11/9/02 The "Soft Spot" Befalls Turner's In Corning, Iowa
It's a very sad day when tradition's best closes its doors. After 134 years, Turner's Clothing Store is shutting its SE Iowa operation.
Clare Hushbeck, an AARP economist: "Nobody knows what the economy or the markets will do...more people are showing up at soup kitchens and food pantries and that's a real sign of the economic pain that Americans on fixed incomes are experiencing in this recession."
Paul Palmer Jr, Cypress Advisory Services in Houston: "Right now a lot of people lack the confidence to do anything because they don't want to run the risk of losing principal."
Paul McCulley, Pimco, "There is a global deficiency of global aggregate demand."
When there is uncertainty, a lack of confidence, too little demand, and too much supply, you have a recipe for trouble. That's what we have. Trouble.
Friday, November 08, 2002
11/8/02 The "Soft Spot" Hits Main Street America
McDonald's will miss their already reduced profit forecast, close restaurants, and lay off workers. The poor economy has hit the supermarket business. Safeway lowered its earnings forecast.
Most municipal bonds now have a higher yield than treasury bonds.
The yield curve is flattening. As such, the spread between 2 year and 30 year treasury bonds is narrowing. The yield on the latter is down to 4.82% and the 10 year yields 3.87%.
I have said it so many times. We have widespread overcapacity; too much consumer debt; imports pressing prices lower; and deflation looming on the horizon. Most businesses will continue to cut costs and sidestep hiring and capital investment.
SAS to cut 2700 more jobs.
McDonald's will miss their already reduced profit forecast, close restaurants, and lay off workers. The poor economy has hit the supermarket business. Safeway lowered its earnings forecast.
Most municipal bonds now have a higher yield than treasury bonds.
The yield curve is flattening. As such, the spread between 2 year and 30 year treasury bonds is narrowing. The yield on the latter is down to 4.82% and the 10 year yields 3.87%.
I have said it so many times. We have widespread overcapacity; too much consumer debt; imports pressing prices lower; and deflation looming on the horizon. Most businesses will continue to cut costs and sidestep hiring and capital investment.
SAS to cut 2700 more jobs.
Thursday, November 07, 2002
11/7/02 The Fed Slices, Dices, And Panics
It is difficult to begin the day on a critical note. Providing praise, on the other hand, is quite uplifting. Yesterday the Fed lowered their funds rate to a level below the inflation rate. The latter is 1.4%. In essence, the Fed said this lowered rate would provide the balance between inflation and the "soft spot" we now have in the economy. This statement is an insult to the intelligence of the American people. Inflation is essentially non-existant. Additionally, we do not have a soft spot economically. We have a serious problem on our hands. You don't believe me?
Costco, one of our foremost retailers, today warned about less than expected results due to disappointing same store sales. Sam's Club, a unit of WalMart, announced a 1.6% decline in its October same store sales. WalMart, as a whole, produced a 3.7% sales gain, and this approximated its results for the past several months. The company said November would show a 2 to 4% sales gain, hardly the growth that made WalMart great.
Cisco's latest quarterly results showed a $500 million decline (a bit over 30%) in cash flow from operations from the prior quarter. The CEO expects sales for the current quarter to be flat to down 3 to 4%. He said customers remain cautious regarding spending and are unsure of revenue and profit projections.
Advanced Micro devices announced their need to lay off 20% of the workforce in order to bring costs in line with sharply reduced revenues.
The Bank of England and the European Central Bank both left their rates unchanged. There was a time these institutions would have followed the Fed's lead. Unfortunately, in my view, the Fed has lost its credibility in the marketplace. Only the media finds this Fed newsworthy.
The consumer is beleaguered. Does the Fed want the consumer to borrow more at slightly lower interest rates? Should they take out more car loans? Should they buy more presents on their debt laden credit cards? I don't think so. I believe a clean sweep is in store. Show the exit door to the Chair and the 12 governors and let them follow Harvey Pitt to the showers.
I apologize for this late posting. The .Net Passport server has been down.
It is difficult to begin the day on a critical note. Providing praise, on the other hand, is quite uplifting. Yesterday the Fed lowered their funds rate to a level below the inflation rate. The latter is 1.4%. In essence, the Fed said this lowered rate would provide the balance between inflation and the "soft spot" we now have in the economy. This statement is an insult to the intelligence of the American people. Inflation is essentially non-existant. Additionally, we do not have a soft spot economically. We have a serious problem on our hands. You don't believe me?
Costco, one of our foremost retailers, today warned about less than expected results due to disappointing same store sales. Sam's Club, a unit of WalMart, announced a 1.6% decline in its October same store sales. WalMart, as a whole, produced a 3.7% sales gain, and this approximated its results for the past several months. The company said November would show a 2 to 4% sales gain, hardly the growth that made WalMart great.
Cisco's latest quarterly results showed a $500 million decline (a bit over 30%) in cash flow from operations from the prior quarter. The CEO expects sales for the current quarter to be flat to down 3 to 4%. He said customers remain cautious regarding spending and are unsure of revenue and profit projections.
Advanced Micro devices announced their need to lay off 20% of the workforce in order to bring costs in line with sharply reduced revenues.
The Bank of England and the European Central Bank both left their rates unchanged. There was a time these institutions would have followed the Fed's lead. Unfortunately, in my view, the Fed has lost its credibility in the marketplace. Only the media finds this Fed newsworthy.
The consumer is beleaguered. Does the Fed want the consumer to borrow more at slightly lower interest rates? Should they take out more car loans? Should they buy more presents on their debt laden credit cards? I don't think so. I believe a clean sweep is in store. Show the exit door to the Chair and the 12 governors and let them follow Harvey Pitt to the showers.
I apologize for this late posting. The .Net Passport server has been down.
Wednesday, November 06, 2002
11/6/02 Insurance Premiums
Insurance premiums are rising at their fastest clip in a decade, fueled by increased demand for hospital services and prescription drugs. Premiums are forecast to leap an average 15.4% for employers next year, even as the economy remains shaky and the job market tight.
Some employers are requiring workers to pay 10% to 30% more toward monthly premiums, raising deductibles and setting higher co-payments for office visits, hospital care and drugs. Hewitt Associates estimates that the amount employees will pay in premiums and other costs next year will rise by an average of $342, to $1,753.
Since June 415,000 jobs have been added in agriculture, and that accounts for roughly 50% of the new jobs added since June. Are marijuana farmers being counted now or possibly illegal migrant farm workers being added to payrolls?
The ISM monthly index of non-manufacturing activity(or lack of) showed new orders slowed in October to 50.9 from 52.3, and this is the lowest level since January. The non-manufacturing employment index fell to 46.2, and this is the 20th consecutive month for job losses.
Insurance premiums are rising at their fastest clip in a decade, fueled by increased demand for hospital services and prescription drugs. Premiums are forecast to leap an average 15.4% for employers next year, even as the economy remains shaky and the job market tight.
Some employers are requiring workers to pay 10% to 30% more toward monthly premiums, raising deductibles and setting higher co-payments for office visits, hospital care and drugs. Hewitt Associates estimates that the amount employees will pay in premiums and other costs next year will rise by an average of $342, to $1,753.
Since June 415,000 jobs have been added in agriculture, and that accounts for roughly 50% of the new jobs added since June. Are marijuana farmers being counted now or possibly illegal migrant farm workers being added to payrolls?
The ISM monthly index of non-manufacturing activity(or lack of) showed new orders slowed in October to 50.9 from 52.3, and this is the lowest level since January. The non-manufacturing employment index fell to 46.2, and this is the 20th consecutive month for job losses.
Tuesday, November 05, 2002
11/5/02 More Job Cuts
In October there were 176,010 announced job cuts. This was the second highest monthly number in 2002. Only January had more.
Yesterday Applied Materials announced they are laying off 11% of their workforce, and Dow Jones is cutting an additional 3% of theirs. What I find interesting is that both of these companies are the leaders in their respective fields. Additionally, Jim Morgan, the CEO of Applied Materials, is one of the brightest guys in the Silicon Valley. If Morgan thought business were on the verge of improving, he wouldn't be making these cuts.
Last Friday Network Commerce filed for chapter 11. At one time the company had 650 employees and had a stock market value exceeding $500 million. Between 1998 and 2001 they reported losses exceeding $500 million. How many other stories like this are in the naked city?
Factory orders dropped 2.3% in September.
IBM will spend $700-800 million over the next year on ads to promote "on-demand computing." The spoof ads are intended to counteract technology gloom and doom. In my view, growth in cash flow and net profits might be a much better tonic.
The Dow at 8600 is up 20%(about 1400 points) above its 5 year low of about 7200 set intraday on October 10. I wonder how much new money was suckered into this bear market rally.
In October there were 176,010 announced job cuts. This was the second highest monthly number in 2002. Only January had more.
Yesterday Applied Materials announced they are laying off 11% of their workforce, and Dow Jones is cutting an additional 3% of theirs. What I find interesting is that both of these companies are the leaders in their respective fields. Additionally, Jim Morgan, the CEO of Applied Materials, is one of the brightest guys in the Silicon Valley. If Morgan thought business were on the verge of improving, he wouldn't be making these cuts.
Last Friday Network Commerce filed for chapter 11. At one time the company had 650 employees and had a stock market value exceeding $500 million. Between 1998 and 2001 they reported losses exceeding $500 million. How many other stories like this are in the naked city?
Factory orders dropped 2.3% in September.
IBM will spend $700-800 million over the next year on ads to promote "on-demand computing." The spoof ads are intended to counteract technology gloom and doom. In my view, growth in cash flow and net profits might be a much better tonic.
The Dow at 8600 is up 20%(about 1400 points) above its 5 year low of about 7200 set intraday on October 10. I wonder how much new money was suckered into this bear market rally.
Monday, November 04, 2002
11/4/02 Happy Anniversary Guy
Your smiling eyes are everywhere and light up the sky.
Tomorrow there are 36 governorships, 34 Senate spots, and 435 House seats up for grabs. Hopefully, we will vote with our heads and not focus on the photo-ops. These individuals are to represent your beliefs. With all due respect, maybe they will do a better job than the current array of money managers who are stewards for your money. Everyone should be tired by now of losing money. Are we also tired of bloated government and a do-nothing Congress? The choice is yours. A single vote can make the difference.
After years of reading about the "Microsoft Case" it is finally over. Nothing happened except for the hundreds of millions of dollars wasted on pursuiing competition in our capitalistic society. John D. Rockefeller must be smiling.
Today I will need to rest. I have to prepare myself for the Fed meeting this week. The outcome has so much meaningless suspense.
Your smiling eyes are everywhere and light up the sky.
Tomorrow there are 36 governorships, 34 Senate spots, and 435 House seats up for grabs. Hopefully, we will vote with our heads and not focus on the photo-ops. These individuals are to represent your beliefs. With all due respect, maybe they will do a better job than the current array of money managers who are stewards for your money. Everyone should be tired by now of losing money. Are we also tired of bloated government and a do-nothing Congress? The choice is yours. A single vote can make the difference.
After years of reading about the "Microsoft Case" it is finally over. Nothing happened except for the hundreds of millions of dollars wasted on pursuiing competition in our capitalistic society. John D. Rockefeller must be smiling.
Today I will need to rest. I have to prepare myself for the Fed meeting this week. The outcome has so much meaningless suspense.
Sunday, November 03, 2002
11/3/02 Happy Birthday Guy
This blog is for you. I remember and will never forget. May your soul light up the earth and the stars.
I must have received at least 23 spam messages this week informing me that the Fed will lower interest rates this coming Wednesday. Does this mean that I can borrow at 1.5% or that the economy will turn on a dime? Actually I have given this matter a great deal of thought. I need to give credit where credit is due. The Fed is the second coming of Prozac- generically speaking of course. When I think of Alan Greenspan and his associates, I envision the Lone Ranger and Tonto, Spiderman, Superman, Elvis, John Wayne, and Madonna all coming to the rescue. After all, I read where our economic recovery is in peril. That's correct. Peril. Everything will be ok. I'll have some milk and cookies, go to bed, and wake up in March 2003 when all will be rosy.
The problem with the above scenario is missing the holiday season. The retailers need our dollars to buy merchandise for the Spring. I cannot have on my conscience the thought that my sleeping thru the holidays could contribute to KMart going the way of Loehman's. I would rather stay awake and swallow the peril pill. Reality is easier to digest in the short and long run.
This blog is for you. I remember and will never forget. May your soul light up the earth and the stars.
I must have received at least 23 spam messages this week informing me that the Fed will lower interest rates this coming Wednesday. Does this mean that I can borrow at 1.5% or that the economy will turn on a dime? Actually I have given this matter a great deal of thought. I need to give credit where credit is due. The Fed is the second coming of Prozac- generically speaking of course. When I think of Alan Greenspan and his associates, I envision the Lone Ranger and Tonto, Spiderman, Superman, Elvis, John Wayne, and Madonna all coming to the rescue. After all, I read where our economic recovery is in peril. That's correct. Peril. Everything will be ok. I'll have some milk and cookies, go to bed, and wake up in March 2003 when all will be rosy.
The problem with the above scenario is missing the holiday season. The retailers need our dollars to buy merchandise for the Spring. I cannot have on my conscience the thought that my sleeping thru the holidays could contribute to KMart going the way of Loehman's. I would rather stay awake and swallow the peril pill. Reality is easier to digest in the short and long run.
Saturday, November 02, 2002
11/2/02 Grip That Yellow Brick Road
The drive along the country road is beautiful. The colors are something to behold. Not a cloud on the horizon. I'm in hog heaven. I've just logged 4 straight weeks of stock market gains. November has just begun. How sweet it is! In the last dozen midterm election years there have been only two down Novembers- 1974 and 1994. We've just come off the low in early October and bounced a profitable 1200 Dow points. The consensus is that 4th quarter eanings will increase by 17% and in 2003 by 15%. We're off to the races. Look. I am driving with only one hand on the wheel and my head is outside the front window. The road is so magnificent. There isn't another car to be seen. I'll just drive with no hands and steer with my smile. Not to worry. My airbag has Alan Greenspan stenciled on the front. He's Superman's first cousin on his second wife's side. Alan looks out for all of us. He'll lower interest rates and I'll refinance my mortage for the 11th time in 2002. Capitalism works.
I hope you are one of the lucky ones with health insurance, workman's comp, and a 401K with some worth. I hope you have a job. May I suggest you get a holiday gift for Mr. Greenspan. How about a red, white, and blue parachute?
The drive along the country road is beautiful. The colors are something to behold. Not a cloud on the horizon. I'm in hog heaven. I've just logged 4 straight weeks of stock market gains. November has just begun. How sweet it is! In the last dozen midterm election years there have been only two down Novembers- 1974 and 1994. We've just come off the low in early October and bounced a profitable 1200 Dow points. The consensus is that 4th quarter eanings will increase by 17% and in 2003 by 15%. We're off to the races. Look. I am driving with only one hand on the wheel and my head is outside the front window. The road is so magnificent. There isn't another car to be seen. I'll just drive with no hands and steer with my smile. Not to worry. My airbag has Alan Greenspan stenciled on the front. He's Superman's first cousin on his second wife's side. Alan looks out for all of us. He'll lower interest rates and I'll refinance my mortage for the 11th time in 2002. Capitalism works.
