12/6/03 Show Me The Money
Yesterday Bush attended a noontime $2,000-a-plate fund-raiser at the Hyatt Regency in Baltimore. While collecting $1 million more for his election campaign, he proclaimed that “the tax relief we passed is working for the American people.” It’s true the American people are working harder but where is the remuneration? The average hourly earnings of production or non-supervisory workers on private non-farm payrolls increased by one cent in November, and the average weekly earnings amount to $524.09. Over the year, average hourly earnings increased by 2.1%, and after inflation, the average worker has absolutely nothing to show for his increased productivity. As Dean Baker of the Center for Economic & Policy Research points out, “this is the lowest rate of nominal wage growth that we’ve seen since 1964, when data was first collected.” When was the last time Bush appeared at an unemployment office? When was the last time he held a “conversation” with workers who are on strike over the threat of decreased healthcare benefits? You can hold up a fake turkey, you can avoid going to funerals for our fallen U.S. soldiers, you can hold up a banner stating ‘mission accomplished,’ but you can’t fool all the people all the time. Leaders bleed with the people. Leaders bleed with the troops. Leaders feel and know the pain. Bush raised $4.6 million this week in Detroit, Newark, Pittsburgh, and Baltimore. For 40 consecutive months the manufacturing sector has lost jobs. The average duration of unemployment is 20.1 weeks, a 19-year high. More than 2 million jobless Americans have been out of work for more than a half-year. They represent almost 24% of the total unemployed. Bush may have a job but millions do not.
As Andrew Stettner, policy analyst for the National Employment Law Project points out, the Labor Department’s household payroll survey is widely skewed. It counts as employed anyone working even one hour. For example, Stettner stated, “if you fix the roof of your friend one weekend and he gives you 100 bucks, then you are employed. All sorts of part-time employment is included.” Until the duration to find a job comes down, unemployment will not be reduced. That has not happened. In addition, as the Labor Department stated, in November 1.5 million persons were marginally attached to the labor force. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. There were 457,000 discouraged workers in November, and they are described as not currently looking for work specifically because they believed no jobs were available for them. Within the marginally attached, another 1 million Americans had not searched for work for reasons such as school or family responsibilities. Mark Zandi of Economy.com describes the situation quite accurately. He remarked “what’s disconcerting is that if you’re unemployed, you’re staying unemployed.” In addition, starting December 21, about 90,000 jobless Americans a week will not have access to extra unemployment benefits. For millions, the doldrums will continue. Economist Richard Carlson of Spectrum Economics in Mountain View, CA observed that “nationally, this is an economists’ recovery. Everything we measure is good except jobs.”
Actually, there is something else in the wind that is changing the economic landscape. Retailers are wary. The retail sector added fewer workers for the holidays than a year ago. They were smart to do so. Consumers are using less credit. According to the Cambridge Consumer Credit Index survey, 38% of all Americans plan to use less credit to purchase holiday gifts this year, up by 7 percentage points from a year ago. Another 29% plan to use the same amount of credit as they did last year, and that is down 2 percentage points from 2002. Another 29% plan not to use any credit cards this season, down by 7 percentage points from last year. In terms of the overall consumer debt picture, the survey indicates that, in December, 30% of Americans say they have taken on more debt, with 22% taking on a little and 9% taking on a lot more debt. Conversely, 70% of Americans have paid off debt, with 53% paying off a little and 17% paying off a lot. The numbers in this survey are borne out by the recent Federal Reserve numbers. Consumer credit increased by only one-half of one percent in October 2003 and November edged up even less. In December 2002 consumer credit contracted, and it offset the rise in the prior two months so that consumer credit was unchanged for last year’s fourth quarter. This contraction helped to explain the very poor retail sales for 2002’s holiday shopping season. Should this December follow the most recent two months of only a slight increase in consumer credit, then this holiday shopping season will not be much better than last year’s. If that is the case, business optimism for the near future will be significantly dampened. A growing number of people are frustrated with high credit card interest rates and other bank fees. In addition, families are hurting from longer layoffs, low wages, few overtime hours, and increased costs for health care, natural gas, local taxes and fees. Families have less capacity to spend. Their free cash flow is dwindling. The growth in consumer spending is on the decline. The use of consumer credit is on the decline. With two-thirds of our GDP generated by the consumer, the results looking out are less dependable. The consumer is getting the picture. The Bush Administration’s spending habits continue out of control, and I suggest a prompt enrollment in spenders’ anonymous might be in order.
Yesterday was another debacle for the U.S. dollar. The euro has risen 15% this year versus the greenback. The yen is at a 3-year high versus the dollar, and the Swiss franc is at a 5-year high. Meanwhile, gold jumped to another multi-year high of $407 per ounce. The one bright spot was that the two-year U.S. Treasury had its biggest gain since January 2002. The disappointing job report created a significant decline in yields on Treasury bonds.
There was an interesting development in Hyderabad, India. Intel is looking to implement 1,000 Wi-Fi hot spots in India by mid-2004 for various customers and has initiated a wireless verification program in the country to improve performance and enable interoperability across these locations. The intention is to improve compatibility for Intel’s Centrino mobile technology in hot spots and to make WLAN work in India.
Friday, December 05, 2003
12/5/03 Wall Street Expectations
Wall Street analysts do the investing world a serious disservice. In an effort to raise the upside potential for stock prices, they are dedicated in their efforts to increase their earnings projections. Often this raised guidance goes against the forecasts provided by management. The most recent example is with the four-week sales period ending November 28 for WalMart. The company was quite clear in their prediction that comparable sales for this period would be in the range of a 3 to 5 per cent increase. In fact, total U.S. sales were reported up 3.9%. The International division’s comp sales rose 15.8%. The aforementioned figures are essentially identical for the latest forty-three week period. These numbers proved disappointing to Wall Street. They had chosen to ignore WalMart’s predictions. I guess the analysts think they are smarter and know more about the company’s business than does its management. That should not be surprising. According to Thomson Financial, in November U.S. corporate insiders sold $43 worth of their companies’ shares for every $1 they purchased. Insider sales amounted to $4.5 billion for the month. The ignorant greed on Wall Street will lead to many a financial ruin. You can back test that statement, and take it to the bank. As an aside, for the December five-week period, WalMart’s management is “forecasting comparative sales for the total company to be in the 3 to 5 percent range.” That is identical to their guidance for November. Over the years their predictions have been on the money.
Ellen Tolley, a spokeswoman for the National Retail Federation, stated “we think retailers will probably hire about the same amount of people as they did last year and ask them to work more hours. Last year, retailers nationwide hired about 750,000 people to help in the crucial final quarter.” Kurt Barnard, president and chief economist for Barnard’s Retail Consulting Group, remarked “the idea for almost every business in America today is to cut costs as much as possible. Staffing is a very important way to achieve that.” Surveying some big retailers, Limited Brands is hiring the same 75,000 seasonal workers as last year. Nordstrom said it’s hiring the same number of seasonal workers in the Bay Area this year. On the other hand, the Gap is hiring 20,000 seasonal workers, and that’s a 30% increase from last year. For non-retail seasonal jobs, Kelly Services’ president stated “we saw a slight increase, say 1 to 2 percent. Last year was flat to negative.” FedEx Ground hired 2,500 seasonal workers, the same as a year ago. UPS is adding 50,000 seasonal workers, the same as last year. I have no doubt that the payroll number released this morning shall be a large one. No matter the spin, I know from my research that the vast majority of the increased employment is of a seasonal nature, and it will be only marginally better than last year’s holiday season.
I strongly suggest that you circle December 20 on your calendar. This is the date jobless workers who have exhausted their regular unemployment benefits stop receiving more benefits. Since March 2002, the federal unemployment program has provided up to 13 weeks of additional benefits to people who exhaust their state benefits and still have not been able to find a job. Under this program, people in some high unemployment states, such as, California were eligible for a second 13-week extension of federal benefits after their first 13-week extension ran out. After December 20, people who are already receiving extended benefits will continue to receive them until their allotment is exhausted, or through April 3, whichever occurs first. If regular benefits expire December 21 or later, there are no more benefits received. If the present program is not extended, an estimated 66,696 people in California will run out of state benefits. It should be noted that California’s unemployment insurance fund is expected to run out of money in January.
