11/17/04 Creating Shareholder Value

There are many ways to accomplish this endeavor. One is through merging. Kmart will Buy Sears, creating the third largest retailer with about 3,500 stores. The transaction is valued at $11 billion, and the new company will be called Sears Holdings even though each business will be operated separately under their respective brand names. Eddie Lampert, the largest shareholder in each company, will look to sell more stores and unleash underlying shareholder value. So far, he has done just that after Kmart came out of bankruptcy. This is a merger of two weak retailers.

Then there is the case of HP. They grew quarterly revenue 8% year-over-year. The problem is that their receivables increased $1.8 billion from the prior quarter to $10.2 billion and inventory ended the quarter at $7.1 billion, up $1 billion or 16+% year-over-year. In other words, the headlines read great with respect to sales and earnings but beneath the surface potential problems loom.

Then there is cost cutting in an effort to unlock shareholder value. GM plans to close its Baltimore assembly plant next year. The plant makes the Chevy Astro and the GMC Safari. There is practically no demand for these vehicles, and hasn’t been in well over a year. The shutdown will impact about 1,000 hourly and 100 salaried workers.

Bertrand Russell: “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd.”

Marcel Proust: “The voyage of discovery is not in seeking new landscapes but in having new eyes.”

One of the problems with security analysts and market sages is that they look at the landscape with old eyes. Often, one hears the same stories about year-end rallies and rallies after presidential elections. Unfortunately, the landscape’s underpinnings change through the years. It requires new eyes. On Thursday night, the Senate will take up the vote for increasing the debt limit. Since Bush took office, the debt limit has been increased by more than $2 trillion to its present $7.4 trillion. Now, Republicans want to raise the debt limit for the third time in three years. This has never taken place in our nation’s history. Will this vote be accompanied by a vote on spending measures to control the budget deficit?

Nancy Pelosi: “We must return to fiscal responsibility, because no nation has ever been strong, free, and bankrupt.” If the Senate does not put forth any pay-as-you-go measures, I urge investors to sharply reduce their holdings in equities, and begin with those companies not central to your long-term objectives.

General Omar Bradley: “Our is a world of nuclear giants and ethical infants. If we continue to develop our technology without wisdom or prudence, our servant may prove to be our executioner.”

Wal-Mart’s CFO stated current U.S. quarterly sales remain sluggish.

GM’s October sales in western Europe fell 9.5%.

Goldman Sachs suggests that 2005 will prove to be another year of modest tech spending.

According to Cendant, there are more than 89 million members of frequent flyer programs today, and $1.9 billion is spent annually as part of loyalty programs.

The Association of Flight Attendants represents more than 46,000 flight attendants at 26 airlines. The president of the AFA urged union leaders to authorize a nationwide strike and railed against U.S. airlines for slashing flight attendants’ pay and benefits.

The euro traded at a record high and gold hit a new 16-year high.

The index for crude materials rose 4.3% in October compared with a decline of 4.2% in September. U.S. October PPI intermediate prices rose 0.9% with core prices up 0.3% for the second consecutive month. The PPI is now up 4.4% in the past 12 months, with the core rate up 1.8% in the past year. The good news is that crude reached $55.67 on October 25, and it’s now trading around the $46 level. Longer-term inflation worries remain subdued as the difference between the 10-year Treasury bond and 10-year TIPS is about 2.5 percentage points, close to the 10-year average.

Money Foods is closing its three U.S. mushroom operations in Michigan, Indiana, and San Mateo County, CA. The farms have not made any money in the last four years. Several hundred workers will lose their jobs. Osram Sylvania will close its Waldoboro, Maine light bulb filament plant and 134 workers will lose jobs. Most of the production will be shifted to the Czech Republic, where labor costs are cheaper.

11/17/04 Creating Shareholder Value

There are many ways to accomplish this endeavor. One is through merging. Kmart will Buy Sears, creating the third largest retailer with about 3,500 stores. The transaction is valued at $11 billion, and the new company will be called Sears Holdings even though each business will be operated separately under their respective brand names. Eddie Lampert, the largest shareholder in each company, will look to sell more stores and unleash underlying shareholder value. So far, he has done just that after Kmart came out of bankruptcy. This is a merger of two weak retailers.

Then there is the case of HP. They grew quarterly revenue 8% year-over-year. The problem is that their receivables increased $1.8 billion from the prior quarter to $10.2 billion and inventory ended the quarter at $7.1 billion, up $1 billion or 16+% year-over-year. In other words, the headlines read great with respect to sales and earnings but beneath the surface potential problems loom.

Then there is cost cutting in an effort to unlock shareholder value. GM plans to close its Baltimore assembly plant next year. The plant makes the Chevy Astro and the GMC Safari. There is practically no demand for these vehicles, and hasn’t been in well over a year. The shutdown will impact about 1,000 hourly and 100 salaried workers.

Bertrand Russell: “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd.”

Marcel Proust: “The voyage of discovery is not in seeking new landscapes but in having new eyes.”

One of the problems with security analysts and market sages is that they look at the landscape with old eyes. Often, one hears the same stories about year-end rallies and rallies after presidential elections. Unfortunately, the landscape’s underpinnings change through the years. It requires new eyes. On Thursday night, the Senate will take up the vote for increasing the debt limit. Since Bush took office, the debt limit has been increased by more than $2 trillion to its present $7.4 trillion. Now, Republicans want to raise the debt limit for the third time in three years. This has never taken place in our nation’s history. Will this vote be accompanied by a vote on spending measures to control the budget deficit?

Nancy Pelosi: “We must return to fiscal responsibility, because no nation has ever been strong, free, and bankrupt.” If the Senate does not put forth any pay-as-you-go measures, I urge investors to sharply reduce their holdings in equities, and begin with those companies not central to your long-term objectives.

General Omar Bradley: “Our is a world of nuclear giants and ethical infants. If we continue to develop our technology without wisdom or prudence, our servant may prove to be our executioner.”

Wal-Mart’s CFO stated current U.S. quarterly sales remain sluggish.

GM’s October sales in western Europe fell 9.5%.

Goldman Sachs suggests that 2005 will prove to be another year of modest tech spending.

According to Cendant, there are more than 89 million members of frequent flyer programs today, and $1.9 billion is spent annually as part of loyalty programs.

The Association of Flight Attendants represents more than 46,000 flight attendants at 26 airlines. The president of the AFA urged union leaders to authorize a nationwide strike and railed against U.S. airlines for slashing flight attendants’ pay and benefits.

The euro traded at a record high and gold hit a new 16-year high.

The index for crude materials rose 4.3% in October compared with a decline of 4.2% in September. U.S. October PPI intermediate prices rose 0.9% with core prices up 0.3% for the second consecutive month. The PPI is now up 4.4% in the past 12 months, with the core rate up 1.8% in the past year. The good news is that crude reached $55.67 on October 25, and it’s now trading around the $46 level. Longer-term inflation worries remain subdued as the difference between the 10-year Treasury bond and 10-year TIPS is about 2.5 percentage points, close to the 10-year average.

Money Foods is closing its three U.S. mushroom operations in Michigan, Indiana, and San Mateo County, CA. The farms have not made any money in the last four years. Several hundred workers will lose their jobs. Osram Sylvania will close its Waldoboro, Maine light bulb filament plant and 134 workers will lose jobs. Most of the production will be shifted to the Czech Republic, where labor costs are cheaper.

11/16/04 U.S. Small Business Owners’ Early Holiday Sales Forecast

According to the recent DollarDays survey, 48% of small business owners say their customers are more focused on price this year than they were last year, while 33% say their customers will be about as cost-conscious as last year. Only 13% expect their shoppers to be less frugal. Importantly, 13% say 2004 holiday sales to date are ahead of last year’s sales, while 27% sat sales are even and 26% say sales are behind. Sixteen percent say they will hire additional help for the busiest shopping season of the year, while 70% say they won’t. Twelve percent say they will begin marking down seasonal merchandise right after Thanksgiving, while 19% say their first markdowns will occur by Dec. 10. In sum, Marc Joseph, COO of DollarDays, stated “small business owners are clearly walking the line between being optimistic about their busiest income-generating season and being pragmatic.”

Marc Joseph’s comments could also characterize the situation at Wal-Mart, the ultimate proxy for the nation’s average paycheck-to-paycheck consumer. The company’s CEO is optimistic heading into the holiday shopping season; however, the results just reported for the third quarter were not pleasing. The Wal-Mart stores unit “had a poor quarter” with same-store sales rising only 1.3%. Sam’s Club comp sales growth was somewhat better at 4%, but compared to the results at Costco, they too were disappointing. The International division continues as the star performer with comp sales for the quarter rising 18%. In sum, overall corporate sales were below forecasts and net income benefited from a work opportunity tax credit, which acts as an incentive to hire certain workers, such as, former welfare recipients. One might also note that, as lower margin grocery sales grow as a percentage of sales, it can be expected that profit margins will be tested. International operations will need to carry a larger share of the growth story.

Justice Brandeis: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

Office Depot is cutting 819 workers. Detroit Public Schools announced it will have to cut 4,000 jobs and close as many as 40 of the district’s 255 schools due to the latest projected budget crisis. Putnam is cutting 100 jobs.

The UK is experiencing a soft patch in its housing sector.

The Pension Benefit Guaranty Corp. lost $12.1 billion in fiscal 2004, boosting its year-end deficit to $23.3 billion, the federal agency stated yesterday. Most of the loss came from $14.7 billion in terminated pension plans. In addition, the agency calculated $96 billion in unfunded vested benefits in other plans as “reasonably possible” at risk of default, up from $82 billion a year earlier. I wonder how long this growing financial cancer can be swept under the rug?

December crude closed yesterday at $46.87 a barrel, a two-month low.

Justice Brandeis: “Experience teaches us to be most on our guard to protect liberty when the government purposes are beneficent.” When those in elected office choose power for the few over the well-being of the majority, then it’s time to watch the burning fuse on the exposed time-bomb.

