1/25/03 The Stock Market Headlines
Do you really believe the stock market is falling because investors fear a protracted war with Iraq or a possible nuclear confrontation with N. Korea? I mentioned weeks ago that I do not believe we will go to war with Iraq and that the problems with N. Korea would be settled thru discussions. If I am wrong about Iraq and there is a war, it will be short-lived. Helping to rebuild the Iraq infrastructure will take some time. From the market's standpoint Iraq and N. Korea are non-events. They are being used as headline diversions. The real story is the economy has entered a downward spiral and is picking up speed, and the consumer, business, and the government can't stop it. Time has run out.
How did we reach this point? It's pretty simple. We squandered our cash flow surpluses, overspent, didn't save, created excess capacity in just about every area, and then failed to see foreign competition wiping out pricing power. We are left with excess capacity, almost no pricing power, on-going surpluses of goods and services, too little demand, too much debt, and too little cash flow. The crack in the armor can clearly be witnessed in the falling dollar, which has dropped for 9 consecutive days to a 3 year low vs the Euro and a 4 year low vs the Swiss franc. The dollar's drop is picking up speed and reflects the weakening economic status of the U.S.
Over the lifespan of this 3 year bear market about $7 trillion has been lost. For a $10 trillion economy that's a major hit. Before this bear market ends, trillions more will be lost. It's a painful process, and only the strong-willed shall bounce back. The tough times have only just begun in earnest. You can listen to all the state of the union messages you want. You can salute the flag. All that talk and all that devotion to country will not solve our problems and will not return us to positive cash flow. A perfect example is the Pension Benefit Guaranty Corp, which was founded in 1974. It insures pensions of 44 million Americans, and in recent years had an $8 billion surplus. Because of numerous bankruptcies, that surplus has turned into a $1-2 billion deficit. Companies only pay $19 per person covered each year, or more if a pension fund is underfunded. I have pointed out how many companies have underfunded pension funds. Given the aforementioned information, do you believe guaranteed retirement benefits are at risk? I do.
The FTSE is at a 7 year low.
The IMF oks a $3 billion loan for Argentina.
Home Depot hit a 5 year low.
Congratulations to Serena and Venus Williams for putting on the best women's tennis match ever. They both are remarkable winners. We could use more like them.
Just a final word. Let me be very clear. I am an incredible optimist and not a doomsdayer. On the other hand, it would be stupid for me to put my head in the sand. Some of you were annoyed that I called for a long bear market in June, 2000. Maybe some of today's blog rubs you the wrong way. That's not my problem. I call it the way I see it- without emotion. It's just business for me.
Friday, January 24, 2003
1/24/03 Litigation Will Not Halt The Competition
A few months ago I wrote about China eating Cisco's lunch in the low-cost networking router business. I mentioned that life would never be the same for Cisco. Yesterday Cisco sued Huawei Technologies claiming the latter had copied intellectual property in their manufacturing of the low-cost routers. The lawsuit will not stop the competition. The marketplace wants lower prices, and Cisco hasn't provided them. We have seen Dell come to dominate in the PC and laptop area. We witness the growth of Linux in the low-cost server market. China is not a looming force. They are a force now and growing every day. Cisco has reason to be concerned. Their days of leadership are waning. Their pricing power is dead in the water.
Gold reached a 6 year high of $367.
AT&T's stock plunged over 20% after a disappointing 2003 forecast.
The FTSE closed down for the 9th consecutive day, and had the lowest close since 1995. UK's economy only grew 1.7% last year, the slowest since 1992.
The U.S. will give the inspectors more time to inspect.
The unemployment rate in N.Y.C. is 8.4%, the highest since 1998.
Bush's proposal on Medicare will link drug benefits to joining HMOs.
Bell South's quarterly profits fell 25%.
Caterpillar said their 2003 earnings would drop 5%.
McDonald's reported their first ever loss, and announced the closing of 719 restaurants worldwide.
