9/6/04 The Case Of The Disappearing Consumer

You are probably thinking I'm either joking or being a bit dramatic. Actually, I'm quite serious. I make a point of studying Wal-Mart. I've been doing it for three decades. Everyone knows the consumer is feeling pinched from higher gasoline prices and a challenging, at best, job market. Everyone knows that, according to the BLS, 80% of wages for non-farm workers fell in the past three months. It's not just that sales at Wal-Mart continue to be disappointing but the recent trend has been strength in food and health and beauty products rather than general merchandise, and the latter takes up the majority of the floor space in their stores. In fact, the sale of general merchandise was down in August at Wal-Mart. When was the last time this occurred? I couldn't begin to tell you. Obviously, it was a very long time ago. Economists will focus on the latest jobs report. In my view, they are missing the real story, and that can be found at Wal-Mart.

Ford is delaying shipment of three new vehicles. Ford Division dealer pretax profits are down 8% through July.

A car bomb near Falluja killed 7 American marines. According to the Pentagon, the death toll for U.S. personnel has reached at least 985 since we invaded Iraq.

Stephen Klineberg, a Rice University sociology professor and director of the Houston Area Survey for 23 years on the economy and social issues: "The old blue-collar path to economic security has disappeared. We've lost all those blue-collar jobs where you can leave high school with a diploma and earn a middle-class wage. Never again. We have a two-tiered emerging hourglass economy. There really are two Americas out there."

In July 2004, Pennsylvania had 81,300 fewer jobs than when the recession began in March 2001. The state's job creation performance after the 2001 recession is the fourth worst since WW II. In July 2004, the state had 151,600 fewer manufacturing jobs than when the recession started, an 18% loss. The average wage of production workers was lower in July 2004 than in any of the previous three years. It is a dollar lower than the national average. Employment in the state's high-wage industries has fallen 5.6% over the last three years while employment in low-wage industries has grown by 2.9%. If you lived in Pennsylvania, would you vote for Bush?

According to the BLS, ex-factory workers are the least likely of all workers to find new full-time jobs, and a third of them will eventually accept work for less pay, often 20% less, with less generous benefits. Over the last five years, about 210,000 Michigan factory workers have lost their jobs. Do you think they'll be voting for Bush? Three years ago, Michigan Works, the state agency that helps people find jobs, put 69 different factory jobs on its "declining occupation list," which is about half of the 140 careers that are waning in Michigan.

Herbert Hoover: "About the time we think we can make ends meet, somebody moves the ends."

Bush: "I know how hard it is to put food on your family." Hoover couldn't have said it better.

9/5/04 Herbert Hoover Is Bush's Ghost Speech WriterAugust 11, 1928 in Hoover's speech accepting the Republican nomination: "Unemployment in the sense of distress is widely disappearing...We in America today are nearer to the final triumph over poverty than ever before in the history of any land. The poorhouse is vanishing among us."October 28, 1928 Herbert Hoover's Campaign Address in Madison Square Garden: "Prosperity is no idle expression. It is a job for every worker, it is the safety and safeguard of every business and every home. A continuation of the Republican party is fundamentally necessary to the future advancement of this progress and to the further building of this prosperity."During Hoover's prseidency, there were productivity gains but these were not accompanied by proportionate gains in purchasing power. Wage gains did not keep up with gains in profits. Income inequality grew wider. As the rich got richer, speculation followed. Many paycheck-to-paycheck workers purchased goods on the installment plan, and their buying exceeded their ability to pay in many cases. A downturn developed in the auto industry, durable goods, and construction. The bubble finally burst.If you lived in Ohio, and your state had lost 230,000 jobs since Bush was elected, would you vote for him?If the population is growing at the rate of 220,000 per month, and 144,000 jobs supposedly are created in August, by definition the labor participation rate will fall.It would be wise for investors to consider the circumstances at Intel, and to go to school, as it were, on other sectors in the economy. My main point is focusing on the ability of companies to manage excess production capacity with the knowledge that profit margins could be hurt. In the case of Intel we're talking a couple of percentage points. We should take a closer look, for example, at the domestic auto industry. Production cutbacks have been announced by GM and Ford. Are more to follow? What will the impact of less production combined with average vehicle incentives of $4,200 mean to profit margins? What other industries are dependent on auto production? How will their margins be impacted? If back-to-school sales are disappointing, and wages and benefits continue to trail inflation, will upcoming holiday sales also be below expectations? We are an economy dependent on the consumer. Where will the money come from to buy large ticket items, such as, laptop computers?Instead of driving 60mph on the investor highway, one might consider downshifting in order to be more in synch with the economic slowdown. Jamming on the brakes is quite unnecessary. Anticipate the caution lights ahead. Plenty of companies will be providing warnings on quarterly revenues and earnings. If the great ones like Intel and Wal-Mart are running into headwinds, how about the also-rans? There will always be plenty of money managers who will tell you that this time it is different. They will tell you the poorhouse is a thing of the past. As long as the spectre of margin calls exists, nothing has changed. We only need to fear complacency and the words of the politicians born with silver spoons in their mouths and their heads up their butts.Linda Davies: "The job of a derivatives trader is like that of a bookie once removed, taking bets on people making bets."Walter Dolde: "A common misconception about risk management in some quarters is that the use of derivative securities constitutes speculation- that is, the addition of financial risk to the business risk of a firm's operations. Some think that condom use increases risk."Since 1994, federal law has required government departments to make financial audits...the Defense Department has never complied with this requirement. Its records are in such disarray that they cannot be audited. If government officials are violating federal law, then bring a court action against them.Henry Hazlitt: "The 'private sector' of the economy is, in fact, the voluntary sector, and... the 'public sector' is, in fact, the coercive sector."September 4, 2004 Bush speaking at the Erie Veterans Memorial Stadium: "Over the next four years we'll continue to work hard to reform systems that need to be changed so that American people can realize their dreams. We'll spread ownership and opportunity to every corner of this country." Herbert Hoover could not have said it better.Alexander Hamilton: "The violent destruction of life and prosperity incident to war, the continual effort and alarm attendant on a state of continual danger, will compel nations the most attached to liberty to resort for repose and security to institutions which have a tendency to destroy their civil and political rights. To be more safe, they at length become willing to run the risk of being less free. " That is a risk I am not willing to take, and certainly not for another four years.

9/4/04 Failed Policies Of The Present

Before proceeding with an analysis describing where I went wrong with my payrolls projection, I would like to indulge readers of this blog with some observations. The Labor Dept states, that since January, industries in the lowest 20% for annual salaries have created 477,000 jobs and industries in the top 20% for pay have exhibited zero job growth. In addition, those laid off and then finding another job, report that 57% are earning less than before. Between 2002 and 2012, the Labor Dept expects the economy to create more than 7.5 million jobs; however, almost 6 million of those new jobs will be low-wage jobs. Just 38% of low-wage workers receive health insurance from their employer compared to 69% of higher-wage workers. Bush promised that his economic plan would create 5.5 million new jobs by the end of 2004. He will wind up 4 million jobs short of that figure. Voters in November need to hold this country’s chief executive accountable. Bush offers promises but his execution is a miserable failure. An example of the job market and employment figures is the Bank of America. They laid off 1,365 former FleetBoston workers in New England and hired 600 part-time workers. The result is a reported net loss of 765 jobs. It’s important to distinguish between full-time and part-time as well as low-paying and higher-paying jobs. Yesterday I mentioned Intel and their lowered forecast for this quarter. Under the radar screen, Microsoft cut 93 positions in their windows server area. The jobs are not being outsourced and are not being replaced on their campus in India. In addition, the company is not hiring contractors but rather only individuals for project positions which last a month to six weeks. Cypress Semiconductor lowered its third quarter guidance due to ongoing softness in customer orders and the specific slowdown in the networking and wireless infrastructure business. I should mention that Florida is the second largest market behind California for new cars. Starting in January, for 39 million Americans, Medicare premiums will increase over 17%.

The Arizona Republic’s Robert Robb: “The Medicare prescription drug plan he signed made its long-term finances less secure, not more. And Medicare reform didn’t make it into Bush’s second-term agenda... Bush says his reforms move towards empowering people and giving them more choices... but will Bush truly fight for these reforms... on this front there’s reason to doubt his resolve.”

Roger Altman: “Over the past three months, the percentage of Americans who are working has fallen.” On that note, the Household Survey, which Bush heralded after the July jobs report, indicated a drop of 152,000 in the labor force in August.

The ISM Non-Mfg index in August fell to 58.2% from 64.8% in July. New orders fell to 58.6% from 66.4%, the lowest since June 2003.

The Census Bureau estimates that the U.S. population is growing this year by a rate of about 220,000 per month.

American Greetings management stated they would either close their Plus Mark plant in Franklin, Tenn. or in Greeneville. Plus Mark is a major manufacturer of gift wrap and specialty printing products. The Greeneville plant employs 850 and Franklin 450. Anthem Blue Cross & Blue Shield of Maine is eliminating 70 positions. Philips Medical is cutting 150 jobs at its Bothell, WA site.

How did I underestimate 95,000 jobs being created in August? It was part carelessness. I forgot that 28,000 auto workers returned from annual retooling shutdowns in July. In other manufacturing areas there was little change, as I had previously mentioned, and factory hours and overtime were flat. I had mistakenly thought about 12,000 jobs would be lost due to Hurricane Charley. That was a foolish mistake. The hurricane hit late in the reporting period for most of the survey's respondents. For the storm to have affected payroll employment, people would have had to have been off work for an entire pay period and not paid for the time missed. That leaves 55,000 unexplained jobs. I did not expect 20,000 additions in social assistance. That area had not been growing recently. I ignored rental and leasing and that was 7,000. I underestimated the financial positions by 12,000 hires, and figured that there would not be gains in temp work but 10,000 jobs were created there. I had figured on a pick up of 36,000 healthcare positions and the final count was 42,000.
Importantly, as I had thought, the average work week remained unchanged at 33.8 hours, average hourly earnings only rose by 5 cents, and the labor force participation edged down over the month and the rate has been at or near 66% since late 2003. Finally, there were 534,000 discouraged workers.

