3/20/04 High Value Target: The Dollar
Niccolo Machiavelli: “There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success than to take the lead in the introduction of a new order of things.”
The Mainichi Shimbun reported in its Friday editions that Japanese monetary authorities have decided to scale back intervention in world currency markets. Officials in Tokyo have decided that massive yen-selling is no longer necessary, the paper stated, attributing this to “an international monetary source” believed to be someone at the Ministry of Finance. For almost two years I have strongly recommended diverting one’s dollar holdings into the New Zealand dollar and, secondarily, into the Swiss franc. Over this time frame, the dollar has depreciated in value against 15 of the world’s leading currencies, the lone exception being the Mexican peso. I believe this depreciation could accelerate in the future. The dollar has been, and will continue to be, the world’s high value target.
According to the Labor Department and Datastream, the spread between producer and consumer inflation is near a 28-year high. Russ Koesterich, State Street’s chief North American equity strategist, noted that, since 1948, when the CPI change has been below that of the PPI, earnings growth has slowed to an average of 2% the next 12 months. By comparison, whenever the CPI is above the PPI, earnings growth averages about 8% over the next year.
Charles Hill: “The visibility on the second half of this year is horrendous.”
The Massachusetts Division of Unemployment Assistance reported yesterday that Bay State employers shed another 9,500 payroll jobs in February, the most since February 2003. At the same time, the state’s jobless rate fell to 5.3% from 5.6% in January as thousands gave up looking for jobs and therefore were not counted as unemployed. David Pace, regional economist at Global Insight, stated “we were hoping to see at least a bottoming, and maybe a move forward, but we’re still seeing a deterioration.” Payroll employment in the state has declined in 10 consecutive months. Since February 2001, Massachusetts has lost nearly 220,000 jobs, a decline of 6.5%. Andre Mayer, senior vice president of Associated Industries of Massachusetts observed “we keep seeing signs that we’re going to be creating jobs. We keep hearing from our members that they plan to be adding jobs, but it doesn’t quite happen.”
Meanwhile, the report from Pennsylvania yesterday was that nonfarm jobs in February fell by 2,000 on a seasonally adjusted basis. Since February 2003, total jobs were down 32,500. On average, it took unemployed workers in Pennsylvania longer to find work in 2003. The average number of weeks Pennsylvanians collected unemployment benefits increased by 5.6 weeks from 13.2 weeks in 2001 to 18.8 weeks in 2003.
National City is Ohio’s largest bank. By buying Provident Financial, National City will become the 10th largest bank in the U.S., based on assets. Provident’s CEO told employees in a memo that some duplicate jobs will be eliminated as a result of the merger. The final number has not been determined but sources put the number at 400 to 800 job cuts.
When you think of outsourcing, a foreign country quickly comes to mind. With Duke University it is another story. They sold its 65,000-square-foot hospital laundry to Angelica Corp. That outsourcing move will cost 40 Duke laundry workers their jobs.
A cash crunch has hit a specialty pharmaceutical company, Women First Healthcare. They will eliminate their 44-member pharmaceutical sales force.
According to Ward’s Reports, including this week’s estimates, calendar year North American vehicle output is down 4.1% from like-2003’s pace.
Natasha Humphries, a former employee at Palm Computing, told a California state Senate hearing that “offshoring has created a devastating economic climate, not just among Silicon Valley technical workers, but nationwide. Free trade is not free. The middle class is paying the price.”
The federal Trade Adjustment Assistance (TAA) program funds retraining and health insurance tax credits. It is aimed at manufacturing workers who have lost jobs because of imports or production shifting overseas. There is growing bipartisan momentum to expand the TAA to include workers from service-related fields such as computer software.
Patrick Stafford Kelley, editorial editor page of The Emporia Gazette in Kansas, stated “there are fewer flags on the streets. The first flush of patriotism has ended. People are hunkered down…and wondering when it’s going to end.”
According to the Honolulu Board of Realtors, prices for single-family homes rose 13.4% in 2003 after climbing the year before 11.7%. Single-family homes sold on Oahu last month spent an average of just 23 days on the market, the shortest time since the Board of Realtors started keeping track in 1987. Oahu condos averaged 34 days before a sale last month. On the island of Hawaii, the number of building permits were 22% higher in 2003 compared with the prior year.
Friday, March 19, 2004
3/19/04 Keeping It Real
Steve Ballmer, Microsoft CEO: “I believe we reached agreement on the issues of the case. But we were unable to agree on principles for new issues that could arise in the future.” The EU will rule that Microsoft is an illegal monopolist. How would they know? They’ve not had one in the EU. They only think they know one in Microsoft. Ballmer met a good deal of their demands. Obviously, that wasn’t good enough. I hope the EU has the patience and money for this battle. They’ll need it.
John Armbrust is a Florida consultant specializing in jet-fuel contracts for the airlines. He remarked “don’t underestimate the ability of the airlines to walk off a cliff together. Almost all of them are pretty vulnerable right now.” Southwest locked in 83% of its fuel purchases through March and hedged some purchases through 2008. The company has spent about $25 million on such hedges for this year. JetBlue probably has the second-best jet-fuel hedged position in the industry.
Yesterday Goldman Sachs economist Jan Hatzius stated “slow growth equals no jobs- perhaps it’s that simple.” Hatzius believes our government mistakenly exaggerated GDP. That’s mistakenly as in misspeak.
Meanwhile, Goldman Sachs told its clients yesterday that the firm expects national payrolls to grow by 160,000 this month. Other economists project a rise to 200,000. I don’t want to explode everyone’s bubble; however, on March 19, it is too early to know. At this time, the data is insufficient and incomplete to make an accurate analysis. There are a couple of thoughts though. In Georgia, for example, their state labor commissioner, Michael Thurmond, stated “you can’t just look at the unemployment rate and get a complete picture of the job market of the economy. While we’re encouraged by the decline in the unemployment rate, job creation remained anemic in February.” In Georgia, about 14.4% of the officially unemployed have been out of work for a half-year or more. For the nation as a whole, about 22% have been out of work for at least 27 weeks. Thurmond observed “I can envision job growth, but we don’t have any objective evidence that it has begun.”
Yesterday the Labor Department reported that U.S. initial jobless claims fell by 6,000 last week. That number was dwarfed by the increase of 47,000 in the number of people continuing to collect state jobless benefits. That number amounted to 3.064 million in the week ended March 6, and was understated by the thousands of workers being dropped weekly from the unemployment rolls due to their benefits not being extended. In addition, the Labor Department stated 33 states and territories reported an increase in new unemployment claims, while 20 reported a decrease. Again, much of the decrease is due to the unemployment benefits not being extended and not to job creation.
On Friday, March 12, Greenspan stated “employment will begin to increase more quickly before long.” On Tuesday, March 16, after the FOMC meeting, the Federal Reserve stated “new hiring was lagging.” What happened in those four days to create such a change in the tone? It’s possible they spoke to the National Federation of Independent Business. The 5.8 million small businesses in the U.S. employ about half of the U.S. workforce. The National Federation’s most recent survey indicated that only 13% of small businesses polled in February plan on hiring new workers, down from 17% in January. That is not too encouraging.