According to the California Chamber of Commerce, to replenish this fund, employers will have to pay an average of $346 per worker in 2004, up from $210 per worker in 2003.
According to IDC, in 2004 offshore outsourcing will increase 100% in the U.S. IT market, and that by 2007, approximately 25% of the IT services market will be outsourced and accomplished offshore. This trend can only create greater unemployment problems for California as well as other states with a large IT base.
Tyson Foods announced the closing of facilities in Manchester, New Hampshire and Augusta, Maine. About 720 workers will lose their jobs. The company is making an effort to further improve long-term manufacturing efficiencies. A spokesperson for Tyson stated “while it is never easy to make business decisions like these that affect the lives of our team members and the communities in which we operate, these steps are necessary for us to meet our responsibilities to all of our stakeholders.”
Robert Parry, San Francisco Fed President, remarked last week “the inflation rate, which is already down to one and a quarter percent, may slip even lower—despite rapid economic growth.” That statement should make for an interesting Fed meeting next week.
The Oxford Research International survey on Iraq indicated that 78.8% of respondents have little or no confidence in the U.S. and British occupation forces. In contrast, about 70% of Iraqis had a lot or a great deal of trust in their religious leaders, and they had more trust in the United Nations (34.6%) than the U.S. and British occupation forces. Only 1.1% of Iraqis said the U.S.-led reconstruction efforts is what Iraqis need most in the next 12 months. One more U.S. soldier was killed in Iraq today.
Wall Street analysts do the investing world a serious disservice. In an effort to raise the upside potential for stock prices, they are dedicated in their efforts to increase their earnings projections. Often this raised guidance goes against the forecasts provided by management. The most recent example is with the four-week sales period ending November 28 for WalMart. The company was quite clear in their prediction that comparable sales for this period would be in the range of a 3 to 5 per cent increase. In fact, total U.S. sales were reported up 3.9%. The International division’s comp sales rose 15.8%. The aforementioned figures are essentially identical for the latest forty-three week period. These numbers proved disappointing to Wall Street. They had chosen to ignore WalMart’s predictions. I guess the analysts think they are smarter and know more about the company’s business than does its management. That should not be surprising. According to Thomson Financial, in November U.S. corporate insiders sold $43 worth of their companies’ shares for every $1 they purchased. Insider sales amounted to $4.5 billion for the month. The ignorant greed on Wall Street will lead to many a financial ruin. You can back test that statement, and take it to the bank. As an aside, for the December five-week period, WalMart’s management is “forecasting comparative sales for the total company to be in the 3 to 5 percent range.” That is identical to their guidance for November. Over the years their predictions have been on the money.
Ellen Tolley, a spokeswoman for the National Retail Federation, stated “we think retailers will probably hire about the same amount of people as they did last year and ask them to work more hours. Last year, retailers nationwide hired about 750,000 people to help in the crucial final quarter.” Kurt Barnard, president and chief economist for Barnard’s Retail Consulting Group, remarked “the idea for almost every business in America today is to cut costs as much as possible. Staffing is a very important way to achieve that.” Surveying some big retailers, Limited Brands is hiring the same 75,000 seasonal workers as last year. Nordstrom said it’s hiring the same number of seasonal workers in the Bay Area this year. On the other hand, the Gap is hiring 20,000 seasonal workers, and that’s a 30% increase from last year. For non-retail seasonal jobs, Kelly Services’ president stated “we saw a slight increase, say 1 to 2 percent. Last year was flat to negative.” FedEx Ground hired 2,500 seasonal workers, the same as a year ago. UPS is adding 50,000 seasonal workers, the same as last year. I have no doubt that the payroll number released this morning shall be a large one. No matter the spin, I know from my research that the vast majority of the increased employment is of a seasonal nature, and it will be only marginally better than last year’s holiday season.
I strongly suggest that you circle December 20 on your calendar. This is the date jobless workers who have exhausted their regular unemployment benefits stop receiving more benefits. Since March 2002, the federal unemployment program has provided up to 13 weeks of additional benefits to people who exhaust their state benefits and still have not been able to find a job. Under this program, people in some high unemployment states, such as, California were eligible for a second 13-week extension of federal benefits after their first 13-week extension ran out. After December 20, people who are already receiving extended benefits will continue to receive them until their allotment is exhausted, or through April 3, whichever occurs first. If regular benefits expire December 21 or later, there are no more benefits received. If the present program is not extended, an estimated 66,696 people in California will run out of state benefits. It should be noted that California’s unemployment insurance fund is expected to run out of money in January.
According to the California Chamber of Commerce, to replenish this fund, employers will have to pay an average of $346 per worker in 2004, up from $210 per worker in 2003.
According to IDC, in 2004 offshore outsourcing will increase 100% in the U.S. IT market, and that by 2007, approximately 25% of the IT services market will be outsourced and accomplished offshore. This trend can only create greater unemployment problems for California as well as other states with a large IT base.
Tyson Foods announced the closing of facilities in Manchester, New Hampshire and Augusta, Maine. About 720 workers will lose their jobs. The company is making an effort to further improve long-term manufacturing efficiencies. A spokesperson for Tyson stated “while it is never easy to make business decisions like these that affect the lives of our team members and the communities in which we operate, these steps are necessary for us to meet our responsibilities to all of our stakeholders.”
Robert Parry, San Francisco Fed President, remarked last week “the inflation rate, which is already down to one and a quarter percent, may slip even lower—despite rapid economic growth.” That statement should make for an interesting Fed meeting next week.
The Oxford Research International survey on Iraq indicated that 78.8% of respondents have little or no confidence in the U.S. and British occupation forces. In contrast, about 70% of Iraqis had a lot or a great deal of trust in their religious leaders, and they had more trust in the United Nations (34.6%) than the U.S. and British occupation forces. Only 1.1% of Iraqis said the U.S.-led reconstruction efforts is what Iraqis need most in the next 12 months. One more U.S. soldier was killed in Iraq today.
Thursday, December 04, 2003
12/4/03 Another Look At Employment Trends
Xerox announced the elimination of about 800 jobs in the United States. It is a further effort to streamline their operations. Over the last two years, the company has cut its worldwide payroll by about a third to its present staff of 62,000. A Xerox spokesperson stated “our approach now is to react and adapt to business conditions to stay competitive.” There is a good deal of talk about the rebound in the semiconductor industry. Yesterday, chip maker ON Semiconductor stated they would close manufacturing operations in East Greenwich, Rhode Island and cut about 330 jobs as part of a cost-cutting effort. The company will transfer those operations to lower cost manufacturing facilities outside of North America. Navistar International, the world’s fourth-largest truck manufacturer, stated it will cut 1,600 employees who will be given early-retirement incentives. The other side of the employment equation can be found at Norm Thompson, a mail order company located in Portland, Oregon. The holiday season is their busy time of the year. They have hired 2000 seasonal workers, 1000 for their call center and 1000 for their distribution center. Naturally, after the holiday shopping season is over, their services will no longer be required. The aforementioned is a pretty fair look at the present-day employment picture. It gives you a window to Friday’s payroll report. The headlines will make for stunning reading. President Bush will proclaim his tax cuts are working, and people are returning to work. He is quite correct. Some have returned to work for the holidays.
The Administration can boast about the gains in productivity in the third quarter. Companies are squeezing more out of their workforce. Hours worked remain about unchanged and so do wages, and bonuses are slim pickings. Of course, that formula doesn’t do much for the standard of living on Main Street. When you cheer for the home team, please keep in mind that unit labor costs, or the amount paid for each unit of production, fell at a 5.8% annual rate last quarter, after a 3.2% drop in the previous three months. The last time labor costs fell more was a 6.5% decline in the second quarter of 1983.
