1/15/05 Cutting And Closing
Yesterday was the end of another five-day work-week. Unfortunately, for many, it was the end. Oracle announced it is cutting its worldwide workforce by 5,000. Boeing is closing its Long Beach, CA plant and also announced closing its historic Toronto site. About 350 employees will lose their jobs in Toronto. Weapons maker Aliant Techsystems will close its Janesville, Wisconsin plant and cut some 200 jobs. Nagle Industries will close its Clarksville, Tenn. plant and about 150 employees will lose their jobs. However, the work will be going to Mexico. NAFTA works! Enterasys Networks will reduce its workforce by about 115 positions.
Yesterday marked the fifth anniversary of the high attained by the Dow. On his website, www.technicalindicatorindex.com, Robert McHugh points out “there’s either a .382 or a .618 ratio relationship for every single top or bottom since Jan. 14, 2000 with another top or bottom since Jan. 14, 2000. Those are Fibonacci numbers and those tops or bottoms identify each phi mate. He mentions 22 consecutive pairs of tops and bottoms since Jan. 14, 2000. At the start of 2004, he forecast the major turning points in the market for the entire year. He was pretty darn accurate. For 2005, he forecasts the next major turn date as Feb. 15, a major bottom, with July 25 as a major top. After that, the major turn dates will be Sept. 16 and December 27. I look forward to tracking those dates. McHugh concluded his most recent letter with the following observation: “2004/2005 is paralleling the great crashes of 1972-73 and 1928/29. Period.”
In the third quarter, the Fed stated the largest gain among durable goods industries was in primary metals, in which output rose 3%. In November, mining, which includes oil extraction, surged 2.2% and then settled back to a 0.4% gain in December. Last month, we experienced a 2.2% surge in power utility production. By comparison, production of automotive products declined 0.8% in November and rose 0.5% in December. In the future, Toyota and Honda will become the moving forces for any net gain in the production of automotive products in the U.S.
Over the past 12 months, real estate loans have increased about 14% to $319 billion.
Fed Governor Ferguson: “Detecting a bubble appears to require judgment based on scant evidence, It entails asserting knowledge of the fundamental value of the assets in question.” It could also entail opening one’s eyes and viewing the landscape above and beyond the beige book.
For my money, the big issue for 2005, 2006, and beyond is the foreign appetite for U.S. dollar assets and dollar-denominated debt. That statement reflects little positive news on the savings rate and the government spending front.
Friday, January 14, 2005
1/14/05 Earnings Watch
Earnings growth for the S&P 500 is estimated at 15% for the fourth quarter of 2004; however, for the first quarter of 2005, that growth is anticipated to drop in half to 7.5%.
Another factor that appears to weigh on equities is the concern about the inflow of capital investment by foreigners. On Tuesday, the information for November will be available. Some place the inflow at $45 billion. Considering the latest monthly trade deficit was $60 billion, the difference would make for a $15 billion shortfall. The decline in November exports did not help our cause.
It’s not surprising that Buffett increased Berkshire Hathaway’s holdings of foreign currencies to $20 billion from the $12 billion reported in the 2003 annual report. Buffett observed that “the rest of the world owns $10 trillion of us, or $3 trillion net. If lots of people try to leave the market, we’ll have chaos because they won’t get through the door…Sooner or later markets win over the intervenors. The intervenors always run out of gas.”
Imports of non-petroleum industrial supplies and material prices increased 17.1% for the year ended in December. Prices for foods, feeds, and beverages rose 7.8% over the past 12 months. Of course, several Fed members recently remarked that inflation was not a concern.
Is anyone concerned that crude rose to a 6-week high of $48 a barrel?
Comerica’s National Recession Watch Index registered a 17-percent probability in December, and that was unchanged from November’s reading.
Germany’s economy grew 1.7% in 2004, and that was sharply less robust than the growth in the U.S.
Workers arriving at Hickory, NC- based Dunmore Furniture Industries found a note on the door that the plant was closed and would not reopen. A total of 250 employees lost their jobs.
Applied Materials cut up to 240 positions. The Seattle Times is cutting 90 to 110 jobs.
