9/13/03 For Whom The Bell Tolls
Since the beginning of the Iraq war on March 20, there have been 188 U.S. fatalities in combat and another 106 in accidents and other non-combat incidents. In Operation Desert Storm 148 were killed in combat and accidents killed another 145. As the casualties of the Iraq war have risen, Bush’s approval rating in the latest CNN-USA Today-Gallup poll has dropped to 52%, and that is down 7 points in the last month. While speaking to troops in Georgia, Bush remarked “no free nation can be neutral in the fight between civilization and chaos.” He might have added that no democracy is capable of providing for the safety of its citizens without the truth being told. The citizenry can handle the truth. Next week former U.N weapons inspector Kay returns from Iraq. He and his team have been hunting for the WMD. As David Albright, a former U.N. weapons inspector recently stated, “he’s not finding the kinds of things the administration expected to find- large quantities of biological and chemical weapons or evidence that they were destroyed prior to the war.” They have found zilch. How does Bush react to this revelation? At Ft Stewart, Georgia yesterday he remarked “because of our military, catastrophic weapons will no longer be in the hands of a reckless dictator.” What weapons? We went to war over WMD. The president and his team want to change the justification by saying removing Hussein was reason enough to go to war. That arrogant attitude is a one way ticket to palookaville.
Contract talks between the UAW and the big three auto companies are getting down to the wire. There’s plenty to discuss. GM has 2.8 hourly retirees per active hourly worker. Their hourly and salaried retiree pension plan is underfunded by $19 billion. In 2002 GM spent $4.5 billion on health care. The UAW wants to preserve health care benefits. The companies want to crack down on absenteeism. They wish increased worker flexibility so that employees can be moved from one job to another, depending on where they are needed. The 1999 agreement provided for 3% annual wage increases. This new agreement may allow for no increase in pay. A new labor pact will require give and take. Otherwise, Toyota will continue to win market share.
Yesterday economists were, once again, surprised by the news that consumer sentiment has fallen in September. The main culprits were 93,000 job cuts in August and record gasoline prices. We can add to that record beef prices and rapidly escalating plywood prices. In some areas of the country, sheets of plywood rose 80% in price from the level in August.
Next week the Fed meets on Sept 16. As the budget deficit rises beyond $500 billion, there is a need to sell more Treasury notes. This week’s auctions included the first September sale of five-year notes since 1997 and the first September sale of 10-year notes on record. I am certain we can expect more records broken in the very near future. The Fed will do its part to keep a lid on short-term rates. The Ponzi game continues into the next inning.
Friday, September 12, 2003
9/12/03 Footprints In The Quicksand
Bill Cheney, chief economist at John Hancock: “Right now we’re consuming everything in the world.”
How is it possible for there to be serious trouble when the GDP is expected to grow at a 5% rate from July to September? There are many aspects to the answer. Let’s begin with how Americans view life on Main Street. In the most recent IBD/TIPP National Outlook Index, which fell to 49.5, the lowest point since Bush took office, the president of TIPP described it this way: “two things are important to Americans- the job situation at home, and Iraq. Iraq more than terrorism is on Americans’ minds.” The “direction of the country index” fell to 48.1, the lowest point since the start of Bush’s term. 40% of Americans say they feel more at risk from terrorism today than before 9/11.
When it comes to unemployment, Challenger, Gray, and Christmas had something unsettling to say yesterday, and it was similar to what I have stated for months. They said the real unemployment rate was not 6.1% but rather 9.1%. The difference would be combining those out of work with those who have given up looking for a job. If you consider those who only can get part-time work, then the picture looks even grimmer. Of course, the manufacturing sector has been hit the hardest. In that sector 16% of that workforce or 2.7 million jobs have been cut in a record 37 straight months.
In sum, we are witnessing a landscape where companies have little or no top-line growth; prices are stagnant; there is a lack of spending on plant and equipment; and companies are axing employees. It’s more than just not hiring. It amounts to job losses.
The economists tell us that the economy is growing vigorously. Yet, August retail sales rose a disappointing 0.6%, down from 1.3% in July. The core PPI index rose only 0.1% in August, down from 0.2% in July. Purchase of building materials fell for the first time since February. In the tech sector, Oracle had a 7% drop in new software licensing in its fiscal first quarter. In sum, consumers have spent their tax benefits and child credits. We’re back to square one, and that means a very poor job picture and more of our troops getting killed in Iraq. Bill O’Reilly describes this as WWIII. Americans get what’s happening. It’s the politicians and the economists who are in the dark. That should come as no surprise.
Bill Cheney, chief economist at John Hancock: “Right now we’re consuming everything in the world.”
How is it possible for there to be serious trouble when the GDP is expected to grow at a 5% rate from July to September? There are many aspects to the answer. Let’s begin with how Americans view life on Main Street. In the most recent IBD/TIPP National Outlook Index, which fell to 49.5, the lowest point since Bush took office, the president of TIPP described it this way: “two things are important to Americans- the job situation at home, and Iraq. Iraq more than terrorism is on Americans’ minds.” The “direction of the country index” fell to 48.1, the lowest point since the start of Bush’s term. 40% of Americans say they feel more at risk from terrorism today than before 9/11.
When it comes to unemployment, Challenger, Gray, and Christmas had something unsettling to say yesterday, and it was similar to what I have stated for months. They said the real unemployment rate was not 6.1% but rather 9.1%. The difference would be combining those out of work with those who have given up looking for a job. If you consider those who only can get part-time work, then the picture looks even grimmer. Of course, the manufacturing sector has been hit the hardest. In that sector 16% of that workforce or 2.7 million jobs have been cut in a record 37 straight months.
In sum, we are witnessing a landscape where companies have little or no top-line growth; prices are stagnant; there is a lack of spending on plant and equipment; and companies are axing employees. It’s more than just not hiring. It amounts to job losses.
The economists tell us that the economy is growing vigorously. Yet, August retail sales rose a disappointing 0.6%, down from 1.3% in July. The core PPI index rose only 0.1% in August, down from 0.2% in July. Purchase of building materials fell for the first time since February. In the tech sector, Oracle had a 7% drop in new software licensing in its fiscal first quarter. In sum, consumers have spent their tax benefits and child credits. We’re back to square one, and that means a very poor job picture and more of our troops getting killed in Iraq. Bill O’Reilly describes this as WWIII. Americans get what’s happening. It’s the politicians and the economists who are in the dark. That should come as no surprise.
Thursday, September 11, 2003
9/11/03 Honoring With Honor
All Americans will forever remember the horror of two years ago on this day. Hopefully, honoring those who perished will make our nation stronger. Each individual can do his part, and I humbly suggest we honor the dead with the daily strength of speaking the truth. Words can be powerful, and the knowledge from those words can bring life to the weak.
I attempt each day to provide an economic and financial back drop which might illustrate the truths in our society and in our markets. Some suggest I have a negative bent. I suggest I tell the truth. I provide the facts. If the facts prove too harsh, then hit the delete button. But, don't whine to me. I adore caring for pigs but not whiners.
Unemployment is on the upswing. Yesterday was a bad day for workers. Levi Strauss is slashing 650 jobs, International Paper 3000, Champion Enterprises 1000, and Tellabs, which has already cut 4000 employees, is slashing some more. On average payrolls have declined 56,000 a month this year. Challenger, Gray, and Christmas said last month that U.S. workers are 25% more likely to lose a job between September and December than they were in the previous 8 months. It would appear their prediction is all too true as the number of new unemployment claims in the most recent week rose to the highest level in two months.
The U.S. July trade deficit widened to $40.32 billion, and our trade deficit with China was a record $11.3 billion and we also had a record trade deficit with Western Europe. We cntinue to spread the wealth.
It's about time the Senate did something positive. They are opposing Bush on the overtime issue. Let's see if he has the power of his conviction and the nerve to veto their action.
All Americans will forever remember the horror of two years ago on this day. Hopefully, honoring those who perished will make our nation stronger. Each individual can do his part, and I humbly suggest we honor the dead with the daily strength of speaking the truth. Words can be powerful, and the knowledge from those words can bring life to the weak.
I attempt each day to provide an economic and financial back drop which might illustrate the truths in our society and in our markets. Some suggest I have a negative bent. I suggest I tell the truth. I provide the facts. If the facts prove too harsh, then hit the delete button. But, don't whine to me. I adore caring for pigs but not whiners.
Unemployment is on the upswing. Yesterday was a bad day for workers. Levi Strauss is slashing 650 jobs, International Paper 3000, Champion Enterprises 1000, and Tellabs, which has already cut 4000 employees, is slashing some more. On average payrolls have declined 56,000 a month this year. Challenger, Gray, and Christmas said last month that U.S. workers are 25% more likely to lose a job between September and December than they were in the previous 8 months. It would appear their prediction is all too true as the number of new unemployment claims in the most recent week rose to the highest level in two months.
The U.S. July trade deficit widened to $40.32 billion, and our trade deficit with China was a record $11.3 billion and we also had a record trade deficit with Western Europe. We cntinue to spread the wealth.
It's about time the Senate did something positive. They are opposing Bush on the overtime issue. Let's see if he has the power of his conviction and the nerve to veto their action.
Wednesday, September 10, 2003
9/10/03 Outlining Expectations
The U.S. Army Guard and Reservists face extended tours of duty in Iraq and Kuwait, and will be required to serve up to 12 months in their areas of operation. Time spent at U.S. military basese awaiting deployment doesn't count. Lt. Gen. Roger Schultz, director of the U.S. Army National Guard in Washington said yesterday "we didn't do a very good job of outlining expectations, so right in the middle of a mission- a fairly difficult mission- we are changing the rotation policy as it affects Iraqi Freedom."
The S&P 500 has rallied 28% from the March 11 low. Accompanying this increase, come major expectations for increased earnings and enhanced economic visibility. There isn't any room for disappointment. Today, National City, a Cleveland based bank, lowered its financial outlook for 2003 to reflect the adverse impact of the recent rise in long-term rates on its mortgage business. When it comes to revised downward outlooks and rising long-term rates, National City will have plenty of company.
As I predicted back in July, mortgage lenders are cutting jobs. They aren't alone. 3COM will outsource all manufacturing of its computer-networking equipment and eliminate about 1,000 jobs or one-third of its employees.
The IBD/TIPP Economic Optimism Index dropped 2.3 points to 52.5 in September. Raghavan Mayur, president of TIPP, said "we are seeing a broad-based decline in economic confidence in September." He said the average reading of the last recession was 54.3. The six-month economic outlook fell 4.3 points to 51.
A new study reveals workers in employer-sponsored health plans are paying 48% more out of their own pay for medical care than just 3 years ago.
After 21 years at Sun Microsystems and as co-founder, Bill Joy, the Java pioneer, is leaving the company. There is only one Bill Joy. This is like Babe Ruth leaving Boston for New York.
The UAW's 4-year national contract covering 37,000 hourly workers and 522,000 retirees, surviving spouses, and dependents, expires at midnight Sunday. Chrysler wants to outsource "general service operators" or plant janitors, drive down absenteeism, and reduce job classification. Chrysler should also focus on Toyota. In August, Toyota's 3 brands, Tyota, Lexus, and Scion, eclipsed the combined Chrysler, Dodge, and Jeep U.S. monthly sales for the first time.
The U.S. Army Guard and Reservists face extended tours of duty in Iraq and Kuwait, and will be required to serve up to 12 months in their areas of operation. Time spent at U.S. military basese awaiting deployment doesn't count. Lt. Gen. Roger Schultz, director of the U.S. Army National Guard in Washington said yesterday "we didn't do a very good job of outlining expectations, so right in the middle of a mission- a fairly difficult mission- we are changing the rotation policy as it affects Iraqi Freedom."
