9/16/04 Storms
According to the latest Duke University CFO Outlook Survey, chief financial officers of U.S. corporations are markedly less optimistic about the domestic economy than they were three months ago, and they are concerned about consumer spending, health-care costs, and domestic terrorism. CFOs predict only 2.8% real GDP growth over the next 12 months. This forecast is considerably lower than the Fed’s expectations. When was the last time the Fed was right?
Regarding the Administration’s Medicare program, which went into law based on cost estimates that were $135 billion lower than those documented by Rick Foster, the chief Medicare actuary at the HHS, once the drug benefit begins in 2006, seniors will pay an additional premium that goes up every year.
According to the BLS, employer costs for employee compensation averaged $24.96 prt hour worked in June 2004. Wages and salaries averaged $17.70 and benefits amounted to $7.26. Costs for legally required benefits, including Social Security, Medicare, unemployment insurance, and workers’ compensation, averaged $2.03 per hour, representing the largest non-wage employer cost.
Kerr-McGee Chemical, a wholly-owned affiliate of Kerr-McGee Corp., is the world’s third-largest producer and marketer of titanium dioxide pigment, an inorganic whitener and opacifier for paints, plastics, paper, inks, and hundreds of consumer products. The company plans to shut down its titanium pigment sulfate production at its Savannah facility by the end of September and will cut 140 jobs.
According to a report by Genomic Society Consulting, an emerging services sector in India is poised to capture a new wave of offshore contracts from the U.S. pharmaceutical, biotech, and life sciences technology industries. They report "known worldwide for sophisticated IT services, and lately for a biotechnology boom that is moving from copycat drugs into R&D, India is well-positioned to merge the talent of these two industries into a service sector that meets the needs of the global drug discovery industry. Our research reveals that salaries for skilled professionals and PhDs in this sector are as much as 90% lower in India than the U.S., so cost savings can be significant."
Shanghai’s National Bureau of Statistics slashed its forecast for China’s full-year automobile production to 2.39 million units from 2.82 million and trimmed the annual growth rate to 18% from 40%. With output in July and August nearly flat, more than 30% of capacity stood idle as vehicle makers were forced to cut prices to try and get through stalled inventories, stated the NBS. China’s vehicle market is currently the world’s fourth largest. Xu Yunkai, an auto analyst with Guotai Junan Securities, stated "auto consumers are becoming more rational and are waiting for price cuts as they also focus more on brands and the service offered by the auto companies." The NBS also said carmakers were likely to try and consolidate their position in the market by steeper price reductions while reducing production. The market in China has been doing the heavy lifting for GM. The company won’t come close to making their numbers for 2005.
U.S. business inventories grew 0.9% in July while sales only increased 0.6%. Auto inventories, already bloated, increased 1.8%. Wall Street took the inventory rise as being bullish. Maybe that’s because they’ve not run a business. When inventory production outpaces sales for two consecutive months, that spells potential problems. Has Wall Street ever heard of just-in-time inventories? If not, Wal-Mart can explain it. Bloated inventories will create price reductions and production cutbacks. That’s the story in China’s auto market.
Sluggish sales in North America and Europe will cause Coca Cola to miss second half estimates by a wide margin.
The state of Washington lost 6,800 jobs in August and the unemployment rate rose to 6.2% from July’s 6%. In February 2004, the rate was also 6.2%. That’s six months without an improvement.
August factory capacity utilization was unchanged at 77.3%. There is plenty of slack in this economy.
H. Ross Perot: "If you see a snake, just kill it. Don’t appoint a committee on a snake."
H. Ross Perot: "If we did nit have such a thing as an airline industry today, we would probably create something the size of NASA to make one."
The API stated that crude inventories fell by 2.3 million barrels in the week ended Spt. 10 while the Energy Dept reported a 7.1 million barrel drop. Every day gas prices remain at high levels is another day of pressure on consumer cash flow.
After Associated Ban-Corp completes the acquisition of First Federal Capital, about 425 positions will be cut.
A Goldman Sachs survey indicated softening corporate spending on technology.
According to the Generic Pharmaceutical Assoc., generics represent 51% of the total prescriptions dispensed in the U.S., but represents less than 8% of all dollars spent on prescription drugs.
It may not be readily apparent, but we are facing a recession right in the face. The consumer has started the ball rolling. Exports into the U.S. are feeling the pinch.
William McChesney Martin: "The Fed’s mission is to take away the punch bowl just when the party gets going." That statement was made several decades ago. Today the punch bowl is on empty and the Fed’s grasp of the economy has long since been rinsed down the drain.

