5/8/04 Ass Backwards
For well over a year, I would get emails berating me for ignoring the Household Employment Survey. In the last two months, no one has written me on this subject. I am truly upset by that. I will fill in the blanks for you. Between the third quarter of 2003 and the end of April 2004, those not in the labor force rose from 75.290 million to 76.016 million while the employed population rose by 200,000. Over the past three months, the civilian labor participation rate has remained unchanged at 65.9% while the employment-population ratio has remained about unchanged at 62.2%. Presently, the total not in the labor force is 76.5 million versus 74.6 million only one year ago. In other words, for all the whiners, the employment situation for the past year has sucked under your requested survey.
There are two sides to every coin. The “other survey” paints a different picture. Prior employment numbers for February and March were increased, and April’s numbers were another barn burner. I’m a bit old fashioned. I don’t give a crap for simple statistics. I want to know more. Consequently, this is my take, and straight up without a chaser. There are more jobs being created. Those jobs, as a generalization, stink the house out. The average hours for all employees held at 33.7 per week in April. Why? There was a large increase in temporary help, those in employment services, food services, and services to buildings and dwellings. Do you get the picture? The headlines state that there has been a pick-up in the manufacturing sector. Really? The manufacturing workweek fell to 40.6 hours from 40.9 hours in March. April overtime declined to 4.5 hours from 4.6 hours. Overall, workers’ average hourly earnings rose by 5 cents in April. Average weekly earnings rose by $1.68. After inflation, the workers in this nation are behind the eight ball. They are in a negative position for the third straight year. Of the 288,000 jobs added in April, 246,000 were service jobs. For the most part, these positions are in the lower paying per hour category with fewer weekly working hours. This is not progress. On the contrary, it leads to a lower standard of living for out nation.
While job numbers were revised upward, consumer credit for February was revised downward from the $4.2 billion initially estimated to $883 million. Yesterday, March’s consumer credit numbers came in at a rise of $5.7 billion, less than the $7 billion projected. I feel confident that the March number will be revised downward. With April retail sales less than expected and auto sales disappointing, I believe April consumer credit will also be on the low side. The consumer is reining in his/her spending habits. As the price of gas, milk, meat, and other daily staples rise, and wages and salaries stay pretty much stagnant, there is less cash flow available for discretionary spending. With interest rates rising, the crunch will become worse. The refinancing boom is over, and there will not be the added cash available from that source. In fact, according to the latest Cambridge Consumer Credit Index, only 8% of Americans plan to refinance their mortgage in the next year, down 50% from those polled in October 2002. Of those surveyed, in the past two years 35% refinanced their mortgages. In addition, there will not be a check in the mail for child credits and your refund checks have been received. The thrill is gone. Our consumer-based economy is rolling over. The headlines state the opposite. My money is where my mouth is. This economy is facing a world of hurt.
Even Warren Buffett’s Berkshire Hathaway is in for a world of hurt. The company’s first-quarter earnings dropped 10%. There’s much more to follow. As the price increases for insurance become less frequent, and, in fact, begin to turn down, profits will fall even more. Berkshire stated yesterday that “underwriters are instructed to reject inadequately priced risks.” They may need to get more accustomed to lower pricing. The gravy train has left the station. Just as Friday was most unpleasant for shareholders of Krispy Kreme, Monday will prove unsettling for Berkshire holders. A significant portion of the company’s cash flow is derived from re-insurance. As with refinancing income, this too has seen it’s best days for sometime.
International Association of Machinists International President Tom Buffenbarger, whose union lost 90,000 members since 2000, observed “the fear of job loss runs deep among the workers. For millions of middle class Americans, both in and out of work, the nation’s employment crisis is far from over.”
OPEC’s 11 members, including Iraq, pumped 330,000 barrels per day less in April than in March. According to the Platts survey, “these numbers show that OPEC never came close to implementing its 1 million barrel per day cut in April, and all our early reports for May and even into June show no further significant cuts likely.”
Those betting on higher prices for gas, milk, meat, and other daily staples will, in my view, be disappointed. More muted consumer spending will lead to larger inventories in the pipeline, as it were.
Bush: “ I put together a fantastic team of people to serve this country.” Possibly he is referring to the Texas Rangers baseball team.
Friday, May 07, 2004
5/7/04 Staying Ahead Of The Brainless
According to the BLS, non-farm unit labor costs grew 0.5% in the first quarter of 2004. They were unchanged in the fourth quarter of 2003. When the rise in consumer prices was taken into account, real hourly compensation grew by 0.4% in this year’s first quarter. It had increased 1.7% in the fourth quarter of 2003. In this year’s first quarter, unit labor costs for non-durable manufacturing rose by 2% while unit labor costs for durable manufacturing fell by 1.4%. This highlights a point made by Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, who stated “there are cost pressures affecting firms, such as, soaring prices for insurance, energy, and raw materials, and firms are doing their best to battle these factors, so they aren’t likely to give very much on labor.” Last week, the Labor Department stated that, in this year’s first quarter, salaries rose just 0.6%. Meanwhile, the Commerce Department’s latest report showed inflation running at an annual rate of 3.2%. With an abundance of unemployed workers, and an increasing amount of unemployed workers who lose their benefits each week and therefore are not counted as unemployed, the employed are unafraid to lose their jobs should they ask for higher wages and benefits. They can easily be replaced by the unemployed or even have their jobs outsourced, such as, interrogators for our armed forces. Rising productivity has not led to higher wages. As Meckstroth observed, “the higher material cost pressures are coming at a time when Wall Street expects increased profitability. You’ve got to offset those higher costs somewhere, and labor is your variable cost.” One additional point must be recognized. The Labor Department stated that, in the 12 months that ended in March, the cost of providing workers with benefits increased by 6.9%. Private employers, on average, pay about $23 for each hour worked, but of that amount, about $6.50 goes towards benefits. In sum, despite greater productivity, businesses are loath to raise salaries due to increased spending on medical costs and health insurance.
