9/20/03 G 7 Meeting
The China Daily newspaper remarked “making China the scapegoat can perhaps help some U.S. politicians score cheap political points, but it has nothing to do with the solution of their real problems.” China found an ally in Bundesbank’s Vice President Juergen Stark who stated “we should not let the discussion about the yuan distract from the main problem of the U.S.’s twin deficits.” Meanwhile, Bank of Japan’s Toshihiko Fukui stated “China has clearly said that it will work out ways to make its currency system more flexible. It is important that there is constructive discussions to take it in the right direction.” The Snowman chimed in by declaring “The United States can’t be the only engine of growth.” Looking at almost 3 million job losses since Bush was elected, Snow doesn’t have to worry about the only growth engine being the U.S. If other countries were like the U.S, world economic conditions would be significantly worse than the present. No other country imports more, spends more, and runs up such massive budget and trade deficits. Still, the U.S. thinks they can tell the rest of the world how to run their respective economies. The U.S. has successfully alienated the rest of the world save for England.
The National Association of Manufacturers blames China for U.S. economic problems and intends to file a formal trade complaint protesting China’s “illegal currency manipulation.” In my view, this is one of the stupidest moves I have seen in years. I agree with much of the views expressed by Steve Forbes who believes U.S. deflation stems from our own trade policies and that revaluation of the yuan would hurt the world economies as well as that of China. In actuality, the strongest world economy over the past 10 years has been China’s. It has grown almost 10% a year over the past decade and its GDP now exceeds $1 trillion a year. They have the world’s sixth largest economy. The G-7 accounts for two-thirds of the world’s economy. Realistically, one should note that Japan, Taiwan, South Korea, Indonesia, and Thailand have all sold their currencies in the past 12 months in order to avoid erosion of demand for their exports.
Boeing Commercial Airplanes Group handed out 70 layoff notices Friday. Since late 2001, Boeing has laid off 35,560 workers. Friday was also the last day of work for 420 who received layoff notices 60 days ago.
British Columbia loggers and mill workers overwhelmingly voted yesterday to strike . Union leaders are scheduled to decide tomorrow whether to give legally required 72-hour strike notice. Earlier strikes occurred in 2000 and 1986. Weyerhaeuser has six plants and six timberland operations that could be affected by a strike.
According to the Oil Price Information Service in Lakewood, N.J., the wholesale price of gasoline has dropped 30 cents a gallon in recent weeks. The American Petroleum Institute said high pump prices in August caused the first year-on-year decline in demand since 1997. The Institute said refinery output of gasoline in August set a record for the month. So much for reports of shortages. As the price drops, refinery margins will decline too. Unless a disaster strikes, the party is over for the refiners.
A new study by Stanford University’s Energy Modeling Forum (EMF) concludes that natural gas supplies are likely to meet growing demand in coming decades if policy-makers are able to strike a balance between environmental protection and the need for new energy sources. The EMF’s executive director and co-author of the study stated “recent volatile natural gas prices do not foreshadow a pending, long-term crisis in future natural gas supplies. Industry will respond with more investment, and demand will respond to prices-provided that market participants are given the opportunity.”
A look at the new UAW contracts reveals a good deal of give and take on the part of the union and the big three auto companies. Rather than raises this year and next, UAW employees will receive a $3,000 bonus before taxes and other deductions in 2003. Next year there’s another proposed bonus of 3% of pay. In 2005 there would be a 2% pay raise and in 2006 a 3% pay raise. In addition, UAW workers won’t be hit with drastic hikes in their out-of-pocket health care costs. For the auto makers there are pluses. No longer will they be forced to run factories at full or near full capacity. They have more flexibility to cut their work forces and thereby control labor costs. They can move idled workers from plant to plant. There is increased leeway in cracking down on absenteeism. There are extra incentives to encourage older workers to retire. It is predicted that the auto companies will close more plants and cut jobs.
Ed Yardeni, chief investment strategist with Prudential Securities, states “we have a chronic employment problem because as a result of globalization we are all potentially competing with an enormous labor force in Asia.” I would add India to that competitive labor force.
Friday, September 19, 2003
9/19/03 Job-Destroying Recovery
Robert Hormats, Goldman Sachs International vice-chairman: “Corporations are not yet convinced of the durability of this recover. People say this is a jobless recovery. It’s not. It’s a job-destroying recovery.” Yesterday, Sun Microsystems announced plans to cut another 3% of its workforce or 1,080 jobs. At the end of fiscal 2001 it had 43,683 employees. At the end of the last quarter the number had been reduced to 36,000. The company’s revenue has fallen for nine straight quarters, and they are the market leader in the server industry.
The number of people continuing to collect state unemployment insurance rose by 39,000 to just shy of 3.7 million in the week ended Sept.6. The total was the highest since the week ended June 28. The FOMC Committee had sad in a statement that “spending is firming, although the labor market has been weakening. Business and pricing power and increases in core consumer prices remain muted.
In his $87 billion request, Bush is doing his part to spur employment. Unfortunately, it won’t help Americans. There is $60 million to register “100,000 militia combatants” in Afghanistan as well as to “demobilize and integrate an additional 13,000 militia combatants” and provide than with “training, job placement, and other integration activities.” Another $35 million would go towards anti-terrorism training programs in Afghanistan to protect Hamid Karzai. There is good news. Bush wants to increase “hardship duty pay” from $300 to $600 per month until 9/30/2004. That hardship pay is too late for the 297 U.S. military personnel killed in the Iraq war. About another 1500 have been wounded.
Airbus doesn’t see the commercial aircraft industry recovering before 2005.
U.S. Comptroller General David Walker, head of the General Accounting Office, spoke yesterday at the National Press Club. He stated “our nation has a major long-term fiscal challenge that is not going away and requires serious and sustained attention. The current and projected deficits far exceed the costs associated with Iraq, the global war against terrorism and any incremental homeland security costs. The bottom line is, there is little question that deficits do matter, especially if they are large, structural and recurring in nature.” The markets are not bothered though. The unweighted S&P 500 is about 5% from its all-time high. The Nasdaq has now reached 1900. Even the Nikkei has rallied to the 11,000 level.