The National Intelligence Council (that's funny) provided a pessimistic assessment about the future security and stability of Iraq.

9/15/04 Ivan Comes Packing
From Florida to Louisiana, millions wait for the arrival of Ivan. Meanwhile, Royal Dutch Shell evacuated 850 employees at its exploration and production facilities in the eastern and central Gulf of Mexico, and this will impact 445,000 barrels of oil and 1.443 billion cubic feet of gas per day.
Japan is having its worst typhoon season on record.
Of 45 million Americans without health insurance, 60% work in small businesses.
Xilinx cuts its second quarter revenue outlook as well as its gross margin forecast. The company stated that sales in the Asia Pacific region will be down double digits from the first quarter.
Oracle’s application software sales declined 36% in the quarter. PeopleSoft is in that business.
According to the Commerce Dept, the U.S. current account deficit widened to a record $166.2 billion in the second quarter from $147.2 billion in the first quarter and that’s with a weak U.S. dollar. The deficit increased to a record 5.7% of GDP during the quarter. If we include the other half of the twin tower deficits, then the deficits amount to 10% of our GDP, and that is enough to topple our economic well being.
Lakshman Achuthan, Economic Cycle Research Institute managing director: "The numbers show that retail sales are in a clear cyclical downtrend." Just a reminder that we are a consumer-based economy.
North Carolina has lost 160,000 manufacturing jobs under Bush. A GOP presidential nominee hasn’t lost North Carolina since 1976. Edwards is the first North Carolinian on a national ticket in 140 years.
The Pension Benefit Guaranty Corp. pays benefits to about 1 million Americans and insures private pensions for approximately 43 million more. In a 29-page report by the Center On Federal Financial Institutions, the analysis revealed that the PBGC will run out of money in 2020 if current financial conditions persist. The agency’s programs ended 2003 with about $35 billion of assets, according to its annual report.
The recent study by the Center for Economic and Policy Research stated that between March 2001 and July 2004 the state of Pennsylvania lost over 81,000 jobs, or 1.4% of the total number of jobs in the state. During that three year time period, nearly 1 in 20 Pennsylvania workers lost a long-term job compared with about 1 in 25 in the nation as a whole.
Herbert Hoover: "There are only three ways to meet unpaid bills of a nation. The first is taxation. The second is repudiation. The third is inflation."
George W. Bush: "Natural gas is hemispheric. I like to call it hemispheric in nature because it is a product that we can find in our neighborhoods."
Wyeth is closing its West Chester, PA plant and 200 employees will lose their jobs. Foremost Dairies will close its plant in Hawaii. The company provides 25% of the state’s milk supply, and 120 workers will be out of jobs.
The state of Oklahoma remains more than 50,000 jobs, or 3.6%, below the June 2001 peak in seasonally adjusted employment.
The Center for Urban Economic Development at the University of Illinois-Chicago released a study yesterday showing that more than 403,000 U.S. information technology jobs have disappeared since March 2001. The report stated "the gap between the ‘two economies’…is especially pronounced in the information techology industry, where job dislocations due to ‘offshoring’ have contributed to an already hard-hit IT industry."
Grant Aldonas, U.S. undersecretary of commerce, stated he told China to expect American textile makers to seek new limits on Chinese imports as soon as next week.
In 1999, according to the Labor Dept, the average household health expenditure was $1,959, or 4.5% of income. In 2002, it had risen to $2,350 a year, or 4.8% of its income. In fact, in 2002, healthcare spending exceeded federal taxes as a percentage of household income. In late November 2004, the figures will be released for 2003. The percentages will have risen once again, and most likely equate to 5% of the average household income. It should be noted that, even with the rising cost of gasoline, nearly twice as much is spent on healthcare than on gas by the average household. When analyzing the slowing of retail sales, the key ingredient not mentioned is rising healthcare expenditures as a percentage of the average household income. Between healthcare and gas, the average consumer has no choice but to cut back. After accounting for inflation, wages and salaries and benefits are falling for the paycheck-to-paycheck consumer. The numbers work against a consumer-based economy. Going against those statistics will bring you a lot of investor hurt.

