12/19/03 The Truth Is
The truth is the Nasdaq has risen 46% this year. The annual survey of the U.S. Conference of Mayors found that, in nearly all the cities, requests for emergency food assistance have increased by an average of 17% over last year, and the demand for emergency shelter rose by an average of 13%. More than half of the cities surveyed reported that emergency food assistance facilities had to either turn people away or limit the groceries families could receive on each visit. Of those requesting food help, 59% were families and 39% were employed, the survey stated. According to the Conference of Mayors report, in 84% of the cities surveyed, shelters reported turning away homeless families because of too few beds and other resources. Officials estimated that 30% of requests for shelter by homeless people, and 33% of the requests by homeless families were unmet.
Since Saddam Hussein was captured, the truth is more Americans now back the Iraq war. According to new Pentagon data, The military has made 8,581 medical evacuations from Operation Iraqi Freedom for non-hostile causes in addition to the 2,273 wounded, a total of 10,854. The Pentagon states that 458 troops have died. In addition, the nine-month search for weapons of mass destruction has slowed. Charles McKay is a member of the Defense Threat Reduction Agency that has been involved in the search for WMD since May. He related “for a while this place was really active, but that’s changed in the last month. Now we’re lucky if there’s a mission once a week around here. Yesterday a U.S. intelligence official in Washington said David Kay, who heads up the weapons hunt staffed by more than 1,000 intelligence analysts, interrogators, and translators, is considering quitting his post. Hans Blix, the former chief U.N. weapons inspector, stated “it’s probably time to call it quits. The U.S. and Britain are so wedded to the idea that the Iraqis were hiding things that they are not willing to explore the possibility that they’re wrong.�
The truth is that the population of the United States is nearing 300 million. According to the Census Bureau, our population grew by 2.8 million in the past year to nearly 291 million people. At the current rate of growth, the Population Reference Bureau anticipates the nation will be home to 300 million people within four years. The high birth rate among Hispanics has helped fuel the increase. With more people, one would think more people would shop for more gifts this holiday season. That has not been the story. Northeast Phoenix resident Susie Johnston describes the current shopping landscape, and states that “it’s less stressful when you spend less. It’s definitely a relief. I’m pretty proud of myself. I didn’t have to pay interest on anything.� She shops for deep discounted merchandise and remarks “I know where to shop.� Retailers are depending on last-week shoppers to save their holiday sales. Among retailers surveyed by Jupiter Research, 37% said they would offer discounted or free express shipping this year to lure last-minute Internet shoppers, up from 24% last year, and 42% said they would extend the cutoff date for ordering, compared with 30% last year. Jupiter stated “you’ll see a growth in retailers offering orders through the 23rd.� Shopping.com confirmed that “people are beginning to believe in the online channel as a last-minute resource.�
The truth is that the U.S. Chamber of Commerce chief economist, Mark Regalia, recently stated “the dollar has sunk significantly which has spurred trade.� The U.S. trade representative’s office (USTR) stated in a report released yesterday that “indeed, over the last three years, while U.S. exports to the rest of the world have decreased by 10%, U.S. exports to China have increased by 66%.� It should be noted that the Chinese currency has had a fixed peg against the U.S. dollar for many years.
A new survey conducted on behalf of American Express Financial Advisors (AEFA), called the Personal Economy Index, shows “that the majority of Americans do not have a clear road map for their financial future.� The truth is a survey spokesperson indicates “the only economy we can control is our own personal economy and this is the one that matters most.� One highlight from the Personal Economy Index revealed that one third of Americans reported their financial situation has worsened over the past two years, and of those who stated it worsened, four out of ten cited an increase in healthcare costs and a third cited the decline in the stock market as factors.
The truth is we do not think of the Federal Reserve banks as employers. The fact is they employ more than 22,000 people, or did. Yesterday they stated as many as 300 jobs would be eliminated as part of a shift in their savings bond business toward electronic transactions. The banks will eliminate 25 to 50 percent of ist 638 positions in its retail securities position. In Buffalo, N.Y., 60 of 130 jobs will be cut in the restructuring. Branches in Kansas City, Richmond, Dallas, and Boston will also face stiff cuts. A spokesperson stated “as people move to the Internet, it requires fewer resources.� It’s a little like what’s taking place for retailers.
The truth is that the value of farmland in Iowa set a record in 1981 at $2,147 per acre. In 2003, that record was broken. The average price of Iowa farmland increased 9.2% to $2,275 an acre. When the 2003 average price is adjusted for inflation, this year’s value is about the same as the figures from the early 1970s. A lot depends on one’s frame of reference.
The truth is Illinois Governor Jennifer Granholm has faced nearly $3 billion in projected deficits due to a weak economy that produced smaller than expected revenues. She and the Illinois Legislature have been hard at work to resolve the budget problem. Yesterday a vote was taken, and there will be a 6-month delay in an income tax cut that was scheduled to take place in January. In addition, there will be a 5% cut in aid to universities; a $96 per-pupil cut in aid to public schools; revenue sharing for cities, townships, and counties took a 5% funding hit; half of the state tax on health care benefits provided by employers will be phased out; and an additional $12 million in administrative cuts shall be spread across state government. Erasing the state budget deficit was not easy, but Republicans and Democrats worked together and settled on compromises to achieve the desired results. If it can be done in Illinois, it can be done on Capital Hill.
Another governor was hard at work yesterday. Arnold stated “I had to do this.� The truth is California has been in a fiscal crisis for some time. He shall impose $150 million in spending cuts without the Legislature’s approval. The cuts are expected to come from social service programs. Hopefully, these cuts will offset a portion of the lost revenue from the repealed car tax.
In my view, the three-judge panel of the 2nd U.S. Circuit Court of Appeals stepped up to the plate for our Constitution, and yesterday stated that Jose Padilla’s detention since May 2002 was not authorized by Congress and that Bush could not designate him as an enemy combatant without the authorization. The truth is the majority decision stated “but presidential authority does not exist in a vacuum, and this case involves not whether those responsibilities should be aggressively pursued, but whether the president is obligated, in the circumstances presented here, to share them with Congress.�
The truth is that Rob Glaser was a former Microsoft executive. He founded RealNetworks in 1994, and intoduced its digital media player in 1995. Microsoft introduced its own digital media player a year later, and in May 1999 launched Windows 98 Second Edition and integrated its digital media player into its operating system. For the last two and one-half years this bundling has remained in force. Yesterday Glaser’s company filed a $1 billion lawsuit against Microsoft. Glaser is attempting to liken Microsoft’s dominance over Netscape to the current battle for market share with RealNetworks and has cited notes from an internal Microsoft meeting quoting one of its executives as saying RealNetworks “is like Netscape, the only difference is we have a chance to start this battle earlier in the game.� In essence, Glaser is blaming his company’s lack of competitive success against Microsoft on the latter having WPM, as it were. In this case they would be tying its digital media player to its operating system. This is a losing argument. Users are able to remove links to its Windows Media Player, and thus the latter is not the system’s default media player.
The truth is the Labor Department stated yesterday that the number of Americans filing first-time applications for state unemployment benefits fell by 22,000 in the week that ended Saturday to 353,000. The whole truth is the number of people continuing to collect state jobless benefits rose 28,000 to 3.34 million in the week that ended Dec. 6. The Labor Department also said that 40 states and territories reported an increase in new claims, while 13 reported a decrease.
The truth is the Conference Board announced yesterday that the U.S. leading index increased 0.3 percent in November. Six of the ten indicators that make up the leading index increased in November. On the other hand, the lagging index decreased 0.3 percent in November, and that was after a 0.1 percent decline in October and a 0.5 percent drop in September. The Conference Board’s economist Ken Goldstein stated “the lone note of caution is that although the path is up, it has been bumpy and will remain so in the new year.�
Dan DiMicco, Nucor CEO, remarked that “the same fundamental forces that effect manufacturing are going to effect these so-called hi-tech service jobs.� Will Cashion, treasurer of the Association of Machinist and Aerospace Workers union, observes “there is no way to stop the global economy and as long as we continue to compete with poverty stricken countries, we can’t win.� The truth is Richmond Fed chairman Alfred Broaddus is not concerned as he stated “what we are undergoing here in the manufacturing sector in the Carolinas is an evolution. Industries in some locations diminish, other kinds of activities replace those and that’s the way our economy sort of churns itself and maintains the extraordinary longer-run performance that has been and is one of the real economic wonders of the world.� Broaddus is correct. Industries in some locations diminish. Yesterday MeadWestvaco announced they are cutting 1,000 jobs in a cost-cutting effort. Those cut from the payroll would not describe our GDP as one of the real economic wonders of the world.
Thursday, December 18, 2003
12/18/03 Microinvesting
I know you probably are thinking I shall be writing about small cap stocks. I�ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let�s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That�s a great clue. I will put you out of your misery. This is the newest trend and it�s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that�s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through �microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated �while we�ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia�s senior vice president stated �microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone�s attention in a hurry. Hopefully, yesterday�s rise in January�s natural gas to $6.86 per million BTUs won�t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated �in a down economy, Goodwills have a tendency to do well. We�ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, �we are very much aware of the impact that the economy, regulation, and competition is having on the company� a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year�s total to more than 3,000 union jobs that have been labeled as �surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it�s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States �remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated �fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state�s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state�s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California�s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, � if I don�t get paid enough to cover my expenses, I�ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that�s before the proposed reimbursement cuts.
According to Ernst & Young�s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated �retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express� John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked �post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
I know you probably are thinking I shall be writing about small cap stocks. I�ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let�s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That�s a great clue. I will put you out of your misery. This is the newest trend and it�s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that�s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through �microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated �while we�ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia�s senior vice president stated �microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone�s attention in a hurry. Hopefully, yesterday�s rise in January�s natural gas to $6.86 per million BTUs won�t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated �in a down economy, Goodwills have a tendency to do well. We�ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, �we are very much aware of the impact that the economy, regulation, and competition is having on the company� a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year�s total to more than 3,000 union jobs that have been labeled as �surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it�s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States �remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated �fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state�s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state�s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California�s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, � if I don�t get paid enough to cover my expenses, I�ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that�s before the proposed reimbursement cuts.
According to Ernst & Young�s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated �retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express� John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked �post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
12/18/03 Microinvesting
I know you probably are thinking I shall be writing about small cap stocks. I�ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let�s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That�s a great clue. I will put you out of your misery. This is the newest trend and it�s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that�s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through �microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated �while we�ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia�s senior vice president stated �microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone�s attention in a hurry. Hopefully, yesterday�s rise in January�s natural gas to $6.86 per million BTUs won�t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated �in a down economy, Goodwills have a tendency to do well. We�ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, �we are very much aware of the impact that the economy, regulation, and competition is having on the company� a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year�s total to more than 3,000 union jobs that have been labeled as �surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it�s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States �remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated �fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state�s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state�s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California�s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, � if I don�t get paid enough to cover my expenses, I�ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that�s before the proposed reimbursement cuts.
According to Ernst & Young�s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated �retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express� John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked �post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
I know you probably are thinking I shall be writing about small cap stocks. I�ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let�s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That�s a great clue. I will put you out of your misery. This is the newest trend and it�s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that�s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through �microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated �while we�ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia�s senior vice president stated �microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone�s attention in a hurry. Hopefully, yesterday�s rise in January�s natural gas to $6.86 per million BTUs won�t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated �in a down economy, Goodwills have a tendency to do well. We�ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, �we are very much aware of the impact that the economy, regulation, and competition is having on the company� a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year�s total to more than 3,000 union jobs that have been labeled as �surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it�s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States �remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated �fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state�s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state�s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California�s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, � if I don�t get paid enough to cover my expenses, I�ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that�s before the proposed reimbursement cuts.
According to Ernst & Young�s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated �retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express� John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked �post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
12/18/03 Microinvesting
I know you probably are thinking I shall be writing about small cap stocks. I’ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let’s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That’s a great clue. I will put you out of your misery. This is the newest trend and it’s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that’s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through “microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated “while we’ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia’s senior vice president stated “microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone’s attention in a hurry. Hopefully, yesterday’s rise in January’s natural gas to $6.86 per million BTUs won’t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated “in a down economy, Goodwills have a tendency to do well. We’ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, “we are very much aware of the impact that the economy, regulation, and competition is having on the company… a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year’s total to more than 3,000 union jobs that have been labeled as “surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it’s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States “remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated “fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state’s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state’s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California’s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, “ if I don’t get paid enough to cover my expenses, I’ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that’s before the proposed reimbursement cuts.
According to Ernst & Young’s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated “retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express’ John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked “post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
I know you probably are thinking I shall be writing about small cap stocks. I’ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let’s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That’s a great clue. I will put you out of your misery. This is the newest trend and it’s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that’s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through “microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated “while we’ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia’s senior vice president stated “microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone’s attention in a hurry. Hopefully, yesterday’s rise in January’s natural gas to $6.86 per million BTUs won’t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated “in a down economy, Goodwills have a tendency to do well. We’ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, “we are very much aware of the impact that the economy, regulation, and competition is having on the company… a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year’s total to more than 3,000 union jobs that have been labeled as “surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it’s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States “remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated “fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state’s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state’s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California’s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, “ if I don’t get paid enough to cover my expenses, I’ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that’s before the proposed reimbursement cuts.
According to Ernst & Young’s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated “retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express’ John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked “post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
12/18/03 Microinvesting
I know you probably are thinking I shall be writing about small cap stocks. I’ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let’s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That’s a great clue. I will put you out of your misery. This is the newest trend and it’s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that’s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through “microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated “while we’ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia’s senior vice president stated “microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone’s attention in a hurry. Hopefully, yesterday’s rise in January’s natural gas to $6.86 per million BTUs won’t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated “in a down economy, Goodwills have a tendency to do well. We’ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, “we are very much aware of the impact that the economy, regulation, and competition is having on the company… a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year’s total to more than 3,000 union jobs that have been labeled as “surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it’s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States “remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated “fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state’s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state’s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California’s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, “ if I don’t get paid enough to cover my expenses, I’ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that’s before the proposed reimbursement cuts.
