5/29/04 It's Telling
As we ponder over this Memorial Day weekend, I thought I might interrupt the various happenings with an observation that has proven helpful to me over the years. Whether it's the media, politicians, financial pundits, friends, or family members, often it is more meaningful to focus on what is not said rather than what has been said. The unspoken and the unwritten are frequently more telling and closer to the truth.
Thursday, May 27, 2004
5/28/04 Economic Uncertainty And Casino Gaming
Life must be a crap shoot for many Americans. According to the 2004 State of the States: The AGA Survey of Casino Entertainment, two million more Americans visited a casino in 2003 than in 2002. In fact, 53.4 million adult Americans went to casinos last year. These visitors made a total of 310 million trips to casinos in 2003, averaging 5.8 trips per person. According to statistics gathered primarily from state regulatory agencies, the 443 commercial casinos in 11 states nationwide generated more than $27 billion in gross gaming revenue in 2003, an increase of nearly 2% compared to 2002. From that revenue, casinos paid state and local governments $4.32 billion in direct gaming taxes. Employment figures rose slightly in 2003, with the industry providing jobs for 352,428 workers who earned more than $11.8 billion in salaries, including benefits and tips. Frank Fahrenkopf, Jr., president and CEO of the AGA, stated “what these numbers signify is that even when the country is facing an extended period of economic uncertainty, Americans still set aside a portion of their disposable income for fun and entertainment.”
U.S. Energy Secretary Abraham stated that the increase in output by Saudi Arabia would have a “significant effect on oil prices. We also have positive signs from Mexico, Nigeria, and Russia that production will rise to meet the global demand.” In response to those statements, light crude dropped about $1 to $39.75 per barrel. On the other hand, OPEC President Yusgiantoro stated OPEC probably would have to raise supply allocations by more than 2.3 million barrels per day or 10% to have much success in curbing speculation. In my view, rising prices will reduce demand and the latter will curtail speculation. Gasoline consumption needs to decline from the present 9 million barrels per day. It’s up to American drivers to make that happen.
While the Dow, S&P, and the Nasdaq have been focusing on oil prices, the dollar has resumed its downtrend. The dollar dropped to its lowest level versus the euro in over three weeks. The British pound rose to a six week high against the dollar. In addition, money keeps flowing from the dollar into the Japanese yen. Traders blame the weakness in the dollar on the rising threat of terrorism. That maybe a partial answer; however, with the demand for new houses dimming, rising inventories of SUVs, the impact of high gas prices on consumers, and the failure of jobless claims to experience a larger drop, there is a growing inkling that economic growth has topped out. The recent strength in the bond market appears to be confirming this message.
Government spending rose at a 2.9 percent annual rate last quarter rather than the initial estimate of 2 percent.
The latest GDP report showed after-tax corporate profits rose a muted 1.4 percent in the January-March period, compared with the fourth quarter. I would be surprised if the next quarter approaches that level of improvement.
According to the World Bank, the number of Chinese people subsisting on less than $1 a day has fallen from 490 million in 1981 to 88 million. During this period the country's output has increased more than eight fold and the average income has risen by 7% a year, passing $1,000 (currently £551) for the first time in 2003.
On Thursday, gold for June delivery rose $6.60 to close at $394.90 an ounce on the New York Mercantile Exchange. That's its highest closing level since April 27.
General Electric expects its 2005 revenues from China to increase 92 percent from last year to $5 billion, according to published reports in AFX News and the China Daily.
Banking and financial services company Washington Mutual Inc. has issued layoff notices to 170 employees at its Seattle headquarters.They will be effective on June 1.
Life must be a crap shoot for many Americans. According to the 2004 State of the States: The AGA Survey of Casino Entertainment, two million more Americans visited a casino in 2003 than in 2002. In fact, 53.4 million adult Americans went to casinos last year. These visitors made a total of 310 million trips to casinos in 2003, averaging 5.8 trips per person. According to statistics gathered primarily from state regulatory agencies, the 443 commercial casinos in 11 states nationwide generated more than $27 billion in gross gaming revenue in 2003, an increase of nearly 2% compared to 2002. From that revenue, casinos paid state and local governments $4.32 billion in direct gaming taxes. Employment figures rose slightly in 2003, with the industry providing jobs for 352,428 workers who earned more than $11.8 billion in salaries, including benefits and tips. Frank Fahrenkopf, Jr., president and CEO of the AGA, stated “what these numbers signify is that even when the country is facing an extended period of economic uncertainty, Americans still set aside a portion of their disposable income for fun and entertainment.”