While companies are squeeeeezing you, so is your government. You will feel it on April 15, 2004. That is the day you will be officially screwed. Remember those lower tax rates squeezed into your paychecks? For many taxpayers those tax cuts shall push more people into paying the Alternative Minimum Tax or AMT. According to the U.S. Congress’ Joint Committee on Taxation, 2.5 million Americans will be driven into the AMT on their 2003 taxes and that shall jump to 3 million in another year. Tom Ochsenschlager, a partner with Grant Thornton, stated that those earning income mainly from capital gains and dividends “should be concerned.” He remarked that it is very difficult to generalize about AMT. In my view, it would be quite wise to get with an accountant about AMT. John Battaglia, a director at Deloitte, stated “if you find yourself in AMT in 2003, you would not want to prepay your state and local income taxes. You’re not going to get the benefit of that deduction in AMT. One should also note that exercised but unsold stock options are taxed under AMT. If the stock is down significantly, it might be to your advantage to sell the stock prior to year-end and less income would be picked up. Under AMT, one is taxed on the difference between the grant price and the sale price, not the exercise price. There shall be another surprise. Interest on a home equity loan can only be deducted if the funds were used to buy, build, or remodel a home, and not for personal purposes under AMT. In sum, for millions of Americans the tax cuts delivered to your doorstep shall be nullified by the AMT, and that is the bad news. The good news is it’s only politics as usual. In the words of Chief Justice John Marshall, “the power to tax is the power to destroy.”
I am delighted to report that Costco, one of the great ones, had a great November. Their over-all same-store sales rose 14% with a 10% rise in the United States and a 29% increase in international sales. Their management knows how to run a business.
The other day I wrote where the Governor of Indiana was attempting to void an outsourcing contract with Tata, an IT consulting company located in India. I am happy to report that the lawmakers in Indiana opposed the Governor’s actions, as they felt it could affect Indiana’s drive to attract foreign investment. However, this will not be the last we hear of this problem. New Jersey Senator Shirley Turner is reported considering legislation that will ban the outsourcing of state contracts to companies based abroad. Outsourcing will continue to grow. Britain’s largest insurer Aviva Plc just announced it would create 2,500 back office jobs in India in addition to the 1,200 jobs that had already been transferred there.
When Chinese Premier Wen Jiabao visits the United States, he shall participate in a luncheon in Boston on Wednesday. The luncheon is being sponsored by Boston’s largest insurance company, Liberty Mutual, which ia opening a major branch office in China next month in Chongqing. The state of Massachusetts has a growing relationship with China. According to the Massachusetts Institute for Social and Economic Research, the state’s exports to China rose 47% to $416 million in the first three months of the year.
Saudi Oil Minister Ali al-Naimi announced today that “ a decision must be taken during this meeting to cut production starting from the first quarter of next year. OPEC should in its statement indicate it will cut its output starting from February.” OPEC’s previous price target was $25 per barrel and they want to raise it to a range of $22-28 with sales hopefully at the upper part of the range. Naimi stated the dollar’s sharp slump against the euro over the past two years justified the higher $28 price for OPEC crude. If we were in his shoes, we’d be making the same point.
A recent survey by the Segal Company revealed that retail prescription drug costs are set to rise by 18.1% in 2004, only a small decrease from the 19.5% jump this year. Costs for PPO plans are projected to increase 14.4% in 2004, roughly the same as this year. For HMOs, healthcare costs are anticipated to rise by 13.7% in 2004, again only a small decline from this year’s 14.4% rise.
Xerox announced the elimination of about 800 jobs in the United States. It is a further effort to streamline their operations. Over the last two years, the company has cut its worldwide payroll by about a third to its present staff of 62,000. A Xerox spokesperson stated “our approach now is to react and adapt to business conditions to stay competitive.” There is a good deal of talk about the rebound in the semiconductor industry. Yesterday, chip maker ON Semiconductor stated they would close manufacturing operations in East Greenwich, Rhode Island and cut about 330 jobs as part of a cost-cutting effort. The company will transfer those operations to lower cost manufacturing facilities outside of North America. Navistar International, the world’s fourth-largest truck manufacturer, stated it will cut 1,600 employees who will be given early-retirement incentives. The other side of the employment equation can be found at Norm Thompson, a mail order company located in Portland, Oregon. The holiday season is their busy time of the year. They have hired 2000 seasonal workers, 1000 for their call center and 1000 for their distribution center. Naturally, after the holiday shopping season is over, their services will no longer be required. The aforementioned is a pretty fair look at the present-day employment picture. It gives you a window to Friday’s payroll report. The headlines will make for stunning reading. President Bush will proclaim his tax cuts are working, and people are returning to work. He is quite correct. Some have returned to work for the holidays.
The Administration can boast about the gains in productivity in the third quarter. Companies are squeezing more out of their workforce. Hours worked remain about unchanged and so do wages, and bonuses are slim pickings. Of course, that formula doesn’t do much for the standard of living on Main Street. When you cheer for the home team, please keep in mind that unit labor costs, or the amount paid for each unit of production, fell at a 5.8% annual rate last quarter, after a 3.2% drop in the previous three months. The last time labor costs fell more was a 6.5% decline in the second quarter of 1983.
While companies are squeeeeezing you, so is your government. You will feel it on April 15, 2004. That is the day you will be officially screwed. Remember those lower tax rates squeezed into your paychecks? For many taxpayers those tax cuts shall push more people into paying the Alternative Minimum Tax or AMT. According to the U.S. Congress’ Joint Committee on Taxation, 2.5 million Americans will be driven into the AMT on their 2003 taxes and that shall jump to 3 million in another year. Tom Ochsenschlager, a partner with Grant Thornton, stated that those earning income mainly from capital gains and dividends “should be concerned.” He remarked that it is very difficult to generalize about AMT. In my view, it would be quite wise to get with an accountant about AMT. John Battaglia, a director at Deloitte, stated “if you find yourself in AMT in 2003, you would not want to prepay your state and local income taxes. You’re not going to get the benefit of that deduction in AMT. One should also note that exercised but unsold stock options are taxed under AMT. If the stock is down significantly, it might be to your advantage to sell the stock prior to year-end and less income would be picked up. Under AMT, one is taxed on the difference between the grant price and the sale price, not the exercise price. There shall be another surprise. Interest on a home equity loan can only be deducted if the funds were used to buy, build, or remodel a home, and not for personal purposes under AMT. In sum, for millions of Americans the tax cuts delivered to your doorstep shall be nullified by the AMT, and that is the bad news. The good news is it’s only politics as usual. In the words of Chief Justice John Marshall, “the power to tax is the power to destroy.”
I am delighted to report that Costco, one of the great ones, had a great November. Their over-all same-store sales rose 14% with a 10% rise in the United States and a 29% increase in international sales. Their management knows how to run a business.
The other day I wrote where the Governor of Indiana was attempting to void an outsourcing contract with Tata, an IT consulting company located in India. I am happy to report that the lawmakers in Indiana opposed the Governor’s actions, as they felt it could affect Indiana’s drive to attract foreign investment. However, this will not be the last we hear of this problem. New Jersey Senator Shirley Turner is reported considering legislation that will ban the outsourcing of state contracts to companies based abroad. Outsourcing will continue to grow. Britain’s largest insurer Aviva Plc just announced it would create 2,500 back office jobs in India in addition to the 1,200 jobs that had already been transferred there.
When Chinese Premier Wen Jiabao visits the United States, he shall participate in a luncheon in Boston on Wednesday. The luncheon is being sponsored by Boston’s largest insurance company, Liberty Mutual, which ia opening a major branch office in China next month in Chongqing. The state of Massachusetts has a growing relationship with China. According to the Massachusetts Institute for Social and Economic Research, the state’s exports to China rose 47% to $416 million in the first three months of the year.
Saudi Oil Minister Ali al-Naimi announced today that “ a decision must be taken during this meeting to cut production starting from the first quarter of next year. OPEC should in its statement indicate it will cut its output starting from February.” OPEC’s previous price target was $25 per barrel and they want to raise it to a range of $22-28 with sales hopefully at the upper part of the range. Naimi stated the dollar’s sharp slump against the euro over the past two years justified the higher $28 price for OPEC crude. If we were in his shoes, we’d be making the same point.
A recent survey by the Segal Company revealed that retail prescription drug costs are set to rise by 18.1% in 2004, only a small decrease from the 19.5% jump this year. Costs for PPO plans are projected to increase 14.4% in 2004, roughly the same as this year. For HMOs, healthcare costs are anticipated to rise by 13.7% in 2004, again only a small decline from this year’s 14.4% rise.