According to Ernst & Young’s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated “retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express’ John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked “post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
I know you probably are thinking I shall be writing about small cap stocks. I’ll give you a hint. What does the holiday shopping season have in common with microinvesting? That clue was pretty lame. Let’s try one more. What do incentives for bargain hungry holiday shoppers have in common with microinvesting? That’s a great clue. I will put you out of your misery. This is the newest trend and it’s coming to your neighborhood. As opposed to the traditional discount or mail-in rebate, a growing number of retailers are appealing to a motivation stronger than simply bargain hunting, and that’s the need for consumers to better secure their financial future. Retailers have begun offering shoppers deposits into their college savings or retirement accounts through “microinvesting.� According to a recent report by Financial Research Corporation, microinvesting programs have the potential to capture about $22 billion annually in eligible shopping transactions, and this would represent an incremental $1.1 billion per year in assets to individual investors. Vestia Corporation of Atlanta launched its first program about three years ago. A spokesperson stated “while we’ve always had a large number of online and gift certificate merchants in our programs, I fully expect our off-line network to double in size by this time next year.� The newest participants are Hickory Farms and FastFrame, which has more than 250 custom picture-framing shops. Vestia’s senior vice president stated “microinvesting programs are truly a win-win for both participating retailers and consumers--retailers end up increasing customer loyalty and decreasing their promotional expense when compared to other traditional promotions, while consumers end up investing assets that otherwise may never have been set aside.�
To many, it just seems like words on a page when headlines describe crude oil climbing to a 9-month, post-Iraq war high of $33.75 per barrel. In Denver those words became truly meaningful. Many Denver motorists woke up yesterday to a 20 cent per gallon price overnight increase at the pump to $1.50 per gallon. That got everyone’s attention in a hurry. Hopefully, yesterday’s rise in January’s natural gas to $6.86 per million BTUs won’t produce the same unpleasant overnight results that gasoline did. In home heating, a natural gas services index is 16.5% higher than in November 2002.
It is the sign of the times. Goodwill Industries of Central North Carolina has plans to open three new stores and a new job-training center in 2004, investing an estimated $5.4 million. The expansion is expected to create about 25 jobs. Goodwill invests about 90% of its profits back into the community. Their group vice president stated “in a down economy, Goodwills have a tendency to do well. We’ve had a few good years, and we just felt it was time to maximize our investment.� Meanwhile, BellSouth Corp. will slash 1,074 positions nationwide between January and April next year. Positions affected include service technicians, clerical workers, operators, and pay phone staff. The company is exiting the pay phone business at the end of the year. Said a BellSouth spokesperson, “we are very much aware of the impact that the economy, regulation, and competition is having on the company… a scheme of government-managed competition that directs BellSouth to give away parts of its network at a rate that is below the cost that we have to invest to build it is not conducive to a positive effect on your company.� This layoff brings this year’s total to more than 3,000 union jobs that have been labeled as “surplus� and last year BellSouth cut nearly 12,000 union and nonunion jobs. It should be noted that BellSouth was not alone yesterday in announcing layoffs. Human Genome Sciences stated they shall fire 75 workers, nearly 7% of its workforce, because of overlapping responsibilities. The company lost $47 million last quarter.
I was reading yesterday that Japan has sold 18 trillion yen this year. Considering that the dollar is at about 107.27 yen, I must say Japan does not have much to show for those funds. We could have made use of those yen in the purchase of U.S. treasuries. The Treasury department stated purchases of U.S. treasuries by international investors in October would have dropped $1.7 billion had it not been for central banks. In my view, only lower deficits will help our dollar. Bush has essentially stated that we should trust him to spend less after his re-election. In other words, he needs to spend more in 2004 to buy the votes needed for re-election. Many accuse me of lacking sophistication, and that I should realize it’s American politics. My answer is I intend to cast my vote for Ron Paul.
A recent report from the nonpartisan think tank, the Council on Foreign Relations, concluded that the United States “remains dangerously ill-prepared to handle a catastrophic attack on American soil.� Analysts at the think tank estimated it would cost $98 billion over five years to give first responders and public health agencies the training and equipment to detect weapons of mass destruction and respond to an attack. The report stated “fire departments across the country have only enough radios to equip half the firefighters on a shift and breathing apparatuses for only one-third. Only 10 percent of fire departments in the United States have the personnel and equipment to respond to a building collapse.� Overall, the Department of Homeland Security will spend more than $29 billion in fiscal 2004, including $4.2 billion for the Office of Domestic Preparedness. It would be interesting to know how much of this money is spent on pet pork projects and/or contracts for political friends and allies. The answer should not come as a surprise.
Pharmacists across California are complaining about the proposed cuts in the state’s Medi-Cal program, which subsidizes drugs for poor citizens. A group of independent pharmacists and doctors have filed lawsuits against the state, accusing the head of the state’s Department of Health Services of violating federal laws that assure access to care for Medicaid patients. Pharmacists, doctors, dentists, and others serve California’s nearly 6.5 million Medi-Cal patients. Over the summer Governor Gray Davis and the Legislature had approved a 5% reduction in provider reimbursements scheduled to go into effect on January 1. Governor Arnold Schwarzenegger has proposed an additional 10% cut in reimbursements. A growing number of doctors in the state have stopped accepting Medi-Cal patients, and that number is expected to increase as a result of the proposed cuts. Almost all of the 6,000 pharmacies in the state fill Medi-Cal prescriptions. Many of these pharmacies are considering dropping Medi-Cal prescriptions. As one pharmacy owner stated, “ if I don’t get paid enough to cover my expenses, I’ll have to close up.� Walgreens operates 360 stores in the state, and they claim their operating profit margin is a slim 2%, and that’s before the proposed reimbursement cuts.
According to Ernst & Young’s calculations, deflation is going to hit the bottom line for retailers this holiday season. Their director of retail and consumers products research stated “retailers are hoping their lower prices will be offset by an increase in unit sales. We believe that deflation will, ultimately, be a drag on sales in all three sectors (apparel, consumer electronics, and toys), but especially in toys.� Meanwhile, Amrican Express’ John Theiss said 52% of Americans are planning to shop for discounts during the post-holiday season. Best Buy CEO Brad Anderson remarked “post-Christmas week is as big as the week that includes Thanksgiving.� I believe shoppers may find that prices will be a good deal lower than those during Thanksgiving week.
Wednesday, December 17, 2003
12/17/03 Two Sides To Every Story
In today’s Investor’s Business Daily a headline reads “Commerce Department Says IT Output Up In 2003.” The article stated that the U.S. tech industry will grow 6.4% in 2003. It quoted Phil Bond, undersecretary of technology for Commerce that “it’s clear the IT sector, after being through tough times, is on the comeback trail.” Yesterday morning I read another article on the IT industry in the Silicon Valley/San Jose Business Journal. Gartner, Inc., a research firm specializing in the IT sector, publishes its Gartner Technology Demand Index, and according to this Index, executives in the private and public sectors continued to demonstrate caution in their IT purchases in November. According to its weekly poll of IT-decision-makers in small, midsize, and large public and private organizations, businesses continued to spend below their budgeted levels for information technology. The Index for November recorded a score of 81. An index value of 100 means business spent exactly what they had budgeted for the month. In October, the index totaled 85. All technology sectors suffered a decline on the Technology Demand Index, and the IT services segment saw the biggest decline, dropping to 79 in November. David Hankin, senior vice president and general manager at Gartner, remarked that “coming from a strong position earlier in the year, IT services has seen an erosion in both current spending and in projected spending in 2004. We believe that much of the shortfall is the result of competitive pricing among vendors and new outsourcing options that have put considerable pressure on domestic service providers in North America.”
Frequently, I have discussed the falling dollar and its impact on our exports. Yesterday, for example, Oracle reported that much of their gain in sales and revenues was due to dollar weakness. The other side of the story, a more important part, is the impact on foreign investor flows and the current account deficit. Yesterday, it was reported that the current account deficit narrowed to $135 billion in the latest quarter; however, the second quarter was revised upward to $139.4 billion. Taking the two together indicates the U.S. will have a $500 billion current account deficit this year. The other portion of the bad news was that, in the latest quarter, foreign investors purchased $13 billion in U.S. corporate and agency (mortgage) debt, and that was down sharply from the second quarter’s $65.4 billion. In addition, there was a reduction in U.S. treasuries purchased from $55 billion down to $49.9 billion in the latest quarter. Finally, in the latest quarter, foreigners sold $3.5 billion in U.S. stocks, and this was a sharp reversal from the $22.6 billion in purchases in the second quarter.
Yesterday, there was much celebration in the state of Washington when Boeing announced the company was going ahead with plans to build the 7E7, and the location would be Everett, a suburb of Seattle. Over the next 20 years Boeing believes there is a market for 3,500 7E7s. Boeing has never in its history launched the manufacturing of a new airplane without launch orders for the plane. That was true until now. There is not one single order for the 7E7. If I were a Boeing stockholder, I would not be jumping for joy. One of the veteran machinists at the Boeing Everett plant stated “it’ll just mean a few less people being laid off.”
Yesterday was an interesting one at Sears. The CEO outlined the company’s restructuring effort and stated it might mean the third round of job cuts at its corporate headquarters in as many years. He mentioned Sears needed a “more focused and efficient corporate structure.” A job at Sears may not be for life but Sears announced their gift cards are now good for life. The vice president for the company’s customer relations stated “Sears customers have told us they want gift cards without fees or expiration dates.” Previously, Sears gift cards generally expired two years from the date of purchase. Same-store sales for Sears have been disappointing this holiday season, a their good for life gift cards is the company’s attempt to attract shoppers into their stores.
Most Americans have not heard of Miracle Recreation Equipment Co. in Mount Ayr, Iowa; however, I believe most have seen their equipment. They are the nation’s largest manufacturer of children’s park and recreation equipment. Their most famous products were the fiberglass and plastic statues of Ronald McDonald and the equipment in the play areas in McDonald’s restaurants. On December 31 production will be moved, the plant closed, and about 30 jobs eliminated. The plant’s shut down will hurt this town of 1,800 people. Another town will soon be hurting. Wilder, Ohio-based Newport Steel Corp. is a maker of tubular steel for the oil and gas drilling market. It will lay off 90 hourly and salaried employees effective the end of this week because of weak market conditions. The company will continue to employ about 230 at their plants in Wilder and Newport. I guess the oil and gas drilling business is not as strong as the headlines have indicated. Bad news has also reached the United Kingdom. British Airways is planning to make additional employment cuts. They will drop 5,000 workers in order to cut cuts.
Several times over the past six months I have mentioned the $100,000 tax deduction available to those purchasing a vehicle weighing 6,000 pounds or more. The idea was to hurry and purchase such a vehicle because the tax deduction might not be available in another year. Another part of the Jobs and Growth Act of 2003 signed by Bush was the bonus depreciation that allows businesses to immediately deduct 60% or more of what they spend on new equipment from taxable income as long as the equipment goes into service before Jan. 1, 2005. This is the perfected art of re-election economics. We have an economy that has a significant amount of unused capacity, and this depreciation booster will just add to that capacity. It will be likened to the purchases prior to Y2K. Under normal depreciation schedules, a 10% or 20% annual deduction is typical. When the stimulus ends, when the polling places are closed, just what do you think will be the result? That’s the other side of the story, and it won’t be pleasant.
Boston Federal Reserve President Cathy Minehan spoke yesterday to the Chamber of Commerce in Randolph, Mass. She provided two sides to the story. She stated “as the expansion seems to be broadening, deepening and picking up steam, excess resources should be absorbed even as productivity growth helps keep costs in check and inflation pressures low.” But she noted that “the hand-off from the consumer-driven to business-led growth to falter, bringing a weaker pattern to next year.” I suggest we toss a coin to decide.
Many economists and analysts were surprised by the decline in consumer prices, and the showing that underlying inflation is running at a nearly 38-year low. The core rate of inflation declined for the first time since December 1982. With large unused capacity, large unemployment, highly competitive pricing to attract consumers, too much production and too little demand, it is understandable that my continued worry is that of deflation rather than inflation. There will be continued adjustments in demand. As I mentioned earlier this month, Ford revised their fourth-quarter production downward from 920,000 vehicles in North America to 900,000. They will stop production at six North American plants through January 5 to adjust for falling sales of Taurus sedans and Focus small cars. A total of 12,600 workers will be affected by the shutdown. Even Ford’s monthly incentives of $4,396 did not help those 12,600 employees. Take away cash incentives and election depreciation bonuses, and one might get a true picture of the slack in ongoing resource utilization. It’s not a pretty Kodak moment.
In today’s Investor’s Business Daily a headline reads “Commerce Department Says IT Output Up In 2003.” The article stated that the U.S. tech industry will grow 6.4% in 2003. It quoted Phil Bond, undersecretary of technology for Commerce that “it’s clear the IT sector, after being through tough times, is on the comeback trail.” Yesterday morning I read another article on the IT industry in the Silicon Valley/San Jose Business Journal. Gartner, Inc., a research firm specializing in the IT sector, publishes its Gartner Technology Demand Index, and according to this Index, executives in the private and public sectors continued to demonstrate caution in their IT purchases in November. According to its weekly poll of IT-decision-makers in small, midsize, and large public and private organizations, businesses continued to spend below their budgeted levels for information technology. The Index for November recorded a score of 81. An index value of 100 means business spent exactly what they had budgeted for the month. In October, the index totaled 85. All technology sectors suffered a decline on the Technology Demand Index, and the IT services segment saw the biggest decline, dropping to 79 in November. David Hankin, senior vice president and general manager at Gartner, remarked that “coming from a strong position earlier in the year, IT services has seen an erosion in both current spending and in projected spending in 2004. We believe that much of the shortfall is the result of competitive pricing among vendors and new outsourcing options that have put considerable pressure on domestic service providers in North America.”
Frequently, I have discussed the falling dollar and its impact on our exports. Yesterday, for example, Oracle reported that much of their gain in sales and revenues was due to dollar weakness. The other side of the story, a more important part, is the impact on foreign investor flows and the current account deficit. Yesterday, it was reported that the current account deficit narrowed to $135 billion in the latest quarter; however, the second quarter was revised upward to $139.4 billion. Taking the two together indicates the U.S. will have a $500 billion current account deficit this year. The other portion of the bad news was that, in the latest quarter, foreign investors purchased $13 billion in U.S. corporate and agency (mortgage) debt, and that was down sharply from the second quarter’s $65.4 billion. In addition, there was a reduction in U.S. treasuries purchased from $55 billion down to $49.9 billion in the latest quarter. Finally, in the latest quarter, foreigners sold $3.5 billion in U.S. stocks, and this was a sharp reversal from the $22.6 billion in purchases in the second quarter.
