Sunday's posted on Saturday morning. Saturday's has been posted below too.
11/23/03 Waiting For Trust And The Truth
Wouldn’t it be a wonderful gift for the Thanksgiving holiday if we were to receive the truth from industry and the government? How long do we need to wait?
Boeing stated they would not be sending out more layoff notices. They said that only a few weeks ago. Boeing has given layoff notices to some workers each month since the end of 2001. Other than Boeing employees or former employees, how many people know that? On Friday, Boeing issued 60-day layoff notices to 340 workers. Since September 11, 2001, Boeing has cut 36,490 jobs in its commercial airplane division.
When Gray Davis was governor of California, he had issued an executive order imposing a hiring freeze on state government. While the freeze was in order, 33,000 people were hired as they filled so-called exempt positions. Arnold has issued an executive order imposing a hiring freeze. His order prohibits all state agencies and departments from filing vacancies except for specified positions. For vacant positions financed by funds other than the state’s General Fund, state agencies “are encouraged to work with the Department of Finance to gain exemptions,” the governor’s office states.
President Bush maintains he is behind the efforts of the American worker to gain employment and to be paid a fair wage. I have written so often on the efforts of the White House to kill overtime for millions of workers. After Arlen Spector caved under immense pressure, the White House has prevailed. The Administration maintains the new overtime regulations would guarantee overtime protection for an estimated 1.3 million more low-income, white-collar workers. That, my readers, is so far from the truth that it is a kissing cousin to the lie provided on WMD in Iraq. These changes in the overtime rules will screw working men and women who depend on overtime pay. It eliminates proper pay for work hours. William Samuel, director of the 13-million member of the AFL-CIO, stated “the White House was willing to provoke a fiscal crisis to get its way…we will make sure that the American people know the length that this administration went to cut overtime for 8 million Americans.” Conditions are difficult enough in the workplace. Changing the work rules will make those conditions more difficult. Maybe the President does not have to worry about making ends meet. He will find out in 2004 just how many Americans he screwed out of overtime.
The Administration is pressing to pass the Medicare bill. Health and Human Services Secretary Tommy Thompson said although the bill is not perfect, “seniors can’t wait for perfect.” The fact is elections are coming up in 2004. Many politicians are afraid of voting against this measure for fear it will be their political death knell. Conferees worked until 1:30a.m. EST on Friday. Rep. Sheila Jackson Lee, D-Texas, told the Rules Committee that “a thousand pages in four hours is not acceptable.” The legislation has been a long time in coming. What is the rush? What is the negative in having a full airing of the proposals? In order to have an educated vote, Senate and House members must be educated about privatization, subsidies for private health plans, how retirees will maintain their health coverage from former employers, etc. Once again, a vote will be rushed in order to promote the interests of certain politicians. It’s no wonder there is a floundering faith in our government officials.
Friday, November 21, 2003
11/22/03 Graft Dodgers
By a vote of 58 to 39, the Senate Democrats and Republicans blocked passage of the proposed energy bill. It had passed the House on Tuesday by a vote of 246 to 180. A major sticking point is the provision that manufacturers should not be held liable for the mishandling of MTBE by businesses responsible for groundwater contamination. A lesser area of contention is a provision that would double the use of ethanol over five years. As I previously stated, the CBO estimates the bill will cost around $32 billion over the next decade, including around $23.5 billion in tax breaks, and it also includes loan guarantees in excess of $20 billion for pork programs.(not the diet kind.) As such, today’s title suggests those who have voted against the energy bill were, in fact, also voting against graft and pork. In sum, sponsors of this bill require two additional votes for passage. I wonder what the graft will be to buy those votes.
Now let’s visit another country with a different orientation towards its energy program. The Fifth Indian Oil and Gas Conference will be held in New Delhi from Jan. 12-14, 2004. Provided will be an overview of the status of deregulation and trends, and plans and budgets for new ventures in India. A comprehensive and in-depth analysis of the growth potential in both the oil and natural gas/LNG markets shall be undertaken. India is the fourth largest oil consumer in Asia-Pacific. On April 1, 2002 India embarked on the process of deregulation and decontrol of its oil and gas markets. The price of indigenous crude being decontrolled and aligned with international pricing levels. They have abolished the oil pool and rationalized subsidies in kerosene and LPG. Lastly, India has paved the way for both existing downstream companies and new players to enter India’s huge oil market.
Over the last decade, India’s oil market has experienced tremendous growth, with consumption doubling to over mmb/d in 2001, from 1 mmb/d in 1990. In the long run, India’s oil consumption is poised to grow at 4-5% per year through 2010 and beyond. With the expected commencement of gas imports in 2004, the overall consumption of natural gas is forecast to grow in the range of 6-7% per year through 2010.
India is Asia’s third largest crude importer after Japan and South Korea and ahead of China. India currently imports 1.2 mmb/d of crude oil. Domestic production has plateaued at about 650kb/d. By the end of the decade, it is estimated that India will need to import close to 2 mmb/d. India’s refining capacity has surged to 2.3 mmb/d, and this is up nearly 60% from the 1999 level. This has transformed India from a net importer of oil products to net exporter of diesel and gasoline. The recent domestic discovery of gas along the east coast of India is expected to transform the Indian gas business, with virtually every major oil and gas operator in India aspiring to enter the natural gas market. With maiden LNG imports expected in early 2004, despite pricing concerns, India is poised to become a major LNG consumer in the Asia-Pacific region.
On November 20 New Delhi’s largest oil exploration company, Oil and Natural Gas Corp., announced they are considering giving 2-3% of its equity shares to its 40,000 workers through an ESOP. Mercer Consulting of Washington, DC was hired to help in the design and implementation of the ESOP. A director of ONGC stated “we feel money alone cannot motivate employees to excel in their profession. Giving employees ESOP will involve them more in the company’s growth. We expect such participation in the hands of employees will only motivate them to perform better.”
With the opening up of petroleum marketing to the private sector, one can expect hectic activity in this sector too. Now national oil companies have about 20,000 retail outlets, and another 10,000 are expected in the next two years. With India set to become one of the world’s largest consumers of oil and gas, it is expected that, over the next 25 years, the refining sector would need an investment of around $60 billion, and marketing and distribution sectors would need an investment of $30 billion. As such, the oil and gas industry will remain a focal point of the country’s policy making.
The oil and gas industry remains a focal point of the policy making in the United States. Our citizens, who in large part are tax payers, who in a lesser part are voters, and in an even lesser part fight to protect our freedoms, are, in my view, deserving of a sound energy bill, and one that can stand the test of time. India is moving in the right direction. The United States should be a leader and not a follower in the effort to become energy self-sufficient.
I would like to turn to the matter of the money supply. William Poole is the president of the Federal Reserve Bank of St. Louis, and spoke at a conference at the Cato Institute. He mentioned that M3, the broadest measure of money, is down 6.4% annualized over the past three months using the weekly Fed data. This is the sharpest three-month deceleration in M3 growth since 1963. Poole commented that ‘my attitude is to be careful about reacting…to money growth changes over matters of weeks or even months. But it does catch my attention, and the longer and more persistent these changes are, I think, the more important it is to look more deeply into the situation.” Mr. Poole has a good deal of experience in these matters. However, there is another statement made today that does not sit well with me. It is contradictory. Roger Ferguson is the Federal Reserve Vice Chairman, and downplayed the risk of the recovery stalling out. At the same time, he mentioned that inflation is more likely to decline than to rise in current circumstances. Also, on Friday, Gary Stern, president of the Minneapolis Federal Reserve echoed these sentiments with “I don’t expect to see any material acceleration of inflation next year.” Given the recent 7.2% GDP growth in the third quarter and the Fed’s optimistic view for the economy going forward, it should be more likely for inflation to increase rather than for it to be more likely to decline. Demand should increase with better business conditions, and therefore, inflation should rise. The combination of Ferguson’s statements and the information on M3 give me greater cause for concern about current conditions. I already question the government figures. This creates more questions in my mind.
While we have a little time, let’s visit the state of Pennsylvania and their economy. They lost 3,900 jobs in October. According to Keystone Research Center and Economic Policy Institute’s analysis of President Bush’s “Jobs and Growth” plan, from June 2003 to October 2003, 38,100 jobs were supposed to have been created in Pennsylvania. In fact, since the tax cut was projected to start creating jobs, Pennsylvania has lost 14,500 jobs. The executive director of Keystone Research Center stated “the reason is simple economics—tax cuts that target the affluent don’t pump up the economy quickly because the dollars aren’t spent.” Pennsylvania has fewer jobs than when the recession began. They have fewer jobs than when the recession ended. They have a higher employment rate than when the recession began. They have a higher unemployment rate than when the recession ended. They have fewer jobs than in the beginning of 2001. They have a higher unemployment rate than in the beginning of 2001. Job growth has not kept up with working-age population growth in Pennsylvania.
By a vote of 58 to 39, the Senate Democrats and Republicans blocked passage of the proposed energy bill. It had passed the House on Tuesday by a vote of 246 to 180. A major sticking point is the provision that manufacturers should not be held liable for the mishandling of MTBE by businesses responsible for groundwater contamination. A lesser area of contention is a provision that would double the use of ethanol over five years. As I previously stated, the CBO estimates the bill will cost around $32 billion over the next decade, including around $23.5 billion in tax breaks, and it also includes loan guarantees in excess of $20 billion for pork programs.(not the diet kind.) As such, today’s title suggests those who have voted against the energy bill were, in fact, also voting against graft and pork. In sum, sponsors of this bill require two additional votes for passage. I wonder what the graft will be to buy those votes.
Now let’s visit another country with a different orientation towards its energy program. The Fifth Indian Oil and Gas Conference will be held in New Delhi from Jan. 12-14, 2004. Provided will be an overview of the status of deregulation and trends, and plans and budgets for new ventures in India. A comprehensive and in-depth analysis of the growth potential in both the oil and natural gas/LNG markets shall be undertaken. India is the fourth largest oil consumer in Asia-Pacific. On April 1, 2002 India embarked on the process of deregulation and decontrol of its oil and gas markets. The price of indigenous crude being decontrolled and aligned with international pricing levels. They have abolished the oil pool and rationalized subsidies in kerosene and LPG. Lastly, India has paved the way for both existing downstream companies and new players to enter India’s huge oil market.