At the end of the third quarter in 2004, household financial obligations as a percentage of disposable personal income, seasonally adjusted, amounted to 15.83%. Total consumer debt has mounted to just over $2 trillion, and this does not include mortgage indebtedness. The Fed can attempt to inflate away the government debt, but households don't possess that same printing press. In addition, with the decline in real earnings for 2004, households will find it more difficult to save. The hurdles to financial stability are getting higher. Of course, I feel confident that the Fed is not worried. Why should they worry? They probably aren’t personally in deep hock.
Due to the rising cost of prescription drugs, GM will spend about $5.6 billion on health care in 2005, up from $5.2 billion in 2004 and $4.8 billion in 2003. GM is projecting that its profits for North America will decline by 50% or more in 2005, and therefore, the company expects to earn less than it will in Asia. That will be the first time since GM began breaking out Asia-Pacific profits in 1998. Then there is the problem of their European operations. They continue to be unprofitable--- to the tune of hundreds of millions. GM hopes to only lose $500 million in Europe in 2005. The one bright spot for 2005 is GMAC where profits are projected at $2.5 billion.
Reality has caught up with Boeing. The company will recognize pre-tax charges totaling approximately $615 million, or 48 cents per share, related to the U.S. Air Force 767 tanker program and expenses incurred to end production of the 717. The charges will be incorporated in the company’s fourth-quarter and full-year 2004 results. They will be released on Feb. 2nd. No decision has been made on the potential phase out of the 767 line.
Earnings growth for the S&P 500 is estimated at 15% for the fourth quarter of 2004; however, for the first quarter of 2005, that growth is anticipated to drop in half to 7.5%.
Another factor that appears to weigh on equities is the concern about the inflow of capital investment by foreigners. On Tuesday, the information for November will be available. Some place the inflow at $45 billion. Considering the latest monthly trade deficit was $60 billion, the difference would make for a $15 billion shortfall. The decline in November exports did not help our cause.
It’s not surprising that Buffett increased Berkshire Hathaway’s holdings of foreign currencies to $20 billion from the $12 billion reported in the 2003 annual report. Buffett observed that “the rest of the world owns $10 trillion of us, or $3 trillion net. If lots of people try to leave the market, we’ll have chaos because they won’t get through the door…Sooner or later markets win over the intervenors. The intervenors always run out of gas.”
Imports of non-petroleum industrial supplies and material prices increased 17.1% for the year ended in December. Prices for foods, feeds, and beverages rose 7.8% over the past 12 months. Of course, several Fed members recently remarked that inflation was not a concern.
Is anyone concerned that crude rose to a 6-week high of $48 a barrel?
Comerica’s National Recession Watch Index registered a 17-percent probability in December, and that was unchanged from November’s reading.
Germany’s economy grew 1.7% in 2004, and that was sharply less robust than the growth in the U.S.
Workers arriving at Hickory, NC- based Dunmore Furniture Industries found a note on the door that the plant was closed and would not reopen. A total of 250 employees lost their jobs.
Applied Materials cut up to 240 positions. The Seattle Times is cutting 90 to 110 jobs.
At the end of the third quarter in 2004, household financial obligations as a percentage of disposable personal income, seasonally adjusted, amounted to 15.83%. Total consumer debt has mounted to just over $2 trillion, and this does not include mortgage indebtedness. The Fed can attempt to inflate away the government debt, but households don't possess that same printing press. In addition, with the decline in real earnings for 2004, households will find it more difficult to save. The hurdles to financial stability are getting higher. Of course, I feel confident that the Fed is not worried. Why should they worry? They probably aren’t personally in deep hock.
Due to the rising cost of prescription drugs, GM will spend about $5.6 billion on health care in 2005, up from $5.2 billion in 2004 and $4.8 billion in 2003. GM is projecting that its profits for North America will decline by 50% or more in 2005, and therefore, the company expects to earn less than it will in Asia. That will be the first time since GM began breaking out Asia-Pacific profits in 1998. Then there is the problem of their European operations. They continue to be unprofitable--- to the tune of hundreds of millions. GM hopes to only lose $500 million in Europe in 2005. The one bright spot for 2005 is GMAC where profits are projected at $2.5 billion.
Reality has caught up with Boeing. The company will recognize pre-tax charges totaling approximately $615 million, or 48 cents per share, related to the U.S. Air Force 767 tanker program and expenses incurred to end production of the 717. The charges will be incorporated in the company’s fourth-quarter and full-year 2004 results. They will be released on Feb. 2nd. No decision has been made on the potential phase out of the 767 line.
