11/1/03 Consumer Spending Slowdown
Washington DC, Wall Street, and the media whooped it up after the third quarter GDP growth of 7.2% was released. We were off to the races. I smiled. I knew the consensus was wrong once again. I knew the consumer spending numbers would be worse than expected. I had done my homework. Analysts had forecast a 0.1% decrease in spending for September. The actual 0.3% decline was the largest since a 0.4% drop in September one year ago. This news is very important in light of the reported 0.3% rise in Americans’ income for September of this year. The consumer is slowly cutting back on expenditures. Spending on cars and appliances were down 5.1% in the month. In August they had risen 3.8% for the same items. Even spending on food and clothing was reduced from the August rise of 1.4% to a mere 0.3% in September. The only area of increased spending was a small bump on services from 0.3% in August to 0.4% in September. October will prove modestly better for discounters like WalMart and Target, but for department stores it should prove disappointing. Halloween will be a bright spot. Last October the same-store sales for WalMart rose 3.7%, and I am thinking a comparable number for this October will be about a 4.3% increase. Last October was the turning point in retail sales. It was then that the consumer began to cut down on expenditures. I believe the same thing happened this year, and that’s why I only look for a modest increase in holiday spending over last year’s results. It’s more than just a feeling. I look at facts. The IBD TIPP Home Computer Purchase Outlook Index fell11% in October to 17.5, just above its all-time low of 17.3 in March. Only 19.7% of respondents said they were very likely or somewhat likely to buy a new PC within the next six months. That compares with 26.1% in July. According to this poll, 78% of U.S. households have at least one PC, and 37% have more than one PC. The IBD TIPP survey data reveals that September consumer confidence “fell off a cliff.” October only inched back. If the consumer continues to cut back on spending, GDP growth will turn to barely positive, and equity prices will also fall off a cliff. I hope no one gets hurt. I’ll be waiting at ground level.
Yesterday, the USDA said 12 million families last year worried they didn’t have enough money to buy food. Thirty two per cent of them actually experienced someone going hungry at one time or another.
Intense geomagnetic storms raging on the sun made the sky shimmer red and green. The storms again disrupted telecommunications, and high radiation levels at 25,000 feet and above will persist through the weekend. The telescope at Kitt Peak, Arizona picked up the largest array of sunspots in a very long time.
ChevronTexaco has 53,000 employees. Yesterday, they announced job cuts of 2000. Commerce One’s stock was a high flying company at the height of the Internet craze. With cash running out, they laid off most of the remaining 116 employees. Earlier in October they had cut 80 people from the payroll. On Monday morning Chairman and CEO Mark Hoffman should be able to hear a pin drop in their Pleasanton, CA office.
A roadside bomb killed at least two U.S. soldiers and wounded two other soldiers in Mosul, Iraq today. In addition, an oil pipeline was on fire about 10 miles north of Tikrit. The two deaths bring to 122 the number of American soldiers killed by hostile fire since Bush declared an end to hostile combat on May 1. A total of 114 U.S. soldiers were killed between the start of the war on March 20 and the end of April. An Islamic clergymen’s association in Mosul issued a statement Friday stating “supporting Americans is apostasy and a betrayal of religion.”
An average WalMart supercenter generates $80 to $100 million a year in annual revenues. Their smaller discount stores produce $60 million a year. People shop at WalMart for their low prices. They sell a 47-inch Panasonic high-definition television for $1,284. The same product sells on Best Buy’s website for $1,499.99. When it comes to price comparison shopping, consumers know their stuff.
Starbucks continues to expand, and plans to open “3 to 4 new stores every day around the world.” Since their IPO in 1992, Starbucks stock has had one of the best performances over this time period. They continue to meet goals of 20% sales growth and 20-25% earnings per share growth. The company expects their 500 stores in Japan to turn profitable in 2004. At present, they have 119 stores throughout China, but their chairman, Howard Schultz, thinks China could prove to be their biggest market outside the United States in future years.
Recently, I mentioned Amazon.com had introduced “Search Inside the Book,” an excellent search technology that allows one to search the contents of a book and preview individual pages and print those of particular interest. Yesterday, Amazon disabled this search and print technology found on the books located on its website. I do not know whether the cancellation is temporary or permanent, but will endeavor to find out.
Friday, October 31, 2003
10/31/03 ABCs: Arrogance, Bubbles, Competition
Lightening can strike twice. Solar storms can strike back-to-back. Never say never. It will happen today. The first geomagnetic storm was ranked X17, and was among the four most powerful in recorded history. It disabled two Japanese satellites, caused air traffic controllers to alter some trans-Atlantic flights, disrupted radio communications, and some power grids were curbed. What are the chances of such a storm occurring again in this decade? What are the chances it could happen today? Until this week, any brilliant physicist would say “no way.” He would be correct. It has not taken place back-to back. Actually, the physicist would be wrong. It’s happening today. In fact, there is a chance the two storms could join forces as the second one catches up with the first. The FAA issued an alert- the first of its kind ever- cautioning passengers about extra radiation they would receive during flights above 25,000 feet north of Albuquerque and similar latitudes. John Kohl, a solar physicist with the Harvard-Smithsonian Center for Astrophysics, stated “the probability of this happening is so low that it is a statistical anomaly…this second blast is moving like a fast freight train that very soon will plow into the back of the slower moving freight train in front of it, just as it pulls into the station. The station, in this case, happens to be the planet earth.” Kohl said the potential effect is not known. The National Oceanic and Atmospheric Administration (NOAA) RUNS THE Space Environment Center. Researchers are not in agreement that airline traffic is safe. The NOAA estimates an airline passenger can experience as much as 10 chest X-rays during a geomagnetic storm. According to the Space Environment Center, the chance of a major(X-class) solar eruption on each of the next three days is 50%.
Country accords can create massive eruptions. G-5 finance ministers gathered at the Plaza Hotel in New York City on September 22, 1985. A consensus was reached that the U.S. dollar was significantly overvalued, and dangerous financial and trade imbalances were in the process of reaching the boiling point. An agreement was formulated that “some further orderly appreciation of the main non-dollar currencies against the dollar is desirable, and they stand ready to cooperate more closely to encourage this when to do so would be helpful.” In the next two and one-half years the dollar melted in half against the yen and the DM. The purpose of the dollar devaluation was to eliminate the enormous U.S. financial and trade deficits with Japan. This was the yen revaluation storm that initiated the downward economic spiral in Japan. Government intervention does not work, and governments rarely learn from their mistakes. In fact, they compound their mistakes. On February 22, 1987 G6 Finance Ministers and Central Bank Governors met in Paris, France for the Louvre Accord, and they agreed to intensify their economic policy coordination efforts in order to promote more balanced global growth and to reduce existing imbalances. Surplus countries committed themselves to follow policies designed to strengthen domestic demand and to reduce their external surpluses while maintaining price stability. Deficit countries committed themselves to follow policies designed to encourage steady, low-inflation growth while reducing their domestic imbalances and external deficits. Furthermore, it was agreed that the substantial exchange rate changes since the Plaza Agreement increasingly contributed to reducing imbalances and brought their currencies within ranges broadly consistent with underlying economic fundamentals and policy commitments. In sum, they agreed to cooperate closely to foster stability of exchange rates around current levels.
IS EVERYONE AWAKE? Does everyone remember the G-7 summit meetings with the IMF and the World Bank in Dubai, United Arab Emirates from September 19 through September 23, 2003? A communique was issued by the G-7 calling for “more flexibility in exchange rates.” It read “in the context of exchange rates, we will strengthen the dialogue with other major economic areas to promote smooth adjustment of international imbalances, based on market mechanisms.” In the next few days, the Japanese yen and the euro rose sharply against the U.S. dollar. As one observer remarked, “I don’t think the dollar going down has to do with the Dubai G-7 communique insisting on flexible exchange rates; there is something else going on. The financial world has latched onto a falling dollar, because of knowledge that has been picked up…that the Administration clearly wants to abandon the strong dollar. It’s fair to say, that they want to drive the dollar down, because of growing desperation about the American economy, as the election year approaches.” China will not make the same mistake Japan made in 1985. A more expensive currency would create widespread job losses for Chinese workers at a time when China needs to create a minimum of 20 million jobs annually. China will not give in to pressure from the United States. Prof. Jiang Ruiping, Chairman of the Department of International Economics of the Foreign Affairs College in Beijing, remarked that the Bush Administration, and some in Japan, want China to submit to the same sort of agreement that took place in 1985 and 1987. He said a “yen revaluation depression” is a bitter pill that China and its yuan will not swallow. China will relax curbs in 14 trial provinces and regions, allowing local foreign exchange capital of overseas investment projects with a limit of $3 million versus a previous ceiling of $1 million. The stability of the yuan will be maintained. The goal is to boost China’s economic growth within a stable financial environment.