U.S. Energy Secretary Abraham stated that the increase in output by Saudi Arabia would have a “significant effect on oil prices. We also have positive signs from Mexico, Nigeria, and Russia that production will rise to meet the global demand.” In response to those statements, light crude dropped about $1 to $39.75 per barrel. On the other hand, OPEC President Yusgiantoro stated OPEC probably would have to raise supply allocations by more than 2.3 million barrels per day or 10% to have much success in curbing speculation. In my view, rising prices will reduce demand and the latter will curtail speculation. Gasoline consumption needs to decline from the present 9 million barrels per day. It’s up to American drivers to make that happen.
While the Dow, S&P, and the Nasdaq have been focusing on oil prices, the dollar has resumed its downtrend. The dollar dropped to its lowest level versus the euro in over three weeks. The British pound rose to a six week high against the dollar. In addition, money keeps flowing from the dollar into the Japanese yen. Traders blame the weakness in the dollar on the rising threat of terrorism. That maybe a partial answer; however, with the demand for new houses dimming, rising inventories of SUVs, the impact of high gas prices on consumers, and the failure of jobless claims to experience a larger drop, there is a growing inkling that economic growth has topped out. The recent strength in the bond market appears to be confirming this message.
Government spending rose at a 2.9 percent annual rate last quarter rather than the initial estimate of 2 percent.
The latest GDP report showed after-tax corporate profits rose a muted 1.4 percent in the January-March period, compared with the fourth quarter. I would be surprised if the next quarter approaches that level of improvement.
According to the World Bank, the number of Chinese people subsisting on less than $1 a day has fallen from 490 million in 1981 to 88 million. During this period the country's output has increased more than eight fold and the average income has risen by 7% a year, passing $1,000 (currently £551) for the first time in 2003.
On Thursday, gold for June delivery rose $6.60 to close at $394.90 an ounce on the New York Mercantile Exchange. That's its highest closing level since April 27.
General Electric expects its 2005 revenues from China to increase 92 percent from last year to $5 billion, according to published reports in AFX News and the China Daily.
Banking and financial services company Washington Mutual Inc. has issued layoff notices to 170 employees at its Seattle headquarters.They will be effective on June 1.
5/27/04 Clear And Present Danger
Jay Watson, Wildlife Fire Program director for the Wilderness Society: “It all adds up to a real shortage of resources. This unpreparedness flies in the face of all the rhetoric we have heard from this Bush administration about the forest-fire crisis and the need for proactive fire prevention.” He referred to Bush unexpectedly grounding a fleet of 33 air tankers that are used to dump fire retardant and for refusing to provide extra money to hire temporary firefighters for this summer. Unless emergency funds are provided, there will be 3,000 fewer seasonal firefighters, or 30% less, this summer than last summer. Three weeks ago 29,000 acres burned in S. California and 28 homes were destroyed. In New Mexico, a state of emergency was declared after two wildfires blazed out of control.
It may come as a surprise to some that U.S. Agriculture Secretary Ann Veneman oversees the Forest Service. This is the same woman who is in charge of handling the outbreak of mad cow disease. With more than half of the nation’s 345,000 Army National Guard serving overseas in places such as Iraq and Afghanistan, there will most certainly be a shortage of manpower to combat wildfires this summer in California, Idaho, Montana, Oregon, Washington, New Mexico, and Arizona. After an unusually warm spring, six years of drought, and infestations by tree-killing beetles, there is a clear and present danger that this summer season will be accompanied by potentially devastating wildfires. Only after the fact, will Ann Veneman have a press conference announcing the steps being taken to fight the raging fires. By that time, they will be out of control.
While the employment of seasonal firefighters is sharply reduced, homeland security with its fight on terror continues to add to the non-farm payrolls. There is a recent report “so fresh that we haven’t even bound the pages yet,” stated Tom Clark, executive vice president of the Metro Denver Economic Development Corp. He describes the area being the “center of gravity for the military.” The report tallied 47,500 direct jobs and about 95,000 indirect or spinoff jobs. Of the direct jobs, 16,000 are in the private sector at Raytheon, Northrop Grumman, Boeing, and Merrick, and 31,500 are government employees. Clark stated that only California, Texas, and Florida are ahead of Colorado in defense and military job creation. The 142,500 jobs have generated an annual $9.7 billion payroll to the sate of Colorado. Bush and a larger government go hand-in-hand. This is hardly the picture of a fiscally conservative president.
In April, orders for big-ticket durable goods fell 2.9% after a gain of 5.7% in March and 3.9% in February. It was the largest decrease since the 6% registered in September 2002. Orders outside the defense sector declined 2.4% while non-defense capital goods excluding aircraft dropped 3.5%. Is this a trend reversal? In my view, the best we can hope for is a slow down in the GDP growth curve. Is there a present danger that a slowdown could result in a downturn? We’d need to ask the geniuses at the Fed for that answer.
New U.S. mortgage applications fell last week for a third straight week. Sales of new homes in April fell by 12%.
Stocks of gasoline inventories are running about 4.7 million barrels below the level at this time last year.
