9/25/04 No End In Sight
The Economic Cycle Research Institute's director of research, Anirvan Banerji, stated "the ECRI and its growth rate have been essentially flat for a couple of months, after falling sharply starting in the spring. That suggests that the economic slowdown we are now seeing is real and there is no end in sight."
According to the weekly index compiled by the Economic Cycle Research Institute, the ECRI index fell 0.3% last week, the eighth consecutive weekly decline.
Economy.com's Sophia Koropeckys: "Rising oil prices and geo-political concerns as well as high pension and healthcare costs seem to be constraining hiring. Business confidence remains fragile despite strong profitability and cash flow."
Jared Bernstein: "Whenever you see a spike in self-employment in this kind of economy, you know that it is involuntary entrepreneurship."
Lyndon B. Johnson: "Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else."
According to the Northwest Federation of Community Organizations, more than a quarter of the job openings in Washington state pay less than $20,942 a year, the minimum income needed by a single adult to cover rent, health insurance, food, and transportation. In addition, 77% of job openings statewide paid less than a single parent with two children would need to earn at least $43,608 to make ends meet in Washington.
Agere will announce "material" job cuts next week. Miramax to cut workforce by another 13% or 55 employees.
The yield curve experienced a significant flattening this week. The spread between 2-year and 10-year Treasury bonds narrowed to 145 basis points. Some might suggest that indicates very modest levels of inflation. Some might suggest it indicates slower growth. Others believe it reflects an economy on firmer footing, and therefore, the Fed will continue to raise short-term rates and that places pressure on the 2-year bonds. Let me state that, for the last eight trading days, this spread has narrowed. At the end of 2003, the spread was 242 basis points. After subtracting core consumer prices that rose 1.7% over the past 12 months, the 10-year bond would yield 2.33%. Over the last 10 years, the real yield has averaged about 3.25%. It would be, in my view, a serious mistake for the Fed to tighten again. Consumer spending, job creation, and real salaries and wages are disappointing. With crude closing at a new record high of $48.88 per barrel, the economy doesn't need more headwinds.
U.S. August existing home sales fell 2.7% to 6.54 million, the second consecutive month of declining sales. Average U.S. home prices have risen 24% since 2001 or much faster than wages, and this has created eroding affordability.
The headlines for August durable goods showed that orders dropped 0.5% but increased 2.3% when orders for planes were excluded. Some large shifts took place between July and August. In July Boeing booked orders for 75 planes. In August the bookings dropped to 20. Orders for core capital goods excluding defense and civilian aircraft fell 0.5% in August after gaining 0.6% in July. Core capital goods are a good indicator of demand for investment goods. On the other hand, shipments for the month rose 1.4%, and business was particularly strong for communications equipment. Interestingly, shipments for machinery fell 1.1%. A big swing were orders for autos that climbed 5.7%. The month before they declined 4.5%. Orders for defense capital goods increased 4.5% while shipments increased 1.5%. Additionally, unfilled orders for August increased 0.3%, while inventories rose 0.6%. As economist Robert Brusca stated, "the report is pretty firm but it does not point to much job growth ahead." Morgan Stanley lowered their forecast for September job creation to 100,000. Some brokerage firms raised their estimate for 3rd quarter GDP growth and some lowered their projections.
Since the invasion of Iraq, 1,040 U.S. service members have been killed and close to 7,500 have been wounded.
Philip Stevens of the Financial Times: "By any objective measure America stands on the brink of strategic failure in Iraq, but the U.S. president is fighting an election. So, at every turn, loud determination defies grim reality... the rising death toll of innocent civilians, the pitiless barbarism of the hostage-takers led by Abu Musab al-Zarqawi and the impotence of an American military increasingly confined to its fortified bases bear daily witness to the gathering catastrophe in Iraq."
Ronald Reagan: "History teaches that war begins when governments believe the price of aggresssion is cheap."
Friday, September 24, 2004
9/24/04 A Closer Look At The LEI
Positive contributions to the Leading Economic Indicators Index in August were: manufacturers’ new orders for consumer goods and materials; real money supply; and average weekly initial claims for unemployment insurance (inverted). The negative factors were: the interest rate spread; building permits; index of consumer expectations; manufacturers’ new orders for non-defense capital goods; vendor performance; and stock prices. During the six months through August, the leading index increased 0.7%, hardly a sign of much economic strength.
Ken Goldstein, chief economist for the Conference Board: “The leading indicators continue to suffer. There is concern about weak consumption and the pace of wage and salary increases. Consumers worry about their wages and salaries, which could limit spending. Businesses worry about their ability to raise prices and cover rising costs.” This message sounds quite different from that provided by the Fed.
