2/21/04 It’s Only A Matter Of Time
On the surface, the big story yesterday was the surging dollar. It had it’s biggest single day rise against the yen in about a year and a half. In addition, it moved sharply higher against the euro and approximately a dozen other major currencies. The Japanese government stated they may continue to sell the yen, and this comes as no surprise since they sold a record 7.15 trillion yen in January, a monthly record. Japan now holds over $550 billion of U.S. Treasury securities. We also heard from Klaus Liebscher, an ECB council member, who stated it’s “always possible” the bank will sell the euro to stem its two-year advance against the dollar. Contributing to this currency unrest was the Japanese Prime Minister raising that nation’s terrorism alert to the highest level. In addition, there are large short positions in the dollar, and many traders rushed in to cover their shorts as the dollar moved higher. Bear markets don’t trade down in a straight line. There can be sharp rallies within bear markets, and the dollar has been in a downturn for close to two years. With rising trade and budget deficits and interest rates much lower than the rest of the world’s economies, this trend will not change with a short-term rally. However, there is change in the currency wind. He Fan of the Chinese Academy of Social Sciences in Beijing stated “we are seeing a gradual shift in the world economy to this area. Some economists predict that in 2050 China will be the No. 1, the largest economy in the world as a result of both economic growth and an increase in the value of RMB.” (RMB stands for the Chinese currency, the renminbi, which is counted in yuan, and the yuan is now fixed at a value of about 12 U.S. cents or 8.28 to the dollar.) It should be noted that, in 1987, the official rate was 3.7 yuan to the dollar, but the black market rate was 10 yuan to the dollar. It is estimated that Chinese households have $100 billion in savings in U.S. dollars. As the confidence in the stability and viability of the Chinese economy increases, a gradual shift is taking place. Every day more Chinese citizens are converting their dollars into yuan. Chinese officials are well aware of this shift. There may be another reason for this sudden change of heart. Many believe it is only a matter of time until the yuan increases in value due to a change in the exchange rate. As the yuan takes on a greater life of its own as initially a regional currency, a modest revaluation is likely. It may not be tomorrow. But tomorrow more dollars will be converted into yuan, and the day after, and the day after that.
The country watched the indictment of Enron’s Skilling. Some wondered about Ken Lay’s future. Kenny Boy and his wife, Linda, are long-time friends of Bush and Cheney. This is an election year. An indictment of Lay would be most embarrassing for the president and vice president. I am not a lawyer; however, I have been reading 8-K reports filed with the SEC for several decades. Since 1985, Lay ran Enron. In 1987 in an 8-K filing the Enron Oil trading operation lost $85 million. The trading didn’t begin with Skilling and his cronies. Jan Avery worked in the Enron tax department in 1987. She stated “the pattern began very early, much earlier than anyone has reported. It started in the gray area of what was acceptable accounting principles and, in my opinion, later turned into a clean case of fraud.” She asked “where are the books for Enron Oil? How am I suppose to justify a $142 million loss for state tax purposes?” She refused to sign off on that figure. In the 1987 8-K filing that $142 million became $85 million. Avery stated “that was the clear beginning for me, when I realized that they were trying to hide all the losses. There was a huge discrepancy.” Under the law, once a party agrees to an illicit agreement, willful blindness will not save co-conspirators from being responsible for other conspirators’ acts. Looking the other way will not cut the mustard. It has been reported that Lay sold $100 million of Enron stock to pay debts. Did he know about the discrepancy in the 1987 8-K or any future discrepancies? Willful blindness may help in an election year, but it’s only a matter of time until that help disappears.
Boeing ran into a small hurdle yesterday. Let me have Boeing’s CEO tell you all about it. In a message to employees, Harry Stonecipher provided the following update on the U.S. Air Force 767 Tanker program: “Secretary of Defense Rumsfeld has implemented a pause in discussions between the U.S. Air Force and Boeing on the Air Force tanker program while a series of reviews is undertaken… consequently, starting on February 23, Boeing will slow the development efforts on the Air Force 767 tanker… through the end of 2003 Boeing had spent $270 million of company money on the Air Force 767 tanker program and has been spending approximately one million per day since then…we do not believe that continuing development work at the current level of effort is prudent for either the Air Force or Boeing. The slowdown will result in the releasing of approximately 100 contract employees in Wichita and could result in layoffs of up to 50 employees in Puget Sound as well as redeployment of approximately 600 Boeing employees across both sites.”
Phone company Alltel announced a company-wide restructuring. A total of 600 jobs will be eliminated. Company-wide, Alltel’s workers are split 60% to 40% between wireline and wireless divisions.
The global hedge fund industry had record inflows exceeding $60 billion in 2003. Overall, last year’s returns were estimated at 15.44%. Total hedge fund assets are said to approximate $750 billion.
The Texas Animal Health Commission has indicated that an isolated case of avian influenza has been identified on a non-commercial farm outside of Gonzales, Texas. Preliminary indications are that the virus is a low-pathogenic strain, significantly less serious than the high-pathogenic strain recently found in Asia. There is no connection between this isolated case and that found in recent weeks in the Northeastern U.S. or the virus found in Asia.
Friday, February 20, 2004
2/20/04 A Field Trip
Is everyone on the plane? We have six stops to make. We’ll be in Maryland, Virginia, Florida, Arkansas, Pennsylvania and California. Paul Pinkney invited us to the 3.1 million square foot GM plant on Broening Highway where the company makes the GMC Safari and Chevrolet Astro. There’s Paul. He’s the burly 6 foot 2 inch guy in his 60s. Paul has been at this Maryland plant for 39 years. His starting pay was $2.54 per hour. Today he makes $26 per hour. When he first started at the plant, more than 7,000 workers were employed. The number has shrunk to 1,100. In 1965, when Paul joined GM, one out of every four adults in the U.S. worked in manufacturing. Now, it’s about one in ten. In their new contract with the United Auto Workers, GM has targeted this southeast Baltimore plant for possible closure next year. Paul observed that “these younger people, they’re going to have to move or get other trades or something because, at the rate things are going, they can bring in two pieces of equipment and eliminate 10 jobs.” Paul stated “I am General Motors. General Motors is what made me. Some people went in that plant, worked the same job ‘til they retired. No more of that.”
We need to hurry over to Virginia. It’s just a short trip. They have a $1 billion hole in the two-year, $59 billion state budget. Last night the state Senate took a voice vote on a plan that will have Virginians pay $2 billion a year in new taxes on sales, salaries, smokes, and motor fuel. The plan was tentatively approved. There’s Sen. H. Russell Potts Jr. He is a Republican from Winchester, and a true Virginian. He remarked “I hate taxes, but I love Virginia more.” Potts informed us that, adding a penny to the sales tax, now 4.5 cents on the dollar; pushing gasoline and diesel fuel taxes to 20.5 cents per gallon; and boosting the income tax for high-dollar Virginians, the Senate plan closes several loopholes in the corporate tax law and raises the cigarette tax from 2.5 cents a pack to 35 cents over two years. Sen. Charles Colgan is the senior member of the chamber. He observed “the next election shouldn’t mean a thing. What happens over the next generation is what matters.”
Our next stop is in the Orlando area but we will not be seeing Mickey Mouse. Unfortunately, there won’t be smiles at the Department of Children & Families (DCF). Their operations include the Family Safety Program Office, which oversees contracts with agencies that run group homes. In addition, they find adoptive parents and counsel members for abusive families. This Florida child-protection agency is beginning a major restructuring. They will eliminate 400 positions statewide and require 10% of its local work force to reapply for their jobs. The agency hopes to eliminate redundancies and standardize DCF management across regions.
The next stop will be a short visit with the CEO of Wal-Mart in Bentonville, Arkansas. I thought it might be interesting to inquire about their success. Lee Scott, their CEO, remarked “we are not raising prices and have no intention of doing so.” In fact, he claims Wal-Mart made $12 billion of rollbacks or price cuts last year. That’s more than the yearly revenue of many companies on the New York Stock Exchange. Target, their main competitor, stated rival Wal-Mart “are very, very competitive as they always have been and we have seen no change in their pricing strategy in the fourth quarter, and so far in the first quarter.”
On our way back to California we’ll be making a short stop in Philadelphia. Before the mad cow incident, we had planned for a Philly steak lunch. Now it will be a turkey sandwich. Rather be safe than sorry. It will be interesting to see why the folks over at the Philadelphia Reserve Bank of Philadelphia believe manufacturers remain optimistic. I did read where there is a slight improvement in the expectation of firms in the area about future plant employment. At the same time, expectations for capital spending did decline slightly. It would appear that the Philly Fed has opened an optical business. They are wearing rose-colored glasses. Upon further analysis, the diffusion index of current general activity has experienced a sharp decline of 7 points this month. The new orders index fell about 9 points. The shipments index fell almost 14 points. Not surprisingly, the current employment index fell. We need to leave. Otherwise, our group could get depressed. There’s plenty of time for that in sunny California.
Now that I have you captive on the long plane ride I thought I would go over the information provided in your welcome aboard packet. Twenty nine states are projecting budget shortfalls totaling up to $41 billion for fiscal 2005, which starts this July 1 for all but four states, according to this month’s report from the Center on Budget and Policy Priorities. Congress doled out $20 billion to help states patch gaps in fiscal 2003 and 2004. The “fiscal relief” package will run out this June 30. Many states used temporary or one-time fixes, such as depleting state rainy day reserves or drawing on tobacco settlement money, to balance the books in 2003 and 2004. The gaps will reappear in 2005. Most state budgets rely heavily on income taxes and earnings from employment. The national economic recovery did not create jobs over the past 12 months. In fact, there were net job losses and this means less revenue for the states. According to a December report from the National Governors Association, last year states collected almost $24 billion less in personal income, corporate income and sales tax revenue than they had originally budgeted. Scott Pattison, executive director of the National Association of State Budget Officers (NASBO) stated “if projections aren’t being met, that’s a definite sign that states are in real trouble and that there might be some structural problems.”
Here we are in Sacramento. Elizabeth Hill has been a nonpartisan analyst who has advised lawmakers on the budget for 18 years. The other day she stated the state of California is facing a $17 billion budget, which is $3 billion more than Governor Arnold projected in his January budget proposal. The problem has grown, Hill stated, in part because of weaker than expected wages, which will lead to less in personal income tax receipts. Hill observed that, even if the $15 billion deficit bond measure passes, the state’s budget gap the following year will be $7 billion. In addition, the state maintains a deficit of at least $5 billion through 2008-2009 because of a consistent imbalance between revenues and expenditures. Hill remarked “the economy will not solve this problem for us. Even with the type of revenue growth that we are estimating, which is moderate economic growth and no recession, we cannot grow our way out of this problem.” She went on to relate that a report released last week showed that sales tax revenue dropped sharply in January, the second month in a row that tax receipts dropped. Hill criticized several of Arnold’s proposals, and suggested the Legislature look at alternative plans. They would be well served to do so.
Before our day ends, I have two pieces of good news. Mortgage rates have tumbled to seven-month lows. Anyone in need of a refinancing fix might consider it at this time. Secondly, that smiling person in the front will be handing out a box of Krispy Kreme donuts for you to take home. We wouldn’t want you to leave without a smile on your face. The company estimates that system wide sales will increase approximately 25% in their new fiscal year, and I wanted to do my part to help them achieve that goal.
Is everyone on the plane? We have six stops to make. We’ll be in Maryland, Virginia, Florida, Arkansas, Pennsylvania and California. Paul Pinkney invited us to the 3.1 million square foot GM plant on Broening Highway where the company makes the GMC Safari and Chevrolet Astro. There’s Paul. He’s the burly 6 foot 2 inch guy in his 60s. Paul has been at this Maryland plant for 39 years. His starting pay was $2.54 per hour. Today he makes $26 per hour. When he first started at the plant, more than 7,000 workers were employed. The number has shrunk to 1,100. In 1965, when Paul joined GM, one out of every four adults in the U.S. worked in manufacturing. Now, it’s about one in ten. In their new contract with the United Auto Workers, GM has targeted this southeast Baltimore plant for possible closure next year. Paul observed that “these younger people, they’re going to have to move or get other trades or something because, at the rate things are going, they can bring in two pieces of equipment and eliminate 10 jobs.” Paul stated “I am General Motors. General Motors is what made me. Some people went in that plant, worked the same job ‘til they retired. No more of that.”
We need to hurry over to Virginia. It’s just a short trip. They have a $1 billion hole in the two-year, $59 billion state budget. Last night the state Senate took a voice vote on a plan that will have Virginians pay $2 billion a year in new taxes on sales, salaries, smokes, and motor fuel. The plan was tentatively approved. There’s Sen. H. Russell Potts Jr. He is a Republican from Winchester, and a true Virginian. He remarked “I hate taxes, but I love Virginia more.” Potts informed us that, adding a penny to the sales tax, now 4.5 cents on the dollar; pushing gasoline and diesel fuel taxes to 20.5 cents per gallon; and boosting the income tax for high-dollar Virginians, the Senate plan closes several loopholes in the corporate tax law and raises the cigarette tax from 2.5 cents a pack to 35 cents over two years. Sen. Charles Colgan is the senior member of the chamber. He observed “the next election shouldn’t mean a thing. What happens over the next generation is what matters.”
Our next stop is in the Orlando area but we will not be seeing Mickey Mouse. Unfortunately, there won’t be smiles at the Department of Children & Families (DCF). Their operations include the Family Safety Program Office, which oversees contracts with agencies that run group homes. In addition, they find adoptive parents and counsel members for abusive families. This Florida child-protection agency is beginning a major restructuring. They will eliminate 400 positions statewide and require 10% of its local work force to reapply for their jobs. The agency hopes to eliminate redundancies and standardize DCF management across regions.
The next stop will be a short visit with the CEO of Wal-Mart in Bentonville, Arkansas. I thought it might be interesting to inquire about their success. Lee Scott, their CEO, remarked “we are not raising prices and have no intention of doing so.” In fact, he claims Wal-Mart made $12 billion of rollbacks or price cuts last year. That’s more than the yearly revenue of many companies on the New York Stock Exchange. Target, their main competitor, stated rival Wal-Mart “are very, very competitive as they always have been and we have seen no change in their pricing strategy in the fourth quarter, and so far in the first quarter.”
On our way back to California we’ll be making a short stop in Philadelphia. Before the mad cow incident, we had planned for a Philly steak lunch. Now it will be a turkey sandwich. Rather be safe than sorry. It will be interesting to see why the folks over at the Philadelphia Reserve Bank of Philadelphia believe manufacturers remain optimistic. I did read where there is a slight improvement in the expectation of firms in the area about future plant employment. At the same time, expectations for capital spending did decline slightly. It would appear that the Philly Fed has opened an optical business. They are wearing rose-colored glasses. Upon further analysis, the diffusion index of current general activity has experienced a sharp decline of 7 points this month. The new orders index fell about 9 points. The shipments index fell almost 14 points. Not surprisingly, the current employment index fell. We need to leave. Otherwise, our group could get depressed. There’s plenty of time for that in sunny California.
Now that I have you captive on the long plane ride I thought I would go over the information provided in your welcome aboard packet. Twenty nine states are projecting budget shortfalls totaling up to $41 billion for fiscal 2005, which starts this July 1 for all but four states, according to this month’s report from the Center on Budget and Policy Priorities. Congress doled out $20 billion to help states patch gaps in fiscal 2003 and 2004. The “fiscal relief” package will run out this June 30. Many states used temporary or one-time fixes, such as depleting state rainy day reserves or drawing on tobacco settlement money, to balance the books in 2003 and 2004. The gaps will reappear in 2005. Most state budgets rely heavily on income taxes and earnings from employment. The national economic recovery did not create jobs over the past 12 months. In fact, there were net job losses and this means less revenue for the states. According to a December report from the National Governors Association, last year states collected almost $24 billion less in personal income, corporate income and sales tax revenue than they had originally budgeted. Scott Pattison, executive director of the National Association of State Budget Officers (NASBO) stated “if projections aren’t being met, that’s a definite sign that states are in real trouble and that there might be some structural problems.”
Here we are in Sacramento. Elizabeth Hill has been a nonpartisan analyst who has advised lawmakers on the budget for 18 years. The other day she stated the state of California is facing a $17 billion budget, which is $3 billion more than Governor Arnold projected in his January budget proposal. The problem has grown, Hill stated, in part because of weaker than expected wages, which will lead to less in personal income tax receipts. Hill observed that, even if the $15 billion deficit bond measure passes, the state’s budget gap the following year will be $7 billion. In addition, the state maintains a deficit of at least $5 billion through 2008-2009 because of a consistent imbalance between revenues and expenditures. Hill remarked “the economy will not solve this problem for us. Even with the type of revenue growth that we are estimating, which is moderate economic growth and no recession, we cannot grow our way out of this problem.” She went on to relate that a report released last week showed that sales tax revenue dropped sharply in January, the second month in a row that tax receipts dropped. Hill criticized several of Arnold’s proposals, and suggested the Legislature look at alternative plans. They would be well served to do so.
Before our day ends, I have two pieces of good news. Mortgage rates have tumbled to seven-month lows. Anyone in need of a refinancing fix might consider it at this time. Secondly, that smiling person in the front will be handing out a box of Krispy Kreme donuts for you to take home. We wouldn’t want you to leave without a smile on your face. The company estimates that system wide sales will increase approximately 25% in their new fiscal year, and I wanted to do my part to help them achieve that goal.
Thursday, February 19, 2004
2/19/04 Making Change Your Friend
A new survey by the Business Council revealed that 54% of its members stated their own companies had shifted employment from our shores to abroad over the past twelve months. Bank of America announced yesterday that it will set up an Indian subsidiary in Hyderabad for back-office operations with 1000 employees. You can expect other major financial institutions to make similar announcements.
The weather in January was 6.5 degrees Fahrenheit cooler than average. In fact, it got so cold that U.S. single-family housing starts fell 8% in January. Starts of townhouses, apartments, and other multifamily homes fell 7.8%. This decline will impact the final numbers for January’s economic growth. Residential construction accounts for 5% of the value of all goods and services produced in the U.S., and this does not include furniture, appliances, and other items for the home market.
The cold weather was a blessing for Wal-Mart. The company sold a lot of winter clothing. Overall, Wal-mart reported record earnings and sales for the quarter ended January 31, 2004. Total U.S. comparable sales for the quarter increased 4.8% and for the 12- month period they rose 4.1%. The largest percentage gainer was Sam’s Club. However, the star performer is the International Division. It’s comp sales for the year rose 17.3% and its yearly operating profit rose 18.6% to $2.370 billion. Income from continuing operations after minority interest and taxes for the whole year for the company was $8.9 billion. Wal-Mart now operates 1,355 locations in foreign countries in contrast to 3,551 locations in the United States. In ten years, I would not be surprised to see about the same number of locations inside and outside the United States. Wal-Mart continues to benefit from its television network providing product information. According to Nielsen ratings, 99 million consumers turn to Wal-Mart Television Network for product information each month.