Maybe GDP growth is slowing. The Philadelphia Federal Reserve’s measure of business activity fell to 24.2 in March from 31.4 in February.
GM recalled more than 4 million pickup trucks to replace tailgate support cables that may corrode and fracture. GM remains prominently in the recall lead. With a full head of steam, I remain confident that they can retain their dominance in this category.
Beryl Sprinkel was chairman of the Council of Economic Advisors under former President Reagan. He stated Bush has “not done a good job” in restraining spending. “I’m disappointed.” Federal spending now amounts to about 20% of GDP. Federal receipts as a percent of GDP have fallen from 21% in 2000 to below 16% this year. The historical average ranges between 17 and 19 percent.
Steve Ballmer, Microsoft CEO: “I believe we reached agreement on the issues of the case. But we were unable to agree on principles for new issues that could arise in the future.” The EU will rule that Microsoft is an illegal monopolist. How would they know? They’ve not had one in the EU. They only think they know one in Microsoft. Ballmer met a good deal of their demands. Obviously, that wasn’t good enough. I hope the EU has the patience and money for this battle. They’ll need it.
John Armbrust is a Florida consultant specializing in jet-fuel contracts for the airlines. He remarked “don’t underestimate the ability of the airlines to walk off a cliff together. Almost all of them are pretty vulnerable right now.” Southwest locked in 83% of its fuel purchases through March and hedged some purchases through 2008. The company has spent about $25 million on such hedges for this year. JetBlue probably has the second-best jet-fuel hedged position in the industry.
Yesterday Goldman Sachs economist Jan Hatzius stated “slow growth equals no jobs- perhaps it’s that simple.” Hatzius believes our government mistakenly exaggerated GDP. That’s mistakenly as in misspeak.
Meanwhile, Goldman Sachs told its clients yesterday that the firm expects national payrolls to grow by 160,000 this month. Other economists project a rise to 200,000. I don’t want to explode everyone’s bubble; however, on March 19, it is too early to know. At this time, the data is insufficient and incomplete to make an accurate analysis. There are a couple of thoughts though. In Georgia, for example, their state labor commissioner, Michael Thurmond, stated “you can’t just look at the unemployment rate and get a complete picture of the job market of the economy. While we’re encouraged by the decline in the unemployment rate, job creation remained anemic in February.” In Georgia, about 14.4% of the officially unemployed have been out of work for a half-year or more. For the nation as a whole, about 22% have been out of work for at least 27 weeks. Thurmond observed “I can envision job growth, but we don’t have any objective evidence that it has begun.”
Yesterday the Labor Department reported that U.S. initial jobless claims fell by 6,000 last week. That number was dwarfed by the increase of 47,000 in the number of people continuing to collect state jobless benefits. That number amounted to 3.064 million in the week ended March 6, and was understated by the thousands of workers being dropped weekly from the unemployment rolls due to their benefits not being extended. In addition, the Labor Department stated 33 states and territories reported an increase in new unemployment claims, while 20 reported a decrease. Again, much of the decrease is due to the unemployment benefits not being extended and not to job creation.
On Friday, March 12, Greenspan stated “employment will begin to increase more quickly before long.” On Tuesday, March 16, after the FOMC meeting, the Federal Reserve stated “new hiring was lagging.” What happened in those four days to create such a change in the tone? It’s possible they spoke to the National Federation of Independent Business. The 5.8 million small businesses in the U.S. employ about half of the U.S. workforce. The National Federation’s most recent survey indicated that only 13% of small businesses polled in February plan on hiring new workers, down from 17% in January. That is not too encouraging.
Maybe GDP growth is slowing. The Philadelphia Federal Reserve’s measure of business activity fell to 24.2 in March from 31.4 in February.
GM recalled more than 4 million pickup trucks to replace tailgate support cables that may corrode and fracture. GM remains prominently in the recall lead. With a full head of steam, I remain confident that they can retain their dominance in this category.
Beryl Sprinkel was chairman of the Council of Economic Advisors under former President Reagan. He stated Bush has “not done a good job” in restraining spending. “I’m disappointed.” Federal spending now amounts to about 20% of GDP. Federal receipts as a percent of GDP have fallen from 21% in 2000 to below 16% this year. The historical average ranges between 17 and 19 percent.
Thursday, March 18, 2004
3/18/04 Budget Cuts Can Be Unwelcome
Kunji Okue, an economist at Dresdner Kleinwort Wasserstein in Tokyo: “Japan is hard at work importing the U.S. deficit. That could be dangerous, since it may be impossible to unwind.”
Alan Greenspan: “Considering the possibility of extending unemployment insurance is not a bad idea.” A friend pointed out that Bloomberg reported the rate at which unemployed U.S. workers exhausted their jobless benefits in 2002 and 2003 approached highs not seen since the program began in the 1930s as a response to the Great Depression.
A friend from Baltimore called and told me that, to balance the city’s $2.1 billion budget, it would have to eliminate 533 jobs, including police officers, firefighters, and trash collectors, as well as increasing the city’s property tax rate. The cuts are blamed on macroeconomic factors, such as, lost jobs that result in less revenue from income taxes.
Other communities are experiencing cutbacks. The Philadelphia Police Department is eliminating positions. Hospitals in Georgia, the state of Washington, and Colorado are cutting hundreds of positions. School districts and colleges in California, Florida, Kansas, Ohio, Missouri, and Kentucky have announced layoffs due to budget constraints.
According to the Kaiser Family Foundation, monthly insurance premiums for the nation’s employers rose almost 14% in 2003, the third straight year of double-digit increase. Costs for doctors’ services increased by 1.1% in February.
Mat Johnson, Quantit Economic Group’s chief economist: “The one thing that doesn’t adjust is wages and salaries. They don’t all of a sudden fall. The way to make them fall is to fire workers and try to raise productivity, and/or buy back workers at a later date at less of a cost.”
With the merger of Bank of America and Fleet Boston, 13,000 workers will lose their jobs. Bombardier, the world’s biggest maker of train equipment, will cut 6,600 jobs in its train business, or 19% of the division’s workforce, and close seven plants in Europe. It would appear that their 2001 acquisition of DaimlerChrysler AG’s Adtranz rail equipment unit was partially to blame for the cutbacks. About 990 jobs were eliminated by the closing of Thomson’s tv picture tube plant in Marion, Indiana. About 545 employees at a sister plant in Circleville, Ohio also will be cut.
A new report indicates that the percentage of prescriptions filled by generics in the U.S. has risen from 18.6% in 1984 to nearly 50% today. In 2002, filling an average generic prescription cost patients $16.85 vs. $72.20 for the average branded prescription.
Real average weekly earnings decreased by 0.1%from January to February after seasonal adjustment, according to preliminary data released yesterday by the BLS.