I hope you are one of the lucky ones with health insurance, workman's comp, and a 401K with some worth. I hope you have a job. May I suggest you get a holiday gift for Mr. Greenspan. How about a red, white, and blue parachute?
Friday, November 01, 2002
11/1/02 Hello November
We need some new cooks. The present economic recipe is for the pits. We have lower than anticipated 3rd quarter GDP; higher than expected jobless claims; the number of hours worked each week is down; business has cut investment spending for six straight quarters; there is overcapacity; we have a rising jobless rate; and over the next six months businesses expect to trim payrolls rather than hire. Maybe Wolfgang Puck should become the next Fed chairman.
It's not all bad though. The government continues to hire staff. They are attempting to keep people off the streets. They're reverting to the program initiated in the 1930's. It's not a concern. When the budget deficit gets larger, then more dollars can be printed. It's no wonder the dollar is at a two month low against the Euro.
We need some new cooks. The present economic recipe is for the pits. We have lower than anticipated 3rd quarter GDP; higher than expected jobless claims; the number of hours worked each week is down; business has cut investment spending for six straight quarters; there is overcapacity; we have a rising jobless rate; and over the next six months businesses expect to trim payrolls rather than hire. Maybe Wolfgang Puck should become the next Fed chairman.
It's not all bad though. The government continues to hire staff. They are attempting to keep people off the streets. They're reverting to the program initiated in the 1930's. It's not a concern. When the budget deficit gets larger, then more dollars can be printed. It's no wonder the dollar is at a two month low against the Euro.
Thursday, October 31, 2002
10/31/02 Goblins
The last three weeks should enable this October to be the best October on record. The market has climbed a wall of worry- disastrous consumer sentiment, lousy leading economic indicators, three straight weeks of declines for mortgage applications which provide the sign for slower housing activity, and 40% of consumers planning to spend less on gifts this holiday season. Operationally, the best results have been reported by consumer staple companies- Colgate, P&G, and Unilever.
Yesterday the CEO of IBM chimed in as a forecaster. The market took his word as the gospel. Of course, he missed the extent of the decline in the computing and IT industry as well as the second half economic weakness we are experiencing. What did he say? He stated that short term circumstances are difficult but that customers are ultimately optimistic about the long term. Additionally, he proclaimed the economy has hit bottom or is flattening out. He must have based that on being ultimately optimistic despite difficult short term circumstances. He could be the second coming of Yogi Berra. Come to think of it. There is only one Yogi Berra, and I think Yogi makes more sense.
I for one will not be eating a great deal of candy this Halloween. I am on a candy strike- at least candy made by Hershey's. The stockholders were disenfranchised and never had a chance to sell to Wrigley.
The last three weeks should enable this October to be the best October on record. The market has climbed a wall of worry- disastrous consumer sentiment, lousy leading economic indicators, three straight weeks of declines for mortgage applications which provide the sign for slower housing activity, and 40% of consumers planning to spend less on gifts this holiday season. Operationally, the best results have been reported by consumer staple companies- Colgate, P&G, and Unilever.
Yesterday the CEO of IBM chimed in as a forecaster. The market took his word as the gospel. Of course, he missed the extent of the decline in the computing and IT industry as well as the second half economic weakness we are experiencing. What did he say? He stated that short term circumstances are difficult but that customers are ultimately optimistic about the long term. Additionally, he proclaimed the economy has hit bottom or is flattening out. He must have based that on being ultimately optimistic despite difficult short term circumstances. He could be the second coming of Yogi Berra. Come to think of it. There is only one Yogi Berra, and I think Yogi makes more sense.
I for one will not be eating a great deal of candy this Halloween. I am on a candy strike- at least candy made by Hershey's. The stockholders were disenfranchised and never had a chance to sell to Wrigley.
Wednesday, October 30, 2002
10/30/02 The Consumer Has It Right
The Conference Board proclaimed yesterday that "the outlook for the holiday retail season is now fairly bleak." That statement is perfectly understandable after the latest reading on consumer confidence plummeted to 79.4 from September's 93.7. The expectation was for a number around 90.
The consumer is on the right path to spending less and attempting to save more. The consumer is laden with 14% of disposable income going towards debt service. When you add the latter to paying taxes and accounting for normal living expenses, the monthly budget has difficulty in coming out on a positive note. In itself that is a downer. When you combine it with job layoffs and job instability, you have the foundation for unstable waters. This situation is not easily overcome, and it will take time to right itself.
I have often said over the past three months that the U.S. econnomy could no longer depend on the consumer to carry two-thirds of the load. Business investment is silent. Interest rates are already at a 40 year low. Don't look to the Fed to solve the problems. The landscape is definitely murky.
The Conference Board proclaimed yesterday that "the outlook for the holiday retail season is now fairly bleak." That statement is perfectly understandable after the latest reading on consumer confidence plummeted to 79.4 from September's 93.7. The expectation was for a number around 90.
The consumer is on the right path to spending less and attempting to save more. The consumer is laden with 14% of disposable income going towards debt service. When you add the latter to paying taxes and accounting for normal living expenses, the monthly budget has difficulty in coming out on a positive note. In itself that is a downer. When you combine it with job layoffs and job instability, you have the foundation for unstable waters. This situation is not easily overcome, and it will take time to right itself.
I have often said over the past three months that the U.S. econnomy could no longer depend on the consumer to carry two-thirds of the load. Business investment is silent. Interest rates are already at a 40 year low. Don't look to the Fed to solve the problems. The landscape is definitely murky.
Tuesday, October 29, 2002
10/29/02 The U.S. Economy
A CNN/USA Today/Gallup poll indicated 60% of Americans rated the economy poor in October.
Richard Curtin, director of the University of Michigan's Consumer Research Center, said "consumer spending will depend on getting even larger discounts, and profits will depend on making even larger cost cuts." This sounds like growing deflation and more job cuts.
Curtin went on to say that "accumulated loss in consumer confidence could tip the economy back into recession."
The Conference Board will release its monthly index of consumer confidence this morning.
Talking about confidence or the lack of, IBM is reintroducing a 90 day deferral on financing payments and this includes initial down payments. Financing rates are as low as 3.1%.
Cisco's Catalyst 6500 LAN Switch accounts for about 25% of the company's total sales. Cisco lowered its price on this product by 15-35%.
A CNN/USA Today/Gallup poll indicated 60% of Americans rated the economy poor in October.
Richard Curtin, director of the University of Michigan's Consumer Research Center, said "consumer spending will depend on getting even larger discounts, and profits will depend on making even larger cost cuts." This sounds like growing deflation and more job cuts.
Curtin went on to say that "accumulated loss in consumer confidence could tip the economy back into recession."
The Conference Board will release its monthly index of consumer confidence this morning.
Talking about confidence or the lack of, IBM is reintroducing a 90 day deferral on financing payments and this includes initial down payments. Financing rates are as low as 3.1%.
Cisco's Catalyst 6500 LAN Switch accounts for about 25% of the company's total sales. Cisco lowered its price on this product by 15-35%.
Monday, October 28, 2002
10/28/02 When Is The Bear Market Over For You?
This question is asked time and time again each day. The answer is easy. The bear market has ended when the stocks you purchased at $50 no longer are selling for 5 cents. When they rally to $5, it's time to break open the Pellegrino. When they go back to $10, then mass hysteria has set in and you've hit irrational exuberance. In other words, for most of you the losses will be permanent.
No one likes to lose money; however, it's well to remember that the first loss is the best loss. Limit your losses and let your winners run- but only with the great ones. You never lose money by taking a profit. The stock market does not have a place for hopes and prayers or crystals or tarot cards. Hard work, long hours of study, and independent thought will bring better results.
All of the above may sound harsh and sarcastic. It's meant well, and maybe will provide an improved path to future stock market profits.
This question is asked time and time again each day. The answer is easy. The bear market has ended when the stocks you purchased at $50 no longer are selling for 5 cents. When they rally to $5, it's time to break open the Pellegrino. When they go back to $10, then mass hysteria has set in and you've hit irrational exuberance. In other words, for most of you the losses will be permanent.
No one likes to lose money; however, it's well to remember that the first loss is the best loss. Limit your losses and let your winners run- but only with the great ones. You never lose money by taking a profit. The stock market does not have a place for hopes and prayers or crystals or tarot cards. Hard work, long hours of study, and independent thought will bring better results.
All of the above may sound harsh and sarcastic. It's meant well, and maybe will provide an improved path to future stock market profits.
Sunday, October 27, 2002
10/27/02 World Series Time For The Consumer
Make the retailers pitch to you. There are only 26 shopping days between Thanksgiving and Xmas. DVD players are $59 or less vs $200 two years ago. PlayStation 2 and XBox are being discounted. Digital cameras are being reduced in price. 0 percent financing and free leather recliners are being offered on digital projection televisions. You are in the driver's seat. Drive a hard bargain and drive down the prces. Make deflation work for you. There are too many retailers out there with too much inventory and too few selling days.
We have seen patience on Wall Street pay off. Value will win out. It's only a matter of time. This week the numbers will indicate rising unemployment and lower consumer confidence. Wait for your pitch from the retailer. Don't swing at a ball out of the strike zone. The count is in your favor. Make them pay and not you.
Make the retailers pitch to you. There are only 26 shopping days between Thanksgiving and Xmas. DVD players are $59 or less vs $200 two years ago. PlayStation 2 and XBox are being discounted. Digital cameras are being reduced in price. 0 percent financing and free leather recliners are being offered on digital projection televisions. You are in the driver's seat. Drive a hard bargain and drive down the prces. Make deflation work for you. There are too many retailers out there with too much inventory and too few selling days.
We have seen patience on Wall Street pay off. Value will win out. It's only a matter of time. This week the numbers will indicate rising unemployment and lower consumer confidence. Wait for your pitch from the retailer. Don't swing at a ball out of the strike zone. The count is in your favor. Make them pay and not you.
Saturday, October 26, 2002
10/26/02 The Consumer
When will someone tell Alan Greenspan that he is on the injured reserve list? He rants on about productivity while consumer confidence is crumbling to its lowest level in 9 years. Consumers are throwing in the towel. They've shouldered the economy long enough. It gets tiring being Atlas.
Business investment is dropping like a rock. There's a lack of confidence dropping new orders for durable goods in September at their fastest pace in a year. Demand for non-military capital goods sank by 12.6%.
If the stock market elects to ignore the consumer, a great deal of money will be washed down the drain. There is no excuse for being a sloppy investor. Additionally, over the years the majority of money managers have proven they are ill equipped to provide outstanding performances. To pay for mediocrity makes little sense.
When will someone tell Alan Greenspan that he is on the injured reserve list? He rants on about productivity while consumer confidence is crumbling to its lowest level in 9 years. Consumers are throwing in the towel. They've shouldered the economy long enough. It gets tiring being Atlas.
Business investment is dropping like a rock. There's a lack of confidence dropping new orders for durable goods in September at their fastest pace in a year. Demand for non-military capital goods sank by 12.6%.
If the stock market elects to ignore the consumer, a great deal of money will be washed down the drain. There is no excuse for being a sloppy investor. Additionally, over the years the majority of money managers have proven they are ill equipped to provide outstanding performances. To pay for mediocrity makes little sense.
Friday, October 25, 2002
10/25/02 $2 Trillion
For the fiscal year ended 9/30/02 the U.S. budget deficit amounted to $159 billion. The government pointed a finger to the stock market as the main factor for recording this negative number-- there was a decline in receipts from capital gains taxes. A more appropriate culprit might have been that the government spent just over $2 trillion in the latest fiscal year. That's difficult to comprehend.
With the present economy it's no wonder that a deficit is forecast for this year and next. I guess the OMB is not planning on a pick-up in capital gains receipts. That might imply they figure the stock market will not be robust. The latter opinion might force me into becoming a bull. I said might and not necessarily.
For the fiscal year ended 9/30/02 the U.S. budget deficit amounted to $159 billion. The government pointed a finger to the stock market as the main factor for recording this negative number-- there was a decline in receipts from capital gains taxes. A more appropriate culprit might have been that the government spent just over $2 trillion in the latest fiscal year. That's difficult to comprehend.
With the present economy it's no wonder that a deficit is forecast for this year and next. I guess the OMB is not planning on a pick-up in capital gains receipts. That might imply they figure the stock market will not be robust. The latter opinion might force me into becoming a bull. I said might and not necessarily.
Thursday, October 24, 2002
10/24/02 David Bell Has Great Baseball Genes
Gus Bell. Buddy Bell. Now David Bell. The Bell rang in the 8th inning. We have ourselves a series!
Morgan Stanley's chief economist said there is a real rising risk of deflation. You can say that again.
Did you all happen to notice? Since October 1 car sales have hit a brick wall. We should recall that the car industry represents 4% of our GDP. There is little question but that the big three auto companies will begin to spill some serious red ink. Incentives no longer will do the trick.
Eastman Kodak to have more layoffs.
Gus Bell. Buddy Bell. Now David Bell. The Bell rang in the 8th inning. We have ourselves a series!
Morgan Stanley's chief economist said there is a real rising risk of deflation. You can say that again.
Did you all happen to notice? Since October 1 car sales have hit a brick wall. We should recall that the car industry represents 4% of our GDP. There is little question but that the big three auto companies will begin to spill some serious red ink. Incentives no longer will do the trick.
Eastman Kodak to have more layoffs.
Wednesday, October 23, 2002
10/23/02 Blaming Wall Street
New York City is facing a $1 billion budget shortfall. The main culprit appears to be lower than expected revenues from Wall Street.
Cooper Industries has 30,000 employees. They plan on closing 10 factories. Schlumberger and Dynegy announce layoffs. IBM cuts another 2800.
Bill Ford is the former governor of the Atlanta Fed. Yesterday he stated that a rising deficit+ slower economic growth = a terrible prescription for the economy.
The Anaheim Angels made winning look easy in game 3.
New York City is facing a $1 billion budget shortfall. The main culprit appears to be lower than expected revenues from Wall Street.
Cooper Industries has 30,000 employees. They plan on closing 10 factories. Schlumberger and Dynegy announce layoffs. IBM cuts another 2800.
Bill Ford is the former governor of the Atlanta Fed. Yesterday he stated that a rising deficit+ slower economic growth = a terrible prescription for the economy.
The Anaheim Angels made winning look easy in game 3.
Tuesday, October 22, 2002
10/22/02 The Economic Stumble And The Market Rally
In September the index of leading economic indicators fell for the fourth consecutive month. This last took place in November 1990. The Dow has rallied for 7 out of the last 8 days. The last time it rose 16% in this consecutive period of time was in 1939 or 63 years ago. That's longer than the world series drought for the Giants.
Texas Instruments, AT&T, and Sega all had disappointing results and UAL will layoff more workers. If you buy into this rally, then you must project a profit turnaround. Do you see more than a handful of CEOs upbeat about future results? I read about the lack of visibility. I hear talk of asset allocation- more stock buying and the reduction in bond positions. How many money managers are buying stocks with their own money and not your money? How many CEOs are buying stock in their own companies? Follow the money and not just yours.
In September the index of leading economic indicators fell for the fourth consecutive month. This last took place in November 1990. The Dow has rallied for 7 out of the last 8 days. The last time it rose 16% in this consecutive period of time was in 1939 or 63 years ago. That's longer than the world series drought for the Giants.