Wednesday, December 03, 2003
12/3/03 A Holiday Season Minus FAO Schwarz
During the holiday shopping season New York City dwellers and its visitors can look forward to the lighting of the gigantic Christmas tree, ice skating in Central Park, and browsing through FAO Schwarz, a tradition since 1870. Steiff toys could be seen throughout, and children from all over the world would walk through the front door wide-eyed and mouth open in total amazement. Grown-ups would be caught up in this splendor. Who would have ever thought FAO could close? For me, it has always been better than Disneyland and Disney World. Having just filed for bankruptcy for the second time this year, it would appear that the lights could go dim at FAO. This is a great deal more than just a shame. In a world fraught with terror, FAO brought a smile to everyone’s face- no matter the race, the creed, or the color. You can’t say that statement very often today. The talk today will be about the rising productivity in the labor force, and how wonderful it is that it creates a falling unit labor cost. Of course, it also negates the real need to hire more workers. I’m all for efficiency. Anyone who has worked with me (I never say for me. It’s obnoxious) knows my dedication towards the highest quality at the lowest cost of production. They also know my adherence to top pay for top work along with top healthcare and other benefits. In the present work place, the employee is confronted with reduced benefits, reduced hours worked, stagnant pay, less job security, stingy bonuses, but more productivity requested. This is not the formula for the successful long term running of a business.
According to a survey by Challenger, Gray, and Christmas, corporate layoffs amounted to 99,452 in November. It is good to note that this survey does not track actual reductions in the labor force, only announcements. In addition, and more importantly, the survey only delineates a small fraction of all layoffs. According to government data, about 1.5 million workers lost their jobs in the first four weeks of November and filed for state unemployment benefits. Friday’s employment report will show about a 200,000 increase in jobs for November. Naturally, those jobs are mostly seasonal for the holidays and not permanent. How is that number of 200,000 possible? I suggest you write President Bush and ask him as he has a large team of economic advisors. This year announced job cuts have numbered 104,000 per month. As such, the November figures are close to the year’s average.
The Department of Defense, the Veterans Affairs Department, and state Medicaid programs negotiate discounts with drug manufacturers. For example, Zocor costs the VA 66 cents and retails for $3.77 per pill. Plavix costs the VA $2.01 and retails for $3.63. How is it then that, in the new Medicare legislation, there is a prohibition against the government negotiating prices with pharmaceutical companies? Is the Administration promoting a formal means for controlling prices in the healthcare industry? I believe Washington DC should be declared a no-trade zone. Quite obviously, competitive forces hang in the chad.
Yesterday the Redbook report on retail sales was not very cheery. It indicated that retail sales ended November down 2.8% compared with October. The report indicated that department stores struggled, discounters had solid gains, and on-line retailers fared best of all on a comparative basis.
It’s hard to believe that Microsoft and now WalMart are trading below year earlier levels. These companies are in the top five of the highest market capitalizations of all publicly traded equities. Both stocks are trading below their 5o day and 200 day moving averages. A word of caution for WalMart shoppers. Effective Feb.1, the company will no longer accept the MasterCard signature debit card because the fees are too high. Customers will still be able to use MasterCard debit cards if they use their PINs.
Bill Ford announced yesterday that Ford Motor expects to source about $1 billion in automotive parts from China next year, and mentioned they may eventually open the door to exports from its auto operations in China. I wonder how many more layoffs that will mean for their auto parts suppliers as well as their U.S. automotive workers. Over the last two years I wondered when Boeing would “outsource” its top management. Finally, that was accomplished. I wonder the same thing about Ford and Chrysler.
Tracy DeGregorio, director at Decision Resources, stated about the pharmaceutical and health care industry “it’s really a numbers game. R&D expenditure for each of the top 12 companies approached or exceeded $2 billion, and for some it was well over $3 billion. An annual investment of this magnitude can be made only by a very limited number of firms, and is probably the lowest threshold for a company that wishes to stay in the game indefinitely. Mid-tier European pharmaceutical companies are at particular risk, as they are too numerous and too small.”
Simon Furnell, customer services director of Lloyds TSB Insurance stated that the transfer of processing ad call center work to India was an inescapable fact. Recently, Lloyds announced the closing of a call center in Newcastle and shall move 750 jobs to Hyderabad in India.
The Conference Board stated that the $35-trillion world economy is not growing fast enough to provide jobs for millions of people who want them. Their report indicated that half of the current 2-3% average annual economic growth in the global economy is needed t provide employment for the 40 million people flooding the world’s job markets each year. Their chief economist remarked “there is simply not enough growth to go around…to think that what was viewed as the boom times of the 1990s was actually the slowest-growing decade in the world economy in the past 40 years.”
Since entering the Chinese market in 1996, WalMart has opened 31 stores in 15 cities. The Ministry of Commerce has approved the company’s entry into Shanghai, and they plan to open three stores in that location in 2004.
Pepsi has about 142,000 employees worldwide. Yesterday the company announced cutting about 750 jobs as it reorganizes its North American soft drink business and international operations and closes its Frito-Lay plant in Louisville, Kentucky and other manufacturing facilities in an effort to cut costs.
In an effort to cool consumer spending, the surge in credit growth, and the boom in their housing market, Australia’s central bank increased its benchmark interest rate a quarter percentage point for the second month in a row. The target for overnight funds was increased to 5.25%. Our Fed has maintained a 1% rate for overnight funds in an effort to stimulate the economy. Ignoring the usury rates on credit card balances, I believe it is fair to state that credit is too cheap in our country and that the growth of credit is both irresponsible and undermines the financial stability, or what’s left of it, of the U.S. It is hardly surprising that the Australian dollar rose to a new six-year high of 73.32 versus our dollar. Meanwhile, the euro hit record highs against the U.S. dollar for the fourth consecutive trading day. To put matters in perspective, the euro was introduced in January 1999 at $1.1740. Over the next 21 months it declined down to $0.8225 in October 2000. Since that time, it has risen to its present level of $1.2115. If the U.S. has a strong dollar policy, then the policy is defective and/or the American public is not being told the truth.
During the holiday shopping season New York City dwellers and its visitors can look forward to the lighting of the gigantic Christmas tree, ice skating in Central Park, and browsing through FAO Schwarz, a tradition since 1870. Steiff toys could be seen throughout, and children from all over the world would walk through the front door wide-eyed and mouth open in total amazement. Grown-ups would be caught up in this splendor. Who would have ever thought FAO could close? For me, it has always been better than Disneyland and Disney World. Having just filed for bankruptcy for the second time this year, it would appear that the lights could go dim at FAO. This is a great deal more than just a shame. In a world fraught with terror, FAO brought a smile to everyone’s face- no matter the race, the creed, or the color. You can’t say that statement very often today. The talk today will be about the rising productivity in the labor force, and how wonderful it is that it creates a falling unit labor cost. Of course, it also negates the real need to hire more workers. I’m all for efficiency. Anyone who has worked with me (I never say for me. It’s obnoxious) knows my dedication towards the highest quality at the lowest cost of production. They also know my adherence to top pay for top work along with top healthcare and other benefits. In the present work place, the employee is confronted with reduced benefits, reduced hours worked, stagnant pay, less job security, stingy bonuses, but more productivity requested. This is not the formula for the successful long term running of a business.
According to a survey by Challenger, Gray, and Christmas, corporate layoffs amounted to 99,452 in November. It is good to note that this survey does not track actual reductions in the labor force, only announcements. In addition, and more importantly, the survey only delineates a small fraction of all layoffs. According to government data, about 1.5 million workers lost their jobs in the first four weeks of November and filed for state unemployment benefits. Friday’s employment report will show about a 200,000 increase in jobs for November. Naturally, those jobs are mostly seasonal for the holidays and not permanent. How is that number of 200,000 possible? I suggest you write President Bush and ask him as he has a large team of economic advisors. This year announced job cuts have numbered 104,000 per month. As such, the November figures are close to the year’s average.