Since Bush gave the order to invade Iraq, 976 U.S. troops have been killed in that country while another 6,916 have been wounded, according to the Pentagon.

Thomas Sowell: "Many of the 'abuses' of today were the 'reforms' of yesterday."

According to the monthly Sypherion Employment Report, 48% of respondents believe that fewer jobs are available and 37% believe the economy is getting weaker.

A monthly survey of business leaders by the Santa Clara University Business Index found a sharp drop in business confidence in the Silicon Valley in August and observed "their pessimism about the future casts doubt in the idea that the slowdown is necessarily temporary."

9/3/04 Down For The Count

This is being written prior to the release of the non-farm payrolls report. Few know that I have owned a recruiting company, and that experience might give me a small leg up when analyzing employment numbers and projections. Early Thursday morning the Monster August Employment Index was posted on the Monster website. Traders jumped on that number and stocks were off to the races while bond prices tanked. Their August index rose to 145 from July's 134. In July there had been a slight dip. This index does not have a long history, but that doesn't prevent hedge funds from making a straight line between the index and non-farm payroll gains. In other words, the index cemented the forecast for job gains of at least 150,000 in August. Unfortunately, many have short memories. This same index increased from May's 128 to June's 136, and non-farm payrolls were quite disappointing in June. I know a lot of folks hope my projection is way wrong. I don't believe the number will be negative, but I do believe the gains will be less than 50,000.

Yesterday there was a great deal of interesting information. Target's same-store sales for August rose 1.8%. Wal-Mart reduced their estimate for Sept. comp sales to a range of 2 to 4%. With Frances on the way that estimate could be suspect. Intel reduced its revenue projections for the quarter as well as their profit margins and the stock dropped to a 15-month low.

Initial first-time jobless claims in the week ending August 28 rose 19,000 to 362,000. Hurricane Charley accounted for a "little less than half" of the increase, according to the Labor Dept.

According to the BLS, real hourly compensation fell 1% in the second quarter of 2004, after falling 0.8% in the first quarter of this year. The second quarter decline was the largest since hourly compensation fell 1.6% in the second quarter of 2000. I don't envision improvement for this third quarter. In my view, real hourly compensation declines will determine this election.

U.S. second quarter productivity was revised downward from 2.9% to 2.5%.

PaylessShoeSource will sell as well as close some stores and that will cause layoffs. Continental Air will cut about 425 management and clerical jobs. Ford may close or mothball production at its Land Rover plant and 8,000 wrkers will be impacted.

According to the Census Bureau, property taxes have had a 5.7% annual increase for each of the last five years.

Ex civilian aircraft, July factory orders fell 0.4%

Unit labor costs were revised downward to 1.8% from 1.9%.

In sum, except for special cases, I see no reason for companies to hire permanent workers. Top line growth is suspect and clearly grinding to a halt. Productivity gains are on the decline. Benefit costs are rising and create caution in the hiring process. The Fed talks a good growth game but the picture I see has a far different look. With the plant closings on the rise, I see a very poor employment number for September- worse than August's. Hurricane Frances will only add to the misery index. I pray for the well-being of those in the area, and that includes my Dad. I hope this holiday weekend is an enjoyable one for all and a safe one.

9/1/04 The Bench

Haeger Industries is closing its Illinois pottery plant and laying off 60 workers. That qualifies for a mass layoff (the definition is 50 or more workers losing their jobs by a single event.) If you are a daily reader of this blog, then you know that plant closings have increased significantly over the last 60 days. According to the BLS, in July 2004 employers took 2,094 mass layoff actions and the number involved totaled 253,929 worker Both the number of events and the initial claims were higher than a year ago and also higher than any July since July 2001. This is not a misprint.

Since Bush took office, the S&P 500 is down about 18% and the Nasdaq about 33%. We have gone from gov't surpluses to twin tower deficits looming over our economy. Real incomes, adjusted for inflation, for Americans as a whole have declined. Consumer debt is climbing. Bankruptcies have risen. There has been a significant number of job losses over the last four years. No sitting president can make that statement other than Hoover. Most new jobs have been low-paying. There are several million discouraged workers. There are millions of part-time workers who cannot find full-time employment. If you consider this mission accomplished, then your thinking processes are 180 degrees from accomplished.

Should you go to North Beach at Point Reyes National Seashore about an hour and fifteen minutes outside of San Francisco, you would notice plenty nof warning signs. This is not a safe place to swim. The undertow and the currents are not for mere mortals. The Fed might take notice. They have ignored the warning signs and are knee-deep in potential danger. They have ignored the slowing economy mixed with muted inflation signals. Rather, they are smitten with the on-going effort of raising short-term interest rates. Only the Fed believes they know how to equate the "natural" rate of interest with the money rate. Meanwhile, the market goes about reading the data, and consequently, 10-year treasuries have recently declined 50 basis points to a 4.13% yield, a five month low. When a dozen economists think they know more than the market, then it's time to bring in a fresh bunch off the bench. Greenspan and his cronies are spent and need a long rest. The August payrolls report will push them over the cliff- only to hang by their useless rhetoric.

The Conference Board's Delos Smith: "If you're insecure in your job, you're not going to think things are good."

Lynn Franco, director of the Conference Board's Consumer Research Center: "Until the job market and pace of hiring picks up, the cautious attitude will prevail. The slowdown in job growth has curbed consumers' confidence."

The Chicago Purchasing Management Index fell to 57.3 in August from 64.7 in July. New orders fell to 58 from 68.7. Supplier delivery times index stood at 55.2% compared with July's 64%.

U.S. mutual fund assets fell 2% to $7.4 trillion in July.

The war on terror and the invasion of Iraq are not cut from the same cloth.

On Monday, on the NBC Today show, Bush stated about the war on terror "I don't think we can win it." On Tuesday, speaking to the American Legion, Bush stated about the war on terror " one that we will win." What a difference a day makes.

Effective October 1, State Farm will lower California auto insurance rates an average of 7.6%.

Coal consumption still accounts for 67% of China's current energy mix. They plan on importing 880 million barrels of oil this year. Oil prices account for less than 2% of their CPI, which mainly is driven by food prices.

California's July construction employment was down 3,400 from June. Statewide construction was down 26.2% from June, according to the Construction Industry Research Board.

Edward Langley: "What this country needs is more unemployed politicians."

Slappy White: "The trouble with unemployment is that the minute you wake up in the morning you're on the job."

According to the Financial Times, United Airlines is looking to cut 6,000 jobs.

8/31/04 No Relation To Ricky Ricardo

Over the weekend we visited with Wicksell's theories. Today,we go back even further in time to around 1800 to David Ricardo. Most folks think of Warren Buffett as an example of a superb investor, and that he has been for 40 years. Long before Buffett came Ricardo. At the age of 14, his father employed him full-time at the London Stock Exchange. At the age of 21 he went out on his own. In 20 years he made great sums in bonds, currencies, commodities, and arbitrage. He retired at 41, and only then did he become an economist. One of his theories should be kept in mind- he showed that a rise in wages did not lead to higher prices. Rather, higher wages lowered profits. In another theory, he argued that relative "natural" prices of commodities are determined by the relative hours of labor expended in their production. Ricardo believed that value was independent of distribution, and he adhered to his "labor-embodied" theory. He envisioned the introduction of labor-saving machinery, and considered that there could be a resulting pool of unemployed workers accompanied by downward pressure on wages- all leading to the general misery of the working classes. In addition, in foreign trade, if goods are imported at a lower price than they cost domestically, the result could lead to the lowering of the real wage and a rise in profits.

Global oil consumption is 82 million barrels a day and growing quickly in China, India, and other regions. According to the Bureau of Economic Analysis, oil-related costs shaved three-tenths of a percentage point off GDP growth in the second quarter. So far in July and August, oil prices have reached higher levels than in the second quarter.

Mitsubishi Motors America is looking at more layoffs in the U.S. in early September as sales have plunged.

Interstate Bakeries has also run into difficulty. With 58 bakeries, such as, Wonder Bread, Hostess, and Drake's, over 1,000 thrift outlets, and 34,000 employees, you can expect more plant closings and more layoffs.

Ford added new incentives and cut-rate financing.

According to Weiss Ratings, HMOs earned $10.2 billion in 2003 and Blue Shield plans reported a 63% jump in earnings. Michael Moore's next project is on HMOs.

A key advisor to Bush maintains that the election will be won by generating higher turnout from core supporters rather than appealing to the middle. In my view, Bush wouldn't recognize a paycheck-to-paycheck American. A problem with Bush is that he can't be compassionate even with taxpayer money.

8/30/04 Caught In The Middle

Do you know what that means? In August 2001, average weekly earnings were $490.36 and average hourly earnings, seasonally adjusted, were $14.38. When reported this Friday, three years later, average weekly earnings will be about $529.10 and average hourly earnings about $15.46. Naturally, those numbers have not been adjusted for inflation. In other words, under Bush, income-wise the average person's lot has gone backwards. You are worse off than you were in 2001. To put an exclamation on this point, for the first seven months of 2004, real disposable incomes increased just 0.9%. Our twin tower deficits rise daily to new heights while incomes remain behind the eight ball. In sum, the vast majority of Americans have been screwed under Bush. If you vote for him, you are a masochist.

It's comical to read the projections made by economists for August 2004 job growth. August has been a pretty dismal month for jobs under Bush. In August 2001, nonfarm payrolls declined 113,000. In August 2002, they increased by 39,000. Importantly, last August 2003, non-farm payrolls were significantly weaker than expected. They registered the largest decline since March 2003. Instead of the expected gain of 20,000 jobs, there was a decline of 93,000 payrolls. Now, economists estimate that jobs will increase from 150,000 to 185,000 for this August. Keep in mind that the economy has been slowing for the past three months and job generation has been disappointing. Of course, we can count on health care for gains and maybe with declining interest rates construction will surprise on the upside. State education is a possible wild card. Of course, the gov't can always hire even though they are bumping the top of the debt limit. Unfortunately, the important trends will continue. Most new jobs are low paying and overall benefits have been getting reduced. The last time I looked there were a growing number of plants closing. Is there any reason to believe that this August will be different from the prior three Augusts under Bush?

