11/25/03 Consumer Cash Flow
In only a few days ‘Black Friday’ will arrive. This is the name given to the day after Thanksgiving. It describes how retailers are in the ‘red’ all year until ‘Black Friday’ arrives, and then their books turn profitable and they are in the ‘black.’ According to the International Council of Shopping Centers, the day after Thanksgiving usually ranks about fourth or fifth among the 10 busiest shopping days of the year. Last year, 10% of holiday sales were done during the Thanksgiving weekend. The biggest share or 41% was done the week before Christmas as shoppers waited for better bargains. It is interesting to note that, in their Christmas 2003 survey, America’s Research Group found that the number of people planning to shop on ‘Black Friday’ is at the lowest point since 1997. Many serious bargain hunters comb the early morning sales items listed at www.fatwallet.com and www.dealcatcher.com prior to venturing into the stores on ‘Black Friday.’
The fact is that consumers do not have fat wallets right about now. According to a recently issued Deutsche Bank report, “the consumer’s liquidity crisis is the worst that WalMart has seen and is the most pronounced in the last five to seven years. The immediate future is not bright either. According to compliance publisher, BLR, employers are planning their smallest pay increases of the past two decades. A record 1,438 employers participated in this year’s nationwide survey. The average pay raises for 2004 for exempt and non-exempt white-collar employees and unionized and non-unionized plant employees will range from 2.8% to 3.5% with the median close to 3.3%. After deductions, and accounting for inflation, the raises do not fatten the consumers’ wallets. Between now and year end, Fitch Ratings remarks “as consumers remain financially burdened due to the economic landscape, performance is expected to remain challenged over the near term and worsen later in the fourth quarter of 2003.”
Families on Main Street continue to focus on jobs and layoffs. Yesterday Sprint Corp. said it would cut about 2,000 jobs, or about 3% of its workforce, as it attempts to cut costs to offset shrinking revenues and weak demand. Additional layoffs can be expected in 2004. Merck will be meeting with analysts on December 9. Recently, I noted their employee cutbacks. The CEO may describe further cost cutting measures for 2004. Home Depot is consolidating its smaller Northwest division into its Western division. Yesterday the company announced it shall close its Seattle Store Support Center office and cut about 100 jobs.
The U.S. Commerce Department said it shall levy duties of as much as 46% on color televisions imported from China. There is only one television manufacturer left in the U.S., Greenville, Tenn.-based Five Rivers Electronic Innovations LLC. This company and its labor unions alleged that China and Malaysia were “dumping” products in the U.S. at prices below their fair value and sought duties of as much as 80%. The U.S., upon investigation, ruled that the sets were priced 28% to 46% below market value. The Commerce Department did not find any violations from Malaysia. The duties will take effect on December 1.This is but one more act of stupidity brought to you by the Bush Administration. Bush has argued for free trade, and yet, he has violated international trade agreements by imposing steel tariffs, and thus, jeopardize our trade with foreign countries. Now he is taking on China in an attempt to win more votes for 2004. I guess electoral votes mean more to the financial well being of American citizens.
The Austin American Statesman reported that Dell is shifting a call center from Bangalore to call centers in Texas, Idaho, and Tennessee. Dell Spokesman Jon Weisblatt stated “customers weren’t satisfied with the level of support they were receiving, so we’re moving some calls around to make sure they don’t feel that way anymore.”
HealthPartners is a family of nonprofit Minnesota health care organizations focused on improving the health of its 670,000 members. They are offering a new plan to allow Seniors more health plan options that includes an unlimited generic prescription drug package and an open access network. There is an optional add-on solution allows Seniors to have an all-inclusive generic prescription benefit package for the cost of only $29 per month, and after the initial cost of $29, Seniors only have a low co-payment for each prescription.
The University of Pennsylvania’s non-partisan National Annenberg Election Survey released results yesterday that show 49% of seniors polled didn’t want the proposed Medicare legislation to pass. On eof the items causing concern is that, if seniors don’t sign up when they become eligible at age 65, they could face penalties if they enroll later. The drug-coverage plan is billed as voluntary; however, in reality, it is coercive.
Monday, November 24, 2003
11/24/03 Payments For Promises Made
Arnold promised to eliminate the unpopular hike in the California car tax. He made good on his promise. He then proposed a $15 billion state bond measure to pay for California’s bills. Timing is a large part of good decision making. Starting on December 10, cities and counties will begin to see reduced revenues from the cut in the car tax. The full impact will be felt in January. The result is “we’re out of money. There is no money for us to provide to local government,” said state Sen. Wes Chesbro, D-Arcata, chairman of the Senate Budget Committee. Berkeley Mayor Tom Bates remarked “we’ve hit the wall.” As such, his city is facing the prospect of laying off police officers and firefighters. Alameda County would raise the county’s sales tax from 8.75% from the current 8.25%. Monterey County will propose a half-cent sales tax increase and so will Santa Cruz County. Contra Costa County said there would need to be cutbacks in local law enforcement. The city of Oakland would have to cut at least 180 jobs. San Jose has an $85 million budget shortfall, and that will rise as the revenues are reduced from cuts in the car tax. More job and service cuts will be forthcoming. Before one makes a promise, it is wise to know how to fund the promise.
President Bush promised to produce a Medicare reform bill. The proposed legislation has an estimated price tag of $400 billion over 10 years. Sen. Don Nickles, R-Okla., told fellow House-Senate negotiators “I predict right now it will come out double that.” That’s a pretty easy prediction to make. Seventy six million baby boomers begin to retire in 2012. Who will address the problem that the large number of employers who currently provide prescription-drug benefits for retirees will drop coverage? Kenneth Thorpe, a health-policy expert at Emory University, anticipates that some 2.1 million private-sector retirees would probably lose their retirement benefits if the GOP bill becomes law. Ross Baker, a political scientist at Rutgers University, remarked “this is the group that can be most easily ignited, if there is any sense that companies are beginning to shut down plans for retirees. Hell hath no fury like seniors inflamed.” Perhaps Stephen Moore of the Club for Growth, an anti-tax group, describes it best in remarking that “the Medicare bill fits into a broader theme, which is that Republicans have lost their fiscal conscience.” How does Senator Kennedy describe this modernized Medicare system with a prescription drug benefit? He stated “you are going to lose seven million that are on Medicaid today, that now are being covered by the states, that are going to lose it with this bill. You are going to have millions that currently have adequate retirement programs that are going to be dropped by this bill. And you are going to see the premiums- the amount that are going to be expended by seniors- your are going to find their premiums are going to go through the roof. And you begin the dismantling of Medicare.” Before one makes a promise, it is wise to have a full comprehension of the impact of the promise.
Joseph Stiglitz won the Nobel Prize in economics in 2001. For a good part of the 1990s, he was the head of President Clinton’s Council of Economic Advisors. Stiglitz, in a recent interview, stated that, in the last quarter, the number of hours worked was down by almost 1%, and that in a jobless recovery, the typical pattern is that hours worked go up because jobs aren’t being created. He observed “this is a recovery in which hours worked aren’t going up. This suggests it may not be recovery. You’re getting firms trying to squeeze more and more work out of workers, working fewer and fewer hours.”
There are many times I feel pretty stupid. Yesterday was one of them. I read the following release: ArvinMeritor terminates tender offer for Dana (ARM, DCN) by Anne Stanley SAN FRANCISCO (CBS.MW) -- Automotive parts maker ArvinMeritor (ARM) announced Sunday it is ending its tender bid of $18 a share for Ohio-based Dana Corp. (DCN) following a decision by Dana's board of directors to reject the latest offer. ArvinMeritor, based in Troy, Mich., started its bid for Dana in July. On Friday, ArvinMeritor stock added 8 cents to close at $18.43. Shares of Dana gained 2 cents to end at $15. I apologize for doing such a poor job of analyzing this potential merger. I am still not certain why Arvin-Meritor chose to drop its tender. The acquisition was well-conceived, and there were benefits for shareholders, customers, and the combined enterprise.
Thomas G. Donlan writes in the Barron’s Editorial Commentary describes the proposed energy legislation as “all the things that had to be assembled to attract 60 votes in the Senate and 218 in the House so that a bill could pass. What’s missing is anything that would justify passing the bill.”
It was only a few weeks ago that I provided the data on the enormous insider selling that had take place in October alongside the puny insider buying. This ration has carried over into November. When the final tally is made, I believe November’s insider selling will dwarf even October’s numbers. November insider buying will continue to be on the puny side.
Arnold promised to eliminate the unpopular hike in the California car tax. He made good on his promise. He then proposed a $15 billion state bond measure to pay for California’s bills. Timing is a large part of good decision making. Starting on December 10, cities and counties will begin to see reduced revenues from the cut in the car tax. The full impact will be felt in January. The result is “we’re out of money. There is no money for us to provide to local government,” said state Sen. Wes Chesbro, D-Arcata, chairman of the Senate Budget Committee. Berkeley Mayor Tom Bates remarked “we’ve hit the wall.” As such, his city is facing the prospect of laying off police officers and firefighters. Alameda County would raise the county’s sales tax from 8.75% from the current 8.25%. Monterey County will propose a half-cent sales tax increase and so will Santa Cruz County. Contra Costa County said there would need to be cutbacks in local law enforcement. The city of Oakland would have to cut at least 180 jobs. San Jose has an $85 million budget shortfall, and that will rise as the revenues are reduced from cuts in the car tax. More job and service cuts will be forthcoming. Before one makes a promise, it is wise to know how to fund the promise.
President Bush promised to produce a Medicare reform bill. The proposed legislation has an estimated price tag of $400 billion over 10 years. Sen. Don Nickles, R-Okla., told fellow House-Senate negotiators “I predict right now it will come out double that.” That’s a pretty easy prediction to make. Seventy six million baby boomers begin to retire in 2012. Who will address the problem that the large number of employers who currently provide prescription-drug benefits for retirees will drop coverage? Kenneth Thorpe, a health-policy expert at Emory University, anticipates that some 2.1 million private-sector retirees would probably lose their retirement benefits if the GOP bill becomes law. Ross Baker, a political scientist at Rutgers University, remarked “this is the group that can be most easily ignited, if there is any sense that companies are beginning to shut down plans for retirees. Hell hath no fury like seniors inflamed.” Perhaps Stephen Moore of the Club for Growth, an anti-tax group, describes it best in remarking that “the Medicare bill fits into a broader theme, which is that Republicans have lost their fiscal conscience.” How does Senator Kennedy describe this modernized Medicare system with a prescription drug benefit? He stated “you are going to lose seven million that are on Medicaid today, that now are being covered by the states, that are going to lose it with this bill. You are going to have millions that currently have adequate retirement programs that are going to be dropped by this bill. And you are going to see the premiums- the amount that are going to be expended by seniors- your are going to find their premiums are going to go through the roof. And you begin the dismantling of Medicare.” Before one makes a promise, it is wise to have a full comprehension of the impact of the promise.
Joseph Stiglitz won the Nobel Prize in economics in 2001. For a good part of the 1990s, he was the head of President Clinton’s Council of Economic Advisors. Stiglitz, in a recent interview, stated that, in the last quarter, the number of hours worked was down by almost 1%, and that in a jobless recovery, the typical pattern is that hours worked go up because jobs aren’t being created. He observed “this is a recovery in which hours worked aren’t going up. This suggests it may not be recovery. You’re getting firms trying to squeeze more and more work out of workers, working fewer and fewer hours.”
There are many times I feel pretty stupid. Yesterday was one of them. I read the following release: ArvinMeritor terminates tender offer for Dana (ARM, DCN) by Anne Stanley SAN FRANCISCO (CBS.MW) -- Automotive parts maker ArvinMeritor (ARM) announced Sunday it is ending its tender bid of $18 a share for Ohio-based Dana Corp. (DCN) following a decision by Dana's board of directors to reject the latest offer. ArvinMeritor, based in Troy, Mich., started its bid for Dana in July. On Friday, ArvinMeritor stock added 8 cents to close at $18.43. Shares of Dana gained 2 cents to end at $15. I apologize for doing such a poor job of analyzing this potential merger. I am still not certain why Arvin-Meritor chose to drop its tender. The acquisition was well-conceived, and there were benefits for shareholders, customers, and the combined enterprise.
Thomas G. Donlan writes in the Barron’s Editorial Commentary describes the proposed energy legislation as “all the things that had to be assembled to attract 60 votes in the Senate and 218 in the House so that a bill could pass. What’s missing is anything that would justify passing the bill.”
It was only a few weeks ago that I provided the data on the enormous insider selling that had take place in October alongside the puny insider buying. This ration has carried over into November. When the final tally is made, I believe November’s insider selling will dwarf even October’s numbers. November insider buying will continue to be on the puny side.
Saturday, November 22, 2003
Sunday's posted on Saturday morning. Saturday's has been posted below too.
11/23/03 Waiting For Trust And The Truth
Wouldn’t it be a wonderful gift for the Thanksgiving holiday if we were to receive the truth from industry and the government? How long do we need to wait?
Boeing stated they would not be sending out more layoff notices. They said that only a few weeks ago. Boeing has given layoff notices to some workers each month since the end of 2001. Other than Boeing employees or former employees, how many people know that? On Friday, Boeing issued 60-day layoff notices to 340 workers. Since September 11, 2001, Boeing has cut 36,490 jobs in its commercial airplane division.
When Gray Davis was governor of California, he had issued an executive order imposing a hiring freeze on state government. While the freeze was in order, 33,000 people were hired as they filled so-called exempt positions. Arnold has issued an executive order imposing a hiring freeze. His order prohibits all state agencies and departments from filing vacancies except for specified positions. For vacant positions financed by funds other than the state’s General Fund, state agencies “are encouraged to work with the Department of Finance to gain exemptions,” the governor’s office states.
President Bush maintains he is behind the efforts of the American worker to gain employment and to be paid a fair wage. I have written so often on the efforts of the White House to kill overtime for millions of workers. After Arlen Spector caved under immense pressure, the White House has prevailed. The Administration maintains the new overtime regulations would guarantee overtime protection for an estimated 1.3 million more low-income, white-collar workers. That, my readers, is so far from the truth that it is a kissing cousin to the lie provided on WMD in Iraq. These changes in the overtime rules will screw working men and women who depend on overtime pay. It eliminates proper pay for work hours. William Samuel, director of the 13-million member of the AFL-CIO, stated “the White House was willing to provoke a fiscal crisis to get its way…we will make sure that the American people know the length that this administration went to cut overtime for 8 million Americans.” Conditions are difficult enough in the workplace. Changing the work rules will make those conditions more difficult. Maybe the President does not have to worry about making ends meet. He will find out in 2004 just how many Americans he screwed out of overtime.
The Administration is pressing to pass the Medicare bill. Health and Human Services Secretary Tommy Thompson said although the bill is not perfect, “seniors can’t wait for perfect.” The fact is elections are coming up in 2004. Many politicians are afraid of voting against this measure for fear it will be their political death knell. Conferees worked until 1:30a.m. EST on Friday. Rep. Sheila Jackson Lee, D-Texas, told the Rules Committee that “a thousand pages in four hours is not acceptable.” The legislation has been a long time in coming. What is the rush? What is the negative in having a full airing of the proposals? In order to have an educated vote, Senate and House members must be educated about privatization, subsidies for private health plans, how retirees will maintain their health coverage from former employers, etc. Once again, a vote will be rushed in order to promote the interests of certain politicians. It’s no wonder there is a floundering faith in our government officials.
11/23/03 Waiting For Trust And The Truth
Wouldn’t it be a wonderful gift for the Thanksgiving holiday if we were to receive the truth from industry and the government? How long do we need to wait?
Boeing stated they would not be sending out more layoff notices. They said that only a few weeks ago. Boeing has given layoff notices to some workers each month since the end of 2001. Other than Boeing employees or former employees, how many people know that? On Friday, Boeing issued 60-day layoff notices to 340 workers. Since September 11, 2001, Boeing has cut 36,490 jobs in its commercial airplane division.
When Gray Davis was governor of California, he had issued an executive order imposing a hiring freeze on state government. While the freeze was in order, 33,000 people were hired as they filled so-called exempt positions. Arnold has issued an executive order imposing a hiring freeze. His order prohibits all state agencies and departments from filing vacancies except for specified positions. For vacant positions financed by funds other than the state’s General Fund, state agencies “are encouraged to work with the Department of Finance to gain exemptions,” the governor’s office states.
President Bush maintains he is behind the efforts of the American worker to gain employment and to be paid a fair wage. I have written so often on the efforts of the White House to kill overtime for millions of workers. After Arlen Spector caved under immense pressure, the White House has prevailed. The Administration maintains the new overtime regulations would guarantee overtime protection for an estimated 1.3 million more low-income, white-collar workers. That, my readers, is so far from the truth that it is a kissing cousin to the lie provided on WMD in Iraq. These changes in the overtime rules will screw working men and women who depend on overtime pay. It eliminates proper pay for work hours. William Samuel, director of the 13-million member of the AFL-CIO, stated “the White House was willing to provoke a fiscal crisis to get its way…we will make sure that the American people know the length that this administration went to cut overtime for 8 million Americans.” Conditions are difficult enough in the workplace. Changing the work rules will make those conditions more difficult. Maybe the President does not have to worry about making ends meet. He will find out in 2004 just how many Americans he screwed out of overtime.
The Administration is pressing to pass the Medicare bill. Health and Human Services Secretary Tommy Thompson said although the bill is not perfect, “seniors can’t wait for perfect.” The fact is elections are coming up in 2004. Many politicians are afraid of voting against this measure for fear it will be their political death knell. Conferees worked until 1:30a.m. EST on Friday. Rep. Sheila Jackson Lee, D-Texas, told the Rules Committee that “a thousand pages in four hours is not acceptable.” The legislation has been a long time in coming. What is the rush? What is the negative in having a full airing of the proposals? In order to have an educated vote, Senate and House members must be educated about privatization, subsidies for private health plans, how retirees will maintain their health coverage from former employers, etc. Once again, a vote will be rushed in order to promote the interests of certain politicians. It’s no wonder there is a floundering faith in our government officials.
Friday, November 21, 2003
11/22/03 Graft Dodgers
By a vote of 58 to 39, the Senate Democrats and Republicans blocked passage of the proposed energy bill. It had passed the House on Tuesday by a vote of 246 to 180. A major sticking point is the provision that manufacturers should not be held liable for the mishandling of MTBE by businesses responsible for groundwater contamination. A lesser area of contention is a provision that would double the use of ethanol over five years. As I previously stated, the CBO estimates the bill will cost around $32 billion over the next decade, including around $23.5 billion in tax breaks, and it also includes loan guarantees in excess of $20 billion for pork programs.(not the diet kind.) As such, today’s title suggests those who have voted against the energy bill were, in fact, also voting against graft and pork. In sum, sponsors of this bill require two additional votes for passage. I wonder what the graft will be to buy those votes.
Now let’s visit another country with a different orientation towards its energy program. The Fifth Indian Oil and Gas Conference will be held in New Delhi from Jan. 12-14, 2004. Provided will be an overview of the status of deregulation and trends, and plans and budgets for new ventures in India. A comprehensive and in-depth analysis of the growth potential in both the oil and natural gas/LNG markets shall be undertaken. India is the fourth largest oil consumer in Asia-Pacific. On April 1, 2002 India embarked on the process of deregulation and decontrol of its oil and gas markets. The price of indigenous crude being decontrolled and aligned with international pricing levels. They have abolished the oil pool and rationalized subsidies in kerosene and LPG. Lastly, India has paved the way for both existing downstream companies and new players to enter India’s huge oil market.