American citizens have paid a stiff price for the mistakes made by its political and economic leadership. The United States is the greatest country on the globe. We are in grave danger. We have endured civil war, world wars, the depression, 9/11, and hopefully, the Iraq war. We are facing a different war. It’s the assault on our populace and our standard of living and our freedoms by the global economy. China is not the culprit. Japan is not the culprit. India is not the culprit. YOU believe what you read and you believe what you hear. YOU DO NOT THINK FOR YOURSELF. That is you God given right. You have abused the privilege. I do think for myself. I do not know all the answers, but I know the following. Unless you make changes, there will be an economic upheaval in this country, and there will be bread lines- unless bread-making is outsourced. You, the American consumer, account for about 70% of our GDP. You run the show. You are in charge. You pay the salaries and the services. You account for 20% of the world economic activity. Without you, imports are history. You get the picture? The government is not your friend. They are destroying the value of the dollar. In so doing, they are wrecking your purchasing power. Stop the train. Get off the train. Stop buying foreign goods. We can compete with any country. Our workers are smarter and they need to have a better sense of accomplishment. Management personnel need to cut their salaries and benefits. Members of Congress need to cut their salaries and benefits. You have been given the means to pile up debt with low interest rates. You have received tax reductions and tax credits. You buy cars with zero down and zero interest rates. You spend. The government spends. You live paycheck to paycheck. The government lives debt ceiling increase to debt ceiling increase. The average American indebtedness represents 115% of disposable income. You have negative cash flow. Many public companies have negative cash flow. We have a national debt bubble of mammoth proportions accompanied by negative cash flow that prevents the paying down of debt. The only solution is to cut down on spending- both at the consumer and the government level. It will cause a recession. It will not cause a depression. If you don’t buy foreign goods, you won’t need to worry about the yuan, the yen, and the euro. The market forces will work in your favor. Your purchasing power will be restored. You will have done away with G-5, G-6, and G-7 accords. They only create stock market crashes and economic upheaval.
When WalMart first began, they proudly advertised their product offerings as “all American.” WalMart now purchases about $12 billion in goods from China. If you demand American goods and leave the foreign goods on the shelf, WalMart will supply you with the goods you desire. You must be willing to pay, in the short run, a premium for the American goods. The American worker receives a higher wage. You must support that wage or that wage will be outsourced. It’s your choice. The answer is not by re-arranging foreign currencies. It creates disastrous results.
This week someone emailed me to say that our plants were only at 75% capacity because the unused capacity was not competitive. He is correct; however, some companies are doing something about it. Anadarko Petroleum did lay off 400 workers to trim $100 million a year in costs. There will not be more layoffs. In addition to the $100 million, they reduced drilling costs by 15%. Companies need to find ways to reduce costs other than by cutting workers and outsourcing to foreign nations. The future is here. The present is here. The troubles are here. Imbalances are dangerous. Governments can’t fix them. You must demand they get fixed. They begin with you, your lifestyle, and your vote. The American citizen is the fall guy. China is not. Japan is not. India is not. We have clear choices. They are buy American, spend less, demand less spending in Washington, and make our businesses and our lifestyles more cost efficient. We must pay down debt and still save. We cannot have countries like Japan and China sustain large trade account surpluses with our country. It undermines our economic well being by depending on daily foreign capital inflows of $1.6 billion. Do you want to go begging every day from Japan and China. The global economy is dependent you for its export growth and your rising indebtedness and the nation’s indebtedness. The insatiable spending habits have generated deflation. The credit and indebtedness bubbles have generated global over-capacity, and the latter cannot be met with present demand.
I waited to write this piece until after the third quarter GDP numbers were released. I figured some months back that the quarter would be strong- over 5% and maybe even 6%. The 7+% did not surprise me. The public thinks we’re off to the races. Bush tells you we’re off to the races. There were 41,000 jobs lost in the quarter. Yesterday Duke Energy announced a plan to cut 2,000 employees. The help wanted index remains at the lowest point of 2003. The growth in job benefit costs is double the rate of wage increases, which remain muted. Companies cannot pass along increased costs. There are rising costs besides those in the benefit area. Many industrial commodities have risen sharply, and not just gold. Some agricultural commodities have risen sharply, such as, soybeans. These rising costs put a damper on business profit margins and consumer pocketbooks. You can see that at the gas pump or in your home heating bills. The CRB index is at its highest point in about six years. What happens when budget deficits occur? The city of San Jose is facing a huge budget deficit for the second consecutive year. The $85 million shortfall is more than 10% of the total operating budget. It will mean layoffs, deeper service cuts, and higher fees. The budget shortfall will be felt throughout the entire community. It’s a serious problem. Two economists at UC Berkeley’s Fisher Center for Real Estate and Urban Economics present another problem- up to 14 million jobs, and many of them in the Bay Area, are at risk of being shipped overseas. They range from computer programmers to clerks who input data, from medical transcriptionists to paralegals, and “the bottom line is, if there is a job that can be done equally well, equally efficient, at a much lower cost in a different part of the world, then that job is at risk in today’s globalizing world.” It is our job to make sure we do that job better and more efficiently so that increased productivity overwhelms the wage differences. We must give businesses good reasons to hire American workers and to keep American workers on the payrolls. The solution is not to place a cap on outsourcing. The solution is to do a better job and to reduce overhead.
Globalization in the workplace is a present danger that has created the loss of 3 million jobs over the past three years. You hold the key. You can compete. You also hold the key to trade deficits, and therefore, you can engineer a rebound in your purchasing power. You can spend less and pay down debt. You can save. Bush has looked to rising stock prices to create consumer optimism and for you to spend more so more jobs will be created. You have spent more. You spend more every day. Our hourly trade deficit mounts at an historic and an alarming rate. Our budget deficits mount hourly at the federal, state, and local levels. The debt levels of the American people rise hourly. The problem is the nation’s cash flow and that of its citizens continues to diminish. There is a daily shortfall. When making bread, there is a resting period. Without it, the bread will be a flop. We need a pause. We need a spending respite. We need to buy and employ American. It will mean lower earnings in the short run. It will mean lower stock prices. It will also ensure our future economic revival and vitality for future generations.
Lightening can strike twice. Solar storms can strike back-to-back. Never say never. It will happen today. The first geomagnetic storm was ranked X17, and was among the four most powerful in recorded history. It disabled two Japanese satellites, caused air traffic controllers to alter some trans-Atlantic flights, disrupted radio communications, and some power grids were curbed. What are the chances of such a storm occurring again in this decade? What are the chances it could happen today? Until this week, any brilliant physicist would say “no way.” He would be correct. It has not taken place back-to back. Actually, the physicist would be wrong. It’s happening today. In fact, there is a chance the two storms could join forces as the second one catches up with the first. The FAA issued an alert- the first of its kind ever- cautioning passengers about extra radiation they would receive during flights above 25,000 feet north of Albuquerque and similar latitudes. John Kohl, a solar physicist with the Harvard-Smithsonian Center for Astrophysics, stated “the probability of this happening is so low that it is a statistical anomaly…this second blast is moving like a fast freight train that very soon will plow into the back of the slower moving freight train in front of it, just as it pulls into the station. The station, in this case, happens to be the planet earth.” Kohl said the potential effect is not known. The National Oceanic and Atmospheric Administration (NOAA) RUNS THE Space Environment Center. Researchers are not in agreement that airline traffic is safe. The NOAA estimates an airline passenger can experience as much as 10 chest X-rays during a geomagnetic storm. According to the Space Environment Center, the chance of a major(X-class) solar eruption on each of the next three days is 50%.