According to the AARP, a fifth of Americans aged 50 and older cut back on vacations last year. Thirteen percent of retirees stated they were considering returning to work. Twenty one percent of working respondents stated they decided in the past year to retire later than previously planned.
A report released by Demos, a nonprofit public policy group, stated that senior households, most are on fixed incomes, owe an average of $4,041 on their credit cards. The report revealed that credit card debt of Americans aged 65 or older has jumped 89% in the past ten years.
For the first time, the U.S. government’s national debt amounted to more than $7 trillion. The government debt ceiling stands at $7.384. Prior to the November election, the Treasury will need to go back to the Congress for approval to raise the debt ceiling. This could become an issue in the upcoming election. Two years ago the debt reached $6 trillion. A trillion here and a trillion there, and before you know it, this becomes mounting and piling debt.
The U.S. government is not accepting any more H1-B applications. This year’s quota of 65,000 has been filled.
George Bush: “I’m not a statistician. I’m not a predictor.” Actually, he predicts all the time. There is good news though. Even a busted clock is right twice a day.
Voltage Security Inc. of Palo Alto has created an Instant Messaging –encryption product that’s designed to protect message exchanges from intercepting hackers.
The number of unemployed still on the benefit rolls after claiming an initial week of aid rose by 106,000 to 3.19 million in the Feb. 7 week, the latest for which figures are available.
A new survey by the Business Council revealed that 54% of its members stated their own companies had shifted employment from our shores to abroad over the past twelve months. Bank of America announced yesterday that it will set up an Indian subsidiary in Hyderabad for back-office operations with 1000 employees. You can expect other major financial institutions to make similar announcements.
The weather in January was 6.5 degrees Fahrenheit cooler than average. In fact, it got so cold that U.S. single-family housing starts fell 8% in January. Starts of townhouses, apartments, and other multifamily homes fell 7.8%. This decline will impact the final numbers for January’s economic growth. Residential construction accounts for 5% of the value of all goods and services produced in the U.S., and this does not include furniture, appliances, and other items for the home market.
The cold weather was a blessing for Wal-Mart. The company sold a lot of winter clothing. Overall, Wal-mart reported record earnings and sales for the quarter ended January 31, 2004. Total U.S. comparable sales for the quarter increased 4.8% and for the 12- month period they rose 4.1%. The largest percentage gainer was Sam’s Club. However, the star performer is the International Division. It’s comp sales for the year rose 17.3% and its yearly operating profit rose 18.6% to $2.370 billion. Income from continuing operations after minority interest and taxes for the whole year for the company was $8.9 billion. Wal-Mart now operates 1,355 locations in foreign countries in contrast to 3,551 locations in the United States. In ten years, I would not be surprised to see about the same number of locations inside and outside the United States. Wal-Mart continues to benefit from its television network providing product information. According to Nielsen ratings, 99 million consumers turn to Wal-Mart Television Network for product information each month.
According to the AARP, a fifth of Americans aged 50 and older cut back on vacations last year. Thirteen percent of retirees stated they were considering returning to work. Twenty one percent of working respondents stated they decided in the past year to retire later than previously planned.
A report released by Demos, a nonprofit public policy group, stated that senior households, most are on fixed incomes, owe an average of $4,041 on their credit cards. The report revealed that credit card debt of Americans aged 65 or older has jumped 89% in the past ten years.
For the first time, the U.S. government’s national debt amounted to more than $7 trillion. The government debt ceiling stands at $7.384. Prior to the November election, the Treasury will need to go back to the Congress for approval to raise the debt ceiling. This could become an issue in the upcoming election. Two years ago the debt reached $6 trillion. A trillion here and a trillion there, and before you know it, this becomes mounting and piling debt.
The U.S. government is not accepting any more H1-B applications. This year’s quota of 65,000 has been filled.
George Bush: “I’m not a statistician. I’m not a predictor.” Actually, he predicts all the time. There is good news though. Even a busted clock is right twice a day.
Voltage Security Inc. of Palo Alto has created an Instant Messaging –encryption product that’s designed to protect message exchanges from intercepting hackers.
The number of unemployed still on the benefit rolls after claiming an initial week of aid rose by 106,000 to 3.19 million in the Feb. 7 week, the latest for which figures are available.
Wednesday, February 18, 2004
2/18/04 Reverse Auctions
According to a recent survey by the state of Massachusetts Division of Health Care Finance and Policy, companies with fewer than 50 employees paid more for family coverage. The average premium was $818 per worker per month for a family plan, up 13.6% from 2002 and 37% higher than paid in 2000. For family coverage it was $857 per month, up 17.4% from 2002 and 42% since 2000.
The second annual investor survey on inflation sponsored by the Hartford Financial Services Group indicated that 72% of investors are concerned their investments will not keep pace with inflation, an increase of 14% from the prior year’s survey. The concern increases with age. Of those respondents age 65 and older, 86% believed that inflation would be higher during the next five years.
The British pound rose to $1.90, a 12-year high versus the dollar. The euro rose to an all-time high of $1.29 versus the dollar. While our currency has been declining in value, the Treasury has been experiencing strong net inflows into the U.S. Over the whole year, the inflows have averaged $59 billion per month, up sharply from $48 billion averaged monthly in 2002. With rising deficits, the U.S will need to import even greater monthly inflows this year.
Cingular is paying about $41 billion for AT&T Wireless. That’s a lot of money for advanced digital networks that allow high data transfer speeds as well as significant amount of spectrum that carry cell phone signals. By combining operations, Cingular states they can achieve savings in distribution, billing, marketing, and advertising. AT&T Wireless employs 31,000 people. To achieve significant cost savings it is safe to believe large layoffs can be expected after the merger becomes finalized.
Yesterday the Federal Reserve reported that factory output gained in January, and the main reason was cold weather. Utility output climbed 5.2% while natural gas production increased by 7%. Unfortunately, for some, it doesn’t get very cold in Houston in January. Yesterday Reliant Resources, a company that wholesales and retails electricity, put out a 2004 forecast that was lower than some on Wall Street expected. They initiated a cost-cutting program, and since the start of the year, about 150 jobs have been eliminated. They have 5,300 employees, and management stated total job cuts will end up being a significantly higher number than 150. For this year, Reliant stated it expected to make less money in its wholesale business because of additional plant capacity having come on line in its market last year, and with more expected to begin operating this year. It’s just another example of too much capacity and too little demand.
Fortunately for the Houston community they can fall back on the growth of Wal-Mart, this nation’s largest employer in the private sector. A new two million square-foot distribution center is being built in Baytown in order to expedite shipments from the Port of Houston and rail lines. The company can offload containers from ships and truck them to the distribution center for storage before shipment by truck or rail to other Wal-Mart stores. The facility should be operating by summer 2005. The center is expected to bring between 300 and 400 jobs to the area.
PPD, Inc. of Wilmington, NC announced the opening of a new office in Mumbai, India. This new drug development site will provide patient recruitment and clinical monitoring for Phase II-IV studies in key therapeutic areas. The company’s CEO stated it “allows us to assist clients in offering cost-effective clinical research opportunities to treatment-naïve patients for a number of therapies, including oncology and metabolic disease, such as diabetes.” According to a report in CenterWatch, patients can sometimes be recruited in India three to four times faster than in the West, including heightened acceleration for oncology studies due to the unmet needs in the therapeutic area.
The maker of AstroTurf has filed for Chapter 11 bankruptcy reorganization in Georgia. The parent company, American Sports Products Group, has as some of its largest creditors GE Capital and Blackstone.
Reverse auctions work like eBay only backward. Bidders push the price down rather than up. Reverse auctions enable competitors to see what the going price is and respond accordingly. Auctions are set for a given time, and normally bidders get two minutes to act each time a new low bid is made. Since 2001, Minnesota’s Department of Administration has started using reverse auctions to pit companies against each other to reduce the money the state pays each year for goods and services. Kent Allin, the state’s materials management director, stated that, in 14 of the 20 completed auctions, the online bid undercut the lowest sealed price. Minesota was the fist state to buy software and conduct auctions rather than contract the job out. The range of purchases Minnesota puts up for electronic bidding is wider than those of most states. Bills have been introduced to permit cities within Minnesota to hold reverse auctions. Allin observed “the Internet has revolutionized the way state government can buy and sell goods and services.” GE’s CIO claims the company saves hundreds of millions dollars per year utilizing reverse auctions. FreeMarkets claims it can save its customers at least 20% on purchases using reverse auctions. There are some who claim buyer and supplier relationships will deteriorate with these auctions beating up suppliers on price, and that the buyer’s savings is the seller’s loss of revenue. My belief is the process needs to be good for both the buyer and the seller. Both need to make money or this procurement mechanism will have a limited future. If handled properly, total costs can be reduced along with a reduction in the purchasing cycle.
According to a recent survey by the state of Massachusetts Division of Health Care Finance and Policy, companies with fewer than 50 employees paid more for family coverage. The average premium was $818 per worker per month for a family plan, up 13.6% from 2002 and 37% higher than paid in 2000. For family coverage it was $857 per month, up 17.4% from 2002 and 42% since 2000.
The second annual investor survey on inflation sponsored by the Hartford Financial Services Group indicated that 72% of investors are concerned their investments will not keep pace with inflation, an increase of 14% from the prior year’s survey. The concern increases with age. Of those respondents age 65 and older, 86% believed that inflation would be higher during the next five years.
The British pound rose to $1.90, a 12-year high versus the dollar. The euro rose to an all-time high of $1.29 versus the dollar. While our currency has been declining in value, the Treasury has been experiencing strong net inflows into the U.S. Over the whole year, the inflows have averaged $59 billion per month, up sharply from $48 billion averaged monthly in 2002. With rising deficits, the U.S will need to import even greater monthly inflows this year.
Cingular is paying about $41 billion for AT&T Wireless. That’s a lot of money for advanced digital networks that allow high data transfer speeds as well as significant amount of spectrum that carry cell phone signals. By combining operations, Cingular states they can achieve savings in distribution, billing, marketing, and advertising. AT&T Wireless employs 31,000 people. To achieve significant cost savings it is safe to believe large layoffs can be expected after the merger becomes finalized.
Yesterday the Federal Reserve reported that factory output gained in January, and the main reason was cold weather. Utility output climbed 5.2% while natural gas production increased by 7%. Unfortunately, for some, it doesn’t get very cold in Houston in January. Yesterday Reliant Resources, a company that wholesales and retails electricity, put out a 2004 forecast that was lower than some on Wall Street expected. They initiated a cost-cutting program, and since the start of the year, about 150 jobs have been eliminated. They have 5,300 employees, and management stated total job cuts will end up being a significantly higher number than 150. For this year, Reliant stated it expected to make less money in its wholesale business because of additional plant capacity having come on line in its market last year, and with more expected to begin operating this year. It’s just another example of too much capacity and too little demand.
Fortunately for the Houston community they can fall back on the growth of Wal-Mart, this nation’s largest employer in the private sector. A new two million square-foot distribution center is being built in Baytown in order to expedite shipments from the Port of Houston and rail lines. The company can offload containers from ships and truck them to the distribution center for storage before shipment by truck or rail to other Wal-Mart stores. The facility should be operating by summer 2005. The center is expected to bring between 300 and 400 jobs to the area.
PPD, Inc. of Wilmington, NC announced the opening of a new office in Mumbai, India. This new drug development site will provide patient recruitment and clinical monitoring for Phase II-IV studies in key therapeutic areas. The company’s CEO stated it “allows us to assist clients in offering cost-effective clinical research opportunities to treatment-naïve patients for a number of therapies, including oncology and metabolic disease, such as diabetes.” According to a report in CenterWatch, patients can sometimes be recruited in India three to four times faster than in the West, including heightened acceleration for oncology studies due to the unmet needs in the therapeutic area.
The maker of AstroTurf has filed for Chapter 11 bankruptcy reorganization in Georgia. The parent company, American Sports Products Group, has as some of its largest creditors GE Capital and Blackstone.
Reverse auctions work like eBay only backward. Bidders push the price down rather than up. Reverse auctions enable competitors to see what the going price is and respond accordingly. Auctions are set for a given time, and normally bidders get two minutes to act each time a new low bid is made. Since 2001, Minnesota’s Department of Administration has started using reverse auctions to pit companies against each other to reduce the money the state pays each year for goods and services. Kent Allin, the state’s materials management director, stated that, in 14 of the 20 completed auctions, the online bid undercut the lowest sealed price. Minesota was the fist state to buy software and conduct auctions rather than contract the job out. The range of purchases Minnesota puts up for electronic bidding is wider than those of most states. Bills have been introduced to permit cities within Minnesota to hold reverse auctions. Allin observed “the Internet has revolutionized the way state government can buy and sell goods and services.” GE’s CIO claims the company saves hundreds of millions dollars per year utilizing reverse auctions. FreeMarkets claims it can save its customers at least 20% on purchases using reverse auctions. There are some who claim buyer and supplier relationships will deteriorate with these auctions beating up suppliers on price, and that the buyer’s savings is the seller’s loss of revenue. My belief is the process needs to be good for both the buyer and the seller. Both need to make money or this procurement mechanism will have a limited future. If handled properly, total costs can be reduced along with a reduction in the purchasing cycle.
Tuesday, February 17, 2004
2/17/04 Reality Can Prove Illusory
Bush: “A lot of economic growth depends on psychology of the people making decisions all throughout our economy… people are pretty upbeat all over the country.” These remarks were made yesterday during Bush’s visit to NuAir Manufacturing in Tampa, Florida. He stated this company hopes to hire 40 more workers this year, and remarked “forty workers here, five workers there, begin to add up.” Bush states that the facts bear out his optimism. Here’s a dose of reality. About 24 million people are not counted in the monthly government unemployment rate until they seek employment. Maybe Bush’s optimism will become contagious. Maybe he jolts some of those 24 million into once again seeking employment. Bush is a good salesman. He sold the country on going to war. He certainly can sell some people on seeking employment. He had better not be too good at this selling job. If some of these folks become job seekers, then their entry will elevate the unemployment rate. The government states that there are 4.7 million people who want jobs but did not seek work during the prior four weeks. They are listed in the discouraged category. In January, the government stated the number of job market re-entrants rose by 6% or 143,000. With more entrants, the time required for job search has increased by 16% for managers and executives over the last nine months of 2003. John Challenger of Challenger, Gray & Christmas observed “the hidden network of potential job seekers is below the radar of those who are actively searching for employment, not to mention the economists and others who monitor the economy for significant signs. Imagine the impact nationwide if the unemployment rate suddenly shot up to 7.9%.”
The Georgia Department of Labor has reported 70,271 laid-off workers filed a first-time claim for unemployment insurance benefits in January, an increase of 19% from December when 59,206 claims were filed. Just recently, such companies as Panasonic, Washington Mutual, Hoover Hanes, Fleetwood, Volt Services, and Columbia Forest Products have announced even more job cuts. State Labor Commissioner Michael Thurmond stated “these new losses not only affect workers whose jobs are being terminated, but make it even harder for Georgians who have been out of work for months to find employment.”
Faced with a liquidity crisis and in Chapter 11, One Price Clothing Stores was forced to lay off about 200 people at its home office and distribution center in Duncan, South Carolina. Further layoffs will follow as the company proceeds to liquidate. They employ 3,000 associates in 30 states, Washington DC, Puerto Rico, and the U.S. Virgin Islands.
Friday the 13th proved an unlucky day for a number of employees of the Union Institute and University on McMillan Street in Avondale located in the Cincinnati area. With declining enrollment, 51 of the university’s 485 positions were cut.
Since becoming president, yesterday marked Bush’s 19th visit to the state of Florida. When giving his talk in Tampa, he failed to mention an automatic $133 million increase in the state’s unemployment tax was being activated in April because of high jobless claims. When the fund dropped to just under $1.5 billion in November, that automatic increase was triggered for the 426,000 Florida employers covered by the program. The jobless benefits fund had grown each year for nearly a decade before Bush was elected. According to a state report released yesterday, the jobless benefits fund has dropped steadily since 1999. After 9/11, a large portion of the federal aid Florida received was used to help prop up the fund.
Seventy-five of 130 Ground Round restaurants nationwide that are owned by American Hospitality Concepts Inc. of Braintree, Massachusetts closed suddenly on Friday. Local franchise owners stated about 5,000 workers lost jobs nationwide. There was no advanced notice whatsoever. The Ground Round was launched as a division of the Howard Johnson restaurant chain in 1969.
While evaluating competing takeover offers from Cingular and Vodafone, the AT&T Wireless management still found the time to lay off 220 information technology workers. There are more layoffs to be announced. Employees were told that more IT cuts could be expected in the near term. About an additional 1,000 jobs will be eliminated. That is without the acquisition by Cingular. The latter is paying about $40 billion for the company, and cost savings will need to be accomplished in order to enhance operating cash flow.
Siemens announced that it will move most of the company’s 15,000 software programming jobs from its offices in the U.S. and Western Europe to India, China, and Eastern Europe. Siemens already has 3,000 IT workers located in Bangalore.
In the past week, Tower Automotive announced it would move 500 jobs from a plant that makes frames for the Dodge Ram pickup in Milwaukee to Mexico. Other auto suppliers will be shifting production and jobs overseas to tap cheap labor, according to a recent study by Roland Berger Strategy Consultants. Jim Gillette, director of supplier analysis at CSM Worldwide, stated “ the attitude is spreading that if you’re not ready to do business in these markets, you’re not going to be around in five years.”
Bush may be looking at 40 new jobs in Tampa, Florida. The United States is a big country. He might take a heavy dose of reality. His salesmanship won’t pay the bills for the unemployed. His optimism won’t bring back those soldiers who have lost their lives in Iraq.
According to the India Department of Commerce, the United Kingdom, India’s second largest trading partner, has no plans to restrict the flow of jobs to India. On the other hand, the Indian government pointed to proposed outsourcing restrictions in the U.S. and stated opening the domestic agriculture market to U.S. exports would become very difficult if the U.S. stopped or curtailed the exporting of jobs to India. It should be noted that, unlike in the United States, agriculture is not subsidized in India
With customers purchasing more coats, food, Valentine’s Day items and pharmaceuticals, Wal-Mart stated February sales at U.S. stores are rising at the high end of its forecast, which would be close to 5%. The Southern California supermarket strike has certainly helped their sales growth. One cannot underestimate their continued dedication to providing customers with everyday low prices. Another successful high volume, low cost concept can be found at SRI Shoe Warehouse. They have three locations in Raleigh, Baltimore, and Greensboro. To keep costs down, SRI has the Raleigh store open Thursday through Sunday and Wednesday through Sunday at the two other locations. Each store stocks 45,000 pairs of women’s, men’s, and children’s shoes right on the display floor. The selection is larger than that found at competitors and the prices are lower by 35 to 50%. The three stores generate more than $10 million in sales annually.