China’s PPI rose 5% in April from a year earlier. It was the largest increase since 1996. Their consumer prices rose 3.8% from a year earlier, and it was the largest increase in seven years.
India’s exports rose 19.55 in April over the same period last year. India’s goal is to achieve one percent of global trade by 2007.
Iranian OIL Minister Bijan Zanganeh: “Any OPEC quota increase should be based on consensus, be cautious, limited, and temporary.’
Jay Watson, Wildlife Fire Program director for the Wilderness Society: “It all adds up to a real shortage of resources. This unpreparedness flies in the face of all the rhetoric we have heard from this Bush administration about the forest-fire crisis and the need for proactive fire prevention.” He referred to Bush unexpectedly grounding a fleet of 33 air tankers that are used to dump fire retardant and for refusing to provide extra money to hire temporary firefighters for this summer. Unless emergency funds are provided, there will be 3,000 fewer seasonal firefighters, or 30% less, this summer than last summer. Three weeks ago 29,000 acres burned in S. California and 28 homes were destroyed. In New Mexico, a state of emergency was declared after two wildfires blazed out of control.
It may come as a surprise to some that U.S. Agriculture Secretary Ann Veneman oversees the Forest Service. This is the same woman who is in charge of handling the outbreak of mad cow disease. With more than half of the nation’s 345,000 Army National Guard serving overseas in places such as Iraq and Afghanistan, there will most certainly be a shortage of manpower to combat wildfires this summer in California, Idaho, Montana, Oregon, Washington, New Mexico, and Arizona. After an unusually warm spring, six years of drought, and infestations by tree-killing beetles, there is a clear and present danger that this summer season will be accompanied by potentially devastating wildfires. Only after the fact, will Ann Veneman have a press conference announcing the steps being taken to fight the raging fires. By that time, they will be out of control.
While the employment of seasonal firefighters is sharply reduced, homeland security with its fight on terror continues to add to the non-farm payrolls. There is a recent report “so fresh that we haven’t even bound the pages yet,” stated Tom Clark, executive vice president of the Metro Denver Economic Development Corp. He describes the area being the “center of gravity for the military.” The report tallied 47,500 direct jobs and about 95,000 indirect or spinoff jobs. Of the direct jobs, 16,000 are in the private sector at Raytheon, Northrop Grumman, Boeing, and Merrick, and 31,500 are government employees. Clark stated that only California, Texas, and Florida are ahead of Colorado in defense and military job creation. The 142,500 jobs have generated an annual $9.7 billion payroll to the sate of Colorado. Bush and a larger government go hand-in-hand. This is hardly the picture of a fiscally conservative president.
In April, orders for big-ticket durable goods fell 2.9% after a gain of 5.7% in March and 3.9% in February. It was the largest decrease since the 6% registered in September 2002. Orders outside the defense sector declined 2.4% while non-defense capital goods excluding aircraft dropped 3.5%. Is this a trend reversal? In my view, the best we can hope for is a slow down in the GDP growth curve. Is there a present danger that a slowdown could result in a downturn? We’d need to ask the geniuses at the Fed for that answer.
New U.S. mortgage applications fell last week for a third straight week. Sales of new homes in April fell by 12%.
Stocks of gasoline inventories are running about 4.7 million barrels below the level at this time last year.
China’s PPI rose 5% in April from a year earlier. It was the largest increase since 1996. Their consumer prices rose 3.8% from a year earlier, and it was the largest increase in seven years.
India’s exports rose 19.55 in April over the same period last year. India’s goal is to achieve one percent of global trade by 2007.
Iranian OIL Minister Bijan Zanganeh: “Any OPEC quota increase should be based on consensus, be cautious, limited, and temporary.’
Wednesday, May 26, 2004
5/26/04 A Closer Look
Richard Branson: “Like old trees, some airlines deserve to die.”
Bush’s five-step program for Iraqi sovereignty is halfway there to a 10-step recovery plan. Maybe the plan should be outsourced to AA.
Not all nations are created equal. Despite record high prices for oil imports, Japan’s trade surplus rose 30% in April from a year earlier. The eurozone region had a current account surplus of 12.4 billion euros in March. It’s no wonder the rally in the dollar has hit a brick wall.
All eyes are on the Energy Information Administration data to be released today at 10:30 am EDT. A Reuters survey suggests gas supplies will be up by 1.2 million barrels for the latest week and crude oil stocks will have had a rise of 1.6 million barrels. The market’s strong rally yesterday reflected Tuesday’s 1.4% decline in the price of crude oil. For my money, other matters carry equal and/or more weight.
According to the AARP Public Policy Institute report, prices for 197 drugs most commonly prescribed for older Americans rose by an average of 27.6% over the past four years, almost triple the overall rate of inflation during this period. Prices of the top 30 medicines used by seniors increased by more than four times the rate of inflation in the past year alone.