According to the CDC, the U.S is expected to report a record number of West Nile infections this year. In 2002 4,156 people were infected, and 284 died.
In August the semiconductor equipment book-to-bill ratio was 0.91 which means $91 worth of new orders were received for every $100 of product billed for the month. Dan Tracy, director of industry research for SEMI, stated “overall bookings and billings figures for North American-based semiconductor capital equipment providers have remained essentially flat over the past several months.” On the other hand, the stock price for Applied Materials has not remained flat over this time period.
It’s most unfortunate that it takes a hurricane named Isabel to close federal government in Washington, DC. A cut in government spending would create a more permanent closing.
The Federal Reserve Bank of Philadelphia said its index of factory business conditions fell to 14.6 from 22.1 in August, and that drop was much sharper than what had been expected by economists.
The Conference Board’s Consumer Research Center recently completed a survey showing that only 49% of American workers are satisfied with their job. This represents the lowest level of satisfaction since the first survey was taken in 1995. It is the first time the level has been below 50%. Even a terrific company like Southwest Airlines is having trouble with workers. There have been 16 months of negotiations between management and the flight attendants union. They have now turned to a federal mediator. The attendants’ slogan is “Working for free…that’s just ‘plane’ nuts.” The attendants claim they have to clean cabins between flights without being paid, because the planes are idle. They get paid for the time the plane is in the air. The union contends flight attendants work for free more than 23 hours every month.
PeopleSoft had filed a lawsuit against Oracle in Alameda County Superior Court. Yesterday various internal Oracle emails were unsealed. Here is an excerpt from an Oracle employee: “We’ve certainly wounded PeopleSoft…even if we don’t end up closing the deal, this is going to take PeopleSoft time to recover. And, of course, our corporate image of being aggressive, brash, and marching to the tune of a different drummer has been reinforced.” In addition, there were emails pointing to Oracle’s strategy of how to influence industry analysts. From the outset I have stated Oracle’s strategy was flawed and that it would fail. I have not changed my opinion.
Robert Hormats, Goldman Sachs International vice-chairman: “Corporations are not yet convinced of the durability of this recover. People say this is a jobless recovery. It’s not. It’s a job-destroying recovery.” Yesterday, Sun Microsystems announced plans to cut another 3% of its workforce or 1,080 jobs. At the end of fiscal 2001 it had 43,683 employees. At the end of the last quarter the number had been reduced to 36,000. The company’s revenue has fallen for nine straight quarters, and they are the market leader in the server industry.
The number of people continuing to collect state unemployment insurance rose by 39,000 to just shy of 3.7 million in the week ended Sept.6. The total was the highest since the week ended June 28. The FOMC Committee had sad in a statement that “spending is firming, although the labor market has been weakening. Business and pricing power and increases in core consumer prices remain muted.
In his $87 billion request, Bush is doing his part to spur employment. Unfortunately, it won’t help Americans. There is $60 million to register “100,000 militia combatants” in Afghanistan as well as to “demobilize and integrate an additional 13,000 militia combatants” and provide than with “training, job placement, and other integration activities.” Another $35 million would go towards anti-terrorism training programs in Afghanistan to protect Hamid Karzai. There is good news. Bush wants to increase “hardship duty pay” from $300 to $600 per month until 9/30/2004. That hardship pay is too late for the 297 U.S. military personnel killed in the Iraq war. About another 1500 have been wounded.
Airbus doesn’t see the commercial aircraft industry recovering before 2005.
U.S. Comptroller General David Walker, head of the General Accounting Office, spoke yesterday at the National Press Club. He stated “our nation has a major long-term fiscal challenge that is not going away and requires serious and sustained attention. The current and projected deficits far exceed the costs associated with Iraq, the global war against terrorism and any incremental homeland security costs. The bottom line is, there is little question that deficits do matter, especially if they are large, structural and recurring in nature.” The markets are not bothered though. The unweighted S&P 500 is about 5% from its all-time high. The Nasdaq has now reached 1900. Even the Nikkei has rallied to the 11,000 level.
According to the CDC, the U.S is expected to report a record number of West Nile infections this year. In 2002 4,156 people were infected, and 284 died.
In August the semiconductor equipment book-to-bill ratio was 0.91 which means $91 worth of new orders were received for every $100 of product billed for the month. Dan Tracy, director of industry research for SEMI, stated “overall bookings and billings figures for North American-based semiconductor capital equipment providers have remained essentially flat over the past several months.” On the other hand, the stock price for Applied Materials has not remained flat over this time period.
It’s most unfortunate that it takes a hurricane named Isabel to close federal government in Washington, DC. A cut in government spending would create a more permanent closing.
The Federal Reserve Bank of Philadelphia said its index of factory business conditions fell to 14.6 from 22.1 in August, and that drop was much sharper than what had been expected by economists.
The Conference Board’s Consumer Research Center recently completed a survey showing that only 49% of American workers are satisfied with their job. This represents the lowest level of satisfaction since the first survey was taken in 1995. It is the first time the level has been below 50%. Even a terrific company like Southwest Airlines is having trouble with workers. There have been 16 months of negotiations between management and the flight attendants union. They have now turned to a federal mediator. The attendants’ slogan is “Working for free…that’s just ‘plane’ nuts.” The attendants claim they have to clean cabins between flights without being paid, because the planes are idle. They get paid for the time the plane is in the air. The union contends flight attendants work for free more than 23 hours every month.
PeopleSoft had filed a lawsuit against Oracle in Alameda County Superior Court. Yesterday various internal Oracle emails were unsealed. Here is an excerpt from an Oracle employee: “We’ve certainly wounded PeopleSoft…even if we don’t end up closing the deal, this is going to take PeopleSoft time to recover. And, of course, our corporate image of being aggressive, brash, and marching to the tune of a different drummer has been reinforced.” In addition, there were emails pointing to Oracle’s strategy of how to influence industry analysts. From the outset I have stated Oracle’s strategy was flawed and that it would fail. I have not changed my opinion.