9/14/04 A Lesson In Branding
Pepe Escobar of the Hong Kong Asia Times: "President Bush’s crusade is a failure. ..Al Qaeda, from a business point of view, is a major success: it is a global brand and a global movement…Bin Laden is laughing. Bush’s crusade has legitimized an obscure sect as a worldwide symbol of political revolt. How could bin Laden not vote for Bush?"
The New Investors Business Daily poll shows the Bush-Kerry race tied and that the RNC bounce is fading. If investors have been pouring money into the market because they consider a Bush victory a lock, maybe they had better think twice. It’s tough to win when you have accomplished mostly negative results.
Ivan is about 500 miles south of Pensacola with top sustained winds remaining at 160 mph. The last time 3 storms hit Florida in such a short stretch of time was 1964, but those storms did not pack the same punch. Florida is the fourth-biggest state in the nation as measured by population, economic output, and worker payrolls.
It is new product day on the corporate headquarters campus at Microsoft. If any of the products are as successful at hotmail, they will have lots to cheer. There are 330 million registered hotmail users just in the U.S.
Secretary of State Powell: Regarding WMD in Iraq, he stated "I think it’s unlikely we will find any stockpiles."
LSI Logic cut its third quarter outlook citing customer inventory build-up.
Economist Arindrajit Dube with UC Berkeley’s Institute for Industrial Relations stated that, when the unemployment rate and the payroll number paint different pictures, the relationship between wage growth and productivity may be the best indicator of labor market health. Citing Labor Dept figures, Dube stated productivity grew 4% from August 2003 to August 2004, but wages after inflation actually fell during that period. He said " that is a symptom of a weak labor market."
Heating oil for October delivery is $1.206 per gallon.
OPEC is currently producing at the max- at 29.92 million barrels per day in August. In my view, with crude trading at $44.45 a barrel, and the average price on a national level for regular unleaded gas around $1.85, gas at the pump is probably underpriced by about 10 to 20 cents per gallon.
Let us not forget that Bush has made the decision to top off the Strategic Oil Reserve, which stands at 97% of capacity. The topping off will begin monthly on October 1, and continue for about eight months.
According to the Oil and Gas Journal, the U.S. has the 11th largest proved oil reserves in the world, but the U.S. is the #1 energy consumer and net importer.
Delphi closed its Flint, Michigan plant and 450 were laid off. In 2004, they have eliminated 4,925 jobs and the goal is to cut close to 6,000 by year-end. Johnson Controls closed a sun visor plant in Holland, Michigan and 800 jobs went to Mexico. Funny that Bush was in Michigan yesterday but never mentioned that.
In 2000, Bush won Ohio by 3.5 percentage points. One key reason was he garnered 59% of the vote in places like Seneca County. When Bush took office in 2001, Seneca County had 7% unemployment. Today it has risen to 10.2% and that level represents a significant threshold of pain.
John Kingston, global director of oil at Platts Survey, stated "while consumers can certainly feel encouraged by the continuing surge in OPEC output, that upward movement keeps bringing the world closer to 100% of capacity utilization. This growth in output is not showing signs of building significant amounts of inventory, and it raises the question of where the spare supply is going to come from should there be a disruption or a colder than average winter. It is important to note that we are about to begin the fourth quarter-traditionally the period of highest global demand for oil."
In order to reach a "neutral" level, San Francisco Fed’s Yellen stated the federal funds target would need to rise to between 3.5% and 4.5%, Cleveland Fed’s Pianalto used a wider range of 3% to 5%. Meanwhile, 10-year treasury notes are at 4.15%. We’ll see whether Fed governors or the market make the final determination.

9/13/04 Between Bare Tolerance And Outright Hostility

A senior U.S. diplomat in Baghdad: "We're dealing with a population that hovers between bare tolerance and outright hostility. The idea of a functioning democracy here is crazy. We thought there would be a reprieve after sovereignty, but all hell us breaking loose." In August, there were an average of 87 attacks per day on U.S. troops. The attacks are taking place over an increasingly larger geographical area. You should seriously ask yourself who is winning this war. This is Bush's Viet Nam, and thousands and thousands of our troops will die and be wounded before the fighting ends. If you believe we invaded to rid the world of Saddam, then you need to increase your daily dosage of Prozac.