As head of the 1982 presidential commission on "fixing the baby boom," Greenspan made recommendations and they were enacted into law in 1983. A payroll tax increase was to provide solvency to Social Security through 2042. That tax increase has generated about $1.5 trillion over the past 20 years. Unfortunately, over those 20 years, presidents have looted that $1.5 trillion to pay for their own agendas, such as, the most recent tax cuts and tax credits. Baby boomers prepaid for the cost of their "retirement." Now Greenspan wants to cut the benefits which have been prepaid and which he recommended into law in 1983. This is immoral at the least. He should resign.

According to Rep. Earl Pomeroy, 40% of National Guard and Reserve soldiers between the ages of 19 and 35 do not have health insurance.

8/29/04 Beatable

One Bush official: "If Bush hadn't invaded Iraq, he'd be unbeatable." If the Queen had balls, she'd be King.

Britney Spears: "Honestly, I think we should just trust our president in every decision that he makes and we should just support that." This must be a blonde joke. Who would believe anyone who "misspeaks" to his fellow Americans?

I wonder whether the GOP convention will focus on the growing number of plant closings around our country. Rock-Tenn announced they would close their St. Paul, Minn. carton plant and about 170 people will lose their jobs. Circle S Foods will close its turkey processing plant in Wallace, NC and lay off 400 workers. Chelsea Industries will close its Cadiz, Ky plant. Over 50 employees will lose their jobs. They had been making seats for Mitsubishi, and the latter is having tough times.

According to the Energy Information Administration, the average cost for a gallon of heating oil in N.J. is $1.52, up from $1.36 one year earlier. The agency predicts that heating oil will average $1.54 per gallon nationally this coming winter compared with $1.37 last winter.

8/28/04 Taking A Page From Knut WicksellBeing a bit older, my memory can jump back to the late 1800s to the time of Swedish economist Knut Wicksell. You don’t hear his name very often, but over the last three years, our nation has been “Wickselled” by the Fed. This economist was quite brilliant and stated that “any theory of money worthy of the name must be able to show how and why the monetary or pecuniary demand for goods exceeds or falls short of the supply of goods in given conditions.” This was part of his theory called the “cumulative process” of inflation. Importantly, Wicksell made investment independent of savings, and in that way, aggregate demand could rise above or below the aggregate supply. He noted that increases in the supply of money would lead to price rises. We should pay attention to Wicksell’s description of credit money. He said there were two interest rates- the “natural” rate and the “money” rate. The former is the return on capital and the latter is the loan rate. Wicksell wrote that finance frees investment from savings. The “cumulative process” describes the finance demand for money set by the difference between the money and natural rates of interest. If the natural rate is greater than the money rate, the marginal product of capital is greater than its cost. As such, it will spur borrowings in order to invest in capital. In short, the money supply increases. As long as the natural rate of interest remains above the money rate of interest, the demand for loans will continue to accumulate, but the savings does not really catch up. As the money supply expands, prices rise. How does this spiral end? The loan rate is raised to equate the natural rate. In addition, as inflation increases, the attractiveness of new capital investment diminishes. Does any of the above have a familiar ring? The Fed did nothing more than take a page from Wicksell’s theories. In so doing, and not fully comprehending the dangerous consequences of the credit spiral, they were and are playing with fire. As some examples, year to date, M3 and Bank Credit have expanded at over an 8% annual rate; real estate loans at a 14% annual rate; and total commercial paper at a 10% annual rate.The Commerce Dept stated after-tax profits fell 1.2% in the April-June quarter compared with the first quarter. It was the weakest quarter since 2003’s March quarter.Jaguar will cut production due to slack demand.Private aircraft maker Mavericks Jet is, according to Business Standard, exploring a facility in India with an investment of over $1 billion in 3 years.Asian Development Bank’s chief economist stated that, if the price of oil stays above $40 until the end of 2005, the combined GDP for Asia excluding Japan in 2005 would be around 0.8% lower than it would otherwise.According to Delhi’s Times News network, 60% of developing Asia’s population of 1.9 billion live on less than $2 a day.A total of 830 natural gas wells were completed in Texas in July- the highest number of completions in 2004 and a 30-year high, according to the Texas Railroad Commission.Year-to-date, Fed Foreign custody holdings of Treasury and Agency Debt are up almost 30% on an annualized basis.I would like to thank Stephen Roach for bringing the following to my attention: as of year-end 2003, BIS data reveal dollar-denominated assets made up about 70% of the world's total holdings of foreign exchange reserve compared with our nation's 30% share of the world's GDP. Could this disequilibrium be a reminder of a somewhat similar situation contributing to October 1987's crash?

8/27/04 The Message Is Clear

If, as Bush maintains, we have turned the corner, then we have been greeted by increased poverty and decreased opportunity. This is failed leadership. It is not surprising that, according to the Community Service Society of N.Y. third annual survey, a third of voting age citizens in N.Y.C. live below twice the poverty level. The survey shows the main concerns, by a wide margin, are jobs and the economy.
Nine out of ten say their family finances have not improved over last year and 36% say they are even worse off.
For the first time in over a decade the number of poor in the U.S. increased for three years in a row. For the second year in a row the average income did not rise. Since Bush took office, the number of Americans without health insurance has increased by 5 million.
Since invading Iraq, 969 U.S. troops have died and 6,690 service members have been injured.
In a WSJ/NBC poll, 52% disapprove of Bush's handling of the economy and 51% state he needs to change his approach on Iraq.
General Eberhart, head of NORTHCOM and NORAD, stated "I believe it's just a matter of time until the terrorists try to use a ....maritime attack against us." He sees North Korea as posing the greatest threat to the U.S.
Next month Interstate Bakeries will close its Monroe, LA plant and 50 people will lose their jobs. In October, the company will close its Buffalo,N.Y. plant and there will be a loss of 200 jobs. Cirrus Logic is laying off 7% of its workforce. In Kingston, NC Unifi is buying a textile plant from Koch Industries. The new owner told hundreds of workers they must take a 20% pay cut if they want to keep their jobs. Novellus Systems sees some shipment delays due to some customer cautiousness.
Today, Greenspan will give a speech and tell the world everything is coming up roses. The U.S. second quarter GDP growth was revised downwward from 3% to 2.8%. Ex food and energy, the Consumer Price Consumption Expenditure Index rose at a 1.7% annual rate. In the meantime, in the latest report, consumer spending is slowing in Japan and their unemployment rate is rising.
The 10 year Treasury notes continue to hold its gains. With a yield of 4.21%, the market is telling us that GDP growth is going nowhere fast. That will continue to limit gains for equities. Those fighting that picture have faired poorly and will again do so in coming months.

8/26/04 Follow The Facts

U.S. new home sales declined 6.4% in July.

The latest weekly jobless claims rose by 10,000 to 343,000. The number of people collecting state unemployment checks rose by 5,000 to 2.897 million in the week ending August 14.

The good news yesterday was that crude closed down to $43.47 per barrel. One should remember that, in 1979, a gallon of gas cost $3.78 in 2004 dollars. On a relative basis, gas is a good value at $2 per gallon. Unless China's thirst for oil lessens, pressure will remain on the world's oil supply.

Including state and federal subsidies, it costs $2.24 to produce a gallon of ethanol compared with 63 cents for gasoline.

Analysts just don't get it. Boeing rose to a new yearly high based on a $4 billion order for 18 777s from Singapore Airlines. The market ignored the bigger news. The airline decided against placing an order for the 7E7. Why? The economics for the new plane were not sufficiently compelling. Boeing was banking on Singapore Airlines to provide the second biggest order for the 7E7 behind the All Nippon deal for 50 planes. The 7E7 is Boeing's future.

LaCrosse Footwear is laying off 70 workers and closing its Claremont, NH plant.

Square D is closing its Oxford, Ohio plant and laying off 242 hourly and salaried employees.

Harry Truman: "I want a one-armed economist so that the guy could never make a statement and then say 'on the other hand.'"

GM has asked the supplier of the Hummer H2 to cut production because sales have slowed.

The IMF raised the forecast for GDP growth for China in 2004 from 8.5% to 9% and stated it is not certain that China can achieve a soft landing.

Bob Beckham: "I put the Financial Times on the floor and called my dog William over to pee on it. Wherever there was a mark I could do some trading."

India's gold imports, accroding to commerce industry data, rose 30.7% in the April-June quarter this year compared with the prior year's period.

Kerry won the endorsement of 10 Nobel Prize-winning economists.

There are 78 ethanol plants in 19 states. Approximately 10% of all the corn grown in the U.S. goes into ethanol while 70% is fed to cattle. ADM controls 60% of the ethanol market. According to the Cato Institute, every dollar in profits earned by ADM from ethanol costs taxpayers $30. Since 1980, ADM has received over $10 billion in subsidies. Ethanol is protected by a 54 cent per gallon foreign trade tariff. It should be noted that, of all the major crops, corn creates the most soil erosion and demands huge amounts of herbicides, insecticides, and chemical fertilizers. According to studies at Cornell University, without factoring in costs to ship ethanol to blending sites, it costs 29% more energy to produce ethanol than you get from burning it. Ethanol causes air pollution by releasing significant amounts of hydrocarbons and nitrogen oxides.

8/25/04 Capital Equipment Purchases Are On Borrowed Time

There are only four months remaining for large companies to write off 50% of qualified capital equipment orders. After Dec. 31, the tax incentive ends. You have witnessed what happens to consumer spending after the child tax credit impact ended. The same will take place with business equipment purchases. In the meantime, orders for core capital goods increased 0.6% in July after gaining 1.4% in June. Computers, autos, and defense goods declined while transportation goods, such as, aircraft gained 5.6%. Bookings for commercial aircraft increased 100%. A year ago, Boeing's orders for commercial aircraft were at a standstill.