P.J. O’Rourke: “The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”
According to the IRS, total corporate income tax receipts declined to $128.8 billion in 2003, down 13.4% from 2001’s $148.7 billion. During the interim two years, pre-tax corporate income rose sharply as did the federal government deficit.
Joseph Binkman, Stanford law professor and an expert on business taxes, stated “given our current huge deficit, we’re replacing taxes with debt. When the debt comes due, today’s tax cuts are a tax on our children.”
P.J. O’Rourke: When government does, occasionally, work, it works in an elitist fashion. That is, government is most easily manipulated by people who have money and power already. That is why government benefits usually go to people who don’t need benefits from government. Government may make some environmental improvements, but these will be improvements for rich bird-watchers. And no one in government will remember that when poor people go bird watching they do it at Kentucky Fried Chicken.’
GM stated they are way behind on their plan to break-even in Europe as pricing there has been more challenging than anticipated and structural costs are too high. GM expects to spend $5.1 billion on healthcare this year, and that is equal to its budget for capital expenditures.
December gold closed at $412.60.
Last week 600,000 barrels of oil were added to the Strategic Oil Reserve. That did not get any publicity. I wonder why. That same 600,000 barrels would have curtailed the loan request from refiners. That loan request, and complying with it, got plenty of publicity. I wonder why. In sum, our giving federal government will lend oil to a few refiners and the amount will equate to that purchased last week.
The Cingular Wireless purchase of AT&T Wireless will close shortly. The latter has 31,000 employees. With the acquisition, there will be many departmental duplications, such as, HR, sales, and marketing. Thousands of employees will lose their jobs. TRW Automotive ceased production yesterday at its Pitt, NC plant near Greenville. They laid off 105 people. Since 2003, more than 2,000 manufacturing jobs have been eliminated in Pitt and several surrounding counties.
Positive contributions to the Leading Economic Indicators Index in August were: manufacturers’ new orders for consumer goods and materials; real money supply; and average weekly initial claims for unemployment insurance (inverted). The negative factors were: the interest rate spread; building permits; index of consumer expectations; manufacturers’ new orders for non-defense capital goods; vendor performance; and stock prices. During the six months through August, the leading index increased 0.7%, hardly a sign of much economic strength.
Ken Goldstein, chief economist for the Conference Board: “The leading indicators continue to suffer. There is concern about weak consumption and the pace of wage and salary increases. Consumers worry about their wages and salaries, which could limit spending. Businesses worry about their ability to raise prices and cover rising costs.” This message sounds quite different from that provided by the Fed.
P.J. O’Rourke: “The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn’t work and then they get elected and prove it.”
According to the IRS, total corporate income tax receipts declined to $128.8 billion in 2003, down 13.4% from 2001’s $148.7 billion. During the interim two years, pre-tax corporate income rose sharply as did the federal government deficit.
Joseph Binkman, Stanford law professor and an expert on business taxes, stated “given our current huge deficit, we’re replacing taxes with debt. When the debt comes due, today’s tax cuts are a tax on our children.”
P.J. O’Rourke: When government does, occasionally, work, it works in an elitist fashion. That is, government is most easily manipulated by people who have money and power already. That is why government benefits usually go to people who don’t need benefits from government. Government may make some environmental improvements, but these will be improvements for rich bird-watchers. And no one in government will remember that when poor people go bird watching they do it at Kentucky Fried Chicken.’
GM stated they are way behind on their plan to break-even in Europe as pricing there has been more challenging than anticipated and structural costs are too high. GM expects to spend $5.1 billion on healthcare this year, and that is equal to its budget for capital expenditures.
December gold closed at $412.60.
Last week 600,000 barrels of oil were added to the Strategic Oil Reserve. That did not get any publicity. I wonder why. That same 600,000 barrels would have curtailed the loan request from refiners. That loan request, and complying with it, got plenty of publicity. I wonder why. In sum, our giving federal government will lend oil to a few refiners and the amount will equate to that purchased last week.
The Cingular Wireless purchase of AT&T Wireless will close shortly. The latter has 31,000 employees. With the acquisition, there will be many departmental duplications, such as, HR, sales, and marketing. Thousands of employees will lose their jobs. TRW Automotive ceased production yesterday at its Pitt, NC plant near Greenville. They laid off 105 people. Since 2003, more than 2,000 manufacturing jobs have been eliminated in Pitt and several surrounding counties.
Thursday, September 23, 2004
9/23/04 What Matters?
It depends on who is doing the talking. There are some who truly believe that unemployment has no bearing on stock prices. Some believe these record oil prices do not influence and/or impact consumer spending. Ther are money managers who follow the belief that one should be fully invested at all times because the market has risen 9% a year over time. When it comes to the economy, many economists believe it is output or production that is the final arbiter of business cycles. Interestingly, all of these examples reside in macro economics, and the latter matters to me in my investment decisions.