Over the last decade, India’s oil market has experienced tremendous growth, with consumption doubling to over mmb/d in 2001, from 1 mmb/d in 1990. In the long run, India’s oil consumption is poised to grow at 4-5% per year through 2010 and beyond. With the expected commencement of gas imports in 2004, the overall consumption of natural gas is forecast to grow in the range of 6-7% per year through 2010.
India is Asia’s third largest crude importer after Japan and South Korea and ahead of China. India currently imports 1.2 mmb/d of crude oil. Domestic production has plateaued at about 650kb/d. By the end of the decade, it is estimated that India will need to import close to 2 mmb/d. India’s refining capacity has surged to 2.3 mmb/d, and this is up nearly 60% from the 1999 level. This has transformed India from a net importer of oil products to net exporter of diesel and gasoline. The recent domestic discovery of gas along the east coast of India is expected to transform the Indian gas business, with virtually every major oil and gas operator in India aspiring to enter the natural gas market. With maiden LNG imports expected in early 2004, despite pricing concerns, India is poised to become a major LNG consumer in the Asia-Pacific region.
On November 20 New Delhi’s largest oil exploration company, Oil and Natural Gas Corp., announced they are considering giving 2-3% of its equity shares to its 40,000 workers through an ESOP. Mercer Consulting of Washington, DC was hired to help in the design and implementation of the ESOP. A director of ONGC stated “we feel money alone cannot motivate employees to excel in their profession. Giving employees ESOP will involve them more in the company’s growth. We expect such participation in the hands of employees will only motivate them to perform better.”
With the opening up of petroleum marketing to the private sector, one can expect hectic activity in this sector too. Now national oil companies have about 20,000 retail outlets, and another 10,000 are expected in the next two years. With India set to become one of the world’s largest consumers of oil and gas, it is expected that, over the next 25 years, the refining sector would need an investment of around $60 billion, and marketing and distribution sectors would need an investment of $30 billion. As such, the oil and gas industry will remain a focal point of the country’s policy making.
The oil and gas industry remains a focal point of the policy making in the United States. Our citizens, who in large part are tax payers, who in a lesser part are voters, and in an even lesser part fight to protect our freedoms, are, in my view, deserving of a sound energy bill, and one that can stand the test of time. India is moving in the right direction. The United States should be a leader and not a follower in the effort to become energy self-sufficient.
I would like to turn to the matter of the money supply. William Poole is the president of the Federal Reserve Bank of St. Louis, and spoke at a conference at the Cato Institute. He mentioned that M3, the broadest measure of money, is down 6.4% annualized over the past three months using the weekly Fed data. This is the sharpest three-month deceleration in M3 growth since 1963. Poole commented that ‘my attitude is to be careful about reacting…to money growth changes over matters of weeks or even months. But it does catch my attention, and the longer and more persistent these changes are, I think, the more important it is to look more deeply into the situation.” Mr. Poole has a good deal of experience in these matters. However, there is another statement made today that does not sit well with me. It is contradictory. Roger Ferguson is the Federal Reserve Vice Chairman, and downplayed the risk of the recovery stalling out. At the same time, he mentioned that inflation is more likely to decline than to rise in current circumstances. Also, on Friday, Gary Stern, president of the Minneapolis Federal Reserve echoed these sentiments with “I don’t expect to see any material acceleration of inflation next year.” Given the recent 7.2% GDP growth in the third quarter and the Fed’s optimistic view for the economy going forward, it should be more likely for inflation to increase rather than for it to be more likely to decline. Demand should increase with better business conditions, and therefore, inflation should rise. The combination of Ferguson’s statements and the information on M3 give me greater cause for concern about current conditions. I already question the government figures. This creates more questions in my mind.
While we have a little time, let’s visit the state of Pennsylvania and their economy. They lost 3,900 jobs in October. According to Keystone Research Center and Economic Policy Institute’s analysis of President Bush’s “Jobs and Growth” plan, from June 2003 to October 2003, 38,100 jobs were supposed to have been created in Pennsylvania. In fact, since the tax cut was projected to start creating jobs, Pennsylvania has lost 14,500 jobs. The executive director of Keystone Research Center stated “the reason is simple economics—tax cuts that target the affluent don’t pump up the economy quickly because the dollars aren’t spent.” Pennsylvania has fewer jobs than when the recession began. They have fewer jobs than when the recession ended. They have a higher employment rate than when the recession began. They have a higher unemployment rate than when the recession ended. They have fewer jobs than in the beginning of 2001. They have a higher unemployment rate than in the beginning of 2001. Job growth has not kept up with working-age population growth in Pennsylvania.
By a vote of 58 to 39, the Senate Democrats and Republicans blocked passage of the proposed energy bill. It had passed the House on Tuesday by a vote of 246 to 180. A major sticking point is the provision that manufacturers should not be held liable for the mishandling of MTBE by businesses responsible for groundwater contamination. A lesser area of contention is a provision that would double the use of ethanol over five years. As I previously stated, the CBO estimates the bill will cost around $32 billion over the next decade, including around $23.5 billion in tax breaks, and it also includes loan guarantees in excess of $20 billion for pork programs.(not the diet kind.) As such, today’s title suggests those who have voted against the energy bill were, in fact, also voting against graft and pork. In sum, sponsors of this bill require two additional votes for passage. I wonder what the graft will be to buy those votes.
Now let’s visit another country with a different orientation towards its energy program. The Fifth Indian Oil and Gas Conference will be held in New Delhi from Jan. 12-14, 2004. Provided will be an overview of the status of deregulation and trends, and plans and budgets for new ventures in India. A comprehensive and in-depth analysis of the growth potential in both the oil and natural gas/LNG markets shall be undertaken. India is the fourth largest oil consumer in Asia-Pacific. On April 1, 2002 India embarked on the process of deregulation and decontrol of its oil and gas markets. The price of indigenous crude being decontrolled and aligned with international pricing levels. They have abolished the oil pool and rationalized subsidies in kerosene and LPG. Lastly, India has paved the way for both existing downstream companies and new players to enter India’s huge oil market.
Over the last decade, India’s oil market has experienced tremendous growth, with consumption doubling to over mmb/d in 2001, from 1 mmb/d in 1990. In the long run, India’s oil consumption is poised to grow at 4-5% per year through 2010 and beyond. With the expected commencement of gas imports in 2004, the overall consumption of natural gas is forecast to grow in the range of 6-7% per year through 2010.
India is Asia’s third largest crude importer after Japan and South Korea and ahead of China. India currently imports 1.2 mmb/d of crude oil. Domestic production has plateaued at about 650kb/d. By the end of the decade, it is estimated that India will need to import close to 2 mmb/d. India’s refining capacity has surged to 2.3 mmb/d, and this is up nearly 60% from the 1999 level. This has transformed India from a net importer of oil products to net exporter of diesel and gasoline. The recent domestic discovery of gas along the east coast of India is expected to transform the Indian gas business, with virtually every major oil and gas operator in India aspiring to enter the natural gas market. With maiden LNG imports expected in early 2004, despite pricing concerns, India is poised to become a major LNG consumer in the Asia-Pacific region.
On November 20 New Delhi’s largest oil exploration company, Oil and Natural Gas Corp., announced they are considering giving 2-3% of its equity shares to its 40,000 workers through an ESOP. Mercer Consulting of Washington, DC was hired to help in the design and implementation of the ESOP. A director of ONGC stated “we feel money alone cannot motivate employees to excel in their profession. Giving employees ESOP will involve them more in the company’s growth. We expect such participation in the hands of employees will only motivate them to perform better.”
With the opening up of petroleum marketing to the private sector, one can expect hectic activity in this sector too. Now national oil companies have about 20,000 retail outlets, and another 10,000 are expected in the next two years. With India set to become one of the world’s largest consumers of oil and gas, it is expected that, over the next 25 years, the refining sector would need an investment of around $60 billion, and marketing and distribution sectors would need an investment of $30 billion. As such, the oil and gas industry will remain a focal point of the country’s policy making.
The oil and gas industry remains a focal point of the policy making in the United States. Our citizens, who in large part are tax payers, who in a lesser part are voters, and in an even lesser part fight to protect our freedoms, are, in my view, deserving of a sound energy bill, and one that can stand the test of time. India is moving in the right direction. The United States should be a leader and not a follower in the effort to become energy self-sufficient.
I would like to turn to the matter of the money supply. William Poole is the president of the Federal Reserve Bank of St. Louis, and spoke at a conference at the Cato Institute. He mentioned that M3, the broadest measure of money, is down 6.4% annualized over the past three months using the weekly Fed data. This is the sharpest three-month deceleration in M3 growth since 1963. Poole commented that ‘my attitude is to be careful about reacting…to money growth changes over matters of weeks or even months. But it does catch my attention, and the longer and more persistent these changes are, I think, the more important it is to look more deeply into the situation.” Mr. Poole has a good deal of experience in these matters. However, there is another statement made today that does not sit well with me. It is contradictory. Roger Ferguson is the Federal Reserve Vice Chairman, and downplayed the risk of the recovery stalling out. At the same time, he mentioned that inflation is more likely to decline than to rise in current circumstances. Also, on Friday, Gary Stern, president of the Minneapolis Federal Reserve echoed these sentiments with “I don’t expect to see any material acceleration of inflation next year.” Given the recent 7.2% GDP growth in the third quarter and the Fed’s optimistic view for the economy going forward, it should be more likely for inflation to increase rather than for it to be more likely to decline. Demand should increase with better business conditions, and therefore, inflation should rise. The combination of Ferguson’s statements and the information on M3 give me greater cause for concern about current conditions. I already question the government figures. This creates more questions in my mind.
While we have a little time, let’s visit the state of Pennsylvania and their economy. They lost 3,900 jobs in October. According to Keystone Research Center and Economic Policy Institute’s analysis of President Bush’s “Jobs and Growth” plan, from June 2003 to October 2003, 38,100 jobs were supposed to have been created in Pennsylvania. In fact, since the tax cut was projected to start creating jobs, Pennsylvania has lost 14,500 jobs. The executive director of Keystone Research Center stated “the reason is simple economics—tax cuts that target the affluent don’t pump up the economy quickly because the dollars aren’t spent.” Pennsylvania has fewer jobs than when the recession began. They have fewer jobs than when the recession ended. They have a higher employment rate than when the recession began. They have a higher unemployment rate than when the recession ended. They have fewer jobs than in the beginning of 2001. They have a higher unemployment rate than in the beginning of 2001. Job growth has not kept up with working-age population growth in Pennsylvania.
11/21/03 Sneak And Peek
This is not a new version of hide and go seek. It’s the name of the Homeland Security search warrant. Basically, the holder of the warrant can search any part of the premises, and the owner does not sign the warrant, and his personal property rights are forfeited under the law. Do you think sneak and peek was intended for Michael Jackson or followers of Osama bin Laden? Seventy officers were deemed necessary for searching Neverland. John McCain has stated we are short on troops in Iraq. Maybe we could use those 70 officers as a special sneak and peek task force to search and bring into custody Saddam Hussein. The only things which have been delivered to date have been hundreds of bodybags, thousands of wounded, and a few tapes of Hussein’s messages.
I think we might take a trip to the unemployment lines in Michigan. Their unemployment rate hit an 11-year high in October. The state’s jobless rate edged up to 7.6% during the month from 7.5% in September. In January 1992 it stood at 7.8%. The job market traditionally lags behind the national labor recovery, and 2003 is no exception. From January to October 2003, the state’s unemployment rate worsened 1.4 percentage points while the national average rose only three-tenths of a percentage point. The Michigan workforce totals about 5.1 million. Employment rose by 25,000 during October; however, many unemployed workers who had been discouraged, and had stopped looking for a job, started once again applying for a job in October. I have written many times that the unemployment rolls in this country are significantly understated. The media has written that the economy is turning upward, and this fact has given hope to the discouraged unemployed worker. More and more states are seeing the discouraged unemployed worker now seeking work again. The problem is simple. There aren’t enough jobs for those seeking jobs.
Kenneth Rosen is a UC Berkeley economist and chairman of the Fisher (as in the Gap’s founder) Center for Real Estate. Yesterday he addressed 500 local property owners and investors at the Fairmont Hotel in San Francisco. Rosen stated the Bay Area’s depressed market for office space won’t recover for at least three years while the housing market appears vulnerable to interest rate hikes likely to follow the 2004 election. Another economist, Cynthia Kroll, stated “any job that mostly involves sitting at a desk, talking on the phone, and working on a computer is at risk for outsourcing,” especially in high-cost regions like the Bay Area. Rosen believes that mortgage rates are likely to rise to 8% during 2005 and 2006, and that would slow house building and depress prices nationwide. Just as disturbing, he remarked that a post-election federal tax hike is inevitable, no matter who is elected. He cited the growing deficits in the federal budget and international; trade.
Nanotechnology is the science of building matter on a very small scale. Federal research experts have predicted that the market for nanotechnology devices could reach $1 trillion a year within a decade or so. Congress passed legislation yesterday that will increase federal funding for nanotechnology research in coming years. The President has yet to veto any proposed legislation that has made it to his desk, and therefore, I feel certain he will sign the bill. It will accelerate research and development by earmarking $3.7 billion for the study of nanotechnology during the next four years. Given the potential for nanotechnology, these funds are minimal. Think of all the money expended on pork programs.
Yesterday new auto incentives have reached your neighborhood. Chrysler is offering a new-car and truck sales incentive that waives some remaining lease payments, matching a General Motors program begun this month. The so-called lease pull-ahead is the latest incentive offered by Detroit automakers as they try to offset weaker-than-expected U.S. sales in October. Chrysler’s lease pull-ahead program waives remaining lease payments for customers whose contracts on their Chrysler vehicles expire before July 31 if they buy or lease a new car or truck made by the company. Chrysler also increased its cash rebate offers on the sale of its 2003 and 2004 model vehicles by $500. This week GM offered to defer monthly payments for 90 days when customers purchase a new 2003 or 2004 model vehicle. This week Ford revived a $5-a-day lease offer on base versions of its Ford Mustang coupe. Detroit automakers are manufacturing vehicles to keep their plants running. They are building a vehicle for inventory without a dealer or distributor having ordered the vehicle. The bloated October vehicle inventory numbers skewed the national economic picture, and overstated consumer demand for produced goods.
IBM has 38,000 software employees. Yesterday they reduced 200 employees company-wide and “across the board.” They included programmers, pervasive computer engineers, Tivoli and rational subgroups, as well as administrative and support function employees. These cuts are modest considering they represent less than one-half of one per cent of its total software employees. If business were robust, the cuts would not be necessary. If business were robust, IBM would be hiring. It’s smart to look at what companies do and not what they say. The bottom line is that net employee reductions still are the daily story in tech land.
Hino Motors is a subsidiary of Toyota Motor Corporation. Hino is a global commercial-vehicle manufacturer. In other words, they make trucks. Dana has a facility in Renton, Washington. At that location, Dana will assemble driveshafts for the 2005 Hino platform. Dana’s Commercial vehicle systems unit designs, manufactures, and markets front-steer, rear-drive, trailer, and auxiliary axles; driveshafts; steering shafts; brakes; suspensions; and related systems, modules, and services for the commercial vehicle market.
Yesterday Alan Greenspan told a monetary conference sponsored by the Cato Institute and The Economist magazine that “it is imperative that creeping protectionism be thwarted and reversed…should globalization be allowed to proceed and thereby create an ever more flexible international financial system, history suggests that current imbalances will be diffused with little disruption.”
This is not a new version of hide and go seek. It’s the name of the Homeland Security search warrant. Basically, the holder of the warrant can search any part of the premises, and the owner does not sign the warrant, and his personal property rights are forfeited under the law. Do you think sneak and peek was intended for Michael Jackson or followers of Osama bin Laden? Seventy officers were deemed necessary for searching Neverland. John McCain has stated we are short on troops in Iraq. Maybe we could use those 70 officers as a special sneak and peek task force to search and bring into custody Saddam Hussein. The only things which have been delivered to date have been hundreds of bodybags, thousands of wounded, and a few tapes of Hussein’s messages.
I think we might take a trip to the unemployment lines in Michigan. Their unemployment rate hit an 11-year high in October. The state’s jobless rate edged up to 7.6% during the month from 7.5% in September. In January 1992 it stood at 7.8%. The job market traditionally lags behind the national labor recovery, and 2003 is no exception. From January to October 2003, the state’s unemployment rate worsened 1.4 percentage points while the national average rose only three-tenths of a percentage point. The Michigan workforce totals about 5.1 million. Employment rose by 25,000 during October; however, many unemployed workers who had been discouraged, and had stopped looking for a job, started once again applying for a job in October. I have written many times that the unemployment rolls in this country are significantly understated. The media has written that the economy is turning upward, and this fact has given hope to the discouraged unemployed worker. More and more states are seeing the discouraged unemployed worker now seeking work again. The problem is simple. There aren’t enough jobs for those seeking jobs.
Kenneth Rosen is a UC Berkeley economist and chairman of the Fisher (as in the Gap’s founder) Center for Real Estate. Yesterday he addressed 500 local property owners and investors at the Fairmont Hotel in San Francisco. Rosen stated the Bay Area’s depressed market for office space won’t recover for at least three years while the housing market appears vulnerable to interest rate hikes likely to follow the 2004 election. Another economist, Cynthia Kroll, stated “any job that mostly involves sitting at a desk, talking on the phone, and working on a computer is at risk for outsourcing,” especially in high-cost regions like the Bay Area. Rosen believes that mortgage rates are likely to rise to 8% during 2005 and 2006, and that would slow house building and depress prices nationwide. Just as disturbing, he remarked that a post-election federal tax hike is inevitable, no matter who is elected. He cited the growing deficits in the federal budget and international; trade.
Nanotechnology is the science of building matter on a very small scale. Federal research experts have predicted that the market for nanotechnology devices could reach $1 trillion a year within a decade or so. Congress passed legislation yesterday that will increase federal funding for nanotechnology research in coming years. The President has yet to veto any proposed legislation that has made it to his desk, and therefore, I feel certain he will sign the bill. It will accelerate research and development by earmarking $3.7 billion for the study of nanotechnology during the next four years. Given the potential for nanotechnology, these funds are minimal. Think of all the money expended on pork programs.
Yesterday new auto incentives have reached your neighborhood. Chrysler is offering a new-car and truck sales incentive that waives some remaining lease payments, matching a General Motors program begun this month. The so-called lease pull-ahead is the latest incentive offered by Detroit automakers as they try to offset weaker-than-expected U.S. sales in October. Chrysler’s lease pull-ahead program waives remaining lease payments for customers whose contracts on their Chrysler vehicles expire before July 31 if they buy or lease a new car or truck made by the company. Chrysler also increased its cash rebate offers on the sale of its 2003 and 2004 model vehicles by $500. This week GM offered to defer monthly payments for 90 days when customers purchase a new 2003 or 2004 model vehicle. This week Ford revived a $5-a-day lease offer on base versions of its Ford Mustang coupe. Detroit automakers are manufacturing vehicles to keep their plants running. They are building a vehicle for inventory without a dealer or distributor having ordered the vehicle. The bloated October vehicle inventory numbers skewed the national economic picture, and overstated consumer demand for produced goods.
