Saturday, October 04, 2003

10/04/03 What! Me Worry?

Dennis Jett, former U.S. ambassador to Peru and presently dean of the International Center at the University of Florida: “The U.S. is not unique in being threatened by terrorism. And it will not be unique if the response is for the majority to accept the violation of the rights of a few in exchange for the promise of greater security. Some would argue that has already happened.”

President Bush in May 2003: “We found the weapons of mass destruction …and we’ll find more as time goes by.”

Vice President Cheney, recently in a “Meet the Press” interview, described Iraq as “the geographic base of the terrorists who had us under assault now for many years, but most especially on 9-11.”

On Thursday, a study was released, and it was conducted by the Program on International Policy Attitudes based at the University of Maryland and the Menlo Park polling firm of Knowledge Networks. The study indicated that, between January and September, 60% of Americans held at least one of these common mistaken impressions: U.S. forces found WMD in Iraq; there’s clear evidence that Iraqi President Saddam Hussein worked closely with the Sept. 11 terrorists; and people in foreign countries generally either backed the U.S.-led war or were evenly split between supporting and opposing it.

According to Pentagon data, nearly 4,000 U.S. troops have been medically evacuated from Operation Iraqi Freedom for non-combat reasons- with more than one in five of those for psychiatric or neurological problems. Since March 20, 318 soldiers have died in Iraq and another 1,380 soldiers have been wounded in action as of Oct 1.

I will return to yesterday’s paragraph on employment in just a moment. Let’s turn to the underemployed. We must not forget them. Barbara Card Atkinson, a writer and mother of two small children, lives in Arlington, Mass. She writes in the Christian Science Monitor “In our house, Bush’s child-tax rebate checks went to past-due utility bills, groceries, and a full tank of gas. So much for stimulating the economy. My husband and I are two of the almost 1 million “underemployed” in this country- a demure label for a violent lifestyle change. We, with our college degrees and previous incarnations as latte-swilling yuppies, are now attempting- and failing badly- to keep our family of four afloat on an average combined income of substantially less than $1000 a month. Like those others, we’re holding our breath, waiting for the economy to rebound. For us, it’s been more than a year. Our personal trajectory in the high-tech flameout happened to so many others that it’s now clithe: the faltering of a dotcom job, the bankruptcy of a software company. We had great connections, my husband and I, so finding another job wouldn’t be a problem, we thought. We thought wrong. …we’re a legion of misfits, my underemployed brethren and I. We’re workers with superfluous skills in need of jobs when there are no jobs to be had; generally too old and too smart to be making so little; fighting pride and snobbery while wiping counters, flipping burgers, selling shoes…we’re part of the new demographic middle-aged professionals losing our credit, our savings, and our homes. The Foreclosure Generation…I’m spending all my attention, all my energy taking care of things at home. I wonder when George W., chin out, brashly taking on the world, will look back over his shoulder and do the same.”

The same administration that brought you misconceptions and misstatements about the Iraq war also brought you yesterday’s non-farm payroll report. The Bureau of Labor Statistics reported a net increase of 57,000 jobs in September, and this included a gain of 74,000 service sector jobs. It is quite telling that only a little over an hour later the ISM reported that this same service sector in the same month of September had a drop in employment of 1.9%, a significant drop. I mentioned yesterday that over 76,000 job cuts had been announced in September, and that it was statistically impossible for employment to have increased. I wrote yesterday’s report prior to the ISM release. If you wish to invest on misinformation, and I say that politely, then go ahead. It’s your money. We have much worse happening. Our fighting men and women are dying, getting wounded, and being evacuated every day in Iraq. You can walk around every day with a what! Me worry? attitude. It’s a free country- but getting less so also daily.

Blue Bird Corp. is a 76-year old company that makes school buses, commercial buses, and Wanderlodge motor coaches. They are cutting 750 employees from their Fort Valley and LaFayette factories in Georgia. They blamed the layoffs on the sluggish North American economy. Tellabs announced plans to reduce its worldwide workforce by about 370 employees. They also plan to close its development center in Quebec, Canada next year. Eastman Chemical will cut 600 jobs. They have been hurt by pricing pressures and rising material costs.