Pimco's Paul McCulley: Re the November election, "a Democratic win would be unambiguously bullish for bonds versus stocks because there would be deficit hawks (calling for) increasing taxes forthe affluent."
The ABC News/Money magazine consumer comfort index dropped to -9 in the week ended Sept. 19, down from -7 in the previous week.
Lucent is planning additional cuts in retiree health-care benefits.
Yesterday, October heating oil traded at an all-time high of $1.34 a gallon. With crude inventories falling 9.1 million barrels and gasoline inventories declining by 3.3 million barrels, it was not surprising to see crude oil jump to $48.35 a gallon. This is about $1 below the clsoing all-time high for crude oil.
The death toll and the list of wounded U.S. service members continue to escalate in Iraq. The number of daily attacks is on the rise. Does this matter to voters? Does it matter that the war on terror and the war of choice in Iraq are not one and the same? Does it matter we invaded Iraq over the supposed existence of WMD and then changed the reason to rid the world of Saddam Hussein? Doe sit matter that the costs for Medicare were deliberately under-estimated to Congress?
Do you want to lsiten to the message being delivered by the U.S. Treasury market or by the Federal Reserve? How is it possible that the Fed is all-knowing that the "natural rate" for short-term interest rates should be about 2.5% while 10-year Treasury bonds traded yesterday at 3.97%? How can the economy be gaining traction while the yield curve dramatically flattens? We are approaching a differential of 150 basis points between 2-year and 10-year U.S. Treasury bonds.
It might be wise to keep an eye on the UK housing market. I is cooling down. Ther are signs that the housing market is slowing in the U.S. It is not to be found in new housing starts; however,the drop in housing permits will translate into declining construction. There is another sign. When placing a property on the market, one needs to hire a building construction inspector, one who can describe what structural deficiencies might exist and need to be fixed. Over the past couple of years there has been a wait to hire such an individual. Now, in most cases, there isn't a wait. That matters. It's a sure sign of slowing. Home construction has been the most consistent growth engine for our economy during the Bush term in office. It may play a much more diminished role over the next four years. That spells trouble, on the one hand, for employment in the construction trades and for cash flow emanating from rising home prices and home equity lines of credit. On the other hand, it may also mean lower inflation with less demand for lumber and other building materials.
Today we will be reading about the weekly first-time initial jobless claims and the monthly leading economic indicators for August. I anticipate both will reflect a slowing economy, an economy with a rapidly flattening yield curve. Rapidily it is, and this matters. That is very bad news for common stocks, and is one reason why rallies in the Dow, S&P 500, and the Nasdaq are short-lived.
Nintendo DS will debut in North American stores on November 21. It will sell for $149.99.
About 90% of Japan's imported beef presently arrive from Australia.
According to Mic Dinsmore, chief executive of the Port of Seattle, the U.S. has 361 river ports and seaports, and every day 21,000 containers enter our country but at present only 4 to 6% of these containers' contents are verified.
Due to technical problems, the following is a continuation from the above sections written about 8 hours ago.
The WSJ stated "the economy is an electoral curveball...Bush may benefit from recent bright signs, but job and income issues could help Kerry." Consider these bright signs: initial jobless claims for the week ended Sept. 18 rose by 14,000 to 350,000, higher than the prior 4-week moving average; the August Leading Economic Indicators fell 0.3%, the third consecutive monthly decline. I would anticipate another decline in September; with rising incentives needed to move bloated inventories, GM's profit per vehicle sold in the U.S. in 2004 could drop to $150 from the $180 recorded in 2003, the same year Toyota earned $1,700 on each vehicle they sold in the U.S.; and over the past 12 months, consumer prices rose 2.7% while average hourly wages for production workers were up 2.3%
There is speculation that Agere Systems will cut 205 of their employees and Commerce One will file for bankruptcy protection.
Thank goodness for Homeland Security. We're safe from Cat Stevens!
It depends on who is doing the talking. There are some who truly believe that unemployment has no bearing on stock prices. Some believe these record oil prices do not influence and/or impact consumer spending. Ther are money managers who follow the belief that one should be fully invested at all times because the market has risen 9% a year over time. When it comes to the economy, many economists believe it is output or production that is the final arbiter of business cycles. Interestingly, all of these examples reside in macro economics, and the latter matters to me in my investment decisions.
Pimco's Paul McCulley: Re the November election, "a Democratic win would be unambiguously bullish for bonds versus stocks because there would be deficit hawks (calling for) increasing taxes forthe affluent."
