware of the differences in our health care services from those in Cuba, but are we getting real value? I don't think so, and I think malpractice insurance rates have a good deal to do with the question posed.
Sunday, April 27, 2003
4/27/03 I'm Bushed
Jed Bush in thanking the NRA: "Were it not for your active involvement, it's safe to say my brother would not be president of the United States." He noted that 48% of the voters in the 2000 presidential race were gun owners. Jed Bush went on to say "the sound of our guns is the sound of freedom." It's our constitutional right to bear arms; however, to applaud the sound of guns is, in my opinion, irresponsible and reprehensible. Maybe carrying a gun makes one feel like a tough guy. I don't know. I never have even held a gun in my hand. Then again, I use suntan lotion so my neck won't get red. I try to prevent cancers of all kinds.
If Governor Bush's remarks were not enough, I was faced with the words from his brother, President Bush, who stated "America's families are seeing their incomes on the rise." A more appropriate statement of reality might have been that there are 8 million unemployed Americans, and that does not include the 5 million Americans who aren't counted in the monthly numbers who earn too little to cover their rent and other necessary expenses. The number of the "underemployed" has grown 41% over the past two years, and characterizes those taking part-time jobs and/or low-paying jobs. Then there are the 500,000 "discouraged jobless" who have stopped looking for work after almost two years of trying. Taken together, the unemployment rate of 5.8% jumps to at least 10.5%. Yes, you are right. I have mentioned this in prior blogs. I felt a need to mention it again in the hopes that our President might take notice of these numbers. The voters will when the next election comes around.
Mexico's Environmental Ministry estimates that in 1960 each of its 35 million people generated one-half a pound of refuse, and most was biodegradable. Today there are more than 100 million Mexicans each producing two pounds of rubbish a day, and much of it is plastic wrappers and bottles that are not biodegradable. Officials say untreated municipal sewage or toxic waste are more urgent problems than refuse. I would not want to live along the waterways bordering Mexico. Now I know why so many Texans bear arms. Many are trying to shoot the sewage and toxic waste flowing towards them from Mexico.
Maybe because of SARS many have forgotten about the West Nile infection which hit 46 states last year up from 10 states in 2001. In 2002 the virus killed 284 people and caused serious illness in more than 4000. Temperatures are beginning to warm and mosquitoes start to hatch. Up to this point, predictions about the West Nile have been wrong.
Twenty miles north of Tikrit in Iraq our "Buffalo Soldiers" found fourteen 50-gallon drums with liquids testing positive for cyclo-sarin. They are thought to be part of two mobile labs.
Between 2004 and 2013 the CBO stated the president's tax proposals would add $621 billion to mandatory spending. In addition, during that time period, analysts have stated the proposals would reduce revenues by $1.5 trillion. Maybe a cut in spending might be in order. Fiscal restraint is a bit like chicken soup. It can't hurt.
The British pound has fallen 12% vs the euro in the past year and the FTSE has declined 25% during this time. The British budget deficit will widen to $43 billion this year, and the pound is at its lowest level in four years.
U.S. customers buy about 20% of the goods exported by the twelve euro-based countries.
GlaxoSmithKline generates 50% of its sales in the U.S. A weak dollar will hurt their results as it will DaimlerChrysler, Schering AG, Pechiney SA, AstraZeneca Plc, Unilever, Ericsson AB, Nestle SA, Michelin, and others. It should be noted that currency rates can be hedged successfully, and I noted in a prior blog how hedging oil contracts assisted Southwest Airlines in the first quarter. If companies remain unhedged in this world of wide currency fluctuations, it only reflects inept managements.
Forty two per cent of employers surveyed said they expect to cut college hiring.
The average stock mutual fund investor has lost almost $36,000 during the past three years. When starting from a smaller base, recouping losses becomes a much more difficult achievement. If a stock goes from $10 to $5, the drop is 50%. To reverse and go from $5 to $10 requires a gain of 100%. That's why recouping losses takes a long period of time. In some cases, after bear market declines, it has taken 10 to 20 years.
Taiwan said today that it would bar visitors from Hong Kong, China, Singapore, and Canada. Taiwan's Premier said "fighting the epidemic is like fighting a war. We face an invisible enemy (SARS)." The probable cases in Taiwan jumped from 33 to 55 and suspect cases from 50 to 72. Sunday marked the first SARS death in Taipei.
The SARS mortality rate started at 4%, rose to 5%, then 6%, and is now thought to be 10%. China and Hong Kong each have reported 122 deaths and Singapore and Canada each 19.
Beijing has ordered the closure of theaters, cinemas, dance halls, and other entertainment venues in an attempt to control SARS. Beijing's Ditan Hospital was the third of the capital's medical centers to be shut in recent days.
In China, almost 40,000 students hoping to study at U.S. universities next year may miss the deadline because the Educational Testing Service has suspended administering several tests in China. The ETS, located in Princeton, N.J., said China had requested the suspension.
WHO official Mark Salter told reporters the search for an effective vaccine to stem the SARS pandemic would take time. He said " I think we are looking at two years, three years, maybe, before a vaccine."
Dr. David Heymann, the WHO's head of communicable diseases, said "we don't know what this disease would do in immunity-suppressed populations."
