11/10/03 Follow The Sun
I know something about running a business with factories as well as running a business without factories. I found my greatest success was running both businesses around the clock. Cost per unit were reduced in the factory. In the non-factory business, there are significant advantages in timing, execution, and delivery. I have experienced both over the past 23 years. Oracle Corp. of Redwood Shores formed their subsidiary in India in 1993. They had some engineers working there on a project by project basis. In 1996 the subsidiary received its first product to deliver on its own, and the result was successful. From there, in 1999, Oracle adopted the follow the sun business model. Projects begun in Redwoord Shores would be handed off via telecommunications to the technical staff in India. When the staff in California was asleep, the engineers in India would be working on the project, and vice versa. Oracle has locations in Hyderabad and Bangalore, and they are building a new seven-acre campus in Hyderabad. When completed, Oracle will have about 4,000 employees in India. Oracle is hiring about 4 engineers each work day. It’s not just about cost savings. Engineering costs do run less than half of that in the United States. That’s important; however, it’s also vital to be closer to your customers, and Oracle does 60% of its business outside the U.S. India is the company’s fifth-largest market in Asia, with more than 6,000 customers. This is the hi-tech workplace of today and tomorrow.
There is an interesting study by Ben Jacobsen, an associate professor of finance at Erasmus University in Rotterdam, and two of his students, Gerben Driesprong and Benjamin Maat. They have studied the relationship between oil prices and the U.S. market for stocks from October 1973 to April2003. They found “changes in oil prices strongly predict future stock market returns.” The study is available at http://papers.ssrn.com/sol3/papers.cfm?abstract-id=460500. They constructed a hypothetical portfolio that shifted entirely into short-term Treasury bills whenever oil prices rose during the previous month by more than 5%. When prices rose less than 5%, the portfolio was kept in stocks. During the period studied, after transaction costs, their portfolio gained 11.5% versus a buy and hold performance of plus 10.4% a year on average; however, their portfolio was 30% less risky than buying and holding, as measured by the volatility of its returns. It should be noted that, although successful, they found the stock market moved in the direction suggested by the model only 52% of the time. They began the study in 1973 because oil did not trade freely before that year.
Blue Cross Blue Shield of Massachusetts (BCBSMA) uses more than 90% of every premium dollar topay doctors, hospitals, and prescription drug bills. The company has been successful in managing costs while enhancing the quality of care its members receive. The company is expected to earn a two per cent targeted operating profit margin in 2003. They are reducing premium increases in 2004 and expects to reduce the margin from two per cent down to one per cent by the end of next year. They are New England’s largest health plan and serve 2.5 million members.
In the latest Newsweek poll, 50% would not re-elect Bush, and 48% disapprove of his handling of the economy. This poll was taken after the good news was released on jobs and productivity. Fifty six per cent are worried about their ability to have enough savings for retirement and fifty three per cent are concerned about being able to pay medical and health care costs.
On Sunday evening south of Baghdad, a U.S. soldier was killed in a rocket-propelled grenade attack. The latest death brought to 151 the number of American soldiers killed in hostile action since President Bush declared major combat in Iraq over on May 1.
Bankruptcy attorneySteven Jurista stated that “solicitations for credit cards are absolutely out of control.” He asserts that consumers are already carrying debts of $10,000 at 20% per year. There is a good side. About 40% of Americans pay their credit card debts in full every month, he said. Alan Franklin, president of American Credit Alliance, warns against hoe-equity loans because “you never know when you are going to lose your job or get a very expensive illness. If you borrow, say $20,000, and start missing payments, lenders can take your house, even if it has $100,000 in equity.”
Meta Group analyst Jack Gold: “Everyone falls off a cliff at some point if they don’t see the cliff coming.” That includes economists and their theories. N. Gregory Mankiw is the chairman of the President’s economic council. Mankiw has written several analyses on the natural rate, NAIRU, monetary policy, and productivity. NAIRU is not another spelling for a Nehru jacket. In economist speak it stands for “non-accelerating inflation rate of unemployment.” These guys think up phrases to make themselves appear more erudite. Of course, no one understands a word they are saying. NAIRU is the unemployment rate consistent with maintaining stable inflation. The theory is that inflation will tend to rise if the unemployment rate falls below the natural rate, and conversely, when unemployment rises above the natural rate, inflation tends to fall. Since 1961, the average long-run employment rate is approximately 6%, or the level it is today. Since 1961. wehave never experienced short-term interest rates at 1% combined with productivity gains of 8% with an unemployment rate of 6% and a core inflation rate less than 2%. The composition of the labor force is changing with more service workers employed at wages at $10 per hour and under, and less skilled workers employed at $40,000 per year and higher. For example, we have discussed the highly skilled engineers being hired daily by Oracle in India with no job growth in the U.S. In fact, the U.S. payrolls have been lessened at that company. In addition, there are longer periods of uemployment and wage demands have lessened. This has contributed to lower core wage inflation. In addition, workers have concerns for their jobs. As we have seen in the auto industry, strikes have eventually led to plant closures. There may not be a direct connection, but worker dissatisfaction creates a less productive employee, and costs escalate for the employer. Mankiw has promoted the hypothesis that the decline in the NAIRU is attributable to the acceleration in productivity growth. I think we are discovering many other factors are contributing to changes in the NAIRU, and thus, refinements in monetary policy should be forthcoming.
Sunday, November 09, 2003
11/9/03 Home For The Holidays
Contributions to major charitable organizations fell last year for the first time in 12 years, according to The Chronicle of Philanthropy’s annual survey of the nation’s 400 largest nonprofit organizations. Donations dropped 1.2% last year to $47 billion. During the previous five years, donations increased an average of 12% each year. There is a rising demand for services, declining donations from individual donors, diminished endowments for foundation donors, and reduced grants from strapped federal and state governments. In his Saturday radio address, President Bush mentioned that this year’s stock market rally had added $2 trillion to the nation’s wealth; however, he did not state that charities anticipate heavier than usual demand for services between now and the end of this year. The organizations that provide meals to the needy are expecting they will need more food this Thanksgiving and Christmas. Providers are serving more people in the nationwide soup kitchens on a daily basis. Patrick M. Rooney, research director at the Center on Philanthropy at Indiana University, stated “giving falls…as personal incomes and corporate profits plunge.” How can that be after profits from continuing operations at the S&P 500 companies expanded at a rate of nearly 22% in the most recent quarter? The answer is right under the nose of every investor. The boards of public companies and their CEOs don’t feel good about those profits. It’s nice to show operating improvement; however, for the vast majority, it comes via cost cutting and eliminating employees and shutting plants. For every eBay, there are 100s that are not increasing revenues. Just as the economic recovery is a quite different from the past, so is the holiday season for the disadvantaged. This year, in addition to the unemployed seeking help, a record number of minimum-wage workers cannot afford to buy presents and still afford food and rent. In addition, there are a rising number of grandparents requesting gifts for grandchildren who live with them as well as more victims of domestic violence who are seeking aid. As Peggy Vick, the Salvation Army’s director of family services notes, “all these families find themselves in a crunch of some kind. They are all just trying to hold everything together and provide something for the children at Christmas.”
With Veterans’ Day approaching, Democrats charged that Republican-passed tax cuts and spending priorities have undermined the nation’s ability to provide health care and benefits to those who served in uniform. Rep. Chet Edwards in the Democrats’ weekly radio address stated “I have great concern that trillion dollar tax cuts to some of America’s wealthiest families have cut into our promise to support a decent quality of life for our military families and quality health care for our veterans. What message does it send to our veterans when the Administration says American taxpayers can afford to build new hospitals in Iraq, but we cannot afford to keep open veterans hospitals here at home?” He said 60,000 veterans were waiting six months or more for an appointment at a VA hospital. Edwards remarked “that is unacceptable. Democrats have proposed increasing funding for VA hospitals, expanding health access to health care for the National Guard and Reserves, and improving the health care injured veterans receive when they return from Iraq. Democrats are working hard to end the unjust disabled veterans tax for all veterans, and not just a few. The current Republican plan has been called ‘unacceptable’ by the American Legion, and we agree.”
I feel confident that not too many readers have heard the name Tan Kong Cheok, a 28 year old Singaporean. He started working for his father 16 years ago. At that time he packed boxes for his father, who runs Fullmark, a Singaporean ink refill-kit maker. For two and one-half years Tan worked on a product that would change the nature of the computer-ink business. Tan achieved what no one else has been able to accomplish. His product was launched in September at Singapore’s Comex show. He expected to sell 200 units. He ran out of product in the first three or four hours, says Jeremy Wagstaff. In the first two weeks he sold 5,000 units. The system is fool-proof. One places an old, empty cartridge in one side of Tan’s Inke machine, place an Inke tank on the other side, press a button, and a few minutes later the cartridge is full of ink. The manufacturer can be found at www.inke.com.sg and the average user should save more than $300 over 3 years. The product is guaranteed for 30 refills, but it should provide a much longer life as Tan has managed to recycle the same cartridge 30 times in some cases. The Inke machine costs between $45 and $60 and comes with three ink-tanks or the equivalent of three new black cartridges. It is available in Singapore, and early next year will be available worldwide. Now it’s available only for Hp printers, but Tan soon promises them for Epson, Lexmark, and Canon printers. The HP profit margins and cash flow will be hurt by Tan’s invention.
Clint Willis points out that there have been 10 bull markets since 1950, and they have delivered average gains of 133% over average periods of 50 months. Since 1950, there have been 10 bear markets that have created losses of 27% over 13 months. As he points out, “even the smartest investors can’t consistently predict what the stock market will do next.”
India’s National Association of Software and Service Companies (Nasscom) is an umbrella grouping of 850 companies. Nasscom estimates that job outsourcing to India saved U.S. companies $10-$11 billion in 2001 and was accompanied by a $3 billion increase in American exports to India that year. The exact number of jobs that have moved to India is not known. The Communications Workers of America estimates that 400,000 white-collar jobs have already been lost, particularly to India. They project another 3 million will migrate offshore by 2012, and that many shall go to India. On the other hand, Nasscom statistics estimate that India had 171,500 “business process” jobs by March 2003, up from 106,000 a year earlier. That number, Nasscom predicts, will grow annually by about 45% over the next five years to nearly 1 million by 2008. John Chen, Sybase CEO, argues that “when we spend $1 in India and China, 65 cents comes back” I the form of orders for hi-tech equipment.
Construction has provided a boost to the nation’s economy in 2003. Since February, the industry has added 147,000 jobs. According to the Labor Department, “construction was little changed in October.” Mortgage banking and mortgage refinancing has provided quite a lift to consumers’ cash flow as well as to business activity as a whole. According to the Labor Department, in October, “in the financial sector, employment in credit intermediation, which includes mortgage banking, fell by 10,000, reflecting the decline in mortgage refinancing activity.”
Contributions to major charitable organizations fell last year for the first time in 12 years, according to The Chronicle of Philanthropy’s annual survey of the nation’s 400 largest nonprofit organizations. Donations dropped 1.2% last year to $47 billion. During the previous five years, donations increased an average of 12% each year. There is a rising demand for services, declining donations from individual donors, diminished endowments for foundation donors, and reduced grants from strapped federal and state governments. In his Saturday radio address, President Bush mentioned that this year’s stock market rally had added $2 trillion to the nation’s wealth; however, he did not state that charities anticipate heavier than usual demand for services between now and the end of this year. The organizations that provide meals to the needy are expecting they will need more food this Thanksgiving and Christmas. Providers are serving more people in the nationwide soup kitchens on a daily basis. Patrick M. Rooney, research director at the Center on Philanthropy at Indiana University, stated “giving falls…as personal incomes and corporate profits plunge.” How can that be after profits from continuing operations at the S&P 500 companies expanded at a rate of nearly 22% in the most recent quarter? The answer is right under the nose of every investor. The boards of public companies and their CEOs don’t feel good about those profits. It’s nice to show operating improvement; however, for the vast majority, it comes via cost cutting and eliminating employees and shutting plants. For every eBay, there are 100s that are not increasing revenues. Just as the economic recovery is a quite different from the past, so is the holiday season for the disadvantaged. This year, in addition to the unemployed seeking help, a record number of minimum-wage workers cannot afford to buy presents and still afford food and rent. In addition, there are a rising number of grandparents requesting gifts for grandchildren who live with them as well as more victims of domestic violence who are seeking aid. As Peggy Vick, the Salvation Army’s director of family services notes, “all these families find themselves in a crunch of some kind. They are all just trying to hold everything together and provide something for the children at Christmas.”
With Veterans’ Day approaching, Democrats charged that Republican-passed tax cuts and spending priorities have undermined the nation’s ability to provide health care and benefits to those who served in uniform. Rep. Chet Edwards in the Democrats’ weekly radio address stated “I have great concern that trillion dollar tax cuts to some of America’s wealthiest families have cut into our promise to support a decent quality of life for our military families and quality health care for our veterans. What message does it send to our veterans when the Administration says American taxpayers can afford to build new hospitals in Iraq, but we cannot afford to keep open veterans hospitals here at home?” He said 60,000 veterans were waiting six months or more for an appointment at a VA hospital. Edwards remarked “that is unacceptable. Democrats have proposed increasing funding for VA hospitals, expanding health access to health care for the National Guard and Reserves, and improving the health care injured veterans receive when they return from Iraq. Democrats are working hard to end the unjust disabled veterans tax for all veterans, and not just a few. The current Republican plan has been called ‘unacceptable’ by the American Legion, and we agree.”
I feel confident that not too many readers have heard the name Tan Kong Cheok, a 28 year old Singaporean. He started working for his father 16 years ago. At that time he packed boxes for his father, who runs Fullmark, a Singaporean ink refill-kit maker. For two and one-half years Tan worked on a product that would change the nature of the computer-ink business. Tan achieved what no one else has been able to accomplish. His product was launched in September at Singapore’s Comex show. He expected to sell 200 units. He ran out of product in the first three or four hours, says Jeremy Wagstaff. In the first two weeks he sold 5,000 units. The system is fool-proof. One places an old, empty cartridge in one side of Tan’s Inke machine, place an Inke tank on the other side, press a button, and a few minutes later the cartridge is full of ink. The manufacturer can be found at www.inke.com.sg and the average user should save more than $300 over 3 years. The product is guaranteed for 30 refills, but it should provide a much longer life as Tan has managed to recycle the same cartridge 30 times in some cases. The Inke machine costs between $45 and $60 and comes with three ink-tanks or the equivalent of three new black cartridges. It is available in Singapore, and early next year will be available worldwide. Now it’s available only for Hp printers, but Tan soon promises them for Epson, Lexmark, and Canon printers. The HP profit margins and cash flow will be hurt by Tan’s invention.
Clint Willis points out that there have been 10 bull markets since 1950, and they have delivered average gains of 133% over average periods of 50 months. Since 1950, there have been 10 bear markets that have created losses of 27% over 13 months. As he points out, “even the smartest investors can’t consistently predict what the stock market will do next.”
India’s National Association of Software and Service Companies (Nasscom) is an umbrella grouping of 850 companies. Nasscom estimates that job outsourcing to India saved U.S. companies $10-$11 billion in 2001 and was accompanied by a $3 billion increase in American exports to India that year. The exact number of jobs that have moved to India is not known. The Communications Workers of America estimates that 400,000 white-collar jobs have already been lost, particularly to India. They project another 3 million will migrate offshore by 2012, and that many shall go to India. On the other hand, Nasscom statistics estimate that India had 171,500 “business process” jobs by March 2003, up from 106,000 a year earlier. That number, Nasscom predicts, will grow annually by about 45% over the next five years to nearly 1 million by 2008. John Chen, Sybase CEO, argues that “when we spend $1 in India and China, 65 cents comes back” I the form of orders for hi-tech equipment.
Construction has provided a boost to the nation’s economy in 2003. Since February, the industry has added 147,000 jobs. According to the Labor Department, “construction was little changed in October.” Mortgage banking and mortgage refinancing has provided quite a lift to consumers’ cash flow as well as to business activity as a whole. According to the Labor Department, in October, “in the financial sector, employment in credit intermediation, which includes mortgage banking, fell by 10,000, reflecting the decline in mortgage refinancing activity.”
Saturday, November 08, 2003
11/8/03 Eclipsing The Headlines
Yesterday, I knew Turkey number 10 would be the Labor Department; however, I decided to wait for today to write about this reporting fiasco. Before I begin, let me point out that, at about 5pm early this evening, an eclipse of the moon shall begin. Unlike a solar eclipse, there isn’t any danger from the intensity of the sunlight that can burn one’s retina. The eclipsed moon shall be very low in the sky. Total eclipse starts at 5:06pm and lasts until 5:31pm. The partial eclipse concludes at 7:04pm. I bring this information to your attention in the hopes that everyone shall realize that an eclipse of the financial headlines will not in any way damage your eyes or your brain. That brings us to Turkey number 10. The headlines were terrific: payrolls surge, and rise for the third straight month. The Labor Department made large upward revisions to payrolls for August and September. Non-farm payrolls in October had their largest rise since January. The unemployment rate fell to 6%. It represents the fastest economic expansion in 19 years. Let’s bring out the champagne. It’s orgasm time! Then, a terrible thing happened. I remembered that these are government numbers, and just maybe, I should read below the headlines. The news was not quite the same: “the number of unemployed persons, 8.8 million, were essentially unchanged in October…in October, 2 million unemployed persons had been looking for work for 27 weeks or longer, about the same level as in September. They represented 23% of the total unemployed (3 years ago it was 14%)…in October the civilian labor force was little changed at 146.8 million…in October, 1.6 million persons were marginally attached to the labor force, 170,000 more than a year earlier. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. Of the 1.6 million, 462,000 were discouraged workers- persons who were not currently looking for work specifically because they believed no jobs were available for them. The number of discouraged workers was up by 103,000 from October 2002.” The news continues. The average weekly hours worked, the average weekly earnings, and weekly overtime were all essentially unchanged from September to October. In addition, it is always wise to analyze the numbers. For example, since the beginning of this year, temporary help has added 150,000 jobs and 113,000 restaurant workers have been placed on payrolls. Prior to September, an average of 53,000 factory jobs were cut monthly. Across the country, yesterday’s job cut announcements hit many different industries. The Bank of America eliminated 100 investment banking jobs. That leaves them with 6000. Siemens Energy & Automation plans to cut 121 jobs at its Tucker facility NEAR Alpharetta, Georgia. Their technologies range from circuit protection and energy management systems to process control, industrial software, and totally integrated automation productions. Everlast Worldwide Inc. will close its Bronx, NY plant and eliminate 100 jobs. Production of boxing trunks and speed bags will move to their plant in Missouri. They expect the move to save $2.8 million per year.
