4/5/03 The Bigger The Boom The Bigger The Bust
Over the past few years I have discussed the growing health care crisis, our ever-increasing unemployment, declining retirement pensions, an overpriced stock market, an international economy which is in the midst of a contraction, this country’s over consumption and extended debt position, the federal government’s unwillingness to reduce spending as tax revenues plummet, deficits at the state and local levels, and the potential for a global big D, just to name a few items. It no longer is a matter of looking at a glass being half full or half empty. Now it’s a matter of the glass being empty. Accounting gimmicks won’t work; revising monthly numbers won’t help; the spinmeisters can no longer make it happen. It’s time to swallow the bitter medicine, retrench, and rebuild. That will mean plenty of hardships for everyone. No one will be spared.
At the September 1996 Federal Open Market Committee Alan Greenspan said “ I recognize that this is a stock market bubble problem at this point.” He remarked that the solution was “the possibility of increasing margin requirements… if you want to get rid of the bubble, whatever it is, that will do it.” In my view, many of the present problems might have been avoided with those increased margin requirements.
The Pension Benefit Guaranty Corp, a federal agency, is $3.5 billion in debt. That agency now controls the $7.8 billion Bethlehem Steel pension plan which covers 95,000 workers. Those workers will receive monthly pension payments which are roughly 50% less than they had originally expected. There are examples after examples like this. Yesterday I described the U.S. Airways pension plan.
Close to two dozen software companies have issued warnings about the quarter not living up to prior expectations.
Georgia Pacific is laying off another 300 workers, Infospace fired 115, GE is cutting 56, and Trendwest is eliminating 111 call centers.
J. Paul Getty: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
The year-to-year net change in private payrolls has been negative for 21 straight months, the longest stretch since WW II. Over the past two years 2.5 million jobs have been lost in the private sector. Morgan Stanley’s chief economist, Richard Berner, said the unemployment rate in the first quarter should have been at least 6.3% and not what has been reported. I totally agree, and have said just that many times in my blog.
Since February 20 I have often inquired how the government was operating with no money. Today we found out. The Treasury has been forced to suspend investing in the Civil Service Retirement and Disability Fund in order to meet spending needs. The government is already at the debt ceiling limit. This action will provide the government with $12 billion in funds thru July 11.
Europe’s biggest chip maker STMicroelectronics issued disappointing results.
The February job loss was revised from 308,000 to 357,000 jobs lost.
Daniel Carp, Eastman Kodak CEO: “It remains to be seen how demand recovers after the war, because I don’t think the slowdown we’re in is all due to the war in Iraq.”
The U.S. economy lost 108,00 jobs in March- three times the amount expected. The percentage of the U.S population holding jobs fell to 62.3% in March, the lowest level in nine years.
Crude oil fell to a two week low of $24.40 a barrel.
For the week ending April 2, funds invested in U.S. stocks had outflows of $1.6 billion.
Friday, April 04, 2003
4/4/03 A Pandemic
In Canada a seventh SARS patient died yesterday. "Unfortunately, it's an epidemic now that will become a pandemic," predicted Donald Low, chief microbiologist at Toronto's Mt. Sinai Hospital. Denis Maki, a University of Wisconsin-Madison infectious diseases expert, spoke about SARS on Thursday at an American College of Physicians meeting in San Diego. He said "when you get a new strain that everyone's susceptible to, you have pandemic disease. There's a very good likelihood this is going to continue to spread."
Federal tax revenues as a percentage of GDP have averaged about 17% over the last four decades. With growing unemployment, less business growth, and our country getting poorer due to massive government spending reflected in the $2.2 trillion proposed budget, I expect tax revenues to be less than 15% of GDP this year.
Altria, parent of Philip Morris, will not be able to make their April 15 payment to 46 states, under the 1998 tobacco settlement agreement, if the company is required to post a $12 billion bond. Some states have issued bonds supported by those yearly payments, which are projected as $206 billion over 25 years. This could be a very messy matter for many parties. The states fought for this day of reckoning, and now they will wish they never opened the lid to this rancid creation.
We have 8.5 million unemployed Americans, and more lose their jobs daily. Yesterday Monaco Coach announced cutting 850 jobs, HealthSouth 165 jobs, and Georgia Pacific 170 jobs. Seven trillion dollars have been lost in the stock market since 2000. Obviously, the lesson of following the trend has been lost on many money managers, most of whom remain bullish. You'll know the lesson has been learned when, at Broad and Wall Street, your love one or someone close to you is left standing without his shirt, so to speak.
Vickers Insiders Weekly noted that the one-week ratio of insider sales to purchases recently surged to 2.95. This is decidedly negative.
In a study entitled "When Bubbles Burst", The IMF states "housing price busts on average occurred about once every 20 years, lasted about 4 years, and involved price declines of about 30%. There has been a 70% rise in U.K. housing prices since 1994 and 27% in the U.S. since 1996. A housing bust in one country will have spillovers in the rest of the world... the risks of a bust in the U.K. are greater than in the U.S."
The June eurodollar futures contract reflects a yield of 1.13% which is lower than the present Fed overnight target rate, and the latter could be cut at any time to 1%.
The spread between a two year and ten year Treasury bond is the widest since November 1992. It approximates 2.38 points.
A house panel is proposing a bill which would let workers choose between paid time off or overtime pay- both at the rate of time and one half. The bill, however, would allow employers to decide when the time could be taken.
Uruguay is set to default on as much as $6.5 billion in bonds.
Alan Greenspan: "Reports of nonbusiness bankruptcy filings reaching record highs in 2002 reveal that many consumers are experiencing significant financial crises." He needed bankruptcy filings to realize this?