IBM has 38,000 software employees. Yesterday they reduced 200 employees company-wide and “across the board.” They included programmers, pervasive computer engineers, Tivoli and rational subgroups, as well as administrative and support function employees. These cuts are modest considering they represent less than one-half of one per cent of its total software employees. If business were robust, the cuts would not be necessary. If business were robust, IBM would be hiring. It’s smart to look at what companies do and not what they say. The bottom line is that net employee reductions still are the daily story in tech land.
Hino Motors is a subsidiary of Toyota Motor Corporation. Hino is a global commercial-vehicle manufacturer. In other words, they make trucks. Dana has a facility in Renton, Washington. At that location, Dana will assemble driveshafts for the 2005 Hino platform. Dana’s Commercial vehicle systems unit designs, manufactures, and markets front-steer, rear-drive, trailer, and auxiliary axles; driveshafts; steering shafts; brakes; suspensions; and related systems, modules, and services for the commercial vehicle market.
Yesterday Alan Greenspan told a monetary conference sponsored by the Cato Institute and The Economist magazine that “it is imperative that creeping protectionism be thwarted and reversed…should globalization be allowed to proceed and thereby create an ever more flexible international financial system, history suggests that current imbalances will be diffused with little disruption.”
Thursday, November 20, 2003
11/20/03 Cracks In The Foundation
China will raise tariffs on some commodities imported from the United States. The Chinese stated the new tariffs were in response to U.S. duties on steel imports. The latter were imposed 18 months ago. The cap on imports of Chinese bras and gowns came this week. China Daily stated “the cheap political points the Bush administration scored by touting trade protectionism will prove costly for U.S. consumers as well as global trade… and that Washington had “stubbornly resorted to short-sighted protectionism. Mounting U.S. protectionism against China is by no means a solution to the exploding U.S. trade deficit.”
Yesterday, India’s Foreign Secretary Kanwal Sibal remarked his government and their tech sector have been concerned by recent moves in the U.S. to restrict trade in IT services and IT-enabled services. He stated “the proposed anti-legislature measures by a few states in the U.S. on IT outsourcing and offshoring needs to be addressed squarely, as such attempts would only hinder progress in high technology areas between the two countries… we need to educate the American people and the U.S. media on the cost benefits of outsourcing IT projects to countries like India, which has a reservoir of skilled talent pool and core competencies.” U.S. Under Secretary of Commerce Kenneth Juster urges the Indian government to remove impediments on trade investments by U.S. firms and to raise the cap on foreign direct investment in defense ventures from the present 26%.
Even as consumer spending rose sharply in the third quarter, customer satisfaction did not. The American Consumer Satisfaction Index (ACSI) remained unchanged last quarter, portending a more moderate rise in fourth-quarter household spending. The Index is up only 1% from the year ago period. The University of Michigan Business School’s National Quality Research Center compiles and analyzes the data. In their view, the stability in the ACSI suggests a much more modest increase in fourth quarter spending of 3.7%, and this number would be consistent with the forecast being provided by WalMart.
In a recent PricewaterhouseCoopers survey of senior executives at U.S.-based multinational corporations, most said their staffing levels would suffice until economic growth persists. Gerald Ward, chief of the firm’s auditing and accounting business, stated “the strong gains in productivity made by U.S. companies during the long slump preclude much more than replacement hiring. For the near future, executives believe productivity will be sufficient to meet increased demand without much net new hiring.” The executives polled remarked that weak market demand remains the leading barrier to growth over the next 12 months, and that concern has grown over competition from foreign markets.
Each day I try to gain a greater understanding of the unemployment problems in our country. Each state has its own concerns. I thought it might prove interesting to visit each state. Today we’ll spend some time with Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia’s Robinson College of Business. So far this year Georgia has added 82,000 jobs; however, Dr. Dhawan states “jobs that have supposedly been created are showing up in sectors that are low paying at best. These low paying jobs drastically affect purchasing power, and, subsequently, tax revenue…the problem is that we’ve added almost 44,000 jobs since November 2001 in the low paying business services category, but we have close to 4,000 jobs at the management level. It seems to me that this is a case of too many foot soldiers for every officer standing, leaving a poorly equipped army – meaning we may have increased the number of people working but they don’t have enough purchasing power to sustain a recovery.” He stated that, during the first half of the 90s, roughly every dollar increase in sales tax collection was matched by a dollar increase in personal income tax collection. In the second half of the decade, that number was even higher with income tax collections adding $1.34 for every dollar collected. However, once the recession began, everything dropped. For the first two quarters of 2003, personal income growth has risen by 4.1%, but personal tax collections have dropped even further by 3% from the lows of last year.
The IMF said on Tuesday that there is no clear evidence that China’s yuan is substantially undervalued, and this counters claims by U.S. exporters that the yuan has been artificially kept low to give Chinese exports an advantage. The IMF forecasts an 8% growth for China’s economy in 2004. Meanwhile, Beijing has condemned Taiwan’s leaders for their push for independence, and yesterday stated “the use of force may be unavoidable” should Taiwan not curb the move towards independence.
Acting Army Secretary Les Brownlee and Chief of Staff Gen. Peter Schoomaker told senators yesterday they are concerned that, when thousands of soldiers and reservists return from Iraq during the first four months of 2004, there will be a shortage of doctors and adequate housing. In Iraq, the Army has been faced with a shortage of body armor, armored Humvees, and anti-missile technology for helicopters.
General Electric said it would have little or no growth in 2004, and that is after a disappointing 2003. However, the company said they would return to double-digit growth in 2005. The latter statement boosted the price of GE stock. I doubt very much whether any corporate executive has clear visibility into 2005. I believe it is irresponsible to provide such a forecast. It entails too many unknowns.
If the 5% cut in the Medi-Cal (California Medicaid) reimbursement rate is enacted as planned January 1, 2004, Walgreen’s 356 California pharmacies may be forced to withdraw from the program. A spokesperson for Walgreen’s stated “this rate reduction will also negatively impact our company’s ability to serve workers’compensation patients. If the 5% cut is not rescinded, workers’ comp reimbursements in California--- tied to Medi-Cal rates as of Jan. 1—will be the lowest in the nation.”
For the fifth year in a row, national results of the Harris Poll indicate that there has been a modest drop in the “Feel Good Index.” The largest declines over these five years relate to the economy. Those who feel good about the economy are down 29 points from 64% in 1998 to only 35% now.
Cato Director of Health and Welfare Studies Michael Tanner believes the pending Medicare plan is “a terrible mistake that will clearly cost our children and grandchildren. This is not a Medicare reform bill. This is barely a Medicare prescription drug bill. This is a bill for politicians and special interests buying favor with the AARP…short-term political advantage is not worth the cost to future generations. Sometimes the better part of valor is recognizing when you have made a mistake. Congress should recognize that this bill is a mistake and go back to the drawing board.” The Council for Citizens Against Government Waste stated “the bad news is this bill fails to reform Medicare, a program that is headed towards bankruptcy…Medicare’s unfunded liability currently hovers around $40 trillion. Today’s politicians are raiding the paychecks of the unborn to impress senior citizens before the 2004 elections.”
Less than four years after Convergys Corp. established a phone-in customer service center in South Toledo, the Cincinnati company said yesterday it will the office and eliminate jobs for 570 people. The company said its restructuring would eliminate about 950 professional and administrative positions worldwide.
Privately-owned Ikea has stores from Shanghai to San Francisco, and are located in a total of 22 countries. If they ever go public, I would certainly be interested in becoming a stockholder, and for the long-term. An independent survey was commissioned by Stockholm’s Gothenburg University. The survey focused on trust. It indicated that more people trust Ikea than they do their parliament and their political parties.
China will raise tariffs on some commodities imported from the United States. The Chinese stated the new tariffs were in response to U.S. duties on steel imports. The latter were imposed 18 months ago. The cap on imports of Chinese bras and gowns came this week. China Daily stated “the cheap political points the Bush administration scored by touting trade protectionism will prove costly for U.S. consumers as well as global trade… and that Washington had “stubbornly resorted to short-sighted protectionism. Mounting U.S. protectionism against China is by no means a solution to the exploding U.S. trade deficit.”
Yesterday, India’s Foreign Secretary Kanwal Sibal remarked his government and their tech sector have been concerned by recent moves in the U.S. to restrict trade in IT services and IT-enabled services. He stated “the proposed anti-legislature measures by a few states in the U.S. on IT outsourcing and offshoring needs to be addressed squarely, as such attempts would only hinder progress in high technology areas between the two countries… we need to educate the American people and the U.S. media on the cost benefits of outsourcing IT projects to countries like India, which has a reservoir of skilled talent pool and core competencies.” U.S. Under Secretary of Commerce Kenneth Juster urges the Indian government to remove impediments on trade investments by U.S. firms and to raise the cap on foreign direct investment in defense ventures from the present 26%.
Even as consumer spending rose sharply in the third quarter, customer satisfaction did not. The American Consumer Satisfaction Index (ACSI) remained unchanged last quarter, portending a more moderate rise in fourth-quarter household spending. The Index is up only 1% from the year ago period. The University of Michigan Business School’s National Quality Research Center compiles and analyzes the data. In their view, the stability in the ACSI suggests a much more modest increase in fourth quarter spending of 3.7%, and this number would be consistent with the forecast being provided by WalMart.
In a recent PricewaterhouseCoopers survey of senior executives at U.S.-based multinational corporations, most said their staffing levels would suffice until economic growth persists. Gerald Ward, chief of the firm’s auditing and accounting business, stated “the strong gains in productivity made by U.S. companies during the long slump preclude much more than replacement hiring. For the near future, executives believe productivity will be sufficient to meet increased demand without much net new hiring.” The executives polled remarked that weak market demand remains the leading barrier to growth over the next 12 months, and that concern has grown over competition from foreign markets.
Each day I try to gain a greater understanding of the unemployment problems in our country. Each state has its own concerns. I thought it might prove interesting to visit each state. Today we’ll spend some time with Dr. Rajeev Dhawan, director of the Economic Forecasting Center at Georgia’s Robinson College of Business. So far this year Georgia has added 82,000 jobs; however, Dr. Dhawan states “jobs that have supposedly been created are showing up in sectors that are low paying at best. These low paying jobs drastically affect purchasing power, and, subsequently, tax revenue…the problem is that we’ve added almost 44,000 jobs since November 2001 in the low paying business services category, but we have close to 4,000 jobs at the management level. It seems to me that this is a case of too many foot soldiers for every officer standing, leaving a poorly equipped army – meaning we may have increased the number of people working but they don’t have enough purchasing power to sustain a recovery.” He stated that, during the first half of the 90s, roughly every dollar increase in sales tax collection was matched by a dollar increase in personal income tax collection. In the second half of the decade, that number was even higher with income tax collections adding $1.34 for every dollar collected. However, once the recession began, everything dropped. For the first two quarters of 2003, personal income growth has risen by 4.1%, but personal tax collections have dropped even further by 3% from the lows of last year.
The IMF said on Tuesday that there is no clear evidence that China’s yuan is substantially undervalued, and this counters claims by U.S. exporters that the yuan has been artificially kept low to give Chinese exports an advantage. The IMF forecasts an 8% growth for China’s economy in 2004. Meanwhile, Beijing has condemned Taiwan’s leaders for their push for independence, and yesterday stated “the use of force may be unavoidable” should Taiwan not curb the move towards independence.
Acting Army Secretary Les Brownlee and Chief of Staff Gen. Peter Schoomaker told senators yesterday they are concerned that, when thousands of soldiers and reservists return from Iraq during the first four months of 2004, there will be a shortage of doctors and adequate housing. In Iraq, the Army has been faced with a shortage of body armor, armored Humvees, and anti-missile technology for helicopters.
General Electric said it would have little or no growth in 2004, and that is after a disappointing 2003. However, the company said they would return to double-digit growth in 2005. The latter statement boosted the price of GE stock. I doubt very much whether any corporate executive has clear visibility into 2005. I believe it is irresponsible to provide such a forecast. It entails too many unknowns.
If the 5% cut in the Medi-Cal (California Medicaid) reimbursement rate is enacted as planned January 1, 2004, Walgreen’s 356 California pharmacies may be forced to withdraw from the program. A spokesperson for Walgreen’s stated “this rate reduction will also negatively impact our company’s ability to serve workers’compensation patients. If the 5% cut is not rescinded, workers’ comp reimbursements in California--- tied to Medi-Cal rates as of Jan. 1—will be the lowest in the nation.”
For the fifth year in a row, national results of the Harris Poll indicate that there has been a modest drop in the “Feel Good Index.” The largest declines over these five years relate to the economy. Those who feel good about the economy are down 29 points from 64% in 1998 to only 35% now.
Cato Director of Health and Welfare Studies Michael Tanner believes the pending Medicare plan is “a terrible mistake that will clearly cost our children and grandchildren. This is not a Medicare reform bill. This is barely a Medicare prescription drug bill. This is a bill for politicians and special interests buying favor with the AARP…short-term political advantage is not worth the cost to future generations. Sometimes the better part of valor is recognizing when you have made a mistake. Congress should recognize that this bill is a mistake and go back to the drawing board.” The Council for Citizens Against Government Waste stated “the bad news is this bill fails to reform Medicare, a program that is headed towards bankruptcy…Medicare’s unfunded liability currently hovers around $40 trillion. Today’s politicians are raiding the paychecks of the unborn to impress senior citizens before the 2004 elections.”
Less than four years after Convergys Corp. established a phone-in customer service center in South Toledo, the Cincinnati company said yesterday it will the office and eliminate jobs for 570 people. The company said its restructuring would eliminate about 950 professional and administrative positions worldwide.
Privately-owned Ikea has stores from Shanghai to San Francisco, and are located in a total of 22 countries. If they ever go public, I would certainly be interested in becoming a stockholder, and for the long-term. An independent survey was commissioned by Stockholm’s Gothenburg University. The survey focused on trust. It indicated that more people trust Ikea than they do their parliament and their political parties.
Wednesday, November 19, 2003
11/19/03 Re-election Or Bust
With this Administration I am never disappointed. I can depend on them for endless irrational thinking (I said that so politely). It was too much to expect that the desire to win votes for 2004 would end with the steel tariffs. The trade off to woo voters in the four big steel states certainly was met with a huge payment, $4 billion in proposed fines from the EU. A bigger payment was running aground with Japan, and alienating the biggest buyer of our treasuries. That buyer helps to fund our massive deficits. The second largest buyer of our treasuries is China. In an absolute stroke of genius, Bush imposed temporary quotas on various Chinese textiles, such as, bras and robes. When was the last time Bush ever put forth a temporary measure? The tax cuts were temporary but they are not. The steel tariffs are temporary, but there is a fight to retain them. Only the voters have the power to make Bush temporary. The bra barrier, as I call it, is aimed at winning voters in the textile states, such as, in South Carolina. Plants have closed so furiously in the last four years that it is difficult to find too many textile workers left in that state. Calls to various agencies suggest there may be 8,000 such workers left in South Carolina, down twenty times from about twenty years ago. That sounds like a very rational trade-off, to piss China off to win re-election in South Carolina and to possibly save 8,000 jobs. Just to put it in perspective, AT&T wireless will layoff 3000 workers, and they will look to India for outsourcing those jobs. Yesterday I mentioned 21,000 Verizon workers would be leaving that company on Friday. There is a mass exodus of workers in this country, and that exodus has been from the employment rolls. What action is Bush going to take against WalMart? What’s the difference between China’s lower prices and WalMart’s? The latter reduced their prices on toys to such an extent that Toys R Us is needing to close their Kids R Us and Imaginarium stores, and take large losses as well as lay off employees in those divisions. A few thousand will be dropped from the payroll. Should we place a floor under prices at WalMart, our largest private employer with almost 1.5 million on the payroll? Think of all the companies that compete with WalMart. Bush could win those votes, and they must exceed 1,5 million.
Retaliation is taking place. Foreign buyers are purchasing less of our treasuries. You can bet that China will not be rushing out to buy our bonds. Bush stabs the countries that fund our deficits. The American voter did not elect him to protect the worker from foreign competition. Actually, come to think of it, the majority of the voters didn’t elect him in the first place. I almost forgot. I’m wondering what temporary measure Bush can devise to help the high-tech worker. Figures compiled by a trade group, the AeA, indicate 540,000 high-tech jobs were eliminated in 2002, and another 234,000 will be cut this year. In 2002, California accounted for 22% of such layoffs. Bush needs to do something quickly to win California. Maybe he will temporarily place an export quota on outsourcing in the name of homeland security. If Bush can temporarily stall a trade or currency crisis, he will have successfully defended his anti-freetrade measures. Don’t bet on the success of this on-going policy. Biting the hand that feeds you is not a winning game plan.
Yesterday the dollar fell to a three year low versus the yen, and reached a new low versus the euro. At the same time, gold traded above $400 per ounce for the first time since April 1996. Crude oil traded at $33.25 per barrel, a higher price than it was when the invasion of Iraq took place on March 20. Foreign purchases of treasuries, on a monthly basis, fell to their lowest level since February. For the first time since October 1998, foreigners had net sales of agency debt issued by Fannie Mae and Freddie Mac. The Administration will proclaim that the lower dollar helps our exports, but they only account for about 10% of our GDP. On the other hand, it hurts the exports of most other nations as it makes their exports more expensive and decreases the buying power of our consumer. Exports are more important to other nations, such as, Japan. A rational view of our trade deficit with China shall indicate that it will reach about $130 billion this year; however, China only exports $3 billion in textiles to the U.S. We should have a trade war over $3 billion so he can win North and South Carolina in 2004? I don’t think so.
Bush had better keep an eye on India because their electronic hardware and computer software services registered a growth of 35% in dollar terms at $6.5 billion during the April through September 2003 period. The executive director of Electronics and Computer Software Export Promotion Council, DK Sareen, stated “going by the trend, we are confident that the export target set for 2003-2004 at $13.77 billion is in the achievable realm.” The 2008 target for India’s IT exports is $50 billion. The Administration needs to get working on an IT tariff plan immediately. The news gets worse. Hitachi Data Systems is setting up a 100% owned subsidiary in India, and they will be making a substantial investment there. K.C. Pant, deputy chairman of India’s Planning Commission, spoke in Washington on Monday night. He is forecasting per capita incomes of 4.5 to 5% per annum in the next fifteen years, a doubling of the present rate. According to a recent study by Goldman Sachs, India will be the third largest economy in the world by 2040 after China and the United States. Pant maintained “the simple fact of the matter is that India, along with China, is potentially the future market driver for the world economy, and anything that retards our rate of progress will eventually have repercussions on the pace of growth and stability of the larger system in the world economy.” I don’t believe anyone from the Bush Administration attended that speech at the Center for Strategic and International Studies(CSIS). The CSIS is a think tank in Washington D.C.
Editing information is a growing cancer in the Bush Administration. A few days ago the New York Times wrote an article entitled “Deal on 9/11 Briefings Lets White House Edit Papers.” In all my years of writing, this is the first time I have referred to an article in that newspaper. The Administration has not been forthcoming in providing documents towards the investigation of 9/11. That is public information. What concerns me is the Administration has been permitted to edit the documents prior to providing them to the commission doing the investigation. In addition, there are limits placed on the number of commission members who have access to the report. As Timothy Roemer indicates, “our members may see only two or three paragraphs out of a nine-page report.” The commission is required to present its final report on May 24,2004. The law states the report should be “a full and complete account of the circumstances surrounding the September 11, 2001 terrorist attacks, including preparedness for and the immediate response to the attacks.” No document is suppose to be beyond the commission’s reach. No document should be outside the range of scrutiny, unless controls are being placed on the access to intelligence, or the lack of intelligence.