The S&P 500 has rallied 28% from the March 11 low. Accompanying this increase, come major expectations for increased earnings and enhanced economic visibility. There isn't any room for disappointment. Today, National City, a Cleveland based bank, lowered its financial outlook for 2003 to reflect the adverse impact of the recent rise in long-term rates on its mortgage business. When it comes to revised downward outlooks and rising long-term rates, National City will have plenty of company.
As I predicted back in July, mortgage lenders are cutting jobs. They aren't alone. 3COM will outsource all manufacturing of its computer-networking equipment and eliminate about 1,000 jobs or one-third of its employees.
The IBD/TIPP Economic Optimism Index dropped 2.3 points to 52.5 in September. Raghavan Mayur, president of TIPP, said "we are seeing a broad-based decline in economic confidence in September." He said the average reading of the last recession was 54.3. The six-month economic outlook fell 4.3 points to 51.
A new study reveals workers in employer-sponsored health plans are paying 48% more out of their own pay for medical care than just 3 years ago.
After 21 years at Sun Microsystems and as co-founder, Bill Joy, the Java pioneer, is leaving the company. There is only one Bill Joy. This is like Babe Ruth leaving Boston for New York.
The UAW's 4-year national contract covering 37,000 hourly workers and 522,000 retirees, surviving spouses, and dependents, expires at midnight Sunday. Chrysler wants to outsource "general service operators" or plant janitors, drive down absenteeism, and reduce job classification. Chrysler should also focus on Toyota. In August, Toyota's 3 brands, Tyota, Lexus, and Scion, eclipsed the combined Chrysler, Dodge, and Jeep U.S. monthly sales for the first time.
Monday, September 08, 2003
Posting for Tuesday
9/09/03 Termites In The Woodwork
W.D. Gann, who died in 1955, is well known for his geometric angles. Many professional investors have looked down on Gann as a financial astrologer. Most of these naysayers couldn’t carry his briefcase. I have long appreciated Gann’s emphasis on patience, a healthy mind and body, and the daily thirst for knowledge. He focused on not losing money, and realizing the power of risk and reward as he waited until the risk/reward ratio was 90% in his favor prior to investing. He did not believe in debt, never drank alcohol, and didn’t drink or take drugs. Gann stated “do the opposite of the masses, and you will make money.” He said “the man who looks forward and sees the darkest side and prepares for it is the man who will succeed, and the nation that prepares for the worst will not have to face the worst.”
John Maynard Keynes: “When the facts change, I change my mind. What do you do, sir?”
The equity tension index (EqTI), says Howard Simons, “is based on the premise that a market’s volatility structure and forward curve each convey as much useful trading information as does the price itself.”
Economist William Gale, a senior fellow at the Brookings Institute, stated “the deficit is not the wolf at the door; it’s more the termites in the woodwork.”
Singapore’s Ministry of Health said on Monday that one man’s “initial tests seem to indicate this person has the SARS virus, but we are doing further tests tonight.”
International Atomic Energy Agency chief Mohamed ElBaradei said “no indication of post-1991 weaponization activities was uncovered in Iraq. In the areas of uranium acquisition, concentration and centrifuge enrichment, extensive field investigation and document analysis revealed no evidence that Iraq had resumed such activities.” His experts had withdrawn from Iraq before the war began in March. He said “the agency observed a substantial degradation in facilities, financial resources and programs throughout Iraq that might support a nuclear infrastructure. The former cadre of nuclear experts was being increasingly dispersed and many key figures were reaching retirement or had left the country.” The International Atomic Energy Agency has a 35-nation board of governors. The aforementioned facts place considerable doubt on Iraq’s nuclear terrorist capabilities. I feel confident that our CIA shared the same view and information. It must have been delayed getting to the White House. Movement over the desert sands takes time.
9/09/03 Termites In The Woodwork
W.D. Gann, who died in 1955, is well known for his geometric angles. Many professional investors have looked down on Gann as a financial astrologer. Most of these naysayers couldn’t carry his briefcase. I have long appreciated Gann’s emphasis on patience, a healthy mind and body, and the daily thirst for knowledge. He focused on not losing money, and realizing the power of risk and reward as he waited until the risk/reward ratio was 90% in his favor prior to investing. He did not believe in debt, never drank alcohol, and didn’t drink or take drugs. Gann stated “do the opposite of the masses, and you will make money.” He said “the man who looks forward and sees the darkest side and prepares for it is the man who will succeed, and the nation that prepares for the worst will not have to face the worst.”
John Maynard Keynes: “When the facts change, I change my mind. What do you do, sir?”
The equity tension index (EqTI), says Howard Simons, “is based on the premise that a market’s volatility structure and forward curve each convey as much useful trading information as does the price itself.”
Economist William Gale, a senior fellow at the Brookings Institute, stated “the deficit is not the wolf at the door; it’s more the termites in the woodwork.”
Singapore’s Ministry of Health said on Monday that one man’s “initial tests seem to indicate this person has the SARS virus, but we are doing further tests tonight.”
International Atomic Energy Agency chief Mohamed ElBaradei said “no indication of post-1991 weaponization activities was uncovered in Iraq. In the areas of uranium acquisition, concentration and centrifuge enrichment, extensive field investigation and document analysis revealed no evidence that Iraq had resumed such activities.” His experts had withdrawn from Iraq before the war began in March. He said “the agency observed a substantial degradation in facilities, financial resources and programs throughout Iraq that might support a nuclear infrastructure. The former cadre of nuclear experts was being increasingly dispersed and many key figures were reaching retirement or had left the country.” The International Atomic Energy Agency has a 35-nation board of governors. The aforementioned facts place considerable doubt on Iraq’s nuclear terrorist capabilities. I feel confident that our CIA shared the same view and information. It must have been delayed getting to the White House. Movement over the desert sands takes time.
9/08/03 Shock-And-Awe
The President’s speech last night reflected the shock-and-awe of human sacrifices and mounting costs of the war in Iraq. The American people and the world were told over and over again that the reason for this war was the massive array of WMD. Last night no mention was made of the daily urgent hunt for the WMD, and the lack of success in finding even a small cache of such weapons. Let there be no misunderstanding. I fiercely and proudly bleed red, white, and blue. Unfortunately, that doesn’t mean I support errors of omission. The President stated “we will do whatever is necessary.” I say go to main street and not land on the U.S. Abraham Lincoln. Listen to the words of LT. Gen. Ricardo Sanchez, the commander of U.S. forces in Iraq: “If a militia or an internal conflict of some nature were to erupt, that would pose a challenge…that I do not have sufficient forces for. The coalition lacks sufficient troops to protect Iraq’s porous borders or its thousands of miles of highways.” Obviously, we aren’t doing whatever is necessary to win the “mop-up operation.” Congress had been told that up to $80 billion would be required for the Iraq reconstruction effort. Now the President asks for another $87 billion. It sounds like the CBO forecasting a budget deficit of $167 billion about 10 months ago, and now they estimate the total to be at least $465 billion. These people either don’t know what they’re doing or they provide errors of omission or both. Any way you look at it, they can’t hack it and won’t admit they mishandled the war effort as well as the economy. A new Zogby International poll puts Bush’s approval rating at 54% negative and 45% positive. After last night’s speech, I would imagine the negative factor would increase once again. Winners don’t look to justify failure.
With respect to the Homeland Security department, a White House official who handles homeland-security issues and who asked not to be identified, said “not a lot is getting done at the top of the department, and nobody’s making them focus on it.” Last week two top officials in that department stepped down amidst growing criticism.
President Bush: “The Americans who assume great risks overseas understand the great cause they are in.” As the polls indicate, the people of Great Britain don’t understand this same cause, and they are our only significant partner in Iraq. Despite growing outrage over the country’s participation in Iraq, Britain’s top government officials announced sending 1200 more troops to Iraq.
Larry Ellison: “We saw the zenith in tech jobs around 2001. We saw a point where half of all capital spending was tech. That will never happen again. My industry will never come back. Nor should it. Computer systems are still too expensive. They’re too labor intensive.”
The annual OracleWorld conference opens today in San Francisco. Grid computing will be the center piece of Oracle speak. On Friday the company will announce quarterly results.
The war in Iraq and today’s equity investing have one large commonality- they both lack an exit strategy.
The President’s speech last night reflected the shock-and-awe of human sacrifices and mounting costs of the war in Iraq. The American people and the world were told over and over again that the reason for this war was the massive array of WMD. Last night no mention was made of the daily urgent hunt for the WMD, and the lack of success in finding even a small cache of such weapons. Let there be no misunderstanding. I fiercely and proudly bleed red, white, and blue. Unfortunately, that doesn’t mean I support errors of omission. The President stated “we will do whatever is necessary.” I say go to main street and not land on the U.S. Abraham Lincoln. Listen to the words of LT. Gen. Ricardo Sanchez, the commander of U.S. forces in Iraq: “If a militia or an internal conflict of some nature were to erupt, that would pose a challenge…that I do not have sufficient forces for. The coalition lacks sufficient troops to protect Iraq’s porous borders or its thousands of miles of highways.” Obviously, we aren’t doing whatever is necessary to win the “mop-up operation.” Congress had been told that up to $80 billion would be required for the Iraq reconstruction effort. Now the President asks for another $87 billion. It sounds like the CBO forecasting a budget deficit of $167 billion about 10 months ago, and now they estimate the total to be at least $465 billion. These people either don’t know what they’re doing or they provide errors of omission or both. Any way you look at it, they can’t hack it and won’t admit they mishandled the war effort as well as the economy. A new Zogby International poll puts Bush’s approval rating at 54% negative and 45% positive. After last night’s speech, I would imagine the negative factor would increase once again. Winners don’t look to justify failure.
With respect to the Homeland Security department, a White House official who handles homeland-security issues and who asked not to be identified, said “not a lot is getting done at the top of the department, and nobody’s making them focus on it.” Last week two top officials in that department stepped down amidst growing criticism.
President Bush: “The Americans who assume great risks overseas understand the great cause they are in.” As the polls indicate, the people of Great Britain don’t understand this same cause, and they are our only significant partner in Iraq. Despite growing outrage over the country’s participation in Iraq, Britain’s top government officials announced sending 1200 more troops to Iraq.
Larry Ellison: “We saw the zenith in tech jobs around 2001. We saw a point where half of all capital spending was tech. That will never happen again. My industry will never come back. Nor should it. Computer systems are still too expensive. They’re too labor intensive.”
The annual OracleWorld conference opens today in San Francisco. Grid computing will be the center piece of Oracle speak. On Friday the company will announce quarterly results.
The war in Iraq and today’s equity investing have one large commonality- they both lack an exit strategy.
Sunday, September 07, 2003
9/07/03 The Road Map To Patience
This evening the president will address the nation and outline the progress made in Iraq, and he will ask for more patience to finish the job. Having not seen the speech, I would doubt much time is devoted to a discussion of the WMD, the reason provided for initiating this conflict. I doubt much time will be devoted to the 149 men and women in uniform who have died in Iraq since May 1. In fact, a mention of the wounded may not be forthcoming. On the other hand, Rumsfeld may have given us a clue as to the tenor of the talk when he said yesterday “the Iraqi people are so much better off than four or five months ago.” I wonder if the American people are better off than they were in January, 2001 when Bush was inaugurated. While Bush asks for patience, the city of Santa Cruz is moving in an opposite direction. Their city council will consider Tuesday a measure that, if passed, would give members the go-ahead to send a letter of inquiry to Congress. The Santa Cruz Mayor and Vice Mayor and one councilman have already signed a draft of a letter to members of the House Judiciary Committee asking them whether any of Bush’s conduct equated to an impeachable offense, such as, whether Bush violated international treaties and the U.S. Constitution by invading and occupying Iraq. The Mayor said “we have to know why the Bush administration lied to us about Iraq.”