Over the last decade, India’s oil market has experienced tremendous growth, with consumption doubling to over mmb/d in 2001, from 1 mmb/d in 1990. In the long run, India’s oil consumption is poised to grow at 4-5% per year through 2010 and beyond. With the expected commencement of gas imports in 2004, the overall consumption of natural gas is forecast to grow in the range of 6-7% per year through 2010.
India is Asia’s third largest crude importer after Japan and South Korea and ahead of China. India currently imports 1.2 mmb/d of crude oil. Domestic production has plateaued at about 650kb/d. By the end of the decade, it is estimated that India will need to import close to 2 mmb/d. India’s refining capacity has surged to 2.3 mmb/d, and this is up nearly 60% from the 1999 level. This has transformed India from a net importer of oil products to net exporter of diesel and gasoline. The recent domestic discovery of gas along the east coast of India is expected to transform the Indian gas business, with virtually every major oil and gas operator in India aspiring to enter the natural gas market. With maiden LNG imports expected in early 2004, despite pricing concerns, India is poised to become a major LNG consumer in the Asia-Pacific region.
On November 20 New Delhi’s largest oil exploration company, Oil and Natural Gas Corp., announced they are considering giving 2-3% of its equity shares to its 40,000 workers through an ESOP. Mercer Consulting of Washington, DC was hired to help in the design and implementation of the ESOP. A director of ONGC stated “we feel money alone cannot motivate employees to excel in their profession. Giving employees ESOP will involve them more in the company’s growth. We expect such participation in the hands of employees will only motivate them to perform better.”
With the opening up of petroleum marketing to the private sector, one can expect hectic activity in this sector too. Now national oil companies have about 20,000 retail outlets, and another 10,000 are expected in the next two years. With India set to become one of the world’s largest consumers of oil and gas, it is expected that, over the next 25 years, the refining sector would need an investment of around $60 billion, and marketing and distribution sectors would need an investment of $30 billion. As such, the oil and gas industry will remain a focal point of the country’s policy making.
The oil and gas industry remains a focal point of the policy making in the United States. Our citizens, who in large part are tax payers, who in a lesser part are voters, and in an even lesser part fight to protect our freedoms, are, in my view, deserving of a sound energy bill, and one that can stand the test of time. India is moving in the right direction. The United States should be a leader and not a follower in the effort to become energy self-sufficient.
I would like to turn to the matter of the money supply. William Poole is the president of the Federal Reserve Bank of St. Louis, and spoke at a conference at the Cato Institute. He mentioned that M3, the broadest measure of money, is down 6.4% annualized over the past three months using the weekly Fed data. This is the sharpest three-month deceleration in M3 growth since 1963. Poole commented that ‘my attitude is to be careful about reacting…to money growth changes over matters of weeks or even months. But it does catch my attention, and the longer and more persistent these changes are, I think, the more important it is to look more deeply into the situation.” Mr. Poole has a good deal of experience in these matters. However, there is another statement made today that does not sit well with me. It is contradictory. Roger Ferguson is the Federal Reserve Vice Chairman, and downplayed the risk of the recovery stalling out. At the same time, he mentioned that inflation is more likely to decline than to rise in current circumstances. Also, on Friday, Gary Stern, president of the Minneapolis Federal Reserve echoed these sentiments with “I don’t expect to see any material acceleration of inflation next year.” Given the recent 7.2% GDP growth in the third quarter and the Fed’s optimistic view for the economy going forward, it should be more likely for inflation to increase rather than for it to be more likely to decline. Demand should increase with better business conditions, and therefore, inflation should rise. The combination of Ferguson’s statements and the information on M3 give me greater cause for concern about current conditions. I already question the government figures. This creates more questions in my mind.
While we have a little time, let’s visit the state of Pennsylvania and their economy. They lost 3,900 jobs in October. According to Keystone Research Center and Economic Policy Institute’s analysis of President Bush’s “Jobs and Growth” plan, from June 2003 to October 2003, 38,100 jobs were supposed to have been created in Pennsylvania. In fact, since the tax cut was projected to start creating jobs, Pennsylvania has lost 14,500 jobs. The executive director of Keystone Research Center stated “the reason is simple economics—tax cuts that target the affluent don’t pump up the economy quickly because the dollars aren’t spent.” Pennsylvania has fewer jobs than when the recession began. They have fewer jobs than when the recession ended. They have a higher employment rate than when the recession began. They have a higher unemployment rate than when the recession ended. They have fewer jobs than in the beginning of 2001. They have a higher unemployment rate than in the beginning of 2001. Job growth has not kept up with working-age population growth in Pennsylvania.
11/21/03 Sneak And Peek
This is not a new version of hide and go seek. It’s the name of the Homeland Security search warrant. Basically, the holder of the warrant can search any part of the premises, and the owner does not sign the warrant, and his personal property rights are forfeited under the law. Do you think sneak and peek was intended for Michael Jackson or followers of Osama bin Laden? Seventy officers were deemed necessary for searching Neverland. John McCain has stated we are short on troops in Iraq. Maybe we could use those 70 officers as a special sneak and peek task force to search and bring into custody Saddam Hussein. The only things which have been delivered to date have been hundreds of bodybags, thousands of wounded, and a few tapes of Hussein’s messages.
I think we might take a trip to the unemployment lines in Michigan. Their unemployment rate hit an 11-year high in October. The state’s jobless rate edged up to 7.6% during the month from 7.5% in September. In January 1992 it stood at 7.8%. The job market traditionally lags behind the national labor recovery, and 2003 is no exception. From January to October 2003, the state’s unemployment rate worsened 1.4 percentage points while the national average rose only three-tenths of a percentage point. The Michigan workforce totals about 5.1 million. Employment rose by 25,000 during October; however, many unemployed workers who had been discouraged, and had stopped looking for a job, started once again applying for a job in October. I have written many times that the unemployment rolls in this country are significantly understated. The media has written that the economy is turning upward, and this fact has given hope to the discouraged unemployed worker. More and more states are seeing the discouraged unemployed worker now seeking work again. The problem is simple. There aren’t enough jobs for those seeking jobs.
Kenneth Rosen is a UC Berkeley economist and chairman of the Fisher (as in the Gap’s founder) Center for Real Estate. Yesterday he addressed 500 local property owners and investors at the Fairmont Hotel in San Francisco. Rosen stated the Bay Area’s depressed market for office space won’t recover for at least three years while the housing market appears vulnerable to interest rate hikes likely to follow the 2004 election. Another economist, Cynthia Kroll, stated “any job that mostly involves sitting at a desk, talking on the phone, and working on a computer is at risk for outsourcing,” especially in high-cost regions like the Bay Area. Rosen believes that mortgage rates are likely to rise to 8% during 2005 and 2006, and that would slow house building and depress prices nationwide. Just as disturbing, he remarked that a post-election federal tax hike is inevitable, no matter who is elected. He cited the growing deficits in the federal budget and international; trade.
Nanotechnology is the science of building matter on a very small scale. Federal research experts have predicted that the market for nanotechnology devices could reach $1 trillion a year within a decade or so. Congress passed legislation yesterday that will increase federal funding for nanotechnology research in coming years. The President has yet to veto any proposed legislation that has made it to his desk, and therefore, I feel certain he will sign the bill. It will accelerate research and development by earmarking $3.7 billion for the study of nanotechnology during the next four years. Given the potential for nanotechnology, these funds are minimal. Think of all the money expended on pork programs.
Yesterday new auto incentives have reached your neighborhood. Chrysler is offering a new-car and truck sales incentive that waives some remaining lease payments, matching a General Motors program begun this month. The so-called lease pull-ahead is the latest incentive offered by Detroit automakers as they try to offset weaker-than-expected U.S. sales in October. Chrysler’s lease pull-ahead program waives remaining lease payments for customers whose contracts on their Chrysler vehicles expire before July 31 if they buy or lease a new car or truck made by the company. Chrysler also increased its cash rebate offers on the sale of its 2003 and 2004 model vehicles by $500. This week GM offered to defer monthly payments for 90 days when customers purchase a new 2003 or 2004 model vehicle. This week Ford revived a $5-a-day lease offer on base versions of its Ford Mustang coupe. Detroit automakers are manufacturing vehicles to keep their plants running. They are building a vehicle for inventory without a dealer or distributor having ordered the vehicle. The bloated October vehicle inventory numbers skewed the national economic picture, and overstated consumer demand for produced goods.
IBM has 38,000 software employees. Yesterday they reduced 200 employees company-wide and “across the board.” They included programmers, pervasive computer engineers, Tivoli and rational subgroups, as well as administrative and support function employees. These cuts are modest considering they represent less than one-half of one per cent of its total software employees. If business were robust, the cuts would not be necessary. If business were robust, IBM would be hiring. It’s smart to look at what companies do and not what they say. The bottom line is that net employee reductions still are the daily story in tech land.
Hino Motors is a subsidiary of Toyota Motor Corporation. Hino is a global commercial-vehicle manufacturer. In other words, they make trucks. Dana has a facility in Renton, Washington. At that location, Dana will assemble driveshafts for the 2005 Hino platform. Dana’s Commercial vehicle systems unit designs, manufactures, and markets front-steer, rear-drive, trailer, and auxiliary axles; driveshafts; steering shafts; brakes; suspensions; and related systems, modules, and services for the commercial vehicle market.
Yesterday Alan Greenspan told a monetary conference sponsored by the Cato Institute and The Economist magazine that “it is imperative that creeping protectionism be thwarted and reversed…should globalization be allowed to proceed and thereby create an ever more flexible international financial system, history suggests that current imbalances will be diffused with little disruption.”
This is not a new version of hide and go seek. It’s the name of the Homeland Security search warrant. Basically, the holder of the warrant can search any part of the premises, and the owner does not sign the warrant, and his personal property rights are forfeited under the law. Do you think sneak and peek was intended for Michael Jackson or followers of Osama bin Laden? Seventy officers were deemed necessary for searching Neverland. John McCain has stated we are short on troops in Iraq. Maybe we could use those 70 officers as a special sneak and peek task force to search and bring into custody Saddam Hussein. The only things which have been delivered to date have been hundreds of bodybags, thousands of wounded, and a few tapes of Hussein’s messages.