There are about 150 major tribes in Iraq. A British official states "the tribes play a long game. For them, the real currency is not just money but privileges and the promise of roles and influence in the post-Saddam government, whatever the UN or the Iraqi exile groups may say."
The ISM for non-manufacturing businesses fell to 47.9 from 53.9 in February. The median forecast of 49 economists was for a reading of 52. The index contracted the most since October 2001. These figures were compiled prior to the start of the war. The services sector accounts for over 75% of the U.S. economy.
The number of U.S. workers filing new claims for state unemployment benefits rose by 38,000 to 445,000, the highest in almost one year. The number of Americans who continue to collect benefits each week surged 107,000 to 3.61 million.
Michael Moskow, president of the Federal Reserve Bank of Chicago, said "my own sense is that in early to mid-February is when things started to slow." He should tell that to the 8.5 million Americans who are unemployed.and can't find a job. Moskow lacks a sense of reality.
The services sector in the euro zone and in the U.K. slowed sharply last month, and Germany's unemployment rose to a 5 year high with about 4.5 million Germans out of work.
Iranian President Khatami: "The result of this war is the death of innocent people and circulating and strengthening extremism and violence...to answer back your violence with violence."
In Canada a seventh SARS patient died yesterday. "Unfortunately, it's an epidemic now that will become a pandemic," predicted Donald Low, chief microbiologist at Toronto's Mt. Sinai Hospital. Denis Maki, a University of Wisconsin-Madison infectious diseases expert, spoke about SARS on Thursday at an American College of Physicians meeting in San Diego. He said "when you get a new strain that everyone's susceptible to, you have pandemic disease. There's a very good likelihood this is going to continue to spread."
Federal tax revenues as a percentage of GDP have averaged about 17% over the last four decades. With growing unemployment, less business growth, and our country getting poorer due to massive government spending reflected in the $2.2 trillion proposed budget, I expect tax revenues to be less than 15% of GDP this year.
Altria, parent of Philip Morris, will not be able to make their April 15 payment to 46 states, under the 1998 tobacco settlement agreement, if the company is required to post a $12 billion bond. Some states have issued bonds supported by those yearly payments, which are projected as $206 billion over 25 years. This could be a very messy matter for many parties. The states fought for this day of reckoning, and now they will wish they never opened the lid to this rancid creation.
We have 8.5 million unemployed Americans, and more lose their jobs daily. Yesterday Monaco Coach announced cutting 850 jobs, HealthSouth 165 jobs, and Georgia Pacific 170 jobs. Seven trillion dollars have been lost in the stock market since 2000. Obviously, the lesson of following the trend has been lost on many money managers, most of whom remain bullish. You'll know the lesson has been learned when, at Broad and Wall Street, your love one or someone close to you is left standing without his shirt, so to speak.
Vickers Insiders Weekly noted that the one-week ratio of insider sales to purchases recently surged to 2.95. This is decidedly negative.
In a study entitled "When Bubbles Burst", The IMF states "housing price busts on average occurred about once every 20 years, lasted about 4 years, and involved price declines of about 30%. There has been a 70% rise in U.K. housing prices since 1994 and 27% in the U.S. since 1996. A housing bust in one country will have spillovers in the rest of the world... the risks of a bust in the U.K. are greater than in the U.S."
The June eurodollar futures contract reflects a yield of 1.13% which is lower than the present Fed overnight target rate, and the latter could be cut at any time to 1%.
The spread between a two year and ten year Treasury bond is the widest since November 1992. It approximates 2.38 points.
A house panel is proposing a bill which would let workers choose between paid time off or overtime pay- both at the rate of time and one half. The bill, however, would allow employers to decide when the time could be taken.
Uruguay is set to default on as much as $6.5 billion in bonds.
Alan Greenspan: "Reports of nonbusiness bankruptcy filings reaching record highs in 2002 reveal that many consumers are experiencing significant financial crises." He needed bankruptcy filings to realize this?
There are about 150 major tribes in Iraq. A British official states "the tribes play a long game. For them, the real currency is not just money but privileges and the promise of roles and influence in the post-Saddam government, whatever the UN or the Iraqi exile groups may say."
The ISM for non-manufacturing businesses fell to 47.9 from 53.9 in February. The median forecast of 49 economists was for a reading of 52. The index contracted the most since October 2001. These figures were compiled prior to the start of the war. The services sector accounts for over 75% of the U.S. economy.
The number of U.S. workers filing new claims for state unemployment benefits rose by 38,000 to 445,000, the highest in almost one year. The number of Americans who continue to collect benefits each week surged 107,000 to 3.61 million.
Michael Moskow, president of the Federal Reserve Bank of Chicago, said "my own sense is that in early to mid-February is when things started to slow." He should tell that to the 8.5 million Americans who are unemployed.and can't find a job. Moskow lacks a sense of reality.
The services sector in the euro zone and in the U.K. slowed sharply last month, and Germany's unemployment rose to a 5 year high with about 4.5 million Germans out of work.
Iranian President Khatami: "The result of this war is the death of innocent people and circulating and strengthening extremism and violence...to answer back your violence with violence."
Thursday, April 03, 2003
4/3/03 Leon Levy: "People Typically Discount The Risks On Stocks They Own"
Stephen Roach, Morgan Stanley's chief economist, will advise clients on Friday that he is forecasting a world recession in 2003. In my view, as expressed over and over again, that is already taking place. The question I believe is whether we are facing a global big D.
The WHO has confirmed 2,223 cases of SARS with 1898 of them in China and Hong Kong. In the U.S. 27 states have reported suspected SARS cases. There is a growing fear that, because of SARS, companies exposed to China and Hong Kong will see their earnings take a hit.
There have been at least 78 confirmed coalition deaths in the war. In addition, there are 22 soldiers listed as either POWs or MIA.