According to a survey conducted for Robert Half Technology, CIOs are cautious about Q3 IT hiring. Eight percent of executives expect to add IT staff and three percent plan personnel cutbacks. The net five percent hiring increase compares with a net nine percent forecast last quarter. Eighty eight percent plan to maintain existing staff levels. The survey noted that “businesses that overstaffed and experienced layoffs during the recession are taking a more strategic and measured approach to hiring today. Many managers are initiating projects previously on hold due to budget constraints. However, they are carefully analyzing their requirements before adding full-time IT employees and relying on project professionals for short-term demands.” Prior to buying a tech stock, it might be wise to look around the corner in order to see business beyond short-term demands. The P/E ratios, for the most part, reflect a vision of clear sailing for the longer term. If that were true, more insiders would most likely be buying shares in their own company.
The Conference Board’s latest monthly survey indicated that the proportion of consumers anticipating an increase in their incomes declined again and is now at 16.8%, down from 17.4% last month. In other words, 83.2% see no increase in their incomes. The survey didn’t reveal what percentage anticipated a decrease in their incomes. If there were such a rush to hire, then one might expect some upward pressure on wages and salaries. As the CIO survey indicates for Q3, for example, 88% are not hiring.
Insanity reigns. According to the California Association of Realtors, the median price of an existing home in California in April increased 24.6% and sales increased 9.8% compared tot he same period a year ago. In just the one month of April, the median price increased 5.8% compared to March’s numbers and stands at $453,590. Can you imagine what the price would be if people were not moving out of the state?
Wal-Mart has a 37.8% stake in Japan’s Seiyu. A company spokesperson stated they would likely exercise their option to increase ownership to 50.1% in 2005.
In April, China’s M2 money supply surged 19%. Outstanding loans in both yuan and foreign currency rose 20%. Fixed-asset investment rose 43% in the first quarter. If the Chinese government is attempting to cool the economy, their efforts have not proven too successful. Their central bank stated that, only in the second half of this year, would a slowdown start to emerge as government policies come through the system. Maybe then shipping costs will decrease along with the prices for soybeans, coal, copper, aluminum, tin, crude oil, and many other widely used commodities.
India-China bilateral trade surged 88% in the first quarter of 2004 to $3.13 billion, and appears on its way to exceed $10 billion on an annual basis for the first time.
John Kay: “However it comes about, the inevitable consequence of the U.S. ceasing to spend more than it produces is that other countries must cease to produce more than they spend. The solution to America’s problems will not be a problem for America alone.”
At some point reality will hit Boeing shareholders. Their management continues to expound the theory that the Boeing tanker deal has simply been delayed--this time for another six months. I strongly suggest the company’s board of directors instruct the CEO to, at the very least, revise downward earnings projections for 2004.
There hasn’t been a new oil refinery built in the U.S. since 1976.
Hans Blix remarked that Bush and Blair “may have been sincerely convinced that there were weapons of mass destruction in Iraq like some were convinced of the existence of witches in the 18th century.”
Richard Branson: “Like old trees, some airlines deserve to die.”
Bush’s five-step program for Iraqi sovereignty is halfway there to a 10-step recovery plan. Maybe the plan should be outsourced to AA.
Not all nations are created equal. Despite record high prices for oil imports, Japan’s trade surplus rose 30% in April from a year earlier. The eurozone region had a current account surplus of 12.4 billion euros in March. It’s no wonder the rally in the dollar has hit a brick wall.
All eyes are on the Energy Information Administration data to be released today at 10:30 am EDT. A Reuters survey suggests gas supplies will be up by 1.2 million barrels for the latest week and crude oil stocks will have had a rise of 1.6 million barrels. The market’s strong rally yesterday reflected Tuesday’s 1.4% decline in the price of crude oil. For my money, other matters carry equal and/or more weight.
According to the AARP Public Policy Institute report, prices for 197 drugs most commonly prescribed for older Americans rose by an average of 27.6% over the past four years, almost triple the overall rate of inflation during this period. Prices of the top 30 medicines used by seniors increased by more than four times the rate of inflation in the past year alone.
According to a survey conducted for Robert Half Technology, CIOs are cautious about Q3 IT hiring. Eight percent of executives expect to add IT staff and three percent plan personnel cutbacks. The net five percent hiring increase compares with a net nine percent forecast last quarter. Eighty eight percent plan to maintain existing staff levels. The survey noted that “businesses that overstaffed and experienced layoffs during the recession are taking a more strategic and measured approach to hiring today. Many managers are initiating projects previously on hold due to budget constraints. However, they are carefully analyzing their requirements before adding full-time IT employees and relying on project professionals for short-term demands.” Prior to buying a tech stock, it might be wise to look around the corner in order to see business beyond short-term demands. The P/E ratios, for the most part, reflect a vision of clear sailing for the longer term. If that were true, more insiders would most likely be buying shares in their own company.