One third of U.S. oil production is located in the Gulf of Mexico. Yesterday, with Ivan approaching, Shell Oil shut down production at two sub-sea wells and took about 150 staff members off platforms in the eastern part of the Gulf.

The 2005 Old Farmer's Almanac calls for this winter to have above average snowfall and colder than normal temperatures.

Ffe Governor Susan Bies: "Our main direction is clearly up, but there's no urgency. We're not hitting all cylinders yet, and that gives us a little bit of time." We're not even close to hitting on all cylinders. This is not a Roger Federer economy.

In August 2002, U.S. Air filed for bankruptcy protection and emerged from bankruptcy in March 2003. Yesterday tey filed again for bankruptcy protetion and seek $800 million in concessions from their employees, and they number 28,000. The airline stated employees will be paid and their benefits will continue. For how long though? In my view, there are too many airlines, too many auto companies, and so on. It's only a matter of time until the less efficient disappear. It is the survival of the fittest. Hopefully, the employees impacted will have viable alternatives for earning a living. That concerns me greatly.

GM's CEO: "We've been running at the limits on inventory." GM is carrying an average of 85 days of supply of light trucks. They may have to park some of these vehicles in the Mohave next to the mothballed jets.

9/12/04 The Tax Holiday On Foreign-Earned Profits
If one steps back and views the global economic landscape, it would be clear that profits generated outside our borders are growing much more rapidly than those from domestic operations. A prime example would be the auto results for GM in China compared with those in the U.S. Most Americans don’t realize that those foreign profits remain overseas and are not taxed. Foreign subsidiaries of U.S. companies are holding an estimated $500 billion in cash and other liquid assets. Why? Tax provisions permit U.S. corporations to defer payment on profits made outside the U.S. so long as the profits are not brought back into our country. This stimulates the building of new plants outside our borders as well as the hiring of additional employees. It should be noted that many products made in these overseas plants are, in fact, sold in the U.S. In my view, this situation bears heavily on the election debate and focuses on the untapped ability to stimulate our economy and provide new jobs. Bush wants to keep the status quo. Kerry has a plan that makes excellent sense and is most timely. Kerry’s plan would provide corporations with a one-year window to bring those foreign profits earned over the years back to the U.S. at a tax rate of 10%. After year one, those foreign earnings would be taxed at the same corporate rate as domestic earnings, and that would be true whether they remained overseas or returned to the U.S. In a report written just last year, J.P. Morgan Chase Bank estimated that at least $300 billion could be brought back to the U.S. and 400,000 jobs would be created.
With the rising federal budget deficit, there will not be a $20 billion bailout to help the states cover Medicaid. This year the states’ share of their Medicaid costs will grow 4.6%. Next year it will increase 12%. This will create budget gaps in about 33 states for fiscal 2005, which started on July 1 for all but four states.
Mary McCarthy: "If a politician tells you he’s going to make a ‘realistic decision," you immediately understand that he’s resolved to do something bad."
The Economic Report of the President for 2004 forecast that the number of payroll jobs would rise by at least 300,000 each month in election year. When was the last time Bush didn’t "misspeak" to the American people?
On Sept. 9, with no advance warning, Shasta Regional Medical Center in Shasta, CA announced plans to begin massive layoffs by issuing a list of more than 50 names of healthcare workers slated to lose their jobs. The hospital then began meeting with the individual employees one by one to inform them of their decision. Management had refused to meet with the workers’ union, SEIU 250, which has 100,000 members and is the largest healthcare union in the western U.S.
Martin Barnes, managing editor of the Bank Credit Analyst: "If you stand back and take a structural view of the world, deflation is still a bigger threat than inflation. It is still a highly competitive world and there is still the whole Asia supply story out there. Technology is still a disinflationary force in the sense that it encourages more competition and pushes prices down. The Internet is a true force for competition and low prices…Even though the Fed has had a very stimulative policy for some time now, they haven’t really been able to create a whole lot of inflation yet. Inflation popped up in asset prices and in the housing sector in some markets, but despite their best efforts inflation has been very slow to come back. That tells you there is a deflationary tone to the world."