As we move towards next week, we can look forward to the report from the UN inspectors on Iraq and then the President's state of the union message. Both reports will probably hold few surprises. The market, on the other hand, is full of surprises. Often I have said that the market accomodates the fewest number of people at any one time. To be one of the few means being prepared and willing to be extraordinarily nimble. Just like life throws us curves, so does the market. The curves can be wicked- more lethal than Barry Zito's breaking pitch. You will often miss a pitch, but when the count gets full, that's the time to get on base. We don't need homers. We just need to score to ring the register. Be consistent and come to play hard each day.
A few months ago I wrote about China eating Cisco's lunch in the low-cost networking router business. I mentioned that life would never be the same for Cisco. Yesterday Cisco sued Huawei Technologies claiming the latter had copied intellectual property in their manufacturing of the low-cost routers. The lawsuit will not stop the competition. The marketplace wants lower prices, and Cisco hasn't provided them. We have seen Dell come to dominate in the PC and laptop area. We witness the growth of Linux in the low-cost server market. China is not a looming force. They are a force now and growing every day. Cisco has reason to be concerned. Their days of leadership are waning. Their pricing power is dead in the water.
Gold reached a 6 year high of $367.
AT&T's stock plunged over 20% after a disappointing 2003 forecast.
The FTSE closed down for the 9th consecutive day, and had the lowest close since 1995. UK's economy only grew 1.7% last year, the slowest since 1992.
The U.S. will give the inspectors more time to inspect.
The unemployment rate in N.Y.C. is 8.4%, the highest since 1998.
Bush's proposal on Medicare will link drug benefits to joining HMOs.
Bell South's quarterly profits fell 25%.
Caterpillar said their 2003 earnings would drop 5%.
McDonald's reported their first ever loss, and announced the closing of 719 restaurants worldwide.
As we move towards next week, we can look forward to the report from the UN inspectors on Iraq and then the President's state of the union message. Both reports will probably hold few surprises. The market, on the other hand, is full of surprises. Often I have said that the market accomodates the fewest number of people at any one time. To be one of the few means being prepared and willing to be extraordinarily nimble. Just like life throws us curves, so does the market. The curves can be wicked- more lethal than Barry Zito's breaking pitch. You will often miss a pitch, but when the count gets full, that's the time to get on base. We don't need homers. We just need to score to ring the register. Be consistent and come to play hard each day.
Thursday, January 23, 2003
1/23/03 The Dow And The S&P 500 Close Below The Dec. 31, 2002 Levels
With the exception of a small gain for the Nasdaq, all the January market advancements have evaporated. As discussed often in this blog, the handwriting has been on the wall. The lonely road often has greater visibility while it can get pretty murky in a crowd. The consumer has been telling a story. About half of the consumers feel Bush's stimulus package will not prove of much benefit; the majority are negative on the current economic conditions; and overall consumer sentiment is at a 9 year low. With the consumer accounting for at least two thirds of our GDP, it is obvious that profit growth will not be forthcoming. Since the stock market follows profit growth or the lack of it, we remain in a bear market. Rallies take place frequently in bear markets, and they are opportunities to sell. These facts are for everyone to see, and not just for me. I may have more direct investing experience, but the rules are the same for me as they are for you. We need to concentrate intensely on the facts, and to think rationally on a consistent basis. Independent and dedicated thinking can prove intellectually and monetarily rewarding. It's available to all of us. It's a matter of how badly you want to succeed.
Once again, Kodak has announced layoffs. This time it is 3% of the workforce.
While the FTSE continues to decline, the Nikkei is starting to surprise on the upside. Will it be sustainable? It hasn't been up to this point.
Nokia is forecasting lower first quarter sales. They are the industry leader, and that should tell you something. Remember WalMart slowing in August and the collapse in overall holiday sales for the retail industry.
Non- performing bank loans continue to rise, and they are at a record level.