Texas Instruments, AT&T, and Sega all had disappointing results and UAL will layoff more workers. If you buy into this rally, then you must project a profit turnaround. Do you see more than a handful of CEOs upbeat about future results? I read about the lack of visibility. I hear talk of asset allocation- more stock buying and the reduction in bond positions. How many money managers are buying stocks with their own money and not your money? How many CEOs are buying stock in their own companies? Follow the money and not just yours.
Monday, October 21, 2002
10/21/02 Menlo Park
This town is at the core of both the Silicon Valley and the venture capital industry. It is next door, so to speak, to Stanford University and many renown companies. As such, I was shocked to learn that Menlo Park's latest quarterly tax revenue receipts dropped 41% from the like period one year ago. This is not a town comprised of mainly new wealth, and this news should be a wake-up call to anyone believing the valley is going to make a quick turnaround.
Hitachi cut its operating profit forecast by about 30%. Samsung had lower than expected profits.
Bank of Japan's Governor Hayami said Japan's financial system is in its most severe status ever.
This town is at the core of both the Silicon Valley and the venture capital industry. It is next door, so to speak, to Stanford University and many renown companies. As such, I was shocked to learn that Menlo Park's latest quarterly tax revenue receipts dropped 41% from the like period one year ago. This is not a town comprised of mainly new wealth, and this news should be a wake-up call to anyone believing the valley is going to make a quick turnaround.
Hitachi cut its operating profit forecast by about 30%. Samsung had lower than expected profits.
Bank of Japan's Governor Hayami said Japan's financial system is in its most severe status ever.
Sunday, October 20, 2002
10/20/02 Alderwoods And UAL
Alderwoods is the second largest funeral services company in North America with 10,000 employees, 920 funeral homes, and 275 cemeteries. On Monday funeral directors are set to strike a dozen Alderwoods funeral homes in Chicago, and it would be the first such strike in Chicago. Don't you think there's enough trouble in Chicago? UAL is losing $7 million in cash per day. It would be too much for the hearts of Chicagoans if Alderwoods and UAL both shut their doors in the windy city. On the other hand, let's look on the bright side. U-Haul could really use the business.
The holiday season looks mediocre at best. Will Kmart make it? How many store closings will occur at other companies in the retail industry? Maybe we should run a contest to see who can come closest to the actual downsizing number.
Alderwoods is the second largest funeral services company in North America with 10,000 employees, 920 funeral homes, and 275 cemeteries. On Monday funeral directors are set to strike a dozen Alderwoods funeral homes in Chicago, and it would be the first such strike in Chicago. Don't you think there's enough trouble in Chicago? UAL is losing $7 million in cash per day. It would be too much for the hearts of Chicagoans if Alderwoods and UAL both shut their doors in the windy city. On the other hand, let's look on the bright side. U-Haul could really use the business.
The holiday season looks mediocre at best. Will Kmart make it? How many store closings will occur at other companies in the retail industry? Maybe we should run a contest to see who can come closest to the actual downsizing number.
Saturday, October 19, 2002
10/19/02 Consumers Are Spooked
Halloween sales of candy and costumes are forecast to be flat. WalMart says theirs "are not where we would like them."
Disney's debt rating is reduced for the 3rd time in 2 months. That is not easy to accomplish! No wonder Eisner has board backing.
The U.S. trade gap ballooned to a record $38.5 billion in August. The government takes 60 days to release these figures. I wasn't slow in noticing this news. Our account deficit with China continues to climb. If this trend were to be maintained, it's conceivable China could tender for the U.S. in 2050. Of course, they might not want to be burdened with our healthcare costs and social security concerns.
This should be an exciting world series. We have two former Dodger teammates going head to head as managers. That must be a first.
Halloween sales of candy and costumes are forecast to be flat. WalMart says theirs "are not where we would like them."
Disney's debt rating is reduced for the 3rd time in 2 months. That is not easy to accomplish! No wonder Eisner has board backing.
The U.S. trade gap ballooned to a record $38.5 billion in August. The government takes 60 days to release these figures. I wasn't slow in noticing this news. Our account deficit with China continues to climb. If this trend were to be maintained, it's conceivable China could tender for the U.S. in 2050. Of course, they might not want to be burdened with our healthcare costs and social security concerns.
This should be an exciting world series. We have two former Dodger teammates going head to head as managers. That must be a first.
Friday, October 18, 2002
10/18/02 There's More Than The Headlines
As I often stated, over the past 25 years Microsoft is easily the biggest business success story. Yesterday the media butchered Microsoft's news release. Yes, their 1st quarter results were above expectations. New licensing programs were the major reason. I failed to read, however, that there was a positive swing in investment income to the tune of one billion dollars. Operating margins were lower, and the second quarter will be lower. The company raised their estimate for the entire year by 5 cents per share, and therefore, results should exceed the prior year by maybe 3-5 cents to about $1.90. At $53 the stock is not exactly a bargain.
Over the past week treasuries have been pounded and yields have risen by 55 basis points. This is a huge move in one week, and is another illustration of extreme market volatility. Some money managers have been shifting their asset allocation and purchasing more stocks- in hopes that last week saw the bottom in stock prices. Good luck to them.
Sears dropped another 30% yesterday, and is now down almost 50% in the past 2 weeks. They made additional provisions for uncollectable credit accounts. I hope you don't believe Sears is alone in this area. This is just the tip of the iceberg for financial institutions.
Delta Air is laying off another 8000 and Sun Microsystems 11% of its workforce. Ericsson's numbers were a nightmare. Eastman Kodak's results were a pleasant surprise. Colgate, one of the great ones, continues to deliver in tough times.
It's interesting that the unemployment claims rose sharply, that there was an unexpected decline in September industrial production, and yet housing permits were the highest in 16 years. Maybe record low mortage rates helped the latter. In the last week those rates have risen 15 basis points or more.
As I often stated, over the past 25 years Microsoft is easily the biggest business success story. Yesterday the media butchered Microsoft's news release. Yes, their 1st quarter results were above expectations. New licensing programs were the major reason. I failed to read, however, that there was a positive swing in investment income to the tune of one billion dollars. Operating margins were lower, and the second quarter will be lower. The company raised their estimate for the entire year by 5 cents per share, and therefore, results should exceed the prior year by maybe 3-5 cents to about $1.90. At $53 the stock is not exactly a bargain.
Over the past week treasuries have been pounded and yields have risen by 55 basis points. This is a huge move in one week, and is another illustration of extreme market volatility. Some money managers have been shifting their asset allocation and purchasing more stocks- in hopes that last week saw the bottom in stock prices. Good luck to them.
Sears dropped another 30% yesterday, and is now down almost 50% in the past 2 weeks. They made additional provisions for uncollectable credit accounts. I hope you don't believe Sears is alone in this area. This is just the tip of the iceberg for financial institutions.
Delta Air is laying off another 8000 and Sun Microsystems 11% of its workforce. Ericsson's numbers were a nightmare. Eastman Kodak's results were a pleasant surprise. Colgate, one of the great ones, continues to deliver in tough times.
It's interesting that the unemployment claims rose sharply, that there was an unexpected decline in September industrial production, and yet housing permits were the highest in 16 years. Maybe record low mortage rates helped the latter. In the last week those rates have risen 15 basis points or more.
Thursday, October 17, 2002
10/17/02 Corporate Disappointments
I mentioned yesterday that a 1000 point Dow rally would not prevent bad news from occurring. Yesterday disappointing results were announced by Coke, Boeing, Motorola, Novellus, Plantronics, Ultratech and others. Weyerhaeuser, Honeywell, and Retek all announced layoffs and additional layoffs are expected to be announced within the semiconductor industry.
After the close IBM had a 3rd quarter conference call, and the stock rallied sharply to 70. I listened to the call and read their release. Their income from continuing operations was flat, their revenue was down 2%, and gross margins declined. So why did the stock rally? Management projected a 4th quarter revenue level which excited the Street. I was in the minority. The projection was well within prior announced expectations, and frankly, that projection is nothing to write home about. The Street is grasping for straws, and that has proven to result in unfavorable investing returns.
I mentioned yesterday that a 1000 point Dow rally would not prevent bad news from occurring. Yesterday disappointing results were announced by Coke, Boeing, Motorola, Novellus, Plantronics, Ultratech and others. Weyerhaeuser, Honeywell, and Retek all announced layoffs and additional layoffs are expected to be announced within the semiconductor industry.
After the close IBM had a 3rd quarter conference call, and the stock rallied sharply to 70. I listened to the call and read their release. Their income from continuing operations was flat, their revenue was down 2%, and gross margins declined. So why did the stock rally? Management projected a 4th quarter revenue level which excited the Street. I was in the minority. The projection was well within prior announced expectations, and frankly, that projection is nothing to write home about. The Street is grasping for straws, and that has proven to result in unfavorable investing returns.
Wednesday, October 16, 2002
10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap. 10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, in my view, the stock market does not represent good value and is not cheap.
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap. 10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, in my view, the stock market does not represent good value and is not cheap.
10/16/02 Perspective On 1000 Dow Points
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap.
Good value is in the eye of the investor. For me the last two times the market was truly an excellent value was in 1982 and in 1974. Patient investors have a better chance to achieve above average results. Often that requires sitting on one's hands and doing nothing.
It was not until some time during 1982 that the Dow was able to rally just above the 1000 mark and to remain above that level. In other words, Dow 1000 was a huge hurdle for a very long time. Now we fast forward to 2002. From last thursday's intraday low to yesterday's close the Dow rallied 1000 points! It took only 4 days for the Dow to rally those 1000 points.
Last evening Sun Microsystems announced that they may have to lay off 8000 employees. Intel said that 4th quarter revenues will be lower than expected and lowered their capital spending budget as well as warning about lower than expected profit margins. Banc One warned about increasing loan losses in 2003. The point is simple. The bad news is not going to stop just because the Dow rallied 1000 points. In a month I believe investors will once again look back and wished they had sold into the rally. As an overall description, the stock market does not represent good value and is not cheap.
Good value is in the eye of the investor. For me the last two times the market was truly an excellent value was in 1982 and in 1974. Patient investors have a better chance to achieve above average results. Often that requires sitting on one's hands and doing nothing.
Tuesday, October 15, 2002
10/15/02 Polls Taken In 1998 And Now
In 1998 a Gallup Poll indicated that two-thirds of those surveyed found it a good time to invest. It was for the next two years. In a recent Associated Press poll 64% thought it a bad idea to invest now. Time will tell how smart those recently surveyed are.
Osama bin Laden: "We congratulate our Islamic world for the heroic operations of courageous jihad carried out by its pious fighter children in Yemen, against the tanker of the crusaders, and in Kuwait, against the American invasion and occupation forces." In my view the free nations of the world must come together to eliminate this on-going horror. Hittler was eliminated and so shall these evil doers.
In 1998 a Gallup Poll indicated that two-thirds of those surveyed found it a good time to invest. It was for the next two years. In a recent Associated Press poll 64% thought it a bad idea to invest now. Time will tell how smart those recently surveyed are.
Osama bin Laden: "We congratulate our Islamic world for the heroic operations of courageous jihad carried out by its pious fighter children in Yemen, against the tanker of the crusaders, and in Kuwait, against the American invasion and occupation forces." In my view the free nations of the world must come together to eliminate this on-going horror. Hittler was eliminated and so shall these evil doers.
Monday, October 14, 2002
10/14/02 Mitchell E. Daniels Jr.
This gentleman is the Director of the OMB(Office of Management and Budget). Last week he wrote a letter to Congress in which he stated "federal government's accounts would never be tolerated in the private sector...repair of the system so badly broken will not happen overnight." He was referring to the trillions of dollars in unsubstantiated balance adjustments occurring yearly in federal departments and related that 20 of the largest agencies had serious chronic problems.
This gentleman is the Director of the OMB(Office of Management and Budget). Last week he wrote a letter to Congress in which he stated "federal government's accounts would never be tolerated in the private sector...repair of the system so badly broken will not happen overnight." He was referring to the trillions of dollars in unsubstantiated balance adjustments occurring yearly in federal departments and related that 20 of the largest agencies had serious chronic problems.
Sunday, October 13, 2002
10/13/2002 The Unsuccessful Investor
A common cause for the lack of success is the frequency with which investors come to believe only what they wish to believe.
One case in point is GE. On friday the company announced that they had hit their targets for the third quarter. The CEO said they had encountered "a more difficult environment than the one we had expected in July... and was counting on extremely low economic growth for 2003." Mr. Immelt did not provide a forecast for their earnings in 2003. He is assuming a 2% growth in the GDP for 2003. It is most unfortunate for investors that they failed to read beyond the 3rd quarter numbers.
Back in 1957 Arthur Rock was one of the forefathers of the Silicon Valley. He stated that this is the worst slump he has seen in the Valley and "there are no jobs. None. Zero."
A recent NY Times/CBS poll indicated about half of Americans are worried that someone in their household will be laid off within a year's time. It's no wonder that consumer confidence is the pits.
A common cause for the lack of success is the frequency with which investors come to believe only what they wish to believe.
One case in point is GE. On friday the company announced that they had hit their targets for the third quarter. The CEO said they had encountered "a more difficult environment than the one we had expected in July... and was counting on extremely low economic growth for 2003." Mr. Immelt did not provide a forecast for their earnings in 2003. He is assuming a 2% growth in the GDP for 2003. It is most unfortunate for investors that they failed to read beyond the 3rd quarter numbers.
Back in 1957 Arthur Rock was one of the forefathers of the Silicon Valley. He stated that this is the worst slump he has seen in the Valley and "there are no jobs. None. Zero."
A recent NY Times/CBS poll indicated about half of Americans are worried that someone in their household will be laid off within a year's time. It's no wonder that consumer confidence is the pits.
Saturday, October 12, 2002
10/12/02 The Cliff
The big story on Friday was not the sharp rally in stocks and the big decline in bonds. The consumer was the main event, and properly so. When you account for two-thirds of the economy, there's no question but that the consumer is all powerful. Unfortunately for the economy, in the latest readings, consumer confidence and expectations fell off a cliff. The drop was a massive plummet. Therefore, it's not surprising that retail sales had their largest drop since November 2001. There are many reasons- the weak job market, Iraq, and growing household debt combined with low savings. Analysts refer to a market being oversold. Well, the consumer is overbought and overspent and overwrought. WalMart listens to the customer better than any other company. WalMart has said for the past three months that its customer, that's you, is slowing down in the buying department. With the holiday season approaching, that's a disaster waiting to happen.
A rally for a few days does not mean the market is oversold. There are always going to be rallies. Analysts simply have a need to provide reasons for happenings after they happen but rarely before they happen. As such, they are mainly worthless despite their large salaries. Listening to analysts is, for the most part, a losing proposition. Do you think Warren Buffett hangs on the words of Wall Street?
This market is highly volatile, and increasingly so. This creates a greater risk, and especially in the derivatives market, which is 10 times the size of our yearly GDP and dwarfs the stock and bond markets. In a perfect world counterparty risk is intended to create zero risk. The world is not perfect, and therefore, not risk free. As such, those creating the custom derivatives, the financial institutions, are increasingly at risk. With heightened geopolitical worries, that aforementioned risk could create massive market dislocations. I don't believe the market adequately accounts for this potential meltdown.