Today there will be the report on non-farm payrolls. A survey of 75 economists projects a rise in jobs of 170,000+ for the month of April with the unemployment rate remaining the same at 5.7%. Most of the jobs will be lower-paying and non-permanent positions at service companies. Some will be at a missile-manufacturing site. Some could be at a firm that makes landing gear for aircraft. Some might be California grocery workers returning to their jobs. No mention will be made of the 320,000 in April dropped from the unemployment roles due to the loss of unemployment benefits. The bond and stock markets are prepared for a blow-out number like March’s. They will most likely ignore other statistics released today- the monthly consumer debt increase and the level of business inventories. The growth in consumer spending has topped out. When talking about the latest retail sales number, even Michael Niemira, chief economist at the International Council of Shopping Centers, warned that “the discretionary purchasing power of middle-to-lower income households was seeing some constraint.” Niemira is a bull of all of retail bulls. It must have been difficult for him to make that statement. It's not surprising that Wal-Mart'’ stock has recently declined from $60 to $54. Stay ahead of the brainless. When they raid the whorehouse, they take all the girls.
A big deal will be made that there might be a slight increase in manufacturing employment in April. Keep your eye on the ball. The average hourly earnings are up only 1.8% year-on-year. Inflation is running higher than that. In addition, inventories are piling up in certain industries, such as, in the automotive field. There will be manufacturing cut-backs. Is that the Hummer I see with discounted prices? How the mighty tax-credit vehicle has begun to fall? If you have to ask the price of gas, maybe the Hummer isn’t for you.
BASF will eliminate 550 to 680 jobs at its Geismer, Louisiana and Freeport, Texas sites.
In April, the corporate tax revenue in Georgia fell 8.5% to $71 million.
According to Cutting Edge Information, the generic pharmaceuticals market is anticipated to rise 15% in 2004. Nearly 50% of all U.S. prescriptions today are filled with generic drugs, up from 18.6% twenty years earlier.
China accounted for 12% of Japan’s exports in 2003, up one-third from the prior year.
Greenspan: “Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces.”
Santa Clara County announced a $32 million “structural deficit.” Since its fiscal 2003 fiscal year, the county has had to find more than $500 million in savings in response to local conditions and cuts in federal and state funding. The county manager stated “this is unprecedented” and also proposed hundreds of layoffs at the county department level.
Krispy Kreme revised its forecast for fiscal 2005 diluted earning per share from continuing operations down 10% from previously announced guidance. The company chairman stated “for several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including, bread, cereal, and pasta. This trend had little discernible effect on our business last year. However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and as accelerated in the last two to three months. This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged donuts to grocery store customers.” The U.S. packaged donut category experienced a 0.4% decrease in volume for the 12-week period ending April18, 2004 compared to the same period a year ago, according to IRI reports. However, during the same period, Krispy Kreme experienced a 26.3% increase in system-wide volume in U.S. packaged donuts. Periodically, there are difficult moments, as it were, at some great companies. It has occurred with Starbucks and studies on caffeine, for example. Now we come to low carbohydrate diets and Krispy Kreme. I do believe the long-term viability of many grocery outlets is in doubt. That will put a damper on their off-premises business; however, long-term their growth at their own stores will, in my view, more than offset that weakness. At the outset of its public offering, I believed this company’s shares offered a wonderful long-term investment. I continue to believe that.
According to the Joint Commission on the Accreditation of Healthcare Organizations, nearly a third of Americans will experience chronic pain at some joint in their lives. Approximately 50 million Americans live with chronic pain today. Lessen the potential pain levels in your portfolio. Read beyond the headlines. The story is often buried in the small print. I haven’t had an opportunity to read the fine print. The headlines were: April non-farm payrolls up by 288,000, unemployment rate down to 5.6%, and March’s numbers revised upward. So much for the median forecasts by economists or by me.
According to the BLS, non-farm unit labor costs grew 0.5% in the first quarter of 2004. They were unchanged in the fourth quarter of 2003. When the rise in consumer prices was taken into account, real hourly compensation grew by 0.4% in this year’s first quarter. It had increased 1.7% in the fourth quarter of 2003. In this year’s first quarter, unit labor costs for non-durable manufacturing rose by 2% while unit labor costs for durable manufacturing fell by 1.4%. This highlights a point made by Daniel Meckstroth, chief economist for the Manufacturers Alliance/MAPI, who stated “there are cost pressures affecting firms, such as, soaring prices for insurance, energy, and raw materials, and firms are doing their best to battle these factors, so they aren’t likely to give very much on labor.” Last week, the Labor Department stated that, in this year’s first quarter, salaries rose just 0.6%. Meanwhile, the Commerce Department’s latest report showed inflation running at an annual rate of 3.2%. With an abundance of unemployed workers, and an increasing amount of unemployed workers who lose their benefits each week and therefore are not counted as unemployed, the employed are unafraid to lose their jobs should they ask for higher wages and benefits. They can easily be replaced by the unemployed or even have their jobs outsourced, such as, interrogators for our armed forces. Rising productivity has not led to higher wages. As Meckstroth observed, “the higher material cost pressures are coming at a time when Wall Street expects increased profitability. You’ve got to offset those higher costs somewhere, and labor is your variable cost.” One additional point must be recognized. The Labor Department stated that, in the 12 months that ended in March, the cost of providing workers with benefits increased by 6.9%. Private employers, on average, pay about $23 for each hour worked, but of that amount, about $6.50 goes towards benefits. In sum, despite greater productivity, businesses are loath to raise salaries due to increased spending on medical costs and health insurance.