On Wednesday the World Trade Organization summit is set to open in Cancun, Mexico. The United States has tried to lower expectations about the outcome of the talks. The main problems focus on agricultural subsidies in developed countries and lower tariffs for manufactured products. Adriano Campolina Soares, director of ActionAid Brazil, stated “people think you in the United States are only willing to give peanuts on agricultural concessions but are charging an amazingly enormous price for that, which are the new issues.” These new issues include government procurement, competition, trade facilitation and a new investment agreement to limit governments’ ability to place checks on trade and investment.
Silicon Valley’s Santa Clara County had 864,500 non-farm jobs in July, about the same number as it had 7 ½ years ago in the beginning of 1996. This week analysts raised their earnings estimates for Siebel Systems and Oracle. With revenue growth missing and a job-loss recovery, I think these analysts are out to lunch. These are the same folks who said tech stocks were going to the moon in 1999 and early 2000. I suggest they should be added to the unemployment rolls. Meanwhile, Jim Cunneen, president of the San Jose Silicon Valley Chamber of Commerce, stated “ we won’t have a meaningful recovery until jobs are added.”
China’s central bank said its economic policy units “unanimously think that the bank loans right now are increasing too fast.” Chinese banks lent more money in the first 7 months of 2003 than in all of last year. Standard & Poor’s estimates that borrowers have defaulted on nearly half of all bank loans in China.
This evening the president will address the nation and outline the progress made in Iraq, and he will ask for more patience to finish the job. Having not seen the speech, I would doubt much time is devoted to a discussion of the WMD, the reason provided for initiating this conflict. I doubt much time will be devoted to the 149 men and women in uniform who have died in Iraq since May 1. In fact, a mention of the wounded may not be forthcoming. On the other hand, Rumsfeld may have given us a clue as to the tenor of the talk when he said yesterday “the Iraqi people are so much better off than four or five months ago.” I wonder if the American people are better off than they were in January, 2001 when Bush was inaugurated. While Bush asks for patience, the city of Santa Cruz is moving in an opposite direction. Their city council will consider Tuesday a measure that, if passed, would give members the go-ahead to send a letter of inquiry to Congress. The Santa Cruz Mayor and Vice Mayor and one councilman have already signed a draft of a letter to members of the House Judiciary Committee asking them whether any of Bush’s conduct equated to an impeachable offense, such as, whether Bush violated international treaties and the U.S. Constitution by invading and occupying Iraq. The Mayor said “we have to know why the Bush administration lied to us about Iraq.”
On Wednesday the World Trade Organization summit is set to open in Cancun, Mexico. The United States has tried to lower expectations about the outcome of the talks. The main problems focus on agricultural subsidies in developed countries and lower tariffs for manufactured products. Adriano Campolina Soares, director of ActionAid Brazil, stated “people think you in the United States are only willing to give peanuts on agricultural concessions but are charging an amazingly enormous price for that, which are the new issues.” These new issues include government procurement, competition, trade facilitation and a new investment agreement to limit governments’ ability to place checks on trade and investment.
Silicon Valley’s Santa Clara County had 864,500 non-farm jobs in July, about the same number as it had 7 ½ years ago in the beginning of 1996. This week analysts raised their earnings estimates for Siebel Systems and Oracle. With revenue growth missing and a job-loss recovery, I think these analysts are out to lunch. These are the same folks who said tech stocks were going to the moon in 1999 and early 2000. I suggest they should be added to the unemployment rolls. Meanwhile, Jim Cunneen, president of the San Jose Silicon Valley Chamber of Commerce, stated “ we won’t have a meaningful recovery until jobs are added.”
China’s central bank said its economic policy units “unanimously think that the bank loans right now are increasing too fast.” Chinese banks lent more money in the first 7 months of 2003 than in all of last year. Standard & Poor’s estimates that borrowers have defaulted on nearly half of all bank loans in China.
Saturday, September 06, 2003
9/06/03 80% Permanent
A study released this week by the Federal Reserve Bank of New York found that about 80% of the jobs lost since the 2001 recession were the result of structural changes by businesses aimed at permanently reducing their labor forces. During the 1990-91 recession, 57% of the job cuts reflected permanent structural changes. It is no wonder that more job seekers are discouraged. In the month of August the number of discouraged workers climbed to over 500,000 for the first time in this job downturn. More than 20% of those without a job have been out of work for six months or longer, and this is a 20-year high.
Richard Yamarone, Argus Research economist: “This is the productivity miracle at work- lost jobs and low inflation.”
Mark Zandi, chief economist at Economy.com: “If we don’t see some good job growth by Thanksgiving, then the spurt in economic activity that we are currently experiencing will fade."
Not since World War II has employment failed to grow for so long during a recovery. The national payroll has shrunk by almost 3 million jobs since March 2001. Most economists are surprised that the loss of jobs continues despite an extraordinary level of economic stimulus- low interest rates, tax cuts and rebates, a rise in government spending and not only military, and mortgage refinancings. In addition, the overall workweek sits at an all-time low while the manufacturing workweek is at a low for the current business cycle.
In its August monetary policy report to the Congress, the FOMC stated “but because of the considerable amount of economic slack prevailing and the economy’s ability to expand without putting upward pressure on prices, the Committee (FOMC) indicated that the small chance of an unwelcome decline in the inflation rate was likely to remain its predominant concern for the foreseeable future.” The Committee might consider how wrong they are in one area. They have continually misjudged the benefits from improved productivity. The fact is household incomes have not been lifted from increased productivity. Business capital spending has hardly improved from increased productivity. On the other hand, inflation remains tame overall. Obviously, there have been price spikes in gasoline, beef, and some other areas.
On Friday December gold rose 1.3% to close at $378.70 an ounce, its highest closing since early February. December silver rose 2.3% to close at $5.15. Palladium closed up 6.7% at $222 an aounce, a five-month high. Hard assets are in growing demand.
Bill Cheney, chief economist at John Hancock Financial Services: “Businesses across the board are figuring ways to do more with fewer people. We may be further than we thought from a truly sustainable economic recovery.”
Labor Secretary Elaine Chao expresses an empathetic viewpoint: “the manufacturing sector has been in a decline for the last 40 years. Having said that, we are very concerned . We are focusing a lot of attention on manufacturing.” That concern and attention and a buck will get you on the bus.
The lack of jobs is taking its toll on consumer confidence, and that was reflected in the latest University of Michigan survey where the drop in confidence was more than expected.
Larry Bartels, a professor of politics and public affairs at Princeton University, says real disposable income per capita (RDI) is the single best predictor of presidential elections. He said “it’s closer to everyday people’s ordinary experience. It’s a measure of what they actually have in their pockets, rather than an abstract economic indicator.” The Investors Business Daily points out that, four times since 1948, the party in the White House lost the popular vote when the RDI per capita grew less than 2%. In the June quarter which just ended, it rose just 1% from a year earlier and at an annualized 1.7% pace. Maybe it’s symbolic that the president is speaking to the nation on Sunday night from the White House and not the oval office.
White House spokeswoman Claire Buchan: “The president’s priorities are that government gets results for the people, and he is focused on protecting Americans, winning the war on terrorism, and ensuring economic security.” I think Ms Buchan needs to take a reality check. A report issued on Wednesday for the Joint Chiefs of Staff said planning for the rebuilding phase of the Iraq war was late in starting and not ready for activation when the war began March 19. Since the May 1 landing on the deck of the carrier USS Abraham Lincoln (the one announcing the end of major combat operations), 149 Americans have died in Iraq, exceeding the 138 who perished during major combat operations. Additionally, no WMD have been found. Osam bin Laden has not been captured. Saddam Hussein is still at large. Meanwhile, troop morale is at a low level and four times they have been given a date by which they would leave Iraq. Each time the date cam and went. The troops have been faced with reductions in pay but only yesterday Bush said “my attitude is, anytime we put our troops in harm’s way, they deserve the best pay, the best training and the best possible equipment.” He must think he’s still on the deck of the USS Abraham Lincoln. If Norman Schwartzkopf were running this operation, things would be a lot different for our troops.
Bush in his 2000 presidential nomination acceptance speech: “Big government is not the answer. The alternative…is to put conservative values and conservative ideas into the thick of the fight for justice and opportunity.” Since late 2000, 500,000 new defense-related jobs have been created, but this number only included 70,000 troops in uniform. That’s big government at its worst. The discretionary spending levels of the Bush years have been deplorable. Reduced spending must be considered curse words at 1600 Pennsylvania Avenue.
Despite the fact that Mexico has lost 200,000 jobs to China, the Mexican government will not support the U.S. efforts to have the yuan float freely. Jose Francisco Gil Diaz, finance minister of Mexico, stated “I am not asking any country to do anything. Maybe what the Chinese are doing now is correct, maybe.”
Phillipine’s Finance Secretary Jose Camacho: “We support the position that each of the APEC economies should be given the respect for applying policies appropriate for its own economy. We should allow the Chinese to determine the timing.”
A study released this week by the Federal Reserve Bank of New York found that about 80% of the jobs lost since the 2001 recession were the result of structural changes by businesses aimed at permanently reducing their labor forces. During the 1990-91 recession, 57% of the job cuts reflected permanent structural changes. It is no wonder that more job seekers are discouraged. In the month of August the number of discouraged workers climbed to over 500,000 for the first time in this job downturn. More than 20% of those without a job have been out of work for six months or longer, and this is a 20-year high.
Richard Yamarone, Argus Research economist: “This is the productivity miracle at work- lost jobs and low inflation.”
Mark Zandi, chief economist at Economy.com: “If we don’t see some good job growth by Thanksgiving, then the spurt in economic activity that we are currently experiencing will fade."
Not since World War II has employment failed to grow for so long during a recovery. The national payroll has shrunk by almost 3 million jobs since March 2001. Most economists are surprised that the loss of jobs continues despite an extraordinary level of economic stimulus- low interest rates, tax cuts and rebates, a rise in government spending and not only military, and mortgage refinancings. In addition, the overall workweek sits at an all-time low while the manufacturing workweek is at a low for the current business cycle.
In its August monetary policy report to the Congress, the FOMC stated “but because of the considerable amount of economic slack prevailing and the economy’s ability to expand without putting upward pressure on prices, the Committee (FOMC) indicated that the small chance of an unwelcome decline in the inflation rate was likely to remain its predominant concern for the foreseeable future.” The Committee might consider how wrong they are in one area. They have continually misjudged the benefits from improved productivity. The fact is household incomes have not been lifted from increased productivity. Business capital spending has hardly improved from increased productivity. On the other hand, inflation remains tame overall. Obviously, there have been price spikes in gasoline, beef, and some other areas.
On Friday December gold rose 1.3% to close at $378.70 an ounce, its highest closing since early February. December silver rose 2.3% to close at $5.15. Palladium closed up 6.7% at $222 an aounce, a five-month high. Hard assets are in growing demand.
Bill Cheney, chief economist at John Hancock Financial Services: “Businesses across the board are figuring ways to do more with fewer people. We may be further than we thought from a truly sustainable economic recovery.”
Labor Secretary Elaine Chao expresses an empathetic viewpoint: “the manufacturing sector has been in a decline for the last 40 years. Having said that, we are very concerned . We are focusing a lot of attention on manufacturing.” That concern and attention and a buck will get you on the bus.