Jed Bush in thanking the NRA: "Were it not for your active involvement, it's safe to say my brother would not be president of the United States." He noted that 48% of the voters in the 2000 presidential race were gun owners. Jed Bush went on to say "the sound of our guns is the sound of freedom." It's our constitutional right to bear arms; however, to applaud the sound of guns is, in my opinion, irresponsible and reprehensible. Maybe carrying a gun makes one feel like a tough guy. I don't know. I never have even held a gun in my hand. Then again, I use suntan lotion so my neck won't get red. I try to prevent cancers of all kinds.
If Governor Bush's remarks were not enough, I was faced with the words from his brother, President Bush, who stated "America's families are seeing their incomes on the rise." A more appropriate statement of reality might have been that there are 8 million unemployed Americans, and that does not include the 5 million Americans who aren't counted in the monthly numbers who earn too little to cover their rent and other necessary expenses. The number of the "underemployed" has grown 41% over the past two years, and characterizes those taking part-time jobs and/or low-paying jobs. Then there are the 500,000 "discouraged jobless" who have stopped looking for work after almost two years of trying. Taken together, the unemployment rate of 5.8% jumps to at least 10.5%. Yes, you are right. I have mentioned this in prior blogs. I felt a need to mention it again in the hopes that our President might take notice of these numbers. The voters will when the next election comes around.
Mexico's Environmental Ministry estimates that in 1960 each of its 35 million people generated one-half a pound of refuse, and most was biodegradable. Today there are more than 100 million Mexicans each producing two pounds of rubbish a day, and much of it is plastic wrappers and bottles that are not biodegradable. Officials say untreated municipal sewage or toxic waste are more urgent problems than refuse. I would not want to live along the waterways bordering Mexico. Now I know why so many Texans bear arms. Many are trying to shoot the sewage and toxic waste flowing towards them from Mexico.
Maybe because of SARS many have forgotten about the West Nile infection which hit 46 states last year up from 10 states in 2001. In 2002 the virus killed 284 people and caused serious illness in more than 4000. Temperatures are beginning to warm and mosquitoes start to hatch. Up to this point, predictions about the West Nile have been wrong.
Twenty miles north of Tikrit in Iraq our "Buffalo Soldiers" found fourteen 50-gallon drums with liquids testing positive for cyclo-sarin. They are thought to be part of two mobile labs.
Between 2004 and 2013 the CBO stated the president's tax proposals would add $621 billion to mandatory spending. In addition, during that time period, analysts have stated the proposals would reduce revenues by $1.5 trillion. Maybe a cut in spending might be in order. Fiscal restraint is a bit like chicken soup. It can't hurt.
The British pound has fallen 12% vs the euro in the past year and the FTSE has declined 25% during this time. The British budget deficit will widen to $43 billion this year, and the pound is at its lowest level in four years.
U.S. customers buy about 20% of the goods exported by the twelve euro-based countries.
GlaxoSmithKline generates 50% of its sales in the U.S. A weak dollar will hurt their results as it will DaimlerChrysler, Schering AG, Pechiney SA, AstraZeneca Plc, Unilever, Ericsson AB, Nestle SA, Michelin, and others. It should be noted that currency rates can be hedged successfully, and I noted in a prior blog how hedging oil contracts assisted Southwest Airlines in the first quarter. If companies remain unhedged in this world of wide currency fluctuations, it only reflects inept managements.
Forty two per cent of employers surveyed said they expect to cut college hiring.
The average stock mutual fund investor has lost almost $36,000 during the past three years. When starting from a smaller base, recouping losses becomes a much more difficult achievement. If a stock goes from $10 to $5, the drop is 50%. To reverse and go from $5 to $10 requires a gain of 100%. That's why recouping losses takes a long period of time. In some cases, after bear market declines, it has taken 10 to 20 years.
Taiwan said today that it would bar visitors from Hong Kong, China, Singapore, and Canada. Taiwan's Premier said "fighting the epidemic is like fighting a war. We face an invisible enemy (SARS)." The probable cases in Taiwan jumped from 33 to 55 and suspect cases from 50 to 72. Sunday marked the first SARS death in Taipei.
The SARS mortality rate started at 4%, rose to 5%, then 6%, and is now thought to be 10%. China and Hong Kong each have reported 122 deaths and Singapore and Canada each 19.
Beijing has ordered the closure of theaters, cinemas, dance halls, and other entertainment venues in an attempt to control SARS. Beijing's Ditan Hospital was the third of the capital's medical centers to be shut in recent days.
In China, almost 40,000 students hoping to study at U.S. universities next year may miss the deadline because the Educational Testing Service has suspended administering several tests in China. The ETS, located in Princeton, N.J., said China had requested the suspension.
WHO official Mark Salter told reporters the search for an effective vaccine to stem the SARS pandemic would take time. He said " I think we are looking at two years, three years, maybe, before a vaccine."
Dr. David Heymann, the WHO's head of communicable diseases, said "we don't know what this disease would do in immunity-suppressed populations."
Saturday, April 26, 2003
4/26/03 Zorbing
Zorbing has its origins in New Zealand, the same country which brought the world bungy jumping. Despite the fact that the Zorb can pick up some pretty hefty speeds along its journey, there has never been a serious accident. You can Zorb on the hills, on snow, and on water. The Zorb is a clear bubble-like, inflatable 10.5 foot sphere with a 3.9 foot inner chamber. Air cushioning keeps the Zorber safe inside as they hurtle down the hill or along the water. This is considered an extreme sport, and may be coming to your neighborhood. It arrives on one of Boston's rivers today.