Today there will be the report on non-farm payrolls. A survey of 75 economists projects a rise in jobs of 170,000+ for the month of April with the unemployment rate remaining the same at 5.7%. Most of the jobs will be lower-paying and non-permanent positions at service companies. Some will be at a missile-manufacturing site. Some could be at a firm that makes landing gear for aircraft. Some might be California grocery workers returning to their jobs. No mention will be made of the 320,000 in April dropped from the unemployment roles due to the loss of unemployment benefits. The bond and stock markets are prepared for a blow-out number like March’s. They will most likely ignore other statistics released today- the monthly consumer debt increase and the level of business inventories. The growth in consumer spending has topped out. When talking about the latest retail sales number, even Michael Niemira, chief economist at the International Council of Shopping Centers, warned that “the discretionary purchasing power of middle-to-lower income households was seeing some constraint.” Niemira is a bull of all of retail bulls. It must have been difficult for him to make that statement. It's not surprising that Wal-Mart'’ stock has recently declined from $60 to $54. Stay ahead of the brainless. When they raid the whorehouse, they take all the girls.
A big deal will be made that there might be a slight increase in manufacturing employment in April. Keep your eye on the ball. The average hourly earnings are up only 1.8% year-on-year. Inflation is running higher than that. In addition, inventories are piling up in certain industries, such as, in the automotive field. There will be manufacturing cut-backs. Is that the Hummer I see with discounted prices? How the mighty tax-credit vehicle has begun to fall? If you have to ask the price of gas, maybe the Hummer isn’t for you.
BASF will eliminate 550 to 680 jobs at its Geismer, Louisiana and Freeport, Texas sites.
In April, the corporate tax revenue in Georgia fell 8.5% to $71 million.
According to Cutting Edge Information, the generic pharmaceuticals market is anticipated to rise 15% in 2004. Nearly 50% of all U.S. prescriptions today are filled with generic drugs, up from 18.6% twenty years earlier.
China accounted for 12% of Japan’s exports in 2003, up one-third from the prior year.
Greenspan: “Our fiscal prospects are, in my judgment, a significant obstacle to long-term stability because the budget deficit is not readily subject to correction by market forces.”
Santa Clara County announced a $32 million “structural deficit.” Since its fiscal 2003 fiscal year, the county has had to find more than $500 million in savings in response to local conditions and cuts in federal and state funding. The county manager stated “this is unprecedented” and also proposed hundreds of layoffs at the county department level.
Krispy Kreme revised its forecast for fiscal 2005 diluted earning per share from continuing operations down 10% from previously announced guidance. The company chairman stated “for several months, there has been increasing consumer interest in low-carbohydrate diets, which has adversely impacted several flour-based food categories, including, bread, cereal, and pasta. This trend had little discernible effect on our business last year. However, recent market data suggests consumer interest in reduced carbohydrate consumption has heightened significantly following the beginning of the year and as accelerated in the last two to three months. This phenomenon has affected us most heavily in our off-premises sales channels, in particular sales of packaged donuts to grocery store customers.” The U.S. packaged donut category experienced a 0.4% decrease in volume for the 12-week period ending April18, 2004 compared to the same period a year ago, according to IRI reports. However, during the same period, Krispy Kreme experienced a 26.3% increase in system-wide volume in U.S. packaged donuts. Periodically, there are difficult moments, as it were, at some great companies. It has occurred with Starbucks and studies on caffeine, for example. Now we come to low carbohydrate diets and Krispy Kreme. I do believe the long-term viability of many grocery outlets is in doubt. That will put a damper on their off-premises business; however, long-term their growth at their own stores will, in my view, more than offset that weakness. At the outset of its public offering, I believed this company’s shares offered a wonderful long-term investment. I continue to believe that.
According to the Joint Commission on the Accreditation of Healthcare Organizations, nearly a third of Americans will experience chronic pain at some joint in their lives. Approximately 50 million Americans live with chronic pain today. Lessen the potential pain levels in your portfolio. Read beyond the headlines. The story is often buried in the small print. I haven’t had an opportunity to read the fine print. The headlines were: April non-farm payrolls up by 288,000, unemployment rate down to 5.6%, and March’s numbers revised upward. So much for the median forecasts by economists or by me.
Thursday, May 06, 2004
5/6/04 Technically Speaking
Donald Rumsfeld: “My impression is that what has been charged so far is abuse, which I believe technically is different from torture.”
Edmund Burke: “The greater the power, the more dangerous the abuse.”
The Bank of England raised its short-term interest rate from 4% to 4.25% in order “to keep CPI inflation on track to meet the target in the medium term.”
Walgreens has more 24-hour pharmacies than all its competitors combined.
According to a new study by the Sacramento Regional Research Institute, new-home construction generated $59 billion in economic activity and more than 526,000 jobs in California in 2003. The housing industry (including expenditures on existing housing) contributed $218 billion to the state’s economy, supported almost 1 million jobs, and accounted for approximately 10% of all statewide activity. The California Building Industry stated, with about 600,000 people being added to the state’s population yearly, the current construction pace is barely keeping up with demand and has done nothing to erase an estimated deficit of 500,000 housing units accumulated in the 1990s. The report failed to address the affordability index in California. The facts show that there is a widening gap between the annual income for those in California and the escalating prices for new and existing homes.
Ohio Casualty’s first quarter profit results fell and were short of analyst expectations. The company, however, is on track in one area. It has so far cut 384 jobs on the way to its goal of as many as 500 job cuts by the end of 2004.
In 2000, Chiron purchased Seattle’s Pathogenesis, a company that developed an aerosol drug called Tobi for cystic fibrosis. Last year Chiron laid off 30 researchers at the Seattle site. With additional cuts announced yesterday, only 85 people remain at Pathogenesis, down 50% from its peak employment level.
According to a new Wall Street Journal/NBC poll, six in 10 of those polled responded that the economy is headed for trouble rather than better times. Only 42% say they are better off than 4 years ago, and that compares with 33% who state they are worse off and 23% reporting about the same. The view on Main Street is quite different from the windows looking out over Wall Street. On Main Street many bulls graze on farms and ranches. On Wall Street a good deal of bullshit is generated. TIPS are the tip of the iceberg. If one wants to protect against inflation, consume less. A good place to start is to walk more and drive less. There are no carbs in walking.