Country accords can create massive eruptions. G-5 finance ministers gathered at the Plaza Hotel in New York City on September 22, 1985. A consensus was reached that the U.S. dollar was significantly overvalued, and dangerous financial and trade imbalances were in the process of reaching the boiling point. An agreement was formulated that “some further orderly appreciation of the main non-dollar currencies against the dollar is desirable, and they stand ready to cooperate more closely to encourage this when to do so would be helpful.” In the next two and one-half years the dollar melted in half against the yen and the DM. The purpose of the dollar devaluation was to eliminate the enormous U.S. financial and trade deficits with Japan. This was the yen revaluation storm that initiated the downward economic spiral in Japan. Government intervention does not work, and governments rarely learn from their mistakes. In fact, they compound their mistakes. On February 22, 1987 G6 Finance Ministers and Central Bank Governors met in Paris, France for the Louvre Accord, and they agreed to intensify their economic policy coordination efforts in order to promote more balanced global growth and to reduce existing imbalances. Surplus countries committed themselves to follow policies designed to strengthen domestic demand and to reduce their external surpluses while maintaining price stability. Deficit countries committed themselves to follow policies designed to encourage steady, low-inflation growth while reducing their domestic imbalances and external deficits. Furthermore, it was agreed that the substantial exchange rate changes since the Plaza Agreement increasingly contributed to reducing imbalances and brought their currencies within ranges broadly consistent with underlying economic fundamentals and policy commitments. In sum, they agreed to cooperate closely to foster stability of exchange rates around current levels.
IS EVERYONE AWAKE? Does everyone remember the G-7 summit meetings with the IMF and the World Bank in Dubai, United Arab Emirates from September 19 through September 23, 2003? A communique was issued by the G-7 calling for “more flexibility in exchange rates.” It read “in the context of exchange rates, we will strengthen the dialogue with other major economic areas to promote smooth adjustment of international imbalances, based on market mechanisms.” In the next few days, the Japanese yen and the euro rose sharply against the U.S. dollar. As one observer remarked, “I don’t think the dollar going down has to do with the Dubai G-7 communique insisting on flexible exchange rates; there is something else going on. The financial world has latched onto a falling dollar, because of knowledge that has been picked up…that the Administration clearly wants to abandon the strong dollar. It’s fair to say, that they want to drive the dollar down, because of growing desperation about the American economy, as the election year approaches.” China will not make the same mistake Japan made in 1985. A more expensive currency would create widespread job losses for Chinese workers at a time when China needs to create a minimum of 20 million jobs annually. China will not give in to pressure from the United States. Prof. Jiang Ruiping, Chairman of the Department of International Economics of the Foreign Affairs College in Beijing, remarked that the Bush Administration, and some in Japan, want China to submit to the same sort of agreement that took place in 1985 and 1987. He said a “yen revaluation depression” is a bitter pill that China and its yuan will not swallow. China will relax curbs in 14 trial provinces and regions, allowing local foreign exchange capital of overseas investment projects with a limit of $3 million versus a previous ceiling of $1 million. The stability of the yuan will be maintained. The goal is to boost China’s economic growth within a stable financial environment.
American citizens have paid a stiff price for the mistakes made by its political and economic leadership. The United States is the greatest country on the globe. We are in grave danger. We have endured civil war, world wars, the depression, 9/11, and hopefully, the Iraq war. We are facing a different war. It’s the assault on our populace and our standard of living and our freedoms by the global economy. China is not the culprit. Japan is not the culprit. India is not the culprit. YOU believe what you read and you believe what you hear. YOU DO NOT THINK FOR YOURSELF. That is you God given right. You have abused the privilege. I do think for myself. I do not know all the answers, but I know the following. Unless you make changes, there will be an economic upheaval in this country, and there will be bread lines- unless bread-making is outsourced. You, the American consumer, account for about 70% of our GDP. You run the show. You are in charge. You pay the salaries and the services. You account for 20% of the world economic activity. Without you, imports are history. You get the picture? The government is not your friend. They are destroying the value of the dollar. In so doing, they are wrecking your purchasing power. Stop the train. Get off the train. Stop buying foreign goods. We can compete with any country. Our workers are smarter and they need to have a better sense of accomplishment. Management personnel need to cut their salaries and benefits. Members of Congress need to cut their salaries and benefits. You have been given the means to pile up debt with low interest rates. You have received tax reductions and tax credits. You buy cars with zero down and zero interest rates. You spend. The government spends. You live paycheck to paycheck. The government lives debt ceiling increase to debt ceiling increase. The average American indebtedness represents 115% of disposable income. You have negative cash flow. Many public companies have negative cash flow. We have a national debt bubble of mammoth proportions accompanied by negative cash flow that prevents the paying down of debt. The only solution is to cut down on spending- both at the consumer and the government level. It will cause a recession. It will not cause a depression. If you don’t buy foreign goods, you won’t need to worry about the yuan, the yen, and the euro. The market forces will work in your favor. Your purchasing power will be restored. You will have done away with G-5, G-6, and G-7 accords. They only create stock market crashes and economic upheaval.
When WalMart first began, they proudly advertised their product offerings as “all American.” WalMart now purchases about $12 billion in goods from China. If you demand American goods and leave the foreign goods on the shelf, WalMart will supply you with the goods you desire. You must be willing to pay, in the short run, a premium for the American goods. The American worker receives a higher wage. You must support that wage or that wage will be outsourced. It’s your choice. The answer is not by re-arranging foreign currencies. It creates disastrous results.
This week someone emailed me to say that our plants were only at 75% capacity because the unused capacity was not competitive. He is correct; however, some companies are doing something about it. Anadarko Petroleum did lay off 400 workers to trim $100 million a year in costs. There will not be more layoffs. In addition to the $100 million, they reduced drilling costs by 15%. Companies need to find ways to reduce costs other than by cutting workers and outsourcing to foreign nations. The future is here. The present is here. The troubles are here. Imbalances are dangerous. Governments can’t fix them. You must demand they get fixed. They begin with you, your lifestyle, and your vote. The American citizen is the fall guy. China is not. Japan is not. India is not. We have clear choices. They are buy American, spend less, demand less spending in Washington, and make our businesses and our lifestyles more cost efficient. We must pay down debt and still save. We cannot have countries like Japan and China sustain large trade account surpluses with our country. It undermines our economic well being by depending on daily foreign capital inflows of $1.6 billion. Do you want to go begging every day from Japan and China. The global economy is dependent you for its export growth and your rising indebtedness and the nation’s indebtedness. The insatiable spending habits have generated deflation. The credit and indebtedness bubbles have generated global over-capacity, and the latter cannot be met with present demand.
I waited to write this piece until after the third quarter GDP numbers were released. I figured some months back that the quarter would be strong- over 5% and maybe even 6%. The 7+% did not surprise me. The public thinks we’re off to the races. Bush tells you we’re off to the races. There were 41,000 jobs lost in the quarter. Yesterday Duke Energy announced a plan to cut 2,000 employees. The help wanted index remains at the lowest point of 2003. The growth in job benefit costs is double the rate of wage increases, which remain muted. Companies cannot pass along increased costs. There are rising costs besides those in the benefit area. Many industrial commodities have risen sharply, and not just gold. Some agricultural commodities have risen sharply, such as, soybeans. These rising costs put a damper on business profit margins and consumer pocketbooks. You can see that at the gas pump or in your home heating bills. The CRB index is at its highest point in about six years. What happens when budget deficits occur? The city of San Jose is facing a huge budget deficit for the second consecutive year. The $85 million shortfall is more than 10% of the total operating budget. It will mean layoffs, deeper service cuts, and higher fees. The budget shortfall will be felt throughout the entire community. It’s a serious problem. Two economists at UC Berkeley’s Fisher Center for Real Estate and Urban Economics present another problem- up to 14 million jobs, and many of them in the Bay Area, are at risk of being shipped overseas. They range from computer programmers to clerks who input data, from medical transcriptionists to paralegals, and “the bottom line is, if there is a job that can be done equally well, equally efficient, at a much lower cost in a different part of the world, then that job is at risk in today’s globalizing world.” It is our job to make sure we do that job better and more efficiently so that increased productivity overwhelms the wage differences. We must give businesses good reasons to hire American workers and to keep American workers on the payrolls. The solution is not to place a cap on outsourcing. The solution is to do a better job and to reduce overhead.