Wednesday, January 12, 2005
1/13/05 America's Small Businesses
Our 6 million small businesses are responsible for the majority of our economic growth and for the hiring of new employees. According to the National Federation of Independent Business, their recent survey indicates that 30% of small firms plan to increase prices in the next three months. That's the highest percentage in six years. When companies like Sara Lee, Kraft, and P&G raise prices, that news makes the headlines. However, 30% of those six million small companies speak in a loud voice when they elect to raise prices. Such action can impact the inflation rate in a very negative fashion. One would think that the expectation for higher inflation would be greater than it is currently. With the dollar weakening again, and crude moving above $46 a barrel, complacency on the inflation front is not in order. As an aside, eBay and eBay Motors announced a higher fee schedule late in the trading day.
Fed Governor Gramlich: "We have not seen any worrying rise of inflation at this point."
That brings me to the current flattening of the yield curve. It has declined to about 103 basis points, and it looks like an opportunity to consider taking some action. A flattening yield curve usually indicates rising short term rates coupled with the expectations for moderating growth and moderating inflation. The Fed continues to raise short term rates and the outlook for economic growth is for a moderating trend. However, there are plenty of reasons to believe inflation will rise, and I have begun to provide a daily account of companies raising prices. Hence, it might be timely to consider buying 2-year Treasury bonds and shorting a like amount of 10-year Treasury bonds. In my view, there is not enough risk premium in the latter over the 2-year.
Platts survey of OPEC indicates an output reduction of 70,000 barrels per day from November's levels. Excluding Iraq, the decline was 110,000 barrels daily. Further cuts are expected this month.
U.S. Airways plans to cut 2,000 jobs.
The U.S. trade deficit grew to $60.3 billion in November, the largest ever. Imports rose 1.3% but exports declined 2.3%, the first decline since June. I guess all that talk about the cheaper U.S. dollar did not in fact help our exports. Witness our $7.3 billion shortfall with Japan, the largest in four years. We blame every other country for our trade deficits. It's so convenient. Losers don't take responsibility for their own actions. We continue to spend money we don't have. Save might be a four-letter word, but it's not a swear word.
The Snowman: "As an accounting matter, the obligations of the U.S. will come down." Translated this means all workers who have payroll taxes deducted from their paychecks will get screwed. The Republican-controlled Congress will make certain the laws are changed to protect the guilty.
Our 6 million small businesses are responsible for the majority of our economic growth and for the hiring of new employees. According to the National Federation of Independent Business, their recent survey indicates that 30% of small firms plan to increase prices in the next three months. That's the highest percentage in six years. When companies like Sara Lee, Kraft, and P&G raise prices, that news makes the headlines. However, 30% of those six million small companies speak in a loud voice when they elect to raise prices. Such action can impact the inflation rate in a very negative fashion. One would think that the expectation for higher inflation would be greater than it is currently. With the dollar weakening again, and crude moving above $46 a barrel, complacency on the inflation front is not in order. As an aside, eBay and eBay Motors announced a higher fee schedule late in the trading day.
Fed Governor Gramlich: "We have not seen any worrying rise of inflation at this point."
That brings me to the current flattening of the yield curve. It has declined to about 103 basis points, and it looks like an opportunity to consider taking some action. A flattening yield curve usually indicates rising short term rates coupled with the expectations for moderating growth and moderating inflation. The Fed continues to raise short term rates and the outlook for economic growth is for a moderating trend. However, there are plenty of reasons to believe inflation will rise, and I have begun to provide a daily account of companies raising prices. Hence, it might be timely to consider buying 2-year Treasury bonds and shorting a like amount of 10-year Treasury bonds. In my view, there is not enough risk premium in the latter over the 2-year.
Platts survey of OPEC indicates an output reduction of 70,000 barrels per day from November's levels. Excluding Iraq, the decline was 110,000 barrels daily. Further cuts are expected this month.
U.S. Airways plans to cut 2,000 jobs.
The U.S. trade deficit grew to $60.3 billion in November, the largest ever. Imports rose 1.3% but exports declined 2.3%, the first decline since June. I guess all that talk about the cheaper U.S. dollar did not in fact help our exports. Witness our $7.3 billion shortfall with Japan, the largest in four years. We blame every other country for our trade deficits. It's so convenient. Losers don't take responsibility for their own actions. We continue to spend money we don't have. Save might be a four-letter word, but it's not a swear word.