The Department of Defense, the Veterans Affairs Department, and state Medicaid programs negotiate discounts with drug manufacturers. For example, Zocor costs the VA 66 cents and retails for $3.77 per pill. Plavix costs the VA $2.01 and retails for $3.63. How is it then that, in the new Medicare legislation, there is a prohibition against the government negotiating prices with pharmaceutical companies? Is the Administration promoting a formal means for controlling prices in the healthcare industry? I believe Washington DC should be declared a no-trade zone. Quite obviously, competitive forces hang in the chad.
Yesterday the Redbook report on retail sales was not very cheery. It indicated that retail sales ended November down 2.8% compared with October. The report indicated that department stores struggled, discounters had solid gains, and on-line retailers fared best of all on a comparative basis.
It’s hard to believe that Microsoft and now WalMart are trading below year earlier levels. These companies are in the top five of the highest market capitalizations of all publicly traded equities. Both stocks are trading below their 5o day and 200 day moving averages. A word of caution for WalMart shoppers. Effective Feb.1, the company will no longer accept the MasterCard signature debit card because the fees are too high. Customers will still be able to use MasterCard debit cards if they use their PINs.
Bill Ford announced yesterday that Ford Motor expects to source about $1 billion in automotive parts from China next year, and mentioned they may eventually open the door to exports from its auto operations in China. I wonder how many more layoffs that will mean for their auto parts suppliers as well as their U.S. automotive workers. Over the last two years I wondered when Boeing would “outsource” its top management. Finally, that was accomplished. I wonder the same thing about Ford and Chrysler.
Tracy DeGregorio, director at Decision Resources, stated about the pharmaceutical and health care industry “it’s really a numbers game. R&D expenditure for each of the top 12 companies approached or exceeded $2 billion, and for some it was well over $3 billion. An annual investment of this magnitude can be made only by a very limited number of firms, and is probably the lowest threshold for a company that wishes to stay in the game indefinitely. Mid-tier European pharmaceutical companies are at particular risk, as they are too numerous and too small.”
Simon Furnell, customer services director of Lloyds TSB Insurance stated that the transfer of processing ad call center work to India was an inescapable fact. Recently, Lloyds announced the closing of a call center in Newcastle and shall move 750 jobs to Hyderabad in India.
The Conference Board stated that the $35-trillion world economy is not growing fast enough to provide jobs for millions of people who want them. Their report indicated that half of the current 2-3% average annual economic growth in the global economy is needed t provide employment for the 40 million people flooding the world’s job markets each year. Their chief economist remarked “there is simply not enough growth to go around…to think that what was viewed as the boom times of the 1990s was actually the slowest-growing decade in the world economy in the past 40 years.”
Since entering the Chinese market in 1996, WalMart has opened 31 stores in 15 cities. The Ministry of Commerce has approved the company’s entry into Shanghai, and they plan to open three stores in that location in 2004.
Pepsi has about 142,000 employees worldwide. Yesterday the company announced cutting about 750 jobs as it reorganizes its North American soft drink business and international operations and closes its Frito-Lay plant in Louisville, Kentucky and other manufacturing facilities in an effort to cut costs.
In an effort to cool consumer spending, the surge in credit growth, and the boom in their housing market, Australia’s central bank increased its benchmark interest rate a quarter percentage point for the second month in a row. The target for overnight funds was increased to 5.25%. Our Fed has maintained a 1% rate for overnight funds in an effort to stimulate the economy. Ignoring the usury rates on credit card balances, I believe it is fair to state that credit is too cheap in our country and that the growth of credit is both irresponsible and undermines the financial stability, or what’s left of it, of the U.S. It is hardly surprising that the Australian dollar rose to a new six-year high of 73.32 versus our dollar. Meanwhile, the euro hit record highs against the U.S. dollar for the fourth consecutive trading day. To put matters in perspective, the euro was introduced in January 1999 at $1.1740. Over the next 21 months it declined down to $0.8225 in October 2000. Since that time, it has risen to its present level of $1.2115. If the U.S. has a strong dollar policy, then the policy is defective and/or the American public is not being told the truth.
Tuesday, December 02, 2003
12/2/03 ‘Virtual’ Colonoscopy For CEOs And Politicians
Dr.Perry J. Pickhardt of the University of Wisconsin Medical School believes “virtual colonoscopy is an accurate screening tool…and hopefully this will lead to more widespread screening.” He presented his findings yesterday at a Chicago meeting of the Radiological Society of North America, and they will be published later this week in the New England Journal of Medicine. I am suggesting that we take this X-ray technique to another level. Presently, the virtual procedure minimizes the psychological barrier that prevents a great many Americans from undergoing screening for colorectal cancer. Snaking the tiny TV camera is not the most pleasant experience. In this vein, I think we could utilize this screening tool prior to hiring a CEO or electing a politician for office. We might be in a better position to make an early discovery of the predisposition to various ills, such as, cheating, lying, many other forms of unethical behavior, being hooked on pork and cover-ups, and the inability to admit mistakes. In an editorial in the New England Journal of Medicine, Dr. Thomas Lamont of the Beth Israel Deaconess Medical Center in Boston suggested that the technique is now “ready for prime time.” I would think stockholders in Enron, MCI, Tyco, and many other companies, would concur with Dr. Lamont.
China’s premier, Wen Jiabao, makes his first official visit to the United States this weekend. To make him feel welcome, the Administration is holding “creeping protectionism” in his honor rather than a state dinner. This makes perfect sense. After all, China is now the fastest-growing export market for U.S. products. Last year our exports to China increased by 19%, and in 2003 they have risen 22%. Congress is considering legislation that could impose tariffs on apple juice, CD players, and other products made in China. We can always depend on Sen. Charles Schumer (D) of New York. He is the chief sponsor of proposed legislation that would require Bush to impose 27.5% across-the-board tariffs on Chinese goods unless China lets its currency float. I would recommend Schumer as an excellent candidate for a ‘virtual’ colonoscopy. Maybe we can prevent his illness from spreading.
As the Nasdaq marches to the 2000 level, I was especially interested in the CIO Magazine’s monthly “Tech Poll” for November. In October, the poll showed that Chief Information Officers planned to increase tech spending by 6% over the next 12 months. These CIOs must not read the bullish headlines for tech. The November poll revealed their plans to increase tech spending by 4.2%. At this rate, by the time February comes around, they may not increase their spending at all. That would not surprise me. But would it interrupt the Nasdaq’s climb? Never! Onward and upward until it implodes.
I cannot understand this. The Nasdaq is up 45% this year, and other smaller indices have reached new all-time highs. Yet, officials of the Retirement Systems of Alabama (RSA) are asking for more money from the state next year in part to make up for their investment losses in 2001 and 2002. They need a 20-year old money manager with a fresh perspective. Alabama paid an estimated $285million to RSA in the 2003 budget year, which ended Sept. 30. RSA officials expect the state to pay $364 million this year, and in 2005, $427 million.
Lois Huff, senior vice president at Columbus, Ohio-based consulting firm Retail Forward, stated retailers are cautious about this year’s holiday spending season. Her company predicts retail sales will increase between 3.5% and 4% this holiday, or one-half to 1 percentage points grater than the 2.2% sales growth of the 2002 holiday season. Talking about the shoppers, she stated “while they may be slightly better off than a decade ago, they realize things change very quickly, whether it’s the stock market, corporate scandals, terrorism, or war.”
Toys “R” Us recently announced a company restructuring, and that included eliminating 3,800 national jobs and closing their Kids “R” Us and Imaginarium chains. Yesterday, the company stated they would close its Lawrenceville, Georgia distribution facility and cut 89 jobs by Jan. 25, 2004. On the other hand, DuPont yesterday announced major changes, and they will include some large layoffs to occur in the latter part of April, 2004. Now their employees can fret for five months about the size of the layoffs, and the yet-to-be named persons on the list. Management of DuPont would be prime candidates for a ‘virtual’ colonoscopy.
A new service allows banks to federally insure accounts of up to $1.5 million. Promontory Interfinancial Network LLC of Arlington, Va., headed by Eugene Ludwig, a former comptroller of the currency, devised the idea. They have more than 500 community banks nationwide signed up. Basically, this network of banks can safeguard funds beyond the FDIC $100,000 limit by swapping customer deposits. At the same time, their customers’ money continues to circulate within the local community. The service recently expanded to individual retirement accounts.
