5/17/03 Investing On A Muddy Track
I am not a handicapper. I eat at the risk arbitage railing. There are similarities, however, between horse racing and investing. I discussed some of these just prior to the running of the Kentucky Derby. Today we will see an off-track at the Preakness due to the rain. Therefore, we must assess a couple of known facts. First, since 1983 there have been 89 non-Kentucky Derby starters entered into the Preakness. Only Red Bullet, the 6-1 second choice, was the victor over that 20 year period. Today there are 10 horses running in the Preakness, and six did not run in the Derby. Not one can be considered a serious contender to win- none is a Red Bullet. Therefore, I will concentrate on the four horses that did run in the Kentucky Derby. Scrimshaw finished 11th in the Derby, and was beaten by 10 lengths. Gary Stevens is a great jockey but better than the horse. Peace Rules came in third in the Derby. I had picked him for second behind my Empire Maker pick. The horse has never been spectacular on a wet course. I'll pick him for third this time. Funny Cide does well on an off-track and won the Derby. I had picked him for third there. He is the favorite. The Preakness favorite has lost six of the past 10 years. In the Derby the favorite has lost 23 out of the past 24 years. (I did not put enough weight into that fact.)Funny Cide starts from Post 9. Through Wednesday, Pimlico post positions 8,9,and 10 were a combined 3 for 76 on the track. I will pick Funny Cide for second. That leaves only one Derby starter remaining, and that's Ten Cents A Shine at an early morning line of 15-1. The horse finished 8th in the Derby; however, thr horse has been training well the past week or so. His times have been his fastest to date, and Jerry Bailey is a great jockey and Lukas is a great trainer. I like the number 5 Post. I have not heard anyone to date mention this horse as having a chance. The reason is simple- the horse has not been a strong contender for four months. It's an off-track. When the stakes are high and the going a bit muddy, anything can happen.
As in horse racing, you can know a ton of facts and still be a poor investor. You have to know when to pull the buy and the sell lever. You can follow Buffett in stocks and Gross in bonds. They deserve to be the favorites in their respective fields. Their records have proven that over time. No one is perfect and that is true for Buffett and Gross. The same can be said for Baffert, Frankel, Lukas, Stevens, and Bailey at the Preakness. They are the proven winners- especially in the big money races. Every day in the market is a big stakes day. Today we will try to look at the whole field, the whole track, and come away with some clarity out of our field of vision. I am not suggesting to follow my lead. I am trying to set the table, and you can decide whether you want to nibble or gorge or walk-away. Either way, I don't present you with a check and I don't rely on tips for investing.
There are individuals who do get paid to write. Let's take Timothy Middleton who just wrote a piece for MSN Money entitled "Investors reap spoils of deflation war." I don't know Middleton and have never spoken or interacted with him. He writes "the Fed has an almost unlimited ability to impose its will on the financial sector-- it generates inflation... the Fed's checkbook is bottomless; if it wanted to buy every single Treasury bond in existence, it could. All the cash it spent doing so would quickly find its way into corporate coffers and worker pay envelopes." I will not characterize the words I uttered to myself after reading this. I will only suggest that the spoken and/or written word can be meant well but come out in a very different fashion and in so doing, contribute to a muddy investment track.
Over this past week, since May 6, the long treasury market has reacted strongly to the Fed's recent stated concern about deflation. We have witnessed a gigantic rally in the long end of the market as rates declined to record low levels. Yesterday Ferguson, the Vice Chair of the Fed, gave a business school commencement speech at Washington University in St. Louis. He said that the possibility of delation "remains quite remote...The United States has too many good things going for it to make a forecast for deflation credible." Actually, Ferguson, you placed the policy statement of May 6th in question and raised the overall credibilty of the Fed, and that is something I have been discussing for two years. As such, I might change Middleton's words a bit and suggest the Fed has an uncanny ability to muddy the financial landscape with a downpouring of disparate statements.
Let's examine some facts in no particular order. Consumer demand is at a decade low pace. There is little or no pricing power. Import prices continue to decline. Prices at both the wholesale and consumer level are falling. Even medical costs are rising at a slower rate. In the first quarter of 2002 they were up 5% and this year only 1.7%, and that's a big difference. We need to remember that the health care sector is 16% of our GDP and rising each year as our population ages. Unemployment claims have stayed above 400,000 for 13 straight weeks. Industrial production continues to drop. Factory utilization is down to a 20 year low. Our account/trade deficit continues to rise to record levels and so does our Federal budget deficit. This landscape does not preclude rallies but it does not make for bull markets. Rising free cash flow, increasing revenues and profit margins, market leadership- that's a recipe for success. That's why Dell makes their shareowners money and those are the reasons I suggested to climb on board that horse when the stock was flattened after 9/11 to the upper teens. One might consider scaling back and taking some money off the table- not all but some. Why not play with the house's money in the next race?
There's a lot of talk about currencies, and I have contributed to that noise over the past year. Our rising spending and decreasing revenues and widening account deficits combined with our GDP growth accounted for by productivity gains have made for a declining dollar. The Fed's printing press has been a contributing factor as well. If we are to have a wide view of the field, we should also note the economic weakness in Europe and Japan have negatively impacted our exports as well as the potential flow of capital into the U.S. The economy for the EU has not been stagnant- it is down. Germany, France, Italy, Holland- all weak. Japan's economy is still weak. Their GDP is not growing and deflation continues. Middleton might check his words. Record low interest rates do not necessarily make for bull markets. Japan has been in a devastatingly long bear market. Their No. 26 note yielded 0.17% yesterday. They can't give the money away!!!! Japan has had 23 months of falling wages. It's no wonder the Nikkei dropped 31% last year. Deflation can cripple markets, and the Fed is not bigger than the market or deflation. Don't be misled by the cautious optimism coming out of the G7 meeting. They mean well. Just like Ferguson, they are trying to provide assurance to a muddy investor track. It would be helpful for the horse and the jockey to be in sync.
Let's review the bidding tomorrow. I want to catch breakfast at the muddy track and view the 10 horse field during their warm ups. You never know. My horse may still be running when tomorrow comes around or it could surprise. That's what makes for horse racing- especially on an off-track.
Friday, May 16, 2003
5/16/03 PIMPS Not TIPS
Every third Friday of each month I have an early breakfast with George Orwell. It's quite amazing how much I learn from an individual who has not been on this earth for quite a period of time. George asked me whether I had enjoyed last night's total lunar eclipse. The last one had occurred on January 20, 2000. Unfortunately, I said, the weather was not too cooperative, and I could not see very much. He said that's the basic problem today on earth. The citizens don't see a helluva lot, and the so-called leaders have soggy observations. He told me how we were behind the times, and suggested that the euro was a little like the Linux operating system- not painful to install, cost effective, and slowly gaining acceptance as the currency of choice. Heck, he said, the U.K. might jump on board on June 9th, and suggested the U.S. should join the group before the dollar fades into a newly-colored bill- one printed in yellow as in a caution light.
George asked me whether I had read the recent piece by Pimco's Bill Gross. I said I thought it was cleverly written with many good points. George said TIPS are ok but that PIMPS are way cool. I told him I'd never heard of PIMPS. He said they were on the way to everyone's neighborhood and to watch for them. I asked what PIMPS stands for. He laughed and said not what I think. It stands, he said, for Pension Investment Management Plans for Schmucks. He said Wilshire Associates has told the pension investors that 79% of U.S. public pension plans are underfunded. So now everyone knows. The solution, he said, is sheer genius- to sell pension obligation bonds, and to use the proceeds to jack up the asset returns and eliminate the underfunding. How simple can you make it? I wondered out loud who would buy these pieces of junk. George said investors are experienced in buying junk. That's where the PIMPS come into play. The PIMPS buy the junk with the left hand while the right hand wipes out the underfunding. I thought for a moment, and said it just doesn't sit right with me. George said not to worry because the citizens don't see a helluva lot and the leaders are in a fog.