The competition to attract companies to a community is getting fierce. Soon companies will be getting signing bonuses in addition to incentives. West Des Moines is trying to attract Wells Fargo’s home mortgage and consumer credit expansion to their community. The City Council will vote on a package of incentives worth $32 million. It would include $25 million in new public road construction, $5 million in cash, and $2 million in water line and sewer line extensions. In return, Wells Fargo would construct a 900,000 square foot building with a minimum value of $118 million. This building would generate yearly property taxes of $4 million, and the bank would create or retain at least 3,300 jobs in West Des Moines over the next seven years.


Friday, October 03, 2003

10/03/03 For The Non-Squeamish

My patience has run out. That has happened very rarely in my life. If you’re squeamish, do not proceed with your reading. While David Kay goes through 600,000 ton of artillery shells looking for WMD, the government is weaving a new spin on the unemployment picture. The Labor Department, which labors over the spinning, will announce today an adjustment to the payroll numbers. This information is so accurate that it is available only through a lag and only covers the 12 months through last March. They will provide an officially revised number almost one year later in February 2004. The government wants to include nannies and maids and unpaid family workers. They didn’t mention wet nurses. In sum, the Labor Department will try to tell the American people that the unemployment rolls are overstated by at least 750,000 workers. I suggest we eradicate the Labor Department. Tom Nardone, chief of the Division of Labor Force Statistics, states “if what you are interested in is counting wage and salary jobs, the payroll survey has a clear advantage.” In other words, the attempt to place a new spin on unemployment and the unemployment rate is a failure to communicate reality.

I am pleased to report that Bush will be faced with the veto card. The House and the Senate have voted to oppose the administration’s plans to change the rules on overtime pay that would deny benefits to millions of workers. Just like the Labor Department wants to redefine unemployment, so does the administration wish to redefine eligibility for overtime. Yesterday 21 Republicans joined Democrats in the House to oppose the rule changes. The Fair Labor Standards Act of 1938 created the 40-hour work week by guaranteeing overtime pay, at time and a half, for each hour worked over 40. The law allows for the exemption of administrative, professional, and executive workers. Under the U.S. Labor Department’s proposal, more employees could be reclassified as exempt administrators, professionals, or executives if they meet certain criteria, and particularly if they earn more than $65,000. The administration wants to take overtime pay from millions of American workers. They also wanted to take pay raises from our fighting men and women. That effort was stopped. I truly hope the overtime protection remains in force. At some point, this administration must learn the meaning of loyalty and putting the interests of the people before personal considerations. I’m an optimist. It’s not over until the pudgy lady sings.

Let’s turn to the CIA leak. The role of the president is that of leader, CEO, and commander-in-chief. As CEO of the White House staff, it is his responsibility to quickly get to the core of the leak. He should have ordered everyone on the staff to individually come into his office and, in private, ask whether that person had a participation in the leak. This situation is one of life and death, and not for simply for the operative. It quite conceivably could endanger each individual with whom that operative came into contact. Not taking decisive action is a major disappointment.

Yale Hirsch’s Stock Trader’s Almanac points out that October 9 is historically one of the two worst trading days of the year. Less than 25% of the time do stocks go up on that day.

As part of the JD Edwards acquisition, PeopleSoft planned to cut 750 to 1000 workers. These employees have begun to get laid off. Last month, Springs Industries closed its 1890s-era plants in Fort Mill and Lancaster eliminating 500 jobs, and laid off another 130 employees at its Grace facility in Lancaster County. Yesterday the company said it would close two weaving plants. The one in Fort Lawn employs 140, and the other in Laurel Hill has 180 workers. Interstate Bakeries announced plans to close its bread and roll bakery in Grand Rapids, Michigan and 160 employees will be affected. The company is the nation’s largest baker and distributor of fresh baked bread and sweet goods in the U.S.

Yesterday the Labor Department said filings for state jobless benefits rose by 13,000 in the week ended Sept. 27. The Commerce Department said factory orders dropped 0.8% in August while orders for durable goods declined 1.1%. Chicago Fed President Michael Moskow said yesterday “I have to admit that until we actually book a couple of quarters of solid output growth and see the beginning of an employment rebound, there will be some doubts in my mind whether we are, at last, out of the woods.” Fed Governor Ben Barnanke said yesterday “the most difficult question is when the employment situation will turn around.” Philadelphia Fed chief Anthony Santomero said yesterday “in this particular cycle, I believe the challenge is somewhat more difficult because technological change and globalization are affecting the economy’s long-run capacity for growth and near-term capacity to employ people in ways that are difficult to quantify.”