According to a recent study by The Robert Wood Foundation, nationally, at least 20 million working Americans do not have health insurance. In six states, at least one in five working adults is uninsured. In 38 other states, at least one working adult in every 10 does not have health insurance. With 27%, Texas has the highest percentage of uninsured residents among all employed or self-employed. It should come as no surprise that, the number of Americans without health insurance, has risen since January 2001 when Bush became president.
About 3 million individuals and families were hit by the AMT this year. The House voted 333-89 to prevent the tax from snaring 9 million more taxpayers next year and imposing about $18 billion in extra taxes. The House bill would keep the amount of income exempt from the tax to this year’s level of $40,250 for individuals and $58,000 for couples. Without passage of the House bill, the exemptions would fall back next year to $33,750 for individuals and $45,000 for couples. It still needs to be passed by the Senate and to be signed by Bush. The Democrat plan, which was rejected, was to exempt every individual earning $125,000 or less and every couple earning $250,000 or less.
Donald Rumsfeld: “My impression is that what has been charged so far is abuse, which I believe technically is different from torture.”
Edmund Burke: “The greater the power, the more dangerous the abuse.”
The Bank of England raised its short-term interest rate from 4% to 4.25% in order “to keep CPI inflation on track to meet the target in the medium term.”
Walgreens has more 24-hour pharmacies than all its competitors combined.
According to a new study by the Sacramento Regional Research Institute, new-home construction generated $59 billion in economic activity and more than 526,000 jobs in California in 2003. The housing industry (including expenditures on existing housing) contributed $218 billion to the state’s economy, supported almost 1 million jobs, and accounted for approximately 10% of all statewide activity. The California Building Industry stated, with about 600,000 people being added to the state’s population yearly, the current construction pace is barely keeping up with demand and has done nothing to erase an estimated deficit of 500,000 housing units accumulated in the 1990s. The report failed to address the affordability index in California. The facts show that there is a widening gap between the annual income for those in California and the escalating prices for new and existing homes.
Ohio Casualty’s first quarter profit results fell and were short of analyst expectations. The company, however, is on track in one area. It has so far cut 384 jobs on the way to its goal of as many as 500 job cuts by the end of 2004.
In 2000, Chiron purchased Seattle’s Pathogenesis, a company that developed an aerosol drug called Tobi for cystic fibrosis. Last year Chiron laid off 30 researchers at the Seattle site. With additional cuts announced yesterday, only 85 people remain at Pathogenesis, down 50% from its peak employment level.
According to a new Wall Street Journal/NBC poll, six in 10 of those polled responded that the economy is headed for trouble rather than better times. Only 42% say they are better off than 4 years ago, and that compares with 33% who state they are worse off and 23% reporting about the same. The view on Main Street is quite different from the windows looking out over Wall Street. On Main Street many bulls graze on farms and ranches. On Wall Street a good deal of bullshit is generated. TIPS are the tip of the iceberg. If one wants to protect against inflation, consume less. A good place to start is to walk more and drive less. There are no carbs in walking.
According to a recent study by The Robert Wood Foundation, nationally, at least 20 million working Americans do not have health insurance. In six states, at least one in five working adults is uninsured. In 38 other states, at least one working adult in every 10 does not have health insurance. With 27%, Texas has the highest percentage of uninsured residents among all employed or self-employed. It should come as no surprise that, the number of Americans without health insurance, has risen since January 2001 when Bush became president.
About 3 million individuals and families were hit by the AMT this year. The House voted 333-89 to prevent the tax from snaring 9 million more taxpayers next year and imposing about $18 billion in extra taxes. The House bill would keep the amount of income exempt from the tax to this year’s level of $40,250 for individuals and $58,000 for couples. Without passage of the House bill, the exemptions would fall back next year to $33,750 for individuals and $45,000 for couples. It still needs to be passed by the Senate and to be signed by Bush. The Democrat plan, which was rejected, was to exempt every individual earning $125,000 or less and every couple earning $250,000 or less.
Wednesday, May 05, 2004
5/5/04 Measure This!
The Lone Star Beef plant in San Angelo, Texas processes older dairy cows, which carry a higher risk of being infected with Mad Cow disease. It is the 18th largest slaughterhouse in the U.S. and processed about 350,000 animals over the last two years. During this time period, only three animals have been tested for the disease, which is an incurable, fatal brain disorder. The three animals that were tested were downers between the ages of 5 and 8+ years. The principal product from this plant is ground beef. How many hamburgers and tacos are consumed in Texas? How many came from this plant. Happy Cinco de Mayo to you too. Fire up that outdoor grill! Mad Cow has an incubation period stretching many years.
According to the Earth Policy Institute, the 2004 world grain harvest is expected to reach a record 1.89 billion tons. Unfortunately, consumption is projected at 1.95 billion tons. It would represent the fifth straight year of grain-harvest shortfalls. This organization’s president stated “we are looking at substantial rises in grain and food prices as early as this fall.”
Oil prices reached $39 (Roy Campanella’s old jersey number) a barrel, a 13 ½ year high. At the same time, GM announced disappointing sales results for April. Inventories are at high levels for the big three auto companies. I look for production schedules to be reduced. In my view, near-term demand has peaked-out for the auto industry. A model like the Prius will remain in demand.
With high interest rates anticipated by all economists, the refinancing frenzy will lessen and the price and sale of new homes will decline. That means less demand for mortgage bankers and home construction workers.
Boeing has put up 46 acres of contiguous land in Renton, Washington for sale. The site formerly was part of Boeing’s 737 and 757 production program, but was vacated when the company consolidated these operations. The 757 assembly line will be shut down in October. The jobs were not outsourced. They were permanently eliminated. Airbus has increasingly taken Boeing’s customers.