Researchers at St. Jude Children’s Research Hospital in Memphis, Tenn. Issued their finding that the United States is not adequately prepared to respond to a worldwide outbreak of influenza, which many experts say may be imminent. Dr. Robert Webster, a member of the Infectious Disease department and holder of the Rose Marie Thomas Chair at St. Jude, stated “if an influenza pandemic started tomorrow, we would not be able to head it off with vaccines because the production facilities available to produce them are grossly inadequate.”
It is no secret that Mervyn’s has been an under-performer for its owner, Target. Yesterday about 150 employees at Mervyn’s at SeaTac Mall in Federal Way, WA were told that the store would close Jan 5. The store will be knocked down and replaced by a larger Target store set to open next October, and it will also take the place of a smaller Target location near-by. The latter will remain in business until the new Target is opened.
On Monday an American soldier was killed west of Baghdad near the town of Habbaniya. Since President Bush declared an end to major hostilities in Iraq on May 1, a total of 188 U.S. soldiers have been killed in combat.
Dr.Perry J. Pickhardt of the University of Wisconsin Medical School believes “virtual colonoscopy is an accurate screening tool…and hopefully this will lead to more widespread screening.” He presented his findings yesterday at a Chicago meeting of the Radiological Society of North America, and they will be published later this week in the New England Journal of Medicine. I am suggesting that we take this X-ray technique to another level. Presently, the virtual procedure minimizes the psychological barrier that prevents a great many Americans from undergoing screening for colorectal cancer. Snaking the tiny TV camera is not the most pleasant experience. In this vein, I think we could utilize this screening tool prior to hiring a CEO or electing a politician for office. We might be in a better position to make an early discovery of the predisposition to various ills, such as, cheating, lying, many other forms of unethical behavior, being hooked on pork and cover-ups, and the inability to admit mistakes. In an editorial in the New England Journal of Medicine, Dr. Thomas Lamont of the Beth Israel Deaconess Medical Center in Boston suggested that the technique is now “ready for prime time.” I would think stockholders in Enron, MCI, Tyco, and many other companies, would concur with Dr. Lamont.
China’s premier, Wen Jiabao, makes his first official visit to the United States this weekend. To make him feel welcome, the Administration is holding “creeping protectionism” in his honor rather than a state dinner. This makes perfect sense. After all, China is now the fastest-growing export market for U.S. products. Last year our exports to China increased by 19%, and in 2003 they have risen 22%. Congress is considering legislation that could impose tariffs on apple juice, CD players, and other products made in China. We can always depend on Sen. Charles Schumer (D) of New York. He is the chief sponsor of proposed legislation that would require Bush to impose 27.5% across-the-board tariffs on Chinese goods unless China lets its currency float. I would recommend Schumer as an excellent candidate for a ‘virtual’ colonoscopy. Maybe we can prevent his illness from spreading.
As the Nasdaq marches to the 2000 level, I was especially interested in the CIO Magazine’s monthly “Tech Poll” for November. In October, the poll showed that Chief Information Officers planned to increase tech spending by 6% over the next 12 months. These CIOs must not read the bullish headlines for tech. The November poll revealed their plans to increase tech spending by 4.2%. At this rate, by the time February comes around, they may not increase their spending at all. That would not surprise me. But would it interrupt the Nasdaq’s climb? Never! Onward and upward until it implodes.
I cannot understand this. The Nasdaq is up 45% this year, and other smaller indices have reached new all-time highs. Yet, officials of the Retirement Systems of Alabama (RSA) are asking for more money from the state next year in part to make up for their investment losses in 2001 and 2002. They need a 20-year old money manager with a fresh perspective. Alabama paid an estimated $285million to RSA in the 2003 budget year, which ended Sept. 30. RSA officials expect the state to pay $364 million this year, and in 2005, $427 million.
Lois Huff, senior vice president at Columbus, Ohio-based consulting firm Retail Forward, stated retailers are cautious about this year’s holiday spending season. Her company predicts retail sales will increase between 3.5% and 4% this holiday, or one-half to 1 percentage points grater than the 2.2% sales growth of the 2002 holiday season. Talking about the shoppers, she stated “while they may be slightly better off than a decade ago, they realize things change very quickly, whether it’s the stock market, corporate scandals, terrorism, or war.”
Toys “R” Us recently announced a company restructuring, and that included eliminating 3,800 national jobs and closing their Kids “R” Us and Imaginarium chains. Yesterday, the company stated they would close its Lawrenceville, Georgia distribution facility and cut 89 jobs by Jan. 25, 2004. On the other hand, DuPont yesterday announced major changes, and they will include some large layoffs to occur in the latter part of April, 2004. Now their employees can fret for five months about the size of the layoffs, and the yet-to-be named persons on the list. Management of DuPont would be prime candidates for a ‘virtual’ colonoscopy.
A new service allows banks to federally insure accounts of up to $1.5 million. Promontory Interfinancial Network LLC of Arlington, Va., headed by Eugene Ludwig, a former comptroller of the currency, devised the idea. They have more than 500 community banks nationwide signed up. Basically, this network of banks can safeguard funds beyond the FDIC $100,000 limit by swapping customer deposits. At the same time, their customers’ money continues to circulate within the local community. The service recently expanded to individual retirement accounts.
Researchers at St. Jude Children’s Research Hospital in Memphis, Tenn. Issued their finding that the United States is not adequately prepared to respond to a worldwide outbreak of influenza, which many experts say may be imminent. Dr. Robert Webster, a member of the Infectious Disease department and holder of the Rose Marie Thomas Chair at St. Jude, stated “if an influenza pandemic started tomorrow, we would not be able to head it off with vaccines because the production facilities available to produce them are grossly inadequate.”
It is no secret that Mervyn’s has been an under-performer for its owner, Target. Yesterday about 150 employees at Mervyn’s at SeaTac Mall in Federal Way, WA were told that the store would close Jan 5. The store will be knocked down and replaced by a larger Target store set to open next October, and it will also take the place of a smaller Target location near-by. The latter will remain in business until the new Target is opened.
On Monday an American soldier was killed west of Baghdad near the town of Habbaniya. Since President Bush declared an end to major hostilities in Iraq on May 1, a total of 188 U.S. soldiers have been killed in combat.
Monday, December 01, 2003
12/1/03 Protectionism Is Replacing Free Enterprise In your Neighborhood
Bush blinked and will remove almost all of the steel tariffs. I thought the world of protectionism had taken a step backwards. I was so very wrong. Today, the Indiana state senate committee will look into why the state awarded a computer contract to an Indian company that planned to import 65 Indian technicians to work alongside 18 current state employees to upgrade the processing of unemployment claims. Tata Consultancy Services underbid Accenture Ltd. And Deloitte Consulting for the $15.2 million contract. The state of Indiana has routinely awarded contracts to outside companies in their effort to trim costs. State Sen. Jeff Drozda, a Republican, wants “to send a message to other states. We’re supposed to be helping unemployed and underemployed Hoosiers.” Drozda wants to examine the pay scales Tata proposed for the workers it would have imported. It should be noted that, according to Ron Hira, a professor at Rochester Institute of Technology, there are about 500,000 non-citizens working in the United States under special visas. The bottom line is the $15.2 million contract to Tata has been canceled. The matter will not end here. As Phiroz Vanrevala, executive vice president of Tata stated, “It (the government IT contract) is a big market for Indian companies. If this sort of thing happens, obviously it is going to restrict our choice to compete in that market. The initial market is not there. But looking to the long term view of the market, it is something we need to worry about and engage with governments to ensure that we can do something. We bid on a contract and we won that. If someone wants to cancel it, we will see what recourse we need to take. This is a government-related issue. We expect our government and industry association like Nasscom to respond to it. A single company is not going to take that up.” He added that the contract had been canceled because of a statutory change and not because Tata did not perform.
While India was ripping up the contract awarded to Tata, Hewlett-Packard announced the buy-out of its Indian subsidiary, Digital GlobalSoftLtd. They will pay a premium of 50% of the average price over the last 26 weeks of trading for the stock they do not already own. The Indian government is not expected to interfere with this purchase. It is most unfortunate that politicians like Drozda are elected to represent their constituency.