In 2003, Freddie Mac financed homes for more than 5.5 million families. The company purchased more than $106 billion of mortgages made to minority families.
San Mateo-based Six Apart Ltd. announced and demonstrated new features in its Typepad personal weblogging software that lets people easily add pictures, audio, and text to their weblogs directly from their mobile phones or PDAs.
Using a biometric fingerprint scan, Philadelphia-based AllenPort has created a system based upon a paradigm that uses bank ATM networks as a model. It centralizes, protects, and provides each individual’s “digital assets”, such as, applications, user settings, and data, at a central personal computer service hosting facility.
Insurers want a law that forces hospitals to make their pricing public. The problem occurs when a hospital is “out-of-network.” This means the insurer has no contract for discounts. When that occurs, and if the insurer and the hospital can’t agree on the charges, then the hospital can charge what’s “usual and customary.” The latter most often means list prices without any discounts, and many insurers believe they represent three to five times Medicare prices.
In turning down the Comcast merger proposal, the Disney board stated “we are committed to creating shareholder value now and in the future and will carefully consider any legitimate proposal that would accomplish that objective.” At the same time, they stated there would not be a search for a white knight. Over time, a proposal most likely will be brought forth that will contain a collar or some protection against a further decline in the price of Comcast shares. This deal will take months to complete. There are several regulatory hurdles, and then there is a final agreement on price.
Bush: “A lot of economic growth depends on psychology of the people making decisions all throughout our economy… people are pretty upbeat all over the country.” These remarks were made yesterday during Bush’s visit to NuAir Manufacturing in Tampa, Florida. He stated this company hopes to hire 40 more workers this year, and remarked “forty workers here, five workers there, begin to add up.” Bush states that the facts bear out his optimism. Here’s a dose of reality. About 24 million people are not counted in the monthly government unemployment rate until they seek employment. Maybe Bush’s optimism will become contagious. Maybe he jolts some of those 24 million into once again seeking employment. Bush is a good salesman. He sold the country on going to war. He certainly can sell some people on seeking employment. He had better not be too good at this selling job. If some of these folks become job seekers, then their entry will elevate the unemployment rate. The government states that there are 4.7 million people who want jobs but did not seek work during the prior four weeks. They are listed in the discouraged category. In January, the government stated the number of job market re-entrants rose by 6% or 143,000. With more entrants, the time required for job search has increased by 16% for managers and executives over the last nine months of 2003. John Challenger of Challenger, Gray & Christmas observed “the hidden network of potential job seekers is below the radar of those who are actively searching for employment, not to mention the economists and others who monitor the economy for significant signs. Imagine the impact nationwide if the unemployment rate suddenly shot up to 7.9%.”
The Georgia Department of Labor has reported 70,271 laid-off workers filed a first-time claim for unemployment insurance benefits in January, an increase of 19% from December when 59,206 claims were filed. Just recently, such companies as Panasonic, Washington Mutual, Hoover Hanes, Fleetwood, Volt Services, and Columbia Forest Products have announced even more job cuts. State Labor Commissioner Michael Thurmond stated “these new losses not only affect workers whose jobs are being terminated, but make it even harder for Georgians who have been out of work for months to find employment.”
Faced with a liquidity crisis and in Chapter 11, One Price Clothing Stores was forced to lay off about 200 people at its home office and distribution center in Duncan, South Carolina. Further layoffs will follow as the company proceeds to liquidate. They employ 3,000 associates in 30 states, Washington DC, Puerto Rico, and the U.S. Virgin Islands.
Friday the 13th proved an unlucky day for a number of employees of the Union Institute and University on McMillan Street in Avondale located in the Cincinnati area. With declining enrollment, 51 of the university’s 485 positions were cut.
Since becoming president, yesterday marked Bush’s 19th visit to the state of Florida. When giving his talk in Tampa, he failed to mention an automatic $133 million increase in the state’s unemployment tax was being activated in April because of high jobless claims. When the fund dropped to just under $1.5 billion in November, that automatic increase was triggered for the 426,000 Florida employers covered by the program. The jobless benefits fund had grown each year for nearly a decade before Bush was elected. According to a state report released yesterday, the jobless benefits fund has dropped steadily since 1999. After 9/11, a large portion of the federal aid Florida received was used to help prop up the fund.
Seventy-five of 130 Ground Round restaurants nationwide that are owned by American Hospitality Concepts Inc. of Braintree, Massachusetts closed suddenly on Friday. Local franchise owners stated about 5,000 workers lost jobs nationwide. There was no advanced notice whatsoever. The Ground Round was launched as a division of the Howard Johnson restaurant chain in 1969.
While evaluating competing takeover offers from Cingular and Vodafone, the AT&T Wireless management still found the time to lay off 220 information technology workers. There are more layoffs to be announced. Employees were told that more IT cuts could be expected in the near term. About an additional 1,000 jobs will be eliminated. That is without the acquisition by Cingular. The latter is paying about $40 billion for the company, and cost savings will need to be accomplished in order to enhance operating cash flow.
Siemens announced that it will move most of the company’s 15,000 software programming jobs from its offices in the U.S. and Western Europe to India, China, and Eastern Europe. Siemens already has 3,000 IT workers located in Bangalore.
In the past week, Tower Automotive announced it would move 500 jobs from a plant that makes frames for the Dodge Ram pickup in Milwaukee to Mexico. Other auto suppliers will be shifting production and jobs overseas to tap cheap labor, according to a recent study by Roland Berger Strategy Consultants. Jim Gillette, director of supplier analysis at CSM Worldwide, stated “ the attitude is spreading that if you’re not ready to do business in these markets, you’re not going to be around in five years.”
Bush may be looking at 40 new jobs in Tampa, Florida. The United States is a big country. He might take a heavy dose of reality. His salesmanship won’t pay the bills for the unemployed. His optimism won’t bring back those soldiers who have lost their lives in Iraq.
According to the India Department of Commerce, the United Kingdom, India’s second largest trading partner, has no plans to restrict the flow of jobs to India. On the other hand, the Indian government pointed to proposed outsourcing restrictions in the U.S. and stated opening the domestic agriculture market to U.S. exports would become very difficult if the U.S. stopped or curtailed the exporting of jobs to India. It should be noted that, unlike in the United States, agriculture is not subsidized in India
With customers purchasing more coats, food, Valentine’s Day items and pharmaceuticals, Wal-Mart stated February sales at U.S. stores are rising at the high end of its forecast, which would be close to 5%. The Southern California supermarket strike has certainly helped their sales growth. One cannot underestimate their continued dedication to providing customers with everyday low prices. Another successful high volume, low cost concept can be found at SRI Shoe Warehouse. They have three locations in Raleigh, Baltimore, and Greensboro. To keep costs down, SRI has the Raleigh store open Thursday through Sunday and Wednesday through Sunday at the two other locations. Each store stocks 45,000 pairs of women’s, men’s, and children’s shoes right on the display floor. The selection is larger than that found at competitors and the prices are lower by 35 to 50%. The three stores generate more than $10 million in sales annually.
In 2003, Freddie Mac financed homes for more than 5.5 million families. The company purchased more than $106 billion of mortgages made to minority families.
San Mateo-based Six Apart Ltd. announced and demonstrated new features in its Typepad personal weblogging software that lets people easily add pictures, audio, and text to their weblogs directly from their mobile phones or PDAs.
Using a biometric fingerprint scan, Philadelphia-based AllenPort has created a system based upon a paradigm that uses bank ATM networks as a model. It centralizes, protects, and provides each individual’s “digital assets”, such as, applications, user settings, and data, at a central personal computer service hosting facility.
Insurers want a law that forces hospitals to make their pricing public. The problem occurs when a hospital is “out-of-network.” This means the insurer has no contract for discounts. When that occurs, and if the insurer and the hospital can’t agree on the charges, then the hospital can charge what’s “usual and customary.” The latter most often means list prices without any discounts, and many insurers believe they represent three to five times Medicare prices.
In turning down the Comcast merger proposal, the Disney board stated “we are committed to creating shareholder value now and in the future and will carefully consider any legitimate proposal that would accomplish that objective.” At the same time, they stated there would not be a search for a white knight. Over time, a proposal most likely will be brought forth that will contain a collar or some protection against a further decline in the price of Comcast shares. This deal will take months to complete. There are several regulatory hurdles, and then there is a final agreement on price.
Monday, February 16, 2004
2/16/04 There Is Plenty Of News
In an attempt to avoid merging with Sanofi, Aventis has been searching for a white knight. Novartis is kicking the tires, and may come to the rescue.
Cingular and Vodafone continue to up their offers for AT&T Wireless. Their bidding has reached the frenzy stage as it approaches $14 per share. I hope each has a good plan as to how to create value for their own shareholders.
Yesterday, Japan’s agriculture minister called a U.S. probe into the outbreak of mad cow disease incomplete and stated his country would not reconsider a six-week ban on American beef until it receives new proposals from Washington for tighter safeguards. This would include testing all cattle for the disease before slaughter. Kamei remarked “it’s unclear where the other 50 cows ended up, and that’s not adequate. I don’t think they made enough of an effort.” I certainly agree with that observation.
A week from today, the Knoxville-based Tennessee Valley Authority will finish cost-cutting reviews. The TVA stated they will cut its workforce with a combination of layoffs and early retirements. The federal utility stated it’s part of an effort to compete under deregulation. Layoffs will be announced on April 22. TVA Chairman Glenn McCullough remarked “forty percent of our workforce is eligible for retirement in the next 16 months. So by looking at some areas where we may be over-staffed, it may be just a matter of some early retirements that sort of thing, as opposed to widespread RIFs. We’re looking at head count. We’re looking at programs. We’re looking at capital expenditures, everything. The TVA needs to pay down debt and become more efficient. That’s true of most areas of the federal government.
It is anticipated that car sales in India will approach 700,000 units in the fiscal year ending March 31, a growth of nearly 30% over the previous year. New Delhi-based National Council of Applied Economic Research predicted in September that car sales would rise to one million vehicles a year by 2012. That estimate now appears much too conservative.
According to Automotive News, Ford is imposing new contract terms on its global suppliers, including a clause that lets the company deduct money from suppliers’ accounts without prior notice. Parts makers state they have been told they could lose future business if they don’t comply. The Automotive News also reports on what is termed “upside-down deals.” They state that more trade-ins these days are worth less than the amount buyers still owe. The result is a growing debt load that many in the industry believe see as an industry time bomb. It is estimated that about 30% of all customers walk into showrooms upside down. In essence, auto sales are being propped up increasingly by longer loans and bulging consumer debt. U.S. supplies of cars and light trucks stood at 90 days on Feb. 1, up from 69 days on Jan.1. The ideal level is 60 to 65 days. Automotive stocks have also been selling at multi-year highs. What’s the incentive to make them go higher? Short covering? The Ford F-150 is so hot that the company started a Fast Cash incentive on Jan. 16 that runs through March 1. I bet it will be extended.
Auto sales in Canada fell 11.6% in January to their lowest total for any month in six years. On the other hand, Japanese new-vehicle sales rose 6.3% in January.
Carrier Corp. is closing its manufacturing facility in McMinnville, Tenn. A total of 1,300 jobs will be eliminated.
Steelcase Inc. is closing its wood-furniture plant in Fletcher, NC. A total of 480 jobs will be eliminated. The company is also closing its wood-furniture plant in New Paris, Indiana and 160 jobs will be eliminated.
Biocon Ltd. Will become India’s first biotechnology IPO. Biocon is India’s largest biotech company. They aim to have $1 billion in revenue within a decade. The CEO “would definitely put growth at 30% per annum.” They employ 1,200 people. Almost all of their revenue comes from enzymes or biopharmaceuticals.
According to the AAA Texas Weekend Gas Watch, prices at the gas pump rose by an average 15.5 cents a gallon in January. According to the Department of Energy, 43% of the price at the pump is accounted for by the amount that goes towards buying crude oil. The remainder is comprised of distribution and marketing costs, refining costs, and taxes.
One place that doesn’t run out of gas is on East 7th Street in the East Village section of New York City. Tomorrow McSorley’s Old Ale House celebrates its 150th birthday. John McSorley opened the place in 1854. The only change was in 1970, the year women were permitted into this establishment. It is still going strong. Matty Maher owns the place now. He stated "the years have been easy. It’s the days that get tough.” This pub is the real deal.
New York City is in for a gastronomic treat. Thomas Keller brings his bag of cooking tricks to his new restaurant, Per Se. It opens this evening. The renovation on his Yountville, California French Laundry restaurant will be completed in May. I would recommend getting on Per Se’s reservation list. You should be seated in about three months. Keller is arguably the most talented chef our nation has today.
Joseph Stiglitz, Nobel laureate in economics: “the U.S.’ economic program for reconstructing Iraq is laying the foundations for poverty and chaos…blinded by ideology, however, the Bush administration seems determined to continue its record of dismal failures by ignoring past experience.”
In an attempt to avoid merging with Sanofi, Aventis has been searching for a white knight. Novartis is kicking the tires, and may come to the rescue.
Cingular and Vodafone continue to up their offers for AT&T Wireless. Their bidding has reached the frenzy stage as it approaches $14 per share. I hope each has a good plan as to how to create value for their own shareholders.
Yesterday, Japan’s agriculture minister called a U.S. probe into the outbreak of mad cow disease incomplete and stated his country would not reconsider a six-week ban on American beef until it receives new proposals from Washington for tighter safeguards. This would include testing all cattle for the disease before slaughter. Kamei remarked “it’s unclear where the other 50 cows ended up, and that’s not adequate. I don’t think they made enough of an effort.” I certainly agree with that observation.
A week from today, the Knoxville-based Tennessee Valley Authority will finish cost-cutting reviews. The TVA stated they will cut its workforce with a combination of layoffs and early retirements. The federal utility stated it’s part of an effort to compete under deregulation. Layoffs will be announced on April 22. TVA Chairman Glenn McCullough remarked “forty percent of our workforce is eligible for retirement in the next 16 months. So by looking at some areas where we may be over-staffed, it may be just a matter of some early retirements that sort of thing, as opposed to widespread RIFs. We’re looking at head count. We’re looking at programs. We’re looking at capital expenditures, everything. The TVA needs to pay down debt and become more efficient. That’s true of most areas of the federal government.
It is anticipated that car sales in India will approach 700,000 units in the fiscal year ending March 31, a growth of nearly 30% over the previous year. New Delhi-based National Council of Applied Economic Research predicted in September that car sales would rise to one million vehicles a year by 2012. That estimate now appears much too conservative.
According to Automotive News, Ford is imposing new contract terms on its global suppliers, including a clause that lets the company deduct money from suppliers’ accounts without prior notice. Parts makers state they have been told they could lose future business if they don’t comply. The Automotive News also reports on what is termed “upside-down deals.” They state that more trade-ins these days are worth less than the amount buyers still owe. The result is a growing debt load that many in the industry believe see as an industry time bomb. It is estimated that about 30% of all customers walk into showrooms upside down. In essence, auto sales are being propped up increasingly by longer loans and bulging consumer debt. U.S. supplies of cars and light trucks stood at 90 days on Feb. 1, up from 69 days on Jan.1. The ideal level is 60 to 65 days. Automotive stocks have also been selling at multi-year highs. What’s the incentive to make them go higher? Short covering? The Ford F-150 is so hot that the company started a Fast Cash incentive on Jan. 16 that runs through March 1. I bet it will be extended.
Auto sales in Canada fell 11.6% in January to their lowest total for any month in six years. On the other hand, Japanese new-vehicle sales rose 6.3% in January.
Carrier Corp. is closing its manufacturing facility in McMinnville, Tenn. A total of 1,300 jobs will be eliminated.
Steelcase Inc. is closing its wood-furniture plant in Fletcher, NC. A total of 480 jobs will be eliminated. The company is also closing its wood-furniture plant in New Paris, Indiana and 160 jobs will be eliminated.
Biocon Ltd. Will become India’s first biotechnology IPO. Biocon is India’s largest biotech company. They aim to have $1 billion in revenue within a decade. The CEO “would definitely put growth at 30% per annum.” They employ 1,200 people. Almost all of their revenue comes from enzymes or biopharmaceuticals.
According to the AAA Texas Weekend Gas Watch, prices at the gas pump rose by an average 15.5 cents a gallon in January. According to the Department of Energy, 43% of the price at the pump is accounted for by the amount that goes towards buying crude oil. The remainder is comprised of distribution and marketing costs, refining costs, and taxes.
One place that doesn’t run out of gas is on East 7th Street in the East Village section of New York City. Tomorrow McSorley’s Old Ale House celebrates its 150th birthday. John McSorley opened the place in 1854. The only change was in 1970, the year women were permitted into this establishment. It is still going strong. Matty Maher owns the place now. He stated "the years have been easy. It’s the days that get tough.” This pub is the real deal.
New York City is in for a gastronomic treat. Thomas Keller brings his bag of cooking tricks to his new restaurant, Per Se. It opens this evening. The renovation on his Yountville, California French Laundry restaurant will be completed in May. I would recommend getting on Per Se’s reservation list. You should be seated in about three months. Keller is arguably the most talented chef our nation has today.
Joseph Stiglitz, Nobel laureate in economics: “the U.S.’ economic program for reconstructing Iraq is laying the foundations for poverty and chaos…blinded by ideology, however, the Bush administration seems determined to continue its record of dismal failures by ignoring past experience.”
Sunday, February 15, 2004
2/15/04 Forces Impacting Our Present And Future
According to the National Association of State Budget Offices, thirty six states enacted tax and fee increases for fiscal 2004. In addition, tax amnesty programs and accelerating payment of sales taxes are raising additional billions in order to balance budgets.
The unemployment tax averages about 2% of payroll or taxable wages. A growing number of companies have budgeted for a 20% or higher increase in their unemployment burden. As the number of unemployed rises, there is a corresponding requirement to boost the funds necessary to replenish the unemployment trust funds. This is but one more way to check on the unemployment numbers released by the Labor Department. If the unemployment levels were declining, there would not be the need for additional funding into the unemployment trust fund. It doesn’t take a rocket scientist to catch politicians in lies.
The administration will be providing information to voters on insourcing, a term referring to American jobs supported by U.S. subsidiaries of foreign companies. You will read that there are 6.4 million insourced jobs with an annual payroll of $350 billion. Examples provided will be Honda increasing their U.S. manufacturing employment by 15% last year. Novartis moved its world-wide R&D facility from Switzerland to Massachusetts. Samsung is investing $500 million in its Texas semiconductor plant where it will employ 1200 people. U.S. subsidiaries account for over 22% of total U.S. exports. That is a significant number.