Yesterday, there was much celebration in the state of Washington when Boeing announced the company was going ahead with plans to build the 7E7, and the location would be Everett, a suburb of Seattle. Over the next 20 years Boeing believes there is a market for 3,500 7E7s. Boeing has never in its history launched the manufacturing of a new airplane without launch orders for the plane. That was true until now. There is not one single order for the 7E7. If I were a Boeing stockholder, I would not be jumping for joy. One of the veteran machinists at the Boeing Everett plant stated “it’ll just mean a few less people being laid off.”
Yesterday was an interesting one at Sears. The CEO outlined the company’s restructuring effort and stated it might mean the third round of job cuts at its corporate headquarters in as many years. He mentioned Sears needed a “more focused and efficient corporate structure.” A job at Sears may not be for life but Sears announced their gift cards are now good for life. The vice president for the company’s customer relations stated “Sears customers have told us they want gift cards without fees or expiration dates.” Previously, Sears gift cards generally expired two years from the date of purchase. Same-store sales for Sears have been disappointing this holiday season, a their good for life gift cards is the company’s attempt to attract shoppers into their stores.
Most Americans have not heard of Miracle Recreation Equipment Co. in Mount Ayr, Iowa; however, I believe most have seen their equipment. They are the nation’s largest manufacturer of children’s park and recreation equipment. Their most famous products were the fiberglass and plastic statues of Ronald McDonald and the equipment in the play areas in McDonald’s restaurants. On December 31 production will be moved, the plant closed, and about 30 jobs eliminated. The plant’s shut down will hurt this town of 1,800 people. Another town will soon be hurting. Wilder, Ohio-based Newport Steel Corp. is a maker of tubular steel for the oil and gas drilling market. It will lay off 90 hourly and salaried employees effective the end of this week because of weak market conditions. The company will continue to employ about 230 at their plants in Wilder and Newport. I guess the oil and gas drilling business is not as strong as the headlines have indicated. Bad news has also reached the United Kingdom. British Airways is planning to make additional employment cuts. They will drop 5,000 workers in order to cut cuts.
Several times over the past six months I have mentioned the $100,000 tax deduction available to those purchasing a vehicle weighing 6,000 pounds or more. The idea was to hurry and purchase such a vehicle because the tax deduction might not be available in another year. Another part of the Jobs and Growth Act of 2003 signed by Bush was the bonus depreciation that allows businesses to immediately deduct 60% or more of what they spend on new equipment from taxable income as long as the equipment goes into service before Jan. 1, 2005. This is the perfected art of re-election economics. We have an economy that has a significant amount of unused capacity, and this depreciation booster will just add to that capacity. It will be likened to the purchases prior to Y2K. Under normal depreciation schedules, a 10% or 20% annual deduction is typical. When the stimulus ends, when the polling places are closed, just what do you think will be the result? That’s the other side of the story, and it won’t be pleasant.
Boston Federal Reserve President Cathy Minehan spoke yesterday to the Chamber of Commerce in Randolph, Mass. She provided two sides to the story. She stated “as the expansion seems to be broadening, deepening and picking up steam, excess resources should be absorbed even as productivity growth helps keep costs in check and inflation pressures low.” But she noted that “the hand-off from the consumer-driven to business-led growth to falter, bringing a weaker pattern to next year.” I suggest we toss a coin to decide.
Many economists and analysts were surprised by the decline in consumer prices, and the showing that underlying inflation is running at a nearly 38-year low. The core rate of inflation declined for the first time since December 1982. With large unused capacity, large unemployment, highly competitive pricing to attract consumers, too much production and too little demand, it is understandable that my continued worry is that of deflation rather than inflation. There will be continued adjustments in demand. As I mentioned earlier this month, Ford revised their fourth-quarter production downward from 920,000 vehicles in North America to 900,000. They will stop production at six North American plants through January 5 to adjust for falling sales of Taurus sedans and Focus small cars. A total of 12,600 workers will be affected by the shutdown. Even Ford’s monthly incentives of $4,396 did not help those 12,600 employees. Take away cash incentives and election depreciation bonuses, and one might get a true picture of the slack in ongoing resource utilization. It’s not a pretty Kodak moment.
Tuesday, December 16, 2003
12/16/03 It Was 8AM EST
For all on Wall Street the mood was gleeful. It was to be a prosperous day. The markets were higher all over the globe. Americans felt better about the war in Iraq. Saddam Hussein had received a message from President Bush. It was now safe for the President to hold a news conference. Another message was received at 8am EST yesterday. On their weekly recorded message WalMart stated people were buying “closer to need” and that their December same-store sales increase would reach closer to 3%, the lower end of their projected 3 to 5 percent rise. The key information was the number of shoppers declined from a year ago, and during the latter period, weak demand only generated a 2.3% gain in same-store sales. Another reason given for the current disappointment was the increase in gift cards for the holiday season. Over the past couple of weeks I have discussed this growing trend. In addition, the company stated more people appeared to be completing their holiday shopping later this season. The last week before Christmas accounts for the largest segment of the year’s retail sales. Consumers maybe waiting for larger discounts, but I believe more is at work. It should be noted that in the early evening yesterday Target stated that December same-store sales were running “below plan” for the week ended December 13 for the entire corporation, and that includes the Target stores as well as its two department store divisions. The results for WalMart and Target were in line with my expectations, and also reflect the recent survey by Coinstar, the maker of coin-counting machines, which found that 42% of shoppers plan to spend about what they did in 2002, but 35% remarked they would spend less than last year.
I believe last year’s holiday sales and this year’s will look rosy when compared with future results. It’s not just the gift cards or the online shopping or the tight consumer budget. Americans are turning to more homemade gifts. Some make ornaments for the tree, bake cookies, produce personalized holiday greeting cards, or create picture albums for friends and families. It’s about de-emphasizing the commercial aspects of the holiday season. Many are inviting friends over for a special meal. This can be good news for WalMart because they are the leading grocer in the country, and account for 10% of grocery dollars, up from 4% in 1997. The company has earned that business by providing quality at lower prices, and consumers keep returning to their stores. Unfortunately, this holiday season less shoppers are walking through their doors. If WalMart is having difficulty attracting the consumer, you can imagine the trouble brewing at other chains.
I came across a product from Tilano Fresco and it is in the spirit of making a gift for the holidays. They make an image transfer kit, and with the kit you can place a favorite picture and add some words on a marble coaster or on a fresco tile. You will need to get your picture laser copied onto the special Tilano transfer paper included in the kit.
I sometimes wonder whether Bush ever gives a thought as to why the majority of the American people are disappointed with his handling of the economy. He might consider his promise to “hold discretionary spending to 4%- that’s what we agreed with the Congress during the budget negotiations.” I am learning promises have little value. The Heritage Foundation calculates discretionary outlays rose 13% in 2002, 12% in 2003, and will rise 10% in 2004. Last week Bush also remarked “we have a strong dollar policy, which is, in our judgment good for the economic vitality of this country.” You want to vote for someone who “misspeaks?”
Foreclosures.com of Fair Oaks, California stated median new home prices fell 25.9% in October 2003 compared with a year ago in Alameda County, CA. Prices fell 15.5% in San Mateo County, CA, 14.1% in San Francisco, and 11.2% in Santa Clara County year over year. Alexis McGee, president of Forclosures.com, remarked “if recent history is any example, we expect this cooling to spread to resale homes and then move out of the Bay Area to spread throughout the state. We expect California foreclosure activity to increase in 2004. Even a slight market decline would se prices begin to approach existing loan balances. Homeowners in trouble will have less financial ‘headroom’ in their properties and will have difficulty selling their way out of foreclosure. We could see many more homes going back to lenders next year.”
TYCO Plastics and Adhesives announced plans to close its Lawrenceville, Georgia facility and cut 88 jobs. The moves are part of a corporate restructuring plan that includes the consolidation of 219 manufacturing, sales, distribution, and other facilities. These actions are expected to reduce employment by 7,200 employees. In response to slumping demand for refinancing home loans, Cowlitz Bancorporation is closing its Bay Mortgage division offices in Seattle and Bellevue and laying off 32 employees.
Should you read only the headlines this morning, you will see that Manpower’s Employment Outlook Survey predicts stronger first quarter hiring activity for the first time in five years. Of the 16,000 U.S. employers polled, 20% said they plan to boost employment levels for the first three months of 2004, while 13% anticipate a slower hiring pace. The two main areas of strength are in construction and education. The estimated hiring pace in education, however, “is still not as strong as it was a year ago.” That leaves the area of construction where the greatest opportunities are reflected in the South. With a slowdown in home building and home renovation coupled with budget constraints at the federal, state, and local government levels, I have serious doubts about increased hiring for construction. It pays to read beyond the headlines.
The U.S. government has increased enforcement of rules covering Americans traveling to Cuba. However, there is an exception to the U.S. trade embargo allowing direct sales of American farm products to Cuba. Where there is a will there is a way. On Monday, contracts were signed that could result in as much as $130 million in new farm product sales to Cuba, and that is in addition to the $500 million in goods already contracted. This marks the second anniversary of U.S. commercial food shipments to Cuba.
The Boston Consulting Group released a new study revealing that almost one in three patients surveyed reported having taken a medication less often than prescribed during the previous 12 months, and about one in four said they had delayed filling a prescription. Nearly one in five admitted that they had failed to fill a prescription during the same period. About one-fifth of the patients surveyed also stopped taking a prescription medication sooner than prescribed. About one in seven took their prescription medication but in smaller doses than prescribed.
For all on Wall Street the mood was gleeful. It was to be a prosperous day. The markets were higher all over the globe. Americans felt better about the war in Iraq. Saddam Hussein had received a message from President Bush. It was now safe for the President to hold a news conference. Another message was received at 8am EST yesterday. On their weekly recorded message WalMart stated people were buying “closer to need” and that their December same-store sales increase would reach closer to 3%, the lower end of their projected 3 to 5 percent rise. The key information was the number of shoppers declined from a year ago, and during the latter period, weak demand only generated a 2.3% gain in same-store sales. Another reason given for the current disappointment was the increase in gift cards for the holiday season. Over the past couple of weeks I have discussed this growing trend. In addition, the company stated more people appeared to be completing their holiday shopping later this season. The last week before Christmas accounts for the largest segment of the year’s retail sales. Consumers maybe waiting for larger discounts, but I believe more is at work. It should be noted that in the early evening yesterday Target stated that December same-store sales were running “below plan” for the week ended December 13 for the entire corporation, and that includes the Target stores as well as its two department store divisions. The results for WalMart and Target were in line with my expectations, and also reflect the recent survey by Coinstar, the maker of coin-counting machines, which found that 42% of shoppers plan to spend about what they did in 2002, but 35% remarked they would spend less than last year.
I believe last year’s holiday sales and this year’s will look rosy when compared with future results. It’s not just the gift cards or the online shopping or the tight consumer budget. Americans are turning to more homemade gifts. Some make ornaments for the tree, bake cookies, produce personalized holiday greeting cards, or create picture albums for friends and families. It’s about de-emphasizing the commercial aspects of the holiday season. Many are inviting friends over for a special meal. This can be good news for WalMart because they are the leading grocer in the country, and account for 10% of grocery dollars, up from 4% in 1997. The company has earned that business by providing quality at lower prices, and consumers keep returning to their stores. Unfortunately, this holiday season less shoppers are walking through their doors. If WalMart is having difficulty attracting the consumer, you can imagine the trouble brewing at other chains.
I came across a product from Tilano Fresco and it is in the spirit of making a gift for the holidays. They make an image transfer kit, and with the kit you can place a favorite picture and add some words on a marble coaster or on a fresco tile. You will need to get your picture laser copied onto the special Tilano transfer paper included in the kit.
I sometimes wonder whether Bush ever gives a thought as to why the majority of the American people are disappointed with his handling of the economy. He might consider his promise to “hold discretionary spending to 4%- that’s what we agreed with the Congress during the budget negotiations.” I am learning promises have little value. The Heritage Foundation calculates discretionary outlays rose 13% in 2002, 12% in 2003, and will rise 10% in 2004. Last week Bush also remarked “we have a strong dollar policy, which is, in our judgment good for the economic vitality of this country.” You want to vote for someone who “misspeaks?”
Foreclosures.com of Fair Oaks, California stated median new home prices fell 25.9% in October 2003 compared with a year ago in Alameda County, CA. Prices fell 15.5% in San Mateo County, CA, 14.1% in San Francisco, and 11.2% in Santa Clara County year over year. Alexis McGee, president of Forclosures.com, remarked “if recent history is any example, we expect this cooling to spread to resale homes and then move out of the Bay Area to spread throughout the state. We expect California foreclosure activity to increase in 2004. Even a slight market decline would se prices begin to approach existing loan balances. Homeowners in trouble will have less financial ‘headroom’ in their properties and will have difficulty selling their way out of foreclosure. We could see many more homes going back to lenders next year.”
TYCO Plastics and Adhesives announced plans to close its Lawrenceville, Georgia facility and cut 88 jobs. The moves are part of a corporate restructuring plan that includes the consolidation of 219 manufacturing, sales, distribution, and other facilities. These actions are expected to reduce employment by 7,200 employees. In response to slumping demand for refinancing home loans, Cowlitz Bancorporation is closing its Bay Mortgage division offices in Seattle and Bellevue and laying off 32 employees.
Should you read only the headlines this morning, you will see that Manpower’s Employment Outlook Survey predicts stronger first quarter hiring activity for the first time in five years. Of the 16,000 U.S. employers polled, 20% said they plan to boost employment levels for the first three months of 2004, while 13% anticipate a slower hiring pace. The two main areas of strength are in construction and education. The estimated hiring pace in education, however, “is still not as strong as it was a year ago.” That leaves the area of construction where the greatest opportunities are reflected in the South. With a slowdown in home building and home renovation coupled with budget constraints at the federal, state, and local government levels, I have serious doubts about increased hiring for construction. It pays to read beyond the headlines.
The U.S. government has increased enforcement of rules covering Americans traveling to Cuba. However, there is an exception to the U.S. trade embargo allowing direct sales of American farm products to Cuba. Where there is a will there is a way. On Monday, contracts were signed that could result in as much as $130 million in new farm product sales to Cuba, and that is in addition to the $500 million in goods already contracted. This marks the second anniversary of U.S. commercial food shipments to Cuba.