With the exception of a small gain for the Nasdaq, all the January market advancements have evaporated. As discussed often in this blog, the handwriting has been on the wall. The lonely road often has greater visibility while it can get pretty murky in a crowd. The consumer has been telling a story. About half of the consumers feel Bush's stimulus package will not prove of much benefit; the majority are negative on the current economic conditions; and overall consumer sentiment is at a 9 year low. With the consumer accounting for at least two thirds of our GDP, it is obvious that profit growth will not be forthcoming. Since the stock market follows profit growth or the lack of it, we remain in a bear market. Rallies take place frequently in bear markets, and they are opportunities to sell. These facts are for everyone to see, and not just for me. I may have more direct investing experience, but the rules are the same for me as they are for you. We need to concentrate intensely on the facts, and to think rationally on a consistent basis. Independent and dedicated thinking can prove intellectually and monetarily rewarding. It's available to all of us. It's a matter of how badly you want to succeed.
Once again, Kodak has announced layoffs. This time it is 3% of the workforce.
While the FTSE continues to decline, the Nikkei is starting to surprise on the upside. Will it be sustainable? It hasn't been up to this point.
Nokia is forecasting lower first quarter sales. They are the industry leader, and that should tell you something. Remember WalMart slowing in August and the collapse in overall holiday sales for the retail industry.
Non- performing bank loans continue to rise, and they are at a record level.
Wednesday, January 22, 2003
1/22/03 Humility And The Stock Market
Several times I have written that one cannot expect to buy at the low and sell at the top. In fact, should that occur in a particular stock, it should be considered luck and not brains. To be a successful investor one should expect to be humbled on a regular basis. My readers have commented that often I come across as brash, opinionated, and full of myself. I think I probably am all of those descriptions at one time or another; however, beneath the surface, I have a tremendous respect for the marketplace. I know I may be right 99 consecutive times, but on the 100th I will look really stupid. The market might attempt to take my big head off. That should be looked as a positive. We must learn from our mistakes, not make the same mistake twice, and cut our losses short. It is very costly to be stubborn in the face of a losing trade. Don't take it personally. No one is out to get you. Only you can do yourself in. You make the ultimate decision to buy, sell, or hold. No one else. Depend on your own rational thinking, and do not fall in love with a stock. It's only a piece of corporate ownership and not a heart and soul.
$130 billion went into bond funds in 2002. $10 billion came out of stock funds last year, and it was the first year of withdrawals since 1988. $5.5 billion were withdrawn in December.
Kodak has lowered its outlook.
Lucent recorded its 11th straight quarterly loss. That takes a concerted effort to pull off.
Hispanics are now the number one minority in the U.S., and will become the majority in Phoenix in 2007.
Insurance premiums from Blue Cross Blue Shield of Michigan will rise 23% in March.
Bush's budget will be released in the next few weeks, and it will not give the states added assistance to pay for Medicaid health insurance for the poor. Most states have cut Medicaid coverage because increased enrollment and rising healthcare costs have made the program unaffordable.
Microsoft to buy web-conferencing firm, PlaceWare of Mountain View.
Among companies in Georgia with revenues of $10 million or more, 25% are likely to move some manufacturing operations out of the U.S.
Due to the drought, water shortages can be expected in coming months in Montana, Colorado, and Utah, and possibly in Arizona and Nevada. In addition, lack of moisture in the midwest has created low supplies of grain.
Several times I have written that one cannot expect to buy at the low and sell at the top. In fact, should that occur in a particular stock, it should be considered luck and not brains. To be a successful investor one should expect to be humbled on a regular basis. My readers have commented that often I come across as brash, opinionated, and full of myself. I think I probably am all of those descriptions at one time or another; however, beneath the surface, I have a tremendous respect for the marketplace. I know I may be right 99 consecutive times, but on the 100th I will look really stupid. The market might attempt to take my big head off. That should be looked as a positive. We must learn from our mistakes, not make the same mistake twice, and cut our losses short. It is very costly to be stubborn in the face of a losing trade. Don't take it personally. No one is out to get you. Only you can do yourself in. You make the ultimate decision to buy, sell, or hold. No one else. Depend on your own rational thinking, and do not fall in love with a stock. It's only a piece of corporate ownership and not a heart and soul.