Mizuho, the world's largest bank by assets, has slid about 11% in the last three trading sessions in Japan and closed at a record low.
Telia Sonera AB, the largest Nordic phone company, will cut 400 jobs in Finland; KLM will cut several thousand jobs; Finnair OYJ will cut 1200 jobs; AMR will furlough 2500 more pilots; and Aloha Airlines is in arrears on about $1 million in airport fees to the state of Hawaii.
Yesterday the FBI issued an alert to all field agents for terrorists trying to make chemical weapons such as ricin.
Factory orders dropped 1.5% in February, the biggest decline in 5 months. These numbers took place prior to the start of the war.
World Bank: "A worrisome characteristic of the current economic environment is that macroeconomic policies maybe running up against their limits... the global trend toward deflation poses new challenges for policy makers."
GM is offering 5-year no interest loans. Ford offers $5 a day lease deals. However, the consumer appears still inclined towards the attractive incentives for a Camry, Corolla, and a Civic. The top Japanese carmakers sold more cars and trucks in the U.S. this March than they did a year earlier.
Applications for mortgages in the U.S. fell 17% from the previous week.
The President's overall budget for fiscal 2004 amounts to $2.2 trillion. Where will the money come from to fight the war as well as to offer seniors a Medicare drug plan which will offset the present high cost for prescription drugs? When will the debt ceiling be increased, and by how much?
The U.S Airways pilots' pension plan was underfunded by $2.5 billion but the Pension Benefit Guaranty Corp. will only fund about $600 million. Federal law sets a minimum benefit of about $44,000 for retirees enrolled in pension plans that terminate this year and are taken over by the government program. In sum, government protection and guaranty are misnomers. That goes for just about all government programs offering such proposed benefits. For example, if many banks go belly up, do you think the FDIC will have the money for complete insured reimbursement? Maybe the saying "let's sleep on it" should have a greater meaning.
Due to a projected $8 million budget deficit, the Scottsdale Arizona Unified School District notified 163 teachers(10% of the teaching staff) that their jobs will be eliminated next year. These teaching pink slips are being delivered all over the U.S.
Jose Narosky: "In war, there are no unwounded soldiers."
Gunnery SGT Bill Hale of Pennsauken, N.J.: "This battle (near Nassiriya) was only supposed to last six hours. We were fighting five days straight, 24 hours a day." Hale is in a wheelchair. He suffered a concussion, nerve damage and injuries to his lower back and knee as a result of being ambushed by Iraqi fire.
First LT James Uwins of South Pasadena, Ca fought alongside Bill Hale. He said they were unable to sleep more than a couple of hours in a time in 36-40 hour periods. He said "that's the thing that really gets you- it's the slow burn." He has shrapnel in his legs and left arm from the ambush of rocket-propelled grenades.
Barbara W. Tuchman: "War is the unfolding of miscalculations."
In the U.S. about one out of every seven jobs is either directly or indirectly linked to the airline and travel sector.
San Francisco's downtown office vacancies rose to a record high 20.3% in the first quarter. Rents fell for the ninth straight quarter to levels, adjusted for inflation, below 1992 levels. The vacancy rate is expected to rise further.
20 years ago the per capita GDP in Iraq was $9000. Now it's $1000.
Stephen Roach, Morgan Stanley's chief economist, will advise clients on Friday that he is forecasting a world recession in 2003. In my view, as expressed over and over again, that is already taking place. The question I believe is whether we are facing a global big D.
The WHO has confirmed 2,223 cases of SARS with 1898 of them in China and Hong Kong. In the U.S. 27 states have reported suspected SARS cases. There is a growing fear that, because of SARS, companies exposed to China and Hong Kong will see their earnings take a hit.
There have been at least 78 confirmed coalition deaths in the war. In addition, there are 22 soldiers listed as either POWs or MIA.
Mizuho, the world's largest bank by assets, has slid about 11% in the last three trading sessions in Japan and closed at a record low.
Telia Sonera AB, the largest Nordic phone company, will cut 400 jobs in Finland; KLM will cut several thousand jobs; Finnair OYJ will cut 1200 jobs; AMR will furlough 2500 more pilots; and Aloha Airlines is in arrears on about $1 million in airport fees to the state of Hawaii.
Yesterday the FBI issued an alert to all field agents for terrorists trying to make chemical weapons such as ricin.
Factory orders dropped 1.5% in February, the biggest decline in 5 months. These numbers took place prior to the start of the war.
World Bank: "A worrisome characteristic of the current economic environment is that macroeconomic policies maybe running up against their limits... the global trend toward deflation poses new challenges for policy makers."
GM is offering 5-year no interest loans. Ford offers $5 a day lease deals. However, the consumer appears still inclined towards the attractive incentives for a Camry, Corolla, and a Civic. The top Japanese carmakers sold more cars and trucks in the U.S. this March than they did a year earlier.
Applications for mortgages in the U.S. fell 17% from the previous week.
The President's overall budget for fiscal 2004 amounts to $2.2 trillion. Where will the money come from to fight the war as well as to offer seniors a Medicare drug plan which will offset the present high cost for prescription drugs? When will the debt ceiling be increased, and by how much?
The U.S Airways pilots' pension plan was underfunded by $2.5 billion but the Pension Benefit Guaranty Corp. will only fund about $600 million. Federal law sets a minimum benefit of about $44,000 for retirees enrolled in pension plans that terminate this year and are taken over by the government program. In sum, government protection and guaranty are misnomers. That goes for just about all government programs offering such proposed benefits. For example, if many banks go belly up, do you think the FDIC will have the money for complete insured reimbursement? Maybe the saying "let's sleep on it" should have a greater meaning.