The ABC News/Money magazine consumer comfort index dropped to -9 in the week ended Sept. 19, down from -7 in the previous week.
Lucent is planning additional cuts in retiree health-care benefits.
Yesterday, October heating oil traded at an all-time high of $1.34 a gallon. With crude inventories falling 9.1 million barrels and gasoline inventories declining by 3.3 million barrels, it was not surprising to see crude oil jump to $48.35 a gallon. This is about $1 below the clsoing all-time high for crude oil.
The death toll and the list of wounded U.S. service members continue to escalate in Iraq. The number of daily attacks is on the rise. Does this matter to voters? Does it matter that the war on terror and the war of choice in Iraq are not one and the same? Does it matter we invaded Iraq over the supposed existence of WMD and then changed the reason to rid the world of Saddam Hussein? Doe sit matter that the costs for Medicare were deliberately under-estimated to Congress?
Do you want to lsiten to the message being delivered by the U.S. Treasury market or by the Federal Reserve? How is it possible that the Fed is all-knowing that the "natural rate" for short-term interest rates should be about 2.5% while 10-year Treasury bonds traded yesterday at 3.97%? How can the economy be gaining traction while the yield curve dramatically flattens? We are approaching a differential of 150 basis points between 2-year and 10-year U.S. Treasury bonds.
It might be wise to keep an eye on the UK housing market. I is cooling down. Ther are signs that the housing market is slowing in the U.S. It is not to be found in new housing starts; however,the drop in housing permits will translate into declining construction. There is another sign. When placing a property on the market, one needs to hire a building construction inspector, one who can describe what structural deficiencies might exist and need to be fixed. Over the past couple of years there has been a wait to hire such an individual. Now, in most cases, there isn't a wait. That matters. It's a sure sign of slowing. Home construction has been the most consistent growth engine for our economy during the Bush term in office. It may play a much more diminished role over the next four years. That spells trouble, on the one hand, for employment in the construction trades and for cash flow emanating from rising home prices and home equity lines of credit. On the other hand, it may also mean lower inflation with less demand for lumber and other building materials.
Today we will be reading about the weekly first-time initial jobless claims and the monthly leading economic indicators for August. I anticipate both will reflect a slowing economy, an economy with a rapidly flattening yield curve. Rapidily it is, and this matters. That is very bad news for common stocks, and is one reason why rallies in the Dow, S&P 500, and the Nasdaq are short-lived.
Nintendo DS will debut in North American stores on November 21. It will sell for $149.99.
About 90% of Japan's imported beef presently arrive from Australia.
According to Mic Dinsmore, chief executive of the Port of Seattle, the U.S. has 361 river ports and seaports, and every day 21,000 containers enter our country but at present only 4 to 6% of these containers' contents are verified.
Due to technical problems, the following is a continuation from the above sections written about 8 hours ago.
The WSJ stated "the economy is an electoral curveball...Bush may benefit from recent bright signs, but job and income issues could help Kerry." Consider these bright signs: initial jobless claims for the week ended Sept. 18 rose by 14,000 to 350,000, higher than the prior 4-week moving average; the August Leading Economic Indicators fell 0.3%, the third consecutive monthly decline. I would anticipate another decline in September; with rising incentives needed to move bloated inventories, GM's profit per vehicle sold in the U.S. in 2004 could drop to $150 from the $180 recorded in 2003, the same year Toyota earned $1,700 on each vehicle they sold in the U.S.; and over the past 12 months, consumer prices rose 2.7% while average hourly wages for production workers were up 2.3%
There is speculation that Agere Systems will cut 205 of their employees and Commerce One will file for bankruptcy protection.
Thank goodness for Homeland Security. We're safe from Cat Stevens!
Wednesday, September 22, 2004
9/22/04 2004: The Year Of The Disconnect
Yesterday was an important day in the bond market. All eyes were on the Fed as their members voted unanimously to raise its target for the federal funds rate by 25 basis points to 1 ¾ percent, and the discount rate by 25 basis points to 2 ¾ percent. Prior to the meeting, 10-year Treasury bonds were trading at 4.08%. By the close of trading, the yield had dropped to 4.04%, and that was just above the day’s low at 4.03%. Significantly, the yield curve flattened to the narrowest point since September 2001. The spread between 2-year and 10-year Treasury bonds was 157 basis points. In sum, despite the Fed stating output regained some traction and that the labor market improved modestly, the long Treasury market ignored the Fed’s description of the economic conditions in our country. There is a disconnect between 10-year Treasury yields and the Fed raising short-term rates. Moreover, the flattening of the yield curve describes a viewpoint that the economy is slowing dramatically. Some traders mentioned that the rally in 10-year Treasury bonds reflected a fear of convexity where mortgage players buy 10-year Treasury bonds to enhance their income and duration shortfalls due to rising prepayment risks. Convexity measures the way duration and price change when interest rates change. That may have played a part in the buying of 10-year Treasury bonds yesterday, but let’s keep it real. The yield on the 10-year has recently dropped from 4.88% to 4.04%. Something a lot big than convexity fears is going on to generate such a decline. It’s called the economy grinding to a halt. It’s called the tapped out consumer. It’s called borrowing about $2 billion per day from foreign sources pushing our country into possible financial ruin.