We had another cup of coffee, and while sipping, George asked if I had seen the latest report showing where the price for crude goods had dropped 1.3% ex food and energy. I had seen that. He asked whether I had noticed the job cuts at IBM, American Airlines, and HealthSouth. I had seen them too. He wondered what I thought of the April PPI having the biggest drop on record. I was not surprised. He asked, if I knew all this, then how is it that, supposedly the economy is in the early stages of recovery, and 10 year Treasury bonds only yield 3.5% and 30 year mortgages are at a record low of 5.45%? I told him I thought the economy was not in the early stages of recovery and that investors buying long treasuries at these historic low yields should be committed. George thought a moment. He told me I was not as stupid as the other guys upstairs were making me out to be.
I got George some more eggs. The man eats like there's no tomorrow. George laughed. He told me a story about this self-proclaimed financial expert who thinks the world is about to witness a new technology cycle. George said the only cycle coming this person's way will be his passing go and collecting the $200. George explained this happens every time there is a total lunar eclipse. It plays tricks with people's senses. George said the last killer technology was email and, with it, instant messaging. Even eCommerce didn't make money in 2002. George said businesses are not looking to spend money. In order to get them to part with the green, the ROI has to be out of sight on a near-term basis.
George became more serious and changed the subject. He said that the economist from the Dallas Fed, Lori Taylor, was on the money. George remarked Taylor's analysis of Texas' tax revenue crunch was timely for Texas and the nation. Taylor stated "although economic weakness caused the revenue collapse, we cannot grow fast enough in the next couple of years to make the shortfall go away." George should know a timely analysis. He is able to see into the future.
Every third Friday of each month I have an early breakfast with George Orwell. It's quite amazing how much I learn from an individual who has not been on this earth for quite a period of time. George asked me whether I had enjoyed last night's total lunar eclipse. The last one had occurred on January 20, 2000. Unfortunately, I said, the weather was not too cooperative, and I could not see very much. He said that's the basic problem today on earth. The citizens don't see a helluva lot, and the so-called leaders have soggy observations. He told me how we were behind the times, and suggested that the euro was a little like the Linux operating system- not painful to install, cost effective, and slowly gaining acceptance as the currency of choice. Heck, he said, the U.K. might jump on board on June 9th, and suggested the U.S. should join the group before the dollar fades into a newly-colored bill- one printed in yellow as in a caution light.
George asked me whether I had read the recent piece by Pimco's Bill Gross. I said I thought it was cleverly written with many good points. George said TIPS are ok but that PIMPS are way cool. I told him I'd never heard of PIMPS. He said they were on the way to everyone's neighborhood and to watch for them. I asked what PIMPS stands for. He laughed and said not what I think. It stands, he said, for Pension Investment Management Plans for Schmucks. He said Wilshire Associates has told the pension investors that 79% of U.S. public pension plans are underfunded. So now everyone knows. The solution, he said, is sheer genius- to sell pension obligation bonds, and to use the proceeds to jack up the asset returns and eliminate the underfunding. How simple can you make it? I wondered out loud who would buy these pieces of junk. George said investors are experienced in buying junk. That's where the PIMPS come into play. The PIMPS buy the junk with the left hand while the right hand wipes out the underfunding. I thought for a moment, and said it just doesn't sit right with me. George said not to worry because the citizens don't see a helluva lot and the leaders are in a fog.
We had another cup of coffee, and while sipping, George asked if I had seen the latest report showing where the price for crude goods had dropped 1.3% ex food and energy. I had seen that. He asked whether I had noticed the job cuts at IBM, American Airlines, and HealthSouth. I had seen them too. He wondered what I thought of the April PPI having the biggest drop on record. I was not surprised. He asked, if I knew all this, then how is it that, supposedly the economy is in the early stages of recovery, and 10 year Treasury bonds only yield 3.5% and 30 year mortgages are at a record low of 5.45%? I told him I thought the economy was not in the early stages of recovery and that investors buying long treasuries at these historic low yields should be committed. George thought a moment. He told me I was not as stupid as the other guys upstairs were making me out to be.
I got George some more eggs. The man eats like there's no tomorrow. George laughed. He told me a story about this self-proclaimed financial expert who thinks the world is about to witness a new technology cycle. George said the only cycle coming this person's way will be his passing go and collecting the $200. George explained this happens every time there is a total lunar eclipse. It plays tricks with people's senses. George said the last killer technology was email and, with it, instant messaging. Even eCommerce didn't make money in 2002. George said businesses are not looking to spend money. In order to get them to part with the green, the ROI has to be out of sight on a near-term basis.
George became more serious and changed the subject. He said that the economist from the Dallas Fed, Lori Taylor, was on the money. George remarked Taylor's analysis of Texas' tax revenue crunch was timely for Texas and the nation. Taylor stated "although economic weakness caused the revenue collapse, we cannot grow fast enough in the next couple of years to make the shortfall go away." George should know a timely analysis. He is able to see into the future.
Thursday, May 15, 2003
5/15/03 Federal Unemployment Benefits Reloaded? And Our Bond Market
As I have previously noted, a federal unemployment extension providing 13 weeks of benefits to those who have run thru their state aid expires at the end of May. The Senate will vote on an amendment by Sen. Kennedy that would enable all unemployed workers eligible for the next 6 months for 26 weeks of federal jobless aid. In order to pay for this amendment, it is proposed to exclude the income tax cut for the top income bracket. Kennedy said his amendment would "provide a lifeline to those hurt the most by the enormous economic downturn." Sen Grassley called the proposal "a job-killing amendment." This says something about the problems in our country where the Congress pits the rich against the poor. It also says something about this country's finances. Obviously, we do not have the needed cash flow to generate jobs as well as to help the jobless.
That brings me to the state of the bond market. Thirty year governments are yielding a record low of 4.59%. Ten year treasuries just touched a 45 year low. We know prices are coming down. Just look at the gas pump. Retail sales are difficult to generate, and, as WalMart just stated, even revenue can be disappointing for Mother's Day. Inventory levels are higher than normal at retail, and that's not just for autos. Even sales of building materials fell in April. Simply put, with more unemployment there is less consumer spending, and we know the consumer accounts for at least two-thirds of our GDP. So, with this backdrop, why am I negative on the bond market? That's a darn good question. My answer flies in the face of normalcy and can be criticized and will be. I feel that our recession (I can use that word because the President just did to describe our economy) and the present state of deflation or disinflation(take your politically correct pick) will turn into something a lot worse- the big D. Please do not compare our interest rate environment to that of Japan. The latter runs trade account surpluses and we wish our country had their free cash flow. I do not believe the rates of return we offer on government bonds is enough to continue to attract foreign buyers to the tune of $2 billion per day, and with continued economic problems, I do not believe we can be viewed as a safe haven. A prudent investor should look at the risk/reward for government bonds- both from a global market and cash flow basis. Any way you cut the cheese, we don't cut the mustard. We aren't living on borrowed time. We are living on borrowed funds we cannot repay. Our credit rating should be downgraded. To prove my point, I have often discussed the U.S. being at a crossroads. We have reached the limit on our $6.4 trillion debt ceiling. It was reached today. The Republicans want the ceiling raised by $984 billion, a toothfairy number. The Democrats will offer a $250 billion alternative that they say will cover government borrowing thru the end of this year. By the way, I do not believe it will cover the borrowing. We can't even fund ourselves month to month. This is a situation which entails great risk to the investor and should be accompanied by significantly higher interest rates.