Globalization in the workplace is a present danger that has created the loss of 3 million jobs over the past three years. You hold the key. You can compete. You also hold the key to trade deficits, and therefore, you can engineer a rebound in your purchasing power. You can spend less and pay down debt. You can save. Bush has looked to rising stock prices to create consumer optimism and for you to spend more so more jobs will be created. You have spent more. You spend more every day. Our hourly trade deficit mounts at an historic and an alarming rate. Our budget deficits mount hourly at the federal, state, and local levels. The debt levels of the American people rise hourly. The problem is the nation’s cash flow and that of its citizens continues to diminish. There is a daily shortfall. When making bread, there is a resting period. Without it, the bread will be a flop. We need a pause. We need a spending respite. We need to buy and employ American. It will mean lower earnings in the short run. It will mean lower stock prices. It will also ensure our future economic revival and vitality for future generations.
Thursday, October 30, 2003
10/30/03 “It Ain’t Fair. It Ain’t Right.”
Since getting elected, President Bush will make his 13th visit to Ohio today. I wonder whether he will be discussing medical care for our wounded soldiers. Yesterday, he discussed a Medicare bill that would omit co-pay for home health care. Cpl. Waymond Boyd has served the military for 15 years, and was recently in Iraq with the National Guard. He said “I joined to serve my country. It doesn’t make sense to go over there and risk your life and come back to this. It ain’t fair and it ain’t right. I used to be patriotic.” Boyd’s knee and wrist injuries were severe enough that he was evacuated and sent to Fort Knox. It took him about two months to get a cast for his wrist. He walks with a cane. More than 400 sick and injured soldiers are stuck at Fort Knox waiting weeks and sometimes months for medical treatment. The conditions at Fort Stewart were not an isolated situation. I will repeat what I previously stated. A commander-in-chief should care for his soldiers and should not let them endure inadequate medical treatment. To consider any financial aid for Iraq before proper assistance is provided to those serving our country is unspeakable. Our own come first.
It was reported in the Washington Times that, on June 25, the FBI’s regional office in Denver had sent a memo to state and local law enforcement agencies warning them of a plot to start forest fires in the western United States using timed incendiary devices. The fires in southern California have produced 20 deaths, charred about 700,000 acres, and destroyed 2600 homes. With increased smoke and ash producing hundreds of natural chemicals as well as numerous gases, airborne particulate levels have become highly unhealthy, and, in some cases, dangerous for breathing.
Peaking of Fort Knox, as the new colorful $20 bills circulate around the country, more consumers are finding that the bills do not work on ATM machines found in self-service check-out counters at many grocery stores. Customers can pay a store cashier with the new bills. Sprint also can’t accept the new bill at payment machines in their 600 stores nationwide. This is another example of inadequate government planning. They can’t blame this on terrorism.
California’s Controller, Steve Westley, urged Arnold to push for spending cuts. Westley anticipates that the state will have at least an $8 billion budget shortfall, and remarked “do not rely on putting our problems off to the future by extended borrowing.” Talking about California, the East Bay section of the San Francisco Bay Area had a severe venture capital slump in the third quarter, the weakest quarter since the beginning of 1997, and 39% below the financing levels of the third quarter of 2002. Steve Bengston, managing director of emerging company services with PricewaterhouseCoopers, stated “the good news is we are at or near the bottom. The bad news is the market will not head up any time soon.”
The EU slashed its growth forecasts for 2003 to “a mere 0.4%” and stated that next year growth should return to average growth of 1.8%. They warned “the need for firms to focus on cost reductions…together with the prospects for a mild recovery” as drags on job creation. The unemployment rate in the euro-zone approximates 9%. Yesterday brought more bad news for our own loss of jobs. EDS, the number two computer services company, said it will cut 2,500 more jobs. They had originally announced layoffs for 2,700 employees. General Cable announced they would be closing a 131,000 square foot manufacturing plant in Taunton, Mass due to what its CEO calls the “unprecedented decline in North American industrial activity.” The plant employed 77 workers. In addition, the company is conducting feasibility studies of facilities in South Hadley, Mass. and Marion, Ind. to determine whether to continue operations at the plants or transfer or outsource the production. Do not be concerned. The GDP growth rate for the third quarter will be announced and it will be a buoyant 6% or so, and everything will be fine and dandy.
The Urban Land Institute had its fall meeting in San Francisco. The leading concern is the jobless recovery. Without more jobs, offices will remain empty and rents will not increase. Said one participant worried about outsourcing, “it was one thing to move a back office to Sioux Falls in the nineties. It is quite another to move an accounting operation to Banglahor…it’s hard to have much near-term conviction.”
Yesterday’s geomagnetic storm did a number on Japan. The storm shut down two experimental communications satellites. They could be permanently damaged. The brunt of the storm is known as a coronal mass ejection. I have to get me one of those!
In his 1/29/03 State of the Union address, Bush said “Medicare is the binding commitment of a caring society.” Then, in a 6/6/03 speech, Bush stated “we must protect seniors from high medical costs that can rob them of their savings.” There are several studies that show the proposed Medicare plan will, in fact, increase costs for seniors, such as, eliminating co-payments for home health care. A July 2003 stdy by the U.S. Action Education Fund shows that drug prices could be negotiated at 40% savings below retail if Medicare were able to offer a prescription drug benefit directly. The proposed plan will increase the level of deductible costs.
The Iraq Survey Group is comprised of 1,400 people working under David Kay. Having not found the WMD, there are thoughts to shift some of these “intelligence personnel” to the battle against insurgent forces with their attacks on our troops.
Since getting elected, President Bush will make his 13th visit to Ohio today. I wonder whether he will be discussing medical care for our wounded soldiers. Yesterday, he discussed a Medicare bill that would omit co-pay for home health care. Cpl. Waymond Boyd has served the military for 15 years, and was recently in Iraq with the National Guard. He said “I joined to serve my country. It doesn’t make sense to go over there and risk your life and come back to this. It ain’t fair and it ain’t right. I used to be patriotic.” Boyd’s knee and wrist injuries were severe enough that he was evacuated and sent to Fort Knox. It took him about two months to get a cast for his wrist. He walks with a cane. More than 400 sick and injured soldiers are stuck at Fort Knox waiting weeks and sometimes months for medical treatment. The conditions at Fort Stewart were not an isolated situation. I will repeat what I previously stated. A commander-in-chief should care for his soldiers and should not let them endure inadequate medical treatment. To consider any financial aid for Iraq before proper assistance is provided to those serving our country is unspeakable. Our own come first.
It was reported in the Washington Times that, on June 25, the FBI’s regional office in Denver had sent a memo to state and local law enforcement agencies warning them of a plot to start forest fires in the western United States using timed incendiary devices. The fires in southern California have produced 20 deaths, charred about 700,000 acres, and destroyed 2600 homes. With increased smoke and ash producing hundreds of natural chemicals as well as numerous gases, airborne particulate levels have become highly unhealthy, and, in some cases, dangerous for breathing.
Peaking of Fort Knox, as the new colorful $20 bills circulate around the country, more consumers are finding that the bills do not work on ATM machines found in self-service check-out counters at many grocery stores. Customers can pay a store cashier with the new bills. Sprint also can’t accept the new bill at payment machines in their 600 stores nationwide. This is another example of inadequate government planning. They can’t blame this on terrorism.
California’s Controller, Steve Westley, urged Arnold to push for spending cuts. Westley anticipates that the state will have at least an $8 billion budget shortfall, and remarked “do not rely on putting our problems off to the future by extended borrowing.” Talking about California, the East Bay section of the San Francisco Bay Area had a severe venture capital slump in the third quarter, the weakest quarter since the beginning of 1997, and 39% below the financing levels of the third quarter of 2002. Steve Bengston, managing director of emerging company services with PricewaterhouseCoopers, stated “the good news is we are at or near the bottom. The bad news is the market will not head up any time soon.”
The EU slashed its growth forecasts for 2003 to “a mere 0.4%” and stated that next year growth should return to average growth of 1.8%. They warned “the need for firms to focus on cost reductions…together with the prospects for a mild recovery” as drags on job creation. The unemployment rate in the euro-zone approximates 9%. Yesterday brought more bad news for our own loss of jobs. EDS, the number two computer services company, said it will cut 2,500 more jobs. They had originally announced layoffs for 2,700 employees. General Cable announced they would be closing a 131,000 square foot manufacturing plant in Taunton, Mass due to what its CEO calls the “unprecedented decline in North American industrial activity.” The plant employed 77 workers. In addition, the company is conducting feasibility studies of facilities in South Hadley, Mass. and Marion, Ind. to determine whether to continue operations at the plants or transfer or outsource the production. Do not be concerned. The GDP growth rate for the third quarter will be announced and it will be a buoyant 6% or so, and everything will be fine and dandy.