Thursday, September 18, 2003
9/18/03 Cape Fear
Isabel moves at speeds of about 14mph. Coastal flooding is expected. Hurricane warnings have been issued from Cape Fear, NC to Chincoteague, VA. The National Weather Service advisory states “all preparations to protect life and property should be rushed to completion in the hurricane warning area.” Other than Dick Grasso’s resignation, it’s business as usual on Wall Street. There aren’t reports of 105 mph winds or high seas or flooding. Nasdaq member firms have just had a fivefold plus increase in margin debt to $26 billion at July 31 from $5 billion at 12/31/02. Yesterday the NASD said trading “on margin” is up 25% year-to-date. It remains to be seen whether the Nasdaq tightens margin requirements as it did in early 2000.
The IMF warned that record U.S. trade and budget deficits threaten global growth in the years ahead. In its semi-annual World Economic Outlook, the IMF raised its forecast for U.S. growth in 2003 to 2.6% and to 3.9% in 2004. The report stated that “it seems unlikely that the U.S. can or should provide the degree of support to the global economy over the medium term that it has in the past.” The IMF predicts Japan’s economy will grow 2% this year and 1.4% in 2004, and they reduced the growth forecast for the 12 euro nations to 0.5% in 2003 and for next year to 1.9%. The IMF said U.S. growth shall probably come at the expense of widening the trade deficit and a depreciation of the dollar.
Hans Blix: “In the Middle Ages when people were convinced those were witches they certainly found them. This is a bit risky…what in a way stands accused is the culture of spin, the culture of hyping… Advertisers will advertise a refrigerator in terms that we don’t quite believe in, but we expect governments to become more serious and have more credibility.”
The Illinois Supreme Court threw out a trial judge’s order for Altria to post a $12 billion bond, reducing the amount to $6.8 billion. In March Illinois Judge Nicholas Byron ruled Philip Morris had misled Illinois smokers about the health risks of light cigarettes, which are intended to have less tar and nicotine, and ordered the company to pay damages of $10.1 billion. Yesterday R.J. Reynolds said it would reduce its workforce by 40% and eliminate about 2,600 jobs. Both tobacco companies have been hurt by the competition from low-cost brands. The company will focus primarily on Camel and Salem, and limit their investments in Winston and Doral.
According to the Bureau of Economic Analysis, defense expenditures jumped in the April-to-June quarter of 2003 by 46% over the first quarter. If the $87 billion is approved, 2004 defense spending would increase to about $470 billion. War costs are rising above $1 billion per week. Winslow Wheeler of the Center for Defense Information stated “the economics of our defense budget are mind-blowing.” Edward McKelvey, an economist at Goldman Sachs, observed “the government is going to be in a position where it’s borrowing $400 billion and $500 billion a year. It’s first in line for borrowing. The notion that that guy can get first in line without shoving out the guy in the back of the line just doesn’t pass the smell test. You don’t have to be an economist to understand that.”
An interesting phenomenon is taking place. Growth forecasts for the U.S. are being raised for this year and next; however, the Fed is expected to maintain current interest rates at the present level for another year. The market believes that scenario as 10- year treasuries closed yesterday at their lowest yield since July 23. The recipe is for higher corporate profits through cost cutting, no growth in jobs, benign inflation, increased government spending, increased budget and trade deficits, and a rising stock market. I say ignorance is bliss.
Elizabeth Warren, a Harvard law professor, and specializes in the bankruptcy field. By the end of the decade, she says, an estimated 6 million families with children, or 1 in every 7 such families, may declare bankruptcy. This year more children are going through their parents’ bankruptcies than their parents’ divorces. Ms Warren remarked “bankers who wear $3,000 suits and starched shirts are now charging interest rates that Jimmy the Leg-Breaker didn’t charge 25 years ago. Nobody sounds the alarm. The consequence is a wealth transfer of tens of billions of dollars every year from middle-class families to a handful of big banks.” A new study by a nonpartisan public-policy group called Demos finds that, in the 1990s, the average family’s credit card debt rose by 53%. Middle class families saw a 75% in crease in that debt and very low- income families had a 184% rise.
In a special fall issue of CFO magazine, Bob Violino writes that there is new software to better track corporate spending. It is called ESM or enterprise spend management software, and it especially has appeal in these times when companies face flat or reduced revenues. The idea is to reduce costs through improved sourcing and procurement and to enhance expense management. Christa Degnan, supply-chain research director at Aberdeen Group, stated “it surprises me how much companies really don’t know about what they’re spending money on. They’ve never had granular detail on who they’re spending with, how much, and why they’re spending.” The board of the NY Stock Exchange might be a good example.
Isabel moves at speeds of about 14mph. Coastal flooding is expected. Hurricane warnings have been issued from Cape Fear, NC to Chincoteague, VA. The National Weather Service advisory states “all preparations to protect life and property should be rushed to completion in the hurricane warning area.” Other than Dick Grasso’s resignation, it’s business as usual on Wall Street. There aren’t reports of 105 mph winds or high seas or flooding. Nasdaq member firms have just had a fivefold plus increase in margin debt to $26 billion at July 31 from $5 billion at 12/31/02. Yesterday the NASD said trading “on margin” is up 25% year-to-date. It remains to be seen whether the Nasdaq tightens margin requirements as it did in early 2000.
The IMF warned that record U.S. trade and budget deficits threaten global growth in the years ahead. In its semi-annual World Economic Outlook, the IMF raised its forecast for U.S. growth in 2003 to 2.6% and to 3.9% in 2004. The report stated that “it seems unlikely that the U.S. can or should provide the degree of support to the global economy over the medium term that it has in the past.” The IMF predicts Japan’s economy will grow 2% this year and 1.4% in 2004, and they reduced the growth forecast for the 12 euro nations to 0.5% in 2003 and for next year to 1.9%. The IMF said U.S. growth shall probably come at the expense of widening the trade deficit and a depreciation of the dollar.
Hans Blix: “In the Middle Ages when people were convinced those were witches they certainly found them. This is a bit risky…what in a way stands accused is the culture of spin, the culture of hyping… Advertisers will advertise a refrigerator in terms that we don’t quite believe in, but we expect governments to become more serious and have more credibility.”