This Friday the Labor Department will issue their report on jobs. As we know, they announced that 286,000 jobs were added from August through October. It is anticipated that the report will indicate that 150,000 people were added to the employment rolls in November. Before you get all excited and work yourself up into the need for a cold shower, let's examine some reality. If people were getting hired permanently, a few things would be first taking place. We would be seeing employees working longer than 33 hours per week. That has not happened. We would see more people working overtime hours. That has not happened. We would be seeing an increase in the help-wanted advertising index. That has not happened. On the other hand, the job placement firm of Challenger, Gray & Christmas reported that planned layoffs at U.S. firms were 171,874 in October, more than double September’s total and the highest in a year. A survey of 74 companies by Pacific Staffing, a firm that supplies temporary workers to hundreds of local businesses in the Sacramento, CA area, found that most were not planning to add employees. It’s President Jay Jurschak stated “ we haven’t seen a big spike the way you would have in previous recoveries.” Intel projects sales in the fourth quarter of about $8.7 billion, and this would equal its record fourth quarter of 2000. At that time, Intel employed 86,000 people and now has 79,000 employees. A spokesperson for the company remarked that Intel has no plan to add more employees in the U.S. until the economy “improves significantly.” Scott Montrey of the National Assn. of Manufacturers expressed the situation quite well. He stated “if you survived the last few years, you’ve done it by being really mean and lean. And once you get lean and mean, you don’t go back to being fat and lazy.” John Challenger remarked “my sense is that hiring and job creation will be meager. There are huge transformative forces at work, with technology and globalization forcing us in different directions. I think we’re in uncharted territory.” In sum, when you see the 150,000 jobs announced on Friday, please remember it’s the holiday season. Temporary workers are hired in the stores. We know that, between Circuit City and WalMart, over 25,000 were added to the payrolls for the holiday shopping season. Of course, we could go around the horn, so to speak, and visit with Target, Federated, Sears, etc. to see how many they hired for this holiday season. I am certain of one thing. More permanent workers are losing their jobs and/or having those jobs outsourced than are being hired on a permanent basis. More factories are being shut down than are being expanded or opened. In a speech to the Economic Club of Washington, the Snowman stated “there can’t be a jobless recovery. The nature of a recovery is to recover. You don’t recover if lots of people are looking for work and can’t find work.” When you look around, you’ll see over 15 million people searching for work. I don’t think you’ll be in need of that cold shower. Staying warm in the winter is a good thing.
Dr. Charles Cefalu is the president of the Louisiana Geriatric Society and a former board member of the American Geriatric Society. That makes him a maven on geriatrics. He stated that Medicare has cut reimbursement of primary care physicians who treat the elderly (I prefer the word ‘seasoned’) by 17% in the past three years. According to Dr. Cefalu, more than 60% of doctors who offer such care are threatening to end it, if the proposed 4.5% reduction in Medicare reimbursement goes through in fiscal 2004. Dr. Robert Butler, head of the International Longevity Center in New York, remarked “older people are very disadvantaged by the U.S. medical system. Only about 40% of their costs are covered by Medicare and Medicaid…care of older people needs to be dramatically improved.”
Senator John McCain: “Congress is now spending money like a drunken sailor, and I’ve never known a sailor, drunk or sober, with the imagination that this Congress has…the President cannot say, as he has many times, that ‘I’m going to tell Congress to enforce some spending discipline’ and then not veto bills…Any economist will tell you cannot have this level of debt of increasing deficits without eventually it affecting interest rates and inflation. Those are the greatest enemies of middle-income Americans and retired Americans.”
Last year’s holiday shopping season got off to a strong start. Over the last three days, stores had a sales gain of about 4%. It was a solid but not spectacular long weekend of shopping for the retailers. Last year’s holiday results were about unchanged from 2001. According to the International Council of Shopping Centers, a year ago 41% of holiday sales took place in the week before Christmas and the busiest shopping day over the last few years has been the Saturday before Christmas. We will need to wait a bit longer to see how this holiday shopping season will pan out.
Bush blinked and will remove almost all of the steel tariffs. I thought the world of protectionism had taken a step backwards. I was so very wrong. Today, the Indiana state senate committee will look into why the state awarded a computer contract to an Indian company that planned to import 65 Indian technicians to work alongside 18 current state employees to upgrade the processing of unemployment claims. Tata Consultancy Services underbid Accenture Ltd. And Deloitte Consulting for the $15.2 million contract. The state of Indiana has routinely awarded contracts to outside companies in their effort to trim costs. State Sen. Jeff Drozda, a Republican, wants “to send a message to other states. We’re supposed to be helping unemployed and underemployed Hoosiers.” Drozda wants to examine the pay scales Tata proposed for the workers it would have imported. It should be noted that, according to Ron Hira, a professor at Rochester Institute of Technology, there are about 500,000 non-citizens working in the United States under special visas. The bottom line is the $15.2 million contract to Tata has been canceled. The matter will not end here. As Phiroz Vanrevala, executive vice president of Tata stated, “It (the government IT contract) is a big market for Indian companies. If this sort of thing happens, obviously it is going to restrict our choice to compete in that market. The initial market is not there. But looking to the long term view of the market, it is something we need to worry about and engage with governments to ensure that we can do something. We bid on a contract and we won that. If someone wants to cancel it, we will see what recourse we need to take. This is a government-related issue. We expect our government and industry association like Nasscom to respond to it. A single company is not going to take that up.” He added that the contract had been canceled because of a statutory change and not because Tata did not perform.
While India was ripping up the contract awarded to Tata, Hewlett-Packard announced the buy-out of its Indian subsidiary, Digital GlobalSoftLtd. They will pay a premium of 50% of the average price over the last 26 weeks of trading for the stock they do not already own. The Indian government is not expected to interfere with this purchase. It is most unfortunate that politicians like Drozda are elected to represent their constituency.
This Friday the Labor Department will issue their report on jobs. As we know, they announced that 286,000 jobs were added from August through October. It is anticipated that the report will indicate that 150,000 people were added to the employment rolls in November. Before you get all excited and work yourself up into the need for a cold shower, let's examine some reality. If people were getting hired permanently, a few things would be first taking place. We would be seeing employees working longer than 33 hours per week. That has not happened. We would see more people working overtime hours. That has not happened. We would be seeing an increase in the help-wanted advertising index. That has not happened. On the other hand, the job placement firm of Challenger, Gray & Christmas reported that planned layoffs at U.S. firms were 171,874 in October, more than double September’s total and the highest in a year. A survey of 74 companies by Pacific Staffing, a firm that supplies temporary workers to hundreds of local businesses in the Sacramento, CA area, found that most were not planning to add employees. It’s President Jay Jurschak stated “ we haven’t seen a big spike the way you would have in previous recoveries.” Intel projects sales in the fourth quarter of about $8.7 billion, and this would equal its record fourth quarter of 2000. At that time, Intel employed 86,000 people and now has 79,000 employees. A spokesperson for the company remarked that Intel has no plan to add more employees in the U.S. until the economy “improves significantly.” Scott Montrey of the National Assn. of Manufacturers expressed the situation quite well. He stated “if you survived the last few years, you’ve done it by being really mean and lean. And once you get lean and mean, you don’t go back to being fat and lazy.” John Challenger remarked “my sense is that hiring and job creation will be meager. There are huge transformative forces at work, with technology and globalization forcing us in different directions. I think we’re in uncharted territory.” In sum, when you see the 150,000 jobs announced on Friday, please remember it’s the holiday season. Temporary workers are hired in the stores. We know that, between Circuit City and WalMart, over 25,000 were added to the payrolls for the holiday shopping season. Of course, we could go around the horn, so to speak, and visit with Target, Federated, Sears, etc. to see how many they hired for this holiday season. I am certain of one thing. More permanent workers are losing their jobs and/or having those jobs outsourced than are being hired on a permanent basis. More factories are being shut down than are being expanded or opened. In a speech to the Economic Club of Washington, the Snowman stated “there can’t be a jobless recovery. The nature of a recovery is to recover. You don’t recover if lots of people are looking for work and can’t find work.” When you look around, you’ll see over 15 million people searching for work. I don’t think you’ll be in need of that cold shower. Staying warm in the winter is a good thing.