The big story on Friday was not the sharp rally in stocks and the big decline in bonds. The consumer was the main event, and properly so. When you account for two-thirds of the economy, there's no question but that the consumer is all powerful. Unfortunately for the economy, in the latest readings, consumer confidence and expectations fell off a cliff. The drop was a massive plummet. Therefore, it's not surprising that retail sales had their largest drop since November 2001. There are many reasons- the weak job market, Iraq, and growing household debt combined with low savings. Analysts refer to a market being oversold. Well, the consumer is overbought and overspent and overwrought. WalMart listens to the customer better than any other company. WalMart has said for the past three months that its customer, that's you, is slowing down in the buying department. With the holiday season approaching, that's a disaster waiting to happen.
A rally for a few days does not mean the market is oversold. There are always going to be rallies. Analysts simply have a need to provide reasons for happenings after they happen but rarely before they happen. As such, they are mainly worthless despite their large salaries. Listening to analysts is, for the most part, a losing proposition. Do you think Warren Buffett hangs on the words of Wall Street?
This market is highly volatile, and increasingly so. This creates a greater risk, and especially in the derivatives market, which is 10 times the size of our yearly GDP and dwarfs the stock and bond markets. In a perfect world counterparty risk is intended to create zero risk. The world is not perfect, and therefore, not risk free. As such, those creating the custom derivatives, the financial institutions, are increasingly at risk. With heightened geopolitical worries, that aforementioned risk could create massive market dislocations. I don't believe the market adequately accounts for this potential meltdown.
Friday, October 11, 2002
10/11/02 Maintain Trend Focus
Rallies in a bear market provide welcome relief. One might characterize them as a Wall Street Prozac tonic. Unfortunately, the prescription is not necessarily renewable.
Over-all comparable retail sales grew just 1.5% in September. Warnings are being issued about a possible anemic holiday shopping season.
GM is out of stealth mode. They are now offering a new car "purchase" plan- no money down and no payment for 90 days. At least they could include a toaster or possibly the right to return the car after 90 days- a little like an Oreck vacuum.
There is $6 trillion in mortgage debt outstanding. Why would anyone consider the possibility of a bubble in housing?
The other day three men were huddling after returning from a funeral. They were comparing notes on their refinancing experiences. In 1999 these same men probably were discussing day trading and the Nasdaq.
Rallies in a bear market provide welcome relief. One might characterize them as a Wall Street Prozac tonic. Unfortunately, the prescription is not necessarily renewable.
Over-all comparable retail sales grew just 1.5% in September. Warnings are being issued about a possible anemic holiday shopping season.
GM is out of stealth mode. They are now offering a new car "purchase" plan- no money down and no payment for 90 days. At least they could include a toaster or possibly the right to return the car after 90 days- a little like an Oreck vacuum.
There is $6 trillion in mortgage debt outstanding. Why would anyone consider the possibility of a bubble in housing?
The other day three men were huddling after returning from a funeral. They were comparing notes on their refinancing experiences. In 1999 these same men probably were discussing day trading and the Nasdaq.
Thursday, October 10, 2002
10/10/02 It Was Almost Like Old Times
Other than the Dow at a 5 year low and the Nasdaq at a 6 year low and the Nikkei at a 19 year low it could have been 1999.
Amidst the carnage Yahoo, Sun, Intel, Amgen, EBay, Veritas, Seibel, Broadcom, Brocade, Verisign, Amazon, Cisco, and Gilead were all higher yesterday. I was psyched but then I read about GE laying off 1000 at the jet engine division and Abbott Labs laying off 2000 and Virginia laying off 1000 and household debt as a % of GDP at record levels.
Then the sun came out with Glenn Hubbard. He enabled me to sleep better. He said deflation appeared unlikely... that home refinancing had not been excessive...that home refinancing hadn't propped up consumption growth. Now I'm ready for another day.
Winnebago reported record sales and profits for their 4th quarter. Retirees must be taking to the roads. Meanwhile jets increasingly adorn the Mojave landscape. Maybe that's a reason the airline industry has lost $15 billion over the past 24 months. Yes, Boeing did layoff more folks yesterday. If the economy is so sound, as Glenn Hubbard declares, then why are Ford bonds trading at junk levels and Boeing creating an unemployment nightmare in the Seattle environs?
Other than the Dow at a 5 year low and the Nasdaq at a 6 year low and the Nikkei at a 19 year low it could have been 1999.
Amidst the carnage Yahoo, Sun, Intel, Amgen, EBay, Veritas, Seibel, Broadcom, Brocade, Verisign, Amazon, Cisco, and Gilead were all higher yesterday. I was psyched but then I read about GE laying off 1000 at the jet engine division and Abbott Labs laying off 2000 and Virginia laying off 1000 and household debt as a % of GDP at record levels.
Then the sun came out with Glenn Hubbard. He enabled me to sleep better. He said deflation appeared unlikely... that home refinancing had not been excessive...that home refinancing hadn't propped up consumption growth. Now I'm ready for another day.
Winnebago reported record sales and profits for their 4th quarter. Retirees must be taking to the roads. Meanwhile jets increasingly adorn the Mojave landscape. Maybe that's a reason the airline industry has lost $15 billion over the past 24 months. Yes, Boeing did layoff more folks yesterday. If the economy is so sound, as Glenn Hubbard declares, then why are Ford bonds trading at junk levels and Boeing creating an unemployment nightmare in the Seattle environs?
Wednesday, October 09, 2002
10/9/02 Port Lockout Ends. Credit President Bush Invoking Taft Hartley
For the first time in 19 years Japan's Nikkei falls below 8500.
Yesterday's Wall Street mini rally had more declines than advances.
Shared National Credit Review reveals loan losses rising by 34% at banks and other institutions.
Fiat to cut 6000 jobs.
SBC warns on profits.
Cisco finds revenue generation a challenge.
Hussein channels money to Palestinian terrorists.
For the first time in 19 years Japan's Nikkei falls below 8500.
Yesterday's Wall Street mini rally had more declines than advances.
Shared National Credit Review reveals loan losses rising by 34% at banks and other institutions.
Fiat to cut 6000 jobs.
SBC warns on profits.
Cisco finds revenue generation a challenge.
Hussein channels money to Palestinian terrorists.
Tuesday, October 08, 2002
10/8/02 Rumors To The Contrary The World Beyond Pluto, Quaoar, Does Not Hold A Bull Market
Since December 1999 U.S. government bonds have outperformed U.S. stocks by 56%. Pimco now the nation's biggest mutual fund.
Sears warns 3rd quarter earnings will fall short of expectations due to more credit card delinquencies.
Credit Suisse First Boston lays off 1700.
Mitsubishi Illinois production plant halted by port lockout.
August saw the slowest rise in consumer debt in 8 months. Christmas might be white but clearly not green.
Since December 1999 U.S. government bonds have outperformed U.S. stocks by 56%. Pimco now the nation's biggest mutual fund.
Sears warns 3rd quarter earnings will fall short of expectations due to more credit card delinquencies.
Credit Suisse First Boston lays off 1700.
Mitsubishi Illinois production plant halted by port lockout.
August saw the slowest rise in consumer debt in 8 months. Christmas might be white but clearly not green.
Monday, October 07, 2002
10/7/02 Nikkei Plunges To 8688 In Biggest 1 Day Drop Since June
War on Iraq seen by Administration as liberating not conquering.
Senior citizens would prefer the government to pay for their prescription drugs rather than spend millions of dollars on increasing Medicare payments to doctors and hospitals. A growing problem is healthcare for retirees prior to medicare eligibility. More U.S.
retirees making their homes in Mexico.
The department of labor says the average household unit made about $40,000 in 2001, spent $7000 on cars, and owes $7000 on credit cards.
The World Economic Forum conference in East Asia began in Kuala Lumpur on Sunday. Kenneth Courtis, vice chairman Asia, Goldman Sachs Japan, said "Asia's growth has probably peaked." China is the wild card, and has invested $60 billion this year into Asia. Malaysia has become China's largest trading partner in SE Asia.
War on Iraq seen by Administration as liberating not conquering.
Senior citizens would prefer the government to pay for their prescription drugs rather than spend millions of dollars on increasing Medicare payments to doctors and hospitals. A growing problem is healthcare for retirees prior to medicare eligibility. More U.S.
retirees making their homes in Mexico.
The department of labor says the average household unit made about $40,000 in 2001, spent $7000 on cars, and owes $7000 on credit cards.
The World Economic Forum conference in East Asia began in Kuala Lumpur on Sunday. Kenneth Courtis, vice chairman Asia, Goldman Sachs Japan, said "Asia's growth has probably peaked." China is the wild card, and has invested $60 billion this year into Asia. Malaysia has become China's largest trading partner in SE Asia.
Sunday, October 06, 2002
10/6/02 Wilshire 5000 At 5 Year Low
Over 500 negative earning and or revenue warnings in the past 5 weeks.
On Friday puts ahead of calls by 2 to 1 ratio.
Fourth quarter growth likely to be no more than 1%. Earnings will be lower than the 3rd quarter.
Israel Defense Minister: "Possible that the U.S. will begin attacks on Iraq toward the end of November."
Over 500 negative earning and or revenue warnings in the past 5 weeks.
On Friday puts ahead of calls by 2 to 1 ratio.
Fourth quarter growth likely to be no more than 1%. Earnings will be lower than the 3rd quarter.
Israel Defense Minister: "Possible that the U.S. will begin attacks on Iraq toward the end of November."
Saturday, October 05, 2002
10/5/02 Dow At 7500- Near 5 Year Low
Being up into the early morning hours this blog will be a bit short today.
Ethan S. Harris, chief economist Lehman Bros, "from the point of view of the average person, we're still in a recession. What the average person cares about is jobs."
President Bush: "there are still too many ppeople who wonder whether or not they're going to find employment."
Senator Sarbanes: "the jobs aren't there right now."
JP Morgan to layoff 4000 investment bankers.
Hiring on hold at temp agencies.
Being up into the early morning hours this blog will be a bit short today.
Ethan S. Harris, chief economist Lehman Bros, "from the point of view of the average person, we're still in a recession. What the average person cares about is jobs."
President Bush: "there are still too many ppeople who wonder whether or not they're going to find employment."
Senator Sarbanes: "the jobs aren't there right now."
JP Morgan to layoff 4000 investment bankers.
Hiring on hold at temp agencies.
Friday, October 04, 2002
10/4/02 Nasdaq At 6 Year Low
Warnings from Boeing, EMC, Prime Hospitality, Schering Plough, Bank of N.Y., Park Place, and others.
Awful results at Alcoa. Additional layoffs at Verizon and EMC. Terrific results at Starbucks, one of the great ones over the past 10 years.
The 4 week moving average of jobless claims was the highest since the first week in May. For the month there was a decline of 43,000 jobs; however, the government said the unemployment rate declined to 5.6% and that the reason was a decrease in teenager unemployment. I can't even comment on this!
For the very first time there was a delivery of Russian oil into our Strategic Petroleum Reserve.
Only 34% of large companies offer retiree health coverage, down from 66% in 1988. Only 5% of small firms with fewer than 200 workers offer coverage. Benefits are declining. Under existing plans, retirees will pay for 90% of total medical costs by 2031.
The Business Council is an association comprised of CEOs, and they are currently having their half-yearly gathering at the Greenbrier in West Virginia. The chairman is Bill Esprey, the CEO of Sprint. Has Mr. Esprey ever tried getting thru to Sprint's customer service line? He must not value his customers very highly. Another member is Carly Fiorina, CEO of HP. She stated "this is a climate that doesn't reward risk-taking- yet the fundamentals of business are to take prudent risks at the right time." She doesn't get it. Michael Dell does. Dell has entered the server and printer markets. Dell understands risk/reward, and they are eating their competitor's lunch, and that includes HP. Bill Harrison, CEO of JP Morgan Chase, stated that "Business Council members retain a very cautious view of the U.S. economy's near-term growth prospects." I would remain cautious too with Morgan's dismal performance over the last 6 quarters. Scott McNealy, CEO of Sun Microsystems, said "executives had to spend massive amounts of time executing on the rigmarole around Sarbines-Oxley." Rather than wine maybe McNealey should be concentrating on making Sun's servers more price competitive in the current environment. If he did, possibly Sun would not be facing additional layoffs and the stock wouldn't be selling at $2+. Former illustrious Business Council members are Kenneth Lay and Dennis Kozlowski. Maybe receiving an invitation to join the group isn't worth the paper on which it's printed.
Warnings from Boeing, EMC, Prime Hospitality, Schering Plough, Bank of N.Y., Park Place, and others.
Awful results at Alcoa. Additional layoffs at Verizon and EMC. Terrific results at Starbucks, one of the great ones over the past 10 years.
The 4 week moving average of jobless claims was the highest since the first week in May. For the month there was a decline of 43,000 jobs; however, the government said the unemployment rate declined to 5.6% and that the reason was a decrease in teenager unemployment. I can't even comment on this!
For the very first time there was a delivery of Russian oil into our Strategic Petroleum Reserve.
Only 34% of large companies offer retiree health coverage, down from 66% in 1988. Only 5% of small firms with fewer than 200 workers offer coverage. Benefits are declining. Under existing plans, retirees will pay for 90% of total medical costs by 2031.
The Business Council is an association comprised of CEOs, and they are currently having their half-yearly gathering at the Greenbrier in West Virginia. The chairman is Bill Esprey, the CEO of Sprint. Has Mr. Esprey ever tried getting thru to Sprint's customer service line? He must not value his customers very highly. Another member is Carly Fiorina, CEO of HP. She stated "this is a climate that doesn't reward risk-taking- yet the fundamentals of business are to take prudent risks at the right time." She doesn't get it. Michael Dell does. Dell has entered the server and printer markets. Dell understands risk/reward, and they are eating their competitor's lunch, and that includes HP. Bill Harrison, CEO of JP Morgan Chase, stated that "Business Council members retain a very cautious view of the U.S. economy's near-term growth prospects." I would remain cautious too with Morgan's dismal performance over the last 6 quarters. Scott McNealy, CEO of Sun Microsystems, said "executives had to spend massive amounts of time executing on the rigmarole around Sarbines-Oxley." Rather than wine maybe McNealey should be concentrating on making Sun's servers more price competitive in the current environment. If he did, possibly Sun would not be facing additional layoffs and the stock wouldn't be selling at $2+. Former illustrious Business Council members are Kenneth Lay and Dennis Kozlowski. Maybe receiving an invitation to join the group isn't worth the paper on which it's printed.
Thursday, October 03, 2002
10/03/02 Little To Smile About
Cisco's Chambers: "There's little to smile about when it comes to the short-term outlook for Cisco."
CEOs, in a survey, see slower economic growth in the months and year ahead.
Our oil inventories are at a 20 year low.
Tokyo stocks closed at a new 19 year low. Bad loans at Japanese banks continue to weigh on any recovery.
Foreigners cut their net purchases of US corporate bonds to a 7 year low in July. Purchases down 74%.
AMD has a significant revenue warning. Others warning: Dow Chemical, Libbey, and Charter Communications.
After 128 years the Younkers corporate offices are being moved out of Iowa. The new owner, Saks Inc, sacks 270 people.
Analysts continually try and compare this economy with prior economies in hopes the comparisons will provide a reading for future stock market movements. There's one problem. Our economy does not resemble prior periods like 1990 and 1974. Healthcare is now 15% of our GDP. The manufacturing sector represents only 14% of total jobs. Corporate balance sheets have a different look.