For the first time in five years, the quarterly orders at Applied Materials came in at less than $1 billion.
A market research study shows investors' confidence levels are at the highest point in 12 months. There are 3.40 bulls for each bear. That sounds like the rally's legs will not be long-lived.
Venezuela underestimated the resolve of its oil workers. I believe France, Germany, and Austria are underestimating the resolve of striking union workers. Their banner speaks volumes: "So it isn't the street that governs?"
AC Nielsen reports that there are about 13,000 dollar stores nationwide and that it's the fastest growing retail segment. Some of the largest companies are Dollar General, Dollar Tree, Family Dollar, and Ninety Nine Cents Only. I know- 99 cents is not a dollar.
In November we can look forward to "The Matrix Revolutions." Is Hollywood sending a message?
Thirty four states have overspent their budgets for fiscal 2003, and 27 have deficits to close by July 1. Good luck.
Nineteen states are reducing prison budgets and one, Minnesota, like Virginia, is considering serving two meals per day on weekends. Says Minnesota State Rep. Marty Seifert, "we have to make sure the rapists and the murderers sacrifice like everyone else." On the other hand, Nevada Governor Guinn is against cutting the food budgets for prisons because, he says, the state pays more to feed the wild horses under state control than to feed its prisoners.
The U.S. and Germany have something in common. Germany is now suggesting the country might be in a recession.
Minority Whip Harry Reid, Nevada Democrat: "If 60 Senators do not agree to support Social Security over the dividend-tax cut, I feel very sorry for the remainder of this session as to what it's going to do to the American people."
For the first time in about 7 weeks June crude closed above $29 a barrel.
Yesterday was a sad day. We lost Dave DeBusschere to a heart attack at the age of 62. He was a great NBA Hall of Famer and an incredible competitor and contributor to the championship Knick years in the 1970s.
Taiwan now has 34 SARS deaths, 264 confirmed cases, and 400 patients holed up at two hospitals.
The falling dollar has begun to exert an export toll on Japan, Canada, Mexico, and the euro countries.
Governor Davis has projected California's budget deficit at $38 billion. I apologize for projecting it yesterday at $39 billion. Davis has truly perfected the art of politics as he plans to extend $10.7 billion of that deficit into future years via a bond sale. I wouldn't buy those bonds with your money. In addition, Davis has become a comedian and should be considered as a guest host for SNL. He has called for significant structural reform in order to avoid future financial problems "or the same problems we're wrestling with will revisit us." I'm sure he is talking about the structural reform of tying his salary to specific levels of job performance.
As I mentioned a couple of weeks ago, we can expect the West Nile virus to be visiting our neighborhods very shortly. Yesterday two Harvard experts(those from Harvard consider themselves experts) said the West Nile could have a much larger impact than SARS in 2003- particularly in the Plains, western states, and Alaska. Last year the West Nile killed 284 in North America and resulted in 4,156 illnesses. They said "it is entirely reasonable to expect that the North American impact of West Nile virus will be as significant in 2003 as it was in 2002." They did not mean to indicate the East and the South would avoid the virus.
As I have previously noted, a federal unemployment extension providing 13 weeks of benefits to those who have run thru their state aid expires at the end of May. The Senate will vote on an amendment by Sen. Kennedy that would enable all unemployed workers eligible for the next 6 months for 26 weeks of federal jobless aid. In order to pay for this amendment, it is proposed to exclude the income tax cut for the top income bracket. Kennedy said his amendment would "provide a lifeline to those hurt the most by the enormous economic downturn." Sen Grassley called the proposal "a job-killing amendment." This says something about the problems in our country where the Congress pits the rich against the poor. It also says something about this country's finances. Obviously, we do not have the needed cash flow to generate jobs as well as to help the jobless.
That brings me to the state of the bond market. Thirty year governments are yielding a record low of 4.59%. Ten year treasuries just touched a 45 year low. We know prices are coming down. Just look at the gas pump. Retail sales are difficult to generate, and, as WalMart just stated, even revenue can be disappointing for Mother's Day. Inventory levels are higher than normal at retail, and that's not just for autos. Even sales of building materials fell in April. Simply put, with more unemployment there is less consumer spending, and we know the consumer accounts for at least two-thirds of our GDP. So, with this backdrop, why am I negative on the bond market? That's a darn good question. My answer flies in the face of normalcy and can be criticized and will be. I feel that our recession (I can use that word because the President just did to describe our economy) and the present state of deflation or disinflation(take your politically correct pick) will turn into something a lot worse- the big D. Please do not compare our interest rate environment to that of Japan. The latter runs trade account surpluses and we wish our country had their free cash flow. I do not believe the rates of return we offer on government bonds is enough to continue to attract foreign buyers to the tune of $2 billion per day, and with continued economic problems, I do not believe we can be viewed as a safe haven. A prudent investor should look at the risk/reward for government bonds- both from a global market and cash flow basis. Any way you cut the cheese, we don't cut the mustard. We aren't living on borrowed time. We are living on borrowed funds we cannot repay. Our credit rating should be downgraded. To prove my point, I have often discussed the U.S. being at a crossroads. We have reached the limit on our $6.4 trillion debt ceiling. It was reached today. The Republicans want the ceiling raised by $984 billion, a toothfairy number. The Democrats will offer a $250 billion alternative that they say will cover government borrowing thru the end of this year. By the way, I do not believe it will cover the borrowing. We can't even fund ourselves month to month. This is a situation which entails great risk to the investor and should be accompanied by significantly higher interest rates.
For the first time in five years, the quarterly orders at Applied Materials came in at less than $1 billion.
A market research study shows investors' confidence levels are at the highest point in 12 months. There are 3.40 bulls for each bear. That sounds like the rally's legs will not be long-lived.
Venezuela underestimated the resolve of its oil workers. I believe France, Germany, and Austria are underestimating the resolve of striking union workers. Their banner speaks volumes: "So it isn't the street that governs?"
AC Nielsen reports that there are about 13,000 dollar stores nationwide and that it's the fastest growing retail segment. Some of the largest companies are Dollar General, Dollar Tree, Family Dollar, and Ninety Nine Cents Only. I know- 99 cents is not a dollar.
In November we can look forward to "The Matrix Revolutions." Is Hollywood sending a message?
Thirty four states have overspent their budgets for fiscal 2003, and 27 have deficits to close by July 1. Good luck.
Nineteen states are reducing prison budgets and one, Minnesota, like Virginia, is considering serving two meals per day on weekends. Says Minnesota State Rep. Marty Seifert, "we have to make sure the rapists and the murderers sacrifice like everyone else." On the other hand, Nevada Governor Guinn is against cutting the food budgets for prisons because, he says, the state pays more to feed the wild horses under state control than to feed its prisoners.
The U.S. and Germany have something in common. Germany is now suggesting the country might be in a recession.
Minority Whip Harry Reid, Nevada Democrat: "If 60 Senators do not agree to support Social Security over the dividend-tax cut, I feel very sorry for the remainder of this session as to what it's going to do to the American people."
For the first time in about 7 weeks June crude closed above $29 a barrel.