9/11/04 2,749
Mark Twain: "Each nation knowing it has the only religion and the only sane system of government, each despising all the others, each an ass and not suspecting it."
Viktor Frankl: " We who lived in concentration camps can remember the men who walked through the huts comforting others, giving away their last piece of bread. They may have been few in number, but they offer sufficient proof that everything can be taken away from a man but one thing: the last of the human freedoms- to choose one’s attitude in any given set of circumstances, to choose one’s own way."
Henry Miller: "The world dies over and over again, but the skeleton always gets up and walks."
So many thoughts rushed through my mind on Sept. 11, 2001. In the darkness of night I recalled the words of Will Durant that "most of us spend too much time on the last twenty-four hours and too little time on the last six thousand years." My memory is pretty good but sometimes I forget details over a span of six thousand years. The point is that the terrorist attack by al-Qaeda did not just happen over night. Their hatred for the U.S. and Israel and others has been building for generations. It will not be eradicated through the elimination of bin Laden and al-Zawahiri. Through the multiplication of deadly cells, al-Qaeda has grown around the globe into a deadly force and is slowly morphing into a political party.
Hopefully, each and every day we will remember the 2,749 who perished in 9/11. We must learn from our mistakes. This terrorist attack could have been avoided. The warnings had been issued and ignored. That will not return the fallen to their loved ones and to their nation. We must think smarter. All terrorists are not Muslims. One half of our populace believes that Iraq conspired with al-Qaeda in the 9/11 attacks. Iraq is not the enemy. In fact, attacking Iraq only served the purposes of al-Qaeda. Without that invasion, there would not have been the Abu Ghuraib incidents of raping Muslim women and humiliating Muslim men. Those acts alone made our country more prone to terrorist attacks and increased the hatred for the U.S. in the eyes of Muslim nations.
It is despicable that 9/11 brought with it Homeland Security and the violation of the constitutional rights of all Americans. The President has assumed the almighty powers of Carnack the Magnificent. He is all knowing and all powerful and only he can determine who is an enemy combatant and take away your right to confer with lawyers and hold you for months in captivity-- all in the name of the terror card. We must think smarter. We must fight for our constitutional rights. A great many more Americans than 2,749 died fighting to protect those rights and those freedoms. We might consider the words of Bertrand Russell: "the whole problem with the world is that fools and fanatics are always so certain of themselves, and wiser people so full of doubts." We need to protect the memories of the 2,749. We need to protect our country from both terrorists and those who terrorize our rights in the name fighting threats. We must protect fellow Americans from those that swagger, which often masks a sign of insecurity and the daily stench of the mideast sky streaked with the high price of evil.

9/10/04 Big Day For Layoffs

Judge Walker, to my surprise, is permitting Oracle to proceed with the acquisition of PeopleSoft. If successful, Oracle has stated they would layoff 6,000 PeopleSoft employees. Alaska Air is letting go 900 workers. San Jose Medical Center is closing Dec. 9 and at least 450 workers will lose their jobs. Within the next three years. EDS may cut up to 17% of its workforce or 20,000 jobs. Oneida is closing its Sherrill, N.Y. plant and cutting 500 jobs. Dean Foods will close its Benton Harbor, MI plant but did not mention the number to lose their jobs.

George Akerlof, winner of the 2001 Nobel Prize in Economics: "I think this is the worst government the U.S. has ever had in its more than 200 years of history. It has engaged in extraordinarily irresponsible policies not only in foreign and economic but also in social and environmental policy."

According to Kaiser Family Foundation, health premiums rose five times faster than U.S. workers' salaries this year. In 2003, 15.6% of the population went without health insurance. In 2004, 61% of the people received health coverage at work, down from 65% in 2001.

U.S. gasoline supplies were down 2.5 million barrels last week, according to the Energy Dept. For the week ended Sept. 3, crude supplies were down 1.4 million barrels.

Auto inventories rose 2.3% in July, their largest monthly gain since December 2003.

Stocks on hand at wholesalers rose 1.3% in July. With the strength in household spending suspect, higher inventories most likely will lead to increased promotional activities on the part of retailers.

In 2000, 58% of working women voted for Gore and 39% for Bush. Nearly 8 million more women voted in 2000 than men.

Herbert Hoover: "Free speech does not live many hours after free industry and free commerce die." Our freedoms dwindle with the escalation of twin tower deficits. We answer to China and Japan as they help fund our government's irresponsible spending habits. The Administration and the Congress are no better than those strung out on heroin.

