Saturday, July 31, 2004

7/31/04 This Is For Vic

The Commerce Dept released numbers for the second quarter. If you get your news from the media, economists, and the Fed, then it was news that second quarter GDP growth was only 3% and that consumer spending rose at a paltry 1%. The bond market had sniffed out the lower growth, the stock market has been sputtering, and WalMart and Target told you the paycheck-to-paycheck consumer on Main Street was choking on the fumes from high gas prices. The second quarter is history. We're already one-third through the third quarter. Visit a GM or Ford dealer. Look at their inventory levels. It doesn't paint a pretty picture. Look at gas prices. They've come down in the past month but will rise in August as crude rose to $43 a barrel.
With high crude prices, retail sales for August will suck. Don't you think high crude prices reduce the chances of a big SUV being sold even with a large buyer's incentive? There will be plant shutdowns announced any day. The climate is changing. It's not about outsourcing. It's about less hiring, more layoffs, less benefits, and pay that trails the rate of inflation. You can listen to all the buzz on the campaign junkets. Talk is cheap. Permanent hiring is expensive. Training is time consuming. With revenues in this country growing modestly at best, there are few reasons to take on more staff. Most of the improving profits have been the result of cost cutting. The fun and games are in the late innings. The days are getting shorter. I suggest you turn on the lights a bit earlier. It makes it easier to see through the dusk of the economy.
Halliburton announced in November that the company would stop providing health insurance for its retirees who are eligible for Medicare. The change goes into effect Jan.1. Three retirees wrote Halliburton and complained. Halliburton sued them. No retiree left behind!
Now, I wrote this was Vic. I'm your friend. Today is a good day for testing data. When doing so, please leave a bit of time for a visit to Main Street.

Friday, July 30, 2004

7/30/04  Fortunately Help Is On The Way

"The decision by Union Pacific to limit the number of rock and aggregate carloads in Texas will have a severe impact on the economic viability of the entire state, especially Houston, " stated Marianne Gooch, director of communications for Cemex Inc.

The Conference Board's Help-Wanted Advertising Index dipped one point in June to 38. The Index was 38 one year ago. For the past four months the Index has been virtually flat.

Total compensation costs for civilian workers increased 0.9% during the June quarter, seasonally adjusted. In the March quarter there was a 1.1% gain. In the latest period wage and salary costs increased 0.6% and benefit costs rose 1.8%. Wages and salries for both civilian and private workers advanced 0.6% during the June quarter, identical to the March 2004 quarter.

In the latest week auto plant shutdowns contributed to the unemployment rolls rising. There will be plenty more shutdowns in the near future.

Schwab will close more offices and cut 186 workers.

AT&T's debt was downgraded to junk level by Moody's.

State Farm will cut up to 900 jobs.

Washington Mutual announced the closing of an additional fifty three branches and this will create 850 layoffs.