I mention Zorbing not just because it looks like fun but also because looks can be deceiving. On looking at tapes of Zorbing you might think it could be dangerous. The design, however, successfully eliminates the danger. That brings me to SARS. In the U.S. there might be fear from listening to the news and reading the headlines, but the reality of the danger hasn't really been understood. I know that is true on Wall Street. Yet, there are several companies that have mentioned SARS in their recent news releases. Analysts have looked down on those companies as making excuses for possible poor future results. I suggest Wall Street is all wet. Sybase has temporarily closed its offices in Beijing and Hong Kong out of the fear of the spreading SARS epidemic. The Sybase CEO said only yesterday "I am worried, the uncertainty kills markets. It's all a matter of confidence and if every day there are more cases and more people die, the impact will be quite dramatic by the end of the June quarter." We are talking uncertainty, lack of confidence, fear, and possible death. That combination can impact the social and financial fiber of any community on the globe. Shigeru Omi, head of the WHO's Western Pacific regional office, said "the threat posed by SARS is unprecedented. Tourism has almost disappeared. Normal life has also been severely disrupted."
When we look at the economies across the globe, the facts show weakness in the US., euro-denominated countries, Japan, and the U.K. Non-Japan Asia was the fastest growing region of the world economy last year, and China had extraordinary GDP growth in the first quarter- prior to their disclosing the onset of SARS. Asia ex-Japan and South Korea accounted for about 45% of global trade volume in 2002, and the OECD said they were expected to account for over 30% this year, but that was before the fallout from SARS which began in April. Even though Japan has had only two possible SARS cases reported, their Finance Minister is worried that SARS will have a serious impact on Japan's domestic economy. It's not just travel, tourism, shopping, trade, demand for industrial imports like metals and rubber, but also the risk to the global supply chain, and this was even mentioned in the latest Beige Book. Unlike Zorbing, SARS does not have a built-in design to cushion the danger as it spirals and spreads and picks up speed. A global impact on business has begun. This is not a short-run problem. As we go into summer, a virus becomes less potent, but then the weather changes
and it will spiral again. There truly is a growing level of ucertainty. It's no wonder that Japan's Nikkei closed at a new 20-year low.
Business investment fell at a 4.2% annual rate in the first quarter. That was before SARS became a front page fear. SARS can only further dampen the chances for a pick-up in business spending. I believe that is true too of consumer spending, and in the first quarter that spending was the slowest in a decade. Since the consumer accounts for almost 70% of our economy, it is only prudent to have a negative outlook going forward.
Taiwan quarantined over 1100 doctors, nurses, and patients in a hospital.
Three more deaths were reported yesterday in Toronto and eight new cases among health workers. Toronto continues to export SARS to other countries, and that includes the U.S.
Nineteen people have died in Singapore, and 2800 individuals have been quarantined.
WestPoint Stevens to cut 320 jobs, Reader's Digest 200 workers, and EDS to have an undisclosed number of layoffs.
The PC and cell phone market have depended on Asia for a good part of its growth. With SARS, a portion of that demand has been quarantined. Channel inventories are high as end users disappear from view and hide behind masks. Quarterly forecasts will be guided lower- much much lower- and stock prices will follow south.
The S&P posted its biggest decline in two weeks.
Warren Buffett: "No reason to get puffed up because I have a lot of money."
There is a fear that SARS has been significantly understated in Shanghai.
The dollar has lost 19% against the euro in the past 12 months.
Volkswagen said the drop in the dollar will hurt their sales and earnings this year, and that operating profit in 2003 will fall for the second straight year.
GM will trim production 10% in the second quarter and Ford 17%.
Robert Ardrey: "You can't say civilization isn't advancing. In every war they kill you in a new way."
NYC may legalize video slot machines in an effort to close the $3.7 billion budget gap. Just don't cough and sneeze around the machines.
Low-cost cigarettes are eating into sales for RJ Reynolds and Philip Morris. RJR cut its earnings forecast by about 50%. When tough economic times hit, price becomes more important, and brand items take more of a back seat.
Zorbing has its origins in New Zealand, the same country which brought the world bungy jumping. Despite the fact that the Zorb can pick up some pretty hefty speeds along its journey, there has never been a serious accident. You can Zorb on the hills, on snow, and on water. The Zorb is a clear bubble-like, inflatable 10.5 foot sphere with a 3.9 foot inner chamber. Air cushioning keeps the Zorber safe inside as they hurtle down the hill or along the water. This is considered an extreme sport, and may be coming to your neighborhood. It arrives on one of Boston's rivers today.
I mention Zorbing not just because it looks like fun but also because looks can be deceiving. On looking at tapes of Zorbing you might think it could be dangerous. The design, however, successfully eliminates the danger. That brings me to SARS. In the U.S. there might be fear from listening to the news and reading the headlines, but the reality of the danger hasn't really been understood. I know that is true on Wall Street. Yet, there are several companies that have mentioned SARS in their recent news releases. Analysts have looked down on those companies as making excuses for possible poor future results. I suggest Wall Street is all wet. Sybase has temporarily closed its offices in Beijing and Hong Kong out of the fear of the spreading SARS epidemic. The Sybase CEO said only yesterday "I am worried, the uncertainty kills markets. It's all a matter of confidence and if every day there are more cases and more people die, the impact will be quite dramatic by the end of the June quarter." We are talking uncertainty, lack of confidence, fear, and possible death. That combination can impact the social and financial fiber of any community on the globe. Shigeru Omi, head of the WHO's Western Pacific regional office, said "the threat posed by SARS is unprecedented. Tourism has almost disappeared. Normal life has also been severely disrupted."