The lack of jobs is taking its toll on consumer confidence, and that was reflected in the latest University of Michigan survey where the drop in confidence was more than expected.
Larry Bartels, a professor of politics and public affairs at Princeton University, says real disposable income per capita (RDI) is the single best predictor of presidential elections. He said “it’s closer to everyday people’s ordinary experience. It’s a measure of what they actually have in their pockets, rather than an abstract economic indicator.” The Investors Business Daily points out that, four times since 1948, the party in the White House lost the popular vote when the RDI per capita grew less than 2%. In the June quarter which just ended, it rose just 1% from a year earlier and at an annualized 1.7% pace. Maybe it’s symbolic that the president is speaking to the nation on Sunday night from the White House and not the oval office.
White House spokeswoman Claire Buchan: “The president’s priorities are that government gets results for the people, and he is focused on protecting Americans, winning the war on terrorism, and ensuring economic security.” I think Ms Buchan needs to take a reality check. A report issued on Wednesday for the Joint Chiefs of Staff said planning for the rebuilding phase of the Iraq war was late in starting and not ready for activation when the war began March 19. Since the May 1 landing on the deck of the carrier USS Abraham Lincoln (the one announcing the end of major combat operations), 149 Americans have died in Iraq, exceeding the 138 who perished during major combat operations. Additionally, no WMD have been found. Osam bin Laden has not been captured. Saddam Hussein is still at large. Meanwhile, troop morale is at a low level and four times they have been given a date by which they would leave Iraq. Each time the date cam and went. The troops have been faced with reductions in pay but only yesterday Bush said “my attitude is, anytime we put our troops in harm’s way, they deserve the best pay, the best training and the best possible equipment.” He must think he’s still on the deck of the USS Abraham Lincoln. If Norman Schwartzkopf were running this operation, things would be a lot different for our troops.
Bush in his 2000 presidential nomination acceptance speech: “Big government is not the answer. The alternative…is to put conservative values and conservative ideas into the thick of the fight for justice and opportunity.” Since late 2000, 500,000 new defense-related jobs have been created, but this number only included 70,000 troops in uniform. That’s big government at its worst. The discretionary spending levels of the Bush years have been deplorable. Reduced spending must be considered curse words at 1600 Pennsylvania Avenue.
Despite the fact that Mexico has lost 200,000 jobs to China, the Mexican government will not support the U.S. efforts to have the yuan float freely. Jose Francisco Gil Diaz, finance minister of Mexico, stated “I am not asking any country to do anything. Maybe what the Chinese are doing now is correct, maybe.”
Phillipine’s Finance Secretary Jose Camacho: “We support the position that each of the APEC economies should be given the respect for applying policies appropriate for its own economy. We should allow the Chinese to determine the timing.”
Friday, September 05, 2003
9/05/03 Slack In Labor And Product Markets
Robert Parry is the president of the Federal Reserve Bank of San Francisco. He said he expects 4- 4.5% growth in this year’s second half but also said there is so much “slack in labor and product markets” and said risks of disinflation would “remain a concern for some time.” Another Fed member, Ben Bernanke, also spoke yesterday and stated that “soft labor markets and excess capacity create a further downward risk to inflation.” It is clear that they are on the same page, and share the same concerns. I believe the bond and stock markets have underestimated the deep-seated nature of these concerns.
There was greater slack in the labor market yesterday. Del Monte will phase out 15% of their positions in San Francisco; PeopleSoft will cut up to 1000 jobs; Dow Chemical said they still have 1700 jobs to cut; and Marathon Oil will layoff 265 workers. The good news is that Boston Scientific, the stent manufacturer, will hire 1200 new workers.
Pension Benefit Guaranty Corp. said private employer pension plans are $400 billion underfunded.
Kraft expects 3rd quarter earnings of 45-47 cents compared with 50 cents in the same quarter a year ago. Analysts had been expecting 49 cents. To reverse the downturn, the company plans promotions and price reductions and intends to cut capital spending and inventories.
A Washington, Iowa promotional calendar plant has been in this southeast Iowa community for 100 years. In January, 200 employees will be without jobs as the Norwood Promotional Products plant closes. Production will be moved to Sleepy Eye, Minn. The plant’s calendars range from art, animals, and religious subjects to making the Playboy calendars.
Productivity in the second quarter rose at a 6.8% annual rate. Possibly more significant, the U.S. supposedly is in its 20th month of economic recovery without job creation. The Federal Reserve has said there is a typical three-month gap between recovery and job creation. Maybe we haven’t been recovering for 20 months or possibly this economy isn’t typical or possibly no one can explain what truly is taking place today. It’s a bit like where have the WPM gone? Have they disappeared forever? Have jobs disappeared forever? Has Osama bin Laden disappeared forever? Who’s on first?
The unemployment rate will be released shortly. All we need to know is that the economists were wrong again. Unemployment claims rose last week to 413,000, their highest level since the week ended July 12.
In the 1994-2002 period, continuing unemployment claims averaged 2.579 million. This year they have averaged 3.575 million, and now stand at 3.663 million. Last quarter hours worked fell at a 2.3% pace and unit labor costs fell at a revised 2.8% annual rate during this period. Industrial capacity utilization remains around 75%.
The stretch of Pennsylvania Avenue in Washington DC between 15th and 17th streets NW has been closed to traffic since 1995. A promise to reopen the avenue was included in the Republican platform on which George W. Bush ran for president. Yesterday the National Capital Planning Commission approved plans for redesigning the portion of Pennsylvania Avenue in front of the White House with “security improvements” but it shall remain closed to traffic. The 2004 Bush budget includes $15 million for construction of improvements. Commission Chairman John Cogbill stated “the plan allows us to breathe new life into America’s Main Street. If they think this is Main Street America, then this country is truly in serious trouble.
The U.S. economy lost 93,000 non-farm payroll jobs in August, and it was the seventh straight month for these job losses. It was the largest decrease in payrolls since March. Economists had been predicting a job gain of 19,000. For at least two weeks I have been describing the daily job cuts across America. There was no way the August number could have been on the plus side.
Robert Parry is the president of the Federal Reserve Bank of San Francisco. He said he expects 4- 4.5% growth in this year’s second half but also said there is so much “slack in labor and product markets” and said risks of disinflation would “remain a concern for some time.” Another Fed member, Ben Bernanke, also spoke yesterday and stated that “soft labor markets and excess capacity create a further downward risk to inflation.” It is clear that they are on the same page, and share the same concerns. I believe the bond and stock markets have underestimated the deep-seated nature of these concerns.
There was greater slack in the labor market yesterday. Del Monte will phase out 15% of their positions in San Francisco; PeopleSoft will cut up to 1000 jobs; Dow Chemical said they still have 1700 jobs to cut; and Marathon Oil will layoff 265 workers. The good news is that Boston Scientific, the stent manufacturer, will hire 1200 new workers.
Pension Benefit Guaranty Corp. said private employer pension plans are $400 billion underfunded.
Kraft expects 3rd quarter earnings of 45-47 cents compared with 50 cents in the same quarter a year ago. Analysts had been expecting 49 cents. To reverse the downturn, the company plans promotions and price reductions and intends to cut capital spending and inventories.
A Washington, Iowa promotional calendar plant has been in this southeast Iowa community for 100 years. In January, 200 employees will be without jobs as the Norwood Promotional Products plant closes. Production will be moved to Sleepy Eye, Minn. The plant’s calendars range from art, animals, and religious subjects to making the Playboy calendars.
Productivity in the second quarter rose at a 6.8% annual rate. Possibly more significant, the U.S. supposedly is in its 20th month of economic recovery without job creation. The Federal Reserve has said there is a typical three-month gap between recovery and job creation. Maybe we haven’t been recovering for 20 months or possibly this economy isn’t typical or possibly no one can explain what truly is taking place today. It’s a bit like where have the WPM gone? Have they disappeared forever? Have jobs disappeared forever? Has Osama bin Laden disappeared forever? Who’s on first?
The unemployment rate will be released shortly. All we need to know is that the economists were wrong again. Unemployment claims rose last week to 413,000, their highest level since the week ended July 12.
In the 1994-2002 period, continuing unemployment claims averaged 2.579 million. This year they have averaged 3.575 million, and now stand at 3.663 million. Last quarter hours worked fell at a 2.3% pace and unit labor costs fell at a revised 2.8% annual rate during this period. Industrial capacity utilization remains around 75%.
The stretch of Pennsylvania Avenue in Washington DC between 15th and 17th streets NW has been closed to traffic since 1995. A promise to reopen the avenue was included in the Republican platform on which George W. Bush ran for president. Yesterday the National Capital Planning Commission approved plans for redesigning the portion of Pennsylvania Avenue in front of the White House with “security improvements” but it shall remain closed to traffic. The 2004 Bush budget includes $15 million for construction of improvements. Commission Chairman John Cogbill stated “the plan allows us to breathe new life into America’s Main Street. If they think this is Main Street America, then this country is truly in serious trouble.
The U.S. economy lost 93,000 non-farm payroll jobs in August, and it was the seventh straight month for these job losses. It was the largest decrease in payrolls since March. Economists had been predicting a job gain of 19,000. For at least two weeks I have been describing the daily job cuts across America. There was no way the August number could have been on the plus side.
Thursday, September 04, 2003
9/04/05 Leveraging A Little Bit
On August 5 Cisco issued its first quarter 2004 revenue guidance. At that time the company expected revenues to be slightly up 2 to 4% from the prior year’s period, and that would equate to roughly $4.86 billion. Earnings per share before one-time items would approach 15 cents. The news was not greeted with enthusiasm, and the stock proceeded to drop about 10% over 2 days. Yesterday it hit a new high. The CEO said “August was a little bit above my expectations.” It should be noted that August is normally a slow month. He also said that investors should not get too excited because Cisco is still not seeing companies boost spending. In sum, the little bit above expectations announcement resulted in a market cap increase of $3.5 billion. That’s pretty good leverage when one realizes the August revenues might have been less than $100 million above the most recent forecasts.
Alfred Adler: “It is very obvious that we are not influenced by “facts” but by our interpretation of the facts.”
Ian Campbell, UPI Chief Economist Correspondent, said “in 2004 low growth or outright recession is likely for the U.S. economy, and the global impact of that will be negative.”
RSA cut 1000 jobs. Gateway will shut a computer assembly plant in Hampton, VA with 450 employees, and cut an undisclosed number of employees at 2 facilities in South Dakota which employ 3,450 people.
The latest Federal Reserve “beige book” said “labor markets remain slack across the nation. It said, where there were gains in wages, they were modest. At the same time, increasing health care expenses created a rise in overall labor compensation costs.
G.M.’s August U.S. car sales were down 8%. They cited weaker sales to corporate and rental car customers. Ford’s August U.S. sales of cars and trucks fell 12%. The company is lowering production in the current quarter by 1.2% and in the fourth quarter by 6.4%.
Shortly after 9/11, Amazon’s stock traded at $8, and I mentioned that I thought it was a promising risk/reward at that level. I never thought it would rise to $47 in 2 years. Yesterday it traded at that price. Sales are expected to reach $5 billion this year on earnings per share of 55 cents. Next year earnings could increase 50%; however, at the present price level for the stock, the risk/reward no longer looks promising. With those having a long term holding appetite, Exult could prove rewarding. At $8 the stock is not being given away; however, 5 years ago they had no revenue and today its about $500 million. They’ve grown from 2 employees to about 2000, and have $100 million in cash, and should earn about 17 cents this year but next year could bring an increase in earnings of 100%. The market cap is $880 million; however, in several years, their revenues could approach $2.5 billion. They are the leaders in integrated human resources management, and that’s a growing field. Their customer base is loyal and pleased with the results to date.