Many are adept at spouting statistics. One must be wary of those that tell half the story. For example, according to Taxprof, the tax burden in the U.S. is the second lowest of the 30 most advanced nations in OECD. As a percentage of GDP, the OECD stated it is 25.4% in the U.S., and that only Mexico at 19.5% is lower. Under Carter, the percentage was 18.4% and under Reagan it was 18.2%. Even that only tells part of the story. There is a growing gap between tax revenues and expenditures, and that’s why we have record budget deficits. In addition, we should take one further look at the OECD data. Finland is the 4th highest taxed country on the OECD list but the World Economic Forum ranks Finland as the most competitive global economy. Sweden is the highest taxed country and yet it is the third most competitive after the U.S. Statistics can play games with the full story.

Gold hit $440 per ounce.

IDC stated that PC sales growth will slow to 10.5% in 2005 “based on the economic assumption that the current boom is fairly weak as far as booms go and is going to be relatively short.” The last recession was a short one so why can’t this “boom” be relatively short?

Laurence Kotlikoff, professor of economics at Boston University, stated that Medicare and Social Security represent unfunded future liabilities of $43 trillion. He asks “how are we going to pay these bills? The government will have to print more money and you’d want to sell your bonds.” I would also add, as I have done so for two years, you should maintain the smallest holding possible in U.S. dollars. They represent an accident waiting to happen.

U.S. retail chains' same-store sales fell 0.4% in the week ended Nov. 13 compared to the prior week.

11/16/04 U.S. Small Business Owners’ Early Holiday Sales Forecast

According to the recent DollarDays survey, 48% of small business owners say their customers are more focused on price this year than they were last year, while 33% say their customers will be about as cost-conscious as last year. Only 13% expect their shoppers to be less frugal. Importantly, 13% say 2004 holiday sales to date are ahead of last year’s sales, while 27% sat sales are even and 26% say sales are behind. Sixteen percent say they will hire additional help for the busiest shopping season of the year, while 70% say they won’t. Twelve percent say they will begin marking down seasonal merchandise right after Thanksgiving, while 19% say their first markdowns will occur by Dec. 10. In sum, Marc Joseph, COO of DollarDays, stated “small business owners are clearly walking the line between being optimistic about their busiest income-generating season and being pragmatic.”

Marc Joseph’s comments could also characterize the situation at Wal-Mart, the ultimate proxy for the nation’s average paycheck-to-paycheck consumer. The company’s CEO is optimistic heading into the holiday shopping season; however, the results just reported for the third quarter were not pleasing. The Wal-Mart stores unit “had a poor quarter” with same-store sales rising only 1.3%. Sam’s Club comp sales growth was somewhat better at 4%, but compared to the results at Costco, they too were disappointing. The International division continues as the star performer with comp sales for the quarter rising 18%. In sum, overall corporate sales were below forecasts and net income benefited from a work opportunity tax credit, which acts as an incentive to hire certain workers, such as, former welfare recipients. One might also note that, as lower margin grocery sales grow as a percentage of sales, it can be expected that profit margins will be tested. International operations will need to carry a larger share of the growth story.

Justice Brandeis: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

Office Depot is cutting 819 workers. Detroit Public Schools announced it will have to cut 4,000 jobs and close as many as 40 of the district’s 255 schools due to the latest projected budget crisis. Putnam is cutting 100 jobs.

The UK is experiencing a soft patch in its housing sector.

The Pension Benefit Guaranty Corp. lost $12.1 billion in fiscal 2004, boosting its year-end deficit to $23.3 billion, the federal agency stated yesterday. Most of the loss came from $14.7 billion in terminated pension plans. In addition, the agency calculated $96 billion in unfunded vested benefits in other plans as “reasonably possible” at risk of default, up from $82 billion a year earlier. I wonder how long this growing financial cancer can be swept under the rug?

December crude closed yesterday at $46.87 a barrel, a two-month low.

Justice Brandeis: “Experience teaches us to be most on our guard to protect liberty when the government purposes are beneficent.” When those in elected office choose power for the few over the well-being of the majority, then it’s time to watch the burning fuse on the exposed time-bomb.

Many are adept at spouting statistics. One must be wary of those that tell half the story. For example, according to Taxprof, the tax burden in the U.S. is the second lowest of the 30 most advanced nations in OECD. As a percentage of GDP, the OECD stated it is 25.4% in the U.S., and that only Mexico at 19.5% is lower. Under Carter, the percentage was 18.4% and under Reagan it was 18.2%. Even that only tells part of the story. There is a growing gap between tax revenues and expenditures, and that’s why we have record budget deficits. In addition, we should take one further look at the OECD data. Finland is the 4th highest taxed country on the OECD list but the World Economic Forum ranks Finland as the most competitive global economy. Sweden is the highest taxed country and yet it is the third most competitive after the U.S. Statistics can play games with the full story.

Gold hit $440 per ounce.

IDC stated that PC sales growth will slow to 10.5% in 2005 “based on the economic assumption that the current boom is fairly weak as far as booms go and is going to be relatively short.” The last recession was a short one so why can’t this “boom” be relatively short?

Laurence Kotlikoff, professor of economics at Boston University, stated that Medicare and Social Security represent unfunded future liabilities of $43 trillion. He asks “how are we going to pay these bills? The government will have to print more money and you’d want to sell your bonds.” I would also add, as I have done so for two years, you should maintain the smallest holding possible in U.S. dollars. They represent an accident waiting to happen.

U.S. retail chains' same-store sales fell 0.4% in the week ended Nov. 13 compared to the prior week.

11/16/04 U.S. Small Business Owners’ Early Holiday Sales Forecast

According to the recent DollarDays survey, 48% of small business owners say their customers are more focused on price this year than they were last year, while 33% say their customers will be about as cost-conscious as last year. Only 13% expect their shoppers to be less frugal. Importantly, 13% say 2004 holiday sales to date are ahead of last year’s sales, while 27% sat sales are even and 26% say sales are behind. Sixteen percent say they will hire additional help for the busiest shopping season of the year, while 70% say they won’t. Twelve percent say they will begin marking down seasonal merchandise right after Thanksgiving, while 19% say their first markdowns will occur by Dec. 10. In sum, Marc Joseph, COO of DollarDays, stated “small business owners are clearly walking the line between being optimistic about their busiest income-generating season and being pragmatic.”

Marc Joseph’s comments could also characterize the situation at Wal-Mart, the ultimate proxy for the nation’s average paycheck-to-paycheck consumer. The company’s CEO is optimistic heading into the holiday shopping season; however, the results just reported for the third quarter were not pleasing. The Wal-Mart stores unit “had a poor quarter” with same-store sales rising only 1.3%. Sam’s Club comp sales growth was somewhat better at 4%, but compared to the results at Costco, they too were disappointing. The International division continues as the star performer with comp sales for the quarter rising 18%. In sum, overall corporate sales were below forecasts and net income benefited from a work opportunity tax credit, which acts as an incentive to hire certain workers, such as, former welfare recipients. One might also note that, as lower margin grocery sales grow as a percentage of sales, it can be expected that profit margins will be tested. International operations will need to carry a larger share of the growth story.

Justice Brandeis: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

Office Depot is cutting 819 workers. Detroit Public Schools announced it will have to cut 4,000 jobs and close as many as 40 of the district’s 255 schools due to the latest projected budget crisis. Putnam is cutting 100 jobs.

The UK is experiencing a soft patch in its housing sector.

The Pension Benefit Guaranty Corp. lost $12.1 billion in fiscal 2004, boosting its year-end deficit to $23.3 billion, the federal agency stated yesterday. Most of the loss came from $14.7 billion in terminated pension plans. In addition, the agency calculated $96 billion in unfunded vested benefits in other plans as “reasonably possible” at risk of default, up from $82 billion a year earlier. I wonder how long this growing financial cancer can be swept under the rug?

December crude closed yesterday at $46.87 a barrel, a two-month low.

Justice Brandeis: “Experience teaches us to be most on our guard to protect liberty when the government purposes are beneficent.” When those in elected office choose power for the few over the well-being of the majority, then it’s time to watch the burning fuse on the exposed time-bomb.

Many are adept at spouting statistics. One must be wary of those that tell half the story. For example, according to Taxprof, the tax burden in the U.S. is the second lowest of the 30 most advanced nations in OECD. As a percentage of GDP, the OECD stated it is 25.4% in the U.S., and that only Mexico at 19.5% is lower. Under Carter, the percentage was 18.4% and under Reagan it was 18.2%. Even that only tells part of the story. There is a growing gap between tax revenues and expenditures, and that’s why we have record budget deficits. In addition, we should take one further look at the OECD data. Finland is the 4th highest taxed country on the OECD list but the World Economic Forum ranks Finland as the most competitive global economy. Sweden is the highest taxed country and yet it is the third most competitive after the U.S. Statistics can play games with the full story.

Gold hit $440 per ounce.

IDC stated that PC sales growth will slow to 10.5% in 2005 “based on the economic assumption that the current boom is fairly weak as far as booms go and is going to be relatively short.” The last recession was a short one so why can’t this “boom” be relatively short?

Laurence Kotlikoff, professor of economics at Boston University, stated that Medicare and Social Security represent unfunded future liabilities of $43 trillion. He asks “how are we going to pay these bills? The government will have to print more money and you’d want to sell your bonds.” I would also add, as I have done so for two years, you should maintain the smallest holding possible in U.S. dollars. They represent an accident waiting to happen.

U.S. retail chains' same-store sales fell 0.4% in the week ended Nov. 13 compared to the prior week.

11/16/04 U.S. Small Business Owners’ Early Holiday Sales Forecast

According to the recent DollarDays survey, 48% of small business owners say their customers are more focused on price this year than they were last year, while 33% say their customers will be about as cost-conscious as last year. Only 13% expect their shoppers to be less frugal. Importantly, 13% say 2004 holiday sales to date are ahead of last year’s sales, while 27% sat sales are even and 26% say sales are behind. Sixteen percent say they will hire additional help for the busiest shopping season of the year, while 70% say they won’t. Twelve percent say they will begin marking down seasonal merchandise right after Thanksgiving, while 19% say their first markdowns will occur by Dec. 10. In sum, Marc Joseph, COO of DollarDays, stated “small business owners are clearly walking the line between being optimistic about their busiest income-generating season and being pragmatic.”