Dr. Charles Cefalu is the president of the Louisiana Geriatric Society and a former board member of the American Geriatric Society. That makes him a maven on geriatrics. He stated that Medicare has cut reimbursement of primary care physicians who treat the elderly (I prefer the word ‘seasoned’) by 17% in the past three years. According to Dr. Cefalu, more than 60% of doctors who offer such care are threatening to end it, if the proposed 4.5% reduction in Medicare reimbursement goes through in fiscal 2004. Dr. Robert Butler, head of the International Longevity Center in New York, remarked “older people are very disadvantaged by the U.S. medical system. Only about 40% of their costs are covered by Medicare and Medicaid…care of older people needs to be dramatically improved.”
Senator John McCain: “Congress is now spending money like a drunken sailor, and I’ve never known a sailor, drunk or sober, with the imagination that this Congress has…the President cannot say, as he has many times, that ‘I’m going to tell Congress to enforce some spending discipline’ and then not veto bills…Any economist will tell you cannot have this level of debt of increasing deficits without eventually it affecting interest rates and inflation. Those are the greatest enemies of middle-income Americans and retired Americans.”
Last year’s holiday shopping season got off to a strong start. Over the last three days, stores had a sales gain of about 4%. It was a solid but not spectacular long weekend of shopping for the retailers. Last year’s holiday results were about unchanged from 2001. According to the International Council of Shopping Centers, a year ago 41% of holiday sales took place in the week before Christmas and the busiest shopping day over the last few years has been the Saturday before Christmas. We will need to wait a bit longer to see how this holiday shopping season will pan out.
Sunday, November 30, 2003
11/30/03 Outsourcing Overview
Not too many folks in the U.S. have heard of 24/7 Customer. It is a call center located in Bangalore, India. Ninety eight per cent of the employees have college degrees. They work nine-hour shifts sorting out bank card problems, ordering new phone services, and installing software on customers’ home computers. The annual pay for each employee ranges from $2,800 to $8,000. By comparison, most U.S. employees in call centers here do not have a college degree and receive annual remuneration of $30,000 to $45,000. Shortly, 24/7 will open a call center in Hyderabad with 350 employees. According to Stanford University, India’s call center industry has added nearly 200,000 workers since March 2002 and will reach employment of 350,000 by early next year. Gartner predicted information technology companies would move 1 in 10 jobs offshore by the end of 2004. Forrester Research predicted 3.3 tech and service jobs would leave the U.S. by 2015. UC Berkeley remarked that 14 million U.S. service jobs, including tech positions, were threatened. No one knows for certain how many and how quickly jobs will be outsourced. On the other hand, I think it is safe to predict that more jobs will be outsourced than employees added in the U.S. within the same time frame. Consequently, I would question any predictions of job growth in the U.S.
The Congressioanl Budget Office estimates that 23% of the nearly 12 million retirees with employer-provided drug coverage will lose it when the new Medicare program goes into effect in 2006. We know that government estimates are historically understated. In my view, the new Medicare legislation will go down as one of the worst bills in this nation’s history.
How many have heard of Quick, AM Journal Express, RedEye, Red Streak, Noise, or Thrive? They are free daily newspapers. They are giveaway publications. In 1982, 67% of Americans read the newspaper, according to the Newspaper Association of America. By 2002, that number was reduced to 55%. Only 17% of daily newspaper subscribers are between the ages of 18 and 34 while 43% are 55 and up. The large chains wanted to find a new way to offset declining circulation. Jim Moroney, publisher of The Dallas Morning News, expects Quick to be profitable in about three years.
Salem Abraham, head of Abraham Trading Co. and SAA Ventures: “I wondered why all markets behaved the same. It’s because they have one thing in common- people, human psychology…if you look back and see tat if something is done a thousand times and usually gets the same result, that tells you something…since its inception, 15 years and 10 months ago, we’ve had a 24.93% average return. We’ve never lost money for our investors.” Abraham Trading Co. has assets of about $20 million and buys and sells basic futures contracts in 51 markets, such as, grains, currencies, energy, and metals with an average holding period of 3 months. Salem formed SAA Ventures a couple of years ago with $2 million, and specializes in arbitraging the differences between the price of an index and the futures price of that index. He states he “hopes to make $3 on each trade, and makes 3,000 to 5,000 trades a day with an 80% success rate and an average holding time for each trade of two-tenths of a second.
Since the Iraq war began on March 20, November has proven to be the bloodiest month with 79 American soldiers killed. A total of 438 U.S. soldiers have died since the beginning of the war, according to the Pentagon.
My friend, Yale Hirsch, reports in his Stock Market Almanac that December is traditionally the best month of the year for investors with an average gain of 1.8% on the S&P 500 Index since 1950. I no longer a believer in Santa Claus, and therefore, I am skeptical about a possible Santa Claus rally. Then again, the last several months have proven my skepticism ill-founded. Time will tell whether history is on the side with the bulls.
Not too many folks in the U.S. have heard of 24/7 Customer. It is a call center located in Bangalore, India. Ninety eight per cent of the employees have college degrees. They work nine-hour shifts sorting out bank card problems, ordering new phone services, and installing software on customers’ home computers. The annual pay for each employee ranges from $2,800 to $8,000. By comparison, most U.S. employees in call centers here do not have a college degree and receive annual remuneration of $30,000 to $45,000. Shortly, 24/7 will open a call center in Hyderabad with 350 employees. According to Stanford University, India’s call center industry has added nearly 200,000 workers since March 2002 and will reach employment of 350,000 by early next year. Gartner predicted information technology companies would move 1 in 10 jobs offshore by the end of 2004. Forrester Research predicted 3.3 tech and service jobs would leave the U.S. by 2015. UC Berkeley remarked that 14 million U.S. service jobs, including tech positions, were threatened. No one knows for certain how many and how quickly jobs will be outsourced. On the other hand, I think it is safe to predict that more jobs will be outsourced than employees added in the U.S. within the same time frame. Consequently, I would question any predictions of job growth in the U.S.
The Congressioanl Budget Office estimates that 23% of the nearly 12 million retirees with employer-provided drug coverage will lose it when the new Medicare program goes into effect in 2006. We know that government estimates are historically understated. In my view, the new Medicare legislation will go down as one of the worst bills in this nation’s history.
How many have heard of Quick, AM Journal Express, RedEye, Red Streak, Noise, or Thrive? They are free daily newspapers. They are giveaway publications. In 1982, 67% of Americans read the newspaper, according to the Newspaper Association of America. By 2002, that number was reduced to 55%. Only 17% of daily newspaper subscribers are between the ages of 18 and 34 while 43% are 55 and up. The large chains wanted to find a new way to offset declining circulation. Jim Moroney, publisher of The Dallas Morning News, expects Quick to be profitable in about three years.
Salem Abraham, head of Abraham Trading Co. and SAA Ventures: “I wondered why all markets behaved the same. It’s because they have one thing in common- people, human psychology…if you look back and see tat if something is done a thousand times and usually gets the same result, that tells you something…since its inception, 15 years and 10 months ago, we’ve had a 24.93% average return. We’ve never lost money for our investors.” Abraham Trading Co. has assets of about $20 million and buys and sells basic futures contracts in 51 markets, such as, grains, currencies, energy, and metals with an average holding period of 3 months. Salem formed SAA Ventures a couple of years ago with $2 million, and specializes in arbitraging the differences between the price of an index and the futures price of that index. He states he “hopes to make $3 on each trade, and makes 3,000 to 5,000 trades a day with an 80% success rate and an average holding time for each trade of two-tenths of a second.
Since the Iraq war began on March 20, November has proven to be the bloodiest month with 79 American soldiers killed. A total of 438 U.S. soldiers have died since the beginning of the war, according to the Pentagon.
My friend, Yale Hirsch, reports in his Stock Market Almanac that December is traditionally the best month of the year for investors with an average gain of 1.8% on the S&P 500 Index since 1950. I no longer a believer in Santa Claus, and therefore, I am skeptical about a possible Santa Claus rally. Then again, the last several months have proven my skepticism ill-founded. Time will tell whether history is on the side with the bulls.
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