We are recovering from the national tragedy of 9/11. The consumer is tapped out financially and emotionally. At this point only 20% of Americans remain without credit cards. Life hangs on a thread- jobs are scarce, jobs have little security, and employers have no visibility. The Fed is powerless to provide a monetary policy which could change the economic landscape. Interest rates have little to fall until they reach zero. As a last resort the Fed might increase the money supply and the dollar will suffer. The world economies are weak. The banking structure in Japan is unstable, and ours is showing cracks too. WalMart, Microsoft, Dell, P&G, Colgate, and a few others cannot carry our economic burdens. Nor can the government. The latter has difficulty just funding medicare, medicaid, and social security.
A significant problem for today's economy is that we have too much of everything (except cash and housing) with too little demand. That creates little pricing power and an emphasis on cost cutting, and the latter usually entails lay-offs. When the majority of Americans have little net savings and depend on the next paycheck, the stability of the system is at risk. It would be prudent to limit comparisons with the past. Enough trillions have been lost to this point.
Cisco's Chambers: "There's little to smile about when it comes to the short-term outlook for Cisco."
CEOs, in a survey, see slower economic growth in the months and year ahead.
Our oil inventories are at a 20 year low.
Tokyo stocks closed at a new 19 year low. Bad loans at Japanese banks continue to weigh on any recovery.
Foreigners cut their net purchases of US corporate bonds to a 7 year low in July. Purchases down 74%.
AMD has a significant revenue warning. Others warning: Dow Chemical, Libbey, and Charter Communications.
After 128 years the Younkers corporate offices are being moved out of Iowa. The new owner, Saks Inc, sacks 270 people.
Analysts continually try and compare this economy with prior economies in hopes the comparisons will provide a reading for future stock market movements. There's one problem. Our economy does not resemble prior periods like 1990 and 1974. Healthcare is now 15% of our GDP. The manufacturing sector represents only 14% of total jobs. Corporate balance sheets have a different look.
We are recovering from the national tragedy of 9/11. The consumer is tapped out financially and emotionally. At this point only 20% of Americans remain without credit cards. Life hangs on a thread- jobs are scarce, jobs have little security, and employers have no visibility. The Fed is powerless to provide a monetary policy which could change the economic landscape. Interest rates have little to fall until they reach zero. As a last resort the Fed might increase the money supply and the dollar will suffer. The world economies are weak. The banking structure in Japan is unstable, and ours is showing cracks too. WalMart, Microsoft, Dell, P&G, Colgate, and a few others cannot carry our economic burdens. Nor can the government. The latter has difficulty just funding medicare, medicaid, and social security.
A significant problem for today's economy is that we have too much of everything (except cash and housing) with too little demand. That creates little pricing power and an emphasis on cost cutting, and the latter usually entails lay-offs. When the majority of Americans have little net savings and depend on the next paycheck, the stability of the system is at risk. It would be prudent to limit comparisons with the past. Enough trillions have been lost to this point.
Wednesday, October 02, 2002
10/02/02 October
It is a month with tricks and treats; however, the average October manages a slight gain in the Dow. Yesterday we started the month with a bang.
These are not average times. Almost all of the S&P 500 companies have a pension deficit; 401K plans have been taking it on the chin; and we have financial institutions who have guaranteed equity returns. Those guarantees are suspect at best. Even with 0 percent financing for 60 months GM's September sales were down 13%. The factory sector weakened for the first time since January, and the ISM Index slipped below 50%.
Then you have the rising spectre of healthcare costs. Medicaid and Medicare cover 75 million Americans with a yearly cost of $400 billion. This cost will rise in 2003, and the numbers covered with an aging population will rise as well. Of course, we also have 41 million Americans without health insurance- 19% of Californians are in this group, and this number is rising annually too.
The times are not average. Building of offices, plants, and stores have hit a 6 year low. At the same time oil has hit a 19 month high at $31 per barrel.
We are experiencing a slowdown in R&D spending, the first such cut since 1960. It is not surprising that this is the first time the venture capital industry has had back to back years of negative returns.
The National Association of Business Economists said the economy would continue to show solid growth. I don't have a masters or a doctorate degree in economics but I know profit skids when I see them. You can listen to the economists or make the trend your friend. There are very few great companies- WalMart, Microsoft, Dell, and some others. Dell just raised revenue forecasts for their upcoming quarter as they increased sales at the expense of other companies. However, until the economic turmoil reverses for the great majority of companies, we will continue in a bear market. The duration is anyone's guess. If I were taking a guess, I'd say the turn is not just around the corner. In fact, it could get worse. It's good to remember that in all months, and not just October, that the market accomodates the fewest number of people at any one time.
It is a month with tricks and treats; however, the average October manages a slight gain in the Dow. Yesterday we started the month with a bang.
These are not average times. Almost all of the S&P 500 companies have a pension deficit; 401K plans have been taking it on the chin; and we have financial institutions who have guaranteed equity returns. Those guarantees are suspect at best. Even with 0 percent financing for 60 months GM's September sales were down 13%. The factory sector weakened for the first time since January, and the ISM Index slipped below 50%.
Then you have the rising spectre of healthcare costs. Medicaid and Medicare cover 75 million Americans with a yearly cost of $400 billion. This cost will rise in 2003, and the numbers covered with an aging population will rise as well. Of course, we also have 41 million Americans without health insurance- 19% of Californians are in this group, and this number is rising annually too.
The times are not average. Building of offices, plants, and stores have hit a 6 year low. At the same time oil has hit a 19 month high at $31 per barrel.
We are experiencing a slowdown in R&D spending, the first such cut since 1960. It is not surprising that this is the first time the venture capital industry has had back to back years of negative returns.
The National Association of Business Economists said the economy would continue to show solid growth. I don't have a masters or a doctorate degree in economics but I know profit skids when I see them. You can listen to the economists or make the trend your friend. There are very few great companies- WalMart, Microsoft, Dell, and some others. Dell just raised revenue forecasts for their upcoming quarter as they increased sales at the expense of other companies. However, until the economic turmoil reverses for the great majority of companies, we will continue in a bear market. The duration is anyone's guess. If I were taking a guess, I'd say the turn is not just around the corner. In fact, it could get worse. It's good to remember that in all months, and not just October, that the market accomodates the fewest number of people at any one time.
Tuesday, October 01, 2002
10/1/02 The Market And The Ozone Layer
The recent experiences of both are astounding. In 2000 the Antarctica ozone hole was 10.5 million square miles. Now it's 6 million square miles, the smallest size since 1988. Warmer temperatures have caused this reduction. We all know where the Dow and the Nasdaq were in 2000, and we just finished the worst quarter since September 1987. A much cooler economy and disappointing profits have reduced equity prices. At this stage it is important to guard against skin cancer and to safeguard your nest egg.
Glenn Hubbard, Chair of the White House Council of Economic Advisors: equity price declines "would not come anywhere close to tipping the economy into recession." I feel so much better. Our tax dollars have created a penetrating mind.
On Sunday I talked about the great ones and what happens to the also rans. Yesterday Target and Federated and JC Penney told investors their September sales would be well below plan. Walgreen missed their numbers. Cirrus Logic, Extreme Networks, and Harmonic also issued warnings for the quarter. Goldman Sachs, Fidelity, and Carpenter Technology all announced layoffs.
The NAPM in Chicago announced their index dropped to 48.1 from 54.9, the first decline since February and the order backlog slid to 40 from 48. The Midwest is having trouble- even with zero per cent auto financing.
The recent experiences of both are astounding. In 2000 the Antarctica ozone hole was 10.5 million square miles. Now it's 6 million square miles, the smallest size since 1988. Warmer temperatures have caused this reduction. We all know where the Dow and the Nasdaq were in 2000, and we just finished the worst quarter since September 1987. A much cooler economy and disappointing profits have reduced equity prices. At this stage it is important to guard against skin cancer and to safeguard your nest egg.
Glenn Hubbard, Chair of the White House Council of Economic Advisors: equity price declines "would not come anywhere close to tipping the economy into recession." I feel so much better. Our tax dollars have created a penetrating mind.
On Sunday I talked about the great ones and what happens to the also rans. Yesterday Target and Federated and JC Penney told investors their September sales would be well below plan. Walgreen missed their numbers. Cirrus Logic, Extreme Networks, and Harmonic also issued warnings for the quarter. Goldman Sachs, Fidelity, and Carpenter Technology all announced layoffs.
The NAPM in Chicago announced their index dropped to 48.1 from 54.9, the first decline since February and the order backlog slid to 40 from 48. The Midwest is having trouble- even with zero per cent auto financing.
Monday, September 30, 2002
9/30/02 The US Consumer
With consumer sentiment down for 4 straight months it would be a mistake to depend on the consumer to bail out our economy. The consumer is barely maintaining a stable environment. That leaves the possibility of business capital investments as a buoy to the economy; however, that appears highly unlikely with growing layoffs, dwindling profit growth, and plant closures. Hopefully no one is looking to the Fed to inflate or for the government to increase spending, and with it, the deficits to mushroom from present levels.
We have had one week of the Fall season. One week doesn't make a season; hoowever, the horizon doesn't have much visibility.
With consumer sentiment down for 4 straight months it would be a mistake to depend on the consumer to bail out our economy. The consumer is barely maintaining a stable environment. That leaves the possibility of business capital investments as a buoy to the economy; however, that appears highly unlikely with growing layoffs, dwindling profit growth, and plant closures. Hopefully no one is looking to the Fed to inflate or for the government to increase spending, and with it, the deficits to mushroom from present levels.
We have had one week of the Fall season. One week doesn't make a season; hoowever, the horizon doesn't have much visibility.
Sunday, September 29, 2002
7/29/02 Keep An Eye On The Great Ones
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
In my view the two greatest corporate successes over the past 25 years have been WalMart and Microsoft. Over the past two months I made mention that WalMart's recent same store sales have been below expectations. For the past 25 years Microsoft's desktop applications growth has approximated 12% per year. Now management projects that growth to slow to 7-8% per year.
These two companies are the leaders in their field- in the entire world. If their growth is slowing, how do you think their competitors are doing? In actuality, their competitors are, for the most part, afterthoughts. The economic environment has changed even for WalMart and Microsoft. That should be a warning sign.
For the most part home equity loans are being used for new credit card purchases and not for retiring existing credit card debt. The private sector debt is now 1.5% of the $10 trillion GDP. The savings rate has dropped to 3.5%.
Saturday, September 28, 2002
9/28/02 2.2 Ratio Of Negative 3rd Quarter Earnings Pre-Announcements To The Positive
Thru September the bear market is 40 months in duration.
September consumer sentiment still dropping.
Wyeth warns. Barrick Gold warns. Delta Airlines warns and announces job cuts.
Merrill Lynch lowers 4th quarter earnings projections for the S&P and cuts 2003 too.
GE's CFO: "2003 is looking more challenging than it was when we talked in May." He is saying that GE's growth rate in 2003 will be down about 50% in 2003 to about 8%.
Monday is the last day of the quarter. How many mutual funds will want to eliminate stocks from their portfolio and raise cash?
Thru September the bear market is 40 months in duration.
September consumer sentiment still dropping.
Wyeth warns. Barrick Gold warns. Delta Airlines warns and announces job cuts.
Merrill Lynch lowers 4th quarter earnings projections for the S&P and cuts 2003 too.
GE's CFO: "2003 is looking more challenging than it was when we talked in May." He is saying that GE's growth rate in 2003 will be down about 50% in 2003 to about 8%.
Monday is the last day of the quarter. How many mutual funds will want to eliminate stocks from their portfolio and raise cash?
Friday, September 27, 2002
9/27/02 More Layoffs And Earnings Disappointments
SBC Communications slashes 11,000 workers and its capital expenditures. Aetna to layoff 2750.
Philip Morris misses earnings projections by wide margin. Callaway Golf warns. Solectron has quarterly loss. Nortel warns-again.
Japan has its 3rd consecutive year of deflation. Our 30 year mortgage rates fall below 6%, the lowest ever. Is this a sign of deflation?
Unfortunately more Americans owned stocks at the beginning of 2002 than in 1999. Poor timing I'd say.
Underfunded pension funds a growing problem. The stock market is the culprit. The latter certainly has created havoc for 401K plans.
The question for the day: can mortgage refinancing save the Christmas season? If we have 0 percent auto financing, why can't we do the same for the homebuyer? How about 0 monthly payments on credit cards? Can life be a free lunch or is there a payment at some point?
SBC Communications slashes 11,000 workers and its capital expenditures. Aetna to layoff 2750.
Philip Morris misses earnings projections by wide margin. Callaway Golf warns. Solectron has quarterly loss. Nortel warns-again.
Japan has its 3rd consecutive year of deflation. Our 30 year mortgage rates fall below 6%, the lowest ever. Is this a sign of deflation?
Unfortunately more Americans owned stocks at the beginning of 2002 than in 1999. Poor timing I'd say.
Underfunded pension funds a growing problem. The stock market is the culprit. The latter certainly has created havoc for 401K plans.
The question for the day: can mortgage refinancing save the Christmas season? If we have 0 percent auto financing, why can't we do the same for the homebuyer? How about 0 monthly payments on credit cards? Can life be a free lunch or is there a payment at some point?
Thursday, September 26, 2002
9/26/02 Greenspan: "Our Ability To Forecast Is Limited"
Glenn Hubbard, Chairman of the White House Council of Economic Advisors: "On balance the economy's recovery looks pretty typical." Tell that to HP who are laying off another 1800 or Handspring who are laying off 20% of the workforce or Gucci that warned about results or....
If Knight Greenspan is having forecasting difficulty, then how would an investor expect individual companies to assess with accuracy expected results for the 4th quarter and 2003? With limited visibility p/e ratios should be reduced and with them stock prices. A smaller and smaller percentage of companies are making their earnings forecasts, and those forecasts in most cases have been reduced at least once.
Glenn Hubbard, Chairman of the White House Council of Economic Advisors: "On balance the economy's recovery looks pretty typical." Tell that to HP who are laying off another 1800 or Handspring who are laying off 20% of the workforce or Gucci that warned about results or....
If Knight Greenspan is having forecasting difficulty, then how would an investor expect individual companies to assess with accuracy expected results for the 4th quarter and 2003? With limited visibility p/e ratios should be reduced and with them stock prices. A smaller and smaller percentage of companies are making their earnings forecasts, and those forecasts in most cases have been reduced at least once.
Wednesday, September 25, 2002
9/25/02 Posting #2 "I Don't See A Spark"
As I write this blog, the Dow is up 200 points and the Nasdaq abouy 40. One of the reasons cited is GE reaffirming their third quarter numbers. Investors might have been better served to focus on Jeff Immelt's comments made in Boston today. He said that he doesn't see a spark generating a macroeconomic recovery and that CEO's should not expect a strong recovery for the 4th quarter or early 2003. I noticed that Immelt did not provide guidance going forward for GE.
Interestingly, the IMF lowered their estimates for growth going into the 4th quarter and for next year.
As I have often remarked, there are sharp rallies in bear markets; however, they occur at lower and lower levels, and this has been true for the last 2+ years. The idea is to lighten up on the losers during those rallies. I last made these comments when the Dow rallied to 9000 and the Nasdaq to 1400. Of course, this is my opinion and I am prone to making mistakes- just not the same one twice I hope.