Turkey number 11 is the consumer. In September, consumer credit in the United States rose $15.2 billion, or at a 9.7% annual pace. It was the largest gain since January. Most of the increase was in auto loans that rose $12.1 billion and credit cards that increased $3 billion. For months, hourly wages have not risen nor have the weekly hours worked improved. A step plan needs to be devised to reduce consumer spending.
Turkey number 12 is the Administration, the Congress, and the media who blame China for our troubles. There is no question that we have a $100+ billion trade deficit with China. We live in a global economy. Trade is global. China’s imports have grown 40% in 2003, and the vast majority are with other countries in Asia. The net result is that China’s trade surplus with the entire world might only amount to $5 billion this year. It’s important to tell the whole story.
Turkey number 12 is pork. In this case, we are talking pork projects that have absolutely nothing to do with an energy bill being discussed. Iowa Senator Charles Grassley is the Republican chairman of the Senate Finance Committee. He wants to have a $225 million proposed rain forest and learning center attached to the energy bill. Due to the enormous cost, the project was rejected by Des Moines and Cedar Rapids. Grassley wants special tax credits be given to buyers of bonds, and these debt instruments would finance the project. Other proposed projects in the energy bill are Destiny USA for Syracuse, NY, a $2.2 billion entertainment and retail center; $180 million Louisiana Riverwalk in Shreveport-Bossier City; a $2 billion residential and commercial project in Atlanta; and a $750 million mixed-use project for a Denver suburb. These negotiations typify the running of our Congress. It’s time we elected people who don’t answer to their campaign contributors.
Turkey number 13 is the pricing of slaughter-bound cattle. I come from three generations of butchers. I understand the workings of the early morning wholesale meat markets. I know the slaughter houses. I know the feedlots. I know who controls the meat business. I know from meat hooks. Please do not tell me that the six-month ban on Canadian cattle has kept supplies tight. The ban, the result of mad cow disease, only removed 7% of the cattle supplies. In the past month, beef traded above $100 per hundred pounds. The beef plants say they can’t make money because their sales prices for beef do not cover the cost of cattle. Have you been to the supermarket lately? Have you noticed the price for beef? Feeder cattle supply is down. That’s true. Beef consumption is up. The alternative is to eat cheap pork, chicken, or turkey for protein. (I am not being disrespectful to Jews by mentioning pork. I also mentioned chicken and turkey). The December live cattle future rose to a life-of-contract high at 98 cents per pound. There will be a resumption of cattle imports from Canada, and more beef will come to market. The price will go down. No one is bigger than the market.
Turkey number 14 is the Administration’s attempt to dismantle green laws. For example, recent Bush appointees at the EPA have sided with the Pentagon in seeking exemption for military facilities from federal laws governing hazardous waste, air quality, and endangered species. Last week, 13 states and 20 cities sued the Bush Administration for its plan to adjust Clean Air Act regulations in a way critics say will increase the emission of harmful pollutants. The support for increased environmental protection is bipartisan. As an aside, Arnold promises to retrofit his Hummer to run on clean-burning hydrogen.
Turkey number 15 may be the last on today’s list, but certainly it is not the last in importance. Number 15 is our military’s underestimation of the Iraqi enemy. Two soldiers from the U.S. 82nd Airborne Division were killed and one was wounded today when a roadside bomb was detonated next to their convoy in Falluja. The attack raised to at least 149 the number of U.S. soldiers killed in action in Iraq since Washington declared major combat over on May 1. Since the beginning of November, the death toll for our soldiers in Iraq has climbed to 34. A recent study was prepared by a team of Army War College officers and civilian specialists. It asserts that the Iraqi military excel in intelligence, and shadow virtually every real-time movement of coalition troops. Marines captured “a detailed, accurate sand table of U.S. positions.” A sand table is a miniature model of the battlefield that assists commanders in plotting the next moves. Senator McClain’s assertions that we don’t have enough U.S. troops in Iraq is gaining daily validity.
Yesterday, I knew Turkey number 10 would be the Labor Department; however, I decided to wait for today to write about this reporting fiasco. Before I begin, let me point out that, at about 5pm early this evening, an eclipse of the moon shall begin. Unlike a solar eclipse, there isn’t any danger from the intensity of the sunlight that can burn one’s retina. The eclipsed moon shall be very low in the sky. Total eclipse starts at 5:06pm and lasts until 5:31pm. The partial eclipse concludes at 7:04pm. I bring this information to your attention in the hopes that everyone shall realize that an eclipse of the financial headlines will not in any way damage your eyes or your brain. That brings us to Turkey number 10. The headlines were terrific: payrolls surge, and rise for the third straight month. The Labor Department made large upward revisions to payrolls for August and September. Non-farm payrolls in October had their largest rise since January. The unemployment rate fell to 6%. It represents the fastest economic expansion in 19 years. Let’s bring out the champagne. It’s orgasm time! Then, a terrible thing happened. I remembered that these are government numbers, and just maybe, I should read below the headlines. The news was not quite the same: “the number of unemployed persons, 8.8 million, were essentially unchanged in October…in October, 2 million unemployed persons had been looking for work for 27 weeks or longer, about the same level as in September. They represented 23% of the total unemployed (3 years ago it was 14%)…in October the civilian labor force was little changed at 146.8 million…in October, 1.6 million persons were marginally attached to the labor force, 170,000 more than a year earlier. These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. Of the 1.6 million, 462,000 were discouraged workers- persons who were not currently looking for work specifically because they believed no jobs were available for them. The number of discouraged workers was up by 103,000 from October 2002.” The news continues. The average weekly hours worked, the average weekly earnings, and weekly overtime were all essentially unchanged from September to October. In addition, it is always wise to analyze the numbers. For example, since the beginning of this year, temporary help has added 150,000 jobs and 113,000 restaurant workers have been placed on payrolls. Prior to September, an average of 53,000 factory jobs were cut monthly. Across the country, yesterday’s job cut announcements hit many different industries. The Bank of America eliminated 100 investment banking jobs. That leaves them with 6000. Siemens Energy & Automation plans to cut 121 jobs at its Tucker facility NEAR Alpharetta, Georgia. Their technologies range from circuit protection and energy management systems to process control, industrial software, and totally integrated automation productions. Everlast Worldwide Inc. will close its Bronx, NY plant and eliminate 100 jobs. Production of boxing trunks and speed bags will move to their plant in Missouri. They expect the move to save $2.8 million per year.
Turkey number 11 is the consumer. In September, consumer credit in the United States rose $15.2 billion, or at a 9.7% annual pace. It was the largest gain since January. Most of the increase was in auto loans that rose $12.1 billion and credit cards that increased $3 billion. For months, hourly wages have not risen nor have the weekly hours worked improved. A step plan needs to be devised to reduce consumer spending.
Turkey number 12 is the Administration, the Congress, and the media who blame China for our troubles. There is no question that we have a $100+ billion trade deficit with China. We live in a global economy. Trade is global. China’s imports have grown 40% in 2003, and the vast majority are with other countries in Asia. The net result is that China’s trade surplus with the entire world might only amount to $5 billion this year. It’s important to tell the whole story.
Turkey number 12 is pork. In this case, we are talking pork projects that have absolutely nothing to do with an energy bill being discussed. Iowa Senator Charles Grassley is the Republican chairman of the Senate Finance Committee. He wants to have a $225 million proposed rain forest and learning center attached to the energy bill. Due to the enormous cost, the project was rejected by Des Moines and Cedar Rapids. Grassley wants special tax credits be given to buyers of bonds, and these debt instruments would finance the project. Other proposed projects in the energy bill are Destiny USA for Syracuse, NY, a $2.2 billion entertainment and retail center; $180 million Louisiana Riverwalk in Shreveport-Bossier City; a $2 billion residential and commercial project in Atlanta; and a $750 million mixed-use project for a Denver suburb. These negotiations typify the running of our Congress. It’s time we elected people who don’t answer to their campaign contributors.
Turkey number 13 is the pricing of slaughter-bound cattle. I come from three generations of butchers. I understand the workings of the early morning wholesale meat markets. I know the slaughter houses. I know the feedlots. I know who controls the meat business. I know from meat hooks. Please do not tell me that the six-month ban on Canadian cattle has kept supplies tight. The ban, the result of mad cow disease, only removed 7% of the cattle supplies. In the past month, beef traded above $100 per hundred pounds. The beef plants say they can’t make money because their sales prices for beef do not cover the cost of cattle. Have you been to the supermarket lately? Have you noticed the price for beef? Feeder cattle supply is down. That’s true. Beef consumption is up. The alternative is to eat cheap pork, chicken, or turkey for protein. (I am not being disrespectful to Jews by mentioning pork. I also mentioned chicken and turkey). The December live cattle future rose to a life-of-contract high at 98 cents per pound. There will be a resumption of cattle imports from Canada, and more beef will come to market. The price will go down. No one is bigger than the market.
Turkey number 14 is the Administration’s attempt to dismantle green laws. For example, recent Bush appointees at the EPA have sided with the Pentagon in seeking exemption for military facilities from federal laws governing hazardous waste, air quality, and endangered species. Last week, 13 states and 20 cities sued the Bush Administration for its plan to adjust Clean Air Act regulations in a way critics say will increase the emission of harmful pollutants. The support for increased environmental protection is bipartisan. As an aside, Arnold promises to retrofit his Hummer to run on clean-burning hydrogen.
Turkey number 15 may be the last on today’s list, but certainly it is not the last in importance. Number 15 is our military’s underestimation of the Iraqi enemy. Two soldiers from the U.S. 82nd Airborne Division were killed and one was wounded today when a roadside bomb was detonated next to their convoy in Falluja. The attack raised to at least 149 the number of U.S. soldiers killed in action in Iraq since Washington declared major combat over on May 1. Since the beginning of November, the death toll for our soldiers in Iraq has climbed to 34. A recent study was prepared by a team of Army War College officers and civilian specialists. It asserts that the Iraqi military excel in intelligence, and shadow virtually every real-time movement of coalition troops. Marines captured “a detailed, accurate sand table of U.S. positions.” A sand table is a miniature model of the battlefield that assists commanders in plotting the next moves. Senator McClain’s assertions that we don’t have enough U.S. troops in Iraq is gaining daily validity.
Friday, November 07, 2003
11/7/03 Goosed By Turkeys
Turkey number 1: “A dwindling pool of possible efficiencies.” This is Alan Greenspan speaking yesterday. He might be talking about a leech field or possibly government employees. In this instance, he was attempting to explain that productivity gains had reached such heights that companies might be forced to hire additional workers. He failed to say whether they might be seasonal workers for the holiday season. I suggest he visit Iredell County in NC, and head towards Speedball Road. He’ll find the Hunt Corp. plant that makes Boston-brand office supplies and X-Acto knives. Yesterday they announced the plant will be closing, and 325 employees will lose their jobs. Actually, that’s not true. Maybe they’ll have an opportunity to relocate. Production at the plant is moving to Asia in an effort to cut costs. Bush will be in NC today. I’m sure the unemployed workers from the plant closings in textile, furniture, and office supply industries will give him a warm welcome. Getting back to Greenspan, possibly he is counting on expansion within the healthcare industry. I read yesterday where Seattle-based Corixa Corp. is laying off 18% of its workforce. There are long lead times in medical research programs, and the company, said its chairman and CEO, will be “focusing the scope of our pursuits on the greatest opportunities for near-term commercial success.” He meant that the company is down to $200 million in cash and needs to slow the burn rate in order to stay in business. Finally, Greenspan might consider the actions of voters in San Francisco. On Tuesday, San Francisco became the first city in California and the third in the nation to set its own hourly minimum wage. The city’s minimum wage was raised to $8.50, significantly higher than the state minimum of $6.75 and the federal minimum of $5.15. Santa Fe, NM set a minimum wage of $8.50 an hour for businesses with 25 or more employees. Madison, Wisconsin is considering raising the minimum wage to $7.75, and in Washington DC, businesses must pay workers $1 an hour more than the federal minimum wage.
Turkey number 2: the labor department announced “the average weekly number of seasonally adjusted new claims in the most recent week ending Nov.1 fell by 43,000 to 348,000. The average number of continuing claims for state unemployment benefits over the past four weeks fell by about 25,000 to 3.54 million, the lowest since April.” How would the public react had the headlines included “the continuing claims figures do not include some 825,000 workers receiving federal unemployment benefits, which are available to unemployed workers once they exhaust their state benefits, typically after six weeks?” How would the public react had the headlines included “the number of Americans who’ve been out of work longer than six months rose to 2.1 million in September, representing 23.2% of all unemployed workers?” Both figures are highs for the business cycle, and provide absolutely no evidence that businesses will begin hiring. In fact, the facts point to the opposite conclusion. The labor department said employers are able to get as much work out of 953 workers now than they got out of 1,000 a year ago. People are frightened to lose their job, and are working their buns off. J.T. Battenberg, CEO of Delphi Corp., the world’s largest maker of auto parts, stated “I don’t think we’re going to have a huge increase in employment. People are more productive now.”
Turkey number 3: government waste, fraud, and spending in the fiscal year ended 9/30/03. The Washington Times pointed out that the GAO found that the Pentagon “reported an estimated $22 billion in disbursements that it has been unable to match with corresponding obligations.” Did the money disappear? Is that a kissing cousin to the fiasco at Enron and Tyco? It gets worse. Medicare discovered the federal government made $12.5 billion in erroneous payments in fiscal 2001. It took them two years to make this discovery. It gets better. Improper food stamp payments cost more than $1 billion. How much more? It gets better. The Superfund is supposed to be spent on cleaning up waste, not creating more waste. The GAO estimated that $6 out of every $10 spent on Superfund is used for purposes other than toxic waste cleanup. According to OMB performance assessments of 230 programs, 5% of the agencies were rated ineffective and 50.4% of the programs were rated “results not demonstrated.” The Washington Times kindly provided a chart showing it took Congress 101 years to spend its first $500 billion. It took 10 years to send the next $500 billion, and now just 4 years to spend the last $500 billion. I think the next chart will show spending the next $500 billion in one year. The Institute for Policy Innovation report states “what we have in Washington today is a bipartisan fiscal cop-out. No one in the Congress or the executive branch has insisted that federal tax dollars be spent judiciously.”
Turkey number 4: the plans proposed by Congress and Bush to overhaul Medicare. It is flawed from the outset. Bush and the Congress are pushing to give the elderly $400 billion worth of assistance for prescription drugs; however, there are no plans for younger Americans who confront ever-rising health insurance costs. According to the CBO, the Medicare population is expected to spend $1.84 trillion over the next 10 years on prescription drugs. At the same time, Congress has capped a new drug benefit at $400 billion for the decade. There are further problems. The House proposal does not cover individual drug costs between $2,000 and $3.500. The Senate proposal exempts low-income seniors from this gap. Finally, the CBO estimates that passage of either the House or the Senate proposal of the Medicare bill would encourage employers to drop coverage for their retirees, and this would affect one-third of Medicare beneficiaries. Where is the backlash?”
Turkey number 5: the Administration’s policies in Iraq ignore the feelings expressed by the American voters. Rumsfeld and others parade their words describing that the lost lives and the number of wounded since March 20 are acceptable. According to a recent IBD/TIPP poll, 56% say casualties in Iraq are not within acceptable limits, and the poll indicates Americans are eager for out troops to leave Iraq. Today, an Army helicopter crashed near Tikrit, killing at least four U.S. soldiers and possibly all six on board. Another American was killed and nine were wounded in attacks in Mosul. It is safe to say that the Administration’s “plan” to gain the peace in Iraq is quite simply an abortion, and reflects a growing late-term problem for Bush. The voters have expressed this view in various polls. Some 60,00 of the 130,000 U.S. soldiers in Iraq are members of the National Guard or the reserves. An opinion poll last month in the Stars and Stripes newspaper showed 49% threatened not to re-enlist. On the Pentagon’s Defend America website, recruiting has begun to volunteer for local draft boards. The Congress ended the draft in 1973.
Turkey number 6: “In these circumstances, monetary policy is able to be more patient,” said Alan Greenspan in yesterday’s remarks to a securities conference in Boca Raton, Florida. He means that continued low inflation below 2% will enable the Fed to maintain short-term rates at a 45-year low of 1%. Inflation has been muted in Australia. The Reserve Bank of Australia has an inflation target of 2 to 3% per year. As noted yesterday, their Fed raised the rates in Australia by 25 basis points. Even though inflation is modest in Great Britain, yesterday the Bank of England raised their base rate by 25 basis points to 3.75%, sharply above our 1% level. The UK and Australia raised rates in light of the backdrop of a housing boom, rapid credit growth, and “gathering momentum” of the global economic recovery. According to the U.S. Fed Flow of Funds report, total credit outstanding rose at a 12% annualized rate in the second quarter. The federal government’s credit demand was up an astonishing 24.3% in this period, and borrowing by state and local governments rose 12% in the quarter. In sum, Greenspan talks patience and yet he states big government deficits results from excessive spending “could have notable, destabilizing effects on the economy.” He is telling the public to remain calm, and yet there is “a backdrop of growing longer-term concern in financial markets about our federal budget.” Some Wall Street firms such as Merrill Lynch have forecast the deficit may reach $600 billion.
Turkey number 7: The Republican efforts to create an energy bill are an insult to the American people. Rep. Henry Waxman of California described the “arrogance” of Republican negotiators to want to write the bill themselves with no input from Democrats was “outrageous.” U.S. oil reserves represent less than four years of current U.S. oil consumption. A new energy bill must successfully balance incentives for alternative fuels, conservation, clean air laws, measure to promote clean water supplies, and electric transmission grid expansion. Bipartisan cooperation can produce a more effective bill.
Turkey number 8: U.S. auto companies continue with their high incentives while Japanese car makers offer much less in incentives and reduce their inventory levels. In October, the incentives per vehicle for GM, Ford, and Chrysler were $3,980, $3,054, and $3,768, respectively. On the other hand, incentives for Toyota, Honda, and Nissan were $808, $531, and $1,502, respectively per vehicle. U.S. auto companies expand production, give incentives, close plants, and create thousands of unemployed workers.
Turkey number 9: investors with blinders fail to appreciate the relationship between a country’s currency and the equity markets in that country. A strong currency reflects an economy that is strong. Our currency has been strong for a good portion of the last decade. This year the dollar has fallen 10% or more in trade-weighted terms, and yet our equity markets are trading at their highest levels in many months. With rising trade and federal deficit budgets forecast for 2004, the dollar is likely to experience additional declines. This country needs to avoid a financial shock. Investing prudence is a contributor to economic stability over the long run.