Marc Joseph’s comments could also characterize the situation at Wal-Mart, the ultimate proxy for the nation’s average paycheck-to-paycheck consumer. The company’s CEO is optimistic heading into the holiday shopping season; however, the results just reported for the third quarter were not pleasing. The Wal-Mart stores unit “had a poor quarter” with same-store sales rising only 1.3%. Sam’s Club comp sales growth was somewhat better at 4%, but compared to the results at Costco, they too were disappointing. The International division continues as the star performer with comp sales for the quarter rising 18%. In sum, overall corporate sales were below forecasts and net income benefited from a work opportunity tax credit, which acts as an incentive to hire certain workers, such as, former welfare recipients. One might also note that, as lower margin grocery sales grow as a percentage of sales, it can be expected that profit margins will be tested. International operations will need to carry a larger share of the growth story.

Justice Brandeis: “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.”

Office Depot is cutting 819 workers. Detroit Public Schools announced it will have to cut 4,000 jobs and close as many as 40 of the district’s 255 schools due to the latest projected budget crisis. Putnam is cutting 100 jobs.

The UK is experiencing a soft patch in its housing sector.

The Pension Benefit Guaranty Corp. lost $12.1 billion in fiscal 2004, boosting its year-end deficit to $23.3 billion, the federal agency stated yesterday. Most of the loss came from $14.7 billion in terminated pension plans. In addition, the agency calculated $96 billion in unfunded vested benefits in other plans as “reasonably possible” at risk of default, up from $82 billion a year earlier. I wonder how long this growing financial cancer can be swept under the rug?

December crude closed yesterday at $46.87 a barrel, a two-month low.

Justice Brandeis: “Experience teaches us to be most on our guard to protect liberty when the government purposes are beneficent.” When those in elected office choose power for the few over the well-being of the majority, then it’s time to watch the burning fuse on the exposed time-bomb.

Many are adept at spouting statistics. One must be wary of those that tell half the story. For example, according to Taxprof, the tax burden in the U.S. is the second lowest of the 30 most advanced nations in OECD. As a percentage of GDP, the OECD stated it is 25.4% in the U.S., and that only Mexico at 19.5% is lower. Under Carter, the percentage was 18.4% and under Reagan it was 18.2%. Even that only tells part of the story. There is a growing gap between tax revenues and expenditures, and that’s why we have record budget deficits. In addition, we should take one further look at the OECD data. Finland is the 4th highest taxed country on the OECD list but the World Economic Forum ranks Finland as the most competitive global economy. Sweden is the highest taxed country and yet it is the third most competitive after the U.S. Statistics can play games with the full story.

Gold hit $440 per ounce.

IDC stated that PC sales growth will slow to 10.5% in 2005 “based on the economic assumption that the current boom is fairly weak as far as booms go and is going to be relatively short.” The last recession was a short one so why can’t this “boom” be relatively short?

Laurence Kotlikoff, professor of economics at Boston University, stated that Medicare and Social Security represent unfunded future liabilities of $43 trillion. He asks “how are we going to pay these bills? The government will have to print more money and you’d want to sell your bonds.” I would also add, as I have done so for two years, you should maintain the smallest holding possible in U.S. dollars. They represent an accident waiting to happen.

U.S. retail chains' same-store sales fell 0.4% in the week ended Nov. 13 compared to the prior week.

11/15/04 It’s The Season To Hire Seasonal Workers

According to Manpower, 38% of national employers in the retail and wholesale trade sectors plan to boost staffing levels during this shopping season. The sector includes merchandise department stores, restaurants, grocery stores, and wholesale dealers and distributors, among others. According to the Illinois Retail Merchants Association, those seasonal hiring plans aren’t necessarily motivated by an anticipated hike in sales. The association states “it has to do with competition.” It’s often part of the effort to keep lines short because “they don’t want to lose sales. Competition is so tight.” Sears is a good example. They expect flat sales in the fourth quarter, but will still hire holiday workers because “it’s tied to customer service.” Limited Brands has 3,835 stores and will add 80,000 seasonal workers. Target will hire between 50,000 and 80,000 seasonal workers. UPS reports they will hire roughly 70,000 loaders, sorters, and drivers for the holidays. Marshall Field’s is hiring 7,000 for the holidays, and that’s slightly more than last year. Interestingly, the National Retail Federation projects holiday spending will rise 4.5% this year to $219.9 billion. Hiring rose 3.9% last year, but they are projecting head counts will be flat this time overall.

Ogden Nash: “The most exciting happiness is the happiness generated by forces beyond your control.”

After cutting incentives 16% in October, Gm ended the month with a larger than expected inventory of cars and trucks.

GM, Ford, and Chrysler are paying bonuses of $500 to $1,500 to U.S. buyers who finance through captive lenders.

Tower Semiconductor will cut 170 jobs, or 12% of its employees.

Sun Microsystems is introducing its next-generation operating system, the n0-cost Solaris 10. There will be a charge for support and service programs. Sun also promises to make the underlying code of Solaris available under an open-source license.

State media reports a coal shortage for this heating season for 200 million city dwellers in China.

Akimbo introduced the first Internet-to-TV-On Demand service. Kleiner Perkins, Sprout, and Draper Fisher Jurvetson are lead investors in Akimbo. This is a company that could go places.

Milton Berle: “Anytime a person goes into a delicatessen and orders a pastrami on white bread, somewhere a Jew dies.”

Crude fell 53 cents to an eight-week low to $46.59 a barrel.

Federal Judge A. Wallace Tashima: “The war on terrorism threatens to destroy the very values of a democratic society governed by the rule of law.”

Lockheed Martin refiled protests seeking to revoke Boeing’s contracts valued at more than $6 billion, part of the biggest Pentagon procurement scandal in more than a decade.

Last week, Korea’s central bank reduced its lending rate between banks by a quarter point to 3.25%. The decline is an effort to combat a slowing economy. How come their central bank is on the money and our Fed doesn’t get it right?

11/14/04 Bulls In An “Unstable” Shop

There have been many claims that humans use only 10% of their brains. Up until now, I had serious questions about such claims; however, recently, I have had a more open mind. In the face of the dollar being down for seven straight weeks, the euro making a new all-time high, gold reaching 16-year highs, and the Fed raising interest rates for the fourth time this year, the S&P Index had its best 3-week rally in 2 years. Yesterday, Federal Reserve Governor Edward Gramlich, who was appointed to the Fed in 1997 by Clinton, gave a speech at the Gerald R. Ford School of Public Policy in Ann Arbor, Michigan. His comments are worth noting- both for bulls and for bears. In particular, he observed that “our low national savings rate and our high public deficits have in effect translated into national borrowing. If we were any other country in international history, it would have long ago been stopped.” He called the world situation “unstable.”

In the third quarter the private savings rate fell to a record low o.4%. The U.S. Treasury budget deficit weighed in at a record $412 billion for fiscal 2004. The trade deficit for the first nine months placed us on a path towards a yearly deficit of at least $600 billion. Third quarter worker productivity rose at a modest 1.9%, the slowest growth rate in 2 years. Meanwhile, unit labor costs rose at a 1.6% rate, the largest rise since the second quarter of 2001. In the past, Gramlich has noted that “because productivity growth is an important component of earnings growth, stock market valuations depend on the outlook for productivity.” The trend for productivity growth has been steadily dropping for several quarters. Gramlich has observed that “productivity alone determines the long-run path of income per capita, or living standards.” One should note that, in spite of increased productivity gains over the last three years, the average worker’s wages, adjusted for inflation, declined over that same period. As productivity gains continue to evaporate, one can expect further declines in the standard of living for the average American. This backdrop adds to the “unstable” situation described by Gramlich.

As Gamlich sees it, the solution is to cut the federal deficit. He mentioned that “the budget enforcement acts that we had in the late ‘90s proved to be successful.” In my view, there will be a severe dollar correction long before Bush vetoes a spending bill. The buck stops with foreign countries. The same countries that subsidize more than two out of every three dollars of the savings in this world also subsidize our nation’s growing habit to consume. That is an unstable situation, and unsustainable. If fiscal austerity is to find itself to our shores, it will be forced on us by other nations.

This week we will be reading some displeasing news. It will be reported that the PPI was sharply higher in October. The Index of Leading Economic Indicators will be down for October. The CPI will not be as tame as originally projected. The Congress will return to a Federal debt ceiling that is at the max. How many fiscally responsible senators and representatives will tie an increase in the debt ceiling to spending curbs and/or a pay-as-you-go budget?

George Roche: “You can like the company without liking the stock.”

Rick Sherlund: “We just don’t have a Next Big Thing stimulating demand.”

Michael Kelly, Techtel CEO: “Buyers are buying IT only when needed and when benefit is proven and the benefit is related to current important business objectives…Investment spending is being made to keep capacity across the board as close as possible to actual demand.”

One can also see the sparse inventory levels maintained by corporations. Inventory as a percentage of sales has been declining for some time. It reflects uneasiness on the part of CEOs and CFOs about near and intermediate term demand. It also reflects doubt on their pricing power ability. In light of the trend of decreasing worker productivity, one can expect profit margins to decline. Corporations can no longer depend on over-leveraged consumers to bail them out. Wage growth is not on the horizon to bail out consumers. All of the aforementioned does not comprise a wall of worry. It is more than that. It represents a pile of trouble, and that unstable pile is getting bigger every day.

Charlie Maxwell: “We are running out of the ability to produce 2% more barrels each year to meet world demand that increases about 2% annually.”

You can borrow money but you can’t borrow time. There are times when time is not your friend. This is one of those times.

Arnie Berman of CreditSights: “You need a pervasive sense that there is a next obvious thing to do, and that if you don’t do it, you will get left behind. Right now, there is nothing like that. Companies are doing ‘keep the lights on’ spending, and I don’t see that changing anytime soon.”

John Plender of the Financial Times: “GM’s equity is a slender $28 billion wedge that supports hundreds of billions of dollars in debt, healthcare liabilities and pension obligations. It is more of a social insurance for employees and retirees than an exemplar of shareholder capialism.”

Americans continue to import more food than they export.

A new study has been completed by four business scholol professors. The study analyzed 438,00 stock recommendations issued on more than 12,000 companies by 463 investment banks and brokerage frms between January 1996 and June 2003. The best analyst recommendations were those that went against the grain of the securities firms issuing them.