U.S. oil prices rose to their highest level since October 1990. There was a decline in gasoline stocks to about 200 million barrels. It is imperative that all Americans do their part and reduce their driving each week. There is little question that higher prices at the pump are a ball buster. We can’t just blame it on OPEC and higher consumption by Asian countries and/or price gauging by the big oil companies. As individuals, we must assume some responsibility for the lack of conservation.
U.S. treasury yields hit their lowest level in eight months. The yield curve is getting flatter, and this usually is a harbinger of lower economic activity. Less economic growth should be reflected in lower p/e ratios. As long as investors continue to guard against a pickup in inflation and rising treasury yields, they will see their investment accounts dwindle in size. Remaining on the wrong side of the market is a reflection of stubborn investors bearing big egos and/or sheep being led to slaughter by herding dogs and their ill-fated masters.
Kunji Okue, an economist at Dresdner Kleinwort Wasserstein in Tokyo: “Japan is hard at work importing the U.S. deficit. That could be dangerous, since it may be impossible to unwind.”
Alan Greenspan: “Considering the possibility of extending unemployment insurance is not a bad idea.” A friend pointed out that Bloomberg reported the rate at which unemployed U.S. workers exhausted their jobless benefits in 2002 and 2003 approached highs not seen since the program began in the 1930s as a response to the Great Depression.
A friend from Baltimore called and told me that, to balance the city’s $2.1 billion budget, it would have to eliminate 533 jobs, including police officers, firefighters, and trash collectors, as well as increasing the city’s property tax rate. The cuts are blamed on macroeconomic factors, such as, lost jobs that result in less revenue from income taxes.
Other communities are experiencing cutbacks. The Philadelphia Police Department is eliminating positions. Hospitals in Georgia, the state of Washington, and Colorado are cutting hundreds of positions. School districts and colleges in California, Florida, Kansas, Ohio, Missouri, and Kentucky have announced layoffs due to budget constraints.
According to the Kaiser Family Foundation, monthly insurance premiums for the nation’s employers rose almost 14% in 2003, the third straight year of double-digit increase. Costs for doctors’ services increased by 1.1% in February.
Mat Johnson, Quantit Economic Group’s chief economist: “The one thing that doesn’t adjust is wages and salaries. They don’t all of a sudden fall. The way to make them fall is to fire workers and try to raise productivity, and/or buy back workers at a later date at less of a cost.”
With the merger of Bank of America and Fleet Boston, 13,000 workers will lose their jobs. Bombardier, the world’s biggest maker of train equipment, will cut 6,600 jobs in its train business, or 19% of the division’s workforce, and close seven plants in Europe. It would appear that their 2001 acquisition of DaimlerChrysler AG’s Adtranz rail equipment unit was partially to blame for the cutbacks. About 990 jobs were eliminated by the closing of Thomson’s tv picture tube plant in Marion, Indiana. About 545 employees at a sister plant in Circleville, Ohio also will be cut.
A new report indicates that the percentage of prescriptions filled by generics in the U.S. has risen from 18.6% in 1984 to nearly 50% today. In 2002, filling an average generic prescription cost patients $16.85 vs. $72.20 for the average branded prescription.
Real average weekly earnings decreased by 0.1%from January to February after seasonal adjustment, according to preliminary data released yesterday by the BLS.
U.S. oil prices rose to their highest level since October 1990. There was a decline in gasoline stocks to about 200 million barrels. It is imperative that all Americans do their part and reduce their driving each week. There is little question that higher prices at the pump are a ball buster. We can’t just blame it on OPEC and higher consumption by Asian countries and/or price gauging by the big oil companies. As individuals, we must assume some responsibility for the lack of conservation.
U.S. treasury yields hit their lowest level in eight months. The yield curve is getting flatter, and this usually is a harbinger of lower economic activity. Less economic growth should be reflected in lower p/e ratios. As long as investors continue to guard against a pickup in inflation and rising treasury yields, they will see their investment accounts dwindle in size. Remaining on the wrong side of the market is a reflection of stubborn investors bearing big egos and/or sheep being led to slaughter by herding dogs and their ill-fated masters.
Wednesday, March 17, 2004
3/17/04 New Hiring Has Lagged
As Spring approaches, the weather should begin to turn sunnier and warmer. That means two things. One, more construction workers will be hired. Two, we are in the middle of tax season, and seasonal workers will be hired to assist in tax preparation. That’s the good news. The bad news is a bit more overwhelming. BASF will cut another 750 jobs in North America on top of the 1,000 already announced for the year. Demolition crews will tear down the 75-year old Flexsys chemical plant in Nitro, West Virginia. A total of 205 jobs will be eliminated. According to the American Chemical Council, about 100,000 chemical-related jobs, or 1 in every 10, have been cut in the past five years. As more chemical factories shut down due to rising energy costs and increased foreign competition, more workers will lose their jobs.
Did you know that the Atkins diet and mad cow disease have helped to create a slump in the french fry potato market by downsizing serving sizes at fast food outlets? JR Simplot, one of the world’s largest producers of french fries, will close its Hermiston, Oregon plant and eliminate 125 jobs by June, and another 500 by November. Lear Corp., the world’s third largest auto supplier, announced it will close one or both of its Walker, Michigan plants by May. There is a potential for 350 employees to lose their jobs. Avondale Mills will cease weaving operations at its yarn production facility in Monroe, Georgia and lay off half of its staff, or 158 people.
The House Committee on Government Reform reported yesterday that about 350,000 unemployed workers nationwide lost their benefits in January, and that an additional 2 million will do so by July 1 unless benefits are extended. When an individual loses benefits, they are no longer counted on the unemployment rolls. In other words, between December and January, 350,000 Americans were not counted as unemployed. The January unemployment number was reported in the first week of February. As such, in doing the math, it is plain to see unemployment rose in January and it did in February also for the same reason. There is not enough job creation to offset those being dropped from the rolls due to the loss of benefits. That does not take into account plant closings and other job losses from cutbacks. The Fed’s statement, “new hiring has lagged,” does not even begin to reflect the landscape on Main Street.
Let’s take a look at California. There are 59,634 who exhausted their unemployment benefits in January. As of January, there were 1.07 million unemployed workers in California.
The Walt Disney Company is exploring India as a production base for its animation and feature films. Electronic Arts will set up shop in Mumbai for some of its game creations. Gartner, the IT consultancy, predicts that up to 25% of traditional IT jobs will be outsourced by 2010 and that “global sourcing is becoming a mainstream delivery model.” They calculate the world will spend $128 billion this year for business process outsourcing contracts and more than double that amount in 2005. Do you think this might be another reason for a lag in new hiring?
Germany’s ZEW institute stated its gauge of economic expectations fell in March, for the third straight month, to its lowest level since last summer.
Yesterday, oil prices hit fresh one-year highs as U.S. light crude rose to $37.80 per barrel. As temperatures rise, the demand for heating oil should begin to decline. On the other hand, nicer weather makes weekend driving more inviting.