As I write this blog, the Dow is up 200 points and the Nasdaq abouy 40. One of the reasons cited is GE reaffirming their third quarter numbers. Investors might have been better served to focus on Jeff Immelt's comments made in Boston today. He said that he doesn't see a spark generating a macroeconomic recovery and that CEO's should not expect a strong recovery for the 4th quarter or early 2003. I noticed that Immelt did not provide guidance going forward for GE.
Interestingly, the IMF lowered their estimates for growth going into the 4th quarter and for next year.
As I have often remarked, there are sharp rallies in bear markets; however, they occur at lower and lower levels, and this has been true for the last 2+ years. The idea is to lighten up on the losers during those rallies. I last made these comments when the Dow rallied to 9000 and the Nasdaq to 1400. Of course, this is my opinion and I am prone to making mistakes- just not the same one twice I hope.
9/25/02 Dow Had Its Lowest Close IN 4 Years
US consumer confidence declines for 4th consecutive month.
Fed says growing risk of war creates more economic uncertainty. Two Fed members vote to lower interest rates.
US oil supplies continue to shrink, and crude rises to 19 month high.
Several European Union states are experiencing trouble meeting budget goals- Germany may exceed deficit limits and may not balance its budget in 2003.
Japan's trade surplus continues to expand. Unfortunately, they are paying a big price for deflation.
US consumer confidence declines for 4th consecutive month.
Fed says growing risk of war creates more economic uncertainty. Two Fed members vote to lower interest rates.
US oil supplies continue to shrink, and crude rises to 19 month high.
Several European Union states are experiencing trouble meeting budget goals- Germany may exceed deficit limits and may not balance its budget in 2003.
Japan's trade surplus continues to expand. Unfortunately, they are paying a big price for deflation.
Tuesday, September 24, 2002
9/24/02 Cisco's Chambers: Customer Visibility Lessening
Earning warnings issued by Maytag, Target, Steelcase, Temple Inland, and Weyerhaeuser
Traditionally, customer visibility should increase as we move towards the holiday season. For Wall Street November, December, and January most often mean good times. With consumer confidence on the downslope, this holiday season maybe a different one, and things could get worse before they level off. It may be wise to play it close to the vest, and hopefully you will feel cozy in that vest. Don't be ashamed to consider shopping at a thrift store. The savings are real, and the money goes to a good cause.
Earning warnings issued by Maytag, Target, Steelcase, Temple Inland, and Weyerhaeuser
Traditionally, customer visibility should increase as we move towards the holiday season. For Wall Street November, December, and January most often mean good times. With consumer confidence on the downslope, this holiday season maybe a different one, and things could get worse before they level off. It may be wise to play it close to the vest, and hopefully you will feel cozy in that vest. Don't be ashamed to consider shopping at a thrift store. The savings are real, and the money goes to a good cause.
Monday, September 23, 2002
9/23/02 Patients To Have Less Access To Healthcare
The government is proposing sharp cuts in Medicare payments for many drugs, medical devices, and high-tech procedures. At the same time the government expressed "concern to us because of the potential impact on access to care."
According to a survey by AT Kearney, for the first time China is attracting more foreign direct investments than the US.
WalMart expects September sales growth at the low end of their forecast or about 4%. August was a similar experience.
JDS Uniphase lowered its quarterly sales forecast.
David Murdock, CEO of Dole, to take Dole private.
The airlines are considering asking for more government funds.
The government is proposing sharp cuts in Medicare payments for many drugs, medical devices, and high-tech procedures. At the same time the government expressed "concern to us because of the potential impact on access to care."
According to a survey by AT Kearney, for the first time China is attracting more foreign direct investments than the US.
WalMart expects September sales growth at the low end of their forecast or about 4%. August was a similar experience.
JDS Uniphase lowered its quarterly sales forecast.
David Murdock, CEO of Dole, to take Dole private.
The airlines are considering asking for more government funds.
Sunday, September 22, 2002
9/22/02 Half Empty
Robert McTeer, President of the Dallas Fed: "for a while now, when it comes to the economy, the glass has either been half full or half empty..I must say,however, that half full has become a bit of a stretch lately."
Of the earnings pre-announcements for the third quarter, 52% have been negative outlooks.
Japan's cabinet office: "the growth target for 2003-2004 will be extremely difficult to achieve- deflation to continue thru fiscal 2003-2004."
The Mexican peso at a 3 year low vs the dollar. The yen at a 3 year low vs the Euro.
If Japan continues in a deflationary cycle, then why is the 10 year yield spread between Japan and the US narrowing? Maybe because the US is entering a deflationary period. If the latter occurs, stock prices will erode further and house prices will be on a similar path.
NEC lowered its forecasts.
Robert McTeer, President of the Dallas Fed: "for a while now, when it comes to the economy, the glass has either been half full or half empty..I must say,however, that half full has become a bit of a stretch lately."
Of the earnings pre-announcements for the third quarter, 52% have been negative outlooks.
Japan's cabinet office: "the growth target for 2003-2004 will be extremely difficult to achieve- deflation to continue thru fiscal 2003-2004."
The Mexican peso at a 3 year low vs the dollar. The yen at a 3 year low vs the Euro.
If Japan continues in a deflationary cycle, then why is the 10 year yield spread between Japan and the US narrowing? Maybe because the US is entering a deflationary period. If the latter occurs, stock prices will erode further and house prices will be on a similar path.
NEC lowered its forecasts.
Saturday, September 21, 2002
9/21/02 "We Are At War"
This remark was uttered by George Tenet, head of the CIA, in December 1998! He wasn't referring to the West Nile virus. I know next to nothing about politics. Rationally, however, it would appear that Russia has plutonium and uranium. As such, why shouldn't the US buy that uranium and plutonium from Russia and place it in a "vault", so to speak? In order to open the vault it would require two keys. The US could hold one and Russia the other. This, I would think, could prevent the building of a nuclear weapon. Maybe a naiive thought.
Yesterday I was wrong. Triple witching did not bring volatility upon expiration. It was a nice quiet day.
According to IDC Worldwide, spending on outsourcing services amounted to $712 billion in 2001 and will rise to $1.2 trillion in 2006.
Duke Energy warned for 2002 and 2003.
The president of Harvard said that he sees a rise of anti-semitism on the campus. That was in today's N.Y. Times.
This remark was uttered by George Tenet, head of the CIA, in December 1998! He wasn't referring to the West Nile virus. I know next to nothing about politics. Rationally, however, it would appear that Russia has plutonium and uranium. As such, why shouldn't the US buy that uranium and plutonium from Russia and place it in a "vault", so to speak? In order to open the vault it would require two keys. The US could hold one and Russia the other. This, I would think, could prevent the building of a nuclear weapon. Maybe a naiive thought.
Yesterday I was wrong. Triple witching did not bring volatility upon expiration. It was a nice quiet day.
According to IDC Worldwide, spending on outsourcing services amounted to $712 billion in 2001 and will rise to $1.2 trillion in 2006.
Duke Energy warned for 2002 and 2003.
The president of Harvard said that he sees a rise of anti-semitism on the campus. That was in today's N.Y. Times.
Friday, September 20, 2002
9/20/02 Futures And Options Expire Today. It Spells Increased Volatility
Government officials may not be worried in Japan; however, their $14.8 billion 10 year government bond auction was a bust. For the first time the bonds failed to receive enough buyers. Could that happen in the US? Land prices fell in Japan for the 11th straight year. Could that happen in the US?
Yesterday the Dow ended below 8000, and it was the first such close since July 23.
I feel so relieved! In the Journal of Science 19 prominent nuclear experts concluded that our nuclear plants could easily withstand a jetliner crash.
Alcatel to layoff 39,000 by the end of 2003.
Morgan Stanley reported its 8th consecutive quarterly decline in profits, and Knight Ridder reduced its earnings forecast.
The airline industry is getting a needed boost- the UN is sending weapons inspectors to Iraq on Oct 15. The last time I checked the US was getting 9% of its oil imports from Iraq.
Government officials may not be worried in Japan; however, their $14.8 billion 10 year government bond auction was a bust. For the first time the bonds failed to receive enough buyers. Could that happen in the US? Land prices fell in Japan for the 11th straight year. Could that happen in the US?
Yesterday the Dow ended below 8000, and it was the first such close since July 23.
I feel so relieved! In the Journal of Science 19 prominent nuclear experts concluded that our nuclear plants could easily withstand a jetliner crash.
Alcatel to layoff 39,000 by the end of 2003.
Morgan Stanley reported its 8th consecutive quarterly decline in profits, and Knight Ridder reduced its earnings forecast.
The airline industry is getting a needed boost- the UN is sending weapons inspectors to Iraq on Oct 15. The last time I checked the US was getting 9% of its oil imports from Iraq.
Thursday, September 19, 2002
9/19/02 Japan's Houdini
The Bank of Japan must have lost it. They believe hundreds of billions of dollars of bank undercapitalization can disappear by buying listed shares of stocks directly from the banks. I know the Nikkei has lost 30,000 points over the past 13 or so years but an individual would go to jail for stock manipulation. The Bank of Japan believes this action will reduce risk exposure for banks. Japan has billions of dollars of bad loans and a multitude of unprofitable companies. Houdini would make the Bank of Japan disappear.
What can you say about the management of EDS? A month ago they were upbeat and yesterday the earnings warning was so severe the stock dropped by one third. These guys were depending on business from US Airways. The stockholders need to deliver the tooth fairy to the boardroom.
Jobless claims have hit a 4 month high.
Single family home starts have fallen three months in a row, and had their sharpest drop since March.
Crude oil prices are up 40% this year. Hopefully heating oil prices will rise a lesser amount.
The Bank of Japan must have lost it. They believe hundreds of billions of dollars of bank undercapitalization can disappear by buying listed shares of stocks directly from the banks. I know the Nikkei has lost 30,000 points over the past 13 or so years but an individual would go to jail for stock manipulation. The Bank of Japan believes this action will reduce risk exposure for banks. Japan has billions of dollars of bad loans and a multitude of unprofitable companies. Houdini would make the Bank of Japan disappear.
What can you say about the management of EDS? A month ago they were upbeat and yesterday the earnings warning was so severe the stock dropped by one third. These guys were depending on business from US Airways. The stockholders need to deliver the tooth fairy to the boardroom.
Jobless claims have hit a 4 month high.
Single family home starts have fallen three months in a row, and had their sharpest drop since March.
Crude oil prices are up 40% this year. Hopefully heating oil prices will rise a lesser amount.
Wednesday, September 18, 2002
Tuesday, September 17, 2002
Posting for 9/18/02 You Thought The News Couldn't Get Worse? Forget About It!
If I were a shareholder in Hershey, I'd never eat another Reese's again. Ten of the 17 board members turned down an $89 offer or $12.5 billion from Wm Wrigley. The corporate governance world has gone completely nuts. Maybe they didn't like the proposed Wrigley Hershey name. To end the auction after a bid of that magnitude leaves me with one thought- I wouldn't want to be a stockholder in a public company incorporated in Pennsylvania. There aren't enough philly steak sandwiches to entice me.
Yesterday was a big day for profit warnings for the third quarter- McDonald's, JP Morgan, Charles Schwab, and Alcatel to name a few. These are leading companies in their respective industries. It's about time the earnings estimates got sharply reduced for the Dow and the S&P. The market will drop to reflect lower estimates. It's only a matter of time until a big down day occurs.
We had the first drop in industrial output since December 2001. Capacity utilization dropped to 76%. You still question whether we're in a recession?
It must of been an awful blow to Larry Ellison to be cautious about the outlook going forward. They're knocking their brains out at Oracle and still can't meet revenue numbers. He has plenty of company. Look at Seibel.
We're almost through the third quarter. Fall starts next week. Costco has all their Christmas merchandise out. Does that mean they have given up on Fall and are going straight to Christmas? Based on that, October and November should make for bleak reading. By the time Christmas comes around there should be great discounts on all the stale stocking stuffers, such as, Janet Reno crying towels.
If I were a shareholder in Hershey, I'd never eat another Reese's again. Ten of the 17 board members turned down an $89 offer or $12.5 billion from Wm Wrigley. The corporate governance world has gone completely nuts. Maybe they didn't like the proposed Wrigley Hershey name. To end the auction after a bid of that magnitude leaves me with one thought- I wouldn't want to be a stockholder in a public company incorporated in Pennsylvania. There aren't enough philly steak sandwiches to entice me.
Yesterday was a big day for profit warnings for the third quarter- McDonald's, JP Morgan, Charles Schwab, and Alcatel to name a few. These are leading companies in their respective industries. It's about time the earnings estimates got sharply reduced for the Dow and the S&P. The market will drop to reflect lower estimates. It's only a matter of time until a big down day occurs.
We had the first drop in industrial output since December 2001. Capacity utilization dropped to 76%. You still question whether we're in a recession?
It must of been an awful blow to Larry Ellison to be cautious about the outlook going forward. They're knocking their brains out at Oracle and still can't meet revenue numbers. He has plenty of company. Look at Seibel.
We're almost through the third quarter. Fall starts next week. Costco has all their Christmas merchandise out. Does that mean they have given up on Fall and are going straight to Christmas? Based on that, October and November should make for bleak reading. By the time Christmas comes around there should be great discounts on all the stale stocking stuffers, such as, Janet Reno crying towels.
9/17/02 Shift The Headlines
The headlines have now shifted from the jobless economy to changing the regime in Iraq. The weapon inspectors left in 1998. Four years later they are invited back. The reunion should keep the media busy. The markets will rally at the opening, oil will drop in price, bonds will drop in price along with gold. The theory put forth is the lack of justification for the Bush administration to initiate a war in Iraq. They just want a regime change. We have a good many politicians to send to Iraq to run against Saddam. If only we could get the voting booths to work.
It would be wise to keep one's eye on the ball- the economy. Earnings or the lack of move stocks day in and day out. Saddam was news a decade or so ago. Reruns hardly ever have legs at the box office.
The headlines have now shifted from the jobless economy to changing the regime in Iraq. The weapon inspectors left in 1998. Four years later they are invited back. The reunion should keep the media busy. The markets will rally at the opening, oil will drop in price, bonds will drop in price along with gold. The theory put forth is the lack of justification for the Bush administration to initiate a war in Iraq. They just want a regime change. We have a good many politicians to send to Iraq to run against Saddam. If only we could get the voting booths to work.
It would be wise to keep one's eye on the ball- the economy. Earnings or the lack of move stocks day in and day out. Saddam was news a decade or so ago. Reruns hardly ever have legs at the box office.
Monday, September 16, 2002
9/16/02 Dividend Yields
The average return on stocks is about 1.6%, and this is slighly above the inflation rate and slighly below the fed funds rate. The yield is extremely low and requires that one depend on a predictable and generous earning growth rate to buffer the downside on stocks. In other words, you are not currently getting paid much to hold on to stocks and the risks are great without earnings visibility. I again caution everyone to stay on the sidelines until the risks are lessened and the risk/reward ratio turns in your favor. Unless a miracle takes place, that could be quite some time in the future.
The average return on stocks is about 1.6%, and this is slighly above the inflation rate and slighly below the fed funds rate. The yield is extremely low and requires that one depend on a predictable and generous earning growth rate to buffer the downside on stocks. In other words, you are not currently getting paid much to hold on to stocks and the risks are great without earnings visibility. I again caution everyone to stay on the sidelines until the risks are lessened and the risk/reward ratio turns in your favor. Unless a miracle takes place, that could be quite some time in the future.