China is the world’s sixth largest economy, and rising yearly to higher rankings. Each year 20 million people enter their labor market.
Gold is trading around $375 per ounce and nearing the yearly highs.
On August 5 Cisco issued its first quarter 2004 revenue guidance. At that time the company expected revenues to be slightly up 2 to 4% from the prior year’s period, and that would equate to roughly $4.86 billion. Earnings per share before one-time items would approach 15 cents. The news was not greeted with enthusiasm, and the stock proceeded to drop about 10% over 2 days. Yesterday it hit a new high. The CEO said “August was a little bit above my expectations.” It should be noted that August is normally a slow month. He also said that investors should not get too excited because Cisco is still not seeing companies boost spending. In sum, the little bit above expectations announcement resulted in a market cap increase of $3.5 billion. That’s pretty good leverage when one realizes the August revenues might have been less than $100 million above the most recent forecasts.
Alfred Adler: “It is very obvious that we are not influenced by “facts” but by our interpretation of the facts.”
Ian Campbell, UPI Chief Economist Correspondent, said “in 2004 low growth or outright recession is likely for the U.S. economy, and the global impact of that will be negative.”
RSA cut 1000 jobs. Gateway will shut a computer assembly plant in Hampton, VA with 450 employees, and cut an undisclosed number of employees at 2 facilities in South Dakota which employ 3,450 people.
The latest Federal Reserve “beige book” said “labor markets remain slack across the nation. It said, where there were gains in wages, they were modest. At the same time, increasing health care expenses created a rise in overall labor compensation costs.
G.M.’s August U.S. car sales were down 8%. They cited weaker sales to corporate and rental car customers. Ford’s August U.S. sales of cars and trucks fell 12%. The company is lowering production in the current quarter by 1.2% and in the fourth quarter by 6.4%.
Shortly after 9/11, Amazon’s stock traded at $8, and I mentioned that I thought it was a promising risk/reward at that level. I never thought it would rise to $47 in 2 years. Yesterday it traded at that price. Sales are expected to reach $5 billion this year on earnings per share of 55 cents. Next year earnings could increase 50%; however, at the present price level for the stock, the risk/reward no longer looks promising. With those having a long term holding appetite, Exult could prove rewarding. At $8 the stock is not being given away; however, 5 years ago they had no revenue and today its about $500 million. They’ve grown from 2 employees to about 2000, and have $100 million in cash, and should earn about 17 cents this year but next year could bring an increase in earnings of 100%. The market cap is $880 million; however, in several years, their revenues could approach $2.5 billion. They are the leaders in integrated human resources management, and that’s a growing field. Their customer base is loyal and pleased with the results to date.
China is the world’s sixth largest economy, and rising yearly to higher rankings. Each year 20 million people enter their labor market.
Gold is trading around $375 per ounce and nearing the yearly highs.
Wednesday, September 03, 2003
9/03/03 Employment, Presenteeism, And The Consumer
Yesterday morning a financial TV station announced that Challenger, Gray, and Christmas stated layoffs for August had amounted to 79,925, and this figure was down 6% from July’s numbers. Was the viewer to cheer after hearing these layoff numbers? Was this to be taken as good news? Get real. We know the consumer is 70% of the economy. If layoffs persist on a monthly basis, consumption will be effected negatively. If that happens, an economic recovery shall not become a sustainable reality. In the last week of August, U.S. chain store sales lost momentum as they only rose 0.1% in the week ended August 30. I have said on several occasions that the economic blip upward in June, July, and August would be coming due to the tax cut and the child credit, and then the improvement would peter out. The reason was and still is the loss of jobs and the impact on the consumer. If anyone can prove my thinking incorrect, I would be pleased to hear from you. To put this bluntly and respectfully, it is not possible to manipulate consumer sentiment with growing unemployment lines. The media and Washington DC can talk a good game, and so can analysts on Wall Street, but they don’t make out the paychecks for Americans. In addition, unemployment benefits are paid for by the taxpayers and not by promises of a better future.
Presenteeism is what happens when people are too afraid to call in sick. Jeffrey Pfeffer, professor at Stanford University’s Graduate School of Business, says “there is no evidence that excessive hours are necessary for competitive success. But somehow we’ve gotten in our minds that to succeed in this world is to work yourself to death.” In Japan they have a word to describe death from over work. It’s karoshi, and the Japanese government has reported 10,000 cases a year of managers, executives, and engineers who have died from overwork.
Job cut announcements have totaled about 800,000 so far this year. The media will tell you that’s good news because that number is down 15% from the first 8 months of 2002. Meanwhile, the ISM Employment Index fell in August. This is the 35th straight month below the 50 level that separates growth from expansion. Norbert Ore, head of the ISM manufacturing survey committee, said “we have to see significant growth in manufacturing before industries will rehire.” With factories closing, I don’t see much reason to look for rehiring. Additionally, Rick Cobb, executive VP of Challenger, Gray, and Christmas, states “there has yet to be any significant indication of a rebound in capital spending that would support the view that employers will begin hiring en masse.”
Once again, the petroleum industry unjustly struck the pocketbooks of consumers over the Labor Day weekend. There was such a BS shortage that gasoline and crude futures fell more than 6% yesterday to close at their lowest levels since July. October unleaded gasoline fell 8 cents to close below 85 cents a gallon in New York. October crude was down over $2 per barrel to $29.41. It’s time consumers banned together and struck the hearts of the petroleum industry. Every American who drives should commit to reducing weekly gas usage by 1 gallon per week. That means driving 20 miles less per week. That should be achievable. Let’s see how the petroleum industry likes being on the receiving end- like the tobacco industry.
Treasury Department General Counsel David Aufhauser is resigning from his post on Sept. 30 due to the fact that the “campaign against the financing of terror…has defined a significant amount” of his job. Washington DC is a revolving door for employees. There appears to be growing discontent.
DHL announced they would be cutting 2,870 jobs or 6% of the workforce.
You have to hand it to Chrysler. They are on their toes and super promotional. They beat GM to the punch and announced “aggressive” new consumer incentives on most of its 2004 model year vehicles. Despite offering cash rebates of up to $4,500, the Big Three automakers have lost 1.5 percentage points of the U.S. market share since the beginning of 2003. In the second quarter Chrysler lost $1.1 billion due to the high cost of incentives. I guess they feel they’re on a roll, and need to keep those cars coming off the factory floor so that they can be sold at a loss. Maybe they’ll make it up in the volume. GM will announce their incentive program today. Of course, the industry will make a big media splash of record car sales in August. All they need to do now is make a profit on the sales. It’s no big deal if your name is Toyota.
Yesterday morning a financial TV station announced that Challenger, Gray, and Christmas stated layoffs for August had amounted to 79,925, and this figure was down 6% from July’s numbers. Was the viewer to cheer after hearing these layoff numbers? Was this to be taken as good news? Get real. We know the consumer is 70% of the economy. If layoffs persist on a monthly basis, consumption will be effected negatively. If that happens, an economic recovery shall not become a sustainable reality. In the last week of August, U.S. chain store sales lost momentum as they only rose 0.1% in the week ended August 30. I have said on several occasions that the economic blip upward in June, July, and August would be coming due to the tax cut and the child credit, and then the improvement would peter out. The reason was and still is the loss of jobs and the impact on the consumer. If anyone can prove my thinking incorrect, I would be pleased to hear from you. To put this bluntly and respectfully, it is not possible to manipulate consumer sentiment with growing unemployment lines. The media and Washington DC can talk a good game, and so can analysts on Wall Street, but they don’t make out the paychecks for Americans. In addition, unemployment benefits are paid for by the taxpayers and not by promises of a better future.
Presenteeism is what happens when people are too afraid to call in sick. Jeffrey Pfeffer, professor at Stanford University’s Graduate School of Business, says “there is no evidence that excessive hours are necessary for competitive success. But somehow we’ve gotten in our minds that to succeed in this world is to work yourself to death.” In Japan they have a word to describe death from over work. It’s karoshi, and the Japanese government has reported 10,000 cases a year of managers, executives, and engineers who have died from overwork.
Job cut announcements have totaled about 800,000 so far this year. The media will tell you that’s good news because that number is down 15% from the first 8 months of 2002. Meanwhile, the ISM Employment Index fell in August. This is the 35th straight month below the 50 level that separates growth from expansion. Norbert Ore, head of the ISM manufacturing survey committee, said “we have to see significant growth in manufacturing before industries will rehire.” With factories closing, I don’t see much reason to look for rehiring. Additionally, Rick Cobb, executive VP of Challenger, Gray, and Christmas, states “there has yet to be any significant indication of a rebound in capital spending that would support the view that employers will begin hiring en masse.”
Once again, the petroleum industry unjustly struck the pocketbooks of consumers over the Labor Day weekend. There was such a BS shortage that gasoline and crude futures fell more than 6% yesterday to close at their lowest levels since July. October unleaded gasoline fell 8 cents to close below 85 cents a gallon in New York. October crude was down over $2 per barrel to $29.41. It’s time consumers banned together and struck the hearts of the petroleum industry. Every American who drives should commit to reducing weekly gas usage by 1 gallon per week. That means driving 20 miles less per week. That should be achievable. Let’s see how the petroleum industry likes being on the receiving end- like the tobacco industry.
Treasury Department General Counsel David Aufhauser is resigning from his post on Sept. 30 due to the fact that the “campaign against the financing of terror…has defined a significant amount” of his job. Washington DC is a revolving door for employees. There appears to be growing discontent.
DHL announced they would be cutting 2,870 jobs or 6% of the workforce.
You have to hand it to Chrysler. They are on their toes and super promotional. They beat GM to the punch and announced “aggressive” new consumer incentives on most of its 2004 model year vehicles. Despite offering cash rebates of up to $4,500, the Big Three automakers have lost 1.5 percentage points of the U.S. market share since the beginning of 2003. In the second quarter Chrysler lost $1.1 billion due to the high cost of incentives. I guess they feel they’re on a roll, and need to keep those cars coming off the factory floor so that they can be sold at a loss. Maybe they’ll make it up in the volume. GM will announce their incentive program today. Of course, the industry will make a big media splash of record car sales in August. All they need to do now is make a profit on the sales. It’s no big deal if your name is Toyota.
Tuesday, September 02, 2003
9/02/03 I’m Lovin It
That’s the new worldwide McDonald’s ad campaign which begins this week. I’m not so sure the employees in Bellevue, WA are lovin it. Their store was located at a prime site, and was in existence for about 2 decades. Without any publicity, the store closed over this weekend. Located in Bellevue is Burger King, Wendy’s, and the rest of the usual suspects. Arby’s is across the street from McDonald’s. Maybe the competition got too heated from those roast beef sandwiches.
You gotta love Bush’s recipe for fixing our manufacturing base and the loss of jobs in this area. The government does not manufacture anything- except for the items produced in various prisons by inmates. Come to think of it, that’s low cost labor that should be able to compete with China. Many inmates get paid 20 cents or less per hour for working. Of course, they get free food, housing, clothing, and healthcare. Back to Bush. He named a “czar” to address the loss of manufacturing jobs. He did accomplish something. He created a job. At the same time, he was consistent with his economic policy of increased discretionary spending and generating unneeded overhead in Washington.