11/13/04 Different Meals For Different Folks

Sometimes you need to be there to get it. Kola’s in Riverview, Michigan delivers muskrat dinners along with alligator and pizza. Michigan diners have a wish for venison as the state’s 16-day firearms deer hunting season begins Monday. More than 700,000 are expected to participate. On Wall Street the game has a different taste- a search for mouthwatering profits. Recently, glee has blasted through the portfolios of millions of investors as the S&P closed at a 3-year high, the Nasdaq at a 9-month high, and gold at its highest level since July 1988. Icing on the cake was crude’s 5% decline for the week to $47.32 a barrel. Even the average price of gasoline declined 3.3 cents to $2 a gallon. In tech land, Dell climbed to a 4-year high and Microsoft investors chewed on a $3 dividend. The latter would have been tastier had the payout been on January 2 instead of December 2. I guess tax planning is not an active part of a billionaire’s life. Lastly, the consumer came through and delivered U.S. retail sales up 0.2% in October. When you cheer 0.2%, then you know you are feeding on leftovers.

Peter Sellers: “There used to be a real me, but I had it surgically removed.”

I have not been eating much of late. I am still munching on my dreams. Hopefully, I can sleep a bit longer. In my dreamland, there are historically low interest rates combined with historically large budget and trade deficits, leaving me with less purchasing power, but I don’t have a worry. I went out and bought a new home with nothing down and put a new car in the driveway via zero percent financing. This is truly the dream of a lifetime.

Peter Ustinov: “Beliefs are what divide people. Doubt unites them.”

Henry Groppe, a long-time oil consultant and partner with Groppe, Long, & Littell: I think the real key is the peaking of world oil production. In this new environment, the key question is what is going to be required in future years to cause enough demand destruction to match the total available supply. We think it’s $50 or above on a year-round average.”

Dale Steffes: “What hasn’t happened since we got to $50 oil, the exploration people haven’t come in yet and the conservation people haven’t come in yet. Neither side has believed in $50 oil. When those two sides decide to do something, it’s going to fall back, most likely. But before then, my judgment is that it will go to $70…with a severe disruption.”

In the third quarter, the euroland economies grew at the slowest pace in a year. Japan’s economy also slowed dramatically. China is trying to put on the brakes to a bristling economy. Our Fed is applying the brakes through rising interest rates to an economy that is stalling. Do not be fooled by giveaways or by the exceptions, the real growers, such as, Starbucks, Dell, Walgreens, Sysco, eBay, Yahoo, and Pixar. There is a slowdown in the global economy. Growth forecasts will keep coming down. That does not mean meals will cease to exist. One simply has to spend more time hunting, and hopefully, without a firearm.

Textbook printer Von Hoffman Corp. is closing its Frederick, Md. Printing plant and idling 165 workers. Troy, Michigan-based Oxford Automotive Group will close its Alma plant and layoff 260 workers. Visteon Corp. will offer buyouts to a substantial number of its 8,100 white-collar workforce. Luzerne County, Pa. has been hit by job losses at Techneglas, Owens Corning, and Schott Glass, and now it’s New Dana Perfume Co. that’s closing its plant and laying off 200 workers.

11/12/04 Something Has To Give

The share of the economy accounted for by corporate profits is the highest since 1929. On the other side of the spectrum, the worker’s share of 45.7% is at the lowest level since the beginning of the Depression. This disparity is not long for this world.

According to a study by Robert Arnott in the latest issue of the Financial Analysts Journal, the average U.S. pension fund is using an average yearly return assumption of 8.5%, and public pension funds are assuming a return of 8%. Unfortunately, rose-colored glasses don’t create returns, and ignoring valuation effects, the above-mentioned returns have never been achieved over a 10-year period since 1871. Rather, the range averages 5.7% with a standard deviation of 1.3%. In reality, the pension funds will need to cough up more contributions.

According to Edmunds.com, total U.S. market share for domestic vehicles fell to 56.5% in October, the lowest in recorded history. Keep those incentives coming. Unfortunately, they aren’t working.

In Germany, an estimated 20% of shoppers say they will not buy U.S. products. So much for nation building.

According to a new survey by American Affluence Research Center, the wealthiest 11 million households show declining optimism in their 12-month outlook. The survey participants have an average income of $329,000 and an average net worth of almost $3 million. They control 70% of the private wealth in the U.S. An increasing percentage is showing concern about business conditions, the stock market, and their own personal household income 12 months from now. The overall index for these three factors continued a decline that began 6 months ago and is now back to the Fall 2002 level, the record low for these surveys.

Armstrong Corp. announced the closing of their 60-year-old plant in Marietta, PA, throwing 440 out of work.

Not surprisingly, shares of Microsoft made a new yearly high this morning. Today is the last day to buy shares and get the $3 dividend. The price rise does not take into account the company’s slowing sales picture for this fiscal year. Increasing effort is being placed on cost cutting. Microsoft has about 625 employees working in Hyderabad, India. Next week, they are breaking ground on a 250,000 square foot building that will double the size of its new facilities in Hyderabad, which are scheduled to open in January. At present, Microsoft has 57,000 employees world-wide. One can expect their presence in India to become more important.

11/11/04 Veterans Day

According to the National Hospice and Palliative Care Organization, more than 1,800 Veterans die every day in our country- that’s about 54,000 a month. Dying Veterans represent a quarter of all deaths in the U.S.

Former Wal-Mart CEO David Glass: “Sam has been gone for a number of years now, but he’s still alive and well in this company to a large extent. There’s not a day that goes by that I don’t hear conversations around here about what Sam would do or how he felt about something.”

Intel’s chip inventory is a bloated $3 billion.

As exports fell, Germany’s third quarter GDP rose a scant 0.1%.

According to a report by comScore Networks, consumer spending for non-travel goods on U.S.-based websites will exceed $15 billion during the November through December holiday season, about 23% to 26% more than during last year’s period. More people are buying products online that were once traditionally purchased in stores. In addition, more consumers use the Internet to research products and compare prices.

In an effort to reduce inventories and increase market share, GM introduced Lock ‘n’ Roll for the next 20 days. It’s an opportunity to purchase selected vehicles with 0% APR for as long as 10 years, and to duplicate the deal on a second vehicle for up to ten years. Not all consumers will qualify.

Heating-oil supplies fell 74,000 barrels in the week ended Nov. 5, the sixth straight decrease. Stockpiles of distillate fuels, which include heating oil and diesel, fell 137,000 barrels. Heating oil futures are up about 69% from a year ago. Demand for gasoline is running at a rate of 9.2 million barrels a day, and is at its highest level in two months. Many OPEC members are producing close to their maximum capacity limits. According to John Kingston, global director of oil for Platts, “the big question continues to surround not crude, but heating oil, and whether supplies are adequate should we have a cold winter. Continued tightness in heating oil inventories remain a concern”

The U.S. trade deficit for the first nine months of 2004 was $444.5 billion. For all of 2003, it was a record $495 billion. It would appear that the deficit for all of 2004 will approach $600 billion, about an increase of 20% over 2003. That coupled with the budget deficit of $413 billion, brings the total to $1 trillion or one-eleventh of our GDP. With no spending caps going forward and/or a pay-as-you-go plan, our economic well-being is in jeopardy.

In September, our imports of capital goods were the highest in four years.

Sam Walton: “There is only one boss. The customer. And he can fire anybody in the company from the chairman on down, simply by spending his money somewhere else.”

As anticipated, the Fed lifted the funds rate 25 basis points to 2%. It’s message and policy statement remain unchanged. The Fed fails to analyze the quality of our GDP and ignores the double-counting in our employment picture. Of course, the vast majority of investors also ignore the same facts. Ignorance is not the conduit to bliss.

Wal-Mart’s CEO Scott: “What makes us different is our logistics, our information systems, our culture.”

Coke stated its long-term growth targets don't apply to fiscal 2004 or 2005. The company is experiencing weakness in North America, the Phillippines, and Germany.

Tiffany's quarterly income declined 26%. As a result, the company lowered its 2004 earnings outlook.

11/10/04 Trading Was Light But The News Was Not

According to a survey by Deloitte & Touche USA, for the first time since their inception, gift cards will replace apparel as the gift purchase of choice. This year, 64% of consumers stated they intended to buy gift cards, up from 60% in 2003. The increase in gift cards comes at the expense of apparel, CDs, DVDs, tapes, and books. On average, respondents reported they planned to buy 4.7 cards each. These same respondents reported holding 2.3 cards unused from last year. The survey indicated half will purchase cards for stores or products; 34% for restaurants; and 27% for services or experiences. As a reminder, a card is not counted as revenue until redeemed, and many cards are not redeemed until January. A word of caution- 66% of consumers stated they will shop at fewer stores.

Generic drugs now account for more than 50% of all prescriptions filled in the U.S. and more than $40 billion in prescription sales worldwide. More than $80 billion of global blockbuster drugs face U.S. patent expiration by 2007.

Ten months ago Bush pushed for temporary legal status for 10 million undocumented immigrants. Leading up to his re-election, the plan was not mentioned. Yesterday, while in Mexico with five other cabinet members, Colin Powell stated “the president is committed to comprehensive immigration reform as a high priority in his second term.” In other words, people who broke the law when crossing the border will now be rewarded. I wonder how that will sit with the vocal moralists in rural America.

Gail D. Fosler, chief economist for the Conference Board: “The asset inflation that infected the U.S. stock market is increasingly apparent in the housing market.”

Cisco’s cash flow from operations was $1.5 billion for their first quarter of fiscal 2005, compared with $2.1 billion for the fourth quarter of fiscal 2004. During this year’s first quarter, Cisco repurchased 156 million shares of common stock at an average price of $19.24 for an aggregate purchase price of $3 billion. Yesterday, the board of directors authorized up to $10 billion in additional purchases of its common stock.