February home construction fell 4% to the lowest annual pace since August. However, it is anticipated that 2004 will be the second-best year ever for the sale of new homes.
According to a recent report from Cutting Edge Information, today’s generic drug market has zoomed to a $40 billion industry, almost doubling in size from 1998, and is expected to reach more than $60 billion by 2007.
Panacos Pharmaceuticals has begun Phase 1 clinical trial of its small molecule HIV drug candidate PA-457, which represents the first in the new class of antiretrovirals called Maturation Inhibitors that offer the promise of new treatment options for patients with HIV.
Vinod Khosla, General Partner at Klener Perkins Caufield & Byers: “Microcredit has the power to build the next entrepreneur out of the poorest society in India.”
K. Paul Singh, Chairman, President, and CEO of Primust Telecommunications: “People don’t come to work to fail. They are smart. We need to find a good fit for the people when we hire them. It takes time for a member to find his or her fit- at least a year. “
Last year, Toyota was the number one marketer of passenger cars in the Chicago area.
As Spring approaches, the weather should begin to turn sunnier and warmer. That means two things. One, more construction workers will be hired. Two, we are in the middle of tax season, and seasonal workers will be hired to assist in tax preparation. That’s the good news. The bad news is a bit more overwhelming. BASF will cut another 750 jobs in North America on top of the 1,000 already announced for the year. Demolition crews will tear down the 75-year old Flexsys chemical plant in Nitro, West Virginia. A total of 205 jobs will be eliminated. According to the American Chemical Council, about 100,000 chemical-related jobs, or 1 in every 10, have been cut in the past five years. As more chemical factories shut down due to rising energy costs and increased foreign competition, more workers will lose their jobs.
Did you know that the Atkins diet and mad cow disease have helped to create a slump in the french fry potato market by downsizing serving sizes at fast food outlets? JR Simplot, one of the world’s largest producers of french fries, will close its Hermiston, Oregon plant and eliminate 125 jobs by June, and another 500 by November. Lear Corp., the world’s third largest auto supplier, announced it will close one or both of its Walker, Michigan plants by May. There is a potential for 350 employees to lose their jobs. Avondale Mills will cease weaving operations at its yarn production facility in Monroe, Georgia and lay off half of its staff, or 158 people.
The House Committee on Government Reform reported yesterday that about 350,000 unemployed workers nationwide lost their benefits in January, and that an additional 2 million will do so by July 1 unless benefits are extended. When an individual loses benefits, they are no longer counted on the unemployment rolls. In other words, between December and January, 350,000 Americans were not counted as unemployed. The January unemployment number was reported in the first week of February. As such, in doing the math, it is plain to see unemployment rose in January and it did in February also for the same reason. There is not enough job creation to offset those being dropped from the rolls due to the loss of benefits. That does not take into account plant closings and other job losses from cutbacks. The Fed’s statement, “new hiring has lagged,” does not even begin to reflect the landscape on Main Street.
Let’s take a look at California. There are 59,634 who exhausted their unemployment benefits in January. As of January, there were 1.07 million unemployed workers in California.
The Walt Disney Company is exploring India as a production base for its animation and feature films. Electronic Arts will set up shop in Mumbai for some of its game creations. Gartner, the IT consultancy, predicts that up to 25% of traditional IT jobs will be outsourced by 2010 and that “global sourcing is becoming a mainstream delivery model.” They calculate the world will spend $128 billion this year for business process outsourcing contracts and more than double that amount in 2005. Do you think this might be another reason for a lag in new hiring?
Germany’s ZEW institute stated its gauge of economic expectations fell in March, for the third straight month, to its lowest level since last summer.
Yesterday, oil prices hit fresh one-year highs as U.S. light crude rose to $37.80 per barrel. As temperatures rise, the demand for heating oil should begin to decline. On the other hand, nicer weather makes weekend driving more inviting.
February home construction fell 4% to the lowest annual pace since August. However, it is anticipated that 2004 will be the second-best year ever for the sale of new homes.
According to a recent report from Cutting Edge Information, today’s generic drug market has zoomed to a $40 billion industry, almost doubling in size from 1998, and is expected to reach more than $60 billion by 2007.
Panacos Pharmaceuticals has begun Phase 1 clinical trial of its small molecule HIV drug candidate PA-457, which represents the first in the new class of antiretrovirals called Maturation Inhibitors that offer the promise of new treatment options for patients with HIV.
Vinod Khosla, General Partner at Klener Perkins Caufield & Byers: “Microcredit has the power to build the next entrepreneur out of the poorest society in India.”
K. Paul Singh, Chairman, President, and CEO of Primust Telecommunications: “People don’t come to work to fail. They are smart. We need to find a good fit for the people when we hire them. It takes time for a member to find his or her fit- at least a year. “
Last year, Toyota was the number one marketer of passenger cars in the Chicago area.
Tuesday, March 16, 2004
3/16/04 Surplus Employees
The Philippines has 84 million people. With a literacy rate in excess of 90%, universities graduate 350,000 students a year, including 50,000 engineers. The average household income is less than $3,000 per year. There is a sizable middle class. The government predicts that call centers will double over the next year thanks to Dell, P&G, American Express, Citigroup, and others. Accenture, the large consulting company, employs 2,000 Filipino software developers. An average software engineer is quite pleased with a $4,000 annual salary. A very talented programmer can make $1,000 a month. Medical transcription is another field with employment on the rise. Many have degrees in nursing and physical therapy. With excellent voice and data communications, a highly educated population with many possessing English speaking skills, and long-standing economic ties to the U.S., this country has a bright outsourcing future.
Zapatero: “My most immediate priority is to fight all forms of terrorism.”
The U.S. Department of Labor announced it is increasing benefits for Boeing workers who can qualify under its Trade Adjustment Assistance program. The changes included: an additional 26 weeks of unemployment checks for workers who are going through job training, bringing the total to 104 weeks. There will be a tax credit for up to 65% of what individuals pay in premiums to maintain their Boeing health insurance under COBRA. In addition, there is an increase in one-time payment for workers’ job-search and relocation costs, from $800 to $1,250. As previously noted, Boeing has had uninterrupted monthly layoffs for over two years.
Juan Cole: “The Afghanistan GDP is $5 billion a year; $2 billion of that comes from poppy cultivation for heroin production.”
BellSouth stated yesterday that it will eliminate 778 largely technical jobs in nine states in the second quarter. The company has cut nearly a fifth of its jobs in little more than three years. BellSouth describes the targeted workers as “surplused employees.” At the end of last year, the company employed 75,743 workers. I wonder how many top managers are surplus?