The Urban Land Institute had its fall meeting in San Francisco. The leading concern is the jobless recovery. Without more jobs, offices will remain empty and rents will not increase. Said one participant worried about outsourcing, “it was one thing to move a back office to Sioux Falls in the nineties. It is quite another to move an accounting operation to Banglahor…it’s hard to have much near-term conviction.”
Yesterday’s geomagnetic storm did a number on Japan. The storm shut down two experimental communications satellites. They could be permanently damaged. The brunt of the storm is known as a coronal mass ejection. I have to get me one of those!
In his 1/29/03 State of the Union address, Bush said “Medicare is the binding commitment of a caring society.” Then, in a 6/6/03 speech, Bush stated “we must protect seniors from high medical costs that can rob them of their savings.” There are several studies that show the proposed Medicare plan will, in fact, increase costs for seniors, such as, eliminating co-payments for home health care. A July 2003 stdy by the U.S. Action Education Fund shows that drug prices could be negotiated at 40% savings below retail if Medicare were able to offer a prescription drug benefit directly. The proposed plan will increase the level of deductible costs.
The Iraq Survey Group is comprised of 1,400 people working under David Kay. Having not found the WMD, there are thoughts to shift some of these “intelligence personnel” to the battle against insurgent forces with their attacks on our troops.
Wednesday, October 29, 2003
10/29/03 The World Is Not The Rose Garden
For 48 minutes yesterday President Bush gave a news conference out in the Rose Garden. It was a chilly fall morning but he made us feel so much better as he declared “the world is more peaceful and more free under my leadership and America is more secure.” He announced the United States will change tactics and stiffen defenses. It’s too late for the 116 U.S. troops killed in hostile action since Washington declared major combat operations over on May 1. That number exceeds the 115 U.S. combat deaths during the U.S.-led war. Would the president consider this a trick question? How is the world more peaceful if there are on average 26 daily attacks on our troops in Iraq and about 1,675 of our troops wounded since May 1? Attacks have been on the rise since early September. That’s a fact. Britain’s special representative in Iraq, Sir Jeremy Greenstock, predicted the violence would continue and stated “it is going to go on through the winter, probably.”
A little before noon EST today our planet will be buffeted (not Warren) by a major geomagnetic storm, one that has the potential to disrupt satellites, communications, and power. It will be a significant geomagnetic storm. “The flare as measured by X-ray flux is the largest we’ve ever seen,” said John Kohl, a solar astrophysicist at the Harvard-Smithsonian Center for Astrophysics. One of Kohl’s associates, Leon Golub, remarked “this is the strongest flare we’ve seen in the past 30 years… the Earth is essentially right on the axis of this material.” It has already produced enhanced radiation 100,000 times the background levels at the geostationary satellite orbits. It should be noted that these solar storms do not threaten the health or welfare of humans on Earth; however, they do have the potential of producing elongated noses on those in Congress and in the Administration. I should warn you though. This is a category 5 geomagnetic storm, the top of the scale. It has the potential of creating an unusual flow within the power system but it is not powerful enough to disrupt the BS emanating from Washington.
There have been 16 fatalities resulting from the blazing fires in Southern California. About 2000 homes have been destroyed, and up to 100,000 have endured evacuation. The fires have stormed over about 600,000 acres and 900 square miles, about the size of Rhode Island. At the moment, the fires are fiercest in the bone-dry mountain areas. The firefighters are fatigued. More than 11,000 firefighters are on the lines struggling to contain at least 17 separate fires. More than 50 people have been injured, and that does not include the firefighters. Andrea Tuttle, director of California department of Forestry, stated “ we haven’t seen this intensity of fire and number of residents being affected ever before. This is an extraordinary 100-year event…this is Mother Nature’s natural fire cycle and when you get winds like this it will overwhelm, for awhile, our ability to deal with them.”
According to a report in yesterday’s San Francisco Chronicle, California’s unemployment insurance fund may be bankrupt by January unless benefits are slashed, taxes on businesses are raised, or the state gets a loan from the federal government. The state would have to borrow $1.17 billion to keep benefits flowing to California’s jobless in 2004. It would be unprecedented for California but not nationally. In the most recent past, Texas, New York, Illinois and several smaller states have had to borrow federal funds to keep their unemployment funds solvent. The number of unemployed in California exceeds 1.1 million people.
If the merger of R.J. Reynolds and the tobacco operations of BAT in the United States does take place, then one of the world’s largest cigarette factories will close. The Brown and Williamson factory in Macon, Georgia has 2,100 employees. The average hourly worker makes $26 an hour, and the typical before-tax annual pay is $50,000 to $70,000. It is estimated the Macon plant will close in 18 to 20 months. The plant’s output, about one-half of its cigarettes is shipped to Japan and other countries overseas, accounts for one-tenth of the value of all exports from Georgia. The plant has been in Macon for 27 years.
There was more bad news for Georgia. Coca Cola announced they would be increasing layoffs from the previously announced 1900 to 2800. New York was not spared as JP Morgan Chase announced employee cuts of 1,000. Trapeze Networks of Pleasanton, CA has raised more than $50 million in venture capital funding. The company designs wireless networking equipment for the Wi-FI INDUSTRY. Yesterday Trapeze announced cutting 40 of their 120 employees from the payroll. The company’s vice president of marketing stated “we built for an extremely aggressive ramp-up. We thought we’d see meteoric rise in Wi-Fi demand. Overall, the market is still good. We really just needed to resize the company for what the real growth in the market is.”
Delos Smith, a Conference Board economist, said the expectations index remains low considering the economy likely grew at a 6% rate in the third quarter. He remarked “this economy is on steroids, so it’s going to look very beautiful for the third quarter. But you still have the underlying problem of terrorism, you have the underlying problem of employment. Where will the jobs be.” If the Republicans on the House tax-writing committee have their way, more jobs will be exported. Overcoming Democratic opposition, these Republicans voted yesterday to give multinational corporations tax cuts totaling $128 billion over 10 years. The legislation would make it easier for multinational firms to claim tax deductions for interest and taxes paid to foreign governments. It would also cut the top tax rate for most U.S. businesses from 35% to 32% by 2012. However, small businesses would have their cut phased in depending upon a firm’s taxable income. Writing in a letter signed by 10 other Republicans, Rep. Donald Manzullo, R-ILL, stated the legislation would lower “ the cost of doing business overseas for American companies. This will necessarily encourage American companies to move American jobs offshore to China and other locations.”
According to Nielsen Media Research, advertisers spent an estimated $10 billion in China last year, making it the world’s fifth-largest advertising market. It is widely expected to grow by billions of dollars this year, and in 10 years, China is expected to overtake Japan as the second-largest market. Making ads in China is not cheaper than elsewhere.
For 48 minutes yesterday President Bush gave a news conference out in the Rose Garden. It was a chilly fall morning but he made us feel so much better as he declared “the world is more peaceful and more free under my leadership and America is more secure.” He announced the United States will change tactics and stiffen defenses. It’s too late for the 116 U.S. troops killed in hostile action since Washington declared major combat operations over on May 1. That number exceeds the 115 U.S. combat deaths during the U.S.-led war. Would the president consider this a trick question? How is the world more peaceful if there are on average 26 daily attacks on our troops in Iraq and about 1,675 of our troops wounded since May 1? Attacks have been on the rise since early September. That’s a fact. Britain’s special representative in Iraq, Sir Jeremy Greenstock, predicted the violence would continue and stated “it is going to go on through the winter, probably.”
A little before noon EST today our planet will be buffeted (not Warren) by a major geomagnetic storm, one that has the potential to disrupt satellites, communications, and power. It will be a significant geomagnetic storm. “The flare as measured by X-ray flux is the largest we’ve ever seen,” said John Kohl, a solar astrophysicist at the Harvard-Smithsonian Center for Astrophysics. One of Kohl’s associates, Leon Golub, remarked “this is the strongest flare we’ve seen in the past 30 years… the Earth is essentially right on the axis of this material.” It has already produced enhanced radiation 100,000 times the background levels at the geostationary satellite orbits. It should be noted that these solar storms do not threaten the health or welfare of humans on Earth; however, they do have the potential of producing elongated noses on those in Congress and in the Administration. I should warn you though. This is a category 5 geomagnetic storm, the top of the scale. It has the potential of creating an unusual flow within the power system but it is not powerful enough to disrupt the BS emanating from Washington.