According to Challenger, Gray, & Christmas, planned job cuts announced by employers increased in April to 72,184, up 6.1% from March’s figures. Through April, employers have announced 335,024 job cuts, 33% lower than the four-month total in 2003. However, over the past 12 months, employers have announced 1,069,256 job cuts. Since January 2001, 4,995,149 job cuts have been announced. That is a staggering number. As I have mentioned over and over again, there were an increasing number of government and non-profit employers announcing job cuts this year. They totaled 15,926 in April. With on-going budget problems at the local and state levels, one can expect a continued rise in government worker layoffs. Many economists do not weigh in heavily enough on this area.
Dell’s financing arm is offering zero-percent 30-month leases.
Alan Greenspan: “Threats of deflation, which were a significant concern last year, by all indications are no longer an issue for us.” Maybe that’s true for a government worker; however, for the man on Main Street, the wages and salaries continue in a downward direction for the third year in a row.
According to Right Management Consultants, “about 70% of Americans expect the unemployment rate to rise further in the next 12 months. ..There is a recognition that jobs are still neither plentiful, nor are they easy to land. Until the job market completely recovers, we are unlikely to see major shifts in worker confidence levels.”
According to the Hudson Employment Index, 33% of all workers who responded to the survey stated their companies would be hiring in coming months, up from January and February’s 31%. Results were based on telephone interviews of 9,467 working Americans.
The Lone Star Beef plant in San Angelo, Texas processes older dairy cows, which carry a higher risk of being infected with Mad Cow disease. It is the 18th largest slaughterhouse in the U.S. and processed about 350,000 animals over the last two years. During this time period, only three animals have been tested for the disease, which is an incurable, fatal brain disorder. The three animals that were tested were downers between the ages of 5 and 8+ years. The principal product from this plant is ground beef. How many hamburgers and tacos are consumed in Texas? How many came from this plant. Happy Cinco de Mayo to you too. Fire up that outdoor grill! Mad Cow has an incubation period stretching many years.
According to the Earth Policy Institute, the 2004 world grain harvest is expected to reach a record 1.89 billion tons. Unfortunately, consumption is projected at 1.95 billion tons. It would represent the fifth straight year of grain-harvest shortfalls. This organization’s president stated “we are looking at substantial rises in grain and food prices as early as this fall.”
Oil prices reached $39 (Roy Campanella’s old jersey number) a barrel, a 13 ½ year high. At the same time, GM announced disappointing sales results for April. Inventories are at high levels for the big three auto companies. I look for production schedules to be reduced. In my view, near-term demand has peaked-out for the auto industry. A model like the Prius will remain in demand.
With high interest rates anticipated by all economists, the refinancing frenzy will lessen and the price and sale of new homes will decline. That means less demand for mortgage bankers and home construction workers.
Boeing has put up 46 acres of contiguous land in Renton, Washington for sale. The site formerly was part of Boeing’s 737 and 757 production program, but was vacated when the company consolidated these operations. The 757 assembly line will be shut down in October. The jobs were not outsourced. They were permanently eliminated. Airbus has increasingly taken Boeing’s customers.
According to Challenger, Gray, & Christmas, planned job cuts announced by employers increased in April to 72,184, up 6.1% from March’s figures. Through April, employers have announced 335,024 job cuts, 33% lower than the four-month total in 2003. However, over the past 12 months, employers have announced 1,069,256 job cuts. Since January 2001, 4,995,149 job cuts have been announced. That is a staggering number. As I have mentioned over and over again, there were an increasing number of government and non-profit employers announcing job cuts this year. They totaled 15,926 in April. With on-going budget problems at the local and state levels, one can expect a continued rise in government worker layoffs. Many economists do not weigh in heavily enough on this area.
Dell’s financing arm is offering zero-percent 30-month leases.
Alan Greenspan: “Threats of deflation, which were a significant concern last year, by all indications are no longer an issue for us.” Maybe that’s true for a government worker; however, for the man on Main Street, the wages and salaries continue in a downward direction for the third year in a row.
According to Right Management Consultants, “about 70% of Americans expect the unemployment rate to rise further in the next 12 months. ..There is a recognition that jobs are still neither plentiful, nor are they easy to land. Until the job market completely recovers, we are unlikely to see major shifts in worker confidence levels.”
According to the Hudson Employment Index, 33% of all workers who responded to the survey stated their companies would be hiring in coming months, up from January and February’s 31%. Results were based on telephone interviews of 9,467 working Americans.
Tuesday, May 04, 2004
5/4/04 Ferret Out The Truth
Today, we may have some issues to confront. It will be challenging. Depending on what horoscope you read, it’s possible there could be a lunar eclipse and a full moon in your sign today. They could bring misunderstandings and troubles. Prior to bending over backward and falling prey to the cosmic atmosphere, let us illuminate some misconceptions. Wal-Mart is introducing a line of Hawaii Tropic Beverages at 1,200 of their stores. They are sugar-free and caffeine-free. They come from Las Vegas and not Hawaii. Liberate Inc. of San Mateo, California filed for Chapter 11 bankruptcy. The company stated the suppliers would be paid and the stockholders would not be harmed. It’s business as usual. Right? There was this cow at a Lone Star Beef plant in San Angelo, Texas. It was condemned on April 27 after the federal veterinarian “observed the cow stagger and fall,” according to a USDA statement. But instead of holding the cow for testing or giving it a DUI, the carcass was sent to rendering, preventing regulators from ever determining if it had mad-cow disease. The USDA stated the meat from the animal did not enter the human food chain. It’s business as usual. Right? Another three cases of SARS have been confirmed in Beijing. This brings the total to nine. China stated they have a system in place to cut the chain of transmission. Only one of the nine cases has died. In 2002, nearly 800 people died from SARS. It’s business as usual. Right? The U.S. budget deficit is expected to be much less than $520 billion. It appears that tax refunds are less than anticipated and tax receipts are higher than expected. Of course, this year’s costs for the Iraq war are not included in the budget and, as I recently mentioned, other spending items have been unaccounted. In other words, less government spending has not created the projected budget improvement. It’s business as usual. Right? Corporate governance has taken on new meaning. Outsourcing has moved beyond jobs. Boeing performed a slight of hand. Yesterday, they raised the dividend. At the same time, they agreed to demands placed on the company by the Air Force. Boeing is outsourcing its ethics to an independent ethics-compliance watchdog. It’s business as usual as a defense contractor to the Pentagon. Right? Today the Fed will prescribe a glass of warm milk at night for all those investing in U.S. treasury bonds. Of course, the increased demand for milk will create even higher record prices for the moo juice. The Fed has it under control. They will tell investors that the major risk is worrying too much and not enjoying life to the fullest. The danger is not in the rising price of milk. The danger is pulling the trigger and killing the recovery. The Fed does not want the risk of going to prison. They could be judged by the same jury that convicted Quattrone of “destroying evidence in government investigations.” The Fed does not want to put any proclamations in e-mails. They will provide a short written statement that covers up all references to a terror alert on inflation. It’s business as usual. Right?