I think it’s time that we pay a bit more attention to Americans age 50 and over. I know I’m in that grouping. That’s not the point. According to Ken Dychtwald, president of the Age Wave think tank in San Francisco, the 50 and over group control $7 trillion, or 70% of the U.S. wealth, and they bring in $2 trillion in annual income and account for 50% of all discretionary spending. Not surprisingly, only 5% of the yearly advertising dollars are directed at this group. Between 1990 and 2000 this age group’s numbers rose by 12 million while the 18-to-34 year olds declined in number by 9 million. According to the AARP, there will be 54 million people between the ages of 50 and 64 by 2010, and 50 and over will total 90 million Americans or over 30% of the U.S. population. Manufacturers had better get used to the growing changes in the lifestyle habits of this age group. I suggest that the investing field will be impacted too. Lower risk levels will be accepted, and the volatility factor in the marketplace will diminish. Trading will be less in vogue, and investing for long-term appreciation will gain greater acceptance.
The Bureau of Labor Statistics has projected employment growth between 2002 and 2012. I don’t know why I mention this. I think government statistics are sorely lacking in their accuracy. The BLS projected employment growth will be greatest in the service sector, particularly in education and health services as well as business and professional services. There will be growing needs to home health assistants, medical assistants, and network systems and data communications analysts. Interestingly, the BLS projects that, between 2002 and 2012, the number of workers 55 and older will increase by about 50% and account for over 19% of the total workforce. These projections will be available at the end of February in the BLS Occupational Outlook Handbook.
U.S. Energy Secretary Spencer Abraham: “With respect to oil, we already import over half the oil we use, and the projection is that in 20 or 25 years that percentage will be up in the 70 percent range. That’s a much greater dependency level than we’re talking about with gas, where it’s possible we would be up into the range of 25% in 20 years.”
Yesterday was Valentine’s Day. Rather than send a Valentine’s message to all Americans, Bush chose to play the fear card and send the following message on his Saturday radio address: “the possibility of secret and sudden attack with weapons of mass destruction is the greatest threat before humanity today… America faces the possibility of catastrophic attack from ballistic missiles armed with weapons of mass destruction. So we are developing and deploying missile defenses to guard our people.” Hundreds of our troops died in Iraq because of a preemptive strike based on a foundation of the above-mentioned WPM that have proven illusory in nature. They were never found. Thosands of our troops were injured and maimed for the same unfounded reason to go to war. I suggest the WPM do exist. They exist in Washington DC, and I have stated this for well over a year’s time. Bush is correct in stating that we must strengthen laws that fight proliferation. I suggest additional changes need to be made in the decision-making process that sends our troops into harm’s way. Timely facts based on recently acquired evidence must be incorporated into congressional approvals to declare or enter war. The evidence cannot be based on 10 year-old material with subjective interpretations.
According to the National Association of State Budget Offices, thirty six states enacted tax and fee increases for fiscal 2004. In addition, tax amnesty programs and accelerating payment of sales taxes are raising additional billions in order to balance budgets.
The unemployment tax averages about 2% of payroll or taxable wages. A growing number of companies have budgeted for a 20% or higher increase in their unemployment burden. As the number of unemployed rises, there is a corresponding requirement to boost the funds necessary to replenish the unemployment trust funds. This is but one more way to check on the unemployment numbers released by the Labor Department. If the unemployment levels were declining, there would not be the need for additional funding into the unemployment trust fund. It doesn’t take a rocket scientist to catch politicians in lies.
The administration will be providing information to voters on insourcing, a term referring to American jobs supported by U.S. subsidiaries of foreign companies. You will read that there are 6.4 million insourced jobs with an annual payroll of $350 billion. Examples provided will be Honda increasing their U.S. manufacturing employment by 15% last year. Novartis moved its world-wide R&D facility from Switzerland to Massachusetts. Samsung is investing $500 million in its Texas semiconductor plant where it will employ 1200 people. U.S. subsidiaries account for over 22% of total U.S. exports. That is a significant number.
I think it’s time that we pay a bit more attention to Americans age 50 and over. I know I’m in that grouping. That’s not the point. According to Ken Dychtwald, president of the Age Wave think tank in San Francisco, the 50 and over group control $7 trillion, or 70% of the U.S. wealth, and they bring in $2 trillion in annual income and account for 50% of all discretionary spending. Not surprisingly, only 5% of the yearly advertising dollars are directed at this group. Between 1990 and 2000 this age group’s numbers rose by 12 million while the 18-to-34 year olds declined in number by 9 million. According to the AARP, there will be 54 million people between the ages of 50 and 64 by 2010, and 50 and over will total 90 million Americans or over 30% of the U.S. population. Manufacturers had better get used to the growing changes in the lifestyle habits of this age group. I suggest that the investing field will be impacted too. Lower risk levels will be accepted, and the volatility factor in the marketplace will diminish. Trading will be less in vogue, and investing for long-term appreciation will gain greater acceptance.
The Bureau of Labor Statistics has projected employment growth between 2002 and 2012. I don’t know why I mention this. I think government statistics are sorely lacking in their accuracy. The BLS projected employment growth will be greatest in the service sector, particularly in education and health services as well as business and professional services. There will be growing needs to home health assistants, medical assistants, and network systems and data communications analysts. Interestingly, the BLS projects that, between 2002 and 2012, the number of workers 55 and older will increase by about 50% and account for over 19% of the total workforce. These projections will be available at the end of February in the BLS Occupational Outlook Handbook.
U.S. Energy Secretary Spencer Abraham: “With respect to oil, we already import over half the oil we use, and the projection is that in 20 or 25 years that percentage will be up in the 70 percent range. That’s a much greater dependency level than we’re talking about with gas, where it’s possible we would be up into the range of 25% in 20 years.”
Yesterday was Valentine’s Day. Rather than send a Valentine’s message to all Americans, Bush chose to play the fear card and send the following message on his Saturday radio address: “the possibility of secret and sudden attack with weapons of mass destruction is the greatest threat before humanity today… America faces the possibility of catastrophic attack from ballistic missiles armed with weapons of mass destruction. So we are developing and deploying missile defenses to guard our people.” Hundreds of our troops died in Iraq because of a preemptive strike based on a foundation of the above-mentioned WPM that have proven illusory in nature. They were never found. Thosands of our troops were injured and maimed for the same unfounded reason to go to war. I suggest the WPM do exist. They exist in Washington DC, and I have stated this for well over a year’s time. Bush is correct in stating that we must strengthen laws that fight proliferation. I suggest additional changes need to be made in the decision-making process that sends our troops into harm’s way. Timely facts based on recently acquired evidence must be incorporated into congressional approvals to declare or enter war. The evidence cannot be based on 10 year-old material with subjective interpretations.
Saturday, February 14, 2004
2/14/04 Roses And Thorns
It’s wonderful growing roses. The different colors and their graceful buds can provide much pleasure. However, picking those roses is an entirely different story. The thorns on those rose bushes require some careful handling, and can be a bitch.
King Solomon writing in Proverbs: “The Borrower is servant to the lender.”
Ross Perot and Sen. Paul Simon: “A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.”
In 2003, almost $7 trillion was issued I the U.S. fixed income markets, up 28% from 2002. The U.S. trade deficit ballooned to record levels in 2003, and rose 17% from the record set in 2002. We had a $124 billion trade gap with China, and that was a record. Our trade deficit with Japan declined to $66 billion, the lowest level since 1998. Canada was in third place with a trade gap of $54 billion, then Mexico with $40 billion, and Germany close behind with $39 billion. With our weaker dollar, our exports rose 4.6% to $1 trillion, the highest mark since 2000. However, despite the dollar’s fall by 3.3% on a trade-weighted basis in the fourth quarter and by close to 2% in January, last month our trade deficit with the rest of the world rose to over $42 billion. Greenspan stated yesterday that it will take time for the dollar’s decline to begin narrowing the deficit. I think Greenspan is out to lunch. The dollar has been declining for close to two years against the major currencies. He should spend more time watching over his own decline. We are importing close to 320 million barrels of oil a month. Forget about China, Japan, and others for a moment. Greenspan might consider that the exports of our capital goods and consumer goods have begun to decline. Look at the economies of our export markets. We visit different states. Let’s leave the U.S. and travel to the eurozone. In the fourth quarter their economy grew but 0.3%, down from the feeble 0.4% in the third quarter. Growth for all of 2003 was 0.4%. Germany’s economy declined by 0.1% in 2003. In other words, the eurozone cannot be counted on to be a big importer of our goods and services in 2004. In sum, the weaker dollar has not narrowed the current account deficit. Rather, the trade deficit has mushroomed to record levels. The markets listen to Greenspan because they lack, as a generalization, the inability to think for themselves. They are deserving of the losses that have come their way and that will mount in the months and years ahead. Sheep can be seen wandering the financial streets at all times of the day and night. Unfortunately, for them, Greenspan’s words of patience have an air of sweetness, but they carry with them thorns aplenty. Chauncey Gardner was a real gardener. Greenspan misplaced his pruning shears.
Bruce Heitshusen, a South Amana, Iowa row crop farmer and livestock producer: “The market seems to be hanging in there pretty good. Everybody’s just holding their breath and hoping nothing else comes along.” He’s not referring to stocks and bonds but rather to Mad Cow disease. Japan accounted for $1 billion in beef export sales in 2003. It was our number one market for beef exports. With Mad Cow, there goes the $1 billion out the window. A billion here and a billion there, and before you know it, it can add up to some real money.
The University of Michigan preliminary sentiment index for February dropped 10 points from January’s level, which was the highest since November 2000. The preliminary reading is based on 250 households, and the final reading of 500 households is released on Feb. 27. The expectations index and the current conditions index also experienced large drops in February. I wouldn’t be concerned because the optimists will tell you they are lagging indicators. When the readings are promising, the same folks state they are leading indicators.
Greenspan to Congress: “In all likelihood, employment will begin to grow more quickly before long as output continues to expand.”
Home Depot continues to open new stores. On Thursday, the company announced cutting 100 jobs in its finance division at its Atlanta headquarters as apart of a streamlining plan. Being a government employee, Greenspan could not be expected to grasp the meaning of streamlining.
It’s wonderful growing roses. The different colors and their graceful buds can provide much pleasure. However, picking those roses is an entirely different story. The thorns on those rose bushes require some careful handling, and can be a bitch.
King Solomon writing in Proverbs: “The Borrower is servant to the lender.”
Ross Perot and Sen. Paul Simon: “A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.”
In 2003, almost $7 trillion was issued I the U.S. fixed income markets, up 28% from 2002. The U.S. trade deficit ballooned to record levels in 2003, and rose 17% from the record set in 2002. We had a $124 billion trade gap with China, and that was a record. Our trade deficit with Japan declined to $66 billion, the lowest level since 1998. Canada was in third place with a trade gap of $54 billion, then Mexico with $40 billion, and Germany close behind with $39 billion. With our weaker dollar, our exports rose 4.6% to $1 trillion, the highest mark since 2000. However, despite the dollar’s fall by 3.3% on a trade-weighted basis in the fourth quarter and by close to 2% in January, last month our trade deficit with the rest of the world rose to over $42 billion. Greenspan stated yesterday that it will take time for the dollar’s decline to begin narrowing the deficit. I think Greenspan is out to lunch. The dollar has been declining for close to two years against the major currencies. He should spend more time watching over his own decline. We are importing close to 320 million barrels of oil a month. Forget about China, Japan, and others for a moment. Greenspan might consider that the exports of our capital goods and consumer goods have begun to decline. Look at the economies of our export markets. We visit different states. Let’s leave the U.S. and travel to the eurozone. In the fourth quarter their economy grew but 0.3%, down from the feeble 0.4% in the third quarter. Growth for all of 2003 was 0.4%. Germany’s economy declined by 0.1% in 2003. In other words, the eurozone cannot be counted on to be a big importer of our goods and services in 2004. In sum, the weaker dollar has not narrowed the current account deficit. Rather, the trade deficit has mushroomed to record levels. The markets listen to Greenspan because they lack, as a generalization, the inability to think for themselves. They are deserving of the losses that have come their way and that will mount in the months and years ahead. Sheep can be seen wandering the financial streets at all times of the day and night. Unfortunately, for them, Greenspan’s words of patience have an air of sweetness, but they carry with them thorns aplenty. Chauncey Gardner was a real gardener. Greenspan misplaced his pruning shears.
Bruce Heitshusen, a South Amana, Iowa row crop farmer and livestock producer: “The market seems to be hanging in there pretty good. Everybody’s just holding their breath and hoping nothing else comes along.” He’s not referring to stocks and bonds but rather to Mad Cow disease. Japan accounted for $1 billion in beef export sales in 2003. It was our number one market for beef exports. With Mad Cow, there goes the $1 billion out the window. A billion here and a billion there, and before you know it, it can add up to some real money.
The University of Michigan preliminary sentiment index for February dropped 10 points from January’s level, which was the highest since November 2000. The preliminary reading is based on 250 households, and the final reading of 500 households is released on Feb. 27. The expectations index and the current conditions index also experienced large drops in February. I wouldn’t be concerned because the optimists will tell you they are lagging indicators. When the readings are promising, the same folks state they are leading indicators.
Greenspan to Congress: “In all likelihood, employment will begin to grow more quickly before long as output continues to expand.”
Home Depot continues to open new stores. On Thursday, the company announced cutting 100 jobs in its finance division at its Atlanta headquarters as apart of a streamlining plan. Being a government employee, Greenspan could not be expected to grasp the meaning of streamlining.
Friday, February 13, 2004
2/13/04 Deals Are Back
I'm not referring to Oracle and PeopleSoft. That is a figment of Ellison's imagination. Today we'll see Cingular and Vodaphone squaring off for AT&T Wireless. The media is buzzing about all the potential buyers for Disney. The latter hired Goldman Sachs and Bear Stearns to review Comcast's offer. They would be well served to add Allen & Company to their list of advisors. Many potential buyers wil be mentioned. The parts of Disney are worth more than the whole. A buyer like Comcast can take the cream, like ESPN, and sell the non-essentials. That's what I'd do. Take your time selling the pieces. Foreign buyers are looking at a cheap U.S. dollar. They can buy on the cheap. That reminds me. With the pound at an 11 year high vs. the dollar, Unilever should be prowling for deals. That goes for other foreign buyers in the pharmaceutical business. All the newly discovered experts will have opinions on each announced deal. Remember that most are still in diapers. They have never done a deal and don't grasp the difficulties involved in buying another concern. Most large mergers don't work out well. The exception is the Pepsi acquisition of Frito Lay. Much of the success or failure depends on management and melding people and organizations. As such, most are doomed before the ink is dry on the deal. A word of caution might be in order. Investing in risk arbitrage requires filtering out all the noise. If you can't do that, forget it. Don't listen to rumors, and don't invest based on the rumors. Invest on the facts. Put yourself in the shoes of the buyer. What is ESPN worth to Comcast? What's the mouse library worth to Comcast? What's it worth to another company? These are the questions which will determine the ultimate value of Disney, and not what an expert predicts.
One additional word about deals. You'll read that the market must be cheap because deals are getting announced. Each deal has its own story. It has nothing to do with the market as a whole. When you're talking $50 billion+, you're talking an amount which exceeds the GDP for most countries. This is significant jack. There aren't that many companies that can play in that arena. A company like GE can, but then you must look at their position in media and compare it to the fast growing medical business. Media doesn't look great next to it. Talking about medical. The latter now accounts for 15% of our GDP and in a few years is projected to grow to 18%. I have discussed this fact for the last several years. The number one trend in the U.S. is the aging of the population. Japan has had a similar situation for years. There is one bit of better news. Healthcare spending in 2003 grew at a 7.8% rate, down from 9.3% in 2002.
People keep emailing stating that unemployment is a lagging indicator. They are quite correct. It lags and lags and lags. It's been lagging for over two years or in the case of manufacturing close to 3 1/2 years. Yesterday it lagged some more, to a two-month high. With the cost of benefits continuing to rise and the hours worked per week hovering near a multi-year low, the prospect for hiring isn't bright. The people who argue otherwise are also not bright. Hope springs eternal but it doesn't pay the bills.
I'm not referring to Oracle and PeopleSoft. That is a figment of Ellison's imagination. Today we'll see Cingular and Vodaphone squaring off for AT&T Wireless. The media is buzzing about all the potential buyers for Disney. The latter hired Goldman Sachs and Bear Stearns to review Comcast's offer. They would be well served to add Allen & Company to their list of advisors. Many potential buyers wil be mentioned. The parts of Disney are worth more than the whole. A buyer like Comcast can take the cream, like ESPN, and sell the non-essentials. That's what I'd do. Take your time selling the pieces. Foreign buyers are looking at a cheap U.S. dollar. They can buy on the cheap. That reminds me. With the pound at an 11 year high vs. the dollar, Unilever should be prowling for deals. That goes for other foreign buyers in the pharmaceutical business. All the newly discovered experts will have opinions on each announced deal. Remember that most are still in diapers. They have never done a deal and don't grasp the difficulties involved in buying another concern. Most large mergers don't work out well. The exception is the Pepsi acquisition of Frito Lay. Much of the success or failure depends on management and melding people and organizations. As such, most are doomed before the ink is dry on the deal. A word of caution might be in order. Investing in risk arbitrage requires filtering out all the noise. If you can't do that, forget it. Don't listen to rumors, and don't invest based on the rumors. Invest on the facts. Put yourself in the shoes of the buyer. What is ESPN worth to Comcast? What's the mouse library worth to Comcast? What's it worth to another company? These are the questions which will determine the ultimate value of Disney, and not what an expert predicts.
One additional word about deals. You'll read that the market must be cheap because deals are getting announced. Each deal has its own story. It has nothing to do with the market as a whole. When you're talking $50 billion+, you're talking an amount which exceeds the GDP for most countries. This is significant jack. There aren't that many companies that can play in that arena. A company like GE can, but then you must look at their position in media and compare it to the fast growing medical business. Media doesn't look great next to it. Talking about medical. The latter now accounts for 15% of our GDP and in a few years is projected to grow to 18%. I have discussed this fact for the last several years. The number one trend in the U.S. is the aging of the population. Japan has had a similar situation for years. There is one bit of better news. Healthcare spending in 2003 grew at a 7.8% rate, down from 9.3% in 2002.
People keep emailing stating that unemployment is a lagging indicator. They are quite correct. It lags and lags and lags. It's been lagging for over two years or in the case of manufacturing close to 3 1/2 years. Yesterday it lagged some more, to a two-month high. With the cost of benefits continuing to rise and the hours worked per week hovering near a multi-year low, the prospect for hiring isn't bright. The people who argue otherwise are also not bright. Hope springs eternal but it doesn't pay the bills.