Turkey number 1: “A dwindling pool of possible efficiencies.” This is Alan Greenspan speaking yesterday. He might be talking about a leech field or possibly government employees. In this instance, he was attempting to explain that productivity gains had reached such heights that companies might be forced to hire additional workers. He failed to say whether they might be seasonal workers for the holiday season. I suggest he visit Iredell County in NC, and head towards Speedball Road. He’ll find the Hunt Corp. plant that makes Boston-brand office supplies and X-Acto knives. Yesterday they announced the plant will be closing, and 325 employees will lose their jobs. Actually, that’s not true. Maybe they’ll have an opportunity to relocate. Production at the plant is moving to Asia in an effort to cut costs. Bush will be in NC today. I’m sure the unemployed workers from the plant closings in textile, furniture, and office supply industries will give him a warm welcome. Getting back to Greenspan, possibly he is counting on expansion within the healthcare industry. I read yesterday where Seattle-based Corixa Corp. is laying off 18% of its workforce. There are long lead times in medical research programs, and the company, said its chairman and CEO, will be “focusing the scope of our pursuits on the greatest opportunities for near-term commercial success.” He meant that the company is down to $200 million in cash and needs to slow the burn rate in order to stay in business. Finally, Greenspan might consider the actions of voters in San Francisco. On Tuesday, San Francisco became the first city in California and the third in the nation to set its own hourly minimum wage. The city’s minimum wage was raised to $8.50, significantly higher than the state minimum of $6.75 and the federal minimum of $5.15. Santa Fe, NM set a minimum wage of $8.50 an hour for businesses with 25 or more employees. Madison, Wisconsin is considering raising the minimum wage to $7.75, and in Washington DC, businesses must pay workers $1 an hour more than the federal minimum wage.
Turkey number 2: the labor department announced “the average weekly number of seasonally adjusted new claims in the most recent week ending Nov.1 fell by 43,000 to 348,000. The average number of continuing claims for state unemployment benefits over the past four weeks fell by about 25,000 to 3.54 million, the lowest since April.” How would the public react had the headlines included “the continuing claims figures do not include some 825,000 workers receiving federal unemployment benefits, which are available to unemployed workers once they exhaust their state benefits, typically after six weeks?” How would the public react had the headlines included “the number of Americans who’ve been out of work longer than six months rose to 2.1 million in September, representing 23.2% of all unemployed workers?” Both figures are highs for the business cycle, and provide absolutely no evidence that businesses will begin hiring. In fact, the facts point to the opposite conclusion. The labor department said employers are able to get as much work out of 953 workers now than they got out of 1,000 a year ago. People are frightened to lose their job, and are working their buns off. J.T. Battenberg, CEO of Delphi Corp., the world’s largest maker of auto parts, stated “I don’t think we’re going to have a huge increase in employment. People are more productive now.”
Turkey number 3: government waste, fraud, and spending in the fiscal year ended 9/30/03. The Washington Times pointed out that the GAO found that the Pentagon “reported an estimated $22 billion in disbursements that it has been unable to match with corresponding obligations.” Did the money disappear? Is that a kissing cousin to the fiasco at Enron and Tyco? It gets worse. Medicare discovered the federal government made $12.5 billion in erroneous payments in fiscal 2001. It took them two years to make this discovery. It gets better. Improper food stamp payments cost more than $1 billion. How much more? It gets better. The Superfund is supposed to be spent on cleaning up waste, not creating more waste. The GAO estimated that $6 out of every $10 spent on Superfund is used for purposes other than toxic waste cleanup. According to OMB performance assessments of 230 programs, 5% of the agencies were rated ineffective and 50.4% of the programs were rated “results not demonstrated.” The Washington Times kindly provided a chart showing it took Congress 101 years to spend its first $500 billion. It took 10 years to send the next $500 billion, and now just 4 years to spend the last $500 billion. I think the next chart will show spending the next $500 billion in one year. The Institute for Policy Innovation report states “what we have in Washington today is a bipartisan fiscal cop-out. No one in the Congress or the executive branch has insisted that federal tax dollars be spent judiciously.”
Turkey number 4: the plans proposed by Congress and Bush to overhaul Medicare. It is flawed from the outset. Bush and the Congress are pushing to give the elderly $400 billion worth of assistance for prescription drugs; however, there are no plans for younger Americans who confront ever-rising health insurance costs. According to the CBO, the Medicare population is expected to spend $1.84 trillion over the next 10 years on prescription drugs. At the same time, Congress has capped a new drug benefit at $400 billion for the decade. There are further problems. The House proposal does not cover individual drug costs between $2,000 and $3.500. The Senate proposal exempts low-income seniors from this gap. Finally, the CBO estimates that passage of either the House or the Senate proposal of the Medicare bill would encourage employers to drop coverage for their retirees, and this would affect one-third of Medicare beneficiaries. Where is the backlash?”
Turkey number 5: the Administration’s policies in Iraq ignore the feelings expressed by the American voters. Rumsfeld and others parade their words describing that the lost lives and the number of wounded since March 20 are acceptable. According to a recent IBD/TIPP poll, 56% say casualties in Iraq are not within acceptable limits, and the poll indicates Americans are eager for out troops to leave Iraq. Today, an Army helicopter crashed near Tikrit, killing at least four U.S. soldiers and possibly all six on board. Another American was killed and nine were wounded in attacks in Mosul. It is safe to say that the Administration’s “plan” to gain the peace in Iraq is quite simply an abortion, and reflects a growing late-term problem for Bush. The voters have expressed this view in various polls. Some 60,00 of the 130,000 U.S. soldiers in Iraq are members of the National Guard or the reserves. An opinion poll last month in the Stars and Stripes newspaper showed 49% threatened not to re-enlist. On the Pentagon’s Defend America website, recruiting has begun to volunteer for local draft boards. The Congress ended the draft in 1973.
Turkey number 6: “In these circumstances, monetary policy is able to be more patient,” said Alan Greenspan in yesterday’s remarks to a securities conference in Boca Raton, Florida. He means that continued low inflation below 2% will enable the Fed to maintain short-term rates at a 45-year low of 1%. Inflation has been muted in Australia. The Reserve Bank of Australia has an inflation target of 2 to 3% per year. As noted yesterday, their Fed raised the rates in Australia by 25 basis points. Even though inflation is modest in Great Britain, yesterday the Bank of England raised their base rate by 25 basis points to 3.75%, sharply above our 1% level. The UK and Australia raised rates in light of the backdrop of a housing boom, rapid credit growth, and “gathering momentum” of the global economic recovery. According to the U.S. Fed Flow of Funds report, total credit outstanding rose at a 12% annualized rate in the second quarter. The federal government’s credit demand was up an astonishing 24.3% in this period, and borrowing by state and local governments rose 12% in the quarter. In sum, Greenspan talks patience and yet he states big government deficits results from excessive spending “could have notable, destabilizing effects on the economy.” He is telling the public to remain calm, and yet there is “a backdrop of growing longer-term concern in financial markets about our federal budget.” Some Wall Street firms such as Merrill Lynch have forecast the deficit may reach $600 billion.
Turkey number 7: The Republican efforts to create an energy bill are an insult to the American people. Rep. Henry Waxman of California described the “arrogance” of Republican negotiators to want to write the bill themselves with no input from Democrats was “outrageous.” U.S. oil reserves represent less than four years of current U.S. oil consumption. A new energy bill must successfully balance incentives for alternative fuels, conservation, clean air laws, measure to promote clean water supplies, and electric transmission grid expansion. Bipartisan cooperation can produce a more effective bill.
Turkey number 8: U.S. auto companies continue with their high incentives while Japanese car makers offer much less in incentives and reduce their inventory levels. In October, the incentives per vehicle for GM, Ford, and Chrysler were $3,980, $3,054, and $3,768, respectively. On the other hand, incentives for Toyota, Honda, and Nissan were $808, $531, and $1,502, respectively per vehicle. U.S. auto companies expand production, give incentives, close plants, and create thousands of unemployed workers.
Turkey number 9: investors with blinders fail to appreciate the relationship between a country’s currency and the equity markets in that country. A strong currency reflects an economy that is strong. Our currency has been strong for a good portion of the last decade. This year the dollar has fallen 10% or more in trade-weighted terms, and yet our equity markets are trading at their highest levels in many months. With rising trade and federal deficit budgets forecast for 2004, the dollar is likely to experience additional declines. This country needs to avoid a financial shock. Investing prudence is a contributor to economic stability over the long run.
Thursday, November 06, 2003
11/6/03 Government Workers Feel The Pain
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Two American soldiers were killed in separate attacks near Baghdad today. Their deaths brought to 140 the number of U.S. soldiers killed in Iraq by hostile fire since Bush declared an end to major combat May 1. A total of 114 U.S. soldiers were killed in the active combat phase that began March 20.
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Two American soldiers were killed in separate attacks near Baghdad today. Their deaths brought to 140 the number of U.S. soldiers killed in Iraq by hostile fire since Bush declared an end to major combat May 1. A total of 114 U.S. soldiers were killed in the active combat phase that began March 20.
11/6/03 Government Workers Feel The Pain
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
California state government will soon have 16,152 fewer jobs under budget cuts mandated by the state’s current budget. The personnel cuts are expected to save the state just over $1 billion. California will need to additional cost cutting. They are facing a minimum budget shortfall of $8 billion. As such, I expect further job reductions. In the last 12 months, New York City has lost 47,000 jobs. Martin Kohli, the senior economist in charge of the Labor Department’s report, stated “instead of telling us we’re seeing the light at the end of the tunnel, the report shows that we’re still in the tunnel.” Main Street knows we are in the tunnel. Government workers are beginning to see the light. When Wall Street awakens to the facts, the picture will become ugly.
According to an Associated Press recent survey of comparable U.S. and Canadian prices for 10 popular drugs, Canadian prices were 33% to 80% cheaper. The comparison was made on Internet sites maintained by American and Canadian pharmacies. Rep. Jo Ann Emerson, R-MO, stated “you’re talking about a $40 billion savings, just in what the government dispenses. Federal law allows for importation, but only after the secretary of Health and Human Services has certified that public health would not be endangered. That certification has never been made. It should be noted that a coalition of Republicans and Democrats helped pass a bill in the House this year that would permit imports without HHS Secretary Thompson’s certification.
According to Hewitt and Associates, nationally, employees’ health care premium contributions will rise 22.3% in 2003 up from 20.5% in 2002. At the same time, the cost to cover employees’ health care increased proportionally for the employers. In Arizona, even though Phelps Dodge’s earnings are beginning to rebound due to the increased price of copper, the company will charge employees insurance premiums for the first time ever. Still, the employees will only pay about 10% of their health care costs.
Marine Corps Gen. Peter Pace, vice chairman of the Joint Chiefs of Staff, outlined a 2004 Iraq rotation plan, and that the 132,000 American troops now there could decrease to just over 100,000 in May. In all, a total of approximately 43,000 troops could be involved in this rotation plan. Senator John McCain remarked to the Council on Foreign Relations that “hastily trained Iraqi security forces cannot be expected to accomplish what U.S. forces have not succeeded in doing.”
The winter airfare war has begun. American Airlines customers in 16 cities can fly to London for as little as $100 each way this winter. Tickets must be purchased by today, and will be good for travel from November 12 through April 1, and there are the usual holiday travel exceptions.
The Australian economy has added 164,000 jobs in the past three months. Their unemployment rate hit a 14-year low in October. On Tuesday, their Reserve Bank raised its benchmark interest rate a quarter percentage point to 5%, the first increase in 17 months. Hopefully, this increase will not dampen Australia’s economic expansion. Retain sales in September had their largest monthly increase in 4 ½ years.
John McCain has persevered in the U.S. Air Force and Boeing lease deal for one hundred 767 refueling tankers. The Air Force will lease 20 tankers from Boeing and they will buy the remaining 80 under the formal budgeting process. The math shows Boeing will make less money on the deal, and hopefully for once, the taxpayers will be saved some money. Thank you, Senator McCain.
Wednesday, November 05, 2003
11/5/03 Tough Decisions And Productivity
You don’t read too often about a company that is growing, making good money, and is out of space for expansion at its present site. I thought we’d take a little visit to the heartland. Let’s visit a company that is on the move, no pun intended. Have you been to Le Mars, Iowa? Have you heard of Le Mars, Iowa? Have you eaten Blue Bunny ice cream? Have you heard of Wells Dairy? Enough with the questions! The company employs 2400 workers (over 90% of their workforce) spread among seven buildings in Le Mars, a city of 9200 people. The company is family owned, was started close to 100 years ago, sells 550 Blue Bunny products in all 50 states and in 20 other countries, and has sales of $800 million a year. It’s my kind of company. Over the next five years they plan on adding 100 employees, but they don’t have a place to put them at their present location. Iowa’s corporate tax rate is fairly reasonable in that the state taxes only profits made from sales in the state. Next door, so to speak, is South Dakota. That state does not have a state income tax, and that fact is a big carrot for relocation. Wells Dairy will decide by next summer where to build its new headquarters building, which is estimated to cost $30 million. Le Mars recognizes the importance of Wells Dairy, the city’s largest employer. Wells contributes to many community projects, and that includes helping to buy new fire equipment. Wells is a company on the move, but residents of Le Mars will do everything possible to keep this company in their town. It’s been there for over 90 years.
The nation’s productivity numbers will be released today. They should be record figures. Over the past three years it has reflected job cuts and overall cost reductions. Productivity does not necessarily equate with efficiency. That correlation is not always accurate. Let me explain. GM, for example, has over the past five or six years, been reducing the man hours needed to produce a vehicle. That’s a positive. At the same time, plants have been closed and workers have been eliminated. These workers were earning , on average, at least $60,000 a year. A good many of these former employees went on unemployment for a period of time. Some found work at substantially lower salaries. There are costs associated with unemployment, and they exist in the individual company with the layoff, the local communities, and the state in which the company is located. Some employees could not find a job. (A columnist wrote yesterday that “throw in a couple of percentage points for frictional employment(joblessness that results from people looking for a new job, changing jobs or relocating), and the U.S. economy isn’t far away from full employment.” Maybe she has that opinion because she has a job. In my opinion, she is severely employment reality challenged.)
Many former employees stop looking for a job after 20 months. The search becomes debilitating. Some require relocation, and move in with other family members. Meanwhile, GM has tried their best to become competitive in the marketplace. Companies like Toyota can manufacture their autos using less hours of labor. In order to “sell” their autos, GM provides an average incentive of $4200 per vehicle. Essentially, they make their corporate money through GMAC and their mortgage division. Did they become more productive? In labor per auto produced they did. Are they more efficient? No. If they were more efficient, prices for the vehicles would drop. An example of efficiency would be the price for PCs. They drop in price every year. Demand for the product has risen as the price has dropped.
Challenger, Gray and Christmas announced that layoffs from U.S. companies more than doubled in October to 171,874, the highest in a year. In October, the auto industry cut 28,363 workers. So far in 2003, over 1 million job cuts have been announced by U.S. companies. Those job cuts are not moving us in the direction of full employment.
Registered professional nurses comprise the largest segment of all health professionals. Phyllis Hansell, dean of Seton Hall University’s College of Nursing, stated that “currently, there are 2.6 million nurses in the U.S. and it is forecast that by 2010 an additional 1 million will be needed. Nurses will be required in all health care settings.” Where might we get these nurses? No problem. In the Philippines, government hospitals are the country’s largest health care employer. The government typically has only 1,000 new positions available each year for the 10,000 nurses that graduate. Nurses earn an average of $108 a month. Thousands of Filipino nurses are recruited every year to offset the shortage of nurses in the U.S. They apply for a U.S. immigrant visa that allows them to live permanently in the U.S. Alternatively, they come to the U.S. on a 3-year labor contract and then try to change their visa status after coming here. In sum, this is in-sourcing.
You don’t read too often about a company that is growing, making good money, and is out of space for expansion at its present site. I thought we’d take a little visit to the heartland. Let’s visit a company that is on the move, no pun intended. Have you been to Le Mars, Iowa? Have you heard of Le Mars, Iowa? Have you eaten Blue Bunny ice cream? Have you heard of Wells Dairy? Enough with the questions! The company employs 2400 workers (over 90% of their workforce) spread among seven buildings in Le Mars, a city of 9200 people. The company is family owned, was started close to 100 years ago, sells 550 Blue Bunny products in all 50 states and in 20 other countries, and has sales of $800 million a year. It’s my kind of company. Over the next five years they plan on adding 100 employees, but they don’t have a place to put them at their present location. Iowa’s corporate tax rate is fairly reasonable in that the state taxes only profits made from sales in the state. Next door, so to speak, is South Dakota. That state does not have a state income tax, and that fact is a big carrot for relocation. Wells Dairy will decide by next summer where to build its new headquarters building, which is estimated to cost $30 million. Le Mars recognizes the importance of Wells Dairy, the city’s largest employer. Wells contributes to many community projects, and that includes helping to buy new fire equipment. Wells is a company on the move, but residents of Le Mars will do everything possible to keep this company in their town. It’s been there for over 90 years.
The nation’s productivity numbers will be released today. They should be record figures. Over the past three years it has reflected job cuts and overall cost reductions. Productivity does not necessarily equate with efficiency. That correlation is not always accurate. Let me explain. GM, for example, has over the past five or six years, been reducing the man hours needed to produce a vehicle. That’s a positive. At the same time, plants have been closed and workers have been eliminated. These workers were earning , on average, at least $60,000 a year. A good many of these former employees went on unemployment for a period of time. Some found work at substantially lower salaries. There are costs associated with unemployment, and they exist in the individual company with the layoff, the local communities, and the state in which the company is located. Some employees could not find a job. (A columnist wrote yesterday that “throw in a couple of percentage points for frictional employment(joblessness that results from people looking for a new job, changing jobs or relocating), and the U.S. economy isn’t far away from full employment.” Maybe she has that opinion because she has a job. In my opinion, she is severely employment reality challenged.)
Many former employees stop looking for a job after 20 months. The search becomes debilitating. Some require relocation, and move in with other family members. Meanwhile, GM has tried their best to become competitive in the marketplace. Companies like Toyota can manufacture their autos using less hours of labor. In order to “sell” their autos, GM provides an average incentive of $4200 per vehicle. Essentially, they make their corporate money through GMAC and their mortgage division. Did they become more productive? In labor per auto produced they did. Are they more efficient? No. If they were more efficient, prices for the vehicles would drop. An example of efficiency would be the price for PCs. They drop in price every year. Demand for the product has risen as the price has dropped.