The Wall Street Journal, Investors Business Daily, and other publications have commented on the most recent Manpower hiring survey of 16,000 U.S. employers. I don’t write headlines for consumption. Therefore, I have an advantage. Briefly, 28% surveyed plan to increase hiring for the second quarter. However, the increase took place essentially in the South and, for the most part, mainly in construction. Elsewhere, the picture was mixed and, unfortunately, not particularly noteworthy except that the Northeast continued to have a poor hiring outlook. The latter should not be surprising given the bleak March Empire Manufacturing Survey from the Federal Reserve Bank of New York. The index fell to 25.33 from February’s 42.05. The gauge of new orders dropped to 23.52 in March from the prior month’s 34.94. The average employee workweek declined to 11.9 from 26.5 a month earlier. The index of inventories dropped to 3.9 in March from 8.6 in February, and unfilled orders decreased to 3.3 for the month from February’s 6.5.
Wal-Mart reported yesterday that its March sales at stores open at least one year were tracking near the high end of its forecast for a 4% to 6% increase as customers cashed tax refund checks. Money orders and consumables were among the most frequently purchased items when people cashed their refund checks.
Georgia Governor Sonny Perdue, a Republican: “Our theme this year is living within our means. The federal money from last year is gone. And we need to build up our rainy day fund, rather than drawing it down.”
Even though tax collections are up 5.8% in the first seven months of California’s budget year, and even though spending is down 0.6% during this period, the state still ran a $6 billion deficit during this time.
When people think of Kentucky, horses, tobacco, and bluegrass come to mind. Rarely does one mention the textile industry. Last week, Jockey International eliminated 440 jobs at three plants in Carlisle, Mount Sterling, and Maysville. In the last 13 years, the number of employees in apparel manufacturing in Kentucky has plummeted by 70% from 32,200 to 8,900. Arlen Sanders, director of economic development for Liberty and Casey counties, stated “unfortunately, they are continuing to export our jobs. In small, rural communities where we’ve had these jobs, it hurts.” Kentucky has plenty of company. Michael Wald, an economist with the U.S. Bureau of Labor Statistics, stated U.S. apparel makers cut 556,000 jobs- 65% of the industry- in the last decade. While average compensation costs in 2002 were $21.33 an hour in the U.S., Wald stated they were $2.38 in Mexico and $2.57 in Brazil. Jockey International is the largest manufacturing employer in Carlisle. The company contributed about $80,000 annually to Carlisle and Nicholas County in payroll taxes and accounted for about a third of the purchases from the gas and water utilities.
Asked on CNN’s “Late Edition” if the war in Iraq was worthwhile given that 564 U.S. soldiers have died there, Rumsfeld stated, “Oh, my goodness, yes. There’s no question…25 million people in Iraq are free.”
Today the Fed’s Open Market Committee meets. As always, there will be the Fed’s assessment on the economy. There is an opportunity for Greenspan to invite the Bank of Japan to offer the accompanying statement. After all, the B of J has been setting interest rates on our treasuries for some time. By their purchasing hundreds of billions of treasuries, our interest rates have been maintained at an artificially low level. The Fed governors are surplus employees. It’s a good thing they don’t work for BellSouth.
The Wall Street Journal’s lead article today focuses on rising healthcare costs for retired workers, company ceilings on the amount spent per retiree, and examples of companies actually cutting retirees’ health benefits, thus creating greater income for the company itself. In my view, it is worthwhile reading for retirees and investors. For example, IBM spent 5% less on retiree health benefits last year while IBM retiree healthcare premiums rose neatly 29%.
The Philippines has 84 million people. With a literacy rate in excess of 90%, universities graduate 350,000 students a year, including 50,000 engineers. The average household income is less than $3,000 per year. There is a sizable middle class. The government predicts that call centers will double over the next year thanks to Dell, P&G, American Express, Citigroup, and others. Accenture, the large consulting company, employs 2,000 Filipino software developers. An average software engineer is quite pleased with a $4,000 annual salary. A very talented programmer can make $1,000 a month. Medical transcription is another field with employment on the rise. Many have degrees in nursing and physical therapy. With excellent voice and data communications, a highly educated population with many possessing English speaking skills, and long-standing economic ties to the U.S., this country has a bright outsourcing future.
Zapatero: “My most immediate priority is to fight all forms of terrorism.”
The U.S. Department of Labor announced it is increasing benefits for Boeing workers who can qualify under its Trade Adjustment Assistance program. The changes included: an additional 26 weeks of unemployment checks for workers who are going through job training, bringing the total to 104 weeks. There will be a tax credit for up to 65% of what individuals pay in premiums to maintain their Boeing health insurance under COBRA. In addition, there is an increase in one-time payment for workers’ job-search and relocation costs, from $800 to $1,250. As previously noted, Boeing has had uninterrupted monthly layoffs for over two years.
Juan Cole: “The Afghanistan GDP is $5 billion a year; $2 billion of that comes from poppy cultivation for heroin production.”
BellSouth stated yesterday that it will eliminate 778 largely technical jobs in nine states in the second quarter. The company has cut nearly a fifth of its jobs in little more than three years. BellSouth describes the targeted workers as “surplused employees.” At the end of last year, the company employed 75,743 workers. I wonder how many top managers are surplus?
The Wall Street Journal, Investors Business Daily, and other publications have commented on the most recent Manpower hiring survey of 16,000 U.S. employers. I don’t write headlines for consumption. Therefore, I have an advantage. Briefly, 28% surveyed plan to increase hiring for the second quarter. However, the increase took place essentially in the South and, for the most part, mainly in construction. Elsewhere, the picture was mixed and, unfortunately, not particularly noteworthy except that the Northeast continued to have a poor hiring outlook. The latter should not be surprising given the bleak March Empire Manufacturing Survey from the Federal Reserve Bank of New York. The index fell to 25.33 from February’s 42.05. The gauge of new orders dropped to 23.52 in March from the prior month’s 34.94. The average employee workweek declined to 11.9 from 26.5 a month earlier. The index of inventories dropped to 3.9 in March from 8.6 in February, and unfilled orders decreased to 3.3 for the month from February’s 6.5.
Wal-Mart reported yesterday that its March sales at stores open at least one year were tracking near the high end of its forecast for a 4% to 6% increase as customers cashed tax refund checks. Money orders and consumables were among the most frequently purchased items when people cashed their refund checks.
Georgia Governor Sonny Perdue, a Republican: “Our theme this year is living within our means. The federal money from last year is gone. And we need to build up our rainy day fund, rather than drawing it down.”
Even though tax collections are up 5.8% in the first seven months of California’s budget year, and even though spending is down 0.6% during this period, the state still ran a $6 billion deficit during this time.
When people think of Kentucky, horses, tobacco, and bluegrass come to mind. Rarely does one mention the textile industry. Last week, Jockey International eliminated 440 jobs at three plants in Carlisle, Mount Sterling, and Maysville. In the last 13 years, the number of employees in apparel manufacturing in Kentucky has plummeted by 70% from 32,200 to 8,900. Arlen Sanders, director of economic development for Liberty and Casey counties, stated “unfortunately, they are continuing to export our jobs. In small, rural communities where we’ve had these jobs, it hurts.” Kentucky has plenty of company. Michael Wald, an economist with the U.S. Bureau of Labor Statistics, stated U.S. apparel makers cut 556,000 jobs- 65% of the industry- in the last decade. While average compensation costs in 2002 were $21.33 an hour in the U.S., Wald stated they were $2.38 in Mexico and $2.57 in Brazil. Jockey International is the largest manufacturing employer in Carlisle. The company contributed about $80,000 annually to Carlisle and Nicholas County in payroll taxes and accounted for about a third of the purchases from the gas and water utilities.