The Boston Consulting Group released a new study revealing that almost one in three patients surveyed reported having taken a medication less often than prescribed during the previous 12 months, and about one in four said they had delayed filling a prescription. Nearly one in five admitted that they had failed to fill a prescription during the same period. About one-fifth of the patients surveyed also stopped taking a prescription medication sooner than prescribed. About one in seven took their prescription medication but in smaller doses than prescribed.
Monday, December 15, 2003
12/15/03 Dialing For Dollars
Over the past 18 months I have mentioned several times that continued weakness in the dollar would bring foreign buyers to our shores, and that the currency adjustments would make it cheaper to purchase American companies. The Bush administration focuses solely on the cheaper dollar increasing our exports, and that is a small part of the story surrounding the dollar’s decline. Today, the Henkel Group of Dusseldorf, Germany signed an agreement to purchase the Dial Corp, makers of Dial soaps, Purex laundry detergents, Renuzit air fresheners, and Zout, for $28.75 in cash, a premium of 11% over Dial’s closing price on Friday, or about $2.9 billion. This amounts to about 2 times projected revenues for 2004, and the transaction will immediately enhance Henkel’s earnings before the amortization of goodwill. In all probability, Henkel will sell its minority interests in Clorox and Ecolab to help fund the acquisition. Dial employs 2,900 and produces a return on sales (EBIT) exceeding 17%. Henkel is a much larger company with sales approaching 10 billion euros. They employ 50,000 people worldwide. Henkel’s CEO remarked “ we’ve been underrepresented in the U.S.” Dial is based in Scottsdale, Arizona, and Herb Baum, its current CEO, will remain for two years in that role. The transaction is expected to close by April 2004. It will be interesting to see what the next U.S. acquisition shall be for the foreign buyers. There should be a great many more in the coming year.
As we know, the job market peaked in December 2000. Between January 2001 and January 2003 Santa Clara County, the home of Silicon Valley, had lost 192,300 jobs or 18% of the total. Through October of this year, another 12,100 jobs were lost. Many people don’t realize that IBM has had a facility (called a lab) in San Jose for many years. The Wall Street Journal mentioned today that IBM would be adjusting its global sourcing, and that the company would move over 4,700 programmers to India, China, and elsewhere. It has not been disclosed how many programmers might lose their positions in San Jose. To date, IBM has hired about 500 software engineers in India.
In 1995 John Chambers became CEO of Cisco, and he was granted options to purchase shares in the company for $3.45 per share. The option on two million of those shares were due to expire in August 2004. On November 13, 2003 he exercised the two million share option and sold them the same day at prices ranging from $22.50 to $22.73. For the last two and one-half years Chambers’ salary has been only $1 a year. After last month’s sale, he holds about 2 million Cisco shares and owned options to purchase an additional 28.5 million shares. I am certain the vast majority of Chambers’ net worth is in Cisco stock, and profit taking and/or diversification are not unusual. I found it odd that Chambers would choose this time to make the sale. He has been telling investors that business investment is picking up for Cisco’s products. That has not been the case for over two years. In addition, if he had waited until January 2, 2004, the tax on the profit would not be due for another 15 months.
Talking about taxes, according to a Harvard University study, most of the benefits of tax-advantaged retirement accounts go to the highest wage earners. The poorest 40% of households have only about 5% of all assets in these accounts, while the richest 10% have more than half. This is not totally surprising. According to Boston-based Cerulli Associates, about two-thirds of households have savings of less than $10,000. While the country has more than 70 million children under the age of 18, fewer than 3 million “529” savings accounts for college tuition have been opened. The White House estimated in the President’s latest budget that tax breaks for retirement would amount to more than $415 billion between 2004 and 2008. Americans have been saving less. According to the Commerce Department, Congress created IRAs in 1982, and they allowed wage earners to shelter up to $2,000 annually. In 1982 the personal savings rate was 10.9%. In 2002 the rate had dropped down to 2.3%.
A new dimension has been created to deal with the current shortage of registered nurses. Shift bidding is among the newest tools hospitals are using to attract nurses. Through bidding for jobs on internal hospital websites, hospitals save labor costs by using fewer outside nurses while letting their own nurses control when they work and how much they earn. Since 2001, St.Peter’s Hospital in Albany, N.Y. has been able to fill more than 127,000 hours and saved more than $1.7 million through online bidding, and has reduced the need for hiring higher-hourly pat agency nurses. Its overall nurse vacancy rate dropped from 11% to 5%. The national average vacancy rate for RNs is 13%.
According to the International Monetary Fund, China’s share of the world’s output of goods and services has nearly doubled since 1991 to 12.7%. The European Union’s share is 15.7%, and America’s is 21%. India’s share is 4.8%. The key point is that America’s share has not grown since 1980. As Robert Solow, the Nobel laureate in economics points out, “the notion that God intended for Americans to be permanently wealthier than the rest of the world, that gets less and less likely as time goes on.”
When I saw a picture of Saddam Hussein yesterday, my first thought was he could have passed for a homeless person on the streets of San Francisco. The only difference was the $750,000 in cash. Otherwise, the similarity was striking. No one would have noticed or bothered him in San Francisco. He would have blended right into the local landscape. He was a picture of mass destruction- his own. The question remains who gets the $25 million reward? It’s hard to believe 314 American soldiers have died, and thousands have been wounded or injured, to ensure Hussein was not a threat to our country. He may no longer terrorize Iraqis, but as long as we are occupying that nation, car bombings and the like will be commonplace. Let all Americans remember our fallen soldiers and our wounded. Let us never forget this war began over the threat of WMD. They have never been found. Only a homeless power-hungry member of the evil axis was found. For me, that does not warrant celebration. It is cause for serious introspection.
Over the past 18 months I have mentioned several times that continued weakness in the dollar would bring foreign buyers to our shores, and that the currency adjustments would make it cheaper to purchase American companies. The Bush administration focuses solely on the cheaper dollar increasing our exports, and that is a small part of the story surrounding the dollar’s decline. Today, the Henkel Group of Dusseldorf, Germany signed an agreement to purchase the Dial Corp, makers of Dial soaps, Purex laundry detergents, Renuzit air fresheners, and Zout, for $28.75 in cash, a premium of 11% over Dial’s closing price on Friday, or about $2.9 billion. This amounts to about 2 times projected revenues for 2004, and the transaction will immediately enhance Henkel’s earnings before the amortization of goodwill. In all probability, Henkel will sell its minority interests in Clorox and Ecolab to help fund the acquisition. Dial employs 2,900 and produces a return on sales (EBIT) exceeding 17%. Henkel is a much larger company with sales approaching 10 billion euros. They employ 50,000 people worldwide. Henkel’s CEO remarked “ we’ve been underrepresented in the U.S.” Dial is based in Scottsdale, Arizona, and Herb Baum, its current CEO, will remain for two years in that role. The transaction is expected to close by April 2004. It will be interesting to see what the next U.S. acquisition shall be for the foreign buyers. There should be a great many more in the coming year.
As we know, the job market peaked in December 2000. Between January 2001 and January 2003 Santa Clara County, the home of Silicon Valley, had lost 192,300 jobs or 18% of the total. Through October of this year, another 12,100 jobs were lost. Many people don’t realize that IBM has had a facility (called a lab) in San Jose for many years. The Wall Street Journal mentioned today that IBM would be adjusting its global sourcing, and that the company would move over 4,700 programmers to India, China, and elsewhere. It has not been disclosed how many programmers might lose their positions in San Jose. To date, IBM has hired about 500 software engineers in India.
In 1995 John Chambers became CEO of Cisco, and he was granted options to purchase shares in the company for $3.45 per share. The option on two million of those shares were due to expire in August 2004. On November 13, 2003 he exercised the two million share option and sold them the same day at prices ranging from $22.50 to $22.73. For the last two and one-half years Chambers’ salary has been only $1 a year. After last month’s sale, he holds about 2 million Cisco shares and owned options to purchase an additional 28.5 million shares. I am certain the vast majority of Chambers’ net worth is in Cisco stock, and profit taking and/or diversification are not unusual. I found it odd that Chambers would choose this time to make the sale. He has been telling investors that business investment is picking up for Cisco’s products. That has not been the case for over two years. In addition, if he had waited until January 2, 2004, the tax on the profit would not be due for another 15 months.
Talking about taxes, according to a Harvard University study, most of the benefits of tax-advantaged retirement accounts go to the highest wage earners. The poorest 40% of households have only about 5% of all assets in these accounts, while the richest 10% have more than half. This is not totally surprising. According to Boston-based Cerulli Associates, about two-thirds of households have savings of less than $10,000. While the country has more than 70 million children under the age of 18, fewer than 3 million “529” savings accounts for college tuition have been opened. The White House estimated in the President’s latest budget that tax breaks for retirement would amount to more than $415 billion between 2004 and 2008. Americans have been saving less. According to the Commerce Department, Congress created IRAs in 1982, and they allowed wage earners to shelter up to $2,000 annually. In 1982 the personal savings rate was 10.9%. In 2002 the rate had dropped down to 2.3%.
A new dimension has been created to deal with the current shortage of registered nurses. Shift bidding is among the newest tools hospitals are using to attract nurses. Through bidding for jobs on internal hospital websites, hospitals save labor costs by using fewer outside nurses while letting their own nurses control when they work and how much they earn. Since 2001, St.Peter’s Hospital in Albany, N.Y. has been able to fill more than 127,000 hours and saved more than $1.7 million through online bidding, and has reduced the need for hiring higher-hourly pat agency nurses. Its overall nurse vacancy rate dropped from 11% to 5%. The national average vacancy rate for RNs is 13%.
According to the International Monetary Fund, China’s share of the world’s output of goods and services has nearly doubled since 1991 to 12.7%. The European Union’s share is 15.7%, and America’s is 21%. India’s share is 4.8%. The key point is that America’s share has not grown since 1980. As Robert Solow, the Nobel laureate in economics points out, “the notion that God intended for Americans to be permanently wealthier than the rest of the world, that gets less and less likely as time goes on.”
When I saw a picture of Saddam Hussein yesterday, my first thought was he could have passed for a homeless person on the streets of San Francisco. The only difference was the $750,000 in cash. Otherwise, the similarity was striking. No one would have noticed or bothered him in San Francisco. He would have blended right into the local landscape. He was a picture of mass destruction- his own. The question remains who gets the $25 million reward? It’s hard to believe 314 American soldiers have died, and thousands have been wounded or injured, to ensure Hussein was not a threat to our country. He may no longer terrorize Iraqis, but as long as we are occupying that nation, car bombings and the like will be commonplace. Let all Americans remember our fallen soldiers and our wounded. Let us never forget this war began over the threat of WMD. They have never been found. Only a homeless power-hungry member of the evil axis was found. For me, that does not warrant celebration. It is cause for serious introspection.
Sunday, December 14, 2003
12/14/03 A Sunday Outing Shopping Trip
I was all set to get in the car for our behind the scenes look of today’s shopping landscape. The phone rang at 2:30 AM asking me if I had heard the news about Saddam Hussein’s capture in Tikrit. I said his mother had called me Saturday night to tell me all about it. The voice on the other end called me all the familiar names. After all, that’s part of old friendship. So, before we get in the car, I will repeat what I said—for the most part. I’m delighted Hussein has been captured. I wouldn’t trade one dead or wounded U.S. soldier for Hussein, and the killing in Iraq will not stop just because Hussein is in custody. A Governing Council member, Jala Talabani, stated “with the arrest of Saddam, the source financing terrorists has been destroyed and terrorist attacks will come to an end. Now we can establish a durable stability and security in Iraq.” I suggest we give Talabani a rifle and a vest and let him patrol the streets of Baghdad on the front lines. Maybe he would be good enough to tell us where to ship his body after he has been knocked off by terrorists. Now, we can get in the car.
I have always wanted to visit Dodgeville, Iowa. It is about 40 miles northeast of Dubuque, and this is a town called home by 4,200 people. I know where we’re going. We are about to visit a football-field-size room with a height of 65 feet with a capacity to hold 550,000 boxes. We will be seeing a distribution/call center equal in size to 16 football fields. When you order from Lands’ End, this is where it happens. The addition of 2,600 seasonal employees has increased the workforce at this facility to about 7,100. Some milk the cows before arriving at work. This place is music to the ears of UPS. About 95% of Lands’ End shipments go by UPS. This place operates 24 hours a day year-round, except for about 36 hours around December 25. For this season, robes and sweaters are hot items, but not surprisingly to me, so are Lands’ End gift certificates. I mentioned a couple of weeks back that gift cards could account for up to 20% of this year’s holiday spending. As you can see, this place is amazing. It’s not just the bar codes, scanners, the 300 “smart” trays, and computers. There are single-person cranes retrieving boxes. This is cool stuff. Sears paid $2 billion for Lands’ End. If they don’t fiddle with it, they’ll make a good return over time. Hopefully, they won’t find a way to screw it up. As the distribution center director stated, “we’re old pros at it.” That’s a ten four, old buddy.
I thought we’d take a little detour to see how the thrift stores are doing. There’s Shirley Keck, a loyal shopper. She is taking a brief break from her bargain hunting to tell us “people come over to our house and they can’t believe it’s all from here. It’s perfectly good stuff.” The least Shirley could do might be to invite us for dinner, but no such luck. Goodwill Industries is having better fortune. Since July 1, the start of their fiscal year, sales have increased nearly 10% compared with the same period last year. C. Britt Beemer, who heads American Research Group, estimates 6 to 9 percent regularly shop thrift and consignment stores and another 7 to 8 percent are deal hunters who view it as more of a pastime that’s no longer socially stigmatizing. Goodwill also operates career centers for unemployed and under-employed. In the 12-month period ended June 30, more than 6,800 went to the centers looking for employment help. However, from July through November, about 5,800 people have come in seeking help. This is hardly a sign that the employment picture has improved. It’s nice to know that job creation is on Bush’s “pressing business” list for 2004. I think it also made his 2003 list.