Due to a projected $8 million budget deficit, the Scottsdale Arizona Unified School District notified 163 teachers(10% of the teaching staff) that their jobs will be eliminated next year. These teaching pink slips are being delivered all over the U.S.
Jose Narosky: "In war, there are no unwounded soldiers."
Gunnery SGT Bill Hale of Pennsauken, N.J.: "This battle (near Nassiriya) was only supposed to last six hours. We were fighting five days straight, 24 hours a day." Hale is in a wheelchair. He suffered a concussion, nerve damage and injuries to his lower back and knee as a result of being ambushed by Iraqi fire.
First LT James Uwins of South Pasadena, Ca fought alongside Bill Hale. He said they were unable to sleep more than a couple of hours in a time in 36-40 hour periods. He said "that's the thing that really gets you- it's the slow burn." He has shrapnel in his legs and left arm from the ambush of rocket-propelled grenades.
Barbara W. Tuchman: "War is the unfolding of miscalculations."
In the U.S. about one out of every seven jobs is either directly or indirectly linked to the airline and travel sector.
San Francisco's downtown office vacancies rose to a record high 20.3% in the first quarter. Rents fell for the ninth straight quarter to levels, adjusted for inflation, below 1992 levels. The vacancy rate is expected to rise further.
20 years ago the per capita GDP in Iraq was $9000. Now it's $1000.
Wednesday, April 02, 2003
4/2/03 The Push Into Baghdad Overwhelms The Economy And SARS
Yesterday and again overnight and this morning the markets have been focusing on our troops marching towards Baghdad, and trying to figure out the time required to take control of that city. After all, it's much more pleasurable to think about potential good news and to push the bad into the background. The markets might be well served to listen to Boston Fed President Cathy Minchan who said that issues other than just the war- like the overhang from excessive investment of the 1990s- were also restraining growth and suggested another rate cut might be forthcoming.
U.S. retail sales this year are expected to rise at their slowest rate in at least a decade. I am not so sure they will increase at all. Retail chain sales were down 1.4% in the week ending March 29.
Merrill Lynch: "The equity market is becoming less attractive."
The U.S. March ISM manufacturing index fell for the first time since October to 46.2 from 50.5. Economists had been predicting a reading of 49. European manufacturing shrank for the sixth month in seven in March and dropped to 48.4. Construction spending fell 0.2%. In March new orders fell sharply to 46.2 from 52.3 in February. The ISM employment reading fell to 42.1(a really low number). Industry-wide vehicle inventories reached a record of 4 million units in March as auto sales dropped for the third month in a row.
Fleming, Air Canada, and DNA Sciences filed for Chapter 11.
The average unemployed worker already receiving unemployment insurance is out of a job for 19 months, the highest level in eight years.
Berkshire Hathaway to buy Clayton Homes for $1.7 billion in cash, and First Data to buy Concord EFS for $6.75 billion.
After the market closed yesterday, Asyst Technologies issued a serious revenue warning. The revenue shortfall for the quarter would exceed 20%. They make chip manufacturing equipment and cited "continued weakness in the semiconductor industry." They did not mention the war as the culprit.
The Marines of the 3rd Battalion, 7th infantry are short on supplies of cigarettes and smoking tobacco. 34% of servicement smoke. It is permitted in wartime. Farmers in the countryside have helped to ease the shortage. We ask our soldiers to go into battle and can't even supply them adequately. Something is wrong here.
SARS is having a very negative impact on many Asian economies, and growth estimates are being reduced on a daily basis. I certainly pray that this illness will be brought under control. Right now that does not look like a reality.
Yesterday and again overnight and this morning the markets have been focusing on our troops marching towards Baghdad, and trying to figure out the time required to take control of that city. After all, it's much more pleasurable to think about potential good news and to push the bad into the background. The markets might be well served to listen to Boston Fed President Cathy Minchan who said that issues other than just the war- like the overhang from excessive investment of the 1990s- were also restraining growth and suggested another rate cut might be forthcoming.
U.S. retail sales this year are expected to rise at their slowest rate in at least a decade. I am not so sure they will increase at all. Retail chain sales were down 1.4% in the week ending March 29.
Merrill Lynch: "The equity market is becoming less attractive."
The U.S. March ISM manufacturing index fell for the first time since October to 46.2 from 50.5. Economists had been predicting a reading of 49. European manufacturing shrank for the sixth month in seven in March and dropped to 48.4. Construction spending fell 0.2%. In March new orders fell sharply to 46.2 from 52.3 in February. The ISM employment reading fell to 42.1(a really low number). Industry-wide vehicle inventories reached a record of 4 million units in March as auto sales dropped for the third month in a row.
Fleming, Air Canada, and DNA Sciences filed for Chapter 11.
The average unemployed worker already receiving unemployment insurance is out of a job for 19 months, the highest level in eight years.
Berkshire Hathaway to buy Clayton Homes for $1.7 billion in cash, and First Data to buy Concord EFS for $6.75 billion.
After the market closed yesterday, Asyst Technologies issued a serious revenue warning. The revenue shortfall for the quarter would exceed 20%. They make chip manufacturing equipment and cited "continued weakness in the semiconductor industry." They did not mention the war as the culprit.
The Marines of the 3rd Battalion, 7th infantry are short on supplies of cigarettes and smoking tobacco. 34% of servicement smoke. It is permitted in wartime. Farmers in the countryside have helped to ease the shortage. We ask our soldiers to go into battle and can't even supply them adequately. Something is wrong here.
SARS is having a very negative impact on many Asian economies, and growth estimates are being reduced on a daily basis. I certainly pray that this illness will be brought under control. Right now that does not look like a reality.