The Illinois Supreme Court threw out a trial judge’s order for Altria to post a $12 billion bond, reducing the amount to $6.8 billion. In March Illinois Judge Nicholas Byron ruled Philip Morris had misled Illinois smokers about the health risks of light cigarettes, which are intended to have less tar and nicotine, and ordered the company to pay damages of $10.1 billion. Yesterday R.J. Reynolds said it would reduce its workforce by 40% and eliminate about 2,600 jobs. Both tobacco companies have been hurt by the competition from low-cost brands. The company will focus primarily on Camel and Salem, and limit their investments in Winston and Doral.
According to the Bureau of Economic Analysis, defense expenditures jumped in the April-to-June quarter of 2003 by 46% over the first quarter. If the $87 billion is approved, 2004 defense spending would increase to about $470 billion. War costs are rising above $1 billion per week. Winslow Wheeler of the Center for Defense Information stated “the economics of our defense budget are mind-blowing.” Edward McKelvey, an economist at Goldman Sachs, observed “the government is going to be in a position where it’s borrowing $400 billion and $500 billion a year. It’s first in line for borrowing. The notion that that guy can get first in line without shoving out the guy in the back of the line just doesn’t pass the smell test. You don’t have to be an economist to understand that.”
An interesting phenomenon is taking place. Growth forecasts for the U.S. are being raised for this year and next; however, the Fed is expected to maintain current interest rates at the present level for another year. The market believes that scenario as 10- year treasuries closed yesterday at their lowest yield since July 23. The recipe is for higher corporate profits through cost cutting, no growth in jobs, benign inflation, increased government spending, increased budget and trade deficits, and a rising stock market. I say ignorance is bliss.
Elizabeth Warren, a Harvard law professor, and specializes in the bankruptcy field. By the end of the decade, she says, an estimated 6 million families with children, or 1 in every 7 such families, may declare bankruptcy. This year more children are going through their parents’ bankruptcies than their parents’ divorces. Ms Warren remarked “bankers who wear $3,000 suits and starched shirts are now charging interest rates that Jimmy the Leg-Breaker didn’t charge 25 years ago. Nobody sounds the alarm. The consequence is a wealth transfer of tens of billions of dollars every year from middle-class families to a handful of big banks.” A new study by a nonpartisan public-policy group called Demos finds that, in the 1990s, the average family’s credit card debt rose by 53%. Middle class families saw a 75% in crease in that debt and very low- income families had a 184% rise.
In a special fall issue of CFO magazine, Bob Violino writes that there is new software to better track corporate spending. It is called ESM or enterprise spend management software, and it especially has appeal in these times when companies face flat or reduced revenues. The idea is to reduce costs through improved sourcing and procurement and to enhance expense management. Christa Degnan, supply-chain research director at Aberdeen Group, stated “it surprises me how much companies really don’t know about what they’re spending money on. They’ve never had granular detail on who they’re spending with, how much, and why they’re spending.” The board of the NY Stock Exchange might be a good example.
Wednesday, September 17, 2003
9/17/03 China
Only 6 years ago our nation’s total trade deficit was $120 billion. This year our trade deficit with China will amount to that figure. According to Xinhua, the Chinese government new agency, the trading band for the yuan will be widened from 8.3 to the dollar to a trading range of 8.09 to 8.5. That maybe modest, but every little bit does make a difference. As the trade deficit with China widens, the job layoffs in our manufacturing sector continue. There is no end in sight for these job losses.
Der Spiegel magazine reported that Chrysler is quite advanced in its efforts to sell some parts production facilities in its efforts to cut operating costs. It is anticipated that additional job cuts will be announced to.
Kerr-McGee will cut between 200 and 250 jobs or about 7 to 9% of its workforce by year-end.
The MBA reports that seasonally adjusted index tracking mortgage applications dropped 5.8% for the week ended Sept. 12 compared to the prior week.
Military personnel are required to take the anthrax shots and can be court-martialed if they refuse. Meanwhile, a growing number of our troops are getting hospitalized for a mysterious pneumonia-like illness, and many believe it is from the anthrax shots.
Hans Blix believes Iraq destroyed most of its WMD 10 years ago, and suggests that searching for these weapons would most likely only result in finding some “documents of interest.”
The Labor Department reported that real earnings fell 0.3% in August. Average hourly earnings and average weekly hours were about unchanged. The core CPI rate is at a 37 year low. Over the last 12 months, the core goods prices have fallen 2.5%, the biggest drop on records dating back to 1958. At the same time, the cost of services continues its steady price rise.
70% of those voting in Seattle elected to cream the 10 cents a cup proposed espresso tax.
Only 6 years ago our nation’s total trade deficit was $120 billion. This year our trade deficit with China will amount to that figure. According to Xinhua, the Chinese government new agency, the trading band for the yuan will be widened from 8.3 to the dollar to a trading range of 8.09 to 8.5. That maybe modest, but every little bit does make a difference. As the trade deficit with China widens, the job layoffs in our manufacturing sector continue. There is no end in sight for these job losses.
Der Spiegel magazine reported that Chrysler is quite advanced in its efforts to sell some parts production facilities in its efforts to cut operating costs. It is anticipated that additional job cuts will be announced to.
Kerr-McGee will cut between 200 and 250 jobs or about 7 to 9% of its workforce by year-end.
The MBA reports that seasonally adjusted index tracking mortgage applications dropped 5.8% for the week ended Sept. 12 compared to the prior week.
Military personnel are required to take the anthrax shots and can be court-martialed if they refuse. Meanwhile, a growing number of our troops are getting hospitalized for a mysterious pneumonia-like illness, and many believe it is from the anthrax shots.
Hans Blix believes Iraq destroyed most of its WMD 10 years ago, and suggests that searching for these weapons would most likely only result in finding some “documents of interest.”
The Labor Department reported that real earnings fell 0.3% in August. Average hourly earnings and average weekly hours were about unchanged. The core CPI rate is at a 37 year low. Over the last 12 months, the core goods prices have fallen 2.5%, the biggest drop on records dating back to 1958. At the same time, the cost of services continues its steady price rise.