When we look at the economies across the globe, the facts show weakness in the US., euro-denominated countries, Japan, and the U.K. Non-Japan Asia was the fastest growing region of the world economy last year, and China had extraordinary GDP growth in the first quarter- prior to their disclosing the onset of SARS. Asia ex-Japan and South Korea accounted for about 45% of global trade volume in 2002, and the OECD said they were expected to account for over 30% this year, but that was before the fallout from SARS which began in April. Even though Japan has had only two possible SARS cases reported, their Finance Minister is worried that SARS will have a serious impact on Japan's domestic economy. It's not just travel, tourism, shopping, trade, demand for industrial imports like metals and rubber, but also the risk to the global supply chain, and this was even mentioned in the latest Beige Book. Unlike Zorbing, SARS does not have a built-in design to cushion the danger as it spirals and spreads and picks up speed. A global impact on business has begun. This is not a short-run problem. As we go into summer, a virus becomes less potent, but then the weather changes
and it will spiral again. There truly is a growing level of ucertainty. It's no wonder that Japan's Nikkei closed at a new 20-year low.
Business investment fell at a 4.2% annual rate in the first quarter. That was before SARS became a front page fear. SARS can only further dampen the chances for a pick-up in business spending. I believe that is true too of consumer spending, and in the first quarter that spending was the slowest in a decade. Since the consumer accounts for almost 70% of our economy, it is only prudent to have a negative outlook going forward.
Taiwan quarantined over 1100 doctors, nurses, and patients in a hospital.
Three more deaths were reported yesterday in Toronto and eight new cases among health workers. Toronto continues to export SARS to other countries, and that includes the U.S.
Nineteen people have died in Singapore, and 2800 individuals have been quarantined.
WestPoint Stevens to cut 320 jobs, Reader's Digest 200 workers, and EDS to have an undisclosed number of layoffs.
The PC and cell phone market have depended on Asia for a good part of its growth. With SARS, a portion of that demand has been quarantined. Channel inventories are high as end users disappear from view and hide behind masks. Quarterly forecasts will be guided lower- much much lower- and stock prices will follow south.
The S&P posted its biggest decline in two weeks.
Warren Buffett: "No reason to get puffed up because I have a lot of money."
There is a fear that SARS has been significantly understated in Shanghai.
The dollar has lost 19% against the euro in the past 12 months.
Volkswagen said the drop in the dollar will hurt their sales and earnings this year, and that operating profit in 2003 will fall for the second straight year.
GM will trim production 10% in the second quarter and Ford 17%.
Robert Ardrey: "You can't say civilization isn't advancing. In every war they kill you in a new way."
NYC may legalize video slot machines in an effort to close the $3.7 billion budget gap. Just don't cough and sneeze around the machines.
Low-cost cigarettes are eating into sales for RJ Reynolds and Philip Morris. RJR cut its earnings forecast by about 50%. When tough economic times hit, price becomes more important, and brand items take more of a back seat.
Friday, April 25, 2003
4/25/03 Thinking Is Not Necessarily Knowing.
Wall Street and the Iraq war have one thing in common- you think you know but you don't really know. Yesterday President Bush provided the first public indication that his Administration didn't know where the WMD are in Iraq. I alluded to that in yesterday's blog. The President said "But we know he had them. And whether he destroyed them, moved them or hid them, we're going to find out the truth." I believe the President. I believe he thought he knew where the WMD were located. They had 100 possible sites with some evidence leading to that conclusion. David Albright, a former nuclear-weapons inspector in Iraq, said he had believed that the Aministration was overstating the likelihood that Iraq had rebuilt its weapons program. He said "If there are no weapons of mass destruction, I'll be mad as hell. I certainly accepted the administration claims on chemical and biological weapons. I figured they were telling the truth. If there is no massive arsenal, I will feel taken. Because they asserted things with such assurance." So what does Wall Street have in common with the above? There is a wide-spread assurance that the worst is behind the economy and that earnings will pick up strongly by the fourth quarter. Based on this divine knowledge, the markets have rallied strongly since the lows reached in 2002. There are some great companies like Starbucks selling at 35+ times earnings. The overall market does not have the continual growth of Starbucks. Some like Amazon are doing better. Their quarterly sales reached $1 billion and they only lost $10 million. The stock no longer sells at $14. It's now at $28. The overall market forecasts for revenues and earnings are significantly incorrect. They do not in any way take into account the impact of SARS, and there isn't one person with enhanced knowledge of this virus willing to state its existence is here only for the short run. In fact, just the opposite is true. I discussed some weeks back its similarity to AIDS based on RNA rather than DNA. That fact alone is vital. This fact is not based on thinking but rather on knowing. Just consider that the World Bank believes that this year SARS could cut the Asian economies by one-sixth. Based on what is happening in China, Hong Kong, Singapore, and other countries, that projection could be very low. Keep in mind that SARS is spreading and the death rate is rising. That is not a good formula for correct projections concerning revenues and earnings.