Greenspan recently warned China about their overheating economy, and the government officials appear to be listening. Rather than make a major currency adjustment in the yuan, China’s 21st Century Business Herald reported the State Development and Planning Commission may issue a directive as soon as tomorrow ordering commercial banks to stop lending to carmakers, and for local governments to stop building and expanding plants. Only one in 120 Chinese now owns a car. The Herald stated auto manufacturing capacity is forecast to grow to 12 million cars a year by 2007. However, in November, auto prices fell 4.6% and unsold inventory rose by 37%. Some Chinese economists have expressed that China has a problem of too much investment in the auto, steel, and property industries. China has experienced on-going power shortages. It is a smart decision to curtail economic growth. Infrastructure needs to catch up with soaring economic expansion. Excessive production must be reduced in an effort to have demand meet output. Otherwise profits will disappear and bad loans at banks will mushroom.
Over the past decade India is the only country across economies that has experienced acceleration in growth rates of per capita income. As such, almost all other economies have shown an increase in growth rates lower than India’s or negative growth rates through the decade. Only China has had a higher per capita income growth from 1997 through 2002. During the last 5 years, India’s per capita income growth rate was 19% while China’s was 39%. India is not a newcomer to the economic scene. From 1982-92 the per capita income experienced a 36.5% growth rate, and from 1992-2002 improvement to 46%. In terms of current dollar rates, India’s per capita income has increased by 61% from $1,600 in 1992 to $2,570 in 2002. There is a credit boom in India. Visa now has 15 million credit and debit cards in India, more than double a year ago. However, debt levels remain low. According to ABN Amro Asia, household debt as a percentage of India’s GDP was 15% in 2002, below 1995 levels. Debt servicing does not represent much of a problem with interest rates at a 30-year low of 6%.
I was all set to get in the car for our behind the scenes look of today’s shopping landscape. The phone rang at 2:30 AM asking me if I had heard the news about Saddam Hussein’s capture in Tikrit. I said his mother had called me Saturday night to tell me all about it. The voice on the other end called me all the familiar names. After all, that’s part of old friendship. So, before we get in the car, I will repeat what I said—for the most part. I’m delighted Hussein has been captured. I wouldn’t trade one dead or wounded U.S. soldier for Hussein, and the killing in Iraq will not stop just because Hussein is in custody. A Governing Council member, Jala Talabani, stated “with the arrest of Saddam, the source financing terrorists has been destroyed and terrorist attacks will come to an end. Now we can establish a durable stability and security in Iraq.” I suggest we give Talabani a rifle and a vest and let him patrol the streets of Baghdad on the front lines. Maybe he would be good enough to tell us where to ship his body after he has been knocked off by terrorists. Now, we can get in the car.
I have always wanted to visit Dodgeville, Iowa. It is about 40 miles northeast of Dubuque, and this is a town called home by 4,200 people. I know where we’re going. We are about to visit a football-field-size room with a height of 65 feet with a capacity to hold 550,000 boxes. We will be seeing a distribution/call center equal in size to 16 football fields. When you order from Lands’ End, this is where it happens. The addition of 2,600 seasonal employees has increased the workforce at this facility to about 7,100. Some milk the cows before arriving at work. This place is music to the ears of UPS. About 95% of Lands’ End shipments go by UPS. This place operates 24 hours a day year-round, except for about 36 hours around December 25. For this season, robes and sweaters are hot items, but not surprisingly to me, so are Lands’ End gift certificates. I mentioned a couple of weeks back that gift cards could account for up to 20% of this year’s holiday spending. As you can see, this place is amazing. It’s not just the bar codes, scanners, the 300 “smart” trays, and computers. There are single-person cranes retrieving boxes. This is cool stuff. Sears paid $2 billion for Lands’ End. If they don’t fiddle with it, they’ll make a good return over time. Hopefully, they won’t find a way to screw it up. As the distribution center director stated, “we’re old pros at it.” That’s a ten four, old buddy.
I thought we’d take a little detour to see how the thrift stores are doing. There’s Shirley Keck, a loyal shopper. She is taking a brief break from her bargain hunting to tell us “people come over to our house and they can’t believe it’s all from here. It’s perfectly good stuff.” The least Shirley could do might be to invite us for dinner, but no such luck. Goodwill Industries is having better fortune. Since July 1, the start of their fiscal year, sales have increased nearly 10% compared with the same period last year. C. Britt Beemer, who heads American Research Group, estimates 6 to 9 percent regularly shop thrift and consignment stores and another 7 to 8 percent are deal hunters who view it as more of a pastime that’s no longer socially stigmatizing. Goodwill also operates career centers for unemployed and under-employed. In the 12-month period ended June 30, more than 6,800 went to the centers looking for employment help. However, from July through November, about 5,800 people have come in seeking help. This is hardly a sign that the employment picture has improved. It’s nice to know that job creation is on Bush’s “pressing business” list for 2004. I think it also made his 2003 list.
Greenspan recently warned China about their overheating economy, and the government officials appear to be listening. Rather than make a major currency adjustment in the yuan, China’s 21st Century Business Herald reported the State Development and Planning Commission may issue a directive as soon as tomorrow ordering commercial banks to stop lending to carmakers, and for local governments to stop building and expanding plants. Only one in 120 Chinese now owns a car. The Herald stated auto manufacturing capacity is forecast to grow to 12 million cars a year by 2007. However, in November, auto prices fell 4.6% and unsold inventory rose by 37%. Some Chinese economists have expressed that China has a problem of too much investment in the auto, steel, and property industries. China has experienced on-going power shortages. It is a smart decision to curtail economic growth. Infrastructure needs to catch up with soaring economic expansion. Excessive production must be reduced in an effort to have demand meet output. Otherwise profits will disappear and bad loans at banks will mushroom.
Over the past decade India is the only country across economies that has experienced acceleration in growth rates of per capita income. As such, almost all other economies have shown an increase in growth rates lower than India’s or negative growth rates through the decade. Only China has had a higher per capita income growth from 1997 through 2002. During the last 5 years, India’s per capita income growth rate was 19% while China’s was 39%. India is not a newcomer to the economic scene. From 1982-92 the per capita income experienced a 36.5% growth rate, and from 1992-2002 improvement to 46%. In terms of current dollar rates, India’s per capita income has increased by 61% from $1,600 in 1992 to $2,570 in 2002. There is a credit boom in India. Visa now has 15 million credit and debit cards in India, more than double a year ago. However, debt levels remain low. According to ABN Amro Asia, household debt as a percentage of India’s GDP was 15% in 2002, below 1995 levels. Debt servicing does not represent much of a problem with interest rates at a 30-year low of 6%.
Saturday, December 13, 2003
12/13/03 How Can the PPI Fall, Wholesale Prices Fall, And Commodity Prices Rise?
That’s a darn good question for an early Saturday morning. Before we journey into a black hole, let’s get some light on the subject. In the month of November the Producer Price Index declined for the first time in six months. The explanation is simple. There are too many imported goods, and, when combined with excess manufacturing capacity and insufficient consumer demand, companies lack the ability to raise prices on a sustainable basis. A good example would be the auto industry. In November, passenger car prices had their biggest decline since April. Another example would be computers where prices have declined over 16% from year earlier levels. Until pricing power exists, there will be continued pressure on operating profit margins.
The government stated a major reason for wholesale prices dropping in November was the decline in car prices. That was a contributing factor, but energy prices declined 1.2%, the biggest drop since May. I wondered how that was possible. Gasoline dropped 4.8% and natural gas declined 1.1% in price. Today a barrel of crude oil is $33 and natural gas for January delivery surged 9% yesterday to $7.221 per thousand cubic feet on the New York Mercantile Exchange. It was the highest close since Feb. 28. With respect to natural gas, utilities sign long-term contracts for most of their winter fuel over the summer, and therefore, the consumer does not take such a blow from the recent price run-up. As for the price of gasoline, I have written in the past on the growing margins experienced within the industry. These margins can be reduced, and profits can still remain on firm footing. One more reason for the decline in wholesale prices was the decline in food prices, particularly for beef. Not too long ago I wrote about the beef industry, cattle supplies, and pricing for the industry. I mentioned that supplies would be increasing, that beef prices decline in the winter, and consumers should switch to chicken and turkey and still they would be able to get their protein punch.
Before we move to a broader discussion of commodities, I’d like to touch on the Bush administration’s failed “strong dollar policy.” Of course, we know it is a weak dollar policy. If it were the reverse, I would hope that the dollar would not be trading at an 11-year low against the pound, and that, since February 2002, the greenback would not have declined 30% versus the euro and 20% against the yen. The weaker dollar should promote our exports. It has. They increased 2.6% to about $88 billion in October, the highest level since March 2001. Farm exports were the highest in seven years, the exports for our American-made autos rose to the highest point since March 2000, and exports for capital goods increased to their highest level in two and one-quarter years. The falling dollar should make imports more expensive, and the big exception is China with its fixed yuan versus dollar peg. Our imports rose 2.1% in October to about $130 billion, with the deficit with China amounting to a record $13.6 billion. Taking out China, we still had a deficit for the month of $28.2 billion or about $318 billion on an annualized basis. The problem goes much deeper than just China, and that is what Greenspan was saying the other day. He is correct. We will continue to lose jobs to other countries. We will continue to have $400+ billion trade deficits. So far this year the dollar has fallen in value by about 14% against a market basket of major currencies since the beginning of 2003. The weak dollar policy is certainly not the answer. Our country must innovate and export value-priced products that the world wants to import. We cannot rely on Boeing to export planes in the face of increased competition. We cannot afford to wait 3 or 4 years for the 7E7. In addition, the consumer needs to focus on American-made products. If it means paying a bit more, then consider that a user tax that shall be offset by diminishing job losses and less dependency on foreign capital to fund our deficits. Let the Snowman set a bad example and buy his foreign-made toys for the holidays. He doesn’t know any better.
Since Thanksgiving, there has been a 46% rise in the price of natural gas. That makes the Dow and the Nasdaq look like they are standing still. The chemical, fertilizer, and ammonia industries depend on natural gas as a key ingredient for their products. Their profit margins are endangered. Greg Lebedev, president of the American Chemistry Council, stated “at the moment, the price of natural gas is serving as the single largest brake on the U.S. economy.” That may possibly be a small exaggeration, but he is understandably a bit uptight. Heating oil is on the rise too. It rose over 4 cents to almost 93 cents per gallon, gasoline futures increased over 3 cents to 90 cents a gallon, and I previously mentioned January crude oil futures spiking to $33 a barrel. The Reuters CRB index tracks 17 commodities. It is up about 22% since the end of 1999. During the same time the S&P 500 declined about 28%. Half the stocks in the S&P basic materials index have outperformed the S&P 500 this year. Gold gets most of the headlines, as it traded up to $410 per ounce, and it is the first time in 8 years it has been over the $400 level. Gold is up more than 60% from its low of about $255 an ounce in February 2001. Some of the commodities participating in rising prices have been copper, aluminum, steel, forest products, soybeans, and beef. The increased demand from China is often blamed for rising commodity prices. As with our trade deficit, China has been a large participant but other nations, taken as a whole, outweigh the China factor. Depending on your position in the commodity chain, as it were, can determine the point of view on rising commodity prices. We know beef ranchers have been hurting for years. Gold mining companies have waited many years for a rise in the price of gold. The same can be said for those in the silver industry. Commodity prices have been on a roller coaster ride for years. I remember not too long ago, in the late 1990s, hog prices were so low that producers would try to give the hogs away for nothing rather than incur the cost of shipping to auction and paying the auctioneer. The bottom line is many commodities have risen in price of late; however, the United States is mainly a service-oriented nation with less dependency on manufacturing and farming as a percentage of the GDP. As such, as long as there is slack capacity and slack demand, there is room for the Producer Price Index and for U.S. wholesale prices to decline. To offset the declining margins, companies shall continue with their cost-cutting measures. This means more layoffs.
Speaking of layoffs, the state of California Employment Development Department reported yesterday that 14,400 jobs were lost outside the farm sector in November. They also stated that 72,000 workers left the labor force. The November jobs count does not include employees who took part in the work stoppage affecting Southern California supermarket chains. Matters weren’t too bright in Chicago either. Mayor Daley explained “we’re moving people from permanent to seasonal. And also, the federal and state money has dried up. I just can’t them on the payroll. Simple as that.” He was explaining the layoff notices that went out this week to 270 employees in the city departments of Transportation and Water Management in the first wave of 600 firings.
A new poll in the January issue of MONEY magazine indicates that 58% of investors gave Bush’s economic policies fair-to-poor marks. The Managing Editor, Bob Safian, stated “it was surprising to us in particular that support for the President’s tax cuts was so weak, and that our subscribers don’t seem nearly as worried about federal tax relief as they do a whole host of other issues – from health care to education.” Almost all described their views as either moderate (52%) or conservative (38%). Their median household income is $98,000.
The median of 54 estimates in a Bloomberg News survey stated that economists had forecast a reading of 96 in the December Michigan Sentiment Index. In November the Index was 93.7, the highest in more than a year and a half. The economists were way off the mark as the Index fell to 89.6. I don’t place too much importance on this preliminary number because only 250 households are polled. I am mentioning it because, in my view, economists have misjudged the mindset of our consumers. Job losses have taken their toll. Income levels in the workplace have hardly budged, and that is true for hours worked and that includes overtime. With the sharp decline in the refinancing boom, consumers have limited places to turn. They are strapped. When home prices start to fall, then sentiment will truly turn downward. We must remember that the average American has a greater percentage of net worth in the home than in the stock market.
On a final note, I have been respectful of the wishes expressed by many to please not mention, on a daily basis, the death toll in Iraq. I have been careful in this regard. However, this week there have been several suicide bombings and other attacks. Sir Jeremy Greenstock, mentioned in a speech in London that “ the incidents are going to continue. Some of them will be large and, I am afraid, spectacular.” A total of 312 U.S. soldiers have been killed in action since U.S.-led forces invaded Iraq in March, and 197 of them have perished in guerrilla attacks since Bush declared the major combat over on May 1.
That’s a darn good question for an early Saturday morning. Before we journey into a black hole, let’s get some light on the subject. In the month of November the Producer Price Index declined for the first time in six months. The explanation is simple. There are too many imported goods, and, when combined with excess manufacturing capacity and insufficient consumer demand, companies lack the ability to raise prices on a sustainable basis. A good example would be the auto industry. In November, passenger car prices had their biggest decline since April. Another example would be computers where prices have declined over 16% from year earlier levels. Until pricing power exists, there will be continued pressure on operating profit margins.