70% of those voting in Seattle elected to cream the 10 cents a cup proposed espresso tax.
Tuesday, September 16, 2003
9/16/03 Dieciseis de Septiembre
Today is Mexican Independence Day. It marks the onset of Mexico’s revolution in 1810, which led to freedom from Spanish rule. Mexico could have another revolution brewing. With a record weak peso, this country must once again regain its freedom. This time they must find new markets for their exports, and lessen the dependence on the U.S. purchasing about 80%+ of the goods leaving Mexico. To rely on the U.S. for their economic well being would be making a grave mistake.
The U.S. can’t even look after its own citizenry. In January 2001 the Fed began reducing short-term interest rates. From January 2001 through August 2003, according to the Labor Department’s monthly non-farm surveys, 3.3 million private-sector jobs have been cut. Hiroshi Yokotani, economist at Tokio Marine Asset Management, stated “with employment not recovering, consumption is unlikely to grow. The latest data also shows companies are not revising up their production plans despite growth of 5% in the July-September quarter.”
The NASD regulates all 5,300 U.S. brokerage firms. Yesterday they issued a warning to investors about buying on margin. Purchases of securities on margin have increased 25% this year, reaching $174 billion in July. They cited a “precipitous increase” in margin use.
The Georgia Department of Labor reported 43,264 laid-off workers filed a first-time claim for unemployment insurance benefits in August, an increase of 12.5% over August 2002. To combat these layoffs, the state has implemented a new program called “Georgia Works,” which involves on-site workplace training and a special training allowance at the same time those laid-off are drawing unemployment insurance benefits.
The Bush Administration is considering shrinking the number of military personnel who qualify for disability benefits. They want to change the definition of service-connected disability, and this could have far-reaching consequences for millions of service members and veterans. Tom Daschle said the proposals, if retroactive, could disqualify 1.5 million veterans, about two-thirds of those now in the VA disability program. Under current law, disabled veterans eligible for military retirement pay have their retirement reduced by the amount they receive in disability benefits. Future benefits to widows could also be jeopardized. Despite what you read and see in photo-ops, this Administration lacks loyalty to our fighting men and women. Their loyalty is to their power base and remaining in office.
More than 150 local governments have passed resolutions opposing the Patriot Act as an overly broad threat to constitutional rights. Tim Lynch, director of the Cato Institute, stated “we’ve already heard stories of local police chiefs creating files on people who have protested the Iraq war…the government is constantly trying to expand its jurisdictions, and it needs to be watched very, very closely.”
In talking with Tim Russert of Meet The Press, VP Cheney said success in Iraq had to be achieved “whatever the cost in casualties and finances. This is the place we want to take on the terrorists.” Maybe the American people should give serious consideration to making Cheney a casualty in the next election- pull the anti-Cheney lever. Do it for our troops and veterans. It will make you smile.
Manufacturing output fell 0.1% in August, the first decline since April. Capacity utilization remained under 75%. With the inventory to sales ratio at near record lows, the folks who run our factories continue to regard any economic upturn with great doubts. Their actions speak a lot louder than the projections by economists and our Administration.
Today is Mexican Independence Day. It marks the onset of Mexico’s revolution in 1810, which led to freedom from Spanish rule. Mexico could have another revolution brewing. With a record weak peso, this country must once again regain its freedom. This time they must find new markets for their exports, and lessen the dependence on the U.S. purchasing about 80%+ of the goods leaving Mexico. To rely on the U.S. for their economic well being would be making a grave mistake.
The U.S. can’t even look after its own citizenry. In January 2001 the Fed began reducing short-term interest rates. From January 2001 through August 2003, according to the Labor Department’s monthly non-farm surveys, 3.3 million private-sector jobs have been cut. Hiroshi Yokotani, economist at Tokio Marine Asset Management, stated “with employment not recovering, consumption is unlikely to grow. The latest data also shows companies are not revising up their production plans despite growth of 5% in the July-September quarter.”
The NASD regulates all 5,300 U.S. brokerage firms. Yesterday they issued a warning to investors about buying on margin. Purchases of securities on margin have increased 25% this year, reaching $174 billion in July. They cited a “precipitous increase” in margin use.
The Georgia Department of Labor reported 43,264 laid-off workers filed a first-time claim for unemployment insurance benefits in August, an increase of 12.5% over August 2002. To combat these layoffs, the state has implemented a new program called “Georgia Works,” which involves on-site workplace training and a special training allowance at the same time those laid-off are drawing unemployment insurance benefits.
The Bush Administration is considering shrinking the number of military personnel who qualify for disability benefits. They want to change the definition of service-connected disability, and this could have far-reaching consequences for millions of service members and veterans. Tom Daschle said the proposals, if retroactive, could disqualify 1.5 million veterans, about two-thirds of those now in the VA disability program. Under current law, disabled veterans eligible for military retirement pay have their retirement reduced by the amount they receive in disability benefits. Future benefits to widows could also be jeopardized. Despite what you read and see in photo-ops, this Administration lacks loyalty to our fighting men and women. Their loyalty is to their power base and remaining in office.
More than 150 local governments have passed resolutions opposing the Patriot Act as an overly broad threat to constitutional rights. Tim Lynch, director of the Cato Institute, stated “we’ve already heard stories of local police chiefs creating files on people who have protested the Iraq war…the government is constantly trying to expand its jurisdictions, and it needs to be watched very, very closely.”
In talking with Tim Russert of Meet The Press, VP Cheney said success in Iraq had to be achieved “whatever the cost in casualties and finances. This is the place we want to take on the terrorists.” Maybe the American people should give serious consideration to making Cheney a casualty in the next election- pull the anti-Cheney lever. Do it for our troops and veterans. It will make you smile.
Manufacturing output fell 0.1% in August, the first decline since April. Capacity utilization remained under 75%. With the inventory to sales ratio at near record lows, the folks who run our factories continue to regard any economic upturn with great doubts. Their actions speak a lot louder than the projections by economists and our Administration.