The Snowman: "As an accounting matter, the obligations of the U.S. will come down." Translated this means all workers who have payroll taxes deducted from their paychecks will get screwed. The Republican-controlled Congress will make certain the laws are changed to protect the guilty.
1/12/05 Risk
You are in charge of your own homeland economic security. The level of risk chosen could determine whether your portfolio is recalled, as it were. It is imperative that losses be minimized. Not everyone has the patience to let their profits ride. Many sell too soon. That's not against the law. Sometimes I get lucky and don't read the papers or watch TV. One of my stocks could be mentioned, and certainly I don't want to hear advice from someone who doesn't have their own money invested in the company where they are giving advice. Let's take Intel. I have owned that stock on and off for decades. I repurchased it last year at $21. I have a modest profit on the books----just enough for a small tea sandwich. Everyone knows the company has had too much inventory and that production needed to be cut. Sales for the quarter were above plan, but margins continued under pressure so that profits had a small decline. I trust management's decision making ability, and don't worry about quarter to quarter results. I am more interested in the next generation of products utilizing the benefits of nanotechnology. Patience will be required. I think it's worth the wait and that the risk is not overbearing.
Other companies, such as, Unisys and UPS did not fare as well as Intel. There was an exception in Coach. That company continues to raise their forecasts and the results are quite impressive. It's unfortunate that investors can't clone Coach.
For the first nine months of this fiscal year, India's exports grew by 23% to $53 billion and are targeted to reach $88 billion in the 2005-2006 fiscal year.
Daniel Yergin: "Over the next 10 years Indian oil companies will emerge as major players in the global oil industry. It reflects the reality of economic growth and the scope of India in the world oil markets.
Due to the growth of outsourcing, Infosys raised their forecast for sales and earnings.
The Together Rx Access Card is designed to provide prescription drug savings for about 36 million uninsured Americans. Cardholders supposedly will save an average of 25% to 40% on more than 275 brand-name prescription medicines, and even more on generic drugs.
Sears is boosting its prices on home appliances. Late last year, Whirlpool, Maytag, and Electrolux raised prices by at least 5%.
Freddie Mac's chief economist, Frank Nothaft, predicted that housing starts would decline by 1 to 2 percent in 2005 while 30-year mortgage rates are seen increasing by no more than half a percentage point. He anticipates that short-term rates will rise more than long-term rates. In addition, he stated single-family mortgage originations may drop 12% in 2005.
China's exports rose 33% in December, and widened the trade surplus to a record. Imports rose 25% from year earlier levels. China's yearly surplus with the U.S. stands at about $150 billion. Why don't we just hand over the keys to the vault holding our homeland economic security?
Alan Murray is assistant managing editor of the WSJ. He opined that the Congress "won't get serious about" the effect of a weak U.S dollar and huge federal deficits until foreign governments refuse to buy U.S. debt. He added that Social Security reform is a non-starter because "I don't know a single Senate Democrat willing to talk about options." Murray stated that the problem of reducing health care costs won't be solved because "the political climate in Washington is more nasty, more partisan and more divided than anytime in my 25 years."
Our government announced that they stopped looking for WMD in Iraq. Those are the same WMD that ceased to exist in the early 1990s. While the death count rises daily for our soldiers, while the injury count rises daily for our soldiers, a $50 million party is planned for the inauguration. As Ayn Rand observed, "we can evade reality, but we cannot evade the consequences of evading reality." The consequences will be a great deal worse than the recent tsunami. No one will provide us with assistance. Our "friends" are in meetings trying to devise a plan on how best to protect our borders. They are wasting their time. The enemy is within our borders.
You are in charge of your own homeland economic security. The level of risk chosen could determine whether your portfolio is recalled, as it were. It is imperative that losses be minimized. Not everyone has the patience to let their profits ride. Many sell too soon. That's not against the law. Sometimes I get lucky and don't read the papers or watch TV. One of my stocks could be mentioned, and certainly I don't want to hear advice from someone who doesn't have their own money invested in the company where they are giving advice. Let's take Intel. I have owned that stock on and off for decades. I repurchased it last year at $21. I have a modest profit on the books----just enough for a small tea sandwich. Everyone knows the company has had too much inventory and that production needed to be cut. Sales for the quarter were above plan, but margins continued under pressure so that profits had a small decline. I trust management's decision making ability, and don't worry about quarter to quarter results. I am more interested in the next generation of products utilizing the benefits of nanotechnology. Patience will be required. I think it's worth the wait and that the risk is not overbearing.