The Conference Board’s latest monthly survey indicated that the proportion of consumers anticipating an increase in their incomes declined again and is now at 16.8%, down from 17.4% last month. In other words, 83.2% see no increase in their incomes. The survey didn’t reveal what percentage anticipated a decrease in their incomes. If there were such a rush to hire, then one might expect some upward pressure on wages and salaries. As the CIO survey indicates for Q3, for example, 88% are not hiring.
Insanity reigns. According to the California Association of Realtors, the median price of an existing home in California in April increased 24.6% and sales increased 9.8% compared tot he same period a year ago. In just the one month of April, the median price increased 5.8% compared to March’s numbers and stands at $453,590. Can you imagine what the price would be if people were not moving out of the state?
Wal-Mart has a 37.8% stake in Japan’s Seiyu. A company spokesperson stated they would likely exercise their option to increase ownership to 50.1% in 2005.
In April, China’s M2 money supply surged 19%. Outstanding loans in both yuan and foreign currency rose 20%. Fixed-asset investment rose 43% in the first quarter. If the Chinese government is attempting to cool the economy, their efforts have not proven too successful. Their central bank stated that, only in the second half of this year, would a slowdown start to emerge as government policies come through the system. Maybe then shipping costs will decrease along with the prices for soybeans, coal, copper, aluminum, tin, crude oil, and many other widely used commodities.
India-China bilateral trade surged 88% in the first quarter of 2004 to $3.13 billion, and appears on its way to exceed $10 billion on an annual basis for the first time.
John Kay: “However it comes about, the inevitable consequence of the U.S. ceasing to spend more than it produces is that other countries must cease to produce more than they spend. The solution to America’s problems will not be a problem for America alone.”
At some point reality will hit Boeing shareholders. Their management continues to expound the theory that the Boeing tanker deal has simply been delayed--this time for another six months. I strongly suggest the company’s board of directors instruct the CEO to, at the very least, revise downward earnings projections for 2004.
There hasn’t been a new oil refinery built in the U.S. since 1976.
Hans Blix remarked that Bush and Blair “may have been sincerely convinced that there were weapons of mass destruction in Iraq like some were convinced of the existence of witches in the 18th century.”
Tuesday, May 25, 2004
5/25/04 Record High Gasoline Prices Take A Toll
Over the past week, the average retail price for gasoline has jumped to $2.07 a gallon. In a survey of 400 Michigan residents, 38% of those planning a trip Memorial Day weekend stated the change in gasoline prices will affect their travel plans, the highest percentage since 2000, AAA Michigan reported. Last year the percentage had declined to 15%. The group stated “the survey results suggest that the economy and high gas prices continue to affect domestic travel plans.”
Last week I noted that Continental Airlines had raised its fares $10 each way for flights under 1,000 miles and $20 each way for flights over 1,000 miles in an effort to offset soaring fuel costs. Yesterday Continental and other airlines dropped this fare increase. You can expect benefit and wage concessions and, at the very least, furloughs at many major airlines. The higher fuel costs will result in an extra $750 million in operating expenses at United. If the higher fuel costs can’t be passed along, survival may depend on significant employee cuts.
Fifty percent of India’s population is under 25 years of age. Fifty percent of their GDP comes from services with agriculture and manufacturing contributing 25 percent each. P.D. Samududra, Executive Director, Uhde India Ltd, cautioned “ a lot of people are indulging in wishful thinking that India will become an economic superpower by 2020. But, we have to realize that while India certainly has great potential, she has to first tackle more pressing issues like high level of poverty, lack of proper education of the masses, inadequate investments in infrastructure facilities such as water, power, and roads, to name only a few issues.”
Some 109 tornadoes were reported over this past weekend in the plains states. Storms and heavy rains produced flooding from Wisconsin to parts of Iowa.
Retired Marine General Anthony Zinni, former chief of U.S. Central Command, stated that planning for the Iraq war and its aftermath had been flawed from the start. He stated “somebody has screwed up. And at this level and at this stage, it should be evident to everybody that they’ve screwed up. And whose heads are rolling on this? That’s what bothers me most.” So far, the only head to roll appears to be that of Sanchez’s. There will be others.
It was reported that the average Mexican factory worker earns $300 per month or triple the average wage in China. Abel Saavedra, director of international marketing at Mexican shoemaker Botas Industriales de Piletas, stated “we can’t compete with those costs. Basically, it’s all about price.”
As the operating margins continue to increase at our domestic oil refining companies, they should maintain a watchful eye on the price of gas at the pump. Demand does matter. Record high prices do damper demand. Someone has to absorb those higher prices and costs. The headlines will soon show cutbacks in economic growth forecasts and an upswing in announced employee layoffs.
Ben Wallace blocks more shots than an armored Humvee.