Overseas investors now hold 36% of our Treasury bonds and notes. With our escalating budget deficit, the Treasury will have a growing need to issue more debt. Most likely, Japan and China will be the largest purchasers of those debt instruments. As such, one can reasonably anticipate overseas investors soon holding more than 40% of these treasuries. The entities that hold the debt gain an increasing influence until they own over 50% of the debt. At that point they control the country. We are a debtor nation, and in danger of losing control of our own destiny. Spending beyond means will create that situation. Those who cast a vote can make a change. Vote out the spenders.

Jon Markman wrote an excellent article in yesterday’s MSN Money entitled “The Devil wears pink: a grim financial fairy tale.” He provided a quote by Jim Williams who stated “the public has turned to speculation in stocks precisely because they do not have hope. They are piling up debt in total denial of their eroding liquidity. Outside they are partying because inside they are glum; they are grasping for straws.” Hope is important. When the public loses confidence in its leadership, societal fabric begins to wear thin and looks threadbare. In the latest CBS/New York Times poll. There was a sharp drop in public confidence in Bush’s ability to handle foreign and economic policy issues.

Lieutenant General Ricardo Sanchez, commander of ground forces in Iraq, stated “the enemy has evolved. It is a bit more lethal, little bit more complex, little bit more sophisticated and in some cases a little bit more tenacious. As long as we are here the coalition need to be prepared to take casualties. We should not be surprised if one of these days we wake up to find there’s a major firefight or a major terrorist attack.” At least someone tells the truth. Maybe Lieutenant General Sanchez should inform the Commander-in -Chief that the major fighting did not necessarily end on May 1.

CIA advisor David Kay: “Despite evidence of Saddam’s continued ambition to acquire nuclear weapons, to date we have not uncovered evidence that Iraq undertook significant post-1998 steps to actually build nuclear weapons or produce fissile material.”

Earlier this year I mentioned that the WTO had authorized the E.U. to impose as much as $4 billion in tariffs against U.S. farm goods, jewelry, and other products, and the E.U. specifically said they would strongly consider imposing those tariffs unless the Congress voted to repeal export-tax credit breaks. Boeing and Caterpillar, for example, have received hundreds of millions of tax breaks over the years. Yesterday the Senate Finance Committee approved a bill to phase out the credit over three years. The WTO has already waited three years to have this repealed. A total of $4 billion in sanctions are threatened to be imposed by the E.U. if changes are not made by year- end.

Lastly, I would like to touch on a subject I have mentioned over and over again- the lack of credibility in government reporting unemployment numbers. I have over and over again caught errors in simple math and pointed them out. Today we have another one. The government stated September payrolls rose by 57,000 and remarked that Services in government agencies, banks, and retailers added 74,000 jobs. The fact is there were over 76,000 reported company layoffs in September. I mentioned that this week. Those numbers are documented. The best that could have taken place was no job losses and no job gains, and that I do not believe. The revisions will come out down the road. A few points to remember. In September the labor force participation rate fell to 66.1%, the lowest since December 1991. Average weekly hours worked for all employees held at 33.7 hours in September but incomes decreased. Workers’ average hourly earnings declined 0.1%.


Thursday, October 02, 2003

10/02/03 Auto Immune-less System

Dieter Zetsche heads up Chrysler. Yesterday he gave a speech at the Chief Executives Club of Boston. He likened the highly competitive global automotive industry to a “jungle.” If that’s so, then the CEOs of the big two and the big fourth are swinging from the trees without a clue as to the path leading to firm ground. Of course, losers blame it on others. Zetsche remarked “this jungle is an extremely fierce and competitive place. The U.S. market is under attack from all sides and in every segment.” Maybe he should bring out play-do and have everyone make nice. So what is Chrysler to do? Zetsche has the solution. “Global competition, an over saturated market and heavy incentive spending put tremendous pressure on margins,” he stated. “If the market is reducing your top line, you’ve got to work harder to recover that money from your cost base.” As such, the plan is to give incentives up to $5,000 and to cut 5,000 workers. It’s the 5,000 solution. Meanwhile, Chrysler’s sales of new cars and trucks dropped 15% last month. It was their worst September in more than a decade and more than double the drop in August when Toyota passed Chrysler in monthly sales. Only the Jeep Grand Cherokee with its $3,000 rebate had a sales increase. Yesterday Chrysler stock rose 82 cents. There is no way this company is going to break even in 2003. Some predict Chrysler will lose $1 billion in 2004. I know one thing. In my opinion, this company is in big trouble, and the stock does not reflect it. Meanwhile, September sales for GM were up 13% and Ford’s were flat. Yesterday GM raised the level on its incentive program to $4,500 as well as providing interest-free loans for up to five years for purchases of most 2003 and 2004 model-year passenger cars.