Challenger, Gray and Christmas announced that layoffs from U.S. companies more than doubled in October to 171,874, the highest in a year. In October, the auto industry cut 28,363 workers. So far in 2003, over 1 million job cuts have been announced by U.S. companies. Those job cuts are not moving us in the direction of full employment.
Registered professional nurses comprise the largest segment of all health professionals. Phyllis Hansell, dean of Seton Hall University’s College of Nursing, stated that “currently, there are 2.6 million nurses in the U.S. and it is forecast that by 2010 an additional 1 million will be needed. Nurses will be required in all health care settings.” Where might we get these nurses? No problem. In the Philippines, government hospitals are the country’s largest health care employer. The government typically has only 1,000 new positions available each year for the 10,000 nurses that graduate. Nurses earn an average of $108 a month. Thousands of Filipino nurses are recruited every year to offset the shortage of nurses in the U.S. They apply for a U.S. immigrant visa that allows them to live permanently in the U.S. Alternatively, they come to the U.S. on a 3-year labor contract and then try to change their visa status after coming here. In sum, this is in-sourcing.
Tuesday, November 04, 2003
11/4/03 GDP Growth And More Job Losses
By now, everyone has told you that the GDP grew at an annual rate of 7.2% in the third quarter. Did those same people tell you that the average monthly payroll employment in the third quarter was 146,000 less than in the second quarter or that employment measured by the government’s household survey was down 79,000? Beginning with 1947, there have been 38 quarters when economic growth was 7.2% or more. In all of those 38 quarters except one, the number of payrolls rose. For one million dollars, when was the lone exception? You are right! The lone exception was the third quarter of 2003. Norbert Ore, head of the ISM manufacturing business survey committee, said “this is not a typical recovery by any means.” The latest ISM employment index was 47.7, the 37th consecutive month the index has remained below 50%. As Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein in New York stated, “the fact that the employment component is still below 50 means that the rise in orders hasn’t yet translated into jobs.” After four straight months of manufacturing expansion, factory jobs normally would be created. Mr. Ore made a very important observation. He said the ISM factory index reading of 57 is consistent with GDP growth of 5.7% and not the 7.2% that was reported. The rate of liquidation of manufacturers’ inventories decelerated slightly in October as the Inventories Index registered 44.5%, and it has been under 50% for 45 consecutive months. Please note that the Customers’ Inventories Index is at 39%, a decrease of 5.5% from September’s level. This is the 29th consecutive month that this index has registered below 50%. The October reading was at the lowest level since this index was initiated in December 1996; however, it did equal the level reached in May 2002. There was one more trouble spot. The ISM Price Index indicated that manufacturers continued to pay higher prices in October. It was the 20th consecutive month the index has registered higher prices. It would be one thing if the manufacturers were successful in passing along these increased prices; however, with little pricing power, they have not be able to accomplish this task. As such, a major focus has been on cost cutting, and jobs are the first item on the agenda to be reduced. If one really cares enough to dig, the answers are available. It’s a matter of dedication. With an increased knowledge base, one is able to better assess the true economic landscape, and to make rational investment decisions.
Jim O’Conn, group vice president, North American Marketing, Sales and Service for Ford, remarked sales year-date were down 4%, and then stated “the economy is sprinting and consumer fundamentals remain favorable, and we believe auto sales will be strong in 2003 and we look for another good year in 2004.” If sprinting means car sales for Ford in October being down 9%, then sprinting is taking place. GM’s October U.S. sales fell 7% from a year ago, and truck sales declined 8%. Chrysler Group’s October sales rose 11% but that was only because of the 17% increased truck sales. Their car sales declined by 11%. A spokesperson for Cap Gemini Ernst &Young said of the auto industry that “in the past you could just build more and you would sell more. Those days are gone.” It’s only a matter of time until capacity reductions occur except possibly in China where GM is upping capacity by 50%.
With the rising federal budget deficit, the Treasury announced it would need to borrow a record $117 billion this quarter. Borrowing estimates for the next quarter are a whopping $160 billion.
It was about 2 ½ years ago that Kellogg purchased Keebler Foods for $4 billion. Many analysts thought it was an excellent acquisition. Of course, most analysts have never run a business. Since the purchase, cookies have proven to be among Kellogg’s lowest-margin products. Kellogg CEO Carlos Gutierrez said he was disappointed with the sales decline in cookies at Keebler, and that plant closings might be necessary in the fourth quarter and in 2004 to further reduce the cookie-production capacity.
South Florida has received some closure and layoff news. Elizabeth Arden is closing its Miami Lakes distribution center , moving its corporate offices, and laying off 190 people. Appliance maker Applica has 158,000 square feet of space in Miami Lakes. They will move to smaller offices for headquarters in Broward County, and 50 of the 300 jobs will be lost. In addition, Applica is laying off about 4,000, nearly all at its factory in China! Cordis Corp., the Johnson & Johnson stent maker, will terminate 200 people.
The Federal Reserve Bank of San Francisco stated the Bay Area’s employment level now languishes at its early 1998 level after 350,000 jobs, or nearly one in ten, were lost since the employment peak in 2000.
The U.S. Department of Labor calculates that about 500,000 jobs have been lost to Canada or Mexico since the enactment of NAFTA on Jan. 1, 1994. Robert Scott at the Economic Policy Institute in Washington figures it at 766,000. Russell Roberts, a professor of economics at George Mason University in Fairfax, Va, remarked “the bottom line is this: NAFTA has caused hardships for some Americans in certain sectors, but it’s made for a more stable and integrated Mexican political system, and that’s a good thing.” I can hear President Bush using similar phrases in describing the war in Iraq and the ensuing occupation period.
By now, everyone has told you that the GDP grew at an annual rate of 7.2% in the third quarter. Did those same people tell you that the average monthly payroll employment in the third quarter was 146,000 less than in the second quarter or that employment measured by the government’s household survey was down 79,000? Beginning with 1947, there have been 38 quarters when economic growth was 7.2% or more. In all of those 38 quarters except one, the number of payrolls rose. For one million dollars, when was the lone exception? You are right! The lone exception was the third quarter of 2003. Norbert Ore, head of the ISM manufacturing business survey committee, said “this is not a typical recovery by any means.” The latest ISM employment index was 47.7, the 37th consecutive month the index has remained below 50%. As Kevin Logan, a senior economist at Dresdner Kleinwort Wasserstein in New York stated, “the fact that the employment component is still below 50 means that the rise in orders hasn’t yet translated into jobs.” After four straight months of manufacturing expansion, factory jobs normally would be created. Mr. Ore made a very important observation. He said the ISM factory index reading of 57 is consistent with GDP growth of 5.7% and not the 7.2% that was reported. The rate of liquidation of manufacturers’ inventories decelerated slightly in October as the Inventories Index registered 44.5%, and it has been under 50% for 45 consecutive months. Please note that the Customers’ Inventories Index is at 39%, a decrease of 5.5% from September’s level. This is the 29th consecutive month that this index has registered below 50%. The October reading was at the lowest level since this index was initiated in December 1996; however, it did equal the level reached in May 2002. There was one more trouble spot. The ISM Price Index indicated that manufacturers continued to pay higher prices in October. It was the 20th consecutive month the index has registered higher prices. It would be one thing if the manufacturers were successful in passing along these increased prices; however, with little pricing power, they have not be able to accomplish this task. As such, a major focus has been on cost cutting, and jobs are the first item on the agenda to be reduced. If one really cares enough to dig, the answers are available. It’s a matter of dedication. With an increased knowledge base, one is able to better assess the true economic landscape, and to make rational investment decisions.
Jim O’Conn, group vice president, North American Marketing, Sales and Service for Ford, remarked sales year-date were down 4%, and then stated “the economy is sprinting and consumer fundamentals remain favorable, and we believe auto sales will be strong in 2003 and we look for another good year in 2004.” If sprinting means car sales for Ford in October being down 9%, then sprinting is taking place. GM’s October U.S. sales fell 7% from a year ago, and truck sales declined 8%. Chrysler Group’s October sales rose 11% but that was only because of the 17% increased truck sales. Their car sales declined by 11%. A spokesperson for Cap Gemini Ernst &Young said of the auto industry that “in the past you could just build more and you would sell more. Those days are gone.” It’s only a matter of time until capacity reductions occur except possibly in China where GM is upping capacity by 50%.
With the rising federal budget deficit, the Treasury announced it would need to borrow a record $117 billion this quarter. Borrowing estimates for the next quarter are a whopping $160 billion.
It was about 2 ½ years ago that Kellogg purchased Keebler Foods for $4 billion. Many analysts thought it was an excellent acquisition. Of course, most analysts have never run a business. Since the purchase, cookies have proven to be among Kellogg’s lowest-margin products. Kellogg CEO Carlos Gutierrez said he was disappointed with the sales decline in cookies at Keebler, and that plant closings might be necessary in the fourth quarter and in 2004 to further reduce the cookie-production capacity.
South Florida has received some closure and layoff news. Elizabeth Arden is closing its Miami Lakes distribution center , moving its corporate offices, and laying off 190 people. Appliance maker Applica has 158,000 square feet of space in Miami Lakes. They will move to smaller offices for headquarters in Broward County, and 50 of the 300 jobs will be lost. In addition, Applica is laying off about 4,000, nearly all at its factory in China! Cordis Corp., the Johnson & Johnson stent maker, will terminate 200 people.
The Federal Reserve Bank of San Francisco stated the Bay Area’s employment level now languishes at its early 1998 level after 350,000 jobs, or nearly one in ten, were lost since the employment peak in 2000.
The U.S. Department of Labor calculates that about 500,000 jobs have been lost to Canada or Mexico since the enactment of NAFTA on Jan. 1, 1994. Robert Scott at the Economic Policy Institute in Washington figures it at 766,000. Russell Roberts, a professor of economics at George Mason University in Fairfax, Va, remarked “the bottom line is this: NAFTA has caused hardships for some Americans in certain sectors, but it’s made for a more stable and integrated Mexican political system, and that’s a good thing.” I can hear President Bush using similar phrases in describing the war in Iraq and the ensuing occupation period.
Monday, November 03, 2003
11/3/03 Just In Time Employment
The biggest issue facing Americans is the job market. I will do my best to cover all the bases. Since becoming President in 1999, Bush has just received the lowest mark, only 40% approve of how “he understands the problems of people like you.” Let’s get to work on this subject- you and me.
Let’s get some housekeeping out of the way. Tomorrow, Challenger, Gray, and Christmas will release their employment numbers for October. Later in the week the government will release October job numbers. The two reports will not mesh. They never have in the past, and my analysis indicates a small rise in the number of unemployed workers. That too will not jibe with the government numbers. Please keep in mind that, sometime in December, the government will issue a report that they have been underestimating the unemployment number. I am certain that this report will be issued, and the underestimation will be in the range of 200,000 or more out of work Americans.
The workplace situation is simple to explain. Employers have embraced just in time inventory as well as just in time employment. If business picks up, companies will add a temporary worker, a part-time worker, or provide overtime to existing staff rather than hire a full-time worker. Sometimes the employer might hire the temp, part-time, and add overtime to staff- all at the same time. Companies pay less in wages and benefits through this employment practice. In addition, they avoid a layoff and do not have to pay additional unemployment expenses. There are about 130 million people in the workforce. Over the past 30 years temporary employment has risen from 0.3% of total employment to more than 3 million jobs or 800%. Yet, the chairman and CEO of Manpower has stated that, over the past four years, the number of their temporary workers has declined from 1.1 million to 650,000. Over the past 35 years the number of people working part-time jobs has grown from 14% of the workforce to 18%, and this is understated because the category does not include people working more than one job for a total of more than 35 hours.
When business is slow, employers might cut the workweek to 4 days, cut a half-day from the workweek, or even have employees take vacation days.
Overtime has also contributed to less job creation. Among production workers, overtime is up from 2.4 hours a week in 1960 to 4.1 hours, a 71% increase. The occasional overtime pay can provide a needed and welcome boost to income. On the other hand, overtime can generate additional stress in the workplace. Many employees are making a conscious decision to reduce hours worked, and that means less pay. October 24 was celebrated by many as “Take Back Your Time Day.” Many workers express that “they’re so stressed they’re not pausing at all, and you have to pause if you want to define who you want to be.” Many have turned to visiting the Web site, www.newdream.org, which offers tips on lowering consumption and exploring non-material ways for enjoyment. More Americans are seeking leisure over luxuries. Less pay also means focusing on obligatory expenses and cutting down on discretionary items. Lifestyles are changing. The workplace is changing. Main Street is taking on a different look. New saving methods are evolving, and with them, changes in Americans’ long-term investment programs.
James B. Cichanski, Flex HR Inc.’s president and CEO, remarked “every dollar costs, and you think about it in the economic climate today.”
The biggest issue facing Americans is the job market. I will do my best to cover all the bases. Since becoming President in 1999, Bush has just received the lowest mark, only 40% approve of how “he understands the problems of people like you.” Let’s get to work on this subject- you and me.
Let’s get some housekeeping out of the way. Tomorrow, Challenger, Gray, and Christmas will release their employment numbers for October. Later in the week the government will release October job numbers. The two reports will not mesh. They never have in the past, and my analysis indicates a small rise in the number of unemployed workers. That too will not jibe with the government numbers. Please keep in mind that, sometime in December, the government will issue a report that they have been underestimating the unemployment number. I am certain that this report will be issued, and the underestimation will be in the range of 200,000 or more out of work Americans.
The workplace situation is simple to explain. Employers have embraced just in time inventory as well as just in time employment. If business picks up, companies will add a temporary worker, a part-time worker, or provide overtime to existing staff rather than hire a full-time worker. Sometimes the employer might hire the temp, part-time, and add overtime to staff- all at the same time. Companies pay less in wages and benefits through this employment practice. In addition, they avoid a layoff and do not have to pay additional unemployment expenses. There are about 130 million people in the workforce. Over the past 30 years temporary employment has risen from 0.3% of total employment to more than 3 million jobs or 800%. Yet, the chairman and CEO of Manpower has stated that, over the past four years, the number of their temporary workers has declined from 1.1 million to 650,000. Over the past 35 years the number of people working part-time jobs has grown from 14% of the workforce to 18%, and this is understated because the category does not include people working more than one job for a total of more than 35 hours.
When business is slow, employers might cut the workweek to 4 days, cut a half-day from the workweek, or even have employees take vacation days.
Overtime has also contributed to less job creation. Among production workers, overtime is up from 2.4 hours a week in 1960 to 4.1 hours, a 71% increase. The occasional overtime pay can provide a needed and welcome boost to income. On the other hand, overtime can generate additional stress in the workplace. Many employees are making a conscious decision to reduce hours worked, and that means less pay. October 24 was celebrated by many as “Take Back Your Time Day.” Many workers express that “they’re so stressed they’re not pausing at all, and you have to pause if you want to define who you want to be.” Many have turned to visiting the Web site, www.newdream.org, which offers tips on lowering consumption and exploring non-material ways for enjoyment. More Americans are seeking leisure over luxuries. Less pay also means focusing on obligatory expenses and cutting down on discretionary items. Lifestyles are changing. The workplace is changing. Main Street is taking on a different look. New saving methods are evolving, and with them, changes in Americans’ long-term investment programs.
James B. Cichanski, Flex HR Inc.’s president and CEO, remarked “every dollar costs, and you think about it in the economic climate today.”
Sunday, November 02, 2003
11/2/03 Don’t Worry! Be Happy!!
The terror card is not working in Illinois. The Illinois Voter Worry Index is a yearly measure of how worried the citizens in that state are about everything. The index started 14 years ago, and this is the highest level of worry since the index began. Less than 1% of those polled chose terrorism as the biggest worry. In fact, in looking at the results of the poll, terrorism was a non-event. The two biggest jumps in the index were for losing health insurance (17.9%) and ability to pay taxes (14.4%). The results of this poll reflect the daily worries on Main Street: “A lot of people out there feel they are in a dire financial situation, or could be very soon. It should be a wake-up call for lawmakers who think quick cosmetic solutions are enough. Every night the cosmetics come off, and one has to look in the mirror. The voters seem to know this. And they are watching…the intensification seems to be clustering around financial insecurity. Economic worries really seem to be troubling people- and not just for the lower incomes or younger people, not just for certain groups, but for everyone.” These findings are consistent with what I have been saying for the last several years- it’s living paycheck to paycheck, worrying about losing your job, and worries about health insurance and having a bigger co-payment, having less coverage, and/or no coverage. When you have trouble paying bills, the worry is not Osama bin Laden or Saddam Hussein. Bush and his Administration still don’t get it. They’ve never walked the streets of Main Street. They participate in photo shoots while giving fund raising speeches and stumping for Republican candidates.
Yesterday Bush campaigned for two Republican gubernatorial candidates in Mississippi and Kentucky. Thirteen soldiers were killed and more than 20 wounded when their U.S. Chinook helicopter was shot down near Fallujah, about 40 miles west of Baghdad. Fallujah is a center of Sunni Muslim resistance to the U.S. occupation. This was the third time guerrillas had brought down a U.S. military helicopter since Bush declared major combat over in Iraq on May 1. A bomb in Baghdad killed two more U.S. soldiers. During the past week, on average there have been thirty- three daily attacks on our troops in Iraq. The death toll in Iraq is mounting. Since May 1, 137 of our troops have been killed in hostile combat.
PA Consulting Group said 66% of companies surveyed were disappointed with their outsourcing contracts. The survey reveals that only 39% of the companies would renew contracts with their existing outsourcing suppliers, and 15% planned to bring services back in-house. Dave Lakhani, president of business consulting firm Bold Approach Inc., stated only 40% of the outsourcing projects are successful, and that most companies “don’t understand the potential problems. They feel whatever problems may arise, they will be easily offset by the savings. That's really not true.” Problems most often mentioned are security, cultural differences, and logistics.
A new Washington Post-ABC News poll showed Sunday that 48% of those surveyed would vote for Bush if the election were held today while 47% said they would vote for the Democratic Party’s nominee. Five per cent said they did not know.
An interesting dichotomy is revealed with two privately owned companies. Cold Stone Creamery recently opened its 500th store. A new Curves opens about every four hours, and has more than 6,000 low-impact exercise clubs with 2 million members.
Japan has been spending money on bridges, roads, dams, and several other public works projects. Since 1991, Japan’s national debt has risen to 685 trillion yen or about 140% of annual GDP. The market capitalization of all the public companies trading in the United States presently exceeds 100% of our annual GDP. Over the last eight decades the average ratio has been about one-half of that.