The Snowman is over in China jawboning the Chinese government to overhaul its currency system with its yuan fixed at 8.3 to the U.S. dollar. Whose fault is it that the U.S. has a $103 billion trade deficit with China? Are we going to blame it on the exchange rate? Maybe, if our budget deficit were reduced by cutting government spending, our dollar would have a greater purchasing value. Winners accept responsibility and losers blame others. There seem to be plenty of blaming others in Washington DC. Presently, the yuan will not be revalued. It is thought that doing so would exacerbate the problems evident at many of their local banks. China will continue to purchase our treasury notes. Looking at the situation rationally, China is taking the money from the trade surplus generated with the U.S. and investing most of that money in our government bonds. The money is remaining, for the most part, in this country.
Government statistics talk about the recovery. Wall Street buys the talk. If the recovery were for real, then why did the economy lose 44,000 jobs in August? I am tired of jobs being described as a lagging indicator. If jobs were being added, lagging indicator would not be utilized in the description. The stock market, on the other hand, is considered a leading indicator. Why? The sarcastic answer is so few money managers beat the averages and indexes over time. In other words, a bunch of also-rans are the leading indicator. They should get czar jobs in Washington DC.
That’s the new worldwide McDonald’s ad campaign which begins this week. I’m not so sure the employees in Bellevue, WA are lovin it. Their store was located at a prime site, and was in existence for about 2 decades. Without any publicity, the store closed over this weekend. Located in Bellevue is Burger King, Wendy’s, and the rest of the usual suspects. Arby’s is across the street from McDonald’s. Maybe the competition got too heated from those roast beef sandwiches.
You gotta love Bush’s recipe for fixing our manufacturing base and the loss of jobs in this area. The government does not manufacture anything- except for the items produced in various prisons by inmates. Come to think of it, that’s low cost labor that should be able to compete with China. Many inmates get paid 20 cents or less per hour for working. Of course, they get free food, housing, clothing, and healthcare. Back to Bush. He named a “czar” to address the loss of manufacturing jobs. He did accomplish something. He created a job. At the same time, he was consistent with his economic policy of increased discretionary spending and generating unneeded overhead in Washington.
The Snowman is over in China jawboning the Chinese government to overhaul its currency system with its yuan fixed at 8.3 to the U.S. dollar. Whose fault is it that the U.S. has a $103 billion trade deficit with China? Are we going to blame it on the exchange rate? Maybe, if our budget deficit were reduced by cutting government spending, our dollar would have a greater purchasing value. Winners accept responsibility and losers blame others. There seem to be plenty of blaming others in Washington DC. Presently, the yuan will not be revalued. It is thought that doing so would exacerbate the problems evident at many of their local banks. China will continue to purchase our treasury notes. Looking at the situation rationally, China is taking the money from the trade surplus generated with the U.S. and investing most of that money in our government bonds. The money is remaining, for the most part, in this country.
Government statistics talk about the recovery. Wall Street buys the talk. If the recovery were for real, then why did the economy lose 44,000 jobs in August? I am tired of jobs being described as a lagging indicator. If jobs were being added, lagging indicator would not be utilized in the description. The stock market, on the other hand, is considered a leading indicator. Why? The sarcastic answer is so few money managers beat the averages and indexes over time. In other words, a bunch of also-rans are the leading indicator. They should get czar jobs in Washington DC.
Monday, September 01, 2003
9/1/03 The Truth On Labor Day
Worker productivity rises off the charts, and yet, jobs are outsourced to lower labor cost countries. Workers accept pay and benefit cuts only to see a factory shut down. At some point the landscape for workers and management/owners must find a happy medium. There is less and less loyalty within the workplace, and clearly less satisfaction during difficult economic times amidst heightened stress. It may be Labor Day, but today there is much less to celebrate. It’s one thing to have a job, and another thing to keep the job. Millions of Americans have learned that all too well. The U.S. needs to regain some of its sheen. That is not something that can be blamed on 9/11.
A study by researchers at the University of Illinois said, at the current rate, a full recovery in the technology sector is unlikely to come before 2012. The current industry’s job growth is estimated at approximately 1%, and this is down from the double-digit increases in the late 1990s.
This is an appropriate time to explore how some companies offer opportunities for growth and responsibility and maintain a winning team. A good example is a privately owned company with locations in California, Nevada, and Arizona. Most of their management personnel rise through the ranks and are promoted from hourly worker levels. Store managers, on average, have been with the company for over 13 years and make about $100,000 per year. Customer loyalty is at the highest level, and repeat business is the norm. A husband and wife team started the company in 1948, and family members have been at the helm since then. The menu has never changed. They were the first drive-thru hamburger stand in California. Their motto remains the same: “Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment.” The potatoes are cut fresh on site for the french fries. The shakes have real ice cream. There are only double double burgers, cheeseburgers, and hamburgers. Those are the five items on the menu. The meat is fresh, the lettuce is fresh, and the tomatoes are ripe. Everything is cooked to order, and yet it is fast food. This is the Krispy Kreme of the hamburger business. It is the Starbucks of the hamburger business. There aren’t any franchised locations. The customers are dealing with the owners or staff trained by the owners. This is where children and grown-ups come to eat time and time again. Their sales are up 10% this year at the same time Burger King and McDonald’s and Wendy’s are struggling. Winners find a way to win even when the times get tougher. Maybe some day In-N-Out Burger will go public. That will be a real meal.
It’s the end of the summer and it’s been a long summer. There’s been too little sleep and too much on my plate. I take responsibility for this, and somehow I wish that at times I could be more than one person. It may seem that I am not everything I am cranked out to be. For that I apologize. I would never want to create disappointment. Unfortunately, sometimes the demands on my time may create difficulties for others. There are no excuses. I will try to do better.
Worker productivity rises off the charts, and yet, jobs are outsourced to lower labor cost countries. Workers accept pay and benefit cuts only to see a factory shut down. At some point the landscape for workers and management/owners must find a happy medium. There is less and less loyalty within the workplace, and clearly less satisfaction during difficult economic times amidst heightened stress. It may be Labor Day, but today there is much less to celebrate. It’s one thing to have a job, and another thing to keep the job. Millions of Americans have learned that all too well. The U.S. needs to regain some of its sheen. That is not something that can be blamed on 9/11.
A study by researchers at the University of Illinois said, at the current rate, a full recovery in the technology sector is unlikely to come before 2012. The current industry’s job growth is estimated at approximately 1%, and this is down from the double-digit increases in the late 1990s.
This is an appropriate time to explore how some companies offer opportunities for growth and responsibility and maintain a winning team. A good example is a privately owned company with locations in California, Nevada, and Arizona. Most of their management personnel rise through the ranks and are promoted from hourly worker levels. Store managers, on average, have been with the company for over 13 years and make about $100,000 per year. Customer loyalty is at the highest level, and repeat business is the norm. A husband and wife team started the company in 1948, and family members have been at the helm since then. The menu has never changed. They were the first drive-thru hamburger stand in California. Their motto remains the same: “Give customers the freshest, highest quality foods you can buy and provide them with friendly service in a sparkling clean environment.” The potatoes are cut fresh on site for the french fries. The shakes have real ice cream. There are only double double burgers, cheeseburgers, and hamburgers. Those are the five items on the menu. The meat is fresh, the lettuce is fresh, and the tomatoes are ripe. Everything is cooked to order, and yet it is fast food. This is the Krispy Kreme of the hamburger business. It is the Starbucks of the hamburger business. There aren’t any franchised locations. The customers are dealing with the owners or staff trained by the owners. This is where children and grown-ups come to eat time and time again. Their sales are up 10% this year at the same time Burger King and McDonald’s and Wendy’s are struggling. Winners find a way to win even when the times get tougher. Maybe some day In-N-Out Burger will go public. That will be a real meal.
It’s the end of the summer and it’s been a long summer. There’s been too little sleep and too much on my plate. I take responsibility for this, and somehow I wish that at times I could be more than one person. It may seem that I am not everything I am cranked out to be. For that I apologize. I would never want to create disappointment. Unfortunately, sometimes the demands on my time may create difficulties for others. There are no excuses. I will try to do better.
Sunday, August 31, 2003
8/31/03 Our Breathing Is Labored
Do you like getting stabbed in the back? Do you like making your children’s world more fiscally burdensome than yours? Do you like being made to look stupid? It’s pay back time. It’s time for accountability. Look in the mirror. What do you see? If you said, an apathetic American, you are correct. I’m no different. I may have a big mouth and one vote, but I have not gotten out in the political trenches to change things either. Many Americans are happy with their tax cut and child credit check. How do you think the government is paying for the budget deficits? And the CBO says the deficits will rise at least in the near future. These deficits must be funded through additional revenues, and the latter spell increased taxes ranging from a minimum of $4000 to $7000 per household depending on the size of the deficit. There is only one alternative to increased taxation to offset these deficits and that’s to make large spending cuts. I know some of you think I’m being too rough. Actually, I need to be tougher. Bush and the Congress are the WPM. This year non-defense discretionary spending will be about 4% of the GDP. That is more than unacceptable. That is indefensible and irresponsible. Elect no official without a pledge to cut spending by at least 15%. Mandatory spending will exceed 11% of GDP this year. If we can work on a cure for cancer, we certainly can find a cure for pork, welfare, waste, and abuse spending. If we do not cut government spending drastically, our breathing will no longer be labored. The fresh air will cease to exist. Freedom will be lost.
Ford is gloating that August will be their best month this year for car sales. They have little to show for their efforts except the $4000 in incentives on each vehicle. The Big Three share of the auto market has fallen from 60% from 70% over the last five years. Asian auto makers now have over a 32% share up from 25 % only five years ago. All Japanese auto plants in North America are non-union and their labor costs amount to $7,000 per vehicle as compared with the U.S. auto makers’ labor costs of $7,500 per vehicle.
The GM labor contract with the UAW expires on September 14. The company is proposing to freeze hourly wages through 2007, plus paying three bonuses worth $1,066 assuming no overtime pay. GM would double the $3-5 workers pay now for each drug prescription. Workers would continue not paying part of the monthly health insurance premium. The UAW is in a poor bargaining position. Their membership has declined from 1.5 million to 639,000 over the past 25 years. The auto companies maintain they must hold down wages, benefits, and positions to stay competitive. The fact is simple. A growing number of consumers prefer Japanese vehicles. The trend is not friendly for the U.S. auto worker. Overall, labor unions currently represent only 9% of private-sector workers.
Challenger, Gray, & Christmas state that 4.1 million jobs have been cut since January 2001. The Bureau of Labor Statistics reports that 2.6 million fewer people are employed now than in January 2001. These facts explain why Bush is being compared to Hoover on job losses. Even if analysts are correct and 12,000 new jobs outside the agricultural sector were added to U.S. payrolls in August, it still would be only a pimple on an elephant’s ass. Come November 2004, jobs will become a big factor in the election.
Walker Information, a research firm in Minneapolis, said by 2012 more people shall be leaving than entering the workforce. They note that, the hiring and training of replacements, costs up to 1.5 times the position’s annual salary.
Jonathan Golub, VP and U.S. equity strategist with JP Morgan Fleming Asset Management: “What’s leading the market are companies that have no earnings and no dividends…there is a meaningful disparity between the well established companies and the rest.”