According to the Defense Department, a total of 314 American service members have died since the Iraq war started on March 20. Of that number, 90 have died since May 1 when Bush said the major combat operations were over. How does Bush sleep at night?

AT&T eliminated 10,000 positions in 2001, 10,000 in 2002, and 5,000 in 2003. Their CFO said plans for 2004 have not been finalized but they may be more or less than 5,000, he stated. Ashland Inc. had previously announced job cuts of 200. Yesterday they announced eliminating another 500 positions. Their CEO stated “reducing our costs is a pivotal part of our strategy to produce top-quartile results relative to our peers.” A subsidiary of Charlotte-based Ruddick Corp. will close its thread-yarn spinning plant in Maiden, NC and cut 125 jobs. The company cited a declining customer base, increased apparel imports from Asia, and weak business conditions. Assurant Group, a risk management company based in Miami and Atlanta, will lay off 300 employees, and this will include managerial positions. The cuts are in their credit insurance and debt protection businesses.

Challenger, Gray, and Christmas said reported planned layoffs at U.S. firms amounted to 76,506 in September, and down slightly from August’s 79.925. Norbert Ore heads a committee that compiles the survey for the Institute of Supply Management. He stated “there is nothing here that offers signs of encouragement. The rate of decline seems to be slowing…but I don’t see much change in the mployment picture in the next six to 12 months.”

North Korea said it had reprocessed nuclear rods “in the direction increasing its nuclear deterrent force.” These rods had been sealed under a 1994 agreement with the U.S. Last year North Korea had withdrawn from the Non-Proliferation Treaty and started up its Yongbyon plant. No one has verification as to whether the rods have indeed been processed as North Korea had previously expelled the U.N. inspectors. It’s quite apparent that most countries have no interest in joining forces with the Bush Administration. Hopefully, we have learned from the fiasco in Iraq. We cannot spread our troops too thin, and we cannot, at the same time, endanger our populace. That means creating a coalition, and China, in this case, needs to be the major player. We must remember never to negotiate with thugs. They are cancers to their own people and to the world.

Wednesday, October 01, 2003

10/1/03 Involuntary Separation

Yesterday Ford began eliminating about 5,000 world wide positions. Executive Vice President Jim Padilla stated “these decisions have been borne out of our need to respond to an increasingly competitive automotive industry that continues to grapple with the challenges of production over capacity and spiraling incentive costs.” In my view, Edmunds.com gave a more complete analysis stating “despite the increased incentives spending by the domestic manufacturers, their market share declined by an historic 57.6%. In August, Ford’s incentives spending went up by 2.8% to $3,472 per unit while its market share dropped 0.6% to 17.5%.” GM and Chrysler had similar experiences. Ford is cutting more than 3,000 nonunion jobs in North America and offering buyouts to 1,700 German workers. In addition, there is the so-called involuntary separation of about 50 full-time salaried workers. Many salaried workers will receive limited overtime, and new hires will be restricted to critical positions. Padilla went on to state that, “in many instances, full-time salaried employees will stepping in to assume work previously handled by contract help.”

Chrysler announced yesterday that they would be asking several thousand employees to take early retirement. The company will provide more information in the next few days.

Last week Verizon warned it would not meet forecasts for the remainder of the year. Yesterday Verizon offered a voluntary severance package to all of its 74,000 nonunion management employees.

Louisiana Pacific, a major lumber mill company, has been based in Portland, Oregon for 31 years. Most employees have wanted to remain in Portland for the quality of life there. Management decided to move the headquarters to Nashville for cost cutting reasons. There will be 175 jobs cut in Portland.

Jacuzzi Brands is considering closing its manufacturing plant in Salem, Ohio, and this would impact 253 employees. The plant opened 95 years ago. The company said the preliminary conclusion is “that continued manufacture of cast iron products in Salem is not a viable alternative.”