Tuesday, April 01, 2003
4/1/03 I'm Not Foolin. This Is For Real
The consumer is slowly changing. The difficult economic times coupled with the Iraqi war are teaching consumers they can and will do with less. This phenomenon will change the consumer spending landscape and it shall have a profound long term impact on the U.S. economy as well as those economies dependent on our importing appetite. The net result will be, in part, less tax revenues for state and local governments; less service and manufacturing jobs which also translates into reduced tax revenues for the government in Washington; a higher personal savings rate; reduced credit card debt balances; and more price sensitivity when making a purchase. I would expect companies to reduce employment further, to carry lower inventories, to cut cap spending, and to pressure suppliers for price reductions. Deflation will be the by-product of the above environment, and it will be with us for a long period of time.
The percentage of job seekers who said they believe there will be fewer jobs available in six months rose to 40.7%.
David Ogilvy: "The consumer isn't a moron. She is your wife."
Howard Jerome: "We can no longer have everything we want, but we can be more than we imagined."
A Watson Wyatt study shows the percentage of employees nationwide with fully funded pension plans dropped from 84% in 1998 to 37% in 2002, and continues to decline.
The government can print more dollars but they can't manufacture consumer confidence. The consumer will, over time, leave home without their plastic.
Two months ago the inventory of unsold homes was a 3.8 month supply. In February the inventory was up to 5 months, and I expect that to increase and for the median price of a house to decline. The bubble has burst.
The employment component of the Chicago PMI index fell to 45.1 from an already weak 46.6 in February. The new orders index slumped to 52.5 from 59 in February. I expect the March number to be even lower.
WalMart expects sales at stores open for more than a year to be at the low end of its previous estimate for March. Federated, JC Penney, Pier I, and Nordstrom said March sales were below expectations.
March manufacturing activity in the Chicago region plunged sharply to 48.4 from 54.9. Economists had predicted a drop to 51. Economic activity in NYC was reported as weak too.
There were only 5 IPOs in the first quarter, the lowest number in 25 years.
KMart cut their staff by 660. They still employ 170,000. Edgar Online reduced employment by 17%.
Global semiconductor chip sales dropped 3.3% in January. They continue weak.
Violence in Nigeria has slashed crude output by 40% or 800,000 barrels per day, and further reductions are expected.
Saudi Arabia's March oil output was its highest monthly production in 21 years.
Edward Sweda, Jr, senior attorney for the Tobacco Products Liability Project in Boston: "When Philip Morris is talking about the impact of the lawsuits with friends and investors from Wall Street, everything is rosy and the bottom line is fine. When they're talking about the issue with state governments, there's the threat of bankruptcy and their inability to continue paying the settlement and they say they need protection."
China's Huawei Technologies has been selling tech hardware to Iraq. Russia, France, and Jordan are believed to be suppliers to Iraq too.
Japan's biggest manufacturers are pessimistic on their economy for a ninth straight quarter. Large business confidence falls to -10. Sentiment had been expected to rise. Companies with more than 1000 workers will reduce cap spending by 0.8%.
For years the U.S. consumer has been overwhelmed by elevated indebtedness in relation to take-home pay. That won't change overnight, but it will change for the better over time as consumption patterns become increasingly rational.
The consumer is slowly changing. The difficult economic times coupled with the Iraqi war are teaching consumers they can and will do with less. This phenomenon will change the consumer spending landscape and it shall have a profound long term impact on the U.S. economy as well as those economies dependent on our importing appetite. The net result will be, in part, less tax revenues for state and local governments; less service and manufacturing jobs which also translates into reduced tax revenues for the government in Washington; a higher personal savings rate; reduced credit card debt balances; and more price sensitivity when making a purchase. I would expect companies to reduce employment further, to carry lower inventories, to cut cap spending, and to pressure suppliers for price reductions. Deflation will be the by-product of the above environment, and it will be with us for a long period of time.
The percentage of job seekers who said they believe there will be fewer jobs available in six months rose to 40.7%.
David Ogilvy: "The consumer isn't a moron. She is your wife."
Howard Jerome: "We can no longer have everything we want, but we can be more than we imagined."
A Watson Wyatt study shows the percentage of employees nationwide with fully funded pension plans dropped from 84% in 1998 to 37% in 2002, and continues to decline.
The government can print more dollars but they can't manufacture consumer confidence. The consumer will, over time, leave home without their plastic.
Two months ago the inventory of unsold homes was a 3.8 month supply. In February the inventory was up to 5 months, and I expect that to increase and for the median price of a house to decline. The bubble has burst.
The employment component of the Chicago PMI index fell to 45.1 from an already weak 46.6 in February. The new orders index slumped to 52.5 from 59 in February. I expect the March number to be even lower.
WalMart expects sales at stores open for more than a year to be at the low end of its previous estimate for March. Federated, JC Penney, Pier I, and Nordstrom said March sales were below expectations.
March manufacturing activity in the Chicago region plunged sharply to 48.4 from 54.9. Economists had predicted a drop to 51. Economic activity in NYC was reported as weak too.
There were only 5 IPOs in the first quarter, the lowest number in 25 years.
KMart cut their staff by 660. They still employ 170,000. Edgar Online reduced employment by 17%.
Global semiconductor chip sales dropped 3.3% in January. They continue weak.
Violence in Nigeria has slashed crude output by 40% or 800,000 barrels per day, and further reductions are expected.
Saudi Arabia's March oil output was its highest monthly production in 21 years.
Edward Sweda, Jr, senior attorney for the Tobacco Products Liability Project in Boston: "When Philip Morris is talking about the impact of the lawsuits with friends and investors from Wall Street, everything is rosy and the bottom line is fine. When they're talking about the issue with state governments, there's the threat of bankruptcy and their inability to continue paying the settlement and they say they need protection."