Do you like getting stabbed in the back? Do you like making your children’s world more fiscally burdensome than yours? Do you like being made to look stupid? It’s pay back time. It’s time for accountability. Look in the mirror. What do you see? If you said, an apathetic American, you are correct. I’m no different. I may have a big mouth and one vote, but I have not gotten out in the political trenches to change things either. Many Americans are happy with their tax cut and child credit check. How do you think the government is paying for the budget deficits? And the CBO says the deficits will rise at least in the near future. These deficits must be funded through additional revenues, and the latter spell increased taxes ranging from a minimum of $4000 to $7000 per household depending on the size of the deficit. There is only one alternative to increased taxation to offset these deficits and that’s to make large spending cuts. I know some of you think I’m being too rough. Actually, I need to be tougher. Bush and the Congress are the WPM. This year non-defense discretionary spending will be about 4% of the GDP. That is more than unacceptable. That is indefensible and irresponsible. Elect no official without a pledge to cut spending by at least 15%. Mandatory spending will exceed 11% of GDP this year. If we can work on a cure for cancer, we certainly can find a cure for pork, welfare, waste, and abuse spending. If we do not cut government spending drastically, our breathing will no longer be labored. The fresh air will cease to exist. Freedom will be lost.
Ford is gloating that August will be their best month this year for car sales. They have little to show for their efforts except the $4000 in incentives on each vehicle. The Big Three share of the auto market has fallen from 60% from 70% over the last five years. Asian auto makers now have over a 32% share up from 25 % only five years ago. All Japanese auto plants in North America are non-union and their labor costs amount to $7,000 per vehicle as compared with the U.S. auto makers’ labor costs of $7,500 per vehicle.
The GM labor contract with the UAW expires on September 14. The company is proposing to freeze hourly wages through 2007, plus paying three bonuses worth $1,066 assuming no overtime pay. GM would double the $3-5 workers pay now for each drug prescription. Workers would continue not paying part of the monthly health insurance premium. The UAW is in a poor bargaining position. Their membership has declined from 1.5 million to 639,000 over the past 25 years. The auto companies maintain they must hold down wages, benefits, and positions to stay competitive. The fact is simple. A growing number of consumers prefer Japanese vehicles. The trend is not friendly for the U.S. auto worker. Overall, labor unions currently represent only 9% of private-sector workers.
Challenger, Gray, & Christmas state that 4.1 million jobs have been cut since January 2001. The Bureau of Labor Statistics reports that 2.6 million fewer people are employed now than in January 2001. These facts explain why Bush is being compared to Hoover on job losses. Even if analysts are correct and 12,000 new jobs outside the agricultural sector were added to U.S. payrolls in August, it still would be only a pimple on an elephant’s ass. Come November 2004, jobs will become a big factor in the election.
Walker Information, a research firm in Minneapolis, said by 2012 more people shall be leaving than entering the workforce. They note that, the hiring and training of replacements, costs up to 1.5 times the position’s annual salary.
Jonathan Golub, VP and U.S. equity strategist with JP Morgan Fleming Asset Management: “What’s leading the market are companies that have no earnings and no dividends…there is a meaningful disparity between the well established companies and the rest.”
Saturday, August 30, 2003
8/30/03 Monetary Policy Landscape Uncertainty
Alan Greenspan: "Uncertainty is the defining characteristic of the monetary poicy landscape."
Alan Greenspan: "Only a limited number of risks can be qantified with any confidence. And even those risks are generally unquantifiable...becuse we may not fully apprciate even the full range of possibilities, let alone each possibility's likelihood."
The above quotes came from a speech given by Alan Greenspan at the annual Kansas City Federal Reserve Bank meeting held in Jackson Hole, Wyoming. The taxpayers footthe bill to have this speech on risk management and to have the Fed's goal of price stability and the maximum sustainable economic growth reaffirmed. In other words, it's a time to enjoy nature over the Labor Day weekend in beautiful Jackson, where I lived for sevral years.
Warren Buffett: "Risk comes from not knowing what you're doing."
Without the $350 billion tax cut, July disposable income would have gained only 0.2%.
The Mexican peso is flirting with a record low, and stands at a little over 11 to the dollar.
Stephen Roach, chief economist at Morgan Stanley, said "as long as hiring and wage income generation remain deficient, once the policy stimulus fades, there will be little fundamental fuel for the world's only growth engine. I still see the U.S.primarily thru the lens of a post-bubble economy that has failed to purge the excesses of the late 1990s.
Accroding to new statistics released yesterday by Right Management Consultants of Philalphia, unmploye workers at almost all levels are needing nearly twice as long to find new jobs as they did two years ago.
Alan Greenspan: "Uncertainty is the defining characteristic of the monetary poicy landscape."
Alan Greenspan: "Only a limited number of risks can be qantified with any confidence. And even those risks are generally unquantifiable...becuse we may not fully apprciate even the full range of possibilities, let alone each possibility's likelihood."
The above quotes came from a speech given by Alan Greenspan at the annual Kansas City Federal Reserve Bank meeting held in Jackson Hole, Wyoming. The taxpayers footthe bill to have this speech on risk management and to have the Fed's goal of price stability and the maximum sustainable economic growth reaffirmed. In other words, it's a time to enjoy nature over the Labor Day weekend in beautiful Jackson, where I lived for sevral years.
Warren Buffett: "Risk comes from not knowing what you're doing."
Without the $350 billion tax cut, July disposable income would have gained only 0.2%.
The Mexican peso is flirting with a record low, and stands at a little over 11 to the dollar.
Stephen Roach, chief economist at Morgan Stanley, said "as long as hiring and wage income generation remain deficient, once the policy stimulus fades, there will be little fundamental fuel for the world's only growth engine. I still see the U.S.primarily thru the lens of a post-bubble economy that has failed to purge the excesses of the late 1990s.
Accroding to new statistics released yesterday by Right Management Consultants of Philalphia, unmploye workers at almost all levels are needing nearly twice as long to find new jobs as they did two years ago.
Friday, August 29, 2003
8/29/03 Layoffs And Plant Closings Continue
On a day when the growth estimates for the second quarter were raised, several companies announced layoffs and plant closings. In fact, it was one of the busiest days in some weeks for such announcements. First out of the box was Oneida, the plate and dinnerware manufacturer, laying off 100 workers and mulling plant closings in Mexico, China, Italy, and possibly Buffalo. Then Chrysler said significant additional job cuts may be required unless the company can increase U.S. sales. They have closed 7 factories and cut 30,000 jobs since 2001, and it's thought a cut of another 12,000 jobs could be needed over a period of time. After Chrysler, Goodyear anounced cutting 500 jobs. Finally, Novellus said they may close facilities to improve profit margins and may announce job cuts. This company competes with Applied Materials, and the latter has been undergoing significant restructuring. It would appear that companies feel a continuing need to close factories and plants to improve their profitability and to remain competitive in the marketplace. I see no end to this trend, and it looms large for more job losses.
The Commerce Department said after-tax corporate profits were down 3.4% for the second quarter.
Albert Einstein: "The hardest thing in the world to understand is income tax."
Margaret Thatcher: "The usual socialist disease: they have run out of other people's money."
On August 2, 2002 30 year mortgage rates were 6.43%. Now they are 6.32%.
According to the CBO, Congress is set to vote on a Medicare package that could cut up to $16 billion of Medicare funding for cancer care over the next 10 years.
In July, there were inflows of $21 billion in stock funds and $8 billion in outflows for bond funds. The good news is that, in the latest week for August, there were inflows into both types of funds.
Ronald Reagan: "The three stages of government: if it works, tax it. If it still works, regulate it. If it stops working, subsidize it."
On a day when the growth estimates for the second quarter were raised, several companies announced layoffs and plant closings. In fact, it was one of the busiest days in some weeks for such announcements. First out of the box was Oneida, the plate and dinnerware manufacturer, laying off 100 workers and mulling plant closings in Mexico, China, Italy, and possibly Buffalo. Then Chrysler said significant additional job cuts may be required unless the company can increase U.S. sales. They have closed 7 factories and cut 30,000 jobs since 2001, and it's thought a cut of another 12,000 jobs could be needed over a period of time. After Chrysler, Goodyear anounced cutting 500 jobs. Finally, Novellus said they may close facilities to improve profit margins and may announce job cuts. This company competes with Applied Materials, and the latter has been undergoing significant restructuring. It would appear that companies feel a continuing need to close factories and plants to improve their profitability and to remain competitive in the marketplace. I see no end to this trend, and it looms large for more job losses.
The Commerce Department said after-tax corporate profits were down 3.4% for the second quarter.
Albert Einstein: "The hardest thing in the world to understand is income tax."
Margaret Thatcher: "The usual socialist disease: they have run out of other people's money."
On August 2, 2002 30 year mortgage rates were 6.43%. Now they are 6.32%.
According to the CBO, Congress is set to vote on a Medicare package that could cut up to $16 billion of Medicare funding for cancer care over the next 10 years.
In July, there were inflows of $21 billion in stock funds and $8 billion in outflows for bond funds. The good news is that, in the latest week for August, there were inflows into both types of funds.
Ronald Reagan: "The three stages of government: if it works, tax it. If it still works, regulate it. If it stops working, subsidize it."
Thursday, August 28, 2003
8/28/03 Funding The Supply Of Debt
Mark Faber: "between 1997 and 2001 to generate one dollar of GDP growth, 4.8 dollars of new debt was created."
Yesterday $25 billion of 2 year treasuries brought a yield of 2.04% or more than 100 basis points above the Federal Funds rate. Foreign central banks purchased only 26% of the issue compared with 36% of the last 2 year sale. Next month we will witness more than $50 billion of 2 year, 5 year, and 10 year notes being auctioned. This on-going supply hopefully will be met with eager buyers. Unfortunately, I believe the appetite for our treasury notes is waning.
Why do I make this statement? The recipe for these treasury auctions is not too appealing. It is a mixture of the speed of our monetary printing presses; increasing debt loads from growing trade and currency account deficits; the rising rate of government spending; overcapacity; slack demand creating price reductions and greater buyer incentives; and the need for debts to be reduced- either through payments, defaults, or worse yet, hyperinflation.
Federal government spending doesn't create sustainable GDP growth. It creates a false impression that the economy is vibrant. That spending comes from a combination of tax receipts and printing money in the form of debt. In other words, the government consumes and does not produce. As increasing amounts of debt are required to generate GDP growth, our treasury notes take on a risky dimension. It is the latter which makes foreign buyers of our debt instruments wary of getting severe indigestion. I know such a suggestion will be met with horror and blasphemy. I've munched on that combo before and not been worse for wear.
Silicon Graphics cuts 600 workers.
Craig Conway, PeopleSoft CEO: "The Oracle saga has flatlined. I don't think it has a heartbeat. I don't think it has a breath."
The U.S. Energy Department said yesterday it is probably underestimating the amount of fule utilities are storing for the winter because of its mathematical model methods.
Mark Faber: "between 1997 and 2001 to generate one dollar of GDP growth, 4.8 dollars of new debt was created."
Yesterday $25 billion of 2 year treasuries brought a yield of 2.04% or more than 100 basis points above the Federal Funds rate. Foreign central banks purchased only 26% of the issue compared with 36% of the last 2 year sale. Next month we will witness more than $50 billion of 2 year, 5 year, and 10 year notes being auctioned. This on-going supply hopefully will be met with eager buyers. Unfortunately, I believe the appetite for our treasury notes is waning.
Why do I make this statement? The recipe for these treasury auctions is not too appealing. It is a mixture of the speed of our monetary printing presses; increasing debt loads from growing trade and currency account deficits; the rising rate of government spending; overcapacity; slack demand creating price reductions and greater buyer incentives; and the need for debts to be reduced- either through payments, defaults, or worse yet, hyperinflation.