This month WalMart will open a distribution center in north China in Tianjin. To this point, their distribution center in Shenzhen has fueled the supply chain in their existing 31 stores in China. Over the past 7 years, WalMart has worked with the Chinese government to set up a holding company to consolidate joint venture distribution and finance. Globally, WalMart will be increasing its total selling space by 8% next year.

The drug industry spends more than $26 billion annually in the U.S. on R&D. At the same time, since 1996, there has been a steady decline in drugs whose active ingredients have never before been approved in the U.S.

Last week U.S. chain store sales fell for the third consecutive week. A spokesperson for Bank of Tokyo-Mitsubishi and UBS stated there was “some fundamental softening in consumer demand.” WalMart, on the other hand, appears to be taking business from the department stores.

Yesterday, yields on U.S. treasury bonds declined to their lowest level in two months. Some folks in the bond pits believe the Bank of Japan is an on-going and active buyer of our treasuries. Even with the recent gains, the 10-year government bond was down 2% in value for the 3rd quarter.

Pentagon officials report that Air National Guard and Air Force Reserve units contribute 100% of weather reconnaissance, 64% of tactical airlift, 57% of combat search and rescue, and 55% of aerial refueling and strategic tankers. Since the 1991 Persian Gulf War, the full-time military has been cut by 29% to 1.4 million service members. Despite Rumsfeld’s statements, we appear to be short on regular soldiers to get the job done all around the globe. The Congressional Budget Office estimates that adding two new Army divisions would cost up to $19.4 billion in one-time costs, would add another $9.5 billion to $10.1 billion to the annual defense budget, and would take from 3 to 5 years to field with new troops.


Tuesday, September 30, 2003

9/30/03 Happy Birthday Mom

My Mom would have been 87 today. She died three years ago this month. My world misses her each day.

Yesterday I talked about Bon Macy’s , and mentioned that temporary workers would not be hired for the holiday shopping season. The temporary employment industry is a vital part of our economy. If you want to get an early picture on an economic pick-up, then keep an eye on this sector. By December 2000, staffing employment was less than that of the previous December, the first of 23 consecutive months of negative monthly year-over-year comparisons. It should have been a warning sign to investors. The following needs to be remembered. It will save you money. The fourth quarter has historically been the busiest for staffing companies, as clients seek fill-ins for workers on holiday or vacation leave, bring on extra staff to meet added demand associated with the holiday season, or staff up in a rush to make year-end goals. For the first time since quarterly trends were documented in 1992, fourth quarter temporary staffing employment fell in 2000. As it continued to fall, quarter after quarter, through the first quarter of 2002, more than 739,000 temporary staffing jobs vanished, and this was off 28% from the peak. Temporary staffing employment in the first quarter of 2002 was comparable to that of 1996. For 2002, temporary staffing average daily employment totaled just over 2 million, and this was 5.7% less than in 2001, and the second year in a row of decline. If economists are correct, and the economy does have a sustained recovery, one of the first signs will be a marked increase in temporary employment. Prior to hiring full-time workers, businesses will hire temps to test the business climate, as it were. To date, that has not happened.

According to the Census Bureau, the number of people without health insurance rose to 43.6 million, and it was the second consecutive annual increase. The ranks of the uninsured rose by 2.4 million Americans accompanied by health care costs rising 16% and growing unemployment rolls.

September was the seventh straight month of inflow into stock funds. Somewhat less than $10 billion went into those funds, and that was after over $12 billion in August and almost $11 billion in July. Stock funds have over 4% of their assets in cash. Assets in all funds total about $7 trillion. Our GDP is about $9.5 trillion.

Who wrote this? “We should vigorously promote the spirit of waging hard struggles, carefully make overall plans, operate according to our ability, and gradually and systematically carry out the programs to ensure the invigoration strategy can be implemented successfully.” Alan Geenspan? George Bush? It was the front- page article in China’s People’s Daily, the party newspaper. Northeast China has frequent worker protests and is the site of rundown state businesses. Premier Wen Jiabao is attempting to create private sector jobs and revitalize industry in the northeast. It is hoped that this effort will mitigate the growing divide between rich and poor.

Safeco of Seattle is seeking a buyer for its life and investments business in order to focus on its more property and casualty business. The company said it will eliminate “at least 500 positions” from the operations that won’t be sold. Celeritek will exit the wireless handset power amplifier business and layoff 20% of its workforce.