I think we might take a trip to the unemployment lines in Michigan. Their unemployment rate hit an 11-year high in October. The state’s jobless rate edged up to 7.6% during the month from 7.5% in September. In January 1992 it stood at 7.8%. The job market traditionally lags behind the national labor recovery, and 2003 is no exception. From January to October 2003, the state’s unemployment rate worsened 1.4 percentage points while the national average rose only three-tenths of a percentage point. The Michigan workforce totals about 5.1 million. Employment rose by 25,000 during October; however, many unemployed workers who had been discouraged, and had stopped looking for a job, started once again applying for a job in October. I have written many times that the unemployment rolls in this country are significantly understated. The media has written that the economy is turning upward, and this fact has given hope to the discouraged unemployed worker. More and more states are seeing the discouraged unemployed worker now seeking work again. The problem is simple. There aren’t enough jobs for those seeking jobs.
Kenneth Rosen is a UC Berkeley economist and chairman of the Fisher (as in the Gap’s founder) Center for Real Estate. Yesterday he addressed 500 local property owners and investors at the Fairmont Hotel in San Francisco. Rosen stated the Bay Area’s depressed market for office space won’t recover for at least three years while the housing market appears vulnerable to interest rate hikes likely to follow the 2004 election. Another economist, Cynthia Kroll, stated “any job that mostly involves sitting at a desk, talking on the phone, and working on a computer is at risk for outsourcing,” especially in high-cost regions like the Bay Area. Rosen believes that mortgage rates are likely to rise to 8% during 2005 and 2006, and that would slow house building and depress prices nationwide. Just as disturbing, he remarked that a post-election federal tax hike is inevitable, no matter who is elected. He cited the growing deficits in the federal budget and international; trade.
Nanotechnology is the science of building matter on a very small scale. Federal research experts have predicted that the market for nanotechnology devices could reach $1 trillion a year within a decade or so. Congress passed legislation yesterday that will increase federal funding for nanotechnology research in coming years. The President has yet to veto any proposed legislation that has made it to his desk, and therefore, I feel certain he will sign the bill. It will accelerate research and development by earmarking $3.7 billion for the study of nanotechnology during the next four years. Given the potential for nanotechnology, these funds are minimal. Think of all the money expended on pork programs.
Yesterday new auto incentives have reached your neighborhood. Chrysler is offering a new-car and truck sales incentive that waives some remaining lease payments, matching a General Motors program begun this month. The so-called lease pull-ahead is the latest incentive offered by Detroit automakers as they try to offset weaker-than-expected U.S. sales in October. Chrysler’s lease pull-ahead program waives remaining lease payments for customers whose contracts on their Chrysler vehicles expire before July 31 if they buy or lease a new car or truck made by the company. Chrysler also increased its cash rebate offers on the sale of its 2003 and 2004 model vehicles by $500. This week GM offered to defer monthly payments for 90 days when customers purchase a new 2003 or 2004 model vehicle. This week Ford revived a $5-a-day lease offer on base versions of its Ford Mustang coupe. Detroit automakers are manufacturing vehicles to keep their plants running. They are building a vehicle for inventory without a dealer or distributor having ordered the vehicle. The bloated October vehicle inventory numbers skewed the national economic picture, and overstated consumer demand for produced goods.
IBM has 38,000 software employees. Yesterday they reduced 200 employees company-wide and “across the board.” They included programmers, pervasive computer engineers, Tivoli and rational subgroups, as well as administrative and support function employees. These cuts are modest considering they represent less than one-half of one per cent of its total software employees. If business were robust, the cuts would not be necessary. If business were robust, IBM would be hiring. It’s smart to look at what companies do and not what they say. The bottom line is that net employee reductions still are the daily story in tech land.
Hino Motors is a subsidiary of Toyota Motor Corporation. Hino is a global commercial-vehicle manufacturer. In other words, they make trucks. Dana has a facility in Renton, Washington. At that location, Dana will assemble driveshafts for the 2005 Hino platform. Dana’s Commercial vehicle systems unit designs, manufactures, and markets front-steer, rear-drive, trailer, and auxiliary axles; driveshafts; steering shafts; brakes; suspensions; and related systems, modules, and services for the commercial vehicle market.
Yesterday Alan Greenspan told a monetary conference sponsored by the Cato Institute and The Economist magazine that “it is imperative that creeping protectionism be thwarted and reversed…should globalization be allowed to proceed and thereby create an ever more flexible international financial system, history suggests that current imbalances will be diffused with little disruption.”
Thursday, November 20, 2003
11/20/03 Cracks In The Foundation
China will raise tariffs on some commodities imported from the United States. The Chinese stated the new tariffs were in response to U.S. duties on steel imports. The latter were imposed 18 months ago. The cap on imports of Chinese bras and gowns came this week. China Daily stated “the cheap political points the Bush administration scored by touting trade protectionism will prove costly for U.S. consumers as well as global trade… and that Washington had “stubbornly resorted to short-sighted protectionism. Mounting U.S. protectionism against China is by no means a solution to the exploding U.S. trade deficit.”
Yesterday, India’s Foreign Secretary Kanwal Sibal remarked his government and their tech sector have been concerned by recent moves in the U.S. to restrict trade in IT services and IT-enabled services. He stated “the proposed anti-legislature measures by a few states in the U.S. on IT outsourcing and offshoring needs to be addressed squarely, as such attempts would only hinder progress in high technology areas between the two countries… we need to educate the American people and the U.S. media on the cost benefits of outsourcing IT projects to countries like India, which has a reservoir of skilled talent pool and core competencies.” U.S. Under Secretary of Commerce Kenneth Juster urges the Indian government to remove impediments on trade investments by U.S. firms and to raise the cap on foreign direct investment in defense ventures from the present 26%.
Even as consumer spending rose sharply in the third quarter, customer satisfaction did not. The American Consumer Satisfaction Index (ACSI) remained unchanged last quarter, portending a more moderate rise in fourth-quarter household spending. The Index is up only 1% from the year ago period. The University of Michigan Business School’s National Quality Research Center compiles and analyzes the data. In their view, the stability in the ACSI suggests a much more modest increase in fourth quarter spending of 3.7%, and this number would be consistent with the forecast being provided by WalMart.
In a recent PricewaterhouseCoopers survey of senior executives at U.S.-based multinational corporations, most said their staffing levels would suffice until economic growth persists. Gerald Ward, chief of the firm’s auditing and accounting business, stated “the strong gains in productivity made by U.S. companies during the long slump preclude much more than replacement hiring. For the near future, executives believe productivity will be sufficient to meet increased demand without much net new hiring.” The executives polled remarked that weak market demand remains the leading barrier to growth over the next 12 months, and that concern has grown over competition from foreign markets.
Each day I try to gain a greater understanding of the unemployment problems in our country. Each state has its own concerns. I thought it might prove interesting to visit each state. Today we’ll spend some time with Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia’s Robinson College of Business. So far this year Georgia has added 82,000 jobs; however, Dr. Dhawan states “jobs that have supposedly been created are showing up in sectors that are low paying at best. These low paying jobs drastically affect purchasing power, and, subsequently, tax revenue…the problem is that we’ve added almost 44,000 jobs since November 2001 in the low paying business services category, but we have close to 4,000 jobs at the management level. It seems to me that this is a case of too many foot soldiers for every officer standing, leaving a poorly equipped army – meaning we may have increased the number of people working but they don’t have enough purchasing power to sustain a recovery.” He stated that, during the first half of the 90s, roughly every dollar increase in sales tax collection was matched by a dollar increase in personal income tax collection. In the second half of the decade, that number was even higher with income tax collections adding $1.34 for every dollar collected. However, once the recession began, everything dropped. For the first two quarters of 2003, personal income growth has risen by 4.1%, but personal tax collections have dropped even further by 3% from the lows of last year.
The IMF said on Tuesday that there is no clear evidence that China’s yuan is substantially undervalued, and this counters claims by U.S. exporters that the yuan has been artificially kept low to give Chinese exports an advantage. The IMF forecasts an 8% growth for China’s economy in 2004. Meanwhile, Beijing has condemned Taiwan’s leaders for their push for independence, and yesterday stated “the use of force may be unavoidable” should Taiwan not curb the move towards independence.
Acting Army Secretary Les Brownlee and Chief of Staff Gen. Peter Schoomaker told senators yesterday they are concerned that, when thousands of soldiers and reservists return from Iraq during the first four months of 2004, there will be a shortage of doctors and adequate housing. In Iraq, the Army has been faced with a shortage of body armor, armored Humvees, and anti-missile technology for helicopters.
General Electric said it would have little or no growth in 2004, and that is after a disappointing 2003. However, the company said they would return to double-digit growth in 2005. The latter statement boosted the price of GE stock. I doubt very much whether any corporate executive has clear visibility into 2005. I believe it is irresponsible to provide such a forecast. It entails too many unknowns.
If the 5% cut in the Medi-Cal (California Medicaid) reimbursement rate is enacted as planned January 1, 2004, Walgreen’s 356 California pharmacies may be forced to withdraw from the program. A spokesperson for Walgreen’s stated “this rate reduction will also negatively impact our company’s ability to serve workers’compensation patients. If the 5% cut is not rescinded, workers’ comp reimbursements in California--- tied to Medi-Cal rates as of Jan. 1—will be the lowest in the nation.”
For the fifth year in a row, national results of the Harris Poll indicate that there has been a modest drop in the “Feel Good Index.” The largest declines over these five years relate to the economy. Those who feel good about the economy are down 29 points from 64% in 1998 to only 35% now.
Cato Director of Health and Welfare Studies Michael Tanner believes the pending Medicare plan is “a terrible mistake that will clearly cost our children and grandchildren. This is not a Medicare reform bill. This is barely a Medicare prescription drug bill. This is a bill for politicians and special interests buying favor with the AARP…short-term political advantage is not worth the cost to future generations. Sometimes the better part of valor is recognizing when you have made a mistake. Congress should recognize that this bill is a mistake and go back to the drawing board.” The Council for Citizens Against Government Waste stated “the bad news is this bill fails to reform Medicare, a program that is headed towards bankruptcy…Medicare’s unfunded liability currently hovers around $40 trillion. Today’s politicians are raiding the paychecks of the unborn to impress senior citizens before the 2004 elections.”