China’s economy grew over 9% in the third quarter as compared with the prior year’s third quarter. During the first nine months of 2003, China’s imports increased more than 40% from the year earlier period. A good portion of that import growth came from Southeast Asia as well as South Korea.
Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., was recently interviewed in Barron’s. He stated “ the simple story is the market is overpriced and will go to a trendline P/E, which we now believe is 16 times based on research that shows earnings tend to be overstated over time because assets tend to be underdepreciated during times of technological progress. Currently, the market is around 24 times trailing earnings, on a fairly generous earnings estimate. This is not just a bear market rally but the greatest sucker rally in history." I have never talked with or met Jeremy Grantham. He has had a successful money management record for 35 years. Not too many folks can say that.
The terror card is not working in Illinois. The Illinois Voter Worry Index is a yearly measure of how worried the citizens in that state are about everything. The index started 14 years ago, and this is the highest level of worry since the index began. Less than 1% of those polled chose terrorism as the biggest worry. In fact, in looking at the results of the poll, terrorism was a non-event. The two biggest jumps in the index were for losing health insurance (17.9%) and ability to pay taxes (14.4%). The results of this poll reflect the daily worries on Main Street: “A lot of people out there feel they are in a dire financial situation, or could be very soon. It should be a wake-up call for lawmakers who think quick cosmetic solutions are enough. Every night the cosmetics come off, and one has to look in the mirror. The voters seem to know this. And they are watching…the intensification seems to be clustering around financial insecurity. Economic worries really seem to be troubling people- and not just for the lower incomes or younger people, not just for certain groups, but for everyone.” These findings are consistent with what I have been saying for the last several years- it’s living paycheck to paycheck, worrying about losing your job, and worries about health insurance and having a bigger co-payment, having less coverage, and/or no coverage. When you have trouble paying bills, the worry is not Osama bin Laden or Saddam Hussein. Bush and his Administration still don’t get it. They’ve never walked the streets of Main Street. They participate in photo shoots while giving fund raising speeches and stumping for Republican candidates.
Yesterday Bush campaigned for two Republican gubernatorial candidates in Mississippi and Kentucky. Thirteen soldiers were killed and more than 20 wounded when their U.S. Chinook helicopter was shot down near Fallujah, about 40 miles west of Baghdad. Fallujah is a center of Sunni Muslim resistance to the U.S. occupation. This was the third time guerrillas had brought down a U.S. military helicopter since Bush declared major combat over in Iraq on May 1. A bomb in Baghdad killed two more U.S. soldiers. During the past week, on average there have been thirty- three daily attacks on our troops in Iraq. The death toll in Iraq is mounting. Since May 1, 137 of our troops have been killed in hostile combat.
PA Consulting Group said 66% of companies surveyed were disappointed with their outsourcing contracts. The survey reveals that only 39% of the companies would renew contracts with their existing outsourcing suppliers, and 15% planned to bring services back in-house. Dave Lakhani, president of business consulting firm Bold Approach Inc., stated only 40% of the outsourcing projects are successful, and that most companies “don’t understand the potential problems. They feel whatever problems may arise, they will be easily offset by the savings. That's really not true.” Problems most often mentioned are security, cultural differences, and logistics.
A new Washington Post-ABC News poll showed Sunday that 48% of those surveyed would vote for Bush if the election were held today while 47% said they would vote for the Democratic Party’s nominee. Five per cent said they did not know.
An interesting dichotomy is revealed with two privately owned companies. Cold Stone Creamery recently opened its 500th store. A new Curves opens about every four hours, and has more than 6,000 low-impact exercise clubs with 2 million members.
Japan has been spending money on bridges, roads, dams, and several other public works projects. Since 1991, Japan’s national debt has risen to 685 trillion yen or about 140% of annual GDP. The market capitalization of all the public companies trading in the United States presently exceeds 100% of our annual GDP. Over the last eight decades the average ratio has been about one-half of that.
China’s economy grew over 9% in the third quarter as compared with the prior year’s third quarter. During the first nine months of 2003, China’s imports increased more than 40% from the year earlier period. A good portion of that import growth came from Southeast Asia as well as South Korea.
Jeremy Grantham of Grantham, Mayo, Van Otterloo & Co., was recently interviewed in Barron’s. He stated “ the simple story is the market is overpriced and will go to a trendline P/E, which we now believe is 16 times based on research that shows earnings tend to be overstated over time because assets tend to be underdepreciated during times of technological progress. Currently, the market is around 24 times trailing earnings, on a fairly generous earnings estimate. This is not just a bear market rally but the greatest sucker rally in history." I have never talked with or met Jeremy Grantham. He has had a successful money management record for 35 years. Not too many folks can say that.
Saturday, November 01, 2003
11/1/03 Consumer Spending Slowdown
Washington DC, Wall Street, and the media whooped it up after the third quarter GDP growth of 7.2% was released. We were off to the races. I smiled. I knew the consensus was wrong once again. I knew the consumer spending numbers would be worse than expected. I had done my homework. Analysts had forecast a 0.1% decrease in spending for September. The actual 0.3% decline was the largest since a 0.4% drop in September one year ago. This news is very important in light of the reported 0.3% rise in Americans’ income for September of this year. The consumer is slowly cutting back on expenditures. Spending on cars and appliances were down 5.1% in the month. In August they had risen 3.8% for the same items. Even spending on food and clothing was reduced from the August rise of 1.4% to a mere 0.3% in September. The only area of increased spending was a small bump on services from 0.3% in August to 0.4% in September. October will prove modestly better for discounters like WalMart and Target, but for department stores it should prove disappointing. Halloween will be a bright spot. Last October the same-store sales for WalMart rose 3.7%, and I am thinking a comparable number for this October will be about a 4.3% increase. Last October was the turning point in retail sales. It was then that the consumer began to cut down on expenditures. I believe the same thing happened this year, and that’s why I only look for a modest increase in holiday spending over last year’s results. It’s more than just a feeling. I look at facts. The IBD TIPP Home Computer Purchase Outlook Index fell11% in October to 17.5, just above its all-time low of 17.3 in March. Only 19.7% of respondents said they were very likely or somewhat likely to buy a new PC within the next six months. That compares with 26.1% in July. According to this poll, 78% of U.S. households have at least one PC, and 37% have more than one PC. The IBD TIPP survey data reveals that September consumer confidence “fell off a cliff.” October only inched back. If the consumer continues to cut back on spending, GDP growth will turn to barely positive, and equity prices will also fall off a cliff. I hope no one gets hurt. I’ll be waiting at ground level.
Yesterday, the USDA said 12 million families last year worried they didn’t have enough money to buy food. Thirty two per cent of them actually experienced someone going hungry at one time or another.
Intense geomagnetic storms raging on the sun made the sky shimmer red and green. The storms again disrupted telecommunications, and high radiation levels at 25,000 feet and above will persist through the weekend. The telescope at Kitt Peak, Arizona picked up the largest array of sunspots in a very long time.
ChevronTexaco has 53,000 employees. Yesterday, they announced job cuts of 2000. Commerce One’s stock was a high flying company at the height of the Internet craze. With cash running out, they laid off most of the remaining 116 employees. Earlier in October they had cut 80 people from the payroll. On Monday morning Chairman and CEO Mark Hoffman should be able to hear a pin drop in their Pleasanton, CA office.
A roadside bomb killed at least two U.S. soldiers and wounded two other soldiers in Mosul, Iraq today. In addition, an oil pipeline was on fire about 10 miles north of Tikrit. The two deaths bring to 122 the number of American soldiers killed by hostile fire since Bush declared an end to hostile combat on May 1. A total of 114 U.S. soldiers were killed between the start of the war on March 20 and the end of April. An Islamic clergymen’s association in Mosul issued a statement Friday stating “supporting Americans is apostasy and a betrayal of religion.”
An average WalMart supercenter generates $80 to $100 million a year in annual revenues. Their smaller discount stores produce $60 million a year. People shop at WalMart for their low prices. They sell a 47-inch Panasonic high-definition television for $1,284. The same product sells on Best Buy’s website for $1,499.99. When it comes to price comparison shopping, consumers know their stuff.
Starbucks continues to expand, and plans to open “3 to 4 new stores every day around the world.” Since their IPO in 1992, Starbucks stock has had one of the best performances over this time period. They continue to meet goals of 20% sales growth and 20-25% earnings per share growth. The company expects their 500 stores in Japan to turn profitable in 2004. At present, they have 119 stores throughout China, but their chairman, Howard Schultz, thinks China could prove to be their biggest market outside the United States in future years.
Recently, I mentioned Amazon.com had introduced “Search Inside the Book,” an excellent search technology that allows one to search the contents of a book and preview individual pages and print those of particular interest. Yesterday, Amazon disabled this search and print technology found on the books located on its website. I do not know whether the cancellation is temporary or permanent, but will endeavor to find out.
Washington DC, Wall Street, and the media whooped it up after the third quarter GDP growth of 7.2% was released. We were off to the races. I smiled. I knew the consensus was wrong once again. I knew the consumer spending numbers would be worse than expected. I had done my homework. Analysts had forecast a 0.1% decrease in spending for September. The actual 0.3% decline was the largest since a 0.4% drop in September one year ago. This news is very important in light of the reported 0.3% rise in Americans’ income for September of this year. The consumer is slowly cutting back on expenditures. Spending on cars and appliances were down 5.1% in the month. In August they had risen 3.8% for the same items. Even spending on food and clothing was reduced from the August rise of 1.4% to a mere 0.3% in September. The only area of increased spending was a small bump on services from 0.3% in August to 0.4% in September. October will prove modestly better for discounters like WalMart and Target, but for department stores it should prove disappointing. Halloween will be a bright spot. Last October the same-store sales for WalMart rose 3.7%, and I am thinking a comparable number for this October will be about a 4.3% increase. Last October was the turning point in retail sales. It was then that the consumer began to cut down on expenditures. I believe the same thing happened this year, and that’s why I only look for a modest increase in holiday spending over last year’s results. It’s more than just a feeling. I look at facts. The IBD TIPP Home Computer Purchase Outlook Index fell11% in October to 17.5, just above its all-time low of 17.3 in March. Only 19.7% of respondents said they were very likely or somewhat likely to buy a new PC within the next six months. That compares with 26.1% in July. According to this poll, 78% of U.S. households have at least one PC, and 37% have more than one PC. The IBD TIPP survey data reveals that September consumer confidence “fell off a cliff.” October only inched back. If the consumer continues to cut back on spending, GDP growth will turn to barely positive, and equity prices will also fall off a cliff. I hope no one gets hurt. I’ll be waiting at ground level.
Yesterday, the USDA said 12 million families last year worried they didn’t have enough money to buy food. Thirty two per cent of them actually experienced someone going hungry at one time or another.
Intense geomagnetic storms raging on the sun made the sky shimmer red and green. The storms again disrupted telecommunications, and high radiation levels at 25,000 feet and above will persist through the weekend. The telescope at Kitt Peak, Arizona picked up the largest array of sunspots in a very long time.
ChevronTexaco has 53,000 employees. Yesterday, they announced job cuts of 2000. Commerce One’s stock was a high flying company at the height of the Internet craze. With cash running out, they laid off most of the remaining 116 employees. Earlier in October they had cut 80 people from the payroll. On Monday morning Chairman and CEO Mark Hoffman should be able to hear a pin drop in their Pleasanton, CA office.
A roadside bomb killed at least two U.S. soldiers and wounded two other soldiers in Mosul, Iraq today. In addition, an oil pipeline was on fire about 10 miles north of Tikrit. The two deaths bring to 122 the number of American soldiers killed by hostile fire since Bush declared an end to hostile combat on May 1. A total of 114 U.S. soldiers were killed between the start of the war on March 20 and the end of April. An Islamic clergymen’s association in Mosul issued a statement Friday stating “supporting Americans is apostasy and a betrayal of religion.”
An average WalMart supercenter generates $80 to $100 million a year in annual revenues. Their smaller discount stores produce $60 million a year. People shop at WalMart for their low prices. They sell a 47-inch Panasonic high-definition television for $1,284. The same product sells on Best Buy’s website for $1,499.99. When it comes to price comparison shopping, consumers know their stuff.
Starbucks continues to expand, and plans to open “3 to 4 new stores every day around the world.” Since their IPO in 1992, Starbucks stock has had one of the best performances over this time period. They continue to meet goals of 20% sales growth and 20-25% earnings per share growth. The company expects their 500 stores in Japan to turn profitable in 2004. At present, they have 119 stores throughout China, but their chairman, Howard Schultz, thinks China could prove to be their biggest market outside the United States in future years.
Recently, I mentioned Amazon.com had introduced “Search Inside the Book,” an excellent search technology that allows one to search the contents of a book and preview individual pages and print those of particular interest. Yesterday, Amazon disabled this search and print technology found on the books located on its website. I do not know whether the cancellation is temporary or permanent, but will endeavor to find out.
Friday, October 31, 2003
10/31/03 ABCs: Arrogance, Bubbles, Competition
Lightening can strike twice. Solar storms can strike back-to-back. Never say never. It will happen today. The first geomagnetic storm was ranked X17, and was among the four most powerful in recorded history. It disabled two Japanese satellites, caused air traffic controllers to alter some trans-Atlantic flights, disrupted radio communications, and some power grids were curbed. What are the chances of such a storm occurring again in this decade? What are the chances it could happen today? Until this week, any brilliant physicist would say “no way.” He would be correct. It has not taken place back-to back. Actually, the physicist would be wrong. It’s happening today. In fact, there is a chance the two storms could join forces as the second one catches up with the first. The FAA issued an alert- the first of its kind ever- cautioning passengers about extra radiation they would receive during flights above 25,000 feet north of Albuquerque and similar latitudes. John Kohl, a solar physicist with the Harvard-Smithsonian Center for Astrophysics, stated “the probability of this happening is so low that it is a statistical anomaly…this second blast is moving like a fast freight train that very soon will plow into the back of the slower moving freight train in front of it, just as it pulls into the station. The station, in this case, happens to be the planet earth.” Kohl said the potential effect is not known. The National Oceanic and Atmospheric Administration (NOAA) RUNS THE Space Environment Center. Researchers are not in agreement that airline traffic is safe. The NOAA estimates an airline passenger can experience as much as 10 chest X-rays during a geomagnetic storm. According to the Space Environment Center, the chance of a major(X-class) solar eruption on each of the next three days is 50%.
Country accords can create massive eruptions. G-5 finance ministers gathered at the Plaza Hotel in New York City on September 22, 1985. A consensus was reached that the U.S. dollar was significantly overvalued, and dangerous financial and trade imbalances were in the process of reaching the boiling point. An agreement was formulated that “some further orderly appreciation of the main non-dollar currencies against the dollar is desirable, and they stand ready to cooperate more closely to encourage this when to do so would be helpful.” In the next two and one-half years the dollar melted in half against the yen and the DM. The purpose of the dollar devaluation was to eliminate the enormous U.S. financial and trade deficits with Japan. This was the yen revaluation storm that initiated the downward economic spiral in Japan. Government intervention does not work, and governments rarely learn from their mistakes. In fact, they compound their mistakes. On February 22, 1987 G6 Finance Ministers and Central Bank Governors met in Paris, France for the Louvre Accord, and they agreed to intensify their economic policy coordination efforts in order to promote more balanced global growth and to reduce existing imbalances. Surplus countries committed themselves to follow policies designed to strengthen domestic demand and to reduce their external surpluses while maintaining price stability. Deficit countries committed themselves to follow policies designed to encourage steady, low-inflation growth while reducing their domestic imbalances and external deficits. Furthermore, it was agreed that the substantial exchange rate changes since the Plaza Agreement increasingly contributed to reducing imbalances and brought their currencies within ranges broadly consistent with underlying economic fundamentals and policy commitments. In sum, they agreed to cooperate closely to foster stability of exchange rates around current levels.
IS EVERYONE AWAKE? Does everyone remember the G-7 summit meetings with the IMF and the World Bank in Dubai, United Arab Emirates from September 19 through September 23, 2003? A communique was issued by the G-7 calling for “more flexibility in exchange rates.” It read “in the context of exchange rates, we will strengthen the dialogue with other major economic areas to promote smooth adjustment of international imbalances, based on market mechanisms.” In the next few days, the Japanese yen and the euro rose sharply against the U.S. dollar. As one observer remarked, “I don’t think the dollar going down has to do with the Dubai G-7 communique insisting on flexible exchange rates; there is something else going on. The financial world has latched onto a falling dollar, because of knowledge that has been picked up…that the Administration clearly wants to abandon the strong dollar. It’s fair to say, that they want to drive the dollar down, because of growing desperation about the American economy, as the election year approaches.” China will not make the same mistake Japan made in 1985. A more expensive currency would create widespread job losses for Chinese workers at a time when China needs to create a minimum of 20 million jobs annually. China will not give in to pressure from the United States. Prof. Jiang Ruiping, Chairman of the Department of International Economics of the Foreign Affairs College in Beijing, remarked that the Bush Administration, and some in Japan, want China to submit to the same sort of agreement that took place in 1985 and 1987. He said a “yen revaluation depression” is a bitter pill that China and its yuan will not swallow. China will relax curbs in 14 trial provinces and regions, allowing local foreign exchange capital of overseas investment projects with a limit of $3 million versus a previous ceiling of $1 million. The stability of the yuan will be maintained. The goal is to boost China’s economic growth within a stable financial environment.
American citizens have paid a stiff price for the mistakes made by its political and economic leadership. The United States is the greatest country on the globe. We are in grave danger. We have endured civil war, world wars, the depression, 9/11, and hopefully, the Iraq war. We are facing a different war. It’s the assault on our populace and our standard of living and our freedoms by the global economy. China is not the culprit. Japan is not the culprit. India is not the culprit. YOU believe what you read and you believe what you hear. YOU DO NOT THINK FOR YOURSELF. That is you God given right. You have abused the privilege. I do think for myself. I do not know all the answers, but I know the following. Unless you make changes, there will be an economic upheaval in this country, and there will be bread lines- unless bread-making is outsourced. You, the American consumer, account for about 70% of our GDP. You run the show. You are in charge. You pay the salaries and the services. You account for 20% of the world economic activity. Without you, imports are history. You get the picture? The government is not your friend. They are destroying the value of the dollar. In so doing, they are wrecking your purchasing power. Stop the train. Get off the train. Stop buying foreign goods. We can compete with any country. Our workers are smarter and they need to have a better sense of accomplishment. Management personnel need to cut their salaries and benefits. Members of Congress need to cut their salaries and benefits. You have been given the means to pile up debt with low interest rates. You have received tax reductions and tax credits. You buy cars with zero down and zero interest rates. You spend. The government spends. You live paycheck to paycheck. The government lives debt ceiling increase to debt ceiling increase. The average American indebtedness represents 115% of disposable income. You have negative cash flow. Many public companies have negative cash flow. We have a national debt bubble of mammoth proportions accompanied by negative cash flow that prevents the paying down of debt. The only solution is to cut down on spending- both at the consumer and the government level. It will cause a recession. It will not cause a depression. If you don’t buy foreign goods, you won’t need to worry about the yuan, the yen, and the euro. The market forces will work in your favor. Your purchasing power will be restored. You will have done away with G-5, G-6, and G-7 accords. They only create stock market crashes and economic upheaval.