There have been 16 fatalities resulting from the blazing fires in Southern California. About 2000 homes have been destroyed, and up to 100,000 have endured evacuation. The fires have stormed over about 600,000 acres and 900 square miles, about the size of Rhode Island. At the moment, the fires are fiercest in the bone-dry mountain areas. The firefighters are fatigued. More than 11,000 firefighters are on the lines struggling to contain at least 17 separate fires. More than 50 people have been injured, and that does not include the firefighters. Andrea Tuttle, director of California department of Forestry, stated “ we haven’t seen this intensity of fire and number of residents being affected ever before. This is an extraordinary 100-year event…this is Mother Nature’s natural fire cycle and when you get winds like this it will overwhelm, for awhile, our ability to deal with them.”
According to a report in yesterday’s San Francisco Chronicle, California’s unemployment insurance fund may be bankrupt by January unless benefits are slashed, taxes on businesses are raised, or the state gets a loan from the federal government. The state would have to borrow $1.17 billion to keep benefits flowing to California’s jobless in 2004. It would be unprecedented for California but not nationally. In the most recent past, Texas, New York, Illinois and several smaller states have had to borrow federal funds to keep their unemployment funds solvent. The number of unemployed in California exceeds 1.1 million people.
If the merger of R.J. Reynolds and the tobacco operations of BAT in the United States does take place, then one of the world’s largest cigarette factories will close. The Brown and Williamson factory in Macon, Georgia has 2,100 employees. The average hourly worker makes $26 an hour, and the typical before-tax annual pay is $50,000 to $70,000. It is estimated the Macon plant will close in 18 to 20 months. The plant’s output, about one-half of its cigarettes is shipped to Japan and other countries overseas, accounts for one-tenth of the value of all exports from Georgia. The plant has been in Macon for 27 years.
There was more bad news for Georgia. Coca Cola announced they would be increasing layoffs from the previously announced 1900 to 2800. New York was not spared as JP Morgan Chase announced employee cuts of 1,000. Trapeze Networks of Pleasanton, CA has raised more than $50 million in venture capital funding. The company designs wireless networking equipment for the Wi-FI INDUSTRY. Yesterday Trapeze announced cutting 40 of their 120 employees from the payroll. The company’s vice president of marketing stated “we built for an extremely aggressive ramp-up. We thought we’d see meteoric rise in Wi-Fi demand. Overall, the market is still good. We really just needed to resize the company for what the real growth in the market is.”
Delos Smith, a Conference Board economist, said the expectations index remains low considering the economy likely grew at a 6% rate in the third quarter. He remarked “this economy is on steroids, so it’s going to look very beautiful for the third quarter. But you still have the underlying problem of terrorism, you have the underlying problem of employment. Where will the jobs be.” If the Republicans on the House tax-writing committee have their way, more jobs will be exported. Overcoming Democratic opposition, these Republicans voted yesterday to give multinational corporations tax cuts totaling $128 billion over 10 years. The legislation would make it easier for multinational firms to claim tax deductions for interest and taxes paid to foreign governments. It would also cut the top tax rate for most U.S. businesses from 35% to 32% by 2012. However, small businesses would have their cut phased in depending upon a firm’s taxable income. Writing in a letter signed by 10 other Republicans, Rep. Donald Manzullo, R-ILL, stated the legislation would lower “ the cost of doing business overseas for American companies. This will necessarily encourage American companies to move American jobs offshore to China and other locations.”
According to Nielsen Media Research, advertisers spent an estimated $10 billion in China last year, making it the world’s fifth-largest advertising market. It is widely expected to grow by billions of dollars this year, and in 10 years, China is expected to overtake Japan as the second-largest market. Making ads in China is not cheaper than elsewhere.
Tuesday, October 28, 2003
10/28/03 Staying The Course
Sometimes it gets pretty scary staying the course. Sometimes it means staying inside your living quarters and placing wet towels around the doors and windows to the outside world. The soot and grime find a way through the cracks. You can see the bright flames on the hills not far from where you are. The highways are closed. The local roads are bumper to bumper. Transmission lines are damaged. People are urged to stay indoors. Schools are closed. The airports cancel flights. Some panic and attempt to drive through the flames. It’s tough to breathe. At least fifteen are known dead. At least 1,500 homes have been destroyed, and another 30,000+ homes are threatened with raging flames. Already 500,000 acres have been consumed from the border of Mexico to the northeast suburbs of LA. Supposedly, cooler and less windy weather is on the way. That forecast could raise the hopes of the overworked fire personnel and the endangered residents, and one of those is my son.
There are times when one decides against staying the course. Warren Buffett made that decision over the past year and a half. For the first time in his seventy-plus years, he made significant purchases in foreign currencies. He remarked that “our trade deficit has greatly worsened, to the point that our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate.”
In the past two days Cadbury and Sony have announced they will cut thousands of employees over the next few years. Sony will cut 7,000 just in Japan. These two companies could reduce their employment by almost 30,000 people.
The state of Illinois claims that importing cheaper prescription drugs from Canada could save their residents up to $90 million a year without compromising safety. The Illinois report said there is an additional guarantee of safety because Canadian pharmacies fill prescriptions in amounts supplied by the manufacturer in sealed containers only. They do not open manufacturer supplied containers, count, and repackage to fill the prescription as done in the United States.
It is not unusual for an individual to work for a company because of the insurance benefits and not just for the pay. Many of those companies employee 1,000 or more, and many of those companies are cutting those same benefits. In the 1960s, more than 80% of U.S. workers had health insurance through their employers. With sharply rising premiums, that number is down to 62%. A recent study by the Institute for Labor and Economy at UC Berkeley found that 700,000 uninsured people who were eligible for the state Medicaid program were in families with a wage earner employed by a company of more than 1,000 employees.
How many citizens ask what will $500 million budget deficits and $500 million trade deficits mean to my family? Richard Kogan, a fellow at the Center for Budget and Policy Priorities, explains that “these historically large deficits mean a generation is going to have to pay taxes at higher rates, if we are going to support a decent retirement and healthcare system.” Do not be fooled by the tax cuts and child credit extended to our citizens over the past three years. Tax cuts along with record deficits create catastrophic economic and social derailments. The payments for mismanagement take place over many years. There are rational ways to stay the course and then there are poorly planned strategies. Alan Greenspan was smart enough to realize there was a bubble forming in 1996. He also has warned the Congress of the current out-of-control spending policies. Buffett sees the handwriting on the wall. Do you? When you vote, ask whether that person you want elected gets it.
The McDonald Financial Group Affluent Consumer Index is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, or personal annual incomes of $150,000 or more. Some 60% of respondents classify themselves as business leaders and senior executives, and of them, 73% said they plan to hold their holiday spending steady compared with 2002, while only 13% said they would spend more. The affluent is paying down debt. Only 30% of the respondents actually plan to increase their investments in the next three months and 27% intend to reduce them.
R.J. Reynolds and British American Tobacco will combine the assets and operations of their respective U.S. tobacco businesses into a new publicly traded holding company. RJR shareholders will own 58% and BAT holders 42%. The transaction will be tax-free, and is expected to close in mid-2004. The combination will consolidate the second and third largest U.S. tobacco companies, and generate over 30% of the cigarette sales in the United States.
Sometimes it gets pretty scary staying the course. Sometimes it means staying inside your living quarters and placing wet towels around the doors and windows to the outside world. The soot and grime find a way through the cracks. You can see the bright flames on the hills not far from where you are. The highways are closed. The local roads are bumper to bumper. Transmission lines are damaged. People are urged to stay indoors. Schools are closed. The airports cancel flights. Some panic and attempt to drive through the flames. It’s tough to breathe. At least fifteen are known dead. At least 1,500 homes have been destroyed, and another 30,000+ homes are threatened with raging flames. Already 500,000 acres have been consumed from the border of Mexico to the northeast suburbs of LA. Supposedly, cooler and less windy weather is on the way. That forecast could raise the hopes of the overworked fire personnel and the endangered residents, and one of those is my son.