There is trouble afoot in San Jose. Stay out of the parks. In an effort to close the third year of budget gaps, San Jose is locking rest rooms at city parks. It’s possible urinating in the bushes will be allowed. We don’t know for certain at this point. On a less serious note, scores of city employees will lose their jobs. In addition, they might impose a fee for calling 911. I hope everyone knows how to whistle loudly for help. In addition, the frequency of trash collection, graffiti abatement and watering will be reduced. I can’t wait to move to San Jose. The quality of life seems so inviting.
According to a recent RBC Dain Rauscher report, in 2008, as the first of the baby boomers begin to retire, some developed nations will be confronted with a smaller share of workers to support a growing group of retirees. The report mentions “unfortunately, many investors are unprepared. Their retirement fantasy is just that--- a fantasy. More workers may be forced to postpone retirement and work part-time in retirement. It also puts them at greater risk of outliving their savings.” The good news is a greater potential pool of part-time workers. Essentially, almost all of the job growth is in part-time work. We can keep wage levels down with more part-time workers. The Fed can afford to be patient.
Today, we may have some issues to confront. It will be challenging. Depending on what horoscope you read, it’s possible there could be a lunar eclipse and a full moon in your sign today. They could bring misunderstandings and troubles. Prior to bending over backward and falling prey to the cosmic atmosphere, let us illuminate some misconceptions. Wal-Mart is introducing a line of Hawaii Tropic Beverages at 1,200 of their stores. They are sugar-free and caffeine-free. They come from Las Vegas and not Hawaii. Liberate Inc. of San Mateo, California filed for Chapter 11 bankruptcy. The company stated the suppliers would be paid and the stockholders would not be harmed. It’s business as usual. Right? There was this cow at a Lone Star Beef plant in San Angelo, Texas. It was condemned on April 27 after the federal veterinarian “observed the cow stagger and fall,” according to a USDA statement. But instead of holding the cow for testing or giving it a DUI, the carcass was sent to rendering, preventing regulators from ever determining if it had mad-cow disease. The USDA stated the meat from the animal did not enter the human food chain. It’s business as usual. Right? Another three cases of SARS have been confirmed in Beijing. This brings the total to nine. China stated they have a system in place to cut the chain of transmission. Only one of the nine cases has died. In 2002, nearly 800 people died from SARS. It’s business as usual. Right? The U.S. budget deficit is expected to be much less than $520 billion. It appears that tax refunds are less than anticipated and tax receipts are higher than expected. Of course, this year’s costs for the Iraq war are not included in the budget and, as I recently mentioned, other spending items have been unaccounted. In other words, less government spending has not created the projected budget improvement. It’s business as usual. Right? Corporate governance has taken on new meaning. Outsourcing has moved beyond jobs. Boeing performed a slight of hand. Yesterday, they raised the dividend. At the same time, they agreed to demands placed on the company by the Air Force. Boeing is outsourcing its ethics to an independent ethics-compliance watchdog. It’s business as usual as a defense contractor to the Pentagon. Right? Today the Fed will prescribe a glass of warm milk at night for all those investing in U.S. treasury bonds. Of course, the increased demand for milk will create even higher record prices for the moo juice. The Fed has it under control. They will tell investors that the major risk is worrying too much and not enjoying life to the fullest. The danger is not in the rising price of milk. The danger is pulling the trigger and killing the recovery. The Fed does not want the risk of going to prison. They could be judged by the same jury that convicted Quattrone of “destroying evidence in government investigations.” The Fed does not want to put any proclamations in e-mails. They will provide a short written statement that covers up all references to a terror alert on inflation. It’s business as usual. Right?
There is trouble afoot in San Jose. Stay out of the parks. In an effort to close the third year of budget gaps, San Jose is locking rest rooms at city parks. It’s possible urinating in the bushes will be allowed. We don’t know for certain at this point. On a less serious note, scores of city employees will lose their jobs. In addition, they might impose a fee for calling 911. I hope everyone knows how to whistle loudly for help. In addition, the frequency of trash collection, graffiti abatement and watering will be reduced. I can’t wait to move to San Jose. The quality of life seems so inviting.
According to a recent RBC Dain Rauscher report, in 2008, as the first of the baby boomers begin to retire, some developed nations will be confronted with a smaller share of workers to support a growing group of retirees. The report mentions “unfortunately, many investors are unprepared. Their retirement fantasy is just that--- a fantasy. More workers may be forced to postpone retirement and work part-time in retirement. It also puts them at greater risk of outliving their savings.” The good news is a greater potential pool of part-time workers. Essentially, almost all of the job growth is in part-time work. We can keep wage levels down with more part-time workers. The Fed can afford to be patient.