Other companies, such as, Unisys and UPS did not fare as well as Intel. There was an exception in Coach. That company continues to raise their forecasts and the results are quite impressive. It's unfortunate that investors can't clone Coach.
For the first nine months of this fiscal year, India's exports grew by 23% to $53 billion and are targeted to reach $88 billion in the 2005-2006 fiscal year.
Daniel Yergin: "Over the next 10 years Indian oil companies will emerge as major players in the global oil industry. It reflects the reality of economic growth and the scope of India in the world oil markets.
Due to the growth of outsourcing, Infosys raised their forecast for sales and earnings.
The Together Rx Access Card is designed to provide prescription drug savings for about 36 million uninsured Americans. Cardholders supposedly will save an average of 25% to 40% on more than 275 brand-name prescription medicines, and even more on generic drugs.
Sears is boosting its prices on home appliances. Late last year, Whirlpool, Maytag, and Electrolux raised prices by at least 5%.
Freddie Mac's chief economist, Frank Nothaft, predicted that housing starts would decline by 1 to 2 percent in 2005 while 30-year mortgage rates are seen increasing by no more than half a percentage point. He anticipates that short-term rates will rise more than long-term rates. In addition, he stated single-family mortgage originations may drop 12% in 2005.
China's exports rose 33% in December, and widened the trade surplus to a record. Imports rose 25% from year earlier levels. China's yearly surplus with the U.S. stands at about $150 billion. Why don't we just hand over the keys to the vault holding our homeland economic security?
Alan Murray is assistant managing editor of the WSJ. He opined that the Congress "won't get serious about" the effect of a weak U.S dollar and huge federal deficits until foreign governments refuse to buy U.S. debt. He added that Social Security reform is a non-starter because "I don't know a single Senate Democrat willing to talk about options." Murray stated that the problem of reducing health care costs won't be solved because "the political climate in Washington is more nasty, more partisan and more divided than anytime in my 25 years."
Our government announced that they stopped looking for WMD in Iraq. Those are the same WMD that ceased to exist in the early 1990s. While the death count rises daily for our soldiers, while the injury count rises daily for our soldiers, a $50 million party is planned for the inauguration. As Ayn Rand observed, "we can evade reality, but we cannot evade the consequences of evading reality." The consequences will be a great deal worse than the recent tsunami. No one will provide us with assistance. Our "friends" are in meetings trying to devise a plan on how best to protect our borders. They are wasting their time. The enemy is within our borders.
Tuesday, January 11, 2005
1/11/05 Scarce Morsels
It is the start of the earnings season. Advanced Micro stated its fourth quarter operating income would be down significantly from the third quarter due to pricing pressures for flash products which account for about 50% of sales. STMicroelectronics warned its margins would be under pressure. The weak dollar hurt Alcoa's earnings. Genetech missed its fourth quarter forecast.
In the layoff department, the news was also not rosy. WestPoint Stevens will close plants in 4 states and cut 2,465 employees from the payroll. Come Friday the 14th, Oracle should announce laying off over 10% of its workforce which totals about 54,000 employees.
On the other hand, as expected, comScore Networks stated online consumer retail spending grew by 26% to a record level of more than $117 billion in 2004, and this included almost $51 billion in travel business, also up 26% for the full year.
In almost 2 months, M3 money supply is up about $100 billion, of which more than 50% of the increase was in the week of December 27th. Is the Fed getting nervous about this economy?
In the first week of February, there will be a new revised benchmark to arrive at a monthly estimate of nonfarm payrolls. It is updated from unemployment records compiled in all 50 states and DC. After speaking at length with the BLS, I don't anticipate the revision will be statistically material. However, there will be more discussions regarding the data that goes into the revisions and the data that is omitted. The BLS does not include certain data because it has not been mandated by the OMB. We can touch on this subject in further writings, but it is fair to state that the net birth/death BLS computer model for new business formations overstates the new jobs being created. It is a subject not really understood by Wall Street or Main Street. I assure you it has not escaped Greenspan that the net birth/death adjustment model accounts for an important part of each month's supposed job creation, and can range from 50,000 to over 250,000 depending on seasonal adjustments.