Monday, September 15, 2003
9/15/03 Getting Off The Titanic
VP Cheney: “Yeah, I did misspeak. I said repeatedly during the show (Meet the Press) ‘weapons capability.’ We never had any evidence that (Saddam) had acquired a nuclear weapon.” That sounds like lying to me, and not misspeaking. The word “never” places a different emphasis on the known facts. Maybe Bush was misspeaking last week in asking for the $87 billion. Asked on NBC’s Meet the Press yesterday whether that $87 billion would be the final request, Cheney replied “I can’t say that. It’s all we think we’ll need for the foreseeable future, for this year.” It’s as if the attitude is we can fool the American people whenever the spirit moves us. I predict the Santini Bros. moving truck will be there in November 2004.
Rumsfeld talking about Iraq: “Tourism is going to be something important in that country as soon as the security situation is resolved.” The two big tourist sites will be the empty tomb of Saddam Hussein and the empty display of WMD.
Cheney sees 4% GDP growth or better. He expects to cut the federal deficit “roughly in half” from next year’s level in the coming five years. Cheney comes from Casper, Wyoming. Have you ever been to Casper? There is an odor permeating this city of 48,000 people. The odor is the residue from closed refineries. It’s not exactly a city known for those with a nose for business.
The world’s 7th largest economy is that of the state of California. This is our largest state in terms of population and business. It’s in serious trouble. The future is a great deal bleaker than the current $38 billion deficit. Employers worry about new mandatory health insurance that may become law. A paid family leave act goes into effect in California in 2004. “These things all cost employers money,” said Allen Zaremberg, president of the California Chamber of Commerce. “You just encourage people to move.” According to a survey by the Small Business Survival Committee, they found (1) California has one of the highest personal income tax rates in the country. Only Rhode Island has a higher income tax rate. (2) The state also is one of the highest for corporate income taxes. Only 10 states have a higher rate for corporate taxation. (3) California also ranks among the five most expensive states for workers’ compensation costs and electricity expenses. (4) In sum, California had the worst business climate among the 50 states. For the first seven months of 2003, the U.S. private workforce declined by 0.2%, but California was down 0.6%. More and more companies are moving to Nevada and Arizona. John Chen is chairman and chief executive officer of Dublin-based Sybase Inc. He remarked “the costs of being in California are too high. I can find qualified people, bright people, in many different places outside of California. We are in a number of states and countries, and California is one of the most expensive.” Bob Marshall, owner of Postal Annex in Concord, stated “in the last year there has been a rush to get out. It’s like everyone is trying to get off the Titanic. I want to stay. But I wonder what they know that we don’t.”
Theresa Ruf, with 15 years of healthcare experience, lost her medical transcription job in August. She was told transcription could be done for 2 cents per line in India compared to 12 cents per line in the U.S.
Sweden’s 7 million voters decided not to adopt the euro as its currency. Over 56% rejected the euro and decided to keep their krona.
The WTO conference in Cancun fell apart. It was as anticipated. European and American farmers receive huge subsidies, and, as such, receive significant protection against imports from developing countries. Sugar would be an excellent example of such protectionism.
“You can’t negotiate with these people, you can’t try to talk sense to these people. The only way to deal with them is to find them and bring them to justice,” Bush said. Was he talking about terrorists or about politicians lurking in pork barrels?
Governor Rod Blagojevich of Illinois said he directed the Illinois special advocate to draft a plan for buying inexpensive medications in Canada for as many as 240,000 state employees and retirees. He stated yesterday “the status quo on prescription drugs is intolerable and unacceptable. This year, the state is spending $340 million on prescriptions for its workforce, a 15% increase over last year. I am optimistic we will be able to save literally millions of dollars for the taxpayers and set a precedent other states will follow.”
HUD says mobile or manufactured homes account for one-third of all new single-family homes. There are about 7.2 million such homes with the average sales price approximating $49,000 compared with about $164,000 for a traditional single-family home. There has been a recent spike in delinquencies and foreclosures on loans for manufactured homes, and this concerns Fannie Mae. As such, Fannie Mae has begun requiring a 10% down payment for 30-year mortgages on such homes, plus a fee of one-half of 1% of the loan amount. Previously, people could put no money down and pay no fee. These new down payment guidelines went into effect on August 24.
David M. Walker is the General Accounting Office head and the U.S. Comptroller. On Friday he stated “from an overall fiscal perspective, it’s time to admit we’re in a fiscal hole, and to stop digging. We must begin to come to grips with the dawning fiscal realities that threaten our nation’s children and grandchildren’s future.” This Wednesday Walker will deliver a speech to the National Press Club. It will begin with a wake-up call and end with a call to action. In the middle he will discuss “the facts and figures to make the case that we have a serious financial and fiscal challenge. Although growth can help, we’re not going to grow our way out of this problem…For example, depending on how you want to calculate what the gap is, how much money for every man, woman, and child in America it is…it’s a big number, and it’s a number that, if you think about what the average wage is in the United States, if you think about the average worth of an American, it’s going to be way in excess of these two numbers.” Walker said he was concerned that many things being discussed in government will make the situation “worse, not better.”
If this nation is in a fiscal hole, you’d never know it on Wall Street. It’s business as usual. Investors have been piling their dollars on the cruise ship Titanic. It’s built to withstand typhoons, hurricanes, and waves of mass destruction. Life boats are not required.
VP Cheney: “Yeah, I did misspeak. I said repeatedly during the show (Meet the Press) ‘weapons capability.’ We never had any evidence that (Saddam) had acquired a nuclear weapon.” That sounds like lying to me, and not misspeaking. The word “never” places a different emphasis on the known facts. Maybe Bush was misspeaking last week in asking for the $87 billion. Asked on NBC’s Meet the Press yesterday whether that $87 billion would be the final request, Cheney replied “I can’t say that. It’s all we think we’ll need for the foreseeable future, for this year.” It’s as if the attitude is we can fool the American people whenever the spirit moves us. I predict the Santini Bros. moving truck will be there in November 2004.