The government stated a major reason for wholesale prices dropping in November was the decline in car prices. That was a contributing factor, but energy prices declined 1.2%, the biggest drop since May. I wondered how that was possible. Gasoline dropped 4.8% and natural gas declined 1.1% in price. Today a barrel of crude oil is $33 and natural gas for January delivery surged 9% yesterday to $7.221 per thousand cubic feet on the New York Mercantile Exchange. It was the highest close since Feb. 28. With respect to natural gas, utilities sign long-term contracts for most of their winter fuel over the summer, and therefore, the consumer does not take such a blow from the recent price run-up. As for the price of gasoline, I have written in the past on the growing margins experienced within the industry. These margins can be reduced, and profits can still remain on firm footing. One more reason for the decline in wholesale prices was the decline in food prices, particularly for beef. Not too long ago I wrote about the beef industry, cattle supplies, and pricing for the industry. I mentioned that supplies would be increasing, that beef prices decline in the winter, and consumers should switch to chicken and turkey and still they would be able to get their protein punch.
Before we move to a broader discussion of commodities, I’d like to touch on the Bush administration’s failed “strong dollar policy.” Of course, we know it is a weak dollar policy. If it were the reverse, I would hope that the dollar would not be trading at an 11-year low against the pound, and that, since February 2002, the greenback would not have declined 30% versus the euro and 20% against the yen. The weaker dollar should promote our exports. It has. They increased 2.6% to about $88 billion in October, the highest level since March 2001. Farm exports were the highest in seven years, the exports for our American-made autos rose to the highest point since March 2000, and exports for capital goods increased to their highest level in two and one-quarter years. The falling dollar should make imports more expensive, and the big exception is China with its fixed yuan versus dollar peg. Our imports rose 2.1% in October to about $130 billion, with the deficit with China amounting to a record $13.6 billion. Taking out China, we still had a deficit for the month of $28.2 billion or about $318 billion on an annualized basis. The problem goes much deeper than just China, and that is what Greenspan was saying the other day. He is correct. We will continue to lose jobs to other countries. We will continue to have $400+ billion trade deficits. So far this year the dollar has fallen in value by about 14% against a market basket of major currencies since the beginning of 2003. The weak dollar policy is certainly not the answer. Our country must innovate and export value-priced products that the world wants to import. We cannot rely on Boeing to export planes in the face of increased competition. We cannot afford to wait 3 or 4 years for the 7E7. In addition, the consumer needs to focus on American-made products. If it means paying a bit more, then consider that a user tax that shall be offset by diminishing job losses and less dependency on foreign capital to fund our deficits. Let the Snowman set a bad example and buy his foreign-made toys for the holidays. He doesn’t know any better.
Since Thanksgiving, there has been a 46% rise in the price of natural gas. That makes the Dow and the Nasdaq look like they are standing still. The chemical, fertilizer, and ammonia industries depend on natural gas as a key ingredient for their products. Their profit margins are endangered. Greg Lebedev, president of the American Chemistry Council, stated “at the moment, the price of natural gas is serving as the single largest brake on the U.S. economy.” That may possibly be a small exaggeration, but he is understandably a bit uptight. Heating oil is on the rise too. It rose over 4 cents to almost 93 cents per gallon, gasoline futures increased over 3 cents to 90 cents a gallon, and I previously mentioned January crude oil futures spiking to $33 a barrel. The Reuters CRB index tracks 17 commodities. It is up about 22% since the end of 1999. During the same time the S&P 500 declined about 28%. Half the stocks in the S&P basic materials index have outperformed the S&P 500 this year. Gold gets most of the headlines, as it traded up to $410 per ounce, and it is the first time in 8 years it has been over the $400 level. Gold is up more than 60% from its low of about $255 an ounce in February 2001. Some of the commodities participating in rising prices have been copper, aluminum, steel, forest products, soybeans, and beef. The increased demand from China is often blamed for rising commodity prices. As with our trade deficit, China has been a large participant but other nations, taken as a whole, outweigh the China factor. Depending on your position in the commodity chain, as it were, can determine the point of view on rising commodity prices. We know beef ranchers have been hurting for years. Gold mining companies have waited many years for a rise in the price of gold. The same can be said for those in the silver industry. Commodity prices have been on a roller coaster ride for years. I remember not too long ago, in the late 1990s, hog prices were so low that producers would try to give the hogs away for nothing rather than incur the cost of shipping to auction and paying the auctioneer. The bottom line is many commodities have risen in price of late; however, the United States is mainly a service-oriented nation with less dependency on manufacturing and farming as a percentage of the GDP. As such, as long as there is slack capacity and slack demand, there is room for the Producer Price Index and for U.S. wholesale prices to decline. To offset the declining margins, companies shall continue with their cost-cutting measures. This means more layoffs.
Speaking of layoffs, the state of California Employment Development Department reported yesterday that 14,400 jobs were lost outside the farm sector in November. They also stated that 72,000 workers left the labor force. The November jobs count does not include employees who took part in the work stoppage affecting Southern California supermarket chains. Matters weren’t too bright in Chicago either. Mayor Daley explained “we’re moving people from permanent to seasonal. And also, the federal and state money has dried up. I just can’t them on the payroll. Simple as that.” He was explaining the layoff notices that went out this week to 270 employees in the city departments of Transportation and Water Management in the first wave of 600 firings.
A new poll in the January issue of MONEY magazine indicates that 58% of investors gave Bush’s economic policies fair-to-poor marks. The Managing Editor, Bob Safian, stated “it was surprising to us in particular that support for the President’s tax cuts was so weak, and that our subscribers don’t seem nearly as worried about federal tax relief as they do a whole host of other issues – from health care to education.” Almost all described their views as either moderate (52%) or conservative (38%). Their median household income is $98,000.
The median of 54 estimates in a Bloomberg News survey stated that economists had forecast a reading of 96 in the December Michigan Sentiment Index. In November the Index was 93.7, the highest in more than a year and a half. The economists were way off the mark as the Index fell to 89.6. I don’t place too much importance on this preliminary number because only 250 households are polled. I am mentioning it because, in my view, economists have misjudged the mindset of our consumers. Job losses have taken their toll. Income levels in the workplace have hardly budged, and that is true for hours worked and that includes overtime. With the sharp decline in the refinancing boom, consumers have limited places to turn. They are strapped. When home prices start to fall, then sentiment will truly turn downward. We must remember that the average American has a greater percentage of net worth in the home than in the stock market.
On a final note, I have been respectful of the wishes expressed by many to please not mention, on a daily basis, the death toll in Iraq. I have been careful in this regard. However, this week there have been several suicide bombings and other attacks. Sir Jeremy Greenstock, mentioned in a speech in London that “ the incidents are going to continue. Some of them will be large and, I am afraid, spectacular.” A total of 312 U.S. soldiers have been killed in action since U.S.-led forces invaded Iraq in March, and 197 of them have perished in guerrilla attacks since Bush declared the major combat over on May 1.
Friday, December 12, 2003
12/12/03 The War Over Homeland Economic Security
The headlines center on the Dow at 10,000. I do not want to minimize the Dow and the Nikkei closing above that level for the first time in I don’t remember when. I could look it up but there are more important matters to cover. Shots are being fired. The bleeding has begun. There will be casualties. This is not in Iraq. It is happening in Washington, DC and on Main Street. There is both a revolt and a revolution. I am not trying to get your attention. That’s strictly up to you.
Greenspan is taking on Bush. This will not be simply a war of words. The fighting is over the economic stability of the United States. We won’t be sending troops. It is a war Bush is destined to lose, and his presidency is at stake. That’s his problem. He created the problems. Greenspan has delivered many speeches on the dangers of protectionism, and has outlined the many downsides to that policy. Even when the EU clobbers his administration on illegal steel tariffs, and finally they are removed due to monetary threats, Bush does not listen. He needs to have it his way. Yesterday the U.S. Commerce Department launched an investigation that could lead to anti-dumping duties on more than $1 billion of wooden bedroom imports from China. We have had bras, textiles, TVs, and now wooden bedroom furniture. Of course, Bush waited until the Chinese Premier Wen Jiabao left the U.S. before raising this increased trade protection measure. Nixon broke into Watergate. Bush has created tradegate to win votes from the states housing the 27 U.S. bedroom furniture makers. The charge is that Chinese imports have been dumped in the U.S. at prices below fair value, and this has caused the closing of dozens of U.S. factories. As Greenspan would tell you, if they weren’t made in China, they’d be manufactured in another country with low-cost labor. This is the world economy. There will be casualties in this world economy, and protectionism will only hurt international trade and create a greater loss of jobs. As Greenspan remarked, “we can shut our part or all foreign competition, but we would pay a price for doing so—perhaps a rather large price.” Bush will lose this war.
With respect to the dollar and foreign currencies, Greenspan is taking on Bush. He stated that China might need to end its currency being pegged to the U.S. dollar. In order to prevent its economy from overheating, and not because the 8.3 ratio of the yuan to the greenback would lead to more U.S. jobs and exports. He remarked “a rise in the value of the renminbi (yuan) would be unlikely to have much, if any, effect on the aggregate employment in the United States.” Touching on employment, the FOMC stated today’s economy “would not entirely eliminate currently large margins of unemployed labor and other resources until perhaps the latter part of 2005 or even later.” Wall Street took this comment to mean that interest rates would remain low for at least the next year, and the Dow powered through 10,000. Actually, the Fed was describing the weakness in employment levels. They are reading the entire report issued by the U.S. Department of Labor, and not listening to the rhetoric from Bush on how many jobs have been created over the past few months. The Fed refers to the “substantial slack in ongoing resource utilization.” In English this means plants are running at 75% of capacity, and there isn’t enough business to warrant hiring more workers. The Labor Department describes it more starkly in yesterday’s unadjusted employment data. The real unemployment picture revealed by them stated “the advance number of actual initial claims under state programs, unadjusted, totaled 490,406 in the week ended December 6, an increase of 133,566 from the previous week…the advance adjusted insured unemployment rate was 2.7% during the ending Nov. 29, an increase of 0.4 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 3,429,500, an increase of 488,281 from the preceding week.” Greenspan understands the severity of the labor problem. Bush refers to seasonally adjusted initial claims, and that is simply data for headline news and reflect re-election rhetoric. It is a war of words that Bush will lose. Millions of Americans have lost jobs while Bush has been in the White House. The unadjusted number has grown by 133,566 in this last week alone.
Greenspan has hammered away on Bush’s excessive spending for months. Bush has refused to curtail spending. The Fed has maintained a 1% Fed funds rate, and during this period the consumer price index has remained at a muted level; however, the CPI does not include housing prices, and they have been anything but muted. The single business expense for most Americans is their mortgage payment or rent. House prices have risen for the greater part of 2003 and for all of 2002. At the same time, mortgage rates declined until June 2003. This decline spurred the refinancing boom and helped to explain the tremendous growth in the money supply. M3, for example, almost doubled since 1996. Over the past 2 years the reserve bank credit has grown at about a 10% rate. However, soon after the refinancing boom dropped off a cliff, the weekly money supply began to decline. It is not a coincidence that the growth in consumer credit also has slowed over the past three months. The latest U.S. M-2 money supply is $15 billion below the four-week moving average. There are less funds, less cash in our economy. Some economists will point to the price of gold at multi-year highs and various commodity indexes rising at a 20 or 30% rate, and that indicates to these economists that the Fed is creating more liquidity. The Fed is not buying gold or these commodities. They are entities that trade in many markets around the globe. China could be buying gold, for example, in European markets and the price is rising. That has not increased physical liquidity here. In sum, in the recent past the rate of our nation’s monetary base as well as its money supply was in an upward trend. Over the past three months, the quantitative money supply has been on the decline. The latter may have been created by the drop off in refinancing, consumer credit, foreign investment, Fed interventions, or any possible combination of those factors. The fact is a decline in the money supply will, over time, limit and possibly choke off economic growth, and certainly will offset Bush’s spending habit. This is a war Bush will lose.
The war on removing overtime pay is heating up. It is a war Bush will lose in voting booths. Doug Dority is President of the 1.4 million United Food and Commercial Workers International Union. Dority charged that the Bush overtime plan would be the “largest single pay cut for workers in history…I guess this is George W. Bush’s idea of fairness. Cuts for everybody. Tax cuts for the wealthy. Pay cuts for the workers.” The Bush plan would re-define the exempt occupational categories of “Executive,” “Administrative,” and “Professional” to exempt jobs such as a lead produce clerk in a supermarket or a hospital technician from overtime pay. Bush is banking on refund checks offsetting the furor over the loss of overtime pay. Tax refund checks will be mailed out in the early part of 2004. The tax cuts enacted in July were retroactive to January. As such, the government will refund the over-withheld tax money.
Refunds will clearly help but not everyone. In Contra Costa County, California the 2004-05 budget is projected to have a $23.6 million shortfall. As one school district committee member stated, “they’re going to close schools, that’s a given.” The last time West Contra Costa shuttered a campus was in 1990, and that was due to seismic safety concerns. It is no wonder that the nonpartisan Field Institute annual survey conducted for the Bay Area Council revealed that 38% of area residents feel things are going “somewhat badly” or “very badly” in the Bay Area. That compares to 26% who felt that way a year ago. The 38% is the largest segment of the respondents since the poll taken in 1993. Not surprisingly, the current survey indicated that 61% say the economy has worsened in the past year and 67% say unemployment has gotten worse. Yesterday the unemployment picture became bleaker in Berkeley. Bayer Healthcare AG stated its pharmaceutical division will reorganize its biotechnology research operations and cut 265 jobs, 190 of them at its Berkeley facility.
The headlines center on the Dow at 10,000. I do not want to minimize the Dow and the Nikkei closing above that level for the first time in I don’t remember when. I could look it up but there are more important matters to cover. Shots are being fired. The bleeding has begun. There will be casualties. This is not in Iraq. It is happening in Washington, DC and on Main Street. There is both a revolt and a revolution. I am not trying to get your attention. That’s strictly up to you.