Herbert Hoover tried in vain to hang on to "our American system" and attempted to preserve the foundation of our liberties. FDR was committed to government intervention in the economy, and with his victory in 1932, our way of life has not been the same.

Since Bush took office, jobs have been lost and incomes have fallen and continue to fall.

The House voted to overturn the Labor Dept's new overtime rules.

After reporting disappointing earnings for the past six months, Alcoa warned that results for this quarter would fall far short of estimates.

AutoNation cut its 2004 outlook. About 30% of its operating profits are generated in Florida. The state accounts for 8% of Ford's total U.S. sales. Ivan is expected to reach Florida on Sunday.

The PPI dipped 0.1% in August. Our imports fell in July, the first time in nearly a year. This is another sign of the consumer pulling back on spending.

9/9/04 Muted Economic Growth, Household Spending, and Inflation

The Fed beige book: "Several districts indicated that the pace has slowed since their last reports... household spending was reported to have softened in many parts of the nation... wage pressures remain modest... consumer prices were generally flat or up modestly."

Greenspan: "Despite the rise in oil prices through mid-August, inflation and inflation expectations have eased."

The story remains the same. The money continues to be made owning 10 year Treasury bonds. The yield yesterday wa 4.16%.

Cisco's John Chambers stated he expected most of his company's competitors to be Asian in 5 years time. That will translate into lower prices and smaller margins for Cisco.

Sara Lee will close its bakery in Ft. Payne, Alabama, and about 80 workers will be impacted. The Walker Systems plant in Williamstown, W VA is closing and 235 hourly and 75 salaried workers will be effected. Dean Foods will close its St. Joseph, MI plant and 45 workers will lose their jobs.

Retired Army LT Colonel Carlo D'Este: "There is no visible light at the end of the tunnel, nor has the Bush Administration articulated a viable exit strategy, without which the war will continue indefinitely- that is, years."

Lt. Col. Jerry Killian's Aug. 1, 1972 memo: "On this date I ordered that 1st LT. Bush be suspended from flight status due to failure to perform to USAF/TexANG standards and failure to meet annual physical examination...as ordered." On Aug. 18, 1973 Killian wrote "Bush was not here during rating period and I don't have any comments from 187th in Alabama. I will not rate." This is the real picture of this nation's Commander in Chief: does not follow orders, is suspended, and is not rated. His next in line, Cheney, had five deferments and never served. It's no wonder there is "no light at the end of the tunnel" in Iraq.

Export prices fell 0.5% in August compared with a revised 0.5% rise in July. Lower export prices combined with higher import prices for crude can do a number on a company's net profit margins.

The number of former workers continuing to receive state unemployment benefits rose by 20,000 to 2.9 million in the week ending Aug. 29.

9/8/04 Show Me The High-Paying JobsMissouri endured the worst job losses in the nation in July as the state lost 51,800 positions or 1.9% of its seasonally adjusted non-farm payroll. In St. Louis the unemployment rate rose to 6.5%. If you lived in Missouri, would you vote for Bush?Over the past 12 months, the total non-farm payrolls in Texas and Colorado have risen only 1.1%. That is certainly less than had been anticipated by the Bush Administration.Mark Zandi: "The job market is still very weak. Employers have the upper hand in any negotiation with employees, and that's weighing on compensation, particularly take home pay."In August, the average duration of unemployment without work was 19 weeks, compared with 18.6 weeks in July. This is mission accomplished?Peter Morici, an economist and professor of international business at the University of Maryland, stated "more workers will be compelled to accept positions without health benefits, and benefit packages, generally, will continue to deteriorate."The survey by Challenger, Gray, & Christmas found employers announced plans to cut 74,150 jobs in August, up 6.6% from July's announced layoffs. At the same time, employers announced plans to hire 132,105 workers in the weeks and months ahead, of which 83,450 would come from retailers and reflect the upcoming holiday season. They stated "many of those jobs may disappear by February." Importantly, Challenger added "there probably has never been a time when companies were this cautious to add workers in a recovery. There is undoubtedly a lot of concern about the fragile state of this recovery."Herbert Hoover on Sept. 17, 1928: "This recovery and this stability are no accident. It has not been achieved by luck. Were it not for sound governmental policies and wise leadership, employment conditions in America would be similar to those existing in many other parts of the world."George W. Bush on Aug. 9, 2004: "Let me put it to you bluntly. In a changing world, we want more people to have control over your own life."George W. Bush on Feb. 19, 2004: "Recession means that people's incomes, at the employer level, are going down, basically, relative to costs, people are getting laid off." Hoover could not have said it better.Since invading Iraq in March 2003, there have been a total of 1,002 military deaths. Every evening Bush and Cheney go to bed, I hope they see blood on their hands. They are personally responsible for sending our troops into harms way and invading Iraq and for "misspeaking" about the WMD. They went to the Congress for authorization to invade, and that authorization should never have taken place without a strong coalition of foreign nations accompanied by superior intelligence. In addition to the fallen 1,002, which grows each day, we have almost 7,000 wounded troops, and that does not include those impacted psychologically by the horrors of war. To re-elect these two would be to risk nightmares from blood on your hands. That's what your vote will get you.Delta Airlines will cut up to 10% of their workforce or 7,000 jobs in 18 months in an effort to avoid filing for bankruptcy.Ford will end the second of its two production shifts at its suburban St. Louis assembly plant effective Jan. 3, 2005. A total of 800 jobs will be eliminated.Alcan will close its Mays Landing, N.J. plastics manufacturing plant on October 3, and 74 jobs will be cut.