Yesterday was a sad day. We lost Dave DeBusschere to a heart attack at the age of 62. He was a great NBA Hall of Famer and an incredible competitor and contributor to the championship Knick years in the 1970s.
Taiwan now has 34 SARS deaths, 264 confirmed cases, and 400 patients holed up at two hospitals.
The falling dollar has begun to exert an export toll on Japan, Canada, Mexico, and the euro countries.
Governor Davis has projected California's budget deficit at $38 billion. I apologize for projecting it yesterday at $39 billion. Davis has truly perfected the art of politics as he plans to extend $10.7 billion of that deficit into future years via a bond sale. I wouldn't buy those bonds with your money. In addition, Davis has become a comedian and should be considered as a guest host for SNL. He has called for significant structural reform in order to avoid future financial problems "or the same problems we're wrestling with will revisit us." I'm sure he is talking about the structural reform of tying his salary to specific levels of job performance.
As I mentioned a couple of weeks ago, we can expect the West Nile virus to be visiting our neighborhods very shortly. Yesterday two Harvard experts(those from Harvard consider themselves experts) said the West Nile could have a much larger impact than SARS in 2003- particularly in the Plains, western states, and Alaska. Last year the West Nile killed 284 in North America and resulted in 4,156 illnesses. They said "it is entirely reasonable to expect that the North American impact of West Nile virus will be as significant in 2003 as it was in 2002." They did not mean to indicate the East and the South would avoid the virus.
Wednesday, May 14, 2003
5/14/03 Winning Ways
Last night I was reminded of several valuable lessons. The Lakers were playing uninspired basketball, and they were down by 25 points to the Suns. I turned off the TV. Very early this morning I watched the highlights. Had Robert Horry's shot gone in at the buzzer, the Lakers would have won and not lost by two points. As it pertains to the market, you can't count your winnings before you lock them in for good. As it pertains to your enemies, never give them the opportunity to return. The Suns learned that and we witnessed it in Riyadh. Lastly, there are times when being at your worst can really be the best of times because the path of least resistance is up. The reverse is true as well.
Just before turning in last night I had wanted to watch the news headlines. I meant to turn to that station but mistakenly punched the wrong number by one digit and CNBC came on. I watched for two minutes or so- just in time for the head of this hedge fund to say that, had you invested in a mutual fund over the past three years, you would have lost money, and during that same period, investing in the average hedge fund would have generated a return of 13%. I sat there with my mouth open. I had no idea performances had been this poor. Taken over a six year period, the mutual fund investor would have been even and the hedge fund investor would have been up 75%. I never think about someone else's returns. I have always told myself that my knowledge is highly limited. Over a span of 3+ decades I have not made too many yearly investment decisions. I can't day trade. I don't understand technical analysis and, for example, the cup-with-handle. I know about drinking coffee. I don't read analyst reports. I don't listen to recommendations on TV or the radio or the Internet or in newspapers. I do read releases on the PR Newswire and on the Business Wire. I do read footnotes to company reports as well as 10K and 10Q reports. Occasionally, I call a company with a question arising out of their releases. I visit stores. I speak to consumers in stores. I speak to clerks. I speak to store managers. I look at the pricing of inventory. I notice carts coming out of stores. I do not believe government numbers. They get revised. I do not notice the size of Greenspan's briefcase. Basically, I read and think. I wish I were a good deal smarter. My results over the past three years or over the past six years aren't too bad though. You might say the average mutual fund or the average hedge fund would have been delighted to change places. But, then again, they do know sector investing and momentum investing and IPO flipping and go to investor conferences and talk to analysts and CFOs and CEOs and payout big commission dollars and charge big management fees. They have it going on all right.
Let's review what we've been able to nail down: an overvalued market in May/June 2000; undervalued housing stocks in 1999; under-appreciated gold in 2001; an overvalued dollar in early 2002; a good buying opportunity a week after 9/11; a good buying opportunity in mid-Oct. 2002; turning bearish on the economy in early 2001 and bullish on bonds; and sprinkled in-between all that, we had some risk arbitrage opportunities as well as some hedging opportunities. Over all, we didn't do too much. It's a full-time effort to stay ahead of the curve. There are a great many train wrecks in the naked city.
I know from experience that you are only as good as your last trade or investment. Right now, I walk a very lonely road. I am extremely negative on the world economy, and that includes ours. I believe most securities are significantly overvalued in most markets. I believe our unwillingness to cut federal government expenditures should be viewed in a criminal light. Tens of millions of Americans are having their lives destroyed as Washington politicians invoke policies which endanger our democracy. The real war is fought every day on Main Street as folks try to make ends meet, put food on the table, care for their sick without health insurance, lose their pension benefits, and pound the pavements and the Internet looking for a job- any job. This is not a soap opera. This is the real deal. If the President wants to have a real landing, he should try landing on Main Street for one week and not on a fighter jet. To understand the people you need to feel their pain. To be a successful investor you need to walk away from losers. Cut your losses short.
As unemployment has risen, so have foreclosures, and this despite record low interest rates. There are 34 million primary mortgages in this country, and more than 400,000 households are in foreclosure. Tom DiMercurio heads up Fidelity National Asset Management Solutions, the "foreclosure king" for 18 of the nation's top mortage makers. Tom asked his clients whether foreclosures would slow down this year, and "all of them told me to add staff. They definitely felt things were going to get worse before they scratched the surface at getting better." The big home builders are doing great, and many of their stocks hit new all-time highs this week. With rising foreclosures, it might be wise to nail down profits. It's a lot easier to sell on the way up.
Our trade gap rose to $43.46 billion. Maybe the Snow man will realize we import more than we export and that a weak dollar is disastrous to the U.S. economy.
The outbreak of SARS in Taiwan is spreading to the city of Kaohsiung.
Inventories of unsold vehicles are at a record high, and are up 630,000 units from a year ago. I say park these suckers along with the jetliners in the Mojave.
Gray Davis' plan for California is to increase the sales tax, triple the vehicle license fees, cut community college benefits, etc. Who elected this guy?
Singapore may have had an outbreak of SARS at its Institute of Mental Health.
Last night I was reminded of several valuable lessons. The Lakers were playing uninspired basketball, and they were down by 25 points to the Suns. I turned off the TV. Very early this morning I watched the highlights. Had Robert Horry's shot gone in at the buzzer, the Lakers would have won and not lost by two points. As it pertains to the market, you can't count your winnings before you lock them in for good. As it pertains to your enemies, never give them the opportunity to return. The Suns learned that and we witnessed it in Riyadh. Lastly, there are times when being at your worst can really be the best of times because the path of least resistance is up. The reverse is true as well.
Just before turning in last night I had wanted to watch the news headlines. I meant to turn to that station but mistakenly punched the wrong number by one digit and CNBC came on. I watched for two minutes or so- just in time for the head of this hedge fund to say that, had you invested in a mutual fund over the past three years, you would have lost money, and during that same period, investing in the average hedge fund would have generated a return of 13%. I sat there with my mouth open. I had no idea performances had been this poor. Taken over a six year period, the mutual fund investor would have been even and the hedge fund investor would have been up 75%. I never think about someone else's returns. I have always told myself that my knowledge is highly limited. Over a span of 3+ decades I have not made too many yearly investment decisions. I can't day trade. I don't understand technical analysis and, for example, the cup-with-handle. I know about drinking coffee. I don't read analyst reports. I don't listen to recommendations on TV or the radio or the Internet or in newspapers. I do read releases on the PR Newswire and on the Business Wire. I do read footnotes to company reports as well as 10K and 10Q reports. Occasionally, I call a company with a question arising out of their releases. I visit stores. I speak to consumers in stores. I speak to clerks. I speak to store managers. I look at the pricing of inventory. I notice carts coming out of stores. I do not believe government numbers. They get revised. I do not notice the size of Greenspan's briefcase. Basically, I read and think. I wish I were a good deal smarter. My results over the past three years or over the past six years aren't too bad though. You might say the average mutual fund or the average hedge fund would have been delighted to change places. But, then again, they do know sector investing and momentum investing and IPO flipping and go to investor conferences and talk to analysts and CFOs and CEOs and payout big commission dollars and charge big management fees. They have it going on all right.