When WalMart first began, they proudly advertised their product offerings as “all American.” WalMart now purchases about $12 billion in goods from China. If you demand American goods and leave the foreign goods on the shelf, WalMart will supply you with the goods you desire. You must be willing to pay, in the short run, a premium for the American goods. The American worker receives a higher wage. You must support that wage or that wage will be outsourced. It’s your choice. The answer is not by re-arranging foreign currencies. It creates disastrous results.
This week someone emailed me to say that our plants were only at 75% capacity because the unused capacity was not competitive. He is correct; however, some companies are doing something about it. Anadarko Petroleum did lay off 400 workers to trim $100 million a year in costs. There will not be more layoffs. In addition to the $100 million, they reduced drilling costs by 15%. Companies need to find ways to reduce costs other than by cutting workers and outsourcing to foreign nations. The future is here. The present is here. The troubles are here. Imbalances are dangerous. Governments can’t fix them. You must demand they get fixed. They begin with you, your lifestyle, and your vote. The American citizen is the fall guy. China is not. Japan is not. India is not. We have clear choices. They are buy American, spend less, demand less spending in Washington, and make our businesses and our lifestyles more cost efficient. We must pay down debt and still save. We cannot have countries like Japan and China sustain large trade account surpluses with our country. It undermines our economic well being by depending on daily foreign capital inflows of $1.6 billion. Do you want to go begging every day from Japan and China. The global economy is dependent you for its export growth and your rising indebtedness and the nation’s indebtedness. The insatiable spending habits have generated deflation. The credit and indebtedness bubbles have generated global over-capacity, and the latter cannot be met with present demand.
I waited to write this piece until after the third quarter GDP numbers were released. I figured some months back that the quarter would be strong- over 5% and maybe even 6%. The 7+% did not surprise me. The public thinks we’re off to the races. Bush tells you we’re off to the races. There were 41,000 jobs lost in the quarter. Yesterday Duke Energy announced a plan to cut 2,000 employees. The help wanted index remains at the lowest point of 2003. The growth in job benefit costs is double the rate of wage increases, which remain muted. Companies cannot pass along increased costs. There are rising costs besides those in the benefit area. Many industrial commodities have risen sharply, and not just gold. Some agricultural commodities have risen sharply, such as, soybeans. These rising costs put a damper on business profit margins and consumer pocketbooks. You can see that at the gas pump or in your home heating bills. The CRB index is at its highest point in about six years. What happens when budget deficits occur? The city of San Jose is facing a huge budget deficit for the second consecutive year. The $85 million shortfall is more than 10% of the total operating budget. It will mean layoffs, deeper service cuts, and higher fees. The budget shortfall will be felt throughout the entire community. It’s a serious problem. Two economists at UC Berkeley’s Fisher Center for Real Estate and Urban Economics present another problem- up to 14 million jobs, and many of them in the Bay Area, are at risk of being shipped overseas. They range from computer programmers to clerks who input data, from medical transcriptionists to paralegals, and “the bottom line is, if there is a job that can be done equally well, equally efficient, at a much lower cost in a different part of the world, then that job is at risk in today’s globalizing world.” It is our job to make sure we do that job better and more efficiently so that increased productivity overwhelms the wage differences. We must give businesses good reasons to hire American workers and to keep American workers on the payrolls. The solution is not to place a cap on outsourcing. The solution is to do a better job and to reduce overhead.
Globalization in the workplace is a present danger that has created the loss of 3 million jobs over the past three years. You hold the key. You can compete. You also hold the key to trade deficits, and therefore, you can engineer a rebound in your purchasing power. You can spend less and pay down debt. You can save. Bush has looked to rising stock prices to create consumer optimism and for you to spend more so more jobs will be created. You have spent more. You spend more every day. Our hourly trade deficit mounts at an historic and an alarming rate. Our budget deficits mount hourly at the federal, state, and local levels. The debt levels of the American people rise hourly. The problem is the nation’s cash flow and that of its citizens continues to diminish. There is a daily shortfall. When making bread, there is a resting period. Without it, the bread will be a flop. We need a pause. We need a spending respite. We need to buy and employ American. It will mean lower earnings in the short run. It will mean lower stock prices. It will also ensure our future economic revival and vitality for future generations.
Lightening can strike twice. Solar storms can strike back-to-back. Never say never. It will happen today. The first geomagnetic storm was ranked X17, and was among the four most powerful in recorded history. It disabled two Japanese satellites, caused air traffic controllers to alter some trans-Atlantic flights, disrupted radio communications, and some power grids were curbed. What are the chances of such a storm occurring again in this decade? What are the chances it could happen today? Until this week, any brilliant physicist would say “no way.” He would be correct. It has not taken place back-to back. Actually, the physicist would be wrong. It’s happening today. In fact, there is a chance the two storms could join forces as the second one catches up with the first. The FAA issued an alert- the first of its kind ever- cautioning passengers about extra radiation they would receive during flights above 25,000 feet north of Albuquerque and similar latitudes. John Kohl, a solar physicist with the Harvard-Smithsonian Center for Astrophysics, stated “the probability of this happening is so low that it is a statistical anomaly…this second blast is moving like a fast freight train that very soon will plow into the back of the slower moving freight train in front of it, just as it pulls into the station. The station, in this case, happens to be the planet earth.” Kohl said the potential effect is not known. The National Oceanic and Atmospheric Administration (NOAA) RUNS THE Space Environment Center. Researchers are not in agreement that airline traffic is safe. The NOAA estimates an airline passenger can experience as much as 10 chest X-rays during a geomagnetic storm. According to the Space Environment Center, the chance of a major(X-class) solar eruption on each of the next three days is 50%.
Country accords can create massive eruptions. G-5 finance ministers gathered at the Plaza Hotel in New York City on September 22, 1985. A consensus was reached that the U.S. dollar was significantly overvalued, and dangerous financial and trade imbalances were in the process of reaching the boiling point. An agreement was formulated that “some further orderly appreciation of the main non-dollar currencies against the dollar is desirable, and they stand ready to cooperate more closely to encourage this when to do so would be helpful.” In the next two and one-half years the dollar melted in half against the yen and the DM. The purpose of the dollar devaluation was to eliminate the enormous U.S. financial and trade deficits with Japan. This was the yen revaluation storm that initiated the downward economic spiral in Japan. Government intervention does not work, and governments rarely learn from their mistakes. In fact, they compound their mistakes. On February 22, 1987 G6 Finance Ministers and Central Bank Governors met in Paris, France for the Louvre Accord, and they agreed to intensify their economic policy coordination efforts in order to promote more balanced global growth and to reduce existing imbalances. Surplus countries committed themselves to follow policies designed to strengthen domestic demand and to reduce their external surpluses while maintaining price stability. Deficit countries committed themselves to follow policies designed to encourage steady, low-inflation growth while reducing their domestic imbalances and external deficits. Furthermore, it was agreed that the substantial exchange rate changes since the Plaza Agreement increasingly contributed to reducing imbalances and brought their currencies within ranges broadly consistent with underlying economic fundamentals and policy commitments. In sum, they agreed to cooperate closely to foster stability of exchange rates around current levels.
IS EVERYONE AWAKE? Does everyone remember the G-7 summit meetings with the IMF and the World Bank in Dubai, United Arab Emirates from September 19 through September 23, 2003? A communique was issued by the G-7 calling for “more flexibility in exchange rates.” It read “in the context of exchange rates, we will strengthen the dialogue with other major economic areas to promote smooth adjustment of international imbalances, based on market mechanisms.” In the next few days, the Japanese yen and the euro rose sharply against the U.S. dollar. As one observer remarked, “I don’t think the dollar going down has to do with the Dubai G-7 communique insisting on flexible exchange rates; there is something else going on. The financial world has latched onto a falling dollar, because of knowledge that has been picked up…that the Administration clearly wants to abandon the strong dollar. It’s fair to say, that they want to drive the dollar down, because of growing desperation about the American economy, as the election year approaches.” China will not make the same mistake Japan made in 1985. A more expensive currency would create widespread job losses for Chinese workers at a time when China needs to create a minimum of 20 million jobs annually. China will not give in to pressure from the United States. Prof. Jiang Ruiping, Chairman of the Department of International Economics of the Foreign Affairs College in Beijing, remarked that the Bush Administration, and some in Japan, want China to submit to the same sort of agreement that took place in 1985 and 1987. He said a “yen revaluation depression” is a bitter pill that China and its yuan will not swallow. China will relax curbs in 14 trial provinces and regions, allowing local foreign exchange capital of overseas investment projects with a limit of $3 million versus a previous ceiling of $1 million. The stability of the yuan will be maintained. The goal is to boost China’s economic growth within a stable financial environment.
American citizens have paid a stiff price for the mistakes made by its political and economic leadership. The United States is the greatest country on the globe. We are in grave danger. We have endured civil war, world wars, the depression, 9/11, and hopefully, the Iraq war. We are facing a different war. It’s the assault on our populace and our standard of living and our freedoms by the global economy. China is not the culprit. Japan is not the culprit. India is not the culprit. YOU believe what you read and you believe what you hear. YOU DO NOT THINK FOR YOURSELF. That is you God given right. You have abused the privilege. I do think for myself. I do not know all the answers, but I know the following. Unless you make changes, there will be an economic upheaval in this country, and there will be bread lines- unless bread-making is outsourced. You, the American consumer, account for about 70% of our GDP. You run the show. You are in charge. You pay the salaries and the services. You account for 20% of the world economic activity. Without you, imports are history. You get the picture? The government is not your friend. They are destroying the value of the dollar. In so doing, they are wrecking your purchasing power. Stop the train. Get off the train. Stop buying foreign goods. We can compete with any country. Our workers are smarter and they need to have a better sense of accomplishment. Management personnel need to cut their salaries and benefits. Members of Congress need to cut their salaries and benefits. You have been given the means to pile up debt with low interest rates. You have received tax reductions and tax credits. You buy cars with zero down and zero interest rates. You spend. The government spends. You live paycheck to paycheck. The government lives debt ceiling increase to debt ceiling increase. The average American indebtedness represents 115% of disposable income. You have negative cash flow. Many public companies have negative cash flow. We have a national debt bubble of mammoth proportions accompanied by negative cash flow that prevents the paying down of debt. The only solution is to cut down on spending- both at the consumer and the government level. It will cause a recession. It will not cause a depression. If you don’t buy foreign goods, you won’t need to worry about the yuan, the yen, and the euro. The market forces will work in your favor. Your purchasing power will be restored. You will have done away with G-5, G-6, and G-7 accords. They only create stock market crashes and economic upheaval.
When WalMart first began, they proudly advertised their product offerings as “all American.” WalMart now purchases about $12 billion in goods from China. If you demand American goods and leave the foreign goods on the shelf, WalMart will supply you with the goods you desire. You must be willing to pay, in the short run, a premium for the American goods. The American worker receives a higher wage. You must support that wage or that wage will be outsourced. It’s your choice. The answer is not by re-arranging foreign currencies. It creates disastrous results.
This week someone emailed me to say that our plants were only at 75% capacity because the unused capacity was not competitive. He is correct; however, some companies are doing something about it. Anadarko Petroleum did lay off 400 workers to trim $100 million a year in costs. There will not be more layoffs. In addition to the $100 million, they reduced drilling costs by 15%. Companies need to find ways to reduce costs other than by cutting workers and outsourcing to foreign nations. The future is here. The present is here. The troubles are here. Imbalances are dangerous. Governments can’t fix them. You must demand they get fixed. They begin with you, your lifestyle, and your vote. The American citizen is the fall guy. China is not. Japan is not. India is not. We have clear choices. They are buy American, spend less, demand less spending in Washington, and make our businesses and our lifestyles more cost efficient. We must pay down debt and still save. We cannot have countries like Japan and China sustain large trade account surpluses with our country. It undermines our economic well being by depending on daily foreign capital inflows of $1.6 billion. Do you want to go begging every day from Japan and China. The global economy is dependent you for its export growth and your rising indebtedness and the nation’s indebtedness. The insatiable spending habits have generated deflation. The credit and indebtedness bubbles have generated global over-capacity, and the latter cannot be met with present demand.
I waited to write this piece until after the third quarter GDP numbers were released. I figured some months back that the quarter would be strong- over 5% and maybe even 6%. The 7+% did not surprise me. The public thinks we’re off to the races. Bush tells you we’re off to the races. There were 41,000 jobs lost in the quarter. Yesterday Duke Energy announced a plan to cut 2,000 employees. The help wanted index remains at the lowest point of 2003. The growth in job benefit costs is double the rate of wage increases, which remain muted. Companies cannot pass along increased costs. There are rising costs besides those in the benefit area. Many industrial commodities have risen sharply, and not just gold. Some agricultural commodities have risen sharply, such as, soybeans. These rising costs put a damper on business profit margins and consumer pocketbooks. You can see that at the gas pump or in your home heating bills. The CRB index is at its highest point in about six years. What happens when budget deficits occur? The city of San Jose is facing a huge budget deficit for the second consecutive year. The $85 million shortfall is more than 10% of the total operating budget. It will mean layoffs, deeper service cuts, and higher fees. The budget shortfall will be felt throughout the entire community. It’s a serious problem. Two economists at UC Berkeley’s Fisher Center for Real Estate and Urban Economics present another problem- up to 14 million jobs, and many of them in the Bay Area, are at risk of being shipped overseas. They range from computer programmers to clerks who input data, from medical transcriptionists to paralegals, and “the bottom line is, if there is a job that can be done equally well, equally efficient, at a much lower cost in a different part of the world, then that job is at risk in today’s globalizing world.” It is our job to make sure we do that job better and more efficiently so that increased productivity overwhelms the wage differences. We must give businesses good reasons to hire American workers and to keep American workers on the payrolls. The solution is not to place a cap on outsourcing. The solution is to do a better job and to reduce overhead.
Globalization in the workplace is a present danger that has created the loss of 3 million jobs over the past three years. You hold the key. You can compete. You also hold the key to trade deficits, and therefore, you can engineer a rebound in your purchasing power. You can spend less and pay down debt. You can save. Bush has looked to rising stock prices to create consumer optimism and for you to spend more so more jobs will be created. You have spent more. You spend more every day. Our hourly trade deficit mounts at an historic and an alarming rate. Our budget deficits mount hourly at the federal, state, and local levels. The debt levels of the American people rise hourly. The problem is the nation’s cash flow and that of its citizens continues to diminish. There is a daily shortfall. When making bread, there is a resting period. Without it, the bread will be a flop. We need a pause. We need a spending respite. We need to buy and employ American. It will mean lower earnings in the short run. It will mean lower stock prices. It will also ensure our future economic revival and vitality for future generations.
Thursday, October 30, 2003
10/30/03 “It Ain’t Fair. It Ain’t Right.”
Since getting elected, President Bush will make his 13th visit to Ohio today. I wonder whether he will be discussing medical care for our wounded soldiers. Yesterday, he discussed a Medicare bill that would omit co-pay for home health care. Cpl. Waymond Boyd has served the military for 15 years, and was recently in Iraq with the National Guard. He said “I joined to serve my country. It doesn’t make sense to go over there and risk your life and come back to this. It ain’t fair and it ain’t right. I used to be patriotic.” Boyd’s knee and wrist injuries were severe enough that he was evacuated and sent to Fort Knox. It took him about two months to get a cast for his wrist. He walks with a cane. More than 400 sick and injured soldiers are stuck at Fort Knox waiting weeks and sometimes months for medical treatment. The conditions at Fort Stewart were not an isolated situation. I will repeat what I previously stated. A commander-in-chief should care for his soldiers and should not let them endure inadequate medical treatment. To consider any financial aid for Iraq before proper assistance is provided to those serving our country is unspeakable. Our own come first.
It was reported in the Washington Times that, on June 25, the FBI’s regional office in Denver had sent a memo to state and local law enforcement agencies warning them of a plot to start forest fires in the western United States using timed incendiary devices. The fires in southern California have produced 20 deaths, charred about 700,000 acres, and destroyed 2600 homes. With increased smoke and ash producing hundreds of natural chemicals as well as numerous gases, airborne particulate levels have become highly unhealthy, and, in some cases, dangerous for breathing.
Peaking of Fort Knox, as the new colorful $20 bills circulate around the country, more consumers are finding that the bills do not work on ATM machines found in self-service check-out counters at many grocery stores. Customers can pay a store cashier with the new bills. Sprint also can’t accept the new bill at payment machines in their 600 stores nationwide. This is another example of inadequate government planning. They can’t blame this on terrorism.
California’s Controller, Steve Westley, urged Arnold to push for spending cuts. Westley anticipates that the state will have at least an $8 billion budget shortfall, and remarked “do not rely on putting our problems off to the future by extended borrowing.” Talking about California, the East Bay section of the San Francisco Bay Area had a severe venture capital slump in the third quarter, the weakest quarter since the beginning of 1997, and 39% below the financing levels of the third quarter of 2002. Steve Bengston, managing director of emerging company services with PricewaterhouseCoopers, stated “the good news is we are at or near the bottom. The bad news is the market will not head up any time soon.”
The EU slashed its growth forecasts for 2003 to “a mere 0.4%” and stated that next year growth should return to average growth of 1.8%. They warned “the need for firms to focus on cost reductions…together with the prospects for a mild recovery” as drags on job creation. The unemployment rate in the euro-zone approximates 9%. Yesterday brought more bad news for our own loss of jobs. EDS, the number two computer services company, said it will cut 2,500 more jobs. They had originally announced layoffs for 2,700 employees. General Cable announced they would be closing a 131,000 square foot manufacturing plant in Taunton, Mass due to what its CEO calls the “unprecedented decline in North American industrial activity.” The plant employed 77 workers. In addition, the company is conducting feasibility studies of facilities in South Hadley, Mass. and Marion, Ind. to determine whether to continue operations at the plants or transfer or outsource the production. Do not be concerned. The GDP growth rate for the third quarter will be announced and it will be a buoyant 6% or so, and everything will be fine and dandy.
