11/28/02 Happy Thanksgiving

Our diminished appetite for risk has impacted the economy this year but our appetite for turkey continues to grow. I have concluded that a turkey economy is consumer friendly. May everyone enjoy this wonderful day of thanksgiving.

11/27/02 Final Demand

The Fed said yesterday that final demand remains vulnerable to weak hiring and a war with Iraq.

Now for the good news. Over the years the market has risen 75% of the time the day before Thanksgiving. So we should look forward to a positive tone today. It would be great if every day of the year were like today.

Forecasters at the NABE cut their estimates for 4th quarter GDP growth to 1.4% from 2.7%. We should be thankful. It could have been negative growth. I'm already in the holiday spirit!

Even I was amazed to read that in 1999 out of 6000 analyst stock recommendations only 8 were labeled to sell. It just goes to prove that in the case of Wall Street analysts even a busted clock is not right twice a day. They are one big train wreck.

11/26/02 The Unemployed

The percentage of the unemployed without work for 27 weeks or more rose to 20.3% in October, and in October the average length of unemployment was 17 1/2 weeks. Those unemployed for 6 months or more amounted to 1.66 million Americans.

For the six months ended September 30 Americans filed for over 800,000 bankruptcies, a record number.

Business confidence in Germany fell to a 10 month low.

Last week U.S. chain store sales were on or below plan.

11/25/02 WalMart Cannot Forecast Sales For December

With only a few days left in November I believe it is rather significant that WalMart seems unwilling and/or uncomfortable to forecast same store sales for December. It appears that their November same store sales will grow at 3% or less.

According to the latest Census Bureau figures, 1.4 million Americans lost their health insurance last year. This trend is indeed serious and impacts lower and middle class family members. Healthcare coverage or the lack of it could become a major issue in the next presidential election.

11/24/02 Homeland Non-Security

On Friday our do nothing Congress adjourned for the year. They failed to extend beyond December 28 unemployment benefits for approximately 900,000 jobless workers. An additional 95,000 unemployed will exhaust their unemployment benefits each week thereafter. This is clearly a "soft spot" in our economy.

Taxable realized capital gains amounted to $600 billion in 2000, $350 billion in 2001, and are estimated at $250 billion this year. No wonder there are deficits at the federal and state levels.

Stock option income was $250 billion in 2000, and this year the amount will be minimal at best.

11/23/02 Getting In Touch With Their Unsold Side

Only the auto industry could run plants overtime in an economy with "soft spots". After a weak October Chrysler has a 97 day supply of inventory and Ford 81 days. The winter consistently brings with it the lowest prices for used cars, and there is a glut of used cars on lots. It won't be long before the auto companies will be parking their inventory in the Mojave desert next to all the mothballed jet planes. We should remember that new cars account for 15% of consumer retail spending. Maybe the solution is to sell them wholesale to consumers, or better yet, no money down with no interest and with no monthly payments for 5 years. The bottomline is you can expect auto production cutbacks.

Economists for the Philadelphia Fed reduced their growth forecasts for the 4th quarter and for 2003. They still expect growth to exceed 2%.

Prices in Hong Kong have fallen for 48 consecutive months. Their continued deflation, along with Japan's, will place a ceiling on prices in the U.S.

Brocade announced a 12% cutback of its workforce and revised its 1st quarter forecast downward. The stock certainly got slammed. Tax selling could place additional pressure on Brocade shares.

11/22/02 Out Of The Woods Perception Has Generated A Big Rally

The Dow and the S&P closed Thursday more than 20% above the Oct. 9 lows. Yesterday the Nasdaq hit its highest level in 5 months.

GE cut its earnings forecast for the 4th quarter and 2003.

Morgan Stanley to cut 2000 jobs.

Over the past year the state of Georgia has shed 2.2% of its jobs-86,500 positions.

Revise this!!!! U.S. leading economic indicators for September were revised lower to a negative 0.4% from negative o.2%. That is a 100% negative revision. For October those leading economic indicators were reported as unchanged. What will they be revised to in December? Creating a false perception can be very damaging. Proceed at your own risk tolerance.