Yesterday, crude oil closed at $47.10 per barrel, October heating oil at $1.30 per gallon, and October natural gas at $5.60 per BTU.
RF Micro Devices warned that their sales forecast would fall short of expectations due to an inventory glut in Asian electronics. They had lower than anticipated sales to certain Mobile phone customers. Meanwhile, Samsung, the world’s second largest chipmaker, stated that memory chip prices will fall sharply.
Interstate Bakeries filed for chapter 11 bankruptcy. GM will cut 3,000 jobs in Europe. Continental Tire North America has decided to close its Mayfield, KY tire plant that employs 827 people. Continental stated the plant is its most expensive factory to operate in North America. Plexus is cutting 160 jobs.
While U.S. housing starts rose 0.6% in August to a 2 million annual rate, building permits fell 5.5% to 1.952 million units.
Ralph Waldo Emerson: "It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay."
Norway is a large oil producer. Norwegian bonds are backed by large oil reserves.
P.J. O’Rourke: "You’re into derivatives whether you like it or not. Your adjustable rate mortgage is a derivative. You got a deal on a loan that was cheaper at any time than a fixed-rate mortgage. In return you’re taking a risk. Your risk is that the amount of interest you’ll pay in the future will be decided from a formula involving the prime rate, T-bills, and the chairman of Chase Manhattan’s boxer shorts waistband size. In this case, the underlying commodity is banker fat."
The British ambassador to Rome stated Bush is "al-Qaeda’s best recruiting sergeant…If anyone is ready to celebrate the eventual re-election of Bush, it’s al-Qaeda."
GM is planning a clearance sale next week on 2004 models, offering zero-percent financing for 72 months to help unload a backlog of inventory. GM spent an average of $4,379 per vehicle on incentives, the most of any major automaker, and still inventories rose in August. Bob Schnorbus, chief economist for J.D. Power and Associates, stated "for whatever reason, consumers right now just aren’t in a buying mood."
A recent study by Research and Markets indicated that the worldwide analgesic market was worth $38 billion last year and is expected to nearly double to $75 billion by the year 2010.
Jim Cramer provided the joke of the day. He stated "the simple truth about this economy is that while nothing’s ever perfect, we’ve got a bit of a barn-burner on our hands." Funny stuff.
Yesterday was an important day in the bond market. All eyes were on the Fed as their members voted unanimously to raise its target for the federal funds rate by 25 basis points to 1 ¾ percent, and the discount rate by 25 basis points to 2 ¾ percent. Prior to the meeting, 10-year Treasury bonds were trading at 4.08%. By the close of trading, the yield had dropped to 4.04%, and that was just above the day’s low at 4.03%. Significantly, the yield curve flattened to the narrowest point since September 2001. The spread between 2-year and 10-year Treasury bonds was 157 basis points. In sum, despite the Fed stating output regained some traction and that the labor market improved modestly, the long Treasury market ignored the Fed’s description of the economic conditions in our country. There is a disconnect between 10-year Treasury yields and the Fed raising short-term rates. Moreover, the flattening of the yield curve describes a viewpoint that the economy is slowing dramatically. Some traders mentioned that the rally in 10-year Treasury bonds reflected a fear of convexity where mortgage players buy 10-year Treasury bonds to enhance their income and duration shortfalls due to rising prepayment risks. Convexity measures the way duration and price change when interest rates change. That may have played a part in the buying of 10-year Treasury bonds yesterday, but let’s keep it real. The yield on the 10-year has recently dropped from 4.88% to 4.04%. Something a lot big than convexity fears is going on to generate such a decline. It’s called the economy grinding to a halt. It’s called the tapped out consumer. It’s called borrowing about $2 billion per day from foreign sources pushing our country into possible financial ruin.
Yesterday, crude oil closed at $47.10 per barrel, October heating oil at $1.30 per gallon, and October natural gas at $5.60 per BTU.
RF Micro Devices warned that their sales forecast would fall short of expectations due to an inventory glut in Asian electronics. They had lower than anticipated sales to certain Mobile phone customers. Meanwhile, Samsung, the world’s second largest chipmaker, stated that memory chip prices will fall sharply.