Initial U.S. jobless claims rose to 455,000, the highest level in more than one year, and were 30,000 higher than the number projected by economists. The four-week moving average is about 440,000.
The number of workers continuing to receive jobless benefits increased by 42,000, and was at the highest level since the week ended November 2, 2002. This does not reflect a lackluster economy.
Bert Murray: "It used to be that death and taxes alone were inevitable. Now there's shipping and handling."
Airline traffic for the week ended April 13 fell 11% from a year earlier. That's not lackluster either.
BE Aerospace, the world's largest maker of airline seats, said it would cut more jobs this quarter on top of the 1400 reductions already announced.
President Bush: "There is too much economic uncertainty today." The facts support that statement.
George Shaw: "A government which robs Peter to pay Paul can always depend on the support of Paul." That presupposes Paul doesn't have SARS.
There is an excellent article in the May issue of Business 2.0 by Paul Kaihla on Bob Beyster and his employee-owned SAIC located in La Jolla. They have revenues of approximating $6 billion, and they are the largest privately held infotech company.
U.S. light crude futures fell to a five-month low of $25.77 per barrel. Gas prices will continue to fall at the pumps.
The Conference Board's Help-wanted Advertising Index fell two points in March to 38. It was 45 one year ago. Their chief economist said "the earliest the labor market will snap back to life will be later this year or even early next year."
Howard Dvorkin, Pesident of Consolidated Credit Services, said, that in a recent poll, nearly 80% stated they would spend at least 10% less on a vacation than was the case a year ago, and that 45% said the most popular vacation destination would be with friends and family.
AIG said the spread of SARS is curbing sales in Hong Kong and China and may hurt earnings. Asia contributed over 25% of AIG's revenue last year.
Marriott says forecasting future performance is very difficult given the continued economic uncertainty, the lingering effects of the Iraq war, and SARS.
LVMH fears SARS could hurt luxury goods sales in its key Asian market. PPR's Gucci said that sales are thought to be possibly impacted as well.
China signed a contract for 30 Airbus jets. I trust those planes won't be delivered for some time. China's planes aren't welcome in too many places right now. SARS isn't going away any time soon.
U.K.'s GDP grew only 0.2% in the first quarter, the slowest pace in one year. The number of shoppers is lower than a year ago at this time.
CDC's Gerberding said "we are very concerned about what appears to us to be ongoing transmission in China of SARS. It's going to take a great deal of time before we really piece together the full picture there."
The CDC said you are not at risk if you travel to Toronto. Just stay away from hospitals and anyone who might cough or sneeze. At least they didn't include hiccups.
Beijing placed 4000 people under quarantine.
Japan's unemployment rate rose to 5.4% in March, and is near record levels. Fujitsu had a worse than expected loss.
A Millersville, Maryland woman returned from China with SARS symptoms. She and her husband and one year old son are being quarantined for 8 days. It just goes to show that quarantining is occurring all over the globe.
The Kansas City Royals will be playing the Toronto Blue Jays in Toronto for a weekend series. I predict that not too many fans will show up at the Skydome. Many players on the visiting Royals want the game postponed to later dates.
I predict that the spreading of SARS will freeze business spending.
A second major hospital in Beijing was shut yesterday.
In NYC the number of SARS cases are thought to be about 18. Mayor Bloomberg said a travel advisory against the city could cripple an already fragile economy.
A Philippine Airlines flight to South Korea was turned back to Manila after a passenger showed SARS-like symptoms. That was a smart decision. CDC's Gerberding said "there is nothing to suggest that an infected traveler could not come to this country and initiate a cascade of transmissions."
.
Wall Street and the Iraq war have one thing in common- you think you know but you don't really know. Yesterday President Bush provided the first public indication that his Administration didn't know where the WMD are in Iraq. I alluded to that in yesterday's blog. The President said "But we know he had them. And whether he destroyed them, moved them or hid them, we're going to find out the truth." I believe the President. I believe he thought he knew where the WMD were located. They had 100 possible sites with some evidence leading to that conclusion. David Albright, a former nuclear-weapons inspector in Iraq, said he had believed that the Aministration was overstating the likelihood that Iraq had rebuilt its weapons program. He said "If there are no weapons of mass destruction, I'll be mad as hell. I certainly accepted the administration claims on chemical and biological weapons. I figured they were telling the truth. If there is no massive arsenal, I will feel taken. Because they asserted things with such assurance." So what does Wall Street have in common with the above? There is a wide-spread assurance that the worst is behind the economy and that earnings will pick up strongly by the fourth quarter. Based on this divine knowledge, the markets have rallied strongly since the lows reached in 2002. There are some great companies like Starbucks selling at 35+ times earnings. The overall market does not have the continual growth of Starbucks. Some like Amazon are doing better. Their quarterly sales reached $1 billion and they only lost $10 million. The stock no longer sells at $14. It's now at $28. The overall market forecasts for revenues and earnings are significantly incorrect. They do not in any way take into account the impact of SARS, and there isn't one person with enhanced knowledge of this virus willing to state its existence is here only for the short run. In fact, just the opposite is true. I discussed some weeks back its similarity to AIDS based on RNA rather than DNA. That fact alone is vital. This fact is not based on thinking but rather on knowing. Just consider that the World Bank believes that this year SARS could cut the Asian economies by one-sixth. Based on what is happening in China, Hong Kong, Singapore, and other countries, that projection could be very low. Keep in mind that SARS is spreading and the death rate is rising. That is not a good formula for correct projections concerning revenues and earnings.