I will be interested to see the final numbers on consumer spending for the fourth quarter. In the third quarter, consumer spending accounted for about 90% of real GDP. Considering the level of wage gains, the rate of inflation, consumer debt levels, and the projected cost for health care in 2005, it is safe to state we are in a massive consumer spending bubble that will lose its air this year.
The Bank Credit analyst stated that China's currency reserves grew by $112 billion in 2004 but only 25% of that amount went into U.S. dollars. Russia is also reducing its holdings in U.S. dollars, and is increasing its percentage of foreign reserves denominated in gold.
The Conference Board stated that about 57 million U.S. households now have discretionary income, up from nearly 54 million in 1997-1998, but the percentage of the American population with discretionary income declined to 51% compared with 52% six years earlier. However, 82% of all discretionary income is held by those earning $100,000 or more. Households with earnings of less than $50,000 represent about 26% of all households with discretionary income, but less than 3% of all discretionary income. Average household discretionary income in this group is only $2,075--- 90% below the national average. There are 36 million households in the 35-50 age group, and 20 million have about 40% of all discretionary income. There are 26 million households in the 50-65 age group, and they possess 30% of total discretionary income. The remaining 22 million housegolds are in the 65 and over segment and have about 13% of all discretionary income. One can easily see how the aging of our population will influence our country's overall discretionary income.
FDIC's chief economist Richard Brown warned about the dangers of home-equity lines of credit as they have exhibited unprecedented growth and now represent 80% of the home-equity market. Drawdown rates are approaching 50% and are being utilized to fuel consumer spending.
It is the start of the earnings season. Advanced Micro stated its fourth quarter operating income would be down significantly from the third quarter due to pricing pressures for flash products which account for about 50% of sales. STMicroelectronics warned its margins would be under pressure. The weak dollar hurt Alcoa's earnings. Genetech missed its fourth quarter forecast.
In the layoff department, the news was also not rosy. WestPoint Stevens will close plants in 4 states and cut 2,465 employees from the payroll. Come Friday the 14th, Oracle should announce laying off over 10% of its workforce which totals about 54,000 employees.
On the other hand, as expected, comScore Networks stated online consumer retail spending grew by 26% to a record level of more than $117 billion in 2004, and this included almost $51 billion in travel business, also up 26% for the full year.
In almost 2 months, M3 money supply is up about $100 billion, of which more than 50% of the increase was in the week of December 27th. Is the Fed getting nervous about this economy?
In the first week of February, there will be a new revised benchmark to arrive at a monthly estimate of nonfarm payrolls. It is updated from unemployment records compiled in all 50 states and DC. After speaking at length with the BLS, I don't anticipate the revision will be statistically material. However, there will be more discussions regarding the data that goes into the revisions and the data that is omitted. The BLS does not include certain data because it has not been mandated by the OMB. We can touch on this subject in further writings, but it is fair to state that the net birth/death BLS computer model for new business formations overstates the new jobs being created. It is a subject not really understood by Wall Street or Main Street. I assure you it has not escaped Greenspan that the net birth/death adjustment model accounts for an important part of each month's supposed job creation, and can range from 50,000 to over 250,000 depending on seasonal adjustments.
I will be interested to see the final numbers on consumer spending for the fourth quarter. In the third quarter, consumer spending accounted for about 90% of real GDP. Considering the level of wage gains, the rate of inflation, consumer debt levels, and the projected cost for health care in 2005, it is safe to state we are in a massive consumer spending bubble that will lose its air this year.
The Bank Credit analyst stated that China's currency reserves grew by $112 billion in 2004 but only 25% of that amount went into U.S. dollars. Russia is also reducing its holdings in U.S. dollars, and is increasing its percentage of foreign reserves denominated in gold.