9/8/04 Show Me The High-Paying JobsMissouri endured the worst job losses in the nation in July as the state lost 51,800 positions or 1.9% of its seasonally adjusted non-farm payroll. In St. Louis the unemployment rate rose to 6.5%. If you lived in Missouri, would you vote for Bush?Over the past 12 months, the total non-farm payrolls in Texas and Colorado have risen only 1.1%. That is certainly less than had been anticipated by the Bush Administration.Mark Zandi: "The job market is still very weak. Employers have the upper hand in any negotiation with employees, and that's weighing on compensation, particularly take home pay."In August, the average duration of unemployment without work was 19 weeks, compared with 18.6 weeks in July. This is mission accomplished?Peter Morici, an economist and professor of international business at the University of Maryland, stated "more workers will be compelled to accept positions without health benefits, and benefit packages, generally, will continue to deteriorate."The survey by Challenger, Gray, & Christmas found employers announced plans to cut 74,150 jobs in August, up 6.6% from July's announced layoffs. At the same time, employers announced plans to hire 132,105 workers in the weeks and months ahead, of which 83,450 would come from retailers and reflect the upcoming holiday season. They stated "many of those jobs may disappear by February." Importantly, Challenger added "there probably has never been a time when companies were this cautious to add workers in a recovery. There is undoubtedly a lot of concern about the fragile state of this recovery."Herbert Hoover on Sept. 17, 1928: "This recovery and this stability are no accident. It has not been achieved by luck. Were it not for sound governmental policies and wise leadership, employment conditions in America would be similar to those existing in many other parts of the world."George W. Bush on Aug. 9, 2004: "Let me put it to you bluntly. In a changing world, we want more people to have control over your own life."George W. Bush on Feb. 19, 2004: "Recession means that people's incomes, at the employer level, are going down, basically, relative to costs, people are getting laid off." Hoover could not have said it better.Since invading Iraq in March 2003, there have been a total of 1,002 military deaths. Every evening Bush and Cheney go to bed, I hope they see blood on their hands. They are personally responsible for sending our troops into harms way and invading Iraq and for "misspeaking" about the WMD. They went to the Congress for authorization to invade, and that authorization should never have taken place without a strong coalition of foreign nations accompanied by superior intelligence. In addition to the fallen 1,002, which grows each day, we have almost 7,000 wounded troops, and that does not include those impacted psychologically by the horrors of war. To re-elect these two would be to risk nightmares from blood on your hands. That's what your vote will get you.Delta Airlines will cut up to 10% of their workforce or 7,000 jobs in 18 months in an effort to avoid filing for bankruptcy.Ford will end the second of its two production shifts at its suburban St. Louis assembly plant effective Jan. 3, 2005. A total of 800 jobs will be eliminated.Alcan will close its Mays Landing, N.J. plastics manufacturing plant on October 3 and 74 jobs will be cut.

9/8/04 Show Me The High-Paying Jobs

Missouri endured the worst job losses in the nation in July as the state lost 51,800 positions or 1.9% of its seasonally adjusted non-farm payroll. In St. Louis the unemployment rate rose to 6.5%. If you lived in Missouri, would you vote for Bush?