China's Huawei Technologies has been selling tech hardware to Iraq. Russia, France, and Jordan are believed to be suppliers to Iraq too.
Japan's biggest manufacturers are pessimistic on their economy for a ninth straight quarter. Large business confidence falls to -10. Sentiment had been expected to rise. Companies with more than 1000 workers will reduce cap spending by 0.8%.
For years the U.S. consumer has been overwhelmed by elevated indebtedness in relation to take-home pay. That won't change overnight, but it will change for the better over time as consumption patterns become increasingly rational.
4/1/03 I'm Not Foolin. This Is For Real
The consumer is slowly changing. The difficult economic times coupled with the Iraqi war are teaching consumers they can and will do with less. This phenomenon will change the consumer spending landscape and it shall have a profound long term impact on the U.S. economy as well as those economies dependent on our importing appetite. The net result will be, in part, less tax revenues for state and local governments; less service and manufacturing jobs which also translates into less tax revenues for the government in Washington; a higher personal savings rate; reduced credit card debt balances; and more price sensitivity when making a purchase. I would expect companies to reduce employment further, to carry lower inventories, to cut cap spending, and to pressure suppliers for price reductions. Deflation will be the by-product of the above environment, and it will be with us for an extended period of time.
The percentage of job seekers who said they believe there will be fewer jobs available in six months rose to 40.7%.
David Ogilvy: "The consumer isn't a moron. She is your wife."
Howard Jerome: "We can no longer have everything we want, but we can be more than we imagined."
A Watson Wyatt study shows the percentage of employees nationwide with fully funded pension plans dropped from 84% in 1998 to 37% in 2002, and continues to decline.
The government can print more dollars but they can't manufacture consumer confidence. The consumer will, over time, leave home without their plastic.
Two months ago the inventory of unsold homes was a 3.8 month supply. In February the inventory was up to 5 months, and I expect that to increase and for the median price of a house to decline. The bubble has burst.
The employment component of the Chicago PMI index fell to 45.1 from an already weak 46.6 in February. The new orders index slumped to 52.5 from 59 in February. I expect the March number to be even lower.
WalMart expects sales at stores open for more than a year to be at the low end of its previous estimate for March. Federated, JC Penney, Pier I, and Nordstrom said March sales were below expectations.
March manufacturing activity in the Chicago region plunged sharply to 48.4 from 54.9. Economists had predicted a drop to 51. Economic activity in NYC was reported as weak too.
There were only 5 IPOs in the first quarter, the lowest number in 25 years.
KMart cut their staff by 660. They still employ 170,000. Edgar Online reduced employment by 17%.
Global semiconductor chip sales dropped 3.3% in January. They continue weak.
Violence in Nigeria has slashed crude output by 40% or 800,000 barrels per day, and further reductions are expected.
Saudi Arabia's March oil output was its highest monthly production in 21 years.
Edward Sweda, Jr, senior attorney for the Tobacco Products Liability Project in Boston: "When Philip Morris is talking about the impact of the lawsuits with friends and investors from Wall Street, everything is rosy and the bottom line is fine. When they're talking about the issue with state governments, there's the threat of bankruptcy and their inability to continue paying the settlement and they say they need protection."
China's Huawei Technologies has been selling tech hardware to Iraq. Russia, France, and Jordan are believed to be suppliers to Iraq too.
Japan's biggest manufacturers are pessimistic on their economy for a ninth straight quarter. Large business confidence falls to -10. Sentiment had been expected to rise. Companies with more than 1000 workers will reduce cap spending by 0.8%.
For years the U.S. consumer has been overwhelmed by elevated indebtedness in relation to take-home pay. That won't change overnight, but it will change for the better over time as consumption patterns become increasingly rational.
The consumer is slowly changing. The difficult economic times coupled with the Iraqi war are teaching consumers they can and will do with less. This phenomenon will change the consumer spending landscape and it shall have a profound long term impact on the U.S. economy as well as those economies dependent on our importing appetite. The net result will be, in part, less tax revenues for state and local governments; less service and manufacturing jobs which also translates into less tax revenues for the government in Washington; a higher personal savings rate; reduced credit card debt balances; and more price sensitivity when making a purchase. I would expect companies to reduce employment further, to carry lower inventories, to cut cap spending, and to pressure suppliers for price reductions. Deflation will be the by-product of the above environment, and it will be with us for an extended period of time.
The percentage of job seekers who said they believe there will be fewer jobs available in six months rose to 40.7%.
David Ogilvy: "The consumer isn't a moron. She is your wife."
Howard Jerome: "We can no longer have everything we want, but we can be more than we imagined."
A Watson Wyatt study shows the percentage of employees nationwide with fully funded pension plans dropped from 84% in 1998 to 37% in 2002, and continues to decline.
The government can print more dollars but they can't manufacture consumer confidence. The consumer will, over time, leave home without their plastic.
Two months ago the inventory of unsold homes was a 3.8 month supply. In February the inventory was up to 5 months, and I expect that to increase and for the median price of a house to decline. The bubble has burst.
The employment component of the Chicago PMI index fell to 45.1 from an already weak 46.6 in February. The new orders index slumped to 52.5 from 59 in February. I expect the March number to be even lower.
WalMart expects sales at stores open for more than a year to be at the low end of its previous estimate for March. Federated, JC Penney, Pier I, and Nordstrom said March sales were below expectations.
March manufacturing activity in the Chicago region plunged sharply to 48.4 from 54.9. Economists had predicted a drop to 51. Economic activity in NYC was reported as weak too.
There were only 5 IPOs in the first quarter, the lowest number in 25 years.
KMart cut their staff by 660. They still employ 170,000. Edgar Online reduced employment by 17%.
Global semiconductor chip sales dropped 3.3% in January. They continue weak.