Sunday, September 15, 2002
9/15/02 Posting #2 Boeing
At 6:30 this morning I tried to post a blog on Boeing and a strike being averted; however, there was a message stating error 503 and that the problem was being worked on. At this time it still is not solved. Basically 62% of the 19,000 machinists voted to strike but it took a two thirds vote to initiate the strike. The machinists get pais $62,000 a year and if on strike only $100 per week. We will revisit this subject another day.
At 6:30 this morning I tried to post a blog on Boeing and a strike being averted; however, there was a message stating error 503 and that the problem was being worked on. At this time it still is not solved. Basically 62% of the 19,000 machinists voted to strike but it took a two thirds vote to initiate the strike. The machinists get pais $62,000 a year and if on strike only $100 per week. We will revisit this subject another day.
9/15/2002 6:33:52 AM | michael buchsbaum]
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
[9/15/2002 6:33:52 AM | michael buchsbaum]
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
9/15/02 The Cost For Averting A Boeing Strike
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
Friday evening the strike was settled. Only 62% of the 19,000 machinists voted to strike. To pass a vote to strike required two-thirds of the union members. The average machinist gets a salary of $62,000. On strike they receive $100 a week. In these times you'd expect a no strike vote would have been very one sided.
The remarks of Boeing's CEO could not have been received warmly: "It's a horrible time for all of us, and everybody at Boeing is feeling the same pain ... because our industry is in turmoil," he said. "The positive thing is we can go forward now."
In answer to a question about whether the new contract promises job security, Mulally said: "Nobody can guarantee job security in market-based economies."
Maybe the CEO could have mentioned that Airbus has taken the lead in aircraft production. Maybe the problem at Boeing starts with the management. Maybe the directors should consider management job security Boeing's troubles started way before 9/11.
Saturday, September 14, 2002
9/14/02 Posting #2 Hands Off The Economy
In Greenspan's speech last Thursday he was taking a page from the late Austrian economist Ludwig von Mises, who developed his theories in the 1910s and 1920s. Mises said that, once the depression (he didn't use the term recession) arrives, the government must cease inflating, cease bailing out unsound businesses, cease encouraging consumption spending, and must reduce the government budget.
Coolidge's intervention helped to fuel the depression of 1929, which Mises correctly predicted. In 2002 we need not a new deal but rather a new government hand- Hands Off the economy, cut government spending, and reduce the budget deficit.
In Greenspan's speech last Thursday he was taking a page from the late Austrian economist Ludwig von Mises, who developed his theories in the 1910s and 1920s. Mises said that, once the depression (he didn't use the term recession) arrives, the government must cease inflating, cease bailing out unsound businesses, cease encouraging consumption spending, and must reduce the government budget.
Coolidge's intervention helped to fuel the depression of 1929, which Mises correctly predicted. In 2002 we need not a new deal but rather a new government hand- Hands Off the economy, cut government spending, and reduce the budget deficit.
9/14/02 The Bottomline Is Dwindling
Economists and analysts extol the recent retail sales numbers which grew .08% in August. Without autos the rise is 50% less. So the auto industry in August sold at a 17 million car rate. Ford is making $8 a car or possibly a ticket to see a movie. There isn't any inflation. Prices are coming down and so are profits- if there are any.
It's not just Lucent, Honeywell, and Hitachi having trouble. So far, of the S&P 500 companies pre-announcing earnings for the third quarter, 52% of them said they would not meet earnings projections, and many of those projections were modest in the first place. In other words, profits are trending down faster than anticipated.
You can go to the bank that Japan and China will continue to export into the US and lower prices as necessary to move merchandise. To the greatest extent business today is a matter of price. The consumer wants 0% financing and 70% off sales. With our current job malaise you can't blame the consumer for wanting a bargain. It's been a long time in coming, and that trend will be here for a very long time.
Fasten your seatbelts. Deflation is around the corner. The recession is here. The question is whether the big D is looming. We need to be making provisions for more soup kitchens. That's not a joke!
Economists and analysts extol the recent retail sales numbers which grew .08% in August. Without autos the rise is 50% less. So the auto industry in August sold at a 17 million car rate. Ford is making $8 a car or possibly a ticket to see a movie. There isn't any inflation. Prices are coming down and so are profits- if there are any.
It's not just Lucent, Honeywell, and Hitachi having trouble. So far, of the S&P 500 companies pre-announcing earnings for the third quarter, 52% of them said they would not meet earnings projections, and many of those projections were modest in the first place. In other words, profits are trending down faster than anticipated.
You can go to the bank that Japan and China will continue to export into the US and lower prices as necessary to move merchandise. To the greatest extent business today is a matter of price. The consumer wants 0% financing and 70% off sales. With our current job malaise you can't blame the consumer for wanting a bargain. It's been a long time in coming, and that trend will be here for a very long time.
Fasten your seatbelts. Deflation is around the corner. The recession is here. The question is whether the big D is looming. We need to be making provisions for more soup kitchens. That's not a joke!
Friday, September 13, 2002
9/13/02 Posting #2 The Clock Is Winding Down On Attracting Foreign Capital
Yesterday I touched on our record quarterly current account deficit of $130 billion. This deficit now has reached a 5% level of our GDP, a very dangerous position. Japan's account surplus is 36% of their GDP, Norway's is 14.7%, and Switzerland's is 9.9%. If I were a foreigner looking at alternative places for my money, Norway may be a good stopping off spot. They are large exporters of oil and their interest rates are attractive at 7%. There are alternatives for foreigners. We can no longer be nonchalant about attracting foreign capital in order to bridge our deficits.
Yesterday I touched on our record quarterly current account deficit of $130 billion. This deficit now has reached a 5% level of our GDP, a very dangerous position. Japan's account surplus is 36% of their GDP, Norway's is 14.7%, and Switzerland's is 9.9%. If I were a foreigner looking at alternative places for my money, Norway may be a good stopping off spot. They are large exporters of oil and their interest rates are attractive at 7%. There are alternatives for foreigners. We can no longer be nonchalant about attracting foreign capital in order to bridge our deficits.
9/13/02 Excerpts From Greenspan's Testimony To The House Budget Committee
I am providing these excerpts because the tone and subject matters of the speach were different from the past, and he touched on areas I have discussed in my past blogs, such as, gov't spending, the looming budget deficit, and the aging of our population. The following excerpts are Greenspan's personal views and not necessarily the views expressed by the entire Federal Reserve.
" A year ago, the Congressional Budget Office expected the unified budget to post large and mounting surpluses over the coming decade. As you know, CBO is currently forecasting that, if today's policies remain in place, the unified budget will post deficits through fiscal year 2005. For the fiscal year just ending, CBO now projects a budget balance that is more than $300 billion below the level it had projected a year ago.
To a degree, the return to budget deficits resulted from temporary factors, especially the falloff in revenues and the increase in outlays associated with the economic downturn. But some of the factors accounting for the weaker budget outlook will have longer-lasting effects. A large portion of this year's decline in individual income tax revenues is clearly related to the retrenchment in equity markets. The sharp decline in stock prices appears to have markedly reduced final settlements for the 2001 tax year, as well as receipts on 2002 income. This effect works directly through less tax revenue from capital gains realizations, and indirectly through less revenue collected from the exercise of stock options, from stock-price-related bonuses, and from withdrawals from IRAs and 401(k) plans that have been augmented by capital gains.
The budget enforcement rules are set to expire on September 30. Failing to preserve them would be a grave mistake. For without clear direction and constructive goals, the inbuilt political bias in favor of budget deficits likely will again become entrenched. We are all too aware that government spending programs and special tax benefits can be easy to initiate or expand but extraordinarily difficult to trim or shut down once constituencies develop that have a stake in maintaining the status quo. However, spending and tax-cutting restraint are not symmetrical. While there is no upside limit to spending, taxes cannot go below zero. In any case, the bottom line is that if we do not preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard effort could be squandered.
Besides the near-term budgetary shortfalls that we currently face, the aging of the population presents a daunting long-term fiscal challenge. Indeed, the extent of that challenge is not adequately reflected in conventional measures of the federal budget.
Scoring the budget on an accrual basis--the private sector norm and, I believe, a sensible direction for federal budget accounting--would better underscore the tradeoffs we face. Under accrual accounting, benefits would be counted as they are earned by workers rather than when they are paid out by the government. This method allows us to keep better track of the future obligations that the government has incurred. Under full accrual accounting, the social security program would have shown a substantial deficit last year, rather than the surplus measured under our current cash-accounting regimen.
Such accruals take account of still-growing contingent liabilities, which currently, under most reasonable sets of actuarial assumptions, amount to many trillions of dollars for social security benefits alone. The contingent liabilities implicit in the Medicare program are much more difficult to calculate--but they are also likely in the trillions of dollars. These liabilities are fast approaching their due date. With the baby boom generation beginning to retire in just six short years, cash benefits will soon begin to rise rapidly, exerting pressure on the unified budget.
Given the imminence of these demographic pressures, we need to begin deciding exactly how to reform our retirement programs to close the gap between unified budget outlays and revenues. In essence, we will have to decide how to allocate available resources. All possible policy solutions should be on the table.
More fundamentally, the way to prepare for the challenges ahead is to increase the real resources that will be available to meet those looming needs. The greater the resources available --that is, the greater the output of goods and services produced by our economy--the easier it will be to provide real benefits to retirees without unduly restraining the consumption of workers and without imposing large tax increases that would damp incentives and reduce economic growth.
Returning to a fiscal climate of continuous large deficits would risk returning to an era of high interest rates, low levels of investment, and slower growth of productivity. . But history suggests that an abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth, and force harder choices upon us in the future. "
.
I am providing these excerpts because the tone and subject matters of the speach were different from the past, and he touched on areas I have discussed in my past blogs, such as, gov't spending, the looming budget deficit, and the aging of our population. The following excerpts are Greenspan's personal views and not necessarily the views expressed by the entire Federal Reserve.
" A year ago, the Congressional Budget Office expected the unified budget to post large and mounting surpluses over the coming decade. As you know, CBO is currently forecasting that, if today's policies remain in place, the unified budget will post deficits through fiscal year 2005. For the fiscal year just ending, CBO now projects a budget balance that is more than $300 billion below the level it had projected a year ago.
To a degree, the return to budget deficits resulted from temporary factors, especially the falloff in revenues and the increase in outlays associated with the economic downturn. But some of the factors accounting for the weaker budget outlook will have longer-lasting effects. A large portion of this year's decline in individual income tax revenues is clearly related to the retrenchment in equity markets. The sharp decline in stock prices appears to have markedly reduced final settlements for the 2001 tax year, as well as receipts on 2002 income. This effect works directly through less tax revenue from capital gains realizations, and indirectly through less revenue collected from the exercise of stock options, from stock-price-related bonuses, and from withdrawals from IRAs and 401(k) plans that have been augmented by capital gains.
The budget enforcement rules are set to expire on September 30. Failing to preserve them would be a grave mistake. For without clear direction and constructive goals, the inbuilt political bias in favor of budget deficits likely will again become entrenched. We are all too aware that government spending programs and special tax benefits can be easy to initiate or expand but extraordinarily difficult to trim or shut down once constituencies develop that have a stake in maintaining the status quo. However, spending and tax-cutting restraint are not symmetrical. While there is no upside limit to spending, taxes cannot go below zero. In any case, the bottom line is that if we do not preserve the budget rules and reaffirm our commitment to fiscal responsibility, years of hard effort could be squandered.
Besides the near-term budgetary shortfalls that we currently face, the aging of the population presents a daunting long-term fiscal challenge. Indeed, the extent of that challenge is not adequately reflected in conventional measures of the federal budget.
Scoring the budget on an accrual basis--the private sector norm and, I believe, a sensible direction for federal budget accounting--would better underscore the tradeoffs we face. Under accrual accounting, benefits would be counted as they are earned by workers rather than when they are paid out by the government. This method allows us to keep better track of the future obligations that the government has incurred. Under full accrual accounting, the social security program would have shown a substantial deficit last year, rather than the surplus measured under our current cash-accounting regimen.
Such accruals take account of still-growing contingent liabilities, which currently, under most reasonable sets of actuarial assumptions, amount to many trillions of dollars for social security benefits alone. The contingent liabilities implicit in the Medicare program are much more difficult to calculate--but they are also likely in the trillions of dollars. These liabilities are fast approaching their due date. With the baby boom generation beginning to retire in just six short years, cash benefits will soon begin to rise rapidly, exerting pressure on the unified budget.
Given the imminence of these demographic pressures, we need to begin deciding exactly how to reform our retirement programs to close the gap between unified budget outlays and revenues. In essence, we will have to decide how to allocate available resources. All possible policy solutions should be on the table.
More fundamentally, the way to prepare for the challenges ahead is to increase the real resources that will be available to meet those looming needs. The greater the resources available --that is, the greater the output of goods and services produced by our economy--the easier it will be to provide real benefits to retirees without unduly restraining the consumption of workers and without imposing large tax increases that would damp incentives and reduce economic growth.
Returning to a fiscal climate of continuous large deficits would risk returning to an era of high interest rates, low levels of investment, and slower growth of productivity. . But history suggests that an abandonment of fiscal discipline will eventually push up interest rates, crowd out capital spending, lower productivity growth, and force harder choices upon us in the future. "
.
Thursday, September 12, 2002
9/12/02 Posting #2 The Way It Really Is
US initial jobless claims for the week ended Sept 7 climbed by 19,000 to 426,000, and it was the highest level since April 20.
US account deficit widened to a record $130 billion in the second quarter. We're on a roll. I feel confident the number can get larger.
US initial jobless claims for the week ended Sept 7 climbed by 19,000 to 426,000, and it was the highest level since April 20.
US account deficit widened to a record $130 billion in the second quarter. We're on a roll. I feel confident the number can get larger.
9/12/02 16B
This is not a typo describing a bra size. It's an SEC regulation covering stock options, and, is in my opinion the root of much trouble. The regulation states that a stock option purchase occurs when the option is granted rather than exercised. This is significant because risk for holding the stock can be avoided. For example, an option could be granted(that does not mean it's vested then) on Jan 2, 2002 but not exercised until July 2, 2002 at 9:30am EST and then sold 10 seconds later on the same day. Hundreds of millions of gains were realized via this method during the 1998-2000 period. The rest of the stockholders, who did not have options granted to them, were at risk the moment they purchased stock, and this problem continues to exist. I believe this inequality is a more important matter than the expensing of stock options.
There was a 10.8% increase in credit card debt in July.
Fifty five percent of 50 economists just surveyed believe there is only a 25% chance of a double-dip recession. At the same time two thirds of those polled believe the unemployment rate hasn't peaked. For some reason the two statements don't appear to go hand in hand.
The beige book expressed "widespread concern about the effect that rising health care costs might have on labor costs." They didn't address my concern about 40 million Americans not having health care coverage, and this number rises daily.