Rumsfeld talking about Iraq: “Tourism is going to be something important in that country as soon as the security situation is resolved.” The two big tourist sites will be the empty tomb of Saddam Hussein and the empty display of WMD.
Cheney sees 4% GDP growth or better. He expects to cut the federal deficit “roughly in half” from next year’s level in the coming five years. Cheney comes from Casper, Wyoming. Have you ever been to Casper? There is an odor permeating this city of 48,000 people. The odor is the residue from closed refineries. It’s not exactly a city known for those with a nose for business.
The world’s 7th largest economy is that of the state of California. This is our largest state in terms of population and business. It’s in serious trouble. The future is a great deal bleaker than the current $38 billion deficit. Employers worry about new mandatory health insurance that may become law. A paid family leave act goes into effect in California in 2004. “These things all cost employers money,” said Allen Zaremberg, president of the California Chamber of Commerce. “You just encourage people to move.” According to a survey by the Small Business Survival Committee, they found (1) California has one of the highest personal income tax rates in the country. Only Rhode Island has a higher income tax rate. (2) The state also is one of the highest for corporate income taxes. Only 10 states have a higher rate for corporate taxation. (3) California also ranks among the five most expensive states for workers’ compensation costs and electricity expenses. (4) In sum, California had the worst business climate among the 50 states. For the first seven months of 2003, the U.S. private workforce declined by 0.2%, but California was down 0.6%. More and more companies are moving to Nevada and Arizona. John Chen is chairman and chief executive officer of Dublin-based Sybase Inc. He remarked “the costs of being in California are too high. I can find qualified people, bright people, in many different places outside of California. We are in a number of states and countries, and California is one of the most expensive.” Bob Marshall, owner of Postal Annex in Concord, stated “in the last year there has been a rush to get out. It’s like everyone is trying to get off the Titanic. I want to stay. But I wonder what they know that we don’t.”
Theresa Ruf, with 15 years of healthcare experience, lost her medical transcription job in August. She was told transcription could be done for 2 cents per line in India compared to 12 cents per line in the U.S.
Sweden’s 7 million voters decided not to adopt the euro as its currency. Over 56% rejected the euro and decided to keep their krona.
The WTO conference in Cancun fell apart. It was as anticipated. European and American farmers receive huge subsidies, and, as such, receive significant protection against imports from developing countries. Sugar would be an excellent example of such protectionism.
“You can’t negotiate with these people, you can’t try to talk sense to these people. The only way to deal with them is to find them and bring them to justice,” Bush said. Was he talking about terrorists or about politicians lurking in pork barrels?
Governor Rod Blagojevich of Illinois said he directed the Illinois special advocate to draft a plan for buying inexpensive medications in Canada for as many as 240,000 state employees and retirees. He stated yesterday “the status quo on prescription drugs is intolerable and unacceptable. This year, the state is spending $340 million on prescriptions for its workforce, a 15% increase over last year. I am optimistic we will be able to save literally millions of dollars for the taxpayers and set a precedent other states will follow.”
HUD says mobile or manufactured homes account for one-third of all new single-family homes. There are about 7.2 million such homes with the average sales price approximating $49,000 compared with about $164,000 for a traditional single-family home. There has been a recent spike in delinquencies and foreclosures on loans for manufactured homes, and this concerns Fannie Mae. As such, Fannie Mae has begun requiring a 10% down payment for 30-year mortgages on such homes, plus a fee of one-half of 1% of the loan amount. Previously, people could put no money down and pay no fee. These new down payment guidelines went into effect on August 24.
David M. Walker is the General Accounting Office head and the U.S. Comptroller. On Friday he stated “from an overall fiscal perspective, it’s time to admit we’re in a fiscal hole, and to stop digging. We must begin to come to grips with the dawning fiscal realities that threaten our nation’s children and grandchildren’s future.” This Wednesday Walker will deliver a speech to the National Press Club. It will begin with a wake-up call and end with a call to action. In the middle he will discuss “the facts and figures to make the case that we have a serious financial and fiscal challenge. Although growth can help, we’re not going to grow our way out of this problem…For example, depending on how you want to calculate what the gap is, how much money for every man, woman, and child in America it is…it’s a big number, and it’s a number that, if you think about what the average wage is in the United States, if you think about the average worth of an American, it’s going to be way in excess of these two numbers.” Walker said he was concerned that many things being discussed in government will make the situation “worse, not better.”
If this nation is in a fiscal hole, you’d never know it on Wall Street. It’s business as usual. Investors have been piling their dollars on the cruise ship Titanic. It’s built to withstand typhoons, hurricanes, and waves of mass destruction. Life boats are not required.
Sunday, September 14, 2003
9/14/03 Regaining Reality
To be a successful long-term investor one must be on the right side of reality. That includes making the trend your friend, but it means much more than that. It means having an understanding and an appreciation for a changing landscape. Wall Street has failed in the latter. Analysts can no longer evaluate with the same yardsticks. Adjustments must be made. Forecasts should not be the same. Results shall be different. The workplace has changed, and possibly, permanently. In 1972 there were about 200,000 temporary workers. Today there are 10 times that amount. With capacity utilization at 75%, companies will hire temporary workers. They are easier to fire and they don’t receive on-going benefits. While a greater number of permanent workers are cut from the payrolls, an increasing number of temporary and contract workers join the labor force. The American Staffing Association said companies employed 50,000 more temporary workers in the second quarter of this year than in the first quarter. While top-line growth lags, managers fix their gaze on cost cutting. You cut a bit here and a bit there, and you make do. You patch the equipment, and keep capital expenditures down to the absolute musts. Why? In order to compete in a world economy lower costs can hopefully equate to competitive pricing. Customer loyalty is price driven. Therefore, name recognition has a lesser value. You know what you’re getting at McDonald’s and they have a $1 menu, but suppose the stand next door is offering a hamburger with fries for the same $1. The kids may want to go to McDonald’s but your wallet says go to the other stand.