Interstate Bakeries filed for chapter 11 bankruptcy. GM will cut 3,000 jobs in Europe. Continental Tire North America has decided to close its Mayfield, KY tire plant that employs 827 people. Continental stated the plant is its most expensive factory to operate in North America. Plexus is cutting 160 jobs.
While U.S. housing starts rose 0.6% in August to a 2 million annual rate, building permits fell 5.5% to 1.952 million units.
Ralph Waldo Emerson: "It is said that the world is in a state of bankruptcy, that the world owes the world more than the world can pay."
Norway is a large oil producer. Norwegian bonds are backed by large oil reserves.
P.J. O’Rourke: "You’re into derivatives whether you like it or not. Your adjustable rate mortgage is a derivative. You got a deal on a loan that was cheaper at any time than a fixed-rate mortgage. In return you’re taking a risk. Your risk is that the amount of interest you’ll pay in the future will be decided from a formula involving the prime rate, T-bills, and the chairman of Chase Manhattan’s boxer shorts waistband size. In this case, the underlying commodity is banker fat."
The British ambassador to Rome stated Bush is "al-Qaeda’s best recruiting sergeant…If anyone is ready to celebrate the eventual re-election of Bush, it’s al-Qaeda."
GM is planning a clearance sale next week on 2004 models, offering zero-percent financing for 72 months to help unload a backlog of inventory. GM spent an average of $4,379 per vehicle on incentives, the most of any major automaker, and still inventories rose in August. Bob Schnorbus, chief economist for J.D. Power and Associates, stated "for whatever reason, consumers right now just aren’t in a buying mood."
A recent study by Research and Markets indicated that the worldwide analgesic market was worth $38 billion last year and is expected to nearly double to $75 billion by the year 2010.
Jim Cramer provided the joke of the day. He stated "the simple truth about this economy is that while nothing’s ever perfect, we’ve got a bit of a barn-burner on our hands." Funny stuff.
Tuesday, September 21, 2004
9/21/04 Consumer Fatigue Is Gaining Traction
Pennsylvania Labor & Industry Secretary Stephen M. Schmerin stated "the jump in Pennsylvania’s unemployment rate from 5.3% in July to 5.6% in August indicates the state’s economy, like the rest of the nation’s, remains volatile for workers and businesses. The manufacturing sector aloe lost another 1,200 jobs in August, on top of 1,300 jobs lost in July…Regretfully, other companies, such as Wyeth Pharmaceuticals in Chester County, have already announced job cuts for later this year. Pennsylvania manufacturing jobs are now down 152,000 from March 2001, putting our manufacturing job count at a record low of 693,400. Overall, the Pennsylvania economy generated only 6,400 jobs last month, an increase of 0.1% that mirrored the national sluggish job growth rate."
Employment in low-wage industries, such as call centers and restaurants, is growing faster than in high-wage industries, such as manufacturing and commercial construction, according to an Oregon Employment Department analysis yet to be officially released. Low-wage industries also shrunk less than high-wage industries during the state’s recession from November 2000 to June 2003. Services supporting businesses, largely call centers, rank as the fastest-growing sector of Oregon’s economy, expanding by 66% since January 2001- three times faster than any other industry. In August, Oregon’s unemployment rate spiked six-tenths of a percentage point to 7.4%. For months, median household income has declined faster in Oregon than in the rest of the country, according to federal statistics.
Paul Samuelson: "Risk of inflation is not acute right now."
Yesterday, two U.S. soldiers were killed in a firefight with insurgents in Kabul. According to the Defense Department, 137 U.S. military personnel have died in Operation Enduring Freedom, launched after 9/11.
Douglas Henry, CEO of Henry Molded Products: "The fact that you have no margins brings to a screeching halt the reinvestment in growth and investment capability."
Eastman Kodak will close its only manufacturing and wholesale processing lab in Australia and cut 600 workers. Peoples Energy will cut 110 jobs. Dex Media will eliminate 160 jobs or 6% of its workforce. Overhead Storage to lay off 140 workers, or one-third of its employees.
Kathleen Bostjancic, economist: The consumer is really starting to show some fatigue here. Our big picture analysis is that the economic soft patch is turning out to be more than just a patch and that the economy is more vulnerable than the Fed had perceived."
Greenspan: "Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months."
The core PCE price index rose 1.5% for the 12 months ending in July.
Superior Industries, a maker of aluminum auto parts, warned its third-quarter earnings would fall short of expectations because weak sales of cars and light trucks over the summer led to production cuts from major customers.
Bosch and Volkswagen stated that wage cuts may crimp consumer spending.
Georgia reported 1,649 foreclosures in August. Georgia’s total number of foreclosures is the second largest in the nation with 5,542 foreclosed residential properties. Texas, with a reported 8,364, has the most.