With this Administration I am never disappointed. I can depend on them for endless irrational thinking (I said that so politely). It was too much to expect that the desire to win votes for 2004 would end with the steel tariffs. The trade off to woo voters in the four big steel states certainly was met with a huge payment, $4 billion in proposed fines from the EU. A bigger payment was running aground with Japan, and alienating the biggest buyer of our treasuries. That buyer helps to fund our massive deficits. The second largest buyer of our treasuries is China. In an absolute stroke of genius, Bush imposed temporary quotas on various Chinese textiles, such as, bras and robes. When was the last time Bush ever put forth a temporary measure? The tax cuts were temporary but they are not. The steel tariffs are temporary, but there is a fight to retain them. Only the voters have the power to make Bush temporary. The bra barrier, as I call it, is aimed at winning voters in the textile states, such as, in South Carolina. Plants have closed so furiously in the last four years that it is difficult to find too many textile workers left in that state. Calls to various agencies suggest there may be 8,000 such workers left in South Carolina, down twenty times from about twenty years ago. That sounds like a very rational trade-off, to piss China off to win re-election in South Carolina and to possibly save 8,000 jobs. Just to put it in perspective, AT&T wireless will layoff 3000 workers, and they will look to India for outsourcing those jobs. Yesterday I mentioned 21,000 Verizon workers would be leaving that company on Friday. There is a mass exodus of workers in this country, and that exodus has been from the employment rolls. What action is Bush going to take against WalMart? What’s the difference between China’s lower prices and WalMart’s? The latter reduced their prices on toys to such an extent that Toys R Us is needing to close their Kids R Us and Imaginarium stores, and take large losses as well as lay off employees in those divisions. A few thousand will be dropped from the payroll. Should we place a floor under prices at WalMart, our largest private employer with almost 1.5 million on the payroll? Think of all the companies that compete with WalMart. Bush could win those votes, and they must exceed 1,5 million.
Retaliation is taking place. Foreign buyers are purchasing less of our treasuries. You can bet that China will not be rushing out to buy our bonds. Bush stabs the countries that fund our deficits. The American voter did not elect him to protect the worker from foreign competition. Actually, come to think of it, the majority of the voters didn’t elect him in the first place. I almost forgot. I’m wondering what temporary measure Bush can devise to help the high-tech worker. Figures compiled by a trade group, the AeA, indicate 540,000 high-tech jobs were eliminated in 2002, and another 234,000 will be cut this year. In 2002, California accounted for 22% of such layoffs. Bush needs to do something quickly to win California. Maybe he will temporarily place an export quota on outsourcing in the name of homeland security. If Bush can temporarily stall a trade or currency crisis, he will have successfully defended his anti-freetrade measures. Don’t bet on the success of this on-going policy. Biting the hand that feeds you is not a winning game plan.
Yesterday the dollar fell to a three year low versus the yen, and reached a new low versus the euro. At the same time, gold traded above $400 per ounce for the first time since April 1996. Crude oil traded at $33.25 per barrel, a higher price than it was when the invasion of Iraq took place on March 20. Foreign purchases of treasuries, on a monthly basis, fell to their lowest level since February. For the first time since October 1998, foreigners had net sales of agency debt issued by Fannie Mae and Freddie Mac. The Administration will proclaim that the lower dollar helps our exports, but they only account for about 10% of our GDP. On the other hand, it hurts the exports of most other nations as it makes their exports more expensive and decreases the buying power of our consumer. Exports are more important to other nations, such as, Japan. A rational view of our trade deficit with China shall indicate that it will reach about $130 billion this year; however, China only exports $3 billion in textiles to the U.S. We should have a trade war over $3 billion so he can win North and South Carolina in 2004? I don’t think so.
Bush had better keep an eye on India because their electronic hardware and computer software services registered a growth of 35% in dollar terms at $6.5 billion during the April through September 2003 period. The executive director of Electronics and Computer Software Export Promotion Council, DK Sareen, stated “going by the trend, we are confident that the export target set for 2003-2004 at $13.77 billion is in the achievable realm.” The 2008 target for India’s IT exports is $50 billion. The Administration needs to get working on an IT tariff plan immediately. The news gets worse. Hitachi Data Systems is setting up a 100% owned subsidiary in India, and they will be making a substantial investment there. K.C. Pant, deputy chairman of India’s Planning Commission, spoke in Washington on Monday night. He is forecasting per capita incomes of 4.5 to 5% per annum in the next fifteen years, a doubling of the present rate. According to a recent study by Goldman Sachs, India will be the third largest economy in the world by 2040 after China and the United States. Pant maintained “the simple fact of the matter is that India, along with China, is potentially the future market driver for the world economy, and anything that retards our rate of progress will eventually have repercussions on the pace of growth and stability of the larger system in the world economy.” I don’t believe anyone from the Bush Administration attended that speech at the Center for Strategic and International Studies(CSIS). The CSIS is a think tank in Washington D.C.
Editing information is a growing cancer in the Bush Administration. A few days ago the New York Times wrote an article entitled “Deal on 9/11 Briefings Lets White House Edit Papers.” In all my years of writing, this is the first time I have referred to an article in that newspaper. The Administration has not been forthcoming in providing documents towards the investigation of 9/11. That is public information. What concerns me is the Administration has been permitted to edit the documents prior to providing them to the commission doing the investigation. In addition, there are limits placed on the number of commission members who have access to the report. As Timothy Roemer indicates, “our members may see only two or three paragraphs out of a nine-page report.” The commission is required to present its final report on May 24,2004. The law states the report should be “a full and complete account of the circumstances surrounding the September 11, 2001 terrorist attacks, including preparedness for and the immediate response to the attacks.” No document is suppose to be beyond the commission’s reach. No document should be outside the range of scrutiny, unless controls are being placed on the access to intelligence, or the lack of intelligence.
Tuesday, November 18, 2003
11/18/03 Quality Counts
Global Sources Ltd. Today released the results of a survey revealing that 80% of buyers are willing to pay a premium to purchase Taiwan products as opposed to buying direct from mainland China. Product quality was considered the main reason for buyers’ preference for Taiwan products. A range of other contributing factors includes Taiwan suppliers’ design capabilities, quality control, and R&D. Overseas buyers are also willing to pay a relatively higher price for Taiwan products than for Hong Kong products. Survey results show that 42% of buyers pay between 4 and 10% higher prices to buy products in Taiwan instead of purchasing similar products from the mainland. This is larger than the 34% of buyers who paid similar premiums to purchase from Hong Kong instead of purchasing directly from mainland China.
Sun Microsystems CEO Scott McNealy announced yesterday that the Chinese government has pledged to deploy a million computers in the next year using Sun’s Linux desktop software. The cost is $50 per license, and this includes Sun’s Star Office 7.0 productivity program that is a clone of Microsoft’s Office suite; however, the latter costs about $400 a copy. McNealy stated “this I believe makes us the No. 1 Linux desktop play on the planet.” Next month Sun will begin shipping its Java Desktop System. In my view, the Linux desktop software program has a better future.
Live Canadian cattle are still not permitted to cross into the U.S., but boxed Canadian beef is being shipped to the U.S. and Mexico at a faster pace than this time last year. The Canadian cattle industry is considering building a massive $250 million slaughterhouse in Alberta. This would result in more shipments of beef into the U.S. but fewer shipments of live cattle. Since September, beef shipments to the U.S. and Mexico are up between 7 and 40% per week compared to the same time last year. When the ban of live cattle is considered, however, Canada’s beef export market is only at 60% of last year’s levels. Once the slaughterhouse is completed, Canada would become the world’s number one beef exporting nation.
Hispanics comprise about 14% of the U.S. population, and they are the fastest growing minority. According to the San Jose Group, Hispanics have a combined purchasing power of $562 billion. I would also imagine their voting influence is growing as well.
Two U.S. soldiers were killed and two wounded in attacks north of Baghdad early yesterday in the town of Balad. The deaths brought to 419 American soldiers killed since the U.S. invaded Iraq in March, including 179 killed in guerrilla attacks since May 1 when Bush declared the major combat over. Yesterday, in Iraq, an Italian coalition official resigned . He accused the occupation authorities of incompetence.
The number of home foreclosure actions filed in Santa Clara County was up 5% in the third quarter, compared to the second quarter of 2003, and these figures were compiled by Foreclosures.com. That firm’s president, Alexis Ms. McGee, stated “we thought the worst was over for Santa Clara County as foreclosures fell in the second quarter, but now they’re edging up again. Notices of default, notices of trustees sales, and houses going to auction are up in both Northern and Southern California. We’re seeing a significant increase in the third quarter. During this period of low interest rates, people have been over-leveraging their homes, leaving themselves no wiggle room in case of troubles such as job loss or illness. Also, Fannie Mae and Freddie Mac made a combined effort in recent years to get everyone into a home that wanted one. Now all the easy money is coming back to haunt lenders and homeowners alike.”
Yesterday St.paul and Travelers agreed to merge. It will mean more layoffs in the Baltimore area. Verizon said 21,000 employees accepted an early retirement buyout offer and will leave the company by the end of the week. Toledo Mayor Jack Ford plans to cut about 60 city jobs. He said that administrators would not be exempt from the layoffs. In trying to plug a projected $65 million deficit for next year, Cleveland officials are considering laying off more than 700 uniformed employees in the police, fire, and ambulance ranks. In Columbus Mayor Coleman is asking all city employees to take three days of unpaid leave next year. Governor Bredesen of Tennessee will ask department heads to come forward with two budgets: one promising 5% cuts and one using the same amount of money they now spend. The 5% cut across the board would amount to $259 million. The Governor said no part of state government is off the table when it comes to cuts.
Oil reserves have fallen to record lows in Mexico. For six decades there have been restrictions on foreign investment in Mexico’s oil and gas industry. Pemex, the state-owned oil monopoly, wants to lift those restrictions. Mexico’s present reserves equal 12 years of production. In Venezuela, by comparison, they amount to 70 years. Mexico is the world’s fourth largest oil producing nation, and they are the only oil exporting nation that bars foreign producers from profiting from the sale of their oil and gas. The U.S imports about 2 million barrels a day from Mexico. I am not in favor of investing in oil and gas properties from Mexico nor am I in favor of purchasing oil and gas from Mexico. They expropriated (seized) the properties from U.S. and U.K. oil and gas companies. These properties comprise today’s Pemex. Mexico still has not repaid monies owed going back to 1849. As far as I am concerned, they can choke on their oil and gas. You don’t make the same mistake twice. Standard and Poor’s estimates Pemex’s total liabilities at $40 billion. It’s only a matter of time until their debt is downgraded. When the price of oil drops further, Pemex’s cash flow will be impaired and so will its exploration program. With the country’s fast-growing population, they will eat into their reserves at an alarming rate. Their next revolution shall then be on the horizon. Sometimes it is difficult to comprehend the feelings in another country. Pemex is stolen property and yet the citizens say Pemex is all about sovereignty.
Now I come to another type of acquisition, and that’s the on-going hostile battle by ArvinMeritor for control of Dana Corp. The initial approach took place in June 2002 and yesterday their cash bid was raised from $15 to $18 per share. ArvinMeritor employs 32,000 people in about 150 manufacturing facilities in 27 countries and generates sales of $8 billion. Dana employs 60,000 in 30 countries and has sales of $9.5 billion. Consequently, a great many families depend on these companies for their livelihood. ArvinMeritor identified Dana as a strategic acquisition target. The reason is Dana’s undercarriage expertise. This is an excellent fit. Dana’s position as a driveline supplier will strengthen the combined product offerings on a worldwide basis. Recently, Volvo truck chose to outsource axles to ArvinMeritor, and Hyundai chose the company to supply their autos with doors. Dana has recently signed an axle joint venture in China. In sum, the market for their products is growing on an international basis. The FTC wants to know about the combined position in medium and heavy duty axles and axle components. ArvinMeritor has been having discussions with the FTC on divesting any overlapping operations. It should not be a problem since Dana’s expertise is really in an aligned but not the same area. ArvinMeritor has always maintained they have had access to the funding. In short order, Dana will reply to yesterday’s increased bid. It will be difficult to say the bid is inadequate. Dana was at $6 per share not too long ago. ArvinMeritor stated they would keep their bid open thru December 2. That’s leaves plenty of time for future fireworks. Dana is headquartered in Toledo, Ohio. It’s not Pennsylvania where a company like Hershey can just say no to an $89 bid from Wrigley. The laws are different. Dana needs to be responsible to its shareowners. It will take more than a small increase in the dividend and raising the forecast for 2004. There are many stockholders and many employees waiting for a response from the Dana board. It needs to be fair and objective.
Global Sources Ltd. Today released the results of a survey revealing that 80% of buyers are willing to pay a premium to purchase Taiwan products as opposed to buying direct from mainland China. Product quality was considered the main reason for buyers’ preference for Taiwan products. A range of other contributing factors includes Taiwan suppliers’ design capabilities, quality control, and R&D. Overseas buyers are also willing to pay a relatively higher price for Taiwan products than for Hong Kong products. Survey results show that 42% of buyers pay between 4 and 10% higher prices to buy products in Taiwan instead of purchasing similar products from the mainland. This is larger than the 34% of buyers who paid similar premiums to purchase from Hong Kong instead of purchasing directly from mainland China.
Sun Microsystems CEO Scott McNealy announced yesterday that the Chinese government has pledged to deploy a million computers in the next year using Sun’s Linux desktop software. The cost is $50 per license, and this includes Sun’s Star Office 7.0 productivity program that is a clone of Microsoft’s Office suite; however, the latter costs about $400 a copy. McNealy stated “this I believe makes us the No. 1 Linux desktop play on the planet.” Next month Sun will begin shipping its Java Desktop System. In my view, the Linux desktop software program has a better future.
Live Canadian cattle are still not permitted to cross into the U.S., but boxed Canadian beef is being shipped to the U.S. and Mexico at a faster pace than this time last year. The Canadian cattle industry is considering building a massive $250 million slaughterhouse in Alberta. This would result in more shipments of beef into the U.S. but fewer shipments of live cattle. Since September, beef shipments to the U.S. and Mexico are up between 7 and 40% per week compared to the same time last year. When the ban of live cattle is considered, however, Canada’s beef export market is only at 60% of last year’s levels. Once the slaughterhouse is completed, Canada would become the world’s number one beef exporting nation.
Hispanics comprise about 14% of the U.S. population, and they are the fastest growing minority. According to the San Jose Group, Hispanics have a combined purchasing power of $562 billion. I would also imagine their voting influence is growing as well.
Two U.S. soldiers were killed and two wounded in attacks north of Baghdad early yesterday in the town of Balad. The deaths brought to 419 American soldiers killed since the U.S. invaded Iraq in March, including 179 killed in guerrilla attacks since May 1 when Bush declared the major combat over. Yesterday, in Iraq, an Italian coalition official resigned . He accused the occupation authorities of incompetence.
The number of home foreclosure actions filed in Santa Clara County was up 5% in the third quarter, compared to the second quarter of 2003, and these figures were compiled by Foreclosures.com. That firm’s president, Alexis Ms. McGee, stated “we thought the worst was over for Santa Clara County as foreclosures fell in the second quarter, but now they’re edging up again. Notices of default, notices of trustees sales, and houses going to auction are up in both Northern and Southern California. We’re seeing a significant increase in the third quarter. During this period of low interest rates, people have been over-leveraging their homes, leaving themselves no wiggle room in case of troubles such as job loss or illness. Also, Fannie Mae and Freddie Mac made a combined effort in recent years to get everyone into a home that wanted one. Now all the easy money is coming back to haunt lenders and homeowners alike.”
Yesterday St.paul and Travelers agreed to merge. It will mean more layoffs in the Baltimore area. Verizon said 21,000 employees accepted an early retirement buyout offer and will leave the company by the end of the week. Toledo Mayor Jack Ford plans to cut about 60 city jobs. He said that administrators would not be exempt from the layoffs. In trying to plug a projected $65 million deficit for next year, Cleveland officials are considering laying off more than 700 uniformed employees in the police, fire, and ambulance ranks. In Columbus Mayor Coleman is asking all city employees to take three days of unpaid leave next year. Governor Bredesen of Tennessee will ask department heads to come forward with two budgets: one promising 5% cuts and one using the same amount of money they now spend. The 5% cut across the board would amount to $259 million. The Governor said no part of state government is off the table when it comes to cuts.
Oil reserves have fallen to record lows in Mexico. For six decades there have been restrictions on foreign investment in Mexico’s oil and gas industry. Pemex, the state-owned oil monopoly, wants to lift those restrictions. Mexico’s present reserves equal 12 years of production. In Venezuela, by comparison, they amount to 70 years. Mexico is the world’s fourth largest oil producing nation, and they are the only oil exporting nation that bars foreign producers from profiting from the sale of their oil and gas. The U.S imports about 2 million barrels a day from Mexico. I am not in favor of investing in oil and gas properties from Mexico nor am I in favor of purchasing oil and gas from Mexico. They expropriated (seized) the properties from U.S. and U.K. oil and gas companies. These properties comprise today’s Pemex. Mexico still has not repaid monies owed going back to 1849. As far as I am concerned, they can choke on their oil and gas. You don’t make the same mistake twice. Standard and Poor’s estimates Pemex’s total liabilities at $40 billion. It’s only a matter of time until their debt is downgraded. When the price of oil drops further, Pemex’s cash flow will be impaired and so will its exploration program. With the country’s fast-growing population, they will eat into their reserves at an alarming rate. Their next revolution shall then be on the horizon. Sometimes it is difficult to comprehend the feelings in another country. Pemex is stolen property and yet the citizens say Pemex is all about sovereignty.
Now I come to another type of acquisition, and that’s the on-going hostile battle by ArvinMeritor for control of Dana Corp. The initial approach took place in June 2002 and yesterday their cash bid was raised from $15 to $18 per share. ArvinMeritor employs 32,000 people in about 150 manufacturing facilities in 27 countries and generates sales of $8 billion. Dana employs 60,000 in 30 countries and has sales of $9.5 billion. Consequently, a great many families depend on these companies for their livelihood. ArvinMeritor identified Dana as a strategic acquisition target. The reason is Dana’s undercarriage expertise. This is an excellent fit. Dana’s position as a driveline supplier will strengthen the combined product offerings on a worldwide basis. Recently, Volvo truck chose to outsource axles to ArvinMeritor, and Hyundai chose the company to supply their autos with doors. Dana has recently signed an axle joint venture in China. In sum, the market for their products is growing on an international basis. The FTC wants to know about the combined position in medium and heavy duty axles and axle components. ArvinMeritor has been having discussions with the FTC on divesting any overlapping operations. It should not be a problem since Dana’s expertise is really in an aligned but not the same area. ArvinMeritor has always maintained they have had access to the funding. In short order, Dana will reply to yesterday’s increased bid. It will be difficult to say the bid is inadequate. Dana was at $6 per share not too long ago. ArvinMeritor stated they would keep their bid open thru December 2. That’s leaves plenty of time for future fireworks. Dana is headquartered in Toledo, Ohio. It’s not Pennsylvania where a company like Hershey can just say no to an $89 bid from Wrigley. The laws are different. Dana needs to be responsible to its shareowners. It will take more than a small increase in the dividend and raising the forecast for 2004. There are many stockholders and many employees waiting for a response from the Dana board. It needs to be fair and objective.