11/21/02 Believe In The Facts Not What You'd Wish To Be True

More than half of BellSouth's workforce has agreed to take time off without pay this year to help the company cut costs. It is among corporate America's largest voluntary furloughs. You can expect to read more of this.

Lucent retirees worry that they will lose retirement medical coverage as the company struggles to avoid filing for bankruptcy protection.

Boeing to cut 5000 more jobs.

Immune Response may file for bankruptcy in a few days.

The gov't originally reported jobless claims for the Nov. 9 week at 388,000. Today that figure was revised upward to 401,000. In addition, the gov't stated that jobless claims for last week dropped 25,000 from the 401,000 revised level. I hope no rational person believes these numbers. They are a figment of someone's imagination and creation.

HP increases job cuts for 2003 by 1100 to 17,900. The original figure was 15,000, then 16,800, and now 17,900. It's nice to know their management has a feel for the business. It must be a joy to work there.

I have this annoying habit of reading cash flow statements. For 2002 HP had a $900 million negative cash flow from operations. So much for making money. HP management said they "are not banking on an improved economy to hit our profitability targets." With only their printer business cash flow positive, you can expect more job cuts in their PC and server divisions. Cost cutting can go just so far. Oracle discovered that.

11/20/02 Malpractice Premiums and Medicare Payments

Doctors and hospitals have reported alarming spikes in malpractice premiums as insurers have withdrawn from the market. Many physicians choose to quit practicing.

Medicare payments to doctors were cut 5.4% this year and will be reduced 4.4% next year. More and more doctors will stop accepting Medicare payments for service. Instead they bill Medicare payments in larger amounts, and leave it up to the patients to seek reimbursement.

Home Depot said it expects same store sales in the 4th quarter to drop 3 to 5 %. Home Depot's CFO said the company had cannilbalized 22% of its stores in the 3rd quarter. So much for store clustering.

Agilent, the HP spinoff, is going to layoff another 2500 workers.

October housing starts fell 11%. The percentage drop was the largest in 9 years. We must keep in mind that September was a record for starts. For the past year housing and home construction has been the star in the economy. I thought housing starts would have fallen many months ago. The timing of predictions can often make one look stupid.

If the stock market is to rise from this level, it will need to adeptly climb a daunting wall of worry. Uncertainty offers opportunities and risks. Currently, are the risks outweighed by the rewards? In my view, possibly if one is on mind-altering drugs. I like my reality straight up.

11/19/02 Investment Grade Quality Is Never Static

Never be lulled by the pundits. They almost always have an agenda, and the latter is hardly investment grade. Look at Japan. Fifteen years ago this country was held as the role model for management and economic excellence. Now Japan is in the soup, and that's not chicken soup. The Nikkei just made a 19 year low. Fears of bad loans continue to weigh on bank stocks. Deflation casts an economic pall. Talk of nationalizing banks frightens investors. Japan is in need of a savior. Where are the heroes when they are needed?

The WSJ reports today that GE may announce a large charge in order to build reserves at their Employers Re unit. I find that interesting because I had noted about a week ago that Warren Buffett was in talks to buy that unit. Obviously talks broke down, and possibly over insufficent reserves. That is speculation on my part. Maybe Buffett will now turn his attention to Burger King. Hamburgers go well with Coke.

It is an understatement to say I am distressed to learn that Iraq has been making "dusty" VX for 8 years and that last month they imported 25 metric tons of Aerosil to make "dusty" biological weapons. What are the weapons inspectors going to tell us? I never did understand politics.

11/18/02 Day 1039

You thought I was not counting? Over the past six weeks the market has risen, and will most likely open higher this morning; however, it is day day 1039 since the Dow closed at its all-time high. That is also the timeframe for the longest bear market on record- up to this point- Sept. 3, 1929 to July 8, 1932. During the latter period the Dow plunged 89%. The most the Dow has fallen in this bear market is 38%.