Less than four years after Convergys Corp. established a phone-in customer service center in South Toledo, the Cincinnati company said yesterday it will the office and eliminate jobs for 570 people. The company said its restructuring would eliminate about 950 professional and administrative positions worldwide.
Privately-owned Ikea has stores from Shanghai to San Francisco, and are located in a total of 22 countries. If they ever go public, I would certainly be interested in becoming a stockholder, and for the long-term. An independent survey was commissioned by Stockholm’s Gothenburg University. The survey focused on trust. It indicated that more people trust Ikea than they do their parliament and their political parties.
China will raise tariffs on some commodities imported from the United States. The Chinese stated the new tariffs were in response to U.S. duties on steel imports. The latter were imposed 18 months ago. The cap on imports of Chinese bras and gowns came this week. China Daily stated “the cheap political points the Bush administration scored by touting trade protectionism will prove costly for U.S. consumers as well as global trade… and that Washington had “stubbornly resorted to short-sighted protectionism. Mounting U.S. protectionism against China is by no means a solution to the exploding U.S. trade deficit.”
Yesterday, India’s Foreign Secretary Kanwal Sibal remarked his government and their tech sector have been concerned by recent moves in the U.S. to restrict trade in IT services and IT-enabled services. He stated “the proposed anti-legislature measures by a few states in the U.S. on IT outsourcing and offshoring needs to be addressed squarely, as such attempts would only hinder progress in high technology areas between the two countries… we need to educate the American people and the U.S. media on the cost benefits of outsourcing IT projects to countries like India, which has a reservoir of skilled talent pool and core competencies.” U.S. Under Secretary of Commerce Kenneth Juster urges the Indian government to remove impediments on trade investments by U.S. firms and to raise the cap on foreign direct investment in defense ventures from the present 26%.
Even as consumer spending rose sharply in the third quarter, customer satisfaction did not. The American Consumer Satisfaction Index (ACSI) remained unchanged last quarter, portending a more moderate rise in fourth-quarter household spending. The Index is up only 1% from the year ago period. The University of Michigan Business School’s National Quality Research Center compiles and analyzes the data. In their view, the stability in the ACSI suggests a much more modest increase in fourth quarter spending of 3.7%, and this number would be consistent with the forecast being provided by WalMart.
In a recent PricewaterhouseCoopers survey of senior executives at U.S.-based multinational corporations, most said their staffing levels would suffice until economic growth persists. Gerald Ward, chief of the firm’s auditing and accounting business, stated “the strong gains in productivity made by U.S. companies during the long slump preclude much more than replacement hiring. For the near future, executives believe productivity will be sufficient to meet increased demand without much net new hiring.” The executives polled remarked that weak market demand remains the leading barrier to growth over the next 12 months, and that concern has grown over competition from foreign markets.
Each day I try to gain a greater understanding of the unemployment problems in our country. Each state has its own concerns. I thought it might prove interesting to visit each state. Today we’ll spend some time with Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia’s Robinson College of Business. So far this year Georgia has added 82,000 jobs; however, Dr. Dhawan states “jobs that have supposedly been created are showing up in sectors that are low paying at best. These low paying jobs drastically affect purchasing power, and, subsequently, tax revenue…the problem is that we’ve added almost 44,000 jobs since November 2001 in the low paying business services category, but we have close to 4,000 jobs at the management level. It seems to me that this is a case of too many foot soldiers for every officer standing, leaving a poorly equipped army – meaning we may have increased the number of people working but they don’t have enough purchasing power to sustain a recovery.” He stated that, during the first half of the 90s, roughly every dollar increase in sales tax collection was matched by a dollar increase in personal income tax collection. In the second half of the decade, that number was even higher with income tax collections adding $1.34 for every dollar collected. However, once the recession began, everything dropped. For the first two quarters of 2003, personal income growth has risen by 4.1%, but personal tax collections have dropped even further by 3% from the lows of last year.
The IMF said on Tuesday that there is no clear evidence that China’s yuan is substantially undervalued, and this counters claims by U.S. exporters that the yuan has been artificially kept low to give Chinese exports an advantage. The IMF forecasts an 8% growth for China’s economy in 2004. Meanwhile, Beijing has condemned Taiwan’s leaders for their push for independence, and yesterday stated “the use of force may be unavoidable” should Taiwan not curb the move towards independence.
Acting Army Secretary Les Brownlee and Chief of Staff Gen. Peter Schoomaker told senators yesterday they are concerned that, when thousands of soldiers and reservists return from Iraq during the first four months of 2004, there will be a shortage of doctors and adequate housing. In Iraq, the Army has been faced with a shortage of body armor, armored Humvees, and anti-missile technology for helicopters.
General Electric said it would have little or no growth in 2004, and that is after a disappointing 2003. However, the company said they would return to double-digit growth in 2005. The latter statement boosted the price of GE stock. I doubt very much whether any corporate executive has clear visibility into 2005. I believe it is irresponsible to provide such a forecast. It entails too many unknowns.
If the 5% cut in the Medi-Cal (California Medicaid) reimbursement rate is enacted as planned January 1, 2004, Walgreen’s 356 California pharmacies may be forced to withdraw from the program. A spokesperson for Walgreen’s stated “this rate reduction will also negatively impact our company’s ability to serve workers’compensation patients. If the 5% cut is not rescinded, workers’ comp reimbursements in California--- tied to Medi-Cal rates as of Jan. 1—will be the lowest in the nation.”
For the fifth year in a row, national results of the Harris Poll indicate that there has been a modest drop in the “Feel Good Index.” The largest declines over these five years relate to the economy. Those who feel good about the economy are down 29 points from 64% in 1998 to only 35% now.
Cato Director of Health and Welfare Studies Michael Tanner believes the pending Medicare plan is “a terrible mistake that will clearly cost our children and grandchildren. This is not a Medicare reform bill. This is barely a Medicare prescription drug bill. This is a bill for politicians and special interests buying favor with the AARP…short-term political advantage is not worth the cost to future generations. Sometimes the better part of valor is recognizing when you have made a mistake. Congress should recognize that this bill is a mistake and go back to the drawing board.” The Council for Citizens Against Government Waste stated “the bad news is this bill fails to reform Medicare, a program that is headed towards bankruptcy…Medicare’s unfunded liability currently hovers around $40 trillion. Today’s politicians are raiding the paychecks of the unborn to impress senior citizens before the 2004 elections.”
Less than four years after Convergys Corp. established a phone-in customer service center in South Toledo, the Cincinnati company said yesterday it will the office and eliminate jobs for 570 people. The company said its restructuring would eliminate about 950 professional and administrative positions worldwide.
Privately-owned Ikea has stores from Shanghai to San Francisco, and are located in a total of 22 countries. If they ever go public, I would certainly be interested in becoming a stockholder, and for the long-term. An independent survey was commissioned by Stockholm’s Gothenburg University. The survey focused on trust. It indicated that more people trust Ikea than they do their parliament and their political parties.
Wednesday, November 19, 2003
11/19/03 Re-election Or Bust
With this Administration I am never disappointed. I can depend on them for endless irrational thinking (I said that so politely). It was too much to expect that the desire to win votes for 2004 would end with the steel tariffs. The trade off to woo voters in the four big steel states certainly was met with a huge payment, $4 billion in proposed fines from the EU. A bigger payment was running aground with Japan, and alienating the biggest buyer of our treasuries. That buyer helps to fund our massive deficits. The second largest buyer of our treasuries is China. In an absolute stroke of genius, Bush imposed temporary quotas on various Chinese textiles, such as, bras and robes. When was the last time Bush ever put forth a temporary measure? The tax cuts were temporary but they are not. The steel tariffs are temporary, but there is a fight to retain them. Only the voters have the power to make Bush temporary. The bra barrier, as I call it, is aimed at winning voters in the textile states, such as, in South Carolina. Plants have closed so furiously in the last four years that it is difficult to find too many textile workers left in that state. Calls to various agencies suggest there may be 8,000 such workers left in South Carolina, down twenty times from about twenty years ago. That sounds like a very rational trade-off, to piss China off to win re-election in South Carolina and to possibly save 8,000 jobs. Just to put it in perspective, AT&T wireless will layoff 3000 workers, and they will look to India for outsourcing those jobs. Yesterday I mentioned 21,000 Verizon workers would be leaving that company on Friday. There is a mass exodus of workers in this country, and that exodus has been from the employment rolls. What action is Bush going to take against WalMart? What’s the difference between China’s lower prices and WalMart’s? The latter reduced their prices on toys to such an extent that Toys R Us is needing to close their Kids R Us and Imaginarium stores, and take large losses as well as lay off employees in those divisions. A few thousand will be dropped from the payroll. Should we place a floor under prices at WalMart, our largest private employer with almost 1.5 million on the payroll? Think of all the companies that compete with WalMart. Bush could win those votes, and they must exceed 1,5 million.
Retaliation is taking place. Foreign buyers are purchasing less of our treasuries. You can bet that China will not be rushing out to buy our bonds. Bush stabs the countries that fund our deficits. The American voter did not elect him to protect the worker from foreign competition. Actually, come to think of it, the majority of the voters didn’t elect him in the first place. I almost forgot. I’m wondering what temporary measure Bush can devise to help the high-tech worker. Figures compiled by a trade group, the AeA, indicate 540,000 high-tech jobs were eliminated in 2002, and another 234,000 will be cut this year. In 2002, California accounted for 22% of such layoffs. Bush needs to do something quickly to win California. Maybe he will temporarily place an export quota on outsourcing in the name of homeland security. If Bush can temporarily stall a trade or currency crisis, he will have successfully defended his anti-freetrade measures. Don’t bet on the success of this on-going policy. Biting the hand that feeds you is not a winning game plan.