Violence in Nigeria has slashed crude output by 40% or 800,000 barrels per day, and further reductions are expected.
Saudi Arabia's March oil output was its highest monthly production in 21 years.
Edward Sweda, Jr, senior attorney for the Tobacco Products Liability Project in Boston: "When Philip Morris is talking about the impact of the lawsuits with friends and investors from Wall Street, everything is rosy and the bottom line is fine. When they're talking about the issue with state governments, there's the threat of bankruptcy and their inability to continue paying the settlement and they say they need protection."
China's Huawei Technologies has been selling tech hardware to Iraq. Russia, France, and Jordan are believed to be suppliers to Iraq too.
Japan's biggest manufacturers are pessimistic on their economy for a ninth straight quarter. Large business confidence falls to -10. Sentiment had been expected to rise. Companies with more than 1000 workers will reduce cap spending by 0.8%.
For years the U.S. consumer has been overwhelmed by elevated indebtedness in relation to take-home pay. That won't change overnight, but it will change for the better over time as consumption patterns become increasingly rational.
Monday, March 31, 2003
3/31/03 Goethe: "The Condition of Freedom Is Risk"
It is the 12th day of the war. We have at least 46 casualties and another 17 soldiers are missing. Britain has lost 25 with 5 of those killed in action. According to yesterday's poll, 55% of Americans believe the U.S. government was too optimistic in assessing the course of the war in Iraq (Cheney certainly was) and one-third would not support the war if more than 500 U.S. troops were to die.
With an extended war now expected, second quarter earnings estimates will be revised downward. They were too high for starters.
Japan's industrial production declined 1.7%, and was the fifth decline in the past six months and twice the drop economists had anticipated. Inventories declined 2.3% to the lowest levels since 1988.
The Nikkei ended the year off 28%. Mitsui Chemicals and Sumitomo Chemical eneded their merger plans. It is anticipated that all of Japan's top seven banks will report losses.
European March consumer confidence dropped to the lowest level since August 1993. I am confident that it can decline further.
Over the past 12 months the euro has risen 23% against the dollar. That's some jump.
The NY Times reports that an Iraqi general says 4000 volunteers from 23 Arab countries stand ready to carry out suicide attacks against U.S. troops.( I need to return to school. I didn't know there were 23 Arab countries.) Tariq Aziz says "when you fight an invader by whatever means available to you, you are not a terrorist, you are a hero." I say you are a hero when you kill a terrorist who is mistaken for a hero.
Between now and 2015 the interest on our public debt is about $3.5 trillion.
Egyptian President Mubarek said the Iraqi war would produce "one hundred new bin Ladens." How would he know? Is Egypt harboring terrorists?
In Northeastern Iraq at the Ansar al-Islam compound, there is a complex of underground tunnels and bunkers. It is possible that, at this location, Muslim guerilla groups and al-Qaeda have been making ricin.
Banning smoking in bars and restaurants in NYC has created quite a debate. They are banning a product which is legal. Then again, this country lived thru Prohibition. I notice that Anheuser Busch's cash flow is growing quite nicely. It should be noted that I do not drink or smoke. However, I do cherish freedom. As Goethe said, the condition of freedom is risk.
It is the 12th day of the war. We have at least 46 casualties and another 17 soldiers are missing. Britain has lost 25 with 5 of those killed in action. According to yesterday's poll, 55% of Americans believe the U.S. government was too optimistic in assessing the course of the war in Iraq (Cheney certainly was) and one-third would not support the war if more than 500 U.S. troops were to die.
With an extended war now expected, second quarter earnings estimates will be revised downward. They were too high for starters.
Japan's industrial production declined 1.7%, and was the fifth decline in the past six months and twice the drop economists had anticipated. Inventories declined 2.3% to the lowest levels since 1988.
The Nikkei ended the year off 28%. Mitsui Chemicals and Sumitomo Chemical eneded their merger plans. It is anticipated that all of Japan's top seven banks will report losses.
European March consumer confidence dropped to the lowest level since August 1993. I am confident that it can decline further.
Over the past 12 months the euro has risen 23% against the dollar. That's some jump.
The NY Times reports that an Iraqi general says 4000 volunteers from 23 Arab countries stand ready to carry out suicide attacks against U.S. troops.( I need to return to school. I didn't know there were 23 Arab countries.) Tariq Aziz says "when you fight an invader by whatever means available to you, you are not a terrorist, you are a hero." I say you are a hero when you kill a terrorist who is mistaken for a hero.
Between now and 2015 the interest on our public debt is about $3.5 trillion.
Egyptian President Mubarek said the Iraqi war would produce "one hundred new bin Ladens." How would he know? Is Egypt harboring terrorists?
In Northeastern Iraq at the Ansar al-Islam compound, there is a complex of underground tunnels and bunkers. It is possible that, at this location, Muslim guerilla groups and al-Qaeda have been making ricin.
Banning smoking in bars and restaurants in NYC has created quite a debate. They are banning a product which is legal. Then again, this country lived thru Prohibition. I notice that Anheuser Busch's cash flow is growing quite nicely. It should be noted that I do not drink or smoke. However, I do cherish freedom. As Goethe said, the condition of freedom is risk.
Sunday, March 30, 2003
3/30/03 Human Illusions
Robert Lynde, an Irish author who wrote in the early 20th century: "The belief in the possibility of a short decisive war appears to be one of the most ancient and dangerous of human illusions."
Assets in money market funds and bank savings accounts total more than $5 trillion, and this amount continues to grow. American investors have been taught a stark gambling lesson from the go-go bubble times of only a few years back. There is a disconnect between the average investor and the professional money managers who remain bullish to the core. It's not surprising because the latter are losing other people's money. It's also not surprising that last year a record $140.5 billion was invested in bond funds. One should remember that money market funds limit risk while bond funds do carry risk-maybe not nearly as much as stock funds, but capital can be lost.