Employment data for September will be released on Friday. It is anticipated that unemployment will have increased once again. This rise will probably create some further weakness in the dollar.

In August, savings as a percentage of disposable income grew for the second consecutive month. It rose to 3.8% and was the highest level since February. Savings got a boost from Uncle Sam. In late July and early August, the government mailed out 22.8 million tax-credit checks worth a total of $13.7 billion.

Members of the Committee for Economic Development; the Concord Coalition; the Center on Budget and Policy Priorities; and former senior government officials warned of a “growing mismatch between what Americans are scheduled to pay to government and what they expect government to deliver in return.” They project combined deficits between 2004 and 2013 will total $5 trillion if the nation stays on its current path regarding tax and spending policies. “In the end, our children will have to face higher taxes, reduced public services, or both,” the organizations warned. “But if we wait until the crisis is upon us, the solutions will be more draconian.”


Monday, September 29, 2003

9/29/03 Bottom Up Analysis

I’ve decided that we should learn how easy to sleuth it really is. A lot of you think I’m really smart. You give me much too much credit. I just work hard at it, and tweak the information until a clear picture is developed. Last year I came away in September that the holiday shopping season would not be anything terrific. In fact, I realized it would be pretty disappointing. How did this view come into focus? I talked to store clerks and shoppers. I did this at different stores ranging from small specialty stores to outlet stores to discount stores to department stores. So far this season a very important fact has been uncovered. Bon Marche is a pretty upscale department store, and was purchased by Macy’s some time ago. In August the name was changed to Bon Macy’s. The latter is part of Federated Department Stores, one of this nation’s largest department store chains. In late summer management tells the sales people how many extra hours they can expect to work during the holidays, and then the company arranges with part-time workers to fill-in hours as well. Since the stores have extended hours during the holiday shopping season, that’s a rational approach. This year is different. The full-time sales people are not expected to work longer hours. The company will not be hiring extra part-time workers for the holiday season. The store hours will be stretched as usual. This time the workforce will be thinned. I didn’t grasp this notion at first. Then it was explained to me. Simply put, the stores will remain open for about 16 hours. If there are two sales people in a department, then one will handle one eight-hour shift and the other will handle the remaining shift and they shall alternate. There will be less sales people on the floor selling and providing customer service. There won’t be extra hours worked, and there won’t be temporary workers at Bon Macy’s. This will probably result in a less satisfying customer experience, less store traffic, and disappointing sales. Bon Marche now Bon Macy’s did provide holiday gift wrapping for many years. That service was discontinued some years back.

Based on the projected holiday shopping experience at Bon Macy’s, it is easy to visualize that a growing number of people might frequent Target and WalMart rather than a department store. If service will be lessened, then one might as well go to a self-service discount store for more items. You might find this analysis very simplistic, but keeping things simple more often creates clear pictures of the future. To be a successful investor it’s necessary to stay ahead of the curve. See what’s around that bend before the bend comes into view. Anyone can see on the straightaway. In the retail business it is necessary to provide personal service, quality, and value. If a business drops one of those musts, then the business loses its allure. When that happens, stockholders suffer.

Bob Natt is CEO of mbi based in Waltham, Mass. They have issued 310,000 of the flexible-spending debit cards of the 386,000 currently on the market. He predicts his company will have 1 million such cards issued by January. FSAs (flexible spending accounts) are part of corporate employee benefit plans, and the plans permit employees to set aside up to $5,000 from their paycheck into a special account—before taxes are deducted—to reimburse themselves for medical bills that insurance doesn’t cover. Because money in the account spent on medical bills is not taxed, the programs allow middle-income employees to have about 25% of their medical costs onto the U.S. government. The drawbacks are two-fold: employees forfeit whatever they fail to spend before the year ends and employees must front the money prior to filing a reimbursement claim, and the latter can take weeks to process. The employer wins too. The FSAs cut the cost of processing paper claims, the company avoids paying Social Security and Medicare taxes for every dollar that employees divert from their paychecks into flexible spending accounts. The three major players in this field are mbi, SmartFlex of NY, and Evolution Benefits of Avon, Conn. They get a tiny piece of each debit transaction. I predict this business has a growing future.

In Newsweek’s Oct. 6 issue, they report that huge pension liabilities are strangling corporate America, and execs say this new debt is choking off an economic recovery. Companies that offer workers traditional pensions are suddenly facing a $350 billion deficit in those plans. Thus, the magazine states, companies are delaying expansion plans because of the need to fund the pension plans.