Let's review what we've been able to nail down: an overvalued market in May/June 2000; undervalued housing stocks in 1999; under-appreciated gold in 2001; an overvalued dollar in early 2002; a good buying opportunity a week after 9/11; a good buying opportunity in mid-Oct. 2002; turning bearish on the economy in early 2001 and bullish on bonds; and sprinkled in-between all that, we had some risk arbitrage opportunities as well as some hedging opportunities. Over all, we didn't do too much. It's a full-time effort to stay ahead of the curve. There are a great many train wrecks in the naked city.
I know from experience that you are only as good as your last trade or investment. Right now, I walk a very lonely road. I am extremely negative on the world economy, and that includes ours. I believe most securities are significantly overvalued in most markets. I believe our unwillingness to cut federal government expenditures should be viewed in a criminal light. Tens of millions of Americans are having their lives destroyed as Washington politicians invoke policies which endanger our democracy. The real war is fought every day on Main Street as folks try to make ends meet, put food on the table, care for their sick without health insurance, lose their pension benefits, and pound the pavements and the Internet looking for a job- any job. This is not a soap opera. This is the real deal. If the President wants to have a real landing, he should try landing on Main Street for one week and not on a fighter jet. To understand the people you need to feel their pain. To be a successful investor you need to walk away from losers. Cut your losses short.
As unemployment has risen, so have foreclosures, and this despite record low interest rates. There are 34 million primary mortgages in this country, and more than 400,000 households are in foreclosure. Tom DiMercurio heads up Fidelity National Asset Management Solutions, the "foreclosure king" for 18 of the nation's top mortage makers. Tom asked his clients whether foreclosures would slow down this year, and "all of them told me to add staff. They definitely felt things were going to get worse before they scratched the surface at getting better." The big home builders are doing great, and many of their stocks hit new all-time highs this week. With rising foreclosures, it might be wise to nail down profits. It's a lot easier to sell on the way up.
Our trade gap rose to $43.46 billion. Maybe the Snow man will realize we import more than we export and that a weak dollar is disastrous to the U.S. economy.
The outbreak of SARS in Taiwan is spreading to the city of Kaohsiung.
Inventories of unsold vehicles are at a record high, and are up 630,000 units from a year ago. I say park these suckers along with the jetliners in the Mojave.
Gray Davis' plan for California is to increase the sales tax, triple the vehicle license fees, cut community college benefits, etc. Who elected this guy?
Singapore may have had an outbreak of SARS at its Institute of Mental Health.
Tuesday, May 13, 2003
5/13/03 P-traps And The U.S. Dollar
Every U.S. plumbing fixture in the U.S. uses P-traps that are designed to hold water at all times. The water acts as a barrier and prevents, insects, foul smells, and bacteria from backing up through the drains. What does a P-trap have to do with the U.S. dollar? I will try to explain. Hopefully, the analogy will not appear too convoluted. Some years back, central bankers felt uncomfortable holding so much gold in their coffers. What happened was a rush to the exits, and you probably remember gold cascading down to $250 per ounce. It has ony been in the past couple of years that gold has begun to climb the steep hill back to respectability. It has recovered to about $350 per ounce. Interestingly, about the time gold found a solid floor, the U.S. dollar started to form what has become a ceiling. This phenomenon has very serious implications. The dollar for the longest period could hold water, so to speak, at all times- in the face of a recession and growing account deficits. Many central bankers thought the U.S. dollar was overvalued at the time but the "P-trap" kept them at bay. Slowly, ever so slowly at first, the "P-trap" gave way. It is important to focus on the U.S. dollar comprising about 77% of global central bank reserves. Those central bankers reached a formally deliberated decision to reduce dollar-denominated assets and U.S. dollar holdings. The impact from this decision started to be felt last year, and in the last few weeks, we have witnessed a run on the dollar. Unfortunately, the Snow man has a myopic view of the dollar's decline and its positive impact on our exports- particularly for certain manufacturers and farmers. I would recommend a much broader field of vision.
Obviously, I have not sat in on the central bankers' deliberations. However, it might be useful to speculate as to the formulation for their thinking. The following reasons are brought forth in a random manner. First, would be our record budget deficits which this year will exceed $400 billion and far exceed the accepted level as a percentage of GDP in the euro countries. Second, our record trade account deficits which also will exceed $400 billion. Third, our weak economy which has pushed interest rates down to record lows. The economy is so weak that, at present, all the growth is represented by productivity gains. Yesterday, our President described our economy in this manner: "The best way to deal with the recession is to have an economic growth plan that will cause economic vitality." A recession does not give central bankers much confidence in the dollar. Four, the low returns on government bonds, such as, 3.6% on a 10-year, coupled with rising deficits make them unattractive investments when compared with alternative investment vehicles. Five, the U.S. government has alienated many foreign countries with hostile trade practices. Six, the U.S. government has dictated economic policy to others while it has failed to keep its own house in proper order. There have been too many scandals and too much spending and too much consumption, and each has tarnished our reputation abroad. Seven, even though the U.S. economy still generates almost 30% of global output, the economic dependency of other countries on the U.S. has waned considerably. Our imports are vital to Japan, for example, but they are less attractive as the dollar depreciates vs the yen. The same holds true for the euro counties. Eight, in 1980 the U.S. was a net creditor to the world, and now we are a net debtor exceeding $1 trillion. If interest rates were to rise, making principal and interest payments would place a huge burden on the U.S. treasury. Nine, the rapid rise in U.S. foreign debt has primarily fueled domestic consumption rather than simply investment in U.S. assets. U.S. personal consumption is more than five times larger than gross private investment, and that ratio continues to grow. Ten, the wealth effect from rising real estate values is not sustainable, and the economic impact from a decline in such values will have a profound impact on our economy. Eleven, there is a lack of confidence in the U.S. as a preferred destination for investment. Our stability has come into question. Twelve, There is abroad a distrust of the Bush Administration's anti-terror policies and the unilateral decision making as it pertains to declaring war. Thirteen, productivity increases have surpassed the growth of aggregate demand in the economy. Fourteen, emergence of especially China as a price-reducing entity has created declining import prices and led to increasing unemployment. Many envision this trend to continue and therefore limit future growth in the U.S. Fifteen, the continuing low rate of household savings in the U.S. Sixteen, our monetary base has expanded at a 7% rate in the past year, and rather than creating inflation, it has destabilized the value of the dollar. Seventeen, there is increasing anti-Americanism overseas. This, combined with terrorist acts, such as, yesterday's explosions in Riyadh killing 10 Americans and wounding 40 others, creates a growing feeling that the U.S. may no longer be a safe haven. In sum, the "P-trap" has failed and overseas capital inflows are turning to outflows, and the dollar is being sold while the euro, the Swiss franc, and the yen are being purchased. Every day there is a reminder on why to sell dollars. Yesterday it was the disclosure that, in the first seven months of the present government fiscal year. tax revenues were $62 billion lower than the same period a year ago while government spending rose by $76 billion. In addition, a confused picture is projected to the outside world. Our President pushes for tax cuts while the latest Gallup poll illustrates that Americans continue to regard deficit reductions as a higher priority than cutting taxes.