Initial U.S. jobless claims rose to 455,000, the highest level in more than one year, and were 30,000 higher than the number projected by economists. The four-week moving average is about 440,000.
The number of workers continuing to receive jobless benefits increased by 42,000, and was at the highest level since the week ended November 2, 2002. This does not reflect a lackluster economy.
Bert Murray: "It used to be that death and taxes alone were inevitable. Now there's shipping and handling."
Airline traffic for the week ended April 13 fell 11% from a year earlier. That's not lackluster either.
BE Aerospace, the world's largest maker of airline seats, said it would cut more jobs this quarter on top of the 1400 reductions already announced.
President Bush: "There is too much economic uncertainty today." The facts support that statement.
George Shaw: "A government which robs Peter to pay Paul can always depend on the support of Paul." That presupposes Paul doesn't have SARS.
There is an excellent article in the May issue of Business 2.0 by Paul Kaihla on Bob Beyster and his employee-owned SAIC located in La Jolla. They have revenues of approximating $6 billion, and they are the largest privately held infotech company.
U.S. light crude futures fell to a five-month low of $25.77 per barrel. Gas prices will continue to fall at the pumps.
The Conference Board's Help-wanted Advertising Index fell two points in March to 38. It was 45 one year ago. Their chief economist said "the earliest the labor market will snap back to life will be later this year or even early next year."
Howard Dvorkin, Pesident of Consolidated Credit Services, said, that in a recent poll, nearly 80% stated they would spend at least 10% less on a vacation than was the case a year ago, and that 45% said the most popular vacation destination would be with friends and family.
AIG said the spread of SARS is curbing sales in Hong Kong and China and may hurt earnings. Asia contributed over 25% of AIG's revenue last year.
Marriott says forecasting future performance is very difficult given the continued economic uncertainty, the lingering effects of the Iraq war, and SARS.
LVMH fears SARS could hurt luxury goods sales in its key Asian market. PPR's Gucci said that sales are thought to be possibly impacted as well.
China signed a contract for 30 Airbus jets. I trust those planes won't be delivered for some time. China's planes aren't welcome in too many places right now. SARS isn't going away any time soon.
U.K.'s GDP grew only 0.2% in the first quarter, the slowest pace in one year. The number of shoppers is lower than a year ago at this time.
CDC's Gerberding said "we are very concerned about what appears to us to be ongoing transmission in China of SARS. It's going to take a great deal of time before we really piece together the full picture there."
The CDC said you are not at risk if you travel to Toronto. Just stay away from hospitals and anyone who might cough or sneeze. At least they didn't include hiccups.
Beijing placed 4000 people under quarantine.
Japan's unemployment rate rose to 5.4% in March, and is near record levels. Fujitsu had a worse than expected loss.
A Millersville, Maryland woman returned from China with SARS symptoms. She and her husband and one year old son are being quarantined for 8 days. It just goes to show that quarantining is occurring all over the globe.
The Kansas City Royals will be playing the Toronto Blue Jays in Toronto for a weekend series. I predict that not too many fans will show up at the Skydome. Many players on the visiting Royals want the game postponed to later dates.
I predict that the spreading of SARS will freeze business spending.
A second major hospital in Beijing was shut yesterday.
In NYC the number of SARS cases are thought to be about 18. Mayor Bloomberg said a travel advisory against the city could cripple an already fragile economy.
A Philippine Airlines flight to South Korea was turned back to Manila after a passenger showed SARS-like symptoms. That was a smart decision. CDC's Gerberding said "there is nothing to suggest that an infected traveler could not come to this country and initiate a cascade of transmissions."
.
Thursday, April 24, 2003
4/24/03 Lackluster
What is the best thing since sliced bread? Simple. The honesty and clarity coming from the Fed's beige book. It reminds me of the joke- I'm good at being inarticulately abstracted for the same reason midgets are good at being short. Pablo Picasso would have loved the Fed. He disliked computers. He felt they were useless because they could only give him answers. The Fed doesn't even serve up questions. My suggestions are two-fold. We just need to hold our breath and believe. In the morning we'll say goodbye to lackluster performance forever, have taxes licked, and only have death to worry about. Alternatively, my favorite solution to combat what the Fed calls our lackluster economy, is to apply StriVectin. It works on wrinkles and crow's feet and possibly could be an anti-aging miracle cream. We know it combats stretch marks. We know this. In sum, StriVectin will make the economy look nicer. Things are rosier with the Nasdaq selling at a five month high.
The Fed said consumers are wary. Is that why AOL lost 289,000 subscribers last quarter up 109,000 from the prior quarter? The good news is that AOL's quarterly revenue only fell 4%.
Siebel reported a 93% decline in net income from the year ago's first quarter. It could have been worse.
Peoplesoft is closing its Santa Clara office and cutting 200 jobs. Software license fees dropped 40% in the first quarter. There is a silver lining. Their Pleasanton headquarters will remain intact.
What's lackluster about 45 million Americans not having health insurance? The number keeps rising every quarter.
AMR lost $1 billion in the quarter and the pilots are considering not ratifying the contract deal with the airline.
Planes leaving from NYC to Toronto are 90% empty. I can understand that. A 40 year-old doctor just returned to Baltimore after a visit to Toronto. He returned with the SARS symtoms.