There are times when one decides against staying the course. Warren Buffett made that decision over the past year and a half. For the first time in his seventy-plus years, he made significant purchases in foreign currencies. He remarked that “our trade deficit has greatly worsened, to the point that our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate.”
In the past two days Cadbury and Sony have announced they will cut thousands of employees over the next few years. Sony will cut 7,000 just in Japan. These two companies could reduce their employment by almost 30,000 people.
The state of Illinois claims that importing cheaper prescription drugs from Canada could save their residents up to $90 million a year without compromising safety. The Illinois report said there is an additional guarantee of safety because Canadian pharmacies fill prescriptions in amounts supplied by the manufacturer in sealed containers only. They do not open manufacturer supplied containers, count, and repackage to fill the prescription as done in the United States.
It is not unusual for an individual to work for a company because of the insurance benefits and not just for the pay. Many of those companies employee 1,000 or more, and many of those companies are cutting those same benefits. In the 1960s, more than 80% of U.S. workers had health insurance through their employers. With sharply rising premiums, that number is down to 62%. A recent study by the Institute for Labor and Economy at UC Berkeley found that 700,000 uninsured people who were eligible for the state Medicaid program were in families with a wage earner employed by a company of more than 1,000 employees.
How many citizens ask what will $500 million budget deficits and $500 million trade deficits mean to my family? Richard Kogan, a fellow at the Center for Budget and Policy Priorities, explains that “these historically large deficits mean a generation is going to have to pay taxes at higher rates, if we are going to support a decent retirement and healthcare system.” Do not be fooled by the tax cuts and child credit extended to our citizens over the past three years. Tax cuts along with record deficits create catastrophic economic and social derailments. The payments for mismanagement take place over many years. There are rational ways to stay the course and then there are poorly planned strategies. Alan Greenspan was smart enough to realize there was a bubble forming in 1996. He also has warned the Congress of the current out-of-control spending policies. Buffett sees the handwriting on the wall. Do you? When you vote, ask whether that person you want elected gets it.
The McDonald Financial Group Affluent Consumer Index is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, or personal annual incomes of $150,000 or more. Some 60% of respondents classify themselves as business leaders and senior executives, and of them, 73% said they plan to hold their holiday spending steady compared with 2002, while only 13% said they would spend more. The affluent is paying down debt. Only 30% of the respondents actually plan to increase their investments in the next three months and 27% intend to reduce them.
R.J. Reynolds and British American Tobacco will combine the assets and operations of their respective U.S. tobacco businesses into a new publicly traded holding company. RJR shareholders will own 58% and BAT holders 42%. The transaction will be tax-free, and is expected to close in mid-2004. The combination will consolidate the second and third largest U.S. tobacco companies, and generate over 30% of the cigarette sales in the United States.
Monday, October 27, 2003
10/27/03 Can Your Job Be Digitized?
The Institute for International Economics is a Washington, DC think tank. Gary C. Hufbauer is a senior fellow and international economist at the Institute. He has made an excellent point by stating “if your job can be digitized, it can be moved.” In other words, millions of service jobs could be moved outside the United States and remain there. Normally, one immediately mentions IT jobs but included could be life sciences, legal work, finance, business services, etc. John Napier is a 53-year old electrical engineer who was laid off by EMC Corp. in mid-2001. He raises a crucial point that “the people who get forced out of old jobs that go overseas are not the ones who get the new jobs.” If millions follow Napier to the unemployment rolls over the coming years, what new white-collar “mind”jobs will be created in the United States? There aren’t enough service jobs on the horizon to make this an economy of the under-employed.
We started the week off with two major merger announcements. For years, it was rumored that FleetBoston Financial was a takeover candidate. The Boston Globe reported that Bank of America would pay $45 a share in stock and cash for the seventh-biggest U.S. bank by assets. Bank of America is the third-largest U.S. bank. In addition, Anthem, Inc., the fifth-largest U.S. health insurer, announced plans to buy one of its competitors, WellPoint Health Networks, for more than $12 billion in cash and stock. Both companies are two of the biggest providers of Blue Cross and Blue Shield plans.
Prior to the Iraq war, Tony Blair told the British Parliament that Iraq was trying to procure high-strength aluminum tubes with the potential to be used in nuclear centrifuges. Colin Powell cited these tubes in his address to the United Nations in February, and said the tubes were used to enrich uranium. On Sunday senior officials with the Iraq Survey Group concluded that the high-strength aluminum tubes were “innocuous,” and that Iraqi nuclear scientists undertook no significant work after 1991, and that many facilities described before the war as suspicious were benign. In sum, the WMD claim was dismissed.
Today three American soldiers were killed and four wounded in two separate attacks in Iraq. Since Bush announced the end of major combat in Iraq on May 1, 112 U.S. soldiers have been killed in hostile action.
In a new Newsweek poll, it is reported that 58% of Americans say the U.S. is spending too much on operations in postwar Iraq. Forty nine percent of Americans say they don’t think the Bush administration has a well-thought-out plan to establish security and a stable government in Iraq while 39% say it does. 46% would like to see Bush re-elected and 47% would not. John McCain for the first time compares the situation in Iraq to Vietnam, where he survived six years of wartime imprisonment. McCain told Newsweek “this is the first time that I have seen a parallel to Vietnam in terms of information that the administration is putting out versus the actual situation on the ground. I’m not saying the situation is as bad as Vietnam. But we have a problem in the Sunni Triangle and we should face up to it and tell the American people about it.”
The worst firestorm in 33 years or since the Vietnam War is raging from Valley Center to Mexico. The fires have swept through 200 square miles and over 300,000 acres in Southern California. Tens of thousands have been evacuated, 850 homes have been destroyed, and at least 14 are known dead from the blazes. Schools are closed for today, and Monday Night Football has been moved from San Diego to Tempe, Arizona. A state of emergency has been declared in San Diego, San Bernardino, Los Angeles, and Ventura counties. The heat, wind, and low humidity have help to create relentless flames. With the Santa Ana winds gusting up to 70 mph, it is virtually impossible to contain the fires. National Weather Service meteorologist Robert Balfour said “ we’ll have a 24 to 36 hour window where winds will die down, but the vegetation is so dry and the terrain so steep that the fire will probably take off and go into the mountains then.”
The Institute for International Economics is a Washington, DC think tank. Gary C. Hufbauer is a senior fellow and international economist at the Institute. He has made an excellent point by stating “if your job can be digitized, it can be moved.” In other words, millions of service jobs could be moved outside the United States and remain there. Normally, one immediately mentions IT jobs but included could be life sciences, legal work, finance, business services, etc. John Napier is a 53-year old electrical engineer who was laid off by EMC Corp. in mid-2001. He raises a crucial point that “the people who get forced out of old jobs that go overseas are not the ones who get the new jobs.” If millions follow Napier to the unemployment rolls over the coming years, what new white-collar “mind”jobs will be created in the United States? There aren’t enough service jobs on the horizon to make this an economy of the under-employed.
We started the week off with two major merger announcements. For years, it was rumored that FleetBoston Financial was a takeover candidate. The Boston Globe reported that Bank of America would pay $45 a share in stock and cash for the seventh-biggest U.S. bank by assets. Bank of America is the third-largest U.S. bank. In addition, Anthem, Inc., the fifth-largest U.S. health insurer, announced plans to buy one of its competitors, WellPoint Health Networks, for more than $12 billion in cash and stock. Both companies are two of the biggest providers of Blue Cross and Blue Shield plans.
Prior to the Iraq war, Tony Blair told the British Parliament that Iraq was trying to procure high-strength aluminum tubes with the potential to be used in nuclear centrifuges. Colin Powell cited these tubes in his address to the United Nations in February, and said the tubes were used to enrich uranium. On Sunday senior officials with the Iraq Survey Group concluded that the high-strength aluminum tubes were “innocuous,” and that Iraqi nuclear scientists undertook no significant work after 1991, and that many facilities described before the war as suspicious were benign. In sum, the WMD claim was dismissed.
Today three American soldiers were killed and four wounded in two separate attacks in Iraq. Since Bush announced the end of major combat in Iraq on May 1, 112 U.S. soldiers have been killed in hostile action.