Monday, May 03, 2004
5/3/04 Expectations
Disappointment frequently results from unrealistic expectations. For example, the government of Japan has been purchasing billions of U.S. dollars. Traders have come to believe that Japan is also the buyer of last resort for our treasury bonds. I know a sucker is born every day but that doesn’t mean forever. After having blown $77 billion on currency intervention in the first quarter, Japan didn’t buy one U.S. dollar in the month of April. I guess Japan realized they weren’t getting a bang for their buck.
James Grant: “Whenever I hear the dignified phrase ‘central banker’, I mentally substitute the words ‘government worker.’”
There is a rising expectation that the world is moving from disinflation to inflation. It might serve a purpose to remember that labor is a bigger component of business costs than that of materials or even equipment. Aided by rising productivity, the cost of labor dropped by 1.2% in 2003. In this year’s first quarter one can anticipate a somewhat slowing in productivity gains; however, statistics will show that unit labor costs continued to fall. As such, with non-farm payroll gains probably dropping at least 100,000 from the March number, and almost all of the gains again in the non-permanent sector, unit labor costs for April will once again be down. The folks in New York City will bemoan higher cab fares this morning. They might be better served to focus on the disappointing length of the average workweek; the factory workweek; wage and salary gains more than offset by inflation; the rising cost of benefits; and the strong possibility that the Department of Labor’s overtime guidelines will be implemented to the detriment of both workers and employers. All told, consumer debt accumulation is rising, government debt is rising, and it is only a matter of time until consumer and government spending are curtailed dramatically. Who would have thought that Japan would go one whole month without purchasing our currency?
Since Abraham Thomas, a native of Singapore, took over the running of IBM’s operations in India, that unit’s revenues have doubled to over $650 million. The number of employees increased from 4,500 to 15,000, and hundreds are joining the company each month. IBM’s sales in the domestic market in India grew by 16% in 2002-2003. Its acquisition of Daksh should prove a further boost to its growth strategies.
Eleven American service members were killed in Iraq yesterday and another 41 were wounded. Of those killed, five were Navy Seabees, and therefore it represented the worst casualties in the war for the Navy. Since April 1, 2004, 151 U.S. soldiers have been killed and at least 753 since we invaded Iraq on March 20, 2003.
The Fed meets tomorrow. On Thursday, Sysan Schmidt Bies, Michael Moskow, Alfred Broaddus, William Poole, and Alan Greenspan give speeches and addresses. The noise level this week will be deafening. I suggest you mute the volume and watch the markets. Talk is cheap. You can make or lose a ham sandwich trading the markets. You might want to assess the cost per unit traded. Over-trading might lead to manic disorder.
Disappointment frequently results from unrealistic expectations. For example, the government of Japan has been purchasing billions of U.S. dollars. Traders have come to believe that Japan is also the buyer of last resort for our treasury bonds. I know a sucker is born every day but that doesn’t mean forever. After having blown $77 billion on currency intervention in the first quarter, Japan didn’t buy one U.S. dollar in the month of April. I guess Japan realized they weren’t getting a bang for their buck.
James Grant: “Whenever I hear the dignified phrase ‘central banker’, I mentally substitute the words ‘government worker.’”
There is a rising expectation that the world is moving from disinflation to inflation. It might serve a purpose to remember that labor is a bigger component of business costs than that of materials or even equipment. Aided by rising productivity, the cost of labor dropped by 1.2% in 2003. In this year’s first quarter one can anticipate a somewhat slowing in productivity gains; however, statistics will show that unit labor costs continued to fall. As such, with non-farm payroll gains probably dropping at least 100,000 from the March number, and almost all of the gains again in the non-permanent sector, unit labor costs for April will once again be down. The folks in New York City will bemoan higher cab fares this morning. They might be better served to focus on the disappointing length of the average workweek; the factory workweek; wage and salary gains more than offset by inflation; the rising cost of benefits; and the strong possibility that the Department of Labor’s overtime guidelines will be implemented to the detriment of both workers and employers. All told, consumer debt accumulation is rising, government debt is rising, and it is only a matter of time until consumer and government spending are curtailed dramatically. Who would have thought that Japan would go one whole month without purchasing our currency?
Since Abraham Thomas, a native of Singapore, took over the running of IBM’s operations in India, that unit’s revenues have doubled to over $650 million. The number of employees increased from 4,500 to 15,000, and hundreds are joining the company each month. IBM’s sales in the domestic market in India grew by 16% in 2002-2003. Its acquisition of Daksh should prove a further boost to its growth strategies.
Eleven American service members were killed in Iraq yesterday and another 41 were wounded. Of those killed, five were Navy Seabees, and therefore it represented the worst casualties in the war for the Navy. Since April 1, 2004, 151 U.S. soldiers have been killed and at least 753 since we invaded Iraq on March 20, 2003.
The Fed meets tomorrow. On Thursday, Sysan Schmidt Bies, Michael Moskow, Alfred Broaddus, William Poole, and Alan Greenspan give speeches and addresses. The noise level this week will be deafening. I suggest you mute the volume and watch the markets. Talk is cheap. You can make or lose a ham sandwich trading the markets. You might want to assess the cost per unit traded. Over-trading might lead to manic disorder.
Sunday, May 02, 2004
5/2/04 The U.S. Dollar
Yesterday, at Berkshire Hathaway’s annual meeting, the dollar made headlines. At the end of the year, the company had invested $12 billion in foreign currencies. Buffett announced “we think that over time that the dollar is likely to decline against some of the major currencies.” In the last few months, he stated, Berkshire added “more than a little bit” to those foreign currency holdings. Long term investors have made a great deal of money following Buffett’s advice. A stock doesn’t rise from $20 to $93,000 per share by being wrong very often.
I take issue with Buffett’s current thinking. As readers know, I have stated often that I would not buy the dollar with your money. I have been negative on the dollar for about two years, and believe more than ever, that several other major foreign currencies are a much better place for your money. Buffett is concerned with rising inflation and rising deficits and yet stated yesterday “our underlying premise is that this country will do very well and in particular it will do very well for business.” A combination of rising deficits, rising inflation, and rising interest rates is not productive for the business environment.