Yesterday the dollar fell to a three year low versus the yen, and reached a new low versus the euro. At the same time, gold traded above $400 per ounce for the first time since April 1996. Crude oil traded at $33.25 per barrel, a higher price than it was when the invasion of Iraq took place on March 20. Foreign purchases of treasuries, on a monthly basis, fell to their lowest level since February. For the first time since October 1998, foreigners had net sales of agency debt issued by Fannie Mae and Freddie Mac. The Administration will proclaim that the lower dollar helps our exports, but they only account for about 10% of our GDP. On the other hand, it hurts the exports of most other nations as it makes their exports more expensive and decreases the buying power of our consumer. Exports are more important to other nations, such as, Japan. A rational view of our trade deficit with China shall indicate that it will reach about $130 billion this year; however, China only exports $3 billion in textiles to the U.S. We should have a trade war over $3 billion so he can win North and South Carolina in 2004? I don’t think so.
Bush had better keep an eye on India because their electronic hardware and computer software services registered a growth of 35% in dollar terms at $6.5 billion during the April through September 2003 period. The executive director of Electronics and Computer Software Export Promotion Council, DK Sareen, stated “going by the trend, we are confident that the export target set for 2003-2004 at $13.77 billion is in the achievable realm.” The 2008 target for India’s IT exports is $50 billion. The Administration needs to get working on an IT tariff plan immediately. The news gets worse. Hitachi Data Systems is setting up a 100% owned subsidiary in India, and they will be making a substantial investment there. K.C. Pant, deputy chairman of India’s Planning Commission, spoke in Washington on Monday night. He is forecasting per capita incomes of 4.5 to 5% per annum in the next fifteen years, a doubling of the present rate. According to a recent study by Goldman Sachs, India will be the third largest economy in the world by 2040 after China and the United States. Pant maintained “the simple fact of the matter is that India, along with China, is potentially the future market driver for the world economy, and anything that retards our rate of progress will eventually have repercussions on the pace of growth and stability of the larger system in the world economy.” I don’t believe anyone from the Bush Administration attended that speech at the Center for Strategic and International Studies(CSIS). The CSIS is a think tank in Washington D.C.
Editing information is a growing cancer in the Bush Administration. A few days ago the New York Times wrote an article entitled “Deal on 9/11 Briefings Lets White House Edit Papers.” In all my years of writing, this is the first time I have referred to an article in that newspaper. The Administration has not been forthcoming in providing documents towards the investigation of 9/11. That is public information. What concerns me is the Administration has been permitted to edit the documents prior to providing them to the commission doing the investigation. In addition, there are limits placed on the number of commission members who have access to the report. As Timothy Roemer indicates, “our members may see only two or three paragraphs out of a nine-page report.” The commission is required to present its final report on May 24,2004. The law states the report should be “a full and complete account of the circumstances surrounding the September 11, 2001 terrorist attacks, including preparedness for and the immediate response to the attacks.” No document is suppose to be beyond the commission’s reach. No document should be outside the range of scrutiny, unless controls are being placed on the access to intelligence, or the lack of intelligence.
With this Administration I am never disappointed. I can depend on them for endless irrational thinking (I said that so politely). It was too much to expect that the desire to win votes for 2004 would end with the steel tariffs. The trade off to woo voters in the four big steel states certainly was met with a huge payment, $4 billion in proposed fines from the EU. A bigger payment was running aground with Japan, and alienating the biggest buyer of our treasuries. That buyer helps to fund our massive deficits. The second largest buyer of our treasuries is China. In an absolute stroke of genius, Bush imposed temporary quotas on various Chinese textiles, such as, bras and robes. When was the last time Bush ever put forth a temporary measure? The tax cuts were temporary but they are not. The steel tariffs are temporary, but there is a fight to retain them. Only the voters have the power to make Bush temporary. The bra barrier, as I call it, is aimed at winning voters in the textile states, such as, in South Carolina. Plants have closed so furiously in the last four years that it is difficult to find too many textile workers left in that state. Calls to various agencies suggest there may be 8,000 such workers left in South Carolina, down twenty times from about twenty years ago. That sounds like a very rational trade-off, to piss China off to win re-election in South Carolina and to possibly save 8,000 jobs. Just to put it in perspective, AT&T wireless will layoff 3000 workers, and they will look to India for outsourcing those jobs. Yesterday I mentioned 21,000 Verizon workers would be leaving that company on Friday. There is a mass exodus of workers in this country, and that exodus has been from the employment rolls. What action is Bush going to take against WalMart? What’s the difference between China’s lower prices and WalMart’s? The latter reduced their prices on toys to such an extent that Toys R Us is needing to close their Kids R Us and Imaginarium stores, and take large losses as well as lay off employees in those divisions. A few thousand will be dropped from the payroll. Should we place a floor under prices at WalMart, our largest private employer with almost 1.5 million on the payroll? Think of all the companies that compete with WalMart. Bush could win those votes, and they must exceed 1,5 million.
Retaliation is taking place. Foreign buyers are purchasing less of our treasuries. You can bet that China will not be rushing out to buy our bonds. Bush stabs the countries that fund our deficits. The American voter did not elect him to protect the worker from foreign competition. Actually, come to think of it, the majority of the voters didn’t elect him in the first place. I almost forgot. I’m wondering what temporary measure Bush can devise to help the high-tech worker. Figures compiled by a trade group, the AeA, indicate 540,000 high-tech jobs were eliminated in 2002, and another 234,000 will be cut this year. In 2002, California accounted for 22% of such layoffs. Bush needs to do something quickly to win California. Maybe he will temporarily place an export quota on outsourcing in the name of homeland security. If Bush can temporarily stall a trade or currency crisis, he will have successfully defended his anti-freetrade measures. Don’t bet on the success of this on-going policy. Biting the hand that feeds you is not a winning game plan.
Yesterday the dollar fell to a three year low versus the yen, and reached a new low versus the euro. At the same time, gold traded above $400 per ounce for the first time since April 1996. Crude oil traded at $33.25 per barrel, a higher price than it was when the invasion of Iraq took place on March 20. Foreign purchases of treasuries, on a monthly basis, fell to their lowest level since February. For the first time since October 1998, foreigners had net sales of agency debt issued by Fannie Mae and Freddie Mac. The Administration will proclaim that the lower dollar helps our exports, but they only account for about 10% of our GDP. On the other hand, it hurts the exports of most other nations as it makes their exports more expensive and decreases the buying power of our consumer. Exports are more important to other nations, such as, Japan. A rational view of our trade deficit with China shall indicate that it will reach about $130 billion this year; however, China only exports $3 billion in textiles to the U.S. We should have a trade war over $3 billion so he can win North and South Carolina in 2004? I don’t think so.
Bush had better keep an eye on India because their electronic hardware and computer software services registered a growth of 35% in dollar terms at $6.5 billion during the April through September 2003 period. The executive director of Electronics and Computer Software Export Promotion Council, DK Sareen, stated “going by the trend, we are confident that the export target set for 2003-2004 at $13.77 billion is in the achievable realm.” The 2008 target for India’s IT exports is $50 billion. The Administration needs to get working on an IT tariff plan immediately. The news gets worse. Hitachi Data Systems is setting up a 100% owned subsidiary in India, and they will be making a substantial investment there. K.C. Pant, deputy chairman of India’s Planning Commission, spoke in Washington on Monday night. He is forecasting per capita incomes of 4.5 to 5% per annum in the next fifteen years, a doubling of the present rate. According to a recent study by Goldman Sachs, India will be the third largest economy in the world by 2040 after China and the United States. Pant maintained “the simple fact of the matter is that India, along with China, is potentially the future market driver for the world economy, and anything that retards our rate of progress will eventually have repercussions on the pace of growth and stability of the larger system in the world economy.” I don’t believe anyone from the Bush Administration attended that speech at the Center for Strategic and International Studies(CSIS). The CSIS is a think tank in Washington D.C.
Editing information is a growing cancer in the Bush Administration. A few days ago the New York Times wrote an article entitled “Deal on 9/11 Briefings Lets White House Edit Papers.” In all my years of writing, this is the first time I have referred to an article in that newspaper. The Administration has not been forthcoming in providing documents towards the investigation of 9/11. That is public information. What concerns me is the Administration has been permitted to edit the documents prior to providing them to the commission doing the investigation. In addition, there are limits placed on the number of commission members who have access to the report. As Timothy Roemer indicates, “our members may see only two or three paragraphs out of a nine-page report.” The commission is required to present its final report on May 24,2004. The law states the report should be “a full and complete account of the circumstances surrounding the September 11, 2001 terrorist attacks, including preparedness for and the immediate response to the attacks.” No document is suppose to be beyond the commission’s reach. No document should be outside the range of scrutiny, unless controls are being placed on the access to intelligence, or the lack of intelligence.
Tuesday, November 18, 2003
11/18/03 Quality Counts
Global Sources Ltd. Today released the results of a survey revealing that 80% of buyers are willing to pay a premium to purchase Taiwan products as opposed to buying direct from mainland China. Product quality was considered the main reason for buyers’ preference for Taiwan products. A range of other contributing factors includes Taiwan suppliers’ design capabilities, quality control, and R&D. Overseas buyers are also willing to pay a relatively higher price for Taiwan products than for Hong Kong products. Survey results show that 42% of buyers pay between 4 and 10% higher prices to buy products in Taiwan instead of purchasing similar products from the mainland. This is larger than the 34% of buyers who paid similar premiums to purchase from Hong Kong instead of purchasing directly from mainland China.
Sun Microsystems CEO Scott McNealy announced yesterday that the Chinese government has pledged to deploy a million computers in the next year using Sun’s Linux desktop software. The cost is $50 per license, and this includes Sun’s Star Office 7.0 productivity program that is a clone of Microsoft’s Office suite; however, the latter costs about $400 a copy. McNealy stated “this I believe makes us the No. 1 Linux desktop play on the planet.” Next month Sun will begin shipping its Java Desktop System. In my view, the Linux desktop software program has a better future.
Live Canadian cattle are still not permitted to cross into the U.S., but boxed Canadian beef is being shipped to the U.S. and Mexico at a faster pace than this time last year. The Canadian cattle industry is considering building a massive $250 million slaughterhouse in Alberta. This would result in more shipments of beef into the U.S. but fewer shipments of live cattle. Since September, beef shipments to the U.S. and Mexico are up between 7 and 40% per week compared to the same time last year. When the ban of live cattle is considered, however, Canada’s beef export market is only at 60% of last year’s levels. Once the slaughterhouse is completed, Canada would become the world’s number one beef exporting nation.