Asked on CNN’s “Late Edition” if the war in Iraq was worthwhile given that 564 U.S. soldiers have died there, Rumsfeld stated, “Oh, my goodness, yes. There’s no question…25 million people in Iraq are free.”
Today the Fed’s Open Market Committee meets. As always, there will be the Fed’s assessment on the economy. There is an opportunity for Greenspan to invite the Bank of Japan to offer the accompanying statement. After all, the B of J has been setting interest rates on our treasuries for some time. By their purchasing hundreds of billions of treasuries, our interest rates have been maintained at an artificially low level. The Fed governors are surplus employees. It’s a good thing they don’t work for BellSouth.
The Wall Street Journal’s lead article today focuses on rising healthcare costs for retired workers, company ceilings on the amount spent per retiree, and examples of companies actually cutting retirees’ health benefits, thus creating greater income for the company itself. In my view, it is worthwhile reading for retirees and investors. For example, IBM spent 5% less on retiree health benefits last year while IBM retiree healthcare premiums rose neatly 29%.
Monday, March 15, 2004
3/15/04 Existing In Hostile Territory
They got Mark Everson. He could not dodge the bullet. Who is he? Everson is the IRS Commissioner. For the first time he was forced to pay the AMT. He observed that, if the process isn’t simplified, people will be less willing to pay taxes. He remarked “it’s a matter of simplifying a tax system that’s far too complex. It’s got to be addressed.” The man sounds like his nose is out of joint. Now he knows how millions of Americans got screwed this year.
As I previously noted, this year’s H-1B cap of 65,000 has already been reached. In the India Post newspaper it was reported that Bush told Paresh Shah that he was unaware about the fact that H-1B cases filed in the year 2003 were being applied to the year 2004 H-1B cap. Bush stated that he was willing to review a proposal to recapture approximately 12,000 H-1B visas into the current H-1B cap. This would allow the H-1B category to reopen in this current fiscal year until the recaptured H-1B spots are exhausted.
Craig Barrett, Intel CEO: “People in China are capable of doing any engineering job, any software job, any managerial job that people in the United States are capable of doing. As CEO of Intel, my allegiance is to the shareholders of Intel and to the success of the company. We go after the most cost-effective resources around the world, no matter where they are. However, as an American citizen, I would have to be worried about whether jobs that are created are created outside the U.S…as a citizen, I see all these resources and I think this puts my country in danger.”
Intel’s initial data-storage chip assembling took place in Shanghai in 1998. A second testing and assembly plant will open this year in Chengdu at a cost of $675 million. Intel has sales offices in 14 Chinese cities. The company has invested in 30 start-ups in China. More than 10% of Intel’s sales come from China, the largest consuming nation for mobile phones. Intel’s facility in Shanghai employs 2,000. Intel China President Wee Theng Tan stated “the quality of the work here is equivalent to any of the work we do around the world.” It had better be and it had better say in top form. Down the road is Shanghai-based SMIC, founded in 2000 with investment from Singapore, the U.S., and the Shanghai government. It is China’s leading chip company. It wants to challenge Intel’s leadership. In six years, China is expected to surpass the U.S. as the biggest buyer of personal computers. Currently, SMIC manufactures chips designed by other companies. That too will change. China has 56 wafer-fabrication plants in operation and 12 more under construction. You can bet that chip prices will drop significantly as production increases. Prices for computers will continue to decline. On Friday, SMIC priced its shares to go public. Huann Min Tang, technical director of design services for SMIC, stated we’re probably just a couple of years behind the world leaders now.” And, in my opinion, closing fast. If I know that, so does Craig Barrett.
China’s retail sales rose 10.5% from a year earlier in the first two months of this year. China’s Prime Minister is concerned with growth rates that are too high and the potential dangers of inflationary pressures. He stated “it’s a test no less than the SARS epidemic. If we fail to manage the situation well, setbacks to the economy will be inevitable.”
Daniel Cain lives in Stark County, Ohio. He is a 70 year-old retired steelworker. In 2000 he voted for Bush. Cain stated “I voted for him because I belong to the National Rifle Association. Now, I just don’t trust him because of all the shipping of jobs out of the country.” NRA supporters voted Bush into office in 2000. It won’t happen in 2004. All the ads in the world cannot regain lost trust.
They got Mark Everson. He could not dodge the bullet. Who is he? Everson is the IRS Commissioner. For the first time he was forced to pay the AMT. He observed that, if the process isn’t simplified, people will be less willing to pay taxes. He remarked “it’s a matter of simplifying a tax system that’s far too complex. It’s got to be addressed.” The man sounds like his nose is out of joint. Now he knows how millions of Americans got screwed this year.
As I previously noted, this year’s H-1B cap of 65,000 has already been reached. In the India Post newspaper it was reported that Bush told Paresh Shah that he was unaware about the fact that H-1B cases filed in the year 2003 were being applied to the year 2004 H-1B cap. Bush stated that he was willing to review a proposal to recapture approximately 12,000 H-1B visas into the current H-1B cap. This would allow the H-1B category to reopen in this current fiscal year until the recaptured H-1B spots are exhausted.
Craig Barrett, Intel CEO: “People in China are capable of doing any engineering job, any software job, any managerial job that people in the United States are capable of doing. As CEO of Intel, my allegiance is to the shareholders of Intel and to the success of the company. We go after the most cost-effective resources around the world, no matter where they are. However, as an American citizen, I would have to be worried about whether jobs that are created are created outside the U.S…as a citizen, I see all these resources and I think this puts my country in danger.”
Intel’s initial data-storage chip assembling took place in Shanghai in 1998. A second testing and assembly plant will open this year in Chengdu at a cost of $675 million. Intel has sales offices in 14 Chinese cities. The company has invested in 30 start-ups in China. More than 10% of Intel’s sales come from China, the largest consuming nation for mobile phones. Intel’s facility in Shanghai employs 2,000. Intel China President Wee Theng Tan stated “the quality of the work here is equivalent to any of the work we do around the world.” It had better be and it had better say in top form. Down the road is Shanghai-based SMIC, founded in 2000 with investment from Singapore, the U.S., and the Shanghai government. It is China’s leading chip company. It wants to challenge Intel’s leadership. In six years, China is expected to surpass the U.S. as the biggest buyer of personal computers. Currently, SMIC manufactures chips designed by other companies. That too will change. China has 56 wafer-fabrication plants in operation and 12 more under construction. You can bet that chip prices will drop significantly as production increases. Prices for computers will continue to decline. On Friday, SMIC priced its shares to go public. Huann Min Tang, technical director of design services for SMIC, stated we’re probably just a couple of years behind the world leaders now.” And, in my opinion, closing fast. If I know that, so does Craig Barrett.