The Urban Land Institute had its fall meeting in San Francisco. The leading concern is the jobless recovery. Without more jobs, offices will remain empty and rents will not increase. Said one participant worried about outsourcing, “it was one thing to move a back office to Sioux Falls in the nineties. It is quite another to move an accounting operation to Banglahor…it’s hard to have much near-term conviction.”
Yesterday’s geomagnetic storm did a number on Japan. The storm shut down two experimental communications satellites. They could be permanently damaged. The brunt of the storm is known as a coronal mass ejection. I have to get me one of those!
In his 1/29/03 State of the Union address, Bush said “Medicare is the binding commitment of a caring society.” Then, in a 6/6/03 speech, Bush stated “we must protect seniors from high medical costs that can rob them of their savings.” There are several studies that show the proposed Medicare plan will, in fact, increase costs for seniors, such as, eliminating co-payments for home health care. A July 2003 stdy by the U.S. Action Education Fund shows that drug prices could be negotiated at 40% savings below retail if Medicare were able to offer a prescription drug benefit directly. The proposed plan will increase the level of deductible costs.
The Iraq Survey Group is comprised of 1,400 people working under David Kay. Having not found the WMD, there are thoughts to shift some of these “intelligence personnel” to the battle against insurgent forces with their attacks on our troops.
Since getting elected, President Bush will make his 13th visit to Ohio today. I wonder whether he will be discussing medical care for our wounded soldiers. Yesterday, he discussed a Medicare bill that would omit co-pay for home health care. Cpl. Waymond Boyd has served the military for 15 years, and was recently in Iraq with the National Guard. He said “I joined to serve my country. It doesn’t make sense to go over there and risk your life and come back to this. It ain’t fair and it ain’t right. I used to be patriotic.” Boyd’s knee and wrist injuries were severe enough that he was evacuated and sent to Fort Knox. It took him about two months to get a cast for his wrist. He walks with a cane. More than 400 sick and injured soldiers are stuck at Fort Knox waiting weeks and sometimes months for medical treatment. The conditions at Fort Stewart were not an isolated situation. I will repeat what I previously stated. A commander-in-chief should care for his soldiers and should not let them endure inadequate medical treatment. To consider any financial aid for Iraq before proper assistance is provided to those serving our country is unspeakable. Our own come first.
It was reported in the Washington Times that, on June 25, the FBI’s regional office in Denver had sent a memo to state and local law enforcement agencies warning them of a plot to start forest fires in the western United States using timed incendiary devices. The fires in southern California have produced 20 deaths, charred about 700,000 acres, and destroyed 2600 homes. With increased smoke and ash producing hundreds of natural chemicals as well as numerous gases, airborne particulate levels have become highly unhealthy, and, in some cases, dangerous for breathing.
Peaking of Fort Knox, as the new colorful $20 bills circulate around the country, more consumers are finding that the bills do not work on ATM machines found in self-service check-out counters at many grocery stores. Customers can pay a store cashier with the new bills. Sprint also can’t accept the new bill at payment machines in their 600 stores nationwide. This is another example of inadequate government planning. They can’t blame this on terrorism.
California’s Controller, Steve Westley, urged Arnold to push for spending cuts. Westley anticipates that the state will have at least an $8 billion budget shortfall, and remarked “do not rely on putting our problems off to the future by extended borrowing.” Talking about California, the East Bay section of the San Francisco Bay Area had a severe venture capital slump in the third quarter, the weakest quarter since the beginning of 1997, and 39% below the financing levels of the third quarter of 2002. Steve Bengston, managing director of emerging company services with PricewaterhouseCoopers, stated “the good news is we are at or near the bottom. The bad news is the market will not head up any time soon.”
The EU slashed its growth forecasts for 2003 to “a mere 0.4%” and stated that next year growth should return to average growth of 1.8%. They warned “the need for firms to focus on cost reductions…together with the prospects for a mild recovery” as drags on job creation. The unemployment rate in the euro-zone approximates 9%. Yesterday brought more bad news for our own loss of jobs. EDS, the number two computer services company, said it will cut 2,500 more jobs. They had originally announced layoffs for 2,700 employees. General Cable announced they would be closing a 131,000 square foot manufacturing plant in Taunton, Mass due to what its CEO calls the “unprecedented decline in North American industrial activity.” The plant employed 77 workers. In addition, the company is conducting feasibility studies of facilities in South Hadley, Mass. and Marion, Ind. to determine whether to continue operations at the plants or transfer or outsource the production. Do not be concerned. The GDP growth rate for the third quarter will be announced and it will be a buoyant 6% or so, and everything will be fine and dandy.
The Urban Land Institute had its fall meeting in San Francisco. The leading concern is the jobless recovery. Without more jobs, offices will remain empty and rents will not increase. Said one participant worried about outsourcing, “it was one thing to move a back office to Sioux Falls in the nineties. It is quite another to move an accounting operation to Banglahor…it’s hard to have much near-term conviction.”
Yesterday’s geomagnetic storm did a number on Japan. The storm shut down two experimental communications satellites. They could be permanently damaged. The brunt of the storm is known as a coronal mass ejection. I have to get me one of those!
In his 1/29/03 State of the Union address, Bush said “Medicare is the binding commitment of a caring society.” Then, in a 6/6/03 speech, Bush stated “we must protect seniors from high medical costs that can rob them of their savings.” There are several studies that show the proposed Medicare plan will, in fact, increase costs for seniors, such as, eliminating co-payments for home health care. A July 2003 stdy by the U.S. Action Education Fund shows that drug prices could be negotiated at 40% savings below retail if Medicare were able to offer a prescription drug benefit directly. The proposed plan will increase the level of deductible costs.
The Iraq Survey Group is comprised of 1,400 people working under David Kay. Having not found the WMD, there are thoughts to shift some of these “intelligence personnel” to the battle against insurgent forces with their attacks on our troops.
Wednesday, October 29, 2003
10/29/03 The World Is Not The Rose Garden
For 48 minutes yesterday President Bush gave a news conference out in the Rose Garden. It was a chilly fall morning but he made us feel so much better as he declared “the world is more peaceful and more free under my leadership and America is more secure.” He announced the United States will change tactics and stiffen defenses. It’s too late for the 116 U.S. troops killed in hostile action since Washington declared major combat operations over on May 1. That number exceeds the 115 U.S. combat deaths during the U.S.-led war. Would the president consider this a trick question? How is the world more peaceful if there are on average 26 daily attacks on our troops in Iraq and about 1,675 of our troops wounded since May 1? Attacks have been on the rise since early September. That’s a fact. Britain’s special representative in Iraq, Sir Jeremy Greenstock, predicted the violence would continue and stated “it is going to go on through the winter, probably.”
A little before noon EST today our planet will be buffeted (not Warren) by a major geomagnetic storm, one that has the potential to disrupt satellites, communications, and power. It will be a significant geomagnetic storm. “The flare as measured by X-ray flux is the largest we’ve ever seen,” said John Kohl, a solar astrophysicist at the Harvard-Smithsonian Center for Astrophysics. One of Kohl’s associates, Leon Golub, remarked “this is the strongest flare we’ve seen in the past 30 years… the Earth is essentially right on the axis of this material.” It has already produced enhanced radiation 100,000 times the background levels at the geostationary satellite orbits. It should be noted that these solar storms do not threaten the health or welfare of humans on Earth; however, they do have the potential of producing elongated noses on those in Congress and in the Administration. I should warn you though. This is a category 5 geomagnetic storm, the top of the scale. It has the potential of creating an unusual flow within the power system but it is not powerful enough to disrupt the BS emanating from Washington.
There have been 16 fatalities resulting from the blazing fires in Southern California. About 2000 homes have been destroyed, and up to 100,000 have endured evacuation. The fires have stormed over about 600,000 acres and 900 square miles, about the size of Rhode Island. At the moment, the fires are fiercest in the bone-dry mountain areas. The firefighters are fatigued. More than 11,000 firefighters are on the lines struggling to contain at least 17 separate fires. More than 50 people have been injured, and that does not include the firefighters. Andrea Tuttle, director of California department of Forestry, stated “ we haven’t seen this intensity of fire and number of residents being affected ever before. This is an extraordinary 100-year event…this is Mother Nature’s natural fire cycle and when you get winds like this it will overwhelm, for awhile, our ability to deal with them.”
According to a report in yesterday’s San Francisco Chronicle, California’s unemployment insurance fund may be bankrupt by January unless benefits are slashed, taxes on businesses are raised, or the state gets a loan from the federal government. The state would have to borrow $1.17 billion to keep benefits flowing to California’s jobless in 2004. It would be unprecedented for California but not nationally. In the most recent past, Texas, New York, Illinois and several smaller states have had to borrow federal funds to keep their unemployment funds solvent. The number of unemployed in California exceeds 1.1 million people.
If the merger of R.J. Reynolds and the tobacco operations of BAT in the United States does take place, then one of the world’s largest cigarette factories will close. The Brown and Williamson factory in Macon, Georgia has 2,100 employees. The average hourly worker makes $26 an hour, and the typical before-tax annual pay is $50,000 to $70,000. It is estimated the Macon plant will close in 18 to 20 months. The plant’s output, about one-half of its cigarettes is shipped to Japan and other countries overseas, accounts for one-tenth of the value of all exports from Georgia. The plant has been in Macon for 27 years.
There was more bad news for Georgia. Coca Cola announced they would be increasing layoffs from the previously announced 1900 to 2800. New York was not spared as JP Morgan Chase announced employee cuts of 1,000. Trapeze Networks of Pleasanton, CA has raised more than $50 million in venture capital funding. The company designs wireless networking equipment for the Wi-FI INDUSTRY. Yesterday Trapeze announced cutting 40 of their 120 employees from the payroll. The company’s vice president of marketing stated “we built for an extremely aggressive ramp-up. We thought we’d see meteoric rise in Wi-Fi demand. Overall, the market is still good. We really just needed to resize the company for what the real growth in the market is.”
Delos Smith, a Conference Board economist, said the expectations index remains low considering the economy likely grew at a 6% rate in the third quarter. He remarked “this economy is on steroids, so it’s going to look very beautiful for the third quarter. But you still have the underlying problem of terrorism, you have the underlying problem of employment. Where will the jobs be.” If the Republicans on the House tax-writing committee have their way, more jobs will be exported. Overcoming Democratic opposition, these Republicans voted yesterday to give multinational corporations tax cuts totaling $128 billion over 10 years. The legislation would make it easier for multinational firms to claim tax deductions for interest and taxes paid to foreign governments. It would also cut the top tax rate for most U.S. businesses from 35% to 32% by 2012. However, small businesses would have their cut phased in depending upon a firm’s taxable income. Writing in a letter signed by 10 other Republicans, Rep. Donald Manzullo, R-ILL, stated the legislation would lower “ the cost of doing business overseas for American companies. This will necessarily encourage American companies to move American jobs offshore to China and other locations.”
According to Nielsen Media Research, advertisers spent an estimated $10 billion in China last year, making it the world’s fifth-largest advertising market. It is widely expected to grow by billions of dollars this year, and in 10 years, China is expected to overtake Japan as the second-largest market. Making ads in China is not cheaper than elsewhere.
For 48 minutes yesterday President Bush gave a news conference out in the Rose Garden. It was a chilly fall morning but he made us feel so much better as he declared “the world is more peaceful and more free under my leadership and America is more secure.” He announced the United States will change tactics and stiffen defenses. It’s too late for the 116 U.S. troops killed in hostile action since Washington declared major combat operations over on May 1. That number exceeds the 115 U.S. combat deaths during the U.S.-led war. Would the president consider this a trick question? How is the world more peaceful if there are on average 26 daily attacks on our troops in Iraq and about 1,675 of our troops wounded since May 1? Attacks have been on the rise since early September. That’s a fact. Britain’s special representative in Iraq, Sir Jeremy Greenstock, predicted the violence would continue and stated “it is going to go on through the winter, probably.”
A little before noon EST today our planet will be buffeted (not Warren) by a major geomagnetic storm, one that has the potential to disrupt satellites, communications, and power. It will be a significant geomagnetic storm. “The flare as measured by X-ray flux is the largest we’ve ever seen,” said John Kohl, a solar astrophysicist at the Harvard-Smithsonian Center for Astrophysics. One of Kohl’s associates, Leon Golub, remarked “this is the strongest flare we’ve seen in the past 30 years… the Earth is essentially right on the axis of this material.” It has already produced enhanced radiation 100,000 times the background levels at the geostationary satellite orbits. It should be noted that these solar storms do not threaten the health or welfare of humans on Earth; however, they do have the potential of producing elongated noses on those in Congress and in the Administration. I should warn you though. This is a category 5 geomagnetic storm, the top of the scale. It has the potential of creating an unusual flow within the power system but it is not powerful enough to disrupt the BS emanating from Washington.
There have been 16 fatalities resulting from the blazing fires in Southern California. About 2000 homes have been destroyed, and up to 100,000 have endured evacuation. The fires have stormed over about 600,000 acres and 900 square miles, about the size of Rhode Island. At the moment, the fires are fiercest in the bone-dry mountain areas. The firefighters are fatigued. More than 11,000 firefighters are on the lines struggling to contain at least 17 separate fires. More than 50 people have been injured, and that does not include the firefighters. Andrea Tuttle, director of California department of Forestry, stated “ we haven’t seen this intensity of fire and number of residents being affected ever before. This is an extraordinary 100-year event…this is Mother Nature’s natural fire cycle and when you get winds like this it will overwhelm, for awhile, our ability to deal with them.”
According to a report in yesterday’s San Francisco Chronicle, California’s unemployment insurance fund may be bankrupt by January unless benefits are slashed, taxes on businesses are raised, or the state gets a loan from the federal government. The state would have to borrow $1.17 billion to keep benefits flowing to California’s jobless in 2004. It would be unprecedented for California but not nationally. In the most recent past, Texas, New York, Illinois and several smaller states have had to borrow federal funds to keep their unemployment funds solvent. The number of unemployed in California exceeds 1.1 million people.
If the merger of R.J. Reynolds and the tobacco operations of BAT in the United States does take place, then one of the world’s largest cigarette factories will close. The Brown and Williamson factory in Macon, Georgia has 2,100 employees. The average hourly worker makes $26 an hour, and the typical before-tax annual pay is $50,000 to $70,000. It is estimated the Macon plant will close in 18 to 20 months. The plant’s output, about one-half of its cigarettes is shipped to Japan and other countries overseas, accounts for one-tenth of the value of all exports from Georgia. The plant has been in Macon for 27 years.
There was more bad news for Georgia. Coca Cola announced they would be increasing layoffs from the previously announced 1900 to 2800. New York was not spared as JP Morgan Chase announced employee cuts of 1,000. Trapeze Networks of Pleasanton, CA has raised more than $50 million in venture capital funding. The company designs wireless networking equipment for the Wi-FI INDUSTRY. Yesterday Trapeze announced cutting 40 of their 120 employees from the payroll. The company’s vice president of marketing stated “we built for an extremely aggressive ramp-up. We thought we’d see meteoric rise in Wi-Fi demand. Overall, the market is still good. We really just needed to resize the company for what the real growth in the market is.”
Delos Smith, a Conference Board economist, said the expectations index remains low considering the economy likely grew at a 6% rate in the third quarter. He remarked “this economy is on steroids, so it’s going to look very beautiful for the third quarter. But you still have the underlying problem of terrorism, you have the underlying problem of employment. Where will the jobs be.” If the Republicans on the House tax-writing committee have their way, more jobs will be exported. Overcoming Democratic opposition, these Republicans voted yesterday to give multinational corporations tax cuts totaling $128 billion over 10 years. The legislation would make it easier for multinational firms to claim tax deductions for interest and taxes paid to foreign governments. It would also cut the top tax rate for most U.S. businesses from 35% to 32% by 2012. However, small businesses would have their cut phased in depending upon a firm’s taxable income. Writing in a letter signed by 10 other Republicans, Rep. Donald Manzullo, R-ILL, stated the legislation would lower “ the cost of doing business overseas for American companies. This will necessarily encourage American companies to move American jobs offshore to China and other locations.”
According to Nielsen Media Research, advertisers spent an estimated $10 billion in China last year, making it the world’s fifth-largest advertising market. It is widely expected to grow by billions of dollars this year, and in 10 years, China is expected to overtake Japan as the second-largest market. Making ads in China is not cheaper than elsewhere.
Tuesday, October 28, 2003
10/28/03 Staying The Course
Sometimes it gets pretty scary staying the course. Sometimes it means staying inside your living quarters and placing wet towels around the doors and windows to the outside world. The soot and grime find a way through the cracks. You can see the bright flames on the hills not far from where you are. The highways are closed. The local roads are bumper to bumper. Transmission lines are damaged. People are urged to stay indoors. Schools are closed. The airports cancel flights. Some panic and attempt to drive through the flames. It’s tough to breathe. At least fifteen are known dead. At least 1,500 homes have been destroyed, and another 30,000+ homes are threatened with raging flames. Already 500,000 acres have been consumed from the border of Mexico to the northeast suburbs of LA. Supposedly, cooler and less windy weather is on the way. That forecast could raise the hopes of the overworked fire personnel and the endangered residents, and one of those is my son.
There are times when one decides against staying the course. Warren Buffett made that decision over the past year and a half. For the first time in his seventy-plus years, he made significant purchases in foreign currencies. He remarked that “our trade deficit has greatly worsened, to the point that our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate.”
In the past two days Cadbury and Sony have announced they will cut thousands of employees over the next few years. Sony will cut 7,000 just in Japan. These two companies could reduce their employment by almost 30,000 people.
The state of Illinois claims that importing cheaper prescription drugs from Canada could save their residents up to $90 million a year without compromising safety. The Illinois report said there is an additional guarantee of safety because Canadian pharmacies fill prescriptions in amounts supplied by the manufacturer in sealed containers only. They do not open manufacturer supplied containers, count, and repackage to fill the prescription as done in the United States.
It is not unusual for an individual to work for a company because of the insurance benefits and not just for the pay. Many of those companies employee 1,000 or more, and many of those companies are cutting those same benefits. In the 1960s, more than 80% of U.S. workers had health insurance through their employers. With sharply rising premiums, that number is down to 62%. A recent study by the Institute for Labor and Economy at UC Berkeley found that 700,000 uninsured people who were eligible for the state Medicaid program were in families with a wage earner employed by a company of more than 1,000 employees.