This is not a typo describing a bra size. It's an SEC regulation covering stock options, and, is in my opinion the root of much trouble. The regulation states that a stock option purchase occurs when the option is granted rather than exercised. This is significant because risk for holding the stock can be avoided. For example, an option could be granted(that does not mean it's vested then) on Jan 2, 2002 but not exercised until July 2, 2002 at 9:30am EST and then sold 10 seconds later on the same day. Hundreds of millions of gains were realized via this method during the 1998-2000 period. The rest of the stockholders, who did not have options granted to them, were at risk the moment they purchased stock, and this problem continues to exist. I believe this inequality is a more important matter than the expensing of stock options.
There was a 10.8% increase in credit card debt in July.
Fifty five percent of 50 economists just surveyed believe there is only a 25% chance of a double-dip recession. At the same time two thirds of those polled believe the unemployment rate hasn't peaked. For some reason the two statements don't appear to go hand in hand.
The beige book expressed "widespread concern about the effect that rising health care costs might have on labor costs." They didn't address my concern about 40 million Americans not having health care coverage, and this number rises daily.
Wednesday, September 11, 2002
9/11/02 Proverbs 3:25 Do Not Fear Sudden Terror, Nor The Destruction Of The Wicked When It Comes.
Psalm 29: The Lord will give strength to His people. The Lord will bless His people with peace.
Josephus stated that free-will is granted to every man. If he desires to incline towards the good way, and be righteous, he has the power to do so; and if he desires to incline towards the unrighteous way, and be a wicked man, he has the power to do so. Additionally, we see in Exodus that God has given the reins of man's conduct altogether into his hands.
Bruce Lee, Enter the Dragon: " We need emotional content- not anger."
Psalm 29: The Lord will give strength to His people. The Lord will bless His people with peace.
Josephus stated that free-will is granted to every man. If he desires to incline towards the good way, and be righteous, he has the power to do so; and if he desires to incline towards the unrighteous way, and be a wicked man, he has the power to do so. Additionally, we see in Exodus that God has given the reins of man's conduct altogether into his hands.
Bruce Lee, Enter the Dragon: " We need emotional content- not anger."
Tuesday, September 10, 2002
9/10/02 Quotes For Tuesday
Bank for International Settlements: "The recent decline in share values might forshadow some downward pressure on house prices...that to a greater extent than before, share prices indicated a loss of confidence in the financial sector... every previous recession has been accompanied by at least a slowdown in housing price increases."
Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over Time? : "Average first day gain in IPOs was 7% during the 1980s, 15% during 1990-98, but 65% during 1999-2000."
Sir Edward George, chairman of G10 central bankers: "It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip...the wages developments in the eurozone plus very slow productivity growth in this more modest growth environment could have an upward effect, not a huge upward effect, on inflation."
Rand Institute: "Asbestos lawsuits affect 85% of the US economy... the longest-runing mass tort litigation in US history."
Bank for International Settlements: "The recent decline in share values might forshadow some downward pressure on house prices...that to a greater extent than before, share prices indicated a loss of confidence in the financial sector... every previous recession has been accompanied by at least a slowdown in housing price increases."
Tim Loughran and Jay Ritter, Why Has IPO Underpricing Changed Over Time? : "Average first day gain in IPOs was 7% during the 1980s, 15% during 1990-98, but 65% during 1999-2000."
Sir Edward George, chairman of G10 central bankers: "It is not a strongly negative situation. I do not think there was anybody talking in terms of double dip...the wages developments in the eurozone plus very slow productivity growth in this more modest growth environment could have an upward effect, not a huge upward effect, on inflation."
Rand Institute: "Asbestos lawsuits affect 85% of the US economy... the longest-runing mass tort litigation in US history."
Monday, September 09, 2002
9/9/02 The Colors On Our Flag Do Not Run. They Fly.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
As we begin the week of September 11, I give thanks for living in this great country of ours. On September 11 thousands of innocent Americans died along side hundreds and hundreds of freedom fighters, our every day heroes. Wars have been fought for centuries in this country. We will win this war just as we have defeated Hittler and other demons before him. As Americans stand together, we get stronger and our collected will rings with increasing resolve. Our flag flies with honor, grace, and strength.
Sunday, September 08, 2002
9/8/02 Sunday's Thoughts
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Stock brokerage firms employ roughly the same number of people as live in San Francisco- 727,000. The comparison ends there.
"Nothing has come to anybody's attention that we have done anything wrong," proclaimed Citigroup's Sandy Weill. Just to be charitable Citigroup is paying a $200 million fine to settle alleged FTC charges of predatory lending practices. Imagine the fine were it an accounting scandal. Someone could have been indicted.
Crude oil is back to a one year high of $30 a barrel.
We have a $10 trillion U.S. economy. The 2 year bear market has wiped out $7 trillion in wealth. This might be an indication of how inflated the values really were. Ben Graham would argue they still are overvalued.
When Williams Companies took down a one year loan from Buffett's Berkshire Hathaway, the interest rate was set at 19.8%. Williams must have put the loan on its Visa or Mastercard.
Friday, September 06, 2002
9/6/02 Posting #3 Voodoo Unemployment Rate
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
There is no way the unemployment rate dropped. A survey of 60,000 households was taken. How about looking at the overall available data. There are still 1.5 million people out of work for 27 weeks; the 4 week moving average for first time unemployment claims is the highest in about 3 months; only 162,000 non-farm payroll jobs have been added in the past 4 months and that includes 39,000 in the latest period, or 2000 below the 4 month average. The private sector lost jobs in the latest period. Do the math.
9/6/02 Posting #2 Spur Consumer Spending
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
Here's my plan. The goverment should issue credit cards to all consumers. They would come with 0% interest and no monthly payments until 2005. Let the consumer spend our way out of the present economic malaise instead of the Congress running up the budget deficits on favorite pork programs and overstaffing.
Right now 40% of credit cards are held by sub-par borrowers. Extending credit cards to everyone wouldn't be such a leap of faith. Maybe the government could carry the debt as an off balance sheet item. They can hire some folks from Enron to show them the way.
9/6/06 The Employer Of Last Resort
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Great news!!!! Payrolls increased 39,000 for August. Now the bad news. The entire increase was new hiring by the government. Nothing has changed. With enormous deficits the government just spends and spends with money they don't have. If this were a business, the doors would have been closed a long time ago.
Thursday, September 05, 2002
9/5/02 Posting #2 The United States
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
The latest ISM employment index fell to 47.3, and this reflects the 18th consecutive month of job losses. The four week moving average of first time unemployment claims rose to its highest level since June 8. For anyone dismissing these facts, WalMart certainly is paying attention as their latest sales numbers rose only 3.8%
9/5/02 Germany
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Their unemployment rate rose to 9.9% and manufacturing orders dipped. If large developed economies are weak, who is going to purchase our exports? It's pretty predictable our unemployment rate will rise in the near future. When it does, consumer confidence will weaken some more. You can bet earnings estimates will continue to drop. Winter will soon be upon us. One might consider investment hibernation.
Wednesday, September 04, 2002
9/4/02 Posting #2 Thoughts For The Afternoon
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
I love all the talk from pundits who say stocks are cheap. What's cheap is their talk. Wake me up when one pundit says he or she is purchasing stocks for his/her own account and is unhedged.
In a prior blog I gave my thoughts on Hershey as a risk arbitrage investment. Now to add some spice a judge issued a TRO against a possible sale. Going into court should be avoided at all costs. As I said, buying some Reese's in a store is the best idea.
A German newspaper reports that UBS has thoughts of making an offer for Merrill Lynch. UBS denied the story. At some time I believe Merrill Lynch will be acquired.
9/4/02 The Nikkei 225
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
With a closing low just above 9000 the Nikkei made a 19 year low. You're possibly thinking 9000 isn't so bad because the Dow is at 8300. The difference is a drop of 30,000 points rather than 4000. What's a few points between friends.
You might be thinking Japan is Japan and we're the U.S. As long as men put their pants on one leg at a time and women need to snap their bras closed, there are similarities to cultures. Countries are not run by robots. When the good times roll, most everyone believes they'll roll on for ever. It gets infectious and then the next thing you know there is an infection caused by overindulgence and it is necessary for the patient to rest and get stronger. Japan has been in that state for 19 years. The U.S. has just begun the process. If you rush out too soon, you'll just have a worse relapse.
Tuesday, September 03, 2002
9/3/02 Posting #3 It's Just Business
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
As I mentioned at the beginning of my Aug. 19 blog, 9000 on the Dow and 1400 on the Nasdaq were good spots to sell into the then rally in this 28 month bear market. No one enjoys losing money. The idea is to preserve capital by limiting losses and letting the gains in great companies run. That's the way to come out a winner. We cannot be right on all of our investments. When wrong, swallow the red ink and don't take it personally. The market doesn't know your name or recognize your face. Learn from the loss and don't repeat the same mistake. Don't make excuses. It's your money and it's your decision to buy or sell a stock. If you've given power of attorney to someone else, that too is your decision. Do not lose more than you can afford- under any circumstances. Use stop losses when necessary. Bear markets can be ugly. They don't take any prisoners.
9/3/02 Winning Creates Believers
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
The current bear market has lasted 28 months, extinguished $7 trillion in value, and is the longest bear market since the 1930's. Along the way it has created more and more non-believers in the stock market and corporate America.
Yesterday the A's won their 19th straight thereby tying an American League record with the 1906 Chicago White Sox and the 1947 New York Yankees, the latter possibly the greatest team ever. When Jason Giambi was signed by the Yankees, no one gave Oakland much of a chance to succeed. As their first baseman says, "we've come so far and it's going to end sometime, but we have so much confidence." They believe in themselves and their growing fans believe in them. It's fun to watch a winner.
As we can see, every once in a while a streak will start and build on itself. Confidence and believing are often the keys to keeping it alive. In the case of the stock market it's the exact opposite- lack of confidence and non-believing- that keep the bear market streak alive.
Monday, September 02, 2002
9/2/02 Labor Day
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
I am wondering. Do the unemployed celebrate labor day? When your employer goes out of business, and then the only job you can get is behind the counter at Starbucks, do you feel joyous about celebrating labor day? If you are unemployed, do you want to march in the labor day parade?
The Economy Policy Institute recently issued a report on the job situation and stated "with the boom gone bust, American workers are headed back to an economy marred by slow wage growth and no job growth, with wage and income disparities widening again."
Over the past two years unemployment has risen by almost 3 million. Of course, that doesn't include millions of service workers receiving $7 per hour and making ends meet.
Then the Institute described hidden unemployment of another 1 million with "a weak labor market in which potential job seekers avoid even attempting to enter the workforce because they are pessimistic about their employment prospects."
Then I turned to all the upbeat comments on productivity. With higher job uncertainty and greater income inequality it's no wonder there is greater productivity. So many jobs are tenuous the worker is afraid to say "take this job and shove it."
Sunday, September 01, 2002
Facts For A Sunday
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Statistics show that less than 29% of women have orgasms during intercourse.
Statistics show that less than 29% of mutual fund money managers beat the averages year in and year out.
In 2000 AOL settled a prior SEC inquiry by paying a fine and promising not to break securities laws again.
InDuring the first 6 months of 2002 the number of millionaire households dropped by 17%.
The A's win their 17th straight, the major's longest winning streak in 49 years.
Although interest rates have dropped in 2002, most corporate bond fund returns have declined this year.
Cocoa hit a 15 year high in N.Y. and London trading.
Opec meets Sept. 19 in Osaka.
Citigroup sold their 399 Park Ave. Manhattan headquarters building with 1.68m sq ft for $1.06 billion.
Arthur Andersen had 2500 public companies for clients.
Siebel to buy up to $32 million of worthless share options(exercise prices at $40 & up) from its employees.
Saturday, August 31, 2002
8/31/02 "It Was Very Difficult To Definitely Identify A Bubble Until After The Fact"
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
That's what Alan Greenspan said yesterday to a symposium of the Federal Reserve Bank of Kansas City in Jackson Hole, Wyoming. Maybe Greenspan might have inquired of the elk, moose, and buffalo wandering in Yellowstone. They might have had experience with bubbles in the many streams and rivers. In the end, markets characterized by supply and demand correct bubbles as well as recessions. The Fed reads the market's tea leaves. They make policy after the facts. The only certainty is the marketplace itself. The on-going bubble is the imagined halo formed around the Fed. I cannot say with certainty when that bubble will burst.
Friday, August 30, 2002
8/30/02 Housing
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
In prior blogs I have opined that the housing market has peaked at the bubble stage. There are many who disagree with me including the Fed's Greenspan. Clearly, corporate officials and board members of housing companies agree with me. In the latest quarter they were net sellers of about $260 million worth of stock in their own companies. It is the largest insider selling in housing stocks in 6 years. I consider the selling significant. These individuals should understand their business better than anyone. I wouldn't want to buck their selling. It reminds me of all the selling by insiders in the dotcom stocks at the height of that bubble. We must remember that policymakers like Greenspan aren't in the trenches.
Thursday, August 29, 2002
8/29/02 The GDP Report
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1.0 billion pace and contributing strongly to the quarter's overall growth rate. That growth rate of just over 1% should indicate how weak the economy really is. An inventory build up will only mean markdowns in the coming months and lower corporate margins.
It's most unfortunate that politicians and the media feel a need to talk up the economy in the hopes of improving confidence. The stock market has been declining for over 2 years and the economy has been following in the same direction for months and months. There isn't a double dip- just one extended dip. Rallies in bear markets are still part of a bear market. The same is true with the economy. Rallies take place at lower levels for both.
Wednesday, August 28, 2002
8/28/02 September
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
First I want to apologize for some postings which are duplicate and triplicate in nature. I stink at technology!
Now for the real stuff. SEPTEMBER IS THE WORST MONTH FOR THE STOCK MARKET. In the last 50 years or so the market has been down 80% of the time in September. My suggestion- do nuthing. If you think you're smarter than the percentages, I can find a nice plot for you at Forest Lawn.
Tuesday, August 27, 2002
8/27/02 Posting #2 Congressional Budget Office
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
Today the CBO forecast cumulative surpluses of $336 billion from 2002 thru 2011, down from $1.7 trillion only 5 months ago and $5.6 trillion last year. This is rather incredible for an economy supposedly ramping up. They also projected a deficit of $145 billion for 2003, and that the budget would not be balanced until 2006. At election time I am certain you will be hearing these forecasts over and over again. One should remember the CBO is non-partisan.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. Additionally, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
8/27/02 Durable Goods
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
For the month of July durable goods rose approximately 9%(ex transportation 3.7%) and this reverses a very disappointing June. One must remember how volatile durable goods are from month to month and they are almost impossible to predict with accuracy. Without question the big mover behind the numbers is the 0 % financing for autos. Yesterday the big Dow stock was GM. Some folks must have been enthusiastic about the durable goods numbers to be announced today. Still, there is basically no hiring in the manufacturing sector. If there were, I'd get more excited. In addition, Intel was unable to give any clue about potential IT pick up, and that is troubling but not surprising.
Monday, August 26, 2002
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
8/26/02 A Pimple On An Elephant's Ass
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
This week the media will make a big deal that in July $50 billion, the largest monthly amount on record, was pulled out of stock funds. We have about 60 billion households owning stock and bond funds, and $50 billion represents only about 1 1/2% of their total fund holdings. As such, redemptions potentially have a long way to go. Over the past two years the smart money has been selling. I have confidence in the public, and they are a lot smarter than most "smart" money managers. The $50 billion will prove to be a drop in the bucket or even a pimple on an elephant's ass.
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