Monday, November 17, 2003
11/17/03 Indian IT Industry
Outsourcing is a hot topic these days. I thought it might be a good idea to focus on the facts. The best way to learn about outsourcing is to start with the National Association of Software and Service Companies (NASSCOM) and its president , Kiran Karnik, who remarked that “we hope to log an export growth between 26-28 per cent over last year.” In 2002-2003 India’s IT exports reached $9.5 billion. As a whole, the industry’s worth was $16.5 billion or 3% of India’s GDP. Their IT industry employs over 700,000 professionals. We must remember that the population in India slightly exceeds 1 billion people. Karnik stated that the industry hopes to generate revenues of about $80 billion by 2008, and related that the expected growth would come more from the increasing business process outsourcing (BPO) sector than the services sector. “Let’s say the breakup would be like BPO 40-45 percent and services 18 percent,” he stated. Karnik mentioned that the U.S. is the Indian IT industry’s biggest export market at 71% followed by the U.K. at 14% and the rest of Europe at 9% in 2002-2003. Karnik said the industry had been “upset” with the decision of the U.S. to lower the ceiling of H1-B visas, but he was certain that this development would not impact the industry over the long term. These visas are valid for three years, and are extendable for another three. From October 1, the U.S. reduced the total number of such visas to 65,000 from 195,000.
Yesterday I failed to mention one facet of the proposed Medicare legislation. In an effort to get the support from senators representing 30 states with Medicare reimbursements below the national average, the legislation would assist rural areas. Final numbers still have to be computed by the CBO; however, it is estimated that $20 to $25 billion would go towards rural healthcare states to offset long-standing complaints that Medicare reimbursements are too low in areas with less expensive costs for doctors and hospitals. Michael Abrams, executive vice president of the Iowa Medical Society, remarked “we would hope that any Iowa legislator who opposes other components of the bill would hold their nose, vote for it, then work to perfect those other components later.”
Dan Gilmartin, deputy director of the Michigan Municipal League, stated “I don’t know of a single city in Michigan that has increased its employment at all in the last several years. I can name a number of cities that are way down in terms of employment, whether by not filling retirements or actually laying off people. We’re facing a severe budget crisis.” Gov. Jennifer Granholm is looking at cutting another $200 million in revenue sharing payments from the state to local units of government. She is also threatening layoffs if unionized employees don’t approve $230 million in wage and benefit concessions. Mary Ettinger, president of UAW Local 600, which represents state employees, remarked “the general public here in Michigan believes that state employees are overpaid and underworked. We don’t have a lot of sympathy from the general public because they don’t see the connection between what we do and their daily lives.”
One of the major problems with computers is the area of security and the ability of hackers to break into code and create nightmares throughout the computing world. The worst nightmare for hackers is coming to your neighborhood. The Navajo is not arriving on a horse. It consists of 19-inch black boxes that generate and read the signals over a fiber-optic line. This is the world of quantum encryption brought to you by a company located in New York City called MagiQ Technologies. The website is www.magiqtech.com. The company was formed in 1999 by Robert Gelfond, a former quant trader at D.E. Shaw &Co. and Millennium Partners. The Shaw firm may sound familiar to you. Jeff Bezos of Amazon worked there as well. Gelfond was an early investor in Amazon, and Bezos was an early investor in MagiQ. Gelfond pegs the market for the initial use of his company’s technology to be about $200 million with the second-phase market potential well over $1 billion. With potential users, such as, government agencies, banks, insurers, health care organizations, and others, I view the market as being significantly larger. Microsoft’s security concerns would dwarf the aforementioned potential markets. Lov Grover, a quantum computing researcher at Bell Laboratories, and not involved with MagiQ, stated “there are really no ways of cracking this code.”
A potential competitor could be id Quantique of Geneva as this company has produced a system with similarities to Navajo, and it is in the pilot stage.
Outsourcing is a hot topic these days. I thought it might be a good idea to focus on the facts. The best way to learn about outsourcing is to start with the National Association of Software and Service Companies (NASSCOM) and its president , Kiran Karnik, who remarked that “we hope to log an export growth between 26-28 per cent over last year.” In 2002-2003 India’s IT exports reached $9.5 billion. As a whole, the industry’s worth was $16.5 billion or 3% of India’s GDP. Their IT industry employs over 700,000 professionals. We must remember that the population in India slightly exceeds 1 billion people. Karnik stated that the industry hopes to generate revenues of about $80 billion by 2008, and related that the expected growth would come more from the increasing business process outsourcing (BPO) sector than the services sector. “Let’s say the breakup would be like BPO 40-45 percent and services 18 percent,” he stated. Karnik mentioned that the U.S. is the Indian IT industry’s biggest export market at 71% followed by the U.K. at 14% and the rest of Europe at 9% in 2002-2003. Karnik said the industry had been “upset” with the decision of the U.S. to lower the ceiling of H1-B visas, but he was certain that this development would not impact the industry over the long term. These visas are valid for three years, and are extendable for another three. From October 1, the U.S. reduced the total number of such visas to 65,000 from 195,000.
Yesterday I failed to mention one facet of the proposed Medicare legislation. In an effort to get the support from senators representing 30 states with Medicare reimbursements below the national average, the legislation would assist rural areas. Final numbers still have to be computed by the CBO; however, it is estimated that $20 to $25 billion would go towards rural healthcare states to offset long-standing complaints that Medicare reimbursements are too low in areas with less expensive costs for doctors and hospitals. Michael Abrams, executive vice president of the Iowa Medical Society, remarked “we would hope that any Iowa legislator who opposes other components of the bill would hold their nose, vote for it, then work to perfect those other components later.”
Dan Gilmartin, deputy director of the Michigan Municipal League, stated “I don’t know of a single city in Michigan that has increased its employment at all in the last several years. I can name a number of cities that are way down in terms of employment, whether by not filling retirements or actually laying off people. We’re facing a severe budget crisis.” Gov. Jennifer Granholm is looking at cutting another $200 million in revenue sharing payments from the state to local units of government. She is also threatening layoffs if unionized employees don’t approve $230 million in wage and benefit concessions. Mary Ettinger, president of UAW Local 600, which represents state employees, remarked “the general public here in Michigan believes that state employees are overpaid and underworked. We don’t have a lot of sympathy from the general public because they don’t see the connection between what we do and their daily lives.”
One of the major problems with computers is the area of security and the ability of hackers to break into code and create nightmares throughout the computing world. The worst nightmare for hackers is coming to your neighborhood. The Navajo is not arriving on a horse. It consists of 19-inch black boxes that generate and read the signals over a fiber-optic line. This is the world of quantum encryption brought to you by a company located in New York City called MagiQ Technologies. The website is www.magiqtech.com. The company was formed in 1999 by Robert Gelfond, a former quant trader at D.E. Shaw &Co. and Millennium Partners. The Shaw firm may sound familiar to you. Jeff Bezos of Amazon worked there as well. Gelfond was an early investor in Amazon, and Bezos was an early investor in MagiQ. Gelfond pegs the market for the initial use of his company’s technology to be about $200 million with the second-phase market potential well over $1 billion. With potential users, such as, government agencies, banks, insurers, health care organizations, and others, I view the market as being significantly larger. Microsoft’s security concerns would dwarf the aforementioned potential markets. Lov Grover, a quantum computing researcher at Bell Laboratories, and not involved with MagiQ, stated “there are really no ways of cracking this code.”
A potential competitor could be id Quantique of Geneva as this company has produced a system with similarities to Navajo, and it is in the pilot stage.
Sunday, November 16, 2003
11/16/03 State Budget Bags
Arnold gets sworn in as governor tomorrow. He must be a glutton for punishment. Incoming finance director Donna Arduin said yesterday that, if lawmakers make no changes, California faces a $28.9 billion deficit by July 2005. She said the state, which is counting on borrowing $12.5 billion, probably would not be legally permitted to go ahead with this borrowing. By returning vehicle license fees to pre-Oct 1 rates, the state will need to reimburse cities and counties $7.6 billion over 18 months for lost revenue. There will be at least a $13.2 billion shortfall in the 12 months ending July 2005. Within three years, the fundamental budget gap will grow to about $15 billion per year, according to current forecasts. A significant part of the budget problem revolves around education. Fifty cents of every new dollar must be set aside for public schools from kindergarten through community colleges. Proposition 98 has mandated minimum funding guarantee for schools. As such, the state will owe K-12 schools and community colleges about $1 billion more than the $45 billion they received in the 2003-2004 budget.
We shall take a tour of some of the other states. More than 25,000 Colorado residents filed for bankruptcy in the past year, a 24.3% increase from a year earlier and the highest rate in the country, according to federal figures released on Friday. Since December 2000, Colorado has lost 90,000 jobs. Including 6,000 in September. Last week, economists said it appears Colorado will have two straight years of job losses, something that hasn’t happened since the Depression. For the three months that ended Sept. 30, Colorado had 177 business and 6,655 personal bankruptcy filings.
In Arizona revenues for fiscal 2005 will be about $961 million less than anticipated spending. The president of Northern Arizona University announced on Friday that he will raise fees and tuition and cut 70 faculty or staff positions, 10% of those employed. His goal is to save $15 million over the next three years. Alaska is facing a budget deficit of hundreds of millions of dollars. Indiana is facing a deficit of at least $810 million. Michigan has a $920 million shortfall. A recent poll of Kansas citizens indicated that the primary concern is their economy and creating jobs. The largest percentage said the best way to improve the Kansas economy is to slow government spending, and that budget cuts should occur before any discussion of tax increases.
One of the concerns expressed by folks in Kansas was “lowering healthcare costs.” Let’s take a short look at some of the proposals in the “bipartisan” Medicare legislation being discussed by House and Senate Republican leaders. Democrats only need 41 votes to block the measure using procedural tactics, and last week 44 senators, and that included 7 Republicans, signed a letter saying they oppose it. Beginning in 2006, it would provide seniors with a prescription drug benefit, and this is projected to cost $400 billion over 10 years. In the meantime, seniors would receive discount cards that are estimated by Bush to reduce drug costs an average of 15%. Private insurance companies would play a significant Medicare role in delivering prescription drugs and offering managed-care plans or new PPOs. A health-related tax break would be created for individuals with high-deductible insurance policies. A ban on importing cheaper prescription drugs from abroad would be maintained. In order to reduce the number of retirees who would lose their private coverage, the bill would provide $70 billion in tax-free subsidies to their former employees. In 2006, Medicare would offer drug coverage for about $35 a month. Seniors would have to meet a $275 deductible, then have 75% of drug costs between $276 and $2,200 subsidized by the government. Beneficiaries would pay all their prescription drug expenses beyond that, until they had spent $3,600 out of pocket. At that point, the government would step in again and cover 95% of costs. Low-income seniors, those earning up to $12,123 a year, would receive an additional subsidy. Prior to 2006, Bush stated “the discount drug card would include a $600 annual credit toward drug costs.” In addition, the bill creates a temporary program that tests competition in six metropolitan areas for up to six years, starting in 2010. The plan would have Medicare bidding against private health insurers to cover seniors only in areas where private plans played a substantial role in covering Medicare beneficiaries.
I would like to return to yesterday’s discussion of overtime. I need to provide some additional facts. An unpublished Bureau of Labor Statistics study indicates that those in administrative, managerial, and executive occupations spent an average of 45 hours at work each week in 2002. With the current trend of increased productivity in 2003, it is fair to say that the number of hours at work each week has risen this year. The issue of overtime pay rests with the growing number of salaried workers. The study indicates about 50 million U.S. employees are not eligible for overtime; about 71 million are eligible. We must remember that hourly workers, under the 65-year-old Fair Labor Standards Act, be paid time-and-a-half for overtime. Randy IIG, an economist with the Bureau of Labor Statistics, states the government’s published data may be misleading because they “only measure hours on the job.” The data do not include night and weekend hours spent handling work-related emails, phone calls, and paperwork from home. He remarked “the number of professionals and managers is growing. The percentage of people working off the clock is growing.”
Yesterday’s two Black Hawk helicopters collided near Mosul killing 17 troops. It was the deadliest single incident involving U.S. forces since the March 20 invasion of Iraq. The total killed in combat since May 1, when Bush declared that major combat had ended, has now reached 177. The same Administration that has told you the major combat in Iraq has ended is the same Administration that has told you how the economy has turned and that we can expect better times in 2004, an election year. I suggest you take a look around. Our troops have nowhere to hide in Iraq. They are getting killed daily. Where are you going to hide? – in your home equity line of credit or your car loan or your credit card balance or possibly your overdraft privilege on your checking account or your margin account at the brokerage house. I am not hitting below the belt. It’s not for me to tell you how to live. It’s your life and your money and your financial well being. If you want to live on the edge, it’s your edge. The government has no safety net below for you. The government is busted. Maybe you overlooked the $500 billion trade deficit and the $500 billion budget deficit that has been forecast for this year. If you see an old man on the street with a tin cup, look kindly on him. He represents all Americans. His name is Uncle Sam.
Arnold gets sworn in as governor tomorrow. He must be a glutton for punishment. Incoming finance director Donna Arduin said yesterday that, if lawmakers make no changes, California faces a $28.9 billion deficit by July 2005. She said the state, which is counting on borrowing $12.5 billion, probably would not be legally permitted to go ahead with this borrowing. By returning vehicle license fees to pre-Oct 1 rates, the state will need to reimburse cities and counties $7.6 billion over 18 months for lost revenue. There will be at least a $13.2 billion shortfall in the 12 months ending July 2005. Within three years, the fundamental budget gap will grow to about $15 billion per year, according to current forecasts. A significant part of the budget problem revolves around education. Fifty cents of every new dollar must be set aside for public schools from kindergarten through community colleges. Proposition 98 has mandated minimum funding guarantee for schools. As such, the state will owe K-12 schools and community colleges about $1 billion more than the $45 billion they received in the 2003-2004 budget.
We shall take a tour of some of the other states. More than 25,000 Colorado residents filed for bankruptcy in the past year, a 24.3% increase from a year earlier and the highest rate in the country, according to federal figures released on Friday. Since December 2000, Colorado has lost 90,000 jobs. Including 6,000 in September. Last week, economists said it appears Colorado will have two straight years of job losses, something that hasn’t happened since the Depression. For the three months that ended Sept. 30, Colorado had 177 business and 6,655 personal bankruptcy filings.
In Arizona revenues for fiscal 2005 will be about $961 million less than anticipated spending. The president of Northern Arizona University announced on Friday that he will raise fees and tuition and cut 70 faculty or staff positions, 10% of those employed. His goal is to save $15 million over the next three years. Alaska is facing a budget deficit of hundreds of millions of dollars. Indiana is facing a deficit of at least $810 million. Michigan has a $920 million shortfall. A recent poll of Kansas citizens indicated that the primary concern is their economy and creating jobs. The largest percentage said the best way to improve the Kansas economy is to slow government spending, and that budget cuts should occur before any discussion of tax increases.
One of the concerns expressed by folks in Kansas was “lowering healthcare costs.” Let’s take a short look at some of the proposals in the “bipartisan” Medicare legislation being discussed by House and Senate Republican leaders. Democrats only need 41 votes to block the measure using procedural tactics, and last week 44 senators, and that included 7 Republicans, signed a letter saying they oppose it. Beginning in 2006, it would provide seniors with a prescription drug benefit, and this is projected to cost $400 billion over 10 years. In the meantime, seniors would receive discount cards that are estimated by Bush to reduce drug costs an average of 15%. Private insurance companies would play a significant Medicare role in delivering prescription drugs and offering managed-care plans or new PPOs. A health-related tax break would be created for individuals with high-deductible insurance policies. A ban on importing cheaper prescription drugs from abroad would be maintained. In order to reduce the number of retirees who would lose their private coverage, the bill would provide $70 billion in tax-free subsidies to their former employees. In 2006, Medicare would offer drug coverage for about $35 a month. Seniors would have to meet a $275 deductible, then have 75% of drug costs between $276 and $2,200 subsidized by the government. Beneficiaries would pay all their prescription drug expenses beyond that, until they had spent $3,600 out of pocket. At that point, the government would step in again and cover 95% of costs. Low-income seniors, those earning up to $12,123 a year, would receive an additional subsidy. Prior to 2006, Bush stated “the discount drug card would include a $600 annual credit toward drug costs.” In addition, the bill creates a temporary program that tests competition in six metropolitan areas for up to six years, starting in 2010. The plan would have Medicare bidding against private health insurers to cover seniors only in areas where private plans played a substantial role in covering Medicare beneficiaries.
I would like to return to yesterday’s discussion of overtime. I need to provide some additional facts. An unpublished Bureau of Labor Statistics study indicates that those in administrative, managerial, and executive occupations spent an average of 45 hours at work each week in 2002. With the current trend of increased productivity in 2003, it is fair to say that the number of hours at work each week has risen this year. The issue of overtime pay rests with the growing number of salaried workers. The study indicates about 50 million U.S. employees are not eligible for overtime; about 71 million are eligible. We must remember that hourly workers, under the 65-year-old Fair Labor Standards Act, be paid time-and-a-half for overtime. Randy IIG, an economist with the Bureau of Labor Statistics, states the government’s published data may be misleading because they “only measure hours on the job.” The data do not include night and weekend hours spent handling work-related emails, phone calls, and paperwork from home. He remarked “the number of professionals and managers is growing. The percentage of people working off the clock is growing.”
Yesterday’s two Black Hawk helicopters collided near Mosul killing 17 troops. It was the deadliest single incident involving U.S. forces since the March 20 invasion of Iraq. The total killed in combat since May 1, when Bush declared that major combat had ended, has now reached 177. The same Administration that has told you the major combat in Iraq has ended is the same Administration that has told you how the economy has turned and that we can expect better times in 2004, an election year. I suggest you take a look around. Our troops have nowhere to hide in Iraq. They are getting killed daily. Where are you going to hide? – in your home equity line of credit or your car loan or your credit card balance or possibly your overdraft privilege on your checking account or your margin account at the brokerage house. I am not hitting below the belt. It’s not for me to tell you how to live. It’s your life and your money and your financial well being. If you want to live on the edge, it’s your edge. The government has no safety net below for you. The government is busted. Maybe you overlooked the $500 billion trade deficit and the $500 billion budget deficit that has been forecast for this year. If you see an old man on the street with a tin cup, look kindly on him. He represents all Americans. His name is Uncle Sam.
Saturday, November 15, 2003
11/15/03 An Irresponsible Government Hand Job
It’s early Saturday morning. This is not the way to begin a day, but to turn away, would go against so many of my beliefs in right and wrong. The Republican-proposed energy bill is 1700 pages long. Senate Democrats won’t get a chance to see the full bill until today. Senate Energy Committee Chairman Pete Domenici, R-NM, remarked “we know that as soon as you start reading the language, we’re duck soup.” Billy Tauzin, R-La, is the House Energy and Commerce Committee Chairman, and stated “in short, this bill will put a stop to the job losses that make it difficult for this economy to continue to recover.” The Republicans are selling this as a job creation piece of legislation. That’s right. As Tauzin stated, “this is, in essence, a jobs bill.” He pulled out of his crawfish behind the notion that 1 million jobs would be created by this 1700-page fiasco. John McCain will vote against the bill. He claims “it leaves no lobbyist behind.”