The market is focusing this morning on better than expected earnings for Lowe's Companies. I find much more significant WalMart stating that they see their November same store sales at the low end of their 2-4% growth outlook. For the past several months that growth has not slipped below 3 1/2%. In addition, Federated Dep't Stores said their 2nd week of November sales were disappointing.

An interesting quote comes from Jared Bernstein, an economist with the Economic Policy Institute. He states that "the unemployment rate presents too rosy a picture of labor market conditions now. It leaves out significant groups of people who are unemployed or underemployed." I have been making this same statement for months.

Tokyo's Nikkei close to a 19 year low.

11/17/02 Please Remain Standing During The Entire Performance

I was not surprised to read that 84% of Americans have access to a computer either at home or at work. Nearly 3 out of 4 computer users polled are planning to buy some of their holiday gifts online. Most polled were going to buy books, videos, and CDs.

The past year has had more than its share of grim moments. As such, I thought a humorous gift would be most appropriate. Early this morning an idea was sent along to me- talking toilet paper. You record your message in the holder which is provided, and when the toilet paper is pulled for use, your message comes out loud and clear, such as, please remain standing during the entire performance. To receive such a gift idea I must be on a list of those still in their anal period.

Enjoy the day, and as Dale Evans and Roy Rogers would sing, happy trails to you.

11/16/02 The Needed Stimulator To The Economy?

A good schtup a day. You think I am joshing. Not true. During the recent 4 day international conference held in Singapore it was declared that healthy sex lives make happy workers, and in turn, this counteracts a drooping economy. This proclamation was made by Emil Ng, the founder of the Asian Federation of Sexology. He went on to state that sexual well-being improves a nation's productivity. Ng also stated that "when the economy is down, sexual activity will be lower, not because of sexual problems, but financial problems. This is a vicious cycle."

I suggest that lunch hours be taken between the sheets and all corporate dining rooms removed. We can install cots in all cubes. We can replace stock options with clean bedding twice a week. I suggest we rally around the motto: screw our way out of the recession.
Yeah baby!

Let's remember the words spoken by Bruce Willis in the movie The Whole Nine Yards:" what's important is how I get along with people who are still alive." He could have been referring to multiple orgasms.

11/15/02 FBI Warning: Al-Qaida May Favor Spectacular Terrorist Attacks

These attacks would be characterized by "high symbolic value, mass casualties, severe damage to the U.S. economy, and maximum psychological trauma."

Prior to making an investment in a company, it is wise to uncover any uncovered pension fund. For example, GM's pension fund is underfunded by at least $20 billion.

George Plesko, an MIT accounting professor, says in 1992 there was no appreciable difference between pre-tax income and taxable net income reported to the IRS. Just six years later there was a major difference. Stockholders should be made aware of this fact. Also, by 1998 a University of Arizona study showed that the 1579 companies studied had reported almost $1 trillion more in liabilities to the IRS than to public shareholders and tax assets exceeded book assets by $1.9 trillion. These are material disclosures needing to be made.

More "soft spots": Sprint to lay off 1600; Cable and Wireless 3500; and Lehman 4% of their workers. Argentina defaults on a debt payment. Fourth quarter earnings growth for Target will be modest. Dell said it wasn't certain the industry would see a particularly strong 4th quarter. They don't see the signs of customers buying new computers.

11/14/02 Pay To Play

Commercial lenders are under the scrutiny glass. Regulators are investigating widespread allegations that commercial banks have been and are making loans contingent upon the borrower's ability to bring in other fee-based business. This practice is called "pay to play". When 3500 financial officers were recently polled, almost 50% believed "pay to play" was a very real issue.

Greenspan said, if necessary, the Fed could buy Treasury debt with longer maturities, which would bring down longer-term interest rates. He really said this to Congress yesterday. He must have blinked and missed the huge rally in long Treasuries over the past week or so. Greenspan doesn't get it. The market movements preempt Fed action. The Fed's policy simply is in reaction to market forces, and the latter set the tone.

Applied Materials expects orders and revenues to fall in its fiscal first quarter. This company is certainly one of the strongholds within the semiconductor industry.