Greenbrier Cos., a railcar equipment manufacturer, stated “order backlogs are at their highest levels in the industry since 1998.” D.R. Horton, a homebuilder, reported a record backlog. Honda announced a $270 million expansion in the U.S., including plans to construct a new transmission assembly plant in Georgia. Dell received $242 million in state incentives and will build a new plant in North Carolina. To qualify for the incentives, the plant must employ 1,500 by 2009. If Boeing were to introduce a stretch version of the 7E7, then Qatar would provide the company with a multi-billion order. Boeing will introduce the smaller version of the 7E7 in 2008, and has been holding off on a stretch version. A senior Microsoft games executive stated that first-day sales of the company’s new video game, “Halo 2,” will reach $100 million. Microsoft is set to launch their internet search engine.

The Bank of England cut their 2005 growth forecast to 2.5% from 3.1%.

Marsh & McLennan is cutting 3,000 jobs. Capital One is cutting 750 jobs. Nokia is closing a plant in Florida and cutting 400 jobs. American Greetings is closing a plant in Tennessee and cutting 450 jobs. Crotty Corp. is also closing a plant in Tennessee and cutting 300 jobs. Overseas, Cable & Wireless is cutting 600 jobs and Swisscom is cutting 390 jobs.

Crude broke through $47 barrel on the downside as the IAE suggested that prices may have peaked. With regular unleaded at close to $2.50 a gallon in San Francisco, many in the Bay Area hope the prediction is correct.

In response to many inquiries, I will repeat the situation in the non-farm payroll reports. Should an individual, for example, work two jobs, then that individual is counted as two employees. That is double counting, and grossly overstates the number of employed people in the U.S. inasmuch as 8 million workers work more than one job. That figure comes from the BLS.

The U.S. trade deficit declined 3.7% in September to $51.6 billion. The gap would have been larger except that the importation of crude was disrupted by a hurricane.

11/9/04 Foreigners Vote Every Day

The folks who live in Ohio were pretty angry after receiving thousands of letters from the UK attempting Clarke County voters to cast ballots for Kerry. In fact, record numbers turned out to vote, and that turned a deficit in 2000 to a plus 1,000 margin for Bush this year. Unfortunately, for the U.S., foreigners vote every day in the U.S. They own over half of our $3.7 trillion of Treasury debt, and they vote with their buy and sell orders. Two weeks ago, the U.S. Treasury Dept stated that foreign investors became net sellers of our Treasury notes in the most recent auction of govt securities. Individual foreign lenders, in particular, have been sellers. With a record high budget deficit and the U.S. trade deficit on its way to reaching its highest level in two decades, investors can expect continued dumping of our Treasury notes by foreigners. The daily votes will create a mounting toll. It is insane for investors to ignore the risks created by net selling by foreigners. Bush may want to spend his political capital; however, foreign investment in our country is far more important than Bush strutting over our landscape. He might not like the French, but their Finance Minister Nicholas Sarkozy echoed the sentiment of the majority as stated "the U.S. must cut its budget deficit. This is a unanimous message from Europe and the IMF, which we're sending to our American friends."

The Detroit Free Press reports that incentives are no longer enough to move cars, and that automakers could have to eat more costs. A study by CNW suggests that about 44% of the amount spent on incentives comes from profits. An incentives war is expected in December in an effort to move inventory and hit market share targets.

The euro came close to trading at $1.30, a record high.

Mozilla releases its open source browser, Firefox, today. In my view, it is far superior to Microsoft's IE.

According to Coinstar's National Currency Poll, about 64% of Americans expect to spend the same this holiday season as last year or $805, while 16.3% anticipate spending more, and 18.5% plan to spend less.

IT Group Cap Gemini Ernst & Young will cut another 1,000 jobs.

Germany's Infeon issued a cautious outlook. In November, Germany's consumer confidence declined to the lowest level in almost two years.

Multi-billion plane deals don't grow on trees. Boeing lost another deal to Airbus, and the buyer was another previous all-Boeing airline, AirAsia of Malaysia. The deal for 40 planes is worth over $5 billion. It should be noted that, with the continued decline in the U.S. dollar, foreign buyers' purchasing power increases for Boeing planes. The opposite is true for the euro and Airbus planes. Nevertheless, buyers prefer the Airbus A 320 to the Boeing 737. Additionally, Boeing has an added advantage of paying almost zero income tax in the latest quarter. This was the result of numerous tax credits received. Boeing's inability to compete rests with their management and inefficiencies in their production line.

11/8/04 Telephone Numbers

Interest on the national debt was $318 billion in 2003 and $322 billion in fiscal 2004. Only record low interest rates kept the amount of interest on the $7.4 trillion national debt to its present level. In 2005, as interest rates rise by a significant percentage and the debt continues to accumulate, the interest will approach $350 billion. Interest expense is the third largest expense in the federal budget. With the present trend, in a few years, it could top the defense budget and become the largest budget item. It won’t be long before the daily interest expense amounts to $1 billion. When that happens, the Dow won’t be at or above 10,000 and the Nasdaq won’t be at or above 2000. Those will seem like telephone numbers.

Frank Zappa: “It would be easier to pay off the national debt overnight than to neutralize the long-range effects of our national stupidity.”

Tyler Refrigeration Co. has been in Waxahachie, Texas since 1947. Their North Texas plant, which is owned by Carrier Corp., will close in 2005 and slash more than 500 jobs, with most of the work expected to go to Mexico after the closure.

11/7/04 You’re In Charge

There will always be talk about this “play” or this “break-up value” or this “technical indicator.” There’s something for everyone; however, no one can prove in advance when it is the right time to walk away from the table and to take a breather. Each person must learn the best way to sell to the sleeping point. The idea is not to get over-confident but to remain focused on what you do best as an investor. Straying is for animals.

Donald Trump: “It’s the people you don’t fire who make your life miserable.”

According to Barron’s, fractional jet operators account for no more than 6% of all jet aircraft in use in the U.S. but they have been placing about 40% of all new orders for planes.

Although the dollar is making new multi-year lows against other major currencies, the monthly trade deficits are recording record highs.

Bob Gillis, executive director of the Cathedral Center for Faith & Work, in downtown Kansas City: “There are more people coming now who are looking for something better. They’re underutilized in the job they’re in.”

Including discouraged workers and those who have had to settle for part-time work because full-time work isn’t available, the October unemployment rate is 9.7%.



Jacqueline Midkiff, a Kansas City economist employed by the BLS, noted that the pace of compensation growth did not keep up with the Midwest’s 2.3% inflation rate in the costs of consumer goods.

On Saturday, 20 Marines were wounded at Ramadi.

According to the CBO, in 2003, Medicare and Medicaid outlays accounted for 3.9% of the GDP. In 2004, the price tag for both programs will approach $600 billion. The budget office director stated that the entire federal budget is 20% of this nation’s GDP. A March 2004 report signed by the secretaries of the Treasury, Labor & Health, and Human Services departments stated that “Medicare’s financial difficulties come sooner- and are much more severe- than those confronting Social Security… the financial problem in Medicare is five times as great.”

As of September 30, Microsoft had $64.4 billion in cash. On December 2, the company will pay a $3 a share special dividend to shareholders amounting to $30 billion. The last day to buy shares and receive the dividend is this Friday. Scott Di Valero, Microsoft’s controller, stated that the company’s cash flow for fiscal 2005 would approach $14 or $15 billion on sales growth of 6%.

Yesterday, I mentioned that Delta Airlines is planning to lay off 5,100 workers beginning Jan 1. The company released new details. The number has been raised to 6,900 workers.

Yesterday, Wal-Mart stated it still anticipates a 2 percent to 4 percent increase in November same-store sales. Traffic is currently accounting for most of the sales increase.

According to a new survey by CFO Magazine, more than 60% say their spouses want them to work less and more than 60% believe pressure at work is damaging their health. In addition, one-third of the companies that can’t certify their internal controls on time say the problem is the lack of qualified people to do so.

India’s Finance Minister Palaniappan Chidambaram stated that India is capable of sustaining annual economic growth of 7 to 8 percent over the next 10 to 12 years and is on its way to becoming a “global economic superpower.” He remarked that the economic boom will be fueled largely by higher household savings and investment due to rising literacy levels and growing confidence among foreign investors. Honeywell, for example, mentioned they would be hiring 1,000 additional programmers in India in 2005, adding to their present staff of 3,000. As previously mentioned, Microsoft is building a major technical center in India, adding to their current presence. It is well to note that approximately 80% of our nation’s economy is based on services provided. India’s strength is in services. Their present and future growth will be in services. We have lost a good portion of our manufacturing base. Currently and over time, a good portion of our services base will be lost- to countries like India. I assure you the “Faith Community” won’t be replacing the lost jobs. They’ll be asking you for donations.

The OECD stated an early warning indicator showed the economic outlook weakened in September in the U.S. That indicator, the six-month rate of change, was down for the eighth month in a row, falling to 1.7 in September from 2.3 in August. In addition, they predicted slowing expansion lies ahead for the 30 industrialized countries comprising the OECD.

According to the National Bureau of Statistics, China’s central government’s investment along with local government and state-controlled companies’ spending in roads, bridges, and other fixed assets increased 28% in the first nine months of 2004. At a recent conference in Beijing, senior government officials remarked that State investment will be reduced in 2005 in an effort to cool the economy. Maybe that will occur; however, China’s M2, the broadest measure of the money supply, is expected to increase 16 to 17 percent in 2005. That’s red-hot money supply growth. Meanwhile, the People’s Bank of China continues to proclaim that, in a gradual and steady manner, the central bank will “create a more flexible exchange-rate mechanism.” The latter implies a small downward revision in the peg from 8.3 yuan to the U.S. dollar to about 7.9 to the dollar. An alternative would be to peg the yuan to a basket of currencies, and that could include the U.S. dollar, the yen, the euro, the Singapore currency, the South Korean won, and the Taipei dollar. Looking out over the horizon, our dollar will be less important as a medium of exchange. The same will be true for investment in our equities and bonds. There are too many alternatives in other corners of the world. Our population is aging and our economic growth prospects are diminishing. We are in serious need of a new cash flow generator. Hopefully, one will be discovered in some garage in the Silicon Valley.

Peter Lynch: “I remember a company that this fireman owned, and he had a system. He made $400,000 on a $5,000 investment. He held it for 25 years. And he said, ‘as long as they keep hiring, I’m going to hold onto it. When they stop hiring, I leave.’ So when they stopped hiring, he sold.”