The bill will protect producers of MTBE from lawsuits claiming the gasoline additive is defective. It has been blamed for polluting municipal water supplies from coast to coast. California, New York, and Connecticut have moved to ban the use of MTBE in their states by year end. The bill would phase out the use of this additive by 2015. The bill contains more than $20 billion worth of tax incentives. The Senate allowed for only $16 billion worth of energy tax cuts in its annual budget while Bush only wanted $8 billion. With subsidies, loan guarantees, and direct spending, the cost of this legislation exceeds $100 billion, and McCain described the bill as “an Iranian bazaar, not an energy bill.” The politicians who vote for this bill, as it is presently written, should not be re-elected. They should be out of a job instead of giving the American people a hand job.
According to the Census Bureau figures, budget deficits have not kept state and local governments from increasing their payrolls. There were more than 15.6 million full-time state and local employees in March 2002, more than 200,000 higher than the previous March. Total payroll in March 2002 was over $52.3 billion, up roughly 6%. In recent years, many states and municipalities have coped with tight budgets by slashing services and/or raising taxes. That’s the new American way—slash and raise while you increase the hiring of your own and give yourselves raises! How the voters who are taxpayers stand for this I will never ever understand.
Arnold assumes the governship. The news awaiting him is not rosy. Santa Clara County, the heart of the Silicon Valley, saw its unemployment rate increase to 7.6% in October. The unemployment rate for the entire state this past month was 6.6%. In October, there were an estimated 69,300 adults out of work and actively looking for a job in Santa Clara County and in Los Angeles County last month there were 327,000 jobless. The number of unemployed in the entire state of California amounts to 1,161,000, according to the latest EDD figures.
According to new Pentagon data, the number of U.S. casualties from Operation Iraqi Freedom (what a crock!)—troops killed, wounded, or evacuated due to injury or illness—has passed 9,200. A total of 400 service members have died since the war began on March 20. Steve Robinson, executive director of the National Gulf War Resource Center, stated “we are shocked at the dramatic increase in casualties.” The numbers do not include service members treated in theater or those whose illnesses, such as Post-Traumatic Stress Disorder, were not apparent until after they returned to the United States.
I have written several times on the battle within Congress and with Bush on the matter of overtime pay. As I have mentioned, earlier this fall, both the House and the Senate voted for the provision to block the proposed overtime rules from enactment. In July, the OMB’s Statement of Administration Policy indicated the threat to veto any legislation that blocks implementation of its overtime overhaul. Unfortunately, it appears that the House and the Senate will cave in to the Bush threatened veto. They are likely to eliminate a provision protecting overtime from proposed Labor Department changes. This would deny overtime pay to millions of workers. It would be a very sad day for the American worker to be stripped of hard-earned overtime pay. Any politician who votes against overtime pay should not be re-elected.
The recent record-setting pace of personal bankruptcies continued in the 12 months ending September 30. They jumped 7.8% to 1,625,813 from the year earlier period. Samuel Gerdano, executive director of the American Bankruptcy Institute, stated the bankruptcy filings “are being overwhelmingly driven by individuals with household debt. They do reflect the buildup of heavy consumer debt.” The tight job market and the high number of unemployed workers probably were additional contributors. While bankruptcies were setting records, so were home prices in the third quarter. Home prices in a third of the nation’s cities and towns jumped at least 10% during those three months. According to the National Association of Realtors, prices rose at least 10% from a year earlier in 41 of the 124 areas tracked, the highest number of markets showing double-digit increases since the group began tracking home prices per area in 1982.
Thanksgiving will not be a happy time for some in Baltimore, a city described as having a financially strapped school system. The CEO of the Baltimore school district stated between 800 and 1,000 school employees will lose their jobs by Thanksgiving. John Musso, CFO for Washington DC public schools, said officials are considering cutting hundreds of jobs in their troubled system.
Yesterday I saw something for the first time. Zhone Technologies of Oakland had hoped to go public for several years. The downturn in the telecom industry had prevented it from happening. The company took an interesting route and merged with a public company, Oceanport, New Jersey Trillium Inc. Upon completion of the merger, Zhone announced the firing of 125 people at Tellium. In San Jose, the news was not quite as bad as only 100 jobs were cut at Adobe Systems. This represents about 3% of their workforce.
Martin Hutchinson, UPI Business and Economics Editor, noted that yesterday John Chambers, Cisco’s CEO, cashed in $38 million worth of stock options, leaving him at yesterday’s closing price options worth $363 million, and that all of these options were received since 2001. It’s fair to say that the majority of Cisco shareholders have not profited from their share ownership since 2001. Hutchinson points out that, in total, Cisco's stock option plan has issued 321 million shares with a total value of $7 billion.
According to a recent analysis by the Tufts Center for the Study of Drug Development, the FDA’s fast program to speed new drugs to market has shaved the time required to develop a new drug and win approval for release. Their study found that clinical development time for fast track drugs approved between 1998 and 2003 was, on average, 2 to 2.5 years shorter than for non-fast track drugs.
Yesterday, In New Delhi, South Asia’s biggest annual trade fair opened with President A.P.J. Abdul Kalam saying India can double its economic growth to 10% “with the right type of management system.” He inaugurated the 23rd India International Trade Fair. Despite a steady rise in the rupee, Indian exports rose over 18% last year, and this year they are close to double-digit growth. Kalam noted “the aspirations of both developed and developing nations are the same. While the developed nations, which are just eight in number, strive to retain their place, the developing nations aspire to achieve the status of developed nations. Competitiveness connects the two.” He maintains the winner, according to the law of development, is the smarter of the two “based on the quality, cost competitiveness and just in time delivery.” According to data from the Indian Venture Capital Capital Association, India received $550 million in venture funding in 78 firms in 2002. This year, through September, similar funding has topped $500 million and is expected to reach about $700 million by the end of the year. I believe India shall prove to be an increasingly important country for successful venture capital funding.
Yesterday I touched on the art of thinking for oneself. I mentioned how one could arrive at the conclusion that U.S. retail sales for October would decline, and this after the surge in consumer spending in July and August. In fact, the Commerce Department revised the number for September downward to a larger decrease of 0.4%, and announced a decline of 0.3% for October. The latter was larger than economists had been predicting, but they were at a disadvantage. They were paying attention to the proclamations from their associates. We had a distinct advantage. We ignored what they said, and did our own thinking.
Jack Tierney: “This bull market has been created for the debtor class. Those who have saved and as Clinton would say “played by the rules” are getting screwed. The Greenspan/Bernanke axis has given us three choices: keep your cash in the money market and lose through inflation, spend it now before the greater inflation we’re planning eats it away faster, or invest it in bonds or equities…hundreds of thousands of Americans (perhaps millions) with several hundred thousand dollars put away, and upon which the interest would supplement their pensions and other savings, find themselves strapped. They have no choice but to put their savings at risk. And voila, a bull market is created. But if the hoped for returns don’t materialize or are less than needed, no problem. Take out a mortgage on that home you own free-and-clear… and refinance at will.”
It’s early Saturday morning. This is not the way to begin a day, but to turn away, would go against so many of my beliefs in right and wrong. The Republican-proposed energy bill is 1700 pages long. Senate Democrats won’t get a chance to see the full bill until today. Senate Energy Committee Chairman Pete Domenici, R-NM, remarked “we know that as soon as you start reading the language, we’re duck soup.” Billy Tauzin, R-La, is the House Energy and Commerce Committee Chairman, and stated “in short, this bill will put a stop to the job losses that make it difficult for this economy to continue to recover.” The Republicans are selling this as a job creation piece of legislation. That’s right. As Tauzin stated, “this is, in essence, a jobs bill.” He pulled out of his crawfish behind the notion that 1 million jobs would be created by this 1700-page fiasco. John McCain will vote against the bill. He claims “it leaves no lobbyist behind.”
The bill will protect producers of MTBE from lawsuits claiming the gasoline additive is defective. It has been blamed for polluting municipal water supplies from coast to coast. California, New York, and Connecticut have moved to ban the use of MTBE in their states by year end. The bill would phase out the use of this additive by 2015. The bill contains more than $20 billion worth of tax incentives. The Senate allowed for only $16 billion worth of energy tax cuts in its annual budget while Bush only wanted $8 billion. With subsidies, loan guarantees, and direct spending, the cost of this legislation exceeds $100 billion, and McCain described the bill as “an Iranian bazaar, not an energy bill.” The politicians who vote for this bill, as it is presently written, should not be re-elected. They should be out of a job instead of giving the American people a hand job.
According to the Census Bureau figures, budget deficits have not kept state and local governments from increasing their payrolls. There were more than 15.6 million full-time state and local employees in March 2002, more than 200,000 higher than the previous March. Total payroll in March 2002 was over $52.3 billion, up roughly 6%. In recent years, many states and municipalities have coped with tight budgets by slashing services and/or raising taxes. That’s the new American way—slash and raise while you increase the hiring of your own and give yourselves raises! How the voters who are taxpayers stand for this I will never ever understand.
Arnold assumes the governship. The news awaiting him is not rosy. Santa Clara County, the heart of the Silicon Valley, saw its unemployment rate increase to 7.6% in October. The unemployment rate for the entire state this past month was 6.6%. In October, there were an estimated 69,300 adults out of work and actively looking for a job in Santa Clara County and in Los Angeles County last month there were 327,000 jobless. The number of unemployed in the entire state of California amounts to 1,161,000, according to the latest EDD figures.
According to new Pentagon data, the number of U.S. casualties from Operation Iraqi Freedom (what a crock!)—troops killed, wounded, or evacuated due to injury or illness—has passed 9,200. A total of 400 service members have died since the war began on March 20. Steve Robinson, executive director of the National Gulf War Resource Center, stated “we are shocked at the dramatic increase in casualties.” The numbers do not include service members treated in theater or those whose illnesses, such as Post-Traumatic Stress Disorder, were not apparent until after they returned to the United States.
I have written several times on the battle within Congress and with Bush on the matter of overtime pay. As I have mentioned, earlier this fall, both the House and the Senate voted for the provision to block the proposed overtime rules from enactment. In July, the OMB’s Statement of Administration Policy indicated the threat to veto any legislation that blocks implementation of its overtime overhaul. Unfortunately, it appears that the House and the Senate will cave in to the Bush threatened veto. They are likely to eliminate a provision protecting overtime from proposed Labor Department changes. This would deny overtime pay to millions of workers. It would be a very sad day for the American worker to be stripped of hard-earned overtime pay. Any politician who votes against overtime pay should not be re-elected.
The recent record-setting pace of personal bankruptcies continued in the 12 months ending September 30. They jumped 7.8% to 1,625,813 from the year earlier period. Samuel Gerdano, executive director of the American Bankruptcy Institute, stated the bankruptcy filings “are being overwhelmingly driven by individuals with household debt. They do reflect the buildup of heavy consumer debt.” The tight job market and the high number of unemployed workers probably were additional contributors. While bankruptcies were setting records, so were home prices in the third quarter. Home prices in a third of the nation’s cities and towns jumped at least 10% during those three months. According to the National Association of Realtors, prices rose at least 10% from a year earlier in 41 of the 124 areas tracked, the highest number of markets showing double-digit increases since the group began tracking home prices per area in 1982.
Thanksgiving will not be a happy time for some in Baltimore, a city described as having a financially strapped school system. The CEO of the Baltimore school district stated between 800 and 1,000 school employees will lose their jobs by Thanksgiving. John Musso, CFO for Washington DC public schools, said officials are considering cutting hundreds of jobs in their troubled system.
Yesterday I saw something for the first time. Zhone Technologies of Oakland had hoped to go public for several years. The downturn in the telecom industry had prevented it from happening. The company took an interesting route and merged with a public company, Oceanport, New Jersey Trillium Inc. Upon completion of the merger, Zhone announced the firing of 125 people at Tellium. In San Jose, the news was not quite as bad as only 100 jobs were cut at Adobe Systems. This represents about 3% of their workforce.
Martin Hutchinson, UPI Business and Economics Editor, noted that yesterday John Chambers, Cisco’s CEO, cashed in $38 million worth of stock options, leaving him at yesterday’s closing price options worth $363 million, and that all of these options were received since 2001. It’s fair to say that the majority of Cisco shareholders have not profited from their share ownership since 2001. Hutchinson points out that, in total, Cisco's stock option plan has issued 321 million shares with a total value of $7 billion.
According to a recent analysis by the Tufts Center for the Study of Drug Development, the FDA’s fast program to speed new drugs to market has shaved the time required to develop a new drug and win approval for release. Their study found that clinical development time for fast track drugs approved between 1998 and 2003 was, on average, 2 to 2.5 years shorter than for non-fast track drugs.
Yesterday, In New Delhi, South Asia’s biggest annual trade fair opened with President A.P.J. Abdul Kalam saying India can double its economic growth to 10% “with the right type of management system.” He inaugurated the 23rd India International Trade Fair. Despite a steady rise in the rupee, Indian exports rose over 18% last year, and this year they are close to double-digit growth. Kalam noted “the aspirations of both developed and developing nations are the same. While the developed nations, which are just eight in number, strive to retain their place, the developing nations aspire to achieve the status of developed nations. Competitiveness connects the two.” He maintains the winner, according to the law of development, is the smarter of the two “based on the quality, cost competitiveness and just in time delivery.” According to data from the Indian Venture Capital Capital Association, India received $550 million in venture funding in 78 firms in 2002. This year, through September, similar funding has topped $500 million and is expected to reach about $700 million by the end of the year. I believe India shall prove to be an increasingly important country for successful venture capital funding.
Yesterday I touched on the art of thinking for oneself. I mentioned how one could arrive at the conclusion that U.S. retail sales for October would decline, and this after the surge in consumer spending in July and August. In fact, the Commerce Department revised the number for September downward to a larger decrease of 0.4%, and announced a decline of 0.3% for October. The latter was larger than economists had been predicting, but they were at a disadvantage. They were paying attention to the proclamations from their associates. We had a distinct advantage. We ignored what they said, and did our own thinking.
Jack Tierney: “This bull market has been created for the debtor class. Those who have saved and as Clinton would say “played by the rules” are getting screwed. The Greenspan/Bernanke axis has given us three choices: keep your cash in the money market and lose through inflation, spend it now before the greater inflation we’re planning eats it away faster, or invest it in bonds or equities…hundreds of thousands of Americans (perhaps millions) with several hundred thousand dollars put away, and upon which the interest would supplement their pensions and other savings, find themselves strapped. They have no choice but to put their savings at risk. And voila, a bull market is created. But if the hoped for returns don’t materialize or are less than needed, no problem. Take out a mortgage on that home you own free-and-clear… and refinance at will.”
Friday, November 14, 2003
11/14/04 Joining Minds
I am going to show you how simple it is to arrive at a rational conclusion. We will do this together. We know that the consumer, that’s you and me, account for 70% of our GDP. How do we anticipate what other consumer habits might be and how they are spending or not spending their money? The first thing we do is watch what companies who provide products to the consumer are doing. Today recent retail sales will be released. We know they will be down. How do we know? NOT from reading what Wall Street analysts write. The auto companies have said their sales for October were disappointing. As such, they just raised the incentives on their products. In other words, they are choking on inventories and will lower prices. Who knows the consumer the best? WalMart does. They said consumer demand dropped off dramatically in October when some unseasonably warm weather cut into the demand for fall clothing. As such, the company took write downs on overstocked clothing items in October. That is information the company released. It is available to everyone. It is important to filter out bogus information from companies. Carol Sanger is a spokesperson for Federated Department Stores (Macy’s etc). She stated “I think there’s a feeling of hopeful optimism that the fourth quarter may be better than anticipated based on trends we have seen in the third quarter.” The most encouraging sign, she says, has been a pickup in men’s and women’s apparel, the area where WalMart is taking price reductions. There is another way to check on Ms. Sanger. Yesterday, Levi Strauss cut its financial outlook for the year, citing tighter retail inventories and a worldwide trend toward lower prices for jeans and casual pants. Previously, the company had forecast flat sales, and, in the face of stagnant sales, said full-year net sales were expected to be down 6 to 7%. That is a big negative change. Maybe Ms. Sanger is mistakenly optimistic for the fourth quarter, but WalMart and Target are not, and their record for sales and profits make Federated look like a third rate outfit, which I believe they are. WalMart and Target are cautious for the holiday season, and both state that it will be fiercely competitive for the consumer dollar with heavy price-cutting in video games, digital cameras, and high-tech TVs. WalMart will carry digital TV sets in 1500 stores this holiday season. They will go head-to-head with Best Buy, and the latter has increased its big-ticket TV sales to nearly 30% of its total sales from about 20% a year ago. Consequently, if you were a Best Buy shareowner, you might be worried about reduced margins on plasma, flat-panel, and high-definition TVs.
Watch what the winners are doing. When the government mailed out the child credit checks in July, WalMart made it known to the consumer that the company would cash those checks, and made it easy to spend the money in their stores. This holiday season WalMart is pushing their credit cards. Target has been very successful with their credit card program, and in the latest quarter the credit card dividion contributed $162 million to their pre-tax profits up from the year earlier $138 million. With the new WalMart credit card, there will be no payments for 90 days. You can buy for the holidays and pay later. That is an incentive plus their low every day prices. If merchandise is not moving, WalMart will take the necessary price reductions to clear out stock. They do not wait to have sales after Christmas. They will be having sales each day leading up to Christmas. They will pressure margins at other retailers. The story for this holiday season will be somewhat better sales this year but lower margins.
The number one concern on the consumer’s mind is the employment picture. The Labor Department stated yesterday that first-time claims for unemployment benefits rose 13,000 to 366,000 in the week ended Nov. 8 from a revised 353,000 in the prior week. The latest report showed a rise in the total number of unemployed workers who continued to draw benefits after filing an initial claim. That figure rose by 49,000 to 3.53 million in the week ended Nov.1, the latest week for which figures are available. WalMart’s CEO observed “we’re still seeing a cautious customer who is buying at opening price points and timing their expenditures around the receipt of their paycheck.” Simply put, less paychecks mean less buying, and those buying are purchasing, said their CEO, the lowest-priced items, a sign that household budgets remain strapped.
Consumers are not alone with budget concerns. Georgia’s Department of Community Health, which provides health benefits to state employees, states the benefits program is in financial trouble and will fall short on its budget by $110 million next year. In fact, they are expecting shortfalls in 2004 and 2005. Costs for the program are expected to increase by 12% in 2005, which would leave an estimated $325 million deficit for that year.
Research from ACNielsen shows that private-label brands ranging from soft drinks to paper products grew twice as fast in dollar sales as branded products from 1997 to 2002. The slow economy has prompted more people to purchase private-label products, such as, Sam’s Choice, WalMart’s own brand of soft drinks made by Cott Corp. At an average WalMart store, a 2-liter bottle of Sam’s Choice soda was selling for less than half the price charged for Coke and Pepsi products. The editor and publisher of Beverage Digest remarked that “in supermarkets, the overall carbonated soft drink industry is down, and private label is up strongly. It’s taking share from some brands.” Cott is the biggest maker of private-label soft drinks and the fourth –largest manufacturer overall in the U.S. market. So far this year, Cott stock has risen 50%, and yesterday made a new 52-week high.