$130 billion went into bond funds in 2002. $10 billion came out of stock funds last year, and it was the first year of withdrawals since 1988. $5.5 billion were withdrawn in December.
Kodak has lowered its outlook.
Lucent recorded its 11th straight quarterly loss. That takes a concerted effort to pull off.
Hispanics are now the number one minority in the U.S., and will become the majority in Phoenix in 2007.
Insurance premiums from Blue Cross Blue Shield of Michigan will rise 23% in March.
Bush's budget will be released in the next few weeks, and it will not give the states added assistance to pay for Medicaid health insurance for the poor. Most states have cut Medicaid coverage because increased enrollment and rising healthcare costs have made the program unaffordable.
Microsoft to buy web-conferencing firm, PlaceWare of Mountain View.
Among companies in Georgia with revenues of $10 million or more, 25% are likely to move some manufacturing operations out of the U.S.
Due to the drought, water shortages can be expected in coming months in Montana, Colorado, and Utah, and possibly in Arizona and Nevada. In addition, lack of moisture in the midwest has created low supplies of grain.
Tuesday, January 21, 2003
1/21/03 Business Overcapacity And Unemployment
Kurt Barnard, president of Barnard's Retail Consulting Group: "there is really no government policy that will do much good in dealing with business overcapacity."
A year ago there were 1 million people who had been unemployed 26 weeks or longer. Now there are 1 3/4 million. Replacement jobs are increasingly difficult to find. We have Ph.Ds walking into career centers.
Ed Peters, chief investment officer of PanAgora Investment Fund in Boston: "we overinvested not only in technology but also in people and created more jobs than we actually needed."
Most states require a balanced budget. Governors are reluctantly turning to tax increases to offset deficits. An example is Idaho Governor Kempthorne. In his first term he cut taxes 48 times. Now faced with a 10% budget gap he is calling for an increase in state cigarette and sales taxes. He said "I have done something that is absolutely not part of my fiber but I'm not going to dismantle this state."
More IT jobs headed overseas. In 2000 only 27,000 jobs were outsourced. Now we're on the way to 100,000.
Unemployment taxes are going up. Why? More people are drawing unemployment benefits and they're on those benefits for a long period of time. As one manager put it, it's like auto insurance- the more car accidents you have, the higher the rates are going to be.
With the euro rising against the dollar, there is more pressure on European earnings. Philip Chitty, a senior European economist at ABN Amro Bank, figures "that a 10% depreciation of the dollar against the euro will lower projected 2003 euro-area growth by 0.6 percentage point to 0.8%."
Here is a statement which reflects the Fed's clear thinking. It comes from Federal Reserve Bank of Richmond President Alfred Broaddus: "For the first time in a while I think the chances that actual growth will exceed the consensus forecast somewhat are about equal to the chances that it will come in below it." Doesn't it give you a warm fuzzy feeling knowing that Broaddus is employed and that you have a hand in paying his salary?
Kurt Barnard, president of Barnard's Retail Consulting Group: "there is really no government policy that will do much good in dealing with business overcapacity."
A year ago there were 1 million people who had been unemployed 26 weeks or longer. Now there are 1 3/4 million. Replacement jobs are increasingly difficult to find. We have Ph.Ds walking into career centers.
Ed Peters, chief investment officer of PanAgora Investment Fund in Boston: "we overinvested not only in technology but also in people and created more jobs than we actually needed."
Most states require a balanced budget. Governors are reluctantly turning to tax increases to offset deficits. An example is Idaho Governor Kempthorne. In his first term he cut taxes 48 times. Now faced with a 10% budget gap he is calling for an increase in state cigarette and sales taxes. He said "I have done something that is absolutely not part of my fiber but I'm not going to dismantle this state."
More IT jobs headed overseas. In 2000 only 27,000 jobs were outsourced. Now we're on the way to 100,000.