Hispanics comprise about 14% of the U.S. population, and they are the fastest growing minority. According to the San Jose Group, Hispanics have a combined purchasing power of $562 billion. I would also imagine their voting influence is growing as well.
Two U.S. soldiers were killed and two wounded in attacks north of Baghdad early yesterday in the town of Balad. The deaths brought to 419 American soldiers killed since the U.S. invaded Iraq in March, including 179 killed in guerrilla attacks since May 1 when Bush declared the major combat over. Yesterday, in Iraq, an Italian coalition official resigned . He accused the occupation authorities of incompetence.
The number of home foreclosure actions filed in Santa Clara County was up 5% in the third quarter, compared to the second quarter of 2003, and these figures were compiled by Foreclosures.com. That firm’s president, Alexis Ms. McGee, stated “we thought the worst was over for Santa Clara County as foreclosures fell in the second quarter, but now they’re edging up again. Notices of default, notices of trustees sales, and houses going to auction are up in both Northern and Southern California. We’re seeing a significant increase in the third quarter. During this period of low interest rates, people have been over-leveraging their homes, leaving themselves no wiggle room in case of troubles such as job loss or illness. Also, Fannie Mae and Freddie Mac made a combined effort in recent years to get everyone into a home that wanted one. Now all the easy money is coming back to haunt lenders and homeowners alike.”
Yesterday St.paul and Travelers agreed to merge. It will mean more layoffs in the Baltimore area. Verizon said 21,000 employees accepted an early retirement buyout offer and will leave the company by the end of the week. Toledo Mayor Jack Ford plans to cut about 60 city jobs. He said that administrators would not be exempt from the layoffs. In trying to plug a projected $65 million deficit for next year, Cleveland officials are considering laying off more than 700 uniformed employees in the police, fire, and ambulance ranks. In Columbus Mayor Coleman is asking all city employees to take three days of unpaid leave next year. Governor Bredesen of Tennessee will ask department heads to come forward with two budgets: one promising 5% cuts and one using the same amount of money they now spend. The 5% cut across the board would amount to $259 million. The Governor said no part of state government is off the table when it comes to cuts.
Oil reserves have fallen to record lows in Mexico. For six decades there have been restrictions on foreign investment in Mexico’s oil and gas industry. Pemex, the state-owned oil monopoly, wants to lift those restrictions. Mexico’s present reserves equal 12 years of production. In Venezuela, by comparison, they amount to 70 years. Mexico is the world’s fourth largest oil producing nation, and they are the only oil exporting nation that bars foreign producers from profiting from the sale of their oil and gas. The U.S imports about 2 million barrels a day from Mexico. I am not in favor of investing in oil and gas properties from Mexico nor am I in favor of purchasing oil and gas from Mexico. They expropriated (seized) the properties from U.S. and U.K. oil and gas companies. These properties comprise today’s Pemex. Mexico still has not repaid monies owed going back to 1849. As far as I am concerned, they can choke on their oil and gas. You don’t make the same mistake twice. Standard and Poor’s estimates Pemex’s total liabilities at $40 billion. It’s only a matter of time until their debt is downgraded. When the price of oil drops further, Pemex’s cash flow will be impaired and so will its exploration program. With the country’s fast-growing population, they will eat into their reserves at an alarming rate. Their next revolution shall then be on the horizon. Sometimes it is difficult to comprehend the feelings in another country. Pemex is stolen property and yet the citizens say Pemex is all about sovereignty.
Now I come to another type of acquisition, and that’s the on-going hostile battle by ArvinMeritor for control of Dana Corp. The initial approach took place in June 2002 and yesterday their cash bid was raised from $15 to $18 per share. ArvinMeritor employs 32,000 people in about 150 manufacturing facilities in 27 countries and generates sales of $8 billion. Dana employs 60,000 in 30 countries and has sales of $9.5 billion. Consequently, a great many families depend on these companies for their livelihood. ArvinMeritor identified Dana as a strategic acquisition target. The reason is Dana’s undercarriage expertise. This is an excellent fit. Dana’s position as a driveline supplier will strengthen the combined product offerings on a worldwide basis. Recently, Volvo truck chose to outsource axles to ArvinMeritor, and Hyundai chose the company to supply their autos with doors. Dana has recently signed an axle joint venture in China. In sum, the market for their products is growing on an international basis. The FTC wants to know about the combined position in medium and heavy duty axles and axle components. ArvinMeritor has been having discussions with the FTC on divesting any overlapping operations. It should not be a problem since Dana’s expertise is really in an aligned but not the same area. ArvinMeritor has always maintained they have had access to the funding. In short order, Dana will reply to yesterday’s increased bid. It will be difficult to say the bid is inadequate. Dana was at $6 per share not too long ago. ArvinMeritor stated they would keep their bid open thru December 2. That’s leaves plenty of time for future fireworks. Dana is headquartered in Toledo, Ohio. It’s not Pennsylvania where a company like Hershey can just say no to an $89 bid from Wrigley. The laws are different. Dana needs to be responsible to its shareowners. It will take more than a small increase in the dividend and raising the forecast for 2004. There are many stockholders and many employees waiting for a response from the Dana board. It needs to be fair and objective.
Global Sources Ltd. Today released the results of a survey revealing that 80% of buyers are willing to pay a premium to purchase Taiwan products as opposed to buying direct from mainland China. Product quality was considered the main reason for buyers’ preference for Taiwan products. A range of other contributing factors includes Taiwan suppliers’ design capabilities, quality control, and R&D. Overseas buyers are also willing to pay a relatively higher price for Taiwan products than for Hong Kong products. Survey results show that 42% of buyers pay between 4 and 10% higher prices to buy products in Taiwan instead of purchasing similar products from the mainland. This is larger than the 34% of buyers who paid similar premiums to purchase from Hong Kong instead of purchasing directly from mainland China.
Sun Microsystems CEO Scott McNealy announced yesterday that the Chinese government has pledged to deploy a million computers in the next year using Sun’s Linux desktop software. The cost is $50 per license, and this includes Sun’s Star Office 7.0 productivity program that is a clone of Microsoft’s Office suite; however, the latter costs about $400 a copy. McNealy stated “this I believe makes us the No. 1 Linux desktop play on the planet.” Next month Sun will begin shipping its Java Desktop System. In my view, the Linux desktop software program has a better future.
Live Canadian cattle are still not permitted to cross into the U.S., but boxed Canadian beef is being shipped to the U.S. and Mexico at a faster pace than this time last year. The Canadian cattle industry is considering building a massive $250 million slaughterhouse in Alberta. This would result in more shipments of beef into the U.S. but fewer shipments of live cattle. Since September, beef shipments to the U.S. and Mexico are up between 7 and 40% per week compared to the same time last year. When the ban of live cattle is considered, however, Canada’s beef export market is only at 60% of last year’s levels. Once the slaughterhouse is completed, Canada would become the world’s number one beef exporting nation.
Hispanics comprise about 14% of the U.S. population, and they are the fastest growing minority. According to the San Jose Group, Hispanics have a combined purchasing power of $562 billion. I would also imagine their voting influence is growing as well.
Two U.S. soldiers were killed and two wounded in attacks north of Baghdad early yesterday in the town of Balad. The deaths brought to 419 American soldiers killed since the U.S. invaded Iraq in March, including 179 killed in guerrilla attacks since May 1 when Bush declared the major combat over. Yesterday, in Iraq, an Italian coalition official resigned . He accused the occupation authorities of incompetence.
The number of home foreclosure actions filed in Santa Clara County was up 5% in the third quarter, compared to the second quarter of 2003, and these figures were compiled by Foreclosures.com. That firm’s president, Alexis Ms. McGee, stated “we thought the worst was over for Santa Clara County as foreclosures fell in the second quarter, but now they’re edging up again. Notices of default, notices of trustees sales, and houses going to auction are up in both Northern and Southern California. We’re seeing a significant increase in the third quarter. During this period of low interest rates, people have been over-leveraging their homes, leaving themselves no wiggle room in case of troubles such as job loss or illness. Also, Fannie Mae and Freddie Mac made a combined effort in recent years to get everyone into a home that wanted one. Now all the easy money is coming back to haunt lenders and homeowners alike.”
Yesterday St.paul and Travelers agreed to merge. It will mean more layoffs in the Baltimore area. Verizon said 21,000 employees accepted an early retirement buyout offer and will leave the company by the end of the week. Toledo Mayor Jack Ford plans to cut about 60 city jobs. He said that administrators would not be exempt from the layoffs. In trying to plug a projected $65 million deficit for next year, Cleveland officials are considering laying off more than 700 uniformed employees in the police, fire, and ambulance ranks. In Columbus Mayor Coleman is asking all city employees to take three days of unpaid leave next year. Governor Bredesen of Tennessee will ask department heads to come forward with two budgets: one promising 5% cuts and one using the same amount of money they now spend. The 5% cut across the board would amount to $259 million. The Governor said no part of state government is off the table when it comes to cuts.
Oil reserves have fallen to record lows in Mexico. For six decades there have been restrictions on foreign investment in Mexico’s oil and gas industry. Pemex, the state-owned oil monopoly, wants to lift those restrictions. Mexico’s present reserves equal 12 years of production. In Venezuela, by comparison, they amount to 70 years. Mexico is the world’s fourth largest oil producing nation, and they are the only oil exporting nation that bars foreign producers from profiting from the sale of their oil and gas. The U.S imports about 2 million barrels a day from Mexico. I am not in favor of investing in oil and gas properties from Mexico nor am I in favor of purchasing oil and gas from Mexico. They expropriated (seized) the properties from U.S. and U.K. oil and gas companies. These properties comprise today’s Pemex. Mexico still has not repaid monies owed going back to 1849. As far as I am concerned, they can choke on their oil and gas. You don’t make the same mistake twice. Standard and Poor’s estimates Pemex’s total liabilities at $40 billion. It’s only a matter of time until their debt is downgraded. When the price of oil drops further, Pemex’s cash flow will be impaired and so will its exploration program. With the country’s fast-growing population, they will eat into their reserves at an alarming rate. Their next revolution shall then be on the horizon. Sometimes it is difficult to comprehend the feelings in another country. Pemex is stolen property and yet the citizens say Pemex is all about sovereignty.