Wednesday, February 11, 2004
2/12/04 The Real Deal And Government Testimony
Integrated content and distribution would be the hallmark of a combined Disney and Comcast. The latter, in an unsolicited proposal, offered a tax-free stock for stock merger in which Comcast would issue 0.78 of a share of Class A voting common stock for each share of Disney. The latter shareholders would own approximately 42% of the combined company. Comcast has 21 million cable subscribers and over 5 million high speed Internet subscribers. Disney’s CEO stated he was “unwilling” to enter merger talks. Disney owns ABC television, ESPN, Disney and Miramax movie studios, theme parks , and most importantly, one of the most recognizable global brand names. Utilizing the currency of Comcast stock, it will be much more likely that this bid at some point will be increased. The Roberts family is known as good managers, and they should bring additional financial acumen to Disney. The government approvals should not present a problem. Comcast has Rohaytn, Rattner, Morgan Stanley, and J.P. Morgan Chase as advisors. They are serious about acquiring Disney, and are patient acquirers. It took them over one year to buy AT&T broadband. A combination of the two companies would make this the largest media company. There will be many investment bankers scurrying the financial landscape looking to represent a buyer for Disney. There will be lots of rumors; however, few have the financial capacity or the willingness to undertake a $60 to $70 billion acquisition. It will take time for this deal to develop; however, in my opinion, it is the real deal.
Unfortunately, I cannot say the same for Greenspan’s testimony to the U.S. House Committee. After reading the President’s Economic Report, one would think there is a division on the economy. They are in agreement on a few issues. The stock market is the star performer as rising equity prices have reduced financing costs, and just as importantly, increased household wealth. Bush and Greenspan figure on low inflation continuing along with low interest rates for the remainder of the year. They agree that reduced tax rates and tax credits boosted real disposable income. Greenspan believes productivity gains will slow but not to the extent that Bush does. Both believe productivity growth has lessened the need to hire. Both believe hiring will hasten in 2004 but Greenspan is concerned with the federal budget deficit and the risk it entails to sustaining growth. He doesn’t believe the Bush has offered a convincing road map for lowering deficits. Greenspan is concerned about the impact of a spike in energy prices, and Bush has not addressed that in his economic report. Greenspan stated progress in creating jobs has been limited but Bush gushes about the jobs being created.
Last year, venture capital investment decreased to its lowest level since 1997. Nationally, $18.2 billion was invested in 2003, down 15% from the prior year. The life sciences industry captured 27% of all financing I 2003. The software industry accounted for 20%.
Integrated content and distribution would be the hallmark of a combined Disney and Comcast. The latter, in an unsolicited proposal, offered a tax-free stock for stock merger in which Comcast would issue 0.78 of a share of Class A voting common stock for each share of Disney. The latter shareholders would own approximately 42% of the combined company. Comcast has 21 million cable subscribers and over 5 million high speed Internet subscribers. Disney’s CEO stated he was “unwilling” to enter merger talks. Disney owns ABC television, ESPN, Disney and Miramax movie studios, theme parks , and most importantly, one of the most recognizable global brand names. Utilizing the currency of Comcast stock, it will be much more likely that this bid at some point will be increased. The Roberts family is known as good managers, and they should bring additional financial acumen to Disney. The government approvals should not present a problem. Comcast has Rohaytn, Rattner, Morgan Stanley, and J.P. Morgan Chase as advisors. They are serious about acquiring Disney, and are patient acquirers. It took them over one year to buy AT&T broadband. A combination of the two companies would make this the largest media company. There will be many investment bankers scurrying the financial landscape looking to represent a buyer for Disney. There will be lots of rumors; however, few have the financial capacity or the willingness to undertake a $60 to $70 billion acquisition. It will take time for this deal to develop; however, in my opinion, it is the real deal.
Unfortunately, I cannot say the same for Greenspan’s testimony to the U.S. House Committee. After reading the President’s Economic Report, one would think there is a division on the economy. They are in agreement on a few issues. The stock market is the star performer as rising equity prices have reduced financing costs, and just as importantly, increased household wealth. Bush and Greenspan figure on low inflation continuing along with low interest rates for the remainder of the year. They agree that reduced tax rates and tax credits boosted real disposable income. Greenspan believes productivity gains will slow but not to the extent that Bush does. Both believe productivity growth has lessened the need to hire. Both believe hiring will hasten in 2004 but Greenspan is concerned with the federal budget deficit and the risk it entails to sustaining growth. He doesn’t believe the Bush has offered a convincing road map for lowering deficits. Greenspan is concerned about the impact of a spike in energy prices, and Bush has not addressed that in his economic report. Greenspan stated progress in creating jobs has been limited but Bush gushes about the jobs being created.
Last year, venture capital investment decreased to its lowest level since 1997. Nationally, $18.2 billion was invested in 2003, down 15% from the prior year. The life sciences industry captured 27% of all financing I 2003. The software industry accounted for 20%.
2/11/04 Unfinished Business
Yesterday I kept thinking about the Economic Report of the President. The employment forecast was so unattainable that I thought some phone calls were in order. After all, there is no point to set yourself up to look stupid. Unfortunately, after the calls, I needed to go for a walk. I’ve made this statement over the past several months. The real WMD are in Washington DC. What did I learn? I learned that an additional 700,000 jobs were assumed to have been created by the time the report was completed. However, the administration knew that addition had not materialized when the report was released on Monday. Secondly, the report factored in that annual productivity growth would decline from 4.3% in 2003 to only 1.4% in 2004. I state only because the long term annual productivity growth is 2.1%, and the last time it was as low as 1.4% or lower was in 1995. The president’s economic team stated that, with unusually depressed productivity growth, employers would need to hire more workers. However, that assumption is negated by another assumption behind the report. The economic team projected that hours per worker are not expected to grow in calendar 2004. No business manager or owner would want to hire an additional worker and spend money on training and benefits before adding weekly working hours for existing employees. In sum, this report was released on Monday with the administration knowing that the assumptions behind the conclusions reached were false. I cannot imagine anyone voting for people who pull such falsehoods on the American people.
I don’t know why I was so surprised. Maybe I’m just hopeful that Americans will receive the best from their leaders. Then I recall the two versions of the report on Iraq’s weapons.
The classified version: “The activities we have detected do not, however, add up to a compelling case that Iraq is currently pursuing what INR would consider to be an integrated and comprehensive approach to acquire nuclear weapons. Iraq may be doing so, but INR considers the available evidence inadequate to support such a judgment. Lacking persuasive evidence that Baghdad has launched a coherent effort to reconstitute its nuclear weapons programs, INR is unwilling to… project a timeline for the completion of activities it does not now see happening.” This was written in October 2002. The public version of this report: “…most analysts assess Iraq is reconstituting its nuclear weapons program.”
Over the past 12 years consumer spending by Americans increased each and every quarter. With muted job creation, wage growth merely equating to the rate of inflation, hours worked declining, and with almost 5 million part-time workers who are unable to find full-time employment, consumer spending has come to the crossroads. In 2003, Americans received tax reductions and credits, mortgage equity withdrawals via refinancing, and many shall have refunds coming their way from the IRS in early 2004. Even with those extra dollars, the savings rate has declined to about 1.5%. To make matters worse, a recent study stated the new jobs created pay about 21% less than the jobs they replace. The new jobs pay about $35,410 a year compared with $44,570 at the old jobs. Greenspan and Bush are out of tricks. Slight of hand will not put money in the pockets of Americans. Where do we go from here? It will, in my view, require new leadership based on policies that can stick to your ribs, and grounded in the truth. You can print money, you can spend taxpayer money, you can make false promises and issue false prospects, but eventually there is a stiff price for twin tower deficit policies that undermine the well being of 285 million Americans. We are at that point.
We are fast approaching Feb. 16. Many businesses will be closed for the President’s holiday. It won’t be a time for celebration at AT&T Wireless in Bothell, Washington. In all probability, at least 1,000 employees will receive termination notices.
Yesterday I kept thinking about the Economic Report of the President. The employment forecast was so unattainable that I thought some phone calls were in order. After all, there is no point to set yourself up to look stupid. Unfortunately, after the calls, I needed to go for a walk. I’ve made this statement over the past several months. The real WMD are in Washington DC. What did I learn? I learned that an additional 700,000 jobs were assumed to have been created by the time the report was completed. However, the administration knew that addition had not materialized when the report was released on Monday. Secondly, the report factored in that annual productivity growth would decline from 4.3% in 2003 to only 1.4% in 2004. I state only because the long term annual productivity growth is 2.1%, and the last time it was as low as 1.4% or lower was in 1995. The president’s economic team stated that, with unusually depressed productivity growth, employers would need to hire more workers. However, that assumption is negated by another assumption behind the report. The economic team projected that hours per worker are not expected to grow in calendar 2004. No business manager or owner would want to hire an additional worker and spend money on training and benefits before adding weekly working hours for existing employees. In sum, this report was released on Monday with the administration knowing that the assumptions behind the conclusions reached were false. I cannot imagine anyone voting for people who pull such falsehoods on the American people.
I don’t know why I was so surprised. Maybe I’m just hopeful that Americans will receive the best from their leaders. Then I recall the two versions of the report on Iraq’s weapons.
The classified version: “The activities we have detected do not, however, add up to a compelling case that Iraq is currently pursuing what INR would consider to be an integrated and comprehensive approach to acquire nuclear weapons. Iraq may be doing so, but INR considers the available evidence inadequate to support such a judgment. Lacking persuasive evidence that Baghdad has launched a coherent effort to reconstitute its nuclear weapons programs, INR is unwilling to… project a timeline for the completion of activities it does not now see happening.” This was written in October 2002. The public version of this report: “…most analysts assess Iraq is reconstituting its nuclear weapons program.”
Over the past 12 years consumer spending by Americans increased each and every quarter. With muted job creation, wage growth merely equating to the rate of inflation, hours worked declining, and with almost 5 million part-time workers who are unable to find full-time employment, consumer spending has come to the crossroads. In 2003, Americans received tax reductions and credits, mortgage equity withdrawals via refinancing, and many shall have refunds coming their way from the IRS in early 2004. Even with those extra dollars, the savings rate has declined to about 1.5%. To make matters worse, a recent study stated the new jobs created pay about 21% less than the jobs they replace. The new jobs pay about $35,410 a year compared with $44,570 at the old jobs. Greenspan and Bush are out of tricks. Slight of hand will not put money in the pockets of Americans. Where do we go from here? It will, in my view, require new leadership based on policies that can stick to your ribs, and grounded in the truth. You can print money, you can spend taxpayer money, you can make false promises and issue false prospects, but eventually there is a stiff price for twin tower deficit policies that undermine the well being of 285 million Americans. We are at that point.
We are fast approaching Feb. 16. Many businesses will be closed for the President’s holiday. It won’t be a time for celebration at AT&T Wireless in Bothell, Washington. In all probability, at least 1,000 employees will receive termination notices.
Tuesday, February 10, 2004
2/10/04 The 2004 Economic Report Of The President
The White House Council of Economic Advisors signed off on this report and released it yesterday. I know Wall Street is not concerned about our $7 trillion national debt. China and Japan will fund the debt year in and year out. Interest rates will remain significantly below those found in other industrialized nations, and will not rise as long as inflation remains muted. Just the other day Bush released his $520 billion budget deficit plan. He failed to mention his Social Security privatization plan. It was revealed in yesterday’s 2004 Economic Report of the President and it contains adding another $1 trillion to the national debt for the privatization plan. The report stated “since the budget surpluses forecasted a few years ago have not materialized, critics argue that personal retirement accounts to Social Security is impossible or impractical. In reality, the need to add resources to the Social Security system is no less pressing now that surpluses have disappeared; indeed, it may be even more so.” The report goes on to forecast 4% GDP growth for 2004 and that the economy will generate 2.6 million jobs in 2004. Last year at this time, Bush and his advisors forecast adding 1.7 million jobs in 2003. In fact, over the past year there was a loss of jobs. That’s why it is referred to as a job loss recovery. With January having passed, in order to meet the 2.6 million addition to the payrolls, over 450,000 new jobs would need to be created between February and December. One should note that, taking into account all the benchmarking and revisions of the payroll numbers, total employment in January was but 33,000 more than in October. We’ve seen promises in the past from this administration. They knew where the WMD were located. Precisely 11 months ago, General Meyers pointed to their location on a map. Now they are pointing to tax cuts and other tax incentives to produce 2.6 million jobs in 2004. That tax plan existed in 2003, and the result produced was a loss of jobs.
The IBD/TIPP Economic Optimism Index produced some interesting findings. The nation’s optimism had its biggest one-month drop since July 2002. The Six-Month Economic Outlook had its biggest one-month fall since Bush took office. The survey indicated that “respondents fearing they or someone in their household will lose a job in the next year rose from 16% in January to 20% this month.”
Japan’s Parliament made another $200 billion available to the Ministry of Finance for sales of the yen in order to keep the yen/dollar relationship from falling much further. This amount equates to a quarter of Japan’s foreign currency reserves. Last year they also sold over 20 trillion yen. In the first four weeks of 2004 they sold over 7 trillion yen. Continuing to sell its currency at the current rate can only undermine the economic stability of Japan in the long term. The rate of sales is clearly unsustainable.
In the recent Mortgage Credit News it is reported that “although the office market has begun to bottom, absorption of office space has fallen in nine of the last eleven quarters, and office rents have fallen in all eleven. High-wage jobs are in offices.”
Ford has about 5,600 hourly employees working on two assembly lines that produce the Ford Escape SUV and the F-series pickup at its Claycomo plant . Motor Trend magazine selected the new F-150 as its 2004 Truck of the Year. In December, Ford executives praised the Claycomo workforce for its efforts in launching the new pickup and remarked how the F-150 sales had spiked with the introduction of the new vehicle last fall. It is no wonder how surprised Claycomo employees were to find that layoffs would occur at their plant, the star of the Ford factory locations. One hundred hourly workers were laid off on Friday, Feb. 6, and another 100 employees will be cut on Feb. 13. Maybe the Claycomo employees should have seen the cuts coming. In December, Ford’s CFO stated the cost of producing the new F-150 would drop by about $1,000 per truck by the end of 2004, compared with when its production began last June. I wonder what other cost-cutting measures will occur at plants that produce slower-selling vehicles.
One Price Clothing Stores currently operates 494 stores in 30 states, Washington DC, Puerto Rico, and the U.S. Virgin Islands. Yesterday they filed for voluntary Chapter 11 protection. Tower Records operates 93 stores. Yesterday they filed for Chapter 11. CSX operates a rail network of more than 23,000 route miles in 23 states. In December, they terminated 25 senior executives. Yesterday, they cut about 120 high-level managers. It is part of their ongoing process to reduce the number of layers of supervision in its organization from 11 to 8. Can you imagine the number of managerial layoffs yet to come? How about reducing the layers of supervision to a couple?
I thought it might be interesting to visit with the Arkansas Workforce Investment Board (AWIB). They should provide a clue as to the tomfoolery at the U.S. Bureau of Labor. The AWIB reported that, overall, Arkansas’ nonfarm payroll employment was down 23,200 between December to January to total 1,130,300. The state saw losses in eleven major employment sectors. However, using the Department of Labor numbers, the director of the AWIB stated the state’s unemployment rate fell from December’s 6.3% to January’s 5.2%. The drop was “caused by larger than normal revisions to the statewide estimates for 2003, and blamed the ‘distortion’ in the job market statistics on “benchmarking procedures” used to control unemployment statistics. Distortion appears to be a centerpiece of the administration’s policies.
Four years ago, 29% of Alaska’s voters considered the state’s fiscal situation serious. The new poll indicates that has now risen to 45%. The annual budget shortfall is projected at $600 million this year. The Constitutional Budget Reserve fund is expected to run dry in 2007.
According to ComPsych Corporation, employees’ financial picture has worsened significantly since last year. Calls for financial help have risen 69% from 2002 to 2003, with the majority of calls related to debt, refinancing, and failed investments.
The $4.3 billion research tax credit is scheduled to expire June 30. The Treasury Department estimates making it permanent would reduce government tax receipts by $78.4 billion over 10 years. The research tax credit amounts to a subsidy of about six cents for every dollar a company spends on research in the U.S., according to the R&D Credit Coalition.
The White House Council of Economic Advisors signed off on this report and released it yesterday. I know Wall Street is not concerned about our $7 trillion national debt. China and Japan will fund the debt year in and year out. Interest rates will remain significantly below those found in other industrialized nations, and will not rise as long as inflation remains muted. Just the other day Bush released his $520 billion budget deficit plan. He failed to mention his Social Security privatization plan. It was revealed in yesterday’s 2004 Economic Report of the President and it contains adding another $1 trillion to the national debt for the privatization plan. The report stated “since the budget surpluses forecasted a few years ago have not materialized, critics argue that personal retirement accounts to Social Security is impossible or impractical. In reality, the need to add resources to the Social Security system is no less pressing now that surpluses have disappeared; indeed, it may be even more so.” The report goes on to forecast 4% GDP growth for 2004 and that the economy will generate 2.6 million jobs in 2004. Last year at this time, Bush and his advisors forecast adding 1.7 million jobs in 2003. In fact, over the past year there was a loss of jobs. That’s why it is referred to as a job loss recovery. With January having passed, in order to meet the 2.6 million addition to the payrolls, over 450,000 new jobs would need to be created between February and December. One should note that, taking into account all the benchmarking and revisions of the payroll numbers, total employment in January was but 33,000 more than in October. We’ve seen promises in the past from this administration. They knew where the WMD were located. Precisely 11 months ago, General Meyers pointed to their location on a map. Now they are pointing to tax cuts and other tax incentives to produce 2.6 million jobs in 2004. That tax plan existed in 2003, and the result produced was a loss of jobs.
The IBD/TIPP Economic Optimism Index produced some interesting findings. The nation’s optimism had its biggest one-month drop since July 2002. The Six-Month Economic Outlook had its biggest one-month fall since Bush took office. The survey indicated that “respondents fearing they or someone in their household will lose a job in the next year rose from 16% in January to 20% this month.”
Japan’s Parliament made another $200 billion available to the Ministry of Finance for sales of the yen in order to keep the yen/dollar relationship from falling much further. This amount equates to a quarter of Japan’s foreign currency reserves. Last year they also sold over 20 trillion yen. In the first four weeks of 2004 they sold over 7 trillion yen. Continuing to sell its currency at the current rate can only undermine the economic stability of Japan in the long term. The rate of sales is clearly unsustainable.
In the recent Mortgage Credit News it is reported that “although the office market has begun to bottom, absorption of office space has fallen in nine of the last eleven quarters, and office rents have fallen in all eleven. High-wage jobs are in offices.”
Ford has about 5,600 hourly employees working on two assembly lines that produce the Ford Escape SUV and the F-series pickup at its Claycomo plant . Motor Trend magazine selected the new F-150 as its 2004 Truck of the Year. In December, Ford executives praised the Claycomo workforce for its efforts in launching the new pickup and remarked how the F-150 sales had spiked with the introduction of the new vehicle last fall. It is no wonder how surprised Claycomo employees were to find that layoffs would occur at their plant, the star of the Ford factory locations. One hundred hourly workers were laid off on Friday, Feb. 6, and another 100 employees will be cut on Feb. 13. Maybe the Claycomo employees should have seen the cuts coming. In December, Ford’s CFO stated the cost of producing the new F-150 would drop by about $1,000 per truck by the end of 2004, compared with when its production began last June. I wonder what other cost-cutting measures will occur at plants that produce slower-selling vehicles.