Unemployment taxes are going up. Why? More people are drawing unemployment benefits and they're on those benefits for a long period of time. As one manager put it, it's like auto insurance- the more car accidents you have, the higher the rates are going to be.
With the euro rising against the dollar, there is more pressure on European earnings. Philip Chitty, a senior European economist at ABN Amro Bank, figures "that a 10% depreciation of the dollar against the euro will lower projected 2003 euro-area growth by 0.6 percentage point to 0.8%."
Here is a statement which reflects the Fed's clear thinking. It comes from Federal Reserve Bank of Richmond President Alfred Broaddus: "For the first time in a while I think the chances that actual growth will exceed the consensus forecast somewhat are about equal to the chances that it will come in below it." Doesn't it give you a warm fuzzy feeling knowing that Broaddus is employed and that you have a hand in paying his salary?
Monday, January 20, 2003
1/20/03 We Shall Overcome, Someday
Why doesn't someone write a book entitled race relations for dummies. The author could give a signed copy to the staff at Bob Jones University. Didn't Bush campaign in South Carolina at that university? So much for discrimination at the college entrance level.
The consumer expectations index, which gauges attitudes about the 12-month outlook, fell to 75.2 from 80.8. That should tell you where retail sales are headed- in the toilet.
The Venezuelan oil strike is in its 50th day. Income from oil exports accounts for 50% of the Venezuelan government's income.
New Mexico is choking on Medicaid costs. They're not alone.
Sellers outpaced buyers in 2002 insider trading. Wouldn't you be a seller too if your company's results were disappointing and getting worse? You don't have to run a company to be a seller.
The euro hit a 3 1/2 year high vs sterling.
You want to get depressed on your vacation day? Independent research company Datamonitor reports, that its study revealed, more than one in five depressed patients attempt suicide and a further 47% think about killing themselves before their condition is diagnosed. The stigma of depression has stopped patients from seeking therapy. This is truly a tragic trend.
Why doesn't someone write a book entitled race relations for dummies. The author could give a signed copy to the staff at Bob Jones University. Didn't Bush campaign in South Carolina at that university? So much for discrimination at the college entrance level.
The consumer expectations index, which gauges attitudes about the 12-month outlook, fell to 75.2 from 80.8. That should tell you where retail sales are headed- in the toilet.
The Venezuelan oil strike is in its 50th day. Income from oil exports accounts for 50% of the Venezuelan government's income.
New Mexico is choking on Medicaid costs. They're not alone.
Sellers outpaced buyers in 2002 insider trading. Wouldn't you be a seller too if your company's results were disappointing and getting worse? You don't have to run a company to be a seller.
The euro hit a 3 1/2 year high vs sterling.
You want to get depressed on your vacation day? Independent research company Datamonitor reports, that its study revealed, more than one in five depressed patients attempt suicide and a further 47% think about killing themselves before their condition is diagnosed. The stigma of depression has stopped patients from seeking therapy. This is truly a tragic trend.
Sunday, January 19, 2003
1/19/03 Is The Big D On The Doorstep?
Barron's reports that the government, corporations, and households are saddled with $31 trillion of debt. That's an overwhelming amount for a $10 trillion economy. Now you know why I increasingly worry about the big D arriving on our doorstep. It seems to be slowly creeping up on us.
The California state jobless rate is at a 5 year high of 6.6%.
The Mexican peso is at a 4 year low vs the dollar at 10.61 per dollar. Mexico sends 85% of its exports to the U.S.
Federal securities regulators have told Martha Stewart they've decided to file civil insider-trading charges against her.
Barron's reports that the government, corporations, and households are saddled with $31 trillion of debt. That's an overwhelming amount for a $10 trillion economy. Now you know why I increasingly worry about the big D arriving on our doorstep. It seems to be slowly creeping up on us.
The California state jobless rate is at a 5 year high of 6.6%.
The Mexican peso is at a 4 year low vs the dollar at 10.61 per dollar. Mexico sends 85% of its exports to the U.S.
Federal securities regulators have told Martha Stewart they've decided to file civil insider-trading charges against her.
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