The world communicates through Tellabs equipment more than two-thirds of telephone calls and Internet sessions in several countries, including the United States. Tellabs provides data switching and bandwidth management solutions to communication carriers. Elcoteq Network Corporation is the largest European electronics manufacturing services company, and they focus primarily on communications technology products. Tellabs today announced plans to outsource manufacturing of its international products to Elcoteq. Approximately 300 employees will be affected by the outsourcing and the R&D alignment.
According to a report in Indian daily, WalMart has formally shown interest in sourcing goods worth $7-10 billion from India in the next two years. The company has asked for a list of 20 Indian suppliers to source every category of products in which it is present. It has been suggested that textile quotas will be eliminated beginning on Jan. 1, 2005.This would mea that a U.S. retailer would step up sourcing from India. This is just one more reason why I am very enthusiastic about the long-term prospects for India. I view India as a much more favorable trading partner than I do China.
I am going to show you how simple it is to arrive at a rational conclusion. We will do this together. We know that the consumer, that’s you and me, account for 70% of our GDP. How do we anticipate what other consumer habits might be and how they are spending or not spending their money? The first thing we do is watch what companies who provide products to the consumer are doing. Today recent retail sales will be released. We know they will be down. How do we know? NOT from reading what Wall Street analysts write. The auto companies have said their sales for October were disappointing. As such, they just raised the incentives on their products. In other words, they are choking on inventories and will lower prices. Who knows the consumer the best? WalMart does. They said consumer demand dropped off dramatically in October when some unseasonably warm weather cut into the demand for fall clothing. As such, the company took write downs on overstocked clothing items in October. That is information the company released. It is available to everyone. It is important to filter out bogus information from companies. Carol Sanger is a spokesperson for Federated Department Stores (Macy’s etc). She stated “I think there’s a feeling of hopeful optimism that the fourth quarter may be better than anticipated based on trends we have seen in the third quarter.” The most encouraging sign, she says, has been a pickup in men’s and women’s apparel, the area where WalMart is taking price reductions. There is another way to check on Ms. Sanger. Yesterday, Levi Strauss cut its financial outlook for the year, citing tighter retail inventories and a worldwide trend toward lower prices for jeans and casual pants. Previously, the company had forecast flat sales, and, in the face of stagnant sales, said full-year net sales were expected to be down 6 to 7%. That is a big negative change. Maybe Ms. Sanger is mistakenly optimistic for the fourth quarter, but WalMart and Target are not, and their record for sales and profits make Federated look like a third rate outfit, which I believe they are. WalMart and Target are cautious for the holiday season, and both state that it will be fiercely competitive for the consumer dollar with heavy price-cutting in video games, digital cameras, and high-tech TVs. WalMart will carry digital TV sets in 1500 stores this holiday season. They will go head-to-head with Best Buy, and the latter has increased its big-ticket TV sales to nearly 30% of its total sales from about 20% a year ago. Consequently, if you were a Best Buy shareowner, you might be worried about reduced margins on plasma, flat-panel, and high-definition TVs.
Watch what the winners are doing. When the government mailed out the child credit checks in July, WalMart made it known to the consumer that the company would cash those checks, and made it easy to spend the money in their stores. This holiday season WalMart is pushing their credit cards. Target has been very successful with their credit card program, and in the latest quarter the credit card dividion contributed $162 million to their pre-tax profits up from the year earlier $138 million. With the new WalMart credit card, there will be no payments for 90 days. You can buy for the holidays and pay later. That is an incentive plus their low every day prices. If merchandise is not moving, WalMart will take the necessary price reductions to clear out stock. They do not wait to have sales after Christmas. They will be having sales each day leading up to Christmas. They will pressure margins at other retailers. The story for this holiday season will be somewhat better sales this year but lower margins.
The number one concern on the consumer’s mind is the employment picture. The Labor Department stated yesterday that first-time claims for unemployment benefits rose 13,000 to 366,000 in the week ended Nov. 8 from a revised 353,000 in the prior week. The latest report showed a rise in the total number of unemployed workers who continued to draw benefits after filing an initial claim. That figure rose by 49,000 to 3.53 million in the week ended Nov.1, the latest week for which figures are available. WalMart’s CEO observed “we’re still seeing a cautious customer who is buying at opening price points and timing their expenditures around the receipt of their paycheck.” Simply put, less paychecks mean less buying, and those buying are purchasing, said their CEO, the lowest-priced items, a sign that household budgets remain strapped.
Consumers are not alone with budget concerns. Georgia’s Department of Community Health, which provides health benefits to state employees, states the benefits program is in financial trouble and will fall short on its budget by $110 million next year. In fact, they are expecting shortfalls in 2004 and 2005. Costs for the program are expected to increase by 12% in 2005, which would leave an estimated $325 million deficit for that year.
Research from ACNielsen shows that private-label brands ranging from soft drinks to paper products grew twice as fast in dollar sales as branded products from 1997 to 2002. The slow economy has prompted more people to purchase private-label products, such as, Sam’s Choice, WalMart’s own brand of soft drinks made by Cott Corp. At an average WalMart store, a 2-liter bottle of Sam’s Choice soda was selling for less than half the price charged for Coke and Pepsi products. The editor and publisher of Beverage Digest remarked that “in supermarkets, the overall carbonated soft drink industry is down, and private label is up strongly. It’s taking share from some brands.” Cott is the biggest maker of private-label soft drinks and the fourth –largest manufacturer overall in the U.S. market. So far this year, Cott stock has risen 50%, and yesterday made a new 52-week high.
The world communicates through Tellabs equipment more than two-thirds of telephone calls and Internet sessions in several countries, including the United States. Tellabs provides data switching and bandwidth management solutions to communication carriers. Elcoteq Network Corporation is the largest European electronics manufacturing services company, and they focus primarily on communications technology products. Tellabs today announced plans to outsource manufacturing of its international products to Elcoteq. Approximately 300 employees will be affected by the outsourcing and the R&D alignment.
According to a report in Indian daily, WalMart has formally shown interest in sourcing goods worth $7-10 billion from India in the next two years. The company has asked for a list of 20 Indian suppliers to source every category of products in which it is present. It has been suggested that textile quotas will be eliminated beginning on Jan. 1, 2005.This would mea that a U.S. retailer would step up sourcing from India. This is just one more reason why I am very enthusiastic about the long-term prospects for India. I view India as a much more favorable trading partner than I do China.
Thursday, November 13, 2003
11/13/03 The Dollar Is The World’s Doormat
As the Dow approaches the 10,000 mark, gold $400, and the FTSE Eurotop 300 Index is only five points from this year’s highest point, only one currency, the Mexican peso, of the 16 most-traded currencies, has declined against our dollar this year. The dollar is at a 10 year low versus the Canadian dollar; it is at a 6 year low against the Australian and New Zealand dollars; the yen is near this year’s high versus the dollar; and the euro and the pound are not far away from this year’s top level versus the dollar. Tomorrow, Greenspan will discuss monetary policy at a forum. Our monetary policy is to maintain short term rates at a 1% level, a 45 year low, while rates are being raised in other parts of the world. In the meantime, China is posting a record trade surplus and Japan’s current account surplus is running more than a third greater than last year. There are flashing red lights. China’s consumer prices rose in October at their fastest pace in six years. Prices for food and housing have jumped dramatically. In September, China’s consumer prices rose 1.1%. In October, they escalated 1.8% from a year earlier. China’s economy is overheating. Much of the world this year has depended on their imports. For the first ten months of 2003, China’s imports increased 40% to about $334 billion, and only slightly below their exports of $348 billion. Mexico, on the other hand, depends on the United States for its exports. The U.S. buys 85% of Mexican exports, and this represents 25% of their country’s GDP. Industrial production has dropped for six consecutive months, and yesterday’s their peso had its biggest decline in two months against the dollar as it came to rest at 11.1220 versus the greenback. Mexico’s fortunes are too tied to the United States, and they are paying the price.
When Greenspan discusses monetary policy, he might touch on federal discretionary spending, which expanded by 12.5% in the fiscal year that ended September 30. According to preliminary spending figures from congressional budget panels, the government spending levels have grown by 27% over the past two years. If Bush tells the American people the reason for the increase is to fight terrorism, he is telling half the story. In 2003 military spending did increase 17%; however, nonmilitary discretionary spending rose an unacceptable 8.7% to $418.6 billion. Rudolph Penner, a Republican and former CBO director, remarked “the most interesting thing is Bush has not vetoed anything, let alone a spending program. One wonders how serious the White House is about holding the line.” It should be noted that Homeland Security is just one element in nonmilitary discretionary spending. In my opinion, the Bush administration is the least fiscally conservative administration in this nation’s history. The plummeting value of the dollar is a reflection of my viewpoint.
A recent study by Global Insights of Waltham, Mass. Analyzes job losses between 2001-2003 and expected job gains in 2004-2005. The average wage of jobs lost from 2001 to 2003 was $43,629. The average wage of anticipated new jobs created during the 2004 to 2005 period is forecast to be $35,855, or a wage gap of 18%. Yesterday it was reported that Gene Logic, which sells subscriptions to its gene databases, would cut 50 jobs from the company’s database development and production department. Weyerhaeuser will close its Longview fine paper mill and eliminate 119 jobs. In 2001 they had closed another paper-making plant in the same city.
According to META Group, Inc., an average of 41% of new development activity is now outsourced, and this is up from the 35.9% jump in the prior year. According to the study, more and more companies realize the strategic and financial advantages to using offshore resources for both programming and business processes. Dr. Howard Rubin, META’s executive vice president, stated “going offshore and using the economics of offshore outsourcing have been the only competitive options left for larger companies with all the IT budget decreases of 2000, 2001, 2002, and even 2003…there is no doubt that 2003 has been a terrible year for IT workers. Staff cutbacks and the unavailability of new positions have sent many IT professionals looking for new career options.” Forrester Research said, despite an improving economic picture, 2004 IT budgets remain conservative, and that CIOs expect, on average, a modest 1.7% budget increase from 2003. Their November survey polled more than 800 technology decision-makers at North American firms.
Many months ago, I mentioned that Applied Materials looked like an interesting value. The stock was trading at $12. I never expected it to rise to $26. Yesterday, they reported their first profitable quarter in a year. Their new CEO stated “the fourth-quarter results indicate what we believe is a turning point for the semiconductor equipment industry. We are seeing an improving environment that cuts across most segments and geographies.” To be a successful investor the idea is to do your own homework and research individual companies. Applied Materials’ results are being driven by wireless products and flat-panel displays, and both could be seen coming down the demand lane a year earlier. It should be noted that their order backlog at the end of this past quarter is down slightly from the end of the prior quarter. In their next quarter revenues, said their CFO, are expected to only grow 5 to 8%. That, to me, does not warrant a market capitalization of ten times sales.
In the past year I have often touched on rising home values and rising property taxes. In Maricopa County, Arizona there has been a recent 7 to 8% increase in the value of existing homes. Arizona property owners paid $334 million more or an increase of 7.6% in property taxes this year compared with 2002. This shatters the one-year growth record set in 2000. Kevin McCarthy, president of the Arizona Tax Research Foundation, stated “most economists will tell you the growth we have seen should broaden the tax base and lower the tax rate. In this instance, in most jurisdictions, rates are not being reduced commensurate with growth and values.” Tony D’Alessio is a retired engineer and lives in Pinal County. He remarked “our sleazy politicians claim they have not increased taxes. They are correct. They have relied on the county assessor to do the dirty work for them. It’s really sickening. Is anyone deceived by this party line.”
Yesterday a suicide attack in southern Iraq killed 27 people (and the final toll may be larger). The bombing killed 18 Italians. About2300 Italian troops are stationed here in Iraq. The U.S. military said another American soldier had been killed, and another wounded. Guerrillas have now killed 156 U.S. troops since Bush declared major combat in Iraq over on May 1. A recent CIA report wars that Iraqis are losing faith in U.S.-led occupation forces, and this has led directly to increased support for the resistance. Paul Bremer’s description of the situation was “I think the situation with the Iraqi public is, frankly, not easy to quantify.” John McCain expressed “time is not on our side.” The CIA report warns that appointed Iraqi leaders do not appear to be up to the job of governing or working toward holding elections. Maybe we should consider exporting our hanging “chads” to them.
As the Dow approaches the 10,000 mark, gold $400, and the FTSE Eurotop 300 Index is only five points from this year’s highest point, only one currency, the Mexican peso, of the 16 most-traded currencies, has declined against our dollar this year. The dollar is at a 10 year low versus the Canadian dollar; it is at a 6 year low against the Australian and New Zealand dollars; the yen is near this year’s high versus the dollar; and the euro and the pound are not far away from this year’s top level versus the dollar. Tomorrow, Greenspan will discuss monetary policy at a forum. Our monetary policy is to maintain short term rates at a 1% level, a 45 year low, while rates are being raised in other parts of the world. In the meantime, China is posting a record trade surplus and Japan’s current account surplus is running more than a third greater than last year. There are flashing red lights. China’s consumer prices rose in October at their fastest pace in six years. Prices for food and housing have jumped dramatically. In September, China’s consumer prices rose 1.1%. In October, they escalated 1.8% from a year earlier. China’s economy is overheating. Much of the world this year has depended on their imports. For the first ten months of 2003, China’s imports increased 40% to about $334 billion, and only slightly below their exports of $348 billion. Mexico, on the other hand, depends on the United States for its exports. The U.S. buys 85% of Mexican exports, and this represents 25% of their country’s GDP. Industrial production has dropped for six consecutive months, and yesterday’s their peso had its biggest decline in two months against the dollar as it came to rest at 11.1220 versus the greenback. Mexico’s fortunes are too tied to the United States, and they are paying the price.
When Greenspan discusses monetary policy, he might touch on federal discretionary spending, which expanded by 12.5% in the fiscal year that ended September 30. According to preliminary spending figures from congressional budget panels, the government spending levels have grown by 27% over the past two years. If Bush tells the American people the reason for the increase is to fight terrorism, he is telling half the story. In 2003 military spending did increase 17%; however, nonmilitary discretionary spending rose an unacceptable 8.7% to $418.6 billion. Rudolph Penner, a Republican and former CBO director, remarked “the most interesting thing is Bush has not vetoed anything, let alone a spending program. One wonders how serious the White House is about holding the line.” It should be noted that Homeland Security is just one element in nonmilitary discretionary spending. In my opinion, the Bush administration is the least fiscally conservative administration in this nation’s history. The plummeting value of the dollar is a reflection of my viewpoint.
A recent study by Global Insights of Waltham, Mass. Analyzes job losses between 2001-2003 and expected job gains in 2004-2005. The average wage of jobs lost from 2001 to 2003 was $43,629. The average wage of anticipated new jobs created during the 2004 to 2005 period is forecast to be $35,855, or a wage gap of 18%. Yesterday it was reported that Gene Logic, which sells subscriptions to its gene databases, would cut 50 jobs from the company’s database development and production department. Weyerhaeuser will close its Longview fine paper mill and eliminate 119 jobs. In 2001 they had closed another paper-making plant in the same city.
According to META Group, Inc., an average of 41% of new development activity is now outsourced, and this is up from the 35.9% jump in the prior year. According to the study, more and more companies realize the strategic and financial advantages to using offshore resources for both programming and business processes. Dr. Howard Rubin, META’s executive vice president, stated “going offshore and using the economics of offshore outsourcing have been the only competitive options left for larger companies with all the IT budget decreases of 2000, 2001, 2002, and even 2003…there is no doubt that 2003 has been a terrible year for IT workers. Staff cutbacks and the unavailability of new positions have sent many IT professionals looking for new career options.” Forrester Research said, despite an improving economic picture, 2004 IT budgets remain conservative, and that CIOs expect, on average, a modest 1.7% budget increase from 2003. Their November survey polled more than 800 technology decision-makers at North American firms.
Many months ago, I mentioned that Applied Materials looked like an interesting value. The stock was trading at $12. I never expected it to rise to $26. Yesterday, they reported their first profitable quarter in a year. Their new CEO stated “the fourth-quarter results indicate what we believe is a turning point for the semiconductor equipment industry. We are seeing an improving environment that cuts across most segments and geographies.” To be a successful investor the idea is to do your own homework and research individual companies. Applied Materials’ results are being driven by wireless products and flat-panel displays, and both could be seen coming down the demand lane a year earlier. It should be noted that their order backlog at the end of this past quarter is down slightly from the end of the prior quarter. In their next quarter revenues, said their CFO, are expected to only grow 5 to 8%. That, to me, does not warrant a market capitalization of ten times sales.
In the past year I have often touched on rising home values and rising property taxes. In Maricopa County, Arizona there has been a recent 7 to 8% increase in the value of existing homes. Arizona property owners paid $334 million more or an increase of 7.6% in property taxes this year compared with 2002. This shatters the one-year growth record set in 2000. Kevin McCarthy, president of the Arizona Tax Research Foundation, stated “most economists will tell you the growth we have seen should broaden the tax base and lower the tax rate. In this instance, in most jurisdictions, rates are not being reduced commensurate with growth and values.” Tony D’Alessio is a retired engineer and lives in Pinal County. He remarked “our sleazy politicians claim they have not increased taxes. They are correct. They have relied on the county assessor to do the dirty work for them. It’s really sickening. Is anyone deceived by this party line.”
Yesterday a suicide attack in southern Iraq killed 27 people (and the final toll may be larger). The bombing killed 18 Italians. About2300 Italian troops are stationed here in Iraq. The U.S. military said another American soldier had been killed, and another wounded. Guerrillas have now killed 156 U.S. troops since Bush declared major combat in Iraq over on May 1. A recent CIA report wars that Iraqis are losing faith in U.S.-led occupation forces, and this has led directly to increased support for the resistance. Paul Bremer’s description of the situation was “I think the situation with the Iraqi public is, frankly, not easy to quantify.” John McCain expressed “time is not on our side.” The CIA report warns that appointed Iraqi leaders do not appear to be up to the job of governing or working toward holding elections. Maybe we should consider exporting our hanging “chads” to them.
Wednesday, November 12, 2003
11/12/03 The Pulse Of America
Right Management Consultants publishes their Right Career Confidence Index. In the latest survey, one out of four American workers continues to believe they could lose their job in the coming year, and nearly 85% say it would be difficult for a laid-off employee to find new work. These fears are borne out in several trends. In the late 1990s one might be ashamed to say they had just found a great bargain in a thrift store. The situation is quite different today. People are proud to show off their newest purchase for $2. According to the National Association of Resale & Thrift Shops, “resale is one of the fastest growing segments of the retail industry.” The association estimates more than 15,000 resale shops are operating around the country.
Dorothy George is the vice president of business development for Goodwill Industries of Lower South Carolina. She remarks that “people are paying attention and seeing they can find good deals at Goodwill stores. Attitudes are changing. It’s trendy to shop at Goodwill, especially among college-age people. About 60% of our donors are also our shoppers. People drop something off and then go shopping.” Kathleen Kelly has a consignment shop specializing in furniture and home furnishings. Her shop in the Savannah area has been open for a year. She says the business success is “phenomenal. It’s more of an acceptable thing. Look at the economy-people are counting their pennies.” The National Retail Federation survey of the college crowd confirms what Dorothy George said. Twenty three per cent plan to shop at resale or thrift shops. With the growth in “goodwill” shopping and increased purchases at the dollar stores, there is little question less money is available for merchandise at department stores.