Greenspan is taking on Bush. This will not be simply a war of words. The fighting is over the economic stability of the United States. We won’t be sending troops. It is a war Bush is destined to lose, and his presidency is at stake. That’s his problem. He created the problems. Greenspan has delivered many speeches on the dangers of protectionism, and has outlined the many downsides to that policy. Even when the EU clobbers his administration on illegal steel tariffs, and finally they are removed due to monetary threats, Bush does not listen. He needs to have it his way. Yesterday the U.S. Commerce Department launched an investigation that could lead to anti-dumping duties on more than $1 billion of wooden bedroom imports from China. We have had bras, textiles, TVs, and now wooden bedroom furniture. Of course, Bush waited until the Chinese Premier Wen Jiabao left the U.S. before raising this increased trade protection measure. Nixon broke into Watergate. Bush has created tradegate to win votes from the states housing the 27 U.S. bedroom furniture makers. The charge is that Chinese imports have been dumped in the U.S. at prices below fair value, and this has caused the closing of dozens of U.S. factories. As Greenspan would tell you, if they weren’t made in China, they’d be manufactured in another country with low-cost labor. This is the world economy. There will be casualties in this world economy, and protectionism will only hurt international trade and create a greater loss of jobs. As Greenspan remarked, “we can shut our part or all foreign competition, but we would pay a price for doing so—perhaps a rather large price.” Bush will lose this war.
With respect to the dollar and foreign currencies, Greenspan is taking on Bush. He stated that China might need to end its currency being pegged to the U.S. dollar. In order to prevent its economy from overheating, and not because the 8.3 ratio of the yuan to the greenback would lead to more U.S. jobs and exports. He remarked “a rise in the value of the renminbi (yuan) would be unlikely to have much, if any, effect on the aggregate employment in the United States.” Touching on employment, the FOMC stated today’s economy “would not entirely eliminate currently large margins of unemployed labor and other resources until perhaps the latter part of 2005 or even later.” Wall Street took this comment to mean that interest rates would remain low for at least the next year, and the Dow powered through 10,000. Actually, the Fed was describing the weakness in employment levels. They are reading the entire report issued by the U.S. Department of Labor, and not listening to the rhetoric from Bush on how many jobs have been created over the past few months. The Fed refers to the “substantial slack in ongoing resource utilization.” In English this means plants are running at 75% of capacity, and there isn’t enough business to warrant hiring more workers. The Labor Department describes it more starkly in yesterday’s unadjusted employment data. The real unemployment picture revealed by them stated “the advance number of actual initial claims under state programs, unadjusted, totaled 490,406 in the week ended December 6, an increase of 133,566 from the previous week…the advance adjusted insured unemployment rate was 2.7% during the ending Nov. 29, an increase of 0.4 percentage point from the prior week. The advance unadjusted number for persons claiming UI benefits in state programs totaled 3,429,500, an increase of 488,281 from the preceding week.” Greenspan understands the severity of the labor problem. Bush refers to seasonally adjusted initial claims, and that is simply data for headline news and reflect re-election rhetoric. It is a war of words that Bush will lose. Millions of Americans have lost jobs while Bush has been in the White House. The unadjusted number has grown by 133,566 in this last week alone.
Greenspan has hammered away on Bush’s excessive spending for months. Bush has refused to curtail spending. The Fed has maintained a 1% Fed funds rate, and during this period the consumer price index has remained at a muted level; however, the CPI does not include housing prices, and they have been anything but muted. The single business expense for most Americans is their mortgage payment or rent. House prices have risen for the greater part of 2003 and for all of 2002. At the same time, mortgage rates declined until June 2003. This decline spurred the refinancing boom and helped to explain the tremendous growth in the money supply. M3, for example, almost doubled since 1996. Over the past 2 years the reserve bank credit has grown at about a 10% rate. However, soon after the refinancing boom dropped off a cliff, the weekly money supply began to decline. It is not a coincidence that the growth in consumer credit also has slowed over the past three months. The latest U.S. M-2 money supply is $15 billion below the four-week moving average. There are less funds, less cash in our economy. Some economists will point to the price of gold at multi-year highs and various commodity indexes rising at a 20 or 30% rate, and that indicates to these economists that the Fed is creating more liquidity. The Fed is not buying gold or these commodities. They are entities that trade in many markets around the globe. China could be buying gold, for example, in European markets and the price is rising. That has not increased physical liquidity here. In sum, in the recent past the rate of our nation’s monetary base as well as its money supply was in an upward trend. Over the past three months, the quantitative money supply has been on the decline. The latter may have been created by the drop off in refinancing, consumer credit, foreign investment, Fed interventions, or any possible combination of those factors. The fact is a decline in the money supply will, over time, limit and possibly choke off economic growth, and certainly will offset Bush’s spending habit. This is a war Bush will lose.
The war on removing overtime pay is heating up. It is a war Bush will lose in voting booths. Doug Dority is President of the 1.4 million United Food and Commercial Workers International Union. Dority charged that the Bush overtime plan would be the “largest single pay cut for workers in history…I guess this is George W. Bush’s idea of fairness. Cuts for everybody. Tax cuts for the wealthy. Pay cuts for the workers.” The Bush plan would re-define the exempt occupational categories of “Executive,” “Administrative,” and “Professional” to exempt jobs such as a lead produce clerk in a supermarket or a hospital technician from overtime pay. Bush is banking on refund checks offsetting the furor over the loss of overtime pay. Tax refund checks will be mailed out in the early part of 2004. The tax cuts enacted in July were retroactive to January. As such, the government will refund the over-withheld tax money.
Refunds will clearly help but not everyone. In Contra Costa County, California the 2004-05 budget is projected to have a $23.6 million shortfall. As one school district committee member stated, “they’re going to close schools, that’s a given.” The last time West Contra Costa shuttered a campus was in 1990, and that was due to seismic safety concerns. It is no wonder that the nonpartisan Field Institute annual survey conducted for the Bay Area Council revealed that 38% of area residents feel things are going “somewhat badly” or “very badly” in the Bay Area. That compares to 26% who felt that way a year ago. The 38% is the largest segment of the respondents since the poll taken in 1993. Not surprisingly, the current survey indicated that 61% say the economy has worsened in the past year and 67% say unemployment has gotten worse. Yesterday the unemployment picture became bleaker in Berkeley. Bayer Healthcare AG stated its pharmaceutical division will reorganize its biotechnology research operations and cut 265 jobs, 190 of them at its Berkeley facility.
Thursday, December 11, 2003
12/11/03 Hire And Fire
In the beginning of November, without much publicity, Wells Fargo Home and Consumer Finance Group released an unspecified number of temporary and contract workers in Minnesota and other states “to reflect the pace of the market and our current application volume.” I did a little digging (no pun intended) and two weeks earlier another Twin Cities mortgage division of a local bank had let go all of its temporary workers, a dozen employees, and two contract loan underwriters in Minnesota and Michigan. In chats with other companies in the area, I discovered some firms stopped using temporary workers and even college students.
In talking with economists and industry leaders in the mortgage and home construction industries, I have come away with a lack of concern for this nation’s economic future. The general consensus is that housing and mortgage financing jobs will be cut but more people will be added in service sector jobs and, to a lesser extent, manufacturing. I think we should examine this lack of concern.
The housing industry is cyclical. This is nothing new. Over the decades it has been that way. We have just completed the largest up cycle since WW II. Mortgage rates fell to 45-year lows. Yesterday the Mortgage Bankers Association said mortgage requests fell to their lowest level since the week ending June 14, 2002. Home sales have continued at a brisk but somewhat slower pace, and most CEOs of home building companies expect a good year in 2004. With fixed rates moving higher, adjustable rate mortgages are in increased demand, and now comprise about 30% of applications, the highest level in four years. If short- term rates should move higher, the demand will slacken for adjustable rate and hybrid loan applications.
The broad “credit intermediary” job category, which includes the U.S. mortgage industry, lost about 10,000 jobs in October. I anticipate that number will be as least as large in November and December. I believe the Bureau of Labor Statistics would concur with that statement. With total loan volumes off 50% or more from their peak levels, mortgage companies are shifting towards loans for home purchases rather than the refinancing of existing home loans. Basically, that means a good deal less loan volume. Refinancing activity plummeted in July and August as interest rates spiked up. Beginning in September, a lot of the smaller mortgage companies began the process of laying off operational staff members, loan officers on commission, and independent contractors. Many in the industry hold the view that, mortgage brokers without purchase business, shall shut their doors. In sum, some portion of the first round of layoffs that began in August and September has taken place. There is more to come. At Countrywide Financial Corp., national total loan fundings dropped 44% between July and October, but its worldwide employment has dropped only 4.5% in that time period to 34,396. The layoffs will begin to catch up with the reduced level of business. Reductions will occur in contract, overtime and temporary-support areas, and even full-time equivalent positions. Nationally, employers were still catching up with their backlog of business as late as in September; however, beginning in October, cutbacks have begun in earnest. These cutbacks could could approach 200,000. Combining the “real estate Credit” employee category and the “mortgage and non-mortgage loan brokers” employee category, total industry employment rose by 150,000, or 55%, to 422,000, between January 2001 and September 2003. I have not included the carpenters and electricians, etc. hired during this period. In addition, I have not included self-employed workers that might account for at least 25% of total employment in the industry.
Doug Duncan, chief economist with the Mortgage Bankers Association, has stated that the mortgage industry will cut tens of thousands of temporary workers who were hired to handle the crush of homeowners who refinanced their homes in the past couple of years. Duncan said he expects total mortgage volume in the United States to drop by half next year to around $1.5 trillion. According to Wholesale Access Mortgage Research and Consulting, a firm that works with the nation’s 20 largest mortgage lenders, the total number of workers who could lose their jobs in the field is likely to reach 150,000 or more. That number seems low to me. The MBA states that refinancing has fallen by more than 75% since May. Many are of the belief that this decline will dampen consumer spending in that refinancing lowers homeowner’s debt payments and increases household cash flow. If it took place on the way up, so to speak, then the reverse should be true. In my opinion, economists have not adequately considered the ramifications of the aforementioned layoffs and the negative impact on consumer cash flow from sharply reduced refinancing activity.
So where are the labor shortages? With an aging population, there is a growing need for pharmacists and registered nurses. It is anticipated that public schools could require almost 2 million new teachers by 2012. Another area of need has been that of truck drivers. According to the U.S. Department of Labor, this employment sector accounts for about 3.25 million jobs in the United States, and the demand is expected to increase for the next several years.
In the beginning of November, without much publicity, Wells Fargo Home and Consumer Finance Group released an unspecified number of temporary and contract workers in Minnesota and other states “to reflect the pace of the market and our current application volume.” I did a little digging (no pun intended) and two weeks earlier another Twin Cities mortgage division of a local bank had let go all of its temporary workers, a dozen employees, and two contract loan underwriters in Minnesota and Michigan. In chats with other companies in the area, I discovered some firms stopped using temporary workers and even college students.
In talking with economists and industry leaders in the mortgage and home construction industries, I have come away with a lack of concern for this nation’s economic future. The general consensus is that housing and mortgage financing jobs will be cut but more people will be added in service sector jobs and, to a lesser extent, manufacturing. I think we should examine this lack of concern.
The housing industry is cyclical. This is nothing new. Over the decades it has been that way. We have just completed the largest up cycle since WW II. Mortgage rates fell to 45-year lows. Yesterday the Mortgage Bankers Association said mortgage requests fell to their lowest level since the week ending June 14, 2002. Home sales have continued at a brisk but somewhat slower pace, and most CEOs of home building companies expect a good year in 2004. With fixed rates moving higher, adjustable rate mortgages are in increased demand, and now comprise about 30% of applications, the highest level in four years. If short- term rates should move higher, the demand will slacken for adjustable rate and hybrid loan applications.
The broad “credit intermediary” job category, which includes the U.S. mortgage industry, lost about 10,000 jobs in October. I anticipate that number will be as least as large in November and December. I believe the Bureau of Labor Statistics would concur with that statement. With total loan volumes off 50% or more from their peak levels, mortgage companies are shifting towards loans for home purchases rather than the refinancing of existing home loans. Basically, that means a good deal less loan volume. Refinancing activity plummeted in July and August as interest rates spiked up. Beginning in September, a lot of the smaller mortgage companies began the process of laying off operational staff members, loan officers on commission, and independent contractors. Many in the industry hold the view that, mortgage brokers without purchase business, shall shut their doors. In sum, some portion of the first round of layoffs that began in August and September has taken place. There is more to come. At Countrywide Financial Corp., national total loan fundings dropped 44% between July and October, but its worldwide employment has dropped only 4.5% in that time period to 34,396. The layoffs will begin to catch up with the reduced level of business. Reductions will occur in contract, overtime and temporary-support areas, and even full-time equivalent positions. Nationally, employers were still catching up with their backlog of business as late as in September; however, beginning in October, cutbacks have begun in earnest. These cutbacks could could approach 200,000. Combining the “real estate Credit” employee category and the “mortgage and non-mortgage loan brokers” employee category, total industry employment rose by 150,000, or 55%, to 422,000, between January 2001 and September 2003. I have not included the carpenters and electricians, etc. hired during this period. In addition, I have not included self-employed workers that might account for at least 25% of total employment in the industry.
Doug Duncan, chief economist with the Mortgage Bankers Association, has stated that the mortgage industry will cut tens of thousands of temporary workers who were hired to handle the crush of homeowners who refinanced their homes in the past couple of years. Duncan said he expects total mortgage volume in the United States to drop by half next year to around $1.5 trillion. According to Wholesale Access Mortgage Research and Consulting, a firm that works with the nation’s 20 largest mortgage lenders, the total number of workers who could lose their jobs in the field is likely to reach 150,000 or more. That number seems low to me. The MBA states that refinancing has fallen by more than 75% since May. Many are of the belief that this decline will dampen consumer spending in that refinancing lowers homeowner’s debt payments and increases household cash flow. If it took place on the way up, so to speak, then the reverse should be true. In my opinion, economists have not adequately considered the ramifications of the aforementioned layoffs and the negative impact on consumer cash flow from sharply reduced refinancing activity.
So where are the labor shortages? With an aging population, there is a growing need for pharmacists and registered nurses. It is anticipated that public schools could require almost 2 million new teachers by 2012. Another area of need has been that of truck drivers. According to the U.S. Department of Labor, this employment sector accounts for about 3.25 million jobs in the United States, and the demand is expected to increase for the next several years.
Wednesday, December 10, 2003
12/10/03 Are You Ready?
You had better get comfortable. This will be a long blog. I want to begin by writing something nice about a government agency. No, I haven’t gone soft. Fair is fair. This agency has cut costs sharply. They reduced staff by 24,000 full-time workers without layoffs, and anticipate another 11,000 job cuts, reducing career employees to 729,000, the fewest since 1994. Today they deliver 24 billion more pieces of mail than they did in 1994. We are talking about our U.S. Postal Service. In 2001 they lost $1.7 billion. In 2002 they lost $676 million. In 2003 they had net income from operations of $900 million. Nearly all of the surplus was used to reduce the agency’s outstanding debt. A round of applause is in order for the agency.