Sunday, September 28, 2003

9/28/03 When The Lights Go Out

It must be a virus. It appears to be spreading around the globe. I’m talking about the loss of power. In this instance it’s electrical power. Italy is Europe’s fourth largest economy. They had an early morning blackout. Initially, the problem was caused by a transmission problem between Switzerland and Italy, and then there was an incident involving one of two high-tension lines between France and Italy. Less than a week ago Copenhagen, the rest of eastern Denmark, and southern Sweden lost power for four hours. About a month before that London had an electricity failure. Two weeks before that there was the biggest blackout in the history of North America. Am I to believe that these happenings are coincidences?

The lights are going out at many San Francisco restaurants, but for a different reason. San Francisco features more restaurants per capita than any city nationwide. San Francisco is heavily dependent on tourism. As recently as May of this year, 24% fewer travelers passed through San Francisco International Airport than in May 2000. Since, 2001, this city has lost 7% of its more than 3,000 restaurants. In the past two years 168 more restaurants closed than opened. Kent O. Sims, a Bay Area economic consultant, remarked “nothing like this has happened here. Restaurants open and close all the time. But we’ve never had an overall drop like this. People are getting slaughtered.” The Golden Gate Restaurant Association stated that, from 2001 to 2002, median table service restaurant income dropped 40%; restaurant advertising fell 70%; and the number of applicants seeking restaurant work rose 50%.”

According to the Bureau of Labor Statistics, more than 4.5 million seniors 65 and older were working in August, up 18% from 3.85 million in 1999. They make up 3% of the workforce, and their numbers are expected to climb. Clare Hushbeck, senior legislative representative and labor economist at AARP, stated “they used to call work the poor man’s pension. Now it is going to be part of many, many people’s retirement income stream. People are being yanked back into reality in a fairly painful way. More and more people are going to have to be working in retirement.”

Walter Cronkite recently compared U.S. Attorney General John Ashcroft to Tomas de Torquemada, the 15t century Dominican friar who became the grand inquisitor of the Spanish Inquisition. The New York Times’ Eric Lichtblau recently wrote how the Bush Administration has been using the Patriot Act beyond investigating terrorism, and has expanded its authority to many criminal investigations devoid of connections to terrorism.

Shipping jobs overseas is known in the Silicon Valley as “offshoring.” Daniel Slack, CFO of Centillium Communications of Fremont, California, made a presentation to investors on September 17. He stated that his company had cut its research and development expenses in the second quarter by 21%, compared with the year-earlier period. Slack said the “key factor” was his company shutting two U.S. plants and opening an office in Bangalore, India. As an illustration, Wipro Technologies is an Indian concern that provides global IT services. Over the last three years, their workforce has grown from 3,000 to 20,000. Vivek Paul, Wipro’s president and CEO, stated that India has a pool of 17 million people with science and engineering degrees.

Even though the price of gasoline has come down in the past 30 days, it is still considerably more expensive than one year ago. By comparison, the experience in Iraq is quite different. True, Iraqis are provided low-octane, government-subsidized fuel called benzene, which is cheaper than water in Iraq and priced at 10 cents per gallon. Halliburton was hired by the Army Corps of Engineers to repair Iraq’s energy infrastructure. According to the Army Corps of Engineers, Halliburton has been paid more than $600 million to date to repair Iraq’s gas distribution network. Yet, Iraq is importing about 750,000 gallons of gasoline a day, according to statements by senior Oil Ministry officials. Today Iraq only produces a little over 1 million barrels of oil per day. Majed Mohammed manages the Mansur station for the Iraqi Oil Ministry and has worked for that entity for 21 years. He related that “the benzene we sell here comes from Turkey, Kuwait, and Saudi Arabia. Before the war it was 100% from Iraq. But now we have problems with sabotage of the pipelines. The refineries are working at far less than capacity. The cost is subsidized by the ministry. It was like that before the war when Saddam was here, and it is the same now. We are obliged to do it because of the needs of the people. If we didn’t, there would be major problems and even more anger at the Americans.” It’s better Iraqis should be paying 10 cents a gallon and Americans in the U.S. $1.65 per gallon with the latter heavily taxed and clearly unsubsidized? I’m not for subsidies but I am for a foreign policy promoting the economic well-being of our citizens first and foremeost.