China’s retail sales rose 10.5% from a year earlier in the first two months of this year. China’s Prime Minister is concerned with growth rates that are too high and the potential dangers of inflationary pressures. He stated “it’s a test no less than the SARS epidemic. If we fail to manage the situation well, setbacks to the economy will be inevitable.”
Daniel Cain lives in Stark County, Ohio. He is a 70 year-old retired steelworker. In 2000 he voted for Bush. Cain stated “I voted for him because I belong to the National Rifle Association. Now, I just don’t trust him because of all the shipping of jobs out of the country.” NRA supporters voted Bush into office in 2000. It won’t happen in 2004. All the ads in the world cannot regain lost trust.
Sunday, March 14, 2004
3/14/04 An Oil And Gas Field Trip
Frequently, headlines can be misleading. According to Baker Hughes, the number of rigs exploring for oil and gas in Oklahoma reached an 18-year high of 161 at the end of February. Something about the headline did not sit right with my gut instinct. That’s why we are on U.S. 75 between Tulsa and McAlester. In 2003, natural gas prices exceeded $7 per thousand cubic feet and oil prices rose above $30 per barrel. Oil and gas is the second largest industry in Oklahoma. Would you be surprised to learn that oil and gas production in Oklahoma fell in the first 11 months of 2003 versus the same period in 2002 by 3% each, according to the latest Oklahoma Corporation Commission statistics? Denise Bode, commission chairman, stated “the last time energy prices were near these levels, Oklahoma had over 800 rigs actively exploring for oil and gas.” Why has this taken place? There are many reasons. Bruce Bell, chairman of Mid-Continent Oil and Gas Association of Oklahoma, remarked “we’re kind of seeing a combination of things. We’re seeing the reduction in prospects, the increase in the price of rigs and labor, and overall loss in first year production in natural gas.” It doesn’t help to have a six-month lag between drilling permit application and oil and gas production. The commission reported that producers filed more permit applications to drill new wells in 2003, a total of 5,119, than they did since 1989. Another problem is that of fewer rigs. There are less available today than there were prior to the oil bust in the 1980s. This explains waiting on available rigs. In actuality, rig usage is up 35% over a year ago. Larry Pinkton, president and COO for Unit Corp., has 66 rigs in Oklahoma. Larry stated “we just take care of the customers that we can.” In fact, rig companies have cut back their inventories, and laid-off field hands have left the business in search of more steady employment. The ups and downs of the oil and gas business have taken a toll on the operators and their workers. There are more problems. Another commissioner, Bob Anthony, observed “environmental concerns prohibit producers from drilling in many of the most promising areas.” The commissioners also remarked that Oklahoma’s oil and gas reserves are aging. Existing wells don’t produce as much as they used to and the gas that remains is deeper and harder and more expensive to find. You might state that the cream has been skimmed off the top. Mickey Thompson, president of the Oklahoma Independent Petroleum Association, stated “that doesn’t mean there’s not plenty of oil and gas to recover here. It’s just so expensive that there are not many companies out there willing to take the risk.” Chesapeake Energy is the largest producer in the state. Its production rose by 44% in 2003. They have 41 rigs drilling wells in Oklahoma. Tom Price of Chesapeake stated “it’s going to be more expensive and the reserves are going to be smaller.” The message from Bruce Bell was not promising. He remarked “we’re drilling more holes and, in general, drilling deeper and more deeper holes just to maintain the same output of the last year. That’s not a good sign long term in whether we’ll be able to fill the natural gas needs.” I may not like this picture, but now I’m comfortable we have the skinny. Headlines are for non-thinkers.
The news from the IRS Taxpayer Advocate on the AMT is not good. In 2002, 400,000 households were hit by the AMT and it is estimated that number rose to 2.5 million in 2003 and will climb this year to 3.2 million. Then it will jump to 12.1 million in 2005 and 14.9 million in 2006. By 2010, this WMD will soar to 30 million households! The Taxpayer Advocate tells us that most of this rise can be attributed to Bush’s tax cuts. You read it right. As effective ordinary tax rates decline due to the tax cuts, taxpayers drop below the AMT’s 26% and 28% threshold rates. Because of the AMT, it is estimated that as much as 35% of the Bush tax cuts have been eliminated. In addition, because of budget problems, many tax increases have taken place at local and state government levels. Combine the latter with the nation’s under-estimated unemployment levels, higher natural gas/heating costs, the increased price of gas at the pump, and the cash flow picture for most Americans has taken a step backwards. Why won’t the AMT be repealed? The Tax Policy Center stated full AMT repeal would exceed $1 trillion. Yesterday, in his radio address, Bush stated “with the right policies in Washington, we will maintain America’s economic leadership, we will create more jobs, and we’ll help our workers achieve a better life.” And would you be interested in purchasing the Brooklyn Bridge?
New York City’s unemployment rate increased from 8% in January to 8.4% in February. It has lost 230,000 jobs in the past three years. Mayor Bloomberg stated “our future has never looked brighter.” The same person who wrote Bush’s radio address must have provided Bloomberg with that uplifting statement wrapped in 100% pure bullshit. In the past 18 months the labor participation rate has declined from 65.6% to 57%. If you make it in NYC, you can make it anywhere.
United Airlines is approaching buzz saw time. This airline has 21,000 flight attendants. They have thousands of retirees. The attendants and the retirees will picket and leaflet at Sea-Tac and Washington Dulles airports tomorrow and LAX on Wednesday to protest United’s plan to break its agreement with flight attendant retirees and change their health benefits. Based on a May 2003 agreement, it was promised that flight attendants retiring before July 1, 2003 would have access to health benefits that were less costly and more comprehensive than those that would be in place for those who retire after that date. Based on that agreement, over 2,500 flight attendants retired before the July 1 deadline. An examiner appointed by the bankruptcy court is investigating and will present his findings in bankruptcy court in Chicago on Friday.
Today, another 4 U.S. soldiers were killed in Iraq. Over the past 51 weeks, 564 U.S. armed forces personnel have died in that country.
Richard S. Foster: “Certainly, Congress did not have all the information they might have wanted, or that we had.” Senate Finance Committee Chairman Charles E. Grassley of Iowa stated “government analysts with relevant information should never be muzzled.”
Reuters has reported that, on Monday, 15 EU states may recommend sanctions against Microsoft for breaking antitrust law. A decision is set for March 24. Microsoft will be handed a deadline to comply with the sanctions. The final chapter has not been written.