Over the past week, the average retail price for gasoline has jumped to $2.07 a gallon. In a survey of 400 Michigan residents, 38% of those planning a trip Memorial Day weekend stated the change in gasoline prices will affect their travel plans, the highest percentage since 2000, AAA Michigan reported. Last year the percentage had declined to 15%. The group stated “the survey results suggest that the economy and high gas prices continue to affect domestic travel plans.”
Last week I noted that Continental Airlines had raised its fares $10 each way for flights under 1,000 miles and $20 each way for flights over 1,000 miles in an effort to offset soaring fuel costs. Yesterday Continental and other airlines dropped this fare increase. You can expect benefit and wage concessions and, at the very least, furloughs at many major airlines. The higher fuel costs will result in an extra $750 million in operating expenses at United. If the higher fuel costs can’t be passed along, survival may depend on significant employee cuts.
Fifty percent of India’s population is under 25 years of age. Fifty percent of their GDP comes from services with agriculture and manufacturing contributing 25 percent each. P.D. Samududra, Executive Director, Uhde India Ltd, cautioned “ a lot of people are indulging in wishful thinking that India will become an economic superpower by 2020. But, we have to realize that while India certainly has great potential, she has to first tackle more pressing issues like high level of poverty, lack of proper education of the masses, inadequate investments in infrastructure facilities such as water, power, and roads, to name only a few issues.”
Some 109 tornadoes were reported over this past weekend in the plains states. Storms and heavy rains produced flooding from Wisconsin to parts of Iowa.
Retired Marine General Anthony Zinni, former chief of U.S. Central Command, stated that planning for the Iraq war and its aftermath had been flawed from the start. He stated “somebody has screwed up. And at this level and at this stage, it should be evident to everybody that they’ve screwed up. And whose heads are rolling on this? That’s what bothers me most.” So far, the only head to roll appears to be that of Sanchez’s. There will be others.
It was reported that the average Mexican factory worker earns $300 per month or triple the average wage in China. Abel Saavedra, director of international marketing at Mexican shoemaker Botas Industriales de Piletas, stated “we can’t compete with those costs. Basically, it’s all about price.”
As the operating margins continue to increase at our domestic oil refining companies, they should maintain a watchful eye on the price of gas at the pump. Demand does matter. Record high prices do damper demand. Someone has to absorb those higher prices and costs. The headlines will soon show cutbacks in economic growth forecasts and an upswing in announced employee layoffs.
Ben Wallace blocks more shots than an armored Humvee.
Monday, May 24, 2004
5/24/04 The Real Shrek
There are several reports this morning that Saudi Arabia will boost production by 800,000 barrels a day, bringing daily output to 11.3 million barrels. The news was anticipated and led crude to drop from a 21-year high of $41.85 per barrel to this morning’s level approaching $39.50. On the surface this is most welcome. Unfortunately, the real problem has been set aside. In this year’s first quarter, China overtook Japan as the second largest consuming nation of oil. According to Japan’s Institute of Energy Economics, over the next 20 years China’s consumption of oil will rise by 16 million barrels per day to 35 million barrels per day. You might say “why should I worry?” You would be a fool not to have a real shrek. In the last two years look at what increased consumption by China has done to the prices for steel, copper, aluminum, soybeans, etc. The world cannot afford wars. Nations need to conserve cash flow and expend funds on alternative sources of energy. Without the latter, there will be an untenable price to pay for the six-fold increase expected to occur in the output of vehicles on China’s roads. What form of energy will power those 120 million vehicles? I hope you don’t believe Saudi Arabia’s daily output will make a difference. One additional near-term note of caution might be in order. As we approach Memorial Day, U.S. gasoline inventories are nearly 8 million barrels below the 5-year average at this time.
GM is shutting down its Moraine, Ohio assembly plant for one week. The closure will result in 4,000 workers temporarily being laid off. The plant makes three mid-size SUVs. Last week, another plant in Oklahoma City that makes mid-size SUVs was shut down temporarily. GM will tell you that sales of SUVs continue to exhibit strength. If that were the case, inventories would not exceed 100 days of supply. It is wise to pay attention to what people do, and not what they say. The same can be said for Bush’s speech tonight.
Listening to Bush, reminds me of weather in Iowa in May and June. Those are the most severe weather months for Iowa. Over this past weekend, up to 9 inches of rain and about 20 tornadoes were reported in 16 counties. Bush will tell you help is on the way. The water level may be rising in Iraq, as it were. Americans should not worry. It’s been worth all the deaths and all the wounded. Democracy is coming to Iraq on June 30. Senator Richard Lugar, a Republican from Indiana, remarked “unless the United States commits itself to a sustained program of repairing and building alliances, expanding trade, pursuing resolutions to regional conflicts, supporting democracy and development worldwide, and controlling weapons of mass destruction, we are likely to experience acts of catastrophic terrorism that would undermine our economy, damage our society, and kill hundreds of thousands, if not millions of people. The United States, as a nation, has not made this commitment.”