According to the Craft Yarn Council, since 1998, there has been a 400% increase in the number of women under 35 years old who knit. An estimated 4 million new people pick up knitting needles each year. The Council states that the percentage of women under age 45 who know how to knit and crochet has doubled in the past six years. Debbie Stoller is author of Stitch ‘N Bitch: The Knitter’s Handbook, and believes women knit to free themselves from the “global corporate culture where all clothing is made the same.” It may be more than that. Stephanie Winland is the 25-year-old managing editor of Cast On, the official publication of the Ohio-based Knitting Guild Association. Stephanie states that “knitting is something that Gen Xers and Gen Yers are paying attention to. There are cool, trendy yarns, fibers, and patterns now, so people are getting excited about it.” There is one additional plus to knitting. Says Ilien Hechtman, a Miami knitter, “you can knit instead of eat. Knitting should go right along with the Weight Watchers plan.”
Talking about Florida, The Fort Lauderdale Police Department will cut 42 jobs in an effort to slash $6.3 million and to help make up a $15 million city budget shortfall. The layoffs amount to 8% of its police force. In the last week of October, Standard & Poor’s said it would continue to monitor the city’s financial status. They pronounced its outlook on Fort Lauderdale’s general obligation debt as “negative.” The Georgia Department of Labor announced another plant closing. Lithonia Lighting will shut its Decatur facility and cut 231 jobs.
According to the China Post newspaper, Sun Microsystems is moving forward with a $50 million research and development center in Taiwan. The facility will develop Linux software and Java-based 3G mobile communications technology. In the meantime, Sun has slashed its prices by 30% on one of its key products, the Sun Blade 2000 workstation.
Texas continues to lead the nation in the rate of uninsured, with one in four residents lacking health insurance. This situation was not created overnight. It existed when George Bush was Governor of Texas. His problems with health care have not been resolved. They have been expanded to Medicare. The GOP in the Senate indicate they will not produce a Medicare bill prior to the Thanksgiving holiday. Will they finalize a bill by year-end?
A U.S. soldier was killed Tuesday evening by an improvised explosive device. The death brought to at least 154 the number of U.S. soldiers killed in action since the Bush Administration declared major combat over on May 1.
According to a recent survey by MACResearch, the holiday shopping season has begun for 30% of shoppers; another 16% will begin shortly before Thanksgiving; and 20%will begin the day after Thanksgiving. The balance of the respondents said they would shop the same time as always. I am not certain what that indicates. Shoppers plan to spend $528 on gifts this season, and the average gift list consists of 10.5 people. I guess the .5 is for the unborn. By comparison, 28% plan to spend more on gifts than last year, with 50% spending the same amount. Almost 70% reported to be either value shoppers or careful planners, with the most important influence in purchase decisions cited as “sales.”
Trade with Australia generates $6.6 billion in surplus for the United States. Australian trade and investment employs more than 350,000 Americans. The Australian state of Victoria is a promising site for American companies doing business in the Asia Pacific region. Recently, IBM decided to locate a 300 person software support center there.
Right Management Consultants publishes their Right Career Confidence Index. In the latest survey, one out of four American workers continues to believe they could lose their job in the coming year, and nearly 85% say it would be difficult for a laid-off employee to find new work. These fears are borne out in several trends. In the late 1990s one might be ashamed to say they had just found a great bargain in a thrift store. The situation is quite different today. People are proud to show off their newest purchase for $2. According to the National Association of Resale & Thrift Shops, “resale is one of the fastest growing segments of the retail industry.” The association estimates more than 15,000 resale shops are operating around the country.
Dorothy George is the vice president of business development for Goodwill Industries of Lower South Carolina. She remarks that “people are paying attention and seeing they can find good deals at Goodwill stores. Attitudes are changing. It’s trendy to shop at Goodwill, especially among college-age people. About 60% of our donors are also our shoppers. People drop something off and then go shopping.” Kathleen Kelly has a consignment shop specializing in furniture and home furnishings. Her shop in the Savannah area has been open for a year. She says the business success is “phenomenal. It’s more of an acceptable thing. Look at the economy-people are counting their pennies.” The National Retail Federation survey of the college crowd confirms what Dorothy George said. Twenty three per cent plan to shop at resale or thrift shops. With the growth in “goodwill” shopping and increased purchases at the dollar stores, there is little question less money is available for merchandise at department stores.
According to the Craft Yarn Council, since 1998, there has been a 400% increase in the number of women under 35 years old who knit. An estimated 4 million new people pick up knitting needles each year. The Council states that the percentage of women under age 45 who know how to knit and crochet has doubled in the past six years. Debbie Stoller is author of Stitch ‘N Bitch: The Knitter’s Handbook, and believes women knit to free themselves from the “global corporate culture where all clothing is made the same.” It may be more than that. Stephanie Winland is the 25-year-old managing editor of Cast On, the official publication of the Ohio-based Knitting Guild Association. Stephanie states that “knitting is something that Gen Xers and Gen Yers are paying attention to. There are cool, trendy yarns, fibers, and patterns now, so people are getting excited about it.” There is one additional plus to knitting. Says Ilien Hechtman, a Miami knitter, “you can knit instead of eat. Knitting should go right along with the Weight Watchers plan.”
Talking about Florida, The Fort Lauderdale Police Department will cut 42 jobs in an effort to slash $6.3 million and to help make up a $15 million city budget shortfall. The layoffs amount to 8% of its police force. In the last week of October, Standard & Poor’s said it would continue to monitor the city’s financial status. They pronounced its outlook on Fort Lauderdale’s general obligation debt as “negative.” The Georgia Department of Labor announced another plant closing. Lithonia Lighting will shut its Decatur facility and cut 231 jobs.
According to the China Post newspaper, Sun Microsystems is moving forward with a $50 million research and development center in Taiwan. The facility will develop Linux software and Java-based 3G mobile communications technology. In the meantime, Sun has slashed its prices by 30% on one of its key products, the Sun Blade 2000 workstation.
Texas continues to lead the nation in the rate of uninsured, with one in four residents lacking health insurance. This situation was not created overnight. It existed when George Bush was Governor of Texas. His problems with health care have not been resolved. They have been expanded to Medicare. The GOP in the Senate indicate they will not produce a Medicare bill prior to the Thanksgiving holiday. Will they finalize a bill by year-end?
A U.S. soldier was killed Tuesday evening by an improvised explosive device. The death brought to at least 154 the number of U.S. soldiers killed in action since the Bush Administration declared major combat over on May 1.
According to a recent survey by MACResearch, the holiday shopping season has begun for 30% of shoppers; another 16% will begin shortly before Thanksgiving; and 20%will begin the day after Thanksgiving. The balance of the respondents said they would shop the same time as always. I am not certain what that indicates. Shoppers plan to spend $528 on gifts this season, and the average gift list consists of 10.5 people. I guess the .5 is for the unborn. By comparison, 28% plan to spend more on gifts than last year, with 50% spending the same amount. Almost 70% reported to be either value shoppers or careful planners, with the most important influence in purchase decisions cited as “sales.”
Trade with Australia generates $6.6 billion in surplus for the United States. Australian trade and investment employs more than 350,000 Americans. The Australian state of Victoria is a promising site for American companies doing business in the Asia Pacific region. Recently, IBM decided to locate a 300 person software support center there.
Tuesday, November 11, 2003
11/11/12 Veterans Day
Dwight Eisenhower in 1953: “Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron.”
George Washington: “Occupants of public offices love power and are prone to abuse it.”
George Washington: “Government is not reason. It is not eloquence. It is a force like fire; a dangerous servant and a terrible master. Never for a moment should it be left to irresponsible action.”
Brenda Behnken makes her home in Tempe, Arizona. Her son Paul was sent to Iraq two months after he left Afghanistan. Mrs. Behnken said “I know real fear. It lives in your mind and soul every single minute of every single hour of every single day. It never goes away. Paul has returned home. She states “my son taught me that I don’t have just the five children that I love. I have five million children. Every serviceman and woman who serves my country is my son’s brothers and sisters. He told me so. I have cried and grieved the loss of every soldier. My heart breaks for their families. I will never, never forget their sacrifices. Neither will my children or grandchildren.” Marking the 20th anniversary of the National Endowment for Democracy, President Bush stated “freedom is worth fighting for, dying for, standing for- and the advance of freedom leads to peace.” In an August 2001 speech to the VFW and the American Legion, he emphasized “my administration understands American’s obligations not only to those who wear the uniform today, but to those who wore the uniform in the past: to our veterans.” Speaking to the troops in a medical center in January 2003, he remarked that “America should and must provide the best care for anybody who is willing to put their life in harm’s way.” Unfortunately, as we remember our veterans, we also remember the 200,000 veterans waiting six months or more for their first appointment at a VA facility. We remember veterans being asked to pay an annual health care enrollment fee of $250, doubled prescription costs, and increased co-payments. We remember denying access to veterans who do not have service-related disabilities and with incomes as low as $21,050. We remember that the VA anticipates that 55% of veterans who already participate in the VA health care plan, numbering 1.25 million, may be unable to continue participation due to the enrollment fee. We remember that Congress sought to include $1.3 billion in veteran’s health care and extending benefits for reservists who have been activated in the $87 billion emergency funding bill. In a letter from White House Budget Director Joshua Bolten, the Administration “strongly opposed” the provisions. Should you see pictures of your president participating in remembrances for our veterans, please remember how that individual keeps his commitments to our veterans and how that commitment differs from the every day remembrances expressed by Brenda Behnken.
Using several government surveys, BillSaver.com assembled a financial profile of the typical American. In 2002, median income dropped for the second consecutive year in the United States, decreasing 1.1% to $42,409. More than 41% of all households now make less than $34,999. The median household debt now stands at $38,800, and that does not include home mortgages. “The average person has over 38% more debt than they have in their retirement account,” said the founder of BillSaver.com. The average American household only saves about 7% of its income.
Ajit Gupta, CEO and co-founder of Santa Clara-based Speedera Networks, remarked “in business, there are only two levers: the cost side and the revenue side. Since the economy is not improving, you redirect your cost.” Kaiser Permanente has shifted about 200 information technology jobs to Indian companies, paying between $25 and $30 an hour instead of $80 to $100 an hour in the United States. Whirlpool Corp. is shifting some production to Mexico in order to lower costs. CSX is the biggest railroad in the eastern United States. Yesterday they announced a cost-cutting campaign focused on improving operating income. CSX now employs about 34,000 people, and will cut as many as 1,000 non-union jobs from the payroll. Motorola will lay off an additional 2400 by the end of the first quarter.
In 1962 Kennedy attempted to impose price controls on steel. In March 2002 Bush imposed steel tariffs. The WTO appeals panel ruled yesterday that U.S. tariffs on imported steel are illegal, and that the duties of up to 30% introduced by Bush breached trade rules. The EU said it will impose retaliatory sanctions of up to $2.2 billion by introducing 100% duties on some U.S. imports, effectively pricing those goods out of the EU market. Originally, Bush’s decision to levy steel tariffs was warmly received by the rust-belt states of Pennsylvania, Ohio, and West Virginia, important re-election battlegrounds.
Fred Hu, managing director of Goldman Sachs (Asia), states that China is “still the most profitable automobile market in the world.” GM and Ford are finding a very different experience in the United States. After a sales decline in October, they recently boosted incentive allowances. In the latest quarter, Toyota sold more cars than Ford, and that includes sales of Volvo, Jaquar, Land Rover, and Aston Martin. Toyota might end 2003 as the number two auto maker in the United States.
According to London-based research firm Datamonitor, more than 25% of Fortune 500 companies are shifting back office operations to India. This firm states that currently one out of every 24 call center agents serving U.S. customers is outsourced to a “near outsourcing center” in Canada and Mexico or an “offshore center” in India or the Philippines. It predicts that, by 2008, one in 15 agents will be outsourced to a foreign market. According to Datamonitor, labor costs in outsourcing destinations are 15 to 25% lower than those in the United States, and that agent turnover rates are 10 times less.
Statistics reveal that the economy in India grew 4.3% in the year ended March 2003. If it had not been for the worst drought in three decades, growth would have been higher. Estimates are for their growth to slightly exceed 7% in this fiscal year. Yet, their fiscal deficit will be about 5.8% of their GDP. Government expenditures continue to increase.
John Hussman of the Hussman Fund group points out that Fabrizio Galimberti noted in the Economist that “foreign outsourcing has the effect of artificially raising productivity figures because subtracting imports from GDP does not adequately correct for their impact on final output, yet foreign labor is not counted, so measured output per worker increases.”
The U.S. Commerce Department recently reported that new orders for computers fell 3.2% in September from the level in August. Computer shipments also fell by 1.3%. On a month-to month basis, semiconductor shipments dropped 8.2%.
As I mentioned the other day, there is a growing shortage of nurses in the United States. Positions are being filled by nurses from the Philippines. Next month nurses will begin to arrive from India. Two years ago India began offering exams for nurses to work in the United States. St. Bernadine Medical Center in San Bernadino, CA is experiencing an acute nursing shortage and has not been able to fill the void. Laurie Eberst, senior vice president of clinical services and chief nursing executive, states “we have no alternative but to go outside the U.S.”
Dwight Eisenhower in 1953: “Every gun that is made, every warship launched, every rocket fired signifies in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed. This world in arms is not spending money alone. It is spending the sweat of its laborers, the genius of its scientists, the hopes of its children. This is not a way of life at all in any true sense. Under the clouds of war, it is humanity hanging on a cross of iron.”
George Washington: “Occupants of public offices love power and are prone to abuse it.”
George Washington: “Government is not reason. It is not eloquence. It is a force like fire; a dangerous servant and a terrible master. Never for a moment should it be left to irresponsible action.”
Brenda Behnken makes her home in Tempe, Arizona. Her son Paul was sent to Iraq two months after he left Afghanistan. Mrs. Behnken said “I know real fear. It lives in your mind and soul every single minute of every single hour of every single day. It never goes away. Paul has returned home. She states “my son taught me that I don’t have just the five children that I love. I have five million children. Every serviceman and woman who serves my country is my son’s brothers and sisters. He told me so. I have cried and grieved the loss of every soldier. My heart breaks for their families. I will never, never forget their sacrifices. Neither will my children or grandchildren.” Marking the 20th anniversary of the National Endowment for Democracy, President Bush stated “freedom is worth fighting for, dying for, standing for- and the advance of freedom leads to peace.” In an August 2001 speech to the VFW and the American Legion, he emphasized “my administration understands American’s obligations not only to those who wear the uniform today, but to those who wore the uniform in the past: to our veterans.” Speaking to the troops in a medical center in January 2003, he remarked that “America should and must provide the best care for anybody who is willing to put their life in harm’s way.” Unfortunately, as we remember our veterans, we also remember the 200,000 veterans waiting six months or more for their first appointment at a VA facility. We remember veterans being asked to pay an annual health care enrollment fee of $250, doubled prescription costs, and increased co-payments. We remember denying access to veterans who do not have service-related disabilities and with incomes as low as $21,050. We remember that the VA anticipates that 55% of veterans who already participate in the VA health care plan, numbering 1.25 million, may be unable to continue participation due to the enrollment fee. We remember that Congress sought to include $1.3 billion in veteran’s health care and extending benefits for reservists who have been activated in the $87 billion emergency funding bill. In a letter from White House Budget Director Joshua Bolten, the Administration “strongly opposed” the provisions. Should you see pictures of your president participating in remembrances for our veterans, please remember how that individual keeps his commitments to our veterans and how that commitment differs from the every day remembrances expressed by Brenda Behnken.
Using several government surveys, BillSaver.com assembled a financial profile of the typical American. In 2002, median income dropped for the second consecutive year in the United States, decreasing 1.1% to $42,409. More than 41% of all households now make less than $34,999. The median household debt now stands at $38,800, and that does not include home mortgages. “The average person has over 38% more debt than they have in their retirement account,” said the founder of BillSaver.com. The average American household only saves about 7% of its income.
Ajit Gupta, CEO and co-founder of Santa Clara-based Speedera Networks, remarked “in business, there are only two levers: the cost side and the revenue side. Since the economy is not improving, you redirect your cost.” Kaiser Permanente has shifted about 200 information technology jobs to Indian companies, paying between $25 and $30 an hour instead of $80 to $100 an hour in the United States. Whirlpool Corp. is shifting some production to Mexico in order to lower costs. CSX is the biggest railroad in the eastern United States. Yesterday they announced a cost-cutting campaign focused on improving operating income. CSX now employs about 34,000 people, and will cut as many as 1,000 non-union jobs from the payroll. Motorola will lay off an additional 2400 by the end of the first quarter.
In 1962 Kennedy attempted to impose price controls on steel. In March 2002 Bush imposed steel tariffs. The WTO appeals panel ruled yesterday that U.S. tariffs on imported steel are illegal, and that the duties of up to 30% introduced by Bush breached trade rules. The EU said it will impose retaliatory sanctions of up to $2.2 billion by introducing 100% duties on some U.S. imports, effectively pricing those goods out of the EU market. Originally, Bush’s decision to levy steel tariffs was warmly received by the rust-belt states of Pennsylvania, Ohio, and West Virginia, important re-election battlegrounds.
Fred Hu, managing director of Goldman Sachs (Asia), states that China is “still the most profitable automobile market in the world.” GM and Ford are finding a very different experience in the United States. After a sales decline in October, they recently boosted incentive allowances. In the latest quarter, Toyota sold more cars than Ford, and that includes sales of Volvo, Jaquar, Land Rover, and Aston Martin. Toyota might end 2003 as the number two auto maker in the United States.
According to London-based research firm Datamonitor, more than 25% of Fortune 500 companies are shifting back office operations to India. This firm states that currently one out of every 24 call center agents serving U.S. customers is outsourced to a “near outsourcing center” in Canada and Mexico or an “offshore center” in India or the Philippines. It predicts that, by 2008, one in 15 agents will be outsourced to a foreign market. According to Datamonitor, labor costs in outsourcing destinations are 15 to 25% lower than those in the United States, and that agent turnover rates are 10 times less.
Statistics reveal that the economy in India grew 4.3% in the year ended March 2003. If it had not been for the worst drought in three decades, growth would have been higher. Estimates are for their growth to slightly exceed 7% in this fiscal year. Yet, their fiscal deficit will be about 5.8% of their GDP. Government expenditures continue to increase.
John Hussman of the Hussman Fund group points out that Fabrizio Galimberti noted in the Economist that “foreign outsourcing has the effect of artificially raising productivity figures because subtracting imports from GDP does not adequately correct for their impact on final output, yet foreign labor is not counted, so measured output per worker increases.”
The U.S. Commerce Department recently reported that new orders for computers fell 3.2% in September from the level in August. Computer shipments also fell by 1.3%. On a month-to month basis, semiconductor shipments dropped 8.2%.
As I mentioned the other day, there is a growing shortage of nurses in the United States. Positions are being filled by nurses from the Philippines. Next month nurses will begin to arrive from India. Two years ago India began offering exams for nurses to work in the United States. St. Bernadine Medical Center in San Bernadino, CA is experiencing an acute nursing shortage and has not been able to fill the void. Laurie Eberst, senior vice president of clinical services and chief nursing executive, states “we have no alternative but to go outside the U.S.”
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