Wall Street has this insane idea that p/e multiples of 30 or thereabouts work in this economy. The IT industry isn’t a new-born baby. It’s not in its infancy. Growth rates will be modest for Microsoft. The management is telling you that. As such, p/e ratios need to reflect reality in the marketplace. The short-term trend since March 11 has been sharply higher. That doesn’t mean the long-term trend has changed. As long as the consumer drives the economy, there will not be a sustained recovery without job growth. The latter will not take place for several reasons: excess capacity; too little demand; and foreign competition eliminating pricing power. In other words, nothing has changed for three years except the market took off from March 11 to heights which cannot and will not be sustained.
How am I so sure that I’m right? I’ll let you in on a little something. I pay attention to the value of the U.S. dollar. That value reflects how the world views the economic health of this nation. The dollar is in a downtrend in world currency trading. This trend tells you the world has severe doubts about the economic recovery economists and politicians predict. This week Dresdner Kleinwort Wasserstein and Goldman Sachs both revised lower their outlook for the U.S. dollar against the yen and the euro. Dresdner ranks as the world’s 15th biggest currency trader. They predict in the next 6 months the dollar will drop from about 116 yen to 110 yen and that the euro will rise from the current $1.13 to $1.24 in a year. Goldman Sachs is the world’s fifth largest currency trader. They believe in 6 months the euro will rise to $1.24. The euro economies are weak. That should tell you how weak the U.S. economy might be in 6 months or a year. When the U.S. economy was riding high a few years ago, the euro was at 82.
Our politicians are way out of touch with reality. U.S. senators last week said they planned to introduce legislation that would impose tariffs on Chinese imports unless China floats the yuan. These senators are out to lunch. Actually, they won’t get to lunch. China will gobble them up and spit them out for breakfast.
Bush is getting dangerously close to the third rail. The new Washington Post-ABC poll indicates that 60% of Americans oppose Bush’s $87 billion request for Iraq, and 55% doubt Bush has a clear plan about what to do in Iraq. About 60% disapprove of his handling of the federal budget, health care, and the overall economy.
On October 9 you can be the first one on your block to get the new $20 bill. Andrew Jackson will continue to be on the front, and the White House on the back. It will contain the traditional green and black colors, but the new bills will have touches of peach and blue. They will be more difficult to counterfeit. Hopefully, some day they will be worth $20. In another year or so more colorful $50 and $100 bills will be coming to your neighborhood. With the new colors, the 20s, 50s, and 100s should make great wallpaper.
To be a successful long-term investor one must be on the right side of reality. That includes making the trend your friend, but it means much more than that. It means having an understanding and an appreciation for a changing landscape. Wall Street has failed in the latter. Analysts can no longer evaluate with the same yardsticks. Adjustments must be made. Forecasts should not be the same. Results shall be different. The workplace has changed, and possibly, permanently. In 1972 there were about 200,000 temporary workers. Today there are 10 times that amount. With capacity utilization at 75%, companies will hire temporary workers. They are easier to fire and they don’t receive on-going benefits. While a greater number of permanent workers are cut from the payrolls, an increasing number of temporary and contract workers join the labor force. The American Staffing Association said companies employed 50,000 more temporary workers in the second quarter of this year than in the first quarter. While top-line growth lags, managers fix their gaze on cost cutting. You cut a bit here and a bit there, and you make do. You patch the equipment, and keep capital expenditures down to the absolute musts. Why? In order to compete in a world economy lower costs can hopefully equate to competitive pricing. Customer loyalty is price driven. Therefore, name recognition has a lesser value. You know what you’re getting at McDonald’s and they have a $1 menu, but suppose the stand next door is offering a hamburger with fries for the same $1. The kids may want to go to McDonald’s but your wallet says go to the other stand.
Wall Street has this insane idea that p/e multiples of 30 or thereabouts work in this economy. The IT industry isn’t a new-born baby. It’s not in its infancy. Growth rates will be modest for Microsoft. The management is telling you that. As such, p/e ratios need to reflect reality in the marketplace. The short-term trend since March 11 has been sharply higher. That doesn’t mean the long-term trend has changed. As long as the consumer drives the economy, there will not be a sustained recovery without job growth. The latter will not take place for several reasons: excess capacity; too little demand; and foreign competition eliminating pricing power. In other words, nothing has changed for three years except the market took off from March 11 to heights which cannot and will not be sustained.
How am I so sure that I’m right? I’ll let you in on a little something. I pay attention to the value of the U.S. dollar. That value reflects how the world views the economic health of this nation. The dollar is in a downtrend in world currency trading. This trend tells you the world has severe doubts about the economic recovery economists and politicians predict. This week Dresdner Kleinwort Wasserstein and Goldman Sachs both revised lower their outlook for the U.S. dollar against the yen and the euro. Dresdner ranks as the world’s 15th biggest currency trader. They predict in the next 6 months the dollar will drop from about 116 yen to 110 yen and that the euro will rise from the current $1.13 to $1.24 in a year. Goldman Sachs is the world’s fifth largest currency trader. They believe in 6 months the euro will rise to $1.24. The euro economies are weak. That should tell you how weak the U.S. economy might be in 6 months or a year. When the U.S. economy was riding high a few years ago, the euro was at 82.
Our politicians are way out of touch with reality. U.S. senators last week said they planned to introduce legislation that would impose tariffs on Chinese imports unless China floats the yuan. These senators are out to lunch. Actually, they won’t get to lunch. China will gobble them up and spit them out for breakfast.
Bush is getting dangerously close to the third rail. The new Washington Post-ABC poll indicates that 60% of Americans oppose Bush’s $87 billion request for Iraq, and 55% doubt Bush has a clear plan about what to do in Iraq. About 60% disapprove of his handling of the federal budget, health care, and the overall economy.
On October 9 you can be the first one on your block to get the new $20 bill. Andrew Jackson will continue to be on the front, and the White House on the back. It will contain the traditional green and black colors, but the new bills will have touches of peach and blue. They will be more difficult to counterfeit. Hopefully, some day they will be worth $20. In another year or so more colorful $50 and $100 bills will be coming to your neighborhood. With the new colors, the 20s, 50s, and 100s should make great wallpaper.
Subscribe to:
Posts (Atom)