The California Association of Realtors stated the median price of an existing home in California in July increased 21.4% compared to the same period one year ago. Greenspan stated more data was needed to declare a housing bubble. Obviously, he and his wife are not out house hunting.

Mortgage applications volume was down 6.3% last week. The National Association of Realtors stated sales of previously owned homes declined 2.9% in July from June's record-high pace.

U.S. bombs damaged part of the walls in the Ali Shrine complex. George Will predicted the Baath's planning of a big October offensive, possibly in the al-Anbar Province.

Due to a very early spring and warm summer, Stony Hill Winery in the Napa Valley started its crush on August 11, the earliest in their 52-year history.

Toyota's main Chinese partner posted a decline of 79% in second quarter profit due to sliding car prices and higher raw material costs.

According to the National Women's Business Council, 15.6 million women owned or co-owned businesses in 2002.

Speaking of the new overtime rules, Sen. Tom Harkin stated "plain and simple, this is a rip-off of the American worker."

Mark Zandi, chief economist for Economy.com, stated "in this environment, when the numbers don't come in as strong as expected, businesses pull back."

Mark Twain: "In the beginning of a change, the Patriot is a scarce man- brave, hated, and scorned. When his cause succeeds however, the timid join him. For then, it costs nothing to be a Patriot."

8/24/04 Signs Of Diminished Inflation

Sanderson Farms reported that the price for boneless chicken breast during the quarter peaked at $2.56 a poundbut has since dropped significantly to $1.75 per pound. Meanwhile, oil declined to below $46 per barrel.

First Energy to cut 205 employees at their Ohio plant. Interstate Bakeries to close its Long Island, N.Y. bakery and cut 200 workers.

According to the BLS, the number of American workers in furniture and related products dropped 14% from 674,900 in January 2000 to 581,700 in July 2004.

The BLS is doing yet another study on the 9.5 million self-employed Americans. At first glance, it appears, that as a generalization, income for the self-employed has been on a yearly decline and that has been accompanied by reduced annual workloads.

Target sees August sales in range from flat to plus 2%. That mirrors what Wal-Mart stated.

Tom Nardoni of the Labor Dept's Division of Labor Statistics stated "I can't tell you. We just don't know why there's a difference between the surveys (payroll and household)."

8/23/04 The Paycheck-To-Paycheck Consumer And Investor Optimism

Slightly less than a months ago, Wal-Mart expressed confidence that their August comp sales would rise by 2 to 4%. That forecast was made knowing that the prior August comp sales were up 6.9%, that there would be less discounted merchandise to sell, that the Labor Day weekend fell one week later, and that there would not be child-credit checks available. Today, the company reduced the forecast to a range from no change to plus 2%. The reason provided was Hurricane Charley which forced the closure of 75 stores and impacted a total of 200 stores. Importantly, Wal-Mart stated that back-to-school sales were tracking below plan. This is highly significant. Operations at Wal-Mart's 3,600 U.S. locations tell you more about consumer spending than any other information available. It is a mirror of Main Street spending. In addition, other than the pre-Christmas holiday season, this back-to-school period is the most important contributor to a retailer's annual sales. In sum, the consumer is cutting back again in August. The Fed may miss this point, the Administration may gloss over it, but an investor had better take notice. If you do not adjust your portfolio accordingly, there will be non-pleasantries eating away at your positions.

According to the UBS Index of Investor Optimism, less confidence was expressed by investors in August about the economy and their personal investments. The overall Index declined 11 points to 77 from July's 88. Only 43% expressed optimism on unemployment, down 6% points from July, and now 46% are optimistic about the stock market, down 3% points from July and 4% points from one year ago.

8/22/04 Screams From The Graveyard

On Friday, market participants turned to the media for their news. They relied on headlines to trade oil, stocks, and bonds. They will never learn, and their P&L will rightly suffer the consequences. Either do your own work or expect to be carried out on a stretcher. The news about the mosque turnover was wrong. It wasn't even the main event. No major news bureau has carried the story about the graveyard. The Administration made a very serious error in judgment in their repeated bombing of Najaf's sacred cementary. Many Iranian loved ones are buried there. This is the story that holds significant after shocks. As for the mosque, Al-Jazeerah stated that a Muqtada spokesperson related that, even after the handover, their army of fighters would continue to guard the shrine. It's too late for guarding the graveyard. We will hear the screams.

Southwest of Basra guerillas bombed and set fire to an oil pipeline, one that had been shut down as a precautionary measure. In the meantime, the Snowman stated "the energy experts that I've talked to all indicate current prices are abnormally high, something of a bubble, and they ought to reced as the uncertainties get clarified." I figure his "experts" are short oil and are getting clocked. When you rely on the Snowman's info for wealth creation, things have truly deteriorated. He couldn't even run a railroad.

Lehman Bros. reduced its forecast for U.S. GDP in 2005 from 3.7% to 3.3% due to the slowing of consumer spending and job creation.

John Edwards on the new overtime rules: "Why would anyone want to take overtime pay away from as many as 6 million Americans at a time when they need it the most? And why would anyone support the new rule which could mean a pay cut for millions of Americans who have already seen their real wages drop again this year? If you work hard, then you should be rewarded with that effort." The answer, John, to your questions is simple. Bush's base is fighting wealth distribution, and the Administration has tried to sell the American people on the notion that the tax cuts have promoted wealth creation. You can't create wealth with lower paying jobs and wages and benefits trailing a muted inflation rate for almost four years.

8/21/04 Compassionate Conservatism At Work

About 115 million workers are covered by overtime rules in the 1938 Fair Labor Standards Act. Starting Monday, new overtime rules go into effect. They have been brought to 115 working Americans by Bush and the Republican-controlled Congress. Elaine Chao told Congress the new rules would help stop "needless litigation" because it is designed to clarift who's entitled to overtime. Deputy Labor Secretary Law stated the new rules will "provide a stronger and clearer overtime guarantee for more working Americans." This is such a load of shit. In drafting the language, significant changes were made. The draft had said 1.5 million to 2.7 million workers "will be more readily identified as exempt." The final language stated "it is impossible to quantitatively estimate the number of exempt workers."It is impossible to give an exact number but it had been agreed that a range was realistic. These politicians are dangerous. They are taking away your personal freedoms and now your right to receiving compensation for working more than 40 hours a week. If you vote them in for another four years, you are one huge jerk.

Nancy Pelosi: "These new regulations represent the largest middle-class pay cut in history-- starting Monday, more than 6 million workers will lose their right to overtime pay. President Bush and the Republicans simply do not understand that middle-class families need their overtime pay to put food on the table, to make ends meet, to buy a home, and to send their children to college."

According to the BLS, compared with June, July's unemployment rates were lower in 22 states, higher in 18 states and DC, and unchanged in 10 states.

Alaska Air cut up to 150 mangement jobs. Federal Mogul and Southern Mills will close two plants in west Georgia, laying off 340 workers. Moore Wallace is closing its Manchester, VT plant and 97 employees are losing their jobs. Microsoft is cutting production of their Xbox games, closing its video-game studio in Redmond, and laying off 76 employees.

It should come as no surprise that some big automotive retailers and car dealerships are reducing their orders for GM's 2005 models. GM already acknowledged they were cutting production in this third quarter by 5%. With about 1 million unsold vehicles in inventory, where should the dealers put the 2005 models?

Iranian Defense Minister Ali Shamkhani: "We will not sit to wait for what others will do to us. Some military commanders in Iran are convinced that preventive operations which the Americans talk about are not their monoploy...The U.S. military presence will not become an element of strength at our expense. The opposite is true because their forces would turn into a hostage."

Oil demand growth this year is running at a 24-year high. According to new customs data, China's oil imports are up 40% from July 2003 to July 2004. India expects its crude oil imports to rise 11% in 2004-2005. OPEC is pumping oil at its highest level since 1979.

8/20/04 This Is Not A Soft Patch
The Conference Board reported that the Composite Index of Leading Economic Indicators declined 0.3% in July, the largest drop since February 2003. This followed a 0.1% drop in June. Conference Board economist Ken Goldstein stated "the latest decline in the Leading Index reflects a loss of forward momentum. There are growing concerns about the high cost of gasoline and milk, as well as worries about where economic growth will come from now that tax refunds have been spent and short-term interest rates are rising. Hurricane Charley and renewed concerns about further terrorist attacks may be exogenous but add to overall anxieties." The weakness in the last two months was widespread, stated the Conference Board, and this weakness slowed the growth rate of the leading index into the annual rate range of 1 to 2%. It should be noted that the average annual growth rate of the leading index since 1959 has been about 1.5%. The Conference Board stated that "the slower growth of the leading index so far this year is consistent with a moderate rate of real GDP growth in the near term." In sum, this is not a soft patch but rather is consistent with economic conditions since 1959. If you are expecting more, especially with crude selling near $49 a barrel, then you need to seek professional help.
If Bush thinks he will win Michigan, he needs a reality check. The state lost 16,000 factory jobs in July, and the manufacturing sector jobs dropped to 686,000, the smallest number since the state’s current method of counting them in 1990 and the first time they have dropped below 700,000 since 1990.
Output at U.S. Mid-Atlantic factories slowed in August. The Philadelphia Federal Reserve stated its regional manufacturing index fell to 28.5 in August from 36.1 in July. A gauge of orders for new goods slumped to 19.2 from 35.3 in July. The survey’s employment component also declined.
The number of people who remained on the jobless rolls after collecting an initial week of benefits rose 16,000 to 2.90 million in the week ended August 7. These figures do not include any impact from Hurricane Charley.
Hooker Furniture, a furniture manufacturer and importer, will close its Maiden, NC plant and put 240 employees out of work. After this closure, the company will operate three remaining wood furniture plants.