Now I come to another type of acquisition, and that’s the on-going hostile battle by ArvinMeritor for control of Dana Corp. The initial approach took place in June 2002 and yesterday their cash bid was raised from $15 to $18 per share. ArvinMeritor employs 32,000 people in about 150 manufacturing facilities in 27 countries and generates sales of $8 billion. Dana employs 60,000 in 30 countries and has sales of $9.5 billion. Consequently, a great many families depend on these companies for their livelihood. ArvinMeritor identified Dana as a strategic acquisition target. The reason is Dana’s undercarriage expertise. This is an excellent fit. Dana’s position as a driveline supplier will strengthen the combined product offerings on a worldwide basis. Recently, Volvo truck chose to outsource axles to ArvinMeritor, and Hyundai chose the company to supply their autos with doors. Dana has recently signed an axle joint venture in China. In sum, the market for their products is growing on an international basis. The FTC wants to know about the combined position in medium and heavy duty axles and axle components. ArvinMeritor has been having discussions with the FTC on divesting any overlapping operations. It should not be a problem since Dana’s expertise is really in an aligned but not the same area. ArvinMeritor has always maintained they have had access to the funding. In short order, Dana will reply to yesterday’s increased bid. It will be difficult to say the bid is inadequate. Dana was at $6 per share not too long ago. ArvinMeritor stated they would keep their bid open thru December 2. That’s leaves plenty of time for future fireworks. Dana is headquartered in Toledo, Ohio. It’s not Pennsylvania where a company like Hershey can just say no to an $89 bid from Wrigley. The laws are different. Dana needs to be responsible to its shareowners. It will take more than a small increase in the dividend and raising the forecast for 2004. There are many stockholders and many employees waiting for a response from the Dana board. It needs to be fair and objective.
Monday, November 17, 2003
11/17/03 Indian IT Industry
Outsourcing is a hot topic these days. I thought it might be a good idea to focus on the facts. The best way to learn about outsourcing is to start with the National Association of Software and Service Companies (NASSCOM) and its president , Kiran Karnik, who remarked that “we hope to log an export growth between 26-28 per cent over last year.” In 2002-2003 India’s IT exports reached $9.5 billion. As a whole, the industry’s worth was $16.5 billion or 3% of India’s GDP. Their IT industry employs over 700,000 professionals. We must remember that the population in India slightly exceeds 1 billion people. Karnik stated that the industry hopes to generate revenues of about $80 billion by 2008, and related that the expected growth would come more from the increasing business process outsourcing (BPO) sector than the services sector. “Let’s say the breakup would be like BPO 40-45 percent and services 18 percent,” he stated. Karnik mentioned that the U.S. is the Indian IT industry’s biggest export market at 71% followed by the U.K. at 14% and the rest of Europe at 9% in 2002-2003. Karnik said the industry had been “upset” with the decision of the U.S. to lower the ceiling of H1-B visas, but he was certain that this development would not impact the industry over the long term. These visas are valid for three years, and are extendable for another three. From October 1, the U.S. reduced the total number of such visas to 65,000 from 195,000.
Yesterday I failed to mention one facet of the proposed Medicare legislation. In an effort to get the support from senators representing 30 states with Medicare reimbursements below the national average, the legislation would assist rural areas. Final numbers still have to be computed by the CBO; however, it is estimated that $20 to $25 billion would go towards rural healthcare states to offset long-standing complaints that Medicare reimbursements are too low in areas with less expensive costs for doctors and hospitals. Michael Abrams, executive vice president of the Iowa Medical Society, remarked “we would hope that any Iowa legislator who opposes other components of the bill would hold their nose, vote for it, then work to perfect those other components later.”
Dan Gilmartin, deputy director of the Michigan Municipal League, stated “I don’t know of a single city in Michigan that has increased its employment at all in the last several years. I can name a number of cities that are way down in terms of employment, whether by not filling retirements or actually laying off people. We’re facing a severe budget crisis.” Gov. Jennifer Granholm is looking at cutting another $200 million in revenue sharing payments from the state to local units of government. She is also threatening layoffs if unionized employees don’t approve $230 million in wage and benefit concessions. Mary Ettinger, president of UAW Local 600, which represents state employees, remarked “the general public here in Michigan believes that state employees are overpaid and underworked. We don’t have a lot of sympathy from the general public because they don’t see the connection between what we do and their daily lives.”
One of the major problems with computers is the area of security and the ability of hackers to break into code and create nightmares throughout the computing world. The worst nightmare for hackers is coming to your neighborhood. The Navajo is not arriving on a horse. It consists of 19-inch black boxes that generate and read the signals over a fiber-optic line. This is the world of quantum encryption brought to you by a company located in New York City called MagiQ Technologies. The website is www.magiqtech.com. The company was formed in 1999 by Robert Gelfond, a former quant trader at D.E. Shaw &Co. and Millennium Partners. The Shaw firm may sound familiar to you. Jeff Bezos of Amazon worked there as well. Gelfond was an early investor in Amazon, and Bezos was an early investor in MagiQ. Gelfond pegs the market for the initial use of his company’s technology to be about $200 million with the second-phase market potential well over $1 billion. With potential users, such as, government agencies, banks, insurers, health care organizations, and others, I view the market as being significantly larger. Microsoft’s security concerns would dwarf the aforementioned potential markets. Lov Grover, a quantum computing researcher at Bell Laboratories, and not involved with MagiQ, stated “there are really no ways of cracking this code.”
A potential competitor could be id Quantique of Geneva as this company has produced a system with similarities to Navajo, and it is in the pilot stage.
Outsourcing is a hot topic these days. I thought it might be a good idea to focus on the facts. The best way to learn about outsourcing is to start with the National Association of Software and Service Companies (NASSCOM) and its president , Kiran Karnik, who remarked that “we hope to log an export growth between 26-28 per cent over last year.” In 2002-2003 India’s IT exports reached $9.5 billion. As a whole, the industry’s worth was $16.5 billion or 3% of India’s GDP. Their IT industry employs over 700,000 professionals. We must remember that the population in India slightly exceeds 1 billion people. Karnik stated that the industry hopes to generate revenues of about $80 billion by 2008, and related that the expected growth would come more from the increasing business process outsourcing (BPO) sector than the services sector. “Let’s say the breakup would be like BPO 40-45 percent and services 18 percent,” he stated. Karnik mentioned that the U.S. is the Indian IT industry’s biggest export market at 71% followed by the U.K. at 14% and the rest of Europe at 9% in 2002-2003. Karnik said the industry had been “upset” with the decision of the U.S. to lower the ceiling of H1-B visas, but he was certain that this development would not impact the industry over the long term. These visas are valid for three years, and are extendable for another three. From October 1, the U.S. reduced the total number of such visas to 65,000 from 195,000.
Yesterday I failed to mention one facet of the proposed Medicare legislation. In an effort to get the support from senators representing 30 states with Medicare reimbursements below the national average, the legislation would assist rural areas. Final numbers still have to be computed by the CBO; however, it is estimated that $20 to $25 billion would go towards rural healthcare states to offset long-standing complaints that Medicare reimbursements are too low in areas with less expensive costs for doctors and hospitals. Michael Abrams, executive vice president of the Iowa Medical Society, remarked “we would hope that any Iowa legislator who opposes other components of the bill would hold their nose, vote for it, then work to perfect those other components later.”
Dan Gilmartin, deputy director of the Michigan Municipal League, stated “I don’t know of a single city in Michigan that has increased its employment at all in the last several years. I can name a number of cities that are way down in terms of employment, whether by not filling retirements or actually laying off people. We’re facing a severe budget crisis.” Gov. Jennifer Granholm is looking at cutting another $200 million in revenue sharing payments from the state to local units of government. She is also threatening layoffs if unionized employees don’t approve $230 million in wage and benefit concessions. Mary Ettinger, president of UAW Local 600, which represents state employees, remarked “the general public here in Michigan believes that state employees are overpaid and underworked. We don’t have a lot of sympathy from the general public because they don’t see the connection between what we do and their daily lives.”
One of the major problems with computers is the area of security and the ability of hackers to break into code and create nightmares throughout the computing world. The worst nightmare for hackers is coming to your neighborhood. The Navajo is not arriving on a horse. It consists of 19-inch black boxes that generate and read the signals over a fiber-optic line. This is the world of quantum encryption brought to you by a company located in New York City called MagiQ Technologies. The website is www.magiqtech.com. The company was formed in 1999 by Robert Gelfond, a former quant trader at D.E. Shaw &Co. and Millennium Partners. The Shaw firm may sound familiar to you. Jeff Bezos of Amazon worked there as well. Gelfond was an early investor in Amazon, and Bezos was an early investor in MagiQ. Gelfond pegs the market for the initial use of his company’s technology to be about $200 million with the second-phase market potential well over $1 billion. With potential users, such as, government agencies, banks, insurers, health care organizations, and others, I view the market as being significantly larger. Microsoft’s security concerns would dwarf the aforementioned potential markets. Lov Grover, a quantum computing researcher at Bell Laboratories, and not involved with MagiQ, stated “there are really no ways of cracking this code.”
A potential competitor could be id Quantique of Geneva as this company has produced a system with similarities to Navajo, and it is in the pilot stage.
Sunday, November 16, 2003
11/16/03 State Budget Bags
Arnold gets sworn in as governor tomorrow. He must be a glutton for punishment. Incoming finance director Donna Arduin said yesterday that, if lawmakers make no changes, California faces a $28.9 billion deficit by July 2005. She said the state, which is counting on borrowing $12.5 billion, probably would not be legally permitted to go ahead with this borrowing. By returning vehicle license fees to pre-Oct 1 rates, the state will need to reimburse cities and counties $7.6 billion over 18 months for lost revenue. There will be at least a $13.2 billion shortfall in the 12 months ending July 2005. Within three years, the fundamental budget gap will grow to about $15 billion per year, according to current forecasts. A significant part of the budget problem revolves around education. Fifty cents of every new dollar must be set aside for public schools from kindergarten through community colleges. Proposition 98 has mandated minimum funding guarantee for schools. As such, the state will owe K-12 schools and community colleges about $1 billion more than the $45 billion they received in the 2003-2004 budget.