While I’m still nice, a kind word should be spoken for India. This country prepaid $4.2 billion of high cost foreign currency loans during the calendar year. This includes $2.8 billion from the Asian Development Bank and the World Bank and $1.4 billion in high-cost bilateral loans. The government decided to prepay all bilateral debt to partners other than Japan, Germany, the U.S., France, and Russia. The aforementioned prepayments were accomplished through the growing foreign exchange reserves that now exceed $96 billion. India is doing a fine job of financial management, and should be congratulated.
I wish I could have some nice words for the Bush Administration. There is one constituency that helped Bush get elected, and that is the National Rifle Association and its members. The fiscal year 2004 omnibus spending bill(H.R. 2674) is pending in the U.S. Senate. It contains two dangerous provisions. One would reduce the time that the ATF can retain records of approved gun sales from the current 90 days to a maximum of 24 hours. A June 2002 GAO study found that 97% of firearm retrievals initiated during the first six moths of the current 90-day rule could not have been done under a 24-hour rule. A second dangerous provision would prohibit the ATF from finalizing a proposed August 2000 rule that would require gun dealers to conduct an annual physical inventory. The purpose of the proposed rule is to allow dealers to identify missing and stolen firearms and report them to the ATF in a timely fashion. These provisions are clearly anti-public safety and need to be shot down (no pun intended) prior to inclusion in the spending bill.
A new national poll released today by the Sacred Heart University Polling Institute indicates support for the new Medicare legislation is under-whelming. Only 26.8% polled state they support the program. The largest number of respondents feels the legislation offers too little and provides too few benefits. It sometimes is helpful to visit a specific state and focus on its problem area. Some state treasuries are being eaten up by the cost of Medicaid, the state-federal medical insurance program for low-income people. In Massachusetts, one resident in eight is 55 or older. Medicaid consumes $7 billion out of a state budget of $22 billion. According to the Kaiser Family Foundation, the elderly constitute 9% of Medicaid enrollees; however, they account for 27% of the program’s spending. An aging population can only drive costs higher.
My blog would not be complete without a discussion of the unemployment picture. Before starting, I want to reiterate that the Labor Department survey of payrolls shows 8.7 million unemployed, 4.5 million more who are not in the labor force but want to be, and 4.9 million people working part-time when they want full-time work. That adds up to over 18 million people, a stunning number when compared with a total workforce of 130 million people. This is why I write about the problem every day. It’s in every neighborhood except the White House. They don’t have a neighborhood because there is a barbed wire fence surrounding the property. Today’s scorecard reads like this: Eddie Bauer will close 30 stores. JC Penney will close 12 stores. Chevron-Texaco will eliminate 150-200 jobs. American Online will drop 450 workers. SBC Communications will cut 3,000 to 4,000 jobs. Washington Mutual stated 5,400 positions will be eliminated as a result of falling demand in home mortgages, and many more efficiencies are expected in 2004, during a period the company is calling “transitional.” Their chairman, president, and CEO remarked “we are instilling a discipline of operational excellence.” What were they doing before these cost saving opportunities came to their attention? Maybe they had it too easy in the mortgage business, and the money flowed too freely and masked inefficient operations. Do you think this could have taken place at any other companies?
There is good news to report. According to the eSpending report from Goldman Sachs, Harris Interactive, and Nielsen/NetRatings (this must be quite a report if it took three firms to write it), consumers spent $8.5 billion on the holidays in November, an increase of 55% over the prior year. Online shoppers spent $758 million online to buy videos and DVDs, a 133% increase over last year, and $761 million on books, an increase of 61%. Consumers spent 57% more on music and 32% more on toys. The survey indicates more consumers are shopping online and more money is being spent online. Yesterday I mentioned toffee from Enstrom’s of Grand Junction. Today I’d like to drop a really cute gift idea. For the holidays, Petsmart is carrying a glass fish bowl shaped like a fish. It’s great for children and for grownups. I know it is made in China. I apologize for that. Petsmart is a great store to visit, and especially on Saturday, its big pet adoption day. With FAO going out of business, this is the spot to replace it.
I don’t smoke but smoking must be on the decline. Sales of tobacco, once Kentucky’s most profitable commodity, is likely to drop to nearly $400 million for 2004, down from gross sales of $929 million in 1998. At the same time, tobacco exports are rebounding, and prices are at record levels. There is one on-going problem, and that is import and discount cigarettes. They contain almost no U.S. tobacco and now comprise 13% of the market, up from 2 to 3 percent in the mid-1990s.
According to the Bank of Tokyo-Mitsubishi and UBS report, retail sales declined 2.5% in the week ended December 6, and this was the steepest drop since December 2, 2000 when sales fell 2,6% from the preceding week. Retail sales have now dropped below a five-year average pattern. I don’t believe that is a good thing.
Did you read the report from the Commerce Department. They said wholesale inventories in October rose by 2.7% for autos. That made me laugh. That means the auto companies can increase their incentives even more to get rid of their increased inventory. In the meantime, GM and Ford are making new highs in the market. Sears did too before the stock got creamed as a result of lower sales figures. We must not forget the memorable words of Allan Gilmour, Vice Chairman of Ford, who observed “excess capacity and intense competition and lower prices of imports have meant that companies have had to cost cut their way back to profitability.” Maybe the head of the U.S. postal Service should run Ford.
We have a little something in common with Japan. The Conference Board reported bullish numbers for Japan’s leading economic indicators as well as their related composite indexes for October. At the same time, it was reported that the number of employed persons declined and wage and salary income for manufacturing were weak.
Total foreign exchange product volume at the Chicago Mercantile Exchange is up 48% in this year’s fourth quarter versus year-ago levels. This week new daily volume records have been set. Much of this activity has reflected the continued uncertainty about the future value of the dollar. It would appear that trading is getting a bit frothy, and a respite might be nice at this junction.
U.S. and Mexican officials are discussing an agreement that would allow millions of Mexicans to return home and still collect U.S. Social Security benefits. GOP Rep. Ron Paul of Texas, my favorite member of Congress, remarked “talk about an incentive for illegal immigration. How many more would break the law to come to this country if promised U.S. government paychecks for life?” The Bush administration supports such an accord as a way to improve U.S.-Mexican relations.
The personal consumption expenditures index rose by a slim 1.2% for the 12 months ending October. Everything is okay, stated the Fed. Heck, we have low inflation. Disinflation is not a predominant concern. 15,000 temporary workers were hired in October and another 21,000 in November. Productivity is robust, and we have plenty of slack in our resources to accommodate future increased demand, and the Fed’s policy will continue to be friendly for a considerable period of time. I am as happy as a pig wallowing in manure. It doesn’t get any better than this. Can you stand the smell? How do you like the Fed’s brakes on the money supply? They do screetch a bit. Are you ready for that annoying sound until the election of 2004 comes around?
You had better get comfortable. This will be a long blog. I want to begin by writing something nice about a government agency. No, I haven’t gone soft. Fair is fair. This agency has cut costs sharply. They reduced staff by 24,000 full-time workers without layoffs, and anticipate another 11,000 job cuts, reducing career employees to 729,000, the fewest since 1994. Today they deliver 24 billion more pieces of mail than they did in 1994. We are talking about our U.S. Postal Service. In 2001 they lost $1.7 billion. In 2002 they lost $676 million. In 2003 they had net income from operations of $900 million. Nearly all of the surplus was used to reduce the agency’s outstanding debt. A round of applause is in order for the agency.
While I’m still nice, a kind word should be spoken for India. This country prepaid $4.2 billion of high cost foreign currency loans during the calendar year. This includes $2.8 billion from the Asian Development Bank and the World Bank and $1.4 billion in high-cost bilateral loans. The government decided to prepay all bilateral debt to partners other than Japan, Germany, the U.S., France, and Russia. The aforementioned prepayments were accomplished through the growing foreign exchange reserves that now exceed $96 billion. India is doing a fine job of financial management, and should be congratulated.
I wish I could have some nice words for the Bush Administration. There is one constituency that helped Bush get elected, and that is the National Rifle Association and its members. The fiscal year 2004 omnibus spending bill(H.R. 2674) is pending in the U.S. Senate. It contains two dangerous provisions. One would reduce the time that the ATF can retain records of approved gun sales from the current 90 days to a maximum of 24 hours. A June 2002 GAO study found that 97% of firearm retrievals initiated during the first six moths of the current 90-day rule could not have been done under a 24-hour rule. A second dangerous provision would prohibit the ATF from finalizing a proposed August 2000 rule that would require gun dealers to conduct an annual physical inventory. The purpose of the proposed rule is to allow dealers to identify missing and stolen firearms and report them to the ATF in a timely fashion. These provisions are clearly anti-public safety and need to be shot down (no pun intended) prior to inclusion in the spending bill.
A new national poll released today by the Sacred Heart University Polling Institute indicates support for the new Medicare legislation is under-whelming. Only 26.8% polled state they support the program. The largest number of respondents feels the legislation offers too little and provides too few benefits. It sometimes is helpful to visit a specific state and focus on its problem area. Some state treasuries are being eaten up by the cost of Medicaid, the state-federal medical insurance program for low-income people. In Massachusetts, one resident in eight is 55 or older. Medicaid consumes $7 billion out of a state budget of $22 billion. According to the Kaiser Family Foundation, the elderly constitute 9% of Medicaid enrollees; however, they account for 27% of the program’s spending. An aging population can only drive costs higher.
My blog would not be complete without a discussion of the unemployment picture. Before starting, I want to reiterate that the Labor Department survey of payrolls shows 8.7 million unemployed, 4.5 million more who are not in the labor force but want to be, and 4.9 million people working part-time when they want full-time work. That adds up to over 18 million people, a stunning number when compared with a total workforce of 130 million people. This is why I write about the problem every day. It’s in every neighborhood except the White House. They don’t have a neighborhood because there is a barbed wire fence surrounding the property. Today’s scorecard reads like this: Eddie Bauer will close 30 stores. JC Penney will close 12 stores. Chevron-Texaco will eliminate 150-200 jobs. American Online will drop 450 workers. SBC Communications will cut 3,000 to 4,000 jobs. Washington Mutual stated 5,400 positions will be eliminated as a result of falling demand in home mortgages, and many more efficiencies are expected in 2004, during a period the company is calling “transitional.” Their chairman, president, and CEO remarked “we are instilling a discipline of operational excellence.” What were they doing before these cost saving opportunities came to their attention? Maybe they had it too easy in the mortgage business, and the money flowed too freely and masked inefficient operations. Do you think this could have taken place at any other companies?
There is good news to report. According to the eSpending report from Goldman Sachs, Harris Interactive, and Nielsen/NetRatings (this must be quite a report if it took three firms to write it), consumers spent $8.5 billion on the holidays in November, an increase of 55% over the prior year. Online shoppers spent $758 million online to buy videos and DVDs, a 133% increase over last year, and $761 million on books, an increase of 61%. Consumers spent 57% more on music and 32% more on toys. The survey indicates more consumers are shopping online and more money is being spent online. Yesterday I mentioned toffee from Enstrom’s of Grand Junction. Today I’d like to drop a really cute gift idea. For the holidays, Petsmart is carrying a glass fish bowl shaped like a fish. It’s great for children and for grownups. I know it is made in China. I apologize for that. Petsmart is a great store to visit, and especially on Saturday, its big pet adoption day. With FAO going out of business, this is the spot to replace it.
I don’t smoke but smoking must be on the decline. Sales of tobacco, once Kentucky’s most profitable commodity, is likely to drop to nearly $400 million for 2004, down from gross sales of $929 million in 1998. At the same time, tobacco exports are rebounding, and prices are at record levels. There is one on-going problem, and that is import and discount cigarettes. They contain almost no U.S. tobacco and now comprise 13% of the market, up from 2 to 3 percent in the mid-1990s.
According to the Bank of Tokyo-Mitsubishi and UBS report, retail sales declined 2.5% in the week ended December 6, and this was the steepest drop since December 2, 2000 when sales fell 2,6% from the preceding week. Retail sales have now dropped below a five-year average pattern. I don’t believe that is a good thing.
Did you read the report from the Commerce Department. They said wholesale inventories in October rose by 2.7% for autos. That made me laugh. That means the auto companies can increase their incentives even more to get rid of their increased inventory. In the meantime, GM and Ford are making new highs in the market. Sears did too before the stock got creamed as a result of lower sales figures. We must not forget the memorable words of Allan Gilmour, Vice Chairman of Ford, who observed “excess capacity and intense competition and lower prices of imports have meant that companies have had to cost cut their way back to profitability.” Maybe the head of the U.S. postal Service should run Ford.
We have a little something in common with Japan. The Conference Board reported bullish numbers for Japan’s leading economic indicators as well as their related composite indexes for October. At the same time, it was reported that the number of employed persons declined and wage and salary income for manufacturing were weak.
Total foreign exchange product volume at the Chicago Mercantile Exchange is up 48% in this year’s fourth quarter versus year-ago levels. This week new daily volume records have been set. Much of this activity has reflected the continued uncertainty about the future value of the dollar. It would appear that trading is getting a bit frothy, and a respite might be nice at this junction.
U.S. and Mexican officials are discussing an agreement that would allow millions of Mexicans to return home and still collect U.S. Social Security benefits. GOP Rep. Ron Paul of Texas, my favorite member of Congress, remarked “talk about an incentive for illegal immigration. How many more would break the law to come to this country if promised U.S. government paychecks for life?” The Bush administration supports such an accord as a way to improve U.S.-Mexican relations.
The personal consumption expenditures index rose by a slim 1.2% for the 12 months ending October. Everything is okay, stated the Fed. Heck, we have low inflation. Disinflation is not a predominant concern. 15,000 temporary workers were hired in October and another 21,000 in November. Productivity is robust, and we have plenty of slack in our resources to accommodate future increased demand, and the Fed’s policy will continue to be friendly for a considerable period of time. I am as happy as a pig wallowing in manure. It doesn’t get any better than this. Can you stand the smell? How do you like the Fed’s brakes on the money supply? They do screetch a bit. Are you ready for that annoying sound until the election of 2004 comes around?
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