One Price Clothing Stores currently operates 494 stores in 30 states, Washington DC, Puerto Rico, and the U.S. Virgin Islands. Yesterday they filed for voluntary Chapter 11 protection. Tower Records operates 93 stores. Yesterday they filed for Chapter 11. CSX operates a rail network of more than 23,000 route miles in 23 states. In December, they terminated 25 senior executives. Yesterday, they cut about 120 high-level managers. It is part of their ongoing process to reduce the number of layers of supervision in its organization from 11 to 8. Can you imagine the number of managerial layoffs yet to come? How about reducing the layers of supervision to a couple?
I thought it might be interesting to visit with the Arkansas Workforce Investment Board (AWIB). They should provide a clue as to the tomfoolery at the U.S. Bureau of Labor. The AWIB reported that, overall, Arkansas’ nonfarm payroll employment was down 23,200 between December to January to total 1,130,300. The state saw losses in eleven major employment sectors. However, using the Department of Labor numbers, the director of the AWIB stated the state’s unemployment rate fell from December’s 6.3% to January’s 5.2%. The drop was “caused by larger than normal revisions to the statewide estimates for 2003, and blamed the ‘distortion’ in the job market statistics on “benchmarking procedures” used to control unemployment statistics. Distortion appears to be a centerpiece of the administration’s policies.
Four years ago, 29% of Alaska’s voters considered the state’s fiscal situation serious. The new poll indicates that has now risen to 45%. The annual budget shortfall is projected at $600 million this year. The Constitutional Budget Reserve fund is expected to run dry in 2007.
According to ComPsych Corporation, employees’ financial picture has worsened significantly since last year. Calls for financial help have risen 69% from 2002 to 2003, with the majority of calls related to debt, refinancing, and failed investments.
The $4.3 billion research tax credit is scheduled to expire June 30. The Treasury Department estimates making it permanent would reduce government tax receipts by $78.4 billion over 10 years. The research tax credit amounts to a subsidy of about six cents for every dollar a company spends on research in the U.S., according to the R&D Credit Coalition.
Monday, February 09, 2004
2/9/04 Strike Infested Waters
Last October, 70,000 union workers went out on strike against the big supermarket chains in Southern California. Four months later they are still striking. They may soon have the company of another 100,000 union workers. SBC’s regional contracts with about 100,000 employees nationwide expire in April. Officials at the employees’ union, the Communication Workers of America, have stated that a strike is certain to take place if SBC management tries to change existing medical benefits. SBC is preparing for a strike. The company has informed managers that they must be prepared to take over key operations should a strike materialize. Meanwhile, managers’ vacations for April and beyond have been canceled. Settlement talks will take place this week in Contra Costa County in California. SBC has approximately $2 billion in annual health care costs, and the company wants the employees to share a greater burden of those expenses. A similar issue has been on the table with the 70,000 workers out on strike. In SBC’s case, the union negotiator stated “there is very little wiggle room” as far as health care goes. “Health care is clearly the No. 1 concern of our members. It’s the biggest and most powerful strike issue.” SBC told the unions the company would provide health benefits even during a strike. For its part, the union will give 30 days’ notice before any walkout.
This year, India’s pharmaceutical industry has achieved a 19.6% export growth, which no other product category has realized. Exports of pharma and related products total $5.36 billion.
The Northwest Texas International Trade Center opened in Lubbock in March 1994. In fiscal year 2003, the Center helped generate about $96 million in exports. Over the past 10 years, 95% of the exports have been through small businesses with less than 10 or 15 employees and export business has amounted to $420 million. The Center has about 600 clients, and their office operates with 9 employees and three major departments: marketing research, trade finance, and documentation specialists. If the U.S. had more such centers helping small businesses, our exports would increase dramatically and our trade deficit would decrease, and our need to attract foreign capital would diminish. Private enterprise rooted firmly in capitalism can provide economic independence to local communities and to our nation. This does not involve tax breaks or incentives. It centers on dedication and sweat capital.
This week Greenspan will tell the world that the U.S. economy is doing better and improving monthly and that the job situation is showing signs of stabilizing. He will not discuss why big multinational companies report improved quarterly earnings and accompany the report with additional layoff notices as was the case with Dow Chemical and DuPont. Greenspan might touch on the strength in the housing market; however, he won’t discuss Wells Fargo, a company which reported strong fourth quarter earnings, and has announced a reduction of 7,500 to 10,000 temporary mortgage jobs over the past four months. Greenspan might relate that there were 420 new plant start-ups in 2003. He will omit that there were 443 plant closings in 2003, and that more closings have taken place in the first two months of 2004. However, things are getting better. In 2002, there were over 600 plants shut down. By the time Bush is voted out of office this November, plant closings could be down to 300. The man is on a roll, and Greenspan will accompany him out the door.
EADS, the overseas aerospace and defense company, stated they may cut 670 jobs or about 11% of its workforce. Aviva, Britain’s biggest insurer, has relocated much of its back office work to India. They predicted higher profits this year. Aviva is in the process of outsourcing more than 3,500 back office jobs to India. On Friday, Aviva announced it was closing its Hill House Hammond High Street broking chain. The company claims the move reflected a massive switch by the public to buying house and car insurance over the Internet and on the telephone. Of the 1,600 people employed in the offices about 1,200 face “compulsory redundancies.”
Chinadotcom holds a majority stake in Swedish software maker Industri-Matematik International Corp., and the latter is absorbing Atlanta-based Ross Systems. After completion of the merger, 90 software design jobs will be moved from Atlanta and Sweden to China. Presently, Sun Microsystems does all of its Web browser development work in China. Microsoft and Oracle have development centers there too.
According to the Tax Counseling Project of the Center for Economic Progress, an estimated 21 million workers in the U.S. are eligible for the Earned Income Tax Credit, which provides an average of $1,786 into low-and moderate-income families’ coffers. However, it is estimated that 10 to 15 percent of eligible families nationally still don’t take advantage of the credit.
Furniture Brands is the largest U.S. home-furniture producer. They produce furniture under the Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith, Hickory, and Thomasville brands. In a restructuring move, the company will close a plant producing Hickory Chair furniture, cease production of its Highland House line, and reduce the workforce by 11% at plants producing Thomasville Furniture. The company’s CEO stated “while we remain cautious in our outlook, it appears 2004 is beginning on a positive note.” If it gets any more positive, they’ll be closing all their plants.
Steven Wood, chief economist at Insight Economics: “It’s just flat-out disappointing. We’re just not creating many jobs. Unless there is more job creation and faster wage growth, it is difficult to see how real consumer spending (which makes up) 70% of the economy, can continue to sustain strong economic growth.”
Since the beginning of the Iraq war, 530 U.S. soldiers have died. Rumsfeld calls this a “war of necessity.” Could have + intent do not equate to “imminent threat” or even “a grave and gathering threat.” The fact is Bush is his own worst enemy. He could have been a contender, he might have been a contender for re-election but there is no “unique urgency” and he is left with “word contests" and blood on his hands.
Last October, 70,000 union workers went out on strike against the big supermarket chains in Southern California. Four months later they are still striking. They may soon have the company of another 100,000 union workers. SBC’s regional contracts with about 100,000 employees nationwide expire in April. Officials at the employees’ union, the Communication Workers of America, have stated that a strike is certain to take place if SBC management tries to change existing medical benefits. SBC is preparing for a strike. The company has informed managers that they must be prepared to take over key operations should a strike materialize. Meanwhile, managers’ vacations for April and beyond have been canceled. Settlement talks will take place this week in Contra Costa County in California. SBC has approximately $2 billion in annual health care costs, and the company wants the employees to share a greater burden of those expenses. A similar issue has been on the table with the 70,000 workers out on strike. In SBC’s case, the union negotiator stated “there is very little wiggle room” as far as health care goes. “Health care is clearly the No. 1 concern of our members. It’s the biggest and most powerful strike issue.” SBC told the unions the company would provide health benefits even during a strike. For its part, the union will give 30 days’ notice before any walkout.
This year, India’s pharmaceutical industry has achieved a 19.6% export growth, which no other product category has realized. Exports of pharma and related products total $5.36 billion.
The Northwest Texas International Trade Center opened in Lubbock in March 1994. In fiscal year 2003, the Center helped generate about $96 million in exports. Over the past 10 years, 95% of the exports have been through small businesses with less than 10 or 15 employees and export business has amounted to $420 million. The Center has about 600 clients, and their office operates with 9 employees and three major departments: marketing research, trade finance, and documentation specialists. If the U.S. had more such centers helping small businesses, our exports would increase dramatically and our trade deficit would decrease, and our need to attract foreign capital would diminish. Private enterprise rooted firmly in capitalism can provide economic independence to local communities and to our nation. This does not involve tax breaks or incentives. It centers on dedication and sweat capital.
This week Greenspan will tell the world that the U.S. economy is doing better and improving monthly and that the job situation is showing signs of stabilizing. He will not discuss why big multinational companies report improved quarterly earnings and accompany the report with additional layoff notices as was the case with Dow Chemical and DuPont. Greenspan might touch on the strength in the housing market; however, he won’t discuss Wells Fargo, a company which reported strong fourth quarter earnings, and has announced a reduction of 7,500 to 10,000 temporary mortgage jobs over the past four months. Greenspan might relate that there were 420 new plant start-ups in 2003. He will omit that there were 443 plant closings in 2003, and that more closings have taken place in the first two months of 2004. However, things are getting better. In 2002, there were over 600 plants shut down. By the time Bush is voted out of office this November, plant closings could be down to 300. The man is on a roll, and Greenspan will accompany him out the door.
EADS, the overseas aerospace and defense company, stated they may cut 670 jobs or about 11% of its workforce. Aviva, Britain’s biggest insurer, has relocated much of its back office work to India. They predicted higher profits this year. Aviva is in the process of outsourcing more than 3,500 back office jobs to India. On Friday, Aviva announced it was closing its Hill House Hammond High Street broking chain. The company claims the move reflected a massive switch by the public to buying house and car insurance over the Internet and on the telephone. Of the 1,600 people employed in the offices about 1,200 face “compulsory redundancies.”
Chinadotcom holds a majority stake in Swedish software maker Industri-Matematik International Corp., and the latter is absorbing Atlanta-based Ross Systems. After completion of the merger, 90 software design jobs will be moved from Atlanta and Sweden to China. Presently, Sun Microsystems does all of its Web browser development work in China. Microsoft and Oracle have development centers there too.
According to the Tax Counseling Project of the Center for Economic Progress, an estimated 21 million workers in the U.S. are eligible for the Earned Income Tax Credit, which provides an average of $1,786 into low-and moderate-income families’ coffers. However, it is estimated that 10 to 15 percent of eligible families nationally still don’t take advantage of the credit.
Furniture Brands is the largest U.S. home-furniture producer. They produce furniture under the Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith, Hickory, and Thomasville brands. In a restructuring move, the company will close a plant producing Hickory Chair furniture, cease production of its Highland House line, and reduce the workforce by 11% at plants producing Thomasville Furniture. The company’s CEO stated “while we remain cautious in our outlook, it appears 2004 is beginning on a positive note.” If it gets any more positive, they’ll be closing all their plants.
Steven Wood, chief economist at Insight Economics: “It’s just flat-out disappointing. We’re just not creating many jobs. Unless there is more job creation and faster wage growth, it is difficult to see how real consumer spending (which makes up) 70% of the economy, can continue to sustain strong economic growth.”
Since the beginning of the Iraq war, 530 U.S. soldiers have died. Rumsfeld calls this a “war of necessity.” Could have + intent do not equate to “imminent threat” or even “a grave and gathering threat.” The fact is Bush is his own worst enemy. He could have been a contender, he might have been a contender for re-election but there is no “unique urgency” and he is left with “word contests" and blood on his hands.
2/9/04 Strike Infested Waters
Last October, 70,000 union workers went out on strike against the big supermarket chains in Southern California. Four months later they are still striking. They may soon have the company of another 100,000 union workers. SBC’s regional contracts with about 100,000 employees nationwide expire in April. Officials at the employees’ union, the Communication Workers of America, have stated that a strike is certain to take place if SBC management tries to change existing medical benefits. SBC is preparing for a strike. The company has informed managers that they must be prepared to take over key operations should a strike materialize. Meanwhile, managers’ vacations for April and beyond have been canceled. Settlement talks will take place this week in Contra Costa County in California. SBC has approximately $2 billion in annual health care costs, and the company wants the employees to share a greater burden of those expenses. A similar issue has been on the table with the 70,000 workers out on strike. In SBC’s case, the union negotiator stated “there is very little wiggle room” as far as health care goes. “Health care is clearly the No. 1 concern of our members. It’s the biggest and most powerful strike issue.” SBC told the unions the company would provide health benefits even during a strike. For its part, the union will give 30 days’ notice before any walkout.
This year, India’s pharmaceutical industry has achieved a 19.6% export growth, which no other product category has realized. Exports of pharma and related products total $5.36 billion.
The Northwest Texas International Trade Center opened in Lubbock in March 1994. In fiscal year 2003, the Center helped generate about $96 million in exports. Over the past 10 years, 95% of the exports have been through small businesses with less than 10 or 15 employees and export business has amounted to $420 million. The Center has about 600 clients, and their office operates with 9 employees and three major departments: marketing research, trade finance, and documentation specialists. If the U.S. had more such centers helping small businesses, our exports would increase dramatically and our trade deficit would decrease, and our need to attract foreign capital would diminish. Private enterprise rooted firmly in capitalism can provide economic independence to local communities and to our nation. This does not involve tax breaks or incentives. It centers on dedication and sweat capital.
This week Greenspan will tell the world that the U.S. economy is doing better and improving monthly and that the job situation is showing signs of stabilizing. He will not discuss why big multinational companies report improved quarterly earnings and accompany the report with additional layoff notices as was the case with Dow Chemical and DuPont. Greenspan might touch on the strength in the housing market; however, he won’t discuss Wells Fargo, a company which reported strong fourth quarter earnings, and has announced a reduction of 7,500 to 10,000 temporary mortgage jobs over the past four months. Greenspan might relate that there were 420 new plant start-ups in 2003. He will omit that there were 443 plant closings in 2003, and that more closings have taken place in the first two months of 2004. However, things are getting better. In 2002, there were over 600 plants shut down. By the time Bush is voted out of office this November, plant closings could be down to 300. The man is on a roll, and Greenspan will accompany him out the door.
EADS, the overseas aerospace and defense company, stated they may cut 670 jobs or about 11% of its workforce. Aviva, Britain’s biggest insurer, has relocated much of its back office work to India. They predicted higher profits this year. Aviva is in the process of outsourcing more than 3,500 back office jobs to India. On Friday, Aviva announced it was closing its Hill House Hammond High Street broking chain. The company claims the move reflected a massive switch by the public to buying house and car insurance over the Internet and on the telephone. Of the 1,600 people employed in the offices about 1,200 face “compulsory redundancies.”
Chinadotcom holds a majority stake in Swedish software maker Industri-Matematik International Corp., and the latter is absorbing Atlanta-based Ross Systems. After completion of the merger, 90 software design jobs will be moved from Atlanta and Sweden to China. Presently, Sun Microsystems does all of its Web browser development work in China. Microsoft and Oracle have development centers there too.
According to the Tax Counseling Project of the Center for Economic Progress, an estimated 21 million workers in the U.S. are eligible for the Earned Income Tax Credit, which provides an average of $1,786 into low-and moderate-income families’ coffers. However, it is estimated that 10 to 15 percent of eligible families nationally still don’t take advantage of the credit.
Furniture Brands is the largest U.S. home-furniture producer. They produce furniture under the Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith, Hickory, and Thomasville brands. In a restructuring move, the company will close a plant producing Hickory Chair furniture, cease production of its Highland House line, and reduce the workforce by 11% at plants producing Thomasville Furniture. The company’s CEO stated “while we remain cautious in our outlook, it appears 2004 is beginning on a positive note.” If it gets any more positive, they’ll be closing all their plants.
Steven Wood, chief economist at Insight Economics: “It’s just flat-out disappointing. We’re just not creating many jobs. Unless there is more job creation and faster wage growth, it is difficult to see how real consumer spending (which makes up) 70% of the economy, can continue to sustain strong economic growth.”
Since the beginning of the Iraq war, 530 U.S. soldiers have died. Rumsfeld calls this a “war of necessity.” Could have + intent do not equate to “imminent threat” or even “a grave and gathering threat.” The fact is Bush is his own worst enemy. He could have been a contender, he might have been a contender for re-election but there is no “unique urgency” and he is left with “word
Last October, 70,000 union workers went out on strike against the big supermarket chains in Southern California. Four months later they are still striking. They may soon have the company of another 100,000 union workers. SBC’s regional contracts with about 100,000 employees nationwide expire in April. Officials at the employees’ union, the Communication Workers of America, have stated that a strike is certain to take place if SBC management tries to change existing medical benefits. SBC is preparing for a strike. The company has informed managers that they must be prepared to take over key operations should a strike materialize. Meanwhile, managers’ vacations for April and beyond have been canceled. Settlement talks will take place this week in Contra Costa County in California. SBC has approximately $2 billion in annual health care costs, and the company wants the employees to share a greater burden of those expenses. A similar issue has been on the table with the 70,000 workers out on strike. In SBC’s case, the union negotiator stated “there is very little wiggle room” as far as health care goes. “Health care is clearly the No. 1 concern of our members. It’s the biggest and most powerful strike issue.” SBC told the unions the company would provide health benefits even during a strike. For its part, the union will give 30 days’ notice before any walkout.
This year, India’s pharmaceutical industry has achieved a 19.6% export growth, which no other product category has realized. Exports of pharma and related products total $5.36 billion.
The Northwest Texas International Trade Center opened in Lubbock in March 1994. In fiscal year 2003, the Center helped generate about $96 million in exports. Over the past 10 years, 95% of the exports have been through small businesses with less than 10 or 15 employees and export business has amounted to $420 million. The Center has about 600 clients, and their office operates with 9 employees and three major departments: marketing research, trade finance, and documentation specialists. If the U.S. had more such centers helping small businesses, our exports would increase dramatically and our trade deficit would decrease, and our need to attract foreign capital would diminish. Private enterprise rooted firmly in capitalism can provide economic independence to local communities and to our nation. This does not involve tax breaks or incentives. It centers on dedication and sweat capital.
This week Greenspan will tell the world that the U.S. economy is doing better and improving monthly and that the job situation is showing signs of stabilizing. He will not discuss why big multinational companies report improved quarterly earnings and accompany the report with additional layoff notices as was the case with Dow Chemical and DuPont. Greenspan might touch on the strength in the housing market; however, he won’t discuss Wells Fargo, a company which reported strong fourth quarter earnings, and has announced a reduction of 7,500 to 10,000 temporary mortgage jobs over the past four months. Greenspan might relate that there were 420 new plant start-ups in 2003. He will omit that there were 443 plant closings in 2003, and that more closings have taken place in the first two months of 2004. However, things are getting better. In 2002, there were over 600 plants shut down. By the time Bush is voted out of office this November, plant closings could be down to 300. The man is on a roll, and Greenspan will accompany him out the door.