We shall take a tour of some of the other states. More than 25,000 Colorado residents filed for bankruptcy in the past year, a 24.3% increase from a year earlier and the highest rate in the country, according to federal figures released on Friday. Since December 2000, Colorado has lost 90,000 jobs. Including 6,000 in September. Last week, economists said it appears Colorado will have two straight years of job losses, something that hasn’t happened since the Depression. For the three months that ended Sept. 30, Colorado had 177 business and 6,655 personal bankruptcy filings.
In Arizona revenues for fiscal 2005 will be about $961 million less than anticipated spending. The president of Northern Arizona University announced on Friday that he will raise fees and tuition and cut 70 faculty or staff positions, 10% of those employed. His goal is to save $15 million over the next three years. Alaska is facing a budget deficit of hundreds of millions of dollars. Indiana is facing a deficit of at least $810 million. Michigan has a $920 million shortfall. A recent poll of Kansas citizens indicated that the primary concern is their economy and creating jobs. The largest percentage said the best way to improve the Kansas economy is to slow government spending, and that budget cuts should occur before any discussion of tax increases.
One of the concerns expressed by folks in Kansas was “lowering healthcare costs.” Let’s take a short look at some of the proposals in the “bipartisan” Medicare legislation being discussed by House and Senate Republican leaders. Democrats only need 41 votes to block the measure using procedural tactics, and last week 44 senators, and that included 7 Republicans, signed a letter saying they oppose it. Beginning in 2006, it would provide seniors with a prescription drug benefit, and this is projected to cost $400 billion over 10 years. In the meantime, seniors would receive discount cards that are estimated by Bush to reduce drug costs an average of 15%. Private insurance companies would play a significant Medicare role in delivering prescription drugs and offering managed-care plans or new PPOs. A health-related tax break would be created for individuals with high-deductible insurance policies. A ban on importing cheaper prescription drugs from abroad would be maintained. In order to reduce the number of retirees who would lose their private coverage, the bill would provide $70 billion in tax-free subsidies to their former employees. In 2006, Medicare would offer drug coverage for about $35 a month. Seniors would have to meet a $275 deductible, then have 75% of drug costs between $276 and $2,200 subsidized by the government. Beneficiaries would pay all their prescription drug expenses beyond that, until they had spent $3,600 out of pocket. At that point, the government would step in again and cover 95% of costs. Low-income seniors, those earning up to $12,123 a year, would receive an additional subsidy. Prior to 2006, Bush stated “the discount drug card would include a $600 annual credit toward drug costs.” In addition, the bill creates a temporary program that tests competition in six metropolitan areas for up to six years, starting in 2010. The plan would have Medicare bidding against private health insurers to cover seniors only in areas where private plans played a substantial role in covering Medicare beneficiaries.
I would like to return to yesterday’s discussion of overtime. I need to provide some additional facts. An unpublished Bureau of Labor Statistics study indicates that those in administrative, managerial, and executive occupations spent an average of 45 hours at work each week in 2002. With the current trend of increased productivity in 2003, it is fair to say that the number of hours at work each week has risen this year. The issue of overtime pay rests with the growing number of salaried workers. The study indicates about 50 million U.S. employees are not eligible for overtime; about 71 million are eligible. We must remember that hourly workers, under the 65-year-old Fair Labor Standards Act, be paid time-and-a-half for overtime. Randy IIG, an economist with the Bureau of Labor Statistics, states the government’s published data may be misleading because they “only measure hours on the job.” The data do not include night and weekend hours spent handling work-related emails, phone calls, and paperwork from home. He remarked “the number of professionals and managers is growing. The percentage of people working off the clock is growing.”
Yesterday’s two Black Hawk helicopters collided near Mosul killing 17 troops. It was the deadliest single incident involving U.S. forces since the March 20 invasion of Iraq. The total killed in combat since May 1, when Bush declared that major combat had ended, has now reached 177. The same Administration that has told you the major combat in Iraq has ended is the same Administration that has told you how the economy has turned and that we can expect better times in 2004, an election year. I suggest you take a look around. Our troops have nowhere to hide in Iraq. They are getting killed daily. Where are you going to hide? – in your home equity line of credit or your car loan or your credit card balance or possibly your overdraft privilege on your checking account or your margin account at the brokerage house. I am not hitting below the belt. It’s not for me to tell you how to live. It’s your life and your money and your financial well being. If you want to live on the edge, it’s your edge. The government has no safety net below for you. The government is busted. Maybe you overlooked the $500 billion trade deficit and the $500 billion budget deficit that has been forecast for this year. If you see an old man on the street with a tin cup, look kindly on him. He represents all Americans. His name is Uncle Sam.
Arnold gets sworn in as governor tomorrow. He must be a glutton for punishment. Incoming finance director Donna Arduin said yesterday that, if lawmakers make no changes, California faces a $28.9 billion deficit by July 2005. She said the state, which is counting on borrowing $12.5 billion, probably would not be legally permitted to go ahead with this borrowing. By returning vehicle license fees to pre-Oct 1 rates, the state will need to reimburse cities and counties $7.6 billion over 18 months for lost revenue. There will be at least a $13.2 billion shortfall in the 12 months ending July 2005. Within three years, the fundamental budget gap will grow to about $15 billion per year, according to current forecasts. A significant part of the budget problem revolves around education. Fifty cents of every new dollar must be set aside for public schools from kindergarten through community colleges. Proposition 98 has mandated minimum funding guarantee for schools. As such, the state will owe K-12 schools and community colleges about $1 billion more than the $45 billion they received in the 2003-2004 budget.
We shall take a tour of some of the other states. More than 25,000 Colorado residents filed for bankruptcy in the past year, a 24.3% increase from a year earlier and the highest rate in the country, according to federal figures released on Friday. Since December 2000, Colorado has lost 90,000 jobs. Including 6,000 in September. Last week, economists said it appears Colorado will have two straight years of job losses, something that hasn’t happened since the Depression. For the three months that ended Sept. 30, Colorado had 177 business and 6,655 personal bankruptcy filings.
In Arizona revenues for fiscal 2005 will be about $961 million less than anticipated spending. The president of Northern Arizona University announced on Friday that he will raise fees and tuition and cut 70 faculty or staff positions, 10% of those employed. His goal is to save $15 million over the next three years. Alaska is facing a budget deficit of hundreds of millions of dollars. Indiana is facing a deficit of at least $810 million. Michigan has a $920 million shortfall. A recent poll of Kansas citizens indicated that the primary concern is their economy and creating jobs. The largest percentage said the best way to improve the Kansas economy is to slow government spending, and that budget cuts should occur before any discussion of tax increases.
One of the concerns expressed by folks in Kansas was “lowering healthcare costs.” Let’s take a short look at some of the proposals in the “bipartisan” Medicare legislation being discussed by House and Senate Republican leaders. Democrats only need 41 votes to block the measure using procedural tactics, and last week 44 senators, and that included 7 Republicans, signed a letter saying they oppose it. Beginning in 2006, it would provide seniors with a prescription drug benefit, and this is projected to cost $400 billion over 10 years. In the meantime, seniors would receive discount cards that are estimated by Bush to reduce drug costs an average of 15%. Private insurance companies would play a significant Medicare role in delivering prescription drugs and offering managed-care plans or new PPOs. A health-related tax break would be created for individuals with high-deductible insurance policies. A ban on importing cheaper prescription drugs from abroad would be maintained. In order to reduce the number of retirees who would lose their private coverage, the bill would provide $70 billion in tax-free subsidies to their former employees. In 2006, Medicare would offer drug coverage for about $35 a month. Seniors would have to meet a $275 deductible, then have 75% of drug costs between $276 and $2,200 subsidized by the government. Beneficiaries would pay all their prescription drug expenses beyond that, until they had spent $3,600 out of pocket. At that point, the government would step in again and cover 95% of costs. Low-income seniors, those earning up to $12,123 a year, would receive an additional subsidy. Prior to 2006, Bush stated “the discount drug card would include a $600 annual credit toward drug costs.” In addition, the bill creates a temporary program that tests competition in six metropolitan areas for up to six years, starting in 2010. The plan would have Medicare bidding against private health insurers to cover seniors only in areas where private plans played a substantial role in covering Medicare beneficiaries.
I would like to return to yesterday’s discussion of overtime. I need to provide some additional facts. An unpublished Bureau of Labor Statistics study indicates that those in administrative, managerial, and executive occupations spent an average of 45 hours at work each week in 2002. With the current trend of increased productivity in 2003, it is fair to say that the number of hours at work each week has risen this year. The issue of overtime pay rests with the growing number of salaried workers. The study indicates about 50 million U.S. employees are not eligible for overtime; about 71 million are eligible. We must remember that hourly workers, under the 65-year-old Fair Labor Standards Act, be paid time-and-a-half for overtime. Randy IIG, an economist with the Bureau of Labor Statistics, states the government’s published data may be misleading because they “only measure hours on the job.” The data do not include night and weekend hours spent handling work-related emails, phone calls, and paperwork from home. He remarked “the number of professionals and managers is growing. The percentage of people working off the clock is growing.”
Yesterday’s two Black Hawk helicopters collided near Mosul killing 17 troops. It was the deadliest single incident involving U.S. forces since the March 20 invasion of Iraq. The total killed in combat since May 1, when Bush declared that major combat had ended, has now reached 177. The same Administration that has told you the major combat in Iraq has ended is the same Administration that has told you how the economy has turned and that we can expect better times in 2004, an election year. I suggest you take a look around. Our troops have nowhere to hide in Iraq. They are getting killed daily. Where are you going to hide? – in your home equity line of credit or your car loan or your credit card balance or possibly your overdraft privilege on your checking account or your margin account at the brokerage house. I am not hitting below the belt. It’s not for me to tell you how to live. It’s your life and your money and your financial well being. If you want to live on the edge, it’s your edge. The government has no safety net below for you. The government is busted. Maybe you overlooked the $500 billion trade deficit and the $500 billion budget deficit that has been forecast for this year. If you see an old man on the street with a tin cup, look kindly on him. He represents all Americans. His name is Uncle Sam.
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