8/19/04 Uncertainty And Caution
September crude traded at $47.54. As U.S. stockpiles have fallen, U.S. oil demand has risen 3.4% this year. In April, Iraq exported 1.8 million barrels a day. Iraq’s OPEC governor stated "we are exporting right now about a million barrels a day." U.S. Energy Administration inventory data for the week that ended Friday estimated commercial crude stocks had fallen 1.3 million barrels to 293 million, the third week in a row that inventories have declined. ChevronTexaco CEO Reilly stated "this may not be a short term aberration. I believe energy prices are going to face continued pressure- reflecting fundamental changes in demand, supply, and geopolitics. We are, in fact, witnessing a change in the basic energy equation."
German Chancellor Schroeder stated "we don’t currently see any negative impact from the oil price, and we still have very robust global growth." Germany’s unemployment rate exceeds 10%. U.K. July retail sales were down 0.4%. When was the last time Schroeder got out of his limousine and filled its tank with gas? Talk is cheap. Gas is not.
U.S. Air’s Chairman Bonner stated, that without $800 million in new wage and benefit cuts by Sept. 30, the airline could face liquidation.
Yesterday, heating oil futures rose 0.31 cents to $1.225 per gallon.
Knight Ridder said yesterday that its total ad revenue were up 1.4% from last year. CEO Tony Ridder called the revenue increase "soft" with weakness in national ads.
Ciena Corp. stated "short term, we expect revenue for our fourth quarter will be roughly flat with out fiscal third quarter revenue, reflecting ongoing customer uncertainty and caution."
An Iowa Beef plant in Tama, Iowa will close tomorrow, laying off 540 employees. Hahn Elastomer, which supplies plastics to auto and appliance makers, is closing its Plymouth headquarters and two plants in southeast Michigan, putting 273 people out of work. The company could not provide the required 60-day layoff notice because it was not able to obtain the necessary capital to remain open. Nortel to cut 3,500 jobs.
Google cut the size of its IPO sharply and reduced the price to $85. Still the company raised over $1 billion in new capital.
Speaking yesterday in Minnesota, Bush remarked "even though we did not find the stockpiles that we expected to find, I want you to remember that Saddam Hussein had the capability of making weapons, and he could have passed that capability on to our enemies. And that was a risk we could not afford to take after September the 11th." You will notice that he didn’t mention what type of weapons Hussein had the capability to make. The statement was cleverly worded. Hussein was capable of making foreign bank deposits. That’s what we know. We also know Bush has hit a "soft patch" two and one half months before the election. That’s what happens when your mission is not accomplished.

8/18/04 Searching
Google reduced the range on its IPO pricing from $108 to $135 to $85 to $95, Selling shareholders are reducing the amount of shares to be offered.
In the plant closing category, Alcoa is closing an automotive components plant in Northwood, just outside of Toledo, Ohio. About 140 people will lose their jobs. Libbey will close an LA plant and also eliminate 140 jobs. Time Warner Cable will consolidate its News 14 Carolina support operations and administration in Raleigh and cut between 40 and 50 workers. Bank of America to layoff 1,500 at FleetBoston branches.
N.Y. crude futures traded at $47 this morning, another new high. Getting less headlines is the price for this winter’s heating oil. The Energy Information Agency estimates it will cost consumers an extra $100 to keep their homes warm this winter using heating oil and an extra $179 using natural gas. That estimate is based on crude dropping down to $38 a barrel. Mark Zandi of Economy.com stated "higher energy prices are the key threat to the contiued strength of the economy. There is a risk if prices move higher and stay there that it would begin to undermine productivity growth and the economy’s long-term potential, as happened in the 1970s and 1980s." Al Qaida doesn’t need to attempt another attack on our soil. They simply have to create dislocations in energy supplies and keep prices escalated. We’re a consumer-based economy. Main Street doesn’t have the extra cash flow to offset higher energy prices. Consumption will be reduced, and that includes holiday shopping.
The International Energy Agency stated that rising crude demand has left OPEC countries with "effective" spare oil-production capacity of 500,000 barrels a day. The U.S. will eat up that spare capacity by simply filling the Strategic Oil Reserve to the brim. Bush will make certain it happens. He wants to keep his "base" happy. In addition, when figuring world daily production, it might be wise to count Venezuela’s at 2.5 million barrels per day rather than the reported 3.1 million barrels a day.
U.S. consumer prices fell 0.1% in July, the first time in 8 months. The core rate rose 0.1%. Through the first seven months of 2004, core prices have risen at a 2.4% rate, up from 1.3% a year earlier. Given the significant rise in crude, heating oil, milk, beef, and lumber, the rise in the overall CPI has been modest. As such, the treasury market viewed the news as quite favorable and the yield on the 10 year Treasury bonds dropped to 4.20%.

8/17/04 Sign Of The Times
Costco began selling caskets at two Chicago-area stores.
The poor August employment numbers will be blamed on Hurricane Charley. Meanwhile, little mention is made of plant closings, non-seasonal events. After 50 years in business, Azusa-based Pacific Precision Metals, which makes a wide range of metal products including doorknobs and automotive, furniture, and bathroom accessories, is losing the plant and shifting its workload to Mexico. Layoffs of all 300 employees will begin around September 26. Maytag is closing its refrigerator plant in Galesburg, Illinois. All 1600 employees will lose their jobs. Much of the production will be moved to Reynosa, Mexico.
Swiss chip maker, Unaxis, warned about temporary over-capacity and the slowing investment by its customers.
Since January 2001, Pennsylvania has lost 160,000 manufacturing jobs. Similar experiences have taken place in Ohio and Michigan. Voters vote with their pocketbooks.
Dr. Jane Liu, vice president of Data Analysis for Edmunds.com, stated "new models are being introduced at higher price points, but the competitiveness of the market is dramatically pushing down net prices, resulting in a record average discount." In July, the average discount from MSRP was a record $4,982, or 16.8% of MSRP. Are you still thinking about buying GM or Ford common stock?
The Empire State Manufacturing Index plunged to 12.6 in August from 35.6 in July. The index is at its lowest level since May 2003. The new-orders index fell to 14.9 from 28.6 in July, while shipments fell to 11.9 from 34. The unfilled orders index fell to –4.6 from 14.3 in the previous month. The average employee workweek fell to 6.8 in August from 22.5 in July. The bulls will tell you there is no reason to worry. The overall index is still above zero. My response is Costco has a new item waiting for you.
PricewaterhouseCoopers’ ‘Trendsetter Barometer’ interviewed CEOs of 364 privately-held product and service companies, identified in the media as the fastest growing U.S. businesses over the last five years. The surveyed companies range in size from $5 million to $150 million in revenue/sales. More than half remain concerned about the stability of demand.
According to the Census Bureau, the wealthiest 20% of households in 1973 accounted for 44% of total U.S. income. Their share increased to 50% in 2002. For the bottom fifth, the share dropped from 4.2% to 3.5%. Mark Zandi, chief economist at Economy.com, stated "for those working in the bottom half of the pay scale, they’re under an enormous amount of pressure." On a weekly basis, the average wage of $525.84 is at the lowest level since October 2001. This is the primary reason Bush will lose on November 2. People on Main Street are not better off than they were in 2001.
Ryan Puckett, spokesperson for the Portland Cement Association, a trade group that represents cement companies in the U.S. and Canada, observed that the U.S. has long imported about 25% of its cement, and that much comes from China. Unfortunately, with China in an infrastructure-building boom, that country is now using far more concrete than it exports. Shortages of cement have been declared in 29 states. Puckett stated "it’s impacting customers, employees, company profits, and building projects all over the U.S. Everywhere there is construction, there are cement customers lined up without enough supply to keep them happy." Adding to the problem, are bottlenecked transportation situations at U.S. ports and rail systems, particularly that of the Union Pacific’s.
Senator Tom Harkin was angered by Dick Cheney's remarks questioning John Kerry's ability to understand the war on terrorism. Harkin stated "it just outrages me that someone who got five deferments during Vietnam and said he had 'other priorities' at the time would say that. When I hear this coming from Dick Cheney, who is a coward, who would not serve during the Vietnam War, it makes my blood boil. He'll be tough, he'll be tough with someone else's kid's blood."

8/16/04 Questions

Prior to injecting further funds into either the equity or debt markets, I suggest one ponder the following questions: (1) When was the last time there was such a disconnect between the Fed raising rates and 10 year Treasury bonds declining in yield? What is behind this disconnect? (2) Crude is approaching $47 a barrel. While crude has risen sharply in price over the past two months, prices at the pump have declined? What is the reason for this disconnect? If pump prices begin to rise once again, what impact will that have on consumer spending? (3) Higher prices for crude have had an impact on the world economy as a slowing economic trend is developing around the globe. As this slowing expands with record crude prices, the appetite for our nation's exports will decrease and our trade deficit will expand as it did in the latest figures. What impact will this have on our ability, if any, to attract foreign capital to fund our twin deficits? (4) What impact will the decline in the equity markets have on our economy and consumer and business spending?

Maybe there is a good reason KMart is selling some of its store locations. In the latest reproting period, the company's same-store sales dropped 14.9%.

8/15/04 The Damage Is Done
In Charley’s wake there are at least 15 dead and possibly $15 billion in damages. It will be many months before the clean-up process is completed. It was the most severe hurricane to hit Florida since Andrew in 1992.
According to the California state Department of Insurance, state workers’ comp insurance rates rose an average of 149% between 2000 and 2003.
According to a recent study by the National Center for Policy Analysis, it is estimated that elderly funding will consume 3.6% of federal income taxes this year, twice that in five years, and twice that again in ten years. The aging of our population is possibly the most significant trend in the U.S.
Bush: "I’d like to be the person known as somebody getting the job done." He should have thought of that before invading Iraq without a supporting coalition of foreign nations. He should have thought of that before going on a discretionary spending spree and constructing record-setting twin tower deficits. He should have thought of that before bragging to our citizenry in February 2002 that our economic recovery would produce 6 million net new jobs. He should have thought of that before parading around the country telling folks he wanted each and every American to have a job. Instead there are less jobs. Jobs are returning less after inflation than they did in January 2001 and the greatest percentage of job growth since February 2002 has been in part-time employment. Families are worse off than they were in January 2001. Maybe if Bush had had to depend on a job for his livelihood he would understand the economic struggles on Main Street. He won’t find them in Medina, Washington. Bush has all but exhausted the reservoir of confidence Americans have in their leaders. He has chipped away at the fabric woven over the past two plus centuries. Fortunately, as we look into the mirror, we can say you can fool us some of the time but not all of the time. In two and one-half months his job will officially be over. He never understood that the job entails leading all the people and not just a few. His mission was never started much less accomplished.
Delta Airlines threatened bankruptcy unless they could achieve more cuts from the pilots and the like. Unfortunately, the company didn’t realize that threats can wear away loyalty. Flights are being canceled because sufficient number of crew members are not showing for work. Planes don’t fly without pilots. Passengers are being stranded in cities, such as, Atlanta and are being provided rooms at the Sheraton Gateway Hotel. Is this any way to run an airline?