EADS, the overseas aerospace and defense company, stated they may cut 670 jobs or about 11% of its workforce. Aviva, Britain’s biggest insurer, has relocated much of its back office work to India. They predicted higher profits this year. Aviva is in the process of outsourcing more than 3,500 back office jobs to India. On Friday, Aviva announced it was closing its Hill House Hammond High Street broking chain. The company claims the move reflected a massive switch by the public to buying house and car insurance over the Internet and on the telephone. Of the 1,600 people employed in the offices about 1,200 face “compulsory redundancies.”
Chinadotcom holds a majority stake in Swedish software maker Industri-Matematik International Corp., and the latter is absorbing Atlanta-based Ross Systems. After completion of the merger, 90 software design jobs will be moved from Atlanta and Sweden to China. Presently, Sun Microsystems does all of its Web browser development work in China. Microsoft and Oracle have development centers there too.
According to the Tax Counseling Project of the Center for Economic Progress, an estimated 21 million workers in the U.S. are eligible for the Earned Income Tax Credit, which provides an average of $1,786 into low-and moderate-income families’ coffers. However, it is estimated that 10 to 15 percent of eligible families nationally still don’t take advantage of the credit.
Furniture Brands is the largest U.S. home-furniture producer. They produce furniture under the Broyhill, Drexel Heritage, Henredon, Lane, Maitland-Smith, Hickory, and Thomasville brands. In a restructuring move, the company will close a plant producing Hickory Chair furniture, cease production of its Highland House line, and reduce the workforce by 11% at plants producing Thomasville Furniture. The company’s CEO stated “while we remain cautious in our outlook, it appears 2004 is beginning on a positive note.” If it gets any more positive, they’ll be closing all their plants.
Steven Wood, chief economist at Insight Economics: “It’s just flat-out disappointing. We’re just not creating many jobs. Unless there is more job creation and faster wage growth, it is difficult to see how real consumer spending (which makes up) 70% of the economy, can continue to sustain strong economic growth.”
Since the beginning of the Iraq war, 530 U.S. soldiers have died. Rumsfeld calls this a “war of necessity.” Could have + intent do not equate to “imminent threat” or even “a grave and gathering threat.” The fact is Bush is his own worst enemy. He could have been a contender, he might have been a contender for re-election but there is no “unique urgency” and he is left with “word
Sunday, February 08, 2004
2/8/04 February 5 and April 19
National Food Check-Out Day is celebrated February 5. This is the day farmers and ranchers mark in the year when the average American has earned enough income to buy food for the entire year. On average, it takes 36 days. By comparison, we worked until April 19 of last year just to pay our taxes.
Following the discovery of bird flu in Delaware, Japan has banned chicken imports from the United States. On Saturday, 12,000 chickens were killed at a farm in Delaware. Hong Kong stopped imports of chicken from Delaware. Singapore, Malaysia, and South Korea joined Japan in suspending imports of U.S. chicken. Japan’s Agriculture Minister stated “we can’t agree to imports unless the meat (chicken) has been properly heat treated. We would consider restarting imports only when we have sent our own people to thoroughly check facilities in each country.”
Boca Raton is quite lovely at this time of year. I trust the G7 financial leaders had a pleasant two-day visit. As expected, little was accomplished. One cannot expect too much from government employees. Their statement was “we affirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rate markets are undesirable for economic growth.” This proclamation could have been written by an average student not left behind.
This morning Bush will be very busy with a damage control interview on Meet The Press. For some reason the president feels uncomfortable on Main Street. It’s a nice day. Let’s go for a ride. Our first stop will be Room 375 in the Wilkens Building on Pratt Street in Baltimore. Unfortunately, they don’t serve crab cakes or lump crab meat. This is the location for the processing of bankruptcy petitions. David Rodgers, partner in Rodgers and Dickerson, has filed more than 22,000 personal bankruptcies since opening his Towson practice in 1990. He remarked “there is not a lot of disposable income in the middle class anymore. Jobs are being squeezed. Good jobs are being moved. The middle class is being squeezed. Families have slipped into financial bondage.” You might think Rodgers has gotten himself all worked up unnecessarily. According to the Federal Reserve Board, household debt-service payments and financial obligations rose to 18.09% of disposable personal income as of June 30. According to the Bureau of Economic Analysis, personal savings fell 26.6% from ten years ago. Maryland has one of the highest bankruptcy rates in the nation. Over the past ten years, personal bankruptcies have more than doubled, and one of every 63 Maryland households now files for bankruptcy.
Nearby Virginia’s House Finance Committee will disclose its budget on February 22. The legislature rejected the governor’s budget-balancing plan. As such, the proposed budget will need to close a $1 billion shortfall. They will combine cuts with higher user fees, such as, motorists’ services.
The state of Louisiana has a $17 billion budget. The fiscal year begins July 1, and the legislature must confront pension systems with a $1.6 billion account deficit. The Louisiana taxpayers’ tab for covering pensions of retirees in the four state retirement plans will likely go up by nearly $250 million a year. State budget shortfalls in the new fiscal year have been estimated between $300 million and $500 million already. It will be interesting to see how the legislature proposes to fix this mess. Gary Curran is an actuary and actuarial committee member. He observed “we can ignore it, but it’s not going away. It’s not going to get exponentially worse.” Curran appears to have more common sense than many on Wall Street who prefer to focus on program trading and the latter’s impact on pushing the S&P 500 Index and the Dow higher and higher. After all, they are not concerned with Main Street’s job losses, bankruptcies, and budget shortfalls, which, the financial wizards maintain, share nothing in common with the movement of equity prices. Main Street faces a wall of worry every day. It’s real. It means putting food on the table, providing shelter, paying taxes, and hopefully having enough savings for some medical care. Financial engineering on Wall Street creates the world of derivatives, a $41 trillion WMD. You might ask how do I know this. I ran two brokerage firms. Only a few leaders maintained Wall Street’s Chinese walls. Be careful about strolling along Broad and Wall. The fleecing is not as pure as winter’s white snow.
Our last stop this morning brings us to Montana. Council member Betty Lou Kastan remarked that “Medicaid is the budget buster of the Legislature. If it isn’t controlled, there’s no end to the dollars that would be needed.” Montana’s Medicaid costs have doubled in the last 10 years, and now total $550 million annually. State analysts project that costs for Medicaid will increase between 6 and 8 percent each year through 2011. About 9,000 of Montana’s citizens relied on Medicaid in fiscal year 2003, racking up $110 million in costs. Medicaid for the medically needy is an optional service that the state does not have to provide. Kastan stated “if push came to shove, because it’s optional it would be the first to be considered for elimination. Not that I’m advocating it. But when push comes to shove, you have to get to the bottom line.” I wonder when the Congress will get to the bottom line of our nation’s bulging budget deficit problem?
We might not have visited your home state this morning or in past weeks. We will visit each and every Main Street in each and every state. No state will be left behind. We can kick the tires together.
National Food Check-Out Day is celebrated February 5. This is the day farmers and ranchers mark in the year when the average American has earned enough income to buy food for the entire year. On average, it takes 36 days. By comparison, we worked until April 19 of last year just to pay our taxes.
Following the discovery of bird flu in Delaware, Japan has banned chicken imports from the United States. On Saturday, 12,000 chickens were killed at a farm in Delaware. Hong Kong stopped imports of chicken from Delaware. Singapore, Malaysia, and South Korea joined Japan in suspending imports of U.S. chicken. Japan’s Agriculture Minister stated “we can’t agree to imports unless the meat (chicken) has been properly heat treated. We would consider restarting imports only when we have sent our own people to thoroughly check facilities in each country.”
Boca Raton is quite lovely at this time of year. I trust the G7 financial leaders had a pleasant two-day visit. As expected, little was accomplished. One cannot expect too much from government employees. Their statement was “we affirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rate markets are undesirable for economic growth.” This proclamation could have been written by an average student not left behind.
This morning Bush will be very busy with a damage control interview on Meet The Press. For some reason the president feels uncomfortable on Main Street. It’s a nice day. Let’s go for a ride. Our first stop will be Room 375 in the Wilkens Building on Pratt Street in Baltimore. Unfortunately, they don’t serve crab cakes or lump crab meat. This is the location for the processing of bankruptcy petitions. David Rodgers, partner in Rodgers and Dickerson, has filed more than 22,000 personal bankruptcies since opening his Towson practice in 1990. He remarked “there is not a lot of disposable income in the middle class anymore. Jobs are being squeezed. Good jobs are being moved. The middle class is being squeezed. Families have slipped into financial bondage.” You might think Rodgers has gotten himself all worked up unnecessarily. According to the Federal Reserve Board, household debt-service payments and financial obligations rose to 18.09% of disposable personal income as of June 30. According to the Bureau of Economic Analysis, personal savings fell 26.6% from ten years ago. Maryland has one of the highest bankruptcy rates in the nation. Over the past ten years, personal bankruptcies have more than doubled, and one of every 63 Maryland households now files for bankruptcy.
Nearby Virginia’s House Finance Committee will disclose its budget on February 22. The legislature rejected the governor’s budget-balancing plan. As such, the proposed budget will need to close a $1 billion shortfall. They will combine cuts with higher user fees, such as, motorists’ services.
The state of Louisiana has a $17 billion budget. The fiscal year begins July 1, and the legislature must confront pension systems with a $1.6 billion account deficit. The Louisiana taxpayers’ tab for covering pensions of retirees in the four state retirement plans will likely go up by nearly $250 million a year. State budget shortfalls in the new fiscal year have been estimated between $300 million and $500 million already. It will be interesting to see how the legislature proposes to fix this mess. Gary Curran is an actuary and actuarial committee member. He observed “we can ignore it, but it’s not going away. It’s not going to get exponentially worse.” Curran appears to have more common sense than many on Wall Street who prefer to focus on program trading and the latter’s impact on pushing the S&P 500 Index and the Dow higher and higher. After all, they are not concerned with Main Street’s job losses, bankruptcies, and budget shortfalls, which, the financial wizards maintain, share nothing in common with the movement of equity prices. Main Street faces a wall of worry every day. It’s real. It means putting food on the table, providing shelter, paying taxes, and hopefully having enough savings for some medical care. Financial engineering on Wall Street creates the world of derivatives, a $41 trillion WMD. You might ask how do I know this. I ran two brokerage firms. Only a few leaders maintained Wall Street’s Chinese walls. Be careful about strolling along Broad and Wall. The fleecing is not as pure as winter’s white snow.
Our last stop this morning brings us to Montana. Council member Betty Lou Kastan remarked that “Medicaid is the budget buster of the Legislature. If it isn’t controlled, there’s no end to the dollars that would be needed.” Montana’s Medicaid costs have doubled in the last 10 years, and now total $550 million annually. State analysts project that costs for Medicaid will increase between 6 and 8 percent each year through 2011. About 9,000 of Montana’s citizens relied on Medicaid in fiscal year 2003, racking up $110 million in costs. Medicaid for the medically needy is an optional service that the state does not have to provide. Kastan stated “if push came to shove, because it’s optional it would be the first to be considered for elimination. Not that I’m advocating it. But when push comes to shove, you have to get to the bottom line.” I wonder when the Congress will get to the bottom line of our nation’s bulging budget deficit problem?
We might not have visited your home state this morning or in past weeks. We will visit each and every Main Street in each and every state. No state will be left behind. We can kick the tires together.
Saturday, February 07, 2004
2/7/04 Let’s Talk
I cannot please everyone. I don’t try. My hope is to possibly provide a wide-angle look at the American landscape. The lens will focus on the truth, and the truth is a montage of facts. I do not cherry pick. If I’m wrong or make a mistake, I’ll tell you. I do not shade the truth and I do not omit facts to substantiate my viewpoint. In other words, I have no hidden agenda.
We need to talk about your neighborhood. You might have noticed the problem. It’s the local budget. I am not referring to the Bush deficits. This is your backyard. I’ll get to Bush a bit later. Michael Pagano, the lead researcher for the National League of Cities (NLC), stated “health care and pension systems are fairly prominent around the country. We are now entering a phase in the economic cycle that is having an increasingly visible effect on cities, such as laying people off and cutting into the core of city services.” Let’s visit with Mayor Bill White of Houston. His predecessor, Lee Brown, had projected a $74 million shortfall for fiscal 2005. Which begins July 1. White expects the gap to be more than $150 million. He stated “the magnitude of the problem is greater than many people may appreciate.” Houston is faced with a $40 million increase in the cost of health care benefits, a $50 million police pay raise that takes effect in April, and a $60 million increase in the city’s total contribution to the municipal, police, and fire pension systems. The increase in the cost of employee health care benefits represents a 24% increase to $210 million in the coming fiscal year. Pension benefits are the single biggest problem Houston faces. The municipal pension fund alone represents a nearly $1 billion unfunded liability. The mayor is considering laying off underskilled employees and reducing the number of supervisors or possibly middle managers. In all likelihood, capital expenditures on big-ticket projects will need to be reduced. City controller Parker stated “next year will be an incredibly tight budget.” I am certain that your community faces some of Houston’s problems. Solutions may vary. In Baltimore the teachers will not accept a 6 to 7 percent pay cut or an unpaid eight-day furlough. They won’t accept either one. Those were the two choices offered to avoid layoffs of 1,000 to 1,200 school employees, and most of them will be teachers. The school board meets on Tuesday. One teacher remarked “we’re fed up. They’re not conceding anything right now. We’re going to hold our ground.” The school system’s financial crisis is the result of a cumulative $58 million deficit. Baltimore Schools Chief Executive Officer Superintendent Bonnie Copeland stated she needs to reduce spending by $16 million by the end of June to stay on target with her budgetary goals, and meeting these goals will aid in possibly receiving more funding from Annapolis. Many of the same problems facing your community are present in the corporate arena. There is constant pressure to deal with rising pension contributions, unfunded pension liabilities, rising health care costs, and the increasing cost of benefits. The partial solution has been for businesses and municipalities to cut employees from the payroll, to limit capital expenditures, to keep a lid on repairs and maintenance of equipment, and if possible, reduce the cost of services provided. This agenda does not provide for price increases or, in the case of local governments, tax increases. Over all, it is a defensive strategy. As such, on the domestic landscape there is limited visible growth. The expansion has taken place on foreign soil.
Before I discuss the employment report, I would like to touch on the situation confronting United Airlines flight attendants and retirees. They claim the airline plans to renege on its agreement to provide affordable healthcare for retirees who left the company prior to July 2003. It should be noted that this airline, in times of need, has received significant amounts of taxpayer dollars. United Airlines management signed a letter of agreement in May 2003 to ensure that flight attendants retiring before July 1,2003 would have access to health care benefits that were less costly and more comprehensive than those that would be in place for workers who retire after that date. Based on that agreement, almost 2,500 flight attendants retired before the Jul1 deadline, only to find out just six months later that United intends to cut their benefits and raise their costs. Under the airline’s plan, retirees will have to pay up to $650 per month for less health care, and this is more than ten times what they pay now for better health benefits, and there is no cap on contributions as health care costs climb each year. The average income for retirees is about $1,200 per month. In my view, if United violates the agreement with their retirees, they cannot be trusted with the well being of passengers. The airline should be required to find a buyer or multiple buyers and the current management banned permanently from becoming an officer of any other public company.
The Bureau of Labor Statistics announced that the state of Maryland lost 8,000 jobs in December. Only Michigan, Ohio, and California had larger job losses in December. However, those employment numbers may need some fine-tuning. The Labor Department did some re-figuring of the nation’s numbers. In October and November 2003 they revised the unemployed upward by a total of 50,000. In December, they really went to town. Remember how only 1,000 jobs were created in December? I told you that was bullshit. The Labor Department developed a conscience. They revised the December nonfarm employment number downward by 77,000 (81,000) on a seasonally adjusted basis. In sum, the number of employed workers was overstated by about 130,000 between October and December. Of course, it is not surprising that I am the only one to make this observation. No one else appears to feel compelled to spell out the real employment picture.
Let’s examine why the unemployment rate declined. It’s so simple. The Labor Department tells us “the adjustments decreased the estimated size of the civilian noninstitutional population by 560,000, of the civilian labor force, and by employment by 409,000.” There are fewer workers in the labor force. Jan Hatzius, a Goldman Sachs economist, stated “population growth should be driving the labor force up, but instead, fewer people are looking for work.” In January, there were 432,000 discouraged workers. They are not counted as unemployed. The number of unemployed in January, according to the BLS, was 8.3 million. There were 1.7 million persons marginally attached to the labor force, and they are not counted as unemployed. In the latest January report, the Labor Department reported that retail trade employment increased by 76,000 over the month, after seasonal adjustment. Without the seasonal adjustment, this sector lost 623,000 jobs. The BLS stated that there was a gain of 24,000 construction workers, after seasonal adjustment. Without the seasonal adjustment, there was a loss of 300,000 jobs in the construction sector. Rationally, in the middle of winter, with January’s snows and freezing temperatures, do you think there are more or less construction workers? You don’t need an advanced degree to arrive at the correct answer. I’ve made the rounds of each state in our nation. I defy anyone to document a rise of employment in the month of January. Forget the seasonal adjustment crap. I’m talking net job increases. They don’t need to waste their time. January was another month of job losses. The real unemployment rate in the U.S. is closer to that in the eurozone countries or about 10%.
John Connally, Treasury secretary under Nixon, told Europeans in 1971 that “the dollar may be our currency, but it is your problem.” The G-7 reached that conclusion in Dubai, and I don’t see a reason for a different conclusion in Boca Raton.
Edward F. McKelvy, Goldman Sachs economist, remarked “the labor market is like wet wood in a bonfire. It’s working, but it’s not working very well.”
Sung Won Sohn, chief economic officer at Wells Fargo, stated “I am surprised and disappointed that the relationship between economic growth and employment has broken down…businesses are still very, very cautious about hiring.”
Robert Reich, secretary of labor under Clinton, stated “employers can very easily delay hiring because they can outsource and bring on new technology.”
French Finance Minister Francis Mer stated “we are all interdependent. Nobody can even temporarily think that the way of solving their problems won’t affect others, and in turn them again.”
Jean-Claude Trichet, president of the ECB, observed “ inflationary risks should be contained by more favorable import price developments.” He stated that the ECB is concerned “about excessive exchange rate moves.”
John Chambers, Cisco’s CEO: “After three years of being second-guessed and often missing, many CEOs are going to be unusually cautious in terms of both their capital spending and their hiring.”
Bush’s proposed budget for fiscal 2005 indicates “a major slowdown” in federal spending on information technology. According to a recent analysis, there will be an increase of less than 1% over the request for fiscal 2004. Between fiscal year 1999 and fiscal year 2003, federal IT spending grew an average of 11 percent each year.