According to Fed statistics, since the end of 2001, outstanding household mortgages exceeded a growth rate of 10%, and for 2003, mortgage growth outstripped a 13% rate. The increasing demand for mortgages has led directly to escalating home prices.
Chicago has the nation’s third-largest school system. It faces a $100 million deficit. Approximately, 3,660 Chicago Public School workers. including 2,180 teachers, were laid off this past week.
Samsung and Toshiba control 90% of the $4.7 billion market for 512-megabit flash chips. According to dramaexchange.com, the average price for these chips has dropped to $9 from $21.50 in October. I expect the price to drop further over the course of this year.
There are several reports this morning that Saudi Arabia will boost production by 800,000 barrels a day, bringing daily output to 11.3 million barrels. The news was anticipated and led crude to drop from a 21-year high of $41.85 per barrel to this morning’s level approaching $39.50. On the surface this is most welcome. Unfortunately, the real problem has been set aside. In this year’s first quarter, China overtook Japan as the second largest consuming nation of oil. According to Japan’s Institute of Energy Economics, over the next 20 years China’s consumption of oil will rise by 16 million barrels per day to 35 million barrels per day. You might say “why should I worry?” You would be a fool not to have a real shrek. In the last two years look at what increased consumption by China has done to the prices for steel, copper, aluminum, soybeans, etc. The world cannot afford wars. Nations need to conserve cash flow and expend funds on alternative sources of energy. Without the latter, there will be an untenable price to pay for the six-fold increase expected to occur in the output of vehicles on China’s roads. What form of energy will power those 120 million vehicles? I hope you don’t believe Saudi Arabia’s daily output will make a difference. One additional near-term note of caution might be in order. As we approach Memorial Day, U.S. gasoline inventories are nearly 8 million barrels below the 5-year average at this time.
GM is shutting down its Moraine, Ohio assembly plant for one week. The closure will result in 4,000 workers temporarily being laid off. The plant makes three mid-size SUVs. Last week, another plant in Oklahoma City that makes mid-size SUVs was shut down temporarily. GM will tell you that sales of SUVs continue to exhibit strength. If that were the case, inventories would not exceed 100 days of supply. It is wise to pay attention to what people do, and not what they say. The same can be said for Bush’s speech tonight.
Listening to Bush, reminds me of weather in Iowa in May and June. Those are the most severe weather months for Iowa. Over this past weekend, up to 9 inches of rain and about 20 tornadoes were reported in 16 counties. Bush will tell you help is on the way. The water level may be rising in Iraq, as it were. Americans should not worry. It’s been worth all the deaths and all the wounded. Democracy is coming to Iraq on June 30. Senator Richard Lugar, a Republican from Indiana, remarked “unless the United States commits itself to a sustained program of repairing and building alliances, expanding trade, pursuing resolutions to regional conflicts, supporting democracy and development worldwide, and controlling weapons of mass destruction, we are likely to experience acts of catastrophic terrorism that would undermine our economy, damage our society, and kill hundreds of thousands, if not millions of people. The United States, as a nation, has not made this commitment.”
According to Fed statistics, since the end of 2001, outstanding household mortgages exceeded a growth rate of 10%, and for 2003, mortgage growth outstripped a 13% rate. The increasing demand for mortgages has led directly to escalating home prices.
Chicago has the nation’s third-largest school system. It faces a $100 million deficit. Approximately, 3,660 Chicago Public School workers. including 2,180 teachers, were laid off this past week.
Samsung and Toshiba control 90% of the $4.7 billion market for 512-megabit flash chips. According to dramaexchange.com, the average price for these chips has dropped to $9 from $21.50 in October. I expect the price to drop further over the course of this year.
Sunday, May 23, 2004
5/23/04 Staging
The first thought coming to mind is that of the Broadway stage or possibly the world as a stage. That’s not exactly what I have in mind. Most guys will not be familiar with the term “staging.” I am specifically referring to staging a home prior to its sale. Since its inception 30 years ago, it has been a cottage industry with few participants; however, that is changing.
Staging has become a recognized and accepted selling tool among West Coast real estate professionals. Over the past four years there have been studies comparing the results of staged and non-staged homes. On average, a staged home sells 50% faster and creates at least 5% additional realized value. The cost for the staging services can range from $25 per hour to $200 per hour or for a job in a very large home it can run as high as $50,000.
What is staging? It originated from the description ‘being on stage.’ The idea is to place the home, which is to be put on the market for sale, in the most appealing and sellable manner. Many stagers have their own furniture, fixtures, plants, accessories, etc. They transform your home into a showplace. When the potential buyer approaches the property, the idea is to make that home so appealing that the buyer gladly and willingly overbids the listing price. In the San Francisco Bay Area it is commonplace for a home to sell in one day and for the price to exceed the listing price by 15% or more. Many real estate agents demand that their sellers agree to have their home staged. The results have more than warranted the extra expense.