China plans a broad SARS quarantine. They sealed off the 1200-bed Beijing University People's Hospital as "no one is allowed to enter or leave." They have 60 confirmed or suspected cases of SARS at that hospital.
JetBlue will possibly order 115 planes from Airbus as Boeing would lose out once again.
Britain's InterContinental Hotels to lay off 800 workers.
Germany's largest bank, Deutsche Bank, will report a first quarter loss.
Aviva, Britain's largest insurer, said the outlook remains challenging.
Germany's Siemens cautioned about slow spending in major markets.
Sony's results for the year fell 36% short of forecasts. The fourth quarter loss was larger than expected. Game business sales declined 25%. Sony's CEO said "we should have taken a more drastic reorganization...Sony's not in a satisfying business condition at all right now and we have to start a full scale overhaul."
Hilton's quarterly income dropped 74%.
In NYC, for the second straight day, customers flocked to the Abacus Federal Savings Bank in Chinatown and withdrew more than $2 million. In Philadelphia a branch of the same bank had similar problems yesterday as more than $700,000 was withdrawn.
Pfizer said that job cuts are coming to former Pharmacia Corp. sites in Kalamazoo County in Michigan.
U.S. troops have searched more than 80 of the top 100 most likely sites for WMD in Iraq. Lt. Gen. David McKiernan, commander of land forces in Iraq, said "we did have several hundred sites that we had some history of intelligence on that we were going to exploit." That doesn't sound like a real confidence builder.
Toronto accounts for 20% of the Canadian economy.
Alcoa may mothball its smelter in Ferndale, Washington come September 30.
For wary consumers, there are several offerings out there: $99 flights each way to Honolulu, Maui, and Kauai from either LAX or SFO; 7 day Gulf of Alaska cruises for $399; and for the real adventurous, $78 round trip airfares from Portland, Oregon to Sacramento. That's all the potential enjoyment that's fit to be printed.
What is the best thing since sliced bread? Simple. The honesty and clarity coming from the Fed's beige book. It reminds me of the joke- I'm good at being inarticulately abstracted for the same reason midgets are good at being short. Pablo Picasso would have loved the Fed. He disliked computers. He felt they were useless because they could only give him answers. The Fed doesn't even serve up questions. My suggestions are two-fold. We just need to hold our breath and believe. In the morning we'll say goodbye to lackluster performance forever, have taxes licked, and only have death to worry about. Alternatively, my favorite solution to combat what the Fed calls our lackluster economy, is to apply StriVectin. It works on wrinkles and crow's feet and possibly could be an anti-aging miracle cream. We know it combats stretch marks. We know this. In sum, StriVectin will make the economy look nicer. Things are rosier with the Nasdaq selling at a five month high.
The Fed said consumers are wary. Is that why AOL lost 289,000 subscribers last quarter up 109,000 from the prior quarter? The good news is that AOL's quarterly revenue only fell 4%.
Siebel reported a 93% decline in net income from the year ago's first quarter. It could have been worse.
Peoplesoft is closing its Santa Clara office and cutting 200 jobs. Software license fees dropped 40% in the first quarter. There is a silver lining. Their Pleasanton headquarters will remain intact.
What's lackluster about 45 million Americans not having health insurance? The number keeps rising every quarter.
AMR lost $1 billion in the quarter and the pilots are considering not ratifying the contract deal with the airline.
Planes leaving from NYC to Toronto are 90% empty. I can understand that. A 40 year-old doctor just returned to Baltimore after a visit to Toronto. He returned with the SARS symtoms.
China plans a broad SARS quarantine. They sealed off the 1200-bed Beijing University People's Hospital as "no one is allowed to enter or leave." They have 60 confirmed or suspected cases of SARS at that hospital.
JetBlue will possibly order 115 planes from Airbus as Boeing would lose out once again.
Britain's InterContinental Hotels to lay off 800 workers.
Germany's largest bank, Deutsche Bank, will report a first quarter loss.
Aviva, Britain's largest insurer, said the outlook remains challenging.
Germany's Siemens cautioned about slow spending in major markets.
Sony's results for the year fell 36% short of forecasts. The fourth quarter loss was larger than expected. Game business sales declined 25%. Sony's CEO said "we should have taken a more drastic reorganization...Sony's not in a satisfying business condition at all right now and we have to start a full scale overhaul."
Hilton's quarterly income dropped 74%.
In NYC, for the second straight day, customers flocked to the Abacus Federal Savings Bank in Chinatown and withdrew more than $2 million. In Philadelphia a branch of the same bank had similar problems yesterday as more than $700,000 was withdrawn.
Pfizer said that job cuts are coming to former Pharmacia Corp. sites in Kalamazoo County in Michigan.
U.S. troops have searched more than 80 of the top 100 most likely sites for WMD in Iraq. Lt. Gen. David McKiernan, commander of land forces in Iraq, said "we did have several hundred sites that we had some history of intelligence on that we were going to exploit." That doesn't sound like a real confidence builder.
Toronto accounts for 20% of the Canadian economy.
Alcoa may mothball its smelter in Ferndale, Washington come September 30.
For wary consumers, there are several offerings out there: $99 flights each way to Honolulu, Maui, and Kauai from either LAX or SFO; 7 day Gulf of Alaska cruises for $399; and for the real adventurous, $78 round trip airfares from Portland, Oregon to Sacramento. That's all the potential enjoyment that's fit to be printed.