Lenny Bruce: "Every day people are straying from the church and going back to God."

11/6/04 Double Counting

In the non-farm payroll survey a person with two jobs is counted as two employed people. In addition, the payroll survey systematically double-counts due to job changing. We do not live in a perfect world. However, in the October payroll report something significant happened. Some would point to the 337,000 increase in jobs. Some would suggest that, as 367,000 people entered the labor force, the unemployment rate rose from 5.4% in September to 5.5% in October. There is another item that dwarfed these two items. The number of people holding more than one job rose by 519,000 to 8 million in October. In other words, 519,000 employed people were double counted in the payroll report. The average time for the unemployed to find a job remained at 19.6 weeks.

Let’s examine the report a bit more. Temp jobs rose 47,600 to the same level reached in February 2001, a month before the last recession began. The average workweek was unchanged at 33.8 hours. The manufacturing workweek and factory overtime both declined by 0.1% and 5,000 manufacturing jobs were lost. Meanwhile, average hourly weekly earnings rose by 5 cents to $15.83 and average weekly earnings rose 0.3%. The average worker still isn’t making it. Yesterday, we mentioned that 71,000 construction jobs were added to assist in the hurricane repair work. There were 17,000 financial jobs added and retail trade jobs rose by 21,000. Not surprisingly, 41,000 health services jobs were added. A total of 22,000 education positions were added. Now get this. Within government, local education added 32,000 jobs. What education jobs are added in October? In sum, the labor force participation rate was unchanged at 65.9%; however, the number of unemployed Americans in October increased by about 69,000 from the prior month.

The Economic Cycle Research Institute stated its leading gauge of U.S. economic activity fell 1.4% in the latest week. It was the fourteenth straight week without growth and the tenth straight week it has fallen. Coincidentally, the NAPM index has been declining monthly beginning in July. With falling economic activity, there is little reason to expect hiring to expand—the exception maybe hiring by federal, state, and local governments. Their bloated payrolls can be likened to cancerous tumors enlarging on a monthly basis.

Edward Abbey: “A patriot must always be ready to defend his country against his government.”

Richard Nixon: “When the President does it, that means that it’s not illegal.”

Coyotes have been found roaming near the White House. They are opportunistic predators. Their principle diet is small rodents.

The monthly Spherion Employment Report, conducted by Harris Interactive, shows that, despite the addition of 337,000 jobs in October, 41% of American workers think that the economy is getting weaker, up four percentage points from September. Thirty six percent of working adults in the U.S. are likely to look for a new job in the next 12 months. Forty seven percent of employed adults in the U.S. believe that fewer jobs are available, while 22% believe more jobs are available.

John Locke: “It is one thing to show a man that he is in error, and another to put him in possession of truth.”

The S&P 500 has had nine straight days in the plus column, the most since 1997.

SBC Communications may cut 1000 jobs in Michigan. In the past year, the company has eliminated about 7,000 jobs. In 2005, SBC will cut 10,000 or more jobs. Delta Airlines will cut as many as 5,100 employees. An auto-parts manufacturing plant in Circleville, Ohio is closing its doors and putting 110 people out of work. Mervyn’s is laying off 150 workers. The Hamilton Sunstrand plant in Grand Junction, Colorado is closing down. They make parts for military jets. As one worker stated, “the way jobs are in Grand Junction right now, you can’t find anything.”

Booker T. Washington: “Success is to be measured not so much by the position that one has reached in life as by the obstacles which he has overcome while trying to succeed.”

Consumer credit grew by $9.8 billion in September or at a 5.8% annual rate.

Since same-store sales have been disappointing at Sears, Kmart, and Dillards, the companies are now viewed as real estate plays. Hope springs eternal.

The euro reached an all-time high versus the dollar, and is now 57% above its all-time low of 82 cents reached in October 2000. Each dollar now buys only about three-quarters of a euro. When the euro was introduced in 1999, it was pegged at 1 to 1 against the dollar. The dollar has also been falling against the yen, the British pound, the Swiss franc, and the Canadian dollar. As our deficits continue to rise to record levels, the value of the dollar will continue to depreciate. That’s been proven over the last few years.

According to the Cambridge Consumer Credit Index, 56% of Americans say their monthly lease and car payments are enough of a burden to prevent them from making other big ticket purchases. In addition, 17% of those with car loan payments say these loans are a major burden, up from 11% who said so in 2003. The average car payments have risen because of higher car prices with 17% of those with car payments spending between $500 and $700 per month, up from 10% who paid that amount in 2003.

The credit rating on GM’s $150 billion of debt was cut to two grades above junk.

Gold is trading near $435 per ounce and oil remains just below $50 per barrel.

I find it interesting that the number of unemployed people and the number of people working multiple jobs are each very close in number to 8 million. You add in marginally attached and discouraged workers, and you are at 18.2 million Americans. I won’t double count the under-employed. I leave double counting to the Labor Department.

Ken Goldstein, economist for the Conference Board: "There's a laundry list of indicators that are suggesting the economy in general and the labor market in particular are losing momentum, softening."

Dan Radford, director of the Fedral Reserve Bank of Cincinnati: "What we need are jobs for middle-class folks with skills."

11/5/04 Spending Political Capital

The operative word is “spending.” The government has no capital unless you are confused with the capitol building, and that is owned by the taxpayers. Fortunately, not all Americans are in a reversible coma. Karl Rove may perceive all Americans as brain dead. The last time I checked I, thank God, did not fall into this category. Before Wall Street and Bush get too carried away, I suggest they face a little housekeeping measure. When the Congress returns in mid-November, the first item on the agenda will be to vote on raising the federal debt limit. That’s the one that was reached about three weeks ago at $7.38 trillion. In the interim, in an effort to avoid exceeding the cap, the Treasury department temporarily suspended contributions to a government pension plan. Snow mentioned that “by mid-November all of our previously used prudent and legal actions to avoid breaching the statutory debt limit will be exhausted.” For all followers of the Center for Moral Clarity, it might be noted that Bush submitted a budget to the Congress in February 2001 and he promised that the debt ceiling would not have to be increased until 2008. That promise has been breached three times by Bush, and obviously broken promises are part of a mandate. A spokesperson for Bush claimed breaching the debt limit “is nothing we have control over.” I have zero confidence in Bush reversing his irresponsible spending habits, and suggest the prompt elimination of all U.S. treasury notes in all portfolios. I believe it may state “In God We Trust” on U.S. currency, but that says nothing about the credit worthiness of the currency. Gold selling above $430 an ounce, the dollar approaching 1.29 per euro, 105.67 yen, and an 8-year-low versus the Swiss franc should be some warning signs. The U.S. debt structure is on borrowed time, and I, for one, do not believe in holding the short straw.

Mark Twain: “This nation is like all the others that have been spewed upon the earth- ready to shout for any cause that tickle its vanity or fill its pocket. What a hell of a heaven it will be when they get all these hypocrites assembled there!”

American Airlines has announced plans to furlough 450 pilots and 650 mechanics over the next few months because of soaring jet fuel costs. Venezuela’s Energy Minister RAFAEL Ramirez warned that “oil prices have not yet reached their maximum. We see the market as unstable and higher.” Heating oil inventories are 16% below this time last year. A colder-than-normal winter is anticipated for the eastern United States. As an aside, in Japan, kerosene supplies are 11.5% below this time last year.

Everything is not coming up roses in Ohio. Jim Petro, Ohio Attorney General, will be running for Governor in 2006. Yesterday, he stated “Ohio is trapped in the past. We must reinvent our government so that it runs more effectively, while costing less.” He proposes job cuts for 11,500 state workers. I wonder what the Center for Moral Clarity has to say about that. God can’t eliminate the budget deficits in Ohio.

According to a recent survey by the Securities Industry Conference, investors are expecting an average return of 12.8% on their investments in 2004 and 14.1% next year. The expectation is the highest since 2002 when investors expected 19% returns. The SIA stated the expectations are too high. I recommend the following. Sell into unrealistic expectations. Reduce and/or eliminate all non-core long-term equity holdings.

Mark Zandi, chief economist at Economy.com: “The leading indicators have yellow signals, if not red, for next year. The economy is going to be struggling in the first part of the president’s term.”

Lyle Gramley, a former Fed governor: “So far we haven’t had much of an effect from the rising price of oil, but I think it’s coming.” CIBC World Markets economists stated in Toronto yesterday that “the widely held view that the U.S. economy is half as sensitive to higher oil prices as it was during previous oil shocks simply does not pass the muster. The median household spends no less of its income on energy than it did 25 years ago. Energy efficiency is fast improving, but energy usage is rising even faster. And while energy-intensive goods are no longer as likely to be made at home, the energy costs embedded in their manufacture will still be borne by American consumers… In fact, on average, North American households consume about 10% more energy than they did 25 years ago.”

Houston economist Barton Smith is director of the University of Houston’s Institute for Regional Forecasting. He states that housing prices in about one-third of the country have risen far faster than incomes, in some cities 16% faster. He predicts that eventually housing prices will plummet and “it will stymie the national economy.” He believes that the bursting of the nation’s housing bubble could send our country back into stagnation, and even a recession, depending on how the Federal Reserve responds. In addition, Smith opined “I’d write construction off as a major source of growth for the next five years.”

Anchor Glass Container Corp. is the nation’s third-largest bottler. Without warning, last evening they closed their South Connellsville, Pennsylvania plant in Fayette County and approximately 300 workers are without jobs this morning. Instead of providing 90-day closure notice, the company is making monetary payment equal to 90 days of work.

Third quarter productivity slowed sharply to 1.9%, down from second quarter results of 3.9%. Unit labor costs, which reflect changes in both hourly compensation and productivity, rose 1.5% in the third quarter, about the same as the 1.4% of the second quarter.

Andre Gide: “The true hypocrite is the one who ceases to perceive his deception, the one who lies with sincerity.”

A Labor Department official stated that part of the slide in weekly unemployment claims was due to a decline in Florida where fewer people requested assistance from company closures. Many Florida businesses were interrupted the last two months due to hurricanes. Extended unemployment benefits were not available in any state during the week ending October 16. The largest increases in initial claims for the week ending Oct. 23 were in California (11,561), Missouri (4,285), Illinois (3,090), Michigan (2,877), and North Carolina (2,111) while the largest decrease was I Florida with 1,555.