Staging creates an inviting picture. Everything is real. The paint on the wall can be changed a different color. The art work on the walls may be changed. The carpeting maybe changed. The décor is often transformed. At the same time, it is an illusion for the buyer and the seller. The seller’s home has never looked like this, and the buyer is viewing a home with multiple visual incentives. These staged incentives create an inviting and an appealing look to the buyer. As such, paying a higher price for this transformed masterpiece becomes a pill ready and willing to swallow.
Why do I focus on staging at this time? We are fast approaching the November 2 presidential election. The candidates will be staging their accomplishments and their goals for the future. There is nothing wrong with this endeavor except for one thing. The voter wants to buy the real deal. Bush was elected as a conservative. From a fiscal standpoint, he is the greatest political spender I have witnessed in my lifetime. The voters did not get what they were promised. In real estate, the sellers must list what’s wrong with the listed property. It is not simply buyer beware. In politics, it is buyer beware. To get elected, politicians frequently tell you what you want to hear. The Federal Reserve plays that game as well. While you are paying through the nose for milk and meat, the governors go around the country telling you that inflation is not a problem. Bush goes around the country focusing on the 600,000 new jobs created in the past two months. He is staging his economic policies. He tells you to stay the course with him. It doesn’t matter that your wages and salaries have been running below the inflation rate for the past three years. It doesn’t matter that 80,000 unemployed Americans have lost their benefits each week since December 23, 2003. Bush will stage his policies and change the décor. Buyer beware. The price you are paying is very dear. The price you are paying for the Fed’s staged economy is very dear. Zero down payments and zero percent financing are not sustainable. They are staged short-run policies designed to sell a car or a home or refinance your debt in the shortest time. The idea is to make you smile while you gladly swallow the daily consumer pill. Don’t look now. You need to call the Roto Rooter man.
The first thought coming to mind is that of the Broadway stage or possibly the world as a stage. That’s not exactly what I have in mind. Most guys will not be familiar with the term “staging.” I am specifically referring to staging a home prior to its sale. Since its inception 30 years ago, it has been a cottage industry with few participants; however, that is changing.
Staging has become a recognized and accepted selling tool among West Coast real estate professionals. Over the past four years there have been studies comparing the results of staged and non-staged homes. On average, a staged home sells 50% faster and creates at least 5% additional realized value. The cost for the staging services can range from $25 per hour to $200 per hour or for a job in a very large home it can run as high as $50,000.
What is staging? It originated from the description ‘being on stage.’ The idea is to place the home, which is to be put on the market for sale, in the most appealing and sellable manner. Many stagers have their own furniture, fixtures, plants, accessories, etc. They transform your home into a showplace. When the potential buyer approaches the property, the idea is to make that home so appealing that the buyer gladly and willingly overbids the listing price. In the San Francisco Bay Area it is commonplace for a home to sell in one day and for the price to exceed the listing price by 15% or more. Many real estate agents demand that their sellers agree to have their home staged. The results have more than warranted the extra expense.
Staging creates an inviting picture. Everything is real. The paint on the wall can be changed a different color. The art work on the walls may be changed. The carpeting maybe changed. The décor is often transformed. At the same time, it is an illusion for the buyer and the seller. The seller’s home has never looked like this, and the buyer is viewing a home with multiple visual incentives. These staged incentives create an inviting and an appealing look to the buyer. As such, paying a higher price for this transformed masterpiece becomes a pill ready and willing to swallow.
Why do I focus on staging at this time? We are fast approaching the November 2 presidential election. The candidates will be staging their accomplishments and their goals for the future. There is nothing wrong with this endeavor except for one thing. The voter wants to buy the real deal. Bush was elected as a conservative. From a fiscal standpoint, he is the greatest political spender I have witnessed in my lifetime. The voters did not get what they were promised. In real estate, the sellers must list what’s wrong with the listed property. It is not simply buyer beware. In politics, it is buyer beware. To get elected, politicians frequently tell you what you want to hear. The Federal Reserve plays that game as well. While you are paying through the nose for milk and meat, the governors go around the country telling you that inflation is not a problem. Bush goes around the country focusing on the 600,000 new jobs created in the past two months. He is staging his economic policies. He tells you to stay the course with him. It doesn’t matter that your wages and salaries have been running below the inflation rate for the past three years. It doesn’t matter that 80,000 unemployed Americans have lost their benefits each week since December 23, 2003. Bush will stage his policies and change the décor. Buyer beware. The price you are paying is very dear. The price you are paying for the Fed’s staged economy is very dear. Zero down payments and zero percent financing are not sustainable. They are staged short-run policies designed to sell a car or a home or refinance your debt in the shortest time. The idea is to make you smile while you gladly swallow the daily consumer pill. Don’t look now. You need to call the Roto Rooter man.
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