Thursday, July 29, 2004

7/29/04 Going Concerns
Excluding transportation, June’s durable orders fell 0.6%. U.S. auto production has kept pace with the year earlier period; however, despite increasing incentives, the inventory of unsold vehicles continues to mount. As for the delivery of commercial aircraft, Boeing anticipates 285 plane deliveries for 2004 or four planes more than the number delivered in 2003. Much of Boeing’s improved earnings for the second quarter can be attributed to a 23 cents per share Federal tax refund, lower than expected pension and retiree medical expenses, and cost savings from monthly employee firings.
Gina Martin, economist at Wachovia, stated "it’s somewhat disappointing; clearly the soft patch continued in June.."
Yukos pumps more oil than five of the OPEC countries. With their production halted by the court, it was not surprising that crude reached $43 a barrel, a 21-year high.
According to the Defense Department, 908 U.S. service members have died since the beginning of military operations in March 2003. Our troops have been stationed there for 16 months.
According to Cutting Edge Information, a business intelligence firm, pharmaceutical companies spend over 25% of their clinical budget outsourcing to CROs. They stated "outsourcing is a great way for lots of pharmas to get the number of trial participants they need in a shorter amount of time…Outsourcing overseas can quickly cut cost and time."
State Farm to cut 900 jobs. About 1,200 jobs will be lost as part of the consolidation of Wella with Proctor & Gamble. About 200 cuts will be in Germany, and the remainder in the U.S., Mexico, South Korea, Indonesia, and other nations. About 300 P&G workers will be affected as well.
Beth Shulman, a D.C.-based labor consultant who wrote "The Betrayal of Work: How Low-Wage Jobs Fail 30 Million Americans and Their Families," stated that one-quarter of workers make less than $8.70 per hour and that "wage inequality translates into a vicious cycle where people get stuck. It’s not just that people aren’t making enough money. That’s bad enough. But the normal means of righting itself is not in place. The political and education system are working to the detriment of moving these people up." Maybe that’s why John Edwards emphasized that "hope is on the way."
Michael Peroutka, Constitution Party presidential nominee, stated "George Bush has given us the most un-Constitutional, most powerful, biggest, far-reaching, fiscally irresponsible, intrusive, debt-ridden Federal government in the history of the universe! If there was, in the ‘Guiness Book of World Records,’ such a category, Mr. Bush, Big Government wise, would be Flip-Flopper Number One.’

Wednesday, July 28, 2004

7/28/04 Pivotal Issues
Yesterday the Conference Board stated that U.S. consumer confidence rose in July to a two-year high. They also mentioned that the percentage of consumers that see business conditions in the current month as "good" was little changed, falling to 25.6 from 25.8 in June. It’s difficult to reconcile those two statements and with the UBS Index which dropped seven points in July.
Maybe it would be helpful to take a closer look at some numbers. Avery Shenfeld, an economist with CIBC World Markets, stated that, in this year’s first quarter, wages and salaries had the smallest share of total national income than at any time since WW II. After adjusting for inflation, average hourly wages in May of $15.64 were at the same level as in November 2001, the month when the last recession ended. In June, real average weekly earnings were down 1.3% from June 2003. It’s not surprising that only 25% of those polled believe business conditions are "good." When analysts look back, this will be one of the primary reasons why Bush will have lost re-election. For 80% of Americans who rely primarily on wages and salaries, they are not better off than four years ago.
According to a survey done for staffing services provider Hudson, 52% of African-Americans and 57% of Hispanics state their pay is not equal to what others in similar positions are paid; 38% of male workers and 36% of female workers state their pay does not equal others in similar positions; and 34% of white workers stated similar complaints. According to BLS statistics, white workers earn a median income of $636 a week, while African-Americans earn about $100 less and Hispanics about $200 less. According to the Hudson survey, only 36% of workers overall said better performance leads to higher pay, while about 60% stated that longevity in a job leads to better pay.
In another survey by Robert Half Management Resources, top complaints were long hours and unfair pay. In the second quarter, 6% of workers stated they quit their jobs voluntarily, up from 5.3% in the first quarter and 3.8% a year ago. Surveys show the primary reasons for leaving were to seek an alternative to long workdays and unfair pay.
Jeff Anderson, senior vice president at Hudson, remarked "we have found that workers’ perceptions are directly linked to reality." In my opinion, Bush will find in November that voters’ perceptions are directly linked to reality.
In a recent Bloomberg survey, it is thought that non-farm payrolls increased by 233,000 jobs in July. Whatever the number, how many jobs are not temporary? How many jobs pay a wage, adjusted for inflation, that exceed the level reached in November 2001? How many unemployed workers lost their benefits in July and were not counted as unemployed? Could that number exceed 233,000? The estimate is 320,000. Are we gaining or losing jobs each month? The numbers tell the story. The numbers will help determine the election.
Every once in a generation, the real deal graces us. Barack Obama is the real deal.