Federal government spending doesn't create sustainable GDP growth. It creates a false impression that the economy is vibrant. That spending comes from a combination of tax receipts and printing money in the form of debt. In other words, the government consumes and does not produce. As increasing amounts of debt are required to generate GDP growth, our treasury notes take on a risky dimension. It is the latter which makes foreign buyers of our debt instruments wary of getting severe indigestion. I know such a suggestion will be met with horror and blasphemy. I've munched on that combo before and not been worse for wear.
Silicon Graphics cuts 600 workers.
Craig Conway, PeopleSoft CEO: "The Oracle saga has flatlined. I don't think it has a heartbeat. I don't think it has a breath."
The U.S. Energy Department said yesterday it is probably underestimating the amount of fule utilities are storing for the winter because of its mathematical model methods.
Tuesday, August 26, 2003
8/27/03 The Very First Time
Microsoft has been in business for close to 30 years. Each year the company has made a practice of giving each employee a raise. The company employees close to 60,000 people. Today Microsoft sent a letter to every employee. For the very first time the company is giving a raise to no one. They stated that it was the management’s belief that employees were already receiving higher comparative salaries than that found at other companies. When I say times are different, many folks scoff at me. They just don’t get it. When they lose their shirts and their pants, they might see the light.
The talk around Sun Microsystems is that another round of layoffs is around the corner. We’ll just have to wait and see.
The CBO forecast a federal budget deficit of $480 billion in 2004. Given the fact that they have raise their deficit forecasts for 2003 seven times, I feel confident we can look for more of the same in coming months. The CBO forecasts unemployment at 6.2% for 2003 and 2004.
According to Tuesday’s ABC and Money Magazine survey, the consumer comfort index fell to a negative 17 in the latest week from a negative 16 in the prior week. That indicates a good deal of skepticism with respect to the anticipated economic recovery.
PeopleSoft is once again offering a money back guarantee on its products and those of newly acquired J.D. Edwards, and has promise five times the value of the software license fees in the event PeopleSoft is acquired and Oracle discontinues support for the product.
Microsoft has been in business for close to 30 years. Each year the company has made a practice of giving each employee a raise. The company employees close to 60,000 people. Today Microsoft sent a letter to every employee. For the very first time the company is giving a raise to no one. They stated that it was the management’s belief that employees were already receiving higher comparative salaries than that found at other companies. When I say times are different, many folks scoff at me. They just don’t get it. When they lose their shirts and their pants, they might see the light.
The talk around Sun Microsystems is that another round of layoffs is around the corner. We’ll just have to wait and see.
The CBO forecast a federal budget deficit of $480 billion in 2004. Given the fact that they have raise their deficit forecasts for 2003 seven times, I feel confident we can look for more of the same in coming months. The CBO forecasts unemployment at 6.2% for 2003 and 2004.
According to Tuesday’s ABC and Money Magazine survey, the consumer comfort index fell to a negative 17 in the latest week from a negative 16 in the prior week. That indicates a good deal of skepticism with respect to the anticipated economic recovery.
PeopleSoft is once again offering a money back guarantee on its products and those of newly acquired J.D. Edwards, and has promise five times the value of the software license fees in the event PeopleSoft is acquired and Oracle discontinues support for the product.
8/26/03 Mexico’s Problem Is China
With a drop in export orders, manufacturing companies in Mexico continue to layoff workers. Unemployment is at its highest level in more than 5 years. The problem is China and its cheaper labor costs. The U.S is Mexico’s largest export market and buys 85% of Mexico’s exports; however, thru the first six months of 2003, Chinese exports to the U.S. have grown 25% and are equal at this time to Mexico’s exports to the U.S. During this period, Mexico has experienced a 4.2% decline in non-oil exports.
Na
A month ago Cadence Design announced a layoff of 500 workers or 10% of its workforce. Their CEO said they will move more engineering jobs to India and China where he said “we can get three to five equivalent engineers for what we pay here.”
Siebel Systems said business software is under pricing pressure and their CEO said there’s “almost desperate pricing “ among its competitors.
The U.S. has been occupying Iraq for 117 days. More soldiers have been killed in this period than when there was heavy combat. The Administration has asked for patience. It’s hard to be patient with a daily average of 25 guerilla attacks on our troops. This is Bush’s Viet Nam and our troops are paying the price for an inept exit strategy.
Although less than 5% of Australian companies’ overseas assets are in Asia, some 60% of Australia’s international trade is with its Asian economic partners. Only 10% of Australia’s foreign trade is with the U.S.
With a drop in export orders, manufacturing companies in Mexico continue to layoff workers. Unemployment is at its highest level in more than 5 years. The problem is China and its cheaper labor costs. The U.S is Mexico’s largest export market and buys 85% of Mexico’s exports; however, thru the first six months of 2003, Chinese exports to the U.S. have grown 25% and are equal at this time to Mexico’s exports to the U.S. During this period, Mexico has experienced a 4.2% decline in non-oil exports.
Na
A month ago Cadence Design announced a layoff of 500 workers or 10% of its workforce. Their CEO said they will move more engineering jobs to India and China where he said “we can get three to five equivalent engineers for what we pay here.”
Siebel Systems said business software is under pricing pressure and their CEO said there’s “almost desperate pricing “ among its competitors.
The U.S. has been occupying Iraq for 117 days. More soldiers have been killed in this period than when there was heavy combat. The Administration has asked for patience. It’s hard to be patient with a daily average of 25 guerilla attacks on our troops. This is Bush’s Viet Nam and our troops are paying the price for an inept exit strategy.
Although less than 5% of Australian companies’ overseas assets are in Asia, some 60% of Australia’s international trade is with its Asian economic partners. Only 10% of Australia’s foreign trade is with the U.S.
Monday, August 25, 2003
8/25/03 President Bush
The markets might consider paying some attention to the August 21-22 poll taken by Newsweek. It is the first time a plurality has opposed a second term for Bush. 49% of registered voters polled would not like to see Bush re-elected, compared with 44% who said they would. The poll indicates increasing concerns about the economy and the continued violence in Iraq where our troops are killed and wounded daily. Wall Street, for the most part, depends on analyst upgrades/downgrades and CEO predictions, and pays very little attention to the every day person on Main Street. In fact, Wall Street looks down on those every day people. They are viewed as having limited investing intelligence. That’s why such a small percentage of mutual fund managers match, much less beat, the averages over time. If there is one major mistake the people on Main Street continue to make, it’s giving their hard-earned money to mutual fund managers, and then paying a fee for under-performance. Don’t worry. This mistake won’t last forever.
The Newsweek poll augurs poorly for the U.S. stock market. Disenchantment with Bush can only lead to lower consumer confidence and the latter to lower consumption levels. If the consumer is 70% of the economy, then the so-called jobless recovery will not last long, and that’s exactly what I have been saying. Money flow will no longer pour into stocks, and that’s what has been taking place over the last 120 days. You need to stay ahead of the curve and anticipate that change. Get the stretchers ready. A great many money managers will be carried out.
There are approximately 6 million small employers and they employ about half of all workers and create most of the new jobs. According to a survey conducted by the National Federation of Independent Business trade group, despite the recent tax cut which raised to $100,000 from $25,000 the amount small businesses could write off annually on capital goods spending, only 26% of small companies plan to buy computers and other big-ticket items in the near future. This is down from 30% before Bush signed the latest tax cut bill. Wall Street seems to have an endless appetite for buying technology stocks. As I said, Wall Street has little respect outside their own small community.
Today in Taipei Intel’s CEO Craig Barrett told reporters that “it is too early to say we have seen the emergence of a total turnaround” in the semiconductor industry. The small business owners could have told you that. I wonder how long it’s going to take for Intel to trade up to $29 again. I wouldn’t hold my breath.
According to Harvard’s Joint Center for Housing Studies, $214 billion was spent on home improvement in 2001, up from $190 billion in 1999. Households spending $20,000 or more accounted for 48.3% of the home improvement market in 2001 compared with 33.3% in 1995. Nesting has grown in importance, but I believe, as money becomes scarcer for the average family, that less money will begin to be spent on home improvement. Rather than large ticket items, such as, Viking ranges and Sub Zero refrigerators, less expensive alternatives will be sought.
I want to close with a personal remark. I get lots of email criticizing my negativity. I do not walk on water and never will. That may come as a disappointment to my Mother, but she died some time ago. However, I am a good swimmer. I have no trouble negotiating the deepest end of the pool or the waves in the ocean. I make plenty of mistakes. Few can state, though, they missed the tech debacle beginning in 2000. Few missed the disaster of October 1987 but caught the upswing in 1982 and 1974. Yes, I have missed, for the most part, the bull move beginning in early March. On the other hand, I will also miss riding out on a stretcher, and that is coming soon to your neighborhood.
The markets might consider paying some attention to the August 21-22 poll taken by Newsweek. It is the first time a plurality has opposed a second term for Bush. 49% of registered voters polled would not like to see Bush re-elected, compared with 44% who said they would. The poll indicates increasing concerns about the economy and the continued violence in Iraq where our troops are killed and wounded daily. Wall Street, for the most part, depends on analyst upgrades/downgrades and CEO predictions, and pays very little attention to the every day person on Main Street. In fact, Wall Street looks down on those every day people. They are viewed as having limited investing intelligence. That’s why such a small percentage of mutual fund managers match, much less beat, the averages over time. If there is one major mistake the people on Main Street continue to make, it’s giving their hard-earned money to mutual fund managers, and then paying a fee for under-performance. Don’t worry. This mistake won’t last forever.
The Newsweek poll augurs poorly for the U.S. stock market. Disenchantment with Bush can only lead to lower consumer confidence and the latter to lower consumption levels. If the consumer is 70% of the economy, then the so-called jobless recovery will not last long, and that’s exactly what I have been saying. Money flow will no longer pour into stocks, and that’s what has been taking place over the last 120 days. You need to stay ahead of the curve and anticipate that change. Get the stretchers ready. A great many money managers will be carried out.
There are approximately 6 million small employers and they employ about half of all workers and create most of the new jobs. According to a survey conducted by the National Federation of Independent Business trade group, despite the recent tax cut which raised to $100,000 from $25,000 the amount small businesses could write off annually on capital goods spending, only 26% of small companies plan to buy computers and other big-ticket items in the near future. This is down from 30% before Bush signed the latest tax cut bill. Wall Street seems to have an endless appetite for buying technology stocks. As I said, Wall Street has little respect outside their own small community.
Today in Taipei Intel’s CEO Craig Barrett told reporters that “it is too early to say we have seen the emergence of a total turnaround” in the semiconductor industry. The small business owners could have told you that. I wonder how long it’s going to take for Intel to trade up to $29 again. I wouldn’t hold my breath.
According to Harvard’s Joint Center for Housing Studies, $214 billion was spent on home improvement in 2001, up from $190 billion in 1999. Households spending $20,000 or more accounted for 48.3% of the home improvement market in 2001 compared with 33.3% in 1995. Nesting has grown in importance, but I believe, as money becomes scarcer for the average family, that less money will begin to be spent on home improvement. Rather than large ticket items, such as, Viking ranges and Sub Zero refrigerators, less expensive alternatives will be sought.
I want to close with a personal remark. I get lots of email criticizing my negativity. I do not walk on water and never will. That may come as a disappointment to my Mother, but she died some time ago. However, I am a good swimmer. I have no trouble negotiating the deepest end of the pool or the waves in the ocean. I make plenty of mistakes. Few can state, though, they missed the tech debacle beginning in 2000. Few missed the disaster of October 1987 but caught the upswing in 1982 and 1974. Yes, I have missed, for the most part, the bull move beginning in early March. On the other hand, I will also miss riding out on a stretcher, and that is coming soon to your neighborhood.
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