In a new Newsweek poll, it is reported that 58% of Americans say the U.S. is spending too much on operations in postwar Iraq. Forty nine percent of Americans say they don’t think the Bush administration has a well-thought-out plan to establish security and a stable government in Iraq while 39% say it does. 46% would like to see Bush re-elected and 47% would not. John McCain for the first time compares the situation in Iraq to Vietnam, where he survived six years of wartime imprisonment. McCain told Newsweek “this is the first time that I have seen a parallel to Vietnam in terms of information that the administration is putting out versus the actual situation on the ground. I’m not saying the situation is as bad as Vietnam. But we have a problem in the Sunni Triangle and we should face up to it and tell the American people about it.”
The worst firestorm in 33 years or since the Vietnam War is raging from Valley Center to Mexico. The fires have swept through 200 square miles and over 300,000 acres in Southern California. Tens of thousands have been evacuated, 850 homes have been destroyed, and at least 14 are known dead from the blazes. Schools are closed for today, and Monday Night Football has been moved from San Diego to Tempe, Arizona. A state of emergency has been declared in San Diego, San Bernardino, Los Angeles, and Ventura counties. The heat, wind, and low humidity have help to create relentless flames. With the Santa Ana winds gusting up to 70 mph, it is virtually impossible to contain the fires. National Weather Service meteorologist Robert Balfour said “ we’ll have a 24 to 36 hour window where winds will die down, but the vegetation is so dry and the terrain so steep that the fire will probably take off and go into the mountains then.”
Sunday, October 26, 2003
10/26/03 Getting The Job Done
The Al Rasheed Hotel is in Baghdad. It was attacked on September 27 with small rockets that caused only minimal damage. At 6:10AM this morning a barrage of rockets hit the hotel. One U.S. soldier was killed and 15 people were wounded. Deputy Defense Secretary Wolfowitz reportedly was staying at the hotel. He has been on a three-day Iraq tour. Putting on his preemption face, Wolfowitz spoke after the attack, and stated “we are taking this fight to the enemy. We are getting the job done.” Lt. Brian Dowd, a 1st Armored Division reconnaissance officer at the scene, had a more rational analysis of the situation and remarked “there is no guarantee we can protect against this kind of thing unless we have soldiers on every block.” The holy fasting month of Ramadan begins in Iraq on Monday.
Yesterday, Senator Patrick Leahy of Vermont gave the Democrats’ weekly radio address. He complained that more than 600 members of the Guard and the Reserve are now in “medical limbo” at Ft. Stewart, Georgia, “living in substandard barracks, without adequate medical care.” I discussed this not so long ago. Leahy said Bush wants $87 billion to rebuild Iraq and keep U.S. troops there but opposes a Senate-passed measure to guarantee health care coverage to all members of the Guard and Reserve. I have discussed this too.
Illinois is a very important election state due to the size of its electoral votes. In a very recent Chicago Tribune/WGN-TV poll, only 38% of Illinois voters want to see Bush re-elected. On TV, for the most part, you hear about approval ratings. The question really is do you want a specific person elected and/or re-elected. That determines the outcome.
This weekend there is a meeting of the Group of 20 nations in Mexico. This group includes the G-7 nations, emerging market nations such as Mexico and Argentina, the EU, the World Bank, and the IMF. Currencies, tariffs, and international trade will be some of the main topics.
Alan Abelson:”We fervently hope Mr. Snow is right about the booming job market. We think not, and we’d be willing to stake our reputation on it, if we could only scare one up.”
Alan Abelson: “The economy in the third quarter was on steroids dished out by Uncle Sam…our sense is that most of the tax cuts have been spent and the vast explosion of mortgage refinancing is over.”
Warren Buffett on the stock market: “We’re not finding anything…we have more cash than ideas. The question is whether that will prevail for an unduly long time…but, occasionally, successful investing requires inactivity.”
In recent weeks I have mentioned that there have been growing layoffs in the textile area and that some companies have closed plants and/or gone out of business. There are three basic problems. The price of cotton has risen almost 40% in 2003 to a 5-year high. The industry has had to absorb those added costs because they have been unable to pass along the cotton price increases. In addition, has been able to offer competitive products at cheaper prices because of their lower cost of labor. China is the world’s largest cotton producer and its largest consumer of cotton. The cotton crop in China has been hurt by poor weather. According to the American Textile Manufacturers Institute, China controls 53% of the U.S. market for apparel products removed from quota control, and by year-end that number will two-thirds, and by the end of 2004 will rise to 75%. In 1998 there were over 600,000 textile jobs in the United States. Today, this number has dropped below 400,000 and continues to decline.
There is one more point I would like to cover, and that is the multiplier effect of employment or unemployment, as the case may be. Boeing, for example, has over the most recent past cut 50,000 from its employment rolls. That is only part of the story. A local think tank has shown that every Boeing job creates 1.8 other indirect jobs in the service economy. Therefore, a loss of 50,000 Boeing jobs means the loss of another 90,000 service jobs. Boeing is not unique. A similar problem occurs in textiles and other industries.
The Al Rasheed Hotel is in Baghdad. It was attacked on September 27 with small rockets that caused only minimal damage. At 6:10AM this morning a barrage of rockets hit the hotel. One U.S. soldier was killed and 15 people were wounded. Deputy Defense Secretary Wolfowitz reportedly was staying at the hotel. He has been on a three-day Iraq tour. Putting on his preemption face, Wolfowitz spoke after the attack, and stated “we are taking this fight to the enemy. We are getting the job done.” Lt. Brian Dowd, a 1st Armored Division reconnaissance officer at the scene, had a more rational analysis of the situation and remarked “there is no guarantee we can protect against this kind of thing unless we have soldiers on every block.” The holy fasting month of Ramadan begins in Iraq on Monday.
Yesterday, Senator Patrick Leahy of Vermont gave the Democrats’ weekly radio address. He complained that more than 600 members of the Guard and the Reserve are now in “medical limbo” at Ft. Stewart, Georgia, “living in substandard barracks, without adequate medical care.” I discussed this not so long ago. Leahy said Bush wants $87 billion to rebuild Iraq and keep U.S. troops there but opposes a Senate-passed measure to guarantee health care coverage to all members of the Guard and Reserve. I have discussed this too.
Illinois is a very important election state due to the size of its electoral votes. In a very recent Chicago Tribune/WGN-TV poll, only 38% of Illinois voters want to see Bush re-elected. On TV, for the most part, you hear about approval ratings. The question really is do you want a specific person elected and/or re-elected. That determines the outcome.
This weekend there is a meeting of the Group of 20 nations in Mexico. This group includes the G-7 nations, emerging market nations such as Mexico and Argentina, the EU, the World Bank, and the IMF. Currencies, tariffs, and international trade will be some of the main topics.
Alan Abelson:”We fervently hope Mr. Snow is right about the booming job market. We think not, and we’d be willing to stake our reputation on it, if we could only scare one up.”
Alan Abelson: “The economy in the third quarter was on steroids dished out by Uncle Sam…our sense is that most of the tax cuts have been spent and the vast explosion of mortgage refinancing is over.”
Warren Buffett on the stock market: “We’re not finding anything…we have more cash than ideas. The question is whether that will prevail for an unduly long time…but, occasionally, successful investing requires inactivity.”
In recent weeks I have mentioned that there have been growing layoffs in the textile area and that some companies have closed plants and/or gone out of business. There are three basic problems. The price of cotton has risen almost 40% in 2003 to a 5-year high. The industry has had to absorb those added costs because they have been unable to pass along the cotton price increases. In addition, has been able to offer competitive products at cheaper prices because of their lower cost of labor. China is the world’s largest cotton producer and its largest consumer of cotton. The cotton crop in China has been hurt by poor weather. According to the American Textile Manufacturers Institute, China controls 53% of the U.S. market for apparel products removed from quota control, and by year-end that number will two-thirds, and by the end of 2004 will rise to 75%. In 1998 there were over 600,000 textile jobs in the United States. Today, this number has dropped below 400,000 and continues to decline.
There is one more point I would like to cover, and that is the multiplier effect of employment or unemployment, as the case may be. Boeing, for example, has over the most recent past cut 50,000 from its employment rolls. That is only part of the story. A local think tank has shown that every Boeing job creates 1.8 other indirect jobs in the service economy. Therefore, a loss of 50,000 Boeing jobs means the loss of another 90,000 service jobs. Boeing is not unique. A similar problem occurs in textiles and other industries.
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