Over the past 12 months, the total non-farm payrolls in Texas and Colorado have risen only 1.1%. That is certainly less than had been anticipated by the Bush Administration.

Mark Zandi: "The job market is still very weak. Employers have the upper hand in any negotiation with employees, and that's weighing on compensation, particularly take home pay."

In August, the average duration of unemployment without work was 19 weeks, compared with 18.6 weeks in July. This is mission accomplished?

Peter Morici, an economist and professor of international business at the University of Maryland, stated "more workers will be compelled to accept positions without health benefits, and benefit packages, generally, will continue to deteriorate."

The survey by Challenger, Gray, & Christmas found employers announced plans to cut 74,150 jobs in August, up 6.6% from July's announced layoffs. At the same time, employers announced plans to hire 132,105 workers in the weeks and months ahead, of which 83,450 would come from retailers and reflect the upcoming holiday season. They stated "many of those jobs may disappear by February." Importantly, Challenger added "there probably has never been a time when companies were this cautious to add workers in a recovery. There is undoubtedly a lot of concern about the fragile state of this recovery."

Herbert Hoover on Sept. 17, 1928: "This recovery and this stability are no accident. It has not been achieved by luck. Were it not for sound governmental policies and wise leadership, employment conditions in America would be similar to those existing in many other parts of the world."

George W. Bush on Aug. 9, 2004: "Let me put it to you bluntly. In a changing world, we want more people to have control over your own life."

George W. Bush on Feb. 19, 2004: "Recession means that people's incomes, at the employer level, are going down, basically, relative to costs, people are getting laid off." Hoover could not have said it better.

Since invading Iraq in March 2003, there have been a total of 1,002 military deaths. Every evening Bush and Cheney go to bed, I hope they see blood on their hands. They are personally responsible for sending our troops into harms way and invading Iraq and for "misspeaking" about the WMD. They went to the Congress for authorization to invade, and that authorization should never have taken place without a strong coalition of foreign nations accompanied by superior intelligence. In addition to the fallen 1,002, which grows each day, we have almost 7,000 wounded troops, and that does not include those impacted psychologically by the horrors of war. To re-elect these two would be to risk nightmares from blood on your hands. That's what your vote will get you.

Delta Airlines will cut up to 10% of their workforce or 7,000 jobs in 18 months in an effort to avoid filing for bankruptcy.

Ford will end the second of its two production shifts at its suburban St. Louis assembly plant effective Jan. 3, 2005. A total of 800 jobs will be eliminated.

Alcan will close its Mays Landing, N.J. plastics manufacturing plant on October 3 and 74 jobs will be cut.

9/7/04 The "Joyless Recovery"

John Challenger: "The voters will draw their conclusion about the overall strength in the economy based almost entirely on whether they and/or their neighbors will be out of work."

Grand Vehicle Works, which makes bodies for walk-in trucks such as the ones UPS uses, will close its Union City, Indiana plant in October. About 120 people will be impacted.

John Silvia, chief economist for Wachovia Securities: "When we want rugs, curtains, carpets, and textiles, we go to the store to buy them, and in the past they would come from NC, SC, and GA. But now they come from China. We have to figure out how to get people back to work in a globally competitive environment."

Alitalia to lay off 5,000 workers.

According to the Census Bureau, in 1969, Michigan's median income was 18% above the national average. By 2003, the figure was less than 4% above the national average and still dropping. Over the past 12 onths, Michigan's average weekly wages grew less than 1% while inflation has been running over twice that rate. The state's 6.8% unemployment rate in July ties it with Oregon for the nation's second worst behind Alaska.

It is customary for paychecks to grow as an economy grows after a recession. It has been three years since the recession ended, and under Bush, this has not taken place and that's one reason some economists call this a "joyless economy." Only a masochist would want another four joyless years.

Arizona Republic's E.J. Montini: "Only 20% of all eligible voters are expected to cast a ballot in our city... almost 3,000 were killed in N.Y., Washington D.C., and Pennsylvania, and 80% of us have nothing to say about who will run the show. More than 1,000 U.S. service members have died in Afghanistan and Iraq, where we hope to spread democracy, while democracy reaches one in five of us here."

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?