In today's economic environment it is wise to avoid a gamble. I am reminded by a statement made by Field Marshall Erwin Rommel. He referred to the battlefield but it is also true of investing: "A gamble is a chance taken; if it fails, recovery is impossible." Today there is little room for error much less a gamble. In 2002 Americans consumed $435 billion more in goods and services than the U.S. produced. As trade and account deficits continue to mount, the dollar has begun to fall, and that fall is picking up speed. We must reduce private and government spending, and increase savings- war or no war. A weak currency reflects a faltering economy, and the latter produces a declining stock market. People will be rewarded for keeping their savings in money market funds. It won't be lost chasing so-called values which are a reflection of human illusions.
When looking at the great companies, such as, WalMart, it is interesting to note their key suppliers. A growing percentage of the business P&G and Clorox put on their books is with WalMart. It is not surprising, therefore, that these two companies are performing better in this harsh economic environment. They have been able to reduce warehousing costs, inventory management, and shipping expenses.
Ali Hassan Majid is Hussein's cousin and known as Chemical Ali. He is leading the enemy troops in southern Iraq. Over the years Ali has killed and maimed several hundred thousand Iraqi and Kurd civilians with chemical weapons. He too must be eliminated. His words reflect horror: "I will kill them all with chemical weapons. Who is going to say anything? The international community? F--- them. The international community and those who listen to them."
Napoleon: "The battlefield is a scene of constant chaos. The winner will be the one who controls that chaos, both his own and the enemies."
N. Korea wants to issue bonds for the first time. They will be called "People's Life Bonds." Maybe Saddam Hussein will purchase some bonds with the money he stole from the Iraqi people.
Commerzbank may announce 2800 layoffs tomorrow.
Kansas topped Arizona in a thriller. That leaves Kansas the favorite among the final four.
One final word about stock market scrutiny. The long term trend is much more significant than the 50 day or 200 day moving average. If the economy were to turn upward, you would have plenty of time to invest your savings. In the meantime the trend is down, and it has been down for three years and it will stay down for a much longer period of time. Greed can be very real but it is often cemented in human illusion. Investing requires discipline and study. Vince Lombardi said that practice does not make perfect- only perfect practice makes perfect. The stock market as a whole is not priced to perfection. Stocks are wondering down the yellow brick road, and after three years of a bear market, they are still priced to reflect good times being just around the corner. It might be wise to take the enemy into account- the pervasive spending habits in the U.S. We are living beyond our means, and tragedy will be the consequence.
Robert Lynde, an Irish author who wrote in the early 20th century: "The belief in the possibility of a short decisive war appears to be one of the most ancient and dangerous of human illusions."
Assets in money market funds and bank savings accounts total more than $5 trillion, and this amount continues to grow. American investors have been taught a stark gambling lesson from the go-go bubble times of only a few years back. There is a disconnect between the average investor and the professional money managers who remain bullish to the core. It's not surprising because the latter are losing other people's money. It's also not surprising that last year a record $140.5 billion was invested in bond funds. One should remember that money market funds limit risk while bond funds do carry risk-maybe not nearly as much as stock funds, but capital can be lost.
In today's economic environment it is wise to avoid a gamble. I am reminded by a statement made by Field Marshall Erwin Rommel. He referred to the battlefield but it is also true of investing: "A gamble is a chance taken; if it fails, recovery is impossible." Today there is little room for error much less a gamble. In 2002 Americans consumed $435 billion more in goods and services than the U.S. produced. As trade and account deficits continue to mount, the dollar has begun to fall, and that fall is picking up speed. We must reduce private and government spending, and increase savings- war or no war. A weak currency reflects a faltering economy, and the latter produces a declining stock market. People will be rewarded for keeping their savings in money market funds. It won't be lost chasing so-called values which are a reflection of human illusions.
When looking at the great companies, such as, WalMart, it is interesting to note their key suppliers. A growing percentage of the business P&G and Clorox put on their books is with WalMart. It is not surprising, therefore, that these two companies are performing better in this harsh economic environment. They have been able to reduce warehousing costs, inventory management, and shipping expenses.
Ali Hassan Majid is Hussein's cousin and known as Chemical Ali. He is leading the enemy troops in southern Iraq. Over the years Ali has killed and maimed several hundred thousand Iraqi and Kurd civilians with chemical weapons. He too must be eliminated. His words reflect horror: "I will kill them all with chemical weapons. Who is going to say anything? The international community? F--- them. The international community and those who listen to them."
Napoleon: "The battlefield is a scene of constant chaos. The winner will be the one who controls that chaos, both his own and the enemies."
N. Korea wants to issue bonds for the first time. They will be called "People's Life Bonds." Maybe Saddam Hussein will purchase some bonds with the money he stole from the Iraqi people.
Commerzbank may announce 2800 layoffs tomorrow.
Kansas topped Arizona in a thriller. That leaves Kansas the favorite among the final four.
One final word about stock market scrutiny. The long term trend is much more significant than the 50 day or 200 day moving average. If the economy were to turn upward, you would have plenty of time to invest your savings. In the meantime the trend is down, and it has been down for three years and it will stay down for a much longer period of time. Greed can be very real but it is often cemented in human illusion. Investing requires discipline and study. Vince Lombardi said that practice does not make perfect- only perfect practice makes perfect. The stock market as a whole is not priced to perfection. Stocks are wondering down the yellow brick road, and after three years of a bear market, they are still priced to reflect good times being just around the corner. It might be wise to take the enemy into account- the pervasive spending habits in the U.S. We are living beyond our means, and tragedy will be the consequence.
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