8/14/04 The Improving Inflation Front

Crude did hit $46 a barrel yesterday; however, there were other bright spots. According to the BLS, the crude goods index declined 0.2% in July after climbing 1.6% in June. The index for finished consumer foods declined 1.6% in July, compared with a 0.6% drop in June. The core PPI is up 1.7% in the past 12 months; however, in July it rose a scant 0.1%.
The Hune trade gap increased by $19 billion to a record $55.8 billion.
China stated crude import growth held in July at 40% versus the same period last year.
The Univ. of Michigan August consumer sentiment declined from July's 96.7 to 94. The expectations index dropped to 84.7 from 91.2.

8/13/04 Plant Closings Are Accelerating

La-Z-Boy blames the closing of three manufacturing plants on the U.S. antidumping tariffs set against Chinese producers of wood furniture. The company will lay off 645 employees. Low-carb diets took a toll on the NorSun Food Group's potato processing plant in Ft. Kent, Maine. The plant closed without advanced warning and 50 employees were out of work. Pennsylvania House Furniture will close its manufacturing and warehouse facilities in Lewisburg, White Deer, and Milton, PA. About 425 jobs will be lost. MeadWestvaco will close its St. Joseph, MO operations and 400 jobs will be lost. They will also close a facility in Garland, TX and 200 jobs will be eliminated. The Columbus, Ohio Techneglas plant will close and 300+ employees will lose their jobs. The 106 year old Union City Body plant in Indiana will close and 115 jobs will be lost. Fifteen days like this and you'll have a loss of 32,000 jobs. This is not a soft patch. Plant closings are building a head of steam. It's no wonder that the yield on 10 year treasury notes has dropped to 4.24%. It is also not surprising that, in the latest American Research Group poll, Kerry leads Bush 50 to 43, and in the latest Quinnpiac poll in Florida, Kerry leads Bush 47 to 41.
The BLS reported that prices for imported consumer goods were unchanged for the second consecutive month in July. In contrast, imported capital goods prices fell 0.1% in July, the sixth consecutive monthly decline. Export prices rose 0.4% in July, and overall, export prices rose 4.4% over the last year.
GM recalled 200,000 Buicks.
Mexico's auto industry output and exports fell in July.
July retail sales, ex autos, were up only 0.2%. Record high energy prices and stagnant wage growth are taking a toll on the paycheck-to-paycheck consumer. Muted sales are contributing to rising business inventories.
IBM stated it continues to experience growth in consulting and services, and the company will hire 18,800 new workers in 2004 with one-third in the U.S. and the Americas.
Servers and printers highlight strategic product growth for Dell in the latest quarter. In addition, U.S. consumers purchased 29% more Dell notebook computers than in the same period a year ago. The company generated more than $700 million in cash from operations in the quarter. Dell continues to be one of the great ones.
GDP annualized growth in Japan was a disappointing 1.7% rather than the expectations of 4.1%
There are many analysts who ponder the significance of round numbers, such as the Dow 10,000, the Nasdaq 2000, and gold $400. It's fair to state that most of these analysts believe there is a nugget in their spoken and/or written words. I suggest the nugget is not in the proximity to the round numbers but rather the substance and sustainability supporting the number. The most recent economic data has created a question about the judgment of those calling the month of June simply a "soft patch." When you question the reliability of the Fed's thinking, it creates an uneasiness in the marketplace. This uneasiness flushes round numbers like shit going through a goose. As such, the Dow closed at 9814 and the Nasdaq at 1752.

8/12/04 Assurances Are Not Sure Things

The Saudis tried to reassure the market that, by increasing daily production, oil shortages would be avoided and the price would go down. The price did go down on that announcement- for an hour or so. Today Sept. crude futures are at $45.12. So much for placing value on assurances.
The opposite is true in the treasury market. The "experts" give daily reasons why interest rates must rise. The market ignores the experts. A clue might be that, in the most recent report, business sales rose only 0.1% and that inventories increased 1.1% in June. Another clue might be that, even with crude at record levels, import prices rose only 0.2% in July. This is even more significant when you consider that consumer prices in China rose 5.3% in the latest month. I found that interesting since the Financial Times reported that Chinese data show easing inflationary pressures. Lastly, Redbook Research stated that sales at major retailers in August were down 0.5% compared with July.
Blue Chip Economic Indicators Survey cut their growth forecast stating "the persistence of sky-high energy prices, lackluster growth in employment and earnings, a weak stock market, anxiety about possible terrorist attacks, and an uncertain outcome to this November's national elections could dampen consumer spending and business investment well into the fall."
Bush: "I'm running for re-election because I understand how to take a strong economy and make it stronger."
Niles Helmboldt, a San Francisco banker and a Republican: "I'm not as well off as I was. My cost of living has gone up, but wages have not kept pace. I don't see his (Bush's) economic policies helping. It's not a pretty picture."
The IEA stated world oil demand will jump by 1.8 million barrels in 2005 after a gain of 2.5 million barrels a day this year.
Dramexchange.com stated there is weaker-than-expected demand for computer-memory chips from computer manufacturers.
John Chambers of Cisco: "Most of the CEOs that I talk with view the economy as growing at a modest level and are a little more cautious...than they were a quarter ago." John, I would asy HP is a lot more than cautious. They badly missed estimates for this latest quarter and for the next quarter they will also disappoint badly. Fortunately, there is Wal-Mart. Even though their profits are rising faster than sales, for the latest quarter, comps for the Wal-Mart stores rose 3.2% while Sam's Club hit it big at an 8.8% jump.
New federal overtime rules go into effect in less than two weeks. Generally, employees are eligible for overtime if they work more than 40 hours a week, except if they are classified as administrative workers, executives, or professionals. Workers in those classifications are exempt from overtime pay.
The middle class squeeze is partly explained by the Kaiser Family Foundation, Health Reserach and Education Trust. They stated that, since Jan. 2001, the cost of family health insurance has increased more than $2,700. From 2001 to 2004, workers' share of family health care premiums has increased by nearly 50%.

8/11/04 Measure This!

Tomorrow is a travel day. As such, I continue as a substitute blogger this afternoon. For the first time, crude futures topped $45 a barrel. Richard Schaeffer of ABN AMRO, while talking about the terror premium for oil, stated "we probably have a $5 to $10 extra charge on top of what the price should be." Meanwhile, the Energy Dept predicted lower retail gas prices and crude for the quarter; however, the price level predicted, $41 a barrel, was10% higher than the prediction made just one month ago. Rather than going out on a terror limb and shorting crude futures, one might consider buying the yen. The risk/reward appears more favorable.
I began by discussing crude because the Fed stated "the economy appears poised to resume a stronger pace of expansion going forward." They blamed the recent softness in output growth and the slowing of job creation on "the substantial rise in energy prices." In sum, the Fed is basing a forecast on a decline in oil prices, and that is highly speculative. The Fed's Phillips stated a Sept. interest rate hike was "a toss up." That indicates the Fed's lack of confidence in their forecasting ability. The Fed and Bush have at least three things in common- both fail to acknowledge mistakes; both attempt to mask mistakes with rhetoric; and both try to change the landscape to suit their original positions. Inflation, ex energy, is moderating. Wages and benefits continue to trail the inflation rate on an annualized basis. Productivity continues to exceed inflation. GDP growth is declining monthly. Job creation has fallen sharply for three consecutive months. There was not one valid reason to raise the Fed Funds rate and the Discount rate today.
Housing has been the strongest sector of the economy for the past two years. According to a July survey conducted by the National Association of Home Builders, builders report shortages of cement, gypsum wallboard, oriented strand board, steel framing, and insulating materials. They state these shortages could result in serious disruptions in the housing market.
Countrywide Credit's July loan production fell to $30 billion from $51.8 billion last July and down 7% from this June.
I wonder whether the Fed knows Nat'l Semi expects 1st quarter sales to drop 4-5% and that Cisco anticipates sales in the Sept. quarter to be flat to up 2%. Cisco's cash flow from operations in the June quarter were $2.1 billion, a decline from the prior quarter's $2.4 billion. Inventory turns were 6.4 this quarter compared with the year ago's 6.8 times. In this quarter Cisco repurchased 90 million shares for $2 billion or all but $100 million of their latest 90 days of cash flow. For the entire fiscal year, they repurchased 408 million shares for $9.1 billion. Considering the limited growth in routers and switches, this does not appear to be money well-spent.
Prior to raising rates, the Fed might have considered the growing list of layoffs announced just recently: KMart to cut 10% of HQ; Lockheed Martin to cut 149; Bosch USA to lay off 530; Sykes to cut 121; Dow Chemical to eliminate 160 employees; the IRS will cut 218 tech employees; Gruner & Jahr USA to lay off 105 workers; Bristol Meyers will phase out 120 jobs; and Premier Blue Cross to cut 82 employees.
A reporter from the Arizona Republic observed John McCain embarked on a multi-state campaign swing with Pres. Bush for what t-shirt vendors shouldmarket as the "Dishonest and Dishonorable Tour."

8/10/04 Productivity And Prosperity

There are some who hold that the productivity of jobs is a key element to our prosperity and not necessarily the number of jobs reported in either an establishment or household survey. In actuality, there are many components to the makings of prosperity. If we examine the latest BLS numbers, it will quickly become apparent that the Bush tax cuts have not initiated positive impetus in the workplace for those producing output in both the nonfarm and business sectors.