It might prove timely to focus, as Brian Riedl of the Heritage Foundation pointed out, on the fact that federal spending has risen above $20,000 per household for the first time since World War II and will rise close to another $1,400 in 2004. In addition, the federal government cannot account for $24.5 billion in expenditures made in 2003. Shouldn’t people go to prison for these transgressions? Where is the public outcry? Does anyone care that discretionary spending has increased 39% in the last three years? As Riedl remarked, “with the federal budget crowding out the family budget, it is time for lawmakers to treat tax dollars as carefully as the taxpayers who labor to earn them.” Maybe members of Saddam’s Republican Guard should be hired to watch over the federal budget process and the entitlement programs. If anyone puts their hand illegally in the till, maybe it should disappear along with the money.
Max Sawicky of the Economic Policy Institute: “Even after job growth, a lot of people are damaged. You don’t pick up where you left off. The last three years shoved millions of people into bankruptcies and foreclosures. Many have still not found work, while many have settled for jobs that pay much less than those they lost. Many households are still in tough financial straits. I would be surprised if there is not solid job growth. But it is the interim period that kills family finances.”
The eight states of the Mountain West from Arizona to Montana have the fastest-growing labor force in the nation with the five fastest-growing states. It is the only part of the country to have doubled GDP in the past decade. These eight Mountain West states embrace 856,077 square miles, an area larger than all 27 states east of the Mississippi combined. With a population of 19 million, these states have just 22 people per square mile; however, 82% of the residents live in urban areas. Two-thirds of all federally-owned land within the contiguous states lies in the Rocky Mountain west. Since the 1990 census, the population of the eight Mountain west states has grown 40% while the rest of the nation grew just under 15%.
Sequoia Capital’s Michael Moritz: “Any business Wall Street is prepared to throw hundreds of millions of dollars at is not one we should be in.”
Mark Zandi, chief economist of Economy.com: “Who’s winning the age-old war between employers and workers? Right now employers are winning hands down. And there’s no reason to suspect that will change anytime soon.”
Anna Bernasek: “Rising medical costs automatically translate into lower wages. Either firms make their employees pay a bigger share of higher health-care costs, lowering take-home pay, or firms offset the increased cost by holding wages down.”
Winston Churchill: “Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events.”
Winston Churchill: “I like pigs. Dogs look up to us. Cats look down on us. Pigs treat us as equals.”
Yesterday, at Berkshire Hathaway’s annual meeting, the dollar made headlines. At the end of the year, the company had invested $12 billion in foreign currencies. Buffett announced “we think that over time that the dollar is likely to decline against some of the major currencies.” In the last few months, he stated, Berkshire added “more than a little bit” to those foreign currency holdings. Long term investors have made a great deal of money following Buffett’s advice. A stock doesn’t rise from $20 to $93,000 per share by being wrong very often.
I take issue with Buffett’s current thinking. As readers know, I have stated often that I would not buy the dollar with your money. I have been negative on the dollar for about two years, and believe more than ever, that several other major foreign currencies are a much better place for your money. Buffett is concerned with rising inflation and rising deficits and yet stated yesterday “our underlying premise is that this country will do very well and in particular it will do very well for business.” A combination of rising deficits, rising inflation, and rising interest rates is not productive for the business environment.
It might prove timely to focus, as Brian Riedl of the Heritage Foundation pointed out, on the fact that federal spending has risen above $20,000 per household for the first time since World War II and will rise close to another $1,400 in 2004. In addition, the federal government cannot account for $24.5 billion in expenditures made in 2003. Shouldn’t people go to prison for these transgressions? Where is the public outcry? Does anyone care that discretionary spending has increased 39% in the last three years? As Riedl remarked, “with the federal budget crowding out the family budget, it is time for lawmakers to treat tax dollars as carefully as the taxpayers who labor to earn them.” Maybe members of Saddam’s Republican Guard should be hired to watch over the federal budget process and the entitlement programs. If anyone puts their hand illegally in the till, maybe it should disappear along with the money.
Max Sawicky of the Economic Policy Institute: “Even after job growth, a lot of people are damaged. You don’t pick up where you left off. The last three years shoved millions of people into bankruptcies and foreclosures. Many have still not found work, while many have settled for jobs that pay much less than those they lost. Many households are still in tough financial straits. I would be surprised if there is not solid job growth. But it is the interim period that kills family finances.”
The eight states of the Mountain West from Arizona to Montana have the fastest-growing labor force in the nation with the five fastest-growing states. It is the only part of the country to have doubled GDP in the past decade. These eight Mountain West states embrace 856,077 square miles, an area larger than all 27 states east of the Mississippi combined. With a population of 19 million, these states have just 22 people per square mile; however, 82% of the residents live in urban areas. Two-thirds of all federally-owned land within the contiguous states lies in the Rocky Mountain west. Since the 1990 census, the population of the eight Mountain west states has grown 40% while the rest of the nation grew just under 15%.
Sequoia Capital’s Michael Moritz: “Any business Wall Street is prepared to throw hundreds of millions of dollars at is not one we should be in.”
Mark Zandi, chief economist of Economy.com: “Who’s winning the age-old war between employers and workers? Right now employers are winning hands down. And there’s no reason to suspect that will change anytime soon.”
Anna Bernasek: “Rising medical costs automatically translate into lower wages. Either firms make their employees pay a bigger share of higher health-care costs, lowering take-home pay, or firms offset the increased cost by holding wages down.”
Winston Churchill: “Never, never, never believe any war will be smooth and easy, or that anyone who embarks on the strange voyage can measure the tides and hurricanes he will encounter. The statesman who yields to war fever must realize that once the signal is given, he is no longer the master of policy but the slave of unforeseeable and uncontrollable events.”
Winston Churchill: “I like pigs. Dogs look up to us. Cats look down on us. Pigs treat us as equals.”
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