For the four weeks ended October 29, the same-store sales increase for the Wal-Mart store division was 2.4% versus the year ago period of plus 4%. Sam’s Club showed a 5% increase compared with the year-ago period of 7%. On the other hand, Target comparable-store sales increased 6% during the month of October compared with 4.5% in October 2003.

Kerry won more votes than any Democrat in the state of Ohio’s history- 2.65 million; however, Bush received 130,650 more. The difference was this. Bush equaled his 2000 performance by carrying 72 of 88 counties, but he improved it by increasing his vote take in 78 counties. A total of 70% of Ohio’s record 8 million registered voters cast ballots. White evangelicals and born-again voters comprised 25% of those who cast ballots in Ohio, and 76% of them voted for Bush.

Judging from the price of the stock, you may not realize that Boeing is in trouble. They are. Their defense business has been carrying the company. It is not unlike GM with its financing division and its operations in China. James Albaugh is head of Boeing's defense business. He stated “you’re going to see a reprioritization of many of the programs that the government is funding. All big programs will come under scrutiny because of their size.” This is bad news for the company. In addition, in another 6 months or so, I predict they will announce the closing down of their 767 line in Everett. There are practically no orders left on the books. The only possible near-term potential was in commercial airplanes for low-cost carriers. Late yesterday, Air Berlin placed a $6 billion order for Airbus A320s. This is significant. Currently, Air Berlin has an all-Boeing fleet. A spokesperson for Boeing stated “we’re obviously disappointed. But (Airbus) seems to be wanting to buy market share at any cost.” That sounds like a sore loser. How long will it take for the stockholders to take it on the chin? The fact is that Airbus has been outperforming Boeing for the last few years. Without cash flow from big government contracts, the next several years will not prove rewarding for Boeing or its shareholders.

Francois Rochefoucauld: “Hyprocrisy is the homage that vice pays to virtue.”

With the election, I have not spent time on analyzing the payrolls for October. I knew there would be a large pickup in construction in order to clean up after the Florida hurricanes. There were- 71,000 jobs. I knew there would be temp hiring for the holidays. There were- 48,000. Manufacturing was down 5,000 jobs in the month and the unemployment rate clibed to 5.5%. Over all, the Labor Dept stated there were 337,000 new jobs in the month of October, twice the number anticipated by economists. I will massage the numbers and we can discuss them tomorrow.

11/4/04 Seeing Red Through Moral Clarity

Have you ever heard of the Center for Moral Clarity? It’s based in Columbus, Ohio and was founded by Pastor Rod Parsley. Bush can thank him for his win. Parsley turned out the “values voters” across 2,500 counties in our nation, and, in particular, in the state of Ohio. As Parsley explains, “the left has done just that--- left, and no longer represent the mainstream. It is not that the country has become more conservative, but that throughout this campaign, the mainstream has more readily identified with the positions long-voiced by Christians and other people of faith and have naturally aligned with our platform, embracing values and a passion for a culture of life. I think we can attribute President Bush’s victory to a couple of different dynamics. Americans realized that our basic common values were under assault by the liberal agenda, and they turned out at the polls to let their voices be heard…It is obvious that the Church has not created a wave, but rather struck a nerve, reflecting the sentiments of the average American.” In Bush’s second term, Parsley will focus on a Federal Marriage Amendment, the appointment of Supreme Court justices, partial birth abortion, and a total of ten specific issues. In other words, painting the country red is aligned with embracing values and a passion for a culture of life as seen through the eyes of the Center for Moral Clarity. It makes me want to jump up and down and clap my hands, and then puke!

While the Center for Moral Clarity congratulates themselves, the U.S. September factory orders declined 0.4% in September after falling 0.3% in August. Maybe Parsley can provide more factory orders. GM and Ford October sales declined 5% in the U.S. and GM October sales declined 6.5% in China. We need Parsley to buy more cars.

American Airlines will soon announce deferring deliveries of 47 Boeing 737-800s and nine Boeing 777-200s between 2006 and 2010. We need Parsley and his Center to fly more.

I’m thinking that maybe Parsley has a plan for job creation to go with his moral values platform. I sure hope so. Lehman Bros. stated that SBC Communications may cut between 10,000 and 20,000 employees in its wire-line business. Credence Systems is cutting 160 jobs. Cincinnati Bell, not so far from Columbus, will shed 150 to 200 jobs. ShawCor Ltd. will close a plant just outside Mobile, Alabama and 450 employees will lose their jobs. According to the Charlotte, NC Chamber, the number of new and expanding companies decreased to 269 in the quarter from 309 in the third quarter of last year. Overall, Mecklenburg County experienced declines in new and expanding businesses, employment, and capital investment in the third quarter of 2004. Don’t worry, Mecklenburg. Parsley is on the way.

Qualcomm announced that 2005 should “get off to a slow start.”

Wal-Mart stated that third-quarter sales were less than hoped because the company’s lower-income customers held down spending due to higher gasoline prices and job concerns. I’m sure that Parsley can help Bush with a new energy program and permanent job cuts to spur spending and debt creation.

British home prices dropped 1.1% in October. When will lower home prices find its way to our shores? Maybe we should keep our eyes out for Los Angeles and Boston and other cities with large populations. Those areas are out of the mainstream and see blue.

According to CIRCLE Research, an estimated 21 million 18-30 year olds voted in the 2004 presidential election, up from nearly 18 million votes cast in 2000.

When issues take over, and the economy counts, and earnings are punk, and stock prices tank, do not worry. Place a call to the Heartland and ask for Parsley. I’m sure he and his evangelicals have plenty of buying power. After all, they recognize “values.”

11/3/04  I Don’t Get Politics



After spending untold hours studying the political

landscape, I realize I understand very little. If

Ohioans stated that the economy was the number one

factor in their voting decision, and hundreds of

thousands of jobs were lost during Bush’s term of

office, then one might conclude that Ohio would

comfortably go for Kerry. Of all the states, Ohio has

been hit hardest by the loss of jobs. It was

unthinkable on my part that Ohio could go in the Bush

win column. After all, statewide voter turnout in Ohio

ran close to 72 plus percent. In fact, when it came to

voting for a president, 5.4 million Ohioans voted, up

from 4.8 million in 2000.



I realized some weeks back that the nationwide voter

turnout would be huge. I thought that first-time

voters would heavily favor Kerry. I never believed

that the increased votes from four million white male

weekly churchgoers would give Bush a 3% edge in the

popular vote. I never thought that “moral family

values” would topple the economy in the minds of so

many Americans in the voting booth. That thought still

blows my mind.



Now we wait for the provisional and absentee ballots

to be counted in Ohio. With Bush leading by 136,000

votes, it would take a miracle for a Kerry win. Local

Ohio boards don’t begin to count these provisional and

absentee ballots until November 13, and the boards

have until December 1 to certify the final results. In

the meantime, the nation will assume a Bush victory.



One might ask how is it possible that Bush’s approval

rating trailed the percentage of the votes he

garnered? I can’t answer that. If every poll showed

that a majority of Americans disapproved of Bush’s

handling of the Iraq war and the economy, then how

could he win a majority of the popular vote? There are

over 58 million Americans who came out and voted for

Bush. He will win at least 30 states.



Through the evening I kept thinking that over the past

year the unemployment rate has declined because the

labor force is shrinking. There are so many

discouraged workers. Were they so discouraged that

they did not vote in Ohio? How is it they voted in

Pennsylvania? During the month of September, 1,100

people left the Pennsylvania job market. It’s

statistics like this in Ohio that should have made a

big difference.



There is good news though. Bush will make the tax cuts

permanent. You’ll still be able to get a tax deduction

for buying a large Hummer. After Oct. 22, deductions

for such vehicles and other large SUVs were capped at

$25,000. Of course, there will be an offset. The

deficits will continue to increase, but it’s ok

because deficits don’t matter. Right? The stock market

will rally out of the box this morning. Traders can

depend on four more years of the same. Nothing will

change. Right?



Challenger, Gray, & Christmas stated layoff

announcements by U.S. companies fell 5.6% in October

to 101,840; however, it was the second straight month

that layoffs remained above 100,000, for the first

time since January-February 2003. Layoffs don’t

matter. Right?



Some time today we’ll find out the final vote tally in

Iowa. It obviously doesn’t matter that Iowa lost

27,000 manufacturing jobs during Bush’s presidency.

The seven electoral votes in Iowa don’t matter either.

They can’t tip the election results.



I have to hand it to Bush. His lack of performance

over the past four years could not defeat him. At the

end of the election night, Trump was not there to say

"you're fired."

11/2/04 Bush Defeats Bush

John Kerry will be our new president and he will win by a very comfortable margin. In the end, however, it will be Bush who defeated Bush. He could not master the job as CEO and Commander-in-Chief of our country. Wall Street is still in denial. Last evening, Tradesports.com had Bush winning 53% to 47%. Interestingly, by comparison, we witnessed early voting in 31 states. By my analysis, in the early voting that ended last night, Kerry was leading by 5 percentage points.

According to the survey conducted at the Weatherhead School of Management at Case Western Reserve University in Cleveland, Ohio, 65% of respondents at the top 30 economics departments gave Bush’s economics policies an overall rating of “poor.” Eighty-seven percent of respondents thought Bush’s series of tax cuts were poorly designed to provide fiscal stimulus. When asked which candidate would be more beneficial to an average elderly American, the choice was Kerry by a margin of 16 to 1. For a family of four earning $50,000 a year, the margin was 14 to 1. For a new college graduate entering the workforce, the margin was 5 to 1.

The U.S. federal government is expected to borrow $100 billion in the final quarter of 2004 to pay for the budget deficits, according to the Treasury Dept. For the first quarter of 2005, the government expects to borrow a record $147 billion. From whom?

In Florida, nearly 2 ½ times the number of people who voted in early 2000 cast their ballots through early or absentee voting this election. By the time today’s election takes place today, it is likely that some of the early voters will have passed on. You see, 455 voting-age people die in Florida each day. In sum, Bush may have been stiffed by a stiff.