In the second quarter, productivity rose 2.9% in the nonfarm sector and 1.9% in the business sector while unit labor costs increased 1.9% on an annualized basis. During this period, real hourly compensation, adjusted for inflation, increased 0.1% on an annualized basis. Prductivity growth in the business sector reflected increases of 3.5% in output and 1.5% in hours. In manufacturing, in the second quarter, productivity rose 7.5% in manufacturing as output increased 6.6% and hours declined 0.9%(seasonally adjusted rates); growth was 5.7% in durable goods manufacturing; and 10.7% in nondurable goods. It should be noted that, according to the BLS, output and hours include about 13% of U.S. business-sector employment.

Analyzing these BLS numbers, we can quickly come to the realization that, those producing the output, have lagged in hours worked and in hourly compensation. Taking all the BLS numbers as a whole, since Jan. 2001, there has been a decline in hours worked, in compensation adjusted for inflation, and in the number of jobs in the nonfarm sector. Even though productivity has increased over this period, prosperity has not found its way into paychecks of the output producing workers. Greenspan does understand this. Many other economists and doctorates do not. That is most unfortunate. It goes to the core of what is wrong in the workplace.

Crude hovers close to the $45 level.

Trump Hotels to file Chapter 11.

Ford is laying off 5,000 salaried employees.

8/9/04 The Market Is A Leading Economic Indicator

Acorn mutual fund's Ralph Wanger stated "the market usually leads. O ne could argue that the recovery we've had was predicted by the market last year." Conversely, with the market indexes making new 2004 lows, maybe the present slowdown and possible future recession is being predicted. However, the most recent Bloomberg survey of 54 economists reveals expectations of third quarter GDP growth of 3.9%. In other words, they expect a 30% improvement from the 3% growth rate in the second quarter. These are the same economists who predicted a gain in July's non-farm payrolls of 240,000. I wonder how many of these same economists believe the Snowman's predictions of strong job gains in the second half of this year. They probably forgot that the Snowman's performance at CSX was the worst of all the CEOs at the major railroads. That may be the reason for Bush choosing him as Secretary of the Treasury. He could relate to him.

Why was U.S. machine tool demand up about 32% in the six months ended June 30? Bush's 50% expensing allowance for machine tools is the answer. That provision expires at the end of this year. This is no more than demand on steroids. It creates a false impression of well-being and is not sustainable. Even the Fed took the bait. They have forgotten the Hummer tax-credit.

According to a Time Magazine poll published Saturday, the economy is the biggest issue in this year's election. Even if Bush "finds" bin Laden, he still will be playing a card from a losing deck.

Who is hiring? Last year, Infosys of Bangalore hired 9,000 employees. That's more than Microsoft hired. Revenues at Infosys exceeded $1 billion for the first time. Microsoft's revenues are over 30 times greater. Infosys is expanding in the Silicon Valley and Texas. Microsoft is expanding in India.

Bangalore-based Elind Computers developed an internalization engine called Stride that can intelligently cross/or route orders depending on the liquidity source. Wall Street firms can hopefully improve service and lower transaction costs.

8/8/04 Playing Cards

Bush: "We're a nation in danger." This was from yesterday's radio address. He elected to play the terror/danger card once again. It's over and over again. Why? Would you like him to talk about the economy? He can't relate to that. He stated the other day "the economy is strong and getting stronger." He has a job- at least for another few months. He has never worried about finding employment. Family and friends took care of that chore. As such, he spends and spends. He doesn't know anything different. It's not his money. The twin tower deficits depreciate the dollar and erode the purchasing power of Americans. Bush pushes for a weaker dollar in an effort to enhance exports. Unfortunately, with all the plant closings and loss of jobs, what do we export? Boeing will deliver 285 planes this year, and only a portion are for export. We export farm products. Of course, farm imports are rising each year. Just go to the supermarket. Buying American might mean toothpaste. If you go to McDonald's, the meat could come from Canada. The coffee at Starbucks comes from many foreign countries. Krispy Kreme is American, but Americans are cutting down on carbs. You can't blame Bush. It's the terror card or bust.

The Fed meets Tuesday. They can't play the growth card. Second quarter growth dropped to 3%, and the third quarter will certainly be less. They are left with the inflation card. They can point to crude being up 30% this year and milk is higher. Of course, wages are only 1.9% higher on an annual basis. If they don't increase rates, they signal the economy is in more than a "soft patch." If they raise rates, economic activity, including hiring, could decrease even more so. Will they swallow and state they misread the economy? Can you see these supposed geniuses with the doctorates doing that? They can always pull a Snowman and state growth will pick up and so will hiring, and then remark, if wrong, adjustments can be fine-tuned down the road. It's the soft patch card or bust.

Against the euro, the dollar had its biggest weekly drop since November.

Schwab forecasts more job cuts.

High crude prices are hurting airlines, truckers, and orange juice manufacturers.

Greg Maddux gets his 300th win.

San Jose's city manager forecasts that annual revenue from the federal gov't will plunge 80% this year to $1 million, and that California's new budget will eliminate another $11 million from the city's $725 million general fund.

The Climate Prediction Centre stated sea surface temperatures have risen in the central Pacific Ocean and may "indicate the possible early stages of a warm episode" and that El Nino could possibly develop by late 2004.

8/7/04 Connecting The Dots

On Thursday, the Deloitte Research Leading Index of Consumer Spending was released. The Index fell in May and June, the first consecutive two-month decline in the index since early 2003. Prominently mentioned was the finding that real wages sharply declined as gasoline prices take a toll on consumer purchasing power.

On Friday, the BLS reported that average hourly earnings in July rose by 5 cents, and over the past year, average hourly earnings grew by 1.9%. When you drive into the gas station to filler up, that 5 cents is devoured pretty darn quickly.

The Strategic Petroleum Reserve currently holds 665 million barrels of crude at 4 sites in Texas and Louisiana. The Bush Administration announced it was adding more oil to the Reserve, and over a six-month period beginning Oct. 1, the 700-million barrel capacity will be filled by mid-2005.

the BLS: "The confidence interval for the monthly change in total employment from the household survey is in the order of plus or minus 350,000...BLS analyses are generally conducted at the 90% level of confidence...at an unemployment rate of 5.5%, the 90% confidence interval for the monthly change in unemployment is +/- 320,000."

the BLS: With respect to the establishment survey, "estimates for the most recent two months are based on substantially incomplete returns; for this reason, these estimates are labeled preliminary in the tables. It is only after two successive revisions to a monthly estimate, when nearly all sample reports have been received, that the estimate is considered final."

U.S. stock indexes closed yesterday at 2004 lows. The Nasdaq closed at its lowest point since last Aug. 26; the Dow closed at its lowest level since Nov. 28; and the S&P 500 closed at its lowest point since Dec. 10. Many economists believe that a good's price reduction will generate greater demand. Unfortunately, for many, economic theory does not always produce pleasing results with equities when they are falling in price. Such declines can lead to margin calls and to increased selling.

Some believe that business closings can be seasonal in nature. That is not the case with plant closings. They continue in all months. Sheridan Books of Spotsylvania County, Pa will close their manufacturing facility in late September. About 145 employees will lose their jobs.

U.S. consumer credit rose by $6.6 billion in June, a 3.9% annual rate. May increased by $8 billion.

The July S&P Hedge Fund Index fell 0.54%.

In June and July, many economists expounded on the "soft patch" theory. The stock and bond markets are telling us a very different story. When was the last time an economist risked his or her own capital based on his or her own economic predictions?

8/6/04 The Two Surveys

This week has been a new experience for me. Mike and I have been the closest of friends for 35 years. He called me early Monday morning and asked if I would ghost write his daily blog. Being a publisher, this was a new role. I also knew the blog is important to Mike, and the serious family illness was all he could handle. All he said was "don't read the newspapers or magazines or listen to the radio or watch TV for the info. Just present the facts. Stay the course. The facts are quite clear. The keys are temp help and services."

Everyone could see that crude was making new highs and that consumer spending was being impacted. Not everyone paid attention to the large percentage drop in those hiring in the ISM report--from 27 to 18%. That should have been a good starting point for the July non-farm payroll number. It was not surprising to see the usual suspects do well in July- employment in healthcare and social assistance increased 20,000 and employment in professional and financial services rose by 42,000 in July; however, employment in temporary help was little changed in the month of July and services only added 14,000 jobs, helping to explain why non-farm payrolls only rose by 32,000. It should be noted that May and June's numbers were revised lower by a cumulative 61,000.

Bush supporters will point to the household survey's gain in employment of 434,000. The BLS has studied the differences in both surveys and they are summarized at http://www.bls.gov/cps/ces_cps_trends.pdf.
The Fed prefers to rely on the non-farm payroll survey with a base of information quite different from the household survey. Speaking of the Fed, they have a dilemma. Do they swallow their pride and stand pat on interest rates next week? With 10 year treasuries yielding 4.19%, it would appear that the Fed is being largely ignored. The Fed might remember Kodak. They recently announced closing 9 processing labs in 7 states. About 1,000 jobs will be lost- most by the end of August. Next month's non-farm payroll number may look worse than July's.

Please excuse me rushing off. I need to return to my day job.

8/5/04 Hiring Trends Continued

The services sector accounts for almost 80% of our economy. Yesterday, the ISM Services Survey on employment dropped to 50 from 57.4. This was the sharpest one-month decline in the history of the survey. To pooh pooh such a decline would indeed be foolhardy.

The Monster Employment Index collects data from over 1,500 web sites. Its July index declined from 136 to 134, still a strong number when compared with the start of 2004.

In the week ended July 31, U.S. jobless claims fell by 11,000 to 336,000; however, the 4-week moving average rose by 6,750 to 343,500.

In sum, the latest hiring trends for the manufacturing and services sectors were weak in July. Balancing that, in part, was the feeling expressed by many in employer-owned businesses that hiring has continued during this period. This mixed picture will create a non-farm payroll figure that could disappoint many.