The Conference Board stated that about 57 million U.S. households now have discretionary income, up from nearly 54 million in 1997-1998, but the percentage of the American population with discretionary income declined to 51% compared with 52% six years earlier. However, 82% of all discretionary income is held by those earning $100,000 or more. Households with earnings of less than $50,000 represent about 26% of all households with discretionary income, but less than 3% of all discretionary income. Average household discretionary income in this group is only $2,075--- 90% below the national average. There are 36 million households in the 35-50 age group, and 20 million have about 40% of all discretionary income. There are 26 million households in the 50-65 age group, and they possess 30% of total discretionary income. The remaining 22 million housegolds are in the 65 and over segment and have about 13% of all discretionary income. One can easily see how the aging of our population will influence our country's overall discretionary income.
FDIC's chief economist Richard Brown warned about the dangers of home-equity lines of credit as they have exhibited unprecedented growth and now represent 80% of the home-equity market. Drawdown rates are approaching 50% and are being utilized to fuel consumer spending.
Monday, January 10, 2005
1/10/05 Creating Ideas For An Advantage
Bill Gates is contemplating writing a blog. He has written for a few days and wants to see whether he can write continually for eight or nine months. I have been doing that for years, but yesterday was an exception. I needed a day for mental renewal.
GM will cut 8,000 U.S. employees in 2005 or about 7% of its workforce. I believe the great companies hire and don't fire because their businesses continue to evolve and grow. When a company fires, maybe it's time to take a good look and see whether you should fire its stock from your portfolio.
According to the NAR, even though the absorption of commercial space is showing marked improvement, the national vacancy rate barely budged. Vacancies averaged 11.7% last year, up just a little from the 11.6% in 2003. And rental rates have been flat. It reminds me of the employment picture in the U.S. Supposedly over 2 million jobs were created in 2004, but wages couldn't hack out much improvement and trailed inflation.
Exempt workers don't qualify for overtime pay. An exempt individual must be compensated on a salary basis and must be paid at least $455 per week. For a complete summary of the regulations, go to www.dol.gov.
Over this weekend, we learned that, three out of four teams with the homefield advantage, lost to the visiting teams in the NFL playoffs. Too often, people rely on a particular advantage in making a decision. Historical odds are important but they are but one input to a decision. That's true of the January effect in the stock market. Each new situation requires original thought. Relying solely on past results, can be a pathway to today's disappointment.
FDR: "We put those payroll contributions in so as to give the contributors a leagl, moral, and political right to collect their pension and employment benefits with those taxes in there. No damn politician can ever scrap my Social Security Program."
The answers to Social Security are obvious--- cut government spending, stop looting Social Security trust funds for Federal budget purposes, and convert all outstanding special issue IOUs to U.S Treasury bonds. If our Treasury bonds are good enough for Japan and China, then they should be good enough for the American worker who contributes payroll taxes to Social Security.
Bill Gates is contemplating writing a blog. He has written for a few days and wants to see whether he can write continually for eight or nine months. I have been doing that for years, but yesterday was an exception. I needed a day for mental renewal.
GM will cut 8,000 U.S. employees in 2005 or about 7% of its workforce. I believe the great companies hire and don't fire because their businesses continue to evolve and grow. When a company fires, maybe it's time to take a good look and see whether you should fire its stock from your portfolio.
According to the NAR, even though the absorption of commercial space is showing marked improvement, the national vacancy rate barely budged. Vacancies averaged 11.7% last year, up just a little from the 11.6% in 2003. And rental rates have been flat. It reminds me of the employment picture in the U.S. Supposedly over 2 million jobs were created in 2004, but wages couldn't hack out much improvement and trailed inflation.
Exempt workers don't qualify for overtime pay. An exempt individual must be compensated on a salary basis and must be paid at least $455 per week. For a complete summary of the regulations, go to www.dol.gov.
Over this weekend, we learned that, three out of four teams with the homefield advantage, lost to the visiting teams in the NFL playoffs. Too often, people rely on a particular advantage in making a decision. Historical odds are important but they are but one input to a decision. That's true of the January effect in the stock market. Each new situation requires original thought. Relying solely on past results, can be a pathway to today's disappointment.
FDR: "We put those payroll contributions in so as to give the contributors a leagl, moral, and political right to collect their pension and employment benefits with those taxes in there. No damn politician can ever scrap my Social Security Program."
The answers to Social Security are obvious--- cut government spending, stop looting Social Security trust funds for Federal budget purposes, and convert all outstanding special issue IOUs to U.S Treasury bonds. If our Treasury bonds are good enough for Japan and China, then they should be good enough for the American worker who contributes payroll taxes to Social Security.
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