AT&T Wireless is based in Redmond, Washington. They employ 5,000 workers in the Puget Sound area. The company is in merger negotiations. If Cingular, for example, were to purchase the company, overlapping operations are likely to result in some large job cuts. Some cuts would probably take place in customer service, administration, and network infrastructure.
DigitalNet went public in October. They will be cutting 10% of its local workforce in Northern Virginia by the end of March. There will be about 55 employees laid off.
Home Depot plans to open 175 stores this year and hire 35,000 workers. The company has engaged AARP in a partnership to attract, motivate, and retain older workers.
According to the Cambridge Consumer Credit Index, over eight out of ten Americans who have outstanding medical debt say that these debts are either a major or minor burden, preventing them from making purchases of large ticket items. As the number of uninsured Americans (now 44 million) grows, the burden of medical debt is going to become even more crushing for many Americans, according to the study. In addition, the results of the survey indicate “that consumers are tightening their purse strings and using far less credit for the second consecutive month after the holidays. Credit usage is now at the lowest level since October 2002, when the economy was much weaker.”
I cannot please everyone. I don’t try. My hope is to possibly provide a wide-angle look at the American landscape. The lens will focus on the truth, and the truth is a montage of facts. I do not cherry pick. If I’m wrong or make a mistake, I’ll tell you. I do not shade the truth and I do not omit facts to substantiate my viewpoint. In other words, I have no hidden agenda.
We need to talk about your neighborhood. You might have noticed the problem. It’s the local budget. I am not referring to the Bush deficits. This is your backyard. I’ll get to Bush a bit later. Michael Pagano, the lead researcher for the National League of Cities (NLC), stated “health care and pension systems are fairly prominent around the country. We are now entering a phase in the economic cycle that is having an increasingly visible effect on cities, such as laying people off and cutting into the core of city services.” Let’s visit with Mayor Bill White of Houston. His predecessor, Lee Brown, had projected a $74 million shortfall for fiscal 2005. Which begins July 1. White expects the gap to be more than $150 million. He stated “the magnitude of the problem is greater than many people may appreciate.” Houston is faced with a $40 million increase in the cost of health care benefits, a $50 million police pay raise that takes effect in April, and a $60 million increase in the city’s total contribution to the municipal, police, and fire pension systems. The increase in the cost of employee health care benefits represents a 24% increase to $210 million in the coming fiscal year. Pension benefits are the single biggest problem Houston faces. The municipal pension fund alone represents a nearly $1 billion unfunded liability. The mayor is considering laying off underskilled employees and reducing the number of supervisors or possibly middle managers. In all likelihood, capital expenditures on big-ticket projects will need to be reduced. City controller Parker stated “next year will be an incredibly tight budget.” I am certain that your community faces some of Houston’s problems. Solutions may vary. In Baltimore the teachers will not accept a 6 to 7 percent pay cut or an unpaid eight-day furlough. They won’t accept either one. Those were the two choices offered to avoid layoffs of 1,000 to 1,200 school employees, and most of them will be teachers. The school board meets on Tuesday. One teacher remarked “we’re fed up. They’re not conceding anything right now. We’re going to hold our ground.” The school system’s financial crisis is the result of a cumulative $58 million deficit. Baltimore Schools Chief Executive Officer Superintendent Bonnie Copeland stated she needs to reduce spending by $16 million by the end of June to stay on target with her budgetary goals, and meeting these goals will aid in possibly receiving more funding from Annapolis. Many of the same problems facing your community are present in the corporate arena. There is constant pressure to deal with rising pension contributions, unfunded pension liabilities, rising health care costs, and the increasing cost of benefits. The partial solution has been for businesses and municipalities to cut employees from the payroll, to limit capital expenditures, to keep a lid on repairs and maintenance of equipment, and if possible, reduce the cost of services provided. This agenda does not provide for price increases or, in the case of local governments, tax increases. Over all, it is a defensive strategy. As such, on the domestic landscape there is limited visible growth. The expansion has taken place on foreign soil.
Before I discuss the employment report, I would like to touch on the situation confronting United Airlines flight attendants and retirees. They claim the airline plans to renege on its agreement to provide affordable healthcare for retirees who left the company prior to July 2003. It should be noted that this airline, in times of need, has received significant amounts of taxpayer dollars. United Airlines management signed a letter of agreement in May 2003 to ensure that flight attendants retiring before July 1,2003 would have access to health care benefits that were less costly and more comprehensive than those that would be in place for workers who retire after that date. Based on that agreement, almost 2,500 flight attendants retired before the Jul1 deadline, only to find out just six months later that United intends to cut their benefits and raise their costs. Under the airline’s plan, retirees will have to pay up to $650 per month for less health care, and this is more than ten times what they pay now for better health benefits, and there is no cap on contributions as health care costs climb each year. The average income for retirees is about $1,200 per month. In my view, if United violates the agreement with their retirees, they cannot be trusted with the well being of passengers. The airline should be required to find a buyer or multiple buyers and the current management banned permanently from becoming an officer of any other public company.
The Bureau of Labor Statistics announced that the state of Maryland lost 8,000 jobs in December. Only Michigan, Ohio, and California had larger job losses in December. However, those employment numbers may need some fine-tuning. The Labor Department did some re-figuring of the nation’s numbers. In October and November 2003 they revised the unemployed upward by a total of 50,000. In December, they really went to town. Remember how only 1,000 jobs were created in December? I told you that was bullshit. The Labor Department developed a conscience. They revised the December nonfarm employment number downward by 77,000 (81,000) on a seasonally adjusted basis. In sum, the number of employed workers was overstated by about 130,000 between October and December. Of course, it is not surprising that I am the only one to make this observation. No one else appears to feel compelled to spell out the real employment picture.
Let’s examine why the unemployment rate declined. It’s so simple. The Labor Department tells us “the adjustments decreased the estimated size of the civilian noninstitutional population by 560,000, of the civilian labor force, and by employment by 409,000.” There are fewer workers in the labor force. Jan Hatzius, a Goldman Sachs economist, stated “population growth should be driving the labor force up, but instead, fewer people are looking for work.” In January, there were 432,000 discouraged workers. They are not counted as unemployed. The number of unemployed in January, according to the BLS, was 8.3 million. There were 1.7 million persons marginally attached to the labor force, and they are not counted as unemployed. In the latest January report, the Labor Department reported that retail trade employment increased by 76,000 over the month, after seasonal adjustment. Without the seasonal adjustment, this sector lost 623,000 jobs. The BLS stated that there was a gain of 24,000 construction workers, after seasonal adjustment. Without the seasonal adjustment, there was a loss of 300,000 jobs in the construction sector. Rationally, in the middle of winter, with January’s snows and freezing temperatures, do you think there are more or less construction workers? You don’t need an advanced degree to arrive at the correct answer. I’ve made the rounds of each state in our nation. I defy anyone to document a rise of employment in the month of January. Forget the seasonal adjustment crap. I’m talking net job increases. They don’t need to waste their time. January was another month of job losses. The real unemployment rate in the U.S. is closer to that in the eurozone countries or about 10%.
John Connally, Treasury secretary under Nixon, told Europeans in 1971 that “the dollar may be our currency, but it is your problem.” The G-7 reached that conclusion in Dubai, and I don’t see a reason for a different conclusion in Boca Raton.
Edward F. McKelvy, Goldman Sachs economist, remarked “the labor market is like wet wood in a bonfire. It’s working, but it’s not working very well.”
Sung Won Sohn, chief economic officer at Wells Fargo, stated “I am surprised and disappointed that the relationship between economic growth and employment has broken down…businesses are still very, very cautious about hiring.”
Robert Reich, secretary of labor under Clinton, stated “employers can very easily delay hiring because they can outsource and bring on new technology.”
French Finance Minister Francis Mer stated “we are all interdependent. Nobody can even temporarily think that the way of solving their problems won’t affect others, and in turn them again.”
Jean-Claude Trichet, president of the ECB, observed “ inflationary risks should be contained by more favorable import price developments.” He stated that the ECB is concerned “about excessive exchange rate moves.”
John Chambers, Cisco’s CEO: “After three years of being second-guessed and often missing, many CEOs are going to be unusually cautious in terms of both their capital spending and their hiring.”
Bush’s proposed budget for fiscal 2005 indicates “a major slowdown” in federal spending on information technology. According to a recent analysis, there will be an increase of less than 1% over the request for fiscal 2004. Between fiscal year 1999 and fiscal year 2003, federal IT spending grew an average of 11 percent each year.
AT&T Wireless is based in Redmond, Washington. They employ 5,000 workers in the Puget Sound area. The company is in merger negotiations. If Cingular, for example, were to purchase the company, overlapping operations are likely to result in some large job cuts. Some cuts would probably take place in customer service, administration, and network infrastructure.
DigitalNet went public in October. They will be cutting 10% of its local workforce in Northern Virginia by the end of March. There will be about 55 employees laid off.
Home Depot plans to open 175 stores this year and hire 35,000 workers. The company has engaged AARP in a partnership to attract, motivate, and retain older workers.
According to the Cambridge Consumer Credit Index, over eight out of ten Americans who have outstanding medical debt say that these debts are either a major or minor burden, preventing them from making purchases of large ticket items. As the number of uninsured Americans (now 44 million) grows, the burden of medical debt is going to become even more crushing for many Americans, according to the study. In addition, the results of the survey indicate “that consumers are tightening their purse strings and using far less credit for the second consecutive month after the holidays. Credit usage is now at the lowest level since October 2002, when the economy was much weaker.”
Friday, February 06, 2004
2/6/04 The Risk Factor
Risk management is currently in vogue. I suggest it might prove helpful to first acknowledge the existence or non-existence of risk. What is the extent of the risk? One must make that determination prior to managing the risk. Too often that step is not accomplished.
Pimco’s Paul McCulley: “Take out insurance: cut risks and be willing to marginally underperform benchmarks (via yield give up), so as to avoid colossally underperforming them… pleasure should be about avoiding them.”
George Tenet: “The CIA never said Iraq was an imminent threat”
Donald Rumsfeld on Sept. 18, 2002 before the House Armed Services Committee: “We do know that Saddam has been actively and persistently pursuing nuclear weapons for more than 20 years. But we should be just as concerned about the immediate threat from biological weapons.”
We can thus add to the mix that one must be forthright about the potential of risk- both with oneself and with others. You can’t distinguish risk from non-risk in the absence of honesty and/or the omission of the most recent information.
At times, to minimize risk, companies will do an about face and change their course of action. Cigna did that today. They will eliminate 3,000 jobs and reduce its quarterly dividend to 2.5 cents from 33 cents. They shall utilize their husbanded funds for stock buybacks.
Sometimes the risks are so great that creditors will be at your door, and severe action will be required. That is the case for Tower Records. A company started in 1960 with a single store. Debts have mounted and it is likely that next week it will file for Chapter 11 bankruptcy. Hopefully, Tower can find a buyer for the business.
In a few minutes the Labor Department will provide the employment numbers for January. Before analyzing the numbers, one might consider their accuracy. Secretary John Snow has stated “there is some question about the accuracy of these statistics.” That could be a significant understatement. However, investment managers will make decisions based on the accuracy of the numbers released. After all, they are government numbers. It is wise to assess the competency of the origin of the supposed facts. The Investors Business Daily raises the point that, because of the rise in the immigrant work force, there has been a increase in “off-the-books work through which workers get paid in cash.” I don’t know where the editors have been for 100 years. This practice has been art form for a very long time. It is suggested that the “government sees 1099 reporting only at year-end.” This is hardly a new event. When employment was tight in the Silicon Valley at the height of the dotcom boom, hundreds of thousands of 1099 workers could be found. No one complained. There wasn’t a problem getting employed. No one cared about off-the books or 1099.
Amid growing resentment in the U.S. against outsourcing, labor organizations in Washington, DC have accused Indian IT majors, Wipro, Tata, and Infosys of “abusing” the L-1 visa program to bring in cheap manpower to take over American jobs. America’s largest labor federation, AFL-CIO, maintained yesterday that these companies were acting as “bodyshops” bringing in foreign workers through the L-1 system and then subcontracting them out to other businesses. The L-1 visa program is designed to bring management executives and experts to companies owned by their employers with operations in the U.S.
On Wednesday a delegation of leading U.S. venture capital firms visited Bangalore. Their purpose is to familiarize themselves with the capabilities of software services exporters in India. The delegation potentially could influence more than 500 portfolio companies that are seeking cross-border business opportunities. When assessing risk, one must realize the totality of the landscape. The risk is not L-1 or HB-1 visas. The opportunity is the growing working relationship on a cross-border playing field. Depending on one’s strength or weakness, that can be an opportunity or a risk to survival.
I would appreciate your patience. We can discuss this more tomorrow. You need to trust what I’m writing. I really do understand this subject. U.S. non-farm payrolls grew 112,000 in January. The reason given was the growth in retail jobs and also in construction. This means jobs actually declined. How do I know this? Before you assess risk, you must know the facts. The clue is the employment rate. I am the only person who said it would decline in January. That is the road map to the truth. Remember December 21? That was the day unemployment benefits were not extended. From that day forward tens of thousands of Americans began to drop off the unemployment rolls. Thus, the labor force declined. Therefore, with a smaller labor force, those working would make the unemployment rate decline. It happened in January. It happened in December. Now for the retail workers. I have explained this already. The retail industry hired less than expected temporary holiday workers this year. I gave as an example a similar experience in December 2002. Therefore, the Labor Department is stating less than a normal amount of retail workers had to be laid off in January. I estimated that number to be 100,000. That represents almost all of the 112,000 nonfarm workers supposedly added in January. That is a fictitious number! That leaves 12,000. I can tell you for certainty that at least 130,000 workers lost their jobs in January. I keep daily records and make checks with the states themselves. I will analyze the full release, but I am sure of my facts. As for the hours worked and the pay for those hours, as I anticipated, they are essentially unchanged. Bernanke stated yesterday that the U.S. economy will see “big numbers of new jobs fairly soon.” Maybe he was including his job in that forecast. He’s never been to Main Street. We should not ignore that last week first-time claims for unemployment benefits rose by 17,000. It’s difficult to assess the risks when the latest information is dismissed.
Risk management is currently in vogue. I suggest it might prove helpful to first acknowledge the existence or non-existence of risk. What is the extent of the risk? One must make that determination prior to managing the risk. Too often that step is not accomplished.
Pimco’s Paul McCulley: “Take out insurance: cut risks and be willing to marginally underperform benchmarks (via yield give up), so as to avoid colossally underperforming them… pleasure should be about avoiding them.”
George Tenet: “The CIA never said Iraq was an imminent threat”
Donald Rumsfeld on Sept. 18, 2002 before the House Armed Services Committee: “We do know that Saddam has been actively and persistently pursuing nuclear weapons for more than 20 years. But we should be just as concerned about the immediate threat from biological weapons.”
We can thus add to the mix that one must be forthright about the potential of risk- both with oneself and with others. You can’t distinguish risk from non-risk in the absence of honesty and/or the omission of the most recent information.
At times, to minimize risk, companies will do an about face and change their course of action. Cigna did that today. They will eliminate 3,000 jobs and reduce its quarterly dividend to 2.5 cents from 33 cents. They shall utilize their husbanded funds for stock buybacks.
Sometimes the risks are so great that creditors will be at your door, and severe action will be required. That is the case for Tower Records. A company started in 1960 with a single store. Debts have mounted and it is likely that next week it will file for Chapter 11 bankruptcy. Hopefully, Tower can find a buyer for the business.
In a few minutes the Labor Department will provide the employment numbers for January. Before analyzing the numbers, one might consider their accuracy. Secretary John Snow has stated “there is some question about the accuracy of these statistics.” That could be a significant understatement. However, investment managers will make decisions based on the accuracy of the numbers released. After all, they are government numbers. It is wise to assess the competency of the origin of the supposed facts. The Investors Business Daily raises the point that, because of the rise in the immigrant work force, there has been a increase in “off-the-books work through which workers get paid in cash.” I don’t know where the editors have been for 100 years. This practice has been art form for a very long time. It is suggested that the “government sees 1099 reporting only at year-end.” This is hardly a new event. When employment was tight in the Silicon Valley at the height of the dotcom boom, hundreds of thousands of 1099 workers could be found. No one complained. There wasn’t a problem getting employed. No one cared about off-the books or 1099.
Amid growing resentment in the U.S. against outsourcing, labor organizations in Washington, DC have accused Indian IT majors, Wipro, Tata, and Infosys of “abusing” the L-1 visa program to bring in cheap manpower to take over American jobs. America’s largest labor federation, AFL-CIO, maintained yesterday that these companies were acting as “bodyshops” bringing in foreign workers through the L-1 system and then subcontracting them out to other businesses. The L-1 visa program is designed to bring management executives and experts to companies owned by their employers with operations in the U.S.
On Wednesday a delegation of leading U.S. venture capital firms visited Bangalore. Their purpose is to familiarize themselves with the capabilities of software services exporters in India. The delegation potentially could influence more than 500 portfolio companies that are seeking cross-border business opportunities. When assessing risk, one must realize the totality of the landscape. The risk is not L-1 or HB-1 visas. The opportunity is the growing working relationship on a cross-border playing field. Depending on one’s strength or weakness, that can be an opportunity or a risk to survival.
I would appreciate your patience. We can discuss this more tomorrow. You need to trust what I’m writing. I really do understand this subject. U.S. non-farm payrolls grew 112,000 in January. The reason given was the growth in retail jobs and also in construction. This means jobs actually declined. How do I know this? Before you assess risk, you must know the facts. The clue is the employment rate. I am the only person who said it would decline in January. That is the road map to the truth. Remember December 21? That was the day unemployment benefits were not extended. From that day forward tens of thousands of Americans began to drop off the unemployment rolls. Thus, the labor force declined. Therefore, with a smaller labor force, those working would make the unemployment rate decline. It happened in January. It happened in December. Now for the retail workers. I have explained this already. The retail industry hired less than expected temporary holiday workers this year. I gave as an example a similar experience in December 2002. Therefore, the Labor Department is stating less than a normal amount of retail workers had to be laid off in January. I estimated that number to be 100,000. That represents almost all of the 112,000 nonfarm workers supposedly added in January. That is a fictitious number! That leaves 12,000. I can tell you for certainty that at least 130,000 workers lost their jobs in January. I keep daily records and make checks with the states themselves. I will analyze the full release, but I am sure of my facts. As for the hours worked and the pay for those hours, as I anticipated, they are essentially unchanged. Bernanke stated yesterday that the U.S. economy will see “big numbers of new jobs fairly soon.” Maybe he was including his job in that forecast. He’s never been to Main Street. We should not ignore that last week first-time claims for unemployment benefits rose by 17,000. It’s difficult to assess the risks when the latest information is dismissed.
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