Once again, Wal-Mart had its pulse on the paycheck-to-paycheck crowd. July same-store sales for the Wal-Mart stores division rose by 2.4% vs the 4.5% gain in the year earlier period; however, its Sam’s Club same-store sales rose 7.7% this July vs 5.1% last year. Overall company results improved by 3.2% in the U.S. and management forecasts a 2 to 4% gain for August. Meanwhile, Target’s July same-store sales increased by 3.8% and Nordstrom’s by 6.1%. On the other hand, results were disappointing for Sears, Kohl’s, Gap, May’s, T J Maxx, Foot Locker, Dollar Tree, Limited, Pier I, Ross, and others.

Wal-Mart is experimenting at five locations with having their pharmacy operating on a 24-hour basis, just like Walgreen’s.

The Bank of England raised its lending rate by a quarter point to 4.25%

Bankrate.com stated that the average 30-year fixed rate mortgage of 6.02% is the lowest since April 14.

Nanosys withdrew its IPO.

Chrysler recalled more than 830,00 minivans.

8/4/04 Recent Hiring Trends

In the July Hudson Employment Index, the percentage of workers reporting hiring at their companies fell one point from June to33%, the same percentage reached in March. The percentage of managers who say their companies are hiring fell two points to 34% from last month’s reading, and was one point below the March and April reading. Private-sector employees report that 39% of their companies are hiring, and that level ahs remained unchanged for the past four months.

Challenger, Gray, & Christmas stated employers announced 69,572 job cuts in July, up 8% from June but down 18% from July 2003. Hiring announcements also declined to 26,880, a 30% drop from June’s level, which was down 31% from May.

The other day we learned that there was a decline in the latest ISM Mfg Employment Index. Many might wonder how that could be with factory orders remaining at a robust level. One might consider that, stripping out transportation, June factory orders advanced only 0.1%. In the transportation sector, Boeing has only delivered four more planes than the year earlier period, and GM and Ford are building vehicles at a 17 million annual rate. You might think their business is vibrant. In fact, GM July sales were down 3.4% and Ford’s declined 3.7%. In an effort to reduce near-record inventories, GM raised incentives on some cars and trucks to $6,000. As of yesterday, GM is offering a $2,500 rebate on many 2005 models! It should be remembered that auto sales represent about 20% of total retail sales. The auto business is beginning to hurt in China too. Overcapacity, falling prices, and a tightening of credit availability are taking its toll on Chinese automakers, and that includes GM.

We are approaching Friday, and the release of July’s non-farm payrolls. The most recent Bloomberg poll of economists has been reduced from last week’s forecast from a gain of 250,000 jobs to 228,000. There is little question that, as crude prices rose to $40 a barrel and higher, consumer spending dropped, and with it, business activity and the pace of permanent hiring. We know that there has been a recent uptick in plant closings, such as this month’s call center in North Dakota, which resulted in about 260 layoffs. Hiring announcements have slowed. It will be difficult to generate the anticipated payroll gain of 228,000 non-farm jobs. In fact, one might expect a downward revision in the disappointing June number. Importantly, gains in wages and benefits will, once again, not keep pace with inflation. The bond market is poised for a disappointing July number. Will the stock market adjust to reduced payroll numbers without producing a slew of mutual fund redemptions? Rather than just focusing on July’s numbers, a better view might take in the August picture. With crude at $44 per barrel, consumer spending will be constrained and business activity will slow materially. Hiring will be impacted. It would not be surprising to see little or no job gains in August. Preparing for this strong possibility might help to preserve your investment capital.

8/3/04 A Day For Puking

This blog is late being posted. I have been too busy puking. Yesterday, the Snowman asked Congress to raise the debt limit from its current level of $7.38 trillion. He stated this debt limit would be reached somewhere in late September or early October. It's the third time the debt ceiling would be increased during Bush's four years in office. This is unprecedented, irresponsible, and dangerous to the economic well being of our country. The debt ceiling should not be raised. Spending must be cut. Bush has not vetoed one spending bill. He would not know what the word "conservative" means. Rallying the NRA and churchgoers does not make you a conservative. It means you pack a weapon to church. If left in office for another term, this Administration will grease the rails towards our country's insolvency.

Construction spending fell 0.3% in June. Spending on housing dropped for the first time in 16 months. Residential construction fell 0.6% in June. The ISM Employment Index dropped to 57.3 from the prior month's 59.7. Consumer spending dropped 0.7% in June, the biggest decline since September 2001. Wages were unchanged in June. The Core Personal Consumption Expenditure Price Index rose only 0.1% in June. This is the index the Fed watches so closely. The personal savings rate rose to 2%. I have been predicting for some time that the savings rate would rise and consumer spending would slow dramatically.

Crude has risen above $44 per barrel.

As we know, this Administration did "misspeak" about the WMD. On Sunday, Homeland Security issued a terror alert for NYC, NJ, and DC. We now know it was based on pre-9/11 information and not recent information. How many times does the American public want to put up with this "missspeaking" and well-timed terror card? By the close of yesterday's trading, the stock market had seen through this mockery. Unfortunately, many innocent people had been agitated in the process. It's enough to make any American puke.

8/2/04 Paycheck To Paycheck

WalMart refers to their customers as living paycheck to paycheck. Putting that into perspective, Joe Gillen, Pinnacle Financial Strategies CEO, stated "some 70% of our working population lives paycheck to paycheck. They pay the minimum on their credit cards, if they have them. And if they miss a week of work, all their payments get behind." This is the main economic theme on Main Street.

Ten year Treasury bonds yield 4.43%, only modestly higher than the recent low yield of 4.36%. Whether it's a terror alert or an alert from slowing economic conditions, the recent trend in U.S. gov't bonds is down.

Speaking of terror alert, our intelligence gathering has been able to ferret out from a Pakistani al-Qaeda prisoner that the NYSE, World Bank, IMF, Prudential, and Citigroup may be bombing targets. Fortunately, Bush will be revamping our intelligence gathering. I wonder if that includes increasing our knowledge of speaking and understanding Pakastani citizens.

This week there are contrasting economic forecasts. Economists predict 250,000 new non-farm payroll jobs in July with rising hourly earnings but earnings that still trail the inflation rate. Construction spending is anticipated to drop from the prior month as are prices for manufactured goods; however, supposedly orders for the month will be on the upswing. What does this all mean? I'm not an economist and didn't make the forecasts. Thanks God. I am certain of one fact. Temporary job creation does not lead to sustainable economic growth.

8/1/04 Present Dangers

Bush speaking yesterday in Canton, Ohio: "We'll help American families keep something they never have enough of, and that is time, time to be with your kids, time to go to Little League games or Girl Scout meetings." He certainly has provided more time, and it's not flex-time. It's a shorter work week, it's more temporary work, its less people working, and its less factories operating. If you want another four more years of more time, then vote for this man.

Bush continues speaking in Canton, Ohio: "After four more years, there will be better paying jobs in America. There will be more jobs in America." The facts speak in quite a different direction. After almost four years, wages and benefits, after adjusting for inflation, have declined each year since Bush took office. The BLS and the IRS confirm this statement. There have been less jobs in America, and that too is confirmed by the BLS. Americans cannot afford another four more of the Bush years. He has earned the right to be sent down to the Bush League.

According to a study of annual reports by RateFinancials Inc, among 120 of the major companies in the S&P 500 Index, long-term debt rose by a median of 30% when operating leases and other financial arrangements were added to the balance sheet. An example would be FedEx which has legally binding off-balance sheet debt that, in present value, may be more than double the amount of debt appearing on the balance sheet.

7/31/04 This Is For Vic

The Commerce Dept released numbers for the second quarter. If you get your news from the media, economists, and the Fed, then it was news that second quarter GDP growth was only 3% and that consumer spending rose at a paltry 1%. The bond market had sniffed out the lower growth, the stock market has been sputtering, and WalMart and Target told you the paycheck-to-paycheck consumer on Main Street was choking on the fumes from high gas prices. The second quarter is history. We're already one-third through the third quarter. Visit a GM or Ford dealer. Look at their inventory levels. It doesn't paint a pretty picture. Look at gas prices. They've come down in the past month but will rise in August as crude rose to $43 a barrel.
With high crude prices, retail sales for August will suck. Don't you think high crude prices reduce the chances of a big SUV being sold even with a large buyer's incentive? There will be plant shutdowns announced any day. The climate is changing. It's not about outsourcing. It's about less hiring, more layoffs, less benefits, and pay that trails the rate of inflation. You can listen to all the buzz on the campaign junkets. Talk is cheap. Permanent hiring is expensive. Training is time consuming. With revenues in this country growing modestly at best, there are few reasons to take on more staff. Most of the improving profits have been the result of cost cutting. The fun and games are in the late innings. The days are getting shorter. I suggest you turn on the lights a bit earlier. It makes it easier to see through the dusk of the economy.
Halliburton announced in November that the company would stop providing health insurance for its retirees who are eligible for Medicare. The change goes into effect Jan.1. Three retirees wrote Halliburton and complained. Halliburton sued them. No retiree left behind!
Now, I wrote this was Vic. I'm your friend. Today is a good day for testing data. When doing so, please leave a bit of time for a visit to Main Street.

7/30/04  Fortunately Help Is On The Way

"The decision by Union Pacific to limit the number of rock and aggregate carloads in Texas will have a severe impact on the economic viability of the entire state, especially Houston, " stated Marianne Gooch, director of communications for Cemex Inc.

The Conference Board's Help-Wanted Advertising Index dipped one point in June to 38. The Index was 38 one year ago. For the past four months the Index has been virtually flat.

Total compensation costs for civilian workers increased 0.9% during the June quarter, seasonally adjusted. In the March quarter there was a 1.1% gain. In the latest period wage and salary costs increased 0.6% and benefit costs rose 1.8%. Wages and salries for both civilian and private workers advanced 0.6% during the June quarter, identical to the March 2004 quarter.

In the latest week auto plant shutdowns contributed to the unemployment rolls rising. There will be plenty more shutdowns in the near future.

Schwab will close more offices and cut 186 workers.

AT&T's debt was downgraded to junk level by Moody's.

State Farm will cut up to 900 jobs.

Washington Mutual announced the closing of an additional fifty three branches and this will create 850 layoffs.