Tuesday, July 27, 2004

7/27/04 Decline In Optimism
According to the UBS Index of Investor Optimism, a joint effort of UBS and the Gallup Organization, the overall index decreased by 7 points in July to 88, down from June’s level of 95. The decline can be attributed to a 4-point decrease in the Index’s personal dimension, which measures investors’ confidence in their ability to reach investment targets and maintain income. It is also driven by a 3-point decrease in the Index’s economic dimension, which measures investors’ sentiment on economic growth, unemployment, stock market performance, and inflation.
Alcoa will lay off 400 workers at an idle aluminum smelter in Wenatchee, Washington this fall after its union rejected a contract proposal. The company stated that health care costs were the sticking point in the contract negotiations.
With a 65% decline in revenue, Cray will lay off 100 workers.
According to the Department of Energy, the nationwide average price for on-highway diesel fuel is about $1.75 a gallon, just shy of the $1.77 record set in March 2003, and it is more than 21% higher than at this time last year. According to a trucking association, the tonnage of freight hauled by trucks nationally hit a record in this April. The tonnage was off a bit in May. Year-to-date truck tonnage is up 6.4% and growth in demand for diesel is up 4.8% this year. By comparison, there has been a 2.5% demand growth for gasoline.
Existing home sales rose 2.1% in June, another new record.
A coalition of health experts called Partnership for Essential Nutrition make the claim that low-carb, high protein diets lead to kidney stress, liver disorders, gout, higher risk o heart disease, stroke, diabetes, assorted types of cancer, and even worse, severe constipation, nausea, headaches, and even bad breath.
DuPont's second quarter revenue rose only 2%.

Monday, July 26, 2004

7/26/04 Inventories And GDP Growth

This week there will be a report on the latest inventory statistics. Contributing to the 3.7% GDP growth rate in the second quarter has been the growth in inventories. That information can be misleading. As the Detroit Free Press recently stated, inventories of 3.5 million vehicles are so bloated at Ford and GM that, even if the companies shut their plants between now and the presidential election, some of the better selling models would still have vehicles remaining after the votes are tallied.
Social Security trustees state that OASDI (old age security and disability income programs) has unfunded liabilities of $3.7 trillion, and that actual cash to make payments may be in trouble as early as 2010. With an aging population, that news is not very comforting.
ETL represents the software market for data extract, transform, and load. Oracle and Microsoft are adding ETL capabilities in their database offerings. PowerCenter 7.0 is the latest ETL version offered by Informatica. PC7 has many capabilities not offered by others in this space. Its strengths in data warehousing and business intelligence make it a compelling alternative in the growing ETL arena. It also can be quite appealing to those looking to make an acquisition in the world of open architecture.

Sunday, July 25, 2004

7/25/04  Supremacy

"Microsoft's CFO John Connor: "We'll take a little bit of a dip this year. If we execute well, we might improve on that; 06', we should be able to accelerate a little bit from 05'." Barron's suggests that Microsoft "has impressive growth prospects." Maybe they do. I have no reason to doubt Connors' statement about the near-term challenges to growth. A slowdown is in the cards. He should know better than Barron's. From his perch, his knowledge reins supreme. On a side note, Microsoft had projected 2004 job growth at 4,000 to 5,000. Actual job growth was 2,000. The company has a strong focus on cost cutting. For fiscal 2005, the forecast is for hiring 6,000 to 7,000 people. Don't bet on it.
As long as hourly wages, adjusted for inflation, remain stagnant or decline, Bush will have trouble at the polls. Main Street contains more votes than Bush's high income base. Without the extension of tax cuts, real disposable income will prove disappointing to voters. That disappointment will also be felt at the retail level. One can hear the grinding noise from the slowing economic gears. The sparks are flying. In this heat the sparks can cause a big conflagration.
It would be a big mistake to miss the Bourne Supremacy. Matt Damon is the real deal. He just keeps getting better.