As of July 31, 2004, Cisco’s order backlog was $1.9 billion compared with $2 billion one year earlier.
KB Home raised its forecast for 2004 to $11 per share and to $14 per share for 2005.
For the first time in almost ten years, Colgate-Palmoive issued a formal profit warning, and stated that earnings would fall short of forecasts due to higher marketing and promotion expenses. Reuben Mark, chairman and chief executive, stated the company has "sharply increased marketing spending to build market share and aggressively improve our brand franchises here and abroad." Even so, gross profit margins for the full year 2004 would be "even with or slightly better than the record 55% set in 2003," noted Mark. The stock declined about 11% on this news. Over the years, I have often stated that, if given a choice for a chief executive to run a company, mine would be Reuben Mark.
Same-store sales at U.S. retail chains declined 1.1% in the week ended September 18 compared to the prior week, and the latter was not exactly a barn burner.
Pennsylvania Labor & Industry Secretary Stephen M. Schmerin stated "the jump in Pennsylvania’s unemployment rate from 5.3% in July to 5.6% in August indicates the state’s economy, like the rest of the nation’s, remains volatile for workers and businesses. The manufacturing sector aloe lost another 1,200 jobs in August, on top of 1,300 jobs lost in July…Regretfully, other companies, such as Wyeth Pharmaceuticals in Chester County, have already announced job cuts for later this year. Pennsylvania manufacturing jobs are now down 152,000 from March 2001, putting our manufacturing job count at a record low of 693,400. Overall, the Pennsylvania economy generated only 6,400 jobs last month, an increase of 0.1% that mirrored the national sluggish job growth rate."
Employment in low-wage industries, such as call centers and restaurants, is growing faster than in high-wage industries, such as manufacturing and commercial construction, according to an Oregon Employment Department analysis yet to be officially released. Low-wage industries also shrunk less than high-wage industries during the state’s recession from November 2000 to June 2003. Services supporting businesses, largely call centers, rank as the fastest-growing sector of Oregon’s economy, expanding by 66% since January 2001- three times faster than any other industry. In August, Oregon’s unemployment rate spiked six-tenths of a percentage point to 7.4%. For months, median household income has declined faster in Oregon than in the rest of the country, according to federal statistics.
Paul Samuelson: "Risk of inflation is not acute right now."
Yesterday, two U.S. soldiers were killed in a firefight with insurgents in Kabul. According to the Defense Department, 137 U.S. military personnel have died in Operation Enduring Freedom, launched after 9/11.
Douglas Henry, CEO of Henry Molded Products: "The fact that you have no margins brings to a screeching halt the reinvestment in growth and investment capability."
Eastman Kodak will close its only manufacturing and wholesale processing lab in Australia and cut 600 workers. Peoples Energy will cut 110 jobs. Dex Media will eliminate 160 jobs or 6% of its workforce. Overhead Storage to lay off 140 workers, or one-third of its employees.
Kathleen Bostjancic, economist: The consumer is really starting to show some fatigue here. Our big picture analysis is that the economic soft patch is turning out to be more than just a patch and that the economy is more vulnerable than the Fed had perceived."
Greenspan: "Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased in recent months."
The core PCE price index rose 1.5% for the 12 months ending in July.
Superior Industries, a maker of aluminum auto parts, warned its third-quarter earnings would fall short of expectations because weak sales of cars and light trucks over the summer led to production cuts from major customers.
Bosch and Volkswagen stated that wage cuts may crimp consumer spending.
Georgia reported 1,649 foreclosures in August. Georgia’s total number of foreclosures is the second largest in the nation with 5,542 foreclosed residential properties. Texas, with a reported 8,364, has the most.
As of July 31, 2004, Cisco’s order backlog was $1.9 billion compared with $2 billion one year earlier.
KB Home raised its forecast for 2004 to $11 per share and to $14 per share for 2005.
For the first time in almost ten years, Colgate-Palmoive issued a formal profit warning, and stated that earnings would fall short of forecasts due to higher marketing and promotion expenses. Reuben Mark, chairman and chief executive, stated the company has "sharply increased marketing spending to build market share and aggressively improve our brand franchises here and abroad." Even so, gross profit margins for the full year 2004 would be "even with or slightly better than the record 55% set in 2003," noted Mark. The stock declined about 11% on this news. Over the years, I have often stated that, if given a choice for a chief executive to run a company, mine would be Reuben Mark.
Same-store sales at U.S. retail chains declined 1.1% in the week ended September 18 compared to the prior week, and the latter was not exactly a barn burner.