Daniel Mitchell, an economist at the conservative Heritage Foundation: "Even though I like to think taxes are the most important things in the world, even I have to admit there are other factors: monetary policy, regulatory policy, trade policy, government spending- all these things matter. Everything has to be interconnected."
The SARS Taiwan chief said it may take 5 weeks to control the disease. In the meantime, 8 people died there yesterday and their Hoping Hospital president was fired.
The N.Y. Times reports a new study finds 60 million Americans are uninsured during a year. That means we have something in common with China. There, only 10% of peasants have health insurance. Yesterday China reported 12 more SARS deaths and 75 additional cases.
On April 30 Microsoft said it was developing a portable toilet with Internet access called an "I -Loo." We now know this was a hoax perpetrated by its British division.
Hartford Financial cuts 1500 jobs.
Today found the Bank of Japan again selling the yen as the Snow man dismissed the effectiveness of currency interventions.
Laurens Van der Post: "Human beings are perhaps never more frightening than when they are convinced beyond doubt that they are right."
Every U.S. plumbing fixture in the U.S. uses P-traps that are designed to hold water at all times. The water acts as a barrier and prevents, insects, foul smells, and bacteria from backing up through the drains. What does a P-trap have to do with the U.S. dollar? I will try to explain. Hopefully, the analogy will not appear too convoluted. Some years back, central bankers felt uncomfortable holding so much gold in their coffers. What happened was a rush to the exits, and you probably remember gold cascading down to $250 per ounce. It has ony been in the past couple of years that gold has begun to climb the steep hill back to respectability. It has recovered to about $350 per ounce. Interestingly, about the time gold found a solid floor, the U.S. dollar started to form what has become a ceiling. This phenomenon has very serious implications. The dollar for the longest period could hold water, so to speak, at all times- in the face of a recession and growing account deficits. Many central bankers thought the U.S. dollar was overvalued at the time but the "P-trap" kept them at bay. Slowly, ever so slowly at first, the "P-trap" gave way. It is important to focus on the U.S. dollar comprising about 77% of global central bank reserves. Those central bankers reached a formally deliberated decision to reduce dollar-denominated assets and U.S. dollar holdings. The impact from this decision started to be felt last year, and in the last few weeks, we have witnessed a run on the dollar. Unfortunately, the Snow man has a myopic view of the dollar's decline and its positive impact on our exports- particularly for certain manufacturers and farmers. I would recommend a much broader field of vision.
Obviously, I have not sat in on the central bankers' deliberations. However, it might be useful to speculate as to the formulation for their thinking. The following reasons are brought forth in a random manner. First, would be our record budget deficits which this year will exceed $400 billion and far exceed the accepted level as a percentage of GDP in the euro countries. Second, our record trade account deficits which also will exceed $400 billion. Third, our weak economy which has pushed interest rates down to record lows. The economy is so weak that, at present, all the growth is represented by productivity gains. Yesterday, our President described our economy in this manner: "The best way to deal with the recession is to have an economic growth plan that will cause economic vitality." A recession does not give central bankers much confidence in the dollar. Four, the low returns on government bonds, such as, 3.6% on a 10-year, coupled with rising deficits make them unattractive investments when compared with alternative investment vehicles. Five, the U.S. government has alienated many foreign countries with hostile trade practices. Six, the U.S. government has dictated economic policy to others while it has failed to keep its own house in proper order. There have been too many scandals and too much spending and too much consumption, and each has tarnished our reputation abroad. Seven, even though the U.S. economy still generates almost 30% of global output, the economic dependency of other countries on the U.S. has waned considerably. Our imports are vital to Japan, for example, but they are less attractive as the dollar depreciates vs the yen. The same holds true for the euro counties. Eight, in 1980 the U.S. was a net creditor to the world, and now we are a net debtor exceeding $1 trillion. If interest rates were to rise, making principal and interest payments would place a huge burden on the U.S. treasury. Nine, the rapid rise in U.S. foreign debt has primarily fueled domestic consumption rather than simply investment in U.S. assets. U.S. personal consumption is more than five times larger than gross private investment, and that ratio continues to grow. Ten, the wealth effect from rising real estate values is not sustainable, and the economic impact from a decline in such values will have a profound impact on our economy. Eleven, there is a lack of confidence in the U.S. as a preferred destination for investment. Our stability has come into question. Twelve, There is abroad a distrust of the Bush Administration's anti-terror policies and the unilateral decision making as it pertains to declaring war. Thirteen, productivity increases have surpassed the growth of aggregate demand in the economy. Fourteen, emergence of especially China as a price-reducing entity has created declining import prices and led to increasing unemployment. Many envision this trend to continue and therefore limit future growth in the U.S. Fifteen, the continuing low rate of household savings in the U.S. Sixteen, our monetary base has expanded at a 7% rate in the past year, and rather than creating inflation, it has destabilized the value of the dollar. Seventeen, there is increasing anti-Americanism overseas. This, combined with terrorist acts, such as, yesterday's explosions in Riyadh killing 10 Americans and wounding 40 others, creates a growing feeling that the U.S. may no longer be a safe haven. In sum, the "P-trap" has failed and overseas capital inflows are turning to outflows, and the dollar is being sold while the euro, the Swiss franc, and the yen are being purchased. Every day there is a reminder on why to sell dollars. Yesterday it was the disclosure that, in the first seven months of the present government fiscal year. tax revenues were $62 billion lower than the same period a year ago while government spending rose by $76 billion. In addition, a confused picture is projected to the outside world. Our President pushes for tax cuts while the latest Gallup poll illustrates that Americans continue to regard deficit reductions as a higher priority than cutting taxes.
Daniel Mitchell, an economist at the conservative Heritage Foundation: "Even though I like to think taxes are the most important things in the world, even I have to admit there are other factors: monetary policy, regulatory policy, trade policy, government spending- all these things matter. Everything has to be interconnected."
The SARS Taiwan chief said it may take 5 weeks to control the disease. In the meantime, 8 people died there yesterday and their Hoping Hospital president was fired.
The N.Y. Times reports a new study finds 60 million Americans are uninsured during a year. That means we have something in common with China. There, only 10% of peasants have health insurance. Yesterday China reported 12 more SARS deaths and 75 additional cases.
On April 30 Microsoft said it was developing a portable toilet with Internet access called an "I -Loo." We now know this was a hoax perpetrated by its British division.
Hartford Financial cuts 1500 jobs.
Today found the Bank of Japan again selling the yen as the Snow man dismissed the effectiveness of currency interventions.
Laurens Van der Post: "Human beings are perhaps never more frightening than when they are convinced beyond doubt that they are right."