How many citizens ask what will $500 million budget deficits and $500 million trade deficits mean to my family? Richard Kogan, a fellow at the Center for Budget and Policy Priorities, explains that “these historically large deficits mean a generation is going to have to pay taxes at higher rates, if we are going to support a decent retirement and healthcare system.” Do not be fooled by the tax cuts and child credit extended to our citizens over the past three years. Tax cuts along with record deficits create catastrophic economic and social derailments. The payments for mismanagement take place over many years. There are rational ways to stay the course and then there are poorly planned strategies. Alan Greenspan was smart enough to realize there was a bubble forming in 1996. He also has warned the Congress of the current out-of-control spending policies. Buffett sees the handwriting on the wall. Do you? When you vote, ask whether that person you want elected gets it.
The McDonald Financial Group Affluent Consumer Index is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, or personal annual incomes of $150,000 or more. Some 60% of respondents classify themselves as business leaders and senior executives, and of them, 73% said they plan to hold their holiday spending steady compared with 2002, while only 13% said they would spend more. The affluent is paying down debt. Only 30% of the respondents actually plan to increase their investments in the next three months and 27% intend to reduce them.
R.J. Reynolds and British American Tobacco will combine the assets and operations of their respective U.S. tobacco businesses into a new publicly traded holding company. RJR shareholders will own 58% and BAT holders 42%. The transaction will be tax-free, and is expected to close in mid-2004. The combination will consolidate the second and third largest U.S. tobacco companies, and generate over 30% of the cigarette sales in the United States.
Sometimes it gets pretty scary staying the course. Sometimes it means staying inside your living quarters and placing wet towels around the doors and windows to the outside world. The soot and grime find a way through the cracks. You can see the bright flames on the hills not far from where you are. The highways are closed. The local roads are bumper to bumper. Transmission lines are damaged. People are urged to stay indoors. Schools are closed. The airports cancel flights. Some panic and attempt to drive through the flames. It’s tough to breathe. At least fifteen are known dead. At least 1,500 homes have been destroyed, and another 30,000+ homes are threatened with raging flames. Already 500,000 acres have been consumed from the border of Mexico to the northeast suburbs of LA. Supposedly, cooler and less windy weather is on the way. That forecast could raise the hopes of the overworked fire personnel and the endangered residents, and one of those is my son.
There are times when one decides against staying the course. Warren Buffett made that decision over the past year and a half. For the first time in his seventy-plus years, he made significant purchases in foreign currencies. He remarked that “our trade deficit has greatly worsened, to the point that our country’s ‘net worth,’ so to speak, is now being transferred abroad at an alarming rate.”
In the past two days Cadbury and Sony have announced they will cut thousands of employees over the next few years. Sony will cut 7,000 just in Japan. These two companies could reduce their employment by almost 30,000 people.
The state of Illinois claims that importing cheaper prescription drugs from Canada could save their residents up to $90 million a year without compromising safety. The Illinois report said there is an additional guarantee of safety because Canadian pharmacies fill prescriptions in amounts supplied by the manufacturer in sealed containers only. They do not open manufacturer supplied containers, count, and repackage to fill the prescription as done in the United States.
It is not unusual for an individual to work for a company because of the insurance benefits and not just for the pay. Many of those companies employee 1,000 or more, and many of those companies are cutting those same benefits. In the 1960s, more than 80% of U.S. workers had health insurance through their employers. With sharply rising premiums, that number is down to 62%. A recent study by the Institute for Labor and Economy at UC Berkeley found that 700,000 uninsured people who were eligible for the state Medicaid program were in families with a wage earner employed by a company of more than 1,000 employees.
How many citizens ask what will $500 million budget deficits and $500 million trade deficits mean to my family? Richard Kogan, a fellow at the Center for Budget and Policy Priorities, explains that “these historically large deficits mean a generation is going to have to pay taxes at higher rates, if we are going to support a decent retirement and healthcare system.” Do not be fooled by the tax cuts and child credit extended to our citizens over the past three years. Tax cuts along with record deficits create catastrophic economic and social derailments. The payments for mismanagement take place over many years. There are rational ways to stay the course and then there are poorly planned strategies. Alan Greenspan was smart enough to realize there was a bubble forming in 1996. He also has warned the Congress of the current out-of-control spending policies. Buffett sees the handwriting on the wall. Do you? When you vote, ask whether that person you want elected gets it.
The McDonald Financial Group Affluent Consumer Index is based on a national survey of randomly selected individuals with investable assets of $500,000 or more, or personal annual incomes of $150,000 or more. Some 60% of respondents classify themselves as business leaders and senior executives, and of them, 73% said they plan to hold their holiday spending steady compared with 2002, while only 13% said they would spend more. The affluent is paying down debt. Only 30% of the respondents actually plan to increase their investments in the next three months and 27% intend to reduce them.
R.J. Reynolds and British American Tobacco will combine the assets and operations of their respective U.S. tobacco businesses into a new publicly traded holding company. RJR shareholders will own 58% and BAT holders 42%. The transaction will be tax-free, and is expected to close in mid-2004. The combination will consolidate the second and third largest U.S. tobacco companies, and generate over 30% of the cigarette sales in the United States.
Monday, October 27, 2003
10/27/03 Can Your Job Be Digitized?
The Institute for International Economics is a Washington, DC think tank. Gary C. Hufbauer is a senior fellow and international economist at the Institute. He has made an excellent point by stating “if your job can be digitized, it can be moved.” In other words, millions of service jobs could be moved outside the United States and remain there. Normally, one immediately mentions IT jobs but included could be life sciences, legal work, finance, business services, etc. John Napier is a 53-year old electrical engineer who was laid off by EMC Corp. in mid-2001. He raises a crucial point that “the people who get forced out of old jobs that go overseas are not the ones who get the new jobs.” If millions follow Napier to the unemployment rolls over the coming years, what new white-collar “mind”jobs will be created in the United States? There aren’t enough service jobs on the horizon to make this an economy of the under-employed.
We started the week off with two major merger announcements. For years, it was rumored that FleetBoston Financial was a takeover candidate. The Boston Globe reported that Bank of America would pay $45 a share in stock and cash for the seventh-biggest U.S. bank by assets. Bank of America is the third-largest U.S. bank. In addition, Anthem, Inc., the fifth-largest U.S. health insurer, announced plans to buy one of its competitors, WellPoint Health Networks, for more than $12 billion in cash and stock. Both companies are two of the biggest providers of Blue Cross and Blue Shield plans.
Prior to the Iraq war, Tony Blair told the British Parliament that Iraq was trying to procure high-strength aluminum tubes with the potential to be used in nuclear centrifuges. Colin Powell cited these tubes in his address to the United Nations in February, and said the tubes were used to enrich uranium. On Sunday senior officials with the Iraq Survey Group concluded that the high-strength aluminum tubes were “innocuous,” and that Iraqi nuclear scientists undertook no significant work after 1991, and that many facilities described before the war as suspicious were benign. In sum, the WMD claim was dismissed.
Today three American soldiers were killed and four wounded in two separate attacks in Iraq. Since Bush announced the end of major combat in Iraq on May 1, 112 U.S. soldiers have been killed in hostile action.
In a new Newsweek poll, it is reported that 58% of Americans say the U.S. is spending too much on operations in postwar Iraq. Forty nine percent of Americans say they don’t think the Bush administration has a well-thought-out plan to establish security and a stable government in Iraq while 39% say it does. 46% would like to see Bush re-elected and 47% would not. John McCain for the first time compares the situation in Iraq to Vietnam, where he survived six years of wartime imprisonment. McCain told Newsweek “this is the first time that I have seen a parallel to Vietnam in terms of information that the administration is putting out versus the actual situation on the ground. I’m not saying the situation is as bad as Vietnam. But we have a problem in the Sunni Triangle and we should face up to it and tell the American people about it.”
The worst firestorm in 33 years or since the Vietnam War is raging from Valley Center to Mexico. The fires have swept through 200 square miles and over 300,000 acres in Southern California. Tens of thousands have been evacuated, 850 homes have been destroyed, and at least 14 are known dead from the blazes. Schools are closed for today, and Monday Night Football has been moved from San Diego to Tempe, Arizona. A state of emergency has been declared in San Diego, San Bernardino, Los Angeles, and Ventura counties. The heat, wind, and low humidity have help to create relentless flames. With the Santa Ana winds gusting up to 70 mph, it is virtually impossible to contain the fires. National Weather Service meteorologist Robert Balfour said “ we’ll have a 24 to 36 hour window where winds will die down, but the vegetation is so dry and the terrain so steep that the fire will probably take off and go into the mountains then.”
The Institute for International Economics is a Washington, DC think tank. Gary C. Hufbauer is a senior fellow and international economist at the Institute. He has made an excellent point by stating “if your job can be digitized, it can be moved.” In other words, millions of service jobs could be moved outside the United States and remain there. Normally, one immediately mentions IT jobs but included could be life sciences, legal work, finance, business services, etc. John Napier is a 53-year old electrical engineer who was laid off by EMC Corp. in mid-2001. He raises a crucial point that “the people who get forced out of old jobs that go overseas are not the ones who get the new jobs.” If millions follow Napier to the unemployment rolls over the coming years, what new white-collar “mind”jobs will be created in the United States? There aren’t enough service jobs on the horizon to make this an economy of the under-employed.
We started the week off with two major merger announcements. For years, it was rumored that FleetBoston Financial was a takeover candidate. The Boston Globe reported that Bank of America would pay $45 a share in stock and cash for the seventh-biggest U.S. bank by assets. Bank of America is the third-largest U.S. bank. In addition, Anthem, Inc., the fifth-largest U.S. health insurer, announced plans to buy one of its competitors, WellPoint Health Networks, for more than $12 billion in cash and stock. Both companies are two of the biggest providers of Blue Cross and Blue Shield plans.
Prior to the Iraq war, Tony Blair told the British Parliament that Iraq was trying to procure high-strength aluminum tubes with the potential to be used in nuclear centrifuges. Colin Powell cited these tubes in his address to the United Nations in February, and said the tubes were used to enrich uranium. On Sunday senior officials with the Iraq Survey Group concluded that the high-strength aluminum tubes were “innocuous,” and that Iraqi nuclear scientists undertook no significant work after 1991, and that many facilities described before the war as suspicious were benign. In sum, the WMD claim was dismissed.
Today three American soldiers were killed and four wounded in two separate attacks in Iraq. Since Bush announced the end of major combat in Iraq on May 1, 112 U.S. soldiers have been killed in hostile action.
In a new Newsweek poll, it is reported that 58% of Americans say the U.S. is spending too much on operations in postwar Iraq. Forty nine percent of Americans say they don’t think the Bush administration has a well-thought-out plan to establish security and a stable government in Iraq while 39% say it does. 46% would like to see Bush re-elected and 47% would not. John McCain for the first time compares the situation in Iraq to Vietnam, where he survived six years of wartime imprisonment. McCain told Newsweek “this is the first time that I have seen a parallel to Vietnam in terms of information that the administration is putting out versus the actual situation on the ground. I’m not saying the situation is as bad as Vietnam. But we have a problem in the Sunni Triangle and we should face up to it and tell the American people about it.”
The worst firestorm in 33 years or since the Vietnam War is raging from Valley Center to Mexico. The fires have swept through 200 square miles and over 300,000 acres in Southern California. Tens of thousands have been evacuated, 850 homes have been destroyed, and at least 14 are known dead from the blazes. Schools are closed for today, and Monday Night Football has been moved from San Diego to Tempe, Arizona. A state of emergency has been declared in San Diego, San Bernardino, Los Angeles, and Ventura counties. The heat, wind, and low humidity have help to create relentless flames. With the Santa Ana winds gusting up to 70 mph, it is virtually impossible to contain the fires. National Weather Service meteorologist Robert Balfour said “ we’ll have a 24 to 36 hour window where winds will die down, but the vegetation is so dry and the terrain so steep that the fire will probably take off and go into the mountains then.”
Sunday, October 26, 2003
10/26/03 Getting The Job Done
The Al Rasheed Hotel is in Baghdad. It was attacked on September 27 with small rockets that caused only minimal damage. At 6:10AM this morning a barrage of rockets hit the hotel. One U.S. soldier was killed and 15 people were wounded. Deputy Defense Secretary Wolfowitz reportedly was staying at the hotel. He has been on a three-day Iraq tour. Putting on his preemption face, Wolfowitz spoke after the attack, and stated “we are taking this fight to the enemy. We are getting the job done.” Lt. Brian Dowd, a 1st Armored Division reconnaissance officer at the scene, had a more rational analysis of the situation and remarked “there is no guarantee we can protect against this kind of thing unless we have soldiers on every block.” The holy fasting month of Ramadan begins in Iraq on Monday.
Yesterday, Senator Patrick Leahy of Vermont gave the Democrats’ weekly radio address. He complained that more than 600 members of the Guard and the Reserve are now in “medical limbo” at Ft. Stewart, Georgia, “living in substandard barracks, without adequate medical care.” I discussed this not so long ago. Leahy said Bush wants $87 billion to rebuild Iraq and keep U.S. troops there but opposes a Senate-passed measure to guarantee health care coverage to all members of the Guard and Reserve. I have discussed this too.
Illinois is a very important election state due to the size of its electoral votes. In a very recent Chicago Tribune/WGN-TV poll, only 38% of Illinois voters want to see Bush re-elected. On TV, for the most part, you hear about approval ratings. The question really is do you want a specific person elected and/or re-elected. That determines the outcome.
This weekend there is a meeting of the Group of 20 nations in Mexico. This group includes the G-7 nations, emerging market nations such as Mexico and Argentina, the EU, the World Bank, and the IMF. Currencies, tariffs, and international trade will be some of the main topics.
Alan Abelson:”We fervently hope Mr. Snow is right about the booming job market. We think not, and we’d be willing to stake our reputation on it, if we could only scare one up.”
Alan Abelson: “The economy in the third quarter was on steroids dished out by Uncle Sam…our sense is that most of the tax cuts have been spent and the vast explosion of mortgage refinancing is over.”
Warren Buffett on the stock market: “We’re not finding anything…we have more cash than ideas. The question is whether that will prevail for an unduly long time…but, occasionally, successful investing requires inactivity.”
In recent weeks I have mentioned that there have been growing layoffs in the textile area and that some companies have closed plants and/or gone out of business. There are three basic problems. The price of cotton has risen almost 40% in 2003 to a 5-year high. The industry has had to absorb those added costs because they have been unable to pass along the cotton price increases. In addition, has been able to offer competitive products at cheaper prices because of their lower cost of labor. China is the world’s largest cotton producer and its largest consumer of cotton. The cotton crop in China has been hurt by poor weather. According to the American Textile Manufacturers Institute, China controls 53% of the U.S. market for apparel products removed from quota control, and by year-end that number will two-thirds, and by the end of 2004 will rise to 75%. In 1998 there were over 600,000 textile jobs in the United States. Today, this number has dropped below 400,000 and continues to decline.
There is one more point I would like to cover, and that is the multiplier effect of employment or unemployment, as the case may be. Boeing, for example, has over the most recent past cut 50,000 from its employment rolls. That is only part of the story. A local think tank has shown that every Boeing job creates 1.8 other indirect jobs in the service economy. Therefore, a loss of 50,000 Boeing jobs means the loss of another 90,000 service jobs. Boeing is not unique. A similar problem occurs in textiles and other industries.
The Al Rasheed Hotel is in Baghdad. It was attacked on September 27 with small rockets that caused only minimal damage. At 6:10AM this morning a barrage of rockets hit the hotel. One U.S. soldier was killed and 15 people were wounded. Deputy Defense Secretary Wolfowitz reportedly was staying at the hotel. He has been on a three-day Iraq tour. Putting on his preemption face, Wolfowitz spoke after the attack, and stated “we are taking this fight to the enemy. We are getting the job done.” Lt. Brian Dowd, a 1st Armored Division reconnaissance officer at the scene, had a more rational analysis of the situation and remarked “there is no guarantee we can protect against this kind of thing unless we have soldiers on every block.” The holy fasting month of Ramadan begins in Iraq on Monday.
Yesterday, Senator Patrick Leahy of Vermont gave the Democrats’ weekly radio address. He complained that more than 600 members of the Guard and the Reserve are now in “medical limbo” at Ft. Stewart, Georgia, “living in substandard barracks, without adequate medical care.” I discussed this not so long ago. Leahy said Bush wants $87 billion to rebuild Iraq and keep U.S. troops there but opposes a Senate-passed measure to guarantee health care coverage to all members of the Guard and Reserve. I have discussed this too.
Illinois is a very important election state due to the size of its electoral votes. In a very recent Chicago Tribune/WGN-TV poll, only 38% of Illinois voters want to see Bush re-elected. On TV, for the most part, you hear about approval ratings. The question really is do you want a specific person elected and/or re-elected. That determines the outcome.
This weekend there is a meeting of the Group of 20 nations in Mexico. This group includes the G-7 nations, emerging market nations such as Mexico and Argentina, the EU, the World Bank, and the IMF. Currencies, tariffs, and international trade will be some of the main topics.
Alan Abelson:”We fervently hope Mr. Snow is right about the booming job market. We think not, and we’d be willing to stake our reputation on it, if we could only scare one up.”
Alan Abelson: “The economy in the third quarter was on steroids dished out by Uncle Sam…our sense is that most of the tax cuts have been spent and the vast explosion of mortgage refinancing is over.”
Warren Buffett on the stock market: “We’re not finding anything…we have more cash than ideas. The question is whether that will prevail for an unduly long time…but, occasionally, successful investing requires inactivity.”
In recent weeks I have mentioned that there have been growing layoffs in the textile area and that some companies have closed plants and/or gone out of business. There are three basic problems. The price of cotton has risen almost 40% in 2003 to a 5-year high. The industry has had to absorb those added costs because they have been unable to pass along the cotton price increases. In addition, has been able to offer competitive products at cheaper prices because of their lower cost of labor. China is the world’s largest cotton producer and its largest consumer of cotton. The cotton crop in China has been hurt by poor weather. According to the American Textile Manufacturers Institute, China controls 53% of the U.S. market for apparel products removed from quota control, and by year-end that number will two-thirds, and by the end of 2004 will rise to 75%. In 1998 there were over 600,000 textile jobs in the United States. Today, this number has dropped below 400,000 and continues to decline.
There is one more point I would like to cover, and that is the multiplier effect of employment or unemployment, as the case may be. Boeing, for example, has over the most recent past cut 50,000 from its employment rolls. That is only part of the story. A local think tank has shown that every Boeing job creates 1.8 other indirect jobs in the service economy. Therefore, a loss of 50,000 Boeing jobs means the loss of another 90,000 service jobs. Boeing is not unique. A similar problem occurs in textiles and other industries.
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