Monday, September 20, 2004
9/20/04 Crosses To Bear
Bellevue, Washington is a suburb on the Eastside of Seattle. It has many parks, and the community is one of the most affluent in the United States. Bill Gates, for example, lives in the Medina area of Bellevue. Yesterday, the Veterans for Peace planted 1,028 crosses on the lawn at the main city of Bellevue park. Each cross displayed the name, the age, the rank, and hometown of the U.S. soldier killed in Iraq during the past one and a half years, the period marking the war of choice. If a park in every town in the U.S. showcased these crosses, then the outcry about the Iraq war would be deafening. That’s the least we can do for these soldiers, and for their families left behind.
Sen. Chuck Hagel is a Vietnam War veteran and co-chairman of Bush’s re-election committee in Nebraska. He stated "the fact is we’re in trouble. We need more help from our allies. We need the Iraqi people to come around in a more supportive way. The fact is a crisp, sharp analysis of our policies is required. We didn’t do that in Vietnam, and we saw 11 years of casualties mount to the point where we finally lost."
Sen. Richard Lugar, also a Republican, mentioned that Congress had appropriated one year ago $18.4 for reconstruction, and that no more than $1 billion had been spent. He opined "this is the incompetence in the administration."
Yukos will halt deliveries to China’s biggest oil company. China is the world’s fastest growing energy market. On this news, crude rose this morning to $46.35 per barrel.
Ford will reduce production of six vehicles to trim inventories. We should be hearing from GM shortly.
Samsung stated the company sees a slowdown in the chip market. I wonder whether the Nasdaq will ignore this piece of information. There appears to be a growing complacency surrounding bad news. Everything is one big yawn. We’ll see who is left standing. It’s never smart to move up to the next weight class unless you have the skills to do it. Few do.
There is quite a battle developing on how much Medicare will cost. Bush promised his proposed benefits would cost no more than $400 billion over 10 years. The sentence was hardly finished when information was released contradicting the figure by at least $176 billion. Since it’s not Bush’s personal funds, he probably was a bit frivolous with projections. A CFO would have been fired on the spot. The fact is the costs of Medicare will jump significantly in 2006 and after 2006. As Robert Hayes, president of the Medicare Rights Center noted, "we’re in deep trouble." He is quite correct. Consumers are facing a debacle, and that is not an exaggeration. The aging of the population will create additional healthcare demands and costs that could easily decimate the cash flow of our seasoned citizens.
Bellevue, Washington is a suburb on the Eastside of Seattle. It has many parks, and the community is one of the most affluent in the United States. Bill Gates, for example, lives in the Medina area of Bellevue. Yesterday, the Veterans for Peace planted 1,028 crosses on the lawn at the main city of Bellevue park. Each cross displayed the name, the age, the rank, and hometown of the U.S. soldier killed in Iraq during the past one and a half years, the period marking the war of choice. If a park in every town in the U.S. showcased these crosses, then the outcry about the Iraq war would be deafening. That’s the least we can do for these soldiers, and for their families left behind.
Sen. Chuck Hagel is a Vietnam War veteran and co-chairman of Bush’s re-election committee in Nebraska. He stated "the fact is we’re in trouble. We need more help from our allies. We need the Iraqi people to come around in a more supportive way. The fact is a crisp, sharp analysis of our policies is required. We didn’t do that in Vietnam, and we saw 11 years of casualties mount to the point where we finally lost."
Sen. Richard Lugar, also a Republican, mentioned that Congress had appropriated one year ago $18.4 for reconstruction, and that no more than $1 billion had been spent. He opined "this is the incompetence in the administration."
Yukos will halt deliveries to China’s biggest oil company. China is the world’s fastest growing energy market. On this news, crude rose this morning to $46.35 per barrel.
Ford will reduce production of six vehicles to trim inventories. We should be hearing from GM shortly.
Samsung stated the company sees a slowdown in the chip market. I wonder whether the Nasdaq will ignore this piece of information. There appears to be a growing complacency surrounding bad news. Everything is one big yawn. We’ll see who is left standing. It’s never smart to move up to the next weight class unless you have the skills to do it. Few do.
There is quite a battle developing on how much Medicare will cost. Bush promised his proposed benefits would cost no more than $400 billion over 10 years. The sentence was hardly finished when information was released contradicting the figure by at least $176 billion. Since it’s not Bush’s personal funds, he probably was a bit frivolous with projections. A CFO would have been fired on the spot. The fact is the costs of Medicare will jump significantly in 2006 and after 2006. As Robert Hayes, president of the Medicare Rights Center noted, "we’re in deep trouble." He is quite correct. Consumers are facing a debacle, and that is not an exaggeration. The aging of the population will create additional healthcare demands and costs that could easily decimate the cash flow of our seasoned citizens.
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