11/13/02 Tightened Bank Lending

Domestic banks cite reduced tolerance for risk and increases in corporate bond defaults as the reasons given for tightened lending practices. As such, recently lowered Fed rates will not do much to improve liquidity in the system.

Eastman Kodak will cut 1300 to 1700 jobs. Research In Motion to cut 220 employees or 10% of its staff.

Philip Morris is experiencing soft cigarette sales. I wonder whether the soft economy is the main reason.

The Business Roundtable survey revealed that 60% of 150 chief executives said their company's employee base would probably be cut next year. The survey showed that capital expenditures are expected to stay flat in 2003. This finding would jibe with Greenspan's testimony before Congress this morning. He doesn't see much vigor in business spending. Without the latter that only leaves the consumer and the government to spend. The holiday season doesn't look like any great shakes, and the government needs to get a budget approved.

11/12/02 Trouble Down On The Farm

75% of the soybeans and 33% of the corn grown in the U.S. is genetically engineered. Americans have a positive attitude towards this new agricultural technology. The Economic Union is the 4th largest market for American farmers and accounts for 12% of U.S. farm exports. The EU wants to enforce the new October 17th legislation which covers biotech labeling and trace back rules. These new regs will hinder our farm exports. Basically it means, for example, our genetically engineered corn is approved for sale in the U.S. but not permitted to be shipped to Europe. In essence, Europeans see agricultural biotechnology "as a luxury they don't really need," says Bernd Halling of the biotech industry's trade group.

So far this year 160 publically traded companies have filed for Chapter 11 bankruptcy. Just another "soft spot".

Federated Dep't Stores (Macy's and Bloomingdale's) expects lower November same-store sales and December sales to be up 1% to down 2%.

Buffett's Berkshire Hathaway may buy GE's Employer Re for $8 billion. This would make Berkshire #1 in the reinsurance business.

11/11/02 Veteran's Day

We give thanks to all the Veterans who have provided us with the blessings of freedom and democracy. Every day should commemorate the successes as well as the sacrifices of our Veteran's. They are heroes.

There are many aftermaths from 9/11. Some can be found right on Wall Street. CFSB dismissed its well-regarded market strategist and Merrill Lynch fired its chief economist. Both had one common shortcoming- they failed to directly produce revenue. Over the past 34 months Wall Street has eliminated 68,000 jobs. With little IPO revenue and few merger fees, more layoffs can be expected. This is another "soft spot".

11/10/02 Another "Soft Spot"

Silicon Valley's jobless rate is now 7.9%. That's the highest level since 1983. Overall in California the rate is 6.4%.

Including today, there are only 7 sundays and 6 saturdays until Christmas.

Sending an email ad costs roughly half a cent and a piece of direct mail advertising about 100 times that amount. A survey has shown that half of on-line consumers are less likely to read on-line promotions. Yet, this year almost $2 billion will be expended on email promotions.

In a recent survey taken by Cigna 3 out of 5 workers say they plan to change their investment strategies if their year-end 401K balance is lower than the year before. I suggest those workers begin to think about new strategies. The new year is right around the corner.

The good news is that misery likes company. With 7 trillion dollars lost in market value in equities over the past 2 1/2 years there must be zillions of folks out there looking for new strategies. A good place to begin is the following: know what you're buying. That goes for stocks and not just underwear and socks.

11/9/02 The "Soft Spot" Befalls Turner's In Corning, Iowa

It's a very sad day when tradition's best closes its doors. After 134 years, Turner's Clothing Store is shutting its SE Iowa operation.

Clare Hushbeck, an AARP economist: "Nobody knows what the economy or the markets will do...more people are showing up at soup kitchens and food pantries and that's a real sign of the economic pain that Americans on fixed incomes are experiencing in this recession."

Paul Palmer Jr, Cypress Advisory Services in Houston: "Right now a lot of people lack the confidence to do anything because they don't want to run the risk of losing principal."

Paul McCulley, Pimco, "There is a global deficiency of global aggregate demand."

When there is uncertainty, a lack of confidence, too little demand, and too much supply, you have a recipe for trouble. That's what we have. Trouble.