Wednesday, April 23, 2003
4/23/03 Reality Is In A State Of Disconnect
Over the past six months or so Ebay shares have rallied about 100% to $92. This company has performed brilliantly and continues to generate significant free cash flow. Yesterday, estimates for earnings per share were raised from $1.35 to $1.45. That means the stock is selling at over 60 times earnings. The time to be buying excellent companies is during sharp market drops. With many averages selling at three and four month highs, now is not such a time.
Yesterday President Bush gave a vote of confidence to Alan Greenspan. That was nice. He is recovering from a successful prostate operation. Sometimes my memory is not sharp. Did Paul O'Neill also receive such kind words?
The FTSE has risen close to the 4000 level.
The number of mortgage applications filed this week was the lowest of the year as the refinancing index slumped 8% to its lowest level of 2003. Mortgage demand for home loans fell for the fifth straight week.
The WHO said the SARS mortality rate is worsening. It has risen from 4% to 5% or possibly in some areas to 6%. The WHO said that China's "health system has collapsed over the past 10 or 20 years because the central government has not invested in health." They went on to say "If China is not able to deal with SARS, then it will be very problematic to deal with globally...diseases like SARS don't respect borders."
Japan's March trade surplus shrank by 20%, and this was a much sharper drop than economists had expected.
Arcata, California is the first city in the nation to pass an ordinance that forbids its citizens from voluntarily complying with the Patriot Act.
7-Eleven Inc. had a 13.5 cent per-gallon profit margin on gasoline in the first quarter.
Kelly Services stated "As our first quarter results reflected, we are continuing to see a pattern of economic weakness and related softening demand for staffing services. As we enter the second quarter, uncertainty surrounding the timing of the economic recovery has increased."
Over 100 people have died from SARS in Hong Kong and that is true for China as well.
U.S. crude oil inventories are 15% lower than a year ago. When OPEC talks of a possible glut, they must be talking about hot air.
Exports account for 25% of China's economy. The Canton Trade Fair has generated $3.3 billion in exports so far, and this is down from $9.3 billion at the same time a year ago.
Only 9% of California voters have a great deal of confidence in the Legislature to do what is right to resolve the budget deficit.
Silicon Valley businesses have an office vacancy rate of nearly 33%.
Starting tomorrow all primary and secondary schools in Beijing will be closed for two weeks. This action has been taken because of the SARS virus, and 1.7 million children will be effected by the school closings.
Because of SARS, the CDC issued a travel advisory for Americans going to Canada.
Maybe we should send the UN weapons inspectors over to comb China's countryside in an effort to search for unreported cases of SARS. This virus is a real-time WMD.
Lucent posted its 12th consecutive quarterly loss.
Over the past six months or so Ebay shares have rallied about 100% to $92. This company has performed brilliantly and continues to generate significant free cash flow. Yesterday, estimates for earnings per share were raised from $1.35 to $1.45. That means the stock is selling at over 60 times earnings. The time to be buying excellent companies is during sharp market drops. With many averages selling at three and four month highs, now is not such a time.
Yesterday President Bush gave a vote of confidence to Alan Greenspan. That was nice. He is recovering from a successful prostate operation. Sometimes my memory is not sharp. Did Paul O'Neill also receive such kind words?
The FTSE has risen close to the 4000 level.
The number of mortgage applications filed this week was the lowest of the year as the refinancing index slumped 8% to its lowest level of 2003. Mortgage demand for home loans fell for the fifth straight week.
The WHO said the SARS mortality rate is worsening. It has risen from 4% to 5% or possibly in some areas to 6%. The WHO said that China's "health system has collapsed over the past 10 or 20 years because the central government has not invested in health." They went on to say "If China is not able to deal with SARS, then it will be very problematic to deal with globally...diseases like SARS don't respect borders."
Japan's March trade surplus shrank by 20%, and this was a much sharper drop than economists had expected.
Arcata, California is the first city in the nation to pass an ordinance that forbids its citizens from voluntarily complying with the Patriot Act.
7-Eleven Inc. had a 13.5 cent per-gallon profit margin on gasoline in the first quarter.
Kelly Services stated "As our first quarter results reflected, we are continuing to see a pattern of economic weakness and related softening demand for staffing services. As we enter the second quarter, uncertainty surrounding the timing of the economic recovery has increased."
Over 100 people have died from SARS in Hong Kong and that is true for China as well.
U.S. crude oil inventories are 15% lower than a year ago. When OPEC talks of a possible glut, they must be talking about hot air.
Exports account for 25% of China's economy. The Canton Trade Fair has generated $3.3 billion in exports so far, and this is down from $9.3 billion at the same time a year ago.
Only 9% of California voters have a great deal of confidence in the Legislature to do what is right to resolve the budget deficit.
Silicon Valley businesses have an office vacancy rate of nearly 33%.
Starting tomorrow all primary and secondary schools in Beijing will be closed for two weeks. This action has been taken because of the SARS virus, and 1.7 million children will be effected by the school closings.
Because of SARS, the CDC issued a travel advisory for Americans going to Canada.
Maybe we should send the UN weapons inspectors over to comb China's countryside in an effort to search for unreported cases of SARS. This virus is a real-time WMD.
Lucent posted its 12th consecutive quarterly loss.
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