Monday, May 12, 2003
5/12/03 Support Our National Debt
Salmonella has been known to cause illness for over 100 years. Those with impaired immune systems, the elderly, and infants are most prone to this illness; however, cross contamination can make everyone susceptible to salmonella infections. I am not a doctor but I am a pretty good cook and I know the importance of hand cleansing and keeping separate cutting boards in order to reduce the potential of cross contamination. In my view, we are confronting highly dangerous consequences from cross contamination. As I mentioned as recently as yesterday, Americans owe $6.1 trillion on home mortgages on top of almost $2 trillion in consumer debt. On top of that each American family owes another $70,000, and this represents each family's share of this country's $6.4 trillion debt. I wonder why the President doesn't go around the U.S. providing that information? What does it mean to exclude $500 of dividends from taxation when your property taxes are going up, your water rates are increasing, and the sales tax is rising? You go to the store more often than you receive a dividend. Sen. John Breaux of Louisiana said that "about 92% of the people in Louisiana would not be affected by the dividend tax repeal." The Bush proposal does not include one penny of direct aid for the states, and the states have accumulated budget deficits of about $78 billion. The current Senate bill does include $20 billion in aid for state and local governments, and some senators want half of that aid to go towards Medicaid. The current tax bill being negotiated also includes $72 billion in corporate tax increases and custom fees. Businesses create jobs and not the government. What good does it do to contaminate the reduction of the current 38.6% tax rate to 35% with corporate tax increases etc? Since the Congress won't reduce spending, maybe we can get the consumer to reduce spending. I suggest that, each January's mailing of tax information, include a bill for $70,000 for the share of the national debt. If we exempt $500 in dividends from taxation, maybe the government can recover those needed dollars by asking families to pay up to $500 in interest on their share of the national debt. After all, that reflects a miniscule interest rate and we could receive in exchange a bumper sticker which reads "Support Our National Debt."
According to UBS Warburg, a net $418 million was taken out of U.S. stocks in the weak ended May 2. The outflow was the fourth in five weeks. In Europe, there has been a net inflow for six of the past seven weeks.
The U.S. and France seem to be on the same page- extending retirement age and reforming retirement benefits. Both have been front page news from time to time in each country. Air France's unions will strike nationwide tomorrow specifically boycotting over the aformentioned topics. The airline will cancel 65% of its flights. Americans are too passive. Have you seen strikes over extending retirement age under social security to 67 or people losing 50-67% of their pension plans when corporations reorganize?
SARS has negatively impacted China's April retail sales and lowered the rate of direct investment into that country.
There have been 8 new SARS deaths in Taiwan.
Palmiero hit his 500th home run.
Spot gold hit a two-month high of $350.75 per ounce. The Snow man makes it so easy for the gold bugs to make money. He says a weak dollar helps exports. Of course, he doesn't say it also acts as a tax on imports- just like higher gas prices at the pump. While MMM and J&J are making more money on exports, the American consumer is taking it in the pocketbook on imports. Meanwhile, the euro has soared to 1.16 vs the dollar. The world is laughing at the U.S. and the voters do absolutely nothing. Does anyone care that, after adjusting for modest inflation, the U.S. median wage for all income levels fell every quarter between March 2002 and March 2003? The upper-income levels, the ones who create jobs, were hardest hit. An accountant put it this way: "with so many people out of work and needing income of any form, employers are able to set wages back two or three years." When President Bush stumps in New Mexico today, I wonder if he will tell that to the workers.
During the first quarter Japan sold the yen for dollars on 17 days. With the dollar at 116+ vs the yen, the Japanese government is probably supporting the dollar again.
Salmonella has been known to cause illness for over 100 years. Those with impaired immune systems, the elderly, and infants are most prone to this illness; however, cross contamination can make everyone susceptible to salmonella infections. I am not a doctor but I am a pretty good cook and I know the importance of hand cleansing and keeping separate cutting boards in order to reduce the potential of cross contamination. In my view, we are confronting highly dangerous consequences from cross contamination. As I mentioned as recently as yesterday, Americans owe $6.1 trillion on home mortgages on top of almost $2 trillion in consumer debt. On top of that each American family owes another $70,000, and this represents each family's share of this country's $6.4 trillion debt. I wonder why the President doesn't go around the U.S. providing that information? What does it mean to exclude $500 of dividends from taxation when your property taxes are going up, your water rates are increasing, and the sales tax is rising? You go to the store more often than you receive a dividend. Sen. John Breaux of Louisiana said that "about 92% of the people in Louisiana would not be affected by the dividend tax repeal." The Bush proposal does not include one penny of direct aid for the states, and the states have accumulated budget deficits of about $78 billion. The current Senate bill does include $20 billion in aid for state and local governments, and some senators want half of that aid to go towards Medicaid. The current tax bill being negotiated also includes $72 billion in corporate tax increases and custom fees. Businesses create jobs and not the government. What good does it do to contaminate the reduction of the current 38.6% tax rate to 35% with corporate tax increases etc? Since the Congress won't reduce spending, maybe we can get the consumer to reduce spending. I suggest that, each January's mailing of tax information, include a bill for $70,000 for the share of the national debt. If we exempt $500 in dividends from taxation, maybe the government can recover those needed dollars by asking families to pay up to $500 in interest on their share of the national debt. After all, that reflects a miniscule interest rate and we could receive in exchange a bumper sticker which reads "Support Our National Debt."
According to UBS Warburg, a net $418 million was taken out of U.S. stocks in the weak ended May 2. The outflow was the fourth in five weeks. In Europe, there has been a net inflow for six of the past seven weeks.
The U.S. and France seem to be on the same page- extending retirement age and reforming retirement benefits. Both have been front page news from time to time in each country. Air France's unions will strike nationwide tomorrow specifically boycotting over the aformentioned topics. The airline will cancel 65% of its flights. Americans are too passive. Have you seen strikes over extending retirement age under social security to 67 or people losing 50-67% of their pension plans when corporations reorganize?
SARS has negatively impacted China's April retail sales and lowered the rate of direct investment into that country.
There have been 8 new SARS deaths in Taiwan.
Palmiero hit his 500th home run.
Spot gold hit a two-month high of $350.75 per ounce. The Snow man makes it so easy for the gold bugs to make money. He says a weak dollar helps exports. Of course, he doesn't say it also acts as a tax on imports- just like higher gas prices at the pump. While MMM and J&J are making more money on exports, the American consumer is taking it in the pocketbook on imports. Meanwhile, the euro has soared to 1.16 vs the dollar. The world is laughing at the U.S. and the voters do absolutely nothing. Does anyone care that, after adjusting for modest inflation, the U.S. median wage for all income levels fell every quarter between March 2002 and March 2003? The upper-income levels, the ones who create jobs, were hardest hit. An accountant put it this way: "with so many people out of work and needing income of any form, employers are able to set wages back two or three years." When President Bush stumps in New Mexico today, I wonder if he will tell that to the workers.
During the first quarter Japan sold the yen for dollars on 17 days. With the dollar at 116+ vs the yen, the Japanese government is probably supporting the dollar again.
Sunday, May 11, 2003
5/11/03 This Time Don't Blame Al-Qaeda
The number of patients at VA hospitals and clinics climbed in number by about two-thirds to 4.3 million over the past six years. During the same time funding for VA health care increased by about one-third to $22.2 billion. As one veteran remarked about Bush and the Congress, "they're going to rebuild Iraq, and they don't have the money to take care of us when we get sick and old? They're going to give those rich folks a tax cut, and they're not even going to help all those veterans who were promised help? I feel sorry for those young ones coming back from the Gulf, if they have to go through what we're going through. I feel a total disappointment." The veteran I quoted enlisted at age 17, volunteered for hazardous duty and saw action in the Philippines and Japan. In sum, there is a waiting list of veterans trying to get into the VA system as new patients. According to the VA, 119,248 former service members were waiting more than six months for an initial appointment at the end of March. Almost 60% of patient appointments were rescheduled, and this created a further wait of two months. It should be noted that service members returning home from combat zones get two years of free care from the VA when they leave the military under recently affirmed policies. We have had more than 250,000 U.S. troops in the Gulf region during the Iraq war. How long will those leaving the combat zone wait for an appointment? Maybe Rumsfeld and Meyers and Franks should wait in line for an appointment alongside our veterans. Maybe those in Congress should join the waiting line. It's time those in Washington got to the back of the line. Their spending policies created the line.