L.L. Bean has been in business for 92 years. In 2003, they had record sales of $1.2 billion, a 10% increase over 2002. Their president and CEO stated “all channels outperformed even our highest expectations… 2003 was a home run.” To show their appreciation, the company’s board of directors approved a cash award of 15% of annual pay to eligible workers, and cash gifts to recognize thousands of seasonal employees who did not meet the eligibility requirements for the larger payout. The total payout of $36 million is the largest year-end bonus in the company’s history. It is quite wonderful for a board of directors and top management to acknowledge the accomplishments of all team members. The economic welfare of Bean employees is important to those overseeing the running of this fine company. The team made it possible for L.L Bean to have its best December in its 92-year history and to ship 175,000 packages on its single busiest day during the holiday sales period.
Frequently, headlines can be misleading. According to Baker Hughes, the number of rigs exploring for oil and gas in Oklahoma reached an 18-year high of 161 at the end of February. Something about the headline did not sit right with my gut instinct. That’s why we are on U.S. 75 between Tulsa and McAlester. In 2003, natural gas prices exceeded $7 per thousand cubic feet and oil prices rose above $30 per barrel. Oil and gas is the second largest industry in Oklahoma. Would you be surprised to learn that oil and gas production in Oklahoma fell in the first 11 months of 2003 versus the same period in 2002 by 3% each, according to the latest Oklahoma Corporation Commission statistics? Denise Bode, commission chairman, stated “the last time energy prices were near these levels, Oklahoma had over 800 rigs actively exploring for oil and gas.” Why has this taken place? There are many reasons. Bruce Bell, chairman of Mid-Continent Oil and Gas Association of Oklahoma, remarked “we’re kind of seeing a combination of things. We’re seeing the reduction in prospects, the increase in the price of rigs and labor, and overall loss in first year production in natural gas.” It doesn’t help to have a six-month lag between drilling permit application and oil and gas production. The commission reported that producers filed more permit applications to drill new wells in 2003, a total of 5,119, than they did since 1989. Another problem is that of fewer rigs. There are less available today than there were prior to the oil bust in the 1980s. This explains waiting on available rigs. In actuality, rig usage is up 35% over a year ago. Larry Pinkton, president and COO for Unit Corp., has 66 rigs in Oklahoma. Larry stated “we just take care of the customers that we can.” In fact, rig companies have cut back their inventories, and laid-off field hands have left the business in search of more steady employment. The ups and downs of the oil and gas business have taken a toll on the operators and their workers. There are more problems. Another commissioner, Bob Anthony, observed “environmental concerns prohibit producers from drilling in many of the most promising areas.” The commissioners also remarked that Oklahoma’s oil and gas reserves are aging. Existing wells don’t produce as much as they used to and the gas that remains is deeper and harder and more expensive to find. You might state that the cream has been skimmed off the top. Mickey Thompson, president of the Oklahoma Independent Petroleum Association, stated “that doesn’t mean there’s not plenty of oil and gas to recover here. It’s just so expensive that there are not many companies out there willing to take the risk.” Chesapeake Energy is the largest producer in the state. Its production rose by 44% in 2003. They have 41 rigs drilling wells in Oklahoma. Tom Price of Chesapeake stated “it’s going to be more expensive and the reserves are going to be smaller.” The message from Bruce Bell was not promising. He remarked “we’re drilling more holes and, in general, drilling deeper and more deeper holes just to maintain the same output of the last year. That’s not a good sign long term in whether we’ll be able to fill the natural gas needs.” I may not like this picture, but now I’m comfortable we have the skinny. Headlines are for non-thinkers.
The news from the IRS Taxpayer Advocate on the AMT is not good. In 2002, 400,000 households were hit by the AMT and it is estimated that number rose to 2.5 million in 2003 and will climb this year to 3.2 million. Then it will jump to 12.1 million in 2005 and 14.9 million in 2006. By 2010, this WMD will soar to 30 million households! The Taxpayer Advocate tells us that most of this rise can be attributed to Bush’s tax cuts. You read it right. As effective ordinary tax rates decline due to the tax cuts, taxpayers drop below the AMT’s 26% and 28% threshold rates. Because of the AMT, it is estimated that as much as 35% of the Bush tax cuts have been eliminated. In addition, because of budget problems, many tax increases have taken place at local and state government levels. Combine the latter with the nation’s under-estimated unemployment levels, higher natural gas/heating costs, the increased price of gas at the pump, and the cash flow picture for most Americans has taken a step backwards. Why won’t the AMT be repealed? The Tax Policy Center stated full AMT repeal would exceed $1 trillion. Yesterday, in his radio address, Bush stated “with the right policies in Washington, we will maintain America’s economic leadership, we will create more jobs, and we’ll help our workers achieve a better life.” And would you be interested in purchasing the Brooklyn Bridge?
New York City’s unemployment rate increased from 8% in January to 8.4% in February. It has lost 230,000 jobs in the past three years. Mayor Bloomberg stated “our future has never looked brighter.” The same person who wrote Bush’s radio address must have provided Bloomberg with that uplifting statement wrapped in 100% pure bullshit. In the past 18 months the labor participation rate has declined from 65.6% to 57%. If you make it in NYC, you can make it anywhere.
United Airlines is approaching buzz saw time. This airline has 21,000 flight attendants. They have thousands of retirees. The attendants and the retirees will picket and leaflet at Sea-Tac and Washington Dulles airports tomorrow and LAX on Wednesday to protest United’s plan to break its agreement with flight attendant retirees and change their health benefits. Based on a May 2003 agreement, it was promised that flight attendants retiring before July 1, 2003 would have access to health benefits that were less costly and more comprehensive than those that would be in place for those who retire after that date. Based on that agreement, over 2,500 flight attendants retired before the July 1 deadline. An examiner appointed by the bankruptcy court is investigating and will present his findings in bankruptcy court in Chicago on Friday.
Today, another 4 U.S. soldiers were killed in Iraq. Over the past 51 weeks, 564 U.S. armed forces personnel have died in that country.
Richard S. Foster: “Certainly, Congress did not have all the information they might have wanted, or that we had.” Senate Finance Committee Chairman Charles E. Grassley of Iowa stated “government analysts with relevant information should never be muzzled.”
Reuters has reported that, on Monday, 15 EU states may recommend sanctions against Microsoft for breaking antitrust law. A decision is set for March 24. Microsoft will be handed a deadline to comply with the sanctions. The final chapter has not been written.
L.L. Bean has been in business for 92 years. In 2003, they had record sales of $1.2 billion, a 10% increase over 2002. Their president and CEO stated “all channels outperformed even our highest expectations… 2003 was a home run.” To show their appreciation, the company’s board of directors approved a cash award of 15% of annual pay to eligible workers, and cash gifts to recognize thousands of seasonal employees who did not meet the eligibility requirements for the larger payout. The total payout of $36 million is the largest year-end bonus in the company’s history. It is quite wonderful for a board of directors and top management to acknowledge the accomplishments of all team members. The economic welfare of Bean employees is important to those overseeing the running of this fine company. The team made it possible for L.L Bean to have its best December in its 92-year history and to ship 175,000 packages on its single busiest day during the holiday sales period.
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