Helen Thomas: “The U.S. attack on Iraq is a clear violation of international law and has made us helpless to condemn others for similar acts.”

According to the Santa Clara University Business Index, Silicon Valley business leaders think a John Kerry presidency would benefit the Silicon Valley economy more than continuing with Bush. Lack of job creation, the fear of burgeoning federal deficits, and his handling of the overall economy are three reasons for the disappointment expressed in Bush.

Bush: “A low voter turnout is an indication of fewer people going to the polls.”

According to a recent survey taken by Columbus, Ohio-based Opinion Strategies Inc., 31% of Ohioans think the top national issue is the economy, followed by foreign policy (28%), health care (15%), and homeland security (8%). Importantly, 17% of respondents expect a brighter future, while 24% anticipate economic conditions to deteriorate. Similarly, 12% stated their personal or family well-being was improved from 2003, but 31% replied that it had declined. In addition, 57% think little or no progress has been made in the war on terrorism, and 69% see little or no progress in Iraq. In view of the above, I believe Kerry will carry Ohio by at least 5 percentage points.

Bush: “Well, I think if you say you’re going to do something and don’t do it, that’s trustworthiness.”

A total of 40,000 users have logged their choices for Republican and Democratic-themed musical playlists on bluebeat.com. As of last evening, Kerry’s lead over Bush has widened to 11 points.

In October, the U.S. ISM Manufacturing Index declined to 56.8, a 13-month low, from 58.5 in September. The production index fell to 58.9 from 61.6 in the prior month. It was the lowest level since July 2003. The employment idex dropped to 54.8, the lowest since January, from 58.1 in September. The index of inventories index fell to 48.2 from 51, and the backlog of orders index dropped to 49, the first contraction since April 2003, from 55. Unfortunately, the prices paid index rose to 78.5 from 76, while the customer index fell to 43.5%. In sum, the soft patch in manufacturing has accelerated in October. Of course, you won’t hear a Fed governor tell you that.

As of November 1, at least 1,122 members of the U.S. military have died since the beginning of the Iraq war in March 2003.

AOL is cutting more than 700 workers. The Stuart, Florida Vought Aircraft plant has layoffs starting today and continuing through February 2006. The facility will be closed.

May Dept Stores same-store sales fell 2.3% in October.

Yesterday, we experienced a welcome respite in the crude oil market as the price declined to $50 a barrel. How many really believed six months ago that we would be cheering a drop to the $50 price level?

Manfred Kurz, an economist at Bayerische Landesbank in Munich: “When purchasing power falls, there’s less money to go around.”

Yesterday, National Semiconductor lowered its revenue guidance for its quarter ending November 28 to a range of $445 million to $450 million, down approximately 18% to 19% sequentially from the prior quarter. Previously, the company had expected that the quarterly revenues would be down 8% to 10% sequentially. The company’s chairman, president, and CEO stated “inventory adjustments and lower-than-typical seasonality have been the themes so far this quarter.” Distributor resale rates of their products have not picked up through October, and this is not typical for the pre-holiday season. Demand from certain customers in Asia for handset and display products have also remained weak, due in part to excess supply in those channels, the company stated.

There is some good news. According to Hewitt Associates, companies nationwide are planning to give their employees a 3.6% boost in their base pay next year, up from 3.4% they parceled out this year. Unfortunately, these wage gains are being offset by rising health insurance costs. Hewitt stated that average out-of-pocket medical expenses have soared to $1,030 this year, up from $383 in 1998. In addition, the nation’s workers on average will pay $1,565 in health care premiums, up from $630 in 1998.

The nation's chain store same-store sales declined 0.3% in the week ended Oct. 30 compared to the prior week. It was the third consecutive week-to-week decline, according to the International Council of Shopping Centers and UBS.

11/1/04 Make Your Day. Make A Difference. Vote Tomorrow.

John F. Kennedy: '"The high office of President has been used to foment a plot to destroy the Americans freedom, and before I leave office I must inform the citizen of his plight."

All voters support our troops, but less than half support the war in Iraq. Our total military presence in Iraq has just been increased to 142,000, the highest level since the summer of 2003. That does not sound like we're making progress in our occupation.

A deputy governor of Baghdad was gunned down on Monday, and two bodyguards were injured.

In the September quarter, Toyota's sales increased 9.4% but net income declined 1.5% as increased incentives cut into operating margins. When a great company experiences tough going, it's no wonder GM and Ford are mired in manure.

Depending on the voter's choice of poison, it appears to be fear over terrorism and/or fear over the economy. Some predict 120 million votes will be cast in this election. Republicans claim they have registered 3.4 million new voters and Democrats proclaim registering twice that number.

The U.S. strategic oil reserve now holds about 670 million barrels of crude oil, close to its 700 million barrel capacity. At $52 a barrel, that's not chump change.

Nigeria is the fifth-largest source of U.S. crude and exports around 2.5 million barrels daily. On Sunday, the country's main labor union called for a nationwide strike on November 16.

John Glenn: "I think the people are beginning to shift. And I'm not gonna predict a landslide, but I'm gonna predict a victory next Tuesday."

So much for buying on the cheap and lowering its offer. Oracle raised its bid for PeopleSoft from $21 to $24 per share.

Clint Eastwood: "This film cost $31 million. With that kind of money, I could have invaded some country."

Bruce Springsteen: "The country we carry in our hearts is waiting, and together we can move America toward her deepest ideals."

DoubleClick retained Lazard Freres in an effort to explore ways to increase shareholder value.

10/31/04 Face The facts

Early this morning we turned back the clock; however, you can’t turn the clock back on the truth or on the facts. Simply put, that is the main reason Bush will lose on Tuesday. Yes, Kerry will win, but it is more about Bush beating Bush.

Bhagavad Gita: "Fear not what is not real, never was and never will be. What is real, always was and cannot be destroyed."

Yesterday, nine U.S. marines were killed and nine others wounded in Iraq. It was the most U.S. deaths on a single day since May 2. Since our invasion of Iraq, at least 1,121 of our fighting men and women have been killed. According to the Lancet, a British medical journal, U.S. and coalition forces have killed 100,000 Iraqi civilians since the fall of Saddam Hussein on April 9, 2003. This report is based on extensive household survey research in Iraq in September 2004.

Nearly 2 million have voted early in Florida.

Iowa has lost 27,000 manufacturing jobs during Bush’s presidency. This fact will play an important role in Bush losing Iowa on Tuesday.

According to the National Council of State Legislatures, Congress owes the states a minimum of $50 billion for fiscal 2004 and 2005 for federally mandated programs that were not fully funded by Washington. So how were state budgets balanced? Services were cut and taxes increased. Property taxes rose an average of 10% in the past year.

The Census Bureau estimates that 5.2 million Americans lost health insurance since Bush arrived at the White House.

Increasing homeowner’s insurance rates have partially offset lower mortgage payments that have resulted from lower interest rates.

According to Bloomberg data, over the past four years the U.S. CPI has outpaced personal income growth.

Joseph Stiglitz, a Nobel Prize winner in economics and a professor at Columbia University: “The dividend tax cut was the most egregious and provided no (economic and job-producing) stimulus.”

According to the federal Energy Information Administration, the U.S. will consume about 7.5 billion barrels of oil this year, 27.4% more than in 1981, the peak year for oil prices on an inflation-adjusted basis.

According to McKinsey & Co., about $1 billion is invested in China per week.

According to the Economic Policy Institute, even with the tax breaks of 2001 and 2003, “all (middle-income) fixed-family types except single mothers experienced a drop in after-tax income—a decline of 0.2% for two-parent families and of 1.4% for young singles and elderly couples.”

Pollster John Zogby: “Months ago I said I thought John Kerry would win…I am sticking with that prediction…This is a referendum on George W. Bush and we see an incumbent polling at 47-48 percent. That is not enough to win.”

The Census Bureau said in August that the ranks of the uninsured and the impoverished grew in 2003 for the third consecutive year, with the number living in poverty rising 1.3 million to 35.8 million. A new Agriculture Report will show an increase in the number of households that either don’t have access to enough food or have experienced hunger.

There are about 42 million Americans aged 18 to 34, and only 36% of 18 to 24 year-olds voted in 2000, compared with 72% of 65 to 72 year-olds. A much higher percentage of 18 to 24 year-olds will vote in this election. It will prove a major reason for Bush not being re-elected.

Visteon was separated from Ford more than four years ago. The company is facing heavy losses, and an aggressive restructuring is in the works. They employ 21,000 workers in southeast Michigan. Visteon plans major cutbacks and will sell or close several unprofitable factories, cutting a portion of its 8,500 U.S. salaried employees and hastening the transfer of factory workers back to Ford. Visteon has worldwide sales of $18 billion and is the second-largest U.S. automotive supplier. Visteon still has 18,000 Ford employees making an average wage of $25 an hour in its factories. New workers receive $14 an hour at Visteon. Do not be surprised to see Visteon go to a four-day work- week to reduce labor costs.

The problems at Visteon highlight current conditions at GM and Ford. They operate too many plants, have too many employees, wages and benefits are much higher than those of competitors, and the inventory levels require cutting back. By running the plants at about a 17 million yearly car rate, the nation’s GDP growth has been overstated for all of 2004. Increased incentives and rising profits in their financing divisions have masked the growing existence of many unprofitable factories and the declining market share for both companies. Unless escalating problems are addressed, stockholders will be left holding the bag.

On election day 2000 the euro was worth 86 cents. On election day 2004 it will be worth about $1.28. So much for the purchasing power of all Americans!

Bunnatine Greenhouse does not preside over our government’s policy on global warming . She is the Army Corps of Engineers top contracting officer. She wrote on October 5 to Lt. Gen. Carl Strock, commander of the Army Corps of Engineers, that Halliburton’s extended troop support contract in the Balkans should not be extended and that “there is little or no incentive for the contractor to reduce or keep cost down…it is not reasonable to believe that only one source responded to the solicitation…the general feeling in the theatre is that the contractor is ‘out of control,’” She went on to say that contracting officials must work as a team because “divided- the contractor will eat our lunch.”

Ghostzapper has the potential to be the best horse since Secretariat. This one is the real deal.

Albert Einstein: "Many of the things you can count, don't count. Many of the things you can't count, really count."