Florida's Broward County was a hot job market throughout the 1990s. In 2002 Tallahassee (the state government) reported that 4400 jobs were lost. Now Tallahassee reports that, in fact, maybe Broward gained 8100 jobs. At the same time the state said Miami-Dade County did not gain 18,500 new jobs in 2002 but rather only 7600. The reason for the changes was placed on supposedly more accurate research methods on behalf of the U.S. Department of Labor. The latter replaced its sampling method with a probability-based system. When was the last time the government was probably right? Certainly not about jobless numbers. Each month they are revised. Certainly not about the budget deficit. That too is revised upwards, and sometimes weekly. Certainly not about the GDP which is often revised downward. Certainly not about the trade imbalance which is revised upward. My solution is to revise the U.S. Department of Labor payroll downward. This department labors under constant revisions and projects the probability of numbers with uncanny lack of success.
Laker coach Phil Jackson underwent angioplasty for chest pains.
36,000 female members of the military are stationed somewhere outside the lower 48 states, and I wonder how many of those women are mothers. Happy Mother's Day.
A Chinese export may have found its way into Houston yesterday. A large motorized rat was one of 250 entries on display during that city's Art Car Parade. It did not win for lack of a surgical mask.
Taxpayers are spending $5 billion per year on airport screening safety. Under-cover agents regularly sneak mock bombs and weapons past the screeners. A screener at LA International Airport said "we are not getting familiar with the stuff I think we need to get familiar with, particularly explosives." It's no wonder I do not want my family flying.
David Resler, chief economist at Nomura Securities International in N.Y. said "what we're hearing on a uniform basis is a complaint from businesses that they have no pricing power. The demand for their goods and services is so weak that they don't dare attempt to raise prices." Demand is weak for airline seats but companies raised prices last week. No one could accuse most airline executives of having a nose for good business judgment.
Americans owe $6.1 trillion on home mortgages on top of almost $2 trillion in consumer debt.
Inflation in the first quarter of 2003 was about 1.3% on an annual basis, and that was smallest rise in 38 years.
On Wednesday Gray Davis releases his budget for California. He will announce that the state's deficit has risen to perhaps $39 billion. He will need to address a short term debt of $12.5 billion which is due next month. With about 700,000 Californians out of work, declining receipts from state income tax are not able to meet rising expenditures. California will run out of money. So will N.Y.C.-once again. Who will look after our veterans, cover day care for working mothers, teach our school children, provide prescription drugs to Medicare patients and health care to our 45 million uninsured Americans, and supply the food banks for the homeless? As the President stumps for tax cuts, the U.S. Treasury is down to its last dime, and will be out of money in about four days. When the lights go dim in DC, Congressional spenders will not be laughing. They won't be able to blame it on Al-Qaeda. The taxpayers can blame it on the voters. The problem is we are the voters.
With five new fatalities, the death toll in China rose to 235 with about 5000 cases proclaimed to date. The WHO says the SARS data is significantly flawed in Beijing. The spokesperson for the WHO said "the problem with the data is that there are holes in it."
The number of patients at VA hospitals and clinics climbed in number by about two-thirds to 4.3 million over the past six years. During the same time funding for VA health care increased by about one-third to $22.2 billion. As one veteran remarked about Bush and the Congress, "they're going to rebuild Iraq, and they don't have the money to take care of us when we get sick and old? They're going to give those rich folks a tax cut, and they're not even going to help all those veterans who were promised help? I feel sorry for those young ones coming back from the Gulf, if they have to go through what we're going through. I feel a total disappointment." The veteran I quoted enlisted at age 17, volunteered for hazardous duty and saw action in the Philippines and Japan. In sum, there is a waiting list of veterans trying to get into the VA system as new patients. According to the VA, 119,248 former service members were waiting more than six months for an initial appointment at the end of March. Almost 60% of patient appointments were rescheduled, and this created a further wait of two months. It should be noted that service members returning home from combat zones get two years of free care from the VA when they leave the military under recently affirmed policies. We have had more than 250,000 U.S. troops in the Gulf region during the Iraq war. How long will those leaving the combat zone wait for an appointment? Maybe Rumsfeld and Meyers and Franks should wait in line for an appointment alongside our veterans. Maybe those in Congress should join the waiting line. It's time those in Washington got to the back of the line. Their spending policies created the line.
Florida's Broward County was a hot job market throughout the 1990s. In 2002 Tallahassee (the state government) reported that 4400 jobs were lost. Now Tallahassee reports that, in fact, maybe Broward gained 8100 jobs. At the same time the state said Miami-Dade County did not gain 18,500 new jobs in 2002 but rather only 7600. The reason for the changes was placed on supposedly more accurate research methods on behalf of the U.S. Department of Labor. The latter replaced its sampling method with a probability-based system. When was the last time the government was probably right? Certainly not about jobless numbers. Each month they are revised. Certainly not about the budget deficit. That too is revised upwards, and sometimes weekly. Certainly not about the GDP which is often revised downward. Certainly not about the trade imbalance which is revised upward. My solution is to revise the U.S. Department of Labor payroll downward. This department labors under constant revisions and projects the probability of numbers with uncanny lack of success.
Laker coach Phil Jackson underwent angioplasty for chest pains.
36,000 female members of the military are stationed somewhere outside the lower 48 states, and I wonder how many of those women are mothers. Happy Mother's Day.
A Chinese export may have found its way into Houston yesterday. A large motorized rat was one of 250 entries on display during that city's Art Car Parade. It did not win for lack of a surgical mask.
Taxpayers are spending $5 billion per year on airport screening safety. Under-cover agents regularly sneak mock bombs and weapons past the screeners. A screener at LA International Airport said "we are not getting familiar with the stuff I think we need to get familiar with, particularly explosives." It's no wonder I do not want my family flying.
David Resler, chief economist at Nomura Securities International in N.Y. said "what we're hearing on a uniform basis is a complaint from businesses that they have no pricing power. The demand for their goods and services is so weak that they don't dare attempt to raise prices." Demand is weak for airline seats but companies raised prices last week. No one could accuse most airline executives of having a nose for good business judgment.
Americans owe $6.1 trillion on home mortgages on top of almost $2 trillion in consumer debt.
Inflation in the first quarter of 2003 was about 1.3% on an annual basis, and that was smallest rise in 38 years.
On Wednesday Gray Davis releases his budget for California. He will announce that the state's deficit has risen to perhaps $39 billion. He will need to address a short term debt of $12.5 billion which is due next month. With about 700,000 Californians out of work, declining receipts from state income tax are not able to meet rising expenditures. California will run out of money. So will N.Y.C.-once again. Who will look after our veterans, cover day care for working mothers, teach our school children, provide prescription drugs to Medicare patients and health care to our 45 million uninsured Americans, and supply the food banks for the homeless? As the President stumps for tax cuts, the U.S. Treasury is down to its last dime, and will be out of money in about four days. When the lights go dim in DC, Congressional spenders will not be laughing. They won't be able to blame it on Al-Qaeda. The taxpayers can blame it on the voters. The problem is we are the voters.
With five new fatalities, the death toll in China rose to 235 with about 5000 cases proclaimed to date. The WHO says the SARS data is significantly flawed in Beijing. The spokesperson for the WHO said "the problem with the data is that there are holes in it."
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